Ticketus LLP and Another v Craig Thomas Whyte and Others
| Jurisdiction | England & Wales |
| Judge | Mr D Halpern |
| Judgment Date | 18 December 2013 |
| Neutral Citation | [2013] EWHC 4069 (Ch) |
| Date | 18 December 2013 |
| Court | Chancery Division |
| Docket Number | Case No: HC12FO3282 |
[2013] EWHC 4069 (Ch)
IN THE HIGH COURT OF JUSTICE
CHANCERY DIVISION
The Rolls Building,
7 Rolls Buildings, Fetter Lane,
London, EC4A 1NL
Mr D Halpern QC (sitting as a judge of the Chancery Division)
Case No: HC12FO3282
Professor Mark Watson-Gandy (instructed by Law Management Solicitors) for the Appellant
Mr Matthew Collings QC and Mr Ben Griffiths (instructed by Michelmores LLP) for the Respondents
Hearing date: 28 November 2013
Mr D Halpern QC (sitting as a judge of the Chancery Division):
This is an appeal brought, with the permission of Newey J, by the First Defendant Craig Whyte against the decision of Master Marsh. The Master awarded summary judgment for more than £18 million by way of damages and interest for fraudulent misrepresentation.
The facts
Octopus Investments is a regulated discretionary fund manager. It acts on behalf of customers who invest in various businesses, including the wholesale purchase at discounted prices of tickets for sporting events, which are then resold to the public at face value. This business is conducted through various entities, which include both Claimants. Investors become members of one or more of these entities. Although there may be no identity of interest between the memberships of the different LLPs, what unites them is that their members are all customers of Octopus, which arranges investments on their behalf. It is common ground that such arrangements had previously been made in respect of tickets for matches played by Rangers Football Club plc ("Rangers").
On 13 October 2010 Ross Bryan, who was then an investment manager with Octopus, met with Mr Whyte and his associate Phil Betts. Following the meeting Mr Bryan sent a £20 million funding proposal involving the pre-purchase of season tickets for Rangers. Mr Whyte claims that this email was never received, but in my judgment nothing turns on this, since it was sent again on 20 October.
On 21 October 2010 Mr Bryan emailed Mr Whyte enclosing non-binding heads of terms which he had signed. The heads of terms were typed on letterhead bearing the logo "Ticketus" in large print at the top and the words "Ticketus LLP" in smaller print at the bottom. They were addressed to Mr Whyte and headed "proposal to pre-purchase Rangers FC Season Tickets pursuant to acquiring Rangers FC." They began with the following words:
"Based on the information we have discussed I would like to confirm the terms on which Ticketus 2 LLP, a trading company of Octopus Investments ('Ticketus') would be willing to purchase in advance season tickets to watch [Rangers] play. The terms set out below are subject to the successful acquisition of the Club by Mr Craig Whyte …".
According to Mr Bryan's witness statement, he sought approval in principle from Octopus's Investment Committee ("the Committee") on 28 October 2010. He states that the Committee had real concerns and therefore attached importance to the due diligence which was required. He further states that he advised the Committee on 8 December 2010 that Mr Whyte would be required to give a deed of guarantee and to provide a net asset statement.
On 16 December 2010 Mr Whyte emailed a director's questionnaire ("the Questionnaire") to Mr Betts to be forwarded to Mr Whyte. Mr Bryan's email said:
"This and the net asset statement should paint the picture IC [i.e. the Committee] are looking for."
It appears that at this stage Mr Whyte was proposing to acquire the share capital of Rangers through a special purpose vehicle. However, the acquisition of Rangers did not take place at the end of 2010. On 7 February 2011 Mr Bryan sent an email to Mr Whyte and Mr Betts. He said that, in order to have the funding in place by the end of February, it would be necessary to complete certain paperwork and due diligence, including the Questionnaire (which he attached) and net asset statement for Mr Whyte. He referred in the email to the documents which would be part of the funding arrangement, including the Ticket Purchase Agreement.
On 28 February 2011 Mr Betts sent an email to Mr Bryan (copied to Mr Whyte) asking whether he was still waiting for anything. Mr Bryan replied as follows:
"Craig — I don't have your directors questionnaire. Much of it would be n/a [not applicable] I imagine, but most relevant are
a) have you ever been disqualified as a director
b) had a company you were involved with investigated or inspected by the LSE, FSA or other financial regulatory body".
Mr Whyte replied by email on the same day saying:
"I have attached the directors questionnaire. I'm not near a scanner right now so it's unsigned. Let me know if you need anything else."
The attached document was headed as follows:
"This Questionnaire has been prepared in connection with the proposed provision of funds via a ticket purchasing mechanism to a BidCo controlled by Mr Craig Whyte in relation to the acquisition of [Rangers]. It forms part of the exercise undertaken by the Octopus Investment Committee to assess whether each Company is an appropriate recipient of funds. It is an important document and you should therefore answer all questions truthfully and without omission."
Question 6.3 asked Mr Whyte whether he had ever been accused of any fraud or other misconduct in connection with the formation or management of any company or other business. Question 6.6 asked if he had ever been disqualified as a director. The answer to both questions was "no". The form concluded with a declaration that the answers were true, complete and not misleading in any way. As I have said, the form was unsigned but was enclosed with Mr Whyte's email to Mr Bryan.
Mario Berti, who was Chairman of the Committee, has made a statement confirming that Mr Bryan reported to the Committee meeting on 28 October 2010, and that the Committee had reservations. He says that on 3 March 2011 Mr Bryan also reported to the Committee on the arrangement which was then proposed and on the material provided by Mr Whyte. Mr Bryan's statement is to the same effect, but he does not mention the date of the March Committee meeting. Mr Berti additionally states that Mr Bryan also reported on the due diligence enquiries into Mr Whyte, including the material provided by Mr Whyte.
The Claimants have not produced Mr Bryan's reports to the Committee or the minutes of the relevant Committee meetings. However, there are statements from the remaining 3 members of the Committee confirming Mr Berti's statement.
The Committee approved the funding arrangement which was completed on 9 May 2011. In the event, the Committee decided that funding would be provided by both Claimants. It appears that the transaction was structured differently from the original intention. Instead of providing funds to "BidCo" for the acquisition of the shares in Rangers, Mr Whyte bought the shares for £1 and the funds were provided direct to Rangers.
Rangers went into administration on 14 February 2012 and is now in liquidation. In the current proceedings the Claimants sue the parties to the agreements made in May 2011, including Mr Whyte who gave a guarantee. They also claim damages from Mr Whyte for fraudulent misrepresentation, and it is this claim for which the Master has given summary judgment.
The Particulars of Claim allege that claims were brought against Mr Whyte by the liquidators of Vital UK Ltd for misfeasance and were settled for £150,000 in 1998. It is also alleged Mr Whyte was disqualified from acting as a director for a period of 7 years in or about June 2000. These allegations are admitted in the Defence.
The Master's judgment
In his reserved judgment dated 5 April 2013, the Master gave summary judgment for the Claimants on the basis that there was no real defence to the following:
i) That the admittedly false representations made by Mr Whyte in the Questionnaire constituted a deceit;
ii) That the representations were made to a class of persons which included the both Claimants;
iii) That the Claimants relied on the misrepresentations and were thereby induced to enter into the funding arrangement; alternatively there is a presumption of fact that a person who enters into an arrangement following a fraudulent misrepresentation does so in reliance on it, and this presumption had not been rebutted;
iv) That the Claimants suffered loss amounting to more than £17 million plus interest; and
v) That Mr Whyte's pleaded set-off, based on a collateral warranty, failed.
vi) Additionally, the Master held that there was no other compelling reason for a trial, having regard to the Overriding Objective.
Grounds of appeal
Mr Whyte's appeal is limited to conclusions ii), iii) and vi) above. It is important to note that there is no challenge to conclusion i). Mr Whyte therefore accepts, at least for the purpose of this appeal, that the answers to the Questionnaire constituted a fraudulent misrepresentation, i.e. a false statement made "(1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false" ( Derry v. Peek (1889) 15 App Cas 337 at 374).
The 6 grounds of appeal are that Mr Whyte has a real prospect of successfully defending on the basis (in summary) that:
i) The answers to the Questionnaire had no causative effect, and in particular there was evidence to rebut the presumption of inducement;
ii) The First and/or Second Claimants were not within the class of representees to whom the representation was directed when made;
iii) The Claimants' failure to produce the minutes of the Committee meetings and investment reports was a further reason why the Master should not have found that there was inducement;
iv) The...
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