Vegesentials Ltd & Anor v Shanghai Commercial & Savings Bank Ltd [2024] EWHC 7 (Ch) is a judgment, as Matthew Hoyle also notes, without reference to authority, and it surprisingly succinctly deals with the applicable law issue for misrepresentation under the Rome II Regulation (readers will be aware that Rome II is what used to be called retained EU law and is now ‘assimilated’ law).
Claimants seek damages from the defendant bank for fraudulent misrepresentations set out in a letter signed and stamped by the bank’s former corporate banking relationship manager of the Chung-Li Branch in Taiwan, to the effect that potential investors had free funds to invest £20 million in a new product, ‘FibreWater’ (chicory inulin, with testified health effects; FibreWater does not need to be chilled, and has a longer shelf life, and higher margins, than fruit and vegetable drinks) which the first claimant was developing. The second claimant was incorporated for the purpose of this claim, and was assigned the first claimant’s rights in the product. Claimant also entered into a sponsorship agreement with the tennis player Sir Andy Murray for him to sponsor FibreWater.
It is now conceded by the defendants that those investors, companies incorporated in Hong Kong and Anguilla respectively, had no such funds and that the manager made the fraudulent misrepresentations knowing them to be false and intending that it should be relied upon by the claimant. No funds were forthcoming, and FibreWater did not proceed. The claimant says that had the misrepresentations not been made, it would have continued to engage with alternative investors, and there was a real chance that investment would have been secured so as to allow the product to be successfully produced, marketed and sold and to become profit making.
Fraudulent misrepresentations are conceded, liability is not. The bank raises issues as to the applicable law, whether the claimant in fact relied on the misrepresentation, whether the bank is vicariously liable, as to causation and as to quantum.
Article 4 Rome II reads
“1. Unless otherwise provided for in this Regulation, the law applicable to a non-contractual obligation arising out of a tort/delict shall be the law of the country in which the damage occurs irrespective of the country in which the event giving rise to the damage occurred and irrespective of the country or countries in which the indirect consequences of that event occur.
2. However, where the person claimed to be liable and the person sustaining damage both have their habitual residence in the same country at the time when the damage occurs, the law of that country shall apply.
3. Where it is clear from all the circumstances of the case that the tort/delict is manifestly more closely connected with a country other than that indicated in paragraphs 1 or 2, the law of that other country shall apply. A manifestly closer connection with another country might be based in particular on a pre-existing relationship between the parties, such as a contract, that is closely connected with the tort/delict in question.”
Claimant submits that the damage it claims to have suffered occurred in E&W because the share purchase agreement was governed by the law of England and Wales and provided for the payment of monies into the claimant’s bank account with Barclays in E&W. Any monies paid by the investors would also have been paid into that account. The claimant is incorporated in E&W and conducted most of its business there. Most of the lost profits claimed arise from the supply to UK retailers. Finally the sponsorship agreement with Sir Andy Murray is governed by English law.
Claimant also submits that the default rule is not displaced by A4(3), because the fraud relied on is not “manifestly more closely connected” with Taiwan. The claimant had no pre-existing relationship with the bank.
The bank submits that the fraud was part of a larger scheme and was planned, orchestrated, and implemented in Taiwan, and there are indications of such a larger scheme in the subsequent criminal proceedings against the manager. Jarman J [32] dismisses the relevance of this, pointing out that “it is not clear precisely who was involved in planning the scheme or where they were located at the time. All that is clear is that [the manager’s] involvement was at a time when he was based in Taiwan.” The bank further submits that the core misrepresentative Letter was concerned with a bank account in Taiwan. The judge again dismisses this, saying [32] “However, the ultimate purpose of [the letter] was to confirm the ability of the investors, incorporated elsewhere, to transfer monies in Pounds and Euros for a shareholding in a company incorporated here to develop business in the UK and Europe.”
[33] the conclusion on applicable law is
In my judgment, the claimant’s submissions on this point are to be preferred. Under Article 4(1) the damage relied upon occurred in this jurisdiction. Although some of the facts relied upon arose in Taiwan, as indicated above, it is not the case that the fraud was manifestly more closely connected with Taiwan within the meaning of Article 4(3). Accordingly the applicable law is that of England and Wales.
Most cases concerning fraudulent misrepresentation concern subsequent acting upon the fraud: see eg Abu Dhabi Commercial Bank Pjsc v Shetty & Ors: In the case of a misrepresentation or fraud, the locus damni is held to be the place where that misrepresentation is acted upon; or Avonwick Holdings: not so much for the (poor) A4(1) analysis in that judgment but rather the A4(3) displacement, and to some degree the potential for the lex contractus (of the contract said to have been missed) to play a role.
I feel there is more to be said about both the A4(1) and 4(3) application than succinctly touched upon in the judgment, in cases where the misrepresentation leads to missed opportunities, rather than to regretted action.
Geert.
EU Private International Law, 4th ed, 2024, 2.443.
gavc law - geert van calster 