Practice and Procedure


PUBLISHED May 2, 2003

The defendants had deceived the claimants into entering into finance agreements by representations which they knew to be false, had no honest intention of fulfilling and on which they knew the claimants would rely.Claims by the claimant ('C') alleging deceit and conspiracy to defraud on the part of the defendants ('D'). The first and second defendants ('M') were one and the same person, "Marcus de Berg" being described as his trading name. Other defendants included M's wife and companies controlled by them. The claims arose out of three financing transactions between C and D. They concerned the supply by D of photocopying equipment and C claimed that D represented orally and in writing that they would discharge C's existing liabilities under equipment leasing agreements. In fact, none of those liabilities was discharged and C's total repayment to D under three finance leases was ?43,000 each quarter, in addition to the existing liabilities. All that C received in return were five photocopiers worth approximately £20,000. An addendum to the leasing proposals ('the addendum') stated that the agreements encompassed C's full contingent liability under the existing finance agreements, and C argued that prior correspondence between the parties confirmed that those were the terms on which C believed it had entered into the agreements. D claimed that they only represented that C's existing maintenance liabilities would be discharged, and denied that any representation was made as to discharging the financing liabilities. D also argued that it would have been commercially suicidal for D to have agreed to discharge C's financing liabilities as they were almost as much as D stood to receive from C under the new agreements. D also pointed to the fact that boxes in the agreements referring to discharging other liabilities had been struck through. D argued that one of the agreements clearly showed that D was not providing finance to pay off existing finance. With another of the three agreements, however, D accepted that it contained a written representation to discharge the existing financing liabilities and the only issue was whether D honestly intended to fulfil that commitment. D argued that they did so intend, and were capable of so doing, but that they were prevented from doing so by C bringing these proceedings and alleging fraud and by a police investigation, leaving D unable to raise finance.HELD: (1) The burden of proving deceit lay on C and the standard was on a balance of probabilities. To prove deceit, C had to show that D had made a false representation, knowing it to be untrue or having no belief in its truth or being reckless as to its truth, with the intention that C should act in reliance on the representation, and that C had in fact relied on it. Although evidence on both sides was deficient and uncorroborated in places, M had employed borderline sharp or shoddy practices, for example representing to C that he and his alias were two different individuals, but that was not enough in itself to make out a case of fraud. (2) Two of the finance agreements and correspondence relating to them did contain representations that C's existing financing liabilities would be discharged by D. Any doubts in that respect were dispelled by the contents of the addendum. D knew those representations to be untrue at the time and D intended that C would rely on them, and the court was satisfied that C was induced into entering into the agreements as a result of that reliance. D had no honest intention of fulfilling their commitment. They had no available assets with which to do so and the funds could not realistically have been raised from profits under the other agreements with C or from D's other business. Substantial sums received from C had been withdrawn by M for his personal benefit, leaving insufficient funds to discharge C's liabilities. Therefore, C's claims for deceit and conspiracy to defraud succeeded in relation to those two agreements. (3) The third finance agreement did not contain any such representation, and C's claim in that respect failed on the burden and standard of proof. C's witness had been discredited and his evidence could not overcome the documentary evidence, which showed that no representation was contained in the agreement as to discharging existing financing.Order accordingly.

[2003] EWHC 839 QC