On 9 October 2009 the High Court gave judgment in the case of Invertec Limited v De Mol Holdings BV and Henricus Albertus de Mol arising from a transaction under which Invertec (the claimant) and De Mol Holding BV (DMH) (the first defendant) entered into a Sale and Purchase Agreement (SPA) to enable Invertec to purchase the entire issued share capital of Volante Public Transportation Interior Systems Limited (Volante) from DMH. The second defendant, Mr de Mol, was a director of DMH and its sole beneficial owner. Invertec claimed that it was induced to enter into the transaction by a number of fraudulent misrepresentations made by DMH and Mr de Mol which became warranties in the SPA.
The alleged fraudulent misrepresentations included the following:
- Volante’s July and August 2005 management accounts - Invertec alleged that the management accounts disclosed to Invertec were not prepared in good faith nor on bases consistent with Volante’s management accounts for the year ended 30 June 2005 and that changes made to them were made dishonestly. The High Court upheld Invertec’s claim for breach of warranty and fraudulent misrepresentation in relation to the management accounts.
- Volante’s solvency - DMH warranted in the SPA that it was “not unable to pay its debts within the meaning of s. 123 Insolvency Act 1986”. Invertec alleged that Volante was unable to pay its debts as at 6 October 2005 (which was the date on which the SPA was entered into) and that DMH knew this when the warranty was made. The defendants argued that the effect of the words “within the meaning of s.123 Insolvency Act 1986” was that the solvency warranty contained in the SPA was “merely a warranty that it has not been proved to the satisfaction of a High Court that Volante is unable to pay its debts as they fall due” (at para. 298). The judge disagreed with this argument and held that Volante was indeed unable to pay its debts as they fell due on 6 October 2005 and that DMH’s representation as to solvency prior to and in the SPA was false and dishonestly made.
- Volante’s corporation tax liability with regard to the year ended June 2004 - DMH made representations both prior to and in the SPA that Volante’s corporation tax liability was less than it actually was. The High Court held that this representation was false and dishonestly made.
The High Court held that Invertec was entitled to a sum in damages as consequential loss caused by the fraudulent misrepresentations and that since the fraudulent misrepresentations were largely made by Mr de Mol on behalf of DMH and the agreements were signed by him even though he knew that the representations were false, he was personally liable for the fraudulent misrepresentations and so for the sums due to Invertec.