Author: Nicola Sharp
13 June 2023
3 min read
Nicola Sharp of Rahman Ravelli details a case that illustrates the difficulty of succeeding in a claim for implied misrepresentations.
Deceit and misrepresentation claims rely on representations being made to the claimant by the defendant. Those representations must be relied on by the claimant, so that the claimant was induced to enter a contract, following which the claimant suffered loss as a result.
Representations can be oral or written, express or implied. Whether or not a representation is implied is a question of fact to be determined in the circumstances of the particular case.
The problem of proving implied representations was highlighted in the recent case of Manish Goyal & Anor v BGF Investment Management Limited & Ors  EWHC 1180 (Comm).
Mr Goyal founded Invenio Business Solutions (IBSL) in 2006. In 2016, relationships between senior management in IBSL became strained and the shareholders (including Mr Goyal) decided to sell the business.
As the company performed well financially in the lead-up to the proposed sale, Mr Goyal changed his mind. Instead, the shareholders agreed to a divestment of some of the shares of certain shareholders. The divestment deal was completed on 16 March 2019.
Following pressure from members of the board, Mr Goyal ceased being the Chief Financial Officer (CFO) of the business, and instead was appointed Chief Investment Officer on 21 June 2019.
After a turbulent board meeting on 29 October 2019, key members of the company decided that Mr Goyal should be dismissed from his employment. He was dismissed on 18 November 2019.
Mr Goyal’s case was that a number of misrepresentations were made to him during the course of the negotiations for the divestment, which induced him to enter into the transaction.
Mr Goyal contended that his understanding, based on those misrepresentations, was that there was no intention on the part of the defendants that he should cease to be the CFO after completion of the divestment deal. Mr Goyal thought he would remain in that position. He says that the true position was that the defendants had intended to remove him as CFO after the divestment.
Mr Goyal said there were eight occasions when things were communicated which gave rise to the implied misrepresentations on which he relied. These occasions were emails, meetings and phone calls.
In terms of the representations alleged to have taken place, the judge found that Mr Goyal gave “implausible” accounts that were “very likely to have been tailored to fit the case the claimants now seek to advance”. Instead, the defendant’s recollection of the gist of the meeting was more compelling and more likely to be true. In any event, if the representations had occurred in the way Mr Goyal had described, they did not give rise to any implied representations as to the other’s intentions.
The sorts of evidence that Mr Goyal put forward to imply a representation included the defendant saying “sounds good” at the end of a conversation. Or the defendant saying that he would “continue to benefit from [Mr Goyal] as the CFO”, when (Mr Goyal alleges) he had no intention of keeping him on after the divestment.
In all eight instances, the statements purported to be implied representations appeared strained and the judge considered they “would not reasonably have been understood to carry with them implied representations.”
The general tests for the implication of a representation are (i) consider what a reasonable person would have understood from the words used in the context in which they were used and (ii) consider what a reasonable person would have inferred was being implicitly represented by the representor's words and conduct in their context.
Whether representations were made must be judged objectively according to the impact of the words - what would a reasonable representee in the same position think?
In deciding the outcome in Manish Goyal v BGF Investment Management Ltd, Mr Justice Butcher distilled a number of principles from the relevant authorities:
The authorities paint a picture of how difficult it is to succeed in a claim for implied misrepresentations. That is possibly because the courts can generally be said to take a sceptical approach towards implied terms. The more difficult it is to formulate the terms of the implied representation, the more reluctant the court will be to accept that it should be implied.
This judicial scepticism often reflects a suspicion of the court that the claimant is seeking to manufacture a case after the event with the benefit of hindsight. The judgment in Manish Goyal v BGF Investment Management Ltd certainly has an air of this cynicism.
 (i) Marme Inversiones 2007 SL v NatWest Markets Plc  EWHC 366 (Comm), (ii) IFE Fund SA v Goldman Sachs International  2 CLC 1043 (iii) Raiffeisen Zentralbank Osterreich AG v RBS  EWHC 1392 (Comm) (iv) Moto Mabanga v Ophir Energy PLC and anor  EWHC 1589 (QB) (v) Deutsche Bank AG v Unitech Global Ltd  EWCA Civ 1372 (vi) Property Alliance Group (PAG) v RBS  EWHC 3342
Nicola is known for her fraud, civil recovery, arbitration and business crime expertise, her experience of leading the largest financial disputes and multinational investigations and her skills in devising preventative measures and conducting internal investigations for corporates.