In Abu Dhabi Investment Company & ors v. H. Clarkson & Company & ors (26 June 2008) the Court of Appeal has held that a special purpose vehicle created by joint venture partners may bring a claim in misrepresentation even where it was not formed when the representation was made.
Abu Dhabi Investment Company (ADIC) entered into a joint venture with Norasia Shipping Limited to operate ten container ships. Norasia made representations to ADIC about the speed, performance and profitability of the vessels which turned out to be false. ADIC subsequently invested in the joint venture through a SPV, Al Shira'a Marine Investments (ASM), which raised capital for the investment from third parties. The joint venture collapsed after 18 months and ASM lost its entire investment.
ASM made claims against Norasia and others, alleging that fraudulent and negligent misrepresentations had induced it to enter the joint venture. The Court of Appeal allowed ASM's claim, despite the fact that ASM had not existed when the misrepresentations were made. The Court found that the misrepresentations were continuing when ASM was formed and that it had always been clear to Norasia that ADIC would invest through a SPV.
This decision shows the willingness of the English courts to hold parties to joint ventures accountable for their representations, irrespective of how the joint ventures are structured. However, such issues can and should be avoided altogether by ensuring that joint ventures agreements incorporate all representations which are being relied on and explicitly exclude reliance on any matters not specifically mentioned.
HFW represented ADIC and the other claimants.
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