Generic selectors
Exact matches only
Search in title
Search in content
Post Type Selectors
Back to all news

Nicholas Goodfellow on Holyoake v Kandy: A multiplicity of lies but not deceit in the property world

On 21 December 2017, judgment was handed down in the much publicised dispute in the property world between (amongst other parties) Mr Mark Holyoake, Mr Nicholas Kandy and Christian Kandy (“the Kandy Brothers”).

In a 193-page judgment, Mr Justice Nugee (“the Judge”) rejected all of the claims brought by Mr Holyoake and Hotblack Holdings Limited (“Hotblack”) against the Kandy Brothers and various other defendants.  The claim included a variety of tortious claims including: deceit; duress; undue influence; intimidation; extortion under colour of due process; unlawful interference with economic interests; and unlawful means conspiracy.

The purpose of this article, by Nicholas Goodfellow, is to focus on the deceit claim.

The claim concerned a property known as Grosvenor House Gardens (“GGH”) which was purchased by Hotblack on 13 October 2011.  The acquisition was made possible by a loan that was entered into between CPC Group Ltd and Mr Holyoake personally (“the Loan Agreement”).

After the acquisition of GGH, CPC queried the sufficiency of a ‘net asset statement’ that Mr Holyoake had provided as part of the terms of the Loan Agreement.  On 29 November 2011, CPC confirmed its opinion that Mr Holyoake was in default under the Loan Agreement, which led to a series of supplemental agreements between CPC and Mr Holyoake, rescheduling and varying the loan terms, some of which were against the background of threatened legal proceedings.  These agreements included a supplemental loan agreement signed in February 2012.

Hotblack did not complete the development of GGH and sold it in February 2014 for over £86 million.  The sale enabled Hotblack to repay CPC, and two other principal lenders, but overall the project made a substantial loss.  The claimants sought damages for loss of profit in excess of £100 million.

Lies on both sides
Rather unattractively for both sides of the dispute, the Judge made a finding that Mr Holyoake and the Kandy Brothers were each “willing on occasion to lie when they consider their commercial interests justify them in so doing” [10].

Deliberate lies
As part of the deceit claim, Mr Holyoake alleged that he had been induced to seek to pay off the Loan Agreement as soon as he could, and enter into the supplemental loan agreement, by a series of lies in email correspondence on 8 November 2011, that CPC was looking to do a large acquisition with Investec which required it to disclose its own net asset statement to Investec.  This would have revealed the existence of the Loan Agreement to Investec, something which Mr Holyoake was vehemently against.  

The Judge found that the emails from Mr Christian Candy on 8 November to Mr Holyoake contained “a series of deliberate lies” about the position in relation to Investec [172].  It was “flatly untrue” that CPC was looking to acquire a large asset that Investec was selling, or that CPC had to disclose its net asset statement [174].

Belief, reliance and inducement
Despite this, Mr Holyoake did not actually believe Mr Christian Candy when he said CPC was doing business with Investec [175].

Nonetheless, Mr Holyoake framed his case on the principle that it is not necessary to prove that a claimant in a deceit claim actually believed the representation to be true: Hayward v Zurich insurance co plc [2016] UKSC 48.  In Hayward the defendant (Zurich) settled a claim for personal injuries despite being very sceptical about whether his injuries were as extensive as he claimed.  The SC held that it was sufficient for Zurich to show that it was induced to settle because of Mr Hayward’s fraudulent misrepresentations, as a matter of fact, and that Zurich did not need to prove it believed them.

Whilst accepting this principle as a matter of law, the Judge distinguished Hayward on two bases:

  1. In the Hayward case, it could not be said that Zurich actually knew the true position [391].
  2. Zurich settled because of the effect that the fraudulent claim might have on a third party (i.e. the risk that the Court might accept the fraudulent claims), whereas in the instant case there was no third party involved [393].

The Judge considered that it was “difficult to see” how the principle could apply where no third party was involved, unless the representee was taken in and believed what had been said.

The Judge found that what Mr Holyoake was really relying on was the “threat to go to Investec” [394].  The fact that Mr Candy was prepared to make these threats made Mr Holyoake realise that “CPC were not his friends”, and “as a result he decided to try and repay them”.  The Judge also found that “the fact that Mr Candy was prepared to resort to lies to justify the threats reinforced the point…” [394].

Claims in deceit which do not rely on the claimant’s belief in the lies proffered are likely to be rare, and difficult to make out.

Establishing deceit based on the possible consequences of a defendant’s willingness to lie, does seem to run counter to the essence of a typical deceit claim.  That said, Hayward establishes that inducement can be established because a third party might believe the lies being proferred.  It is not entirely clear though why a third-party needs to be involved.

If a person’s propensity to lie causes someone to act differently, because of the effect this has on how that person’s actions are viewed by the claimant himself, should this not also come within the scope of the Hayward approach?  The answer may be that the third-party requirement is probably not essential, but given that the Hayward decision sits at one end of the spectrum, the Courts are likely to be slow to extend that principle further unless there is good reason to do so.  A case where the claimant is also found to be lying when it supports his own commercial interests, is unlikely to be a good place to start.

Related Members
Shortlist Updated