Let the seller beware—full disclosure is essential, says Jane Johnson
Fraudulent misrepresentation is notoriously difficult to prove and such an allegation is not taken lightly by the judiciary such that if not proved, then the party failing to make out such a claim may be penalised in costs. The case of Erlson Precision Holdings Limited (formerly GG132 Ltd) v Hampson Industries plc [2011] EWHC 1137 (Comm) demonstrates what is required to show the necessary mens rea for a successful action.
The facts
The claimant bought Hampson Precision Automotive Limited (HPA), which was a subsidiary of the parent company, Hampson Industries plc (Hampson), on 22 June 2010. The companies produce components for the automotive and aerospace sector respectively. An information memorandum was prepared as part of the pre-contractual documentation; this included a lot of information which was relevant to the sale of the business. For example, the products manufactured by HPA, its facilities, the market in which it operated, financial performance, its historic net position and a list of some of the customers
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