Lisitsin wins £1.4m fraud claim against Wharf Land Investments and others

Russian investor Pavel Lisitsin today won his £1.4m high court damages claim for fraud over a development site near Reading. Deputy Judge V Rose found in favour of Lisitsin’s company, Ludsin Overseas, in his claim against parties including: property manager Wharf Land Investments; one of its directors, Douglas Maggs; the agents that recruited him to invest, Eco3 Capital Ltd; and Eco3’s directors Alexander Shadrin and Charles Balfour. The judge found them jointly and severally liable to pay Ludsin £1.4m in damages. Lisitsin successfully claimed that, when he invested the money to help fund the £12.3m purchase of Sandford Farm, he was not told that it was in fact being bought for £9.3m, then immediately sold on to an SPV to achieve a “turn” of £3m. He claimed he was induced by this and other misrepresentations to invest £2m in the purchase in 2005. However, one of the initial defendants, the law firm Forsters, settled the claim against it with the payment of £600,000, and he sought to recover the rest of his investment from the five defendants. Lisitsin alleged that they are jointly and severally liable for his loss after development plans failed to get off the ground, and the SPV, Sandford Farm Property, defaulted on loans and receivers sold the land for £15m, which only just covered its debts. Finding in his favour, the judge said: “I find that Dr Shadrin and Eco3 did fraudulently misrepresent to Ludsin the nature of the transaction in which Ludsin was investing £2m. I also find that, in making those misrepresentations, Dr Shadrin and Eco3 acted as agents for Wharf Land Investments, Mr Maggs and Mr Balfour, and that those defendants knew about and connived in the making of those misrepresentations.” She added: “I conclude that Mr Maggs and Mr Balfour were fully aware of and complicit in the fact that Dr Shadrin had not disclosed the two-tier structure of the deal to Mr Lisitsin, and that, so far as Mr Lisitsin was concerned, the deal was a straightforward purchase of the site from Hicks Persimmon by Sandford farm Property for about £12.25m. “All the defendants are therefore jointly and severally liable to Ludsin for the loss suffered which amounts to £1,400,000.” After the site was sold, the new owner Woodley Developments – of which, Ludsin alleged, Maggs and Balfour are also directors – was able to secure planning permission for residential development and sold the site on to Taylor Wimpey for £27m in August 2010. Ludsin Overseas Ltd v Eco3 Capital Ltd and others Chancery (Deputy Judge Vivien Rose) 19 July 2012 Mark Cunningham QC and Gregory Banner (instructed by Wallace LLP) for the claimant Mark Bishop QC and Sarah O’Kane (instructed directly) for the 1st and 2nd defendants (Eco3 and Shadrin) Mark Warwick (instructed by Jeffrey Green Russell) for the 3rd, 4th and 5th defendants