Investors compensated as if failed project had not happened

The High Court has ruled that investors who had been persuaded to place money in a joint venture as a result of deceit should be compensated as if the failed project had not happened.

The investment had been undertaken by Kea Investments Ltd, which placed £129m in a joint venture vehicle.

The court ruled that as Kea had been induced to make the investment by deceit, it was entitled to treat the venture as a constructive trustee of the sum invested. It should therefore have the money returned, together with interest.

The natural way to compensate Kea was to award a rate of interest that represented the rate of return that would have been made had the fund been invested as it should have been.

The court had to make its assessment by reference to the investment returns available generally to trusts with the same general characteristics as the trust in question, namely large private trusts investing through professional investment managers.

Kea had adduced reliable evidence in that regard and, based on that evidence and applying the broad-brush approach prescribed by the legal authorities, the appropriate rate of interest was 6.5%, compounded annually.

Please contact Holly Baker if you would like more information about the issues raised in this article or any aspect of legal disputes and litigation.