Peekay Intermark Ltd v Australia & New Zealand Banking Group Ltd
Court of Appeal
Citations:  EWCA Civ 386;  2 Lloyd’s Rep 511;  1 CLC 582;  CLY 766.
Peekay (the first claimant) was an investment. The second claimant used them to trade investments in the United Arab Emirates. The defendant developed an investment product they described as a ‘structured US Dollar hedged Russian Treasury bill deposit’. Repayment was linked to the performance of a Russian government issue bond known as a GKO.
The second claimant expressed an interest in the product after speaking to the defendant’s representatives at a meeting. The defendant sent the second claimant an indicated term sheet entitled ‘High Yield Note linked to Russian GKO Bonds hedged into USD. They then sent a final terms and conditions sheet and risk disclosure statement. The second claimant signed and returned these documents on behalf of Peekay without reading them.
The Russian government then announced a moratorium on its bonds, rendering the GKO worthless. Peekay lost its investment as a result. The claimants sued for misrepresentation. They argued that the defendant had misrepresented the nature of the investment at the initial meeting, making the claimants think Peekay would get a property interest in the GKO.
The defendant responded that if they had read the final terms and conditions, they would have understood the true nature of the investment. Additionally, the defendant contended that the claimants were precluded from arguing that they did not understand the true nature of the investment, since they had signed the contract.
- Did the claimants rely on the defendant’s misrepresentation?
- Did the second claimant’s signature on the contract preclude the claimants from arguing that they did not understand the true nature of the investment?
The Court of Appeal held in favour of the defendant. The final terms and conditions made clear the true nature of the investment. They were the first and only opportunity the claimants had to confirm that the investment was satisfactory. The defendant had not told the second claimant not to bother reading the document or explain its effect.
In those circumstances, the claimants were not relying on the defendant’s misrepresentations. Rather, they relied on their own assumption that the defendant would alert them to any discrepancy between the contract and the earlier representations.
In any event, the claimants were precluded from arguing that they did not understand the true nature of the product by the fact that they had signed the contract.
This Case is Authority For…
A misrepresentation can be corrected if the truth is brought to the innocent parties’ attention prior to contracting. It is not enough that the innocent party could have discovered the truth. The defendant must show that they did in fact discover the truth.
However, as this case shows, the even if the defendant did not do enough to correct the misrepresentation, the claimant still needs to show that they relied on it.
A parties’ signature on a contractual document containing the correction precludes them from arguing that they were not aware of the correction. This is party of the doctrine that a person who signs a document is taken to know its terms, whether they have read them or not.