Get professional advice when investing!
Posted: 4th April 2018
A friend you do not trust is hardly worth having, but warm relations are sadly no replacement for professional advice when it comes to investments.
The point was graphically made by a High Court case in which a woman who put £1.25 million into a friend’s business venture ended up losing every penny.
The woman, a professional who had inherited substantial wealth, and her husband had formed a close social bond with a businessman and his wife. They had children at the same school and the men met regularly for a drink in the pub.
Through her husband, the woman was persuaded to invest in the businessman’s company. It never traded or generated any revenue and was eventually placed in liquidation. She lost the entirety of her investment.
In a bid to recoup the money, she launched proceedings against the businessman, accusing him of, amongst other things, fraudulent misrepresentation and deceit. In ruling on the matter, the Court noted that the absence of independent advice, the informality of settings where the investment was discussed, and the bantering style of various text messages made arriving at the truth much more difficult.
The businessman had admitted repeatedly deceiving the company’s finance director and an accountant in respect of payments that were made to him immediately after the woman’s investment. However, in dismissing her claim, the Court was not persuaded that the businessman had also been dishonest in his dealings with her husband, who had managed her finances. Despite treating the businessman’s evidence with great caution, the Court accepted that, in all respects, he had an honest belief in the truth of what he had told the husband.