Next Generation Holdings Limited & Anor v Alec Finch & Anor

Facts

NGHL and AFL (formerly AFL Insurance Brokers Limited) brought claims against Alec Finch and his son Bob Finch, former directors of AFL. NGHL claimed fraudulent misrepresentation and breach of warranty over its 2017 purchase of a majority shareholding in AFL from Alec Finch. AFL claimed damages for breach of fiduciary duty and unlawful means conspiracy, alleging that before the sale the Finches had improperly used client money held on trust to fund AFL's business expenses, and had conspired with AFL's then CFO, Keely Dalfen, to falsify accounting records to disguise the resulting deficit and misrepresent AFL's profitability to induce the sale. After the sale, NGHL invested further capital in ignorance of the fraud; the fraud came to light in 2020, prompting further capital-raising to repay the misappropriated client money, before parts of AFL's business were sold and the remainder wound down solvently. At trial before HHJ Johns KC, sitting as a Judge of the High Court, the judge found a £3,510,000 deficit in AFL's client money accounts as at the 2017 sale date, caused by the Finches' fraud, and held them liable to NGHL and to AFL, awarding AFL substantial damages including trading losses calculated using the client money deficit as a proxy. The Finches appealed, with permission limited to whether AFL's trading losses were legally caused by their wrongdoing.