The claimant had purchased Euros through a foreign exchange dealer. The dealer company became insolvent, causing losses to the claimant, who sought to recover from the company’s managing director, the defendant, saying that he was aware of the insolvency but had continued to trade using the claimant’s money to pay creditors rather than placing it in a client account.
Held: The claim succeeded. The Act was not to be used to evade liability for fraud, and ‘ the defendant did impliedly represent (i) that the business of FX Solutions was being carried out properly and legitimately, in other words that the company was not insolvent and (ii) that the claimant’s monies would be held on trust until used to buy foreign exchange for the claimant. On any view those representations were false to the knowledge of the defendant and were accordingly fraudulent, since by the time they were made on 5 June 2008, the defendant knew that FX Solutions was insolvent and that the monies paid by the claimant would not be held on trust but would be used to pay other creditors with a view to keeping the company afloat as long as possible by ‘robbing Peter to pay Paul’.
Flaux J
[2010] EWHC 529 (QB), [2012] BCC 153
Bailii
Statute of Frauds (Amendment) Act 1828 6
England and Wales
Citing:
Cited – Derry v Peek HL 1-Jul-1889
The House heard an action for damages for deceit or fraudulent misrepresentation.
Held: The court set out the requirements for fraud, saying that fraud is proved when it is shown that a false representation has been made knowingly or without . .
Cited – Hornal v Neuberger Products Ltd CA 1956
Proof Standard for Misrepresentation
The court was asked what was the standard of proof required to establish the tort of misrepresentation, and it contrasted the different standards of proof applicable in civil and criminal cases.
Held: The standard was the balance of . .
Cited – AIC Ltd v ITS Testing Services (UK) Ltd (‘the Kriti Palm’) CA 28-Nov-2006
The defendant appealed a finding of deceit. Having issued its certificate as to the quality of a cargo of gasoline, it then failed to disclose to the party who had paid it to produce the certificate, information it had which cast doubt on the . .
Cited – Dadourian Group International Inc and others v Simms and others CA 13-Mar-2009
Arden LJ summarised the approach to be taken by a court faced with an allegation of fraud: ‘Their Lordships affirmed the decision in Re H and provided an explanation of what Lord Nicholls’ judgment meant. Baroness Hale (with whom the other Law Lords . .
Cited – Contex Drouzhba Ltd v Wiseman and Another CA 20-Nov-2007
The defendant was a director of a company. He signed a letter for the company promising to pay for goods ordered. The representation was found to have been made fraudulently because he knew the company was insolvent, and unable to pay. He now . .
Cited – Dadourian Group International Inc and others v Simms and others ChD 10-Apr-2008
Warren J said: ‘As to that, the judge directed himself in law . . as follows: ‘it is a question of fact whether a representee has been induced to enter into a transaction by a material misrepresentation intended by the representor to be relied upon . .
Cited – Lyde v Barnard CExC 1836
The question before the court was whether a misrepresentation, that a particular fund in which Lord Edward Thynne had a life interest was charged with only three annuities, was a representation relating to Lord Edward’s credit or ability within the . .
Cited – Briess v Woolley HL 1954
A fraudulent misrepresentation made in the course of pre-contractual discussions by a shareholder in a company. He was subsequently authorised by the other shareholders to continue the negotiations as their agent, and in due course a contract was . .
Cited – Standard Chartered Bank v Pakistan National Shipping Corporation, Standard Chartered Bank v Pakistan National Shipping Corporation and Others and Another and Others (Nos 2 and 4) HL 6-Nov-2002
Fraudulent Misrepresentation by Company Director
Fraudulent bills of lading had been issued in order to rely upon letters of credit issued by the bank. The director signing the bills sought to avoid personal liability, saying it was the Act of the company. The defendant company also appealed on . .
Cited – Pasley v Freeman 1789
Tort of Deceit Set Out
The court considered the tort of deceit. A representation by one person that another person was creditworthy was actionable if made fraudulently. A false affirmation made by the defendant with intent to defraud the plaintiff, whereby the plaintiff . .
Cited – Trustor Ab v Smallbone and Another (No 2) ChD 30-Mar-2001
Directors of one company fraudulently diverted substantial sums to another company owned by one of them. The defrauded company sought return of the funds, from the company and from the second director on the basis that the corporate veil should be . .
Cited – Ben Hashem v Ali Shayif and Another FD 22-Sep-2008
The court was asked to pierce the veil of incorporation of a company in the course of ancillary relief proceedings in a divorce. H had failed to co-operate with the court.
After a comprehensive review of all the authorities, Munby J said: ‘The . .
Cited – Contex Drouzhba Ltd v Wiseman and Another CA 20-Nov-2007
The defendant was a director of a company. He signed a letter for the company promising to pay for goods ordered. The representation was found to have been made fraudulently because he knew the company was insolvent, and unable to pay. He now . .
Cited – Claymore Services Ltd v Nautilus Properties Ltd TCC 20-Mar-2007
In order to reflect the principle that interest should reflect the status of the successful party and the rate at which they would be able to borrow commercially, the court may consider awarding a higher rate of interest than 1% over Bank of England . .
Cited by:
Cited – Golden Ocean Group Ltd v Salgaocar Mining Industries Pvt Ltd and Another ComC 21-Jan-2011
The defendants sought to set aside orders allowing the claimants to serve proceedings alleging repudiation of a charterparty in turn allowing a claim against the defendants under a guarantee. The defendant said the guarantee was unenforceable under . .
Lists of cited by and citing cases may be incomplete.
Torts – Other, Company
Updated: 12 January 2022; Ref: scu.403367