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 the basis that the claimant bank had itself been at fault and contributorily negligent.
Held: In the case of a plaintiff, ‘fault’ meant ‘negligence, breach of statutory duty, or other act or omission’ which would give rise to a common law defence of contributory negligence. Under Edgington, if a fraudulent representation was relied upon, other reasons for making the payment were irrelevant. As to the liability of the director his representation was also that of the company, but he did not escape personal liability.
Lord Hoffmann said: ‘if a fraudulent representation is relied upon, in the sense that the claimant would not have parted with his money if he had known that it was false, it does not matter that he also had some other negligent or irrational belief about another matter and, but for that belief, would not have parted with his money either. The law simply ignores the other reasons why he paid.’
Slynn, Mustill, Hoffmann, Hobhouse, Rodger LL
Times 07-Nov-2002, Gazette 09-Jan-2003, [2002] UKHL 43, [2002] 3 WLR 1547, [2003] 1 AC 959, [2003] 1 All ER 173, [2002] CLC 1330, [2003] 1 LLR 227, [2002] BCC 846, [2002] 2 All ER (Comm) 931, [2003] 1 BCLC 244, [2003] 1 Lloyd’s Rep 227
House of Lords, Bailii
Law Reform (Contributory Negligence) Act 1945 1(1), Statute of Frauds (Amendment) Act 1828
England and Wales
Citing:
Re-affirmed – Edgington v Fitzmaurice CA 7-Mar-1885
False Prospectus – Issuers liable in Deceit
The directors of a company issued a prospectus, falsely stating that the proceeds were to be used to complete alterations to the buildings of the company, to purchase horses and vans and to develop the trade of the company. In fact it was to pay off . .
See Also – Standard Chartered Bank v Pakistan National Shipping Corporation and Another CA 17-Dec-1996
. .
See Also – Standard Chartered Bank v Pakistan National Shipping Corporation 1998
‘The tort of deceit involves a false representation made by the defendant, who knows it to be untrue, or who has no belief in its truth, or who is reckless as to its truth. If the defendant intended that the plaintiff should act in reliance on such . .
See Also – Standard Chartered Bank v Pakistan National Shipping Corporation and Others (No 3) ComC 27-May-1998
A company making a false statement on a bill of lading would be held liable for the tort of deceit when it knew that the bill must be relied upon by bankers and others making arrangements on its contents. A claimant ‘cannot recover for a loss . .
Cited by:
Cited – Advanced Industrial Technology Corporation Ltd v Bond Street Jewellers Ltd CA 4-Jul-2006
The claimant left a valuable necklace with the defendant jewellers for sale. The jewellers fell into financial difficulties, and the director gave the necklace as security for a loan to the company. The jeweller failed to maintain payments on 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 – Cheltenham Borough Council v Laird QBD 15-Jun-2009
The council sought damages saying that their former chief executive had not disclosed her history of depressive illness when applying for her job.
Held: The replies were not dishonest as the form could have been misconstrued. The claim failed. . .
Cited – Lindsay v O’Loughnane QBD 18-Mar-2010
lindsay_oloughnaneQBD11
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 . .
Cited – Hayward v Zurich Insurance Company Plc SC 27-Jul-2016
The claimant had won a personal injury case and the matter had been settled with a substantial payout by the appellant insurance company. The company now said that the claimant had grossly exaggerated his injury, and indeed wasfiully recovered at . .
Lists of cited by and citing cases may be incomplete.
Company, Torts – Other
Leading Case
Updated: 02 November 2021; Ref: scu.177935