Tort of Deceit claim dismissed

Damages for loss in a tort of deceit claim are not an especially common remedy in social housing fraud cases, despite the facts often, prima facie at least, satisfying the necessary requirements (not least in right to buy or grant of tenancy scenarios) and the landlord being caused financial loss by reason of the tenant’s or some other party’s fraudulent misrepresentations.  See Haringey LBC v Hines [2010] EWCA Civ 1111, [2011] HLR 6 for one such (albeit failed) example.

“Cornerstone on Social Housing Fraud” described the necessary requirements for such a claim in deceit and a recent High Court authority has usefully re-stated the relevant principles and may be of interest to those facing fraudulent misrepresentation cases.

On 26 March 2018 Mr Justice Soole dismissed a claim for damages arising from a failed investment of £1.25 million in Oxford Healthcare Solutions Ltd. The claimant alleged that her investments were procured by the fraudulent misrepresentations of the defendant, but the court rejected both her tort of deceit claim, and the alternative damages claim brought on the basis of breaches of warranty and other contractual terms.

But as noted above, the basic law relating to the tort of deceit was helpfully set out at paragraphs 173 to 183 of the Soole J’s judgment in Barley v Muir [2018] EWHC 619 (QB):

  1. A claimant must establish that there was (a) a representation, and (b) that representation was false, and also (c) was dishonestly made, and finally that (d) it was intended to be relied on: AIC Ltd v ITS Testing Services (UK) Ltd [2006] EWCA Civ 1601, [2007] 1 All ER (Comm) 667 at para. 251 per Rix LJ.
  2. The dishonest representation must be clearly identified, distinctly alleged and as distinctly proved: AIC at para. 254, and Paragon Finance plc v DB Thakerar & Co [1999] 1 All ER 400.
  3. The standard of proof is the civil standard: Re B [2009] 1 AC 11 at para. 13 per Lord Hoffmann.
  4. The representation must be one of fact.  A statement of opinion will not suffice unless the deceit is in the fact that the opinion was not, or not honestly, held or in some further implicit dishonest misrepresentation of fact to be derived from the statement of opinion: AIC at para. 255.
  5. A representation by a professional person in a position where he would be expected to have significantly greater knowledge of the facts represented then did the representee will or may carry an implied representation that the representor or has reasonable grounds for making the statement: Barings plc (in liquidation) v Coopers & Lybrand [2002] EWHC 461 (Ch), [2002] 2 BCLC 410 at paras. 50 to 52.
  6. Whether any and if so what representation has been made has to be ‘judged objectively according to the impact that whatever is said may be expected to have on a reasonable representee in the position and with the known characteristics of the actual representee’…The reference to the characteristics of the representee is important. The court may regard a sophisticated commercial party who was told that no representations are being made to him quite differently than it would a consumer. In the case of an express statement, ‘the court has to consider what a reasonable person would have understood from the words used in the context in which they were used’… The answer to that question may depend on the nature and content of the statement, the context in which it was made, the characteristics of the maker and of the person to whom it was made, and the relationship between them’: Raiffesen Zentralbank Osterreich v Royal Bank of Scotland plc [2010] EWHC 1392 (Comm) at paras. 80 to 82 per Christopher Clarke J.
  7. As to implied representations, the court has to perform a similar task except that it has to consider what a reasonable person would have inferred was being implicitly represented by the representor’s words and conduct in their context : Raiffeisen at para. 83.
  8. As to falsity, it is not necessary for what was said to be entirely correct, provided it is substantially correct, and the difference between what is represented and what is actually correct would not have been likely to induce a reasonable person in the position of the claimant to enter into the contract. The claimant must show that the difference between what was represented and the truth would have been likely to induce a reasonable person in its position to enter into the contract: Raiffensen at para. 149.
  9. As to dishonesty, fraud is proved when it is shown that a false representation has been made (1) knowingly, (2) without belief in its truth, or (3) recklessly, careless whether it be true or false” : Derry v. Peek (1889) 14 App Cas 337 at 374; see AIC at para. 256.
  10. As to recklessness, ‘Not caring, in that context, did not mean not taking care, it meant indifference to the truth, the moral obliquity of which consists in a wilful disregard of the importance of truth…’ : Angus v. Clifford [1891] 2 Ch 449 at 471; see also AIC at para. 257.
  11. As to intent, it is possible to be fraudulent even by means of an ambiguous statement, but in such a case it is essential that the representor should have intended the statement to be understood in the sense in which it is understood by the claimant…or should have deliberately used the ambiguity for the purpose of deceiving him and succeeded in doing so: AIC at para.253; see also Goose v. Sandford [2001] Lloyd’s Rep PN 189 at para. 41.
  12. As to inducement/reliance, the misrepresentation need not be the sole or predominant cause of entering the contract. It is sufficient if it is one of the inducing causes : Ross River v. Cambridge City Football Club [2007] EWHC 2115 (Ch) at [200].

In Barley, as indicated above, the claim in deceit was on the facts dismissed

“196. In my judgment this claim is quite untenable

First, there is no suggestion nor any basis to conclude that any of the statements referred to was untrue. On the contrary, as the evidence shows and I accept, they were honest and truthful accounts of the business opportunities which OHS was exploring.

Secondly, the matters to which they related were each no more and no less than ‘business opportunities’ which OHS was duly pursuing. Such opportunities would only have ‘value’ in the event that they developed into a commercial relationship.

Thirdly, and in consequence, there is nothing in the identified texts and information to give rise to the alleged implication that OHS was ‘an active company engaged in revenue generating and/or valuable business’ (POC para.22). On the contrary, the only implication was that OHS was actively pursuing a range of business opportunities in the hope that one or more of these might result in valuable business and the generation of revenue. This includes the Quest e-mail of 10 October 2011 which contained no misleading inference.

Fourthly, Mr/Mrs Barley knew long before October 2012 that the Lloyds and Quest joint ventures had failed.

Fifthly, and in consequence, I do not accept that Mrs Barley’s further investment was induced by any representation from Mr Muir. In this respect I also do not accept Ms den Besten’s further or alternative argument that the second investment was induced by the matters relied on as Initial Misrepresentations. This follows from my earlier findings. The statements made by Mr Muir in September 2011 did not influence her decision to exercise the option to make a further investment.”