Do you need to be aware of a false representation to bring a successful deceit claim?

What are deceit claims?

Under English and Welsh law, deceit claims are based upon fraudulent misrepresentation. In its judgment, the Privy Council summarised deceit claims as involving “a simple and perfectly general principle: a person who causes another person to suffer loss by deceiving that other person is liable to compensate the other person for such loss”.

What do successful deceit claims require?

Deceit claims therefore require:
1. A false representation made by the defendant to the claimant.

2. The defendant either knew that the representation was false, or was reckless as to whether the (false) representation was true or false.

3. The defendant intended that the claimant would rely upon the (false) representation.

4. The claimant did rely upon the (false) representation and suffered loss as a result of doing so.

What key issue was considered in Bermuda and by the Board of Privy Council?

Unfortunately, there are conflicting authorities in English and Welsh law as to whether it is a legal requirement of a successful deceit claim for a claimant to have a conscious awareness or conscious understanding of the (false) representation made by the defendant (see, for example, Raiffeisen Zentralbank Österreich AG v Royal Bank of Scotland plc [2010] EWHC 1392 (Comm) as opposed to Gordon and Teixeira v. Selico Ltd. and Select Managements Ltd (1986) 18 H.L.R 219).

The Bermudian Courts and the Privy Council therefore considered this key issue.

At first instance, the Chief Justice of Bermuda determined that the fraudulent misrepresentations by Credit Suisse Life’s agent had induced Mr Ivanishvili to enter two life insurance policies with Credit Suisse Life. In doing so, the Chief Justice of Bermuda considered that by Credit Suisse Life’s agent proposing the life insurance policies, Mr Ivanishvili had been induced to believe that Credit Suisse Life’s agent did not intend to manage the policy assets fraudulently.

However, the Court of Appeal of Bermuda dismissed Mr Ivanishvili’s deceit claim as he had not pleaded or proved that he was consciously aware or consciously understood the (false) representations that were made to him by Credit Suisse Life’s agent.

As the case had proceeded on the basis that Bermudian law was the same as English and Welsh law, the Privy Council (which includes several justices of the UK’s Supreme Court) considered the conflicting authorities under English and Welsh law, and determined that as Mr Ivanishvili had entered the life insurance policies on an unconscious assumption caused by Credit Suisse Life’s agent (false) representation, he was entitled to rely upon the (false) representation for the purposes of his deceit claim.

And what does this judgment mean in practice and for future deceit claims in England and Wales?

In practice this judgment strongly suggests that a successful deceit claim may no longer require a claimant to prove that they were aware of, or had an understanding of, the (false) representation made by the defendant.

Whilst the Privy Council’s decision is not binding upon the English and Welsh courts, it is likely to be very persuasive in future deceit claims in England and Wales. So, claimants not being consciously aware of the (false) representation or consciously understanding the (false) representation, is now less likely to frustrate future deceit claims in England and Wales following the Privy Council’s judgment.

Our Disputes team has significant experience advising businesses of all conceivable sizes, alongside other organisations and high-net worth individuals, within the UK and outside it, including helping them navigate all major arbitral and court fora. Our expertise includes bringing and defending fraudulent misrepresentation and deceit claims (often with an international element), within the specialist courts, across a variety of sectors. If you need help, please get in touch.