Fraud, Dishonest Conduct and the Tort of Deceit

The tort of deceit is founded on the notion that a falsehood is made with the intention that it should be acted on by the party receiving it. The tort requires the claimant to prove a fraudulent intention.

The modern law of the tort is based on the decision of Lord Hershell in Deek v Peek (1889). In that case, the elements of the tort were determined to be as follows:

“In order to sustain an action of deceit, there must be proof of fraud, and nothing short of that shall suffice. Secondly, fraud is shown that a false representation has been made:

1) Knowingly, or

2) Without belief in its truth, or

3) Recklessly, carelessly whether it be true or false.

Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states. To prevent a false statement being fraudulent, there must, I think, always be an honest belief in its truth. And this probably covers the whole ground, for one who knowingly alleges that which is false, has obviously no such honest belief. Thirdly, if fraud be proved, the motive of the person guilty of it is immaterial. It matters not that there was no intention to cheat or to injure the person to whom the statement was made.”

Deceit presupposes that a misrepresentation has been made. The misrepresentation must be of present fact or law; and may be made by words or conduct. Further, the misrepresentation may indicate approval or support for a false representation made by some third person. In this way, to make out an allegation of fraud, words, conduct or a document must misrepresent a present fact or law, and others supporting the misrepresentation may also be liable.

The tort of deceit requires that the claimant acts upon the statement, that is to say relies upon it. If it may be shown that the claimant would have acted in the same way in the event that the representation was not made, an action in deceit will be dismissed. In essence the attempt to deceive on the part of the representor must be successful. The representation is not required to be the sole statement upon which the claimant relied, but it must make a material contribution to the cause of his actions.

Damages

A claimant must show that they have suffered loss as a result of their reliance on the misrepresentation. In common with other areas of law, the measure of damages equates to the loss that they have suffered as a result of the conduct of the defendant, and not in the position they would have been if the statement were true. The same applies to this tort.