Tort - Deceit And Injurious Falsehood

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Deceit - Introduction

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The tort of deceit provides liability for misleading statements.

The main distinction between this and negligent misstatement is that here, the Def intentionally or recklessly made a false statement/representation to the Pl with the intent that the Pl would rely on it.

The following are further distinctions between this and negligent misstatements:

i. Liability for neg. misst. requires “special proximity”; here none is required;
ii. Mens rea higher for deceit: there must be dishonesy, and intention or recklessness, as opposed to mere negligence;
iii. In assessing recovery in deceit, the courts apply the principle of direct consequences, so the Pl may recover all actual loss flowing directly and consequentially from reliance on the false statement.

There are five elements to deceit:

i. Def makes false representation of fact to the Pl;
ii. Def knows it is false, or was reckless as to its truth;
iii. Def intended the Pl to rely on it;
iv. Pl did in fact rely on it;
v. Pl suffered actual loss.

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False Statements and Representations

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Statements = written or oral; express or implied.

Representations = derived from the Def’s conduct.

Silence is general not sufficient to qualify, but material omissions of information may be.

NB: the principle applies to false statements of facts not opinion, e.g.: Smyth v. Lynn (1950).

In practice, it can be difficult to distinguish fact from opinion; note that the words “I believe”/“In my opinion” don’t necessarily save a statement from constituting deceit.

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Gill v. McDowell (1903)

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Pl and Def made a contract for the sale of three cows; one turned out to be a hermaphrodite ox who died shortly after; sale was deemed a statement because the two healthy cattle implicitly suggested the same of the third.

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Smyth v. Lynn (1950)

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The Def auctioneers were found not liable in deceit for false information as to a house’s structural condition in an advertisement; the court held this to be an opinion, not an expert assurance.

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Knowledge of Falsity

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It is essential to prove that the Def knew of – or was reckless as to – the falsity of the statement.

NB: where a Def initially believes a statement to be true, but later discovers its falsity and fails to rectify his statement: he may be liable.

Statements = written or oral; express or implied

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Derry v. Peak (1889)

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Company directors informed shareholders that they were allowed to run steam/mechanical, as well as horse-drawn, trams; however, they actually needed Board of Trade permission, which they later failed to get; a Pl shareholder who had purchased shares in reliance on the statement failed to recover, because there was no evidence that the directors knew of the falsity – it was an honest mistake, and thus not subject to deceit.

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Defendant’s Intention for Reliance

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Pl must show that the Def intended him to act on the false information.

If the Pl is a class of people to whom the information is presented, the Pl must show that the Def intended him to rely on it in an individual capacity.

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Peek v. Gurney (1873)

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Pl relied on false information from a company’s prospectus and bought shares; he failed to recover because the prospectus was intended to be read and relied on by existing shareholders – he did not belong to this class.

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Northern Bank v. Charlton (1979)

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Pl bank sued Def for loan-related guarantees; Def counter-claimed for deceit, arguing they had been induced into signing guarantees after false representations that other investors had already transferred money to the bank for the purpose of the planned takeover; the court held that these facts satisfied the “intention for reliance” test.

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Actual reliance

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Proof that the Pl actually relied on the statement is essential, as it constitutes the causal link between statement and damage.

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Damage

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Test different from negligence; “direct consequences” test. Thus: injury, damage to property, pure economic loss recoverable.

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Injurious Falsehood - Introduction

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This tort protects individuals against false statements about a person’s property, goods or business, which lower the individual in the estimation of others (essentially, defamation in respect of property).

Ratcliffe v. Evans (1892): the court stated that “an action will lie for written or oral falsehoods where they are maliciously published, where they are calculated in the ordinary course of things to produce, and where they do produce, actual damage.”

Thus, the requirements – which radically restrict the tort – are:

i. malicious intention;
ii. damage.

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Ratcliffe v. Evans (1892)

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The court stated that “an action will lie for written or oral falsehoods where they are maliciously published, where they are calculated in the ordinary course of things to produce, and where they do produce, actual damage.”

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Malice

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The Def must have either

(a) known the statement to be untrue, or

(b) must have made the statement with intention of injuring the Pl.

In De Beer’s v. International General Electric (1975):

The test was held to be whether a reasonable man would take the publicised seriously; if so, the Def had to stand by their truth; if he must answer for it.

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Hubbuck v. Wilkinson (1899)

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An advertisement comparing the Def’s product with that of the Pl and based on chemical experiments amounted to no more than a statement that the Def’s product could rival the Pl’s on the market.

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De Beer’s v. International General Electric (1975)

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Where a Def makes claims – apparently based on scientific tests – that his product is better than the Pl’s, and these tests are false, and the Def was either aware of the falsity or reckless as to it, injurious falsehood has been committed.

The test was held to be whether a reasonable man would take the publicised seriously; if so, the Def had to stand by their truth; if he must answer for it.

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Damage

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In most cases, damage can be inferred.

Special damages in the form of proof that property has lost value or that a business has lost custom no longer have to be established:

s. 20 Defamation Act 1961 provides that special damage need not be shown where words are “calculated to cause pecuniary damage to the Pl in respect of any office, profession, calling, trade, or business”.

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s. 20 Defamation Act 1961

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s. 20 Defamation Act 1961 provides that special damage need not be shown where words are “calculated to cause pecuniary damage to the Pl in respect of any office, profession, calling, trade, or business”.