Fraud - The Lesser-Known Tort of Deceit

Fraud generally means a fraudulent misrepresentation – a deceptive act or omission. From a legal standpoint, fraud can be of a civil or criminal nature.

In this article, the civil branch of fraud takes the forefront. Specifically, the operation of the tort (a wrongful act) of deceit will be examined in greater detail and how it differs from an action under Section 2 of the Misrepresentation Act, Chapter 82:35 (the “MA”).

The tort of deceit aims to safeguard parties  in commercial (business) transactions from being misled through deceitful statements or actions.

Notably, the elements of what constitutes the tort were outlined by Lord Hershall in the judgement of Derry v Peek [1889] as follows:

1. A representation by words or conduct;
2. That representation must be untrue to the knowledge of the maker (of the representation) at the time the representation was made;
3. The maker (of the representation) must make the representation by fraud either deliberately or recklessly in the sense that he or she could not care whether the representation was true or not;
4. The representation must be made with the intention that it should be acted upon by the claimant; and
5. It must be proved that the claimant acted upon the fraudulent representation and thereby suffered damage.

Throughout the years, these elements have been scrutinized in a variety of case law. Some key takeaways include that:

• On Representation: Silence does not constitute a representation. Additionally, statements of opinion or intention do not fall within the definition of a false misrepresentation;
• On the falsity of the representation and knowledge of such: In order to file a claim for the tort of deceit, it is not enough that the defendant was negligent as to whether the representation that was made was false. The defendant should know  that the statement was dishonest or reckless about its truth;
• On Reliance: crucially, the claimant must prove that they had relied on the false representation and further, that the defendant intended the claimant to rely on this false representation; and
• On Damage suffered: although the representation does not need to have been the sole reason that resulted in the loss to the claimant, it must have been one of the factors which together led to the overall loss suffered. 

Although these elements must also be met to justify a claim under Section 2 of the MA, there are some noteworthy differences between them:

• Contract or No Contract: Claims under Section 2 of the MA require the claimant to have entered a contract based on the false representation and can only be made against a party to that contract. In contrast, the tort of deceit has no such restrictions.
• Burden of Proof: The claimant must prove the defendant knew or was reckless about the false statement. In a claim under Section 2 of the MA, the defendant must prove that they had reasonable grounds to believe their statement was true. (Section 3 of MA).
• Extent of Damages:  Damages in a deceit claim are larger than those under Section 2 of the MA, which are limited to reasonably foreseeable losses. In assessing damages in a tort of deceit claim, the aim is to put the claimant into the position they would have been in if no false representation had been made.

Bearing that in mind, it is also worth noting that the Limitation Period operates slightly differently with a tort of deceit claim. Generally, due to the operation of Section 3 of the Limitation of Certain Actions Act, Chapter 7:09 (the “Act”), legal actions (i.e., claims) are time barred after a period of four years from the date on which the cause of action occurred.

However, due to the operation of Section 7 of the Act, the limitation period for bringing a tort of deceit claim does not start until the claimant has discovered, or could have discovered with reasonable diligence, the fraud (i.e., the false representation). Markedly, there is no limitation period attached to criminal fraud matters.

Ultimately, the tort of deceit is grounded in morality. Given the element of dishonesty, the main hurdle in claims of deceit lies in sufficiently satisfying the Court that the representation relied upon was made fraudulently. Provided this hurdle can be crossed, the claimant stands to gain considerable tort damages. 

Submitted By:
Isaiah Ferguson
Legal Officer
Civil Legal Department 
Legal Aid and Advisory Authority,
23 Stanmore Avenue, Port of Spain.
Contact: 638-5222 
Email: This email address is being protected from spambots. You need JavaScript enabled to view it.
Website: www.laaa.org.tt

This article is not legal advice. Consult an Attorney for legal issues.