EM5106 - Penalties: culpability: Halsbury's Laws of England - fraud

The following extract is reproduced by kind permission of Messrs Butterworth & Co (Publishers) Ltd, from Halsbury’s Laws of England, under the heading ‘Misrepresentation and Fraud’. Only one of the extensive footnotes has been reproduced.

757 What Constitutes Fraud. Not only is a misrepresentation fraudulent if it was known or believed by the representor to be false when made, but mere non-belief in the truth is also indicative of fraud. Thus, whenever a person makes a false statement which he does not actually and honestly believe to be true, for purposes of civil liability, that statement is as fraudulent as if he had stated that which he did not know to be true, or knew or believed to be false*. Proof of absence of actual and honest belief is all that is necessary to satisfy the requirements of the law, whether the representation has been made recklessly or deliberately; indifference or recklessness on the part of the representor as to the truth or falsity of the representation affords merely an instance of absence of such a belief.

A representor will not, however, be fraudulent if he believed the statement to be true in the sense in which he understood it, provided that was a meaning which might reasonably be attached to it, even though the court later holds that the statement objectively bears another meaning, which the representor did not believe.

[* see Derry v Peek 14 App Cas 337, p374, per Lord Herschell: fraud is proved when it is shown that a false representation has been made (1) knowingly, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false; the third case being but an instance of the second.]

759 Irrelevancy of Representor’s Motive It follows from the meaning of fraudulent misrepresentation that, given absence of actual and honest belief by the representor in the truth of the misrepresentation, his motive in making the misrepresentation is wholly irrelevant. It may be that he intended to injure the representee without benefiting himself, or to benefit himself without injuring the representee; it may be that he did not intend to do either, but solely to benefit a third person, or even the representee himself, or otherwise to do right. Lastly, he may have acted with no intelligible or rational notice whatsoever and told a lie from mere caprice, mischievousness or stupidity. In all these cases, provided that there was an absence of actual and honest belief in the truth of his assertion, the misrepresentation is accounted fraudulent and no proof of any wicked or other intention (other than an intention to induce) on the part of the representor is required by the law; or if it is necessary to establish an intention to deceive or injure, that intention is immediately and irrebutably presumed in law from the mere act of making the misrepresentation without such belief.

760 Representation Subsequently Discovered by Representor to be False Where a representation is a continuing one and where, between the time when it was made and the time when the representee altered his position on the faith of it, either (1) the representor discovers that his original statement which, when he made it, he honestly believed to be true, was false, or (2) supervening events render, to the knowledge of the representor, his statement no longer true, a duty to disclose the changed situation to the representee may arise. In such cases the mere fact that the statement may have been innocently made, though false, or true when made, will not, it seems, prevent the representee from establishing fraud where he can show that the representor dishonestly failed to discharge the duty of disclosing the change in the situation.