What is meant by fraud or fraudulent misrepresentation?
Fraud or fraudulent misrepresentation or misstatement is where a false statement is made to a person upon which that person relies and as a consequence of relying on that statement suffers some damage.
In the case of fraudulent misrepresentation there is a claim in tort under the commonly used name of deceit. As it is a civil claim it will always be between two individuals – in many cases the claimant will be a private company.
Tort of Deceit
The tort of deceit provides a civil remedy for an individual who has relied on a false representation to their detriment and requires the following elements to be proven:
- An individual has made a representation to another party which is false
- The individual knows it to be false or was reckless as to the truth of the statement
- There is an intention to deceive and it is acted upon
- Loss is suffered as a consequence
Example of Deceit
A clear example of when the tort of deceit will come into play is where an individual has made a false insurance claim to their insurer in the case of motoring accidents. If for example they claim that another party has damaged their vehicle in a collision but it in fact was their own fault and the original statement has caused the insurance company to pay out then that individual would be liable to the insurance company under the tort of deceit.
Elements of the Claim
There must be a statement or conduct amounting to a representation which is false. A statement would obviously involve something being said whereas conduct consisting of wearing a uniform or dress of some kind would be included.
Mere silence would not be considered a false representation.
Of a fact
The misrepresentation must be in relation to a specific fact, i.e. the facts of the motoring case. Statements of opinion or intention therefore do not fall within the definition of a false misrepresentation.
Knowing or reckless as to whether the statement is false
For the tort of deceit to be actionable it is not enough that the defendant was negligent as to whether the statement was false (that there was a lack of reasonable grounds to believe the statement was true). The defendant has to know the statement was untrue or be reckless as to the truthfulness. Anything less than this is not enough.
This is of course a subjective test as it is relating to the defendants actual knowledge and state of mind.
There was reliance upon the representation
The representation does not need to have been the sole reason for the subsequent actions leading to loss – it need only to have been material in that it was one of the factors which together led to the course of action.
Damage or loss must have been suffered from the deceit.
What relief can be provided in a claim for deceit?
As is the case in most claims for deceit is monetary loss then the most appropriate remedy to be provided will be that of damages.
If we return to the previous example of a false insurance claim made from a motoring accident we can see the following damages which could be claim for:
- Damages in relation to the time taken by the insurers claims department and investigators to deal with and investigate the claims
- Disbursements incurred by the insurer
- Repair costs to the vehicle of the policy holder who has made the fraudulent claim
- Payments which have already been made to the individual through their policy
- Exemplary damages
Are there any defences against a claim for deceit?
Contributory negligence is where it is asserted that the claimants own negligence is also one of the reasons why he has suffered damage. This defence is unavailable for the tort of deceit as has been held under Sections 1(1) and 4 of the Law Reform (Contributory Negligence) Act 1945 that this defence is unable to be pleaded for a tort which is an intentional tort.
As there is no negligent act in intentionally deceiving someone then there is no way that that individual could have contributed themselves to that deliberate misrepresentation.
Example of Insurance Claims
Often Insurance companies have to deal with claims where they may believe that a false representation has been made and instead of simply relying on the tort of deceit it is often preferable for them to go on the front foot when investigating claims and also to recover damages already paid due to a fraudulent misrepresentation.
Declaration proceedings enable other individuals who have not brought a claim to be brought into the proceedings. This may well be the driver of the other vehicle or the passengers in the vehicle which the original claim concerns. Claimants who are said to be waiting in the background whilst the claim is made can be forced to enter the proceedings against their will. The best example of this is where there have been a number of individuals involved who are giving slightly different stories but only one of them has decided to bring a claim.
Claims for declaration proceedings can be brought for the following examples of behaviour:
- Some of the individuals claiming were in fact not occupants in the car at the time of the accident
- The accident was contrived or staged
- If a certain individual was in the car at the time of the accident but there were not in fact injured
The best example of where declaration proceedings are used most commonly is where insurance proceedings have been issues by the driver of the vehicle but that there is a fraudulent passenger claim in the background, for example the passenger was not in the car at the time of the accident.
If declaration proceedings are then brought against the passenger he will be required to be present to defend the claims of the insurance company that he was not in fact in the car.