The tort of deceit and fraudulent misrepresentation in relation to commercial contract can allow the innocent party to rescind the contract and seek damages.
The elements of deceit and fraudulent misrepresentation are very similar in that there must be:
- A false statement of fact conveyed from one party to another.
- There must be knowledge of the falsity, or reckless indifference as to the truth or falsity of the statement.
- The innocent party must have relied on that statement to their detriment.
- These false statement must have caused loss and damage.
If the innocent party can prove the above to a sufficient degree, then they have some legal remedies open to them.
In this article our Sunshine Coast litigation lawyers will explain the law of deceit and fraudulent misrepresentation in more detail.
If you are the victim of deceit and/or fraudulent misrepresentation then it is vital that you get suitably qualified legal advice by profession commercial litigation solicitor.
The Tort of DeceitA tort refers to a civil wrong or an infringement that causes harm or injury to another person or their property, causing loss or damages.
The tort of deceit arises when a person makes an intentionally false representation, knowingly or recklessly, to another person, to which that person relied, causing damage and loss.
The elements of the tort of deceit were summarised by Gummow, Kirby and Crennan JJ in Magill v Magill [2006] HCA 51 at [114] where they said:
The modern tort of deceit will be established where a plaintiff can show five elements: first, that the defendant made a false representation; secondly, that the defendant made the representation with the knowledge that it was false, or that the defendant was reckless or careless as to whether the representation was false or not; thirdly, that the defendant made the representation with the intention that it be relied upon by the plaintiff; fourthly, that the plaintiff acted in reliance on the false representation; and fifthly, that the plaintiff suffered damage which was caused by reliance on the false representation. Generally, the elements of the tort have been found to exist in cases which concern pecuniary loss flowing from a false inducement and the need to satisfy each element has always been strictly enforced, because fraud is such a serious allegation.
Magill has been followed in numerous further cases.
Elements of the Tort of DeceitFollowing the case of Magill above, for a person to be successful in an action for deceit, the plaintiff must prove the following five (5) elements:
- False Representation - The defendant must have made a false representation, which includes statements actions, or even silence when there is a duty to speak.
- Knowledge of Falsity - The defendant must have known that the representation was false or was reckless as to its truth.
- Intention to Deceive - The defendant must have intended to deceive the plaintiff, knowing that the false representation could lead to the plaintiff's reliance on it.
- Reliance - The plaintiff must have reasonably relied on the false representation, acting upon it to their detriment.
- Damage or Loss - The plaintiff must have suffered some form of harm or loss as a result of their reliance on the false representation.
We will explain these in more detail below.
There must be a False Representation
There must be a representation made, and that representation must be false.
A representation is typically considered to be a statement of fact, whether it is communicated orally or in writing.
However, there are certain circumstances where conduct itself can be viewed as a representation. For example:
- The reading on the car's odometer (indicating mileage usage).
- Smiles, winks, head shakes, and nods.
- Dressing in a particular way to suggest you are something other than the truth.
The statement of fact must be false. A statement can be considered false when it does not align with the actual facts or reality.
It means that the description, representation, or understanding of a particular situation or condition is inaccurate or untrue.
The dictionary defines misrepresentation as:
the act of giving false information about something or someone, often in order to get an advantage.
The dictionary defines false as:
not true but made to seem true in order to deceive people.
So, as well as making a false representation, the plaintiff must also lead evidence that defendant/s had knowledge of the falsity.
The Defendant must have Knowledge of Falsity
A misrepresentation is considered fraudulent when the person making it either does not believe it to be true or shows a reckless indifference to its truthfulness.
To establish a claim of fraud, it is necessary to prove that the individual making the statement acted dishonestly or with a disregard for whether the information...
