CIVIL CLAIMS IN FRAUD

Where he wishes to rely on them in support of his claim, a claimant is required specifically to set out in his particulars of claim any allegation of fraud, details of any misrepresentation, details of all breaches of trust and notice or knowledge of facts (CPR Rule 16.4€, note 16.4.4 and CPR Part 16 PD8.2). The facts must be so stated as to show distinctly that fraud is charged (Garden Neptune v Occidental [1989] 1 Lloyd’s Rep. 305, 308; Davy v Garrett (1878) 7 Ch.D. 473 at 489). Where any inference of fraud or dishonesty is alleged, the party must list the facts on the basis of which the inference is alleged (Chancery Guide at 2.8 and 2.9; Queen’s Bench Guide at 5.6.3; Commercial Court Guide at C1.2.b.).

As to particulars of knowledge, it has been said that it is sufficient when alleging fraud that the pleading expressly states that the defendant had the relevant knowledge, it being open to the defendant then to seek particulars if necessary: Rigby v Decorating Den Systems Ltd LTL 15/3/99, (unreported) CA.

The standard of proof required at trial is the civil standard of proof required at trial is the civil standard of a preponderance of probability. It is not an absolute standard. A civil court, when considering a charge of fraud, will naturally require for itself a higher degree of probability than that which it would require when asking if negligence is established. It does not adopt so high a degree as a criminal court, but it still does require a degree of probability commensurate with the occasion (Hornal v Neuberger Products Ltd. [1957] 1 Q.B. 247; Blyth v Blyth [1966] A.C., 643 (HL); Parks v Clout [2003] EWCA Civ 893).

Misrepresentation. Misrepresentation straddles negligence and fraud, and may arise under any of the following separate sets of circumstances:

  • where the misrepresentation is made dishonestly, i.e. fraudulently, in a common law action of deceit;
  • where the misrepresentation is made innocently, i.e., not fraudulently, under s.2 of the Misrepresentation Act 1967;
  • where the misrepresentation is made negligently, in a common law action for negligent misrepresentation under the doctrine of Hedley Byrne (Hedley Byrne & Co. Ltd v Heller & Partners Ltd [1964] A.C. 465);
  • where the misrepresentation is made in breach of statutory duty, in an action for breach of such duty, e.g. under s.10 of the Land Charges Act 1972 (see Ministry of Housing and Local Government v Sharp [1970] 2 Q.B. 223 applied in Ross v Caunters [1980] Ch. 297; Lawlon v B.O.C. Transhield Ltd [1987] I.C.R. 7; Mills v Winchester Diocesan Board of Finance [1989] Ch. 428).

Non-fraudulent misrepresentations. Where the representatives is not made fraudulently, an action for damages may nevertheless lie under s.2 of the Misrepresentation Act 1967, which, to the extent to which it applies, has altered the former principle of law that no such action would lie for a mere innocent misrepresentation, not made negligently and not amounting to a warranty (see Heilbut, Symons & Co v Buckleton [1913] A.C. 30). Section 2(1) of the Misrepresentation Act 1967 provides as follows:

“Where a person has entered into a contract after a misrepresentation has been made to him by another party thereto and as a result thereof he has suffered loss, then, if the person making the misrepresentation would be liable to damages in respect thereof had the misrepresentation been made fraudulently, that person shall be so liable notwithstanding that the misrepresentation was not made fraudulently, unless he proves that he had reasonable ground to believe and did believe up to the time the contract was made that the facts represented were true.”

The extension of liability for misrepresentation to innocent misstatements under s.2 of the Misrepresentation Act 1967 and to negligent misstatements under the doctrine of Hedley v Byrne may well mean that, in many cases, the claimant need not and perhaps should not undertake the heavier burden of pleading and proving a charge of fraud. Where charges of fraud are made which are not sustained, the judge has power to order the party making such charges to pay the costs occasioned thereby (Parker v McKenna (1874) 10 Ch. App. 96).