Summary

A judge had been entitled to find that those who had been involved in a scheme to purchase a plot of land were liable in deceit to a company which they had induced to invest in the scheme by concealing its true structure and the price being paid for the land.

Facts

The appellants appealed against a decision that they were liable in deceit to the respondent company (L).

L had been introduced by the second defendant (S), the principal shareholder and director of the first defendant company (E), to a scheme to purchase a plot of land. The intention was to increase the value of the land by obtaining additional planning permissions from the local authority and then to sell the land on to developers. The scheme had been devised by the third, fourth and fifth defendants (W, M and B). L invested £2 million in the scheme, with the remainder of the money coming from a bank loan and other investors. The site was the subject of two separate purchases which took place simultaneously. A company representing W, M and B bought the site for £9.3 million. It then sold the site to another company (SF) for £12.25 million. The difference between the two sums was paid out to individuals and companies including E, W, M and B. The scheme did not go to plan, and SF was ultimately wound up. L lost all of its £2 million. The judge accepted L's allegations that E and S had told it that its investment was to be used to purchase the site from the original owner for £12.5 million, and had not told it of the two-tier structure of the scheme or that the true purchase price was £9.3 million. She also accepted that E and S had acted as agents for W, M and B.

The appellants argued that (1) the judge had not found an intention to deceive, thus failing to identify the ingredients of the tort of deceit; (2) the misrepresentation the judge had found proved differed from that pleaded, and the representation pleaded had been true; (3) the judge should not have held that a note in S's diary, indicating that L had been told of the two-tier structure and the price differential, was either falsely dated or inaccurate, since L had failed to serve a notice under CPR r.32.19 challenging the authenticity of the note; (4) W, M and B had no liability as principals for any misrepresentations made by E or S.

Held

(1) Deceit contained four ingredients: (a) the defendant made a false representation to the claimant; (b) the defendant knew the representation was false or was reckless as to its truth; (c) the defendant intended that the claimant should act in reliance on it; (d) the claimant did act in reliance and in consequence suffered loss. "Intention to deceive" was not a separate element of the tort, but merely another way of describing (b) and (c), the mental element of the tort, Derry v Peek (1889) 14 App. Cas. 337, Nocton v Lord Ashburton [1914] A.C. 932 and Armstrong v Strain [1952] 1 K.B. 232 considered. The judge had found that all four ingredients were established. There was no need to expressly state that there had been an intention to deceive (see paras 77-80 of judgment). (2) The representations which the judge had found proved were in accordance with L's pleaded case. Further, on the facts found by the judge, the representations had not been true (paras 86-98). (3) L's case regarding the diary entry was that S had either written it on a later date on blank pages which happened to be at the right place in the diary, or had written it on the recorded date but had done so inaccurately. The judge had found that one of those contentions was correct without saying which. The second scenario was more likely: it would have been surprising had blank pages been left at exactly the right place. In that case, there would be no need for a CPR r.32.19 notice: the document purported to have been written by S on the recorded date and that was indeed what had happened. Under the first scenario, the diary note would not have been authentic for the purposes of r.32.19. The defendants had not placed reliance on r.32.19 until closing speeches, by which time it was too late: the accuracy of the note had been fully explored in evidence; it was not appropriate on the last day of trial to invite the judge to ignore part of the evidence (paras 101-109). (4) W, M and B had not simply suspected that S was concealing the true nature of the transaction from L, but had known and intended that he should do so. The judge had been entitled to find W, M and B liable as principals for the fraudulent representations made by E and S (paras 119-129).

Appeal dismissed