The Con Man: Part II

D Rosen In Part I, I gave an introduction to a typical Con Man, and repeat a quotation: ‘The law doesn’t quarrel with man’s inalienable right to pursue the buck. The law only questions the method and means of acquiring the elusive green’ – The Con Man (87th Precinct) (McBain, Ed) If we are being

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D Rosen

In Part I, I gave an introduction to a typical Con Man, and repeat a quotation:

‘The law doesn’t quarrel with man’s inalienable right to pursue the buck. The law only questions the method and means of acquiring the elusive green’ – The Con Man (87th Precinct) (McBain, Ed)

If we are being honest with ourselves, we have all been in situations where making a friend, making a business acquaintance, entering into a relationship, winning a deal, etc…has meant that we have sought the confidence and trust of others, and in doing so, we have made comments, inferred terms of endearment…schmoozed…where we have appeared to be sincere in our actions, but less than sincere in our motives, all to gain an advantage of one kind or another.

It is the method and means, that the Law questions. In fraud cases, the general principle is to safeguard morality, and to be a deterrent. The principles is set out by Lord Stein in the case of Smith New Court Securities Limited v Scrimgeour Vickers (Asset Management) Limited [1997] AC.

This blog post seeks to illustrate method and means in a Civil Law context: The Law of Deceit, and Misrepresentation.

In writing this blog post, I am not giving legal advice. I am simply illustrating a ‘Con Man’, within the Civil Law arena, and the way in which the Court may deal with such matters in terms of damages. This is my view and consideration, and is not intended to be relied upon. If you seek legal advice, your case or circumstances may require legal analysis on a case by case approach, and what is stated in this blog post may not necessarily apply to your circumstances when placed into context.

1. Deceit:
Deceit, is a tortuous liability, as opposed to a contractual breach.

It is illustrated in the case of AIC Limited v ITS Testing Services (UK) Limited [2007] 1 Lloyd’s Rep 555:

Buxton LJ: ‘The tort involves a perfectly general principle. Where a Defendant makes a false representation, knowing it to be untrue, or being reckless as to whether it is true, and intends that the Claimant should act in reliance on it, then in so far as the latter does so and suffers loss, the Defendant is liable for that loss’.

A statement of opinion is not in itself actionable, but an opinion not honestly entertained and intended to be acted upon, amounts to a fraud.

In Goose v Wilson Sandford & Co [2001] Lloyd’s Rep PN 189:

To establish liability in the tort of deceit, one must demonstrate that:

Morritt LJ: ‘the representor intended his statement to be understood by the representee in the sense in which it was false’.

So, by making a statement, qualified by saying it is only a statement of belief, and that it may not be accurate, and should not be relied upon, because it has not been verified for its accuracy or completeness, may be sufficient to demonstrate whatever was done, or said, or omitted, was not to be relied upon.

The milestone case remains as Derry v Peek [1889] UKHL 1:

Per Lord Herschell: ‘First, in order to sustain an action in deceit, there must be proof of fraud and nothing short of that will suffice. Secondly, fraud is proved when it is shown that a false representation has been made (1) knowingly, (2) without belief in its truth, or (3) recklessly, careless whether it be true or false. Although I have treated the second and third as distinct cases, I think the third is but an instance of the second, for one who makes a statement under such circumstances can have no real belief in the truth of what he states. To prevent a false statement from being fraudulent, there must, I think, always be an honest belief in its truth’.

Standard of care required in the Tort of Deceit:
A Criminal standard of beyond reasonable doubt, is not necessary to establish in the Civil Tort of Deceit. Rather, it is a balance of probabilities. The more improbable the event, the stronger must be the evidence that it did occur before, on the balance of probability, its occurrence will be established. That was the position taken in re. H (Minor) [1996] AC.

What if an employee commits deceit during the course of their employment? It is likely, having regard to all the circumstances, that the employer will be held vicariously liable.

2. Misrepresentation:
There are different forms of misrepresentation. Some founded in Tort, in Contract, and others on a Statutory basis. I only seek to look briefly in this blog post at the statutory position.

Section 2(1) Misrepresentation Act 1967:

‘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 has 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’.

3. Deceit v Statutory Misrepresentation:
In Deceit, it is necessary to prove that the misrepresentation was fraudulent. In Statutory Misrepresentation, the need to prove fraud, is not an ingredient.

Therefore, applying the general principles of Smith New Court Securities, in the absence of fraud, the Court should not be concerned with morality and deterrence, where effectively the ingredient is negligence, and not fraud for Statutory Misrepresentation. Therefore on that principle, the degree of damages to be awarded, ought to be lower for Statutory Misrepresentation, as opposed to deceit.

Damages for negligence, as opposed to damages for fraud, are not generally accepted principles. There is much discussion and discourse amongst academics, for and against damages being different.

Courts previously considering the knowledge and necessary ingredients to establish deceit, were looking for wickedness and dishonesty. The intention is not important to establish, and neither is the Defendant’s motive in saying what was said. These issues are unimportant, when fraud is established.

In Part III, I will be considering the psychological profiling of a Con Man. In Part IV, I will be considering the Con Man’s position from a Criminal Litigation perspective.

Professor David Rosen is a Solicitor-Advocate, Partner, and head of Litigation at Darlingtons Solicitors LLP. He is Strategic Director and Vice-President of the Association of Certified Fraud Examiners UK Chapter. He is a working member of the Fraud Advisory Panel, a member of The Society of Legal Scholars, and an associate Professor of Law at Brunel University specialising in Civil Fraud and Criminal Fraud.

David Rosen • Fraud

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