Lloyd's Maritime and Commercial Law Quarterly
RECENT TRAVAILS OF FRAUDULENT MISREPRESENTATION
William Day *
The law on rescission for misrepresentation has become increasingly bent out of shape by a string of recent first instance and appellate decisions on what “inducement” or “reliance” means. We now seem to have reached a position where: (i) awareness is treated as a freestanding requirement, save where it can be said that awareness is “almost automatic” or “quasi-automatic” or where a representation is unambiguous; (ii) conversely, induced mistake has been jettisoned by the Supreme Court as a freestanding requirement, only to be reinstated at first instance in all “paradigm” two-party cases; and (iii) there may be different causation tests for innocent and fraudulent misrepresentations, with basically no causation test of any rigour or substance applied in the latter instance. This article examines the line of case law and asks what has gone wrong.
The rule that contractual bargains can be unwound for misrepresentation is long established. However, recent law reports demonstrate uncertainty about the concept of the “inducement” or “reliance” requirement in a misrepresentation claim. Some confusion arises from the fact that the terminology hides three different issues: (i) whether the claimant must be aware of the misrepresentation; (ii) whether the claimant must believe the misrepresentation; and (iii) whether the claimant has sufficiently acted on the misrepresentation. As will be seen, it is not helpful for the same label still to be used for all of these questions.
Must a claimant believe a misrepresentation?
Recent travails begin with the Supreme Court’s decision in Zurich Insurance Co Plc v Hayward,1 which answered this question “no”. This author has written about the decision in this Quarterly before,2 so what follows will be limited to setting the scene for the subsequent travails of fraudulent misrepresentation.
Mr Hayward grossly and fraudulently exaggerated his injuries from a workplace accident. The employer’s insurer, Zurich, never believed his claims.3 However, concerned
* Downing College, Cambridge. I have benefi ted from detailed comments from the anonymous reviewer and Peter de Verneuil Smith QC; all remaining errors are my own.
1. [2016] UKSC 48; [2017] Lloyd’s Rep IR 84; [2017] AC 142.
2. PS Davies and W Day, “A Mistaken Turn in the Law of Misrepresentation” [2019] LMCLQ 390.
3. At first instance, it was found that “neither” of the witnesses for Zurich Insurance “can be said to have believed the representations complained of to be true”: Zurich Insurance Co Plc v Hayward (6 September 2013) Unreported, [2.6] (HHJ Moloney QC).
Recent travails of fraudulent misrepresentation
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