The Privy Council was recently asked to answer the following question:
Is it a requirement of the tort of deceit that the claimant is consciously aware of the representations on which the claim is based?
This is one of the issues that arose in Credit Suisse Life (Bermuda) Ltd v Bidzina Ivanishvili and 6 others (Bermuda) [2025] UKPC 53, a multi-jurisdictional action with key lessons for investment fund managers.
The Board of the Privy Council held that, for the tort of deceit, there is no legal requirement for conscious awareness of the false representation. In other words, to succeed in an action based on a fraudulent misrepresentation, the claimant does not need to be consciously aware of the representation, or understand that it was made. There is no basis for excluding liability simply because the claimant has acted on an assumption, provided that assumption was one which was reasonably expected as a response to the defendant’s (false) words or actions (as opposed to an assumption made independently of those words or actions).
The decision is significant because it confirms that a line of English case law, which suggested that there is a legal requirement to show awareness, was wrongly decided1. The Board said that this idea was “misconceived”.
The impact of this clarity may be that it opens the doors to allegations of implied misrepresentation in wider circumstances. Given that fraudulent misrepresentations by agents can be attributed to their principal, companies selling goods or services through agents, particularly investment managers, should carefully consider their processes and procedures. However, as ever with cases of this type, outcomes will be highly fact sensitive.
Misrepresentation and unconscious assumptions
The misrepresentations on which this claim was based were made by an employee (agent) of Credit Suisse AG (the Bank). Mr Lescaudron (also held to have acted as agent on behalf of CS Life) made false representations to Mr Ivanishvili (on behalf of the prospective policyholders) during meetings at which life insurance policies were discussed.
By proposing the policies, Mr Lescaudron induced Mr Ivanishvili to believe that CS Life, through Mr Lescaudron, did not intend to manage the policy assets fraudulently. This would appear to be a reasonable implied assumption. It was unnecessary for Mr Ivanishvili to prove that he had a conscious awareness of the representations impliedly made to him. It was an unconscious assumption that influenced his decisions.
In deciding the point about whether it was necessary that Mr Ivanishvili was aware that implied (false) representations were being made, the Board found that it had a choice:
- Either it must conclude that all relevant previous case law of this kind was wrongly decided; or
- It must reject the theory that contemporaneous awareness and understanding of the representation is in law an essential element of a deceit claim.
After assessing the relevant 19th century authorities which have informed recent case law, the Board found that they were not squarely on point, and it had “no hesitation” in adopting the latter course.
Previous misconceptions now clarified
The Board considered why it was ever thought that there was a legal requirement to show awareness. This idea stemmed from three misconceptions:
- Unless the claimant can show that it was aware of the representation and understood what representation was being made, it cannot show reliance on the representation, which is an essential element of the cause of action.
- A distinction should be drawn between cases where the claimant has relied on a representation and cases where the claimant has acted on an assumption.
- Awareness of the representation is necessary to preserve the distinction between misrepresentation and non-disclosure.
The Board analysed and dismissed these misconceptions to help to clarify the law. One illustrative example was where a party deceiving a victim does so by inputting information into a computer which acts automatically based on that information. Or a taxi driver who assumes that their customer will pay the fare (but the driver does not consciously consider whether or not the customer will do so). To reconcile these clear examples of deceit, conscious awareness could not be a requirement. The same was true in Mr Ivanishvili’s case. Lord Leggatt said that it would “be unreasonable and unworldly – and a charter for fraudsters” if there was a distinction between whether the claimant had or had not engaged in conscious thought in this context.
A victim of fraud may now rely on a representation, even if it is an implied representation, without needing to demonstrate to the court that he or she gave conscious thought to the representation that was made.
The above said, this decision does not impact the key components of a claim in deceit, including reliance – the claimant must, for instance, understand the false statement in the sense that the defendant intended them to understand it so as to rely on, and be induced by, it.
Source
- Thus, although the Privy Council was considering the claim under the law of Bermuda, it confirmed that this was not a legal requirement under the law of England and Wales.
