Tort of deceit
The tort of deceit is a type of legal injury that occurs when a person intentionally and knowingly deceives another person into an action that damages them. Specifically, deceit requires that the tortfeasor
- makes a factual representation,
- knowing that it is false, or reckless or indifferent about its veracity,
- intending that another person relies on it,
- who then acts in reliance on it, to that person's own detriment.
Deceit dates in its modern development from Pasley v. Freeman. Here the defendant said that a third party was creditworthy to the claimant, knowing he was broke. The claimant loaned the third party money and lost it. He sued the defendant successfully.
Relationship with negligence
The leading case in English law is Derry v. Peek, which was decided before the development of the law on negligent misstatement. In Hedley Byrne & Co Ltd v. Heller & Partners Ltd it was decided that people who make statements which they ought to have known were untrue because they were negligent, can in some circumstances, to restricted groups of claimants be liable to make compensation for any loss flowing, despite the decision in Derry v Peek. This falls under the so-called "voluntary assumption of responsibility" test.
Negligence and deceit differ with respect to remoteness of damages. In deceit the defendant is liable for all losses flowing directly from the tort, whether they were foreseeable or not. In Doyle v. Olby (Ironmongers) Ltd Lord Denning MR remarked, "it does not lie in the mouth of the fraudulent person to say that they could not reasonably have been foreseen." So where there is a sudden downturn in the property market, a person guilty of deceitful misrepresentation is liable for all the claimant's losses, even if they have been increased by such an unanticipated event. This is subject to a duty to mitigate the potential losses.
- Pasley v. Freeman, (1789) 3 TR 51
- Derry v Peek  UKHL 1, (1889) LR 14 App Cas 337 (1 July 1889)
- Bradford Equitable B S. v Borders,  2 All ER 205, HL
- Horace Russell (1939). "The Borders Case". The Journal of Land & Public Utility Economics. 15 (2): 225–227. JSTOR 3158131.
- Smith New Court Securities Ltd v. Scrimgeour Vickers (Asset Management) Ltd  UKHL 3,  AC 254 (21 November 1996); Clef Aquitaine SARL v. Laporte Materials (Barrow) Ltd  2 All ER 493
- Doyle v Olby (Ironmongers) Ltd  EWCA Civ 2 at p. 167,  2 QB 158 (31 January 1969)
- Slough Estates Ltd v. Welwyn-Hatfield District Council  2 PLR 50
- Downs v. Chappell  1 WLR 426, where a conned car buyer only recovered losses up to the time he should have sold the car on
- Alliance and Leicester BS v. Edgestop Ltd  1 WLR 1462