Deceit The Lie of the Law

Peter MacDonald Eggers

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9 TOWARDS A RESTATEMENT OF THE TORT OF DECEIT

INTRODUCTION

9.1 The tort of deceit has been enshrined as part of the common law since the decision in 1789 of the Court of King’s Bench in Pasley v. Freeman,1 having been clarified by the House of Lords in Derry v. Peek,2 a century later in 1889. It is the type of tort with which every common lawyer feels familiar, representing an exemplar of the common law’s ability to administer civil law remedies for wrongs done by cheats and fraudsters. The danger confronting and exerted by the tort is that the law of deceit, as currently formulated, may be applied inflexibly and to penal effect, without the court taking the opportunity to consider the moral basis of such legal liability, the fact that alternative causes of action may now exist for a representee, and the appropriateness of the penal remedies to the seriousness of the wrong being examined. 9.2 The previous chapters reveal that in numerous respects the law of deceit is not settled. In such circumstances, the law should be developed to provide the flexibility required to make this tort a fair and just basis of legal liability. This is not an area where the courts would be making brave decisions based on unilateral assessments of social policy,3 but allowing some flexibility in the tort’s application. It is an area which requires reconsideration in light of the tort’s age and the challenges of a modern social and commercial environment, which is markedly different from that which existed in the eighteenth and nineteenth centuries. 9.3 This chapter includes a suggested restatement of the tort of deceit, taking into account such considerations and with a view to ensuring the certainty which a tort of this type requires. Before considering the proposed restatement, it may be helpful to test the boundaries of the tort as it is presently understood.

TESTING THE BOUNDARIES OF THE TORT OF DECEIT

9.4 In order to determine whether or not the tort mirrors the law’s contemporary policy or moral judgment, it is worth asking whether cases involving moral uncertainty should invite legal liability in the tort of deceit. As the law is currently understood, there may be liability in deceit on a strict application of the tort’s ingredients, for example, in the following cases (in each case, the appropriateness of a liability is considered):

1. A customer goes into a clothes shop and tries on a jacket which he thinks about buying. He is uncertain and he asks the sales assistant how it looks. The sales assistant says it looks fabulous, knowing it to be untrue. The customer buys the jacket, which he wears when he is about to sign a contract offering design services for a fashion house, but then fails to secure the contract because of his “fashion sense”. Can the customer sue the sales assistant for loss of the contract? Is this a mere sales pitch and should it be taken with a grain of salt?
In a case such as this, it is unlikely that a customer should reasonably expect that the sales assistant should tell the truth about the sartorial quality of the jacket, as opposed to its manufacture or condition. Accordingly, there should be no liability in deceit.4
2. A tourist asks a street-vendor for directions in Piccadilly to Leicester Square. The street-vendor, as a practical joke, gives directions which requires that person to take the tube to Wimbledon, knowing full well that it is not the most direct route. The tourist incurs expense in getting to and back from Wimbledon. Should the tourist be entitled to recover the unnecessary expenditure? Is it going too far to permit a remedy in deceit against a practical joke, where no other remedy would usually obtain?
This is a difficult example to assess. There are a number of occasions where a practical joke, even if the claimant does not expect it, should not result in a legal liability, given that it would be an undue restriction of human intercourse. In addition, it might be thought that the tourist acted unreasonably either in believing the practical joker (which is strictly irrelevant) or in incurring the expense to Wimbledon (which might be a failure to mitigate). On the other hand, there will be some consequences of a practical joke which are sufficiently serious as to result in a liability in deceit.5
3. A wife tells her husband that her child is his child, knowing it to be untrue, in the hope that he will not seek a divorce and he will provide for the child’s subsistence and education. The husband bears the expense of educating and raising the child and later discovers that his wife had had an extra-marital affair and the child is not his own. Should the husband be entitled to claim damages for the expense of rearing the child? Are claims in deceit desirable when the relations between marital or sexual partners are so emotionally complex?
This example is perhaps the most testing for the tort of deceit. There is no right answer. On the one hand, the husband is being burdened with a responsibility which might not otherwise be his own and being put to expense which he need not have incurred. On the other hand, the mother’s conduct is entirely understandable, having been motivated by a concern for the child.6
4. An employer is approached by an investor who wishes to mount a hostile takeover of the employer’s company on the grounds that its business is in financial difficulty. The investor wishes to buy the business cheaply, dissolve the business and strip it of its assets. The employer convinces the investor that the company is not in financial difficulty. This is a lie and the employer tells it because he wants to maintain a stable place of employment for the company’s staff. As a result, the investor declines to purchase the company and so loses the benefits associated with the takeover. Does the investor have a viable claim in damages against the employer, who was motivated only by a desire to protect the livelihood of his employees?
This example might well be answerable in deceit, given that the representation is made in a commercial environment concerning the possible purchase of the company’s shares, although the context is not the usual one of the representor seeking to induce the representee to purchase, but rather it is a case of the representor seeking to dissuade the investor from purchasing the company.7 This example might also have the unusual result that the measure of damages will be assessed by reference to the investor’s lost expectations, although there would be a case for limiting the investor to his reliance losses, such as wasted expenditure.8
5. A negotiates with B and tells B a lie in order to draw B into a contract. The lie is that A and another company, C, have been awarded a lucrative government contract. B finally decides not to enter into the contract with A but instead contracts with C, after which it discovers that A told a lie. Should B be able to recover compensation from A for losses associated with its contract with C? Whilst the lie was directed towards securing an advantage for A, should A be made responsible for B’s decision to contract with C which A had no intention of bringing about?
This should not result in a liability in deceit, given that A’s intention was not to induce B to contract with C, but to induce B to contract with A. This accords with the general requirements of the tort as laid down by the House of Lords in Bradford Third Equitable Benefit Building Society v. Borders,9 although made uncertain by the Court of Appeal’s decision in Goose v. Wilson Sandford & Co.10
6. A person buys a train ticket and relies on a timetable which the railway company knows is inaccurate. The customer waits for the train and it does not arrive. It is too late for her to take alternative travel. Being late, she has lost the opportunity to attend a final interview for well-paid employment and does not receive an offer of a job which she would otherwise have received. Should the claimant be entitled to claim damages representing the full value of this employment, assuming she cannot obtain another job?
This is also a difficult scenario to assess. It might be thought, however, that the reasonable expectation is that the timetable is a guide and not intended to be a strict representation of the train company’s intentions as to when the trains will or will not arrive at the platform. In such a case, there should be no liability in deceit.11
7. An astrologer (who knows there is nothing in the art) is consulted by someone who wishes to purchase a new home but requires confirmation that the stars are in alignment with his intended purchase. The astrologer advises the purchaser that the heavens forbid the purchase. This leads him to purchase another house, which the astrologer confirms is sanctioned by planetary movements, giving the purchaser the confidence to proceed to buy the house. The house is destroyed by subsidence the day after completion. Is the purchaser entitled to a remedy from the astrologer for the losses on the transaction, including the profits associated with the purchase of the first-mentioned house?
This raises numerous social issues. On the one hand, a number of astrologers may practise as an entertainment and many who consult them do so in that spirit. On the other hand, some seriously believe in astrology and will make important decisions based on the advice of the astrologer, as the astrologer knows. The relevant representation for these purposes is not the advice given to the man intending to purchase, but that the astrologer is acting in good faith and believes in astrology as a science.12 If the astrologer would induce the customer to benefit the astrologer directly, there clearly should be a liability. In theory, therefore, the position should be no different where the inducement is to act other than for the astrologer’s benefit. Against these considerations is the fact that the representation made by the astrologer is not objectively material to the customer’s decision to purchase a house. Accordingly, there should be no liability in deceit.13
8. One paramour tells another “I love you” and agrees to marry him. That is a lie. As a result, the supposed beloved incurs expense in purchasing an engagement ring, which the liar refuses to accept. Is there an action in deceit for fabricated love?
This seems to be an area where the tort of deceit should have no role to play. There are of course cases where misrepresentations between friends and family will result in a legal liability. Although there may well be a reasonable expectation that the truth will be told, and even if the paramour intended the supposed beloved to purchase an engagement ring, she should be entitled to say what she likes in these circumstances, without resulting in a legal liability.14
9. A doctor informs a patient with the latter’s consent that there is no chance of recovery from the patient’s terminal cancer, but deliberately did not tell the patient that there existed a small, but a real, chance of recovery if a particularly uncomfortable course of treatment were undertaken. The doctor was motivated by a sense of not wishing to cause further pain and discomfort to the patient. The patient discovers the truth too late. Should she have a cause of action against the doctor?
This example raises the question whether there should be a liability in deceit for a knowing non-disclosure. Of course, the patient may have a legitimate complaint in negligence, which may make a concurrent liability in deceit unnecessary. Given the doctor’s motive, even if misguided, it would be difficult to justify a legal liability in deceit.15
10. A 10-year-old child asks a department store Father Christmas if he is the real Santa Claus, who says that he is. As a result, the child pays £5 for a photograph of both Father Christmas and the child. Can the child recover the £5 (assuming of course a lie was told)?
This meets all the requirements of an actionable deceit, save one, namely that there is no reasonable expectation that the truth should be told in such circumstances, at least no reasonable expectation on the part of the child’s parents.16
11. At a public debate to which the audience members have paid for admission, one speaker says that there is a god (which he does not truly believe) and another speaker says that there is no god (which he does not truly believe). On the faith of the conviction expressed by the speakers during the debate, each of them succeeds in soliciting contributions from the audience to further their respective campaigns. Can there be an actionable deceit in the areas of metaphysics and theology?
Of the speakers, only one could be potentially liable in deceit, because only one of them has made an untrue statement. The speaker who has made a knowing misrepresentation might be held responsible in deceit if the intention of the lie was to raise the funds contributed.17 On the other hand, the context of the event may be alien to a liability in deceit.
12. A doctor lies to her patient’s insurance company about the origin of the patient’s condition, in order to induce the insurance company to cover the patient’s treatment. The doctor’s motivation is not to seek payment for her services, which she would be willing to provide gratuitously, but to ensure that the patient receives medical treatment from which he would not have benefited without the insurance cover. Is the doctor liable to the insurer in deceit?

Although the doctor’s motives might have been laudable, this is plainly a case of an actionable deceit, all of the ingredients of the tort being present.18

Most of these examples may, at least technically, result in legal liability for deceit, as the law is currently formulated. Yet a number of these examples are cases where a substantial, if not the major, proportion of the population probably would not expect the liar to be punished.19 The difficulty lies not in classifying the relevant conduct as a “deceit”, but in the fact that the deceiver in each case might be compelled to make good a loss whether or not the lie should have been taken seriously, whether or not the loss was foreseeable and whether or not the loss was in a practical sense properly attributed to, even if caused by, the lie. With these examples in mind, the tort of deceit should be restated.

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