GOOSE v WILSON SANDFORD & CO (A FIRM)

Deceit requires a false representation made knowingly, with an intention that the claimant should act upon it, and actual reliance causing loss. A fraudulent representation ordinarily supports a rebuttable inference of an intention to induce reliance. That inference remains a question of fact and may be displaced by the circumstances.

The representor must intend the representation to be understood in the sense in which it is false. Liability also fails where the claimant’s decision was unaffected by the representation. A fiduciary relationship between prospective joint venturers may arise once they embark upon the venture and entrust venture assets to one another, but it does not necessarily exist during preliminary negotiations or preparatory lending.

The claimant charged his English farm to secure a loan to a company through which he and another businessman intended to acquire agricultural land in France. A partner in the defendant firm of accountants had made misleading representations concerning the ownership and availability of gemstones expected to support aspects of the financing scheme. The loan proceeds were misapplied, the company defaulted, and the claimant eventually became bankrupt.

Harman J dismissed the claimant’s two actions. The Court of Appeal subsequently ordered a retrial of specified claims arising from two meetings and a letter. Following that retrial, Rimer J dismissed the remaining action. He found dishonest misrepresentations concerning the availability of the gemstones, but found no intention to induce the claimant’s transaction and no actual reliance. Claims in negligence, breach of fiduciary duty and dishonest assistance also failed.

The claimant appealed on liability, reliance, fiduciary duties and dishonest assistance.

Appeal dismissed. Morritt LJ delivered the judgment of the court.

1. A claimant alleging deceit must prove a representation of fact, knowledge of its falsity, an intention that the claimant should act upon it, and reliance causing damage. Where a representation is ambiguous, the claimant must establish that the representor intended it to be understood in the sense in which it was false. The claimant had not established that intention in relation to the implied representation made at the September 1984 meeting.

2. A fraudulent misrepresentation gives rise to a rebuttable factual presumption that the representor intended the representee to act upon it. The judge had considered and rejected that presumption on the facts. Motive was not substituted for intention; it was legitimately considered as evidence relevant to intention. The necessary intention was not confined to inducing the precise transaction that occurred, but the judge had found that there was no intention to induce the claimant to enter any transaction in reliance upon the statements.

3. The April 1985 letter dishonestly misrepresented that effective prior security over the gemstones could be given. Nevertheless, the accountant neither intended nor could be presumed to have intended that the claimant would rely upon it when entering the materially different loan transaction that followed. Statements at the May 1985 meeting also qualified and corrected the earlier representation about the gemstones’ availability.

4. The judge was entitled to find that the claimant did not rely upon anything said or written by the accountant. He had independently formed his view of the gemstones’ value and proceeded despite firm professional advice. The misrepresentations therefore caused none of the claimed loss. This finding also defeated the negligence and fiduciary-duty claims arising from the April letter.

5. A fiduciary relationship between the prospective joint venturers arose when the secured loan was drawn down. The other participant then had duties to ensure the proper application of the venture money and gemstones. No such relationship existed during the earlier preparatory dealings. The defendant accountant did not assist in the later misapplication, so the dishonest-assistance claim failed.

6. Having upheld the dismissal on primary liability, the court declined to decide the hypothetical issues of limitation, contributory negligence and causation.

1. Court of Appeal (Civil Division): By the present judgment, [2000] EWCA Civ 73, the court unanimously dismissed the appeal from Rimer J’s order.
2. High Court, Chancery Division: On 25 January 1999, following the retrial, Rimer J dismissed the second action.
3. Court of Appeal: On 13 February 1998, the court allowed the claimant’s earlier appeal in part and ordered a retrial of specified claims arising in the second action.
4. High Court: On 1 April 1996, Harman J dismissed both actions after trial.