Standard Chartered Bank (Respondents) v Pakistan National Shipping Corporation (Appellants) Standard Chartered Bank (Appellants) v Pakistan National Shipping Corporation and Others and Another (Respondents) and Others

A person who personally makes a fraudulent representation, intending another to rely on it, is liable in deceit when it is relied upon. Acting as a director or agent does not confer immunity merely because the representation is also attributable to the company or principal.

Contributory negligence is no defence to deceit. Under sections 1(1) and 4 of the Law Reform (Contributory Negligence) Act 1945, a claimant's conduct amounts to statutory fault only if it would have founded a common-law defence of contributory negligence. Once a fraudulent representation has induced payment, the claimant's concurrent negligence, irrational belief or other reason for paying does not reduce the fraudster's liability.

The bank confirmed a letter of credit in favour of a seller whose managing director arranged for bills of lading to be falsely dated. He presented the documents to the bank knowing of the falsity. The bank paid but failed to obtain reimbursement from the issuing bank.

Cresswell J held the shipowners, shipping agents, seller and managing director liable in deceit: [1998] 1 Lloyd's Rep 684. The Court of Appeal held by a majority that damages for deceit could not be reduced for contributory negligence: [2001] QB 167. In a separate decision it unanimously allowed the managing director's appeal, holding that he had made the representation only on behalf of the company: [2000] 1 Lloyd's Rep 218.

The shipowner settled and obtained leave to withdraw its appeal. The remaining questions were whether the managing director was personally liable for his own fraudulent acts and, if so, whether the bank's conduct permitted apportionment under the Law Reform (Contributory Negligence) Act 1945.

1. Disposition. The House unanimously allowed the bank's appeal against Mr Mehra and restored Cresswell J's order holding him liable in deceit. Lord Hoffmann delivered the leading speech, whose reasons were adopted by Lords Mustill, Slynn, Hobhouse and Rodger. Mr Mehra's cross-appeal on contributory negligence was dismissed. The shipowner was permitted to withdraw its appeal following settlement.
2. Contributory negligence. Per Lord Hoffmann, section 4 of the Law Reform (Contributory Negligence) Act 1945 has separate defendant and claimant limbs. For a claimant, statutory fault requires conduct which would have constituted a common-law defence of contributory negligence. Section 1(1) was intended to replace the former complete defence with apportionment, rather than reduce damages in claims where no such defence had previously existed.
3. There is no common-law defence of contributory negligence to deceit. Edgington v Fitzmaurice (1885) 29 Ch D 459 established the relevant causation principle: once the fraudulent representation induced the claimant to act, the law disregards other negligent or irrational reasons which also contributed to the decision. The claimant's careless payment therefore could not constitute statutory fault, and no apportionment was available.
4. Personal liability for deceit. Per Lord Hoffmann, Mr Mehra made the fraudulent representation with the necessary knowledge and intention, and the bank relied upon it. Agency principles also attributed his representation and knowledge to the company, but that attribution did not remove his responsibility for his own tort. A person cannot avoid liability for fraud by declaring that the fraud is committed for somebody else.
5. Williams v Natural Life Health Foods Ltd [1998] 1 WLR 830 concerned negligent misrepresentation, for which personal liability depends upon an assumption of responsibility. That reasoning does not apply to fraud. Mr Mehra was liable because he committed the deceit, not because he was a director or had procured the company's tort.
6. Subsidiary observations. Lord Hoffmann observed that the wider rule excluding consideration of concurrent negligent causes probably applies only to fraudulent misrepresentation. In a claim under section 2(1) of the Misrepresentation Act 1967, other causative negligence may remain relevant, although mere failure to discover the representation's falsity does not. Lord Rodger additionally considered that the historical law showed no contributory-negligence defence where the defendant intended harm; he distinguished Murphy v Culhane [1977] QB 94 and reserved the soundness of the observation made there.
7. The restored order was enforceable subject to credit for the settlement money received from the shipowner. The House did not determine how that payment should be apportioned.

• House of Lords: The bank's appeal was allowed unanimously and Cresswell J's order against Mr Mehra was restored. Mr Mehra's cross-appeal was dismissed. PNSC obtained leave to withdraw its appeal following settlement.
• Court of Appeal: In [2000] 1 Lloyd's Rep 218, the court unanimously allowed Mr Mehra's appeal and set aside his personal liability. In [2001] QB 167, a majority held that damages for deceit could not be reduced under the contributory-negligence legislation; Sir Anthony Evans would have reduced them by 25%.
• High Court: Cresswell J held PNSC, the shipping agents, Oakprime and Mr Mehra liable in deceit, with damages to be assessed: [1998] 1 Lloyd's Rep 684.