GE Commercial Finance Ltd v Gee & Ors

The tort of deceit requires a false representation, knowledge of falsity, absence of honest belief or recklessness, an intention that the claimant rely on it, actual reliance and resulting damage. The inquiry into the representor’s state of mind is wholly subjective. A junior employee acting on a superior’s instructions may be liable where he knows the representation is false, but mere suspicion, carelessness or reliance on a superior’s judgment is insufficient. Unlawful-means conspiracy requires concerted action pursuant to a combination intended to injure the claimant. Damages for deceit include all loss directly flowing from the transaction, including reasonable consequential costs. Contributory negligence is no defence.

GE Commercial Finance Ltd provided invoice-discounting facilities to companies in the City Truck Group. It alleged that David Gee, Kevin Smedley and Kevin Ritchie used fictitious or non-notifiable debts, false aged-debt reports and circular payments to obtain advances and conceal the true position.

The claim was brought in deceit and unlawful-means conspiracy. The court considered whether representations were false, the defendants’ knowledge and state of mind, whether they combined to injure GE, and the resulting loss. The central issues included the liability of a junior employee acting on instructions and the proper assessment of damages.

1. Liability of Mr Gee and Mr Smedley. The court found that the notifications, aged-debt reports, management accounts and related communications contained false representations. Mr Smedley prepared or directed the figures and knew that they were false. Mr Gee knew of and encouraged the conduct. GE relied on the representations in making and continuing advances.

2. Mr Ritchie. The court distinguished between figures entered on Mr Smedley’s instructions, in respect of which Mr Ritchie’s reliance on a superior’s judgment did not establish knowledge or recklessness, and notifications of fictitious debts used to obtain repayment of cheques drawn by CTGSL. In the latter respect Mr Ritchie knew the representations were false. He was not, however, shown to have shared the common intention required for conspiracy.

3. Deceit. The applicable principles were stated by reference to Derry v Peek (1889) 14 App Cas 337 and Standard Chartered Bank v Pakistan National Shipping Corporation [2000] 1 Lloyd's Rep 218. The test was subjective. Motive was irrelevant once fraud was proved, and contributory negligence was no defence.

4. Conspiracy. The court applied the formulation in Kuwait Oil Tanker Company SAK v Al Bader [2000] EWCA Civ 160. A conspiracy required concerted unlawful action pursuant to a combination. Mr Gee and Mr Smedley combined to benefit the group while intentionally exposing GE to the risk of loss. The evidence did not establish that Mr Ritchie shared that intention.

5. Damages. GE was entitled to recover the loss directly flowing from the deceit, including reasonable administration and continuation-of-trading costs. It was unnecessary to identify the precise loss attributable to each false notification. The claim succeeded against Mr Gee and Mr Smedley in the sum of £16,044,000. The court invited further submissions on whether damages should also be awarded against Mr Ritchie.