AIC Ltd v ITS Testing Services (UK) Ltd "The Kriti Palm"

Deceit requires a clearly identified false representation and proof that the representor consciously knew it was false, or was dishonest in having no belief in its truth. An imprecise overall impression cannot found the tort where the recorded conversation, read as a whole, discloses uncertainty rather than the alleged positive assurance.

For section 32(1)(b) of the Limitation Act 1980, a certifier which possesses material of its own creation casting doubt on its certificate must disclose it to its client. A deliberate decision to withhold that material may be deliberate concealment even though it is not deceit. Whether a concealed fact is relevant to a right of action depends on the particular cause of action pleaded, not merely on a general label of negligence or breach of contract.

ITS issued a quality certificate for gasoline loaded on the Kriti Palm. It had used an incorrect test method, although the certificate stated that the fuel met specification. After the cargo reached New York, tests using the specified method indicated that the regular gasoline was off-specification. ITS performed an internal retest on broached samples but did not disclose it or its results to AIC.

AIC began proceedings more than six years after the certificate and telephone conversation. At trial, Cresswell J held that ITS was liable in deceit through Mr Lucas’s telephone statement that it would stand by the certificate, and that ITS had deliberately concealed the retest for the purposes of section 32 of the Limitation Act 1980: [2005] EWHC 2122 (Comm).

The appeal concerned whether deceit had been established and whether the undisclosed retest extended time for AIC’s non-fraud claims.

1. Appeal allowed in part. All members of the court held that the finding of deceit could not stand. The representation found by the judge—that the certificate remained good and valid or reliable—was not clearly made in the recorded conversation. Read as a whole, the conversation showed that Mr Lucas declined to express a view on the accuracy of the stated values or on the effect of the correct test. The evidence was also insufficient to establish the conscious dishonest knowledge required for deceit.

2. By a majority, Buxton LJ and Sir Martin Nourse held that ITS had nevertheless deliberately concealed the Cooper retest and its results within section 32(1)(b) of the Limitation Act 1980. A certifier holding test material of its own creation which casts doubt on the certificate it issued must reveal that material to its client. ITS’s deliberate failure to do so was sufficient; concealment under the section did not require proof of deceit or moral turpitude.

3. The majority further held that the statutory requirement of a fact relevant to a right of action is narrow. It concerns a fact essential to the particular cause of action, rather than evidence which merely improves an existing claim. However, separate allegations that ITS failed to disclose what it actually knew from the Cooper retest pleaded distinct causes of action from allegations based only on what ITS ought to have known. The concealed retest was therefore capable of being relevant within section 32(1)(b).

4. Rix LJ would have allowed the appeal in full, holding that no duty of disclosure arose and that the retest was merely additional evidence. The majority upheld the limitation ruling. The deceit claim was dismissed and the remaining action was remitted to the Commercial Court for reconsideration in light of that dismissal.

• Court of Appeal (Civil Division): allowed the appeal in part. It reversed the finding of deceit, but the majority upheld the application of section 32(1)(b) of the Limitation Act 1980 and remitted the remaining action: [2006] EWCA Civ 1601.
• Commercial Court: Cresswell J held ITS liable in deceit and found deliberate concealment of the Cooper retest and its results: [2005] EWHC 2122 (Comm).