Lindsay v O'Loughnane

A person commits deceit where he knowingly or recklessly makes a false factual representation, intending it to be relied upon, and it materially induces the claimant to act. A representation may arise by implication from words or conduct, viewed in context. A representation concerning an existing state of affairs continues until it is acted upon unless corrected.

An agent who commits fraud while acting for a company remains personally liable. The corporate veil cannot ordinarily be pierced merely because wrongdoing occurred through an insolvent company’s business. The company must have been misused as a device or façade to conceal wrongdoing independent of that business.

The claimant entrusted £565,000 to foreign exchange companies controlled by the defendant. The money was to be converted into euros and transferred abroad. The companies were insolvent, and the defendant knew that client money would instead be used to pay other creditors.

The claimant alleged that the defendant falsely represented that the businesses were trading properly, client funds would be held on trust, and earlier payment delays were attributable to a bank. Relying on those representations, he entered two transactions for which no euros were delivered. He claimed damages for deceit or, alternatively, sought to pierce the corporate veil and recover the companies’ debts from the defendant personally.

1. The claim in deceit succeeded. The defendant knowingly made false representations which materially induced the claimant to part with £565,000. Damages were ordered to be assessed, with an interim payment and interest.

2. By accepting the June order and sending the trade note, the defendant impliedly represented that the foreign exchange businesses were trading properly and legitimately, were solvent, and would hold the claimant’s money on trust until it was used to purchase currency. Context was decisive when determining whether those representations arose. The representations were fraudulent because the defendant knew that the company was insolvent and that the money would be used to pay other creditors.

3. The defendant also falsely represented that delay in completing the June transaction resulted from banking failures and that a duplicate payment had been made. The representations made in June were never corrected. They therefore continued and were repeated when the claimant relied upon them in entering the September transactions. Once the defendant knew that the claimant intended to transfer further money, he was required to correct the false impression before the money was paid.

4. The representations played a real and substantial part in inducing the September transactions. The defendant remained personally liable for his fraud although he acted as an agent of the companies and the claimant did not know his position within them.

5. Section 6 of the Statute of Frauds (Amendment) Act 1828 did not defeat the claim. An implied representation may satisfy the statutory writing requirement where it arises from a signed email. The later email blaming the bank did not concern the character or credit of another person in the statutory sense.

6. The alternative corporate-veil claim would have failed. Piercing requires misuse of a company as a device or façade to conceal wrongdoing independent of the company. The alleged fraudulent trading occurred at the heart of the companies’ own business. This conclusion was academic because deceit provided full recovery.

not stated in the judgment.