Inter Export LLC v Townley & Anor

Fraudulent misrepresentations made by a company director may be actionable against her personally in deceit where the ordinary elements of the tort are proved. The claimant need show that the representation influenced it; it need not prove that it believed the representation.

Damages for deceit are measured by the claimant’s negative interest. The aim is to restore the position that would have existed if the fraudulent representation had not been made. Recovery extends to actual loss directly flowing from the fraud, including consequential loss, and is not confined to the contractual benefit-of-the-bargain measure.

Accessory liability requires more than knowledge or facilitation. The alleged accessory must have acted pursuant to a common design sharing the features which made the primary conduct tortious.

The claimant, a Ukrainian company, supplied sunflower oil to Nerida Trading Limited, later renamed Nemetona Trading Limited. The company failed to pay approximately US$1.2 million and entered liquidation. The claimant alleged that the second defendant, a director and shareholder, made fraudulent representations and forged payment documents, and that the first defendant, a shareholder and former director, was liable as a shadow or de facto director, joint tortfeasor or conspirator.

The central issues were whether the representations amounted to deceit, the proper measure of damages, and whether either defendant shared a common design or was otherwise liable for the company’s conduct.

1. Deceit. The court applied the established elements of deceit: a representation which was false, dishonestly made, intended to be relied on and in fact relied on. The claimant was influenced by the representations and was not required to prove that it believed them. The second defendant’s representations concerning payment and the forged SWIFT documents satisfied those requirements. She was liable in deceit.
2. Damages. The governing measure was the claimant’s negative interest, namely the position it would have occupied if the fraudulent representations had not been made. The rule permits recovery of all actual loss directly flowing from the fraud, including consequential loss, rather than the contractual benefit of the bargain. On the evidence, the appropriate loss was the value of the oil, US$1,203,099. No deduction was made for sunflower meal because the claimant could have sold it in any event. Contractual interest was not recoverable under that rule, but interest pleaded on the usual basis remained arguable.
3. Accessory liability and conspiracy. Mere knowledge, shareholding, directorship, financing or facilitation is insufficient. Joint liability requires a common design to carry out the tort, including shared intention in relation to the features making the conduct tortious. The evidence did not establish that the first defendant participated in the representations, forgeries or any common design.
4. The claim therefore succeeded against the second defendant for US$1,203,099. The claim against the first defendant, including the conspiracy allegation, was dismissed. Further argument on interest was reserved.