Dear Colleagues:

 

My gut reaction (of which I am happy to be disabused) is that the case is wrongly decided and that the decision in the CA is to be preferred.*   As was admitted by the insurer, they did not really believe the statements made by the defendant as to the seriousness of his medical condition but they could not really disprove them at the time of the settlement.  What they really were afraid of was that a sympathetic trial judge might believe the defendant.  So what they relied on was not the truth of the statements but merely the fact that they were made. In this sense and this sense only were the statements a cause of the insurer entering into the settlement. 

 

I am also a little concerned by the summary of the tort given by Lord Toulson at [58] where he seems to be saying that one has to intend the representee to act to his or her detriment in order for the tort be actionable.  He also uses this line of thinking to prove why damage is a necessary element of the tort (at [62]).  But isn’t it trite law that the representor does not have to intend to cause loss: see Bradford v Borders where the court says: ‘If however fraud be established, it is immaterial that there was no intention to cheat or injure the person to whom the false statement was made. ( Derry v. Peek (1889) 14 A.C. 337 at p. 374; Peek v. Gurney L.R. 6 H.L. 377 at p. 409.)’?

 

It seems to me that a better way of dealing with this set of facts is by using the unlawful means tort: the defendant lied to doctors and other professionals involved when they prepared their reports and that this was done with the intention of causing loss to the insurer.

 

*Here is how the CA decision is summarized:

 

“Briggs LJ’s … held that for a misstatement to be the basis for a claim to rescind a contract, the claimant must have given some credit to its truth and have been induced into making the contract by a perception that it was true rather than false. He said that when judges and text-book writers used the  word  “influenced”  …  they  did  so  in  order  to accommodate  cases  where  belief  in  the  truth  of  the  statement  was  a  contributory rather than the [primary] cause of the representee’s entry into the contract.”

 

“Underhill LJ’s … starting  point  was  that  when  a  person  enters  into  a  contract  to  settle  a dispute he knowingly takes the risk of making a payment for a claim which may be ill-founded, and he pays a sum commensurate with his assessment of that risk. But he said that the risk which a settlor must be taken to have accepted will depend on the circumstances of the case. A settlor will not normally be taken to have accepted  the risk that the claimant’s case is not just ill-founded but dishonest. However, if it is sufficiently apparent that the settlor intended  to  settle  notwithstanding the possibility that the claim was fraudulent, he will be held to the settlement. The fact that  the  insurers  had  pleaded  that  the  claim  was  exaggerated  for  financial  gain proved their awareness of the possibility of fraud, but they chose to settle the claim with that awareness, and it was contrary to the public interest in the settlement of disputes for them to be allowed to set aside the settlement.

 

Sincerely,