Tort
Tort
Tort
The tort of fraudulent and negligent misrepresentation8 when made by telephone or telex
is committed at the place where the misrepresentation was received and not the place
from which it was sent9.
The making of a false statement through want of care or making it honestly believing it
to be true falls short of deceit4. The question is whether the defendant honestly believed
the representation in the sense of his understanding of it provided that it is one which
may be reasonably understood; the test is not on the objective basis to be determined
by the court5. Thus statements which are made carelessly without more cannot support a
cause of action for deceit6.
1 Derry v Peek (1889) 14 App Cas 337, HL. See Tegas Baiduri Sdn Bhd v BIMB Trust Ltd [2011] 8 MLJ
210 at 230 citing Panatron Pte Ltd v Lee Cheow Lee [2001] 3 SLR 405, where the Singapore Court of Appeal
held that the law as regards fraudulent representation is clear and settled. A man can be held liable in tort to
another, if he knowingly or recklessly makes a false statement to that other with intent that it would be acted
upon, and that does not act upon it and suffers damage. The plaintiff must prove actual fraud which happens
when it is shown that a false representation has been made knowingly, or without belief in its truth, or
recklessly, without caring whether it be true or false.2 Ie the Contracts Act 1950 (Act 136).3 Ie the Contracts
Act 1950 s 17. See [120] CONTRACT (2013 Reissue).4 Fraud is essential to found an action of deceit, and it
cannot be maintained where the acts proved cannot be so termed.: Derry v Peek (1889) 14 App Cas
337 at 375, HL, per Lord Herschell.5 Akerhielm v De Mare [1959] AC 789, [1959] 3 All ER 485, CA
(Eng).6 Angus v Clifford (1891) 2 Ch 449, CA (Eng).
[380.128]
Damages
The aim in the award of damages1 for deceit is to compensate the complainant and put
him, in so far as money can do it, in the position had there been no reliance on the
fraudulent misrepresentation2. No liability exists where the representee was not
deceived3. In deceit, the reasonable foreseeability test of remoteness4 does not apply,
and the defendant is liable for all the actual loss suffered by the plaintiff5. In principle the
assessment is aimed at putting the plaintiff in the position he would have been in had
the representation not been made6, and not in the position had the representation been
true. Consequently, as a general rule, prospective gains are not recoverable7. The
principle is not absolute, and it is only a method in compensating the plaintiff8. A broad
approach should be adopted, and the law may allow the plaintiff to recover all the losses
that are directly caused by the deceit9. The principle is applicable to the extent that the
plaintiff may recover the value of shares by reference to the purchase price and its fall in
value on account of fraud although the shares were bought at a higher price10, and while
having regard to the peculiarity of a transaction, a negligent valuer is not liable for a
general fall in the property market11, it is probably consistent with the general policy of
the law that a fraudulent valuer should bear the loss12. Consequential damages may be
awarded for the loss directly incurred including unforeseeable loss13.
A plaintiff may abandon his right to rescind the contract and insist that the contract be
performed and that he be put in the position he would have been had the representation
been true14. In cases of fraud where rescission is granted, damages are awarded in
addition to rescission, and the basis of compensation provided by the Contracts Act
195015 has no appplication16. Thus a plaintiff is only entitled to the expenditure
reasonably and properly incurred in consequence of and flowing directly from the
misrepresentation, whether before or after rescission17.
Exemplary damages may also be awarded18, and injured feeling19 and mental
distress20 may be reflected in assessing damages.
1 At common law there are two principles fundamental to the award of damages. First, that the defendant's
wrongful act must cause the damage complained of. Second, that the plaintiff is to be put in the same position
as he would have been in if he had not sustained the wrong for which he is now getting his compensation or
reparation: see Livingstone v Rawyards Coal Co(1880) 5 App Cas 25 at 39, HL, per Lord Blackburn.2 Abdul
Razak Datuk Abu Samah v Shah Alam Properties Sdn Bhd [1999] 3 CLJ 231, [1999] 2 AMR 2351, CA (the
plaintiff is therefore only entitled to recover all expenditure reasonably and properly incurred in consequence of
and flowing from the fraudulent misrepresentation, whether before or after the date of rescission. The
reimbursement of interest paid by the plaintiff constitute expenditure which the plaintiff reasonably and
properly incurred in consequence of the defendant's fraudulent misrepresentation. They are therefore
recoverable by the plaintiff); Holmes v Jones [1907] 4 CLR 1692 at 1709; Demestrious v Gikas Dry Cleaning
Industries Pty Ltd [1991] 22 NSWLR 561 at 575; Sellars Adelaide Petroleum (1994) 179 CLR 332. See
[120] CONTRACT (2013 Reissue).3 Horsfall v Thomas (1862) 1 H & C 90.4 See [380.135].5 Smith New Court
Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254 at 284, HL, per Lord Steyn; Doyle
v Olby (Ironmongers) Ltd [1969] 2 QB 158, [1969] 2 All ER 119, CA (Eng).6 Abdul Razak Datuk Abu Samah v
Shah Alam Properties Sdn Bhd [1999] 3 CLJ 231, [1999] 2 AMR 2351, CA. See also the other cases cited in
note 2 above.7 McConnel v Wright [1903] 1 Ch 546 at 554555, CA (Eng), per Collins MR; Bango v
Halt (1971) DLR (3d) 66; State of Australia v Johnson (1982) 42 ALR 161. However, the plaintiff may recover
for the loss of opportunity to gain a profit which he might have made in some other business with the same
money: East v Maurer [1991] 2 All ER 733, [1991] 1 WLR 461, CA (Eng). See [120] CONTRACT (2013
Reissue).8 Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254,
HL.9 Smith New Court Securities Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254 at 284, HL,
per Lord Steyn; Doyle v Olby (Ironmongers) Ltd [1969] 2 QB 158, [1969] 2 All ER 119, CA (Eng); Tay Tho Bok
v Segar Oil Palm Estate Sdn Bhd [1996] 3 MLJ 181.10 Smith New Court Securities Ltd v Scrimgeour Vickers
(Asset Management) Ltd [1997] AC 254, HL.11 Banque Bruxelles Lambert SA v Eagle Star Insurance Co
Ltd [1997] AC 191, HL.12 The point was left open in Banque Bruxelles Lambert SA v Eagle Star Insurance Co
Ltd [1997] AC 191, HL. It is not proper to apply negligence principles to fraud: see Smith New Court Securities
Ltd v Scrimgeour Vickers (Asset Management) Ltd [1997] AC 254, HL.13 Royscott Trust Ltd v Rogerson [1991]
2 QB 297, [1991] 3 All ER 294, CA (Eng),; East v Maurer [1991] 2 All ER 733, [1991] 1 WLR 461, CA
(Eng); Archer v Brown [1985] 1 QB 401,[1984] 2 All ER 267.14 See the Contracts Act 1950 (Act 136) s 19(2)
and Abdul Razak Datuk Abu Samah v Shah Alam Properties Sdn Bhd [1999] 3 CLJ 231 at 241, CA.15 Ie the
Contracts Act 1950 s 74.16 Abdul Razak Datuk Abu Samah v Shah Alam Properties Sdn Bhd [1999] 3 CLJ 231
at 241, CA.17 See note 16 above.18 Archer v Brown [1985] 1 QB 401, [1984] 2 All ER 267.19 Mafo v
Adams [1970] 1 QB 548, [1969] 3 All ER 1404, CA (Eng).20 Shelley v Paddock [1979] QB 120, [1978] 3 All ER
129; affd [1980] QB 348, [1980] 1 All ER 1009, CA (Eng); Saunders v Edwards [1987] 2 All ER 651, [1987] 1
WLR 1116, CA (Eng).
[380.129]
Negligent statements
A person owes a duty of care not to make untrue statements which result in physical
injury to another person or his property1. In certain circumstances there is also a duty
not to make false statements which cause another person to suffer economic loss. In
order to be liable for such a false statement, the defendant must have assumed some
responsibility in respect of the advice, information or opinion that he has tendered to the
plaintiff, and the circumstances must be such that the plaintiff could reasonably rely on
the defendant's skill or judgement. The duty of care will then exist if the defendant is or
holds himself out to be carrying on a business or profession which entails the giving of
that advice, information or opinion2.
1 See [380.144].2 See [380.143].
Fraud
A court of equity has an inherent jurisdiction to relieve against all types of fraud1. Fraud
is based on dishonesty but is closely linked to unconscionable behaviour. By contrast,
fraud at common law is deliberate dishonesty which is intended to cheat a person and to
induce entry into a contract; it is relieved in tort through the action of deceit 2. This deceit
includes fraudulent misrepresentation. Equitable fraud is evidenced in various ways but
deliberate dishonesty is not a necessary part of the offence. Examples of fraud include: a
mortgagee failing to exhibit good faith in selling mortgaged property; taking an interest
with knowledge of a prior though unprotected interest; exerting unlawful pressure on a
contracting party; and failure to perform duties as a trustee. Misrepresentation is
another example where fraud, illustrated by a false statement made by the defendant,
enables the plaintiff to have the contract set aside3. These examples may also provide an
opportunity for relief on other, more defined grounds, if the resort to fraud is
unsuccessful. Perhaps, the essence of equitable fraud is conscious dishonesty in the
failure to perform an obligation, and unmeritorious and unconscionable conduct 4.
There are various unconscionable dealings, based on pressure inducing entry into the
transaction, against which equity will grant relief. Not all of these represent cases of
fraud because only those transactions evidencing unlawful pressure would come under
this head. The inherent jurisdiction of equity to relieve against harsh and unconscionable
bargains is undoubted. The court does so to prevent those who seek to take advantage
of a person with a legal disability from succeeding5.
The equitable doctrine of notice6 is founded on good faith, or the absence of fraud. A
bona fide purchaser who gives value, but who has notice of a prior interest cannot claim
priority for his interest, otherwise he is guilty of equitable fraud.
1 See Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125 at 154, where Lord Hardwicke LC said that the
purpose of equitable relief in such cases was to prevent taking surreptitious advantage of the weakness or
necessity of another, which knowingly to do is equally against conscience as to take advantage of the
ignorance; Zung Zang Wood Products Sdn Bhd v Kwan Chee Hang Sdn Bhd [2014] 2 MLJ 799, FC; Tai Lee
Finance Co Sdn Bhd v Official Assignee [1983] 1 MLJ 81, FC (the question of existence or otherwise of fraud is
one of fact to be determined in the light of the facts and circumstances surrounding each particular case. The
onus is upon the person alleging fraud to prove fraud not on a balance of probabilities but beyond reasonable
doubt); however see also Ang Hiok Seng @ Ang Yeok Seng v Yim Yut Kiu (Personal Representative of the
estate of Chan Weng Sun, decd)[1997] 2 MLJ 45, FC(whether the allegation of fraud in civil proceedings
concerns criminal fraud such as conspiring to defraud, misappropriation of money or criminal breach of trust, it
is settled law that the burden of proof is the criminal standard of proof beyond reasonable doubt and not on
the balance of probabilities. An allegation of criminal fraud in civil or criminal proceedings cannot be based
merely on suspicion or speculation. However, where the allegation of fraud is entirely founded on civil fraud and
not on criminal conduct or offence, a balance of probability is applicable).2 East v Maurer [1991] 2 All ER
733, [1991] 1 WLR 461, CA (Eng); cf Derry v Peek (1889) 14 App Cas 337, HL. In Victor Cham v Loh Bee
Tuan [2006] 5 MLJ 359 at 366, CA, Arifin Zakaria JCA set out the requirements for a successful action in
deceit, indicating that: Fraudulent misrepresentation comes under the tort of deceit. To succeed in his claim,
the respondent needs to establish that he had acted in reliance on the fraudulent misrepresentation and that
the representation was false. He further needs to establish that the first appellant had made those statements
knowingly or recklessly without caring whether it was true or false. And that as a result of reliance on such
representation, the respondent had suffered damage.
In Khoo Kheng Sim v Khoo Chooi Leong [2002] 5 MLJ 345, Low Hop Bing J (as he then was) referred to the
appropriate pleadings and form of action where the allegation was penipuan. His Lordship held (at 348) that if
the plaintiff intended the word penipuan to mean deceit, then it was a claim made by the plaintiff for relief or
remedy for a tort. It is trite law that deceit is an example of a cause of action in tort, in which case, [the
repealed] RHC O 5 r 2(a) [now RC O 5 r 1] would apply. On the other hand, if penipuan was used to mean
fraud, then [the repealed] O 5 r 2(b) [now RC O 5 r 2] would apply so that the mode of commencement
would still be by way of writ.
As to tortious actions for damages for deceit see TORT (2014 Reissue) [380.122][380.129].
3 Redgrave v Hurd (1881) 20 ChD 1, CA (Eng).4 Rasiah Munusamy v Lim Tan & Sons Sdn Bhd [1985] 2 MLJ
291, SC; Nocton v Lord Ashburton [1914] AC 932, HL.5 Earl of Chesterfield v Janssen (1751) 2 Ves Sen 125 at
127, per Lord Hardwicke LC.6 See also [300.040], [300.041]