In brief:
- The Privy Council has confirmed the legal requirements for a claim in deceit. In doing so, it has settled a significant and murky issue under English law by removing a key hurdle to pleading and proving fraudulent misrepresentation claims.
- Claimants do not need to prove their conscious awareness or understanding of a representation (although they still must prove that the representation induced them to enter the contract).
- The removal of the awareness requirement in deceit claims is likely to make it easier to plead and prove misrepresentation in banking and other complex commercial cases than it has been to date.
- Whilst the decision from the Privy Council will not be directly binding on the English Courts, it is likely to be very persuasive.
Background
The Board of the Privy Council gave judgment in Credit Suisse Life (Bermuda) Ltd v Ivanishvili [2025] UKPC 53 ("Ivanishvili"). In a unanimous judgment delivered by Lord Leggatt, the Privy Council clarified that it is not a legal requirement of a claim in deceit that the plaintiff was aware of the representation on which the claim is based.
On advice from Credit Suisse AG (the "Bank"), Mr Ivanishvili (former prime minister of Georgia) transferred cash and other assets amounting to c.US$750 million as premiums for two life insurance policies, to Credit Suisse Life (Bermuda) Ltd ("CS Life"), a wholly owned subsidiary of the Bank. The policy assets were to be held in a separate account and Mr Ivanishvili had a choice whether they were to be invested on a discretionary or non-discretionary basis.
Mr Ivanishvili later discovered that his relationship manager, Mr Lescaudron, (who was acting for the Bank, which was itself acting on behalf of CS Life) had been dealing fraudulently with his policy assets. He subsequently brought proceedings against CS Life in Bermuda, alleging breach of contract and breach of fiduciary duty, and damages for fraudulent misrepresentation.
These claims succeeded at a trial before the Chief Justice of Bermuda. The Court of Appeal for Bermuda dismissed CS Life's appeal against the award of damages for breach of contract and breach of fiduciary duty but allowed their appeal in relation to the fraudulent misrepresentation claim.
Privy Council's analysis
CS Life appealed to the Privy Council and Mr Ivanishvili cross-appealed against the dismissal of his fraudulent misrepresentation claim. The Privy Council unanimously dismissed CS Life's appeal on all issues save for the correct start date for the assessment of damages (which the Privy Council held starts at the date at which the policy, and so the contractual obligation to invest the premiums, commenced – rather than when, as the Court of Appeal held, Mr Ivanishvili's assets were transferred to CS Life). Importantly, they overturned the Court of Appeal of Bermuda's finding that the fraudulent misrepresentation claim failed because the claimant had not shown that they had been consciously aware of the misrepresentation when entering into the policies. Ultimately, however, the claim for fraudulent misrepresentation still failed because it was out of time.
Deceit/fraudulent misrepresentation
The fraudulent misrepresentations giving rise to the alleged torts were made in Georgia and it was common ground that the misrepresentation claim would succeed only if the misrepresentations were actionable under both the law of Bermuda and the law of Georgia.
There was only one issue of Bermudan law in dispute: whether the claim should fail because there was no finding that Mr Ivanishvili was aware of and understood Mr Lescaudron (the relevant employee of the Bank) to be making the representations on which the claim was based. It was agreed that the relevant Bermudian law is the same as the law of England and Wales.
The tort of deceit/fraudulent misrepresentation is based on the principle that a person who causes another person to suffer loss by deceiving them is liable to compensate that person for the loss. Deceiving someone means (1) making a misrepresentation of fact (or law) by words or actions which (2) are false, (3) the maker does not believe to be true, (4) is intended to be believed by the representee, and (5) causes the representee to believe that the representation is true.
The Court of Appeal of Bermuda held that (as has been suggested in several recent cases) there is a legal requirement that the claimant was aware of the representation and understood it to have been made at the time that they acted in reliance upon it. The Privy Council, however, concluded that there is no such requirement under the laws of England and Wales, and Bermuda. The Privy Council referred to examples of cases where a claimant was deceived and suffered loss as a result of acting on that false belief without having conscious awareness or understanding of the representation being made, and in some cases without even being aware of the conduct which gave rise to the representation – such as a seller of a property deliberately covering up dry rot so that the buyer would not see it. It concluded that it would be wrong if the victims could not recover their losses in such circumstances.
The suggestion that there is a requirement of awareness stems from misconceptions that: (i) reliance on a representation is impossible without awareness; (ii) acting on an assumption and acting in reliance on a representation are mutually exclusive; and/or that (iii) requiring awareness of a representation is necessary to preserve the distinction between a misrepresentation and a non-disclosure. The Privy Council clarified that these are all incorrect as a matter of English (and Bermudian) law.
In this case, however, the claim was not actionable under the law of Georgia because it was brought after the Georgian limitation period had expired.
Commercial implications
Perhaps the most important implication is the Privy Council's guidance in relation to pleading deceit in fraudulent misrepresentation claims. Four key points of guidance emerge from the Ivanishvili decision:
- Clearly plead representations implied from words or conduct, keeping these as simple and clear as possible. They should typically be so obvious that they 'go without saying'.
- Plead features of the representation that "naturally" give rise to a particular assumption (or belief) by the claimant (which turns out to be false, i.e. the claimant was deceived). The assumption should be one which "arises naturally through established social norms and expectations".
- Claimants should plead and prove: (i) that the representation caused the claimant to hold the natural assumption or belief (which turns out to be false); and (ii) that the claimant acted and relied upon that assumption or belief.
- If the representation is at all ambiguous/capable of more than one meaning, the claimant will need to plead, and then prove at trial, that it understood the representation in the sense that the defendant intended the claimant to understand it (and which the defendant knew was false).