Stop Right Now! The Privy Council Strips Back the Essentials of Deceit

You'd be forgiven for thinking there isn't a common thread linking the Spice Girls pop band, the fictional detective duo Holmes and Watson, dry rot and life assurance policies.

That said, in clarifying the fundamental requirements for a cause of action in the tort of deceit, the Privy Council in Credit Suisse Life (Bermuda) Ltd v Bidzina Ivanishvili [2025] UKPC 53 has united these unlikely bed-fellows by virtue of its conclusion that it is not an essential element of a claim in deceit that a claimant demonstrates their contemporaneous awareness or understanding of an impugned representation (or, put another way, that that the representation was “actively present to [their] mind”).

The case presented an opportunity to course-correct and clarify various misconceptions that had informed the development of the relevant law in this area since 2010. Not only has the decision reopened a route to advancing claims based on assumptions derived from another's conduct (such as implied representations about honesty), it may also revive securities litigation "price or market reliance" claims for passive investors under FSMA.

Facts and procedural history

The named claimant, Mr Ivanishvili, is the former Prime Minister of Georgia. He began a banking relationship with Credit Suisse in 2005.

In 2011 and 2012, on the bank's advice he transferred over US$750m to CS Life (a Bermuda insurance company and a wholly owned subsidiary of Credit Suisse) as premiums under two life insurance policies.

Mr Ivanishvili later discovered that his relationship manager, Mr Lescaudron, had being dealing fraudulently with those assets, including misappropriation, self-enrichment via secret commissions, and transferring assets out of the policy accounts to the accounts of unrelated clients.

Civil proceedings were initiated before the courts of Bermuda against CS Life with the claimants seeking damages for breach of contractual and fiduciary duties.

Meanwhile, Mr Lescaudron was prosecuted in Switzerland and convicted of fraud, aggravated mismanagement, and forgery with a 5-year sentence (and by the time of his trial he had admitted to the fraud), such that the claimants later sought damages for fraudulent misrepresentation.

CS Life was found liable at first instance in the Bermudian proceedings for breaches of contractual and fiduciary duties and for fraudulent misrepresentation.

CS Life appealed with partial success, and so all parties then appealed and cross-appealed to the Privy Council: CS Life regarding the successful breach of contract and fiduciary duty claims and Mr Ivanishvili et al. regarding the failed fraudulent misrepresentation claim.

The claim in misrepresentation

The first instance decision held that: (i) by recommending investment in the relevant policies, Mr Lescaudron impliedly represented that the bank (including Mr Lescaudron) was not managing the accounts fraudulently and did not intend to manage the policy assets fraudulently; and (ii) those representations were (a) false (and known by Mr Lescaudron to be false); (b) intended to, and did, induce the claimants to enter into the policies (and Mr Lescaudron could not have induced the claimants to enter into the policies without making the implied representations).

Those finding of fact were binding, but the Court of Appeal held that the misrepresentation claim nevertheless failed because Mr Ivanishvili had not pleaded and proved that he had any conscious awareness or understanding of the representations made to him.

The issue for the Privy Council to determine was whether it is a legal requirement of a claim in deceit that a claimant was aware of the representation on which their claim is based.

The awareness requirement

The origin of the "awareness" requirement appears to derive from cases involving statements that are capable of two meanings (where one is true and the other false), which has led to judicial conflation between what a claimant needs to demonstrate to establish deceit in a specific factual context on the one hand versus what constitutes a fundamental ingredient of the cause of action in the tort of deceit on the other.

In cases involving ambiguous statements, a claimant pleading fraudulent misrepresentation needs to show that (i) they understood the relevant statement in the sense that the defendant intended the claimant to understand that statement (ii) that meaning was false and (iii) the defendant knew it was false or did not believe it was true. The Board held, however, that there is no overriding requirement for contemporaneous awareness of the representation as a matter of law.

Missing representations

The Board then explored cases involving deceit carried out via non-verbal conduct, including conduct of which the victim was entirely unaware, including:

duplicitous sellers covering up defects so that prospective buyers would not see them;
the participation by all five members of the Spice Girls in a photo shoot and promotional materials for their sponsor when Geri Halliwell had in fact stated behind the scenes that she wanted to leave the group; and
a person who orders food in a restaurant or who hails a taxi, thereby representing that he or she has the means and intention to pay their bill and the fare.

Rather than entertain a superficial distinction between awareness and assumption in order to situate those cases within the ambit of what was taken to be the necessary elements of the cause of action, the Board unhesitatingly rejected the notion that contemporaneous awareness and understanding of a representation was an essential element of a deceit claim as a matter of law.

Addressing the decade and a half-long jurisprudential detour, the Board clarified three misconceptions which in their view had contributed to the "awareness" requirement wrongly calcifying as a necessary ingredient of the cause of action.

Securities litigation

The Ivanishvili judgment may herald a renewed focus in securities litigation claims on whether passive investors can meet the statutory reliance threshold under FSMA by advancing "price or market reliance" claims, i.e. claims based on assumptions that the price of a security reflects the underlying published information relating to the same and that that information is both complete and accurate, not least given recent judicial approaches to reliance have left the law in this area unsettled (and ripe for appellate clarification).

Leech J in Allianz Funds Multi-Strategy Trust and Others v Barclays Plc [2024] EWHC 2710 (Ch) held that FSMA imports the common law reliance test under the tort of deceit, such that a claimant must prove that they "read or heard the representation, that they understood it in the sense which they allege was false and that it caused them to act in a way which caused them loss". Put simply: passive investors could not satisfy the reliance requirement in respect of information that they had not read or considered. For omissions, he held that a claimant must demonstrate reasonable reliance on incomplete published information – Ivanishvili will doubtless be prayed in aid in cases involving allegations of deliberate concealment.

Conversely, Mr Justice Michael Green in Various Claimants v Standard Chartered plc [2025] EWHC 698 (Ch) held that the law in this area was active and developing and determined that questions of reliance (including "price or market reliance") ought to be dealt with at trial rather than via summary judgment.

Stumbling blocks for claimants remain, including ambiguous statements (on the basis that a passive investor is by definition very unlikely to be able to evidence that they had any understanding of a given statement, to say nothing of their understanding of it in the sense that it was false) and the fact that the statutory test also imposes a reasonableness requirement (thereby providing an opportunity for additional judicial scrutiny). That said, the Board's decision in Ivanishvili has nevertheless reignited questions as to the relevant parameters of the statutory framework on matters of reliance and whether passive investors may yet be able to avail themselves of the investor protections under FSMA.

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