A recent Privy Council decision has significantly reshaped the legal landscape for civil fraud claims, confirming that a claimant may succeed in a claim for deceit even where they cannot prove they were consciously aware of the false representation at the time it was made.

The ruling overturns a previously assumed barrier in deceit claims and is expected to have wide-ranging implications, particularly for cases involving complex or automated processes.

Background to the decision

The judgment arose from a high-profile appeal by Credit Suisse concerning a damages award of approximately $600 million to Bidzina Ivanishvili, the former prime minister of Georgia. The award followed the conviction of Credit Suisse private banker Patrice Lescaudron for fraud.

As part of its appeal, Credit Suisse argued that Mr Ivanishvili could not succeed in a claim for deceit because he had not demonstrated that he was aware of, or had understood, the representations relied upon in bringing the claim.

The Privy Council rejected that argument, ruling unanimously that awareness of the representation is not a legal requirement for a claim in deceit under the law of England and Wales or Bermuda.

A significant shift in the law of deceit

The ruling was described as having an important impact on civil fraud cases, particularly those involving less traditional forms of representation.

The Board made clear that the absence of evidence showing a claimant’s conscious awareness of a representation does not prevent a deceit claim from succeeding. Crucially, it noted that reaching the opposite conclusion would risk creating a “charter for fraudsters”.

This reasoning is especially relevant in the context of modern financial systems, where representations are frequently embedded within automated or computerised processes. Requiring proof that a claimant consciously considered and understood each representation would, as the Board acknowledged, impose an unduly heavy and unrealistic burden.

Key findings from the Privy Council

In reaching its decision, the Privy Council identified three core misconceptions underpinning the opposing argument:

• Reliance without conscious awareness – The Board confirmed that individuals can rely on representations even where they are not consciously aware of them at the time. People routinely form beliefs and act upon them without deliberate or conscious thought.
• No rigid distinction between assumption and representation – The law does not draw a strict divide between cases where a claimant acts on an assumption and those where they act on a representation. The presence of an assumption does not prevent a claim in deceit.
• Awareness is not required to distinguish deceit from non-disclosure – The Board rejected the idea that claimant awareness is necessary to preserve the legal distinction between misrepresentation and mere non-disclosure.

As the Board concluded, under the law of England and Wales and Bermuda, “it is not a legal requirement of a claim for deceit that the claimant was aware of the representation or understood it to have been made.

Practical implications for future fraud claims

This decision is likely to broaden the scope for claimants pursuing civil fraud claims, particularly in cases involving financial institutions, investment products, or automated decision-making systems. Defendants may find it more difficult to rely on arguments that claimants did not consciously appreciate or understand the false representations made to them.

For businesses and insurers alike, the ruling underscores the importance of robust systems and oversight, as well as a clear understanding of potential exposure in fraud-related disputes.

Funding fraud and deceit litigation

If you are pursuing fraud litigation, legal costs can escalate quickly. Therefore, it is crucial that you are aware of the funding options that are available. Funding this type of case can be complex and will often depend on the circumstances of the case. Listed below are some of the options for funding fraud and deceit claims.

• Conditional fee agreements – Conditional fee agreements (CFAs), also known as ‘no win, no fee agreements’, are a type of funding arrangement that allows individuals to pursue litigation without paying legal fees upfront. Under ano win no fee basis, the law firm agrees to take on the case and only charge a fee if the case is successful. If the case is unsuccessful, the client does not have to pay these legal fees.
• Contingency fee agreement– Some litigation solicitors may offer to take on a case on a contingency fee basis. This means that they will only charge a fee if they are successful in securing a financial settlement or damages. The fee payable to the solicitor is usually a percentage of the amount recovered. If the case is unsuccessful, the law firm will not charge a fee.
• After the event insurance– After the event (ATE) insurance is a type of insurance that can provide cover for legal costs in the event that a case is unsuccessful. This option can be particularly useful in cases where the outcome is uncertain, and the costs of losing a case could be significant. ATE insurance is often used in conjunction with conditional fee agreements.
• Third party litigation funding – In some cases, third party litigation funders may be willing to provide funding for a case in exchange for a percentage of any financial settlement or damages awarded. This option can be attractive for individuals who cannot afford to pay for legal fees themselves but have a strong case.

How can Annecto Legal assist?

At Annecto Legal, our professional advisors assist clients in finding the right legal guidance and funding for fraud and deceit litigation. With the right team, it is possible to put in place the appropriate litigation funding and insurance to take the case all the way to court proceedings, if necessary.

Of course, the preference is always to find a suitable settlement in a reasonable timeframe, but the best way to achieve this is to negotiate from a position of strength. Having the best fraud solicitors and being fully funded gives you that strength and forces your opponent to the negotiating table.

If you wish to speak to an advisor about making and funding a fraud claim, please contact us today. We can help find you the right representation, as well as managing your financial risks and sourcing funding for your legal fees.