Fraud.

In what cases relief given in equity.

No invariable rule.

CHAPTER III.

ACTUAL FRAUD.

IT may be laid down as a general rule that courts of equity exercise a general jurisdiction in cases of fraud, sometimes concurrent with, and sometimes exclusive of, the common law courts. There are a variety of cases of fraud for which the common law affords complete and adequate relief, and with reference to these. cases, Chancery may be said to possess a general and perhaps a universal concurrent jurisdiction. That court would not, however, have readily interfered to stay proceedings at law, where the plaintiff's case in equity might have been pleaded as a defence to the action, and complete justice might thereby be done at law (a); and, of course, since the Judicature Acts, equity cannot now stay any proceedings at law, but the parties may move (in a proper case) to have the action transferred to the Chancery Division. Moreover, there were many cases in which fraud was utterly irremediable at law, and over these courts of equity had an exclusive jurisdiction, and they still in substance retain it.

"As to relief against frauds, no invariable rules can be established. Fraud is infinite; and were a court of equity once to lay down rules how far they would go, and no farther, in extending their relief against it, or to define strictly the species or evidence of it, the jurisdiction would be cramped and perpetually eluded

(a) Hoare v. Bremridge, L. R. 8 Ch. 22.

by new schemes, which the fertility of man's invention would contrive" (b).

To attempt, therefore, the definition of a subject so varied and diversified in its forms as fraud, would scarcely be judicious or useful, if it were possible. The mode and extent of the equity jurisdiction over fraud will best be illustrated by the examination of a few of the more marked classes of cases, in which the principles which regulate the action of courts of equity are fully developed, and from which analogies may be drawn to guide us in the investigation of other and novel circumstances (c).

upon weaker

Before, however, proceeding to those subjects it may Equity acts be proper to observe that although courts of law, evidence equally with courts of equity, hold that fraud is not to than law in inferring be presumed, the latter courts used to act upon cir- fraud. cumstances as presumptions of fraud, where courts of common law would not have deemed them satisfactory proofs. In other words, courts of equity would grant relief upon the ground of fraud established by presumptive evidence, which evidence courts of law would not always deem sufficient proof to justify a verdict at law (d). Or, to express the matter rather more fairly, various circumstances (which at law would not have weighed materially with a jury) were permitted by the Vice-Chancellor, drawing inferences from his varied experience of like transactions, to influence his mind. in arriving at his own conclusions upon the case; for the student should always bear in mind, that nothing is or can be evidence in equity which is not evidence also at law.

(b) Park's Hist. of Chan. 508; St. 186.

(c) St. 189.

(d) Chesterfield v. Janssen, 1 L. C. 541; Fullager v. Clarke, 18 Ves. 483; St. 190.

Actual fraud.

Of two kinds.

I. Arising irrespectively of position of

injured party.

(a.) Misrepresentation.

Where the party makes it intentionally.

Misrepresentation

made with

The subject of fraud may be divided into two sections, Actual Fraud and Constructive Fraud.

An Actual Fraud may be defined as something said, done, or omitted, with the design of perpetrating what the party must have known to be a positive fraud (e).

Actual frauds are of two kinds ( ƒ )—

I. Frauds arising irrespectively of any peculiarity in the position of the injured party; and,

II. Frauds arising chiefly from a consideration of the peculiar position of the injured party.

I. (a.) One of the largest classes of cases in which courts of equity are accustomed to grant relief is where there has been a misrepresentation, or suggestio falsi. With reference to this subject the following propositions may be laid down :

Where a party intentionally, or by design, misrepresents a material fact, or produces a false impression in order to mislead another, or to entrap or cheat him, or to obtain an undue advantage over him, in every such case there is a positive fraud, in the truest sense of the term (g). And what is more, every man must be held responsible for the consequences of a false intent to mis- representation made by him to another, upon which a third person acts, and so acting is injured or damnified; provided it appear that such false representation was made with the intent that it should be acted upon by such third person in the manner that occasions the injury or loss, and provided the injury be the immediate and not the remote consequence of the representation thus made (h).

lead a third

party.

(e) Sm. Man. 56.

(g) St. 192; Hill v. Lane, L. R. 11 Eq. 215.

(f) Sm. Man. 58.

(h) Barry v. Croskey, 2 Johns. & Hem. 22; Attorney-General v. Ray, L. R. 9 Ch. 397.

And not only does fraud exist where the statements Where party are known to be false by those who make them, but a his assertion

did not know

case of fraud is also constituted where statements, false to be true. in fact, are made by persons who do not know them to be true or false, or who believe them to be true, if, in the due discharge of their duty, they ought to have known, or if they had formerly known and ought to have remembered the fact, which negatives the representation made (i).

entitled to

But relief.

sentation must

i.e., it must

As a matter of conscience, any deviation from the What misremost exact and scrupulous sincerity is contrary to the presentations good faith that ought to prevail in contracts. courts of justice generally find themselves compelled to assign limits to the exercise of their jurisdiction, far short of the principles deducible ex æquo et bono; and with reference to the concerns of human life, they endeavour to aim at mere practical good and general convenience (j). Accordingly, therefore, a misrepre- (1.) Misrepre sentation, in order to justify the rescission of a con- be of some tract, must be as to some material fact constituting an material fact, inducement or motive to the act or omission of the other be a case of "To use the expression of the Roman law, locum confraus dans party (k). it must be a fraus dans locum contractui, that is, a tractui. misrepresentation giving occasion to the contract; the proper interpretation of which appears to me to be the assertion of a fact on which the person entering into the contract relied, and in the absence of which it is reasonable to infer that he would not have entered into the contract; or the suppression of a fact, the knowledge of which it is reasonable to infer would have. made him abstain from the contract altogether (1).

In the next place, the misrepresentation must (at (2.) Misrepre

(i) St. 193; Pulsford v. Richards, 17 Beav. 94; Rawlins v. Wickham,

I Giff. 355; 3 De G. & Jo. 304.

(j) St. 194.

(1) Pulsford v. Richards, 17 Beav. 96.

(k) St. 195.

be of some

sentation must least, in cases of vendor and purchaser) be not only in thing in which something material, but it must be something in regard there is a confi- to which the one party places a known trust or confidence reposed. dence in the other.

For if the purchaser, choosing to judge for himself, does not avail himself of the knowledge, or means of knowledge, open to him or his agents, he cannot be heard to say that he was deceived by the vendor's misrepresentations, for the rule in such a case is caveat emptor (m). To this ground of unreasonable indiscretion and confidence, may be referred the common language of puffing and commendation of commodities, which, however reprehensible in morals, as gross exaggerations or departures from truth, are nevertheless not treated as frauds which will avoid contracts. Simplex commendatio non obligat (n). Further, the alleged misrepresentation must not be a mere matter of opinion, equally open to both parties for examination and inquiry, where neither party is presumed to trust the other, but to rely on his own judgment (0).

In the next place, the party must be misled by the misrepresentation; for if he knows it to be false when made it cannot influence his conduct, and it is his own indiscretion, and not any fraud or surprise, of which he has any just complaint to make under such circumstances (p). And further, the party must have been misled to his prejudice or injury; for courts of equity do not, any more than courts of law, sit for the purpose of enforcing moral obligations, or correcting unconscientious acts, which are followed by no loss or damage (@).

(p) St. 202; Nelson v. Stocker, 4 De G. & Jo. 458.

(0) St. 197.

(q) St. 203; Slim v. Croucher, 1 De G. F. & J. 518; Fellowes v. Gwydyr, 1 Sim. 63.