Derry v Peek

Derry v Peek (1889) LR 14 App Cas 337 is a case in English law on the tort of deceit. The House of Lords determined there was no general duty to use ‘care and skill’ in the context of issuing a prospectus to refrain from making misstatements.

Facts

A tram company's prospectus stated that the company had permission to use steam trams, rather than horse powered ones. In fact, it did not because the right to use steam power was subject to the Board of Trade's consent. The company had applied, and honestly believed that they would get it because permission was a mere formality. In fact, after the prospectus was issued, they did not get permission. Shareholders who had purchased their stakes in the company on the faith of the statement's truth sued when the company's business went down and ended up in liquidation.

Judgment

The shareholders' action failed, because it was not proved that the director lacked honest belief in what they had said.^[1] Lord Herschell however did point out that though unreasonableness of the grounds of belief is not deceitful, it is evidence from which deceit may be inferred. There are many cases,

"where the fact that an alleged belief was destitute of all reasonable foundation would suffice of itself to convince the court that it was not really entertained, and that the representation was a fraudulent one."

Context

The tort of deceit would have been established only if the misstatements had been fraudulently made. Derry v Peek thus validated the perspective of the majority judges in the Court of Appeal in Heaven v Pender. That is, for there to be deceit or fraud (which is the same) it must be shown that a defendant knows a statement is untrue, or has no belief in its truth, or is reckless as to whether it is true or false.

Derry v Peek also outlined that no duty would be required in relationship to negligent misrepresentation, without the presence of a contract, fiduciary relationship, fraud or deceit. This was later overruled in Hedley Byrne v Heller.

See also

• English tort law
• Tort law

References

1. ^ 14 App Cas, 337, 376

External links

• Full text on Bailii