Judicial Statements on Fraud

Lord Denning has been often dominated as the most influential judge of the 20th century.

The UK Independent on 3 March 1999 ran the headline:

“Lord Denning the Century’s greatest judge , dies at 100.”

Lord Denning was a Master of the Rolls who famously often took the side of the socially weaker against the stronger. He was the champion of the small man and the small women against the Big System. He insisted on the rights of the deserted wife to remain in the matrimonial home. He backed back wounded soldiers battling the Government over pensions as well as customers battling banks.

Denning saw it as a very simple principle that the common law should protect the common man.

Lord Denning would no doubt have also taken the side of widows battling a large bank that was refusing to pay them their survivorship pensions.

“Fraud unravels everything”

Lord Denning said in Lazarus Estates Ltd v Beasley [1956] 1 QB. 702; [1956] 2 W.L.R. 502; [1956] 1 All ER. 341:

“No Court in this land will allow a person to keep an advantage he has obtained by fraud. No judgment of a court, no order of a Minister, can be allowed to stand if it has been obtained by fraud. Fraud unravels everything. The court is careful not to find fraud unless it is distinctly pleaded and proved; but once it is proved it vitiates judgments, contracts and all transactions whatsoever; see, as to deeds, Collins v Blantern (1767) (2 Wils. KB 342), as to judgments, Duchess of Kington’s Case (1776) (1 Leach 146), and, as to contracts, Master v Miller (1791) (4 Term Rep 320).” [38]

Lord Parker LJ observed that fraud vitiates all transactions known to the law of however high a degree of solemnity.

The High Court in SZFDE v Minister for Immigration and Citizenship [2007] HCA 35 cited Lazarus Estates Ltd v Beasley

Williams J in the High Court said in Farley (Aust) Pty Ltd v JR Alexander & Sons (Q) Pty Ltd [1946] HCA 29:

“Fraud is conduct which vitiates every transaction known to the law. It even vitiates a judgment of the Court. It is an insidious disease, and if clearly proved spreads to and infects the whole transaction (Jonesco v Beard [1930] AC 298).”

In his celebrated speech in Reddaway v Banham 1896 AC199 at 221 , Lord Macnaghten spoke of the various guises in which fraud appears in the conduct of human affairs, saying “fraud is infinite in variety”. A corollary, expressed by Kerr in his “Treatise on the Law of Fraud and Mistake” (1929), is that: “The fertility of man’s invention in devising new schemes of fraud is so great, that the courts have always declined to define it … reserving to themselves the liberty to deal with it under whatever form it may present itself.”

Professor Hanbury in Modern Equity 1962 described the common law and equity as having “quarrelled over the possession of the word ‘fraud’ like two dogs over a bone, off which neither side was sufficiently strong to tear all the meat”, and said that the word fraud applied “indifferently to all failures in relations wherein equity set a certain standard of conduct”. Hence the attachment of the term “fraud” to the exercise of powers of appointment, and of other powers, such as those of company directors, in a fashion of which equity disapproved – See the discussion by Dixon J in Mills v Mills (1938) 60 CLR 150 at 185.

Lord Justice Millett in the Court of Appeal in Armitage v Nurse [1997] 3 WLR 1046, [1997] EWCA Civ 1279, [1997] 2 All ER 705, [1998] Ch 241 stated:

The expression “actual fraud” in Clause 15 is not used to describe the common law tort of deceit. As the Judge appreciated it simply means dishonesty. I accept the formulation put forward by Mr. Hill on behalf of the Respondents which ( as I have slightly modified it) is that it “…connotes at the minimum an intention on the part of the trustee to pursue a particular course of action, either knowing that it is contrary to the interests of the beneficiaries or being recklessly indifferent whether it is contrary to their interests or not”.

It is the duty of a trustee to manage the trust property and deal with it in the interests of the beneficiaries. If he acts in a way which he does not honestly believe is in their interests then he is acting dishonestly. It does not matter whether he stands or thinks he stands to gain personally from his actions. A trustee who acts with the intention of benefiting persons who are not the objects of the trust is not the less dishonest because he does not intend to benefit himself.

Lord Justice Millett drew the distinction between “equitable fraud” which does not necessarily involve dishonesty and “fraud” properly so called which does.

The nature of equitable fraud may be collected from the speech of Viscount Haldane in Nocton v Ashburton and Snell’s Equity (29th. Ed.) pp. 550-1. It covers breach of fiduciary duty, undue influence, abuse of confidence, unconscionable bargains, and frauds on powers. With the sole exception of the last, which is a technical doctrine in which the word “fraud” merely connotes excess of vires, it involves some dealing by the fiduciary with his principal and the risk that the fiduciary may have exploited his position to his own advantage.


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