Case Brief Derry v Peek

.docx

School

University of Dar es salaam**We aren't endorsed by this school

Course

LEGAL LAW 201

Subject

Law

Date

Dec 21, 2024

Pages

Uploaded by MagistrateRaccoonPerson1194

Case Brieffor Derry v Peek:1. Heading - Case CitationDerry v Peek (1889) 14 App Cas 337 (House of Lords)Court: House of Lords2. PartiesAppellant: DerryRespondent: Peek3. Procedural HistoryPeek sued Derry for fraudulent misrepresentation after relying on statements in a company prospectus.The trial court ruled in favor of Peek, holding that Derry’s statements amounted to fraud.Derry appealed to the Court of Appeal, which upheld the decision.The case was then appealed to the House of Lords.4. FactsA company issued a prospectusstating that it had the right to use steam-powered tramsinstead of horse-drawn trams.This right was conditional upon obtaining approval from the Board of Trade.The company directors, including Derry, genuinely believed that approval would be granted, so they published the statement in good faith.However, the Board of Trade refused approval, and the company’s shares dropped in value, leading Peek, a shareholder, to suffer losses.Peek sued the directors for fraudulent misrepresentation.5. IssueDid the directors’ statement in the prospectus amount to fraudulent misrepresentation, entitling Peek to recover damages?

6. HoldingHeld: The House of Lords ruled in favor of Derry. The directors were not liablebecause their statement, although false, was made without fraudulent intent.7. Rule(s)For a misrepresentation to be considered fraudulent, the plaintiff must prove:1.The statement was knowingly false; or2.Made without belief in its truth; or3.Made recklessly, without caring whether it was true or false.A mere honest belief, even if mistaken, does not amount to fraud.Rule Established: Fraud requires proof of dishonesty or a lack of honest belief in the truth of a statement.Legal Principle: This case established the modern definition of fraudulent misrepresentationin tort law.8. RationaleThe House of Lords found that the directors (Derry) honestly believed their statement regarding the right to use steam-powered trams.There was no evidenceto show that the directors acted dishonestly, recklessly, or with intent to deceive shareholders like Peek.The court emphasized that a statement made in good faith— even if it turns out to be false — does not constitute fraud. The term "good faith"in Latin is "bona fide". Bona fide: In legal and general usage, it means "in good faith" or "genuine" and refers to honesty or sincerity of intention.Therefore, Derry could not be held liable for fraudulent misrepresentation.9. Possible Questions to Ask the Teacher/Lecturer1.How does the ruling in Derry v Peekdistinguish between fraudulent misrepresentationand negligent misrepresentation?2.Could Peek have succeeded in this case if he sued for negligencerather than fraud?3.How has the principle in Derry v Peekinfluenced modern laws on misrepresentation in contract and tort?