January 27, 2022

Case Brief: Derry v. Peek

Case Brief

Citation: – 14 App.Cas.337 (House of Lords)

Court: – House of Lords

Decided: – 01 July 1889


Judge(s) sitting: – Lord Halsbury L.C., Lord Watson, Lord Bramwell, Lord Fitzgerald and Lord Herschell

Strong Arguments: – A strong argument is non-deductive argument that succeeds in providing probable, but not conclusive and logical support for its conclusion. There are some important arguments or strong arguments which are the base of the judgment of this case. The arguments are as follows:-

1. Fraud without damage or damage without fraud.

2. Truth of Representation.

3. Action of Deceit.

4. Fraud in law.

5. Misrepresentation.

Facts of Derry v. Peek 

In the prospectus released by the defendant company, it was stated that the company was permitted to use trams that were powered by steam, rather than by horses. In reality, the company did not possess such a right as this had to be approved by a Board of Trade. Gaining the approval for such a case from the Board was considered a formality in such circumstances and the claim was put forward in the prospectus with this information in mind. However, the claim of the company for the right was later refused by the Board. The individuals who had purchased a stake in the business, upon reliance on the statement, brought a claim for deceit against the defendant’s business after it became liquidated.

Issues in Derry v. Peek 

It was important to note that the law regarding false misrepresentation was still developing and this was an important case in doing so. In the case, the court was required to access the statement made by the defendant company in its prospectus to see whether the statement was fraudulent or simply incorrect.

Judgment: Derry v. Peek 

The claim of the shareholders was rejected by the House of Lords. The court held that it was not proven by the shareholders that the director of the company was dishonest in his belief. The court defined fraudulent misrepresentation as a statement known to be false or a statement made recklessly or carelessly as to the truth of the statement. On this basis, the plaintiff could not claim against the defendant company for deceit.

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Author Details: Sarvesh Kasaudhan and Sunny Kumar (Lloyd Law College, Greater Noida)

The views of the author are personal only. (if any)

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