The Privy Council decision in Credit Suisse Life (Bermuda) Ltd v Bidzina Ivanishvili and Ors [2025] UKPC 53 late last year was an important development in the law of fraudulent misrepresentation. Most significantly, the Board of the Privy Council rejected the notion that a claimant must prove “conscious awareness” of a representation in order to establish reliance (or inducement) in deceit. The judgment has previously been reviewed by our Securities team in the context of section 90A FSMA actions (see link to article here). However, members of our Fraud team, comprising Senior Associate Adam Jacobs, Partner Ed Holmes and Partner Pia Mithani provide a broader overview of the case and its implications on fraud claims below.
The judgment will be welcomed by claimants, particularly in cases where an alleged misrepresentation is implied, such as representations about the honesty of the representor. It also provides a more realistic account of how commercial decisions are made, recognising that people often act on assumptions that are not consciously articulated, but are nonetheless induced by another’s words or conduct.
The board’s decision (which addressed matters of Bermudan law) is not strictly binding in England. However, it carries significant persuasive weight, and our comments below should be read with that in mind.
Background facts
The appellant, Credit Suisse Life (Bermuda) Ltd (“CS Life”), is a Bermudan insurance company and a wholly owned subsidiary of Credit Suisse. Mr Ivanishvili is a wealthy businessman and the former prime minister of Georgia.
On Credit Suisse’s advice, in 2011 and 2012, Mr Ivanishvili transferred approximately US$750 million into two life insurance investment policies issued by CS Life. The funds were held in segregated accounts to be invested on either a discretionary or non-discretionary basis, depending on Mr Ivanishvili’s instructions.
In September 2015, Mr Ivanishvili discovered that his Credit Suisse relationship manager, Patrice Lescaudron, had been dealing fraudulently with the policy assets. The misconduct included misappropriating assets, transferring policy assets to unrelated clients at an overvalue to conceal those clients’ losses and making investments in return for secret commissions. Mr Lescaudron was later convicted of criminal offences in Switzerland and subsequently committed suicide.
The claim and appeals
In August 2017, Mr Ivanishvili (along with members of his family and two corporate policyholders) brought proceedings in Bermuda against CS Life alleging breach of contract and breach of fiduciary duty.
In October 2020, the claimants sought to add a claim in deceit, based on implied fraudulent representations by Mr Lescaudron that he would not dishonestly manage the policy assets.
At first instance, Mr Ivanishvili succeeded on all three causes of action: breach of contract, breach of fiduciary duty and deceit.
The Bermuda Court of Appeal upheld the findings on contract and fiduciary duty. However, it overturned the deceit claim on two grounds:
- Mr Ivanishvili had not proved “conscious awareness” or understanding that the implied representations had been made, and therefore had not established reliance, and
- the deceit claim was time-barred under Georgian limitation rules, which imposed a three-year limitation period.
CS Life appealed to the Privy Council against the contractual and fiduciary findings. Mr Ivanishvili cross-appealed on the deceit claim.
The Privy Council’s decision
Giving the judgment of the board, Lord Leggatt upheld the finding that CS Life had breached its contractual duties. However, he preferred a different start date for the assessment of damages, concluding that on the proper construction of the policies, the relevant point was the end of the month in which the policies became effective.
The board declined to determine whether CS Life owed fiduciary duties, reasoning that the issue raised difficult questions (including of Bermudan law) and would make no difference to the outcome.
The most significant part of the decision concerned Mr Ivanishvili’s cross-appeal on deceit and the question of what must be shown to establish inducement or reliance. The court confirmed that, in this respect, the principles under Bermudan and English law were the same.
The “conscious awareness” problem
Lord Leggatt reviewed a line of first instance authorities, which had suggested that to prove reliance on a representation in deceit, the claimant must demonstrate conscious awareness of the representation. That approach had been articulated in cases originating with Raiffeisen Zentralbank Osterreich v RBS and later followed in Marme Inversiones v NatWest Markets, Leeds City Council v Barclays Bank and Loreley Financing (Jersey) No 30 v Credit Suisse Securities (Europe).
A central difficulty with this position is that it struggles to accommodate common examples of actionable fraud where the misrepresentation or concealment does not actively operate on the claimant’s mind. Lord Leggatt referred to cases such as Spice Girls v Aprilia World Service and Gordon v Selico, where the claimants were induced by concealment or non-disclosure without expressly focusing on the missing information.
The conscious awareness requirement also sits uneasily with everyday implied representations. A restaurant customer who orders a meal impliedly represents an intention to pay before, in Lord Leggatt’s words, doing a “runner” (as per DPP v Ray). Further, an auction bidder who raises a paddle impliedly represents a willingness to pay a particular sum. In neither situation does the claimant necessarily reflect on the implied representation in any conscious way, yet it would be artificial to say there is no reliance.
Reliance on an assumption can still be reliance on a representation
The attempt to reconcile these issues led to an overly rigid distinction between:
- acting in reliance on a representation (actionable), and
- acting on an assumption (suggested to be non-actionable).
The theory was that if the claimant merely assumed something (rather than being consciously persuaded of it by the defendant), the defendant could not be said to have caused the claimant’s false belief.
Lord Leggatt rejected this as a “false dichotomy”. In reality, a person may act on an unconscious assumption while also acting in reliance on a representation. Commercial dealings often proceed on unspoken expectations that are naturally prompted by the other party’s conduct. A defendant who speaks or acts so as to cause the claimant to make and act upon an erroneous assumption is just as responsible as a defendant who induces an explicitly held belief.
The crucial question, therefore, is not whether the claimant consciously appreciated the representation, but whether the claimant’s assumption is one that they would naturally be expected to make in response to the defendant’s words or actions. If so, the defendant’s conduct can properly be said to have induced the claimant’s mistake. By contrast, if the claimant’s assumption is independently formed and not induced by the defendant’s conduct, reliance will not be made out.
Outcome of the deceit claim
Although the board accepted Mr Ivanishvili’s argument on the conscious awareness point, the deceit claim still failed on limitation. This was because under Bermudan private international law rules on “double actionability” (which have been largely abolished in England and Wales), he was required to prove his misrepresentation claim under both Bermudan and Georgian law. In accordance with Georgian law, the claim had to be brought within three years of the claimant becoming aware of the fraud. Mr Ivanishvili acquired that knowledge in September 2015 but did not seek to plead deceit until October 2020, and the action was therefore time-barred.
Comment
This decision restores clarity and realism to the concept of reliance in fraudulent misrepresentation. It recognises that commercial parties routinely act on assumptions that are induced by the circumstances of the transaction and the other party’s conduct, without consciously analysing them. The previous focus on conscious awareness risked encouraging an artificial inquiry detached from how transactions are actually conducted.
A key issue going forward is likely to be the extent to which a claimant was reasonably entitled to make the relevant assumption, and whether it was in fact induced by the defendant’s conduct rather than independently formed.
While the judgment may impact on securities actions brought under section 90A/Schedule 10A of FSMA, it will have particular significance for clients of professional and financial services providers. Where a trusted adviser makes implied representations as to honesty and proper management of assets or a client’s affairs, it would be unjust if the law required the claimant to prove conscious recognition of those matters in order to successfully claim in deceit. This decision goes some way to addressing this.
Additionally, it now provides greater scope for such claimants to bring alternative actions in breach of contract and fraudulent misrepresentation. A claim in deceit may be preferable because it can unlock remedies such as rescission. It will also impact how large group misselling claims are pleaded, where implied representations and assumptions play a central role.
Finally, the judgment reinforces that, regardless of the governing law of the dispute, victims of fraud should take steps to investigate and explore their legal options as soon as they know or have reason to suspect that a fraud has been committed. Any undue delay in doing so may jeopardise their limitation position and lead to the loss of what would otherwise be a legitimate claim.
