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FRAUD VITIATES ALL TRANSACTIONS – CONTRACT IS VOIDABLE AT THE ELECTION OF THE PARTY DEFRAUDED

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Fraud vitiates even the most solemn of all transactions. In fact fraud vitiates everything even judgments and orders of the court. However, a contract or other transaction induced or tainted by fraud is not void but only voidable at the election of the party defrauded. See Western Bank of Scotland v. Addie (1867) L.R.Sc. & Div. 145. Until it is avoided the transaction is valid so that third parties without notice of the fraud may in the meantime acquire rights and interests in the matter which they may enforce against the party defrauded. See Oakes v. Torquand (1867) L.R. 2 H.L. 325,373; ReeseRiver Silver Mining Co. v. Smith (1869) L.R.4 H.L. 64; Carter and Kenderdine’s Contractual) 1 Ch. 776 and United Shoe Co. v. Brunei (1909) A.C. 330.

— Agbaje, JSC. Ugo v Obiekwe (1989) – SC.207/1985

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COMPANY WILL NOT BE USE AS AN INSTRUMENT OF FRAUD

It must be stated unequivocally that this court, as the last court of the land, will not allow a party to use its company as a cover to dupe, cheat and or defraud an innocent citizen who entered into lawful contract with the company, only to be confronted, with the defence of the company’s legal entity as distinct from its directors. Most companies in this country are owned and managed solely by an individual, while registering the members of his family as the share holders. Such companies are nothing more than one-man-business; hence, the tendency is there to enter into contract in such company name and later turn around to claim that he was not a party to the agreement since the company is a legal entity.

– MUNTAKA-COMASSIE JSC. Alade v. Alic (2010)

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WHAT IS FRAUD?

What then is fraud or what in law can amount to fraud? In law, fraud has simply been defined as an advantage gained by unfair means; a false representation of fact made knowingly, or without belief in its truth, or recklessly, not caring whether it is true or false. Fraud also means an intentional perversion of truth for the purpose of inducing another in reliance upon it to part with some valuable thing belonging to him or to surrender a legal right. It is also a false representation of a matter of fact whether by words or by concealment of that which should have been disclosed, which deceives another so he shall act upon it to his legal injury, Jowitt’s Dictionary of English Law, Vol. 1, 2nd Edition, p. 827; Black’s Law Dictionary, 8th Edition, p. 660.

— C.C. Nweze, JSC. APC v. Sheriff (2023) – SC/CV/1689/2022

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WHEN IS THERE A FRAUD – WHAT IS FRAUD

Turning now to the meaning of “fraud” in connection with representations, it is firmly settled that whenever a man makes a false statement which he does not actually and honestly believe to be true, that statement is, for purposes of civil liability, as fraudulent as if he had stated that which he did not know to be true, or knew or believed to be false. So, in Derry v. Peek (1889) 14 AC 337 HL at 374, Lord Herschell in the judgment of the House of Lords succinctly stated that fraud is proved when it is shown that a false representation has been made by the representor (1) knowing, or (2) without belief in its truth, or (3) recklessly, careless whether it be true or false the third case being but an instance of the second.

– Iguh, JSC. Afegbai v. A.G Edo State (2001)

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FRAUD IN CIVIL SUIT MUST BE SPECIFICALLY PLEADED

It is trite law that where fraud is alleged it must be specifically pleaded and the particulars of the fraud given in order to enable the party defending the allegation to understand the case he is facing and thereby prepare his defence.

– Amaizu, J.C.A. Adeniran v. Olagunju (2001)

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FRAUD LIFTS VEIL OF INCORPORATION

One of the occasions when the veil of incorporation will be lifted is when the Company is liable for fraud as in the instant case. – Galadima JSC. Alade v. Alic (2010)

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FROM THE FACTS AND CIRCUMSTANCES OF THIS CASE IT SHOWS THAT ARBITRATION MAY BE MORE OPEN TO FRAUD

582. Regardless of my decision, I hope the facts and circumstances of this case may provoke debate and reflection among the arbitration community, and also among state users of arbitration, and among other courts with responsibility to supervise or oversee arbitration. The facts and circumstances of this case, which are remarkable but very real, provide an opportunity to consider whether the arbitration process, which is of outstanding importance and value in the world, needs further attention where the value involved is so large and where a state is involved. 583. The risk is that arbitration as a process becomes less reliable, less able to find difficult but important new legal ground, and more vulnerable to fraud. The present case shows that having (as here) a tribunal of the greatest experience and expertise is not enough. Without reflection, then a case such as the present could happen again, and not reach the court.

— R. Knowles CBE. FRN v. Process & Industrial Developments Limited [2023] EWHC 2638 (Comm)

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