Original URL: http://www.theregister.co.uk/2007/11/26/lying_2_computer_still_lying/

Telling lies to a computer is still lying, rules High Court

Discount scheme deception

By OUT-LAW.COM

Posted in Law, 26th November 2007 09:05 GMT

A person can be guilty of deceit when he lies to a machine rather than a human, a judge has ruled. Renault sued over abuse of a discount scheme and won the deception-by-computer argument. But its case was thrown out because it profited from the abuse.

A company called Fleetpro Technical Services ran an affinity scheme with Renault UK, which entitled members of the British Airline Pilots Association (BALPA) and their immediate families to discounts on new Renault cars. Fleetpro took orders that were then entered into Renault's computer system. Renault S A, the French parent company, then built each car to order.

The deception

Over a 10 month period, Fleetpro placed 217 vehicles through the scheme. But only three of these orders came from eligible members of the scheme. The other 214 vehicles were bought at a discount to which the buyer should not have been entitled.

It transpired that the sole director and employee of Fleetpro, Russell Thoms, had been running a website that passed on the discounts to other internet brokers who resold the cars to members of the public.

Renault sued Fleetpro and Thoms, citing losses of almost £700,000.

The evidence showed that when Thoms took orders via his site, he sent them by email to a Renault fleet sales executive citing the code BALPA or the number 46172, thereby representing that the order was destined for a qualifying customer. The executive printed the emails and his assistant entered them into the computer system of Renault UK. That action ordered the car from Renault UK's parent company in France and recorded the order as a beneficiary of the discount scheme.

According to the judgment, the assistant's was "the last human brain in contact with the claim that a particular order fell within the terms of the discount scheme".

A fraudulent misrepresentation can be made to a machine

"The point of principle which thus arises is whether it is possible in law to find a person liable in deceit if the fraudulent misrepresentation alleged was made not to a human being, but to a machine," wrote judge Richard Seymour QC.

"I see no objection in principle to holding that a fraudulent misrepresentation can be made to a machine acting on behalf of the claimant, rather than to an individual, if the machine is set up to process certain information in a particular way in which it would not process information about the material transaction if the correct information were given," he continued.

"For the purposes of the present action, as it seems to me, a misrepresentation was made to the Importer [Renault UK] when the Importer’s computer was told that it should process a particular transaction as one to which the discounts for which the [pilots' affinity scheme] provided applied, when that was not in fact correct."

The chain of causation

Thoms and his company argued that Renault UK's decision to process the orders broke a chain of causation. Judge Seymour endorsed a ruling from 1914 upon which Renault UK relied.

He paraphrased the judgment in that case: "It was not a defence to a person who has committed deceit to say that the fraudulent misrepresentation concerned was made to an agent for the deceived, and the agent knew the truth.

"It does not seem to me that, in relation to matters of dishonesty and its consequences, it is appropriate for the court to adopt any less exacting standards today than those applied... nearly 100 years ago," wrote Judge Seymour.

Thom's personal liability

He also ruled that Thoms could not escape personal liability by hiding behind his limited liability company. "The true issue is whether an individual who has personally made a fraudulent misrepresentation, as Mr Thoms did in completing each of the orders placed by FleetPro with [Renault UK] with the Fleet Code 'BALPA' or '46172', can escape liability on the grounds that he made the misrepresentation on behalf of a company. The answer is negative," he wrote.

However, Thoms' exposure to liability became irrelevant.

Blind to the obvious

Two of Renault UK's own staff had turned a blind eye to the unusually large number of orders – 217 – received through the BALPA scheme in a 10 month period. In contrast, an affinity scheme with Microsoft had generated just five sales in three years.

Judge Seymour wrote: "As it seems to me, the only proper conclusion to draw from these circumstances is that [Renault UK employees] Miss Sample and Mr Wilson did indeed either understand perfectly well how the sales by FleetPro were being achieved... or each closed his or her eyes to what, if they had thought about it for a moment, was blindingly obvious."

However, that was not Renault UK's ultimate downfall. Its problem was that it made money from the deception.

"[Renault UK] made a profit of some sort on every vehicle. Moreover, it appeared that most, if not all, of the vehicles were manufactured to order by [Renault France]," wrote Judge Seymour. "Thus, if the order for a particular vehicle had not been placed, that vehicle would never have been produced and sold at a profit by [Renault UK]. Thus it appeared that, far from suffering a loss as a result of the misrepresentations complained of, [Renault UK] was in fact better off."

He concluded that although, technically, Renault UK had proved that it relied upon fraudulent misrepresentations made by FleetPro and Thoms, it failed to prove any loss. "Consequently this action fails and is dismissed," he wrote.

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