The recent High Court decision in BV Nederlandse Industrie Van Eiprodukten v Rembrandt Enterprises, Inc [2018] EWHC 1857 (Comm) (the “Rembrandt” Case), provides clarification as to the test applicable to establish inducement in cases of fraudulent misrepresentation.


For years, the established test for inducement in misrepresentation has been said to be whether “but for the misrepresentation, the claimant would have entered into the contract anyway”.


Nevertheless, in Rembrandt, Teare J noted that in the earlier decisions of Raiffeisen Zentralbank Österreich v Royal Bank of Scotland [2010] EWHC 1392 and Cassa di Risparmio della Republica di San Marino SpA v Barclays Bank Limited [2011] EWHC 484 (Comm), it was held in obiter that, where a fraudulent misrepresentation has been made, the ‘but for’ test is weaker than the test applied in cases concerning negligent misrepresentation. It is sufficient to establish that the misrepresentation is merely one of the factors and not the sole factor in the innocent’s party decision to enter into the contract. There “may be more than one ‘but for’ cause”.


Teare J in Rembrandt adopted this approach reaffirming the obiter dicta in the aforementioned cases and held that the applicable test for inducement in cases of fraudulent misrepresentation shall be whether “but for the misrepresentation, the claimant might have acted differently”.


Applying this broader form of the test, it was found that the misrepresentation was one of the three matters and not the sole factor that induced Rembrandt to enter into the Revise Contract. This was sufficient to establish inducement under the test for fraudulent misrepresentation.


By lowering the threshold required to satisfy the test for inducement in fraudulent misrepresentations, the Court now makes it easier for claimants to justify their claim. The high onus of proof lies on the defendant to rebut the presumption, showcasing the Courts’ unwillingness to let parties avail themselves of their fraudulent misrepresentations.


The judgment in Rembrandt provides useful guidance to Cypriot Courts (as common law courts) as to the test applicable in the context of fraudulent misrepresentation.





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