Lying to the Computer

December 11, 2007

There are times when many of us feel that our computers are human – certainly for inanimate objects they have the ability to drive us mad.  A recent case has confirmed that it is possible to lie to a machine and the person so lying can be guilty of deceit.

Renault operated an affinity scheme with a company called Fleetpro Technical Services through which members of the British Airline Pilots Association (BALPA) and the members’ immediate families were able to order Renault cars at a discount.  Fleetpro was responsible for taking orders which were subsequently entered onto Renault’s computer system.

Over a period of ten months, 217 vehicles were ordered through the scheme.  This number was significantly greater than Renault expected.  When Renault investigated, it discovered that the sole director of Fleetpro, Mr Thoms, had set up his own Web site to pass on the discounts to Internet brokers who then resold the cars to members of the public.

Renault claimed Fleetpro and Thoms had made a series of fraudulent misrepresentations and sued Fleetpro and Thoms for just under £700,000, claiming the unauthorised discounts on the vehicles represented a loss.

At the point at which an order was put into the computer system all functions were automatic, without the need for any human intervention. 

In this context, a fraudulent misrepresentation is a statement of fact made without belief in its truth either recklessly, knowingly or without caring whether it is true or false with the intention that it should be acted on and it is in fact acted upon (Derry v Peek (1889) 14 App Case 337).  The claimant may claim rescission and damages.

The question arose as to whether it was 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.

The judge in the case, Richard Seymour QC, stated in his judgment:

“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.  For the purposes of the present action, as it seems to me, a misrepresentation was made….when the….computer was told it should process a particular transaction as one to which the discounts for which the BALPA scheme provided applied when that was not in fact correct.”

Ultimately the judge held that Renault had not suffered a loss.  If the orders had not been made, the cars would not have been built or sold and, despite the unauthorised discount, a profit was made by Renault on every vehicle and consequently there was no loss.  This seems rather harsh, given that Renault certainly lost out on its full profit.

Consequently Renault did not really achieve anything for itself by bringing the action.  However, the case is interesting for businesses involved with sales and operations activities where there is little human intervention as, although not strictly a precedent, it does show that users and customers are required to be truthful.

Helen Hart is a senior associate in the corporate and commercial department at Stevens & Bolton LLP and previously worked in-house at Centrica plc and Palm Europe, having trained at Allen & Overy in London and Frankfurt.