Court case(1889) 14 App Cas 337

A tramway company's prospectus stated that it had the right to use steam power, when in fact that right depended on consent of the Board of Trade, which the directors honestly expected to obtain. Consent was refused, the company was wound up and a shareholder sued the directors for deceit.

The House of Lords held that fraud is proved only when a false representation is made knowingly, or without belief in its truth, or recklessly, careless whether it be true or false. An honest belief in the truth of the statement, however unreasonable, is not fraud. The directors were not liable.