In a widely reported case, Patarkatsishvili & Anor v Woodward-Fisher, the claimants successfully obtained an order for rescission and damages on a £32.5 million purchase of a residential property in London that had a moth infestation. This case highlights the importance of accurate pre-contract enquiries and the consequences of misrepresentation.
Background of the Moth Infestation Case
The property in question had been suffering from a moth infestation in the insulation since early 2018. Despite various treatments by contractors, the issue persisted. The sale of the property was completed in May 2019. During the pre-contract stage, the seller provided false replies to several key enquiries:
- Infestation and Defects: The seller claimed no awareness of any timber infestation, vermin infestation, or other defects since renovation works, despite not having the property surveyed.
- Reports on Property Condition: The seller stated that no reports concerning the property’s condition existed, except those already disclosed.
- Hidden Defects: The seller denied awareness of any defects not apparent on inspection, again without having the property surveyed.
Legal Dispute
The defendant argued that his replies were not misrepresentations and denied knowledge of their falsity. He also claimed that the buyers did not rely on these replies and that any right to rescind the contract was lost after completion.
However, the court found that:
- The seller’s contractors had confirmed the moth infestation, making the seller’s denial a misrepresentation.
- Pest control reports received by the seller were relevant and should have been disclosed.
- The infestation was a defect not apparent on inspection, contradicting the seller’s claims.
The court concluded that the seller knowingly made false statements and was reckless about the truth, resulting in liability for fraudulent misrepresentation. Consequently, the court ordered rescission of the contract, restoration of the purchase price, and damages.
Practical Points
- Rescinding After Completion: Rescission is a primary remedy for fraudulent misrepresentation, even after contract completion. Equity may deny rescission if there is a delay, affirmation of the contract, or impossibility of restoring original positions. In this case, the claimants acted within a reasonable timeframe, making rescission equitable.
- Impossibility of Restoration: Equity prevents rescission if restoring original positions is impossible. Despite the defendant’s financial constraints, the court ordered rescission with a lien for repayment.
- Reliance and Inducement: Misrepresentation requires that the false statement induced the contract. While buyers should ideally read replies to enquiries, reliance can be established if the buyer’s solicitors reviewed and relied on the replies. The court recognized that buyers can rely on their solicitors’ assessments and recommendations.
This case underscores the importance of honesty in pre-contract enquiries and the potential legal consequences of misrepresentation. It also highlights the need for buyers to thoroughly review and verify information provided during property transactions.
How can we help?
Simon Waterfield is a Partner in our expert Dispute Resolution team, specialising in property disputes, rights of way claims, landlord and tenant disputes and commercial disputes.
For more information on the subjects discussed in this article, get in touch with Simon or another member of the team in Derby, Leicester, or Nottingham on 0800 024 1976 or via our online enquiry form.
Contact us