Problems with misrepresentation

The basic cause of action for an incorrect reply to one of the questions on the Property Information Form is an action for misrepresentation. A misrepresentation is an untrue statement made by one contracting party which is relied upon by the other, which induces him/her to enter into the contract, and as a result of which he/she suffers loss. A recent case considers what measure of damages can be expected if a claim is successful, and in particular how they might be affected by a rise in the value of the property due to market forces.

Quilter v Hodson Developments Ltd [2016] EWCA Civ 1125

Alison Quilter bought an apartment in a development managed by the sellers, Hodson Developments Limited, in January 2012. The purchase price was £240,000.

The development comprised 54 dwellings. All the dwellings were serviced by the same communal biomass central heating and hot water system. Hodson was sent pre-contract enquiries by Ms Quilter’s conveyancers. One read:

“Is the seller aware of any past or current dispute which relates in any way to the property, its use, or any other matter connected with the property and, in particular, regarding boundaries, easements, covenants or any planning matters? If so please give details.”

Hodson replied “no”. Unfortunately, after moving in, Ms Quilter discovered that over the past two years there had been repeated failures in the biomass boiler system leaving the houses without hot water or heating. The County Court judge had found that these failures had led to an ongoing dispute with Hodson which ought to have been disclosed and the answer therefore amounted to a misrepresentation.

The judge had awarded Ms Quilter damages based on the difference between the price she had paid for the property and the actual value of what she had acquired i.e. with the boiler problems. Relying on expert evidence, the judge held that the property was valued at £225,000 at the time of the sale whereas she had paid £240,000. He therefore gave judgement in Ms Quilter’s favour for the difference of £15,000.

The Defendants appealed, disputing the finding of misrepresentation by claiming that there was no ‘dispute’ within the meaning of the enquiry and also appealing the measure of damages. Ms Quilter had resold the house for £275,000 and the profit thus made ought to be taken into account when awarding damages.

Court of Appeal Decision

Floyd LJ was quite clear that the problems with the heating did amount to a ‘dispute’.

It cannot be said that there was no evidence from which the judge could conclude that there was a dispute about the biomass system. … She was able … to call evidence from two of the other residents …about the residents’ dissatisfaction with the heating in the dwellings and the notification of that dissatisfaction to Mr Thomas Hodson and Mr Alan Hodson [representatives of Hodson Developments Ltd] That was evidence on the basis of which the judge was entitled to conclude that there was a dispute.

The Court of Appeal also unanimously rejected the appeal as to the measure of damages. Hodson had asserted that Ms Quilter made a £35,000 profit on the sale of the apartment and submitted that this was a case in which the normal measure of damages applied by the judge did not accord with the “overarching principle of compensation” that was applied when awarding damages.

But Floyd LJ stated that: “it is not suggested that Ms Quilter had any obligation to mitigate by re-selling … When the time for buying another property arrived, it arose in the ordinary course of her domestic life rather than being due to the defects in the heating system which were in the course of being repaired. The benefit of the rise in the market value of the apartment should be a benefit she is entitled to retain rather than a benefit for which she should account to the misrepresenting vendor”

Conclusion

So an unusual case, but of interest because of the interpretation of the meaning of ‘dispute’ and the effect of the resale at a profit.

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