February 2025
In this article Julian Record, a Chartered Building Surveyor , Registered Valuer and Member of the Academy of Expert Witnesses explores why cases of misrepresentation appear to be on the rise and the disastrous outcomes which can arise.
In recent years I have noticed a perceptible rise in the number of expert witness enquiries regarding cases of misrepresentation. These arise where the seller of the property did not disclose important information in response to legal enquiries arising from the TA6 Property Information Form which all sellers much complete during the sales process. The consequences of such misrepresentations can be disastrous and give rise to legal action.
Reasons for misrepresentation?
The reasons for any alleged misrepresentation can be innocent, negligent or in the worst cases fraudulent. Cases of misrepresentation often relate to issues including flooding, damp & rot, invasive plants such as Japanese Knowtweed, neighbourly disputes and vermin, which was at the heart of a recent case I will come onto.
Claims are usually for Diminution in Value (DiV), which is the difference in value between the property with no defect and the value of the property with the alleged misrepresentation or defect, but in the case of fraudulent misrepresentation can be for recission of the contract i.e. cancelling the contract and restoring both parties to the state in which they were in immediately prior to the purchase of the property.
Recission & Restitution
Readers may already have heard of the recent case of Patarkatsishvili and Hunyak vs. Woodward-Fisher where the High Court has ordered the handing back of a £32.5million mansion in London to the Defendant / Seller, Woodward Fisher. This case arose due to fraudulent answers made to pre-contract enquiries, about the condition of the property and in particularly the presence of a significant moth infestation which had become apparent to the vendors and not been resolved at the time of the sale. The issue was not disclosed and the moth problem was noticed by the Claimants immediately after taking occupation of the property. Further investigations revealed that this was emanating from contaminated sheeps wool insulation within the walls and ceilings which had been installed by the Defendant during extensive redevelopment of the property prior to sale. The court concluded all of this was known to the Defendant.
In this case the Claimants sought recission of the contract as opposed to seeking damages for diminution in value, which is the more common approach. The reasons for pursuing this remedy are not known, but is likely to have been taken as there had been no increase in the property’s value, the remedial works required were deemed significant and that the Claimants had simply fallen out of love with the property, which is a common occurrence with property disputes.
Recission of a contract requires practical justice to be achieved as the parties need to be returned to a position they were in before the contract was created. This requires what is called ‘restitution’ and ‘counter restitution’ to be provided to each party i.e. it must not penalise the opposing party.
In the case of the Claimant, Mr Justice Fancourt ordered the repayment of the purchase price of £32.5m; payment of purchase costs such as stamp duty, legal costs & removals; payment of simple interest on the purchase price; and miscellaneous damages for repair costs, loss of enjoyment and damaged clothing. In the case of the Defendant, the counter restitution involved payment of rent at £21,000 per week for the property whilst it was occupied by the Claimant.
Diminution in Value
Interestingly, in arriving at his judgement Mr Justice Fancourt also considered the Diminution in Value which had arisen in the event that the claim for recission was later unsuccessful. In this case, it was agreed by the parties that that the correct measure of damages was the “difference between the price paid for the house and its value in its current condition, and further that the right starting point in assessing this is the cost of works that are appropriate to remedy the moth problem. The parties agree that the value of the house in its deficient condition is the price paid less the sum of (a) the cost of the appropriate works and (b) an additional amount, presumably for the time and inconvenience to the owner of having to carry out the work, and any residual element of risk.”
However, there was a huge disparity between the experts; the Claimant’s expert arrived at a repair cost of £7.4m + VAT whereas the Defendant’s expert calculated a repair cost of £205,000 +VAT!!.
I routinely see wide discrepancies such as this in the cases I am involved and it often stems from the approach and specification taken to repair the ‘defect’. I have recently been involved in a case concerned damp and dry rot treatment, which it was alleged had not been disclosed. The claim was for the DiV arising from the repairs costs. My assessment was c.£400,000 whereas the claim was for £1.2m and very little substantiation was provided. It was clear during my review of the repairs that costs had been included for items of betterment such as painting and repointing the whole house as well as other backlog maintenance not directly related to the damp and dry rot.
Back to moths, In this instance, the Claimant’s expert allowed for the complete stripping out of the whole property back to the structure so all the insulation could be completely removed as opposed to the more targeted approach taken by the Defendant’s expert.
Mr Justice Fancourt considered these differences carefully and concluded that the “appropriate works are those that an owner, or an intending purchaser, would carry out in their own interest and at their own expense, to put the property into a satisfactory condition.” and found the Claimant’s experts assessment to be “manifestly excessive”. Mr Justice Fancourt went on to say “The amount of nearly £9 million inclusive of VAT is out of all proportion to the extent of the problem, and the works specified are on any view excessive…. The scheme of works is disproportionate because the choice for the owner is not between spending that huge sum on the one hand and spending nothing and putting up with an increased level of moth activity on the other, but between spending that very large sum and spending a smaller sum that would provide a reasonable degree of assurance, though not an absolute guarantee, that moths will not be sustained for years to come by natural insulation in the house…..”
No precise figure was determined by Mr Justice Fancourt on what the DiV would be as he was of the view that further analysis was necessary, but reading between the lines the figure is likely to have been close to the Defendant’s expert’s assessment of £205,000.
Despite this Mr Justice Fancourt was scathing in his criticism of the Defendant’s expert and said “I was unimpressed by Mr Sullivan’s grasp of the matters in issue, which to a considerable degree, I consider, was work that had been done for him by his team, and with the detail of which he was insufficiently familiar. I was unimpressed by his exercise of judgement, which seemed to me to be flawed in many instances, and by his approach to answering questions that were put to him…”
No expert wants to be on the receiving end of such scathing judicial criticism, and no party wants an expert representing them who is criticised in this way as it can severely damage one’s case.
Conclusions
There are a number of conclusions which can be drawn from this case.
Firstly, vendors need to be absolutely honest and transparent with the answers and information they provide on the TA6 Property Information Form in order to prevent claims for misrepresentation to arise at a later date. It is better to declare an historic or ongoing issue no matter how trivial so that buyers can consider the information and proceed with the purchase (or not) rather than risk non-disclosure. Yes, innocent mistakes or errors can be made.
I am working on one such case where a misrepresentation arose following an earlier divorce so the party selling was not in command of the details concerning changes to the below ground drainage as these fell into the wheelhouse of the other divorced party. A misrepresentation arose which in my view was an innocent mistake. Nevertheless, I still had to work out the diminution in value.
Sometimes also the form is not given the respect it requires and casual answers are thrown in with little thought. It reminds me of when my wife and I bought our current house and the vendors were also going through a divorce. I remember the TA6 form coming back with lines through all the enquiries and casual comments such as ‘not known’ as the wife did not know any of the details. The form was promptly sent back and both vendors requested politely to fill the form in properly!.
Secondly, it was agreed that the correct measure of the diminution in value was the reasonable cost of the works as it is impossible to determine what a hypothetical purchaser may pay for the property with a known defect but with no means of assessing what would be involved to correct the said defect. It is one of Donald Rumsfeld’s “known unknowns”!. In the moth case this was determined by expert quantity surveyors, but it was clear from the judgement that building surveyors should have been involved to undertake a series of further investigations to determine the extent of the infestation and determine a more targeted approach to the repairs than what the Claimant’s expert priced. It reminds me of a case I was involved in regarding a substantial retaining wall which collapsed. I was given broad brush estimates for the repairs from a single contractor which were >£100,000 from which to determine the Diminution in Value. I refused to provide a valuation based on such vague details as I strongly felt that a structural design first needed to be completed so the works could be properly priced and ideally alternative quotations provided.
Thirdly, having established that there is a claim for misrepresentation it is important to engage the right expert who can carefully evaluate the options and arrive at a sensible valuation of the likely Diminution in Value with their reasoning clearly set out for adoption the approach taken.
In my case of the misrepresented below ground drainage, the claimant’s expert arrived at a assessment of the DiV being £60,000 yet no details were provided on how the figure had been reached so how can a judge rely on such evidence?. The report was heavily criticised by myself for this reason and if the case were to proceed to court then that expert might be in for similar scathing judicial criticism. Conversely, I provided a range of potential remedies and prices which explain in detail how I arrived at my valuation.
Criticism aside, a poorly presented expert report can do real harm to one’s chances of being awarded the right amount of damages so it is important that the expert considers a range of opinion and clearly sets out his or her reasoning and supporting evidence for the approach taken. Crucially, if details are missing and wide assumptions have to be made then further investigations and analysis should be undertaken.