Alison Quilter v Hodson Developments Ltd [2016] EWCA Civ 1125

The Court of Appeal has upheld an earlier decision awarding Quilter, the purchaser, damages for losses incurred by misrepresentations made in replies to pre-contract enquiries.

Hodson Developments Ltd, the developers, sold an apartment in a development in Surrey to Quilter in 2012 for £240,000. The development was serviced by a communal central heating and hot water system. Disputes had arisen in relation to this system prior to the sale.

In response to standard pre-contract enquiries, however, Hodson failed to disclose these disputes. Quilter argued therefore that Hodson had impliedly represented, by omissions, that it was not aware of the disputes.

The Judge sitting at Central London County Court found that two misrepresentations had been made and awarded damages in the sum of £15,000. Loss was fixed at the date of purchase with the award being based on the difference between the price paid by Quilter (£240,000) and what the price would have been having regard to the defects (£225,000).

Hodson appealed arguing that:

1) these were no such misrepresentations as there were no disputes; and

2) even if this was incorrect, the measure of damages in this case did not accord with the principle of compensation as Quilter was able to sell the same property in 2014 for a profit at £275,000 (when the disputes still existed and were disclosed but were by then being addressed by NHBC pursuant to their guarantee).

Rejecting the appeal, the Court found that the Judge was correct to conclude that there were disputes and that the misrepresentations had been made.

On the measure of damages point, the Court accepted that there was authority that a wrongdoer could take advantage of a rise in the market value on an apartment when he had induced the purchase by a misrepresentation (British Westinghouse Electric and Manufacturing Company Ltd v underground Electric Railways Company of London Ltd [1912] AC 673).

The Court preferred, however, reasoning supported by later cases which essentially meant that Quilter was entitled to retain any benefit received due to a rise in the market value of the property and did not need to account to the misrepresenting vendor. It is notable that her reasons for selling came about due to family circumstances entirely unrelated to the defects in the boiler system and there was no suggestion that Quilter should mitigate her loss. Further, the fact that she was also able to benefit from the NHBC guarantee, being in the nature of an insurance, to reduce her loss should not be brought into account.

Key points:

Re-states existing authorities to show:

1. where misrepresentations are made in respect of a property, the purchaser can benefit from increases in the market value of the property in addition to recovering damages;

2. the fact that a claimant had been able to use insurance to reduce or extinguish loss is not to be brought in to account when calculating damages.