Moths, Mansions, and Misleading Disclosures: How to Avoid Legal Pitfalls

The High Court’s recent ruling in Patarkatsishvili and Hunyak v Woodward-Fisher serves as a stark reminder of the legal obligations in high-value property transactions. But what does this case mean for buyers and sellers alike?

A Notting Hill mansion, sold for £32.5 million, was found to have a pre-existing moth infestation undisclosed by the seller. The buyers successfully argued that the seller had misrepresented the property’s condition, leading to the sale being rescinded and a substantial financial settlement in their favour.

The Court’s Findings: Fraudulent Misrepresentation

The Court determined that the seller, William Woodward-Fisher, failed to respond truthfully to pre-sale enquiries and was reckless in failing to disclose reports regarding the infestation. As a result, the claimants were entitled to rescind the contract and receive repayment of the purchase price, with additional damages awarded.

Antony O’Loughlin, Head of Litigation at Setfords, explains:

“This decision will serve as a wake-up call to sellers, reinforcing the vital importance of absolute transparency in the pre-sale information given to buyers. The judge in this matter ruled that the purchase price and other damages and costs (together totalling £36.5m) must be refunded to the buyer due to misleading answers in the pre-contract enquiries about whether ‘vermin infestations’ or ‘defects’ existed at the property.

The court found that the seller had not consciously tried to deceive the buyer but had hoped that a prior moth issue had resolved itself and that the problem had gone away, falsely stating that he ‘was unaware of any vermin infestation or defect in the property that was not apparent on inspection’. In fact, there was a large infestation within the walls and floor voids of the house, which the buyers discovered once they had moved in.

The seller’s lawyers argued that moths could not properly be called ‘vermin’, and hence, their client had been truthful in his answers. This was not accepted by the judge, who found that the statements had been misleading and that the seller had failed ‘honestly to disclose’ the true extent of the ‘serious infestation’.”

Key Takeaways for Buyers and Sellers

1. Transparency is Crucial – Sellers must provide honest answers to pre-sale enquiries. Failing to do so, whether negligently or fraudulently, can result in serious financial and legal repercussions.

2. Caveat Emptor is Not Absolute – While buyers should conduct due diligence, the court reaffirmed that misleading responses by a seller can override the principle of ‘buyer beware.’

3. Rescission Must Be Prompt – Buyers seeking to rescind a contract due to misrepresentation must act swiftly to avoid losing their right to do so.

Reassurance for Sellers Facing Disputes

For sellers who may find themselves facing a misrepresentation claim, it is important to remember that not every undisclosed issue amounts to a legal breach. Antony O’Loughlin cautions:

“It will be very tempting for sellers to downplay the true extent of issues at the property they are trying to sell, and to hope that any problems will fix themselves. As the substantial compensation awards in this claim demonstrate, this can be a highly risky strategy, even where the buyer has arranged their own pre-exchange investigations of the property (as occurred several times here). The best advice to sellers is to be transparent and upfront about any past or ongoing issues so that when you do manage to sell the property there will be no further issues.”

For expert advice on property disputes and misrepresentation claims, contact Setfords’ Litigation team today.