High Court Rescinds £32.5 Million Property Sale Over Fraudulent Misrepresentation

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The Sale and Discovery

In May 2019, Iya Patarkatsishvili and Yevhen Hunyak (the “Buyers”) purchased a luxury mansion from high-end developer William Woodward-Fisher (the “Seller”). Shortly after moving in, the Buyers encountered a persistent moth infestation. Despite extensive treatments, the problem continued.

In 2020, the Buyers learned that the Seller had previously engaged pest control services in 2018 to address the same infestation, which had been found to be linked to the property’s wool insulation. Reports from that time recommended the insulation’s complete removal – a remedy the Seller declined. Crucially, none of this was disclosed in the Seller’s replies to the Buyers’ pre-contract enquiries.

The Legal Claim

The Buyers sued for rescission of the sale contract, return of the £32.5 million purchase price, and damages. They claimed the Seller made fraudulent misrepresentations by stating he was unaware of any vermin infestation and that there were no defects or reports to disclose.

The Seller’s Defence

The Seller denied the allegations, asserting that he had not knowingly misrepresented the condition of the property and that the Buyers had not relied on his replies. He further argued that any right to rescind had been lost due to delay in bringing the claim.

Court’s Findings

The court found that:

  • The Seller’s responses were knowingly false and amounted to fraudulent misrepresentation.
  • The moth issue constituted a “vermin infestation,” and the Seller’s failure to disclose prior pest control reports was a material omission.
  • The infestation was not readily apparent on inspection, contradicting the Seller’s representations.

Despite a delay of over seven months between the Buyers discovering the issue and initiating proceedings, the court ruled that this did not bar rescission. It ordered:

  • The return of the property to the Seller;
  • Refund of the purchase price, adjusted for the Buyers’ use of the house;
  • Damages of approximately £4 million, including stamp duty and costs related to ruined clothing and other belongings.

The court also clarified that written reports, not oral advice, must be disclosed when replying to pre-contract enquiries.

Key Takeaways

  • Sellers must provide full and honest disclosure. Fraudulent or misleading replies can lead to the reversal of even high-value transactions.
  • Caveat emptor is not a licence to mislead. While buyers must exercise due diligence, sellers are not permitted to give false assurances or omit known issues.
  • Vermin includes moths. The definition extends to any animals or insects capable of infesting a residence, potentially broadening disclosure requirements.
  • Act promptly if rescission is sought. Delays can undermine a claim, though in this case, the court found the Buyers’ timeline acceptable.

An appeal may follow, but the ruling already marks a significant development in property law, reinforcing that honesty in pre-contract disclosures is non-negotiable.