Notting Hill is known for its famous Portobello market and the vibrant carnival that happens every August Bank holiday. I have lived in Notting Hill my whole life and therefore my eyes were drawn to the recent judgment handed down regarding a property in the area that was, now famously, infested with moths.
The case revolved around Horbury Villa, a seven-bedroom property purchased in 2019 for £32.5 million. The property included a spa, gym, pool, cinema but also, as became evident to the new owners, an unwanted (and extensive) infestation of moths. This lead to a multi-million pound court case which ended in the buyers’ favour. Many will be aware of the principle of caveat emptor, “buyer beware”, nevertheless, there is an obligation that a seller gives true and correct answers in pre-sale enquiries, as otherwise a buyer cannot make an informed decision on whether or not to purchase a property. The case of Horbury Villa proves how costly not following correct form can be.
A case of misrepresentation
This claim, quite unique in its kind, was brought on the basis of misrepresentation. There are three types of misrepresentation: innocent, negligent and fraudulent. Innocent misrepresentation only applies when a misrepresentation is made entirely without fault and is demonstrated by showing that the maker of the representation had reasonable grounds to believe that what they had stated was true. However, if this cannot be proven then the misrepresentation will be negligent or fraudulent. Negligent misrepresentation occurs when a statement is made carelessly or without reasonable grounds to believe that the statement is true. Fraudulent misrepresentation takes this a step further – a false representation that is made knowingly, without a belief in its truth or recklessly, as to whether it is true or not. Fraudulent misrepresentation is the worst of the three and can lead to very negative consequences, as occurred in this case.
The house that was returned
The court decided that the sellers gave false responses and failed to “honestly disclose” the “serious infestation of moths”. As this amounted to a “fraudulent misrepresentation”, the court essentially decided to unwind the transaction. The court also ordered that the buyers be awarded £4.7 million in interest and upfront legal costs of £750,000 which could rise to £2.9 million after a detailed assessment of the costs.
A costly error
The huge costs bill highlights how important it is for litigants to take advice early on in the process to properly understand the risks involved if they are not successful. It is important to take legal advice when making a statement, representation or warranty to ensure you are aware of the negative consequences should a court decide that it amounts to fraudulent misrepresentation.
If it appears that, having sought a solicitor’s advice, it is more likely that you will be unsuccessful in a case, deciding early in proceedings to try to reach a settlement can save a significant amount of money and stop you throwing good money after bad.
At Peacock & Co we can provide advice early in proceedings to give you the chance to potentially settle a matter through some form of alternative dispute resolution. Please contact our specialist dispute resolution team for more information.