Lester Aldridge has achieved great success recently after winning the case of Quilter v Hodson Developments Limited [2016] EWCA Civ 1125 in both the County Court and Court of Appeal on behalf of the claimant, Ms Quilter. Interesting points of law were raised which may have broader application to other cases, in relation to the assessment of damages, principles of mitigation, and the effect of an NHBC guarantee.

Background

The claimant purchased a flat in a development managed by the defendant developers for £240,000 in January 2012. Prior to exchange of contracts, the defendant was sent standard form pre-contractual enquiries to complete but failed to disclose information relevant to a dispute concerning the heating and hot water system at the property. At trial, the County Court Judge found that the defendant had made misrepresentations by implying that it was not aware of the dispute and that, consequently, the claimant suffered loss when purchasing the property.

Key Principles

The defendant appealed this finding in the Court of Appeal, which in turn dismissed the appeal and affirmed the decision of the County Court. Three particularly interesting points of discussion arose from the Court of Appeal decision; namely:

1. Whether a general increase in market value of the property after a cause of action has arisen should be deducted from any damages awarded to the claimant.

The Court stated that the claimant “did not get what she bargained for and should be compensated accordingly”. She adopted the risk as to changes in the market and was entitled to retain the benefit of any related increase in value.

2.To what extent the claimant should be obliged to mitigate her loss by reselling the property.

Having regard to the claimant’s re-sale of the property, the Court of Appeal also established principles in relation to the requirement for claimants to mitigate their losses. The defendant sought to rely on the recent Court of Appeal decision in Bacciottini and another v Gotelee & Goldsmith (A firm) [2016] EWCA Civ 170, in which damages were reduced because the claimant was able to mitigate its losses relatively easily and cheaply.

The Court confirmed that, generally, any resulting profit from a sub-transaction that is part and parcel of a transaction that gave rise to a wrong should be taken into account when assessing damages. However, this did not apply in Quilter, because the claimant’s re-sale was not part and parcel of such a transaction. The Court held that the re-sale arose in the ordinary course of the claimant’s life and that the claimant had no obligation to mitigate by re-selling the property she had bought for herself and her son to live in. The re-sale was therefore independent of the initial sale/purchase transaction between the parties.


3. How important is an NHBC guarantee when assessing loss?

This case extended the principle that it is irrelevant whether repairs can be completed under an insurance policy, to instances where repairs are covered under an NHBC guarantee. The Court compared the NHBC guarantee to any other policy of insurance and consequently held that the use of a guarantee by the claimant to reduce or extinguish loss should not be brought into account when assessing damages. This is of particular importance given the prevalence of NHBC guarantees throughout the UK housing market.

Conclusion

There is a key lesson to be learnt from this case; sellers of a property (or indeed any asset) should take great care to ensure that any representations made about that property during the sale/purchase transaction are accurate. Purchasers may have a valid claim against the seller if they have suffered loss as a result of an inaccurate statement or omission made during the early stages of a transaction.

This is a complex area which could affect a wide range of transactions beyond property sales. As the facts of every case materially differ, we recommend that specialist legal advice be obtained to protect your or your business’ position. Should you wish to discuss any aspects of this case or otherwise wish to engage Lester Aldridge, please contact Amelia Williams.

Amelia was supported on this case by trainee solicitor, Henrietta Dunkley.