Moth-representation: The dramatic consequences of a successful claim for fraudulent misrepresentation

The case of Patarkatsishvili v Woodward-Fisher [2025] EWHC 265 (Ch), concerning moths and an expensive London property, has attracted much media attention and serves as a reminder of the dramatic consequences that can result from a successful claim for fraudulent misrepresentation.

Background

The Claimants were the purchasers of a £32.5 million house in London (the “Property”). They claimed that they were induced to purchase the Property as a result of fraudulent misrepresentations made by the seller, the Defendant in this case.

Following a period of pre-Contract negotiations and enquiries, the Property purchase went ahead. Within days of moving in, the Claimants noticed moths in the Property. As time went on it became apparent that there was a severe infestation of moths.

The Claimants made various enquiries to pest control companies and discovered that one company had previously carried out moth treatment work at the Property for the Defendant.  This pest control company had previously issued reports to the Defendant’s wife prior to the sale of the Property (“Moth Reports”). These Moth Reports concluded that the source of the problem was an infestation of moths in the insulation in the Property.

As a result, the Claimants decided to bring a claim for fraudulent misrepresentation and seek rescission of the Contract, the return of the purchase price, and other damages.

The Alleged Misrepresentations

The Claimants alleged that in the replies to the pre-Contract enquiries (the “Replies“), the Defendant made three fraudulent misrepresentations in that he falsely stated:

1. He was not aware of any “vermin infestation” affecting the Property (“Alleged Misrepresentation 1“).
2. There were no reports concerning either vermin infestation or the fabric of the Property (“Alleged Misrepresentation 2“).
3. He was not aware of any defects in the Property which were not apparent on inspection (“Alleged Misrepresentation 3“).
   
   Together the “Alleged Misrepresentations“.

The Court’s Approach

In determining claims for fraudulent misrepresentation, there is a clear ‘recipe’ for courts to follow. Courts will consider the evidence and determine whether each of the ‘ingredients’ of a fraudulent misrepresentation claim are established on the balance of probabilities.  

Taking each of these ingredients in turn:

First, was there a false representation of fact?

1. The High Court (“Court“) found that each of the Alleged Misrepresentations were, in fact, false representations of fact and that the Defendant had consequently made three Misrepresentations.
2. In relation to:

• Alleged Misrepresentation 1 – an infestation of moths is an infestation of vermin.
• Alleged Misrepresentation 2 – the Moth Reports were reports concerning the fabric of the Property and a vermin infestation.
• Alleged Misrepresentation 3 – the moth infestation of the insulation was a defect not apparent on inspection.

Secondly, did the Claimants rely on the Misrepresentations and were they induced to enter into the Contract as a result?

1. It is not enough to simply show that a misrepresentation was made, it must have been relied on and induced the claimant to enter into the contract. 
2. In this case, there was no evidence that the Claimants personally read the Misrepresentations as the Claimants were relying on an agent to assist with the Property purchase. 
3. However, it is sufficient for claimants to know of a misrepresentation and act on it via their agent, rather than by themselves personally (as long as it is the claimants themselves who suffer loss).
4. The Court found that the Claimants’ agents read the Misrepresentations and that the agents generally told the Claimants that there were no red flags with the Property. The Court found that the substance of the Misrepresentations was sufficiently communicated to the Claimants by their agents.
5. The Court then went on to find that if the Defendant had not answered the relevant pre-Contract enquiries at all, then this would have itself been a red flag for the Claimants who would have likely walked away from the purchase of the Property – and on this basis the Court held that the Claimants did rely on the Misrepresentations.

Third, were the Misrepresentations made fraudulently?

1. This question is critical, and the relevant test sets claims for fraudulent misrepresentation apart from other types of misrepresentation claims (such as for negligent or innocent misrepresentation). In our experience, it is this element of the claim that can be most difficult to prove and can be met with the most intense scrutiny by the courts.
2. In this case, the Court started out by recognising that the requirements for a finding of fraud are “exacting“. The relevant question before the Court was whether, in making the Misrepresentations, the Defendant either (i) knew that they were false, or (ii) was reckless as to their truth (i.e. had no honest belief in their truth).
3. In relation to each of the Misrepresentations, the Court found that they were made fraudulently, given that they were either known to be false or made recklessly.  Particularly the Court held that:

• Alleged Misrepresentation 1 – as to the Defendant’s position that he did not believe that moths were vermin and that he did not believe there was an infestation, the Defendant was reckless as to the truth of this Misrepresentation.
• Alleged Misrepresentation 2 – the Defendant knew that the Moth Reports concerned the defective condition of part of the fabric of the Property such that he “had no honest belief” in the truth of his representation.
• Alleged Misrepresentation 3 – the Defendant could not have honestly believed in the truth of Misrepresentation 3 given his knowledge of the moth infestation in the insulation.

The Outcome and the Remedy of Rescission

Therefore, the three ingredients necessary for establishing fraudulent misrepresentation were satisfied in this case. For successful fraudulent misrepresentation claims there are two principal remedies, and both of these were sought by the Claimants in this case.

1. Rescission – at the moment of rescission the contract becomes avoided from the beginning as if there had been no contract. Any performance already made under the contract is reversed so that the parties are placed in the position in which they would have been had there been no contract. There are however various defences that can prevent a court from awarding recission.
2. Damages – a claimant is entitled to recover all damages caused by entering into the contract, including consequential losses, without any limit on the basis of foreseeability of loss.

The Remedy of Rescission

In this case, the Defendant had three defences to rescission: delay, affirmation, and impossibility.  These represent the most typically deployed defences where rescission is sought, and this case provides a useful summary of the law in this respect.

Taking each in turn:

• Delay – the Defendant argued that the delay by the Claimants of around 7 months before they elected to rescind the Contract should preclude the Claimants from being awarded rescission of the Contract. However, the Court found that the delay was not very long or excessive and further, that the delay did not adversely affect the Defendant.

• Affirmation – the Court found that the Claimants were not affirming the Contract by continuing to live in the Property at the time they became aware of their right to rescind and that the Claimants did nothing to communicate any affirmation to the Defendants.
• Impossibility – in order for a remedy of rescission to be available, it must be possible to reverse the performance made under the contract. The Court found that there was no such impossibility here.

Therefore, the Court rejected the Defendant’s argument that there was a defence to recission and found that rescission was an appropriate remedy. The title to the Property was to be returned to the Defendant who would then be subject to an order to repay the £32.5 million purchase price to the Claimants once he had sold the Property. 

In addition to rescission, the Court also awarded damages resulting from the Misrepresentations, these included the Claimants’ legal costs of the purchase of the Property, the stamp duty paid by the Claimants and other damages.

Comment

Cases of fraudulent misrepresentation in English law are rare and are perhaps rarer still in the context of Construction projects. This case is a useful illustration of some of the unique aspects of advancing misrepresentation claims. It is helpful for parties considering these types of claims to consider the following:

1. Claims for fraudulent misrepresentation necessarily involve detailed factual investigations. When investigating the possibility of these claims it is important to establish a clear timeline. This should not just be what representations were made but should also establish what the individual making the representation ought to have known and when.
2. Misrepresentation cases can often lead to lengthy court hearings and detailed cross examination of witnesses. Even in this case, where the three Alleged Misrepresentations were all contained in a single document, a hearing of 10 days in the Chancery Division of the High Court was still required and much emphasis in the Court’s judgment was placed on the perceived reliability of the factual witnesses.
3. It is sufficient that the fraudulent misrepresentation has been made recklessly, and this case serves as a reminder of the recklessness element of fraudulent misrepresentation.
4. Unlike in this case, in construction contracts often the remedy of “recission” is no longer available. Depending on the nature of the works or services, it may be impossible to restore the parties to the position as if the contract had never been entered into. Therefore, the key remedy for parties claiming misrepresentation in relation to construction contracts will typically be an award of damages.