Iya Patarkatsishvili & Anor v William Woodward-Fisher

In a fraudulent misrepresentation claim arising from replies to pre-contract enquiries, the natural meaning of clear, negative replies is applied without requiring the buyer to prove that they understood the undisclosed matter in its precise form. Knowledge acquired by the buyer’s solicitors or authorised professional team may be treated as the buyer’s knowledge, and a communicated summary of the replies may establish reliance.

Where fraud is established, rescission is the normal remedy. If counter-restitution can be achieved through valuation, adjustments and equitable security, the court has no residual discretion to refuse rescission merely because damages might appear more convenient or because the representor cannot immediately repay the price.

The claimants bought a large house from the defendant for £32.5 million. They alleged that three replies to pre-contract enquiries concerning vermin infestation, reports about the property and concealed defects were false and fraudulent.

After discovering a severe clothes-moth infestation in woollen insulation, and later obtaining pest-control reports showing that the defendant had known of the problem before the sale, the claimants elected to rescind and sought repayment of the purchase price, damages and interest.

The central issues were whether the replies were misrepresentations, whether they induced the purchase, whether the defendant acted fraudulently, whether rescission was barred by delay, affirmation or impossibility of restitution, and what financial adjustments and damages were appropriate.

1. Misrepresentation. In the context of residential pre-contract enquiries, “vermin” included an established infestation of clothes moths capable of damaging the property, impairing enjoyment and requiring expenditure. “Reports” included pest-control documents reporting findings and opinions, even though they also contained quotations for treatment. The fabric of the property included concealed insulation. The three replies were therefore false.
2. Knowledge and inducement. The claimants’ solicitors and professional advisers had read the replies and their knowledge was attributable to the claimants. The general advice that there were no red flags and that it was safe to proceed sufficiently communicated the substance of the negative replies. A claimant relying on the natural meaning of a clear statement need not prove an understanding of the precise undisclosed matter. The claimants were induced to purchase.
3. Fraud. The defendant knowingly made false replies concerning reports and concealed defects. In relation to vermin infestation, he was reckless because he suspected that moths might fall within the enquiry but withheld the known infestation and relevant reports. The requirements in Derry v Peek were satisfied.
4. Rescission. There is no residual equitable discretion to refuse rescission for fraudulent misrepresentation where counter-restitution can be achieved practically. “Practical justice” concerns adjustments and allowances needed to effect restitution, not a free-standing comparison between rescission and damages.
5. Delay of about seven and a half months after discovery of the right to rescind did not make rescission inequitable. Affirmation required an unequivocal act or statement, communicated to the representor, showing an election to affirm. Continuing to occupy the house, without communication to the defendant, was insufficient.
6. The defendant’s inability immediately to repay the purchase price was not a defence. The relevant question was whether the claimants could make counter-restitution. The house could be returned subject to an equitable lien securing repayment, with adjustments for the use of the property and simple interest.
7. Damages in deceit covered losses directly caused by the transaction, including stamp duty, legal and removal costs, remedial works, pest-control expenditure, clothing damage and loss of enjoyment. Compound interest was refused. The claimants were awarded rescission with financial adjustments and damages; consequential orders were to be dealt with at a further hearing.