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Court confirms circumstances in which “normal measure” of damages is recoverable

United KingdomScotland
02/12/2016
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In Quilter v Hodson Developments Ltd [2016] EWCA Civ 1125 the Claimant, Ms Alison Quilter, purchased an apartment managed by the Defendant, Hodson Developments Ltd. When responding to the Claimant’s standard pre-contract enquiries, the Defendant made misrepresentations by implying that it was not aware of certain disputes which affected the value of the property.

At first instance, when considering damages, the judge held that the “normal measure” of damages (which assumes loss is fixed at the date of purchase) should be applied. As a result, the Defendant was liable to pay the difference between the actual value of what was acquired due to the defects (£225,000) and the price paid without reference to those defects (£240,000). The judge also pointed out that the Claimant was entitled to take advantage of any increase in the market value when the property was re-sold and should not have to account to the defendant for this. The reasoning behind this being that the Claimant’s profit margin would have been greater had she paid the actual value of the property.

The Defendant appealed the decision arguing that the Claimant mitigated her loss by re-selling the property for £275,000. The Court of Appeal dismissed the appeal, on the grounds that the Claimant's decision to re-sell the property was not based on its defects and was not a matter of mitigating her loss. In fact, when the property was re-sold the Claimant had already arranged for the National House Building Society to rectify the defects as part of their guarantee.

This decision illustrates that, where misrepresentations are made in respect of a property, the purchaser can benefit from increases in the market value of the property in addition to recovering the “normal measure” of damages. Furthermore, the Court of Appeal confirmed that it is well established that the use of an insurance policy (in this case the NHBC guarantee) should not be brought into account.

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