An awful case - fraudulent misrepresentation

I suspect that it will be with some trepidation that lawyers cite the decision of Ramsey J in Sear v Kingfisher Builders (2013) in the future.

Because the case, which is a relatively rare example of a court making a finding of fraudulent misrepresentation, has a truly tragic back story. James Ward, the solicitor who acted for the claimant, was shot in his office in July of last year; sadly, he died in hospital 20 days later. The person accused of his murder, Michael Chudley, was a partner in Kingfisher Builders. Mr Chudley denies murder and the trial is set for July of this year.

The root of the tragedy appears to have been a dispute between Mr Christopher Sear and Kingfisher. When trying to persuade Mr Sear that Kingfisher was the right builder for the renovation and extension of Mr Sear’s house in Esher, Mr Chudley suggested that Mr Sear speak to Francine Whale, who he suggested was a happy customer of Kingfisher.

In fact, as Ramsey J had decided in an earlier judgment (Sear v Kingfisher Builders (2011)), Mrs Whale was a partner in the business herself. She failed to disclose this (or that Mr Chudley had a conviction for fraud and had been made bankrupt) to Mr Sear. To quote the judge:

“I found that her failure to disclose those matters when providing a reference to Mr Sear … amounted to a misrepresentation. I also found that Mrs Whale acted fraudulently by participating in the charade and giving the appearance of being an independent third party … when, in fact, Mr Chudley was living in her house and she was … a partner in that partnership. I held that the misrepresentation was made intending it to be relied upon, as it was. I therefore held that Mrs Whale was liable for fraudulent misrepresentation and made an order for damages to be assessed.”

This judgment contains that assessment of damages. Ramsey J stressed that Mr Sear was entitled to be put in the same position he would have been had the representation not been made; but that the damages were capped to the actual loss directly flowing from the “fraudulent inducement”. On the facts, Mr Sear was entitled to damages including mortgage redemption penalties, interest on personal loans and the sums expended on a house move (he had to sell the redeveloped property to repay the loans). However, the court did not allow him to recover his claimed losses from a subsequent move into rented accommodation because this was held to have been caused by a deterioration in Mr Sear’s own financial position and not as a result of the fraud.

In relation to the misrepresentation, Mrs Whale has to pay Mr Sear damages and interest of £295,378.37. In addition, she was ordered to pay £81,054.44 (an overpayment made by Mr Sear to Kingfisher which, as a partner in the business, was as much Mrs Whale’s liability to repay as it was Mr Chudley’s).

So, the construction law point to note is the potential high cost of fraudulent misrepresentation. Sadly, that is not the case’s most important legacy. RIP Mr Ward.