Background
Karen Imber had previously settled claims against Thames Water arising from sewage flooding at her home for £500,000. After a further flood in 2014, she advanced a new claim, including a claim for diminution in the property’s market value on the basis that the home was unsaleable because of its flooding history.
During mediation in July 2023, Imber maintained that she was “trapped” in an unsaleable property and claimed its full hypothetical no-flood value of £817,000, alongside other losses. Before the parties concluded a September 2023 settlement under which Thames Water paid £225,000, however, Imber had sold the property for £780,000. Thames Water alleged that she fraudulently failed to correct the continuing implication that the property had not been, and could not be, sold.
The Court’s Holding
Deputy Master Marzec granted Thames Water summary judgment. The statements that the property was unsaleable, although expressed as opinion, carried implied factual representations that it had not been sold and that there was no prospect of a sale. Those representations became false when the sale completed on 3 August 2023, before the settlement agreement was made.
The completed sale fundamentally changed the factual basis of Imber’s diminution-of-value claim and was plainly material to the settlement negotiations. The court held that Thames Water had been materially influenced by the continuing representation even though it had disputed that the property was unsaleable. Applying the test for dishonesty, the court found that ordinary decent people would regard it as dishonest to pursue and settle such a claim without disclosing the completed sale. It rescinded the settlement agreement and ordered Imber to repay the £225,000 settlement sum; damages, if pursued, were to be assessed.
Key Takeaways
- A representation made in settlement negotiations may continue up to contract formation and must be corrected if it becomes false.
- A completed sale was materially different from an accepted offer that might not proceed.
- For inducement, a representee need not have believed the representation; it is enough that it materially influenced the decision to settle.
Why It Matters
The decision illustrates the serious disclosure obligations arising from factual premises advanced in settlement negotiations. A party cannot settle a claim based on a property being effectively unsaleable while withholding the fact that it has been sold.
It also confirms that, in an appropriate fraud case, the High Court may grant summary judgment despite the usual caution surrounding allegations of dishonesty.