Knowing, Not Knowing and Knowing what not to Know.
I’ve been a bit delayed in commenting on this BC Appeals Court decision due to both work and family priorities. The citation is 0759594 B.C. Ltd. v. 568295 British Columbia Ltd., 2013 BCCA 381 with the text of the judgment here.
The Observer article Court overturns SmartCentres ruling (Wickett: Sept. 11 2013) summarizes this recent decision where SmartCentres’ and their co-investor Calloway REIT won their appeal to set aside a previous Supreme Court decision that determined they were to pay the vendor the $2 million dollar unpaid balance of the purchase price.
In the initial lawsuit, the purchasers counter-claimed for $3.3 million for breach of contractual representations, which, they said, resulted in a significant portion of the lands being undevelopable. They had argued they were not obligated to pay the full purchase price because “warranties and representations made in the purchase agreement are untrue,” but the trial judge disagreed. He said the seller could not reveal to the purchasers information not known to him, such as citizen opposition to development of the land, or the effect of the Riparian Areas Regulation, which meant less land was available to be developed.
SmartCentres no longer has to pay the vendor the $2 million. The case heads back to the Supreme Court for exactly what is owed between the original claim by the vendor and SmartCentres’ counterclaim.
Also see the Aim High post SmartCentres (Salmon Arm) Loses in BC Supreme Court (July 30 2012) for links to the original judgment as well my take.
This current Appeals Court decision appears to have turned in part on the ‘warranty’ given by the vendor to SmartCentres. The Appeals Court determined that “ … warranties allocate risk and parties are free to distribute risk as they see fit”. The vendor, by giving a warranty, was responsible for information that may or may not have been known to it.
The information that was contested was “Topography Misrepresentation”, “Zoning Misrepresentation” and “Citizens’ Opposition Misrepresentation”
Check out the recent decision as well as the Observer article. I remain intrigued with the initial judge’s remarks that “The parties’ principals are sophisticated persons knowledgeable in real estate development.”
* Image from WA:TER
The decision turns in part on one development party having legally used the word ‘warranty’ and being held to account when SmartCentres’ plans for the whole enchilada failed. A community woke up and said no to their initial unbridled development plans that would have destroyed a huge swath of a sensitive environmental area … and SmartCentres had a warranty in their back pocket.
Time will tell what that will be worth.