Here's a recent precedent. Courtesy of Clark Wilson ...
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BC Supreme Court: Applying Sharbern, Delays Must be Material
In
299 Burrard Residential Limited Partnership v. Essalat, which was released on July 26, 2011, the buyer purchased a $6 million unit in the
Fairmont Pacific Rim Residences in August, 2007, and refused to complete in April, 2010. The developer sued to keep the $1.1 million deposit.
The buyer raised a
REDMA defence, arguing that the developer should have filed an amendment when it found out that completion would likely be delayed from the estimated date of September 2009 (as shown in the disclosure statement provided at the time of sale) to December 2009. The buyer relied on the decisions in
Chameleon Talent and
Maguire, in both of which courts found contracts unenforceable because substantial delays in completion dates were not brought to buyers' attention via amendments to disclosure statements.
This is the first B.C. case considering the SCC decision in
Sharbern (discussed above) and the court found that although
Sharbern was decided with respect to the
Real Estate Act, rather than
REDMA, it was applicable to the extent that the Court "addressed the elements necessary to establish that there had been a false or misleading statement of a material fact in a disclosure statement" and "gave some guidance as to the general approach courts should take in considering issues arising under regulatory legislation such as
REDMA".
The court held that, although
REDMA expressly defined "material fact",
Sharbern was relevant to determining "whether a statement contained in a disclosure statement concerning a material fact is false or misleading".
Relying on
Sharbern, the court held that to succeed, the buyer had to establish either "as a matter of common sense" or on evidence that "there was a substantial likelihood that the undisclosed delay in completion would have had actual significance to a reasonable purchaser in making a decision whether to purchase a unit."
The court expressly rejected the buyer's argument that "anything more than a trivial change in the completion date meant that the statement contained in the Disclosure Statement had become false and that the plaintiff was therefore required to file an amendment to the Disclosure Statement". On the contrary, the court agreed that the word "estimated" used in the disclosure statement indicated that there was some possibility that actual completion date could vary.
Although the court did find that at the time that the buyer signed the purchase agreement the developer was already aware of the likely delay, it nevertheless distinguished
Chameleon and
Maquire and found that there was no material misrepresentation. The key was that "in this case there is no evidence that the delay that was experienced was in any way unusual or arose from anything other than the normal construction delays that a person would reasonably expect to be encountered in a construction project of this scale." There was no evidence that such a "delay would have assumed actual significance in a reasonable investor’s decision whether to purchase".
Furthermore, under Sharbern, the court also considered "surrounding circumstances" and took into account that the buyer's real estate agent was informed of December completion date prior to the execution of the purchase agreement, and that when the developer advised buyers of delay in September, 2009, it received no complaints. Although neither of these facts were conclusive because the court had to consider materiality from the perspective of a theoretical, reasonable buyer, they informed the court as to what may have been expected by buyers.
At the end, the court found that the developer was entitled to keep the deposit.
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