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Court overturns SmartCentres ruling
An appeal of a BC Supreme Court judgment regarding the SmartCentres property means the purchaser no longer has to pay the seller $2 million.
The appeal stemmed from an initial judgment delivered July 27 in BC Supreme Court in Vancouver, where the court ruled that defendants Salmon Arm Shopping Centres Limited, Calloway Reit (Salmon Arm) Inc. and numbered company, 568295, with president Joseph Amato of Vaughan, Ont. – all affiliated with SmartCentres, must pay $2 million to the plaintiff, another numbered company, 0759594, that listed Mike Fowler out of Richmond as president.
The ‘594’ company – the seller – launched the lawsuit in April 2010. The seller argued that the purchaser agreed to buy the seven parcels involved for $16.7 million. Two million dollars of that payment was deferred, pending rezoning and subdivision approval. If the SmartCentres affiliates couldn’t get city approvals before November 2009, they would pay the seller the remaining $2 million by Nov. 15 of that year. The seller had reserved the right to buy back a portion of the lands for residential development. Because no rezoning and subdivision of the lands occurred by Oct. 15, 2009 and the purchasers did not pay the $2 million by the Nov. 15, 2009 deadline, the plaintiff/seller sued for the two million, plus interest and costs.
On Aug. 28, the BC Court of Appeal overturned the initial judgment and ruled that the purchaser no longer has to pay the seller the $2 million.
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.
In the BC Court of Appeal, Mr. Justice Edward Chiasson said the seller’s warranty stated it would disclose all material facts, known or unknown to it, about the property.
“I have rejected the judge’s conclusion that the vendor’s warranty did not extend to unknown information,” the appeal judge wrote.
He also referred to city approvals.
“The vendor made two statements: one, it had the full support of the planning department; two, it had ‘approval in principle.’ In my view, the November 2007 report shows that it had neither.”
He continued: “In my view, there is a substantial likelihood that the statement that the vendor had the ‘full support’ and ‘approval in principle’ of the planning department would have assumed significance in the deliberations of a reasonable purchaser. I consider the statement to have been material and not true. In finding it not true, I do not suggest dishonesty on the part of the vendor. In my view, the vendor must have misinterpreted the position of the planning department.”
The question of funds owing between the parties is still to be decided by BC Supreme Court.