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Summary

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Property — Real property — Sale of land — Agreement of purchase and sale — Interpretation — Breach of warranty — After purchase, Purchasers discovering several factors preventing them from using land for intended development — Vendor seeking summary judgment to recoup large sums owing from real property transaction and Purchasers counterclaiming alleging breach of warranty — Court of Appeal holding that warranty provision in Agreement of purchase and sale unambiguous and required Vendor to disclose material facts both known and unknown to it — Whether Court of Appeal erred in holding that claim for breach of warranty available when information at issue was unknown to Vendor? — Whether purchasers of land are entitled to claim damages for breach of warranty after having waived “due diligence” conditions dealing with subject matter of alleged breach of warranty? — Whether Court of Appeal erred in overturning trial judge’s findings as to materiality?

The applicant 0759594 B.C. Ltd. (“the Vendor”) sold 60 acres of land in the City of Salmon Arm to the respondents (“the Purchasers”), land which the Vendor marketed as suitable for the development of retail facilities, including a large department store described as a “big box” facility and residential properties. The property required rezoning by the City. The Purchasers intended to develop the property for retail facilities and residential properties.

The Agreement of purchase and sale signed by the parties contained a warranty that, so far as it was aware, the Vendor had disclosed all material facts pertaining to the property to the Purchasers. That warranty also set out that all material information pertaining to the property had been set out in the Agreement or was otherwise contained in other documents in the possession of the Vendor with respect to the property. The latter sentence was not qualified by a reference to the Vendor’s knowledge.

The Purchasers were ultimately unable to develop one-third of the land because of riparian issues. They were also unable to obtain zoning for their proposed high-density residential development on the remaining land and ran up against significant local opposition to the big box facility. When the Purchasers refused to pay $2 million left owing to the Vendor to complete the purchase, the Vendor brought an application for summary judgment in that amount. The Purchasers counterclaimed for over $3 million in damages, alleging that the Vendor failed to disclose the problems related to the development of the property and misrepresented facts relevant to them.

Lower Court Rulings