Here is another case involving Ontario’s Seller Property Information Statement. It was heard recently in the Ontario Court of Appeal.
It involved an Agreement of Purchase and Sale (with “an entire agreement clause”). The clause read: “(The Agreement of Purchase and Sale [APS]) including any Schedule attached hereto, shall constitute the entire Agreement between Buyer and Seller. There is no representation, warranty, collateral agreement or condition, which affects (the APS) other than as expressed herein.”
Before the transaction closed the vendors signed the Seller Property Information Statement. It stated that the property was not subject to flooding. The vendors did not tell the purchasers of a pre-closing basement flood.
After closing, the purchasers experienced a flood in the basement, found out about the earlier flood and sued the vendors for damages for negligent misrepresentation. At trial the judge ruled that the entire agreement clause barred the action.
The Divisional Court reversed that and found in the purchasers’ favour. However, on an appeal to the Court of Appeal, the statement was made that an entire agreement clause only operated retrospectively and not prospectively (in the past – not in the future). Therefore that clause was restricted to limit representations, warranties, collateral agreements and conditions made prior to or during negotiations leading up to the signing of the Agreement of Purchase and Sale. Since the Seller Property Information Statement involved vendors’ representations after the Agreement of Purchase and Sale was completed and signed, the entire agreement clause was spent (over and non-enforceable). However, the purchasers’ negligent misrepresentation claim failed because of lack of evidence that they relied on the vendors’ representations when they closed the transaction. (Soboczynski v. Beauchamp, 2015 ONCA 282)
Changes to a Purchase Agreement prior to sale
In a series of articles that I received recently, an issue arose about whether an American lawyer was guilty of malpractice in selling a corporation.
The attorney reviewed a sale and payment agreement between the company and its shareholders. The defendant lawyer had a small ownership stake in the company, which he took instead of legal fees.
The lawyer amended the Purchase Agreement, which significantly reduced the previously agreed-upon purchase price.
This case clearly shows a company being sold for much less than an agreed-upon purchase price. A plaintiff shareholder of the company alleged that the lawyer breached his fiduciary duty and duty of loyalty as a shareholder of the company and the lawyer failed to advise the plaintiff and others (the plaintiff was the majority shareholder) about the changes he made. The plaintiff also alleged that the lawyer failed to advise him that he was acting contrary to the majority shareholders’ interest. The lawyer deprived the plaintiff as shareholder of obtaining greater benefits by altering the purchase price.
This appears clearly to be an act falling below the standard of care. However, this situation would have to be investigated more extensively. As the lawyer is a shareholder, he might have an agency agreement authorizing him to apply legal principles in such a fashion to benefit the company over the major shareholder. What was the agreed distribution of authority between the shareholders and the attorney as a shareholder and lawyer? Should the “company” be the plaintiff (derivative action)? Did the lawyer also act for the shareholders or only the company on the issue of breach of conflict and fiduciary duty? Obviously at first glance the lawyer has a big problem, but I have cited a number of issues that arise.
Potential email scam
No doubt most of you have received email scams citing a sum of money that must be extricated out of an overseas country into your trust account or bank, to be shared with the person who has written you the email. There are many versions of this scam.
The most recent I heard should be noted. An organization that holds annual meetings for its members reports an XYZ housing service, which states to members that they are calling on behalf of the organization and that they can book rooms for the annual meeting at a much reduced rate. Aggressive, persistent and high pressure tactics are used, including the offer of a prepaid hotel reservation at a significant discount, requiring your credit card information.
Even if the procedure turns out to be legal, resulting in a room rental, a sizeable booking fee is charged to the credit card, plus the hotel room rate.
A further problem is that this alleged housing company resists any refund or cancellation of the organization member’s stay no matter what reason may be given.
Donald Lapowich, Q.C. is a partner at the law firm of Koskie, Minsky in Toronto, where he practices civil litigation, with a particular emphasis on real estate litigation and mediation, acting for builders, real estate agents and lawyers.
