On March 4, 2014, the B.C. Court of Appeal released its judgment in Woo v. Onni 2014 BCCA 76, reversing the decision of the court below which was the first to allow purchasers to rescind their contracts under the Real Estate Development Marketing Act (“REDMA”) post-closing.
The case involved 10 purchasers in a residential condominium project who had entered into contracts on a pre-sale basis. The contracts were completed and the purchasers took possession of their units but, 16 months later, after discovering that the developer had failed to deliver to them the amendment to the disclosure statement disclosing particulars of the building permit for the development that it had filed three years earlier, they sued under s. 21(3) of REDMA claiming a right to rescind their contracts and recover the purchase prices they had paid.
The summary trial judge in the B.C. Supreme Court ruled in favour of the purchasers. On appeal, the Court of Appeal rejected the purchasers’ argument on the basis that the amendment did not disclose facts that were “material” to the purchasers, within the meaning of REDMA. The Court held that it is only facts thatadversely affect the value, price or use of a unit which are material. Because the building permit amendment simply confirmed events (including the issuance of the building permit) that had been predicted in the original disclosure statement, information that was to the purchasers’ benefit not their detriment, the failure to deliver the amendment did not give rise to a right to rescind.
Policy Statement 5 issued by the Superintendent of Real Estate under REDMA does provide that where a project is marketed on a pre-sale basis, the developer is required to deliver to purchasers an amendment confirming the issuance and particulars of the building permit within 9 months of the original disclosure statement, and that purchasers who do not receive this amendment within 12 months of the original disclosure statement have a right to cancel their contracts. However, the Court found that the purchasers in this case had not exercised their right to cancel under Policy Statement 5 and it was therefore irrelevant to their claims.
The Court also made important comments about the purpose of REDMA, stating that while it is consumer protection legislation, it involves “a balancing of the interests of developers and purchasers” and was not intended to create a “windfall that allows purchasers to rescind purchase agreements that delivered to them precisely what they contracted for”.
The case is significant for its clear statement that purchasers should not have a right to rescind based on technical deficiencies in disclosure. However, its outcome ultimately turned on its particular facts, specifically the nature of the information in the amendment that had not been delivered. It remains open to purchasers to claim a right to rescind their contracts under s. 21(3) of REDMA even after closing as long as they can convince the Court that the information which the developer failed to disclose to them was “material”. It therefore continues to be important for developers to be transparent about information affecting their projects, and to deliver amendments whenever they become aware of new information that could be considered adverse to purchasers’ economic interests.