Part 57 published on 01/03/17
Disclosure statement contained a material misrepresentation. However, the purchasers suffered no resulting damages
This case concerned the development and sale of strata units in the Westin Grand Hotel in Vancouver. The purchasers had received a disclosure statement from the developer, in accordance with the Real Estate Act. In a previous decision, the Court of Appeal had upheld the trial judge’s finding that the disclosure statement contained a material misrepresentation. [The misrepresentation concerned projected occupancy rates for the proposed hotel.] The matter had been returned to the trial judge for determination of the resulting losses suffered by the purchasers; and the trial judge had calculated the losses at $8 million, representing reduction in the value of the units as of the date of closing.
The developer appealed, and was successful on appeal. The Appeal Court said:
To succeed in an action for compensation under s. 75 of the Real Estate Act, an investor must prove both the material misrepresentation and that a loss would not have resulted if the representation had been true. A developer is not liable to compensate an investor for losses suffered as a result of external causes, such as changes in the market, which do not result from the inaccuracy of the representation.
In this case, no loss or damage resulted from the inaccuracy of the misrepresentation. Instead, the losses arose from external causes. Thus, the Investors would have suffered a loss even if the representation was true. The loss arose because of a change in market conditions, a risk that was clearly identified in the Disclosure Statement. As the loss arose solely for reasons unrelated to the representation, it is not recoverable against the Developers.
The Owners, Strata Plan LMS 3851 v Homer