Friday, 1 June 2012

Ebbs and Flows of Pre-Sale Litigation

Perhaps it is the beginning of the summer lull, but there has been a dearth of interesting decisions over the last week.  There was, however, a very notable decision dealing with the Real Estate Development Marketing Act (REDMA) released on May 23.

Woo v. ONNI Ioco Road Five Development Limited Partnership, 2012 BCSC 764, was yet another case where purchasers brought an action to rescind pre-sale contracts based on breaches of REDMATwo aspects of this case were unusual, however:
  • the amendment to the disclosure statement that the buyers did not receive, and on which they based their action, essentially provided that everything was on track; and 
  • rescission was demanded more than two years after the sales completed and buyers took possession. 

The court found for the buyers, applying a standard of materiality that arguably differs from the one established by the SCC and BCCA, and which stands in stark contrast to another REDMA decision released earlier this year.  Moreover, and the court refused the developer's counterclaim for occupational rent or compensation for the diminution in value of the units, finding that:
  1. the equitable principle of restitutio in integrum did not apply to statutory rescission under REDMA; and
  2. because REDMA is a consumer protection legislation, policy consideration precluded the developer's claim for compensation:
[123]      In the absence of a statutory provision for an accounting, there are policy considerations that weigh against the Court ordering occupational rent and an accounting.  The purpose of the statutory right of rescission provided by s. 21(3) is to protect consumers by ensuring that developers disclose all material facts. That section is aimed at providing a remedy to purchasers where a developer fails to perform its obligations, rather than at achieving equity between both parties to a commercial transaction.
[124]      The prospect of recovering occupational rent might create for some developers an incentive to litigate claims for statutory rescission and to prolong that litigation, knowing that occupational rent would continue to accrue. 
My full analysis of this and other recent REDMA decisions was published as a feature article on the BCRElinks.Com.