A Murder, a House Sale, and a Lawsuit Regarding Misrepresentation in a Real Estate Transaction
The case of Wang v. Shao, 2019 BCCA 130, has all the makings of a Hollywood movie. The decision by the British Columbia Court of Appeal was released on April 23, 2019, and arose in the context of the sale of a large and expensive house located in the Shaughnessy area of Vancouver.
The tragedy began on November 3, 2007, when Raymond Huang was shot and killed on the sidewalk outside the property’s front gate. Although the trial judge did not make a finding in this regard, media reports associated Mr. Huang with organized crime and in particular, the “Big Circle Boys” gang. Evidently, the police regarded the shooting as a targeted one, and it has never been solved.
Upon learning of his violent death, the private school that Mr. Huang’s daughter attended insisted that she leave the school, expressing concerns for student safety.
The child was transferred to a local public school, but eventually enrolled in a private school in West Vancouver, involving a considerable commute.
The house was eventually put up for sale on the basis that nobody lived there.
The primary issue in the case was whether it was necessary to disclose that Mr. Huang was violently murdered on the street in front of the property.
Advice was received by the real estate broker’s manager that unless a prospective purchaser specifically inquired about a death, disclosure was not required as it was not considered a “latent defect” requiring disclosure.
On one hand, this position makes sense. However, the fact the property had been occupied by a “high level organized crime figure”, and his subsequent unsolved murder occurred right outside the property, arguably made the property dangerous or potentially dangerous and constituted a “defect” that would require disclosure.
The Trial Verdict
The trial judge ruled that the seller was liable to the would-be buyer for fraudulent misrepresentation. When asked by the buyer’s agent why the owner was selling, the owner’s agent answered that her granddaughter was changing schools and the new school was located elsewhere. She did not add that the granddaughter had been asked to leave the previous school because her father had been murdered while entering the property.
When the buyer found out the truth, he refused to complete the purchase and sued. The trial judge found that the owner / seller’s response was a half-truth that “concealed” the true reason for the move, and the owner / seller was therefore liable for “fraudulent misrepresentation by omission”.
The Court of Appeal Reverses the Trial Judge
On April 23, 2019, the Court of Appeal for British Columbia overturned the trial judge, finding that the owner / seller had NOT been obliged to provide further disclosure because she had no reason to know that the fact of the murder (which occurred two years’ prior) would be material to the buyer.
The appellate court noted that materiality is assessed objectively and in absence of expert evidence regarding a particular cultural sensitivity on the part of the buyer, of which the seller was aware, misrepresentation was not proven.
The court reasoned that if the seller was under a duty to disclose why the child was going to school further away, and why she had left her previous private school, then the law relating to real estate transactions would “be turned on its head”.
The court posited:
“Imagine, for example, the following situations:
An owner wishes to sell and when asked why, replies that she is getting a divorce. Is she also required to disclose that her husband often assaulted her in their bedroom? Or why he assaulted her? Or that she has been committing adultery with another man?
An owner wishes to sell and when asked why, replies that she is moving to a different city. Is she required to explain that she is moving to a different city because she has been fired from her job? Must she say she was fired for defalcation of funds? Or that she stole in order to pay gambling debts? Or that her children have been bullied by teenagers next door?
An owner wishes to sell his house for a long list of reasons, including as #10 on the list that he dislikes his neighbours (who are always wanting to borrow his tools) and as #15 on the list, that his late wife died there five years before. When asked why he is moving, he replies that “It’s time for a change.”
The Court of Appeal reasoned that if the law were to be modified to require that upon being asked a general question like the one asked, sellers must disclose all of their personal reasons and explain the causes for those reasons, even when they bear no relationship to the objective value or usefulness of the property, then the “door would be open to a huge numbers of claims. Buyers, perhaps unhappy with their purchases, could claim that information was ‘concealed’ or that a misrepresentation by omission had occurred — despite the fact the undisclosed information is, on an objective view, completely irrelevant to the value and desirability of the property.”
The Court of Appeal concluded by stating that in this particular case, there was no misrepresentation that would void the transaction.
To review the complete decision, click HERE.