When two or more parties enter into a contract, regardless of the subject matter, they are expected to be clear, forthright, and honest about the terms of the deal and the product or service being exchanged. Failure to provide honest, accurate information with respect to the deal may result in a claim of breach of contract due to fraudulent misrepresentation, which can void a contract and even engender damages payable by the guilty party.
Fraudulent misrepresentation essentially amounts to knowingly, intentionally lying about some crucial facet of a deal to induce the other party to enter the deal to their own detriment. An example would be a person selling a used automobile, lying to a potential purchaser that the vehicle had never been involved in an accident and ran very well when the car had been totalled in a terrible accident two months prior and was destined for a scrapyard. Fraudulent misrepresentation is often asserted in commercial contracts, including real estate transactions.
This blog explores an allegation of fraudulent misrepresentation involving a blueberry farm in British Columbia.
Complicated Purchase of Blueberry Farm Gives Rise to Allegation of Fraudulent Misrepresentation
The plaintiffs in 1025996 B.C. Ltd. v Chahal purchased a 96-acre BC blueberry farm from the defendant sellers in 2015. Although the property totals approximately 96 acres, only 72 acres were suitable for agriculture, given the soil quality of the remaining acreage. As such, the defendant property sellers had only ever planted blueberries on 72 acres. Notably, the 72 acres included a river, four creeks and five ditches, which areas were not planted with blueberries.
Realtors represented each of the parties to the sale of the property farm; unfortunately, both realtors had passed away before this trial and thus had not offered testimony or evidence concerning the sale in question. The negotiation in which the relators engaged on behalf of their respective clients was extensive and complicated and involved multiple offers, amendments, addenda and options. As a result, the sale was completed in February 2015 because the purchasers now possessed 72 acres of planted blueberries. Upon attending the Ministry of Agriculture to purchase crop insurance concerning their blueberry farm several months after the purchase, the plaintiff purchasers discovered that only 54.68 acres of their farm were ever planted with blueberries. The measurements possessed by the Ministry had been mapped by hand by an individual walking the property while holding a GPS. In this manner, any ditches, pathways, buildings, creeks, rivers or other unplantable areas are excluded from area counted as planted land.
Dissatisfied with the news that the farm they had recently purchased may contain significantly less planted acreage than they had been advised before the sale, the plaintiffs undertook a new GPS mapping of the property to finally ascertain how many acres of the blueberry farm had been planted. This test revealed the farm’s planted acreage to be 60 acres. The purchasers then commenced a lawsuit in which they alleged, amongst other things, that the defendant sellers had fraudulently misrepresented the property in the sale to the plaintiff purchasers.
What is Fraudulent Misrepresentation?
Fraudulent misrepresentation, also called ‘civil fraud’ and the ‘tort of deceit’, may be identified in circumstances in which the plaintiff can prove the following criteria on the balance of probabilities (i.e., to a certainty of 51 per cent):
- That the alleged wrongdoer made a representation of fact to the victim
- That the representation made is, in fact, false
- That the person who made the misrepresentation had to have known it was a false statement at the time they made it
- That the person who made the misrepresentation intended the victim to act on the false information
- That the victim was induced to enter into a legal contract because of their reliance upon the lie told to them
Importantly, active concealment is generally required to successfully establish a fraudulent misrepresentation claim, as silence is typically insufficient to constitute misrepresentation. Moreover, the court may consider an incomplete statement as misleading or false.
In respect of the third criterion, it is necessary that the plaintiff prove that the person who told the lie knew the statement to be false because deceit cannot be demonstrated in circumstances where the purveyor of the false statement believes the authenticity of their false information.
Once the plaintiff has proven that the defendant intentionally lied or misrepresented facts to the plaintiff to induce the plaintiff to act to their detriment following the falsity, the burden shifts to the defendant to prove that the plaintiff did not rely upon the defendant’s false misrepresentations. Significantly, false misrepresentation is not the sole cause of inducing the plaintiff to act to his or her detriment; it needs to comprise only one contributing factor to such action.
Did the Defendants Fraudulently Misrepresent the Blueberry Farm in its Sale to the Plaintiffs?
The plaintiffs rooted their claim of fraudulent misrepresentation in the allegation that the defendant sellers lied about the planted acreage of the blueberry farm (i.e., they said it was approximately 72 acres of planted acreage, whereas the plaintiffs later confirmed that there are only approximately 60 planted acres). Upon reviewing and considering all of the evidence proffered in this case, the court was satisfied that the plaintiffs had failed to meet their burden for the alleged misrepresentation. In particular, the court noted that little reliable evidence was available concerning the amount of planted acreage on the blueberry farm contained in one of the realtor’s handwritten notes, in which he had written that blueberries had been planted on 72 acres of land. The court considered this statement quite different from asserting that there are 72 acres of planted blueberries.
Furthermore, the plaintiff indicated that he had understood, throughout the purchase, that 23 of the 96.7 acres of farmland were vacant and unsuitable for agricultural purposes such as farming blueberries. The court employed simple math to conclude that this left approximately 73.7 acres of land available for farming. However, as the plaintiffs, anyone experienced in farming would know there are spaces between planted rows of blueberries and that turnaround space is required to accommodate farming vehicles and equipment at the end of each row. Moreover, the plantable acreage included several ditches, rivers, and creeks upon which no blueberries could be planted, which would necessarily reduce the planted acreage from the maximum of 73.7 acres possible.
Given that the plaintiff purchasers had walked the land themselves several times before purchasing the blueberry farm and were therefore aware of the layout of the property and the inclusion of ditches, creeks and rivers thereupon, and given the plaintiffs’ experience as blueberry farmers for many years, they would have been aware that, as only 73.7 acres were suitable for planting, it was not possible that they purchased 72 acres of planted blueberries. As such, the defendant sellers had not fraudulently misrepresented the size of the farm nor the amount of planted acreage.
Vernon Real Estate Lawyers Providing Residential And Commercial Real Estate Services
This case highlights the importance of thorough due diligence and careful consideration of all relevant factors when entering a real estate transaction. The experienced real estate lawyers at CM Lawyers in Vernon and Salmon Arm, British Columbia, are dedicated to simplifying complex transactions, ensuring a smooth and stress-free process. To discuss your real estate matter with a member of our team, call us in Vernon at (250) 308-0338 or Salmon Arm at (250) 803-9171, or contact us online.