In the last few years, there had been a landslide of litigation over pre-sale contract under the Real Estate Development and Marketing Act. In a recently released Supreme Court of Canada case (Sharbern Holding Inc. v. Vancouver Airport Centre Ltd., 2011 SCC 23) , the Supreme Court critically defines what information is “material” and gives rise to a disclosure obligation what does not.
Under the terms of the Real Estate Act (now the Real Estate Development and Marketing Act), a Developer MUST disclose all material information, which means:
“Information is material if there is a substantial likelihood that it would have been considered important by a reasonable investor in making his or her decision to invest. In other words, information is material if there is a substantial likelihood that its disclosure would have been viewed by the reasonable investor as having significantly altered the total mix of information made available.”
One of the critical points here is that the standard is that of a “reasonable investor” meaning that it is an objective test, and not subject to the variety of factors which may motivate individual purchasers.
Critically Developers who make a false statement in a disclosure statement will be provided a defense where:
“the statutory defence contained in s. 75(2)(b)(viii) of the Real Estate Act would preclude [a developer] from being found liable under s. 75(2). To rely on the defence, [a developer] had to show that it subjectively believed the representations it made were true and that it objectively had reasonable grounds for such a belief.”
Developers who use and reasonably rely on experts to produce the information in their disclosure statements may have a defense under this provision.