Disclosure re: Deposit Protection Contract Requires Careful Drafting
In Chaisson v. Avra Developments Corp. 2014 BCSC 925, the B.C. Supreme Court considered the argument that a developer’s failure to disclose a specific calendar date for the effective date of a deposit protection contract was a breach of the Real Estate Development Marketing Act (“REDMA”) entitling a purchaser to rescind their contract.
The developer had disclosed in the original disclosure statement the possibility that it would enter into a deposit protection contract. In a subsequent amendment, it disclosed that it had entered into a master insurance policy deposit protection contract but provided only for a rolling effective date based on the issuance of a contract covering each deposit rather than a reference to any specific calendar date. The amendment stated:
“The Master Deposit Protection Contract will be effective upon registration of the Travelers Security, and satisfaction of any other conditions required by Travelers in order for the Master Deposit Protection Contract to be effective. The date on which the insurance coverage in respect of each deposit takes effect will be the date on which Travelers issues the Deposit Protection Contract for such deposit.”
The plaintiff purchasers argued that the failure to provide a specific calendar date for the effective date of the deposit insurance contract applicable to their deposit was a breach of REDMA. The Court dismissed the claim, applying the materiality test from the B.C. Court of Appeal’s decision in Woo v. Onni from March of this year [discussed on our blog], which held that a fact not disclosed must be one that could have a material objectively negative impact on a purchaser in order for there to be a right of rescission.
In Chiasson, the Court held that the lack of a specific calendar date was not a substantial enough defect to meet the minimal threshold set by the Court of Appeal in Woo v. Onni, and therefore dismissed the plaintiffs’ claim. Nonetheless, the Court did state that the failure to provide a specific calendar date for the effective date of the deposit insurance contract was a deficiency – comments that give good reason to take care in drafting disclosure about deposit protection contracts.
developer Master Deposit Protection Contract purchaser Real Estate Development Marketing Act REDMA Supreme Court Travelers Security