A Vancouver woman who backed out of an agreement to purchase an ICBC driver licensing centre in the city, then sued the seller and her own Realtor over the transaction, has had her claims dismissed in court.
Jia Zuo alleged that the owners of the property at 4126 MacDonald St. – a B.C. company known as Shing Yip Investments Ltd., the owners of which reside in Hong Kong – had fraudulently misrepresented to her that they had no record of environmental contamination at the site.
Zuo also alleged that her Realtor Tony Chen and RE/MAX City Realty had been negligent and breached their contract with her.
In a decision issued last week, B.C. Supreme Court Justice Heather MacNaughton found that Zuo had not proven her allegations against either of the defendants.
Instead, the judge found Zuo liable for the more than $2.6 million in losses Shing Yip suffered when she didn’t complete the purchase and it had to accept a lower offer on the property several months later.
The property’s history
According to the decision, Zuo and her husband have run an ICBC-accredited vehicle repair business since 2009.
In 2018, when they were looking to invest in real estate, Zuo learned that the MacDonald Street property was for sale. She contacted Chen – who she had known since before he became a licensed real estate agent – and inquired about making an offer.
The asking price for the property was $8.25 million, and that’s the amount Zuo eventually agreed to pay for it, according to MacNaughton’s decision.
Shing Yip had owned the property since 1979, and the court decision indicates it was already an ICBC licensing centre when the company acquired it. While Shing Yip’s owners reside in Hong Kong and own various properties there, in mainland China and elsewhere in Canada, Shing Yip itself had only one asset: the MacDonald Street property.
“Shing Yip was not an active owner,” the decision reads. “At all material times, it hired property managers to manage the property.”
At the time of the transaction, the property manager was Jordan Eng, a Realtor with Success Realty. ICBC never communicated with Shing Yip, according to the decision. It only dealt with Success and, specifically, Eng.
In 2012, after ICBC conducted some environmental testing related to renovations it wanted to conduct on the property, it forwarded Eng a report indicating that the property had previously been a gas station and testing had shown both “petroleum hydrocarbon and metal contaminants in the soil and groundwater” on the site.
“Mr. Eng testified that he communicated infrequently with Shing Yip, a company that he described as being extremely inactive as an owner,” the decision reads.
“He testified that he never read the (environmental) report and did not forward it to Shing Yip. He also testified that he never had a conversation with (Maggie) Ma, or anyone at Shing Yip, about the ICBC letter, the report attached to it, or the potential contamination issues. His evidence in that regard remained unshaken. He explained that because the environmental condition of the property was ICBC’s responsibility under the lease renewal, and because the letter did not require any action from Shing Yip, he did not forward the letter to Ms. Ma, who was Shing Yip’s key decision-maker. Shing Yip did not need to know about it.”
The existence of this report and Shing Yip’s knowledge – or lack thereof – of the contamination issue would form the basis of Zuo’s allegations.
Fraudulent misrepresentation
The legal test for fraudulent misrepresentation has five parts, which MacNaughton’s decision summarizes in the context of Zuo’s lawsuit.
To prove fraudulent misrepresentation, the decision reads, Zuo would need to show that Shing Yip made a representation to her, that this representation was false, that Shing Yip knew it was false (or made the representation with reckless disregard for whether it was true), that Shing Yip intended Zuo to act on the false representation and that Zuo had relied on the representation and suffered a detriment as a result.
“I have concluded that on all five elements of the test, Ms. Zuo fails in her claim against Shing Yip,” MacNaughton’s decision reads.
While Zuo alleged that Shing Yip had “repeatedly” assured Chen that it did not have copies of any environmental reports, the company’s Realtor Martin Moriarty told the court he was never asked about such reports.
“Even if Mr. Moriarty had made a representation to Mr. Chen, it would be insufficient to establish a fraudulent misrepresentation; the representation must have been communicated to Ms. Zuo,” the decision reads.
MacNaughton further concluded that – because neither Moriarty nor Shing Yip had received the environmental report – even if Moriarty had made a representation that the company had no environmental reports, such a representation would not have been false. Nor could have it been knowingly made.
Likewise, the judge rejected Zuo’s argument that the defendants had been reckless about the truth of their assertion that they had no environmental reports.
The mere fact that such a report existed and could have been found by Moriarty or Shing Yip doesn’t mean they deliberately avoided seeking it out, according to the decision.
“Moreover, there is no evidence that Mr. Moriarty or Ms. Ma should have suspected the existence of a report or suspected that Mr. Eng may have had or known about such a report,” the decision reads.
“Ms. Ma knew that Shing Yip had not commissioned an environmental report for the property themselves, and if Mr. Eng commissioned such a report, Ms. Ma would have known about it as he would have invoiced Shing Yip for it. There was no argument raised as to the basis on which Ms. Ma or Mr. Moriarty should have suspected that ICBC, a commercial tenant that had leased the property for almost 20 years, would have commissioned an environmental report on its own behalf.”
Breach of contract
Zuo’s contract of purchase and sale for the MacDonald Street property included a clause – inserted by Moriarty on behalf of the sellers – that the property was being acquired “as is, where is.”
“Mr. Moriarty said that he specifically wanted to include an ‘as is, where is’ clause into the offer because he did not have any information about the property,” the decision reads.
“He testified that it is standard practice for a listing broker to do this in both sale or lease transactions when they have no information about the property. The clause puts a potential purchaser (or tenant in a lease transaction) on notice that the seller is not making any representations about the condition of the property and the purchaser should, accordingly, do their own due diligence.”
The contract was subject to a variety of conditions, including clauses allowing Zuo to obtain an inspection of the property, environmental reports and mortgage financing.
According to the decision, the contract had a scheduled closing date of July 30, 2018. On March 15 of that year, Zuo agreed to “remove subjects” – meaning the clauses relating to reports and financing.
“When Ms. Zuo waived or removed the subject clauses, she had not begun the process of obtaining a Phase 1 Environmental Report,” the decision reads. “Nor had she secured financing for her purchase of the property.”
Before removing subjects, Zuo could have walked away from the contract, the decision notes. After agreeing to remove them, she was obligated to complete her purchase.
After Zuo filed her lawsuit against Shing Yip, the company filed a counterclaim, seeking damages for her breach of contract.
According to the company, those damages amounted to $2.67 million, reflecting the difference between Zuo’s offer to purchase the property and the $5.58 million it eventually sold for in February 2019.
“As I have found that the (contract) was valid and enforceable and that Ms. Zuo failed to close in accordance with its terms, she is in breach of contract,” MacNaughton’s decision on the counterclaim concludes.
The judge also ruled that Zuo had not proven her allegations against Chen and RE/MAX. She dismissed all of Zuo’s claims and ordered her to pay court costs for both defendants.
