Executive Summary: Key Legal and Evidentiary Issues

• The seller, a former licensed realtor, provided a disclosure form with a line through all questions and vague additional comments.

• The form failed to disclose an unpermitted property addition the seller knew about from his own purchase of the home.

• The buyer relied on the disclosure form and refused to complete the purchase after discovering the addition.

• The trial judge dismissed the buyer’s claim and accepted the seller's argument that the form was a refusal to provide representations.

• The Court of Appeal found the trial judge overlooked key evidence and misapplied the law on misrepresentation.

• Judgment was awarded in favor of the buyer for return of her deposit, with the counterclaim dismissed and trust issues remitted to trial court.

Facts and outcome of the case

Carolyn Eileen Sewell entered into a contract to purchase a residential property from Ehsan Abadian. Prior to completing the transaction, Mr. Abadian provided a Property Disclosure Statement (PDS) that had all standard questions crossed out and included only the comment, “Tenanted Property, Owner has never occupied.” Importantly, he failed to disclose that the property included an unpermitted addition—something he was aware of from when he purchased the property, as it was disclosed to him in his own PDS from the previous owner.

Ms. Sewell paid a $300,000 initial deposit as part of the agreement. Later, before paying a second $200,000 deposit or closing the transaction, she independently discovered the unpermitted addition. Concluding that the seller had withheld critical information, she chose not to proceed with the purchase and sued for the return of her initial deposit. Mr. Abadian counterclaimed, seeking payment of the outstanding second deposit.

At trial, the Supreme Court of British Columbia dismissed Ms. Sewell’s claim, reasoning that by crossing out the PDS, Mr. Abadian made no affirmative representations, relying in part on the decision in Smith v. Reder. The court accepted the explanation that his additional comment merely confirmed non-occupancy and did not imply actual knowledge or ignorance of any specific issues.

However, the British Columbia Court of Appeal disagreed. Justice Griffin, writing for a unanimous court, found that the trial judge failed to consider several material facts. These included the seller’s real estate background, his knowledge of the unpermitted addition, the disclosure obligations explicitly outlined in the PDS, and the effect of choosing to submit the form while incorporating it into the contract. The court concluded that the form, taken in its full context, amounted to a misrepresentation—either negligent or fraudulent—because it suggested no known issues existed when in fact they did.

The appellate court ruled that Ms. Sewell had indeed relied on the PDS in deciding to enter the contract. Consequently, the court allowed the appeal, awarded her judgment for $300,000 to recover the initial deposit, and dismissed Mr. Abadian’s counterclaim. The matter of whether Mr. Abadian held the deposit in trust was left open and remitted to the trial court for determination.