Executive Summary: Key Legal and Evidentiary Issues

• The plaintiff alleged negligent misrepresentation and breach of contract arising from a failed gravel extraction joint venture.

• Defendants sought dismissal via summary judgment under Rule 9-6 of the Supreme Court Civil Rules.

• The court found no genuine issue for trial regarding the existence of a duty of care or actionable misrepresentation.

• Breach of contract claims lacked evidentiary support and were contradicted by unchallenged affidavits.

• All claims were dismissed, with summary judgment granted in favour of the defendants.

• Costs were awarded to the defendants on Scale B, with no damages awarded to the plaintiff.

Facts and outcome of the case

Background and parties involved

Sherwood Real Estate Corporation, a British Columbia company led by Osvaldo Iadarola, initiated an action against Steven James Kingsnorth and Civil-X Contractors Inc. Kingsnorth, the principal of Civil-X, is also Mr. Iadarola’s nephew. The dispute arose from a failed joint venture involving the extraction and sale of gravel from a quarry on Okanagan Indian Band Reserve No. 1. The joint venture was pursued through Civil-X Aggregates Productions Ltd. (CAP), a company jointly owned by Sherwood and Civil-X, with both parties having equal shares and directorial appointments.

In 2021, the parties entered into a Shareholders Operating Agreement (SHO) to govern their relationship. The plaintiff alleged that he was induced into this venture based on misrepresentations made by Kingsnorth, particularly an email stating there was $9–14 million worth of product already on the ground. The plaintiff also claimed breach of contract related to financial contributions and implied duties under the SHO.

Claims and procedural history

The plaintiff's claim centered on two legal grounds: negligent misrepresentation and breach of contract. Initially filed in January 2023, the claim underwent several amendments after two prior attempts by the defendants to strike it out. While the court had previously granted the plaintiff opportunities to amend and continue, the third application sought dismissal of the action under Rule 9-6 (summary judgment) or Rule 9-5 (strike for failing to disclose a reasonable claim).

Negligent misrepresentation

The claim of negligent misrepresentation was based on a January 2020 email from Kingsnorth estimating the value of gravel products on site. The court examined whether a proximate relationship existed that could give rise to a duty of care. Although the plaintiff argued that Kingsnorth was an industry expert and had a familial relationship with him, the court found these insufficient to establish a duty of care. The judge emphasized that Kingsnorth’s operational background did not equate to expert valuation knowledge, and a family relationship does not inherently create legal proximity.

Moreover, the alleged misrepresentations were found to be projections of future profitability rather than present factual assertions. As Canadian law only recognizes misstatements of fact as actionable in negligent misrepresentation claims, the court held this ground to be legally unsound.

Breach of contract

The plaintiff alleged that the defendants breached provisions of the SHO by requiring him to contribute further capital rather than seeking institutional loans. He also claimed that the defendants breached implied terms requiring them to act in good faith and exercise reasonable care. However, the court accepted unchallenged evidence that Sherwood’s additional investments were voluntary, and that CAP lacked the capacity to borrow institutionally. Consequently, no genuine issue for trial was found in these allegations.

The court also rejected the plaintiff’s attempt to repackage the misrepresentation claim as a breach of contract, holding that a statement which allegedly induced the signing of a contract cannot simultaneously be a term of that same contract.

Judgment and conclusion

Justice Underhill concluded that neither the negligent misrepresentation nor the breach of contract claims raised a genuine issue requiring a trial. The court granted summary judgment in favor of the defendants and dismissed the action in its entirety. As the prevailing parties, the defendants were awarded costs on Scale B. No damages were awarded to the plaintiff.