Executive Summary: Key Legal and Evidentiary Issues

• Dispute centered on whether specific client-related documents constituted “Assets” under a Purchase of Business Agreement.

• Plaintiffs claimed the seller failed to deliver essential business documents and records at closing.

• Key question was whether client contact information and other records were included in the asset transfer.

• Court applied principles of contract interpretation from Sattva Capital and emphasized commercial context.

• Only client contact details were deemed assets; more sensitive client records were excluded due to confidentiality.

• No costs or damages were awarded, and the issue of costs was reserved for future determination.

Facts and outcome of the case

This case arose from the sale of an accounting practice between two professional corporations. LuMei W. CPA Inc., owned by Lu Mei Wallin, purchased the assets of Debra A. Nixon Inc., owned by Debra Nixon, under a “Purchase of Business Agreement” dated January 5, 2023. The total purchase price was $170,000, partly paid up front and partly financed through a loan from the seller. The central dispute focused on whether the seller had fulfilled her obligations to transfer certain client-related business documents and information at the time of closing.

The plaintiffs argued that the seller failed to deliver four key categories of client-related materials: contact information, prior correspondence, client financial records, and previously prepared accounting and tax documents. They contended that these materials were essential to operate the business and should be considered part of the “Assets” under the agreement. They also pointed to sections of the agreement that required the seller to provide information necessary for the purchaser to carry on the business.

Justice Thompson framed the legal question as whether these materials were within the definition of “Assets” or otherwise required under a clause mandating the seller to provide operational information. The court analyzed the language of the agreement and the broader commercial context, especially the professional obligation of accountants to protect client confidentiality.

The decision ultimately concluded that only client contact information—such as names, email addresses, and phone numbers—qualified as “Assets” or operational information under the contract. The remaining items, particularly documents containing confidential client data, were not considered transferable assets without client consent, due to ethical and legal privacy constraints under the Personal Information Protection Act (British Columbia).

The court rejected the plaintiff’s broader interpretation that would effectively treat clients or their confidential records as property that could be sold. It found that while the purchaser was entitled to the benefit of the business’ goodwill and unfilled client engagements, the transfer of any specific client records or relationships depended on client consent and new contractual agreements.

As a result, Justice Thompson partially accepted the plaintiffs’ argument but largely sided with the defendants on the scope of what constituted transferrable assets. The issue of legal costs was reserved for future determination, as neither party was entirely successful. No damages were awarded in this phase of the proceeding.