Executive Summary: Key Legal and Evidentiary Issues

• Sherwood Real Estate Corporation appealed the summary dismissal of its negligent misrepresentation claim against Steven James Kingsnorth and Civil-X Contractors Inc.

• Central to the dispute was a June 25, 2020 email in which Mr. Kingsnorth represented that $9–14 million of already produced gravel product was on the ground ready for sale at a quarry joint venture.

• The chambers judge found no genuine issue for trial regarding a duty of care, concluding that Mr. Kingsnorth's gravel operations experience and familial relationship did not establish the requisite proximate relationship.

• Appellant argued the lower court erred by reducing the proximity analysis to a question of expertise and by misconstruing the representation as a forecast of future events rather than a statement of current fact.

• Although the Court of Appeal found the chambers judge overlooked contextual indicia of proximity from the email, the error was deemed immaterial because the pleaded reliance (entering the SHO Agreement) did not align with the purpose of the alleged representation (inducing share purchase).

• Deficiencies in Sherwood's pleadings persisted through multiple amendments, including the deliberate deletion of the allegation that the misrepresentation induced the share purchase in CAP.

The origins of the dispute

The case arose from a failed joint venture between Civil-X Aggregate Productions Ltd. ("CAP") and OKIB Operations GP Ltd. (the Okanagan Indian Band's economic development entity) for the extraction and sale of gravel aggregate from a quarry located on Okanagan Indian Band Reserve No. 1. Sherwood Real Estate Corporation and Civil-X Contractors Inc. were the two shareholders of CAP. Mr. Steven James Kingsnorth, the principal of Civil-X, is the nephew of Sherwood's principal, Osvaldo Iadarola. In June 2020, several months before Sherwood entered into the Share Purchase Agreement and the SHO Agreement, Mr. Kingsnorth sent Mr. Iadarola an email providing information about the joint venture opportunity and proposing that Mr. Iadarola buy out CAP's then-49 percent owner for $2,750,000.

The June 25, 2020 email and the alleged representation

In that pivotal email, Mr. Kingsnorth provided detailed information about the quarry's material volume, pricing estimates for various gravel products, and calculations suggesting the remaining material in the quarry was worth $104,833,339, not including production costs. Crucially, he represented that there was "$9–14M of already produced product on the ground ready for sales," which, after accounting for a 10% government royalty and the 50/50 joint venture split, amounted to "$4,050,000 on the ground with no production costs." Mr. Kingsnorth also referenced a third-party consultant who suggested a sale price of $3,820,000 for half of CAP, which was also referred to as a "'sale evaluation' starting point." Mr. Iadarola responded the same day with a counterproposal, noting that evaluations vary widely for a new company, and valuing CAP at $2.5 million with a minimum of $500,000 working capital. Negotiations continued, and ultimately, Sherwood entered into the Share Purchase Agreement and paid $1.25 million to acquire 50 percent of the shares in CAP. Sherwood contributed a further $375,000 over the following months. A shareholders operating agreement (the "SHO Agreement") was made as of January 29, 2021.

The litigation and pleading deficiencies

On January 13, 2023, Sherwood filed a notice of civil claim alleging negligent misrepresentation and breach of contract. The claim was subject to three successive applications to dismiss by the respondents. The first was an application to strike pursuant to R. 9-5(1), heard by Associate Judge Robinson on March 13, 2024, which resulted in leave to amend after the court found significant deficiencies in the pleading. In a notable move, Sherwood's amended notice of civil claim, filed on April 15, 2024, deleted the allegation that the misrepresentation induced it to "invest and purchase shares in CAP," narrowing its reliance allegation solely to entry into the SHO Agreement. A second application to strike was heard by Justice Chan on November 4, 2024, which was to have been the first day of trial. Justice Chan adjourned the trial and identified continuing deficiencies, including that the amended notice of civil claim did not set out the material facts supporting a duty of care, it was not clear what the relationship of proximity was alleged to be, there was no explicit pleading that the representations were false, and there was no specificity as to how the representations were alleged to be false. Sherwood filed a second amended notice of civil claim (the "SANOCC") on December 9, 2024, but it remained deficient — most critically, it contained no express allegation that the respondents undertook to represent a state of affairs with the intention of inducing Sherwood to enter into the SHO Agreement or for any other purpose.

The chambers judge's decision on summary judgment

The respondents' third application was heard on April 24, 2025. The chambers judge granted summary judgment under R. 9-6, dismissing Sherwood's entire action. On the negligent misrepresentation claim, the judge found no genuine issue for trial regarding the existence of a duty of care. He concluded that "Mr. Kingsnorth being experienced in gravel operations does not amount to the kind of undertaking of responsibility towards Mr. Iadarola that characterizes a proximate relationship and thereby a duty of care." He also found that the nephew-uncle relationship "suffers from the complete absence of an undertaking of responsibility that characterizes those relationships which the courts have found give rise to a duty of care, such as lawyer-client or trustee-beneficiary." The judge additionally found what he characterized as "at least one other fatal flaw": he concluded that the representations were "best understood as a forecast of future profitability of the venture" and therefore not an actionable representation that could ground a claim in negligent misrepresentation.

The appeal and the Court of Appeal's analysis

Sherwood appealed only the negligent misrepresentation finding, arguing the chambers judge erred in two ways: by reducing the proximity analysis to a question of Mr. Kingsnorth's expertise in valuing gravel, and by misreading the representation as pertaining to future events rather than present facts. The British Columbia Court of Appeal, in reasons written by Justice Warren and concurred in by Justices Harris and Francis, acknowledged that the chambers judge erred in his proximity analysis by failing to consider contextual circumstances emerging from the June 25, 2020 email. These included that Mr. Kingsnorth was providing information about the joint venture opportunity, was seeking to induce Mr. Iadarola's investment, had a financial interest in the matter, made the representation in the course of business and not on a social occasion, portrayed himself as having at least some special knowledge about the opportunity, and had done or was doing research about it. However, the Court found this error was not material.

The fatal misalignment between undertaking and reliance

The Court of Appeal identified that there was no correspondence between the pleaded purpose of the appellant's reliance and the apparent purpose of Mr. Kingsnorth's representation. The June 25, 2020 email made clear, beyond doubt, that the "investment" Mr. Kingsnorth was promoting was the purchase of shares in CAP. Yet Sherwood's pleading expressly and repeatedly stated that the detrimental reliance was not the purchase of shares but rather the entering into of the SHO Agreement. Moreover, the deletion of the earlier allegation that the representation induced the appellant to "invest and purchase shares in CAP" reflected what the Court called "a considered decision to restrict the detrimental reliance allegation." Under the Livent and Maple Leaf frameworks from the Supreme Court of Canada, reliance falling outside the purpose for which a representation was made falls outside the scope of any proximate relationship and the duty of care. The Court found there was nothing in the SANOCC or in any other material in the record that suggested or even hinted that Mr. Kingsnorth's purpose in making the alleged misrepresentation was to induce Sherwood to enter into the SHO Agreement.

The ruling and outcome

The Court of Appeal unanimously dismissed Sherwood's appeal on February 27, 2026. While the chambers judge's proximity reasoning contained an error, the result was ultimately correct: there was no genuine issue as to the existence of a duty of care because the detrimental reliance alleged in the SANOCC (entering into the SHO Agreement) fell outside the scope of the undertaking implicitly alleged in the SANOCC (to induce Mr. Iadarola/Sherwood to purchase shares in CAP). The Court found it unnecessary to consider the second ground of appeal regarding whether the representation pertained to current fact or a future occurrence. The respondents, Steven James Kingsnorth and Civil-X Contractors Inc., were the successful parties. No specific monetary award or costs determination was set out in the appellate judgment.