Contract with Unincorporated Company a Nullity; Unlicensed Person Posing as Licensed; Residential Assessment - Market Value Included Not GST; Cheque Yore Spilling #265

By Gerry Neely
B.A. LL.B

Two decisions illustrate the risk of not using the full name of a company purchasing property, or the failure of a company to be incorporated at the date it received the benefit of an assignment of a contract. In the first case, which involved an agent’s claim for commission, the principal defense was that the agent had failed to disclose the identity of the buyer. The seller was able to make this argument because the agent had not used the full name of the company. The correct corporate buyer’s name was Banwait Investment Holdings Limited, but the name on the contract was B.I. Holdings Limited or nominee.

The agent’s claim for commission was saved for two reasons, the first of which was that the seller was aware of the identity of the buyer. The second reason was that the words "or nominee" indicated that someone other than the corporate buyer might be the eventual owner.¹

No argument was made that in fact there was no such entity as B.I. Holdings Limited. That point was made in the second case, where the assignment of a buyer’s interest in a contract was made to an affiliated company, which was incorporated four days after the date of the assignment.

When the project covered by the contract failed, the now incorporated affiliate company sued for the return of a $500,000 deposit. It lost for a variety of reasons, one of which was that it had no status to sue. Since the company was not in existence at the date the assignment was made, the assignment was a nullity.²

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We tend, as Canadians, to take people at face value, which as an Ontario lawyer discovered was an expensive mistake. The lawyer acted for a mortgagee who advanced $70,000 over property registered in the names of a married couple. The mortgage was signed by the husband, but the wife’s signature was signed by an impostor posing as her. The lawyer’s failure to ask for identification was below the standard of care of solicitors in this situation and judgment was given against him for the full $70,000 plus interest at 18%.³

Impostors are not limited to those who impose upon lawyers. An individual posed as a real estate agent to obtain information from the listing agent of property the individual was interested in purchasing. During discussions he held with the owners of the property, and at his request, the owners pointed out the boundaries of the property. Mistakenly, they included a part not owned by them.

When the individual discovered this after the purchase was completed he sued the owners for misrepresentation. In an interesting decision which shed some light upon the high duty the court believes a real estate agent would have for himself, and by extension for his clients, the individual lost. The reason - the judge concluded that a real licensed real estate agent would not have relied upon the owner’s representation, but instead would have made his own investigation. No harm came to the listing agent, but perhaps licensees will decide to double-check the credentials of people unknown to them who claim to be licensees, if only to avoid being used.

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A buyer of a new condominium, whose unit was assessed on the basis of a purchase price which included GST, appealed the assessment, arguing that the fair market value for assessment purposes should exclude GST, because otherwise the homeowner was being doubly taxed.

The assessment board agreed that including GST would result in double taxation. However, it presented appraisal evidence which showed that when a new residence is resold the amount paid in GST is built into the sale price and recaptured. The Assessment Appeal Board’s decision, which was upheld by a Supreme Court judge, was that including net GST in the estimation of market value for new construction, is the only equitable way of assessing homeowners in a consistent manner.⁴

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Column No. 261 discussed the sale of a mixed commercial/residential use building and the seller’s successful attempt to recover GST paid by the seller on the value of the commercial portion, which the buyer refused to pay.

This case contained an amusing example of how relying upon spell-cheque, oh, excuse me spell-check, may lead to a different meaning to that intended by the author. The lawyer acting for the losing buyer, according to the reasons for judgment, stated that he expected to succeed on the "colon law". Did he mean the "common law" or is this a description of the effect the GST has had? Another example of spell-check editing appeared in the Canadian Bar Association’s newsletter concerning the closures of court houses. The author, while acknowledging the difficult economic times, agreed that some "physical" restraint is necessary. So was the argument about preserving courts or cells? The Vancouver Sun reported that a senior civil servant had retired suddenly and there was speculation that it might be for a "breach" of security. There was nothing in the article, however to suggest that he was caught with his pants down.⁵

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