In the changing Canadian housing landscape, knowing what to do if your seller misrepresents a property is crucial. A recent case, 1000425140 Ontario Inc. v. 1000176653 Ontario Inc., involving NBA star Shai Gilgeous-Alexander and self-described Crypto King, Aiden Pleterski, offers valuable insights. This case is noteworthy not only for its famous names but also for its guidance on a seller’s duty to disclose, fraudulent misrepresentation, and when rescission is an appropriate remedy.
Why Did the Ontario Court Dismissed the Seller’s Appeal on the Burlington Home?
Gilgeous-Alexander’s legal team contested the purchase of the Burlington mansion due to fraudulent misrepresentation, latent defects, and non-disclosure. The lawsuit claimed that the buyer was not informed of ongoing threats to the property. People were reportedly trying to break in to find Pleterski. The case involved allegations of fraudulent misrepresentation, latent defects, and non-disclosure.
Key FACTS –
- Gilgeous-Alexander bought the property because it was advertised as “private and secure”
- The indent of the occupant was not disclosed to the Buyers
- The history of the property was not disclosed to the Buyers
Who was accused in the ‘Canadian NBA star Shai Gilgeous-Alexander’ case?
The Seller in this case was 1000176653 Ontario Inc. The Purchaser was a holding company, 1000425140 Ontario Inc., the principal of which was Shai Gilgeous-Alexander, a well-known professional athlete who was buying the property with his partner, Hailey Summers to start a family. The former occupant of the property was Aiden Pleterski. The following points were the basis for the accusation.
Four days after closing, Ms. Summers answered a knock at the door by someone who was looking for Mr. Pleterski. Mr. Gilgeous-Alexander then came to the door and advised this person Mr. Pleterski was not there, and they (Gilgeous-Alexander and Summers) did not know who he was. Gilgeous-Alexander and Summers subsequently learned the following:
- Aiden Pleterski was the self-described Crypto King who had defrauded some “very bad people”;
- Someone had threatened to burn the house down;
- Pleterski had been kidnapped, a $3 million ransom had been demanded, and he (Pleterski) had been returned with a black eye
- The Principals of the Seller were aware that Mr. Pleterski’s defrauded investors were showing up at the property and Mr. Pleterski was subsequently moved to another property owned by them (the Principals)
- The Principals of the Seller moved one of their employees into the property to keep watch over it and this employee was harassed by people coming up to the house “every single day”
What Was the Motion Court’s Ruling?
In June 2023 the motions court judge heard a motion for summary judgment brought by the Plaintiff. The Plaintiff, alleged that the sellers failed to disclose the property’s history, including threats and aggressive searches for Pleterski. The sellers argued that the four non-threatening visits did not warrant disclosure. They added that those visits did not make the Burlington Mansion as unfit place to habitat and invoked the doctrine of ‘caveat emptor’ or Buyer’s beware.
However, the motion court judge granted judgment favour of the Plaintiff, allowing the Plaintiff to rescind the agreement of purchase and sale and awarding equitable damages, based on the following findings:
- The principals of the Seller knew there was a safety risk at the property at the time it was marketed and sold;
- The Seller knowingly made a false statement when it represented that the property was private and secure
- Silence can amount to a fraudulent misrepresentation where the Seller intended to deceive the Plaintiff by failing to disclose relevant information and intended to commit this fraudulent act through non-disclosure of relevant information.
The court concluded that the Seller suppressed the truth about the property, which amounted to fraudulent misrepresentation
What is ‘Buyer’s Beware’?
The term ‘buyer beware’ comes from the Latin word ‘caveat emptor’. This doctrine recognised by Ontario state of law has been placed to protect sellers of land. It removes the burden from the seller to be liable for everything that could possibly impact a property. Its major goal is to hold the buyer responsible before closing a real estate deal. However, fraudulent misrepresentation or absent fraud, latent defect and non-disclosure of the facts that renders the property as unsafe, are one of the exceptions in this doctrine, applicable to NBA case.
What is known as Latent Defect?
Latent defects are serious issues with a property that are not easily visible, even with a professional inspection. They can make a property unsafe or uninhabitable. In Ontario, sellers must disclose any known latent defects that render a property unsuitable or dangerous.
In this case:
- The Burlington property had an ongoing safety risk.
- The defendants were aware of this defect.
- The defect was not disclosed to the buyer.
A latent defect is one that a reasonable inspection would not uncover. In this instance, the issues related to Mr. Pleterski’s past would not have been found through a standard inspection. The realtors actively concealed this information by misrepresenting the property as “private and secure,” which it was not.
What Are the Elements of Fraudulent Misrepresentation?
The elements of fraudulent misrepresentation state that:
- the defendant made a false representation of fact;
- the defendant knew the statement was false or was reckless as to its truth;
- the defendant made the representation with the intention that it would be acted upon by the plaintiff;
- the plaintiff relied upon the statement; and
- the plaintiff suffered damages as a result.
In this case, all elements of fraudulent misrepresentation were met.
What was the Appeal court decision?
The Court of Appeal upheld the Motion Judge’s decision, finding first that the motion judge correctly articulated the law of fraudulent misrepresentation:
- the defendant made a false representation of fact;
- the defendant knew the statement was false or was reckless as to its truth;
- the defendant made the representation with the intention that it would be acted upon by the plaintiff;
- the plaintiff relied upon the statement; and
- the plaintiff suffered damages as a result.
Therefore, the court correctly determined that both the positive representation that the property was “safe and secure”, and the omissions made by the Seller fulfilled the test for fraudulent misrepresentation. It was proven to be material. Without this misleading assurance, the player would not have proceeded with the purchase. Hence proof of fraud in the context of a real estate transaction induced by misrepresentations is sufficient reason not to allow execution of a contract.
What can Our Real Estate Lawyer do for You?
Our experienced real estate lawyers can help you manage complex property transactions and safeguard your interests. We ensure that you get full disclosure of any potential issues with a property. If you suspect misrepresentation or discover latent defects, we can provide legal guidance, handle disputes, and work to resolve them effectively. Reach out to us for personalized assistance and peace of mind in your real estate dealings. Call us at 905-405-0199.
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