Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534 (1991)

Supreme Court of Canada

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Canson Enterprises Ltd. v. Boughton & Co., [1991] 3 S.C.R. 534 (1991)

Canson Enterprises Ltd. v.

Boughton & Co., [1991] 3 S.C.R. 534

Canson Enterprises Ltd. and Fealty Enterprises Ltd. Appellants v.

Boughton & Company, Ralph R. Wollen, George O. Treit,

Treit Land Consultants Inc., Pacific Mortgage Corporation

Limited, Gordon Bert Wilkins, Sun-Mark Development

Corporation and Peregrine Ventures Inc. Respondents

Indexed as: Canson Enterprises Ltd. v. Boughton & Co.

File No.: 21672.

1990: October 29; 1991: November 21.

Present: Lamer C.J. and Wilson*, La Forest, L'Heureux-Dubé, Sopinka, Gonthier, Cory, McLachlin and Stevenson JJ.

on appeal from the court of appeal for british columbia

Damages -- Breach of fiduciary duty -- Solicitor preparing conveyance not advising purchasers of secret profit made on a flip -- On agreed facts, purchasers fully apprised of situation would not have entered the transaction -- Action arising because inability of other professionals found liable in tort for faulty construction of building on subject lands to pay damages -- Whether or not damages recoverable.

In May, 1977, the appellants and respondent Peregrine Ventures Inc. agreed (on the proposal of respondent Treit) to purchase a piece of property and to enter a joint venture to develop it. The purchasers agreed to pay Treit a commission of 15 percent of any profit on resale. Unknown to the appellants, but known to Peregrine, Treit had arranged for an intermediate company, Sun-Mark Development Corporation, to share in the profit from the sale, a profit from which Treit would share equally. This profit came about because Sun-Mark had entered an interim agreement to buy the land from the vendors (the Hendersons) for $410,000. The purchasers paid $525,000 and the secret profit to Peregrine and Treit from the "flip" was therefore $115,000. Appellants would not have purchased the property or entered into the joint venture had they known of the interim agreement with Sun-Mark.

The alleged breach of fiduciary duty arose out of the following circumstances. The solicitor, Wollen, of the defendant law firm, Boughton & Co., acted for the purchasers in the preparation of the conveyance and joint venture agreement. He also acted for Sun-Mark in its purchase and resale of the property, but did not disclose to the appellant purchasers that the property was not being purchased directly from the Hendersons. The statement of adjustments for the Hendersons prepared by Wollen showed the sale price to be $410,000 while that prepared for the purchasers (the appellants and Peregrine) showed it to be $525,000 paid to the Hendersons. Therefore, this statement of adjustments did not disclose Sun-Mark's interest. Wollen paid over the $115,000 secret profit to Sun-Mark and did not disclose this payment to the appellants. Although the conveyance he prepared transferred the property directly from the Hendersons to the appellants and Peregrine, Wollen did not apportion the land title fees or the conveyancing fees between Sun-Mark and the appellants but rather rendered a bill to the appellants and Peregrine for the entire amount of his services.

Following the purchase, the appellants proceeded with a warehouse development on the property, but suffered substantial losses when piles supporting a warehouse constructed on the property began to sink, causing extensive damage to the building. The appellants then brought action against the soils engineers and a pile-driving company retained by the purchasers for the damage to the warehouse. At trial, the soils engineers were found negligent and damages of $4,920,200.33 were awarded against them. On appeal, the pile-driving company was also found liable in damages for breach of contract. As a result of the inability of the pile-driving company to pay, the matter was settled for a sum less than that awarded at trial. The engineering firm was unable to pay any part of the damage award, and the mortgage company, from which the appellants and Peregrine had borrowed funds, ultimately foreclosed on the property. The appellants and Peregrine received the proceeds of the settlement of the lawsuit, but were left with a shortfall of $801,290 for Canson and $280,000 for Fealty.

The appellants commenced the present action against the respondent solicitor and his law firm for the amount of the shortfall, alleging that the failure to disclose the secret profits was actionable as deceit or breach of fiduciary duty. The action was brought as a special case on the basis of an agreed statement of facts. The sole issue before the court was whether and what damages were recoverable from the defendants (respondents), assuming the facts in the agreed statement were true.

The trial judge found the solicitor Wollen was not liable in deceit but liable for breach of fiduciary duty and awarded damages on the same basis as for an action for deceit. The Court of Appeal dismissed an appeal from that judgment. The appellants appealed to this Court on the ground...

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