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Canson Enterprises V. Boughton Notes

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CANSON ENTERPRISES V. BOUGHTON FACTS In May 1977, on the proposal of the respondent Treit, the appellants, Canson Enterprises Ltd. and Fealty Enterprises Ltd., and the respondent, Peregrine Ventures Inc., agreed 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 per cent of any profit on resale. Unknown to Canson and Fealty, but known to Peregrine, Treit had arranged for an intermediate company, SunMark 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, Mr. and Mrs. Henderson, for $410,000. The price paid by the purchasers was $525,000, so the secret profit to Peregrine and Treit from the "flip" was $115,000. According to the agreed facts, the appellant purchasers, Canson and Fealty, would not have purchased the property or entered into a joint venture had they known of the interim agreement with Sun-Mark. 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. Furthermore, Wollen prepared the statement of adjustments for the vendors (the Hendersons) showing the sale price to be $410,000, and also prepared the statement of adjustments for the purchasers (the appellants and Peregrine) showing the price to be $525,000 and the vendors to be 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. 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 in the British Columbia County Court 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 in failing to detect a layer of peat in the soil, and damages of $4,920,200.33 were awarded against them. The appellants then 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 profit was actionable as deceit or breach of fiduciary duty.

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