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Misrepresentation Claims in Yacht Sale
Published in the September 2009 issue of Transportation Notes - View Article
Early in 2006 James Hartling purchased a 2003 Sea Ray 300 yacht from the Romkeys. Jim Snair acted as agent for both the vendors and the purchasers. In the course of the discussions leading to the sale, Snair advised Hartling that the yacht was “as you requested—like new”. Harding paid $146,000 and concluded the transaction.
Unknown to Harding, and possibly unknown to Snair, the yacht had been involved in a serious accident. It had, however, been well repaired and there was no evidence of any remaining defect. However, all the parties to the litigation agreed that the fact of the accident was material. The Romkeys insisted they told Snair and assumed that he in turn advised Hartling. Snair denied knowing anything of the accident.
The purchase agreement contained a clause permitting the purchaser to have the boat surveyed and to terminate the agreement based on the results of the survey. Hartling did not elect to have a survey. He signed a bill of sale which states that he had the vessel inspected and agreed to accept it “as is, where is”. It also contained a clause which stated that Snair made no representations regarding the condition or fitness of the yacht.
The earlier accident was well know around Chester, Nova Scotia, where Hartling used the boat. He soon learned of the accident and brought an action for rescission of the contract and return of the purchase price, relying on the Sale of Goods Act and alleging misrepresentation. The defendants sought summary judgment dismissing the action and the motion was heard by a judge of the Supreme Court of Nova Scotia.
The claims based on the Act were dismissed. The plaintiff attempted to characterize the statement that the boat was “like new” as a condition in the purchase agreement. The Court found this characterization as quite impossible. At most the comment was a representation which induced Hartling to enter into the contract. It could not support a cause of action as a condition or a warranty. The plaintiff also argued that the “like new” statement was part of the description of the yacht and sought to rely on section 16 of the Act which provides that it is an implied condition of an agreement of sale that goods sold by description correspond to the description. This argument also failed. The comment was made before the sale took place and was not found in the contract where the yacht was described as “one 2003 Sea Ray 300 DA Sundancer pleasure craft approximately 30’ in overall length”. That was the description of the boat.
Finally, the plaintiff argued that the provisions of the Act which provide for implied conditions of fitness and merchantability were breached. However, the Court found that the evidence was so clearly to the contrary that summary judgment should be granted.
The defendants did not fare so well with respect to the claims based on misrepresentation, however. Whether the plaintiff would be able to establish all the elements of an action for negligent misrepresentation would, the Court concluded, require a full trial. In the first place, the judge hearing the motion expressed the view that whether the “like new” comment was “untrue, inaccurate, or misleading” would require a full evidentiary record. He conceded that a boat which was involved in an accident might be so well repaired as to be “like new” but he did not feel able to come to that conclusion in this case given the limited evidence adduced. Likewise, he felt unable to determine whether the comment was made negligently, whether it was relied upon by Hartling, or whether damages resulted from any reliance.
Having determined that the claims based on negligent misrepresentation would have to proceed to trial the judge turned to the final issue, namely whether the facts would also ground a case for contractual misrepresentation. The defendants argued that the “as new” comment was made by Snair in his capacity as Hartling’s broker and therefore could not be imputed to them. The problem with this argument is that Snair clearly acted in a dual capacity, as agents for each of the vendors and the purchaser.
There was a clause in the bill of sale which purported to deny the existence of any representations but the Court found this ineffectual, noting that that the clause was not found in the purchase agreement but only in the bill of sale. On the evidence available it was not possible to say whether this clause constituted an amendment to the purchase agreement. Finally there was an “entire agreement” clause in the agreement but the judge concluded that whether this could be overridden by an underlying misrepresentation could only be determined on a fuller record. Accordingly, summary judgment was denied.
Deep Cove Marine v. Romkey
2009 NSSC 250,