Insights

There is a High Standard of Care for Professionals in Unwritten Contracts

McKay Career Training Inc. v Baker , 2018 SKCA 83

Realtors and other professionals have an obligation to provide accurate advice to their clients, to anticipate the needs and requirements of their clients, to follow up on the information they receive, and to take detailed notes. Failure to perform these obligations may amount to negligence, and may breach an implied term of contract.

McKay Career (“McKay”), a private vocation school in Saskatoon, entered into a contract with Bob Baker (“Mr. Baker”), a realtor, to assist them in finding a new location for their school. During this process, McKay requested that Mr. Baker assist them in determining the scope of any required renovations. In particular, Mr. Baker agreed to confirm with the City of Saskatoon whether or not McKay would need to install a new sprinkler system in their preferred location.

Mr. Baker met with a representative of the City of Saskatoon. He asked if a new sprinkler system would be needed. He did not tell the City that McKay would be undertaking renovations. He did not take any notes, nor record who it was that he met with.

It turns out that the building did need a sprinkler system. Adding this system cost McKay more than $110,000.00. McKay sued Mr. Baker, alleging negligent misrepresentation and breach of contract.

At trial, the Court of Queen’s Bench dismissed the claim of negligent misrepresentation. Drawing on the analysis set out in the Supreme Court of Canada decision of Queen v Cognos Inc., ([1993] 1 SCR 87), the Court found that McKay ought to have sought a more formal answer from the City, and that a prudent party would have requested a more specific confirmation that sprinklers were not needed. Negligent misrepresentation requires the plaintiff to have reasonably relied on the statements of the defendant, and in this case, that requirement was not met.

The Court of Queen’s Bench also dismissed the claim that Mr. Baker had been negligent in meeting the standards of his unwritten contract. The Court noted that though McKay was entitled to assume under their contract that Mr. Baker, as a professional realtor should have acted “in the best interests of [McKay Career] using the reasonable skill and care of an experienced commercial realtor” (at para 16), Mr. Baker had fulfilled this requirement, as he had received the information from the city and relayed it to McKay.

The Court of Appeal disagreed, noting that they were “unable to ascertain” why the trial judge had remarked that Mr. Baker did not meet the standard of an experienced commercial realtor yet did not find him negligent (para 28). While the Court of Appeal upheld the trial judge’s findings regarding negligent misrepresentation, they set aside the Queen’s Bench decision in contract, and awarded damages against Mr. Baker. The Court of Appeal found that because Mr. Baker was a professional, his standard of care under contract was higher than it otherwise would be as a member of the general public.

Because the contract was unwritten, there was an implicit understanding that Mr. Baker was “an experienced commercial realtor”, and should have been held to the standard of one. Looking the trial judge’s own words, the Court of Appeal noted that Mr. Baker should have anticipated his client’s needs, taken appropriate notes, sought confirmation in writing from the City of Saskatoon, and recognize the limits of his own knowledge. The assessment of costs and damages was remitted to the trial judge.

This case serves as a good reminder to Realtors and other professionals that their status as a professional raises the standard of their conduct. Furthermore, Realtors and other professionals would be well served to sign written contracts with their clients to determine the roles and responsibilities for gathering and verifying certain information related to their dealings.