Executive summary: key legal and evidentiary issues

• Clause 8 of BC's standard form contract of purchase and sale required the property to be in "substantially the same condition" on the possession date as when viewed by the buyer.

• A significant flood caused by a water leak in the property's in-slab plumbing was discovered approximately one week before the scheduled completion date, causing significant water damage throughout the main floor.

• The defendant seller denied the severity of the damage, characterizing it as "minor cosmetic damage," and failed to share critical investigation reports or communicate meaningful remediation details to the buyer.

• Expert inspection reports from the buyer's plumber and gasfitter and building inspector identified serious concerns including potential structural slab damage, mould growth risk, and an estimated $155,000 in floor and piping replacement costs.

• The Court rejected the defendant's expert evidence (Mr. Duxbury) as unreliable because he inspected the property only after repairs were done and was not provided with key photographic and video evidence of the active flooding.

• Whether clause 8 constitutes a material term or merely an innominate term/warranty in British Columbia was a central legal question, with the Court ultimately finding it to be a material term entitling the buyer to terminate upon breach.

The parties and the property

Katherine Cheung, a university student at the time, agreed to purchase a residential property at 7780 Eperson Road in Richmond, British Columbia, from Hui Xue Lin for $2,650,000. The contract of purchase and sale was dated April 11, 2022, with both completion and possession dates set for June 15, 2022. Ms. Cheung's father, Steven Cheung, had viewed the property on April 9, 2022, observing it to be in generally good condition with no major visible defects. The plaintiff's offer was above the listing price and subject-free, and a deposit of $132,500 was paid. The defendant, Ms. Lin, is now deceased, and her daughter Tiffany Chen — a licensed real estate agent who also represented her mother in the sale — acted as her litigation representative.

The contract clause at the heart of the dispute

Central to the case was clause 8 of the standard form contract of purchase and sale, which provided that the property and all included items would be in "substantially the same condition at the Possession Date as when viewed by the Buyer on April 9th, yr. 2022." The plaintiff claimed the defendant breached this clause because, due to a significant flood event, the property was far from substantially the same condition on the possession date as when it was initially viewed.

Discovery of the flood and the extent of the damage

On June 6, 2022 — approximately nine days before the completion date — Mr. Cheung and the plaintiff's real estate agent, Brian Chung, were meeting at a neighbouring property and afterward walked over to the subject property, where Mr. Cheung looked through the front window and noticed that the wood flooring appeared heaved, warped, and wet. When the parties and their representatives attended at the property on June 8, 2022, along with a plumber and gasfitter (Adrian Simpson) and a building inspector (Jon Sheppard), Mr. Cheung described the interior as "extremely hot and humid, like a wet sauna." He observed extremely hot water saturated with mud and sand "bubbling up like a hot spring through the kitchen floor near the island." The flooding and damage included water flowing from the concrete foundation into the backyard, pooling water on the interior main floor, warped and buckled hardwood flooring, cracked and dislodged tile flooring, and a hot tub lifted 4–6 inches out of its enclosure.

Emergency repairs and investigation

Ms. Chen engaged Paul Davis Restoration Company on June 8, 2022, to perform emergency water remediation, extraction, and drying. On June 9, she hired Hongwei Song of Oliver Plumbing and Heating Ltd. to investigate the cause. Mr. Song determined the source was water lines leaking in the slab, and he repaired the leaking hot water lines to the kitchen by installing a new supply line to the kitchen and master bedroom, completing the work by the early morning hours of June 12, 2022. Mr. Song's brief investigation report was provided to Ms. Chen on June 13, 2022, but notably was never shared with the plaintiff — the buyer only received it during litigation discovery. Meanwhile, the plaintiff's own inspectors, Mr. Simpson and Mr. Sheppard, delivered reports raising serious concerns: Mr. Simpson opined the home required "major work to be able to live in," estimated approximately $155,000 and 2.5 to 3 months for floor and radiant piping replacement, and warned of imminent mould contamination. Mr. Sheppard recommended immediate review by structural and geotechnical engineers and flagged potential undermining of the home's slab.

The breakdown in communications

On June 10, 2022, the plaintiff's counsel wrote to the defendant's counsel advising that Ms. Cheung would not complete the purchase and requesting return of her deposit. The defendant's counsel responded on June 13, refusing to acknowledge the flood, denying the plaintiff's assertions about the property's condition, and insisting the plaintiff was required to complete. The only information the defendant provided about remediation efforts before the completion date was a brief text message from Ms. Chen stating: "all pipes got fixed and we are doing flooring and dry walls in these couple days." The defendant did not engage with the inspection reports, offer a holdback, or propose extending the completion date.

The property's condition on the completion date and afterward

As of the June 15, 2022 possession date, only emergency water extraction and plumbing repairs had been completed. No work had been done to repair the visible flood damage — flooring in the family and living rooms was still warped and partially torn up, and drywall cut out for plumbing access needed repair. The defendant did not hire a contractor (Gilbert Kan) to replace the damaged flooring and drywall until June 20, and that work was not completed until June 28, 2022. No additional work was done to replace the boiler, address the electrical system, repair the hot tub area, or investigate potential structural or mould issues. The defendant's own expert, Glenn Duxbury, who visited weeks later, observed remaining water damage to baseboards and kitchen cabinetry as late as July or August 2022. The Court gave no weight to Mr. Duxbury's opinions on the cause and extent of damage, finding he had visited only after repairs were completed, was not given the video evidence of the active flood, and appeared to simply adopt Mr. Song's conclusions as his own.

The defendant's attempt to reset closing and the eventual sale

On June 20, 2022, the defendant's counsel attempted to unilaterally reset the completion date to June 28 and characterized the flood damage as merely "minor cosmetic damage." The plaintiff rejected this, took issue with the characterization, and commenced the action on June 22, 2022. The defendant filed a counterclaim seeking specific performance on July 11, 2022. The property was eventually relisted in October 2022 and ultimately sold to a third-party buyer, Yun Ling Wu, for $2,165,000 — $485,000 less than the original contract price — with the sale completing on January 12, 2023.

The Court's analysis on fundamental breach and clause 8

The Court found the defendant was in breach of clause 8, as the property was clearly not in substantially the same condition on the possession date as when viewed. Turning to whether this breach was fundamental, the Court held that the purpose of the contract was to convey a residential property fit for habitation — one the plaintiff could move into and live in on the possession date. Instead, the property was an active construction site with ongoing remediation work, significant unrepaired water damage, and uninvestigated risks of latent defects including structural slab damage and mould growth. The Court distinguished the defendant's authorities — such as the commercial tenancy case of Pakistan-Canada and the subdivision-focused Gambouras v. Swan — on the basis that neither involved a buyer seeking to purchase a home for personal residential use. The Court concluded the plaintiff was deprived of substantially the whole benefit of the contract and that the defendant's breach was therefore fundamental.

The materiality of clause 8 and the ruling

Even absent fundamental breach, the Court found clause 8 to be a material term of the contract. It rejected the defendant's arguments that clause 8 was merely an innominate term or warranty, finding that neither Chaston v. Este nor Park BCCA supported that characterization as a matter of ratio decidendi. The Court held that, consistent with Chaston and the broader jurisprudence, a purchaser of residential property not delivered in substantially the same condition as when viewed is entitled to terminate the contract without needing to establish fundamental breach. The plaintiff's summary trial application was granted, judgment was entered in her favour in the amount of the $132,500 deposit plus accrued interest, the defendant's counterclaim was dismissed, and the plaintiff was awarded costs at Scale B. The exact total award including accrued interest was not specified in the judgment.