The recent case of Lopez v. Dr. M. Douris Dentistry Professional Corporation, [2015] ONSC 3675 exemplifies why dentists looking to purchase the patient records of a dental practice need to be extra careful when doing their due diligence and negotiating what goes into the agreement of purchase and sale.
Dr. Michael Douris was introduced to Dr. Clive Esty by a real estate brokerage and received an appraisal (called an “Opinion of Value”) which had also been prepared by that company.
The “Opinion of Value” had a number of limitations on it, including the following statements: “We understand that our Opinion of Value will be used to assist in determining the sale price of the practice. No other use is inferred or should be implied…The resulting opinion of Value is to be used for the purposes of determining an asking price for the sale of the Practice. The use of this Opinion of Value for purposes other than those stipulated herein is restricted and [the real estate broker] denies any responsibility for any losses resulting from the unauthorized use of this report”.
Dr. Douris eventually bought Dr. Estey’s dental practice, for less than its appraised value. After the deal was completed, Dr. Douris sued Dr. Estey, claiming that there had been a misrepresentation of the number of patients at that practice. While the Opinion of Value represented that there were 1300 patients, Dr. Douris alleged that there were only 700 active patients. The Court rejected this claim on the basis that Dr. Douris did not rely upon any representation concerning the number of patients, had received independent legal advice, is a knowledgeable business person and had exercised his own due diligence before making his offer and closing the transaction. Indeed, the Court went on to say that, had Dr. Douris relied on the [Opinion of Value], his reliance would NOT have been reasonable in the circumstances, “most particularly because of the qualifications and warnings contained in the appraisal which itself had a limited or restricted purpose.” So there was no proof of misrepresentation.
There was also no proof that the real estate brokerage had been negligent.
There was no evidence that Dr. Douris had suffered any damages.
Finally, the purchase and sale agreement did not include any express representation concerning the number of active patients; rather, that agreement contained an entire agreement clause that provided that there are not and shall not be any verbal statements, representations, warranties, undertaking or agreements between the parties. And there’s no reason not to enforce this provision (the agreement was not unconscionable and there’s no policy reason not to enforce the entire agreement clause).
Dr. Douris also claimed that the patient records were deficient, incomplete, and unclear/illegible. The court rejected these allegations on the basis that Dr. Douris did not provide satisfactory evidence (he provided incomplete patient charts and only excerpts of patient charts). Indeed, the patient records were found in the dental practice’s computer system (Logitech), which was replaced by another system selected by Dr. Douris. The Court ultimately sided with Dr. Esty in this case.
Bottom Line
Use a dental professional well versed in purchase and sale transactions when doing your due diligence and negotiating a purchase and sale agreement. Make sure to do your due diligence prior to buying a dental practice (which includes examining patient charts in depth) and also make sure that the agreement of purchase and sale includes (to the extent that it will be accepted by the seller) promises made by the seller concerning the number of active patients at the practice.
