An Engineering Practice Sale Almost Undone by a Family Emergency

The situation

The letter arrived on a Tuesday, forwarded from Gordon's old office address to the numbered company he now used to hold what was left of his consulting income. It was three pages, written by a lawyer he had never heard of, on behalf of a corporation he recognized immediately: the one that had bought his structural engineering practice a little over six months earlier. The letter did not use the word rescission. It talked instead about material misrepresentation, about financial statements that did not match what the buyers were now seeing in the practice's books, and about a demand that Gordon take the business back and return the purchase price.

Gordon had built the practice over eighteen years, incorporated as a professional corporation the way engineering practices in Ontario generally are, doing residential and light commercial structural work across the region. When he decided to retire early to care for an aging parent, he sold the practice for a little over $3 million to Abdi and Hodan, a couple who structured the purchase through a holding company. Abdi worked as an air traffic controller and had no engineering background; Hodan, a professional engineer herself, was meant to take over the technical side while Abdi managed the business. The deal had closed without apparent friction. Financing came through, the transition period Gordon had agreed to stay on for went smoothly, and he had begun treating the sale as finished business.

What the letter did not explain, and what Gordon only learned later, was that the buyers' relationship had come apart at almost the same moment the practice's revenue had started sliding. Hodan's father had died suddenly a few months after closing, and she had taken an extended leave to be with her mother overseas, leaving Abdi running day-to-day operations of a technical practice he was not qualified to run. Client files had slipped. A handful of ongoing structural reviews had stalled. By the time Hodan returned, the buyers were looking for someone to blame, and the financial statements Gordon had provided during due diligence became the obvious target.

Gordon brought us the letter the same week he received it, along with the purchase agreement, the due diligence file, and every email exchanged during the sale. He was less worried about losing the money than about the accusation itself. A misrepresentation claim against a professional corporation, even an unfounded one, could follow him into any future consulting work.

The problem

The buyers' complaint rested on a specific claim: that the practice's revenue figures shown during due diligence had been inflated by including two large projects that were, by the time of closing, effectively at risk of cancellation. Gordon disputed this. Both projects had been active and invoiced at the time the financial statements were prepared, and neither client had given any indication of pulling out before the sale closed. The revenue drop the buyers were pointing to had happened afterward, during the period when Hodan was away and the projects lost momentum for reasons that had nothing to do with anything Gordon had disclosed.

That distinction mattered legally, but it was not going to resolve itself through argument alone. A representation that later turns out to be inaccurate is different from one that was false when made, and the difference is often where these disputes get decided. Post-closing changes in the business are not, on their own, a misrepresentation, but honesty is not the test: a representation is a promise about a fact, so a seller can be liable for one that was untrue when made even if the seller genuinely believed it at the time, which is why proving what was actually true at closing requires a clean paper trail showing exactly what was known and disclosed then. Our first task was to build that record from Gordon's file, because a misrepresentation claim succeeds or fails on that timing, not on how the business performed afterward.

The complicating factor was the buyers' own situation. Hodan's bereavement had genuinely disrupted the practice's operations, and it had also disrupted the buyers' ability to negotiate calmly. Their lawyer's letter, when we spoke with him, made clear that Abdi and Hodan were not looking for a protracted fight. They wanted out. Running a technical practice neither of them was fully equipped to manage through a period of personal crisis had shown them the purchase had been a mistake, whatever the merits of the misrepresentation claim. That gave us something a straight legal defence would not have: a buyer motivated to settle quickly rather than litigate a case they might not win but could not currently afford to run either.

The risk for Gordon was that a defended claim, even a strong one, would take months to resolve and would sit as an open dispute the entire time, with the practice's remaining goodwill and Gordon's professional reputation exposed to it. Clients of an engineering practice notice when its ownership is publicly contested, and referral relationships built over eighteen years do not survive that kind of uncertainty unscathed. The opportunity was that both sides, for different reasons, wanted the same outcome: an end to the relationship rather than a ruling on who was right, and reaching that outcome quickly mattered more to Gordon than winning an argument that would take a year or more to actually resolve.

What we did

1. Reviewed the disclosure file line by line to confirm what Gordon had represented and when, comparing the financial statements provided in due diligence against invoices, engagement letters, and correspondence for the two disputed projects, establishing that both were live and properly invoiced as of the closing date, with nothing in the record suggesting either client had signalled a problem before the sale.
2. Assessed the legal strength of the misrepresentation claim against the timing rule that governs these disputes, concluding the buyers would face a genuine difficulty proving the statements were false when made rather than simply overtaken by later events, and that this weakness gave Gordon real leverage in any negotiation without needing to threaten a fight he would rather avoid.
3. Opened direct communication with the buyers' lawyer rather than responding formally to the demand letter first, to understand what the buyers actually wanted and to test, informally, whether they were open to a negotiated exit rather than litigation neither side had committed to, which surfaced within the first call that both sides preferred to avoid a drawn-out claim.
4. Identified the rescission structure as the lowest-risk resolution once it became clear both sides preferred an exit to a fight, rather than a price adjustment or an indemnity holdback that would have left the misrepresentation allegation unresolved and hanging over Gordon indefinitely. Unwinding the transaction cleanly avoided a costly and uncertain claim while letting Gordon reclaim a practice that, despite the disruption, still had real value, an intact client base, and licensing that had never lapsed.
5. Negotiated the return terms over a series of calls with the buyers' lawyer, covering the purchase price Gordon would refund, an allowance deducted for the buyers' documented operating losses during their ownership period, and a transition schedule that let Gordon come back into daily practice management without a gap in client service, since the engineering work itself had continued throughout the dispute despite the uncertainty over who actually owned the business.
6. Drafted the rescission and mutual release agreement, unwinding the share purchase, restoring Gordon as sole shareholder, and including a full release of claims on both sides so neither party could revisit the misrepresentation allegations or any other aspect of the original deal at a later date, closing off the dispute permanently rather than leaving it dormant, a term the buyers' lawyer initially resisted before agreeing it protected his own clients just as much.
7. Coordinated the financial reconciliation with the buyers' accountant, working through bank statements and the practice's bookkeeping from the ownership period to confirm the refund amount reflected the original price less an agreed deduction for the documented operating shortfall, keeping the calculation transparent enough that both sides could sign off without a further dispute over how the number had been reached.
8. Closed the unwind and confirmed the corporate filings reflecting Gordon's restored ownership, including the share transfer records and the corporation's minute book, ensuring the practice's regulatory standing as a professional corporation was current with its governing engineering body, its licensing intact, and that no gap existed in its authorization to carry on engineering work while the ownership change was being finalized.

The outcome

The rescission closed just under ten weeks after the demand letter arrived. Gordon refunded most of the original purchase price, with an agreed reduction reflecting the operating losses the practice had absorbed during the buyers' ownership, and resumed full control of the practice he had built. No claim was ever filed. No court record exists of a dispute that, on paper, looks like it never happened, which was the point of resolving it this way rather than through a defended action that would have taken far longer and cost considerably more on both sides.

Gordon did not walk away whole. He gave up a portion of the sale proceeds he had already spent planning around for his retirement, and he came back into daily practice management earlier than he had intended when he sold. Several client relationships needed rebuilding after months of inconsistent service during the buyers' ownership. None of that was free, and none of it was disguised as a clean win in the settlement documents, which said plainly that both sides were compromising to end an untenable situation rather than vindicating either one's position.

What Gordon avoided was a misrepresentation claim playing out in the open, with his professional judgment as the subject, for as long as a defended lawsuit would have taken to resolve, likely well over a year given the volume of financial records involved. The buyers avoided sinking further money and time into a practice they no longer had the capacity to run through a period of personal crisis they had not planned for. Neither side got everything it might have wanted, but both got out of a deteriorating situation before it hardened into a matter of public record. Gordon has since brought on a junior engineer to share the workload, a change he says he should have made the first time around, and the two disputed projects that started the whole dispute were completed without further incident.

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