As a Real Estate Agent in Calgary, I am very disappointed to hear of this. The rules regarding dual agency are very stringent and a seller cannot opt to not disclose latent defects, ones that may not be recognizable via a basic inspection by a layperson. In addition, the agent could be held liable for damages simply for advising his clients to not obtain professional independent advice with regard to a home inspection if it can be proven. In my experience I have had the situation where in order for my clients to be successful in their offer to purchase, a home inspection clause was not included even though I had informed them of the potential dangers in doing this, but had them sign a form stating they have been advised by myself of the potential pitfalls in proceeding this way.
I would suggest filing a formal complaint with CREA, and amassing all the information you can get, as purchasing a property through a real estate agent is supposed to provide a buyer with some protection and the Real Estate Association takes such matters very seriously. If there was any wrong doing on the Agents part the buyers will have some recourse although it could take some time.
Although the perception in alberta may be that buying a property in alberta is buyer beware, this is not true, especially when represented by a competent Real Estate Professional, with the clients best interests at heart. I would also suggest to anyone out there to avoid getting yourself in a situation where you are represented by an agent who is also representing the other party, as depending on the agreement made at the time, you may have seriously comprimised your position of protection in the transaction.
I personally feel that dual agency should not be allowed in this industry, just as lawyers are not allowed to represent both parties in a legal proceeding, however the current rules do allow dual agency and is further complicated by the fact that the current structure of the rules also put you into dual agency when dealing with two different agents from the same brokerage!
Anyway, look and see if there may have been some misrepresentation or wrongdoing, consult your lawyer and if you feel there may be a case there definately submit a formal complaint.
Good luck!