COURT FILE NO.: 04-SC-005592
DATE: March 9, 2007
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
SCOTT DAVID GARDINER and SHARON ANTOINETTE GARDINER
Plaintiffs
(Appellants)
- and -
NATHAN CASEY MULDER,
FUTURE HOMES AND REAL ESTATE LTD., and ROBERT TATOMIR
Defendants
(Respondents)
Mark L. Hurley, Counsel for the Plaintiffs/Appellants
Corinne Sutherland-Nikota, Counsel for the Defendant/Respondent, Nathan Casey Mulder
Paul J. Enns, Counsel for the Defendants/Respondents, Future Homes and Real Estate Ltd., and Robert Tatomir
HEARD: February 15, 2007
REASONS ON APPEAL
Cusinato J.
Overview – The Appeal
[1] This is an appeal by the Plaintiff from a Small Claims Court judgment delivered by Deputy Judge Meconi on April 20, 2006. The appeal arises from the dismissal of the Plaintiffs’ claims against the Defendants collectively for breach of contract and damages. In spite of this dismissal, as required the deputy judge appropriately determined and assessed damages against each of the named Defendants in the event of review.
[2] As identified by the claim, the named Plaintiffs, Scott David Gardiner and Sharon Antoinette Gardiner (“Gardiner”), were the purchasers of a property municipally known as 127 Church Street, Harrow, Ontario.
[3] The Defendant, Nathan Casey Mulder (“Mulder”), was the vendor of the said property.
[4] The Defendant, Future Homes and Real Estate Ltd. (“Future Homes”), a Real Estate Brokerage Firm, acted as the broker for the purchase and sale of the subject premises. The Defendant, Robert Tatomir (“Tatomir”) is an owner and Real Estate Agent of the Respondent, Future Homes, and at all times was a dual agent for the Plaintiff, Gardiner, and the Defendant, Mulder, throughout the course of the transaction.
[5] In the Appellants’ amended claim prior to trial the prayer for relief puts forward a claim against all of the Defendants in the sum of $10,000.00. The amended pleadings, however, lack specifics as to the plaintiffs’ claim as against each Defendant named.
[6] I am mindful in this regard, that this is a small court’s claim in which strict procedural compliance as to pleadings required in a Superior Court are not always followed. This is not to suggest this is an acceptable practice but rather an acknowledged truism where many claimants act for themselves.
[7] It is from this examination of the pleadings that we ascertain that the Plaintiffs’ complaint is twofold.
[8] The first complaint relates to the condition of a hot-tub incorporated as a collateral term or condition within the Agreement of Purchase and Sale. The hot-tub intended as a separate proviso in the agreement of sale, that was to accompany the sale was to be in good mechanical working order. In fact, after closing, the purchaser at his earliest opportunity determined that the hot-tub was not operable, even though this was an essential requirement to which we conclude on the totality of the evidence was known to the vendor. It is within these considerations we shall deal with this issue later in my reasons.
[9] The second claim as filed relates to the misrepresentation of the home’s windows on the property to be sold. These were represented as “newer windows” in a listing agreement. This representation and its specifics, however, are not incorporated into the Agreement of Purchase and Sale and thus the agreement on this issue is silent.
[10] In the deputy judge’s disposition of the Plaintiffs’ claim on this issue of “newer windows” he dismissed this claim as constituting a misrepresentation. For the reasons given as to this disposition in his delivered judgment I am in agreement.
[11] In those reasons, it is appropriate to paraphrase his comments regarding the windows in the following terms; “that any reference to ‘newer windows’ is incapable of any specific time-definition. That in any event the plaintiffs’ complaint and claim for damages related not as to the term ‘newer’ but rather its construed meaning in such written representation in the listing.” This to the purchaser perhaps meant it was likely to be free from problems but that in itself is not a misrepresentation.
[12] In comparing this by analogy to the term “newer roof” often seen in real estate sales, although the roof we may discover is 10 years old with a warranty of 35 years, it cannot be said in this context it is a misrepresentation. The inferential concept by a purchaser may be erroneous but that is the subject of inquiry.
[13] As confirmed in this instance, that representation as pleaded concerning the windows did not form a written part of the Agreement of Purchase and Sale dated May 20, 2003. In his conclusion of the issues, the deputy judge found that even if he accepted that such representation was made, any defect in the windows was subject to inspection prior to closing. That with any patent defect, it was readily observable and the subject of inspection and therefore the principle of caveat emptor applied. With this result I find no error.
[14] It is the deputy judge’s dismissal of the Plaintiffs’ claim as it relates to the condition of the “hot-tub” and the Plaintiffs’ disentitlement as to damages for breach of contract for the reasons given with which I am in disagreement.
[15] Although I acknowledge at the outset the deputy judge’s delivered reasons demonstrate a well thought out articulation of the law that he determines applies to the facts, I am not in agreement after review of the evidence that those findings bear careful scrutiny to the transcripts delivered, the testimony therein and the law to be applied to those facts.
[16] Before I turn to my examination of the facts and the inferences to be drawn from what the parties knew and understood, it is appropriate to repeat as earlier stated that Small Claims Court proceedings are summary hearings in nature often engaged in by persons with little or no legal training. I raise this because of the deputy judge’s concerns as to the pleadings.
[17] Although this does not appear to be the situation within these proceedings where the parties are not totally self represented, it would nonetheless do well to have regard to s. 25 of the Courts of Justice Act, R.S.O. 1990, c. C.43. Section 25 C.J.A. which applies to both represented and unrepresented parties stated in the following terms:
Summary hearings
- The Small Claims Court shall hear and determine in a summary way all questions of law and fact and may make such order as is considered just and agreeable to good conscience.
[18] I underline the latter provision of this section for which I shall have more to say in this judgment.
[19] With the inclusion of s. 25 within the C.J.A. it may be argued, if not presumed, that the intent of this section is justice must not only be done but it must appear to be done. As adopted by Heeney J. in 936464 Ontario Limited v. Mungo Bear Ltd. 2003 72356 (ON SCDC), 74 O.R. (3d) 45 in reference to precise pleadings relative to claimed relief, he concluded as to Small Claims Court:
The higher standards of pleading in the Superior Court are simply unworkable in the Small Claims Court, where litigants are routinely unrepresented, and where legal concepts such as the many varieties of causes of action are completely foreign to the parties. Essentially, the litigants present a set of facts to the deputy judge, and it left to the deputy judge to determine the legal issues that emerge from those facts and bring his or her legal expertise to bear in resolving those issues. [para. 45]
[20] In the further case Popular Shoe Store Ltd. v. Simoni, 1998 18099 (NL CA), [1998] 163 Nfld. & P.E.I.R. 100 at 106 (Nfld. C.A.), a complex fact situation but for which the principles are appropriate to our determination, the court had the following to say:
… Popular’s claim. Particularly in Small Claims Court, where claimants, as here, are often unrepresented, a liberal approach ought to be taken to the pleadings that are presented so as to ensure that access to proper adjudication of claims is not prevented on a technicality. Even in superior court, the basic rule of pleading is that a party must plead material facts and is not required, as a condition of relief, to be correct in fitting those facts, as a matter of pleading, into a particular legal pigeon-hole. This is particularly appropriate for litigation in the Small Claims Court where technicalities are to be avoided and unrepresented parties …. are required to express their claims in their own words. If a claimant by his or her pleading or evidence states facts which, if accepted by the trier of fact, constitute a cause of action known to the law, the claimant should prima facie be entitled to the remedy claimed if that is appropriate to vindicate that cause of action. The only limitation would be the obvious one that if the case takes a turn completely different from that disclosed or inferentially referenced in the Statement of Claim, thereby causing prejudice to the other side in being able properly to prepare for or respond thereto, the court may either decline to give relief or allow further time to the other side to make a proper response.
A Small Claims Court judge has a duty, on being presented with facts that fall broadly within the umbrella of the circumstances described in the Statement of Claim, to determine whether those facts constitute a cause of action known to the law, regardless of whether it can be said that the claimant, as a matter of pleading, has asserted that or any other particular cause of action. Subject to considerations of fairness and surprise to the other side, if a cause of action has been established, the appropriate remedy, within the subject-matter jurisdiction of the court, ought to be granted. [para. 24 and 25]
[21] While this concept to make such order as is considered just applies to all our courts it is particularly relevant and important in a Small Claims Court’s disposition where pleadings are not clearly specific to the various relief that may be available.
[22] In this Court, the technicalities of the parties’ pleadings where the Court deals with summary claims without pre-trial examinations may have to be viewed somewhat differently particularly where the parties are unrepresented although not totally the case here. Therefore, in applying the rule of law of what is fair and just for disposition, it goes without saying that it is to be based upon the determination of the law applying it to the issues as taken from the evidence and the facts concluded upon. In this case as before the trial judge I conclude the inferred intent or known intent of the parties, both from the vendor’s knowledge and purchaser’s perspective, are appropriate considerations.
[23] Those determinations are of course to be taken from the entirety of the facts in evidence. It is within this perspective of what the parties were aware of and what was intended from the evidence re the hot-tub that we must ask if these intentions were to be subsumed or merged with the transfer of title or to survive closing.
[24] This may appear to be a difficult proposition where as here it might be said there is a failure of the Plaintiff to properly plead and frame the claim, not only in contract as to intent, but in negligence as to duty of care. This would enable the judge to apply the law to the fact situation concluded from the evidence but even with this failure, it is for the court “to make such order as is considered just and agreeable to good conscience” and the evidence. This principle is subject, however, to the considerations of fairness, surprise and amendment if required.
[25] While I accept that here the pleadings lack specifics, perhaps to facilitate a determination of what might be considered just and fair, based on the evidence both direct and circumstantial, it may well be that this is the rationale for s. 25 C.J.A. This section enables the Small Claims Court to make such order, as is appropriate balancing such consideration as set out in the words of the Newfoundland Court of Appeal.
[26] Perhaps this is why the legislature, in its wisdom, acknowledging these are summary proceedings of no more than $10,000.00, provided for such contingency that this Court must not be overly technical with the pleadings. In this instance, following review of the law and the facts, the deputy judge may either allow amendment to the pleadings as appropriate or make such order as is considered just and agreeable to good conscience. In doing so, he/she should be balancing its fairness to the parties in the proceedings as may be discerned from the evidence.
[27] It is from this perspective that I have reviewed the evidence in keeping with the law and the pronouncements of Chief Justice Dickson in Fraser-Reid v. Droumtsekas 1979 55 (SCC), [1980] 1 S.C.R. 720 (S.C.C.).
Facts taken from the Evidence
[28] I begin my review of the facts with the Agreement of Purchase and Sale which incorporates in the typed body as part of its form, para. 25, containing these prescribed words:
Agreement of Purchase and Sale
- If there is conflict or discrepancy between any provisions added to this Agreement (including any Schedule attached hereto) and any provision in the standard pre-set portion hereof, the added provision shall supercede the standard pre-set provision to the extent of such conflict or discrepancy. This Agreement including any Schedule attached hereto, shall constitute the entire Agreement between Buyer and Seller. There is no representation, warranty, collateral agreement or condition, which affects the agreement other than as expressed herein.
[29] In reference to the disposition of the deputy judge, he made a finding relative to the collateral proviso contained in the agreement. If this proviso, which he constituted to be a warranty, did not merge on closing this would have constituted a breach by the Defendant Mulder of the terms relating to the hot-tub. As such, that would provide for a claim in assessed damages against the vendor Mulder to the extent of 50%. In reference to the claim against Future Homes and its agent, Tatomir, he would have awarded the balance of the 50% in damages against both.
[30] For the reasons ascribed from the evidence hereafter, I conclude that the representation or warranty incorporated into the agreement did not merge but survived the closing of the transaction based on intent. With this finding, I do not deal with the issue of the agent’s suggested failure to provide a survivor covenant. Although as reviewed by the deputy judge, words of survival would have clearly identified the intent of the purchaser, it is my determination from the facts intent was known to the vendor and overcomes the issue of merger.
[31] It is on this basis the clear intent of the purchaser that I conclude that on the transfer of title, the separate collateral terms within the agreement survived the closing. From the evidence reviewed, it is clear the purchaser would not have made an offer on the home unless in his words the hot-tub was in good mechanical order at the time of transfer of title. To apply this to the findings of the deputy judge that the words of the proviso did not incorporate words as to the future I find, rather, it is the intent of the parties relative to the future which is relevant on the issue of merger. To quote this concept, I refer to Fraser-Reid v. Droumtsekas, supra, at p. 8:
Essentially, a deed of conveyance is a mere transfer of title, and it is not to be supposed that the whole contract between the parties is incorporated in the deed. Many provisions found in a contract of sale are not repeated in the deed; for example, an obligation to construct or finish a house in the future, or to install fixtures, or to make improvements or repairs. Where the sale agreement creates rights or imposes obligations or stipulations collateral to, or independent of, the conveyance, the question of whether those stipulations are extinguished by merger is to be treated as one of intention: Hashman v. Anjulin Farms Ltd. [ 1972 145 (SCC), [1973] S.C.R. 268]. In the absence of evidence on the point, there is no presumption that the purchaser intended to surrender or abandon the rights acquired by him under the sale agreement.
[32] Although we accept the purchaser was suspicious that the hot-tub was not operational at the time of inspection, there was no opportunity to check such deficiency until after closing, when the hot-tub could be filled to determine its mechanical condition.
[33] This opportunity for the purchaser to make such a determination of the mechanical operation must of course with the facts before the court take place within a reasonable period of time after closing, that being a question of fact.
[34] To apply the law on the question of merger or collateral undertaking for the bargain as to the evidence, we discern that when dealing with representations as it applies to the Law of Contract, it is a statement or assertion made by one party to the other before or at the time of the contract of some matter or circumstance relating to it. By definition, a declaration of a particular fact.
[35] Representations may fall into various categories: fraudulent, where the intent is to knowingly deceive as to the statements made; innocent, where the party believes the statement to be true; and negligent, where the statement is made negligently and without regard to its accuracy.
[36] With fraudulent misrepresentation, if established, the party offended may rescind and or seek damages on the contract.
[37] With innocent misrepresentation, it is said that the party offended may rescind but it is questionable whether it gives rise to damages.
[38] As to the last category, the party offended may rescind and seek damages.
[39] A good example of fraudulent and negligent misrepresentation is found in the decision of Bolan J. in Lafferty v. Curylo (1991) 17 R.P.R. (2d) 250 (Ont.Gen.Div.). This is a decision where Madam Justice Bolan permitted the purchaser of realty to rescind the agreement relative to a representation and obtain the return of the deposit because of fraudulent and negligent misrepresentation.
[40] In considering the differences and its application between representations and warranties, Justice Dickson had this to say in Fraser-Reid v. Droumtsekas, supra, at para. 22, as represented in the Respondents’ case book of Authorities from Carswell/Westlaw at p. 7:
- A warranty is a term in a contract which does not go to the root of the agreement between the parties but simply expresses some lesser obligation, the failure to perform which can give rise to an action for damages, but never to the right to rescind or repudiate the contract: Fridman, The Law of Contract in Canada (1976), p. 285. An affirmation at the time of sale is a warranty provided it appears on the evidence to have been so intended.
[41] In applying these principles to warranty, for convenience it is appropriate to extract a synopsis of his conclusions from the head note which is summarized in the following terms,
An affirmation at the time of sale is a warranty provided it appears in the evidence to be so intended. The assertion by the vendor of a fact of which the buyer is ignorant is a criterion of value in determining whether a warranty was intended. Based on this test the “Provision” (cited above) in the agreement of purchase and sale was a warranty entitling the plaintiffs to succeed. The warranty was not “merged” on closing. Delivery and acceptance of a conveyance is often merely a part performance of all of the obligations of a vendor under a contract. The deed of conveyance is a mere transfer of title and it is not to be supposed that the whole contract between the parties is incorporated in the deed. The question of merger or otherwise is one of intention of the parties. In the absence of evidence, there is no presumption that the purchaser intended to surrender or abandon the rights acquired by him under the sale agreement. Absent proof of a common intention to merge a warranty in the deed, there is no merger.
[42] For the reasons expressed hereafter, it may be inferred the vendor Mulder was well aware by the incorporation of the provision stated in the agreement that this proviso was not the subject of a merger. As expressed by paragraph 25 of the printed form, the added provision shall supercede the standard pre-set conditions of the agreement. Upon inspection following closing, the purchaser wanted a hot-tub in good mechanical working order and with this understanding it was not the subject of merger on the transfer of title.
[43] In De Lassalle v. Guildford [1901] 2 K.B. 215 (C.A.) at p. 221, A.L. Smith, M.R., had the following to say in reference to warranty:
It must be a collateral undertaking forming part of the contract by agreement of the parties express or implied and must be given during the course of dealing which leads to the bargain, and should then enter into the bargain as part of it.
[44] Applying this last statement to the evidence regarding the hot-tub and its collateral meaning supplementary to the purchase following initial inspection, although the purchaser believed that the hot-tub was not operational at that time, he was prepared to accept the information provided to the agent. The vendor advised the agent that the hot-tub was in good working order and the purchaser assumed it would be so after closing. On this issue, the purchaser states that he would not have made an offer without the understanding that upon and/or after closing the hot-tub was going to be in good mechanical working order. [See Appellants’ Compendium, “S. Gardiner” at p. 5].
[45] From this statement and others in the transcript, the intent of the purchaser was clear – that the good mechanical operation of the hot-tub was collateral to the closing. That it would survive the purchaser’s check for its operation. From the evidence, the purchaser’s concern of the hot-tub was so tied to the purchase that it was he who had the agent incorporate this intent into the offer with these words. “The seller declares the hot-tub is in good mechanical working order.” Although we may say with hindsight that it would have been prudent to make clear this proviso survived transfer of title, when we examine paragraph 25 of the printed agreement together with the intent of the purchaser and the knowledge of the vendor of the importance of this condition its survives the transfer of title. As stated in Fraser-Reid v. Droumtsekas, supra, “ … there is no presumption that the purchaser intended to surrender or abandon the rights … under the sale agreement.”
[46] To support the intent of the purchaser and the knowledge of the vendor as to the importance of this condition surviving the closing, the seller in his evidence confirms that the listing agent, Tatomir, inquired if the hot-tub was working. [See Respondents’ Compendium, “Tatomir’s Cross Examination” at p. 7; “Mulder’s Cross Examination” at p. 37].
[47] In Mulder’s evidence he denies that he confirmed the hot-tub was in good mechanical working order. The deputy judge from the evidence confirmed in his judgment on credibility that the Respondents’ evidence on this point was false or carelessly made.
[48] When the agreement of sale was signed for the full up price, the vendor at that time confirmed to Tatomir the hot-tub was working although he later admits at trial it had not been operated for several years. It is clear from the inquiries made of the vendor by the agent and the insertion of the condition in the agreement that the vendor clearly understood the intent of the purchaser, that he wanted a hot-tub in good mechanical working order both before and after closing.
[49] That intent by inference from all the evidence, aside from the transfer of title to the property, it was understood as to the hot-tub it was a collateral condition that after transfer of title it would be in good mechanical working order and subject to inspection. Such understood and inferred intent demonstrated from the evidence and the findings of the deputy judge as to credibility, support this collateral undertaking as part of the bargain given at the time of signing the agreement and would not subordinate this provision to merger.
[50] This understood intent of the purchaser is to be taken from the entirety of the evidence and was to survive the closing as it related to the operation of the hot-tub.
[51] It is for the above reasons that it may be inferred from the transcript that Mulder signed the agreement with the knowledge that when he sold the house, the hot-tub was to be in good mechanical working order. [See Respondents’ Compendium, “Tatomir Cross Examination” at Tab 5, p. 72, line 25].
[52] In spite of this admission to Tatomir as confirmed in cross-examination, Mulder stated that the hot-tub had not operated since the year 2001 although the subject property for which the Agreement of Sale took place relative to transfer was in the year 2003. During cross-examination, it was pointed out to Mulder that in-chief he said that the hot-tub was last used in the year 2002 and only later said 2001. When confronted, he confirmed in cross-examination he was not certain when it was last used. [See Respondents’ Compendium, “Mulder Cross Examination,” Tab 4 at pp. 14-15]
[53] On the issue of the hot-tub, the agent Tatomir in his testimony, made specific inquiry of Mulder if the hot-tub worked and he replied in the affirmative, “yes.” It is clear with this confirmation that the vendor knew the intent of the purchaser to have an operational hot-tub both before and after closing. [See Respondents’ Compendium, “Mulder Cross Examination,” Tab 4 at pp. 15-16; “Tatomir In Chief,” Tab 5 at p. 45, lines 18-25].
[54] In the agent’s evidence, he confirms that Mulder did not, in the initial offer, want the wording of this condition - that the hot-tub was in good mechanical order. Nonetheless, when the offer was presented with its full asking price, the vendor signed knowing full well the intention of the purchaser re the hot-tub.
[55] In the absence of evidence to the contrary that this condition merged on transfer of title then under those circumstances specific to the offer, the condition survives.
[56] It is equally significant to repeat from a review of the deputy judge’s conclusions that he found Mulder was not a credible witness. He specifically found that Mulder’s belief that the hot-tub was in good mechanical condition was careless at best, or alternatively, that it was untrue when made.
[57] In his conclusion, the deputy judge found in the evidence that the holding out as a fact as to what was represented by Mulder constituted a warranty. He concluded, however, that with the failure of the offer to stipulate it would survive the closing it merged. It is for this reason the deputy judge concluded that upon transfer of title it made this provision unenforceable.
[58] In this regard, there is no indication that the deputy judge was referred to the analysis of the intent of the purchaser to the contrary, concerning the incorporated proviso in the offer and its survival for inspection. Equally significant is the vendor’s knowledge as to the specific incorporated condition in the offer and its importance to the purchaser. Such fact situation concerning the issue of contrary intent as to merger to support the purchasers position as to their bargain is found in Fraser-Reid v. Droumtsekas, supra,
[59] In my view, when the evidence is reviewed as a whole, it is clear that the seller was aware of the buyer’s intent – that the hot-tub upon and after closing would be in good mechanical working order and aware this would be a continuing condition. This is evident where the vendor on the entirety of the evidence knew specifically from the inquiries by Tatomir that the condition of the hot-tub was of such a serious concern to the purchaser it was incorporated in the agreement and would therefore survive the closing. A real concern for its operation may be subscribed in this regard to the purchaser and this may be taken as a clear inference from the evidence as to the intent that it would survive closing.
[60] In the Respondents’ Compendium, “Tatomir In Chief” at p. 45, which is not refuted, the vendor confirms that the hot-tub was in good mechanical order at the time of signing the agreement. Perhaps the vendor was hopeful the purchaser wouldn’t bother to come back to enforce the condition.
[61] From this court’s review, I conclude at the time of signing the agreement by clear inference the vendor was aware of the intent of this condition. While the vendor/and purchaser perhaps would not know the meaning of merger in referring to the agent’s testimony in reference to the vendor, Tatomir had this to say: “he told me that yes, (referring to Mulder) it is working good in reference to the hot-tub and he had no problem signing that and having that clause incorporated into the offer.” [See Respondents’ Compendium, “Tatomir In Chief,” at p. 45].]
Disposition
[62] Based on these findings, I allow the appeal for damages relative to the hot-tub and set aside the issue of costs awarded to the Defendants.
[63] In this regard, I accept the assessment of the deputy judge and award the Plaintiff damages in the sum of $4,500.00 with costs in the sum of $600.00, for the trial proceedings.
[64] Those damages will be assessed as determined by the deputy judge 50% against the Defendant, Mulder, and 50% against the Defendant, Future Homes and Tatomir, of which the latter I find Future Homes is vicariously liable for the agent acting under its authority. The division as to trial cost shall equally apply to those percentages against the defendants as ascribed.
[65] This finding relative to the obligation of the agent as concluded by the deputy judge was, for his failure to make it absolutely clear to the vendor Mulder of his legal responsibilities re the hot-tub and with this failure as it concerned its operation, the purchaser’s right to claim breach and damages.
Costs
[66] On the issue of costs for the appeal, I shall allow written submissions to follow within 30 days, if the parties are unable to resolve the same.
”original signed by Justice Cusinato”_
Anthony E. Cusinato
Justice
Released: March 9, 2007
COURT FILE NO.: 04-SC-005592
DATE: 20070309
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
SCOTT DAVID GARDINER and SHARON ANTOINETTE GARDINER
Plaintiffs
(Appellants)
NATHAN CASEY MULDER,
FUTURE HOMES AND REAL ESTATE LTD., and ROBERT TATOMIR
Defendants
(Respondents)
REASONS ON APPEAL
Cusinato J.
Released: March 9, 2007