CITATION: Lamba v. Mitchell, 2021 ONSC 8011

DIVISIONAL COURT FILE NO. DC-21-214

DATE: 20211207

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

F.B. Fitzpatrick, S.T. Bale and Kristjanson JJ.

BETWEEN:

Amarjot Lamba and Chand Lamba

Plaintiffs (Appellants)

– and –

Michael Mitchell and Richard Bowring

Defendants (Respondents)

Matt Mulholland and Ayda A-Tabrizi for the appellants

Monica Unger Peters, for the respondents

HEARD: October 22, 2021 at Brampton, by video conference

On appeal from the judgment of Justice Michael T. Doi of the Superior Court of Justice dated March 31, 2021, with reasons reported at 2021 ONSC 1612.

S.T. Bale J.:

1This is an appeal from an order granting summary judgment in favour of the vendors in an action arising from a failed residential real estate transaction. The motion judge found the purchasers to be in breach of the agreement of purchase and sale and ordered that their deposit be forfeited.

Background

Background

2The vendors listed their home for sale in July 2020. On August 11, 2020, the purchasers attended and viewed the home, and later the same day, made an unconditional offer to purchase that was accepted.

3In the MLS listing for the property, the square footage of the home was represented to be approximately 2,500 to 3,000 square feet. After entering into the agreement of purchase and sale, Amarjot Lamba, one of the purchasers, contacted the listing agent and requested that he be provided with copies of all available documents related to the property. He says that from these documents, he learned that the actual square footage of the home was 2,155 square feet.

4The home had been significantly enlarged after it was built. The purchasers demanded that they be provided with proof that the renovations had been completed in accordance with the applicable building permit and that the permit was “closed”.

5The agreement was to be completed on September 15, 2020. However, the purchasers refused to close and demanded an extension of the closing date. The vendors refused the extension.

6Following the aborted closing, the purchasers commenced an action claiming specific performance with an abatement and moved unsuccessfully for a certificate of pending litigation. The vendors counterclaimed for damages and an order that the purchasers’ deposit be forfeited.

7The vendors re-sold the home and moved for summary judgment, requesting forfeiture of the purchasers’ deposit. The purchasers responded by arguing that they were entitled to rescission of the agreement of purchase of sale and damages.

8The purchasers’ position on the motion was that they were not required to close because of the misrepresentation with respect to the square footage of the home, and because the vendors had not satisfied them that the renovation of the home had been completed in accordance with the applicable building permit.

9The vendors’ position on the motion was that the purchasers had viewed the home and were aware of its area. They also argued that a floor plan setting out the correct dimensions of the home was attached to the MLS listing and that Mr. Lamba, being an experienced real estate agent himself, had access to the floor plan. In addition, they said that the floor plan and a brochure showing the actual dimensions of the home were in a “stand-up” display on the kitchen counter when the purchasers viewed the home.

10With respect to the renovation and enlargement of the home, the vendors said that the renovation had been completed in 1993, prior to their purchase of the home in 2009, and that they had no records to respond to the purchasers’ demand. In addition, they said that no letter of requisition had been delivered by the purchasers.

The motion judge’s decision

Misrepresentation issue

The motion judge’s decision

11The motion judge correctly set out the test for rescission of a contract based upon misrepresentation – rescission may be available where a party makes a material false statement that induces the innocent party to enter into the contract. However, he found that the false statement of square footage in the present case did not amount to a material misrepresentation that induced the purchasers to purchase the property.

12The motion judge did find that the square footage set out in the MLS listing “exceeded a fair and reasonable approximation of the proper main floor area of the home”, and that the discrepancy “gave rise to a misrepresentation that was not insignificant.” However, he went on to say:

I am not persuaded that the discrepancy should allow the Buyers to rescind the contract. Both of the Buyers personally attended the property to view the home. Having walked through the bungalow during their viewing of the home, I am confident that the Buyers were well-aware of its actual size and layout before they decided to buy what they had seen. In my view, the [purchasers] were not misled about the area of the home for sale. Mr. Lamba is an experienced and sophisticated realtor. Having viewed the home, he and Ms. Lamba clearly knew and appreciated its interior area and layout They knew the area of the home they wanted to buy. In light of this, I am satisfied that the discrepancy between the actual and misstated area in the MLS listing did not constitute a material misrepresentation that would have impacted the [purchasers’] decision to make an offer and enter into the APS.

13The motion judge also found that issue estoppel applied to certain findings of fact found on the motion for a certificate of pending litigation and that those facts were binding on him. However, while the purchasers argue that he erred in doing so, they concede that this court need not deal with the issue, if it finds that it was open to the motion judge, on a consideration of the balance of the evidence, to decide the case as he did.

Building permit issue

Building permit issue

14With respect to the building permit issue, the motion judge found as a fact that not only had the purchasers failed to requisition compliance with the building permit, uncontradicted evidence established that the permit had been closed. As a result, he held that the purchasers were not entitled to rescission on that basis. The purchasers have not appealed from those findings.

Issue on appeal

Issue on appeal

15The purchasers accept that the motion judge correctly set out the legal test with respect to rescission for misrepresentation. However, they take issue with the findings of fact, and application of the law to the facts, on the issue of reliance on the misrepresentation, as an inducement to purchase.

16In their factum, the purchasers framed the primary issue on appeal to be whether the motion judge erred in finding that the purchasers knew of the square footage discrepancy prior to entering into the agreement of purchase and sale. However, in oral argument, purchasers’ counsel conceded that the motion judge had not made such a finding. Rather, his finding was that the purchasers’ satisfaction with the size of the home was based upon their knowledge of the area of home, as observed during their inspection.

17Accordingly, the issue on this appeal is whether the purchasers, in deciding to purchase the home, relied upon the square footage set out in the MLS listing, as they argue; or whether, as found by the motion judge, they relied upon the area and size of the home gleaned from their inspection. The latter was an inference of fact.

Analysis

Analysis

18An appellate court should not interfere with lower courts’ findings of fact, absent palpable and overriding error. A palpable and overriding error is an error that can be plainly seen and that affected the result. “The same proposition is sometimes stated as prohibiting an appellate court from reviewing a trial judge’s decision, if there was some evidence upon which he or she could have relied to reach that conclusion”: Housen v. Nikolaisen, 2002 SCC 33, at para. 1.

19The principle that applies to findings of primary fact also applies to inferences drawn by trial judges. In General Motors v. Johnson, 2013 ONCA 502, at para. 51, the court quoted the following paragraph from L. (H) v. Canada (Attorney General), 2005 SCC 25, at para. 74:

Not infrequently, different inferences may reasonably be drawn from facts found by the trial judge to have been directly proven. Appellate scrutiny determines whether inferences drawn by the judge are "reasonably supported by the evidence". If they are, the reviewing court cannot reweigh the evidence by substituting, for the reasonable inference preferred by the trial judge, an equally — or even more — persuasive inference of its own. This fundamental rule is, once again, entirely consistent with both the majority and the minority reasons in Housen. [Emphasis in original.]

20In Issa v. Wilson, 2019 ONSC 6744, the trial judge found that the purchaser’s expectations with respect to the size of the home were determined by misrepresentations of the square footage, and not by his inspection of the home. On appeal, Issa v. Wilson, 2020 ONCA 756, the vendors argued that the trial judge had erred by not accepting the proposition that where purchasers inspect a property, their reliance on a misrepresentation as to the size of the property will be displaced. The court held, at paras. 10-11, that the proper determination of this issue will depend upon the factual context:

The appellants submit that the trial judge erred by not accepting the proposition that where a purchaser inspects a property their reliance on a misrepresentation as to the size of the property will be displaced.

We do not accept that this is an absolute proposition of law. In some cases, it has been applied; in other cases it has not governed because of a constellation of facts that would make a strict application unfair in the circumstances.

21In this case, the purchasers argue that in coming to his conclusion on the misrepresentation issue, the motion judge made two palpable and overriding errors. They argue that he ignored evidence of Mr. Lamba that he should have considered; and that he improperly considered Mr. Lamba’s extensive real estate experience. Mr. Lamba’s evidence was that he had closed over 2,000 property transactions collectively worth more than $1 billion.

22A trial judge’s failure to refer to a specific piece of evidence is addressed in Cowles v. Balac (2006), 83 O.R. (3d) 660, 2006 34916, at para. 117:

A trial judge's failure to refer to a specific piece of evidence does not per se constitute palpable and overriding error. It is only when an omission gives rise to a reasonable belief that the trial judge must have forgotten, ignored or misconceived the evidence in a way that affected her conclusion that an appellate court is entitled is intervene: Housen v. Nikolaisen, supra, at para. 72.

23The evidence that the purchasers say the motion judge failed to consider relates to obtaining mortgage financing and title insurance. In particular, Mr. Lamba’s evidence was that:

• a mortgage cannot be obtained without an appraisal;

• an appraisal cannot be performed without the correct square footage of the home;

• the misrepresentation as to square footage jeopardized the purchasers’ ability to obtain mortgage approval;

• lenders won’t close without title insurance which could not be obtained without a resolution of the square footage and building permit issues; and

• a 15 per cent reduction in area “affects room use, placement of furniture, the ability to entertain and derive full enjoyment from the home.”

24In my view, it cannot be said that the motion judge’s omission to refer to this evidence gives rise to a reasonable belief that he must have forgotten, ignored or misconceived the evidence in a way that affected his conclusion. I say that for the following reasons.

25There are a number of difficulties with the evidence relied upon by the purchasers. First, as a matter of common sense, I do not accept that an appraiser must be told the correct square footage of a home in order to perform an appraisal. Appraisers are capable of measuring a home themselves. Second, there is no evidence in this case that the purchasers applied for a mortgage or title insurance. Third, and again as a matter of common sense, room use, furniture placement and the ability to entertain are factors more likely to be illuminated by an inspection of the home, than by a representation as to square footage. Fourth, the representation relied upon by the purchasers was imprecise - approximately 2500 to 3000 square feet, a variation of 20 per cent.

26The motion judge’s findings are supported by the fact that the purchasers, through their solicitor, repeatedly affirmed their intention to complete the transaction, notwithstanding their discovery of the actual square footage of the home. While they evidently felt entitled to some compensation for the deficiency, the fact that they were intent on completing the purchase suggests that they based their decision to purchase on their satisfaction with the area and layout of the home, as observed during their inspection, and not on the representation of square footage contained in the listing agreement.

27On August 31, 2020, the purchasers’ solicitor, Kiran Salooja, wrote to the vendors’ solicitor, Samir Chhina, saying that her clients’ major concern was whether the extension to the home had been completed in accordance with the applicable bylaw, and that the issue required resolution before they proceeded with the transaction.

28On September 12, 2020, Ms. Salooja wrote to Mr. Chhina saying that her clients fully intended to close the deal but required the vendors to give them written consent to inspect the city records to confirm the legality of the renovation.

29On September 14, 2020, Ms. Salooja wrote to Mr. Chhina requesting that the closing date be extended to October 15, 2020 or earlier depending upon when the city released the information they required. She indicated that if the information was received earlier, her clients would be willing to close earlier.

30On September 15, 2020 (the closing date), Ms. Salooja wrote to Mr. Chhina saying that her clients wished to complete the purchase but first had to satisfy themselves of the legality of the extension to the home.

31On September 16, 2020, Ms. Salooja wrote to Mr. Chhina again affirming that the purchasers intended to complete the purchase, subject to being satisfied with respect to the permit issue. She said that if the municipal records confirmed the legality of the extension, her clients would “be in a comfortable position to close the property even without title insurance protection on such issue.”

32As further evidence of the purchaser’s satisfaction with the area of the home as observed during their pre-contractual inspection, on September 16, 2020, their solicitor threatened litigation in the event that the vendors re-listed the property, and they moved for a certificate of pending litigation with a view to preventing the vendors from selling the home to anyone else. In his affidavit sworn in support of the motion for a certificate of pending litigation, Mr. Lamba described the property as follows:

6. 796 Clarkson is a residential bungalow in the highly desirable Clarkson area of Mississauga, in which very few houses come up for sale. It is south of Lakeshore Blvd. and very close to Lake Ontario.

7. Bungalows have become rare in the Greater Toronto Area as builders tend to build mostly two-storied residential designs and not bungalows.

8. The house at 796 Clarkson is significantly larger than most bungalows, and 796 Clarkson itself is an extra wide corner lot with a frontage of approximately 85 feet.

9. 796 Clarkson is unique, and exactly what we were looking for.

33The purchasers were aware of the actual square footage of the home at the time the affidavit was sworn. If their satisfaction with the area of the home at the time of purchase was based upon the represented square footage rather than the area and size of the home gleaned from their inspection, it is a reasonable inference that they would not have tried to prevent the home from being sold to others, and that Mr. Lamba would not have sworn that the property was “unique and exactly what we were looking for.”

34Finally, the motion judge did not err by referring to Mr. Lamba’s extensive experience as a real estate agent. In appropriate cases, such considerations may be relevant contextual factors. In Issa, at para. 17, the Court of Appeal held that the trial judge had not erred in considering the purchaser’s youth and inexperience in concluding that the misrepresentation was material to his decision to purchase. The motion judge’s consideration of Mr. Lamba’s extensive experience in this case is simply the other end of the spectrum.

35In the result, in my view, the findings of the motion judge were reasonable and available to him on the evidence, without reference to the facts found on the motion for a certificate of pending litigation. It is therefore unnecessary for this court to consider the parties’ arguments relating to issue estoppel.

Disposition

Disposition

36For the reasons given, I would dismiss the appeal.

37The parties agreed that the costs of the appeal would be fixed in the sum of $8,000 payable to the successful party. I would therefore award costs to the respondents in that amount.

“S.T. Bale J.”

“I agree. F.B. Fitzpatrick J.”

“I agree. Kristjanson J.”

Released: December 7, 2021

CITATION: Lamba v. Mitchell, 2021 ONSC 8011

DIVISIONAL COURT FILE NO. DC-21-214