Court File and Parties
COURT FILE NO.: CV-14-121034-00 DATE: 20160519 ONTARIO SUPERIOR COURT OF JUSTICE
BETWEEN:
MICHAEL SAVO and VERA ROBICHAUD Plaintiffs – and – RASHEED MOURSALIEN Defendant
COUNSEL:
Doug LaFramboise for Plaintiff Michael Savo and Michael Lesage for Plaintiff Vera Robichaud Brent S.J. Cumming, for the Defendant
HEARD: April 13, 2016
REASONS FOR DECISION
CHARNEY J.:
Introduction
[1] This motion for summary judgment arises out of a failed real estate transaction. Michael Savo and Vera Robichaud (the plaintiffs) were the owners of a property located at 76 Forest Heights Blvd. in Kleinberg, Ontario (the property). They listed the property for sale in June 2014. The defendant, Rasheed Moursalien, and his wife, Linda Moursalien, agreed to purchase the property for $1,685,000 pursuant to an Agreement of Purchase and Sale (APS), dated August 25, 2014. The property had a pool, a cabana and a patio in the backyard. It was scheduled to close on November 28, 2014.
[2] Subsequent to the purchase, the defendant discovered that there was a TransCanada Pipeline (TCPL) easement in the backyard that ran directly under the pool, cabana and patio. By virtue of this easement and an agreement on title TCPL had the right to remove the pool and cabana if necessary. The easement and the agreement were also the subject of a law suit between the plaintiffs and TCPL. There was no express reference to this easement or litigation arising out of the easement in the agreement of purchase and sale.
[3] On November 6, 2014, the defendant discovered the TCPL easement, and on November 7, 2014, advised the plaintiffs that the defendant would not close the deal. They requested the return of their $50,000 deposit.
[4] The plaintiffs refused to return the deposit and brought this action for damages resulting from the defendant’s refusal to close. The defendant commenced a counterclaim for the return of the $50,000 deposit.
[5] The plaintiff, Michael Savo, brought a motion for summary judgment under Rule 20.01 of the Rules of Civil Procedure for $78,100.41 damages plus an order that the $50,000 deposit (which is being held in trust) be released to him.
[6] The plaintiffs later separated and Vera Robichaud brought a motion for summary judgment. She seeks an order to discontinue this action as to her, and waives any claim against the defendant for the deposit and/or damages.
[7] The defendant has also agreed to have the claims and counterclaims determined by summary judgment.
[8] For the reasons set out below, I grant summary judgment in favour of the defendant and order that the $50,000 deposit be returned to him. All other claims are dismissed.
Facts
[9] On August 25, 2014, the defendant agreed to purchase the property for $1,685,000. Paragraph 4 of the APS signed on that date references the inclusion of a “Saltwater Vinyl Liner Pool 3 ½ Yrs - 9’” and stated “Unless otherwise stated in this Agreement or any Schedule hereto, Seller agrees to convey all fixtures and chattels included in the Purchase Price free from all liens, encumbrances or claims affecting the said fixtures and chattels.”
[10] The same real estate agents represented both the buyer and seller.
[11] Paragraph 10 of the APS states:
TITLE: Provided that the title to the property is good and free from all registered restriction, charges, liens, and encumbrances except as otherwise specifically provided in this agreement and save and except for …(c) any minor easements for the supply of domestic utility or telephone services to the property or adjacent properties; and (d) any easements for…public utility lines…or other services which do not materially affect the use of the property.
[12] Schedule A of the APS was added in hand-writing by the real estate agent and states:
Buyer acknowledges that there is existing easement of TransCanada Gas Line on the property. Buyer agrees to take the TransCanada easements as applicable.
[13] This paragraph is central to the dispute. In the first sentence, “easement” is written in the singular. In the second sentence it may be written in the plural, although this is unclear from the handwriting. This point is crucial because there were in fact two TCPL easements on the property.
[14] The first easement ran diagonally across the back of the property. This easement was registered on title as instrument number VA41611 on March 26, 1959. The defendant claims that this was the only easement disclosed to the defendant prior to entering into the APS.
[15] The second easement ran adjacent to the 1959 easement. Most importantly, this second easement ran directly under the pool and cabana, outdoor shower and stamped concrete patio. This second easement was registered on title as instrument number LT872370 on October 21, 1992. The 1992 easement prohibits the landowner from excavating, installing or erecting on the easement lands without prior consent of TCPL. The two easements together cover most of the property’s back yard.
[16] The evidence of the defendant and his wife is that they were informed of only the 1959 easement when they signed the APS. They had no idea that there was a second easement under the pool and the cabana. I accept this evidence, and find that only the 1959 easement was brought to the attention of the defendant and his wife when they signed the APS. They did not know of the 1992 easement that ran under the pool and cabana.
[17] The defendant claims that he was told that the easement was only 4 feet wide. In fact it is 36.5 metres wide. He did not know that the two easements together were 46.5 metres wide and covered most of the backyard. For the purposes of my decision, the width of the easement is not as important as the fact that the easement ran beneath the pool and the cabana.
[18] I further find that Schedule A of the APS was legitimately understood by the defendant as referencing only the 1959 easement. The first reference to “easement” is unquestionably written in the singular. In these circumstances, a reasonable person deciphering the handwriting would also interpret the second reference as singular.
[19] The requisition date on the APS was October 9, 2014.
The TCPL Agreement
[20] Sometime in 2011, the plaintiffs constructed the pool, cabana and patio without the consent of the TCPL. The plaintiffs were not aware of the 1992 easement when the excavations began. During construction they were advised (by either TCPL or the City of Vaughan) that the pool and cabana were encroaching on the 1992 easement. The plaintiffs reached an agreement with TCPL that they could finish the construction of the pool and cabana.
[21] The terms of that agreement are set out in a letter from TCPL dated June 2, 2011. This letter states that TCPL is willing to enter into an agreement with the plaintiffs which would allow the pool and cabana to encroach on the TCPL easement on the following terms:
(a) The owners agree to sign a formal agreement prepared by TCPL which will be registered against the title of the land and will carry forward with future ownership; (b) In the event TCPL’s future operations, new installations, integrity or maintenance programs require the removal of the improvements (the pool and cabana) situated on its easement, the Owner agrees to remove the improvements immediately upon receipt of notice. The Owners and TCPL agree to equally share (50/50) the cost to remove the improvements; (c) The Owners covenant and agree that upon the Owner’s sale or disposition of the Lands, the Owners shall fully disclose the restrictive covenant to any prospective purchaser.
[22] The plaintiffs signed the letter, acknowledging acceptance of its terms. This letter was registered on title as instrument YR2003882 on July 15, 2013.
[23] Thereafter TCPL prepared an 11-page formal agreement titled “Agreement to Install Swimming Pool and Cabana”, but the plaintiffs refused to sign it. Since it is not signed it is not registered on title.
[24] The refusal of the plaintiffs to sign the agreement has resulted in legal action between the plaintiffs and TCPL. Prior to the signing of the APS, the plaintiffs had sued TCPL and TCPL had a counterclaim against the plaintiffs to require them to sign the agreement or, in the alternative, for an order requiring the plaintiffs to remove the pool and cabana at their own expense. This lawsuit was not referred to in the APS, and I find that it was not disclosed to the defendant when the APS was signed.
[25] I also accept the defendant’s evidence that the defendant was not informed of the June 2, 2011 letter or the unsigned agreement when they entered into the APS.
[26] The defendant alleges that they first became aware of the 1992 easement and the June 2, 2011 letter on November 5, 2014. On that date the plaintiff Michael Savo phoned the defendant and said that he needed the “TransCanada papers” signed. The defendant claims that he had never heard of the “TransCanada papers” before. There is certainly no reference to these papers or the defendant’s obligation to sign them in the APS.
[27] The defendant’s evidence is that on September 23, 2014, the defendant enlisted the plaintiffs’ real estate agents to list their residence in Brampton for sale. At some point after retaining the real estate agents, the agents gave the defendant an envelope with paperwork related to the sale of the Brampton house. The “TransCanada papers” were among the papers provided. It is unclear from the evidence when this envelope was delivered, and for the purposes of my analysis it does not really matter.
[28] The defendant claims that when the envelope was delivered the agents did not disclose or discuss its contents. It was just delivered in an envelope with other papers. This is confirmed by the transcript of the examination of the agents, who stated that they did not know about the TCPL Agreement and did not know that the defendant was expected to sign it. (There is evidence (see para. 36 below) that the agents knew that the plaintiffs were involved in litigation with TCPL, but they did not know what the litigation was about).
[29] After receiving Michael Savo’s phone call on November 5, 2014, the defendant reviewed the TCPL agreement for the first time.
[30] The “Agreement to Install a Swimming Pool and Cabana” specifically excludes the construction of any additional facilities in the area where the pool and cabana were installed and gives TCPL the right to require the landowner to immediately remove the pool and cabana at a cost borne equally by the landowner and the TCPL. In addition, the agreement provides that TCPL will not be liable for any loss or damage to the pool or cabana suffered by the landowner as a result of the operations of TCPL.
[31] On November 6, 2014, the defendant met with the real estate agents to advise that they would not close the transaction due to what they believed was misrepresentation and material non-disclosure. On November 7, 2014, the defendant telephoned the plaintiffs’ lawyer and confirmed that they would not close the transaction due to misrepresentation and non-disclosure.
[32] The property did not close on November 28, 2014, and the plaintiffs were unable to pay their mortgage payments and defaulted on the mortgage. A Notice of Sale Under Mortgage was issued on November 28, 2014, and the property was sold under power of sale six months later (May 2015) for $1,730,000. The plaintiffs claim that the real estate commission on this sale was 5%, while the commission on the November 2014 transaction was only 2.5%. As a result, even though the property sold for more money the plaintiffs received $78,100 less than they would have received had the November 2014 sale closed.
Previous Agreements
[33] The sale to the defendant on August 25, 2014, was not the first time the plaintiffs had attempted to sell the property.
[34] On July 11, 2014 the plaintiffs signed an APS with Mr. and Mrs. Purbas to sell the property for $1,620,000 (the Purbas APS). That agreement was to close on October 14, 2014. What is significant about the Purbas APS is that it makes specific reference to the TCPL easement and litigation. Although it refers to only one easement, it makes specific reference to the TCPL litigation arising out of the easement. Schedule A of the Purbas APS states:
The Buyer acknowledges that there is an easement on the property by TransCanada Pipeline in the backyard where the property is situated. The Buyer agrees that no claim will be made against the Seller…in respect of this easement. Buyer acknowledges that the Seller is in the process of litigation with the city and TransCanada regarding the easement and buyer agrees that there will be no claim will be made by him to the Seller…in respect of this litigation between the city, TransCanada and the seller regarding this or any benefit resulting from this litigation.
[35] This paragraph, which was typed into the Purbas APS, stands in sharp contrast to the cryptic reference scribbled into Schedule A of the Moursalien APS. This is a significant distinction from which I can draw certain inferences.
[36] On August 7, 2014, the plaintiffs’ real estate agents wrote to the plaintiffs to advise that Purbas refused to proceed with the offer because of the TransCanada litigation. The email stated:
The buyer refused to proceed with this offer because of following reason: Current On Going litigation and easement issue of TransCanada Gas Line – Buyer is concerned that this litigation will affect his property value and may cause more issues in the future with TransCanada. So far we had more than 8 buyers interested in this property. They understand that we have priced it much below the value of properties in the neighbourhood. In spite of that, they do not want to enter in to any firm agreement due to ongoing litigation between you and TransCanada. All the buyers would like to see clear title and property with no existing or future litigation between you and TransCanada. This may be fear of the unknown, but no one so far wants to take a risk with current On Going Litigation between you and TransCanada.
[37] The plaintiff provided no explanation for dropping the reference to the TCPL litigation from the Moursalien APS. I infer that the reference was dropped because it was clear from the real estate agent’s email of August 7, 2014, (just two weeks before the Moursalien APS was signed) that the plaintiffs would have difficulty selling the property if prospective buyers were aware that it was under a litigation cloud. While the defendant was told of a TCPL easement, they were not told that a second easement gave TCPL the right to demand the removal of the pool and cabana, that the two easements together covered most of the backyard, or that the plaintiffs had refused to sign the “Agreement to Install Swimming Pool and Cabana” demanded by TCPL, resulting in litigation in relation to the easement and the pool and cabana.
Analysis
Motion for Summary Judgment
[38] The plaintiff moves for summary judgment pursuant to Rule 20.01 of the Rules of Civil Procedure. Pursuant to Rule 20.04(2)(a):
The court shall grant summary judgement if the court is satisfied that there is no genuine issue requiring a trial with respect to a claim or defence.
[39] In the present case all of the parties have agreed that this claim can be determined on a summary judgment motion (Rule 20.04 (2)(b)), and I am satisfied that it is appropriate to grant summary judgment on the basis of the affidavit evidence provided.
[40] While the defendant has not brought a cross-motion for summary judgment, once a motion for summary judgment is brought the court can decide the issues raised in either party’s favour. In Demide v Attorney General of Canada et al., 2015 ONSC 3000, at paras. 31 to 38, Leach J. reviewed several cases in the wake of Hyrniak v. Mauldin, 2014 SCC 7 [2014] 1 S.C.R. 87, that confirm that:
The court does not require a cross-motion for summary judgment when it can decide the issue that was the subject matter of another party’s motion for summary judgment When at least one party has invited the court to make a summary judgment determination, there is nothing in the wording of Rule 20.04(2) to limit the possibility of summary judgment to a decision in favour of the moving party alone.
[41] For additional cases adopting this position see: Landrie v. Congregation of the Most Holy Redeemer, 2014 ONSC 4008, 120 O.R. (3d) 768, at para. 51; Singh v Trump, 2015 ONSC 4461, at para. 35; and Deluca and Vogeli v. MacLaren Art Centre Inc. 2016, ONSC 1428 at paras. 19-21.
[42] Rule 20.04(2.1) sets out the powers of the court on a motion for summary judgment:
In determining under clause (2) (a) whether there is a genuine issue requiring a trial, the court shall consider the evidence submitted by the parties and, if the determination is being made by a judge, the judge may exercise any of the following powers for the purpose, unless it is in the interest of justice for such powers to be exercised only at a trial:
- Weighing the evidence.
- Evaluating the credibility of a deponent.
- Drawing any reasonable inference from the evidence.
[43] These powers have been extensively reviewed by the Supreme Court of Canada in the case of Hyrniak v. Mauldin, supra.
Application to the Facts
[44] While there are facts in dispute in this motion, I am satisfied from the affidavit evidence and the examinations of the real estate agents, as well as the inferences I have drawn from the contrast between Schedule A in the Purbas APS and the Moursalien APS, that at the time the defendant signed the APS he was not informed and did not know that there was a second TCPL easement (the 1992 Easement) running under the pool and cabana, or that the easement and letter signed by the plaintiffs on June 2, 2011, permitted TCPL to remove the pool and cabana at any time. Nor was the defendant made aware that there was litigation between the plaintiffs and TCPL in relation to the second easement, or that the defendant was required to sign the “Agreement to Install Swimming Pool and Cabana” if they did not want to become embroiled in the litigation upon closing the sale. None of this information was disclosed to the defendant in the APS or when he signed the APS.
[45] In addition, the 1992 easement and the June 2, 2011 letter agreement are inconsistent with the terms of the APS signed on August 25, 2014. These could hardly be described as “minor easements” within the meaning of clause 10(c) of the APS. And, contrary to clause 10(d) of the APS, an easement that gives TCPL the right to remove the pool and cabana at any time cannot be described as an easement that “does not materially affect the use of the property”.
[46] The reference to a single easement in Schedule A of the APS did not provide the defendant with notice or disclosure of the 1992 easement or the June 2, 2011 letter agreement. Schedule A did not referentially incorporate the 1992 easement or make it part of the APS. This is especially true when the wording of Schedule A is compared to the wording of Schedule A in the earlier Purbas APS, which specifically referenced the TCPL litigation. Accordingly, the existence of the 1992 easement, the June 2, 2011 letter agreement, the unexecuted “Agreement To Install Swimming Pool and Cabana”, and the cloud of the litigation in relation to the plaintiffs’ refusal to execute the agreement, all meant that the plaintiffs did not comply with paragraph 10 of the APS which required the title to be free from all registered restrictions except as specifically provided in the agreement.
[47] In addition, a title search of the property would not have revealed the existence of the “Agreement to Install Swimming Pool and Cabana” since the plaintiffs refused to sign it even though they signed the June 2, 2011 letter agreement with TCPL that included an undertaking to execute a formal agreement that would be registered on title. The defendant did not know that he was expected to sign this agreement or that its execution was subject to outstanding litigation.
[48] Finally clause 4 of the APS states that the saltwater pool would be conveyed “free from all liens, encumbrances or claims affecting the said fixtures or chattels.” The plaintiffs were also in violation of this provision since the pool was subject to removal at any time pursuant to the June 2, 2011 letter agreement and was also the subject of a claim by TCPL. This information should have been disclosed.
[49] The defendant takes the position he was induced to believe that he was buying a property with approximately 1.3 acres of land that contained an unencumbered pool and cabana for $1,685,000. He could never be certain as to when he would be required to remove the pool and cabana at a significant financial cost to him. There was no telling whether TCPL would permit him to rebuild the pool and cabana should it ever be removed.
[50] The easements and agreements meant that the defendant was deprived of a substantial portion of the benefit that was agreed to in the contract and the defendant was entitled to treat the contract as at an end and demand the return of his deposit.
[51] The defendant relies on the case of Hallinan v. Coughlin. This case considered a standard form agreement of purchase and sale with language identical to clause 10 in the Moursalien APS at issue in this case. Like this case, that case dealt with an easement that was not disclosed in the agreement of purchase and sale. The easement in the Hallinan case permitted neighbours to use the driveway and backyard of the house. Counsel for the seller took the position that the purchaser could have deduced that the easement existed because she knew that she had to permit access to her backyard to her neighbours.
[52] Gray J. rejected this position stating (at para. 11):
I do not accept this submission. In my view, that sort of informal information acquired in such a fashion is insufficient to put the applicant on notice that there is a registered encumbrance of which she should be concerned. Furthermore, paragraph 10 of the agreement provides, in plain terms, that the title to the property is good and free from all registered encumbrances “except as otherwise specifically provided in this agreement”. The fact that the applicant may have been able to figure out that there might be an easement of some sort does not satisfy the requirement that the easement must be specifically mentioned in the agreement, which it was not.
[53] This analysis also applies in our case. I have already found that the 1992 TCPL easement and the agreements and litigation in relation to the easement and the pool and cabana were not specifically provided for in the APS.
[54] Gray J. was also concerned with the extent of the easement and the unanticipated use to which it could be put. He stated (at para. 12):
Furthermore, the easement covers the entire backyard, and there is no restriction on the uses to which the easement may be put. If one of the neighbours requires access for the building of some large accoutrement, it could conceivably be necessary for the owner to dismantle the deck in order that access can be obtained. The applicant could hardly assess the nature of the potential problems arising from such an easement through informal advice that the neighbours need to have access to the backyard.
[55] Again, this analysis applies in our case. The TCPL easement covers almost the whole backyard, and it could become necessary for the defendant to remove the swimming pool and cabana at TCPL’s request. There is nothing in Schedule A or any other part of the APS to suggest that this property is subject to such an encumbrance.
[56] Like the easement in the Hallinan case, the easement could affect, in a significant way, the defendant’s use and enjoyment of the property.
[57] Gray J. provided the following interpretation of paragraph 10 of the APS (at paras. 14 and 18):
Paragraph 10 of the agreement says nothing about whether the encumbrance affects the use and enjoyment of the property. Rather, it requires that the title be free from all registered encumbrances except as specifically provided in the agreement. If the property is subject to a registered encumbrance that is not specifically provided for in the agreement, the vendor is in breach and the purchaser is entitled to rescind.
In my view, the purpose of a provision such as paragraph 10 of the agreement is to permit the purchaser to make an informed choice as to whether he or she will purchase the property that is subject to such an easement. That is why the existence of such an easement is to be disclosed in the agreement of purchase and sale, and if it is not, the purchaser is given the option to rescind the agreement. It should not be necessary for the purchaser to produce speculative evidence as to how an easement of this sort might affect his or her use and enjoyment of the property.
[58] Gray J. concluded (at para. 20) that the purchaser “was entitled to rescind the agreement as a result of the registered easement that had not been disclosed in the agreement of purchase and sale.” The same conclusion applies in our case.
Conclusion
[59] For these reasons summary judgment is granted in favour of the defendant who is entitled to a return of his deposit of $50,000, together with prejudgment interest from November 28, 2014, the scheduled date of closing.
[60] The defendant is presumptively entitled to costs, subject to any offers to settle under Rule 49.10. If the parties cannot agree on costs, the defendant may file costs submissions of no more than 3 pages (not including costs outline and offers to settle) within 30 days of the release of this decision. The plaintiffs shall have 14 days thereafter to file their submissions on the same terms.
Justice R.E. Charney
Released: May 19, 2016