COURT OF APPEAL FOR ONTARIO
CITATION: Kramer v. Ballantyne-Gaska, 2025 ONCA 1
DATE: 20250102
DOCKET: COA-23-CV-1242
Nordheimer, Copeland and Madsen JJ.A.
BETWEEN
Yvette Kramer and Garry Andrade
Plaintiffs (Respondents)
and
Laurie Ballantyne-Gaska, Jerry Gaska, Rosellee Collins* and Johnson Collins*
Defendants (Appellants*)
Ben Thind, for the appellants
David Morin and Peter Reinitzer, for the respondents
Heard: December 5, 2024
On appeal from the judgment of Justice Susan Stothart of the Superior Court of Justice, dated April 5, 2024,[^1] with reasons reported at 2023 ONSC 6011.
Copeland J.A.:
Introduction
[1] In March 2016, the respondents purchased the Rock Pine Motel and Restaurant, in Marten River, Ontario (the “Property”), from the appellants. The respondents purchased the Property with the intent of continuing to run the business as a motel, restaurant, and gas station.
[2] The respondents testified that while the purchase was negotiated, they inquired of Mr. Collins about the condition of the tank system for the gas station. The respondents testified that Mr. Collins told them the tank system was in good condition and only required some testing in the spring. Mr. Collins denied making such representations. He denied that the respondents asked any questions about the condition or age of the tank system.
[3] The Agreement of Purchase and Sale (“APS”) included a clause in which the appellants agreed to obtain a report from a fuel oil distributor confirming that that the tank system was in safe operating condition and complied with regulatory requirements under the Technical Standards and Safety Act, 2000, S.O. 2000, c. 16 (the “TSSA clause” and the “TSSA”).
[4] In June 2016, after the sale closed and the respondents took title to the Property, they learned that in 2014 and 2015, before they had entered into the APS, inspections had been conducted of the tank system at the Property on a number of occasions by the Technical Standards and Safety Authority (the “Authority”). As a result of those inspections, the Authority issued compliance orders to the appellants on multiple occasions concerning the tank system. Failure to comply with an order made by an inspector of the Authority is an offence under the TSSA and may result in the imposition of a fine or imprisonment of up to one year: TSSA, s. 37(1). The appellants took no steps to have work done on the tank system to bring it into compliance with the orders.
[5] Once the respondents found out about the compliance orders, they made various inquiries about ways to remediate the issues with the tank system. Ultimately, they came to the conclusion that the only remedy was to replace the tank system. The issue of remediation is discussed further below in relation to damages.
[6] In July 2017, the respondents commenced an action against the appellants for damages for breach of contract and fraudulent and/or negligent misrepresentation. The action also included a claim for negligence against the lawyer who acted for the respondents on the purchase transaction.[^2]
[7] The trial judge, in thorough reasons, found in favour of the respondents. She found that that the appellants fraudulently misrepresented the condition of the tank system to the respondents. In particular, the trial judge found that Mr. Collins knew that the tank system had not passed cathodic testing, that the tank lines had not been regularly tested as required, and that the Authority’s inspector had told him during an inspection in December 2015 that he would not be able to use the tank system during the winter of 2015/2016, unless the requirements of the various compliance orders were met. She found that Mr. Collins represented to the respondents that the tank system was “really good” or “all good”, that it “didn’t need anything” other than two tests that needed to be completed in the spring, and that all that needed to be done was to transfer the fuel licence. He did not tell them about the outstanding TSSA compliance orders. She found that Mr. Collins knew that the representations he made about the tank system were false.
[8] The trial judge found that Mr. Collins intended for the respondents to act on his fraudulent misrepresentations. In particular, she found that the appellants wanted to sell the Property without investing further money into it, and that Mr. Collins made the representations to make the Property more attractive and so that the respondents would purchase it. She found that the misrepresentations caused the respondents to purchase the Property. She found that the misrepresentations had caused damage to the respondents.
[9] In making these findings, the trial judge made significant credibility findings adverse to Mr. Collins on the issue of his misrepresentations about the state of the tank system. She found that Mr. Collin’s evidence was not credible, was unreliable, and that he was evasive and contradictory. By contrast, she found the respondents to be credible and reliable.
[10] The trial judge also found the appellants liable for breach of contract. She found that the TSSA clause in the APS required the appellants to provide a report confirming that the tank system was in a safe and legally compliant condition. The appellants breached this term of the APS and never provided the stipulated report. Further, the trial judge found that in light of the TSSA clause, the APS was not an agreement by the respondents to purchase the Property “as is” in relation to the tank system. Rather, the respondents contracted to purchase the Property with a safe and legally compliant fuel tank system. She found that in light of the timing of the sale and the closing, the respondents could not conduct their own due diligence by having the tank system independently tested because the ground was frozen. As a result, the parties agreed to extend the terms of the TSSA clause post-closing. Thus, the obligation assumed by the appellants in the TSSA clause survived closing.
[11] The trial judge assessed damages at $635,189.12. She apportioned 80% of liability to the appellants, 20% to the real estate lawyer, and 0% to the respondents.
[12] The appellants appeal from the judgment. They raise numerous grounds of appeal with respect to the liability finding and also challenge the trial judge’s assessment of damages.
[13] After hearing submissions from the appellants, the court called on the respondents to respond to only two grounds of appeal: 1) whether an adjournment should have been granted to the appellants due to the timing of disclosure of the Pierringer agreement; and 2) whether the trial judge erred in her assessment of damages. For the reasons that follow, I would dismiss the appeal.
Analysis
(1) The trial judge made no error in relation to the Pierringer agreement
[14] Weeks[^3] before the start of the trial, a settlement, which included a Pierringer agreement, was concluded between the respondents and the real estate lawyer who acted for them on the purchase transaction. The Pierringer agreement included provision for the dismissal of the respondents’ claims against the real estate lawyer, and for the respondents to restrict their claims against the appellants to those for which the appellants may be severally liable. A copy of the Pierringer agreement was disclosed to the appellants on March 16, 2023, just over two weeks prior to the first day of trial.
[15] The appellants argue that the Pierringer agreement was disclosed to them late. They argue that they should have been granted an adjournment to consider their position in relation to the Pierringer agreement, so that they could possibly have sought a stay of proceedings for late disclosure, relying on cases such as CHU de Québec-Université Laval v. Tree of Knowledge International Corp, 2022 ONCA 467, 162 O.R. (3d) 514, at para. 55; Aecon Buildings v. Brampton (City), 2010 ONCA 773, at paras. 13 and 16. They argue that they were prejudiced by the late disclosure and a new trial should be ordered on this basis.
[16] There are three problems with this argument.
[17] First, the appellants did not ask for an adjournment when the Pierringer agreement was disclosed. Indeed, they consented to the trial proceeding as scheduled.
[18] As noted above, a copy of the Pierringer agreement was disclosed to the appellants on March 16, 2023. At the outset of the first day of trial, April 3, 2023, counsel for the appellants sought to raise issues regarding the effect of the Pierringer agreement; although they had filed no motion materials. The trial judge suggested that counsel have a mid-trial conference with Ellies J., who had conducted other pre-trial conferences in this matter. In his endorsement from the conference, Ellies J.’s outlined the issue raised regarding the Pierringer agreement and then stated:
However, it is agreed that the Collins defendants will suffer no prejudice if the trial proceeds today as planned and the issue of the effect of the Pierringer agreement is dealt with at the end of the evidence.
After the mid-trial conference, the trial judge read the full endorsement into the record and counsel for both parties confirmed their agreement.
[19] In light of the appellants not only failing to ask for an adjournment, but also agreeing that they did not need one in the mid-trial conference, this ground cannot prevail. The trial judge did not err in failing to grant an adjournment that the appellants did not request.
[20] Second, at no point during the trial did the appellants seek a stay of proceedings based on the Pierringer agreement. There is dispute between the parties about whether the Pierringer agreement was disclosed late (discussed below). But even if it was disclosed late, the failure of the appellants to take any steps to seek a stay is fatal to their position that a new trial should be ordered so that they can seek a stay.
[21] In the case management conference on the first day of trial, the appellants agreed that any issues about the effect of the Pierringer agreement would be addressed at the end of the evidence. That is what happened. The trial judge heard submissions regarding the Pierringer agreement after the evidence was complete. The court was not provided with the transcript of these submissions for the appeal; however, the trial judge briefly addressed them at the end of her reasons for judgment. It is clear from the reasons that the only issue addressed in the submissions arising out of the Pierringer agreement was the possibility that the respondents may be overcompensated if their settlement with the real estate lawyer exceeded the damages apportioned to the real estate lawyer by the trial judge. The trial judge decided that the issue was premature because the unredacted Pierringer agreement with the settlement amounts had not yet been disclosed. She offered to hear additional submissions on the overcompensation issue if the parties wished, after the disclosure of the unredacted settlement agreement.
[22] At no point prior to this appeal did the appellants request a stay. The appellants had ample time between the two weeks before trial when they received the Pierringer agreement and the end of the three week trial to request a stay. They did not do so.
[23] Third, because the appellants did not seek a stay below, there is an insufficient evidentiary basis to conclude that the Pierringer agreement was disclosed late. In oral submissions on the appeal, the respondents contested the assertion that it was disclosed late. In particular, the respondents contested the date that the real estate lawyer signed the Pierringer agreement and also took the position that counsel for the appellants was advised of the existence of the agreement before it was signed and finalized. Because the appellants did not seek a stay below, the respondents were denied the opportunity to file evidence regarding the timing of disclosure.
[24] I would reject this ground of appeal.
(2) The trial judge did not err in the measure of damages for breach of contract
[25] As noted above, the trial judge assessed damages at $635,189.12 and apportioned 80% of the liability to the appellants. The appellants raise three issues in relation to damages. First, they argue that the trial judge misapprehended the evidence about the Northern Ontario Compliance Strategy. They argue that had the trial judge not misapprehended this evidence, the quantum of damages would have been much lower. Second, they argue that that the trial judge erred in relation to the measure of damages. They argue that damages should have been assessed based on the difference between the contract price and the value of the Property on the closing date. Third, they argue that the trial judge erred in failing to deduct an amount for betterment from the damages based on remediating the tank system. That is, the trial judge should have deducted some amount for the fact that through replacing the tank system, the respondents got something of more value than what they had contracted for – a brand new tank system, rather than a used and aged but safe and legally compliant tank system.
(i) The trial judge did not misapprehend the evidence in relation to the Northern Ontario Compliance Strategy
[26] The Northern Ontario Compliance Strategy (the “NOCS”) was a strategy employed by the Authority to provide more time for retail gas outlets in Northern Ontario to bring their fuel delivery systems into regulatory compliance. The appellants argue that the trial judge misapprehended the evidence about the NOCS. They argue that, properly understood, the evidence about the NOCS provided a full alternative to the removal and replacement of the existing tank system. The appellants argue that under the NOCS, the respondents could have obtained a variance which would have permitted them to continue using the existing tank system with regular inspections. Had the trial judge found that this alternative was available, it would have resulted in a much lower quantum of damages.
[27] I would reject this argument. The trial judge carefully considered the evidence relating to the NOCS in her reasons. She found that the evidence did not support the conclusion that the respondents could avail themselves of the NOCS to continue to operate the gas station. She found that the NOCS was a strategy employed by the Authority to provide more time for retail gas outlets in Northern Ontario to bring their fuel delivery systems into compliance with the TSSA, but it did not change the applicable regulatory requirements in the TSSA nor its regulations. A key component of relying on the NOCS was a requirement to obtain a variance. The trial judge found that the evidence did not support the ability of the respondents to obtain that variance under the NOCS. As a result, the NOCS was not available as a less expensive option for the respondents to be able to continue to operate the gas station without replacing the tank system. The trial judge further found that even if there was evidence to support that the respondents would have been able to obtain the variance, that would only delay the need for the respondents to fix the legal compliance deficiencies with the tank system, not remove it.
[28] These findings of fact by the trial judge are supported by the record and are owed deference. I am not persuaded that the trial judge misapprehended the evidence in relation to the NOCS or made any palpable and overriding error in her assessment of this evidence.
(ii) The trial judge made no error in the measure of damages for breach of contract
[29] The appellants argue that the trial judge erred by assessing damages based on the cost to remediate the deficiencies with the tank system, rather than based on the difference between the contract price of the Property and the value of the property as of the date of closing, relying on The Rosseau Group Inc. v. 2528061 Ontario Inc., 2023 ONCA 814, at para. 62.
[30] I disagree.
[31] In her reasons on damages, the trial judge stated that whether damages were assessed as a matter of breach of contract or for the tort of fraudulent misrepresentation, “in this case, they are ultimately the same.” The submissions before us on the measure of damages focused primarily on damages for breach of contract. As I would find no error in the trial judge’s assessment of damages for breach of contract, it is not necessary to consider whether the same measure of damages would have been appropriate had the only liability been in tort.
[32] Citing Fidler v. Sun Life Assurance Co. of Canada, 2006 SCC 30, [2006] 2 S.C.R. 3, and Saramia Crescent General Partner Inc. v. Delco Wire and Cable Limited, 2018 ONCA 519, the trial judge assessed damages for breach of contract on the basis that damages should place a plaintiff in the same position as if the contract had been performed, provided that they arise naturally from the breach or are in the reasonable contemplation of the parties.
[33] The trial judge found that the respondents contracted to purchase a business that had a gas station with a safe and legally compliant fuel tank system. The appellants breached the contract and did not deliver what had been agreed to. The trial judge carefully considered the evidence of the remedial options available to the respondents when faced with this breach. She found that replacing the tank system “arises fairly, reasonably and naturally as a result of the breach of the contract – which was a contract to purchase a property with a safe, legally compliant underground fuel tank system.” She further found that the damages claimed to replace the tank system were within the reasonable contemplation of the parties. Had the respondents not replaced the tank system, they would have been legally required to stop selling fuel. The trial judge found that in order to put the respondents in the position of having a functioning gas station with the safe and legally compliant fuel tank system – what they had contracted for – the tank system had to be replaced.
[34] I see no error in the trial judge’s assessment of damages for breach of contract. In Fidler, at para. 27, the Supreme Court held:
Damages for breach of contract should, as far as money can do, place the plaintiff in the same position as if the contract had been performed. However, at least since the 1854 decision of the Court of Exchequer in Hadley v. Baxendale, it has been the law that these damages must be “such as may fairly and reasonably be considered either arising naturally . . . from such breach of contract itself, or such as may reasonably be supposed to have been in the contemplation of both parties”. [Citation omitted.]
[35] The trial judge applied the measure of damages outlined in Fidler and made no error in so doing. Her findings in relation to damages satisfied the requirements of Fidler that the damages put the respondents in the same position as if the contract had been performed and that the damages either arose naturally from the breach of the contract or were in the reasonable contemplation of the parties.
[36] Although the damages awarded by the trial judge are more than the sale price for the Property in the APS, which was $400,000, they are not an amount that could be said to be outside the contemplation of the appellants in the sense described in Fidler. The appellants knew there was significant cost involved to make the tank system legally compliant. The trial judge found that the appellants were aware of the many TSSA compliance orders involving the tank system, and sold the property without disclosing the problems with the tank system (and misrepresenting the state of the tank system) because they did not have the money to get the work done to comply with the TSSA orders.
[37] Further, in light of the trial judge’s finding of fraudulent misrepresentation by the appellants, it is difficult to see why the agreed purchase price, which was tainted by fraudulent misrepresentation, would be a reliable measure to assess damages.
[38] The circumstances in this case are different from Rosseau. Rosseau involved a failed real estate transaction, where the vendor refused to close the sale. In that context, this court held that the normal measure of damages for the innocent purchaser is the difference between the contract price and the market value of the property on the “assessment date” – usually the closing date in the contract. The court described this as the normal measure of damages “for a failed real estate purchase”: at para. 62. As the court noted at para. 64 of Rosseau, in the context of a real estate transaction that does not close, the difference between the contract price and the value on the closing date will generally put the innocent party, as nearly as possible, in the position it would have been in if the contract had been performed. The principle in Rosseau, thus, applies the general rule from Fidler in the context of a failed real estate transaction.
[39] By contrast, in this case, the sale closed. The respondents became the owners of the Property. The principle from Rosseau about the normal measure of damages for a real estate transaction that does not close is inapplicable.
(iii) The trial judge made no error in her assessment of betterment
[40] The appellants argue that even if the trial judge did not err in basing damages on the cost to remediate the tank system, the respondents received a “windfall” because, by replacing the tank system, they got a brand new system. According to the appellants, a brand new tank system was better (more valuable) than what the trial judge found the respondents had contracted for – a safe and legally compliant, but not brand new, tank system.
[41] I see no error in the trial judge’s assessment of the issue of betterment. The trial judge noted that the appellants did not lead any evidence on the issue of damages. She found that the appellants had failed to satisfy her “that the expenses incurred and the estimated expenses to replace the fuel tank system would result in a windfall to the plaintiffs.” She referred to Gendron v. Thompson Fuels, 2017 ONSC 4009, at paras. 365-67, aff’d 2019 ONCA 293, leave to appeal refused, [2019] S.C.C.A. No. 228, for the proposition that in some cases, “replacing an old system with a new one does not increase the value of the property.” She held that the onus was on the appellants to prove the value of the alleged improvement (i.e., the increase in value of the Property from the new tank system as compared to if it had a safe and legally compliant but not new tank system).
[42] While I agree with the appellants that betterment was a live issue, the appellants bore the burden to prove the value of the alleged improvement: James Street Hardware and Furniture Co. v. Spizziri (1987), 1987 CanLII 4172 (ON CA), 62 O.R. (2d) 385 (C.A.), at pp. 403-5. I see no error in the trial judge’s finding that, with the appellants not having led any evidence on damages, the evidentiary record was insufficient to establish that the new tank system was more valuable than an older but safe and legally compliant tank system. Just by way of example, there was no evidence of the lifespan of an underground tank system. Had there been such evidence, it may have provided a basis to infer that a new tank system was more valuable than a used but safe and compliant older tank system: James Street Hardware, at p. 405.
(3) The remaining grounds of appeal
[43] I address briefly the remaining grounds of appeal, for which the court did not call on the respondents. Both challenge the trial judge’s interpretation of the TSSA clause in the APS.
[44] The appellants argue that the trial judge exceeded her jurisdiction by altering the terms of the TSSA clause in the APS. Although they frame their argument as jurisdictional, it is really a disagreement with the trial judge’s interpretation of the TSSA clause.
[45] The TSSA clause required the appellants to obtain a report stating that the “tank system . . . is in safe operating condition and complies with the requirements of the Technical Standards and Safety Inspection Act, 2002, and any Regulations thereto as amended from time to time.” The clause provided that the report be obtained from “a fuel oil distributor registered under the Technical Standards and Safety Act, 2002”.
[46] The appellants argue that the trial judge erred in her interpretation of the clause for a variety of reasons. They argue that the clause was flawed such that it made their compliance with its terms impossible. These flaws included that the clause misstated the name of the legislation (which was from 2000, not 2002) and referenced a “fuel oil distributor” when it ought to have referred to a “fuel distributor”. The appellants also assert that a distributor under the TSSA could not provide the type of report contemplated.
[47] I would reject the appellants’ argument that the trial judge exceeded her jurisdiction or altered the TSSA clause. The trial judge did not alter the TSSA clause; she interpreted it. The trial judge was required to interpret the meaning of the APS, and in particular, the TSSA clause, as part of the breach of contract claim. Her interpretation of the contractual terms is entitled to deference: Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53, [2014] 2 S.C.R. 633, at paras. 50-51.
[48] The trial judge considered the appropriate legal principles applicable to her interpretation of the contract. She interpreted the TSSA clause in light of those principles in the context of the record before her. She considered all of the arguments made by the appellants about supposed flaws in the TSSA clause and rejected the argument that it was impossible for the appellants to comply with it. She interpreted the TSSA clause to mean that the appellants were required to produce a report from a fuel distributor registered under the TSSA confirming that the tank system was in a safe operating condition and in compliance with the TSSA and its regulations. She interpreted the reference to the “tank system” in the TSSA clause as meaning the fuel tank system, which included the underground tanks, the underground piping, and the dispensing units. I see no palpable and overriding error in the trial judge’s interpretation of the TSSA clause. Indeed, the trial judge’s interpretation would appear to accord with the objective intentions of the parties: Sattva, at para. 55.
[49] The appellants also argue that the trial judge erred in interpreting the TSSA clause as a representation or warranty. The appellants argue that it was a condition included in the APS for the benefit of the respondents as purchasers. They argue that the TSSA clause did not survive the closing of the sale. They argue that the APS provided for the respondents to purchase the Property in “as is” condition.
[50] I would reject these arguments. As noted above, the trial judge found that the TSSA clause required the appellants to provide a report confirming that the tank system was in a safe and legally compliant condition. She found that, in light of the TSSA clause, the APS was not an agreement by the respondents to purchase the Property “as is” in relation to the tank system. Rather, the respondents contracted to purchase the Property with a safe and legally compliance fuel tank system. In light of the timing of the sale and the closing, the respondents could not conduct their own due diligence by having the tank system independently tested because the ground was frozen. As a result, the parties agreed to extend the terms of the TSSA clause post-closing. Thus, the obligation assumed by the appellants in the TSSA clause survived closing.
[51] I see no palpable and overriding error in this interpretation. The trial judge’s interpretation of the TSSA in the context of the APS as a whole is owed deference.
Disposition
[52] I would dismiss the appeal with costs to the respondents in the agreed amount of $25,000, inclusive of disbursements and applicable taxes.
Released: January 2, 2025 “I.N.”
“J. Copeland J.A.”
“I agree. I.V.B. Nordheimer J.A.”
“I agree. L. Madsen J.A.”
[^1]: The trial judge delivered her reasons for judgment on October 25, 2023. However, the formal judgment is dated April 5, 2024.
[^2]: Approximately two weeks before the start of the trial, the respondents entered into a settlement, including a Pierringer agreement, with their real estate lawyer, Laurie Ballantyne-Gaska. As a result, she did not participate in the trial.
[^3]: There is dispute about the date the Pierringer agreement was concluded, which I address below.