CITATION: Yip v. Behboodi, 2020 ONSC 807

NEWMARKET COURT FILE NO.: DC-19-04-00

DATE: 20200205

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

EDWARD YIP

Plaintiff (Respondent)

– and –

NOORULLAH BEHBOODI and ZAHRA BEHBOODI

Defendants (Appellants)

D.M. Goodman, for the Plaintiff (Respondent)

G. Govedaris, for the Defendants (Appellants)

HEARD: January 24, 2020

REASONS FOR DECISION

On appeal from the decision of Deputy Small Claims Court Judge A. Davis

dated March 20, 2019

MULLIGAN J.:

[1] The Appellants, Noorullah Behboodi and Zahra Behboodi (the vendors) were defendants in a Small Claims Court action commenced by Edward Yip (the purchaser), the Respondent in this Small Claims Court appeal.

[2] Deputy Judge A. Davis conducted a trial on December 19, 2018, with respect to a claim by the purchaser against the vendors following the completion of a residential real estate transaction. The deputy judge heard evidence from both the vendor and purchaser, reviewed numerous documents as exhibits, and at the completion of the trial, reserved judgment pending written submissions from the parties. His 28-page Judgment was rendered in favour of the purchaser, Mr. Yip, for damages in the amount of $17,488.27.

[3] The damages awarded were based on two issues. The first was an admitted buy-out figure for an HVAC system, $13,554.35. The balance of $3,933.92, was the amount that the court awarded for certain fixtures removed from the property prior to closing. It should be noted that the purchaser was only partially successful with respect to his claim with respect to the amount sought for fixtures removed contrary to the Agreement.

Background

[4] The essential facts with respect to the Agreement of Purchase and Sale between the parties are not in dispute. The parties entered into an Agreement of Purchase and Sale on October 29, 2016, to purchase a residential property for $2,175,000. Certain chattels were included with the Agreement. No fixtures were listed as excluded. The only rental item noted was “hot water tank if rental”. His Honour made specific findings of fact, noting at page 8 of the decision:

3. The Agreement does not exclude any fixtures.

4. The Agreement does not exclude the HVAC or identify the HVAC system as being one of the rental items.

5. The Defendants (the vendors) were fully aware at the time of their execution of the Agreement as vendors, that the HVAC system was under rental, was not owned by them.

6. The Agreement (of Purchase and Sale) contains the Warranty which states it does not merge on closing of the transaction and binds the parties thereto in accordance with its terms.

7. The Warranty was not amended or altered by a written amendment to the Agreement or otherwise prior to closing to reflect the concept of the rental of the HVAC or that this system is subject to a lien/encumbrance in favour of the lienholder, Enercare.

8. The Undertaking and Bill of Sale delivered on the Closing [with the handwritten words] “except HVAC” from the agreement to leave all chattels and fixtures specified in the Agreement free of encumbrances, liens and claims…

9. The Undertaking of the Bill of Sale purports to amend both the Agreement and the Warranty…

10. There is no consideration given for the defendants’ (vendors) unilateral amendment to the warranty reflected in the Undertaking and Bill of Sale.

11. The Plaintiff (purchaser) only became aware of the lien after the execution of the Agreement by all parties and a search of title.

[5] His Honour considered the submissions of the parties, noting the sellers’ submissions that, “The HVAC furnace issue, were not conditions that could possibly have allowed the plaintiff to refuse to close but rather warranties, which by the terms of the Agreement of Purchase and Sale, survive closing. He summarized the vendors’ position, after considering the purchase home inspections, their Notice to Close Under Protest, followed by a withdrawal, and noted the vendors’ position that these actions by the buyer prior to closing in effect extinguished any rights to the warranty. The plaintiff withdrew the Notice of Protest and failed to object to the alleged defects. His Honour noted that the vendor refused to close unless the “Notice to Close Under Protest” was withdrawn. His Honour considered the legal principles with respect to contracts and warranties. He summarized the law of warranty as follows: “A breach of warranty entitles a beneficiary thereof to damages but does not permit a purchaser to rescind the agreement” (citations omitted).

[6] His Honour considered the credibility of the testimony of both the vendors and purchaser.

[7] In coming to his conclusion, His Honour noted that the HVAC was a rental, not excluded in the Agreement of Purchase and Sale. Further, it was not disputed that the HVAC lien was registered on title and requisitioned by the purchaser’s lawyer in a timely manner. Further, the purchaser suggested it would close under protest, then the protest was withdrawn by the purchaser’s solicitor, who noted, “My client is agreeable to withdrawing the Notice to Close Under Protest but will reserve all rights of recourse as to any defects/deficiencies as may be revealed upon possession.”

[8] The court then noted in para. 21 of his decision:

The plaintiff (purchaser) was under pressure, as were the defendants (vendors), did not “by their own actions” waive the warranty nor, prior to closing, fail to object to the non-compliance with the warranty.

Further stating at p.26:

The plaintiff (purchaser) did not take any measures prior to the closing to deny, affect or negate his ability to rely upon the Warranty, which is stated to survive the closing. [Citation omitted.]

Analysis

[9] The standard of review of decisions under appeal is clearly understood.

[10] In 2002, the Supreme Court of Canada articulated the standard of review in Housen v. Nikolaisen, 2002 SCC 32. With respect to the standard of review for findings of fact, the Court stated at para. 10, “The standard of review for findings of fact is that such findings are not to be reversed unless it can be established that the trial judge made a ‘palpable and overriding error’” (citations omitted).

[11] At para. 18, the Court then said:

The trial judge is better situated to make factual findings owing to his or her extensive exposure to the evidence, the advantage of hearing testimony viva voce, and the judge’s familiarity with the case as a whole. Because the primary role of the trial judge is to weigh and assess voluminous quantities of evidence, the expertise and insight of the trial judge in this area should be respected.

[12] In a recent decision, Canada (Minister of Citizenship and Immigration) v. Vavilov, 2019 SCC 65, the Supreme Court of Canada reinforced the standard of review regarding questions of fact, as set out in its earlier decision Housen v. Nikolaisen, 2002 SCC 33. As the majority stated at para. 37:

Where the scope of the statutory appeal includes questions of fact, the appellate standard of review for those questions is palpable and overriding error (as it is for questions of mixed fact and law where the legal principle is not readily extricable): see Housen.

[13] In Her Majesty the Queen v. The South Yukon Forest Corporation, [2021] FCA 165, Stratas J.A. provided a helpful discussion concerning palpable and overriding error. As the Court stated at para. 44-46:

[44] In defining palpable and overriding error, South Yukon and Liard Plywood relied heavily upon the guidance given by the Court of Appeal for Ontario concerning palpable and overriding error in Waxman v. Waxman. They forcefully submitted that palpable and overriding error is a highly differential standard of review and that the Federal Court judge’s factual findings in this case cannot be disturbed.

[45] On this, I agree with the respondents.

[46] Palpable and overriding error is a highly differential standard of review… “Palpable” means an error that is obvious. “Overriding” means an error that goes to the very core of the outcome of the case. When arguing palpable and overriding error, it is not enough to pull at leaves and branches and leave the tree standing. The entire tree must fall.

[14] With respect to the HVAC issue, His Honour considered the conduct of the defendants/vendors in failing to remove the HVAC lien and in unilaterally amending the Bill of Sale to exclude the HVAC. He stated at page 20:

This would allow the defendants (vendors) to benefit by a potential breach of their obligation under the Agreement to convey title to the home and replace the plaintiff in a position of breaching his obligations to complete the transaction in the circumstance where the breach of the warranty is not sufficient to relieve the plaintiff.

[15] Finally, the Appellants take issue with His Honour’s statement, “The defendants’ (vendors’) non-compliance thereto was not finally discernable until after the closing, until the defendants actually failed to pay out and discharge the lien.” The Appellants submit that this is an error of fact, which requires appellate review on the Housen standard.

Conclusion

[16] In my view, this statement does not rise to the level of a palpable and overriding error as contemplated by the Supreme Court of Canada in Housen. Instead, I would compare it as an attack on leaves and branches, rather than the whole tree, based on the analogy set out in South Yukon. In his written decision, His Honour thoroughly reviewed all of the evidence, considered the credibility of the purchaser and the vendor in circumstances where the HVAC contract was not shown as a rental item on the Agreement of Purchase and Sale, notwithstanding that a lien was registered on title. The lien that was appropriately requisitioned. His Honour made numerous findings of fact in circumstances where the purchaser was buying a $2,100,000 house and the issue at play was a $13,000 HVAC payout. The purchaser chose not to breach the contract to purchase the property but instead, availed himself of the warranty after closing.

[17] I would not disturb the deputy Small Claims judge’s decision with respect to this head of damage.

Other Damages

[18] His Honour awarded damages for certain missing fixtures after considering the evidence of the vendors and purchaser. In drawing negative inferences about the testimony of the vendors, the court stated, “The court finds the testimony of Mr. Behboodi unreliable, self-serving, unsubstantiated and unacceptable on an issue of credibility.” His Honour considered the chattels listed in the Agreement of Purchase and Sale and took into account the purchaser’s evidence about items missing upon first inspection after closing. His Honour made findings of fact with respect to certain fixtures. I find no palpable and overriding error which would cause me to interfere with that finding.

[19] The appeal by Noorullah Behboodi and Zahra Behboodi is dismissed with costs.

Costs

[20] At the conclusion of the hearing, both parties made submissions as to costs in the event that they were successful. The Appellants suggested that they ought to be awarded costs in the range of $2,500, if successful. Counsel for the Respondent submitted a costs outline, suggesting that they ought to be awarded costs in the range of $6,500 on a partial indemnity basis, for the costs of preparation of the appeal, including $1,500 for attendance.

[21] I am satisfied that the Respondent, Edward Yip is entitled to costs on a partial indemnity basis. The Rules of Civil Procedure provide a number of considerations for courts to consider when assessing costs. This was a brief hearing stemming from a Small Claims Court judgment of $17,000. Both parties prepared factums and briefs of authorities. The unsuccessful party submitted his costs claim for comparison purposes. After considering these issues, as well as proportionality, I am satisfied that an award of costs of $3,500, all inclusive, is fair and reasonable under the circumstances, payable by the Appellants, Noorullah Behboodi and Zahra Behboodi, to the Respondent, Edward Chan Lay Yip, within 30 days of the release of this decision.

MULLIGAN J.

Released: February 5, 2020