COURT FILE NO.: CV-99-00051002-00
DATE: 20140721
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
GORNERGRAT DEVELOPMENTS LIMITED, SEAN S. AKI, and SOICHIRO YAMAMOTO
Plaintiffs
– and –
THE CORPORATION OF THE TOWN OF MARKHAM
Defendants
T.B. Rotenberg, for the Plaintiffs
D. Boghosian and S. Taylor, for the Corporation of the Town of Markham
HEARD: June 4, 5, 6 and 9, 2014
REASONS FOR DECISION
HOWDEN J.:
OVERVIEW AND CONTEXT
[1] Before anything else, this case is about a letter. It is also about the vagaries of investing in raw development land, the demands of the planning process as it unfolds at each stage, and the pressures on investors and approval authorities who are not operating with full knowledge of each other’s position and information. Finally, it arises out of facts and events from a period 20-26 years ago; there is a live issue whether the principle of discoverability saves this action in the context of the law of limitations as it existed in 1989-99.
[2] This action was begun on January 8, 1999. It comes a substantial time after an earlier action brought by these plaintiffs against the developer of the subdivision in question which ended summarily and unsuccessfully for the claimants in 1992. That action sounded in alleged breach of contract and general negligence law.
[3] This action began as an action to recover damages and money paid to prior lawyers as well as to recover what was paid on account of an aborted purchase of 3 lots in an industrial subdivision in Markham. It went to trial as an action solely against the Town of Markham. All other defendants are out of the action. The title of proceedings is hereby amended to read as the only defendant “The Corporation of the Town of Markham”. The other defendants are struck from the title.
[4] The subdivision in question is located in the Town of Markham within the southeast quadrant of Highway 7 and Woodbine Avenue. As proposed, it took in land both east and west of Rodick Rd. and south of Yorktech Drive. Lots 1, 2, 3 and 4 are located west of Rodick Rd., and lots 5 to 8 are east of Rodick. The proposed plan of subdivision received approval as a draft plan from the Regional Municipality of York (“York”) on March 4, 1988. The draft conditions were technical and not unusual; they aimed to ensure that services were properly installed and that all planning agencies and line ministries with an interest in the development were consulted and would be satisfied with the subdivision agreement, including the list of required clearances, each subject to conditions.
[5] The plaintiffs have brought this action to claim damages in the sum of $1,196,333.50, being the amount paid on account of the attempted purchase of three lots in the Town of Markham in 1989 and 1990. The plaintiffs allege that they relied to their detriment on the negligent misrepresentation of the Building Director of the Town of Markham in a letter dated August 24, 1989. Gornergrat Developments Limited (“Gornergrat”) had entered three identical long-term agreements of purchase and sale in early 1989 for lots 2, 3 and 4 on the plan of industrial subdivision being developed by Ryan Road Developments Inc. (“Ryan Rd.”).
[6] The purchase price of each lot was $915,525.00. The agreements were structured so that the price was to be paid in instalments, first by deposit (5%of the price) on execution of the agreement, then 10% of the price within five days of registration of the plan of subdivision, and 15% or $137,300 (rounded) on the Date for Adjustment. The balance was to be paid on the second anniversary of the Date for Adjustment. Interest payments on the balance were to begin on the Date for Adjustment. It was an important date. The Date for Adjustment was agreed in section 3.01 of the purchase agreements to be:
the fifth business day following delivery to the purchaser …of a letter from the municipality indicating that upon an application for a building permit being made in accordance with all of the Municipality’s requirements and payment of the appropriate fees of the Municipality, that a building permit will be available for the construction of an industrial building meeting all the requirements of the relevant zoning and building by-laws of the Municipality. PROVIDED, that should a building permit not be available by the 30th day of August,1989,then the Agreement arising out of the acceptance of this offer shall be null and void, the deposit moneys shall be returned to the Purchaser without deduction or interest , and the vendor shall not be liable for any costs or damages of the purchaser. [Emphases added.]
[7] The sole shareholder, director and officer of the plaintiff Gornergrat was Carmen DiPaola. Mr. DiPaola was a real estate broker who became active in land development as well as buying and selling land between 1975 and the early 1990s. He had known of the Ryan Rd. property for some 20 years. In 1988 he became aware that that land was being serviced for an industrial subdivision. He knew in 1988-9 that there was a shortage in Markham of serviced industrial land and that there was a market for lots of 1 acre or slightly more. He found out that lots were available in the Ryan Rd. subdivision of about that size. On February 1, 1989, Gornergrat entered the three identical agreements to purchase lots 2, 3 and 4 on the proposed plan of subdivision in concession 4 of the Town of Markham. The agreement to purchase lot 2 was assigned by Gornergrat to Sean Aki and Soichiro Yamamoto in late May 1989. They and Gornergrat are the plaintiffs in this action (Exhibit 3, Agreed Chronology).
[8] The approval authority for the final phase of the subdivision process leading to the subdivision agreement and final registration was the Town of Markham. The subdivision agreement, together with the official plan and zoning by-law, set the policy and regulatory framework for what followed: i.e. the site plan control agreement and the development of the detailed site plan, minor variance (if required), and processing of the building permit applications. [The Planning Act, R.S.O. 1990, c.P.13, subsections 51(16), (16.1), (17), (23), (24), (26), (57), and (58)]. Subsection 51(26) authorizes the approval authority to enter into a subdivision agreement and gives it special power to enforce its terms; (31) provides for draft plan approval and (57) and (58) provide for the timing of installation of services and final approval and registration of the plan:
51(26) A municipality or approval authority, or both, may enter into agreements imposed as a condition to the approval of a plan of subdivision and the agreements may be registered against the land to which it applies and the municipality or the approval authority, as the case may be, is entitled to enforce the provisions of it against the owner and, subject to the Registry Act and the Land Titles Act, any and all subsequent owners of the land.
(31) The approval authority may give or refuse to give approval to a draft plan of subdivision.
(57) When the draft plan is approved, the person seeking to subdivide may proceed to lay down the highways and lots upon the ground in accordance with the Surveys Act and with the Registry Act or the Land Titles Act, as the case may be, and to prepare a plan accordingly certified by an Ontario land surveyor.
(58) Upon presentation by the person seeking to subdivide, the approval authority may, if satisfied that the plan is in conformity with the approved draft plan and that the conditions of approval have been or will be fulfilled, approve the plan of subdivision and, once approved, the final plan of subdivision may be tendered for registration.
[9] It is a process of increasingly detailed consultation, negotiation, and approvals or non-approvals. Those exchanges and decisions occur with regard to the list of statutory subjects (in s. 51(24) for subdivisions) which encompass all legitimate planning concerns, starting with the official plan and devolving down to use and yard requirements (zoning), draft approval of subdivisions, subdivision agreements, registration of the final plan of subdivision, site control plans and agreements, and finally development approvals. The Official Plan and zoning by-law set the overall policy and use regulation for the subdivision. There is no question of non-compliance with either in this case. And then, following compliance with ministerial and agency approvals including placement of required standards and restrictions in the subdivision agreement and in the subdivision plan where necessary, approval and execution of the agreement follows. Registration of the subdivision agreement and then the plan itself will then occur: later, exacting specifics of negotiating the site plan and the site plan agreement follow. The processing of the building permits brings the process down to the final step of site development that is to occur within the framework of the zoning regulations and specific agency requirements in the subdivision agreement, the final plan of subdivision and the site plan control requirements that have been developed along the way.
[10] Since York’s draft approval of the Ryan Rd. plan of subdivision in March 1988, Ryan Rd. and the Town of Markham had entered into the subdivision agreement for the first phase of the development of the subdivision as proposed on June 29, 1989. By this time, the plan of subdivision to be registered was now reduced to only the lots west of Rodick Rd., the Yorktech Drive and Rodick Rd. rights of way. The agreement identified the “Plan of Subdivision” that it applied to as the land in Schedule A: that schedule identifies only lots 1 to 4, the lots west of Rodick Rd., and the rights of way comprising Yorktech Drive and Rodick Rd. as the proposed plan of subdivision to which the agreement of June 29, 1989 applied. The reason that I referred to phase 1 is due to para 5.1 under the heading “Part 5 Special Conditions:
5.1 Phasing
It is acknowledged and understood that the subject plan comprises Phase 1 of draft approved Plan 19T-870398.
And at para. 5.36, the agreement includes the following clause linking prior MOE approval to issuance of any building permit in the subdivision Phase 1:
5.36 The Owner covenants and agrees that no building permits shall be released until such time as the Ministry of the Environment has given the Town approval to allow development in this area. The Town acknowledges that the lands may be released for building permits on a lot by lot basis should they be released by the Ministry of the Environment.
[11] There are two strange aspects to this case - if not strange, then certainly out of the ordinary. One was the gap in the evidence on how and with what disclosure the August 24, 1989 letter was invited or solicited from Mr. Walker. This is the letter that is the focal point of this action for negligent misrepresentation. Mr. DiPaola gave no evidence as to why or at whose instance it issued, probably because, as a purchaser, he would have little or no direct access to the vendors. In the previous action in 1991, Mr. Harry L. Edwards, Vice-President of Ryan Rd., detailed the events leading up to registration of the subdivision plan on August 22, 1989 and then merely recited that the Town provided the Walker letter on August 24, 1989 as if it simply issued from the Town unasked for and uninformed as to the requirements of Ryan Rd. in the agreements of purchase and sale, Art.3.01. In this, his first of two affidavits, Edwards merely described it as being the Town’s “usual form letter confirming the availability of building permits subject to the requirements of other public authorities” and a proper application being filed [Edwards aff., Sept. 28, 1991, Ex 2(42-1)]. He described it as compliance with Ryan Rd.’s obligation under Art.3.01 of the agreements of purchase and sale.
[12] Mr. Edwards filed a second affidavit in the previous action brought by these plaintiffs, in response to certain statements by Mr. DiPaola in that action. In his second affidavit, his description of the Town’s August 24, 1989 letter was somewhat different. This time, Mr. Edwards repeated his mantra that it complied with Art. 3.01 However this time Edwards swore that Mr. Walker told Edwards about the intent of the letter. Mr. Walker told him that he signed the letter, and that the intent of the letter was that, provided conditions (i) through (v) in the letter are met, building permits will be issued by the Town. Walker also told him that he was unable to say in the letter that building permits would be issued because those five conditions had yet to be complied with (H. Edwards aff., Dec. 6, 1991, Ex. 2(42-3).
[13] The second unusual aspect is the complete lack of any mention of the need for MOE approval in the draft plan conditions. It is only in the subdivision agreement that MOE approval for the first phase development is set out as a prerequisite to development. While this is unusual, it is not beyond the statutory authority of the Planning Act to include it at this later stage. At times, issues come to the fore after draft approval that can only be addressed in the subdivision agreement as a condition precedent to development and issuance of building permits. In this case, the engineering consultants for Ryan Rd. found solid waste materials on part of the Ryan Rd. lands. It was not found on lots 1 to 4.
[14] Unknown to the plaintiffs in 1989, the Ministry of the Environment (“MOE”) had told the Town of Markham, by letter of November 3, 1988, that due to the finding of waste material within part of the Ryan Rd. proposal and its former use as an auto wrecking yard, until the Minister granted a s. 45 approval based on satisfactory plans and specifications, building permits were to be denied. At that time, this directive applied to the entire area of the proposed Ryan Rd. subdivision. Because draft approval had already been granted before the MOE’s finding and directive, there is no mention of this policy in the conditions of draft approval. The MOE letter of November 3, 1988 included a list of matters its consultants must address in order to obtain a s.45 approval as well as a draft indemnification agreement in favour of the MOE.
[15] Section 45 of the Environmental Protection Act, R.S.O. 1980, c.141 (“EPA”) reads in part:
No use shall be made of land ... which has been used for the disposal of waste within a period of twenty-five years from the year in which such land ceased to be so used unless the approval of the Minister for the proposed use has been given.
[16] By the period from March to May 1989, Trow Dames and Moore, the hydrogeologic and environmental consultants, submitted a report containing further borehole testing for the purpose of demonstrating to MOE that lots 1 through5 were unaffected by any previously buried waste which was all located to the west of Rodick Rd. This report referred to phase 1 of the subdivision development as lots 1 to 6. By May and June 1989, the MOE in its memo of May 31 and the Town in the subdivision agreement had picked up on the phasing idea based on the Trow Dames Moore application for clearance for development within the Ministry’s Guidelines for the Decommissioning of Sites and Cleanup of Sites in Ontario [Ex.12(39), Trow Dames Moore report of March 15, 1989; Ex. 11(8), J. Reid, ADM, MOE, memo to G. Miezynski, P.Eng. of the Town re s.45 approval part block 10, Ryan Rd. subdivision for gravel storage; Ex. 2 (11), Subdivision Agreement, June 29, 1989].
[17] It is clear that the phasing idea to allow final approval for registration of the reduced original plan including lots 2, 3 and 4 as well as lots 1 and 5, came out of this ongoing exchange between Ryan Rd.’s consultants, Ryan Rd., the Town and MOE but because MOE had not yet released the remainder of the lots west of Rodick Rd. for development, the Town retained the requirement in the agreement and in the letter of August 24, 1989 requiring approval by all regulatory bodies which Mr. DiPaola knew included MOE. This explains to my satisfaction what was happening at the time of approval of the reduced plan of subdivision as phase 1. The purpose was increasingly seen to be the eventual development of the entire plan as proposed after s. 45 approval was granted or was found to be not substantiated, as indeed MOE found by October 19, 1990.
[18] The Building Director’s letter dated August 24, 1989 was addressed to Mr. H. Edwards, the Vice-President of the vendor Ryan Rd. Given the addressee and the timing of the letter within two days of final plan approval, it is reasonable to infer that Mr. Edwards had been in touch with Mr. Walker to send him a letter setting out the state of availability of building permits. He received a somewhat different letter from the letter described in Art. 3.01 of the Agreements of Purchase and Sale. It reads as follows:
Dear Mr. Edwards
Re: Ryan Road Developments Inc., Building Permit Availability Plan of Subdivision No. 65M - 2755 in the Town of Markham
Upon receipt and review of:
(i) A building permit application detailing sufficient information and/or drawings to determine compliance with the Ontario Building Code, Markham Zoning By-laws and all other applicable law;
(ii) Receipt of an executed Site Plan Control Agreement and compliance with all conditions contained within;
(iii) Compliance with all terms and conditions of the Subdivision Agreement pertaining to the lands on Plan of Subdivision 65M-2755;
(iv) Submission of all necessary documentation and approvals required by the Town of Markham and other regulatory bodies; and,
(v) Payment of all building permit fees,
the Building Department may process and issue building permits for all lots on Registered Plan number 65M-2755 in the Town of Markham, Regional Municipality of York.
Yours truly,
(signed) William C. Walker, C.E.T.
Building Director
In requiring compliance with all terms of the subdivision agreement and submission of all necessary documentation and approvals from other regulatory bodies, this letter went beyond the preconditions of the Art. 3.01 letter which were merely an application for building permit in accordance with all requirements of the municipality and payment of the fees. It also used the discretionary word “may” rather than “will”, no doubt as Mr. Walker is alleged by Mr. Edwards to have said, because the five conditions had not yet been complied with.
[19] The plaintiffs did not learn until October 1990 that a building permit was not available. For one thing, they did not apply for one until the summer of 1990. And Mr. DiPaola agreed that they were in no position to apply for one by August 30, 1989 because they lacked necessary approvals from the Ministry of the Environment (“MOE”) pursuant to the provisions of the subdivision agreement and from the Town for a site plan agreement, nor was there any process initiated to obtain even a preliminary approval for one in August 1989. On the application of Messrs. Aki and Yamamoto in July 1990, they were told that the site plan for lot 2 would be ready for draft approval in two weeks; however, the building permit would not be processed by the Town’s engineering department until MOE gave its approval. (Ex. 4, Yamamoto aff., March 19, 2014, para. 24; Ex. 2(24) Architect Venchiarutti letter, Oct. 29, 1990).
[20] On November 28, 1990, requests went out from Mr. Aki’s and Mr. Yamamoto’s solicitors to the project architect and the Town engineering department for information concerning the delay in availability of building permits and the hold put on by the engineering department. Their architect understood at that time that it was due to toxic material being found in the storm sewers. Mr. DiPaola states in his in chief evidence, para. 44, that methane gas waste material had entered the storm sewers and they were closed and would not be re-opened by the Town until the problem was resolved. [Ex.2(24), Venchiarutti letter to Yamatoto of Oct. 29, 1990; Ex.4, C. DiPaola aff., May 21, 2014]. The Town’s Building Department advised the project architect on December 4, 1990 that the permit application could proceed no further without site plan agreement and approvals from MOE and Hydro. [Ex.2(26), letter G. Nelson, Markham Plans Examiner, Dec. 4, 1990].
[21] The Town’s solicitor provided a copy of a letter from MOE to Mr. DiPaola’s lawyer on December 19, 1990. It was dated October 19, 1990 from MOE’s new District Officer, now D.J. Beach. (The district officer had been Don Pirie in 1988. Mr. Phimister, the expert witness on MOE procedures and requirements in the hydrogeological field, said that a change in the personnel team handling this file occurred and that that change complicated the timing of MOE approval. Mr. Phimister saw the new team as misunderstanding the status of lots 1 to 5 in this subdivision; he said the delay in approval could have been overcome by an early meeting with the Ryan Rd. hydrogeologists and MOE). Mr. DiPaola says he read the letter from MOE shortly after his lawyer received it on December 19, 1990; it was a letter to Ryan Rd’s Project Manager, James Clarry, copy to the Region of York and Town officials and to Ryan Rd.’s soils engineers Trow Dames & Moore. It is an important document in the history and so I will set it out in full:
Dear Mr. Clarry:
Re: Proposed Plan of Subdivision
Part of West Half of Lot 9, Concession 4,
Town of Markham, Regional Municipality of York
Ministry of Municipal Affairs File No. 19T-87038
The Ministry of the Environment has reviewed all available information and has no evidence to substantiate that the lands identified as Lots 1 through 5 and 11…have been used for the disposal of waste. Therefore, the Ministry of the Environment cannot substantiate the application of section 45 of the Environmental Protection Act to lots 1 through 5 and 11.
Section 45 of the Environmental Protection Act approval is required for uses of the remaining lands of the Ryan Road Subdivision identified as lots 6 through 10 and 12 as described in the Draft Plan of Industrial Subdivision, 19T-87038, dated April 14th, 1987.
The ministry is concerned about the presence of waste materials disposed on adjoining lands to the north and east of lots 1 through 5 and 11, the potential for leachate and methane migration from these wastes to lots 1 through 5 and 11, and the presence of methane gas detected on lots 1 through 5 and 11. Redevelopment of lots 1 through 5 and 11 must include measures to monitor the presence of methane gas, engineered controls to eliminate the migration of methane, and, if required, other engineered solutions or appropriate land-uses to eliminate hazards to the public.
On-going monitoring and maintenance devices will be required indefinitely unless or until it is determined by a qualified consultant based on existing data that monitoring is not needed.
Where environmental control works, such as monitoring, gas or leachate controls, are necessary, the Ministry of the Environment requires the local municipality to take responsibility, either directly or indirectly, for control works and for any remedial measures that may subsequently be required. Prior to final approval and registration of the plan, requirements will have to be developed for inclusion in a registered portion of the subdivision agreement to provide for the design, construction, and maintenance of any and all environmental control works.
If waste materials are found to be disposed of at lots 1 through 5 and 11, this letter will not preclude future application of section 45 of the Environmental Protection Act to future uses of lots 1 through 5 and 11.
Yours truly,
(signed) D.J. Beach
District Officer
York-Durham District
[22] The letter of October 19, 1990 recognized the difference in use history between lots 1 to 5 and the lots to the east of Rodick Rd. Unknown to MOE apparently, Phase 1 of the Ryan Rd. subdivision plan had already been finally approved and registered in August 1989, subject to MOE approval in art. 5.36. However no site plan agreement had yet been arrived at, so any monitoring works and remedial measures to cope with potential methane migration to lots 2, 3 and 4 could be dealt with in that process and by amendment to the subdivision agreement. And that is how the resolution with MOE occurred in February 1991.
[23] The fact that the MOE official who wrote this letter assumed that this subdivision as a whole, or even part of it, had not been finally approved for registration is an interesting factor because the position that this subdivision had reached in the process plays a role according to Mr. DiPaola in his understanding of the August 24, 1989 letter. He stated in his affidavit that by 1989, he had dealt several times, even many times, with the development process. He said that generally speaking, when a plan of subdivision receives approval for registration, it means that the developer and municipality have entered a formal agreement governing the terms and requirements for development within the subdivision. He stated in chief by affidavit, “To my general understanding, a subdivision agreement will not be registered until all public authorities approve it, including the MOE.” (DiPaola aff., para. 22.) This view is in accord generally with s.51(58) of the Planning Act and the approval authority being satisfied that conditions of approval will be fulfilled. However, that provision does not infer that approvals will be automatic or will be forthcoming necessarily, only that the authority is satisfied they will be fulfilled at the time for purposes of registration.
[24] Carmen DiPaola met with Markham’s Mayor and the Commissioner of Works Mr. Keliar in December 1990 and was told that they could not say when a permit would be available. In chief, Mr. DiPaola stated that as a developer, his perspective on the October 19, 1990 letter was that methane’s presence would devalue the land and make the lots less attractive to purchasers or tenants. Under cross-examination, he agreed that methane stigma was his main concern about proceeding with the purchase (cross-Ex., p.24).
[25] He understood that an environmental plan must be developed to solve the problem mentioned in the October 19, 1990 letter. Despite the statement in the letter, first paragraph, that MOE had been reviewing all information it had and could not substantiate applying s. 45 of the EPA to lots 1-5 because those lands had not been used for the disposal of waste, and that s.45 approval was required only for the lots east of Rodick Rd. (not lots 2, 3 or 4), he seemed totally unaware of the letter’s confirmation that lots 2, 3 and 4 had been cleared by MOE under s. 45. He stated in chief that that letter did not imply that s. 45 was applied or was being applied to lots 2-4 before October 1990 or particularly in August 1989. Therefore he said he knew nothing of a s. 45 approval being required earlier, for instance in August 1989.
[26] It was on November 30, 1990 that the plaintiffs defaulted on further payments required under the agreements of purchase and sale. The plaintiffs maintain that they could not have known of s. 45 of the EPA applying to lots 2, 3 and 4 since November 3, 1988 and including August of 1989 and the Town misled them negligently in its letter of August 24, 1989 by leading them to believe that building permits were available in the ordinary course as of August 30, 1989.
[27] In December 1990, Mr. DiPaola decided that in order to get their money back from Ryan Rd., they would have to sue for it. They hired a lawyer and on January 23, 1991, Gornergrat, Aki and Yamamoto brought an action against Ryan Rd. They claimed repayment of the money paid on account of the agreements of purchase and sale totalling $1,225,000. They sued for breach of contract and negligence. The alleged breach of their contracts was Ryan Rd.’s advice to Mr. DiPaola’s lawyer that building permits were available when in August 1989 they were not; the alleged negligence as pleaded was actually a failure to disclose that there were environmental problems and in hiring incompetent soils engineers and failing to inquire into their competence.
[28] Ryan Rd. brought a motion to summarily dismiss the action and for judgment on its counterclaim for what was owed them on the agreements for purchase and sale. Strangely despite all the preparatory work which should have gone into this action including third party production and availability of subpoena powers, I am not aware of any inquiry for documents from the MOE regarding the environmental problem asserted by Gornergrat in its statement of claim. All Mr. DiPaola said was that they came out of this action not knowing anything more about it. The Gornergrat action was dismissed and judgment was granted on the counterclaim in the sum of over $2 million. As part of the Reasons for Judgment in that case, Jarvis J. held that the purchases of lots 2, 3 and 4 closed on the Date for Adjustment, 5 days after the letter from the municipality. At that time, the plaintiffs’ position was that building permits were not available in October 1990 and extrapolated that back to denying they were available on August 30, 1989. Jarvis J. held there to be no genuine issue for trial because of the following finding [at Ex.2(52), p. 9]:
The plaintiffs cannot rely on the alleged unavailability of a building permit which occurred some 11 months later. At the time of closing, building permits were available; that is the time that is material.
[29] In his view on the evidence at that time, Jarvis J. understood that “available” within the terms of the agreements of purchase and sale meant that permits would be issued by the municipality subject to the usual terms and conditions being complied with. He offered no reason for his findings that the terms and conditions were usual, that a building permit would actually be issued subject to compliance with conditions, or how a statement by a MOE official on October 19,1990 that developing requirements (not yet done) for the registered subdivision agreement (already registered) requiring installation and maintenance of as yet unspecified environmental works (i.e. to solve the methane migration issue) was proof of availability on August 30, 1989 of a building permit.
PARTIES’ AGREEMENT
[30] The parties agreed to the following in Ex. 1, The Agreed Statement :
The documents in the Joint Document brief (Ex. 2) are admissible in evidence for the truth, except those written by the plaintiffs or their counsel, subject to weight and significance of their factual contents as the trial judge shall determine.
The chronology in Ex 3 is admitted as a general history of each event described therein.
The amounts claimed in the Plaintiffs’ Damages Calculation and Statements of Adjustments, with one exception, are admitted by Markham as to quantum paid. Schedule A to the Agreed Statement identifies those amounts disputed by Markham as to liability even if it is found negligent.
The evidence in Chief of S. Yamamoto, J. Wright and J. Phimister is to be given in chief by affidavit, subject to a brief questioning in examination in chief.
The evidence of William Walker, deceased former building chief of Markham, is to be given in writing. His answers in the undertakings chart are agreed as accurate and credible. No reduction in weight shall be accorded due to the fact he was not available to be cross-examined.
The plaintiffs withdraw any claims against Markham arising from its alleged knowledge, as of August 24, 1989 (or at any time prior to October 1990) about actual, or MOE’s concerns about potential, migration of contaminate leachate and methane gas into the sewer line and onto Lots 2, 3 and 4.
Markham withdraws its defence of abuse of process arising from the prior litigation between the plaintiffs and Ryan Rd.
These matters are accepted by me for purposes of these Reasons and in conducting the trial.
POSITIONS OF THE PARTIES
[31] For the plaintiffs, Mr. Rotenberg submitted that the Anns/Kamloops two-part test for a special relationship and existence of a duty of care is met. He claimed that the municipality in the circumstances here owed a duty of care in law to prospective purchasers even where the Town officials had never met or communicated with them. It was reasonably foreseeable that a purchaser of lots in this subdivision would rely on representations by the municipality with approval authority over it where availability of building permits was involved and the purchasers were buying newly serviced development land with some environmental history. See Anns v. Merton London Borough Council, [1978] AC 728 (H.L.); Kamloops (City) v Nielsen, 1984 21 (SCC), [1984] 2 SCR 2; Lakefield (Village) v. Black (1998), 1998 4299 (ON CA), 41 O.R. (3d) 741 (Ont. C.A.); Wozniak v. Erin (Tn), [2001] O.J. No. 1680 (SCJ).
[32] The plaintiffs’ counsel submitted that the Building Director’s letter of August 24, 1989 was clearly misleading in that the Town had known since November 3, 1988 of MOE’s direction that no building permit be granted until Ryan Rd., or any owner of lots in that subdivision, obtained a s. 45 approval under the EPA; in withholding that information from the August 24, 1989 letter, the Town caused the plaintiffs to take the next step under the agreements of purchase and sale and pay the instalments due, thereby giving up the ability to declare the agreements null and void and reclaim their deposits. In issuing the letter, the Town was saying that building permits were available in the normal course of the planning process. As in Wozniak, the existence of a s. 45 order applying to the subject land had not been specifically asked about. But in issuing this letter the Town building official Mr. Walker knew, or should reasonably have known, that the letter would be relied on by the developer Ryan Rd and any potential purchasers from it. Also he should have known that a s. 45 approval was a significant fact requiring disclosure.
[33] Mr. Walker has since died. His evidence, given through discovery answers and undertakings, was agreed to be admissible. Mr. Rotenberg referred to the following question and answer to show the significance of the particular enactment in question - when asked whether a contravention of s. 45 of the Environmental Protection Act, R.S.O. 1980, c.141 would prohibit issuance of a building permit he replied: “In…not specifically, but as that particular statute would qualify as applicable law, it would enable the building official to deny a permit.” (W. Walker, Exam. for Disc., Sept. 10, 2002, Q.99).
[34] Mr. DiPaola’s experience as a developer was that purchasers acted on letters requested of a municipality at or following final registration of the subdivision plan. He stated that, if the letter had said that a s. 45 approval under the EPA was being required before any building permit would be released, he and the other plaintiffs would not have paid the moneys due at plan registration and on the Date of Adjustment and would have been able to declare the agreement with Ryan Rd. null and void under art. 3.01 of the purchase agreements.
[35] Mr. Rotenberg submitted further that once the plaintiffs in an action for negligent misrepresentation proved that the misrepresentation was a factor inducing the plaintiffs to act to their detriment, an inference of reliance may be drawn from all the evidence; it may be rebutted but the onus is on the representor to do so. Kripps v. Touche Ross &Co., 1997 2007 (BC CA), [1997] BCJ No. 968 (BCCA), at para. 103; NBD Bank, Canada v. Dofasco Inc., 1999 3826 (ON CA), [1999] O.J. No. 4749 (Ont. C.A.) at para. 81. He also submitted that the use of the word “may” rather than “will” makes no difference; in context and using dictionary meanings of the word “may”, this letter was telling interested persons that on meeting the usual Planning Act requirements at this stage where final registration had occurred, building permits will be available.
[36] The plaintiffs relied to their detriment on the Town’s alleged misrepresentation by advancing funds under the purchase agreements, commencing interest payments under those agreements and by failing to use the last proviso in Art. 3.01 of the purchase agreements:
PROVIDED that should a building permit not be available by the 30th day of August, 1989, then the Agreement ...shall be null and void, the deposit moneys returned to the Purchaser ...and the Vendor shall not be liable for any costs or damages of the purchaser.
[37] Mr. Rotenberg said that the letter of October 19, 1990, a copy of which was given to Mr. DiPaola in December 1990, makes no difference. It makes no reference to the fact that the s. 45 order had been in effect on the Ryan Rd. land since November 3, 1988. Throughout, Mr. Rotenberg’s contention is that without being told specifically of, or shown, the contents of the letter from MOE of November 3, 1988, the plaintiffs were operating without knowing a material fact both for the action in negligent misrepresentation and for purposes of discoverability in the limitations context.
[38] As to the limitations defence of the Town, Mr. Rotenberg submitted that it was only after January 11, 1993, and most probably in March 1993, when Raffaela DiPaola obtained access to records from the MOE following a FOI request. It was only then when they saw for the first time the November 3, 1988 letter from MOE, that the material facts were known on which to base this action. He submits therefore that the action has been commenced within the time permitted by the Limitations Act then in effect, i.e. six years for an action in negligence, the time not starting to run until March 1993, or at the earliest, January 11, 1993.
[39] On behalf of the Town of Markham, Mr. Boghosian made the following submissions.
(1.) No action lies against the Town of Markham in his view for the following reasons:
(a) there could be no duty of care owed to a category of people like the plaintiffs with whom the Town officials had had no contact or of whom they had no knowledge; like Hercules Managements Ltd. v. Ernst & Young, 1997 345 (SCC), [1997] 2 S.C.R. 165, the plaintiffs seek to rely on the letter of August 24, 1989 for their purposes whereas the letter was not prepared for any other purpose than to indicate to the developer and the institution financing the project its status at the time;
(b) Mr. Walker, the Town building official, had no knowledge that the letter of August 24, 1989 would go to anyone other than the developer and financial officers at the institution funding the development;
(c) the letter was not misleading, added nothing new to the requirements in the subdivision agreement, and was not by its terms the letter referred to in Art.3.01 of the plaintiffs’ agreements of purchase and sale on which they could rely;
(d) reliance in a reasonable manner must be proven by the plaintiffs and it was not proven - the evidence of Mr. DiPaola and Mr. Yamamoto is that they simply did not rely on that letter at all;
(e) clearance by MOE for development of lots 2, 3 and 4 should have been forthcoming within months of August 24, 1989, as the expert hydrogeologist Jim Phimister testified and could have been available within weeks; the waste concern was never a problem for lots 2, 3 and 4, the ammonia and chloride contamination concerns were met by repairing the storm sewer; and the monitoring and controls required by MOE to deal with potential methane migration from the lands to the north were an issue that could be, and was, addressed in the site plan process which was always understood to be a condition precedent to a building permit issuing.
(2.) This action is out of time, Mr. Boghosian argued, because all elements of the cause of action were, or should have reasonably been, known by the plaintiffs as early as September 15, 1989. The limitation period for this action in tort for negligence was six years in 1989. Therefore the deadline for this action to have been started was September 15, 1995. At the latest, the material facts were known by Mr. DiPaola and the other plaintiffs following his reading of the October 19, 1990 letter from MOE and his meetings with the Mayor and the Town’s Chief Engineer in December 1990. Six years from December 1990 expires three years before this action was started, rendering it out of time.
[40] For his submissions on the limitations issue, Mr. Boghosian relied on case law dealing with whether certainty is required in order to be said to have reasonably ascertained the material facts forming a cause of action. Peixeiro v. Haberman, 1997 325 (SCC), [1997] 3 SCR 549, para. 18; De Shazo v. Nations Energy Co. 2005 ABCA 241, [2005] A.J. No. 856 (Alta. C.A.), at paras. 31-2. In both cases, the court held that the exact extent of the loss or damage need not be known for the cause of action to accrue. The letter of November 3, 1988 was not the material fact; it was the effect of the MOE directive that was necessary to know and that was covered by compliance with the subdivision agreement. On or by August 30, 1989, the plaintiffs knew, or should reasonably have known, that this land could not be developed without MOE approval. On August 22, 1989, the Industrial Subdivision Agreement was registered on title by Ryan Rd. The plaintiffs had it since August 24, 1989. Art. 5.36 of the subdivision agreement states quite specifically:
5.36 The Owner covenants and agrees that no building permits shall be released until such time as the Ministry of the Environment has given the Town approval to allow development in this area. The Town acknowledges that the lands may be released for building permits on a lot by lot basis should they be released by the Ministry of the Environment.
And Art. 7.01 of the Agreements of Purchase and Sale requires the plaintiffs to “adhere to and comply with the terms and conditions of the Subdivision Agreement…”, and by 7.02 and 7.03, to accept title subject to that agreement, and to advise third parties of it and to include in any sale agreement a covenant to be bound by the subdivision agreement.
[41] Mr. Boghosian submitted that by December 1990, Carmen DiPaola, who assisted the others and acted as their agent at times, had seen and was in possession of the letter from MOE of October 19, 1990 and had the August 24, 1989 letter for over a year. He had met with the Mayor and Mr. Keliar, the Town Engineer. He knew that no building permit was forthcoming. He said he relied in September 1989 on the Town’s letter that he understood without careful reading promised availability of building permits, and that reliance had been to the plaintiffs’ detriment as no permits were available, all to the plaintiffs’ knowledge. He knew or should reasonably have known from the October 19, 1990 MOE letter that MOE had required or considered requiring s. 45 approval, that when MOE could no longer substantiate that, MOE had released lots 2, 3 and 4 from s. 45, and required monitoring and controls to be developed in order to ensure that no leachate migration of methane or other toxic material could migrate to Lots 2, 3 and 4. It was because Mr. DiPaola knew of the methane problem, its effect on land value, and need for an environmental plan for lots 2, 3 and 4 of Ryan Rd. that he talked to the other plaintiffs and they decided to default. Their loss was not a result of detrimental reliance on the Town’s letter.
[42] Mr. Boghosian submitted finally that Mr. Yamamoto’s evidence should be given little weight. Ms. DiPaola’s evidence is uncertain as to when she received certain documents from the Town and from the MOE and when the late Mr. Voros received documents. There is little that can be concluded from her evidence as she has no memory of when she received each document including the letter of November 3, 1988. He suggested that the plaintiffs cannot substantiate in any event why they waited until December 1992 to make their FOI request for documents where they are required to act with reasonable diligence and knew since final registration in August 1989, or should reasonably have known, that MOE had not released the land in the Ryan Rd. subdivision for development and failed to even contact that Ministry to learn what it required.
Analysis: 1. Have the plaintiffs made out the cause of action for negligent misrepresentation?
[43] I begin with what is required for a claimant to succeed in recovering damages for negligent misrepresentation. The five elements are set out by the Ontario Court of Appeal as well as other appellate courts in other cases. I am referring to the unanimous judgment of the Court of Appeal delivered by Goudge J.A. in Black v. Lakefield (Village) (1998), 1998 4299 (ON CA), 41 O.R. (3d) 741 at para. 17:
(1) there must be a duty of care based on a "special relationship" between the representor and the representee;
(2) the representation in question must be untrue, inaccurate, or misleading;
(3) the representor must have acted negligently in making said misrepresentation;
(4) the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and
(5) the reliance must have been detrimental to the representee in the sense that damages resulted.
(a) Duty of care
[44] Because Mr. Boghosian made an issue of the existence of a duty of care in this case, I will deal with it, briefly. I do not see this as a serious issue after the appellate decision in Black. The Court of Appeal stated in Black the approach necessary to the first part of the test. The existence of a duty of care requires the application of the two-part test first enunciated in Anns v. Merton London Borough Council, [1978] A.C. 728, [1977] 2 W.L.R. 1024 (H.L.) and later restated in Kamloops (City) v. Nielsen, 1984 21 (SCC), [1984] 2 S.C.R. 2 at pp. 10-11, 10 D.L.R. (4th) 641:
(1) is there a sufficiently close relationship between the parties (the [defendant] and the person who has suffered the damage) so that, in the reasonable contemplation of the [defendant], carelessness on its part might cause damage to that person? If so,
(2) are there any considerations which ought to negative or limit (a) the scope of the duty and (b) the class of persons to whom it is owed or (c) the damages to which a breach of it may give rise?
[45] This is a case where the plaintiffs are one degree further removed than the subdivision-developer from the municipality in the development process. The plaintiffs as purchasers from Ryan Rd. had never met with Town or Regional officials so far as I was made aware before June 29, 1989, when the Industrial Subdivision Agreement was completed with the Town, or before August 24, 1989 when the letter in question was issued. The letter of August 24, 1989 from the Town was issued to Ryan Rd. at the request of its Vice-President Mr. H. Edwards and was sent to his attention.
[46] Mr. Boghosian argues that this case is distinguishable from Black. However, as in Black, the representor was a municipality in which the subject land was situate and which had a lead role in the subdivision planning process. More than Black, the representor in this case was the lead official for permit purposes of the delegated local approval authority for the subdivision agreement and for building permits.
[47] In my view, the Town’s engineering and building officials should have reasonably foreseen that representations concerning availability of development permits may be relied on by someone seeking to subdivide or to purchase a lot or lots for development. As Goudge J.A. stated:
(The municipality) was fully aware that its representation was being made in the context of a proposed plan of subdivision, it must be taken to know of the class of those who could properly complain about its representation, namely, those who would seek to subdivide the property.
Mr. Black was owed a duty of care as a purchaser of land that was draft approved for subdivision. The plaintiffs in this case were purchasers of land in the final stage of subdivision control.
[48] Again as in Black, there is no risk of indeterminacy. The purpose of the Town’s letter was to inform the developer, and through it, purchasers from it who had a similar interest in developing the subdivision, of what was required for building permits to issue. The plaintiffs were entitled to use the letter for that purpose and Mr. DiPaola says they did, to their detriment. In my view, there was a duty of care owed by the Town which is not defeated by policy considerations including indeterminacy of potential liability. To what extent it was relied on and whether it was reasonable for the plaintiffs to have relied on it is to be dealt with later.
[49] In my view the plaintiffs were in a class of persons to whom the Town of Markham owed a duty of care in the context of the subdivision and development process and there is no policy reason for overriding the prima facie finding of a duty of care on the first branch of the Anns/Kamloops test. Though I am not bound to follow McEwen J.’s view in favour of the same conclusion in his decision on a motion for summary dismissal in this action, I concur with that view (Gornergrat Developments Ltd. v. Lalonde, [2010] O.J. No. 5874 (S.C.J.) at para. 45).
(b) Was the representation untrue, inaccurate or misleading?
[50] The second element of negligent misrepresentation is strongly disputed. The plaintiffs say that the letter of August 14, 1989 was misleading in failing to mention the decision in November 1988 to require a s. 45 approval for lands within this subdivision without which building permits were not available. By stating that building permits may issue when a proper application is made, a site plan control agreement is executed, all terms of the subdivision agreement are complied with, all regulatory approvals are received, and permit fees paid, the plaintiffs complain that it misled them into concluding that there were no special problems. Their conclusion from the Town letter was that once the usual forms were completed and the site plan agreement executed, building permit applications would be available. Without knowing that there was a s.45 approval under the EPA required, the plaintiffs say they were misled.
[51] The Town’s response is that there is nothing untrue or misleading in the letter of August 24, 1989. The plaintiffs had the terms of the subdivision agreement which stated quite clearly that no building permits were available for this subdivision until MOE “has given the Town approval to allow development in this area.” (Ex. 2, tab 11, Art. 5.36.) The plaintiffs knew what was required under Art. 3.01 of the agreements of purchase and sale. The Town Building Director said that he had no knowledge of this provision; his experience was that this type of letter was requested by developers to provide to the financial institution which was funding the development. He also said that he understood such letters would not be given to anyone else but no basis for this understanding was provided. Regarding this particular instance, Mr. Walker also said that he did not recall having any discussion with anyone before the letter of August 24, 1989 was drafted, though it is possible that Harry Edwards, Vice President of Ryan Rd., spoke to him. He had no recollection of that. I find that a reasonable inference from this and the evidence of Edwards in the earlier action, cited earlier in these Reasons, is that Edwards did call Walker to prompt the issuance of the letter. Otherwise, how would Walker have known to issue the letter so promptly after registration of the Subdivision Agreement and the final plan? But Edwards told him little or nothing of the requirement in Art. 3.01 of the agreement of purchase and sale.
[52] In addition to a copy of the subdivision agreement being in Mr. DiPaola’s possession by August 25, 1989, as evidenced by the title searcher’s record, the plaintiffs knew that no building permit could issue until a site plan control agreement was signed [Ex. 2(12)]. Mr. DiPaola said that that normally would take at least three months without any environmental approval being necessary. He said they were concerned about availability but not enough to contact MOE to deal with what it required for lots 2, 3 and 4 and to set the Town’s site plan process in motion immediately. The plaintiffs were entitled to exercise their rights under Art. 3.01 if they had chosen to; they had not bothered to read what was sent to them; Ryan Rd. had failed to secure approval from MOE under Art. 5.36 by August 30, 1989.
[53] Within three months of a meeting on December 18, 1990 between Ryan Rd. officials, soils engineers and hydrogeologists contracted by Ryan Rd. and MOE district officials, without any further test materials being provided, they resolved the issues of concern to MOE by additions to the subdivision agreement and site plan control provisions, repairing one storm sewer pipe, and Ryan Rd. taking responsibility for seeing that the monitoring and controls were maintained and in place. [Ex 2(35), Town memo to solicitor re clauses for amendment to subdivision agreement resolving MOE’s environmental concerns, Feb. 24, 1991; Ex. 2 (34) Draft site plan conditions approved by MOE and Town, Feb. 19,1991].
[54] The evidence of the hydrogeologist Jim Phimister, who had dealt with MOE regarding other s. 45 approvals, confirmed this. He had handled about 100 such approvals, approximately one-half of the total s. 45 approvals issued by MOE. He said that a s. 45 approval is routine and could have occurred within three months with some pressure applied on the ministry by suggesting an early meeting. The only factor holding it up was the developer (and/or the plaintiffs if they had bothered to hire an environmental engineer to ascertain the problem) by failing to force the issue sooner and insist on the meeting that finally took place on December 18, 1990 to happen sooner. In fact, as the testing information and rationale required for the decommissioning guidelines and redevelopment of lots 1 to 6 in Phase 1 was all complete in the report of Trow Dames & Moore submitted on March 15, 1989, Mr. Phimister’s evidence was that if the developer had moved this matter along by requesting an early meeting instead of waiting to have it on December 18, 1990, the same result achieving MOE approval could have been achieved in 1989 [Ex. 2(42D), Trow Dames & Moore Decommissioning Report]. Despite being cross-examined, Mr. Phimister’s evidence on this point was unshaken. Assuming that an early ministerial approval were possible in 1989, Mr. Di Paola admitted under cross-examination that, “Yeah, as long as I had a building permit I was fine, absolutely” (cross-examination, p.29).
[55] In not disclosing what the Town officials knew of what was behind the need for MOE approval, i.e. the waste disposal concern from the former wrecking yard which had no direct relation to lots 2, 3 and 4, a fact Mr. DiPaola admitted he knew personally, it can be argued that the Town did not mislead the plaintiffs. The plaintiffs, through Mr. DiPaola, knew no building permits were available until the matters in its letter were obtained including clearance by “regulatory bodies” which included MOE and Mr. DiPaola had possession of the subdivision agreement by August 25, 1989. The subdivision agreement made MOE clearance a condition precedent to any building permit issuing within the Ryan Rd. subdivision.
[56] The plaintiffs’ evidence on this point was summed up by Mr. DiPaola this way:
Gornergrat (and therefore Sam [Yamamoto] and Aki) was sent a letter on August 24, 1989…from Markham stating that permits may be available if there was MOE compliance, when such permits were not in fact available at the time because the MOE requirements for section 45 were still in place. I believe that … Markham’s letter misled Gornergrat, Sam and Aki. I believe that Gornergrat should have been told the full truth that the building permits were at present not available because of s. 45 of the Environmental Protection Act. (DiPaola affidavit in chief, Ex. 4, para. 56). There was no site plan control process started as of August 24, 1989 and they needed approvals from other public authorities before obtaining building permits but “what I’m saying is that as far as we were concerned, when they gave us that letter for all intents and purposes, building permits were available for us to pick up if we had the ability to go in and wanted to go in the next day. We could have, we could have processed with the municipality a site plan prior to that, that date coming along. So as far as we’re concerned, that letter tells us that building permits are available from that date on (C. DiPaola Cr-ex, p.37).
[57] This was Mr. DiPaola’s evidence in chief. Under cross-examination, he stated the following:
• he knew of this property for some 20 years prior to 1989 and he knew that the eastern side of it had been used as an auto wrecking yard, not the part where subdivision lots 2, 3 and 4 were located, and therefore he had no concerns in relation to any environmental problems. (Cr.-ex. of C. DiPaola, pp.26-7)
Q. Okay. There are times that you just develop land and then sold it off to builders.
A. Yes, we’ve developed land and sold the individual parcels, fully developed registered parcels to builders. And, we’ve also built on some of them as well.
Q. And, I take it you’d hire lawyers, and planners, and architects, and municipal engineers to assist with the development.
A. Yes. Yes, we do.
Q. And, to assist with the planning process.
A. That’s correct.
Q. And, I’m suggesting that given your hiring of these experts, you would have more or less a working knowledge of the planning process.
A. Yes, I do.
(Cr.-ex., pp.2-3)
Q. And, I’m suggesting to you, sir, that you were lucky up till 1989 never to have been involved in a property that had environmental issues as a developer or builder.
A. That is correct.
Q. You hadn’t had any prior experience dealing with M.O.E. approvals.
A. Well, only during the, like our, our consultants in developing a parcel of land from raw land to fully serviced land. The M.O.E. is one of the agencies that has to comment on the development that you’re doing.
Q. And, they have…
A. So, our consultants would do that.
Q. And, you always need approval of the M.O.E. for any development, don’t you?
A. Yes, yep, that’s one of the agencies that has to give their approval.
Q. Yes. If they don’t approve, you don’t go ahead with the development.
A. That’s correct.
Q. And, you don’t get a building permit.
A. That is correct.
(Cr.-ex.,pp. 3-4)
A. Yeah. Well, we built over 25 buildings. So, we had extensive experience in building as well.
Q. And, that’s in the 1975, 1990, early 1990s.
A. Yeah, roughly, you know, I mean, yeah.
Q. And, the reason I suggest you ceased involvement in real estate development and building in the early 90s is because many, if not all, of the real estate ventures you had on the go at that point failed.
A. Well, you know, in the early 90s we had, was part of a major recession. So, you know, like I guess it started maybe around 1992, thereabouts. Well, things were slowing down. I can’t quantify exactly when, when that happened.
Q. You were already in big, big trouble by 1992.
A. 1992, yes, yes because we…
Q. Slow down.
A. …we had an awful lot of land that we were carrying and things, you know, weren’t selling.
Q. You were carrying a lot of land, it wasn’t selling.
A. Yeah.
Q. Interest rates had spiked. They were really high after the first quarter of 1990.
A. Yes, yeah.
(Cr.-ex., pp.7-8)
Q. And, there was no site plan process in, in progress at all at that point (as of August 30, 1989).
A. That’s when we closed the deal.
Q. And, you’re agreeing with me there was no site plan process informal or formal.
A. And, again, from that date on, buildings are…
The Court: Was there a site plan process ongoing at that time?
A. Not at August the 30th, no.
The Court: That’s all we need.
A. Sorry, sorry about that.
Mr. Boghosian:
Q. And, you needed to get approvals of any other public authority.
A. Yes.
Q. In no way, shape, or form were building permits available by August 30, as of August 24, 1989.
A. See, I differ with you. Like, that’s a context of the ability to get a building permit was there. We didn’t apply, but that doesn’t say that it wasn’t there, that you could get it.
Q. So, it’s a matter of degree then, sir.
A. Yes.
Q. And, regardless there were, there were steps and processes that had to be undertaken that would take time before you could get a building permit, you knew that as of August 24th, ’89.
A. Yes.
Q. And, you knew absolutely and without a doubt that the letter from the town dated August 24, 1989 did not say that building permits were available on August 30, 1989.
A. They said that building permits may be available. So, you’d come in, our understanding, I won’t go on, I’ll just answer your question, sorry.
Q. Yes. The letter did not state that building permits would be available by August 30, 1989.
A. Yes, it was from that date on, from August the 30th, 1989, definitely building permits were available to be obtained.
Q. That’s your interpretation of available.
A. Well, that’s – absolutely, yes.
(Cr.-ex., pp. 38-9)
[58] In this case, there is nothing untrue in the letter of August 24, 1989. The plaintiffs accept that. Their position is that the letter, in failing to mention the MOE direction of November 3, 1988 that a s. 45 approval was required before any building permit would issue, misled the plaintiffs into believing that there was no problem out of the ordinary to prevent a building permit from being obtained through the usual planning process of obtaining agency approvals, providing the information necessary for the permit application, and working out an executed site plan agreement with the Town. The plaintiffs rely on the cases of Black and Wozniak v Erin (Tn), supra, in submitting that the Town letter of August 24, 1989 was misleading.
[59] The representation in Black was negligently made and clearly false, as the trial judge and the Court of Appeal found; the village informed the approval authority that water service was available to the proposed subdivision when its officials knew it was not. It is not of assistance in this regard.
[60] The case of Wozniak v. Erin (Tn), supra, is of more direct interest. In that case, the claimants wanted to buy a lot in a residential subdivision near the boundary between two municipalities. A master grading and drainage plan had been prepared for the subdivision. Drainage was becoming a problem along one lot line but a building permit was issued on the builder supplying a grading security deposit. The township engineers advised the village not to release the grading security and noted that by this time water was ponding in the rear yard. Later the Wozniaks made an offer when the lot was being sold under power of sale. Their lawyer wrote to the village in which the lot was situated asking if there was compliance with all relevant building and zoning by-laws and if there were any outstanding work orders affecting the property. The Village replied that there were no infractions or outstanding work orders affecting the property. The letter went on to state that a final inspection and occupancy permit would be required. The lot had not been graded in accordance with the plan and the village was aware of continuing flooding and drainage problems due to the neighbouring subdivision’s drainage. The subdivision agreement required that no certificate of occupancy shall be issued until any drainage works affecting the lot have been completed but this was not disclosed to the claimants. They purchased the lot, moved in, and 6 days later the village issued an occupancy permit. The claimants began to experience flooding and drainage problems. The property was regraded. The claimant sued the village for damages for negligent misrepresentation.
[61] The trial judge, Justice Kruzick, held that there was no attempt by the Village to conceal information; but the village’s response was not accurate and it misled the plaintiffs. The Village acted negligently in making the representation it did, knowing that for some time there had been water drainage problems resulting from the development in the adjacent municipality. He held further that the grading and drainage were covered in the subdivision agreement. Compliance was a requirement for issuance of a building permit. The Township was a party to that agreement and that agreement is “part of the Plaintiffs’ deed”. And also because of the village’s part in the subdivision agreement, it was aware of the prohibition of an occupancy permit until the grading conformed with that required by the Township. Yet the village issued an occupancy permit, knowing of the lack of conformity with the grading requirements.
[62] In Wozniak, the village was not asked whether there was conformity with a grading plan. The village was held liable in part for not supplying the information it knew that, although there were no outstanding work orders, the lot in question did not have a clean bill of health because the grading and drainage had not yet been completed and required revision due to the subdivision adjacent to it. Without that information, it was reasonably foreseeable that the purchasers would make a decision not knowing of the drainage non-conformity and its tie-in with the agreement’s prohibition of an occupancy permit which the village negligently issued.
[63] This case raises a somewhat different problem from Wozniak. In Wozniak, it was clear that the solicitor’s inquiry was whether there was some nonconformity with existing by-law and municipal regulations or outstanding work orders for purposes of closing a real estate deal. The village, knowing of the discrepancy with the grading plan and of continuing drainage problems, not only did not inform the solicitor of this but the village issued an occupancy permit in violation of the subdivision agreement to which it was a party.
[64] In this case, the plaintiffs were told of the need for approvals from regulatory bodies which Mr. DiPaola as a somewhat experienced developer understood included MOE. They were told of the need for compliance with the subdivision agreement in which MOE had a veto power over development in the subdivision in question. Mr. DiPaola had not even read that agreement. It was certainly a fact he should have known from both the letter and the agreement. Both were in his possession as of August 25, 1989 at the latest. The only information withheld was the section of the EPA under which approval was required, not that necessary regulatory and municipal approvals had not been given, and no representation was made that the lots were ready for development.
[65] I have found that the Town was requested by Mr. Edwards, an officer of Ryan Rd., to issue a letter regarding availability of building permits. The letter was to state, according to Art. 3.01 of the agreement:
that subject to the requirements of any other public authority that upon an application for a building permit being made in accordance with all of the Municipality’s requirements and payment of the appropriate fees of the Municipality, that a building permit will be available for the construction of an industrial building meeting all the requirements of the relevant zoning and building by-laws of the Municipality.
[66] The letter of August 24, 1989 gives no assurance that building permits will be available. It lists all the conditions precedent to a building permit - sufficient application, site plan agreement, compliance with the subdivision agreement, approvals by all regulatory authorities and by the Town, and payment of permit fees--and then states that the building department may process and issue building permits for lots in the Ryan Rd. subdivision. I have set out the interpretation of this letter by the vendor’s lawyer to Gornergrat - that it was the letter required by Art 3.01. I find that Mr. DiPaola, after only a casual glance at the letter, never read the subdivision agreement, which the plaintiffs all contracted to abide by and adhere to (Art. 7.01(a)). “May process and issue” has not the certainty of the requirement in Art. 3.01, nor does the list of approvals outstanding in the August 24, 1989 letter imply anything beyond what it says. Mr. Yamamoto stated in chief that he did not read the material sent to him on August 24, 1989, including the letter from the Town’s Building Director; under cross-examination, he agreed that, having read it, the letter is not a guarantee of building permits, and that it is conditional.
[67] I do not accept Mr. Rotenberg’s submission that without disclosure by the Town of the s. 45 approval required by MOE since November 3, 1988, the Town had misled the plaintiffs, or persons in their class of interest as purchasers of lots. The need for MOE approval was already binding on the plaintiffs. The Town reiterated what the plaintiffs as development purchasers were already bound to do, that is, to satisfy and obtain approvals from all interested regulatory agencies and comply with the subdivision agreement as a condition precedent to any processing and issuance of building permits.
[68] It is not the role of the Town to tell others why another agency or ministry requires its approval before development can occur. As we have seen, knowledge of the site and of neighbouring lands changes as do concerns arising from that knowledge as site tests and consultants’ reports are provided. The plaintiffs were told by August both by the subdivision agreement they were bound by and the Town letter that various clearances were necessary prior to building permits being released. The representor is entitled to assume that the representee will read what is provided to them where the latter is bound to comply with the document, and MOE approval was required by the subdivision agreement before release of building permits. I am mystified by the failure or refusal of the purchasers to communicate with MOE as to what its requirements were, knowing as Mr. DiPaola admitted that its approval was required for permit release, but admittedly they never did.
[69] For these reasons, I find that there was no misleading of the plaintiffs by the Town nor was there any negligence by the Town in issuing the August 24, 1989 letter. The only negligence in this situation was the failure by Mr. DiPaola and Mr. Yamamoto to read the Town’s letter of August 24, 1989 and the subdivision agreement to which they were bound, rather than making assumptions from what Ryan Rd.’s lawyer told them. I mean this as kindly as I can phrase it but in my view , the circumstances as I have found them require it to be said.
(c) Did the plaintiffs rely on the representation of the Town in the letter of August 24, 1989?
[70] In case I am found to be in error in the above conclusion, I will consider the next element in the tort of negligent misrepresentation - the representee must have relied, in a reasonable manner, on the representation. I must first deal with an issue of burden of proof in regard to this element.
[71] Mr. Rotenberg suggested that once the claimant has provided evidence that the misrepresentation was one factor which induced the claimants to act to their detriment, reliance by the claimants may be inferred. He cited Kripps v. Touche Ross & Co., 1997 2007 (BC CA), [1997] BCJ No. 968 (BCCA). Kripps was a case that dealt with financial statements and the uses to which they may properly be put by investors. The plaintiffs argued on appeal that it is sufficient for them to prove that the misrepresentation sued upon was one of several factors inducing them to invest. They argued that they need not show it was the sole or fundamental factor causing them to act. The court held that there is no reason why the burden of proving reliance should be any different in cases of civil negligence than it is in cases of fraud. If the plaintiff can prove that the misrepresentation was one factor that induced the plaintiff to act to her detriment, then reliance is proven. As well, the court went so far as to rule that where the misrepresentation is one which was calculated or would tend to induce the plaintiff to act upon it, the plaintiff’s reliance may be inferred (at para.103). Kripps was followed by the Ontario Court of Appeal in a brief reference where it made statements to the same effect in obiter in 1999. Neither statement was accompanied by a fully reasoned rationale beyond the facts of the particular cases.
[72] Neither Black nor Wozniak referred to any special dispensation of the usual civil burden of proof for the one element of reliance. In my view, the normal civil burden applies. It is for the plaintiffs to prove their case on a balance of probabilities in all respects. Therefore, the plaintiff must prove on a balance of probabilities that the representee relied reasonably on the representation. There may be several factors which prompted the representee to act as he or she did but reasonable reliance on the misrepresentation must be a significant factor in the party acting as he or she did; like any fact, reliance can be inferred from all the evidence but the burden of proof remains on the plaintiff to prove its case.
[73] Mr. DiPaola gave the following evidence in chief (in his affidavit sworn May 21, 2014 on how he relied on the Town’s letter of August 24, 1989. He stated in paras. 27-8, 30, 31, 37-9:
[27] My general experience both as a developer and as a purchaser of lots from developers was that once the plan of subdivision was registered and the subdivision services were fully installed, the municipality would provide a letter to the developer, which the developer would then provide to its purchasers stating that building permits were now available.
[28] In my general experience whether the letter from the municipality said that the permits “are available” or “may be available” would not have been of any significance to me in terms of public authority approvals. As I have already stated, I would not expect there to be environmental issues that would preclude the availability of a building permit.
[30] Based on my general experience, I understood that the only source of delay to the issuance of a building permit after a letter from the municipality would be the time it would take to meet with municipal officials to discuss and finalize a site plan agreement and for an architect to design and prepare plans to obtain a building permit.
[31] Because the real estate market for industrial land was active in Markham in 1989, I wanted to use Gornergrat to take advantage of the demand for such land by being able to move quickly. The Ryan Road lots were particularly attractive because I was aware that subdivision services were being installed, and because the terms of the Agreements of Purchase and Sale indicated that Ryan Road would be able to obtain those permits before the end of August, 1989.
[37] The August 24, 1989 letter from Markham was important to me. Under paragraph 3.01 of the Agreement, this letter from the Town had to arrive before August 30, 1989, or all 3 Agreements would automatically terminate under paragraph 3.01 of the Agreements.
[38] What I clearly remember, however, is that I would assume the existence of the August 24, 1989 letter from the Town of Markham was confirmation that all subdivision services were in, and that building permits would be available if the requirements (which I described above) were met. The only thing I would have verified was that the site was physically accessible and that the developer’s site work was sufficiently finished that this work will not delay the issuance of a building permit.
[39] I then went to the Ryan Road site to check to see if in fact servicing was completed, based on a visual examination. What I found, however, was that there were barricades on Yorktech Road blocking access to Lots 2, 3, and 4. These lots were being used to divert traffic along Yorktech Road and to store gravel and other material.
[74] Under cross-examination, Mr. DiPaola testified to the following in relation to reasonable reliance on the Town’s representations in the August 24, 1989 letter.
Mr. Boghosian:
Q. I’m sorry, no, your affidavit does not have a Tab 11. I’m referring to Tab 11 of Exhibit 2A.
A. Okay.
Q. You knew that the Ministry of the Environment had to have approved the Industrial Subdivision Agreement in order for it and the Plan of Subdivision to have been registered.
A. I don’t understand your question.
Q. I’m saying that you knew the Ministry of the Environment had to sign off on …
The Court: Just a second. Give him a time, like as of when.
Mr. Boghosian:
Q. As of August of 1989 you were aware that the Ministry of the Environment had to sign off on the Subdivision Agreement and the Plan of Subdivision before there …
A. No, I was not.
Q. Let’s go to Exhibit 4, paragraph 22, second sentence, “To my general understanding a Subdivision Agreement will not be registered and a Plan of Subdivision will …”
A. I don’t see it. Where are you?
Q. Paragraph 22.
A. Paragraph 22.
Q. Your affidavit, Exhibit…
A. Oh, my affidavit.
Q. Sorry, Your Honour. I thought we…
The Court: You’ve got to tell us what you’re talking about. There are so many tabs. What page?
Mr. Boghosian:
Q. So, I’m at Paragraph 22 of page 7.
The Court: Thank you.
Mr. Boghosian:
Q. I’m looking at a second sentence which reads,
To my general understanding, a Subdivision Agreement will not be registered and a Plan of Subdivision will not be finalized without the approval of all public authorities, including the Ministry of the Environment.
A. That is correct.
Q. Yes, and so the answer to my question was not the no that you gave me a few moments ago. It is yes, correct?
A. Give me the question again because I might have interpreted it wrong.
Q. Well, I’m going to let the record speak for itself.
A. Okay. That’s fine.
Q. And, you’re aware that the M.O.E. didn’t in fact approve the Subdivision Agreement in this case.
A. What am I aware of?
Q. That the Ministry didn’t in fact approve the Subdivision Agreement.
The Court: As of when?
Mr. Boghosian:
Q. As of August of 1989.
A. Well, I don’t know that. All I know is that the, we received on August the 22nd a copy of a registration agreement that was registered.
Q. You received a copy of the Industrial Subdivision Agreement.
A. I did, yes.
(Cr.-ex. of C. DiPaola, pp. 40-2)
Mr. Boghosian:
Q. Yes. Now, you knew this document you got on August 22nd, ’89 was an important document, didn’t you?
A. Yes.
Q. And, you knew that because you were bound according to the Agreement of Purchases and Sale to comply with the Subdivision agreement, right?
A. Yes.
Q. If I can take you to Paragraph 5.36 on page 12. And, 5.36 reads,
The owner covenants and agrees that no building permits shall be released until such time as the Ministry of the Environment has given the town approval to allow development in this area. The Town acknowledges that the lands may be released for building permits on a lot-by-lot basis should they be released by the Ministry of the Environment.
Correct, that’s what it reads?
A. Yeah, and the owner is Ryan Road Developments, it’s not me.
Q. No, no, the owner is covenanting an agreement…
A. The owner is Ryan Road Developments in this agreement. This agreement is between Ryan Road Developments and the Town of Markham.
Q. Which you were bound to comply with.
A. Yes, but it is the owner who is signing that that’s, that’s what he has to do and we have to go along with it.
Q. You’re the one that’s going to be applying for a building permit, not the owner, correct?
A. That’s correct.
Q. You’re the one then that has to ensure that you can get a building permit by getting the Ministry of the Environment approval. It’s the building permit that’s not going to get released until the Ministry approves.
A. You know, we got this on August the 22nd thereabouts, and then we got the August 24th letter that building permits were available. We couldn’t have a lot of time to really look at all of these documents at that time.
Q. Oh come on, sir. You had every opportunity. This didn’t close until September 15th. This is a very important document. Are you suggesting you never read it?
A. I’m suggesting that it was sent to my lawyer.
Q. No, it was sent to you. You admitted that on the evidence.
A. Well, then, then it was sent to my lawyer as soon as we got it.
Q. Alright. So, neither you-you and your lawyer had ample time to review it and you certainly as an experienced developer had time to review it and you would have understood…
A. I rely on my lawyer to tell me that the document is okay, relative to our deal, that’s what I did, and that’s what I rely on.
Q. Can I have his examination transcript put before him, please? Your Honour, I’m going to refer to Volume 1, page 65, question 227, “And when it did come ‘in’ on August 22,” in referring to the Industrial Subdivision Agreement, “according to that cover letter, would you have reviewed that document?
A. I’m sorry, which number?
Q. Page 65 at the very bottom question 227.
A. Okay.
The Court: What I want you to do, sir, is just listen to the question and answers and he’ll ask you a question. Just listen.
Mr. Boghosian:
Q. “227. Q. And when it did come August 22, according to that cover letter, would you have reviewed that document?” He’s referring to the I.S.A.,
“A. I don’t recall
- Q. Would you have passed it on to your own lawyer?
Again, I don’t recall.”
You gave those answers on November 25th, 2002.
A. Yes, I did.
Q. Your memory, no doubt, of events prior to that date would have been better 12 years ago than they are today.
A. What was your question?
Q. My question is your recollection today of events in 1989 is certainly no better today than it was in 2002, is it?
A. I wouldn’t think so, no. I can just tell you what I commonly, normally would do, that’s all.
(Cr.-ex., pp.44-6
Q. And, I suggest, sir, that you knew in your experience that this Clause 5.36 was an unusual term to have in a Subdivision Agreement.
A. It didn’t, we didn’t pick it up that it was unusual at that time.
Q. It…
A. Is what, because the experience I have had with the Town of Markham when they send you a letter, building permits were available. No matter what other bodies had to take a look at it, we’ve never had a problem. So, it didn’t…
Q. My question was, this is an unusual clause. I think I have your answer that yes it was, but you didn’t tweak to that at the time because you probably didn’t read the agreement, is that fair?
The Court: Is that right, sir?
A. It could be. I’m not sure, Your Honour.
The Court: As you stand there today, sir, do you really have any recollection of this particular paragraph of that agreement?
A. No, not really.
The Court: So, I take it that’s what you meant when you say you missed it.
A. Yeah.
Mr. Boghosian:
Q. Now, you have this Subdivision Agreement, and there’s this clause in there about Ministry of the Environment approval. I take it you never consulted with the town to find out if the Ministry of Environment approval had been granted.
A. No, I did not.
Q. And, you didn’t have your lawyer do so.
A. Well, my lawyers had all of the documentation. I don’t recall, sorry.
The Court: Did you have your lawyer check on that, on whether the Ministry had approved it or not?
A. I didn’t recommend to them that they do that, yeah.
Mr. Boghosian:
Q. Alright. And, there’s no document in this record whatsoever that even shows that you sent the Subdivision Agreement to your lawyers, is there?
A. I’m sorry. I’m having trouble hearing you.
Q. I said there’s no document in the record to suggest that you did send the Subdivision Agreement to your lawyer, is there?
A. Well, you tell me it’s an important and it is, and those documents, whatever we get, we do send on to our lawyer. It’s my office staff does all of that.
Q. That’s the normal practice.
A. Yes.
Q. But, we have no evidence in this case that that ever happened in this case, right?
A. I guess so, yeah.
Q. And, neither you nor your lawyer consulted with Ryan Road to find out if Ministry approval of building permits had been granted before, before September, August 31st, let’s say, 1989.
A. We relied on the Town of Markham letter. I did not inquire of Ryan Road anything.
Q. Well, the Town of Markham letter did not say that there had been Ministry of Environment approval. In fact, it said you need to get Ministry of Environment approval, correct?
A. That’s correct.
Q. You had no idea what timeline it would take to get the approval that clause 5.36 required of the Subdivision Agreement.
A. I didn’t even look at that. My premise was we had the letter from the Town saying building permits were available under the normal course of business, whatever bodies had to approve of it, and we would get a building permit.
Q. Let’s go to Tab 15 of the Joint Documents Book. Sorry, Your Honour, just bear with me for one moment. Now, you received this letter on August 24, 1989, the date it was dated.
A. Yes.
Q. And, you faxed it to Mr. Yamamoto’s lawyer the same day.
A. Yes.
Q. And, I’m suggesting that at no time prior to August 31, 1989 or September 15, 1989 did you actually review this letter.
A. That is not true.
Q. I’m suggesting that at the very most you may have glanced at it.
A. Well, glancing at it, sir, is reading it.
(Cr.-ex., pp. 47-9)
[75] Mr. DiPaola says that as a developer the letter of August 24, 1989 (as he understood it) is an undertaking by the Town to issue building permits in due course on which he relied. He admitted that he missed an important provision that he and the other plaintiffs were bound by in the subdivision agreement. Art. 5.36 is a remarkable provision which it is hard to imagine any developer experienced in land development not recognizing as unusual. It placed the ultimate control and lever over environmental improvements, and timing and release of building permits in the hands of MOE. The Town letter did nothing more than reiterate that building permits were not available until all regulatory agencies and requirements of the Town were met, including compliance with the subdivision agreement. That would include the necessity of MOE approval before any building permit would be released.
[76] Accordingly, I find that Mr. DiPaola was simply out of his element here. He said he had built 20 to 25 buildings prior to this time but he never had any experience with development of raw rural land where waste and organic soils had penetrated the ground systems in the vicinity of lots in which he was interested in developing. Mr. DiPaola and Mr. Yamamoto missed the MOE approval required as a condition to obtaining a permit by the subdivision agreement. Mr. Yamamoto relied on Mr. DiPaola and he simply took a chance and never bothered to read the documents, assuming his lawyer or someone else would.
[77] As Jim Phimister stated, based on years of dealing with MOE and handling s. 45 approvals among others, the first thing to do is communicate with that Ministry to be sure what their requirements are, as they change in accordance with test information from development consultants as it is developed during the planning process. In this case, the initial concern was waste disposal but none had occurred on lots 2, 3 and 4. By the fall of 1990, another concern had arisen over contamination of the storm sewers. By late 1990, the concern of MOE was potential methane migration from land to the north. Again, lots 2, 3 and 4 were not affected but the Ministry needed a mechanism to satisfy their perceived need for continuous monitoring and maintenance of protective devices. Within three months of the final meeting regarding this issue, the MOE, Town and developer had developed draft site plan controls and an agreement which satisfied that concern and MOE approved development of phase 1 including lots 2, 3 and 4 by March 1991. In Mr. Phimister’s view, all that was necessary here was to insist that a developer’s consultant and personnel meet with MOE district staff to ascertain the problem and possible solutions. The developer’s soils and hydrogeologic consultants had already developed the information required and approval was available within three months. This occurred only three to four months after the plaintiffs decided to default under the agreement.
[78] I find that the plaintiffs relied on Mr. DiPaola’s misunderstanding of the Town’s letter which he assumed from his own experience was an announcement of building permit availability, fed by what he was told by Ryan Rd.’s lawyer. He admitted that he also relied on his own fear about the methane effect on land value in not going through with the purchase (Cr.-ex., p.24). What the plaintiffs did not rely on was the Town’s actual letter, a different message from what they expected from Art. 3.01 of their agreement and Ryan Rd.’s representative who, of course, was acting for a client with a strong interest in portraying that letter as the usual one that conformed with Art. 3.01.
(d) Did the plaintiffs rely reasonably on the representation by the Town?
[79] I listened carefully to Mr. Yamamoto and Mr. DiPaola. Among the plaintiffs, it was Mr. DiPaola who called the shots. The others relied heavily on his advice and acted as he suggested. I find that he relied on the representation of the lawyer for Ryan Road as to what the Town letter said. Neither he nor Mr. Yamamoto knew of the MOE prohibition on release of building permits in the subdivision agreement by which he was bound both as a prospective developer of land in the Ryan Rd. subdivision because they chose not to read the letter or the subdivision agreement. Mr. DiPaola did admit in the preceding cross-examination excerpts that he knew one approval that was required was always MOE, and he had no notice of any approval of this subdivision or of the lots the plaintiffs were buying by MOE for issuance of building permits. Mr. DiPaola was told by Ryan Road’s lawyer Isadore Prydatok by letter enclosing the Town letter of the same date, August 24, 1989, reinforcing what Mr. DiPaola had been told orally:
We enclose herein a letter from the Corporation of the Town of Markham addressed to Ryan Road Developments Inc. This letter is the one contemplated by the provisions of section 3.01 and as you will note indicates that building permits are now available.
[80] If Mr. DiPaola and the other plaintiffs had relied on the Town’s letter, they would have read the subdivision agreement and contacted MOE pursuant to Art. 5.36 to find out what MOE required for its approval to release building permits. I find that no reference to s. 45 of the EPA would have changed what they did. I am not aware from the plaintiffs’ evidence that they ever tried to employ expert help to deal with getting MOE’s approval. I reject Mr. DiPaola’s evidence that he relied on the Town’s letter in proceeding with the agreements of purchase and sale for these reasons. There was, after all, no issue of reasonable reliance, given my findings on the lack of any reliance on the Town’s letter of August 24, 1989 as it actually read.
[81] Accordingly, I find that the defendant municipality is not liable to the plaintiffs for negligent misrepresentation.
Analysis: 2. The Limitations Issue
[82] In case I am found in error in the above conclusion, I will give my reasons on the limitations defence.
[83] The base law is not in dispute. The former Limitations Act, R.S.O. 1980 c.240 and RSO 1990 c.L.15 applied to this case without change from 1989 to post-1990. Actions in tort or negligence, such as this one, must be commenced within 6 years. However, the remaining question is: when does the time start to run? As Peixeiro v. Haberman 1997 325 (SCC), [1997] 3 SCR 549 held, as well as the seminal case Central Trust v. Rafuse (1986), 1986 29 (SCC), 31 DLR (4th) 481 (SCC), the time does not start to run until a reasonably prudent person has discovered, or ought to have discovered, the material facts upon which the claim is based. Perfect certainty is not required. One does not always need a medical opinion to discover they have an action for medical malpractice, such as by knowing that you are infected, that you were treated, that the pain or symptom does not go away and when you obtain the records from the hospital, that person may well be in possession of all the material facts required. Soper v. Southcott, [1998] O.J. No. 2709 (Ont. C.A.). At para. 21, Dunnet J. (ad hoc) wrote:
Limitation periods are not enacted to be ignored. The plaintiff is required to act with due diligence in acquiring facts in order to be fully apprised of the material facts upon which a negligence of malpractice claim can be based.
And in the words of the Alberta Court of Appeal:
Even if the discoverability rule of limitations applies to this case (which I need not decide), it does not call for perfect certainty. It does not require discovery at all: it says something else will do instead. It suffices that “the material facts on which [the cause of action] is based…ought to have been discovered by the plaintiff by the exercise of reasonable diligence…: Central Trust v. Rafuse. (Hill v. Alberta (S. Alberta Ld. Reg. Dist.) (1993), 1993 ABCA 75, 100 D.L.R. (4th) 331 at 336; foll’d De Shazo v. Nations Energy Co., 2005 ABCA 241, [2005] A.J. No. 856 (Alta. C.A.).
[84] Despite my earlier findings, for purposes of this analysis, I shall assume that the Town’s letter misled the plaintiffs or was untrue. Mr. Rotenberg argued that until the plaintiffs actually found the letter of November 3, 1988 stating when the MOE first made the decision not to allow issuance of building permits until a s. 45 approval is provided, all the material facts were not known sufficient to found a cause of action. He relies on the evidence of Raffaela DiPaola, Carmen DiPaola’s assistant and wife who requested documents from the Town and from MOE in December 1992. She said she thinks that she was provided with a copy of that letter by MOE after January 11, 1993 when the Ministry provided certain documents to her. The problem is the list of documents she used was started some years before by the late Mr. Voros, Mr. DiPaola’s research aides and neither he nor she made notes of the dates when any of the documents on the running list was obtained.
[85] Be this as it may, it seems to me that the plaintiffs had knowledge by the fall of 1990 through the subdivision agreement they had obtained in 1989, the Town’s own letter of August 24, 1989, the MOE letter of October 19, 1990 indicating that the s.45 approval requirement for the Ryan Rd. subdivision was no longer warranted. The fact they required was that the MOE approval was required for a building permit to issue and they knew or ought reasonably to have known that fact since December 1990 at the latest when Mr. DiPaola became, he said, fully aware that no building permits were available and the Town Engineer could not say when they would be. He had known that MOE approval was required or no permit would issue and that is the fact that he says the Town’s letter misrepresented. I agree with Mr. Boghosian in this regard; the section number from the EPA adds nothing to the material facts that were in Mr. DiPaola’s knowledge through the documents mentioned by as early as September 15, 1989 or by December 1990 when he obtained a copy of that letter.
[86] Finally, there is no reason provided by the plaintiffs as to why they made no inquiry of MOE about the withholding of its approval, other than their failure to pay any attention to the subdivision agreement as it affected building permits for their lots. They ought reasonably to have known by September 15, 1989 that the subdivision agreement required MOE approval for release of building permits. The Town’s letter told them that approval of other regulatory bodies, which Mr. DiPaola admitted meant MOE for one, was still required for building permits to be considered. They could have easily contacted MOE then to confirm that approval was not forthcoming and under what conditions it would be forthcoming. If they were right that the letter was misleading, and they had acted on it to their detriment by closing the deals, their loss of money paid to November 1990 and all other elements of the tort were reasonably within their grasp by September 15,1989.
[87] The action is dismissed for the reasons given.
DAMAGES
[88] In accordance with the usual practice, I will set out my analysis and ruling on the issue of damages.
[89] The parties agree on much of the quantum of damages sought by the plaintiffs. Schedule A to the Agreed Facts is a breakdown of what the plaintiffs are seeking.
[90] The Town disputes the liability for the initial deposit amounts and for legal fees even if it had been found negligent, and does not accept that interest was paid by Gornergrat. It accepts that Mr. Aki and Yamamoto made “these payments”.
| Gornergrat | Aki/Yamamoto | |
|---|---|---|
| 1. Initial deposit | $91,552.50 | $45,776.25 |
| 2. Assignment fee | $15,000.00 | |
| 3. Second deposit | $100,000.00 | $50,000.00 |
| 4. Paid on Adjustment Date (August 31, 1989) | $408,518.38 | $203,896.94 |
| 5. Subtotals (to Adjustment Date) | $600,070.88 | $314,673.19 |
| 6. Interest from Adjustment Date | $128,323.46 | $64,086.76 |
| 7. Other expenses (Lot 2) | $32,229.22 | |
| 8. Legal fees | $3,194.54 | $53,755.45 |
| TOTALS | $731,588.88 | $464,744.62 |
[91] Counsel for the plaintiffs submits that the principle in Toronto Industrial Leaseholds Ltd. v. Posesorski (1994), 1994 7199 (ON CA), 21 O.R. (3d) 1 (Ont. C.A.) and King Line Investments Inc. v. 973976 Ontario Ltd., 2010 ONCA 345, [2010] O.J. No. 1984 (C.A.) applies to the claim for legal fees in this case. The principle that Mr. Rotenberg relies on is articulated in the Toronto Leaseholds case:
It was reasonably foreseeable that the clients would seek legal advice upon learning of Mr. Solway’s error (He was their lawyer when they purchased a property which they knew was leased for a term to terminate in 1984; what they didn’t know, and Mr. Solway did know at one time but had forgotten, was that Toronto Industrial Leaseholds had a 10-year option on the property). They needed legal assistance in untangling themselves from the mess created by Mr. Solway’s negligence. The clients are entitled to be compensated for the cost of that legal advice: Kienzle v. Stringer [(1981), 1981 1851 (ON CA), 35 O.R. (2d) 85] at p.87.
[92] The court defined compensation in those circumstances as full indemnity. King Line is described by the appellate panel that heard it as a different situation from Toronto Industrial Leaseholds but which raises the same principle, that is, that when a client must sue a third party because of its lawyer’s negligence, the client’s costs of suing may be claimed as damages against its lawyer. In King Line, the client settled with its lawyer for $100,000, and the Court of Appeal attributed $50,000 of the settlement funds to its otherwise unrecoverable costs against 973976 Ontario Ltd. That company was the unsuccessful party against whom King Line obtained judgment in a case involving a claim for a readjusted purchase price to the prejudice of the numbered company. However the point Mr. Rotenberg was using these cases for is simply to show that in some circumstances, such as in Toronto Industrial Leaseholds, legal costs as well as other costs and losses sustained in a law suit involving a third party as a result of the negligence of the lawyer should be recoverable from the negligent party on whose advice the clients relied.
[93] The only issue Mr. Rotenberg saw as contentious regarding the damage award was whether the claim for the initial deposit was part of consequential damages or too remote, given that they were paid before the issuance of the Town’s letter of August 24, 1989.
[94] Mr. Boghosian was permitted to respond by written submissions due to the time constraints of the final day of hearing. Mr. Rosenberg replied by written submissions.
[95] Mr. Boghosian submitted that, first, the plaintiffs should not be entitled to recover from the Town, if it had been found liable in negligence, the legal costs associated with the unsuccessful litigation against Ryan Rd., and second, the initial deposits are not recoverable from the Town.
[96] On the first issue, the Town’s position is that there is no nexus between the issues in the earlier lawsuit and this one. Regarding the second, even if the plaintiffs’ claimed reliance on the August 24, 1989 letter prevented them from declaring the agreement null and void and claiming recovery of the pre-August 24, 1989 deposits from Ryan Rd., Ryan Rd. already had refused repayment in 1990 when the plaintiffs claimed their money back. The Town submits through Mr. Boghosian that years of litigation would have ensued. Ryan Rd. became insolvent when the real estate market turned down in the early 1990s. Ryan Rd. would have been in no position to pay back the initial deposits by June 1991 and thereafter.
[97] In reply, Mr. Rotenberg argues that the reasoning and principle in the Toronto Leaseholds case are not limited to cases of lawyer’s negligence, rooted as they are in well-known concepts in negligence law of foreseeability and causation. In addition, there is a nexus between the Ryan Rd. litigation and this case; and that is the Town’s letter of August 24, 1989 – but for it, the plaintiffs would have terminated the agreements of purchase and sale on August 30, 1989.
[98] A similar “but for” argument was advanced regarding the initial deposits, return of which on the termination of the agreements on August 30, 1989 would have been indefensible. Ryan Rd. continued to retain lawyers and consultants who would not have been working for free as late as 1992, according to Mr. Rotenberg. Its interest in the Rodick Rd./Yorktech subdivision was not foreclosed until 2001.
[99] Regarding the claim by the plaintiffs for their costs of the litigation against Ryan Rd. from the Town, assuming that the Town was found negligent and liable for misrepresentation in issuing the letter of August 24, 1989, I find that there is no basis on which it should pay their legal costs of the failed Ryan Rd. action and appeals. In the Toronto Industrial Leaseholds case, assuming the principle of compensating for costs of an earlier proceeding, the clients were recovering the costs incurred by them directly connected to the negligence of the lawyer and the position his errors had left them in. The clients’ law suit challenging the option was necessitated by the lawyer’s own mistake and he recommended that unsuccessful challenge. In this case, the litigation by the plaintiffs against Ryan Rd. was brought on grounds unrelated to the Town’s assumed negligent misrepresentation. This claim is remote and lacks any causative nexus to the Town’s liability in this case.
[100] As to recovery of the initial deposits, given the assumed negligent misrepresentation of the Town, Mr. Rotenberg’s argument has merit. There is no evidence that Ryan Rd. was insolvent by 1991 and there is evidence that the foreclosure was years later and that Ryan Rd. was meeting its obligations to be able to continue with the planning process at least into 1992. There would have been no defence so the assumption that litigation would have been protracted overlooks the availability of a summary procedure to judgment in such a case. I would find for the plaintiffs on the recovery of the initial deposits.
[101] In the end, however, given my findings in respect of the failure to prove negligent, misrepresentation and reasonable reliance, the plaintiffs’ action against the Town of Markham is dismissed.
[102] If costs are not agreed, I will receive written submissions on costs from the defendant’s counsel within 21 days of release of these Reasons for Judgment and counsel for the plaintiffs may have 21 days for his submissions on costs in writing. The defendant may reply within 7 days of delivery of the plaintiffs’ submissions.
[103] I thank counsel and the parties for their participation and assistance in this case.
HOWDEN J.
Released: July 21, 2014