CITATION: Unique Auto Collision et al. v. Fernandez et al., 2015 ONSC 1012
COURT FILE NO.: CV-12-448923
DATE: 20150318
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Unique Auto Collision Network Solution Court and Cansom Holdings Inc.,
Plaintiffs
– and –
Frank Fernandez and Anna Maria Fernandez
Defendants
Yusuf Barre, for the Plaintiffs
Enio Zeppeiri, for the Defendants
HEARD: December 11-12, 2014
and January 5-6, 2015
REASONS FOR DECISION
CAROLE J. BROWN, J
[1] The plaintiff corporations bring this action under the simplified procedure provisions of Rule 76 of the Rules of Civil Procedure. They allege that the defendants breached the Agreement of Purchase and Sale by selling a commercial property which was not suited for its use; sold them a spray booth which was tampered with and from which the fire prevention system was removed, and also that the defendants commenced wrongful litigation which was found to be based on "illegitimate" claims.
[2] The plaintiff, Unique Auto Collision Network Solutions Corp. ("Unique"), is a corporation incorporated pursuant to the laws of Ontario with its sole director and principal, Yusuf Barre. The plaintiff corporation, Cansom Holdings Inc. ("Cansom"), is a corporation also registered pursuant to the laws of Ontario, with its principal being Mr. Barre.
[3] The defendant, Frank Fernandez, is a trained auto body repair technician who, from 1976 until November of 2009, owned and operated an auto body repair business from the commercial properties located at 42 and 44 Hyde Avenue, which properties he owned together with his wife, Anna Maria Fernandez. Due to an eye injury which rendered it difficult for Mr. Fernandez to continue his work as an auto body repair technician, he decided to retire and to sell the properties. On September 24, 2009, the defendants entered an Agreement of Purchase and Sale with the principal of the plaintiff corporations, Yusuf Barre. The properties were to be sold for $620,000. Only the properties were sold, and not the Fernandez' auto body repair business. As included chattel, was the subject spray booth.
[4] 42 Hyde, which was owned by Ms. Fernandez, was sold to Cansom. This property was zoned retail/commercial. 44 Hyde, which was owned by Mr. Fernandez, was sold to Unique. This property was zoned commercial only.
[5] As regards the use of the properties, the Agreement of Purchase and Sale ("APS") contained the following provisions:
FUTURE USE: Seller and Buyer agree that there is no representation or warranty of any kind that the future intended use of the property by Buyer is or will be lawful except as may be specifically provided for in this Agreement.
[6] At the request of the plaintiff, the APS included, inter alia, the conditions set forth at paragraph 11(h), below.
[7] The APS further contained an "Entire Agreement" clause.
[8] The evidence indicates that the buyers, through their principal, Mr. Barre, throughout the time for inspections, had access to the property, but did not undertake himself or through experts any inspection of the property as provided for in the APS. On October 16, 2009 at 2:00 PM, he executed a written waiver of the above conditions, signed by himself and witnessed by a real estate agent.
[9] Mr. Barre, on behalf of his businesses, alleges that the property, as sold to him, could not be used as an auto body repair shop, as the spray booth did not comply with environmental and fire safety rules and regulations and did not have the appropriate Certificate of Approval such that it could be operated. He alleges that without the spray paint booth, he was unable to operate an auto body repair shop. When specifically asked what prevented him from carrying on business, he stated that it was the spray booth. As a result, he lost significant amounts of money, was unable to generate business income, and defaulted on the two Vendor Take-Back Mortgages which had been negotiated with the defendants in order for him to purchase the properties.
[10] It is the position of the defendants that from early 2010, the plaintiff began to miss payments on the mortgages, failed to pay taxes on the properties and failed to maintain proper insurance policies on the properties. There ensued a history of lengthy litigation as regards default on the mortgages. Some of the numerous motions and appeals brought were decided in favour of the plaintiff, as there was not sufficient evidence or there were other technical issues such that the motion or action could not be sustained. In the end, however, the plaintiffs were found in default of the mortgages and, pursuant to a reference to Master Graham for an assessment of the amounts owing by the plaintiffs to the defendants, were ordered to pay to the defendants on the two Vendor Take-Back Mortgages the amount of $180,444.36 on the first mortgage, and the amount of $307,876.62 on the second mortgage, plus prejudgment interest at 4.75% per annum from November 4, 2012.
[11] An Amended Request to Admit of the defendants and Response of the plaintiffs with denial of certain portions thereof were served. At trial, based on the Request to Admit and the Response, the following facts were agreed upon:
a. On or about September 24, 2009, Frank Fernandez ("Frank") and Anna Maria Fernandez ("Anna Maria") entered into an Agreement of Purchase and Sale ("APS") with the defendant, Cansom.
b. Pursuant to the APS, Frank and Anna Maria agreed to sell the real property located at 42/44 Hyde Avenue, in the City of Toronto, to Cansom for a purchase price of $620,000.
c. Prior to the sale, Frank had been the registered owner of the Property located at 44 Hyde Avenue ("44 Hyde") and Anna Maria had been the registered owner of the Property located at 42 Hyde Avenue ("42 Hyde").
d. The APS was explicitly in relation to the sale of real property and not the sale of any business.
e. The APS provides that a "Spray Booth" is an included chattel, in the sale of the Property.
f. The APS included conditions require [sic] the inspection of 42 Hyde and 44 Hyde by a certified property inspector, at Cansom's expense.
g. The sale was also conditional upon Cansom satisfying itself that all environmental laws and regulations were complied with.
h. The particulars of both conditions as set out in the numbers 13 and 14 above are set out in the second paragraph of the Schedule "A" to the APS and are as follows:
This Offer is conditional upon the inspection of the subject property by a certified property inspector at the Buyer's own expense, and the obtaining of a report satisfactory to the Buyer in the Buyer's sole and absolute discretion respecting retrofitting pursuant to and in compliance with the Fire Protection and Prevention Act, 1997 and its regulations as amended from time to time. Unless the Buyer gives notice in writing to the Seller not later than 6:00 PM within FIFTEEN [15] banking days following the date of acceptance that this condition is fulfilled, this Offer shall be null and void and the deposit shall be returned to the Buyer in full without deduction. Seller agrees to cooperate in providing access to the property for the purpose of this inspection. This condition is included for the benefit of the Buyer and may be waived at the Buyer's sole option by notice in writing to the Seller within the time period stated herein.
The Offer is conditional upon the Buyer determining, at the Buyer's own expense, that all Environmental laws and regulations have been complied with, no hazardous conditions or substances exist on the land, no limitations or restrictions affecting the continued use of the property exist, other than those specifically provided for herein, no pending litigation respecting Environmental matters, no outstanding Ministry of Environment Orders, investigation, charges or prosecutions respecting Environmental matters exist, there has been no prior use as a waste disposal site, and all applicable licenses are in force. Seller agrees to provide to the Buyer upon request, all documents, records and reports relating to the Environmental matters in possession of the Seller. The Seller further authorizes any Ministry/Authority or the Seller's Solicitor to release to the Buyer, the Buyer's Agent or Solicitor, any and all information that may be on record in the Ministry Office with respect to the said property. Unless the Buyer gives notice in writing delivered to the Seller not later than 6:00 PM within FIFTEEN [15] banking days following the date of acceptance, that the preceding condition has been fulfilled, this Offer shall become null and void and the deposit shall be returned to the Buyer in full without deduction. This condition is included for the benefit of the Buyer and may be waived at the Buyer's sole option by notice in writing to the Seller within the time period stated herein.
i. On October 16, 2009, Mr. Barre waived the conditions on behalf of Cansom by executing the Waiver. The Waiver formed part of the APS.
j. Following the waiver of conditions, the transaction closed.
k. In accordance with the APS, Frank transferred 44 Hyde Avenue to Unique and Anna Maria transferred 42 Hyde Avenue to Cansom. Transfers were registered on title on November 12, 2009.
l. As part of the APS, Cansom granted Anna Maria with respect to 42 Hyde a Vendor Take Back Mortgage on the principal of $166,756 ("42 Hyde Mortgage").
m. The 42 Hyde Mortgage was registered on title to 42 Hyde on November 12, 2009, as Instrument No. AT 226993.
n. As part of the APS, Unique granted Frank with regards to 44 Hyde a Vendor Take Back Mortgage in the principal amount of $303,244.00 (“44 Hyde Mortgage”).
o. The 44 Hyde Mortgage was registered on title to 44 Hyde on November 12, 2009 as Instrument No. AT2227013.
p. By Reasons for Judgment and Judgment dated June 14, 2013 by the Hon. Justice Firestone, the following was ordered:
i. Frank and Anna Maria were granted Summary Judgment pursuant to the Mortgages and the matter was put over to a reference to finalize the outstanding amounts; and
ii. The Unique and Cansom Action as against the Defendants was ordered to proceed to Trial and the Motion for Summary Judgment was dismissed with the cost of the Motion to be dealt with by the Trial Judge.
q. By Order dated February 19, 2014, Master Graham finalized the outstanding amounts being:
i. Mortgage No. AT 2227013 – Mortgage amount owing $180,444.33;
ii. Mortgage No. AT 2226993 – Mortgage amount owing $307,876.62;
iii. Pre-judgment interest and Post-judgment interest shall be paid on these amounts at a rate of 4.75%. Pre-judgment interest shall be paid on all amounts save legal fees and the payments made in March 2013 from November 4, 2012.
r. By Order dated June 13, 2014, the Honourable Madam Justice Brown dismissed the Motion of the Plaintiffs to set aside Master Glustein's Writ of Possession as there was no evidence in support of its granting.
s. The herein parties were previously engaged in litigation relating to mortgages ("2010 Actions"). That litigation was commenced by Frank and Anna Maria upon Cansom and Unique's initial default. A summary of steps taken in the 2010 actions are the following:
On or about March 3, 2010, Notices of Sale were sent out to Cansom and Unique.
On May 14, 2010, Statements of Claim were issued by Frank and Anna Maria against Unique and Cansom.
On or about June 7, 2010, Cansom and Unique served Notices of Intent to Defend. No Statements of Defence followed.
On August 23, 2010, Frank and Anna Maria obtained a Default Judgment against Unique and Cansom.
On or about September 27, 2010, Frank and Anna Maria filed a Motion in writing for a Writ of Possession. The Motion was denied by Justice Stinson on October 8, 2010 “without prejudice to a further motion supported by evidence that will satisfy a Judge that Rule 60.10(2) requirements have been met".
On November 15, 2010, Frank and Anna Maria filed a second Motion in writing for a Writ of Possession. The Motion was denied by Master Abrams on December 6, 2010 – "without prejudice to the plaintiff's right to renew it on fresh evidence".
On December 21, 2010, Mr. Barre, on behalf of Unique and Cansom, attended a Case Conference to obtain an urgent date for a Motion to set aside the default judgment. Frank and Anna Maria and their counsel were not provided with notice of this attendance. The Hearing date was set for December 29, 2010.
On December 29, 2010, the Motion was adjourned to January 5, 2011.
On January 5, 2011, Cansom's and Unique's Motion to set aside the default judgment was heard by Justice Penny. Frank, Anna Maria and their counsel were not provided with notice of this motion. Justice Penny determined that the material was insufficient to grant the relief sought, but granted Cansom 30 days to file additional material.
On January 31, 2011, Mr. Barre, on behalf of the Defendants, attended a second Case Conference to obtain a date for the Hearing of the Motion to set aside the default judgment. Frank, Anna Maria and their counsel were not provided with notice of this Hearing. The Hearing date was set for February 7, 2011.
On February 7, 2011, without providing Frank, Anna Maria and/or their counsel with notice of the motion, Mr. Barre, on behalf of the Defendants, attended before Justice Penny. Justice Penny set aside the default judgment, on two conditions:
a. That the Defendants immediately serve and file a Statement of Defence; and
b. That the mortgage payments on the two Properties continued to be made monthly as they fall due.
No Statement of Defence was served or filed at that time.
On March 8, 2011, Frank and Anna Maria brought a further motion. Justice Stinson granted leave for Cansom and Unique to be represented by Mr. Barre, in person, and imposed certain terms for the motion going forward without reinstating the default judgment.
On July 11, 2011, Frank and Anna Maria brought a motion for a Writ of Possession, on the grounds that the Defendants had not adhered to the conditions of Justice Penny and Justice Stinson's Endorsements. Judgment was granted by Justice Allan.
On July 15, 2011, after granting the Judgment, Unique and Cansom filed Statements of Defence. These Statements of Defence were not served on Frank, Anna Maria, or their counsel at that time.
On July 18, 2011, Cansom and Unique filed a Notice of Appeal of the Judgment with the Court of Appeal. Frank, Anna Maria and their counsel were not served with a copy of the Notice of Appeal.
On July 21, 2011, the Court granted a Writ of Possession on the basis of the Judgment.
On July 27, 2011, the Sheriff issued a Notice of Vacating [sic] in respect to the Property, which required Cansom and Unique to vacate the property on or before August 15, 2011.
On August 12, 2011, Frank and Anna Maria obtained a Writ of Seizure and Sale in respect to the Properties.
Also on August 12, 2011, the Defendants moved before the Court of Appeal without notice to Frank, Anna Maria or their counsel, for an interim stay of that Judgment, pending appeal. The interim stay was granted by Justice of Appeal Watt.
On August 19, 2011, the Defendants moved before the Justice of Appeal Rouleau to seek a further stay of the Judgment. Justice of Appeal Rouleau adjourned the motion and extended the interim stay until August 13, 2011.
On August 22, 2011, the Court issued a Notice of Intention to Dismiss the Defendants' appeal for delay.
On August 31, 2011, the Motion was heard by Justice of Appeal Karakatsanis. Her Justice [sic] granted the stay, and extended the time for perfection of the Appeal to September 30, 2011. Justice of Appeal Karakatsanis ordered, however, that the defendants make payment of arrears in the amount of $19,218.90 and that they continue to make all monthly mortgage payments on the 9th day of each month. She also ordered costs of the motion payable to Frank and Anna Maria.
On November 15, 2011, Frank and Anna Maria brought a Motion for Direction as to the Appellants' materials, as Frank, Anna Maria and their counsel had not been served with the Appeal Book or Factum. However, those documents were supplied at the hearing of the Motion. The Justice of Appeal Goudge granted the costs of the Motion to Frank and Anna Maria.
On February 16, 2012, the Appeal proceeded before Justices of Appeal Lang, LaForm and Pattillo. They determined that the judgment must be set aside as Justice Allan had granted default judgment on a motion that sought only a Writ of Possession. Accordingly, the Appeal was allowed and the Judgment set aside.
t. By correspondence dated November 29, 2010, Quick Fix Auto Collision provided the Report of CR Consulting for application for a Certificate of Approval (AIR) Emissions Summary and Dispersion Model Report, including the Application for approval.
The Issues
[12] In this trial, the issues for this Court to determine are as follows:
Whether the Agreement of Purchase and Sale for 42 and 44 Hyde Avenue was breached by the defendants;
Whether the defendants commenced wrongful litigation or illegitimate claims against the plaintiffs, as alleged;
If the answers to issues 1 and/or 2 are yes, what damages were sustained by the plaintiffs attributable to the defendants;
If there was a breach of the Agreement of Purchase and Sale and damages were sustained by the plaintiffs, did the plaintiffs mitigate those damages.
The Evidence
The Plaintiffs' Witnesses
Yusuf Barre
[13] Mr. Barre testified that he owned both plaintiff corporations. When he purchased the building, the chattel, namely the spray booth, was included in the agreed-upon sale price. His main objective in purchasing the building was to operate an auto body and mechanical repair shop.
[14] He stated that when negotiating the purchase, the spray booth was important to him. When asked in cross-examination why he did not put in the conditions contained in the APS that the spray booth should be operational, he testified that he was assured by the real estate agent and his lawyer that it would be operational. However, there is no evidence of that and, indeed, the evidence is contrary to that, namely, the Agreement of Purchase and Sale contained a condition regarding future use which indicated that there were no representations or warranties that the intended future use of the property was or would be lawful.
[15] He stated that he applied for a license to operate a body shop, with car sales for five used cars, and received the license on February 3, 2010. There was no license in evidence before this Court. He stated that he opened for business on February 10, 2010, but had no customers at that time. He stated that he bought used cars at auctions, repaired and sold them and continued to do so after 2010. He stated that, after he learned that the spray booth was not in compliance with the laws and regulations in March of 2010, he sent the used cars out to be painted, but could not remember the name of the place where he sent the cars for painting. He had no invoices and conceded in cross-examination that this was because he did his business in cash. He further testified that he had no Ministry of Transport documentation as he did not have to register these cars with the Ministry of Transport. He later testified that he carried on no business after March 2010.
[16] He testified that on March 30, 2010, there was a "blitz" inspection in the area which was led by the Ministry of Environment to ensure compliance with legislation. Officer Matthew Randall attended at his premises, saw the paint booth at 44 Hyde Avenue and requested to see a Certificate of Approval. He advised Officer Randall that he had just purchased the premises and had a Certificate of Approval, but could not produce it. Officer Randall advised that the premises were not compliant with the legislation and that the plaintiff could not operate the spray booth without the Certificate of Approval. He, thereafter, issued his Air Facility Inspection Report dated March 30, 2010.
[17] The Report indicated that "Quick Fix Auto and Collision" had been operating for approximately 40 days. The "Inspection Observations" stated as follows:
During the inspection I observed a paint spray booth in the back of the shop. I asked the owner Mr. Barre if I could see the Certificate of Approval (CofA) for the booth. Mr. Barre said that it was licensed and he had all of the required documents but could not produce any. He then wanted to call his lawyer so that the lawyer could tell me it was certified. I informed him that I did not want to talk to his lawyer, I just wanted to see the CofA. Joe [Yusuf Barre ] then said he did not have a CofA from the Ministry of the Environment (MOE)".
[18] The Report required that:
"By November 10, 2010, Quick Fix Auto Collision shall retain the services of a "qualified person" (in this case, a qualified person is defined as a professional engineer, who by a combination of education and experience may be considered competent to undertake the work required by action Item 3 and 4 of this report). The qualified person shall be referred to as the "Qualified Person" for the remainder of this Report.
By November 10, 2010, Quick Fix Auto Collision shall submit written verification to the Undersigned Provincial Officer that the requirements of Item #1 have been fulfilled.
By January 31, 2011, Quick Fix Auto Collision shall submit an application for approval, completed by the Qualified Person, for a Certificate of Approval under Environmental Protection Act, section 9 to the Director, Environmental Assessment and Approvals Branch…...
…………….
By January 31, 2011, Quick Fix Auto Collision shall submit written verification to the Undersigned Provincial Officer that the requirements of Item #3 and Item #4 have been fulfilled.
[19] Based on the evidence and the testimony of the witnesses, Mr. Barre, on behalf of the plaintiffs, did not retain a Qualified Person until November 22, 2010 and did not provide written confirmation thereof until November 29, 2010, when application was made for a Certificate of Approval. The Certificate of Approval was granted on June 30, 2011.
[20] The Certificate of Approval, was issued subject to terms and conditions, which included, inter alia, the following:
"The Owner shall design, build, install, operate and maintain the Equipment in accordance with the description given in this Certificate, application for approval of the Equipment and the submitted supporting documents and plans and specifications as listed in this Certificate”.
Equipment was defined as "the paint spray booth described in the Owner's application(s), this Certificate and the supporting documentation referred to herein to the extent approved by the Certificate"
Numerous terms and conditions were specified in the Certificate.
[21] Based on the evidence and testimony in this trial, I find that Mr. Barre never complied with the terms and conditions required by the Certificate of Approval. Mr. Barre, on behalf of the plaintiffs, failed to do the work required by the Certificate of Approval and, therefore, was never in compliance with the Certificate of Approval. He stated that he was unable to do it because of the cost, but had obtained no evidence to indicate what the cost might be.
[22] Mr. Barre testified that in mid-2010, Officer Grams of the Toronto Fire Services came to his building to verify whether the operation was in compliance with all rules and regulations. He testified that the Fire Services alerted him to the fact that there was no fire protection system in the shop or paint booth. He alleges that there had been a fire system for the paint booth prior to purchase of the premises, although there is no evidence of this. He testified that the Toronto Fire Services advised that he could not operate the spray booth without a fire protection system.
[23] The evidence indicates that he did not have a fire protection system installed in order to be able to operate the spray booth. Rather, he demanded of the defendants that the fire protection system which he alleges was connected to the spray booth prior to purchasing the buildings must be returned. However, when he was asked, in cross-examination, whether it was true that he bargained for what was paid for and he received it, he replied "yes".
[24] On August 7, 2012, the Toronto Fire Services issued a Notice of Violation to Mr. Barre as regards the spray booth located at 44 Hyde Avenue. The Report states, inter alia, at Item 1, 2.1, 2.2, as follows:
"The building has a spray booth that is not approved for use since it has no fire suppression agent. It has nozzles but no dry chemical or any other agent hooked up to the nozzles. I have spoken to Mr. Barre and he knows this booth cannot be used until a fire protection system is installed. Spray painting is being done in the booth without any fire protection. A fire protection system has to be installed on the booth for it to be used for spraying purposes. The booth cannot be used until this is done”.
[25] When asked in cross-examination about the Notice of Violation issued by the Toronto Fire Services, he denied that he ever used the spray booth. When questioned as to who did use it, he replied that it was his workers, cleaners and that a neighbour also paints, such that the paint odours may have been detected in his premises. He ended by saying that he "was never caught".
[26] The evidence indicates that Mr. Barre did not take steps to have a fire protection system installed, but rather continued to claim that the defendants should have provided a functional operating spray booth, without certificates and equipment required in order to operate his auto body shop. He again points to this as the reason why he was unable to operate his business, and the reason for which he lost money and the business. When asked in cross-examination what prevented him from carrying on business, he stated that it was the spray booth. He testified that no one forced him to close his business; that he did that himself voluntarily.
[27] While he testified that the defendants were liable for the deficiencies, including the fact that the spray booth could not be operated due to the lack of a Certificate of Approval and the requisite fire safety equipment, he conceded in cross-examination that neither he nor any lawyer retained on his behalf ever wrote to the defendants as regards the alleged deficiencies and that he never discussed with a lawyer the alleged deficiencies. He never instructed a lawyer to send correspondence indicating that he had not received what he bargained for and took no steps with either a lawyer or the real estate agent as regards the issues which are before the Court in this trial.
[28] He further conceded in cross-examination that he had had the opportunity to inspect the premises pursuant to the conditions inserted for his benefit in the Agreement of Purchase and Sale, and to ensure that all laws and regulations had been complied with, but did not do so. He said that the lawyer did all of that for him. He stated that when he asked the lawyer, he was told there were no issues as regards environmental matters or the bylaws. He further stated that when he learned that there were deficiencies, he contacted his lawyer who advised him that all investigations had been done. There is no evidence to indicate that he followed up further in this regard. He stated that he did not bring any action against the real estate agent or lawyer, but would do so if he needed to. While he testified on his examinations for discovery that he had had counsel during the negotiations as well as the closing, at trial, he denied this and said that his previous answer was wrong.
[29] He further admitted in cross-examination that he had never had a fire inspection of the property done, nor had a certified property inspector attend the premises, nor did he have the spray booth inspected and conceded that when the real estate agent had recommended an inspector to him, he did not retain that inspector. He stated that he did not need to. He stated that while he did not conduct any searches, he had discussed it with his lawyer and believed that all was in order and complied with. He waived the conditions and signed the Waiver which is contained in the APS.
[30] While he maintained that he was unable to proceed with installing the equipment to make the spray booth functional, due to lack of money, he conceded in cross-examination that between 2010 and 2012, he renovated the properties, dividing 44 Hyde Avenue into two parts changing doors, fixing the roof and cleaning up the basement. He stated that he spent between $50,000 and $100,000, but does not have any invoices. He admitted that he did not know what it would cost to install a fire suppression system, and had never inquired about the cost of installing one. He further stated that making the spray booth operational was at his discretion, and that he didn't need the additional equipment to make it operational if he didn't use it.
[31] There was no explanation as to why he did not simply replace the fire protection system in order to bring it into compliance with the fire safety rules and regulations such that he could operate the spray booth.
[32] Instead, he testified that because he could not operate the spray booth and, according to him, therefore could not operate the business, he sublet the building to TGS Auto Services in late August of 2011 because, as he testified, he could not do what he intended to do with the building.
[33] As regards leasing a part of 44 Hyde, in cross-examination he admitted that he rented the premises in late August of 2011 to TGS, but did not have, in evidence, a written lease to that effect. Indeed, he had no documentation as regards rental income derived from the properties. He subsequently changed his testimony and indicated that the premises were rented in August of 2012 and not 2011. He did produce a lease with TGS which was executed August 17, 2012. Despite the evidence of Perry Stewart, the real estate appraiser called by him as a witness, he denied that he had leased 44B Hyde and stated that they operated the body shop in that portion of 44 Hyde. It is of note that when he was examining Mr. Stewart in chief, he did not challenge any of Mr. Stewart's evidence, including the tenancies.
[34] He did introduce an Agreement to Lease between Cansom and 18103344 for rental of the premises as an auto body shop from June of 2014 to June 2015.
[35] As regards the alleged wrongful litigation and illegitimate claims, Mr. Barre testified as regards all of the mortgage default proceedings as set forth at para. 11, supra. All of the proceedings, which are alleged to be wrongful or illegitimate, and all of the decisions of the court arising therefrom are in evidence in this trial. Mr. Barre denied that the plaintiffs had defaulted on the mortgage as alleged, but had no financial records, nor evidence of cancelled cheques or payments made. In fact, the decision of Firestone J. found that the plaintiffs did owe money on the mortgage. Following a reference before Master Graham, the amounts found to be owing were $180,444.33 on the first mortgage and $307,876.62 on the second mortgage, with pre-judgment and post-judgment interest payable at 4.75% thereon from November 4, 2012. Indeed, the evidence in this proceeding establishes that there was default on the mortgages, and, as well, the plaintiffs failed to pay their property taxes and to maintain insurance on the property as required pursuant to the Vendor Take-Back Mortgages. When asked about the property taxes, Mr. Barre stated that he had made "arrangements" with the City. He stated that he never notified the mortgagees to advise that he was behind in his taxes. He stated that he did not have to advise them, and that they did not ask. However, on July 31, 2012, a letter was sent to Frank Fernandez, as mortgagee, from the City of Toronto regarding outstanding taxes on that property owing as of July 31, 2012 in the amount of $35,496.18 and advising that failing payment, the City would have to proceed with a collection action.
[36] Mr. Barre conceded in cross-examination that he had a second mortgage on the subject property with several members of the Callia family, with whom he did business. He stated that he did not pay off the second mortgage either.
[37] Mr. Barre further admitted in cross-examination that he had a mortgage on his home, and almost lost the home as he was unable to pay the mortgage. However, he was able to purchase it back in April of 2012. He admitted that he did have the money to purchase the house back, and that he had obtained a loan through a private lender.
[38] Mr. Barre testified as regards all of the legal proceedings concerning default on the mortgages and attempts to obtain vacant possession as set forth in the agreed-upon Request to Admit entered in evidence in this trial and found at paragraph 11, supra. All of the judicial decisions as regards those proceedings are in evidence before me.
Klauss Rossler
[39] Klauss Rossler was summonsed by the plaintiffs to give evidence in this trial. He is the real estate agent who sold the subject properties. He recalls having shown the properties to Mr. Barre. At the time of his signing of the Agreement of Purchase and Sale, he represented both parties, pursuant to the Confirmation of Cooperation and Representation, including the acknowledgment of multiple representation, executed by Mr. Barre and another real estate agent, with the same brokerage firm, Century 21 Royal Windsor Realty Inc.
[40] Mr. Rossler recalls that there were numerous negotiations back and forth. He stated that Mr. Barre was focused on the paint booth. He stated that clauses regarding inspection of the premises following the signing of the Agreement of Purchase and Sale were inserted at the instance of the plaintiffs. He explained all the provisions of the Agreement of Purchase and Sale to Mr. Barre prior to the Agreement being signed. On behalf of the plaintiffs, he contacted an inspector experienced with body shops and suggested that the plaintiffs retain this inspector to conduct an inspection pursuant to the APS. Mr. Barre inquired as to how much this would cost and when Mr. Rossler advised him that it would cost $2,000, Mr. Barre stated that that was too much and that he would get his own inspector. Mr. Rossler stated that Mr. Barre came with another person, that he let them into the premises, they were speaking their own language and that he never saw a report.
[41] Mr. Rossler testified that he went back to the property a few months later and Mr. Barre advised him that there was something missing from the spray booth such that he was unable to operate the booth or operate his business. Mr. Rossler asked if he had taken a photograph of the spray booth prior to closing and he advised that he had not. Mr. Rossler stated that, on that occasion, he saw cars in the shop, although the plaintiff stated that he was unable to operate the business.
Matthew Randall
[42] Matthew Randall is an Environmental Officer with the Ministry of Environment and, in the context of this position, conducts inspections of facilities and industries to ensure compliance with several pieces of legislation. He participated in the "blitz" conducted in the area of the plaintiffs' properties as a group effort to ensure compliance with legislation. He was contacted by the Toronto Police to participate in the "blitz" which was initiated by the City of Toronto. He stated that the premises were inspected as part of the "blitz" in the area, and not because of any complaint as regards the subject premises. He is the author of the Report described at paragraphs 17 and 18, supra. He explained that the purpose of the inspection conducted on March 30, 2010 was to ensure that the subject premises were compliant. In the event that contaminants are discharged into the environment, the Ministry of Environment must inspect to ensure compliance with the legislation. He testified that a body shop was not able to operate a spray booth without a Certificate of Approval. He stated that if the booth were discharging contaminants into the environment, a Certificate of Approval was required. If there was no escape of contaminant into the environment, the spray booth could be operated. He testified that the paint booth at the subject premises emitted contaminant into the environment. He further testified that the plaintiff may have ignored the Report and continued to use the spray booth in non-compliance with the Environmental Protection Act, but he did not know whether this had been done.
[43] He stated that there had been no violation orders previously issued to the former owners [the defendants].
Randall Kent Grams
[44] Randall Grams has been a Fire Inspector for the City of Toronto Fire Services since 2000. He produced handwritten notes and reports as regards the subject premises.
[45] He testified that he was aware, from his notes, that there had been a "blitz" in March of 2010 in the area of the plaintiff corporations, but that, to his knowledge, no one from the Fire Department had attended during that "blitz".
[46] He testified that his first visit to 44 Hyde Avenue was April 13, 2010, as witnessed by his notes.
[47] The purpose of the first visit was to review the address for fire safety. This was in the normal course of his work. He was assigned the task by the Captain. When he attended the site, there were employees working, although Mr. Barre was not present. He conducted a walk-through of the premises and saw that the spray booth was not set up. He identified photographs shown to him by Mr. Barre as the premises that he had seen on his first visit. In cross-examination, he stated that while he did not believe that the spray booth had been used, it may have been.
[48] He attended again at the premises on April 23, 2010 and met with Mr. Barre, who advised him that he had arranged for someone to attend at the premises to make the spray booth operational. He re-attended on May 7, 2010 and was advised that Mr. Barre had made an appointment with the spray booth company to find out what was needed in order to make it operational. He re-attended on June 3, 2010 and was advised by Mr. Barre he was still waiting for the spray booth experts. Inspector Grams stated that after this, it was his understanding that, while body work was being done on the premises, no spraying was being done and, in such a case, there would be no violation. He continued to make visits through January of 2011 and still no booth expert had attended at the premises to make the spray booth operational. He testified that he did not re-attended the premises until August of 2012, and that there was no reason to re-attend as Mr. Barre indicated that he would call Inspector Grams once a spray booth expert had come. Inspector Grams never received a telephone call.
[49] Inspector Grams testified that the spray booth was missing the necessary fire suppression agent and the piping for the dry chemical or other fire suppression agent was not connected. He testified that it did not appear that anything had been removed; it was just absent.
[50] Fire Inspector Grams attended the premises again on August 7, 2012. He testified that he found the spray booth in use on that day and issued the plaintiff a Fire Services Notice of Violation, which was in evidence in the trial. The Violation stated, inter alia, as follows:
"The building has a spray booth that is not approved for use since it has no fire suppression agent. It has nozzles but no dry chemical or any other agent hooked up to the nozzles. I have spoken to Mr. Barre and he knows this booth cannot be used until a fire detection system is installed. Spray painting is being done in the booth without any fire protection.
A fire protection system has to be installed on the booth for it to be used for spraying purposes. The booth cannot be used until this is done."
[51] Inspector Grams testified that he advised Mr. Barre that he would re-attend at the premises on August 15 to ensure that there was no further violation. There was no spraying being done on that attendance, but he did find the plaintiff spraying in the non-approved booth on August 21. He did not re-attend again until December 4, 2013, at which time he was unable to gain access to the building. He noted that a fence had been put up around the premises. He attended again on December 18, December 27, 2013 January 10 and 16, 2014. He found the property locked. He testified that he re-attended in April, May and June of 2014. He noted that there was work going on in the front of the building but not in the back.
[52] From 2010 to 2014, Mr. Barre had taken no steps to make the spray booth operational. In order to make the spray booth operational from the point of view of the Toronto Fire Services, a fire protection system had to be installed and Mr. Barre had to go to the building department to take out a building permit for the spray booth. Fire Inspector Grams testified that he had advised the plaintiff of what was required. The plaintiff was able to carry on business as an auto body shop, except for using the spray booth.
Perry Kenneth Stewart
[53] Mr. Stewart is a real estate appraiser, with AACI designation, and is qualified to conduct appraisals on all types of property. He prepared an appraisal report of the properties dated December 18, 2012 for the Eagle Group Mortgage Brokers. The purpose of the report, as stated in the report was as follows: "The purpose of this appraisal is to estimate the market value of the fee simple interest in the subject property subject to the assumptions and limiting conditions as appear in this Report. The intended use of this Report is to assist the client in ascertaining the value of the asset for mortgage lending purposes."
[54] Pursuant to the appraisal, it was the opinion of Mr. Stewart that the market value of the subject property as at December 3, 2012 was $735,000, using the direct comparison approach.
[55] Mr. Stewart also provided an appraisal based on the income approach. He noted in the Report that 42 Hyde Avenue was, at the time of the Report, leased at a rate of $1,500 per month plus utilities, that 44A Hyde Avenue was leased at a rate of $2,490 per month plus utilities and that 44B Hyde Avenue at a rate of $3,500 per month plus utilities, for a total monthly lease income of $7,490. He stated that he obtained his evidence from a number of sources.
Anna Maria Fernandez
[56] Anna Maria Fernandez testified that she was the previous owner of 42 Hyde Avenue, which she sold to Cansom Holdings pursuant to an Agreement of Purchase and Sale entered into on September 24, 2009. She confirmed that her husband owned 44 Hyde Avenue. The Agreement of Purchase and Sale closed November 2, 2009 and the properties were transferred November 12, 2009 when the mortgage was also registered. She stated that there was a 10-day hiatus between the closing and registration due to the fact that the plaintiff had failed to produce a cheque to his lawyer.
[57] She testified that she had worked with her husband. They started in the business of operating a body shop in 1976, and from that time also had a spray booth. They purchased the subject spray booth used, not new, in the late 1990s. She testified that there had never been violations while they operated the business. She testified that they did not have a Certificate of Approval from the Ministry of Environment and did not know that they had to apply for one. She further stated that there had been no fire suppression system in the spray booth, which was operated from 1976 to 2008. She did not know that either the Certificate of Approval or the fire suppression system were required. Indeed, she never became aware of those requirements until the plaintiffs made the allegations which are the subject of this trial. She further stated that there were never any problems with zoning. I note that that is not at issue in this trial and that the properties were designated commercial, with 44 Hyde being commercial/retail zoning.
[58] Ms. Fernandez testified that the defendants never impeded any access to or inspection of the building prior to closing.
[59] The plaintiff attempted to establish that the defendants had taken the fire suppression equipment to give to their son who also ran an auto body shop in the Innisfil/Barrie area. Ms. Fernandez stated that their son had a paint booth with a fire suppression system, but that it had been purchased new in October of 2010. She denied that she and/or her husband had ever removed equipment from the spray booth. Indeed, her testimony was that they did not have a fire suppression system for the spray booth, nor did they have a Certificate of Approval.
[60] She stated that in 2008, her husband's eye was injured when he got metal in it. They were forced to retire for health reasons, as a result of his injury.
[61] She testified that when the premises were sold to the plaintiffs, she did not have any discussion with Mr. Barre regarding what use could be or was to be made of the building, nor did her husband. She knew that her husband had had no such conversation with Mr. Barre because, due to his eye injury, she had to drive him everywhere and always went to the premises with him to show the premises to prospective purchasers. She testified that she and her husband had no conversations and made no representations or assurances regarding the condition or content of the building.
[62] She testified that there was no reason why they did not sell the business, but only sold the building. She stated that the building could be used for any purpose and for any business, not simply an auto body shop.
[63] As regards the Vendor Take-Back Mortgage, she testified as to the principal amount and that she did not receive payment on the mortgage in February of 2010. From April through December 2010, the defendants missed approximately five mortgage payments. She stated that Notice of Sale under Mortgage proceedings were commenced thereafter. As at February 2, 2011, she was notified that there was no building insurance on the premises. She testified that an investigation indicated that the insurer had cancelled the insurance, as the plaintiffs had not paid instalments. She subsequently purchased insurance herself as mortgagee in order to protect her security. She testified that there had been no insurance from June of 2010 to March of 2011, when she paid for one year's insurance.
[64] She was questioned as regards the proceedings arising from the defaults on the mortgage, including the Writ of Seizure and Sale issued August 12, 2011 and the Notice to Vacate. She testified that eviction finally occurred on June 13, 2014.
Frank Fernandez
[65] Frank Fernandez testified that he is unable to see or read documents due to his eye injury and that any documentation that needs to be read must be read to him. He was accommodated in this regard.
[66] He testified that, as regards the business, his wife took care of all of the paper work for business, financial and legal matters. He testified that he is the owner of the business but gave his wife power of attorney for everything. He testified that whenever she advised him to sign documentation, he did so. All matters as regards the business were initiated by his wife. Upon sale of the premises to the plaintiffs, all of the proceedings regarding default of the mortgage were handled by his wife.
[67] He stated that he was in the auto body shop business for over 30 years and always worked by himself. He did not have employees. He testified that he used the spray booth. He and two friends installed the subject spray booth in 1990. His friends, who are electricians, also did all of the necessary electrical work. He testified that there was no fire suppression system in the booth. They had no Certificate of Approval from the Ministry of the Environment. He described a filter system which takes out and brings in fresh air from the outside.
[68] He testified that he was required to stop working in 2008 due to an injury to his eyes in 2007.
[69] As regards the plaintiffs' default on the Vendor Take-Back Mortgage and the proceedings that ensued thereafter, he recalls that he and his wife attended at the building on two occasions with the sheriff to lock the building.
The Defendants' Witnesses
Peter Callier
[70] Peter Callier is 47 years of age and a resident of Mississauga. He works at Star Automatic, which is owned by his father and uncle. He has been there 25 years and worked as a mechanic. He stated that his father last worked there in 2009.
[71] He testified that his parents had advanced funds to the plaintiffs. His name was also on the mortgage "in case something happened" to his parents. The mortgage documentation, which he had brought to Court, indicated that funds in the amount of $100,000 were advanced to the plaintiffs, and that they only received partial repayment. He testified that Mr. Barre had given post-dated cheques to his father, but they were returned NSF, after which payments would be made in cash and his father would return the NSF cheques to Mr. Barre. He attended on Mr. Barre in order to collect the money owing. Approximately $12,500, plus one year's interest was repaid, all in cash. To date, no action has been taken on the plaintiffs' defaults on the mortgage.
[72] He testified that, between 2009 and 2014, he and the plaintiffs did work for one another on a barter basis. He did mechanical work and the plaintiff may have done paint jobs for him.
Credibility
[73] This is, to a great extent, a fact-based case, with credibility as a significant issue. The evidence on most material points is significantly divergent.
[74] In assessing the credibility of the witnesses in this case, I am guided by the observations made by D. Brown J. in Atlantic Financial Corp. v. Henderson et al, [2007] 15230 (SCJ), as follows:
In deciding between these two diametrically opposed positions, I am guided by the observations made about assessing the credibility of witnesses by O’Halloran, J.A. in Faryna v. Chorny, 1951 CanLII 252 (BC CA), [1952] 2 D.L.R. 354 (B.C.C.A.) where he stated, at page 357:
The credibility of interested witnesses, particularly in cases of conflict of evidence, cannot be gauged solely by the test of whether the personal demeanor of the particular witness carried conviction of the truth. The test must reasonably subject his story to an examination of its consistency with the probabilities that surround the currently existing conditions. In short, the real test of the truth of the story of a witness in such a case must be its harmony with the preponderance of the probabilities which a practical and informed person would readily recognize as reasonable in that place and in those conditions.
[75] Additional factors to take into account when assessing a witness’ credibility include the presence or absence of evidence contradicting a witness’ statements and corroborative evidence: Sopinka and Lederman, The Law of Evidence in Civil Cases (1974), pp. 527-8.
[76] I found Mr. Barre's evidence to be inconsistent and in some instances contradictory, and many of his answers to be self-serving. He changed his testimony on a number of occasions when it appeared to suit him. In cross-examination, when confronted with evidence which was not consistent with his version of the facts, he at times became evasive. Where he did not have documentation, he stated that he simply did not have it or, in some cases, that he was never told to produce it by anyone, including the Court.
[77] In contrast, the evidence of both defendants was direct, forthright, clear and concise in both examination-in-chief and in cross-examination. I found the defendants' evidence to be credible and consistent with the testimony of other witnesses and documentation adduced in evidence. Where the evidence of Mr. Barre and that of the defendants diverges, I prefer the evidence of the defendants, unless otherwise stated.
Analysis
Was There a Breach of the Agreement of Purchase and Sale
[78] For the reasons below, I find that there was no breach of the Agreement of Purchase and Sale. The Agreement was for purchase of 42 and 44 Hyde Avenue. It was not for purchase of the defendants' auto body shop business, F & F Body Shop. It was only for purchase of the two properties. Further, the provisions of the Agreement of Purchase and Sale clearly indicate that there was "no representation or warranty of any kind that the future intended use of the property by Buyer is or will be lawful except as may be specifically provided for in this Agreement." There was nothing in the Agreement which would take away from or negate this provision regarding future use. Accordingly, there was no representation or warranty made by the defendants as regards any intended future use and no representation or warranty that any future intended use was lawful. No evidence was produced by any of the parties to suggest otherwise. It was the buyer's responsibility to ensure that any intended future use for the property was lawful and in compliance with all legislation.
[79] Moreover, the evidence indicates that the buyer, Mr. Barre, did not take advantage of the conditions set forth at para. 6, above, which were inserted for his benefit. He did not retain an inspector for the premises, despite the fact that Mr. Rossler suggested an inspector who had expertise in the operation of body shops. Indeed, he waived the conditions which had been inserted for his benefit.
[80] Based on all of the evidence, I find that Mr. Barre took no steps to ensure that the body shop was compliant with all legislation, other than obtaining the original license for his business, even after learning as a result of the "blitz inspection" that he was non-compliant as regards the paint booth. As found at paragraph 21, above, while he did obtain a Certificate of Approval, it was issued on terms and conditions set forth therein, which he admitted that he did not fulfill in order to make the business compliant. Nor did he take steps to bring the business into compliance as regards the fire suppression system, as set forth above at paragraphs 48 to 52. Rather, he blamed the defendants for failure to ensure that the business was properly compliant with all legislation despite the fact, as found above, that he did not purchase the business, but only the premises, and that the Agreement of Purchase and Sale clearly stated that it was his responsibility to conduct inspections of the property and that there were no representations or warranties as regards future use of the buildings.
[81] The evidence does not support the plaintiffs' claims for breach of the Agreement of Purchase and Sale, and I am satisfied that there was no breach of the said Agreement.
The Alleged Wrongful Litigation and Illegitimate Claims
[82] While there was a long history of proceedings regarding the defaults on the mortgages, including numerous motions and appeals, based on all of the history of the proceedings, my review of the court files and judgments and based on all of the evidence, I find that there was no "wrongful litigation" commenced by the defendants as against the plaintiffs, nor were there any "illegitimate claims" made. Indeed, the defendants’ claims for default on the mortgages, in the end, resulted in a judgment for damages payable by the plaintiffs to the defendants in the amounts set forth above, at paragraphs 11(p) and (q). Accordingly, this aspect of the plaintiffs’ claim is dismissed.
[83] The plaintiffs appear to base this claim on the defendants' service of a Notice of Foreclosure and the Notice of Sale under Mortgage following default on the mortgage. These were served and filed pursuant to the legislation. However, for technical reasons, they were not given effect. Nor was a motion for a Writ of Possession. It is clear that all of the litigation that ensued as a result, was unsuccessful for technical and/or evidentiary reasons. Default judgment was ultimately set aside on conditions that the plaintiff make the necessary mortgage payments as regards payments in arrears. The defendants were ultimately successful in obtaining judgment for arrears outstanding in the amounts set forth above.
Damages
[84] Based on all of the foregoing, as I have found that there was no breach of the Agreement of Purchase and Sale, nor any commencement of "illegitimate” or “wrongful claims", there are no damages which would flow therefrom and therefore no damages owing by the defendant to the plaintiffs.
[85] Nevertheless, I will comment on the damages claimed by the plaintiffs, in the total amount of $1,050,690. The plaintiffs came to court with no evidence whatsoever of any monetary damages sustained, despite the large sums claimed. There were no business or financial records of any sort produced in this action, nor in evidence at the trial.
[86] While the plaintiffs allege that they sustained significant business losses, were unable to operate due to the fact that the defendants had failed to provide the requisite Certificates of Approval and fire suppression system equipment for the spray booth, and claim in total the amount of $1,050,690, they provided no documentation whatsoever in support of these amounts. The claim, as broken down in the statement of claim, was for the following: loss of income in the amount of $324,000, salaries in the amount of $60,000 expenses in the amount of $23,590, "obligations" in the amount of $70,600 and damages of $570,500. None of these was broken down or supported by any evidence. No evidence regarding any of these claims was adduced. There were no business records, financial records nor any income tax returns provided by the plaintiffs. Indeed, Mr. Barre testified that he had not prepared any income tax returns for his businesses during any of the material times. There are no records, T-4 forms or any other evidence to support the claim for "salaries", there is no indication of any "obligations" or "expenses claimed. Finally, there is no indication nor any documentation as regards any "damages", nor any breakdown thereof.
Mitigation
[87] While I have already found, above, that there was no breach of the Agreement of Purchase and Sale by the defendants, such that I need not comment on whether the plaintiffs took any steps to mitigate damages, I nevertheless will make a brief comment herebelow.
[88] The defendants maintain that, in the event that they are found to have breached the Agreement of Purchase and Sale, the plaintiffs failed to mitigate any damages. While the plaintiffs claim that due to the fault of the defendants, they were unable to use the property for that for which it was intended and failed to provide the chattel bargained for, namely a spray paint booth with all necessary approvals and certificates for operation, the evidence indicates that (i) the sale was not of a business, but rather of a property, to be used for any use to which the plaintiffs decided to put it; (ii) the Agreement of Purchase and Sale did not require the defendants to provide a business, nor a spray booth, which had all of the proper certifications and approvals for that business, including use of the spray paint booth; (iii) the onus, pursuant to the APS, was on the plaintiffs to conduct any and all inspections which they wished prior to closing the Agreement; (iv) the plaintiffs failed to retain an expert to conduct any inspections prior to closing, and (v) the plaintiffs failed to take any steps to obtain the necessary approvals and fire equipment for their spray booth.
[89] There was evidence adduced of two commercial leases entered into with Cansom Holdings. The first, dated August 17, 2012, with a stipulated lease period of August 1, 20 12 to July 30, 2014 appears to have been signed by Mr. Barre and the tenant, Gejarbon Tharmabalan for himself and TGA Auto Services Inc. as tenants, with rent payable of $24,000 per year. The second lease, in the form of an Agreement to Lease dated, May 22, 2014 for the rental period June 1, 2014 to June 1, 2015 for an annual rental of $32,400 per year was executed between Cansom and 1810334 Ontario Inc. These leases were the only evidence of an alternate source of income, although no business records were produced to establish monies received from the tenancies, nor any expenses attributed thereto.
Conclusion
[90] Based on all of the evidence before me, both documentary and viva voce, the submissions of the parties and the foregoing analysis, I find that the plaintiffs have not proven their case. Accordingly, I dismiss the plaintiffs' action.
Costs
[91] I would urge the parties to agree upon costs, failing which I would invite the parties to provide any costs submissions in writing, to be limited to three pages, including the costs outline. The submissions may be forwarded to my attention, through Judges’ Administration at 361 University Avenue, within thirty days of the release of this Endorsement.
Carole J. Brown, J.
Released: March 18, 2015
CITATION: Unique Auto Collision et al. v. Fernandez et al., 2015 ONSC 1012
COURT FILE NO.: CV-12-448923
DATE: 20150318
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Unique Auto Collision Network Solution Court and Cansom Holdings Inc.,
Plaintiffs
– and –
Frank Fernandez and Anna Maria Fernandez
Defendants
REASONS FOR JUDGMENT
Carole J. Brown, J
Released: March 18, 2015