ONTARIO
SUPERIOR COURT OF JUSTICE
COURT FILE NO.: SR 782-2012
DATE: 2015/10/19
L’Orignal, Ontario
BETWEEN:
CHRISTIAN MÉNARD
Plaintiff
– and –
GREGORY PARSONS and JENNIFER FEENY
Defendants
AND BETWEEN:
GREGORY PARSONS and JENNIFER
FEENY
Plaintiffs by Counterclaim
– and –
CHRISTIAN MÉNARD, LILIANE MÉNARD, also known as LILIANE
LALONDE, LAURIE COVEDUCK, DAVE COVEDUCK, and ROYAL
LEPAGE REALTY INC.
Defendants by Counterclaim
Jonathan P. Collings, Manou Ranaivoson for the Plaintiff
James L. MacGillivray, for the Defendants
James L. MacGillivray, for the Plaintiffs by Counterclaim
Christopher Hart, Jonathan P. Collings, Manou Ranaivoson, for the Defendants by Counterclaim
AND BETWEEN:
CHRISTIAN MÉNARD and LILIANE
MÉNARD, also known as LILIANE LALONDE
Plaintiffs by Crossclaim
– and –
LAURIE COVEDUCK, DAVE COVEDUCK, and ROYAL LEPAGE TEAM REALITY INC.
Jonathan P. Collings, Manou Ranaivoson for the Plaintiffs by Crossclaim
Christopher Hart , for the Defendants by Crossclaim
HEARD: June 22 to June 24, 2015
REASONS FOR JUDGMENT
MARANGER J.
Introduction:
[1] This case arises as a result of a failed real estate transaction between the plaintiff vendor and the defendant purchasers.
[2] The fundamental question at the core of the litigation is whether the vendor provided the purchasers with adequate disclosure of the fact that the dream home they contracted to purchase was built on top of a discontinued landfill site.
Background:
On November 7, 2011, Gregory Parsons and Jennifer Feeney entered into an agreement of purchase and sale with Christian Ménard to buy his land and home located at 1075 St. Pierre Road, Embrun, Ontario. The agreed upon purchase price was $420,000. The transaction was scheduled to close on March 9, 2012.
[3] The purchasers by letter dated February 23, 2012, advised the vendor that they were not going to go through with the transaction.
[4] Christian Ménard ultimately sold the home and property on September 20, 2012, for $330,000.
[5] Quite apart from the stress of the failed transaction, each side was out-of-pocket thousands of dollars in unanticipated expenditures as a result of the aborted real estate deal.
[6] The vendor sued the purchasers for the difference in what he expected to receive and what he did receive when the property was finally sold as well as other miscellaneous expenses. The agreed-upon damages being claimed by the plaintiff vendor is $100,000.
[7] The defendant purchasers have counterclaimed for approximately $6,500.
[8] The original action included the common-law spouse of Christian Ménard, the real estate agents and their company. These parties were let out of the action prior to the commencement of the trial.
Findings of fact:
[9] The trial lasted three days. Two joint books of documents containing the lion’s share of the exhibits were filed on consent. The court heard testimony from Christian Ménard, Lillian Lalonde, Dave Coveduck, Jennifer Feeney, and Gregory Parsons. Based upon this evidence I make the following findings of fact:
• Christian Ménard acquired vacant land closely located to the town of Embrun from his father Réjent Ménard in 1996-1997 namely a part of Lot 9, Concession 7, Township of Russell, County of Russell, Ontario.
• The land in question was on top of a discontinued landfill site. Réjent Menard commissioned an environmental assessment report from Neil Levac Engineering Limited: the stated purpose of the assessment “was to identify the location of landfill waste materials reported to exist on part of the site due to past landfill activities and to evaluate its potential (based on results of the laboratory testing) for the creation of a residential development.” This report was completed in July 1996.
• The environmental assessment disclosed that on the south half of the property “some of the parameters tested were above the set guidelines for residential development with private on-site wells. However, analytical results of samples collected on the north half of the property did not exceed the set guidelines for residential development”.
• The assessment concluded that if certain precautionary measures were undertaken to the north half of the property it could be developed for residential use. It then listed several preventative measures that should form part of the development process. The most significant of the measures was to “install a clay barrier which would prevent the migration of suspected contaminants from the landfill material on to the north half of the property were residential development would take place. The clay barrier would have to be installed from the most western property line to the creek bordering the most easterly property line. It would have to be inserted into the native clay with a depth of approximately three meters and should be inspected by a qualified geotechnical engineer. Its width should be at least 0.6 m”.
• In the fall of 1996, Réjent Ménard applied to the land division committee of the United Counties of Prescott and Russell to sever the land into two lots.
• On December 18, 1996, the committee granted approval subject to two specific conditions: firstly that the barrier referenced in the environmental assessment prepared by Levac Engineering Ltd. had to be completed and secondly that Réjent Ménard register a notice on title that the lot was constructed on top of a pre-existing landfill site.
• In March 1997 Christian Ménard and his father completed the recommended environmental protection barrier between the north and south half of the property. Photographs of the work being performed show that Christian Ménard was present. I infer that Christian Ménard would have had knowledge of the reason for the barrier.
• In 1997 Christian Ménard acting as a contractor built a home on the north half of the property. It took four months for the construction to be completed. At this stage he understood that the property was ready for residential development and that furthermore the water on the property was potable based upon a water analysis report obtained by his father.
• Lillian Lalonde is Christian Ménard’s common-law spouse, they began their relationship in September 1998 and lived in the home on St. Pierre Road.
• On August 15, 2002 Christian Ménard purchased the south lot adjoining their home from his father for the sum of $35,000. The express reason for buying the lot was not to have any neighbours and increase the size of his property.
• From 1998 to 2011 Christian Ménard and Lillian Lalonde lived in this home and on this property happily and without any problems the entire time.
• By 2011 the home at 1075 St. Pierre Road appeared to be a very nice looking, well-constructed bungalow with a manicured yard spread out over two large lots, and located very close to the town of Embrun.
• Christian Ménard and Lillian Lalonde decided to sell the property in the summer of 2011. They began by listing it themselves and then eventually listed with Margaret Wilson of Royal Lepage. I accept that Lillian Lalonde advised Margaret Wilson of the pre-existing landfill site, and that Margaret Wilson was surprised to learn of that fact given the “park like” nature of the property.
• Shortly thereafter Margaret Wilson passed away and Daniel Coveduck, also an agent with Royal Lepage, took over the listing. He was not advised by Christian Ménard or Lillian Lalonde of the discontinued landfill site beneath the property.
• On August 19, 2011, a listing agreement with Daniel Coveduck was executed and the property was listed for sale for $449,900. At the time he acted on the listing he was unaware of the pre-existing landfill site.
• Jennifer Feeney and Gregory Parsons are common-law husband and wife. They have two children Zachary and Katie who were 7 and 2 years old in 2011. They were residents of Embrun. In that year they decided to look for a home with a larger yard for the benefit of their two young children.
• The couple drove by 1075 St. Pierre and were immediately interested. Initially it was out of their price range. However, once the listing price dropped to $430,000 they became very interested in acquiring the home and property. They viewed it on November 6, 2011. The family was “ridiculously excited”. They saw it as their dream home.
• On November 7, 2011 an agreement of purchase and sale was executed between Gregory Parsons, Jennifer Feeney and Christian Ménard for the purchase of 1075 St. Pierre for the sum of $420,000. Schedule A to the agreement of purchase and sale included a list of conditions including that the seller provide a “seller property information statement” (SPIS) that was in their possession.
• At page 2 of the SPIS there is a paragraph entitled Environmental: (provide applicable additional comments). Question 1 under that paragraph stipulates: “Are you aware of possible environmental problems or soil contamination of any kind on the property or in the immediate area? e.g.: radon gas, toxic waste, underground gasoline or fuel tanks etc.” to which the seller indicated “unknown”.
• Question 2 under that heading stipulates: “Are there any existing or proposed waste dumps, disposal sites or landfills in the immediate area?” to which the seller indicated “yes”.
• In 2011 there was a notorious battle in Embrun and the surrounding area concerning the prospect of a chemical disposal site being constructed by company called Taggart Miller. There was an office in the town of Embrun entitled “dump the dump”. The issue was constantly in the local news.
• Jennifer Feeney and Gregory Parsons believed that the answer to question 2 under Environmental in the SPIS referenced this proposed dump.
• On November 11, 2011, the purchasers attended the home for a home inspection with an accredited home inspector. Lillian Lalonde and Jennifer Feeney spoke and Jennifer Feeney inquired how they obtained 2 beautiful acres of land so close to the Town of Embrun, she advised that they obtained it from her father in law, that they built the house themselves and that the property in fact had two lots. There was no mention whatsoever of the pre-existing dump.
• On November 17, 2011, a test was performed by Public Health Ontario of the well water located on the property; the result was that there was significant evidence of bacterial contamination of the water and that it may be unsafe to drink. This was resolved by installing a water filtration system. At no time was the issue of a pre-existing landfill site discussed by the vendors during this time.
• The Purchasers waived the conditions in the agreement of purchase and sale. They were allowed to attend the property for the purposes of measuring for kitchen cabinets, and window coverings. It appeared as though the transaction would close as scheduled.
• On February 21, 2012, the purchasers were contacted by their real estate lawyer Stephane C. Lalonde who advised them of information he had come across concerning 1075 St. Pierre. In particular he informed them that part of the lot was built on top of a discontinued landfill site.
• The defendant purchasers were shown several letters as well as the engineer’s report of May 28, 1996, which confirmed the nature and extent of the potential contamination on the property. In a letter dated July 14, 1995, the engineer consultant C.R Morey specifies the following:
“The presence of the landfill is of environmental concern due to the possibility of contaminants in the landfill and the possible production of methane gas due to decomposition of some of the landfill materials…
Should the site be developed for residential purposes it is considered that as a minimum all of the existing landfill materials would have to be removed from beneath and somewhat out beyond the footprint of the structures and be replaced to founding level with suitable engineering fill materials…
In addition measures to prevent any methane gas from entering structures at the site would be required.”
Jennifer Feeney was shocked by the discovery. She instructed her lawyer in no uncertain terms that she was not going to move her kids onto property that had materials that could be hazardous to the health of her children.
• A letter was sent on February 23, 2012, by counsel representing the purchasers to the vendor’s counsel stipulating that they would not be going through with the transaction because of the failure to disclose the existence of a pre-existing dump on the property.
• The plaintiff tendered on the defendants.
• Following the failed transaction, the realtor Daniel Coveduck advised the plaintiff that he should specify in the SPIS that the property was on top of a pre-existing landfill site. This resulted in adding the following wording to the SPIS “#2 below: -old landfill site (42 years ago) metal glass plastic brick - Levac engineering confirms no contamination or environmental hazard”.
• My reading of the Levac report and material does not allow for the unequivocal conclusion that Levac engineering “confirms no contamination or environmental hazard”.
• In the fall of 2012, the plaintiff ultimately sold the property for $330,000.
Position of the plaintiff:
[10] The plaintiff through counsel submits that the defendant purchasers were in breach of their contract. They had an obligation to close the transaction once they waived the conditions contained in the agreement of purchase and sale.
[11] He further submitted that the maxim “caveat emptor” (buyer beware) applies to the facts of this case. The purchasers had a positive obligation to satisfy themselves and to conduct their own searches relative to the home and property. They had every available opportunity to do so, including having a home inspector go through the property with them.
[12] Furthermore, it was submitted that the vendor honestly and in good faith completed the SPIS to the best of his ability and had the purchasers any inquiries to make regarding the information contained therein they should have done so before waving the conditions. There was no misrepresentation of any kind in this case.
[13] The failure to close the real estate transaction was a clear breach of contract and thus judgment should be granted in the plaintiff’s favour for the agreed-upon damages of $100,000.
Position of the Defendants:
[14] Counsel for the defendants submitted that once the plaintiff decided to complete the SPIS he created a positive obligation to provide full and frank disclosure about the home and property. The position taken is that the vendor either fraudulently or negligently misrepresented the true character of the property when completing the SPIS. He should have clearly and unequivocally indicated that part the property was constructed on top the discontinued landfill site.
[15] There should have also been full disclosure of any potential environmental concerns that flowed from the pre-existing landfill site. The failure to provide this information prior to the waiver of the conditions allowed the defendants to rescind the contract.
[16] Furthermore, they sustained special damages as a result of this misrepresentation and are claiming approximately $6,500 by way of counterclaim.
Law and Analysis:
Caveat Emptor
[17] In the case of Cotton v. Monahan, 2010 ONSC 1644, 93 R.P.R. (4th) 212, Arrell J. gave the following description regarding the law when it came to the purchase of real estate:
In any discussion regarding the purchase of real estate one must start with the well known legal maxim: “ caveat emptor, qui ignorare non debuit quod jus alienum emit’’ (let the purchaser, who is not to be ignorant of the amount and nature of the interest, exercise proper caution).
The primary obligation is on the purchaser to not be ignorant of the nature of the purchased interest. Defects In Real Estate, Craig R. Carter, 14-1.
The starting point on analysis of property defects would appear to be the often quoted phrase of Prof. Laskin (as he then was) at the 1960 Law Society special lectures: “absent fraud, mistake or misrepresentation, a purchaser takes existing property as he finds it, whether it be dilapidated, bug infested or otherwise uninhabitable or deficient in expected amenities, unless he protects himself by contract terms”. …
[18] The general rule of buyer beware applies to all patent defects, being defects that a purchaser could have discovered by means of a routine inspection. It also applies to latent defects that were unknown to a vendor.
[19] The general rule of caveat emptor, however, does not apply in situations where there has been misrepresentation (Lunney v. Kuntova, [2009] O.J. No. 742 at para. 53 (Sup.Ct.)).
[20] In situations where a vendor attempts to conceal a latent defect the purchaser may be able to ask for rescission of the contract or compensation for damages (Robert v. Kilgour [2015] O.J. No. 4395 at paras. 54-55 (Sup. Ct. (Sm. Cl. Div.)).
Seller Property Information Statements
[21] The Court of Appeal in Krawchuk v. Scherbak, 2011 ONCA 352, 106 O.R. (3d) 598 held that while “statements made in an SPIS are not warranties, they may still be the basis of liability as representations” (at para. 70).
[22] In Krawchuck at paragraph 75 the court held that it was reasonable for a buyer to rely on the representations contained in a seller property information statement once it has been disclosed. At paragraph 77 they further indicated:
77 Although the completion of an SPIS is not mandatory, once the seller decides to fill one out, he or she must do so honestly and accurately and the purchaser is entitled to rely on the representations contained in the SPIS. In Kaufman, Killeen J. held at para. 119 that “once a vendor breaks his silence by signing the SPIS, the doctrine of caveat emptor falls away as a defence mechanism and the defendant must speak truthfully and completely about the matters raised in the unambiguous questions at issue”.
[23] The requirement for the buyer to make his or her own enquiries does not absolve the seller of liability for misstatements in the SPIS. While the buyer has a duty to investigate, this duty does not require the buyer to challenge the honesty of the vendor. The purchaser is entitled to rely on the representations made by the vendor as though they were true (Krawchuck at paras. 88-92).
Rescission and Misrepresentation
[24] In Tse v. Sood, 2015 ONSC 755, the court noted that there are four main legally acceptable justifications for a purchaser refusing to close a real estate transaction. A purchaser may refuse to close the transaction if the vendor has made a false representation and the other elements of a claim for equitable rescission are satisfied. Equitable rescission is an available remedy in cases of negligent misrepresentation. The claim has four elements: the defendant makes a false statement; the statement is material in that it is of the type that would have influenced the contracting party’s decision to enter the contract; the statement induced the party to enter the contract; and the party seeking to rescind the contract does so before the closing of the transaction.
[25] The necessary criteria for the purchasers to rescind this real estate transaction have been made out in this case. The vendor’s completion of the SPIS constituted misrepresentation. The Environmental portion of the SPIS had two statements that were incorrect or misleading to the point of misrepresentation and the plaintiff knew or ought to know that they were incorrect. Answering “unknown” to the question “are you aware of possible environmental problems or soil contamination of any kind on the property or in the immediate area” was incorrect especially given the history of this property and the knowledge of the plaintiff.
[26] The answer “yes” to the question “are there any existing or proposed waste dumps, disposal sites or landfills in the immediate area?” without any further explanation in the circumstances of this transaction was misleading to the point of misrepresentation. The answer has to be taken in context, there was a proposed dump site in the vicinity that was well known in the community of Embrun. It was being strongly resisted. This taken with the fact that the property was built upon a “discontinued landfill site” and not “a proposed or existing landfill site” buttresses the proposition that the answer was misleading.
[27] The answers on the SPIS and the actions of the plaintiff should also be viewed from the perspective that there was a pre-existing obligation to register a notice on the title to this property by the plaintiff’s father advising any prospective purchaser of the existence of a discontinued landfill site. Furthermore, there were several other opportunities where the plaintiff or his common-law spouse could have easily provided information concerning the discontinued landfill site.
[28] Based upon the actions of the vendor, and his common-law wife, I draw the inference that the vendor was at best reluctant to advise anyone about the existence of the landfill site and at worst trying to conceal the fact.
[29] The purchasers on the facts of this case were entitled to rescind the contract and walk away from the real estate transaction in the manner that they did. The plaintiffs claim against them is therefore dismissed.
Counterclaim and Negligent Misrepresentation
[30] The defendants have counterclaimed for the following:
• $508.50 for the home inspection relating to 1075 St. Pierre.
• $565 for the inspection report relating to 1075 St. Pierre.
• $904 for the water inspection report relating to 1075 St. Pierre.
• $2,042.88 in lawyer’s fees for the failed real estate transaction.
• $1,921 for inspection reports and water inspection report relating to the property the defendants ultimately purchased.
[31] The elements of the tort of negligent misrepresentation consist of the following:
• There must be a duty of care based on a special relationship between the representor and the representee;
• The representation in question must be untrue, inaccurate, or misleading;
• The representor must have acted negligently in making the misrepresentation;
• The representee must have relied in a reasonable manner on said negligent misrepresentation; and
• Reliance must have been detrimental to the representee in the sense that damages resulted (Queen v. Cognos Inc., [1993] 1 SCR 87 para. 33).
[32] On the facts of this case negligent representation has been made out. The duty of care existed between the plaintiff and defendants based upon the preparation and providing of an SPIS in the context of a real estate transaction. The plaintiff/defendant by counterclaim made untrue, inaccurate, or misleading representations in the answers he provided in the SPIS. The plaintiff/defendant by counterclaim was negligent and in how he made representations. He was required to “speak truthfully and completely about the matters raised in the unambiguous questions” (Krawchuck at para. 77). He did not. The defendants relied on these representations by going forward with the transaction and incurred special damages as a result.
[33] In this case, however, I would restrict the special damages to those expenses incurred relating to the St. Pierre property and not the subsequent purchase as those expenses are too remote. Therefore, on the counterclaim I would fix the special damages at $4,020.38.
[34] Therefore, there will be a judgment in favour of the defendants/plaintiffs by counterclaim against the plaintiff/defendant by counterclaim in that amount.
Costs:
[35] With respect to the issue of costs, if the parties are unable to agree I will accept written submissions of no more than two pages from counsel representing the defendants/plaintiffs by counterclaim within 15 days of the release of this decision. Counsel representing the plaintiff/defendant by counterclaim will be allowed 7 days thereafter to file his submissions. Failing receipt of this material in the allotted time I will consider that the parties have resolved the costs issue.
Maranger J.
Released: October 19, 2015
COURT FILE NO.: SR 782-2012
DATE: 2015/10/19
L’Orignal, Ontario
CHRISTIAN MÉNARD
Plaintiff
– and –
GREGORY PARSONS and JENNIFER FEENY
Defendants
AND BETWEEN:
GREGORY PARSONS and JENNIFER
FEENY
Plaintiffs by Counterclaim
– and –
CHRISTIAN MÉNARD, LILIANE MÉNARD, also known as LILIANE
LALONDE, LAURIE COVEDUCK, DAVE COVEDUCK, and ROYAL
LEPAGE REALTY INC.
Defendants by Counterclaim
AND BETWEEN:
CHRISTIAN MÉNARD and LILIANE
MÉNARD, also known as LILIANE LALONDE
Plaintiffs by Crossclaim
– and –
LAURIE COVEDUCK, DAVE COVEDUCK, and ROYAL LEPAGE TEAM REALITY INC.
Released: October 19, 2015