Court File and Parties

COURT FILE NO.: CV-14-0843-00 DATE: 2016-10-11

ONTARIO SUPERIOR COURT OF JUSTICE

B E T W E E N:

FREDERICK FISCHER Plaintiff

- and -

GASPARINO VOLPE, DAVID SCANLAN, MINCOM SELECT REAL ESTATE SERVICES LTD., RE/MAX NORTH PARK and RON HARTWICH Defendants

BEFORE: Price J.

COUNSEL: Harvey A. Swartz, for the Plaintiff Amanda S. Gibson, for the Defendants

HEARD: September 29, 2016, at Brampton, Ontario

Reasons For Order

NATURE OF MOTION

[1] The plaintiff, Frederick Fischer, bought a property that its vendor, the defendant, Gasparino Volpe, had recently used for growing marijuana. The use of the property as a marijuana grow operation (“grow op”), was incompatible with the use for which Mr. Fischer bought it, which was to reside in the property and eventually to sell it. There is no dispute that Mr. Volpe’s use of the property as a grow-op created an increased risk of mold and electrical damage, and rendered the property more difficult to sell. Its use as a grow-op, not being visible, was a “latent defect” of a kind that vendors and realtors, if they have knowledge of it, have a duty to disclose to buyers. If the fact that the property was used for a grow-op made it impossible or more costly for him to sell the property, the non-disclosure of that fact to him is compensable in damages.

[2] Mr. Fischer sued those who owed him a duty in the transaction, namely, the vendor, the vendor’s agent, Mr. Fischer’s own agent, and his agent’s broker. He alleges that they fraudulently concealed the facts from him, and fraudulently misrepresented the condition of the property to him.

[3] The vendor’s agent, Mr. Scanlan, has died, and his firm, Mincom Real Estate, has closed. Mr. Fischer now moves for summary judgment against the remaining defendants.

[4] Three facts are not in dispute:

a) Mr. Fischer did not get what he bargained for, namely, a home where he could safely reside, and an asset that he could sell or transfer to another as readily as Mr. Volpe had sold it to him. b) Mr. Fischer was induced to buy the property by not being told that the house had been used for a grow op. c) The defendants, if they knew the house had been used for a grow-op, owed Mr. Fischer a duty to disclose that fact to him.

[5] There are two major issues that are in dispute:

a) The first issue involves the standard of care expected of a buyer’s agent. Who is liable to Mr. Fischer for the loss he suffered by reason of the non-disclosure of material facts to him? While Mr. Volpe himself knew that he had used the house for a grow op, it is disputed whether he disclosed the fact to his listing agent, Mr. Scanlan, and whether Mr. Scanlan informed Mr. Fischer’s agent, Mr. Hartwick. Even if Mr. Volpe disclosed the fact to Mr. Scanlan, it is in dispute whether that would have discharged his own duty to Mr. Fischer, or whether Mr. Hartwick, the buyer’s agent, discharged his own duty to Mr. Fischer if he relied exclusively on what Mr. Scanlan told him. The complexity of this issue in the present case is compounded by the fact that Mr. Scanlan died following the transaction, with the result that the court must draw inferences as to what he knew, and what he disclosed to Mr. Hartwick. b) What loss did Mr. Fischer suffer as a result of the non-disclosure to him? While it is not in dispute that the house was used for a grow-op, and that this will make it more difficult for Mr. Fischer to sell the property, since a purchaser, to obtain financing, will need to show that any damage has been repaired, it is not clear what damage, if any, occurred, or whether it can be repaired, or, if it can be, what the cost will be.

[6] Rule 20, governing motions for summary judgment, requires the court to determine whether there are genuine issues to be determined and, if so, whether they can best be determined at a motion, or whether they require a trial. For the reasons that follow, I find that the issues here require a trial.

BACKGROUND FACTS

[7] Mr. Volpe testified at his examination that, in January 2004, he owned the house and property at 20199 Porterfield Road, in Caledon, Ontario, which is the subject of the present action (“the property”). He admitted that he grew approximately 130 marijuana plants in the house for approximately a month, when the police discovered the operation and arrested him in January 2004. The police charged Mr. Volpe with growing marijuana, and the court released him on bail, one of the terms being that he was prohibited from entering the property.

[8] Mr. Volpe testified that he had substantial debts at the time and that when, owing to the terms of his bail, he was unable to continue residing at the property, he could no longer afford to maintain it, and was forced to sell. The house was vacant in March 2004, when he listed the property for sale with a realtor, David Scanlan.

[9] Mr. Scanlan owned his own brokerage firm, Mincom Select Real Estate Services Ltd., (“Mincom”). He prepared a listing of the property for the Multiple Listing Service (“MLS”), which did not disclose that the property had been used for a grow-op.

[10] Mr. Fischer hired Ron Hartwick (“Mr. Hartwick”, incorrectly described as Ron Hartwich in the style of cause) as the “buyer’s agent”, to assist him in the purchase of a property. Mr. Hartwick’s broker was Re Max North Park Inc. (“Re/Max”). Mr. Hartwick printed the MLS listing that Mr. Scanlan had prepared, and gave it to Mr. Fischer, thereby introducing him to the property. He also prepared the Agreement of Purchase and Sale, which also did not disclose that the property had been used for a grow-op.

[11] Mr. Volpe testified that he met Mr. Scanlan at the property three or four times, and told him that he had been charged with having a grow op in the house. He also told Mr. Scanlan that because of his bail conditions, he needed permission from the court to meet with Mr. Scanlan there.

[12] Mr. Fischer and a friend of his, Rosemary Carfagnini, state in their evidence that Mr. Hartwick told them that Mr. Volpe was selling the property because his sons wanted to attend school in Hamilton, Ontario. Mr. Fischer alleges that Mr. Hartwick invented that explanation in order to conceal the real reason for the sale and to induce him to buy the property.

[13] On March 15, 2004, Mr. Fisher signed an Agreement of Purchase and Sale (“APS”), by which he agreed to buy the property from Mr. Volpe for $330,000. Mr. Hartwick prepared the APS, which did not disclose that the house had been used for a grow-op. Mr. Fischer’s evidence is that had this information had been disclosed to him, he would not have bought the property.

[14] The transaction closed April 30, 2004, and Mr. Fischer thereupon became the registered owner of the property.

[15] In about 2013, Mr. Fischer tried to sell the property. He learned at that time from neighbours that before he bought the property, it had been the subject of a police investigation. He was able to obtain enough information from the police to make a request under the Freedom of Information and Protection of Privacy Act, [1] and thereby learned that the police had found a grow op in the house on January 13, 2004, and had charged Mr. Volpe with growing marijuana there.

[16] At the same time, in 2013, that Mr. Fischer learned that the house had been used for a grow-op, he discovered black mold on and around the ceiling of the house. A home inspection that he had commissioned before buying the property had failed to disclose mold. Mr. Volpe was asked at his examination whether there was mold on the ceiling when he sold the property and he replied that there was not. [2] After discovering the mold, Mr. Fischer did not commission an air quality test or environmental report to determine its extent, and he has not tendered an expert report concerning the mold.

[17] When Mr. Fischer discovered that the house had been used for a grow-op, he made inquiries of several banks as to its implications on the availability of financing for the property. The managers of the National Bank, the Scotia Bank, and the Toronto-Dominion Bank informed him that they would not provide financing for a property that had been used for a grow-op.

[18] Mr. Fischer concluded that he would have to replace the house, and made inquiries as to the cost of doing so. He obtained an estimate dated April 17, 2016, from a contractor, Optimum Home Improvements, estimating the cost of replacing the house at $328,000 plus HST, for a total of $370,000. The total value of the property is currently $620,000.

[19] On February 28, 2013, Mr. Fischer began the present action against the vendor, Mr. Volpe; the listing agent, Mr. Scanlan; his firm, Mincom; the buyer’s agent, Mr. Hartwick; and his broker, Re/Max. He sued the defendants for fraudulently concealing the fact that the house had been used for a grow-op, and for fraudulently misrepresenting the condition of the house to him.

[20] Mr. Scanlan later died, and his firm, Mincom, closed. On October 12, 2015, Mr. Fischer moved for summary judgment against the remaining defendants. Mr. Fischer, Mr. Hartwick, and Re/Max served their motion material on each other and on Mr. Volpe. They served it on Mr. Volpe’s lawyer, Nav Shokar, (“Ms. Shokar”), on August 10, 2016, but a week later, on August 17, 2016, Ms. Shokar obtained an order removing herself and her law firm from the record as Mr. Volpe’s solicitor. The court adjourned the motion for a month to permit Ms. Shokar to serve the order on her client.

[21] Ms. Shokar failed to have the order removing her as Mr. Volpe’s solicitor served on Mr. Volpe, but on September 1, 2016, the lawyer for Mr. Hartwick and Re/Max notified Mr. Volpe, both by e-mail and by regular mail, that his lawyer had been removed as his solicitor of record and that the motion would proceed on September 30th. None of the parties requested a further adjournment of the motion, and I was satisfied that Mr. Volpe had been given an adequate opportunity to respond to the motion if he had wished to do so. The motion therefore proceeded in his absence.

[22] Mr. Fischer claims damages of $370,000, being the estimated cost of replacing his house, based on the defendants’ alleged fraudulent concealment of the grow-op, and their alleged misrepresentation of the condition of the house in the listing and agreement of purchase and sale.

ISSUES

[23] The Court must determine the following:

a) Whether there is a genuine issue requiring trial; b) Whether the evidence filed in the motion (1) allows me to make the necessary findings of fact, (2) allows me to apply the law to the facts, and (3) whether the motion is a proportionate, more expeditious and less expensive means to achieve a just result.

PARTIES’ POSITIONS

[24] Mr. Fischer asserts that Mr. Volpe, Mr. Hartwick, and Re/Max, misrepresented and fraudulently hid the facts about the property’s previous use. He asserts that it will cost him $370,000 to replace the house, which he would not have purchased but for the fraudulent concealment or misrepresentation of the facts. He submits that there is no genuine issue for trial as to whether the defendants misrepresented the facts, or as to the loss he suffered as a result.

[25] Mr. Hartwick and Re/Max assert that there is no genuine issue requiring trial and that Mr. Fischer’s claim should be dismissed. In the alternative, they assert that the following are genuine issues requiring trial:

a) whether Mr. Hartwick knew that the property had been used for a grow-op; b) whether the information that Mr. Hartwick gave to Mr. Fischer regarding Mr. Volpe’s reason for selling the property was based on what Mr. Scanlan had told him; c) whether the property is, in fact, unmarketable because a purchaser would be unable to obtain financing for a property once used for a grow-op, and whether Mr. Fischer has therefore suffered a compensable economic loss.

[26] Mr. Hartwick and Re/Max additionally argue that Mr. Fischer has not properly pleaded negligent misrepresentation, or set out the applicable standard of care and alleged that Mr. Hartwick failed to meet it.

ANALYSIS AND EVIDENCE

The test to be applied in a motion for summary judgment

[27] The amendment of the summary judgment rule (Rule 20.04) on January 1, 2010, [3] expanded the powers of a judge hearing such a motion. In 2014, the Supreme Court of Canada, in Hryniak v. Mauldin, redefined the test to be applied, and recommended that judges hearing such motions exercise a trial management function.

[28] Rules 20.05(1) and (2) now provide, in part:

20.05 (1) Where summary judgment is refused or is granted only in part, the court may make an order specifying what material facts are not in dispute and defining the issues to be tried, and order that the action proceed to trial expeditiously. (2) If an action is ordered to proceed to trial under subrule (1), the court may give such directions or impose such terms as are just . . . .

[29] Based on the guidelines set out in Hryniak, I must first determine, based on the evidence before me, and without using the new fact-finding powers under Rule 20.04, whether there is a genuine issue requiring trial, whether I can fairly and justly adjudicate the dispute, and whether the motion is a timely, affordable, and proportionate procedure under Rule 20.04(2)(a). If there is no genuine issue requiring a trial, I must grant summary judgment. [4]

[30] If there is a genuine issue requiring a trial, I must exercise my discretion to determine whether the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2), provided their use will not be contrary to the interests of justice, will lead to a fair and just result, and will serve the goals of timeliness, affordability, and proportionality, in light of the litigation as a whole. [5]

[31] Mr. Fischer, who is moving for summary judgment, has the onus of establishing that there is no genuine issue of material fact requiring a trial. Once that onus is met, the burden is on the defendants to demonstrate that their defence has a “real chance of success”, or, if the defendants argue that summary judgment should be granted dismissing the claim, the onus is on them to demonstrate that the claim has “no real chance of success”. [6] A self-serving affidavit is not sufficient to create a triable issue, in the absence of detailed facts and supporting evidence.

a) Is there a genuine issue to be determined?

(i) The allegation of fraudulent misrepresentation

[32] Mr. Fischer claims that Mr. Hartwick fraudulently misrepresented the condition of the property by not disclosing, (a) in the Listing and (b) in the Agreement of Purchase and Sale, that the property had been used for a grow-op.

(a) Failure to disclose the use of the house for a grow op

[33] Mr. Volpe was asked, at his examination, whether he knew, at the time, that he had an obligation to disclose that the house had been used for a grow-op. He replied that he did not, but stated that he disclosed the fact to Mr. Scanlan, and thought that Mr. Scanlan had informed Mr. Hartwick. [7]

[34] Mr. Volpe testified that when he disclosed the grow-op to Mr. Scanlon, Mr. Scanlan told him that it was his job to “protect” Mr. Volpe, which is why he “made the big bucks”. Mr. Volpe testified that he concluded, from Mr. Scanlan’s reply, that Mr. Scanlan would inform Mr. Hartwick, but he acknowledges that Mr. Scanlan never told him that he had disclosed the fact to Mr. Hartwick, or that he was going to do so.

[35] Mr. Hartwick testified at his examination that he has no recollection of his conversations with Mr. Fischer or with Ms. Carfagnini, in which he is alleged to have told them that Mr. Volpe was selling the property because his sons wanted to attend school in Hamilton. As he says, the conversations occurred over 12 years ago. He swears, however, that any information he received about the property, or about Mr. Volpe’s reason for selling it, was given to him by Mr. Scanlan.

(b) Misrepresentation in the Property Listing

[36] The evidence of Mr. Hardwick and of his expert, William Johnston, satisfies me that the MLS Listing was likely created by the listing agent, David Scanlan, and entered onto the MLS system, where it could be accessed by other realtors. Mr. Fischer’s realtor, Mr. Hartwick, then printed a copy of the listing for Mr. Fischer.

[37] Mr. Johnston, a lawyer and real estate broker who has acted as a real estate agent and broker since 1982, and is a past president of the Toronto Real Estate Board, and is an accredited ethics instructor for the Real Estate Council of Ontario, provided an expert report in which he asserts that the copy of the listing that Mr. Hartwick gave to Mr. Fischer states that it was “prepared by Ronald William Hartwick” because Mr. Hartwick caused the copy to be printed, and not because the information was gathered by him. Mr. Fischer produced a further copy of the listing, which was printed by another realtor, Stephen Beland. It states that it was “prepared by” Stephen Beland. This supports Mr. Johnston’s explanation of the wording, which I accept.

[38] There is a genuine issue as to whether Mr. Volpe fraudulently concealed from Mr. Hartwick and Mr. Fischer that the house had been used for a grow op, or fraudulently misrepresented that he was selling the property because his sons wanted to attend school in Hamilton. It is disputed that Mr. Volpe gave this explanation to Mr. Scanlan or that Mr. Scanlan gave it to Mr. Hartwick. As noted above, Mr. Volpe has testified that he disclosed the grow op to Mr. Scanlan and assumed from Mr. Scanlan’s response that he disclosed it to Mr. Hartwick.

(c) Misrepresentation in the APS

[39] Mr. Fischer further asserts that Mr. Hartwick misrepresented the property by failing to disclose in the APS that it had been used for a grow-op. In order to establish that Mr. Hartwick fraudulently failed to disclose the grow-op in the APS, he must prove, on a balance of probability, that Mr. Hartwick knew that the property had been used for that purpose.

[40] Mr. Hartwick has given evidence that he did not know that the property had been used for a grow-op. He says that neither Mr. Volpe, nor Mr. Scanlan, informed him of that fact. I find that whether Mr. Hartwick had knowledge of the grow-op is a genuine issue requiring trial.

[41] Mr. Hartwick’s evidence is that any information he gave to Mr. Fisher about Mr. Volpe’s reason for selling the property was given to him by Mr. Scanlan. Mr. Fischer has not offered any evidence to contradict that assertion. I find that whether Mr. Hartwick received the information from Mr. Scanlan, and whether he believed it to be true, is an issue requiring cross-examination, and that that cross-examination should be given at trial.

(ii) The allegation of negligent misrepresentation

[42] In Queen v. Cognos Ltd., in 1983, the Supreme Court of Canada identified five elements necessary to prove negligent misrepresentation:

a) There must be a duty of care arising from a special relationship; b) The representation must be false, inaccurate or misleading; c) The representer must have acted negligently; d) The representee must have reasonably relied upon the representation; and e) Reliance must be detrimental to the representee. [8]

[43] A vendor of real estate may be liable to a purchaser for failing to disclose a latent defect of which he has knowledge, which renders the property unfit for habitation, or dangerous in itself. The Court of Appeal re-affirmed this principle in Barbieri v. Mastronardi, in 2014, in which the vendor failed to disclose that the property had been used for a grow op. However, the Court of Appeal set aside the motion judge’s finding of liability on the ground that he had failed to articulate the basis for his finding that the property was, in fact, dangerous and unfit for habitation. The Court of Appeal stated:

In Ontario, a vendor may be liable to the purchaser of a property which is not new if he knows of a latent defect which renders the premises unfit for habitation or dangerous in itself and does not disclose it to the purchaser: McGrath v. MacLean (1979), 22 O.R. (2d) 784 (C.A.); and Dennis v. Gray, 2011 ONSC 1567, 105 O.R. (3d) 546. [9] [Emphasis added]

[44] There is no dispute in the present case that the property had been used for a grow-op, that this was a latent defect (since no damage was visible), and that the defect was not disclosed to Mr. Fischer. Mr. Hartwick, as buyer's agent, owed a duty to Mr. Fischer. [10] However, Mr. Fischer did not offer any expert evidence as to what a buyer’s agent’s duty entailed.

[45] In a professional negligence claim, the burden is on the plaintiff to prove that the defendant’s conduct fell below the standard of care. Evidence must be led to establish the appropriate standard of care in the circumstances. Mr. Fischer did not provide expert evidence to establish the applicable standard of care for a buyer’s agent.

[46] In order for Mr. Fischer to establish that Mr. Hartwick negligently misrepresented the condition of the property, or the reason Mr. Volpe was selling it, or negligently omitted to inform him that the property had been used for a grow-op, he must establish that Mr. Hartwick’s duty extended beyond conveying to him the information he had received from Mr. Scanlan.

[47] In Charter-York Ltd. v. Hurst (1978), 2 R.P.R. 272 (Ont. H.C.J.), in 1978, Labrosse J., for the Ontario High Court of Justice, held a vendor’s real estate agent liable in negligence to a purchaser for misrepresenting the acreage of the vendor’s property. Justice Labrosse held that the purchaser was not experienced in real estate and was entitled to rely on the agent's professional competence. He held that the agent breached his duty to the purchaser by relying on his representation. He stated:

In all such transactions, fundamental to the agent's contractual responsibility to the vendor was the duty to use reasonable care and skill to determine the exact property being sold. I find that [the vendor’s agent] Goverde breached this duty. He had a general discussion with the vendor who pointed the location of his farm on a large map and he saw a notice of assessment. He should have known that this was insufficient information. He could have walked the boundaries with the vendor, as did [an unsuccessful purchaser, who offered a lower price for the property] Virtue, or he could have checked the legal description at the registry office, or he could have asked the vendor to bring his copy of the mortgage registered on the property. He admitted that had he so checked, he would, from the legal description and with his experience, had been able to determine fairly accurately the size and shape of the farm. He then passed on his limited information to Sutherland, who was delegated to show the property to the purchaser's agent, Leonard Godfrey…. [11]

[48] The evidence in the present case discloses that Mr. Hartwick gave Mr. Fischer the listing that Mr. Scanlan, as listing agent, prepared for the MLS. Mr. Fischer argues that both the vendor’s listing agent, Mr. Scanlan, and his own agent, Mr. Hartwick, owed him a duty to disclose that the property had been used for a grow op. He relies on the Code of Ethics contained in a regulation made pursuant to Real Estate and Business Brokers Act, 2002. [12] The Code of Ethics imposes the following obligations on a “Listing Brokerage”:

The Listing Brokerage must be impartial and equally protect the interests of the Seller and the Buyer in this transaction. The Listing Brokerage has a duty to full disclosure to both the Seller and the Buyer, including a requirement to disclose all factual information about the property known to the Listing Brokerage.

[49] Mr. Fischer additionally relies on Rule 11, in the Code, which he argues imposed a duty on Mr. Hartwick. Rule 11 requires that an agent, “discover and verify the pertinent facts relating to the Property and Transaction relevant to the Licensee’s client that a reasonably prudent Licensee would discover in order to fulfill the obligation to avoid error, misrepresentation or concealment of pertinent facts.”

[50] The defendants argue that the Code of Ethics was not in force in 2004, as it did not take effect until March 31, 2006. In any event, the Code of Ethics, by itself, does establish a legal standard on its own. The legislature or the court must determine the legal standard and what significance, if any, the Code of Ethics has.

[51] Justice Binnie, in Hodgkinson v. Simms, in 1994, stated, “the rules set by the relevant professional body are of guiding importance in determining the nature of the duties flowing from a particular professional relationship.” [13] The Ontario Court of Appeal, in Krawchuk v. Scherbak, 2011 ONCA 352, in 2011, stated:

… The due diligence requirements of a real estate agent mandated by the Code, while not dispositive, are of considerable importance in informing what is expected of real estate agents in terms of verifying information about a property listed for sale [14] [Emphasis added]

[52] The Supreme Court of Canada held, in Perez v. Galambas, 2009 SCC 48, in 2009, that although rules of professional conduct “are of importance in determining the nature and extent of duties flowing from a professional relationship”, [15] they are not binding on the courts, and do not necessarily describe the applicable duty or standard of care in negligence….” [16]

External indicators of reasonable conduct, such as custom, industry practice, and statutory or regulatory standards, may inform the standard. Where debate arises as to how a reasonable agent would have conducted himself or herself, recourse should generally be made to expert evidence. [17] [Emphasis added]

[53] While the Code of Ethics did not take effect until two years after Mr. Fischer’s purchase, it did not change the standard of care that a real estate agent is required to meet. Rather, it re-stated the standard of care that existed previously, as reflected in the jurisprudence.

[54] The Court of Appeal, in Krawchuk, above, stated:

Then, there are authorities that support the proposition that a purchaser’s agent has a duty to verify material facts about a property; interestingly, not only in circumstances where the court has found that the agent has been put on his or her inquiry with respect to the accuracy of the vendors’ representations, but also in cases where the court has found no such “red flag”.

…in Johnstone v. Dame, [1995] B.C.J. No. 2637, 49 R.P. R. (2d) 279 (S.C.); Bond v. Richardson, 2007 NBQB 264, [2007] N.B.J. No. 318, 324 N.B.R. (2d) 64 (Q.B. (T.D.)); Posthumas v. Garner, [1995] O.J. No. 3362, 48 R.P.R. (2d) 286 (Gen. Div.); and 11 Suntract Holdings Ltd. v. Chassis Service & Hyrdraulics Ltd. (1997), 36 O.R. (3d) 328, [1997] O.J. No. 5003 (Gen. Div.) the purchasers’ agent’s duty to verify the vendor’s information about the property was found to exist without reference to the agent’s having been put on inquiry. [Emphasis added]

[55] In Sedgemore et al. v. Block Bros. Realty et al. (1985), 39 R.P.R. 38 (B.C.S.C.), in 1985, Lysyk J. of the B.C. Supreme Court dealt with the duty of a real estate agent to exercise care and skill in a case in which the listing and selling agent had failed to verify information from the vendor that a property conformed to the Building Code before making representations to the purchaser’s agent which were false. He stated:

…In Foster, Real Estate Agency Law (1984), the duty to exercise care and skill is described in the following terms (at p. 243):

It is now well established that real estate brokers who elect to provide information and advice to the third parties with whom they may have dealings must exercise reasonable care and skill in the performance of their undertaking in ensuring the completeness and accuracy of such information and advice.”

Following a review of authorities illustrating the application of this general principle, the author makes these observations (at pp. 245-46):

That the misinformation conveyed by a broker to a third party originates with the broker’s principal, or with the listing broker in a multiple listing situation, will not necessarily relieve the broker from personal liability to the third party. A broker must at least check the completeness and accuracy, both of all information which it is usual or customary for brokers to verify, and of all other information as to the completeness and accuracy of which he is in doubt. However, authority exists to support the contention that the obligation of, at least, a listing broker is somewhat broader in that he must ascertain and verify all pertinent facts concerning the property placed in his hands for disposal.

This passage, in my view, aptly describes the duty of Ms. Fraser – as the listing and sales agent for the property and admittedly the agent for the purchasers as well as the vendor – with respect to checking the completeness and accuracy of the information supplied by the vendor. [18] [Emphasis added]

[56] The Code of Ethics, in 2006, reaffirmed that an agent acting for either the purchaser or vendor may rely on the representations of a vendor unless there are suspicious or other circumstances that suggest the representations should not be relied upon. It is a fact-dependant inquiry. Where a purchaser raises to his agent a specific question or concern regarding the property, the agent is required to inquire into that issue and may not be entitled to rely on the vendor’s representations.

[57] In Davenport v. Stakiw, 2008 ONCA 707, in 2008, the Court of Appeal upheld the trial judge’s finding that the purchaser’s agent was negligent, and 20% liable, for failing to make independent inquiries to confirm the vendor’s agent’s representations as to the availability of parking on the property being purchased. [19] The purchaser, a dentist, had informed his agent that it was important to him that the proposed property had enough parking for his dental practice. The agent relied on the vendor agent’s representations that there was sufficient parking, [20] and failed to make independent inquiries. The court accepted the evidence of a qualified expert on the standards of practice of real estate agents, who testified that a reasonably prudent real estate, faced with the absence of warranties of parking in the Listing Agreement, and the difference in dimensions between the survey he was given and the one that was on file with the City, would have made independent inquiries, which would have revealed the existence of a Parking Agreement with the City which limited parking on the property. The expert testified that the purchaser’s agent, as the person drafting the Agreement of Purchase and sale, should have included adequate parking as a condition, representation, or warranty. Thus, liability will arise for erroneous advice and opinions given by a real estate agent, if based on uninformed positions, or if the agent or broker has failed to undertake any, or sufficient, research, investigation or consultation. [21]

[58] In Halliwell v. Lazarus, 2012 ONCA 348, in 2012, the Court of Appeal reversed a trial judge’s decision that held the purchaser’s agent 25% liable for the $90,000 loss suffered by the purchaser who had informed her agent that she could not tolerate mold, for mold found in the house following the purchase. [22] The appellant had not pleaded the agent’s failure to read and review the inspector’s report and did not call evidence concerning the standard of care expected of an agent in these circumstances. The court held that it was the inspector’s responsibility to discover the potential moisture problem and in the absence of expert evidence, it was an error in law to find the real estate agent liable for failing to read the report, pick up indicators of moisture problems from the report when the inspector, himself, failed to pick up on them.

[59] In the present case, Mr. Hartwick gave evidence that whatever information he gave to Mr. Fischer he had received from the listing agent, Mr. Scanlan. Mr. Fischer should be given an opportunity to cross-examine Mr. Hartwick on this assertion, in the presence of the trier of fact, and to lead expert evidence of his own as to Mr. Hartwick’s duty to verify the information that Mr. Scanlan gave him, and as to whether Mr. Hartwick would have been able to ascertain that the house had been used for a grow-op if he had made reasonable inquiry.

(iii) The allegation of damages

[60] Mr. Fischer asserts that he is unable to sell the property because a lender, knowing that the property was used for a grow-op, would not provide financing to a purchaser. He relies, in this regard, on an e-mail he received from Bob Fishger, a mortgage development manager at Scotiabank. He also refers to information given to him orally by Anabela Silva, at the National Bank in Orangeville, and by Gaye Spencer, at T-D Canada Trust in Orangeville.

[61] Mr. Hartwick and Re/Max tendered a report from David Plaxton, a mortgage broker with 14 years’ experience in the mortgage lending industry, stating that Canada Mortgage and Housing Corporation, as well as Genworth, will finance the property, provided that certain requirements are met, such as disclosure of the grow-op, an environmental report, and an air quality report.

[62] Mr. Hartwick and Re/Max additionally tendered a report from Grant Uba, an accredited appraiser with 40 years of valuation experience, in which he states that eight former grow-ops were sold from January 1, 2011, to February 29, 2016, and were mortgaged to one of the “Big Five” Banks, or a subsidiary of them, to finance the sale. The eight sales, he says, demonstrate that a residential dwelling formerly used for marijuana grow-op is marketable after the damage to the dwelling caused by the former grow-op has been remedied, and the dwelling has been certified to be free of mold. He added that there was no evidence that any of the Class “A” Banks charged a higher interest rate, reduced the term of their loans, or reduced the amortization period because the properties were former marijuana grow-operations. Mr. Fischer’s evidence that T-D Canada Trust would not finance a former grow-op is contradicted, to some extent, by the fact that that Bank was listed as a charge on the former grow-op located at 14 Hawkins Court in Brampton.

[63] Mr. Fischer’s claim that he suffered damages because his property is no longer marketable is refuted by the evidence of Mr. Plaxton, Mr. Uba, and the documents disclosing that former grow-ops have been bought and sold. I therefore find that this is a genuine issue requiring trial. The defendants’ evidence is not, however, conclusive in proving that Mr. Fischer suffered no damages as a result of the misrepresentation or non-disclosure of the grow-op. There is no evidence from either Mr. Fischer or the defendants as to the extent of the mold in the property, or whether it can be effectively removed, and, if it can, the cost that its removal would entail.

b) Do the issues require a trial, or can they be determined at the motion?

[64] Based on the foregoing evidence, I find that the following are genuine issues that need to be determined:

a) Whether Mr. Hartwick had knowledge of the fact that the property had been used for a grow-op; b) Whether Mr. Hartwick received the information as to why Mr. Volpe was selling the property from Mr. Scanlan, and whether he believed it, and had reason to believe it; c) Whether Mr. Fischer suffered damages by reason of the non-disclosure of the grow-op to him, and, if so, the extent of the damages.

[65] Upon finding that there are those genuine issues to be determined, I must exercise my discretion to determine whether the need for a trial can be avoided by using the new powers under Rules 20.04(2.1) and (2.2), provided their use will not be contrary to the interests of justice and will lead to a fair and just result, and serve the goals of timeliness, affordability, and proportionality in light of the litigation as a whole. [23]

[66] The Supreme Court in Hryniak called attention, in the following terms, to the trial management orders that a judge hearing a summary judgment motion may employ in the exercise of his/her trial management function:

Rules 20.05(2)(a) through (p) outline a number of specific trial management orders that may be appropriate. The court may: set a schedule; provide a restricted discovery plan; set a trial date; require payment into court of the claim; or order security for costs. The court may order that: the parties deliver a concise summary of their opening statement; the parties deliver a written summary of the anticipated evidence of a witness; any oral examination of a witness at trial will be subject to a time limit or; the evidence of a witness be given in whole or in part by affidavit. [24]

[67] The Supreme Court in Hryniak recognized that concerns about credibility or clarification of evidence can often be addressed by calling oral evidence at the hearing of the motion, using the powers which Rule 20.04(2.1) gives to the court. It also recognized that there may be cases where, given the nature of the issues and the evidence required, the motions judge cannot make the necessary findings of fact, or apply the legal principles, to reach a just and fair determination. The Court concluded:

There will be no genuine issue requiring a trial when the judge is able to reach a fair and just determination on the merits on a motion for summary judgment. This will be the case when the process (1) allows the judge to make the necessary findings of fact, (2) allows the judge to apply the law to the facts, and (3) is a proportionate, more expeditious and less expensive means to achieve a just result. [25]

[68] Justice Penny observed, in T. Flims S.A. v. Cinemavault Releasing International Inc., 2015 ONSC 6608, in 2015, “In today’s world, the test for whether an application should be converted into a trial (or trial of an issue) is congruent with the direction of the Supreme Court of Canada in Hryniak v. Mauldin, 2014 SCC 7, that is, in order to dispose of the case justly and fairly, is the forensic machinery of a trial required?” [26]

[69] Justice Corbett, in Sweda Farms v. Egg Farmers of Ontario, 2014 ONSC 1200, in 2014, noted that the court’s balancing of fairness and proportionality in formulating an appropriate procedure for determining an action must proceed on a case-by-case basis, based on the record before it. He stated, in the context of a summary judgment motion:

Summary judgment motions come in all shapes and sizes, and this is recognized in the Supreme Court of Canada’s emphasis on “proportionality” as a controlling principle for summary judgment motions. This principle does not mean that large, complicated cases must go to trial, while small, single-issue cases should not. Nor does it mean that the “best foot forward” principle has been displaced; quite the reverse. If anything, this principle is even more important after Hryniak, because on an unsuccessful motion for summary judgment, the court will now rely on the record before it to decide what further steps will be necessary to bring the matter to a conclusion. To do this properly, the court will need to have the parties’ cases before it. [27] [Emphasis added]

[70] The issues that need to be determined in the present case cannot adequately be addressed, using the powers that Rule 20.04(2.1) gives to the court, by calling oral evidence at the hearing of the motion for the following reasons:

a) Mr. Scanlan is no longer alive; b) Mr. Volpe has failed to file responding material upon which he can be cross-examined; c) Mr. Fischer has raised well-founded concerns about Mr. Hartwick’s credibility, based on the evidence that Mr. Fischer and Rosemary Carfagnini have given concerning what Mr. Hartwick told them as to Mr. Volpe’s reason for selling the property, and the fact that the property was vacant. d) Mr. Fischer must be given the opportunity to provide expert evidence as to the standard of care that a buyer’s agent must meet in circumstances such as those that existed here, and to examine Mr. Hartwick on the duties that the standard of care entails. e) Mr. Fischer must be given an opportunity to provide expert evidence as to the extent of mold in the property, whether it can be repaired, and the cost, and the defendants must be given an opportunity to cross-examine on that evidence and respond to it. f) Mr. Fischer must be given an opportunity to provide evidence in reply to the defendants’ expert evidence concerning the marketability of the property, and the conditions that would have to be met to render the property marketable.

[71] Given the number and nature of the issues to be determined, and the evidence required to address them, I cannot make the necessary findings of fact, or apply the legal principles, to reach a just and fair determination in the hearing of the motion. A trial of an issue of law would not offer a fair and economical means of resolving the action.

c) Should Mr. Fischer be granted leave to amend his pleading?

[72] The Rules of Civil Procedure make the following provision for amendments to pleadings:

26.01 On motion at any stage of an action the court shall grant leave to amend a pleading on such terms as are just, unless prejudice would result that could not be compensated for by costs or an adjournment. 26.02 A party may amend the party’s pleading, … (c) with leave of the court.

[73] Where a party has not requested leave to amend, and an amendment is required, the Rules authorize the court, in the following terms, to provide relief:

2.01 (1) A failure to comply with these rules is an irregularity and does not render a proceeding or a step, document or order in a proceeding a nullity, and the court, (a) may grant all necessary amendments or other relief, on such terms as are just, to secure the just determination of the real matters in dispute;

[74] When all the material facts giving rise to the “new cause of action” have been pleaded, then there is in fact no new cause of action being added. Proposed amendments that plead new legal consequences are allowed when the underlying facts have already been pleaded. [28]

[75] An amendment will be granted pursuant to Rule 26.01, even after commencement of a trial, unless there is prejudice. [29] Prejudice” in this context, does not include prejudice resulting from the success of the plea on its merits. [30]

[76] In Iroquois Falls Power Corp. v. Jacobs Canada Inc., 2009 ONCA 517, in 2009, Campbell J. granted summary judgment dismissing the action against the defendants. Jennings J. subsequently denied leave to the plaintiffs to amend its pleadings to add a new cause of action. The Court of Appeal overturned Jenning J.s’ decision, on the ground that Rule 26.01 uses mandatory language: Courts must grant leave to amend pleadings on terms that are just where no uncompensable prejudice would result from the leave. [31] The Court of Appeal noted that the defendant knew from the outset that the core issue in the litigation was the same (i.e. what caused the crack in the casing of the two generators). The Plaintiff originally framed its action as one for damages for faulty design only, but the Court of Appeal granted leave to amend, to include the plea of breach of contractual warranty.

[77] This is not a case, such as Grann v. Thunder Bay Police Services Board, 2015 ONSC 438, in which summary judgment would be granted dismissing the claim as drafted, but in which the plaintiff should be permitted to proceed to trial on an amended claim. [32] Rather, it is one in which Mr. Fischer is entitled to proceed to trial on his claim of fraudulent misrepresentation and should, additionally, be permitted to proceed, based on the same facts, on a claim of negligent misrepresentation, and should be granted leave to advance that cause of action.

[78] Mr. Fischer has pleaded facts that give rise to a claim based on both fraudulent and negligent misrepresentation. He will therefore be granted leave to amend his pleadings to claim negligent misrepresentation more explicitly.

CONCLUSION AND ORDER

[79] For the reasons stated above, it is ordered that:

1. Mr. Fischer’s motion for summary judgment is dismissed.
2. The style of cause is amended to substitute “Ron Hartwick” for “Ron Hartwich”.
3. Mr. Fischer has leave to amend his Claim, by October 31, 2016, to assert a claim based on negligent misrepresentation.
4. The costs of the motion shall be recoverable in the cause.

Price J. Released: October 11, 2016

Footnotes

[1] Freedom of Information and Protection of Privacy Act, RSO 1990, c F.31 [2] Transcript of Mr. Volpe’s examination, question 57 [3] Rules of Civil Procedure, R.R.O. 1990, Reg. 194 [4] Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, para. 66 [5] Hryniak, at para. 66 [6] Hamilton Kilty Hockey Club Inc. v. Ontario (Attorney General), (2003), 64 O.R. (3d) 328 at para. 20. [7] Transcript of Examination of Mr. Volpe, questions 112 and 130, and questions 157 to 160. [8] Queen v. Cognos Ltd., [1983] 1 S.C.R. 87 [9] Barbieri v. Mastronardi, 2014 ONCA 416, para. 17 [10] Adams-Eden Furniture Ltd. v. Kansa General Insurance Co., 1996 MB CA 12473, para. 56 [11] Charter-York Ltd. v. Hurst (1978), 2 R.P.R. 272 (Ont. H.C.J.), pp. 279-80 [12] Real Estate and Business Brokers Act, 2002, SO 2002, c 30, Sch C [13] Hodgkinson v. Simms, [1994] 3 S.C.R. 377, at p. 425 [14] Krawchuk v. Scherbak, 2011 ONCA 352, para 147 [15] Perez v. Galambas, 2009 SCC 48, [2009] 3 S.C.R. 247 para 29, citing Hodgkinson v. Simms, [1994] 3 S.C.R. 377 (S.C.C.) at p. 425 [16] See, for example, MacDonald Estate v. Martin, [1990] 3 S.C.R. 1235 (S.C.C.) at pp. 1244-45 [17] Krawchuk v. Scherbak, 2011 ONCA 352, para 125 [18] Sedgemore et al. v. Block Bros. Realty et al. (1985), 39 R.P.R. 38 (B.C.S.C.), p. 49 [19] Davenport v. Stakiw, 2008 ONCA 707, affirming 2007 ONSC 6911 [20] Davenport v. Staklw, para. 10 [21] William R. Foster, Real Estate Agency Law in Canada, 2d ed., (Toronto: Carswell) p. 220 [22] Halliwell v. Lazarus, 2012 ONCA 348, para. 12 [23] Hryniak, at para. 66 [24] Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, paras. 76 and 77 [25] Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, para. 49 [26] T. Flims S.A. v. Cinemavault Releasing International Inc., 2015 ONSC 6608, para. 6 [27] Sweda Farms v. Egg Farmers of Ontario, 2014 ONSC 1200, para. 32 [28] Gladstone v. Canadian National Transportation Limited, 2009 ON SCDC 38789 [29] Auto Workers' Village (St. Catharines) Ltd. v. Blaney, McMurtry, Stapells, Friedman, [1997] O.J. No. 2865 [30] Hanlan v. Sernesky, 1998 ONCA 5809 [31] Iroquois Falls Power Corp. v. Jacobs Canada Inc., 2009 ONCA 517 [32] Grann v. Thunder Bay Police Services Board, 2015 ONSC 438