COURT FILE NO.: CV-10-00409984
DATE: 20180528
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1043 BLOOR STREET INC.
Plaintiff
– and –
FERNANDO VILHENA
Defendant
D. Singer and N. Condotta, for the Plaintiff
M. Ross and J. Lum-Danson, for the Defendant
HEARD: May 7-10, 2018
REASONS FOR JUDGMENT
SCHRECK J.:
[1] 1043 Bloor Street West (“1043”) is a small office building in Toronto. A driveway next to it belongs to the adjacent building at 1045 Bloor Street West (“1045”) and is the only way whereby parking spaces at the rear of 1043 can be reached. Between 1986 and 2008, the defendant, Fernando Vilhena, owned 1043 and used the driveway to access the back of the building. In 2008, Mr. Vilhena sold the building to the plaintiff, a corporation that had been created by a paralegal, Paula Stamp, and her real estate agent, Joseph Schillaci. Mr. Vilhena told them that he had been using the driveway for many years and believed that he had an easement.
[2] Before the close of the real estate transaction, the owners of 1045 installed a chain to block access to the driveway and made it known that they did not want the new owners of 1043 to use the driveway. Upon learning this, Ms. Stamp and Mr. Schillaci decided to nevertheless close the deal and, if necessary, initiate litigation to establish a right to use the driveway. To this end, they asked Mr. Vilhena to provide them with a statutory declaration outlining his prior use of the driveway. Mr. Vilhena did so. In his statutory declaration, he stated that he had been using the driveway throughout his occupancy of 1043 and had never sought permission to do so from the owners of 1045.
[3] After taking possession of 1043, the plaintiff commenced an action for a declaration that they had an easement with respect to the driveway. Soon after the commencement of the litigation, they learned that Mr. Vilhena’s statement in his statutory declaration that he had never sought permission from the owner of 1045 was inaccurate. In 1987, Mr. Vilhena had drafted an agreement between himself and the owner of 1045 with respect to the driveway (“the 1987 agreement”). He had asked the owner of 1045 to sign the agreement but the owner had refused.
[4] The plaintiff’s action proceeded to trial. It lost because the presiding judge concluded that Mr. Vilhena’s request in 1987 for permission to use the driveway had interrupted the continuous use that was required to create an easement. The plaintiff appealed the decision, but the appeal was dismissed.
[5] The plaintiff is now suing the defendant for negligent misrepresentation, seeking recovery of its legal costs on the action for a declaration. It takes the position that Mr. Vilhena’s failure to mention the 1987 agreement was negligent. The plaintiff’s principals maintain that had they known about the 1987 agreement, they never would have commenced an action against the owners of 1045. As a result, they seek damages of approximately $230,000.00, which is the amount they spent on the unsuccessful litigation.
[6] For the reasons that follow, the action is dismissed. While the defendant owed a duty of care to the plaintiff and made representations that were false, I am not satisfied that the failure to mention the 1987 agreement was negligent. Even if it was, I am not satisfied that the plaintiff relied on the misrepresentation to its detriment. I do not accept the testimony of the plaintiff’s principals that they would not have commenced the action if they had known about the 1987 agreement. Their conduct suggests otherwise. They discovered the existence of the agreement soon after commencing the action, but continued with it nonetheless.
I. EVIDENCE
A. The Offer to Purchase 1043 Bloor Street West
[7] Paula Stamp is a licensed paralegal and the owner of a business called Accident Resolution Group. In 2008, she decided that she needed more office space as her business was expanding. She accordingly contacted a real estate agent, Joseph Schillaci, to help her. Mr. Schillaci recommended that instead of leasing space, Ms. Stamp should consider buying a building and offered to lend her money with which to do so.
[8] During his search for a suitable building, Mr. Schillaci came across a listing for 1043 Bloor Street West. The listing stated that the building had “parking for eight vehicles” as well as street parking. This appealed to Ms. Stamp, who required a building with parking for her employees and clients.
[9] Ms. Stamp decided to make an offer on 1043. Mr. Schillaci accordingly prepared an Agreement of Purchase and Sale (“APS”) and then met with Mr. Vilhena to present the offer. Parking was not mentioned in the APS, although Mr. Schillaci testified that Mr. Vilhena had told him that he had a prescriptive easement and that there were “no issues” with respect to parking. Mr. Vilhena signed back the offer and attached a survey to it. The APS, which contained an “entire agreement” clause, did not reflect the existence of any easement or right of way.
[10] After some negotiations, the defendant agreed to sell the building for $950,000. The parties entered into the APS. Mr. Schillaci and Ms. Stamp formed a corporation, 1043 Bloor Street Inc., to purchase the building with each of them holding 50% of the shares. Ms. Stamp arranged a temporary lease with Mr. Vilhena so that she could occupy the building prior to the closing date of September 26, 2008 and begin renovating it.
B. The 2008 Statutory Declaration
(i) The Events Giving Rise to the Making of the Declaration
[11] On September 18, 2008, prior to the deal being closed, the owners of 1045 installed a chain across the driveway, blocking access to the parking area. Mr. Vilhena’s wife, Anna Vilhena, contacted Ms. Stamp and told her about this. Mr. Vilhena removed the chain and contacted the police. It was Ms. Stamp’s understanding that the police officer who attended had said that he would “charge the other side” if the chain was replaced.
[12] As it had become apparent that there may be litigation respecting the use of the driveway, the plaintiff’s real estate lawyer, Brian McCutcheon, prepared a statutory declaration which Mr. Vilhena signed on September 19, 2008 (“the 2008 declaration”). It included the following:
Since the time of my acquisition of ownership of the Property on the 3rd day of March 1986 up to the 28th day of April 2003 when the Property was converted to the Land Titles System and continuously thereafter, my tenants and I have utilized the easterly 2.6 meters of the property known municipally as 1045 Bloor Street West … as an easement and right of way, without interruption, for the purpose of pedestrian and vehicular access to the rear of the Property. … My tenants and I have used the Right of Way without interruption since March 3, 1986, and I have never sought permission or been granted consent by any owner of the 1045 Property for access across the Right of Way.
Notwithstanding any provision herein to the contrary, on or about September 18, 2008, the owner of the 1045 Property erected a locked chain over the Right of Way to block access and I knocked it down. This was the only time that the owners of the 1045 Property have taken any action to block my use of the Right of Way. [Emphasis added].
Mr. Vilhena also signed a document entitled “Further Assurances” in which he agreed to provide “such evidence regarding the use of the right of way … as may be reasonably requested by the Purchaser”.
[13] Mr. McCutcheon testified that based on the information provided in the 2008 declaration, he advised his clients that it was his opinion that they had an easement with respect to the driveway.
(ii) Inaccuracies in the 2008 Declaration
[14] Certain portions of the 2008 declaration were inaccurate. It was not true that Mr. Vilhena had “never sought permission” for access across the right of way. In 1987, he had prepared an agreement respecting his use of the driveway. He had asked the owner of 1045, who at that time was Dr. Wolodymer Sochaniwskyj, to sign it and thereby grant him permission to use the driveway. Dr. Sochaniwskyj had refused to do so.
[15] It was also not true that apart from the installation of the chain in September 2008, the owners of 1045 had never taken any action to block Mr. Vilhena’s use. In 2005, lawyers acting on behalf of 1045 had written to Mr. Vilhena demanding that he cease using the driveway. There followed an exchange of correspondence between Mr. Vilhena’s lawyer and the lawyers for 1045 concerning the use of the driveway. Mr. Vilhena claimed an easement while 1045 insisted the he stop making use of the driveway. Each side threatened to initiate court proceedings against the other. There was also some discussion about Mr. Vilhena purchasing 1045. Eventually, no litigation was commenced, nor did Mr. Vilhena purchase the property. He continued to use the driveway after this without further objection.
C. The Action Against 1045 Bloor Street West
(i) The Initiation of the Proceedings and Discovery of the 1987 Agreement
[16] After the closing, the owners of 1045 made further attempts to block access to the driveway. Mr. Schillaci and Ms. Stamp, believing that they had an easement with respect to the driveway, decided to commence proceedings to obtain a declaration to that effect. They accordingly retained an experienced litigator, Richard Quance, to represent them.
[17] In January 2009, Mr. Quance became aware of the 1987 agreement when it was provided to him by counsel for the owners of 1045. It was his opinion that because the agreement had not been signed, it did not interrupt the prescriptive period and therefore did not affect his client’s claim of an easement.
(ii) The Trial
[18] The declaration action commenced in October 2010 before Conway J. and then continued in May 2011. On May 18, 2011, Conway J. dismissed the action (1043 Bloor Inc. v. 1714104 Ontario Inc., 2011 ONSC 2779, 338 D.L.R. (4th) 755). She said the following with respect to the 1987 agreement (at paras. 45-50):
The plaintiff submits that nothing turns on the 1987 Agreement. Its position is that:
a. the use of the Lane by Ms. Orpen [the person who owned the property before the defendant] and Mr. Vilhena was “as of right”, as defined by Blair J.A. in Kaminskas [2009 ONCA 318, 95 O.R. (3d) 287] - that is, uninterrupted, open, peaceful and without permission for 20 years;
b. Mr. Vilhena had been using the Lane without permission both before and after he approached Dr. Sochaniwskyj with the 1987 Agreement. The fact that Dr. Sochaniwskyj declined to sign the 1987 Agreement did not change that use;
c. this is not a case of permission asked and granted (which the plaintiff agrees would defeat the easement), but a case of permission asked and not granted;
d. the acknowledgment by Mr. Vilhena in the 1987 Agreement that he did not have the right to use the Lane was simply a correct statement of fact. However, it did not mean that he was not using the Lane “as of right”, as defined by Blair J.A.; and
e. simply because Mr. Vilhena was seeking to secure a legal “right” to use the Lane in the agreement did not mean that he was not using the Lane “as of right”.
The defendant takes the opposite position. It submits that by approaching Dr. Sochaniwskyj with the 1987 Agreement, Mr. Vilhena was acknowledging that he did not have a right to use the Lane and that he required the permission of Dr. Sochaniwskyj to do so. It argues that this is inconsistent with the concept of using the Lane “as of right”.
I agree with the defendant’s submission.
The issue here is not whether Mr. Vilhena did or did not ever obtain permission from Dr. Sochaniwskyj to use the Lane. It is undisputed that he did not.
The issue is whether the request for a right-of-way was inconsistent with the nature of the use required to give rise to a prescriptive easement. In my view, it was.
A claim for a prescriptive easement is based on the claimant’s using the property as if he had a right to do so during the prescriptive period, even though it is not a right recognized at law. While that use may ripen into a legal right once 20 years has elapsed, the user must not do anything during the prescriptive period which is inconsistent with his using the property as if he had that right.
(iii) The Appeal
[19] 1043 appealed Conway J.’s decision. The appeal was dismissed on February 14, 2013 (1043 Bloor Inc. v. 1714104 Ontario Inc., 2013 ONCA 91, 114 O.R. (3d) 241). While the Court was unanimous in the result, all three members of the panel wrote separate reasons. Gillese J.A. agreed with Conway J. that the 1987 agreement interrupted Mr. Vilhena’s claim of right. Laskin J.A., however, took a different view (at paras. 114-115):
By proffering the agreement, Vilhena unquestionably sought Sochaniwskyj’s permission to use the lane. But because Sochaniwskyj refused to sign the document, there was no agreement -- no meeting of the minds -- and therefore no acknowledgment of the basis of Vilhena’s later use of the lane. His later use could have been with Sochaniwskyj’s permission, or it could have been with Sochaniwskyj’s acquiescence, or it could have been in the face of Sochaniwskyj's protests. That was a factual question the unsigned agreement does not resolve, and the application judge did not determine.
Gillese J.A. suggests that because the proposed agreement was an acknowledgement of Sochaniwskyj’s title, it “stopped the clock from running”. I disagree. It seems to me that Vilhena’s acknowledgment that Sochaniwskyj had legal title to the lane is irrelevant to the question whether Vilhena’s use was as of right. As I said earlier, usage as of right does not mean usage based on a mistaken view of who holds legal title. Vilhena always knew and acknowledged that Sochaniwskyj legally owned the lane. Vilhena’s claim to a prescriptive easement was based on his uninterrupted usage and Sochaniwskyj’s acquiescence to that usage.
However, Laskin J.A. held that the fact that the owner of 1045 had put up a sign stating “Private Driveway Private Parking” in 1989 was sufficient to prevent the creation of an easement. He therefore concurred in the result.[^1]
[20] MacPherson J.A. was of the view that either of the 1987 agreement or the putting up of the sign had the effect of interrupting the running of the prescriptive period.
D. The Plaintiff’s Claim of Reliance
[21] Although the plaintiff’s Statement of Claim alleged that they never would have closed had the principals been aware of the 1987 agreement, Mr. Schillaci and Ms. Stamp did not take that position at trial. They acknowledged that they would have closed in any event.
[22] Mr. Schillaci testified that if he had known about the 1987 agreement earlier, he never would have commenced the declaration action. However, he was unable to recall what his lawyers had said about the 1987 agreement once its existence became known, although he acknowledged that Mr. Quance had told him that they had a “good chance” of success. He agreed that in deciding to proceed with the litigation, he relied “partly” on Mr. Quance’s advice.
[23] Ms. Stamp’s evidence as to the effect of the 1987 agreement on the decision to initiate the declaration action was as follows:
Q. If you had had this document prior to December of 2008, would you have commenced the action against 1045?
A. I don’t really know the answer to that because the document is not really stand alone. Given the trial and the findings -- a lot of stuff that came out in Mr. Vilhena’s testimony, Dr. Sochaniwskyj’s son’s testimony -- the document takes on a whole new meaning. So in my opinion, likely we would not have but I know more about this document then the document itself speaks for.
Ms. Stamp agreed that even after the existence of the 1987 agreement was discovered, Mr. Quance advised her that they had a good chance of succeeding.
E. The Defendant’s Testimony
[24] Mr. Vilhena testified that all of the documentation relating to the right of way, including the 1987 agreement and the correspondence from 2005, was kept in a file which he made available to Mr. Schillaci and Ms. Stamp during the negotiations leading up to the signing of the APS. According to him, both Mr. Schillaci and Ms. Stamp went through the file.
[25] According to Mr. Vilhena, when he signed the 2008 declaration, he believed that its contents were accurate. He did not mention the 1987 agreement because his lawyer had told him that it was a “non-event”. Because the agreement had never been signed, he did not believe that it had any effect on the creation of an easement. He did not view the correspondence from 2005 as being a dispute over access to the driveway. Rather, he characterized it as “having a conversation”.
II. ANALYSIS
A. Overview
[26] The tort of negligent misrepresentation has five elements, as set out in Queen v. Cognos Inc., [1993] 1 S.C.R. 87, at para. 33:
The decisions of this Court cited above suggest five general requirements: (1) there must be a duty of care based on a "special relationship" between the representor and the representee; (2) the representation in question must be untrue, inaccurate, or misleading; (3) the representor must have acted negligently in making said misrepresentation; (4) the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and (5) the reliance must have been detrimental to the representee in the sense that damages resulted.
I will consider each of these elements in turn and the evidence that relates to them.
B. The Elements of Fraudulent Misrepresentation
(i) Was There a Duty of Care?
[27] In my view, Mr. Vilhena clearly owed a duty of care to the plaintiff. His relationship to the plaintiff was such that he ought to have reasonably contemplated that carelessness on his part may result in damage: Hercules Management Inc. v. Ernst & Young, [1997] 2 S.C.R. 165, at para. 22. Mr. Vilhena agreed to provide the 2008 declaration in circumstances where he knew that the plaintiff would rely on it and where it was reasonable for the plaintiff to do so: Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, [2017] 2 S.C.R. 855, at para. 30. Any injury that would result from the negligence in making the representations was foreseeable: Deloitte, at para. 33.
(ii) Were the Representations Untrue, Inaccurate or Misleading?
[28] Portions of the 2008 declaration were untrue. Mr. Vilhena’s assertion that he had “never sought permission or been granted consent by any owner of the 1045 Property for access across the Right of Way” was clearly inaccurate, as he had asked the owner to give him permission by signing the 1987 agreement, which the owner refused to do.
[29] The assertion that the incident with the chain in December 2008 “was the only time that the owners of the 1045 Property have taken any action to block my use of the Right of Way” was also untrue. The owners had attempted to block Mr. Vilhena’s use in 2005 by having their lawyer send him letters demanding that he stop using the driveway. I do not accept Mr. Vilhena’s characterization of this exchange of correspondence as a “conversation”. These letters, which included threats of litigation, were a clear attempt by the owners of 1045 to stop him using the driveway.
(iii) Did the Defendant Act Negligently in Making the Representations?
[30] In my view, Mr. Vilhena was clearly negligent in asserting that the incident with the chain was the only time the owners of 1045 had attempted to stop him using the driveway. As outlined earlier, the correspondence in 2005 was a clear attempt to do so. Given the relative recency of the correspondence, I conclude that Mr. Vilhena’s failure to mention this was part of a deliberate attempt to downplay the potential difficulties respecting the parking situation in an attempt to ensure that the deal closed. I do not accept Mr. Vilhena’s evidence that he made the file containing this correspondence available to Mr. Schillaci and Ms. Stamp.
[31] The situation is less clear with respect to the failure to mention the 1987 agreement. The request to have the owner of 1045 sign the agreement had happened 21 years earlier. Mr. Vilhena’s explanation for not mentioning it was that based on advice from his lawyer, he believed that the agreement was of no significance because it had not been signed. In light of the position taken by Mr. Quance and the conclusions reached by Laskin J.A. in the Court of Appeal, this belief was not unreasonable. While the attempt to have the 1987 agreement signed was clearly a request for permission and therefore contrary to what was asserted in the 2008 declaration, I have am not persuaded that the failure to mention it constituted negligence. In any event, given my findings with respect to the plaintiff’s reliance on the misrepresentation, the determination of this issue has no impact on the ultimate outcome.
(iv) Did the Plaintiff Reasonably Rely on the Misrepresentations?
[32] The reasonable reliance element of the tort of negligent misrepresentation involves a “factual test for causation”: Soboczynski v. Beauchamp, 2015 ONCA 282, 125 O.R. (3d) 241, at para. 72. Thus, the issue here is whether the plaintiff would have commenced the declaration action but for Mr. Vilhena’s misrepresentations: Clements v. Clements, 2012 SCC 32, [2012] 2 S.C.R. 181, at paras. 8-10; Sacks v. Ross, 2017 ONCA 773, 417 D.L.R. (4th) 387, at paras. 117-120. It is important to bear in mind that the focus here is on the defendant’s misrepresentations. The issue is not whether the plaintiff relied on the 2008 declaration, which it clearly did. Rather, the issue is whether the plaintiff relied on those portions of the declaration that were false. Put another way, the question to be answered is whether the plaintiff would have behaved differently had it been aware of the true facts.
[33] The plaintiff does not allege that the failure to disclose the 2005 correspondence had any bearing on the decision to commence the declaration action. This correspondence was exchanged in 2005, after the property was converted from the land registry system to the land titles system in 2003. Because of s. 51(1) of the Land Titles Act, R.S.O. 1990, c. L.5, events that took place after the property was converted could have no bearing on whether an easement existed: Combined Air Mechanical Services Inc. v. Flesch, 2011 ONCA 764, 108 O.R. (3d) 1, at para. 189, aff’d without reference to this point sub nom. Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87.
[34] Mr. Schillaci testified that if he had known about the 1987 agreement, he would not have commenced the declaration action. There are two reasons why I do not find his evidence on this point credible. First, Mr. Quance became aware of the 1987 agreement very early on in the proceedings, but did not change his advice that the action had good prospects for success because in his view, the 1987 agreement did not affect the creation of an easement. While ultimately proven to be legally wrong, this was a reasonable position to take and one which one judge of the Court of Appeal agreed with. I find it hard to believe that if Mr. Schillaci had been aware of the 1987 agreement earlier, he would have disregarded the advice of Mr. Quance.
[35] Second, Ms. Stamp does not confirm Mr. Schillaci’s testimony. She candidly acknowledged that the significance of the 1987 agreement did not become apparent until after the trial. She was unable to say that she would not have proceeded with the litigation if she had known about the 1987, although she claims that it was “unlikely”. I do not accept that it was unlikely. It was far more likely that like Mr. Schillaci, she trusted and relied on the advice of Mr. Quance.
[36] At the trial of the declaration action, Mr. Quance argued on behalf of the plaintiff that the 1987 agreement did not preclude the creation of an easement. Ultimately, the trial judge and a majority of the Court of Appeal disagreed with him, but this does not mean that the position was not arguable. The plaintiff made a reasonable decision to advance an argument that was ultimately unsuccessful. Such is the nature of litigation, and blame for the lack of success cannot be laid at the feet of the defendant.
[37] Based on the evidence adduced at this trial, I conclude that the plaintiff would not have behaved any differently had it been aware of the 1987 agreement. The plaintiff elected to continue the litigation, including an appeal, long after the true facts were known.
(v) Was the Reliance Detrimental to the Plaintiff?
[38] As the plaintiff did not rely on the defendant’s misrepresentations, it follows that it did not suffer damages as a result of such reliance. The damages suffered by the plaintiff resulted from its decision to continue the litigation. It made that decision based on the advice of its counsel, who was aware of and had considered the 1987 agreement.
III. DISPOSITION
[39] For the foregoing reasons, I am not persuaded that the defendant’s failure to mention the 1987 agreement in the 2008 declaration was negligent. Even if it was, the plaintiff did not suffer damages as a result of relying on the misrepresentation. As a result, the action is dismissed.
[40] The parties are encouraged to agree on costs. If they are unable to do so, the defendant may make written submissions not exceeding three pages, exclusive of a costs outline and any offers to settle, within 10 days of the date of these reasons and the plaintiff may make written submissions of the same length within 10 days of receiving the defendant’s submissions.
Schreck J.
Released: May 28, 2018.
COURT FILE NO.: CV-10-00409984
DATE: 20180528
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
1043 BLOOR STREET INC.
Plaintiff
– and –
FERNANDO VILHENA
Defendant
REASONS FOR JUDGMENT
Schreck J.
Released: May 28, 2018.
[^1]: There was no admissible evidence in these proceedings that such a sign had been put up in 1989. The only evidence with respect to a sign was from Mr. Vilhena, who testified that he and the owner of 1045 had jointly put up a sign to prevent customers of a nearby bank from parking behind their buildings.