Court File and Parties

Court File No.: CV-12-2650-00 Date: 2019-02-19 Superior Court of Justice – Ontario

Between: Helena Bielanski and Edward Bielanski, Plaintiffs And: Jocie Varghese Mundenchira, Sisily Jocie Mundenchira, Amitha Jocie Mundenchira, Babitha Mundenchira, Anthony Vadakkanchery, Suma Devassy, Bogdan Kaminski and Suvendu Goswami, Defendants

Counsel: H. Mann, Counsel for the Mundenchiras, Plaintiffs by Cross-Claim J. Cook and S. Gfeller, Counsel for the Defendant Goswami, Defendant by Cross-Claim

Heard: September 10-12 and 14, 2018

Reasons for Decision

Lemay J

[1] This action flows from an oversight on a real estate transaction. The original Plaintiffs, the Bielanskis, built two houses on a piece of property in Mississauga. They got permission from the City to sever the property, and sold one of the houses to the Mundenchiras back in 2005. They continued to live in the house on the other half of the property.

[2] Unfortunately, as a result of an oversight when the transaction closed, the Bielanskis sold both halves of their property to the Mundenchiras. No one noticed this oversight for some time. When the oversight was noticed, the Bielanskis started an application in 2012 to have their property transferred back to them.

[3] The lawyers who acted for both the Bielanskis and the Mundenchiras were added as parties to the Court application. In addition, a new severance application was brought and approved by the City of Mississauga. As a result, most of the matters were resolved on consent, and the Bielanskis got their half of the property back.

[4] The remaining issues are claims that the Mundenchiras advance as Plaintiffs by cross-claim against their lawyer, Mr. Suvendu Goswami, for negligence in the completion of the sale in 2005 and damages that the Mundenchiras claim flowed from that negligence.

[5] For the reasons that follow, the Mundenchiras’ cross-claim against Mr. Goswami is dismissed with one exception. The costs of $5,000.00 that the Mundenchiras paid as a retainer for Mr. Goswami to fix the error in title are to be refunded.

Issues

[6] The following issues present themselves in this case:

a) Should the testimony of Mr. Andrew Cochran be admitted as expert testimony and considered as part of this case?

b) Did Mr. Goswami owe the Mundencheras a duty of care? If so, was that duty of care breached?

c) If there was a breach of the duty of care, are the damages that are being sought reasonably foreseeable either in fact or in law?

[7] I will address each issue in turn after laying out some of the factual background in this case.

[8] I should note at the outset that the analysis of the Mundenchiras’ claim can be done either as a breach of contract claim or as a solicitor’s negligence claim. I will consider it as a solicitor’s negligence claim for two reasons. First, the Plaintiff focused the bulk of his arguments on negligence rather than breach of contract. Second, in this case, the differences between a claim in contract and a claim in tort are not significant. As will be seen, the key issue that the Mundenchiras must address under either type of claim is whether the damages are reasonably foreseeable as a result of Mr. Goswami’s error.

The Background Facts

[9] The parties filed an agreed statement of fact that sets out a number of background facts in this case, as well as the positions that they are taking in this matter. It was entered as Exhibit 1 at the trial. I have relied on those facts in reaching my decision.

[10] Exhibit 2 was entered on consent, and the documents were tendered for the proof of their contents. The rest of the exhibits were the subject of oral testimony.

[11] In addition, I heard testimony from Mr. Jocie Mundenchira, Mr. Andrew Cochran and Mr. Suvendu Goswami. I did not hear testimony from any other members of the Mundenchira family, the Bielanskis or the people who purchased the property from the Mundenchiras. I will return to this lack of evidence in my analysis of the issues.

[12] Before reviewing the facts, I should briefly comment on credibility. As will be seen, credibility is a less significant issue in this case because many of my conclusions hinge on the law rather than the facts. However, to the extent that there are credibility issues, I note the following.

[13] First, both Mr. Mundenchira and Mr. Goswami were testifying long after these events took place. The original purchase was in 2005, which was thirteen years ago. The error was cured in early 2012, which was more than six years ago. As a result, memories have naturally dimmed over time. Where there was a dispute between the oral testimony and the documentation, I have generally relied on the documentation.

[14] In addition, I note that Mr. Mundenchira’s evidence in particular was given without much in the way of supporting documentation or corroboration. I will return to the problems with this lack of corroboration on particular issues. However, the most striking omission was the lack of documentation to support his claim that the oversight in 2005 had caused mental distress and other health related concerns that went on for years after the oversight was fixed. While Mr. Mundenchira stated that these concerns had been significant, there was virtually nothing in the way of evidence to support these concerns. In my view, this brings both the existence and extent of the concerns raised by Mr. Mundenchira into serious question.

[15] I also found that Mr. Mundenchira’s evidence was self-serving and contradictory. One example will suffice to demonstrate these problems. In 2009, Mr. Mundenchira obtained an appraisal of the Bluestream property. That appraisal contained a note observing that, according to the land registry office and MPAC, the lot was 100 feet wide. On discovery, Mr. Mundenchira acknowledged reading the note. However, in his evidence before me, Mr. Mundenchira stated that he had not read this note, and he was confused at the time of his discovery. It was clear from his testimony at trial that Mr. Mundenchira was looking to explain away unhelpful evidence.

[16] As a result of these concerns, I have generally focused on the documentation in reaching my factual conclusions.

a) The Parties

[17] The Plaintiff by cross-claim, Mr. Josie Mundenchira, is a real estate agent and investor. He has been qualified as a real estate agent since 2004. Sisily Mundenchira is Josie’s spouse.

[18] The other two Plaintiffs by cross-claim, Amitha and Babitha Mundenchira are the adult children of Josie and Sisily. Amitha is a physician, and earns a considerable salary, and Babitha has a Masters of Business Administration.

[19] Prior to becoming a real estate agent, Josie and Sisily owned a convenience store. In addition to being a real estate agent, Josie also buys and sells condominium units and other real estate.

[20] The Defendant, Mr. Suvendu Goswami, is a lawyer licensed to practice law in Ontario, and has been a lawyer since 1996. His practice includes real estate and, until the issues in this transaction arose, he acted for the Mundenchiras on a significant number of real estate transactions.

b) The Purchase of the Property and the Error

[21] The Bielanskis originally owned the entire Bluestream property. In July of 2013, they obtained permission from the City of Mississauga to subdivide the property into two lots. The property that the Bielanskis intended to continue living in was 3685 Bluestream and was to be Part 1 of the lot, and the one that they intended to sell was 3681 Bluestream and was to be Part 2 of the lot.

[22] In September of 2004, the Bielanskis listed the property at 3681 Bluestream for sale for $728,000.00. This property was on the market for 141 days before the Mundenchiras agreed to purchase it. The purchase price was $682,500.00.

[23] The Agreement of Purchase and Sale (“APS”) included a list of specific work that was to be completed by the Bielanskis prior to closing. The Mundenchiras retained Mr. Goswami to close the transaction. However, Mr. Goswami was not involved in the negotiation of the terms of the APS.

[24] The lawyer for the Bielanskis sent Mr. Goswami the deed for the property in early May of 2005. The wording on this deed was as follows:

Legal Description: PT LT 8 CON 1 NDS TORONTO DES AS PTS 1 & 2, 43R28226 City of Mississauga, Regional Municipality of Peel PIN no. 13325-0560

[25] The problem with this deed is that it transferred both parts 1 and 2 of the property to the Mundenchiras. This meant that both 3681 Bluestream and 3685 Bluestream ended up being transferred to the Mundenchiras. The transaction closed on May 25th, 2005.

c) The Discovery of the Error and the Litigation

[26] In 2008, the Mundenchiras purchased an older home on Joan Drive in Mississauga. They had decided to knock down the existing structure and build their dream home on this lot. This home was going to be ready for occupancy in November of 2009. The Mundenchiras then decided that they would sell 3681 Bluestream in the summer of 2009.

[27] As a result, Mr. Mundenchira obtained an appraisal for this property, which was prepared by Sam Simonetta. The appraisal one of the documents entered as evidence at trial. The appraised value was $850,000.00 by the direct comparison approach and $919,800.00 by the cost approach.

[28] In addition, a portion of the appraisal read as follows:

Note: Land registry and MPAC indicate the subject’s lot size to be 100’ x 171.42’. However, as per the owner the actual lot size is 50’ x 171.42’.

[29] Mr. Mundenchira did not agree with the value that the appraiser had assessed for 3681 Bluestream. As a result, on June 20th, 2009, he listed the property for sale for $1,125,000.00. The property did not sell in the summer of 2009.

[30] In September of 2009, Mr. Mundenchira wrote to the Municipal Property Assessment Corporation (“MPAC”) and stated:

I have represented this since we bought the property in 2005. So far no action has been taken. All of those I contacted said that their records show that our property is 100’ wide!!!

Or do you assess 50’ wide property as having same value?? Am I paying tax for some body elkse’s land since 2005??.

I would appreciate an answer/explanation please.

I may give you a bit of info. (our house is built on half of a property which was 100’ wide and about 173’ long. The severance process has not gone into the record and we are paying the tax for a plot of 100’x172’!!). The neighbor probably does not pay for his lot!!

[31] It is clear that Mr. Mundenchira was well aware that there was an issue with the title to his property when he sent this e-mail. Based on this e-mail, I conclude that Mr. Mundenchira was aware that there was an issue relating to the title of 2681 Bluestream as far back as 2005.

[32] Throughout the early part of 2010, Mr. Mundenchira and Mr. Goswami were in regular contact. Indeed, the documentation filed at trial shows that Mr. Goswami completed more than five property closings for the Mundenchiras between the beginning of 2010 and the end of September 2010.

[33] However, Mr. Mundenchira first contacted Mr. Goswami about the issues with the Bluestream property in an e-mail dated October 13th, 2010. In that e-mail, Mr. Mundenchira indicates that he discovered in September of 2009 that the assessment data for the Bluestream property was wrong. As I have noted above, however, I have found that Mr. Mundenchira was aware of the problem for a considerable period of time prior to 2009.

[34] Mr. Goswami attempted to bring an application to have the Superior Court rectify the problem with the title. He was advised by LawPRO that this application should not be brought, and he discontinued it. Mr. Goswami also assisted the Mundenchiras until LawPRO that he should not act for them any further in this matter.

[35] In the meantime, the Mundenchiras moved to the Joan Drive home in November of 2009. 3681 Bluestream remained vacant until June of 2011.

[36] In March of 2011, the Mundenchiras sold 3681 Bluestream to personal friends, Antony Vadakkanchery and Suma Devassy (collectively the “Devassys”) for $865,000.00. This amount was the appraised value plus the value of some renovations that Mr. Mundenchira had done on the property. As part of the APS for this sale, there was a provision that indicated that there was a dispute relating to the property tax, as well as the frontage for the lot. This sale was completed on June 17th, 2011.

[37] In April of 2012, Mr. Goswami, as the agent for the Devassys, obtained a further consent from the City of Mississauga to sever the two properties. However, the Mundenchiras and Bielanskis were unable to agree on the amount of property taxes that had been paid by the Mundenchiras that the Bielanskis should have paid.

[38] As a result, an application was commenced on June 22nd, 2012 for various relief, including the transfer of 3685 Bluestream (Part 1) to the Bielanskis, as well as other damages. This application was heard by Donohue J. on July 12th, 2012, and an agreement was reached.

[39] As a result of this agreement, all of the claims in the action, except for the Mundenchiras’ claim against Mr. Goswami were dismissed without costs.

[40] With this factual background, I will now address the issues that I have outlined above.

Issue #1- The Expert Report

[41] The Mundenchiras sought to tender the evidence of Mr. Andrew Cochran as expert testimony. The Mundenchiras sought to qualify Mr. Cochran as an expert on business valuation and damages quantification. In the sections that follow, I will summarize Mr. Cochran’s testimony and then analyze whether the testimony meets the test for expert evidence.

a) Mr. Cochran’s Testimony

[42] Mr. Cochran is a partner with Ernst and Young, and a Certified Business Valuator. He is also designated as a Chartered Financial Analyst and has a Masters in Business Administration.

[43] Mr. Cochran provided testimony based on a report and a resume that was produced in 2012. As no updated report or resume had been provided, I ruled that testimony could not be elicited outlining any updates to either the report or the resume.

[44] Mr. Cochran provided a calculation of the losses that the Mundenchiras had allegedly suffered as a result of the fact that they couldn’t sell 3681 Bluestream for a considerable period after they listed it in 2009 and therefore couldn’t use the equity in this house to purchase other properties. Mr. Cochran took the difference between the Mundenchira’s actual cash flows and the cash flows that they would have generated assuming that they sold 3681 Bluestream in 2009 to calculate a total loss of $390,000.00.

[45] There are two features of this calculation that should be borne in mind. First, most of the information that was used to develop the calculation came from Mr. Mundenchira. It was not verified, and Mr. Cochran did not interview any of the other members of the Mundenchira family.

[46] The only inputs that were obtained independently by Mr. Cochran were from RealNet Canada Inc. These were sub-market reports for downtown Toronto. Promotional materials for pre-construction condominiums were also obtained, but these are only promotional materials and do not demonstrate what the condominiums could actually have been purchased for, or what price Mr. Mundenchira could have obtained them for.

[47] Mr. Mundenchira testified about the Park Residences, a development in Mississauga. He testified that he was unable to buy these units because of his cash flow. I will address this issue below.

[48] However, Mr. Mundenchira did not testify about the units identified in Mr. Cochran’s report, or about any other of the condominium developments that Mr. Cochran identified. As a result, I have no idea whether Mr. Mundenchira even knew about the developments identified by Mr. Cochran, much less thought about purchasing them.

[49] Second, this calculation does not actually provide a value for a business. Instead, it provides the change in the Mundenchira’s income stream based on a number of assumptions. Mr. Cochran conceded in cross-examination that, if the assumptions changed, the final loss calculation would change as well. Those assumptions are all questions of fact that I must determine.

b) The Legal Analysis

[50] The Mundenchiras argue that this evidence should be received as expert evidence, as it meets all of the criteria for the admissibility of expert evidence.

[51] Mr. Goswami opposed this evidence on the basis that it was all factual information and calculations, which were well within the expertise of the Court. In addition, counsel for Mr. Goswami pointed out that much of the evidence offered by Mr. Cochran was speculative and unreliable. During the course of trial, Mr. Goswami’s counsel argued that I should conduct a voir dire before receiving the evidence of Mr. Cochran as part of the trial record.

[52] I rejected the request to conduct a voir dire and provided oral reasons for doing so. Briefly, in my view, determining whether the evidence being provided by Mr. Cochran was factual in nature or the subject of expert evidence would require me to hear viva voce testimony from him that would be essentially the same as hearing his evidence as part of the trial.

[53] In addition, I would require context in order to make the ruling, which would mean that I would have to consider the underlying facts of the case in order to determine whether this evidence was necessary within the meaning of the test for expert evidence.

[54] Finally, hearing the evidence twice would have delayed the trial and consumed additional Court resources. In the absence of a jury, I determined that I would hear Mr. Cochran’s evidence during the course of the trial, permit the parties to argue about the admissibility of the expert testimony and then make a ruling as part of my reasons for judgment. This is that ruling.

[55] The test for whether to admit expert evidence is set out in R. v. Mohan, [1994] 2 S.C.R. 9. Four criteria must be considered by a Court, as follows:

a) Relevance b) Necessity in assisting the trier of fact c) The absence of any exclusionary rule, separate and apart from the opinion rule itself. d) A properly qualified expert.

[56] The test for the admissibility of expert evidence has been most recently formulated in White Burgess Langille Inman v. Abbott and Haliburton Co., 2015 SCC 23. Following on the decision in R. v. Abbey, 2009 ONCA 624, 97 O.R. (3d) 330, the admissibility inquiry is divided into two distinct steps. In the first step, the Court considers the Mohan criteria, which are the threshold requirements for admissibility. Then, at the second step, the judge is required to balance the potential risks and benefits of admitting the evidence.

[57] The admissibility of Mr. Cochran’s testimony turns on the question of whether it is necessary. As a result, I will focus my analysis on considering whether the evidence is necessary, and whether the potential benefits of the evidence outweigh the potential prejudice associated with it. In conducting this analysis, I will deal with both halves of the test.

[58] In assessing necessity at the threshold level, the mere fact that the evidence is relevant or helpful is not sufficient for it to be admissible (see White Burgess at paragraph 21). The opinion evidence must be special or peculiar evidence on a question that is beyond the scope of the trier of fact.

[59] Mr. Mann argues that the testimony of Mr. Cochran is necessary because it is only from that testimony that I will be able to understand how to appropriately calculate damages for the Mundenchiras lost opportunities. In other words, Mr. Cochran provided the expert evidence to show how the Mundenchiras could have leveraged their money to buy condominiums.

[60] The problem with this submission is that the bulk of Mr. Cochran’s evidence focused on his review of financial data provided by Mr. Mundenchira. There was no independent review of any banking records. There were no considerations of other cash flows potentially available to the Mundenchiras. There was no consideration of whether the value of the property was properly assessed.

[61] In other words, much of this evidence was based on mathematical calculations that flowed from assumptions made by Mr. Mundenchira and his counsel. The report simply presents calculations based largely on the assumptions in the materials provided by Mr. Mundenchira and his counsel. As a result, the potential benefits of this evidence are, in my view, limited. Most, if not all, of the calculations could be done by the Court based on evidence from a lay witness. Given this fact, I am not persuaded that this evidence meets the threshold test for admissibility.

[62] However, even if it does meet the threshold test for admissibility, it cannot be admitted when the probative value is considered against the prejudicial effect.

[63] I start with the probative value. Mr. Cochran’s report is of limited probative value for two reasons. First, as discussed above, much of the evidence for the report had been provided by Mr. Mundenchira, and Mr. Cochran was simply engaged in arithmetical calculations with this evidence.

[64] Second, while there was some evidence that had been obtained independently, this evidence was speculative. An example will illustrate the problem. Mr. Cochran, in Schedule 7 to his report, sets out changes in values of various condominiums that the Mundenchiras might have purchased. There are two problems with Schedule 7:

a) There is no independent evidence before me as to whether there was any prospect of the Mundenchiras having any intent to purchase one of these condominium units. b) The choice of condominium unit would have governed the returns on investment that the Mundenchiras would have received. There is a wide range of returns, with the lowest rate of return being 1% over a year.

[65] As a result, Schedule 7 of the report, which is a key component of Mr. Cochran’s calculations, has limited probative value.

[66] The prejudicial effect of this evidence is, however, significant. The report seeks to put the gloss of expert testimony on the assumptions of Mr. Mundenchira and his counsel. Those assumptions are subject to review based on the entirety of the evidence at trial and including them in expert testimony runs the risk that a trier of fact will give them undue weight. I acknowledge that this risk is limited in a non-jury action, but it still exists.

[67] When balancing the relevant factors, however, this evidence is not necessary to the trier of fact because it is of very limited probative value, and could be prejudicial. As a result, it does not meet the required threshold to be admitted as expert evidence and I am excluding it.

[68] Then, there is the principle of reliability. This is an issue that goes to the weight of the report rather than its admissibility. However, based on my factual conclusions, I am not persuaded that this report is sufficiently reliable either. The problem comes with the assumptions in the report. For the purposes of my analysis, one example of these assumptions is sufficient. At paragraph 5.8 of his report, Mr. Cochran states:

The problem with the land title did not come to the Mundenchira family’s attention until October 2010 after Jocie Mundenchira contacted MPAC to request a property tax reduction in response to the unsuccessful sales process. Once the error was identified, the property was marketed with this disclosure, however the feedback provided by potential buyers and real estate agents was that no one was interested in buying a property with an unresolved title problem.

[69] The problem with this assumption is clear from my recitation of the facts. The problems with the title came to Mr. Mundenchira’s attention at the latest in 2009 when the appraisal was done. An experienced real estate agent would have known the significance of the comments in the appraisal that I reproduced at paragraph 28, and would have known the title had problems. In addition, there is the e-mail from Mr. Mundenchira that I have reproduced at paragraph 30 above. The assumption that the Mundenchiras did not know about the defect in title until 2010 is not in accordance with the facts.

[70] As a final comment on this issue, I would also note that the testimony from Mr. Cochran is not necessary because of my findings on the scope of foreseeable damages. Mr. Cochran’s testimony addresses damages that, in my view, are not reasonably foreseeable. As a result, his evidence is not relevant in any event.

Issue #2- The Duty of Care

[71] At the outset, I acknowledge that it is difficult to compartmentalize the analysis of the duty of care and the analysis of reasonable foreseeability. In Mustapha v. Culligan of Canada Ltd., 2008 SCC 27, McLachlin C.J.C. stated that:

3 A successful action in negligence requires that the plaintiff demonstrate (1) that the defendant owed him a duty of care; (2) that the defendant’s behaviour breached the standard of care; (3) that the plaintiff sustained damage; and (4) of the damage was caused, in fact and in law, by the defendant’s breach. I shall examine each of these elements of negligence in turn. As I will explain, Mr. Mustapha’s claim fails because he has failed to establish that his damage was caused in law by the defendant’s negligence. In other words, his damage is too remote to allow recovery.

[72] In this case, it is clear that Mr. Goswami owed the Mundenchiras a duty of care. He was their lawyer, and they had a reasonable expectation that he would perform the real estate transaction correctly. The question that arises is whether the duty of care was breached.

[73] The standard to be considered in assessing whether a lawyer has breached his duty of care to his client is set out in a number of decisions (see, for example, Folland v. Reardon, 74 O.R. (3d) 688). In essence, the standard is not that of perfection. Instead, it is a standard that holds lawyers accountable for errors that result from a lack of knowledge or skill ordinarily possessed by other similarly situated lawyers or from failing to use reasonable care and diligence.

[74] In addition, as noted in Deloitte and Touche v. Livent Inc., 2017 SCC 63 at paragraph 31, rights and duties are not limitless. The standard to be applied must “provide a principled delineation of the scope of such duty.”

[75] The error in this case was a failure to notice that the property had not been partitioned and that the PIN Number that was being used on closing covered both halves of the property. It is clear that this was a mistake that was made by both the Bielanskis’ lawyer and Mr. Goswami. It is also clear that neither of the parties noticed the error for some time. The question is whether this oversight amounts to negligence.

[76] The most compelling argument that Mr. Goswami advances to explain why the oversight does not amount to negligence is that the Mundenchiras ended up with more property than they were supposed to have, and that they didn’t lose anything by Mr. Goswami’s oversight.

[77] That argument has some considerable force in addressing the question of whether the damages are reasonably foreseeable. However, it is not an answer to the argument that Mr. Goswami breached the duty of care. The fact that nothing was lost does not answer the question of whether Mr. Goswami breached the duty of care he owed his client.

[78] In my view, Mr. Goswami did breach the duty of care in this case. In a real estate transaction, the client expects to receive good marketable title to the property that they are purchasing. While the Mundenchiras had title to the entire property, it was not clearly good marketable title. The Mundenchiras had not purchased the entire property, the Bielanskis still had an interest in half the property, and there might have been issues if the property was sold as-is.

[79] In addition, there are risks associated with receiving title to more property than a party bargained for. For example, it is possible that some of the property might require environmental remediation, and be very expensive to own.

[80] Mr. Goswami’s duty to the Mundenchiras was to ensure that they received good, marketable title to the property that they had purchased. He would have been aware that the property had been subdivided. As a result, he breached the duty of care to his clients.

[81] I should also address the issue of the size of the oversight. I acknowledge that the error in this case resulted from a very small oversight, in that the PIN did not match the property that was being transferred in a very minor way. I am still of the view that Mr. Goswami breached the duty of care in this case. Regardless of how small the difference is between an incorrect PIN and a correct PIN, making a mistake on this issue has significant effects, and those effects are known by counsel in advance. Put simply, if the PIN is incorrect, then the lawyer has not properly transferred the property, and has not done what his client asked.

Issue #3- Reasonable Foreseeability

[82] Finding a breach of the duty of care does not end the question of whether Mr. Goswami was negligent, and caused the Mundenchira’s losses. It is now necessary to consider the question of what losses, if any, were reasonably foreseeable as a result of this error.

[83] The Mundenchiras’ claim for damages is set out in paragraph 46 and 59 to 66 of the Agreed Statement of Facts. When these claims are reviewed, they can be divided into the following categories:

a) Damages on account of the fees paid for the purchase of 3681 Bluestream. b) Transactional costs associated with the litigation to sever the property and this litigation, including fees associated with expert reports and lawyers’ fees associated with transferring the property back to the Bielanskis. c) Business losses as a result of the fact that the equity in 3681 Bluestream was tied up on the home between 2009 and 2012 d) Losses to the value of 3681 Bluestream because of this error as well as carrying costs on the property from the original listing date until the date the property was sold. e) Interest on the overpayment of property taxes. The Bielanskis paid the overpaid amount for property taxes, but did not pay the interest. f) Damages for aggravation and mental distress as a result of the error in the sum of $200,000.00.

[84] In a negligence action, the damages that the Plaintiff seeks must be reasonably foreseeable in both fact and in law. In the subsections that follow, I will review the legal principles that apply to reasonable foreseeability in this case, and then review each of the different types of damages that the Plaintiff is claiming.

a) The Applicable Legal Principles

[85] The starting point for assessing the damages claims in this case is the question of whether the damages are reasonably foreseeable. The parties focused their attention on two key cases, Toronto Industrial Leasholds Ltd. v. Posesorski, 21 O.R. (3d) 1 (C.A.) (“Tilco”) and Kienzle v. Stringer, 35 O.R. (2d) 85 (C.A.) ). The Plaintiff argues that Tilco is the applicable case, and the Defendant argues that Kienzle is the applicable case.

[86] I am of the view that Kienzle is the case that should be applied to these facts, and that Tilco can be distinguished as it is intended to apply to different circumstances. I start with a review of the facts of Tilco. In that case, the clients purchased a commercial property for $325,000.00. The clients knew that the property was subject to a long-term lease until 1984, but did not know that TILCO had an option to rent the property for ten years when the existing lease expired at a rent substantially below market. The Solicitor was aware of the lease, and had forgotten about it. He did not tell the clients of its existence before they closed the transaction. Negligence was acknowledged.

[87] In Tilco, the parties agreed that the clients would not have purchased the property if they had known about the option to lease. As a result, perfect restitution required a notional undoing of the transaction some ten years later. In achieving that outcome, the majority stated the following about the damages:

Absent the ability to make perfect restitution, a court, in assessing damages, must do the best it can. In my view, the loss flowing from Mr. Solway’s negligence falls under three heads. First, the clients paid more for the property than it was actually worth. Second, they lost the use of the funds represented by that overpayment for a period of five years. Third, the clients incurred certain additional costs and expenses which were a reasonably foreseeable consequence of Mr. Solway’s negligence. The clients should recover all of those losses. I will quantify each in turn.

[88] These are the types of damages that the Mundenchiras seek in this case. The problem is that Tilco is distinguishable from the case at bar.

[89] In this case, the Mundenchiras actually got more than they bargained for. They got the entire parcel of land, rather than merely the half that they had actually purchased. In other words, if they had been aware of the error, they would have instructed their counsel to correct it and proceed with the purchase.

[90] In addition, the Tilco case is distinguishable from the case at bar because the property in Tilco was a commercial property purchased by a commercial client. The potential losses of income were reasonably foreseeable. It is far more difficult for a lawyer to foresee that the money used to purchase a residential real estate property is going to be used for commercial purposes at some point in the future. In this case, the Mundenchiras argue that Mr. Goswami was well aware that they earned significant money in purchasing real estate for investment purposes. However, this argument misses the fact that Mr. Goswami was also well aware that the Bluestream property was purchased as the Mundenchira’s family home.

[91] As a result, the facts in the case before me are closer to the circumstances in Kienzle. In that case, the Court was faced with a client who had purchased his father’s farm from his father’s estate. Unfortunately, the title to the farm was not properly conveyed from the estate to the client. The Court awarded damages to the client in order to rectify the transaction and ensure that he had good, marketable title to the property.

[92] The client in Kienzle appealed to the Court of Appeal, seeking damages in addition to those awarded to him. Those damages included the loss of income from the fact that he was unable to complete a transaction for a new farm in a timely way. The Court of Appeal rejected those claims, stating (at paragraphs 22 and 23):

22. In the ordinary course, a client relies on his solicitor to guarantee the title that he certifies. The fee charged is calculated upon the sale price of the title certified and arguably the size of the risk assumed. It is not unreasonable to add to that risk consequential damages immediately concerned with the failure of marketability.

23. This reliance, however, does not or should not extend to the loss of profits from secondary transactions which may be fuelled by funds expected from the marketing of the subject real property. This range of secondary transactions is unpredictable and limitless and so are the losses that may flow therefrom. If the ambit of reasonable foreseeability takes us into this area of secondary transactions it is difficult, if not impossible, to know where a boundary may be found. In my view, the damages that flow from the loss of profits from a secondary bargain lie on the far side of a Rubicon that should not be crossed; reasonable foreseeability takes us only to the shore. I except again those cases in which particular disclosure may lead to the assumption of additional risks. In this case, of course, there was no such disclosure that the Oxford farm was to be the basis of future purchases.

[93] The damages in this case should be assessed using the same principles as the Court of Appeal articulated in Kienzle.

[94] To put it another way, the damages in this case, whether they are assessed on contractual or negligence principles are generally pure economic losses. As a result, Keinzle suggests that the ability to recover for these damages should be limited to the actual transaction, and not based on secondary transactions.

[95] There has been considerable judicial discussion of the issue of pure economic loss, and I was referred to a number of those decisions. In both D’Amato v. Badger, [1996] 2 S.C.R. 1071 and Martel Building Ltd. v. R., 2000 SCC 60, the Supreme Court outlined the evolution of Canadian law as it relates to pure economic losses.

[96] The principles that flow from those decisions have been discussed by Emery J. in Evans v. Canusa Automotive Warehousing Inc., 2015 ONSC 4879. At paragraph 66 of his judgment, Emery J. listed the following four principles that could be extracted from the case-law:

a) Economic interests are viewed as less compelling of protection than bodily security or proprietary interests. b) An unbridled recognition of economic loss raises the specter of indeterminate liability. This has long been an issue for Courts in considering economic loss (see, for example, Cardozo J.’s judgment in Ultramares Corp. v. Touche Niven & Co, 174 N.E. 441 (N.Y.C.A 1931)) c) Economic losses often arise in a commercial context, where they are often an inherent business risk best guarded against by the party on whom they fall through means of insurance. d) Allowing the recovery of economic loss through tort is sometimes seen as encouraging a multiplicity of inappropriate lawsuits.

[97] In this particular case, there is a question as to whether the damages that are claimed are reasonably foreseeable, even if they can be proven. With this legal framework in mind, I will now review each of the heads of damage.

b) Damages for Fees for the Purchase of the Home

[98] There are two problems with this claim, both factual. First, at the conclusion of his examination in chief, Mr. Mundenchira appeared to abandon this claim for damages. Second, in any event, 3681 Bluestream was transferred to the Mundenchiras and the work was done. In my view, any issue with respect to the legal fees for the title to 3681 Bluestream Crescent can be more appropriately dealt with in considering the retainer that the Mundenchiras paid to Mr. Goswami to unwind the error.

c) Transactional Costs Associated with the Litigation to Sever the Property and This Litigation

[99] The items that comprise this head of the claim for damages are as follows:

a) A retainer in the sum of $5,000.00 provided to Mr. Goswami to commence an application against the Bielanskis b) The fees paid to Mr. Cochran in the sum of $30,972.50 for his report. c) The fees paid to a company called CQK in the sum of $904.00 d) The costs paid to the Devassys’ for the work to undo the transaction.

[100] Only the first claim succeeds. My reasons for reaching this conclusion are rooted in the facts associated with each claim.

[101] I start with the retainer that was provided to Mr. Goswami to commence an application against the Bielanskis. There is no dispute that this money was paid by the Mundenchiras. In my view, the payment of these fees is related to the error that Mr. Goswami made. Indeed, these fees would not have been necessary if the error had not been made.

[102] In addition, these losses are reasonably foreseeable. If a lawyer makes a mistake on the title that his or her client is receiving, it is reasonably foreseeable that additional steps might be necessary to correct that error and ensure that the client actually obtains the title that they agreed to purchase. It is also reasonably foreseeable that there will be a cost associated with taking those steps. For these reasons, the Mundenchiras are entitled to recover this retainer.

[103] Then, there are the fees paid to CQK and to Mr. Cochran. In my view, those fees cannot be recovered by the Mundenchiras for two reasons. First, the costs associated with these reports are not reasonably foreseeable losses flowing from the error. Instead, they are costs associated with preparing reports so that the Mundenchiras can pursue litigation over the value of the error.

[104] Second, these are not proper claims for damages in any event. Instead, they are claims for fees related to the litigation and are properly addressed in the course of the costs submissions. As a result, these invoices may not be claimed as damages.

[105] Finally, there are the costs paid by the Mundenchiras to the Devassys. In reviewing the evidence, there are two problems with this claim. First, there is no explanation as to the basis for this claim of fees. Second, there is no evidence to establish why the Mundenchiras were responsible for these fees. It must be remembered that the Devassys and the Mundenchiras were close personal friends. As a result, it is not clear how the parties allocated the costs associated with the sale and the unwinding of the transaction. In light of this lack of clarity, the claim for costs cannot succeed.

d) Business Losses from the Fact the Equity Was Tied Up in the Home

[106] This is the Mundenchiras’ most significant claim. They have claimed approximately $390,000.00, based on Mr. Cochran’s report. In essence, the Mundenchiras claim that they lost the opportunity to use the equity in 3681 Bluestream to invest in other condominium opportunities. These losses are so significant because the Mundenchiras claim that they would have leveraged the condominium purchases, putting down only 20 percent of the purchase price, and borrowing the remainder from the bank.

[107] I have already set out my reasons for excluding Mr. Cochran’s report. I also conclude that this claim for damages should be denied.

[108] I start with the factual problems with this claim. First, there is no reliable evidence on the record that potential purchasers were not making offers to purchase 3681 Bluestream because the property taxes were too high. In my view, the reason that the house did not sell in 2009 was because Mr. Mundenchira had an unreasonable view of the value of the house.

[109] The appraisal that was done in July of 2009 stated that the value of 3681 Bluestream was not more than $920,000 regardless of what method was used to value the property. However, Mr. Mundenchira decided that this value was incorrect. He then compared the value to other custom built homes in the area. Mr. Mundenchira provided a package of listings of other custom built homes, with list prices ranging from $870,000 to $1,149,000. The problem with this evidence is that it is impossible, on the record before me, to compare the relative features of these different houses to 3681 Bluestream. This evidence does not advance Mr. Mundenchira’s claim that there was a loss of value on the Bluestream property.

[110] In addition, Mr. Mundenchira provided evidence of a series of house sales in the neighbourhood. He compared the sale prices of those houses to their assessed value for property tax purposes. He then pointed out that the assessed value of 3681 Bluestream was higher, and should have sold for more. The problem with this evidence is that the assessed value of the 3681 Bluestream property at the time was based on the value of both Bluestream properties. As a result, it does not assist the Mundenchiras in establishing that their property was sold below market value.

[111] Although the appraiser did not testify, the appraisal is the best evidence of what the value of 3681 Bluestream Crescent was. The property was listed well over its appraised value in the summer of 2009. Although there were a number of reductions in price between the summer of 2009 and the spring of 2011 when the property sold, the list price remained above the appraised value until the end of 2010.

[112] In addition, no specifics were provided by Mr. Mundenchira as to any of the potential buyers who were unwilling to purchase the property because of the fact that the property taxes were too high. This lack of specifics, when combined with my concerns about Mr. Mundenchira’s evidence and the inflated price of the property, leave me unpersuaded that there is any reliable evidence that purchasers were avoiding the property because of the property taxes.

[113] For all of the foregoing reasons, I conclude that the reason that 3681 Bluestream did not sell between the summer of 2009 and the spring of 2011 is because the asking price was too high, and not because of any problems with the title. Mr. Goswami should not be held liable for damages that have nothing to do with the issues relating to the defects in the title.

[114] However, even if the defects in the title were an impediment to the sale of 3681 Bluestream, there is an issue around the timing of the Mundenchiras’ discovery that there was an error in title. As I have set out previously, the Mundenchiras were aware of the defect in the title well before October of 2010, when they notified Mr. Goswami of the problem. In my view, they had been aware of the defect in the title for several years before June of 2009. However, they did nothing to correct the defect in the title until October of 2010.

[115] Even if the fact that the house did not sell between the summer of 2009 and March of 2011 was related to the defects in title, the Mundenchiras cannot claim these losses from Mr. Goswami. They did nothing to resolve an issue that they were aware existed, and Mr. Goswami was not aware of the issue until October of 2010.

[116] In addition, the Mundenchiras have not proven that they actually suffered any losses at all as a result of the equity in 3681 Bluestream being tied up for a year and a half. I reach this conclusion for three reasons:

a) There was no documentation before me to establish that Mr. Mundenchira had any settled intention to purchase condominium units in the Park Residences. b) Other than the Park Residences that Mr. Mundenchira testified about, there is no direct evidence of any properties that the Mundenchiras were interested in during the relevant time period. c) The Mundenchiras have not demonstrated that they were unable to finance the purchase of additional condominiums because the equity in 3681 Bluestream was tied up. Indeed, when asked about their banking records and other financial information on discovery, the Mundenchiras declined to answer this question. In the absence of evidence showing that the Mundenchiras were not able to finance any further condominium purchases, they cannot prove the losses that they are claiming.

[117] In addition, there was evidence that the Mundenchiras did purchase additional condominium units in the fall of 2011. However, in the absence of the evidence described in the previous paragraph (particularly the evidence in paragraph 116(c)) these purchases do not assist the Mundenchiras in establishing that they could not purchase the condominium units any earlier than they did.

[118] Finally, even if the Mundenchira’s could surmount these factual issues, there is still the issue of reasonable foreseeability. There was no evidence before me that Mr. Goswami knew that the Mundenchiras were intending to use the equity in 3681 Bluestream to invest in condominiums. Indeed, the evidence was to the contrary. Mr. Goswami clearly understood that this home was to be the Mundenchira’s residence. As a result, even if the losses from the fact that the equity was tied up in the home for too long a period were related to the defect in the title, and the Mundenchiras could not have avoided those loses, they are not reasonably foreseeable economic loss and the Mundenchiras should not be entitled to recover for them.

e) Losses to the Value of the Bluestream Property and Carrying Costs

[119] The claims that are being made under this category of damages are as follows:

a) $66,784.00 on account of additional carrying costs, including the mortgage and other fixed expenses. b) Reduction in the value of the property in the amount of $235,000.00.

[120] Again, these claims cannot succeed either on the facts or on the principles of foreseeability of economic loss. First, neither claim can succeed because of the delay in raising the issue of the problems with title. If the Mundenchiras had raised the problems with title in a timely way, and taken appropriate steps to resolve those issues, then the damages could have been avoided.

[121] In addition, there is no proof of the loss in the value of the property. The appraisal that Mr. Mundenchira obtained for the property in the summer of 2009 showed a value of $850,000.00 using the direct comparison approach and $919,800 by using the replacement approach. However, there is no evidence to show that these values were affected in any way by the issues with the title.

[122] Then, there is the claim that the property taxes prevented the property from being sold for its proper value. In the previous section, I reviewed all of the reasons why I concluded that the property was overvalued by Mr. Mundenchira. I see nothing in any of this evidence that would establish that the property had a lower value because of the error in title.

[123] For the foregoing reasons, these claims cannot succeed either.

f) Interest on the Payment of Property Taxes

[124] The Mundenchiras claim that the interest on the property taxes that they overpaid between 2005 and 2010 should also be Mr. Goswami’s responsibility. There are two problems with this clam, both of which are fatal to it.

[125] Even if the interest on the property taxes was related to the error that Mr. Goswami committed, it is the Bielanskis that had the advantage of the payments that the Mundenchiras made. As a result, the Mundenchiras should have looked first to the Bielanskis for reimbursement of these monies. They have taken no steps to recover these monies from the Bielanskis (see paragraph 57 of the agreed statement of facts). They should not be entitled to look to Mr. Goswami to recover these costs.

[126] In addition, there is no explanation as to how the property taxes were divided between the Mundenchiras or the Bielanskis, or whether the City of Mississauga would have charged more in property taxes between 2005 and 2010 if the property had been severed. In the absence of this explanation, it is difficult to know whether there was a loss or what the basis of the loss was. As a result, it is not clear to me that the Mundenchiras can establish the losses for interest that they claim.

[127] Second, even if the Mundenchiras could establish the losses, they run into another problem. As I have stated elsewhere in these reasons, the Mundenchiras were well aware of the problems with the title on the property for some considerable time prior to 2009, and took no steps to try and rectify the issues. The interest that accrued on the property taxes would not have accrued if the Mundenchiras had moved more expeditiously.

[128] For the foregoing reasons, this claim for damages is denied.

g) Damages for Aggravation and Mental Distress

[129] The Mundenchiras are claiming $200,000.00 for damages for aggravation and mental distress. In his evidence, Mr. Mundenchira stated the following:

a) He suffered from diabetes and high cholesterol, and had been given medication for his stomach on a daily basis. b) He also suffers from nausea in the mornings, as well as memory problems. As an example, Mr. Mundenchira advised that he had forgotten his cell phone the morning that he testified. c) The error in the transaction has caused uncertainty, a loss of hope, and a loss of confidence. d) Mr. Mundenchira testified that his wife had also suffered badly, and was seeing five consultants every other month. e) Mr. Mundenchira testified that they had to sell their dream home, because there was no income coming in as a result of this error. f) Mr. Mundenchira testified that he was being degraded from society and from his community as a result of these problems.

[130] There is no evidence to support any of these claims. The only medical evidence I had about mental distress was a single page note from Dr. Fiala. However, Dr. Fiala was not called as a witness. There was also a list of prescriptions that was provided in evidence. However, there was no evidence about why these medications had been prescribed or what conditions they treated.

[131] As a result, there is no evidence before me as to the nature or extent of any medical conditions that any of the Mundenchiras suffered from. In addition, there is no evidence, other than Mr. Mundenchira’s viva voce testimony that these conditions (if they exist) are related in any way to the mistake on the title for 3681 Bluestream Crescent.

[132] Then, there are the other claims. Again, other than Mr. Mundenchira’s viva voce evidence, there is no evidence to establish that the Joan Drive home was sold, or the circumstances of that sale. Similarly, there is no evidence about the Mundenchira’s financial circumstances. Indeed, as I noted at paragraph 116(c) these questions were refused on discovery as being irrelevant.

[133] The only evidence that supports the claim for mental distress and aggravated damages comes from Mr. Mundenchira. Even if I was prepared to accept Mr. Mundenchira’s evidence as factual, the absence of other relevant evidence in the possession of the Mundenchiras would be fatal to their claim.

[134] However, as I have noted above, I have problems with Mr. Mundenchira’s credibility and reliability as a witness. Further, in my view, Mr. Mundenchira’s testimony on the effects that this error has caused were significantly overstated in an effort to bolster the claim that he was making. When these problems are combined with the lack of corroborating evidence, this claim also fails.

Conclusion

[135] For the foregoing reasons, I conclude that this action should be dismissed with the exception of the refund in the retainer in the sum of $5,000.00, and an order will issue accordingly.

[136] This leaves the issue of costs. The parties are encouraged to discuss and attempt to agree on costs.

[137] If there is no agreement, then each party is to provide their costs submissions within fourteen (14) days of the release of these reasons. Those submissions are not to exceed three (3) single-spaced pages, exclusive of bills of costs, case-law and offers to settle.

[138] The parties shall then have seven (7) additional days to provide any responding costs submissions. Those submissions are not to exceed two (2) single-spaced pages.

[139] If costs submissions are not received from the parties in accordance with this timetable, then I will presume that the parties have agreed on costs.

Lemay J Released: February 19, 2019