COURT FILE NO.: CV-17-577977
DATE: 20191122
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
HASSAN ISSA
Plaintiff
– and –
JOHN WILSON, WASIM JARRAH and ALEXANDER REALTY CENTRES INC.
cob as KELLER WILLIAMS REALTY CENTRES
Defendants
Howard Shankman, for the plaintiff
Hans Engell, for the defendants Wasim Jarrah and Alexander Realty Centres Inc. cob as Keller Williams Realty Centres
HEARD: November 19, 2019
REASONS FOR JUDGMENT
FERGUSON J.
[1] Hassan Issa (“Mr. Issa”) sues for a declaration that the agreement of purchase and sale dated March 15, 2017 between himself and John Wilson (“Mr. Wilson”), is null and void and seeks rescission of that agreement of purchase and sale. He also sues for the return of the $50,000 deposit plus accrued interest. This agreement of purchase and sale involves the property owned by Mr. Wilson at 94 Winlane Drive, Stouffville Ontario (“the subject property”).
[2] Wasim Jarrah (“Mr. Jarrah”) was the real estate agent involved in the sale, acting for both Messrs. Issa and Wilson. Alexander Realty Centres Inc. cob as Keller Williams Realty Centres (“Keller Williams”) was the listing and seller broker of the subject property
[3] At trial, evidence was received from Messrs. Wilson, Issa and Jarrah. As this was a summary trial, the affidavits of Messrs. Issa and Jarrah were made exhibits and became their evidence‑in‑chief with brief cross‑examinations taking place. Mr. Wilson testified briefly as a “fact” witness. He has been released from the action.
[4] An agreement was entered into with respect to resolution of Mr. Wilson’s damages. As I had some questions about the effect of that agreement, I am going to render this decision and hopefully counsel can sort out the “effect” of that agreement, which was not reduced to writing and involved at least one prior counsel who was replaced by Mr. Engell. I can be contacted if necessary to assist in the resolution of that agreement. Obviously the costs of this action will have to be dealt with and the agreement with respect to Mr. Wilson, may also have some bearing on how costs damages are to be dealt with.
[5] Following the evidence I heard submissions on the law. Statements of law and case law were provided by counsel. I thank them for their cooperation and efficiency in conducting this trial and in providing their submissions.
[6] The parties entered into the following Agreed Statement of Facts:
(i) in January or February of 2017, Mr. Issa contacted Mr. Jarrah about buying a house;
(ii) in late January or early February of 2017, Mr. Issa began looking at potential properties to purchase with Mr. Jarrah. During this period, Mr. Jarrah showed him approximately 10-15 different properties. Mr. Issa put in offers on several properties some of which were between 2,500 and 3,000 square feet. None of these offers were accepted;
(iii) in the afternoon of March 15, 2017, Mr. Jarrah telephoned Mr. Issa to tell him about the property at 94 Winlane Drive in Stouffville. Mr. Jarrah told Mr. Issa that the property was listed at a good price and that he should come and see it right away;
(iv) Mr. Jarrah was also the listing agent for 94 Winlane Drive in Stouffville;
(v) Mr. Issa met Mr. Jarrah at the Winlane property shortly after 6:00pm on March 15, 2017. The owner, Mr. Wilson, was also present;
(vi) at this visit, Mr. Issa asked both Mr. Wilson and Mr. Jarrah about the square footage of the house. Mr. Jarrah told Mr. Issa that the house was approximately 2,100 square feet;
(vii) during this initial visit on March 15, 2017, there were copies of the MLS Listing in the kitchen. The MLS Listing indicated that the approximate square footage of the property was 2,000‑2,500 square feet;
(viii) later that evening, after the initial visit, Mr. Jarrah advised Mr. Issa that he was expecting another offer on the property that evening in the amount of $800,000.00;
(ix) Mr. Jarrah did not receive any offer from another purchaser on March 15, 2017;
(x) after the second visit, Mr. Issa and Mr. Jarrah spoke by telephone. Mr. Jarrah advised Mr. Issa to make an offer on the property quickly and Mr. Issa put in an offer for $730,000.00 which was accepted by Mr. Wilson;
(xi) the following day on March 16, 2017, Mr. Issa provided Mr. Jarrah with a deposit cheque in the amount of $50,000.00 payable to Keller Williams Realty Centres;
(xii) on April 15, 2017, Mr. Issa texted Mr. Jarrah and asked him how much he thought the Winlane property might sell for as Mr. Issa was considering selling the Winlane property before closing;
(xiii) in late May or early June, Mr. Issa received an appraisal on the Winlane property that was carried out in connection with Mr. Issa’s mortgage application;
(xiv) the appraisal prepared by Appraisal Advantage Canada Incorporated, indicates that the square footage of the Winlane property was 1,450 square feet. This appraisal report also appraised the value of the Winlane property at $730,000;
(xv) by email dated June 5, 2017, Mr. Issa wrote to Mr. Jarrah and asked for clarification as to why the appraisal report shows the square footage of the property at 1,450 when the property was advertised between 2,000-2,500 square feet;
(xvi) Mr. Jarrah never provided any explanation to Mr. Issa as to the discrepancy in the square footage as between the appraisal report and the MLS Listing;
(xvii) Mr. Issa informed Mr. Jarrah that he would not be prepared to close the transaction given the true size of the house. The records of MPAC show the total square footage of the Winlane property as 1,444 square feet;
(xviii) the information on the listing agreement and the MLS data information form which shows the square footage of the Winlane property was prepared by Mr. Jarrah;
(xix) Mr. Jarrah did not carry out any measurements in order to confirm the square footage of each room;
(xx) the square footage measurements shown on the MLS data information form were obtained by Mr. Jarrah from the previous listing of the Winlane property some 12 years prior;
(xxi) the measurements of each room that were inserted on the MLS data information form by Mr. Jarrah are shown on square metres;
(xxii) Mr. Jarrah never converted or attempted to convert the metric area of the measurements that he had taken from the previous listing into square footage measurements;
(xxiii) at the time the offer was submitted by Mr. Issa, Mr. Jarrah was a practicing real estate agent with approximately 11 years of experience;
(xxiv) for purposes of this litigation, the parties agree that:
(a) the true square footage of the 94 Winlane property was 1450 square feet;
(b) the market value of the property as at May 26, 2017 was $730,000;
(c) Mr. was negligent in failing to measure or verify the square footage of the property.
[7] The evidence from the affidavits and cross‑examinations will be briefly summarized at this point (hopefully without too much repetition with the Agreed Statement of Facts).
Mr. Issa
[8] Mr. Issa’s affidavit sworn June 28, 2019 confirms the following:
(i) he did not know that Mr. Jarrah was the listing agent for the property;
(ii) on his first visit to the property he thought that the home was small but was told by Mr. Jarrah that it was approximately 2100 square feet and by Mr. Wilson that it was about 2250 square feet. The MLS listing, which he saw, indicated 2000 to 2500 square feet;
(iii) after he saw the property he talked again with Mr. Jarrah who confirmed that the property was over 2000 square feet and that the owner was expecting another offer in the amount of $800,000. Based on that information he contacted his mother so she could see the property;
(iv) he met with his mother and two of his sisters at the property later that evening and were shown the property by Mr. Wilson. His family thought that the house seemed a bit small. Based upon the assurances received from Messrs. Jarrah and Wilson and the MLS information, he told his family that the property was over 2000 square feet and should be suitable;
(v) his offer of $730,000 was accepted by Mr. Wilson and he electronically signed a Confirmation of Cooperation and Representation;
(vi) prior to this litigation he had never seen nor did he sign the Buyer Representation Agreement;
(vii) on March 16, 2017 he provided the deposit for the property and learned that Mr. Jarrah was also acting as the vendor’s agent;
(viii) on April 15, 2017 he texted Mr. Jarrah asking how much the property might sell for as he was aware that the real estate market was rising and he was curious about its value. Mr. Jarrah never responded and he did not pursue the matter any further. It was his intention to close on the property and move there with his family;
(ix) Mr. Jarrah arranged a mortgage from a mortgage broker with whom Mr. Jarrah dealt. The appraisal for that mortgage confirmed the square footage of the property to be 1450 square feet;
(x) he told Mr. Jarrah that he was not prepared to close the transaction given the actual size of the property and was not interested in an offered abatement of purchase price as his primary interest was in purchasing a house that would accommodate his family and needed to be at least 2000 square feet;
(xi) he had never owned a home and had little experience in estimating square footage, which is why he relied upon Messrs. Wilson and Jarrah.
[9] Mr. Issa’s affidavit sworn September 23, 2019 confirms the following:
(i) he does not agree that Mr. Jarrah showed him a property that was less than 2000 square feet;
(ii) he does not agree that he did not tell Mr. Jarrah that square footage was important to him. He told Mr. Jarrah on more than one occasion that he wanted a house with a minimum of 2000 square feet. All of the houses he was shown by Mr. Jarrah were at least 2000 square feet;
(iii) he never told Mr. Jarrah that he intended to renovate the property to rent it out as he always intended to move to the property with his family.
[10] In cross-examination Mr. Issa confirmed the following:
(i) he was going to be on title of the new house and wanted the new house to be about the same size as their existing house;
(ii) he told Mr. Jarrah about the required square footage and also relied on the square footage as set out in the MLS agreement;
(iii) he did not review nor read the documents that Mr. Jarrah sent to him because Mr. Jarrah knew the requirement about size and he had never before bought a house;
(iv) he relied on the MLS sheets which were at each house he saw with Mr. Jarrah. He is not an expert in square footage. He walked through and saw the inside of each house;
(v) he did not believe that it was his duty to measure the house and felt that was his agent’s responsibility. His main criteria was that the house needed to accommodate six people;
(vi) Mr. Jarrah was aware of his financing abilities and he relied on Mr. Jarrah to show him properties which complied with his financing abilities;
(vii) at the first attendance he was able to access all parts of the house. Mr. Wilson told him 2250 square feet. Mr. Jarrah told him it was 2100 square feet. It was probably the smallest house he looked at;
(viii) he was not aware that Mr. Jarrah was the listing agent and did not see the for sale sign with Mr. Jarrah’s picture on it;
(ix) the sole purpose of the purchase was to move with his family which is why some of his family came with him the second time;
(x) he signed the agreement of purchase and sale that was presented to him from Mr. Jarrah and did not look at it with respect to setting out any square footage. It was his decision to sign the agreement of purchase and sale and once signed he was obligated to buy the property;
(xi) the reason he sent the text inquiring of Mr. Jarrah as to what the property might sell for was because he was both curious about how much it would sell for and because he thought the property was small (which he had always thought). He did not agree that he had second thoughts about the property because of its size. He agrees that at his examination for discovery he stated that he always felt that the property was too small. He was also curious to know the value of the property.
Mr. Jarrah
[11] Mr. Jarrah’s affidavit sworn August 16, 2019 includes the following:
(i) he had been told by Mr. Wilson that the house was around 2100 square feet and he did not measure the house;
(ii) he prepared the information inputted into the MLS system and picked the option of 2000 to 2500 square feet;
(iii) he had been showing properties to Mr. Issa and believes that they looked at about 20 properties. Mr. Issa made several offers which were not accepted. He thought that one property was around 3000 square feet and another one was under 2000 square feet;
(iv) Mr. Issa made two visits to the property on March 15, 2017. He was present for one of Mr. Issa’s visits and does not recall Mr. Issa asking him any questions about the square footage. He did tell Mr. Issa that it was about 2100 square feet;
(v) prior to making his offer Mr. Issa did not tell him that the square footage was important to him. If Mr. Issa had done so, he would have included a clause or condition about the square footage;
(vi) Mr. Issa told him that he planned to renovate the property to rent out and did not tell him that his family intended to move to the property;
(vii) later that evening Mr. Issa told him that he wanted to make an offer and told him that he did not need any conditions in the offer. In April of 2017 he received a text from Mr. Issa asking how much the property could sell for before closing;
(viii) on June 5, 2017 he received an email from Mr. Issa, including an appraisal report in the amount of $730,000, which set out the square footage as less than 2000 square feet. This was the first time Mr. Issa complained to him about the square footage;
(ix) in April of 2017, as a result of the foreign buyers tax, there was a substantial slowdown in the real estate market.
[12] On cross-examination he confirmed the following:
(i) he never took the square footage measurements. Mr. Wilson had told him that the property was over 2100 square feet. He chose the range to place on the MLS agreement;
(ii) typically purchasers can rely on information in the MLS agreement. Some purchasers do their own diligence and others rely on him. He did not tell Mr. Issa to do his own measurements. He believes that he had a digital measurer at the time but did not use it. He knew that he could also look at the MPAC information but did not do so;
(iii) most of the properties he showed to Mr. Issa were over 2000 square feet but he believes that he showed him one property under 2000 square feet;
(iv) they were in an upwards market at the time and had lost properties. As a result, he thought that the subject property needed to be moved upon quickly;
(v) he inserted the 2000 to 2500 square feet in the MLS agreement. He told Mr. Issa that the house was 2100 square feet which did not turn out to be true.
Mr. Wilson
[13] Mr. Wilson testified and his discovery evidence was reviewed with him. The following exchange occurred at his discovery:
Q 91: Did you ever suggest to Mr. Jarrah that he take square footage measurements of the property when he was there?
A: When we first discussed putting the property up for sale, my wife’s place, he said he would do it the square… .
Q 92: I’m talking about… I want you to focus your answers. The questions I am asking you are in relation to 94 Winlane. I am not interested in your wife’s property.
A: I am answering that question.
Q 93: Okay.
A: So, when we were at my wife’s house and we first discussed putting my house up for sale he asked me the square footage of my house.
Q94 : Right.
A: And I said I did not know. I am assuming it is about 2000 because I have been paying insurance on that amount for 12 years, and he said he would measure it.
Q 95: He said he would measure it?
A: Yes.
Q 96: And as far as you know he never did?
A: I have no idea if we did or not.
Q 97: You never saw him measure it?
A: I don’t… you are correct, I never saw him actually measure it.
[14] He was also asked the following:
Q 155: So did you ever discuss square footage in my client’s presence?
A: Yes.
Q156: All right. And what did you tell him? Tell me about that discussion.
A: He asked me what I thought the square footage was.
Q157: “He” being my client?
A: Sorry, your client asked me.
Q 158: And what did you tell him?
A: I… sorry, he asked me, he said, “Is the house 2000 square foot” and I said “Yes, I believe it is”, because it is.
[15] In cross-examination Mr. Wilson confirmed that:
(i) during Mr. Issa’s first attendance with Mr. Jarrah he left his home after exchanging pleasantries. No discussion of square footage took place;
(ii) later that night Mr. Issa returned with some of his family members and, after speaking with Mr. Jarrah, he let them look at the house. He did not tell Mr. Issa that it was 2250 square feet but told him it was about 2000 square feet. He paid insurance on about 2000 square feet.
[16] In the end this is not really a credibility contest between the witnesses. Mr. Issa was told (at least once) by both Messrs. Wilson and Jarrah that the property was 2000 or more than 2000 square feet. The MLS category listed was 2000 to 2500 square feet. Mr. Issa relied on that information and wanted to buy a house for his six-member family. I accept that he had the opportunity to view the property two times but in the end, he relied on what he was told about its size. He is young and this was his first time as a house purchaser. Negligence on the part of Mr. Jarrah for failing to measure or verify the square footage has been admitted (and I commend and thank counsel for that). I will now briefly review the law that has been provided to me.
LAW
[17] I thank counsel for their memos of law and case briefs. I stress that the cases provided are fact specific. The following legal principles do however apply:
(i) rescission may be obtained on the basis of a non-fraudulent misrepresentation where the defendant has made a false statement that was material and induced the plaintiff to enter into the contract;[^1]
(ii) the effect of a material misrepresentation is to make an executory contract voidable, not void. On acquiring knowledge of the misrepresentation, the deceived party has the right to elect to affirm or rescind the contract within a reasonable time after the misrepresentation is discovered;[^2]
(iii) equity allows rescission of transactions which have been procured by innocent or negligent misrepresentation;[^3]
(iv) an “entire agreement clause” or a general exclusion clause will not override a specific representation on a point of substance which was intended to induce the making of the agreement;[^4]
(v) an owner is vicariously liable for the negligent misrepresentations made by its agent;[^5]
(vi) the relationship between a real estate agent and his client is a fiduciary relationship. As a result, an agent for a purchaser has a duty to act with utmost good faith in relation to the affairs of the purchaser. The agent must also be reasonably competent and must act with reasonable diligence and integrity in relation to the material aspects of the transaction.[^6] (I note that negligence has been admitted by Mr. Jarrah);
(vii) A purchaser’s inspection of a property can determine their expectations. For example in LeMesurier v. Andrus[^7], the court in dealing with whether a purchaser had valid reasons to repudiate an agreement to purchase a residential property over a size issue, found that to determine the subject matter of the agreement, it could take into account what the purchaser saw when she inspected the property. The court stated that “what she saw is part of the context of fact in which the words chosen by the parties in the agreement to describe the property that was the subject of the agreement must be construed….[^8]. Although the Court of Appeal reversed the trial judge, it did not disturb the trial judge’s suggestion that he could determine the subject matter of the agreement by considering what the purchaser saw when she inspected the property.
[18] In this case I do not find that Mr. Issa’s inspection of the subject property determined his expectations. He was given representations from both Messrs. Jarrah and Wilson that the property was 2000 or greater than 2000 square feet and as well relied upon the MLS agreement which set out 2000 to 2500 square feet. His inspections did not override his expectation that this was the size of the property. (I take his young age, inexperience with square footage, and being a first time home buyer into account when considering the reasonableness of his belief.)
[19] I accept that there are cases in which the court has declined to order rescission where there have been size discrepancies. I decline to follow those cases. As set out above, the cases are fact specific. Mr. Issa was a young first time home buyer. Negligence has been admitted. Mr. Issa was given representations as to size from both Messrs. Wilson and Jarrah. He saw the MLS agreement. Rescission is granted with respect to this agreement of purchase and sale. Mr. Issa is to be provided with the return of the $50,000 deposit plus any accrued interest. He is entitled to his costs of the action. I realize that counsel may need time to sort out costs and the effect of the agreement. I am going to be away from December 9 to the 30, 2019 inclusive. It would be helpful if counsel could let my assistant, Lorie Waltenbury (lorie.waltenbury@ontario.ca) know the status of this matter by January 10, 2020, as the court maintains a reserve tracking list.
J.E. Ferguson J.
Released: November 22, 2019.
COURT FILE NO.: CV-15-534729
DATE: 20191122
ONTARIO
SUPERIOR COURT OF JUSTICE
HASSAN ISSA
Plaintiff
– and –
JOHN WILSON, WASIM JARRAH and ALEXANDER REALTY CENTRES INC.
cob as KELLER WILLIAMS REALTY CENTRES
Defendants
REASONS FOR JUDGMENT
J.E. Ferguson J.
Released: November 22, 2019
[^1]: Singh v. Trump, 2016 ONCA 747, [2016] O.J. No. 5285 (C.A.); Panzer v. Zeifman (1978), 1978 CanLII 1658 (ON CA), 20 O.R. (2d) 502 (C.A.); Beer v. Townsgate1 Limited, 1997 CanLII 976 (ON CA), [1997] O.J. No. 4276 (C.A.); Tejani v. Abreu, [1994] O.J. No. 776 (Gen. Div.); Halsbury’s Laws of Canada-Real Property (2016 Reissue) HRP-182. [^2]: Walton v. Landstock Investment (1977), 1976 CanLII 669 (ON CA), 13 O.R. (2d) 693 (C.A.). [^3]: Bruce Kercher and Michael Noone, Remedies (2ed), The Law Book Company Limited (1990) pp. 257-262. [^4]: Beer v. Townsgate1 Limited (supra); Sodd Corporation Inc. v. Tessis, 1977 CanLII 1415 (ON CA), [1977] O.J. No. 2371 (C.A.); 7326246 Canada Inc. v. Ajilon Consulting, 2014 ONSC 28, [2014] O.J. No. 538 (Div. Ct.); Singh v. Trump (supra). [^5]: Beer v. Townsgate1 Limited (supra); Straus Estate v. Decaire, 2011 ONSC 1157, [2011] O.J. No. 737 (S.C.J.).; Goldstein v. Davison, [1994] O.J. No. 1018 (Gen. Div.); Fridman, H.L., Canadian Agency Law, Third Edition. [^6]: Winsham Fabrik Canada Ltd. v. Re/Max Allstars Realty Inc., [2001] O.J. No 1478 (S.C.J.). [^7]: LeMesurier v. Andrus (1984), 31 R.P.R. 143 (Ont. H.C.) [^8]: LeMesurier (trial decision), supra at 149, 150