Court File and Parties

Court File No.: 21/23 Date: 2023-10-17 Ontario Superior Court of Justice

Between: Mejo Varghese and Bincy Joseph, Applicants And: Hogg Construction Ltd., Respondent

Counsel: M. Simaan, for the Applicants C. Vegso, for the Respondent

Heard: September 26, 2023

Before: Grace J.

A. Introduction

[1] The issue is whether the applicants were entitled to refuse to close the transaction that would have seen them purchase the new home the respondent constructed at 63 Rosina Lane, Thamesford, Ontario. If so, they are entitled to the return of their $60,000 deposit. If not, their application is to be dismissed.

B. The Undisputed Facts

[2] On May 11, 2021, the parties entered into an agreement of purchase and sale (“APS”). The purchase price for the property was $680,000. Deposits in the aggregate amount of $60,000 were paid. The closing date was to be determined once site servicing was complete. Plans were attached. Two clauses pertaining to them were referenced during this proceeding. The relevant portions follow:

The Buyer agree’s [sic] that no changes to floor plans … will be allowed.

The Buyer agree’s [sic] that all attached plans are for reference only and may be subject to minor changes. [Emphasis added]

[3] Schedule “C” to the APS shows the floor plan for the main level. It appears that the length of the structure was to be 48 feet and 7 inches. Within that measurement is one of 19 feet which seems to start at the edge of an internal stairwell and end at the outside wall at the top of the plan. [^1] It is not disputed that the measurement relates, at least in part, to the living room of the residence the respondent constructed.

[4] Ultimately, the parties agreed to close the transaction on December 30, 2022.

[5] A pre-delivery inspection occurred on December 22, 2022. Correspondence sent by the applicants’ solicitors to the respondent the following day explains what happened next. With respect to the single issue that underlies this litigation, the applicants’ lawyer wrote:

… our clients conducted a [pre-delivery inspection] walk through of their prospective home yesterday and were shocked to learn that their house was not what they had purchased.

Even more problematic was that the size of the living room was so small it would be difficult to fit a regular couch within same. They weren’t able to figure out how the living room had become so small until they took the revised plans to their contractor who informed them that the living room was approximately 25% smaller than it should have been due to the wrong placement of the stairs further towards the rear of the house than their plans had required. This essentially make [sic] their living room unliveable.

[6] The applicants took the position that the problems could not be rectified and that there had been “a repudiation of the APS.” Immediate return of their deposit was requested.

[7] The principal of the respondent, Greg Hogg, replied by e-mail the next day. He said there were no deficiencies.

C. The Dispute

[8] The complexion of the dispute really has not changed since then. The applicants take the position the living room is only 14 feet, 9 inches long. They say they expected that principal room to be 23% larger. The applicants allege they would not have agreed to purchase the property had they known it would be 4 feet, 3 inches shorter than depicted on the schedule to the APS.

[9] The respondent’s answer is a simple one: the applicants continue to misinterpret the plan. The position of the respondent is explained at para. 10 of its factum. To the extent material it says:

… The dimension on the main level floor plan represents the distance from the rear wall to the stair opening to the basement and does not indicate where the upper stair would actually finish in the Living Room …

It is 18 feet (not 19 feet as listed in the main level floor plan) from the outside of the wall to the start of the stair opening hole. [^2]

[10] The respondent’s counsel elaborated during his oral submissions. He explained that the difference in measurement is attributable to the fact the applicants’ measurement stopped at the base of the stairs ascending to the second floor while that of the respondent terminated at the start of the cut out of the stairs that descended to the basement. [^3]

[11] The applicable legal principles are not in dispute. The parties agree that the applicants were entitled to terminate the APS if “major changes” were made to the dimensions shown on the plan that was attached. As Moldaver J. said in Stefanovska v. Kok (1990), 73 O.R. (2d) 368 (H.C.J.), at p. 378:

[T]he test to be applied … is whether the vendor can convey substantially what the purchasers contracted to get. In this regard, all of the surrounding circumstances must be considered to determine if the alleged impediment to title would, in any significant way, affect the purchasers’ use or enjoyment of the property.

The materiality of the deficiency is to be determined essentially on an objective basis. However, this is not to say that the subjective views of the purchaser are to be ignored; far from it. There may be instances where a certain purchaser has agreed to buy a piece of property for a specific, legitimate and bona fide purpose, only to discover that some deficiency will render this use impossible.

[12] If proven, a substantial reduction in the size of the living room does not, of course, constitute an “impediment to title”. Nonetheless, if there was a change of the magnitude alleged by the applicants, the parties seem to agree the same principle would apply because the contractual language in the APS only contemplated “minor changes”. [^4]

[13] In its material, the respondent suggested the applicants’ complaint was disingenuous. Their interest in “flipping” the property before closing was well known. However, they had been unable to find another buyer.

[14] Further, the applicants had failed to provide proof that they had financing to complete the transaction themselves. The respondent alleged the applicants often expressed an interest in extending the closing date. There were said to have done so, most recently, on December 13, 2022.

[15] In Stefanovska v. Kok, supra, at p. 379, Moldaver J. wrote that:

Evidence of motive can be of some relevance in a hearing of this nature. While not in and of itself determinative, it may cast doubt upon the legitimacy of the reasons advanced, by one side or the other, for the failure to complete the contract.

[16] As noted, the parties agreed that “minor changes” to the plans were acceptable. Motive has no bearing on the interpretation of that phrase and its application to the residence the applicants inspected on December 22, 2022.

[17] The issue is a factual one. What was the magnitude of the change to the floor plan attached as a schedule to the APS?

[18] Based on the evidence, there are two possibilities. First, as alleged by the applicants, the living room as constructed was more than 4 feet shorter than shown in the plan. Second, as submitted by the respondent, there was a 1-foot reduction in length.

[19] As mentioned earlier, Mr. Hogg responded promptly to the allegations the dimensions of elements of the “as built” home differed markedly from those set forth in the plans.

[20] The initial focus of his December 24, 2022 e-mail was on a fourth bedroom the parties agreed would be built as part of an amendment to the APS. [^5]

[21] Mr. Hogg’s attention then turned to the alleged discrepancy in the size of the living room. In that regard, he wrote in part:

The positioning of the stairs is in conjunction with the revised upper floor plan and they are installed as per the requirements of the Ontario building code and are consistent with other homes we have closed with no complaints... [Emphasis added]

[22] Pausing here, it appears Mr. Hogg is referring to the post-APS revision that was made to the upper floor plan to include a fourth bedroom. A roughly drawn revision reflecting the additional space was appended to a schedule to the APS that was signed in May 2022. [^6] That document did not show the stairs at all, let alone any change in their location.

[23] In his December 24, 2022, e-mail, Mr. Hogg also explained:

… We think the client’s contractor may have misread the plan on schedule C as it refers to the location of the basement stair and has no indication as to the location of the main stair.

[24] That excerpt suggests the addition of a fourth bedroom did not cause the starting point of the 19-foot measurement to change. As noted, according to Mr. Hogg, the edge of the stairwell on the original plan related to the cut out of the stairs to the basement. It had nothing to do with the location of the stairs from the second floor.

[25] Consequently, I carefully compared the plan that was appended to the APS [^7] and the “as built” drawings the respondent produced dated October 7, 2022. [^8] In both cases, the edge of the stairs is parallel to the midpoint of the contemplated location of the kitchen appliances. [^9]

[26] Superficially, that seems consistent with the position the respondent has taken on this application. Does it withstand closer scrutiny? In my view, it does not.

[27] The edge of the staircase on the “as built” drawing bears the notation “UP 16”. That did not appear on the plan appended to the APS. The additional entry can only be a reference to the ascending stairs. Yet, the location is virtually identical to that appearing on the original plan.

[28] On the “as built” drawing, the length of the kitchen, dining room and outer wall totalled 18’10”. [^10] To some extent, the stairwell – on both the plan attached to the APS and on the “as built” drawing, encroaches into that space.

[29] I also reviewed the photographs that were attached to the April 28, 2023 affidavit of Gregory Hogg. [^11] None of the images are determinative but it appears that the base of the stairs from the upper floor is very close to the starting point shown on the initial plan and the “as built” drawings. In other words, none of the photographs are inconsistent with the observations I have just made.

[30] Each side relies on post-construction measurements of the living room. The exercises were recorded on video. The respondent measured the length of the living room from the basement, based on its position the starting point was the cut out for the basement stairs. On the main floor, Mr. Hogg measured the length of the kitchen and dining room area. That measurement was consistent with the dimensions depicted in the “as built” drawing to which I have already referred.

[31] The applicants, on the other hand, measured the living room while on the main floor. They started at the base of the handrail of the staircase to the upper floor and ended at the inside of the rear wall. It is their position that the living room was actually 14’9” long. Even with an allowance for the width of the exterior wall, [^12] the length is approximately 15’6”, which is well below the measurement shown in the plan appended to the APS.

[32] In my view, the applicants’ measurement is the correct one because it was taken using the starting point shown on both plans.

[33] I am also of the view that the size of the living room was objectively significant. The dwelling was not a large one. The area in question was described as the “Great Room” on the “as built” plan. Unquestionably, it was a principal part of the residence. A 3’6” reduction in its length cannot possibly fit within the category of a “minor change” as the APS permitted.

[34] A variation of the magnitude made by the builder was not something that could be made unilaterally. Consent was required both because of the contractual language and because the use and enjoyment of the property was affected in a material way – whether the property was acquired by the applicants or by another purchaser. However, consent was not forthcoming.

[35] Even though the applicants’ other complaint was not pursued, they were within their rights to treat the unauthorized change as significant, as a breach of the APS and as a repudiation of it. They were not obligated to complete the transaction of purchase and sale on the closing date.

D. Conclusion and Costs

[36] For the reasons given, the applicants are entitled to the return of their deposits aggregating $60,000, together with any interest that has accrued.

[37] Shortly after the hearing, the parties’ lawyers advised the court of their agreement that the successful party receive a costs award in the all-inclusive amount of $15,000. Given the result, the respondent shall pay that sum to the applicants forthwith.

“Justice A.D. Grace” Grace J. Released: October 17, 2023

Footnotes

[^1]: The top of the plan represented the rear of the structure. [^2]: The respondent relies on an undated letter from Derek Jukema of dj Design. [^3]: That was the evidence given by Gregory Hogg when cross-examined: see Qs. and As. 23; 25 - 39 and 42. [^4]: At para. 24 of its factum, the respondent said the “main issue” was whether there were “major changes” to the living room. See, too, Israel v. Townsgate 1 Ltd., [1994] O.J. 3187 (Gen. Div.), at para. 46 and Williamson v. Joseph Baruch Construction Ltd. (1977), 2 R.P.R. 197 (Ont. H.C.J.), at para. 28. [^5]: The amendment took the form of another schedule to the APS. [^6]: See para. 10 of Mr. Hogg’s affidavit dated April 28, 2023. [^7]: A copy is at Caselines p. A 39. [^8]: The drawing of the main floor is at Caselines p. B-1-123. [^9]: By that I mean the refrigerator and stove. [^10]: In the middle of that area is a measurement of 17’11.5”. The outer wall measurement appears to be 10.5”. [^11]: See Caselines pp. B-1-86 and B-1-87. [^12]: 10.5” based on the “as built” drawing.