Reasons for Judgment

Court File No.: CV-23-00708794-0000
Date: 2025-04-16
Ontario Superior Court of Justice

Between:
Michael Christopher Giamou and Loren Andrea Giamou, Plaintiffs/Defendants by counterclaim
– and –
Naeem Ahmed, Defendant/Plaintiff by counterclaim

Appearances:
Camille Beaudoin, for the Plaintiffs
Naeem Ahmed, self-represented

Heard: March 26, 27, 2025

Released: April 16, 2025

Judge: Wendy L. Merritt

Overview

[1] The Plaintiffs/Defendants by counterclaim, Michael Christopher Giamou (“Mr. Giamou”) and Loren Andrea Giamou (the “Plaintiffs”), bring this action for damages with respect to a vendor take-back mortgage (the “VTB”).

[2] The Defendant/Plaintiff by counterclaim, Naeem Ahmed (“Mr. Ahmed”), does not dispute the existence of the VTB, nor that he has failed to repay the funds owing under the VTB. Mr. Ahmed defends the action and brings a counterclaim for civil fraud and negligent misrepresentation. He alleges that there was a leak in the foundation which caused flooding in the basement and required substantial remedial work (“the Leak”). Mr. Ahmed alleges that the Plaintiffs knew about the Leak, failed to disclose its existence to him, and actively concealed it.

Procedural History and Denial of Adjournment

[3] On December 12, 2023, the parties attended Civil Practice Court because the Plaintiff was seeking a date for a summary judgment motion. A summary trial was scheduled on consent for the week of February 10, 2025 and the following timetable was ordered for the remaining steps in the action:

1. Affidavits of Documents to be exchanged by March 30, 2024
2. Discoveries to be completed by April 30, 2024
3. Mediation to be conducted by June 30, 2024
4. Plaintiff's affidavits of evidence in chief to be delivered by September 30, 2024
5. Defendant's affidavits of evidence in chief to be delivered by October 30, 2024
6. Notice of the witnesses to be cross-examined to be delivered by November 15, 2024
7. Pre-trial conference for a date to be scheduled with the trial office
8. File trial record at least 10 days before the trial.

[4] The pre-trial conference was held on December 12, 2024. On the Pre-Trial Report to Trial Judge, the pre-trial judge noted that the Defendant had been unresponsive since the examinations for discovery in March 2024 and had served a Notice of Intention to Act in Person that day.

[5] The pre-trial judge ordered the trial to proceed the week of February 10, 2025 and amended the timetable as follows:

1. Plaintiffs’ affidavit of his evidence in chief to be delivered to the Defendant by December 20, 2025.
2. Defendant's affidavit of his evidence in chief to be delivered to the Plaintiffs by January 13, 2025.
3. Responding affidavit of the Plaintiffs to be delivered by January 20, 2025.

[6] The trial was not reached on February 18, 2025, possibly because there was no Certificate of Mediation filed with the trial record. A case conference was convened on March 2, 2025 to reschedule the trial. Despite having been notified of the date of the case conference on February 20, 2025, Mr. Ahmed did not attend the case conference. The case conference judge made an order exempting the action from the mandatory mediation rule pursuant to r. 24.1.05 and scheduled the trial for the week of March 24, 2025.

[7] On March 10, 2025, the trial coordinator notified the parties that the trial would proceed the week of March 24, 2025. The Plaintiffs requested that the trial proceed virtually by Zoom, but because Mr. Ahmed did not respond to provide his consent to a virtual trial, the trial coordinator advised the parties on March 20, 2025 that the trial would proceed on March 26 and 27, 2025 in person.

[8] On March 24, 2025, my judicial assistant wrote to the parties providing directions regarding uploading material to CaseCenter. Mr. Ahmed responded on March 25, 2025 asking if the trial was in person or proceeding on Zoom. My judicial assistant advised Mr. Ahmed that the trial would proceed in person. He said that he was not in the city and would not be able to attend in person. I converted the trial to a virtual trial by Zoom to accommodate Mr. Ahmed and because the Plaintiffs had previously requested a virtual trial by Zoom.

[9] The trial proceeded virtually by Zoom on March 26 and 27, 2025.

[10] Mr. Ahmed did not upload any materials to CaseCenter and did not serve or file an affidavit of his evidence in chief as he was ordered to do by January 13, 2025.

[11] At the commencement of the trial, Mr. Ahmed requested an adjournment because he had two witnesses who he said were supposed to provide affidavits, but Mr. Ahmed had been unable to arrange for the preparation of their affidavits. The two witnesses were his neighbours at the Property. Mr. Ahmed said they would give evidence that the Plaintiffs knew there was a leak and water in the basement. For one witness (Melissa), Mr. Ahmed intended to obtain an affidavit the week before the trial, but Melissa was away. The second witness was also a neighbour and Mr. Ahmed went to his house two weeks prior to the trial date, but was unable to speak to him. Mr. Ahmed said he left it to the last minute to obtain affidavits from these two witnesses because he lost his phone and all his contacts and also because he had been busy talking to his late wife’s doctors. I note that, sadly, the Defendant’s wife passed away last year.

[12] A little more than a decade ago the Supreme Court voiced concerns about a culture of complacency and the pace of civil justice in Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87. This challenge was exacerbated by the pandemic and has now been aptly described as “a state of crisis”: Gagnier v. Burns, 2021 ONSC 1971, para 47; Louis v. Poitras, 2021 ONCA 49, para 1; Barnim v. Mitchell, 2021 ONSC 2914, para 15. As Papageorgiou J. recently stated in Mansoury v. Sadullah, 2024 ONSC 2997, para 43, “one of the reasons why there is such a significant backlog is litigants’ requests for adjournment of fixed trial dates.” Timely access to justice requires that “[a] party cannot set the pace of litigation on their own terms”: Beshay v. Labib, 2023 ONSC 2874, para 51, aff’d 2024 ONCA 186. In considering this request for an adjournment, I bear in mind the interests of other litigants in the system and consider the effect of adjourning any one case on the availability of court resources for other litigants: Daly v. City of Mississauga, 2020 ONSC 5097, para 52; Davis v. Ng, 2024 ONSC 5622, paras 14-17.

[13] I denied the Defendant’s request for an adjournment because there was no reason why he could not have delivered his own affidavit in accordance with the timetable and because the evidence of his proposed witnesses would be of little, if any, assistance in determining the issues in the trial since the Plaintiffs did not dispute that they were aware that there was an issue with water in the basement.

[14] The summary trial proceeded on March 26 and 27, 2025 with the Plaintiffs adducing their evidence on the claim by way of affidavit sworn by Mr. Giamou.

[15] At para. 1 of his affidavit, Mr. Giamou says: “Where my knowledge is based on the information of others, I state the source of that information and believe it to be true.” Several paragraphs of Mr. Giamou’s affidavit are based on “information and belief” and are clearly hearsay. Aside from one exception in para. 25, nowhere in his affidavit does Mr. Giamou state any source for the information which he has clearly received from others, nor does he state that he believes such information to be true. In any event, there is a bigger problem with respect to this type of evidence being tendered at a summary trial.

[16] An affidavit tendered in lieu of viva voce evidence in chief at a summary trial is subject to the same rules of evidence as viva voce evidence in chief: Schindler Elevator Corporation v. Walsh Construction Company of Canada, 2020 ONSC 433; additional reasons 2020 ONSC 443.

[17] Paragraphs 5 and 28 of Mr. Giamou’s affidavit are hearsay and are struck.

[18] There are some paragraphs of Mr. Giamou’s affidavit which would be hearsay if tendered for the truth of their contents; however, they were tendered for a non-hearsay purpose and are therefore admissible – examples include paras. 6-7.

[19] Much of the evidence contained at paras. 14 to 25 is hearsay, but this is of no moment since Mr. Ahmed admits that he agreed to the VTB and its terms.

[20] The evidence at para. 30 to 32 is irrelevant and inadmissible. These paragraphs are struck.

[21] In order to be fair to both parties, I allowed Mr. Ahmed to give his evidence in defence of the claim and on his counter-claim viva voce. I allowed the Plaintiffs’ only witness, Mr. Giamou, to give viva voce evidence regarding the counterclaim. He had not addressed the counterclaim in his affidavit because he did not receive any affidavit evidence at all from the Defendant. Each party conducted cross-examinations of the opposing party.

Decision

[22] The Plaintiffs are entitled to damages in the amount of $320,000 with respect to the VTB, plus prejudgment interest at the contractual rate of 18%.

[23] The Defendant’s counterclaim is dismissed.

Background Facts

[24] On April 19, 2023, the parties entered into an agreement of Purchase and Sale (the “APS”) whereby the Plaintiffs agreed to sell and Mr. Ahmed agreed to buy the residential property at 632 Ludstone Drive, Etobicoke (the “Property”) for $1,200,000. The APS was scheduled to close on June 30, 2023.

[25] Mr. Ahmed was unable to pay the down payment owing under the APS and the parties agreed to the VTB to cover the amount owing for the down payment.

[26] On July 4, 2023, the Plaintiffs registered the VTB in the amount of $320,000.00 (the “Principal”) on title to the Property. The VTB Mortgage provides for payment of the Principal by July 14, 2023 and is subject to an interest rate of 18 per cent per annum.

[27] There is no dispute about the following facts:

1. Mr. Ahmed has not made any payments of principal or interest pursuant to the VTB;
2. the APS is not conditional on Mr. Ahmed conducting an inspection of the Property;
3. Mr. Ahmed did not engage a third-party inspector of his own to conduct an inspection of the Property prior to closing of the APS;
4. Mr. Ahmed did not raise any issue about leaks in the foundation of the property or water in the basement prior to closing of the APS;
5. the first mortgagee evicted Mr. Ahmed from the property on November 6, 2024. The Property was sold and the first mortgage was not paid in full because there was a shortfall; and,
6. the entire amount owing under the VTB remains outstanding.

Positions of the Parties

[28] The Plaintiffs say this is a straightforward mortgage enforcement case because Mr. Ahmed has not repaid the amount owing under the VTB.

[29] Mr. Ahmed says that he only discovered that there was a crack in the foundation of the Property which caused flooding in the basement shortly after the closing of the APS. He says he paid $95,000 to fix the foundation and do necessary related repairs. Mr. Ahmed says that the Plaintiffs knew about the leak in the foundation and failed to disclose it to him before the APS was signed and closed. Mr. Ahmed says that the Plaintiffs actively concealed the foundation leak and water damage in the basement.

[30] The Plaintiffs say they are not responsible for the cost of repairing the foundation leak because it was a patent defect and that Mr. Ahmed knew there was an issue with water in the basement.

The Issues

[31] There are 2 issues as follows:

1. Are the Plaintiffs entitled to judgment for the amount owing under the VTB?
2. Is Mr. Ahmed entitled to damages caused by the foundation leak?

Analysis

The VTB

[32] Mr. Ahmed was a first-time home buyer. He says that he relied on his real estate agent and he says he did not see the listing of the Property on the Multiple Listing Service (the “MLS Listing”), that he did not read the APS, and that he did not know the terms of the VTB. Even if this is true, if his agent did not review it with him and he did not know about the terms, then his remedy lies with his agent rather than the sellers: Kazakevich v. Sychev, 2020 ONSC 3516, para 200; Vandenberg v. Wilken, 2017 ONSC 6665, para 104.

[33] Mr. Ahmed says he did not know the amount of the downpayment which is the amount he borrowed pursuant to the VTB or the interest rate. However, he admits that he generally agreed to the VTB in order to close the APS and as such he is bound by it: Wu v. Charles, 2024 ONSC 947, para 39, citing Gold Leaf Garden Products Ltd. v. Pioneer Flower Farms Ltd., 2015 ONCA 365, para 8.

[34] The terms of the VTB are clear: Mr. Ahmed borrowed $320,000 from the Plaintiffs. The VTB provides for payment of the principal by July 14, 2023 and is subject to an interest rate of 18% per annum calculated monthly. Both the interest and principal were due at the end of the term on July 14, 2023.

[35] There is no dispute that Mr. Ahmed did not pay the VTB and the full amount plus interest remains outstanding.

[36] The Plaintiffs are entitled to judgment with respect to the VTB.

The Foundation Leak

[37] Mr. Ahmed’s counterclaim for damages relating to the foundation leak depends on whether it was a patent defect or a latent defect.

[38] Mr. Ahmed submits that by providing only the Summary Report (defined below at para. 52) before the APS was signed, the Plaintiffs misrepresented the condition of the property.

[39] Where a defect is patent, a vendor is not bound to call attention to it and the rule of caveat emptor or “buyer beware” applies: Capel v. Martin, paras 29-32.

[40] A patent defect is one that can be discovered by inspection and ordinary vigilance on the part of the purchaser: McCallum v. Dean, [1956] O.J. No. 345, para 5.

[41] If prudent purchasers can see the defect, they take the property as they find it. They can protect themselves in the agreement of purchase and sale by requesting repairs before closing, by reducing the purchase price, or by refusing to remove a condition regarding a home inspection and allowing the agreement to be terminated: Ricchio v. Rota, 2011 ONSC 6192, para 25.

[42] A latent defect is some fault in the structure that is not readily apparent to an ordinary purchaser during a routine inspection. If a vendor actively conceals a latent defect the rule of caveat emptor no longer applies and the purchaser is entitled to damages: Swayze v. Robertson, [2001] O.T.C. 186, para 27; Capel, at para 11.

[43] The Plaintiffs commissioned an inspection report dated April 3, 2023 prepared by Milo Petrovic at Carson, Dunlop and Associated Ltd. (the “Full Inspection Report”).

[44] The Full Inspection report refers to water damage in various locations of the Property as follows:

• Signs of water damage in the basement bedroom, dry at the time of inspection;
• Signs of water damage in the rear first floor bathroom, dry at the time of inspection; and
• Water stains in the rear basement, wet at the time of inspection.

[45] The Full Inspection Report also says:

Almost every basement (and crawlspace) leaks under the right conditions. Based on a one-time visit, it's impossible to know how often or severe leaks may be. While we look for evidence of past leakage during our consultation, this is often not a good indicator of current conditions. Exterior conditions such as poorly performing gutters and downspouts, and ground sloping down toward the house often cause basement leakage problems.

[46] Mr. Giamou said that he understood that the Final Inspection Report was made available to all realtors who visited the Property. He said he commissioned the Full Inspection Report on the advice of his real estate agent to encourage offers that were not conditional on inspection.

[47] The MLS Listing says: “Att: Property Insp. Report Summary Ask La Full Report”. I understand this to mean: Property Inspection Report Summary ask listing agent for Full Report. Mr. Ahmed says he did not see the listing; his realtor sent him the address to view the Property.

[48] Mr. Ahmed attended at the Property to view it for the first time on April 17, 2023. He did not see any water damage in the basement. He made an offer which was accepted and the parties entered into the APS on April 19, 2023.

[49] The APS provides:

13. INSPECTION: Buyer acknowledges having had the opportunity to inspect the property and understands that upon acceptance of this offer there shall be a binding agreement of purchase and sale between Buyer and Seller. The Buyer acknowledges having the opportunity to include a requirement for a property inspection report in this Agreement and agrees that except as may be specifically provided for in this Agreement, the Buyer will not be obtaining a property inspection or property inspection report regarding the property.

[50] Schedule A to the APS provides:

ACCESS VISITS: Seller agrees to allow two (2) more access visits to the property at mutually agreeable times with 24 hours’ notice.

[51] Mr. Ahmed says he did not read the APS. He says he was a first-time home buyer and that he relied on his real estate agent. He says no one told him about clause 13. As set out at para 32 and 33 above, Mr. Ahmed may have a remedy against his agent and it is not a defence for him to say he did not understand the APS simply because he did not exercise reasonable care by failing to read it before signing.

[52] Mr. Ahmed said that before making an offer and entering into the APS on April 19, 2023, a Home Inspection Report Summary dated March 31, 2023 prepared by Milo Petrovic (the “Summary Report”) was sent to him which identified what he thought were only “minor” concerns.

[53] The only mention of water issues in the Summary Report is as follows:

Roofing: The built-up [tar and gravel] flat roof membrane over the garage is old and leaking ($2,500 on insurance, moving services, to $5,000) home maintenance / handyman

[54] Mr. Ahmed says that he was satisfied with the Summary Report and did not make the APS conditional on inspection because he did not understand that the Summary Report was not the full report. The Summary Report says on its face that it is a summary report and this fact was referenced in the MLS Listing as set out at para. 47 above.

[55] Mr. Ahmed said he asked about an inspection around April 23, 2023. He said that the Full Inspection Report was sent to his real estate agent on April 21, 2023 and he received it on April 24, 2023.

[56] Mr. Ahmed attended at the Property on June 25, 2023 prior to the closing of the APS. After the June 25, 2023 attendance Mr. Ahmed raised 4 issues, none of which related to the foundation or to water or flooding in the basement.

[57] Mr. Ahmed says he was unable to properly inspect the property on June 25, 2023 because there were tenants living in the Property and their belongings were everywhere.

[58] On June 30, 2023 the APS closed.

[59] On July 6 or 7, 2023 there was a heavy rain and the basement at the Property flooded. Mr. Ahmed discovered that the water was coming from behind the refrigerator/freezer and he discovered black mould in the cupboard under the kitchen sink in the basement.

[60] Mr. Ahmed hired a company to effect repairs. They removed the drywall and found a foundation leak in the basement kitchen behind the refrigerator/freezer.

[61] Mr. Ahmed says he paid $95,000 to repair the foundation leak and effect necessary related repairs. Photographs of the basement showing the water in the basement, as well as the repairs, were marked as exhibits at the trial.

[62] Mr. Giamou denied that he knew how severe the leak was. He said that he did not know where the water in the basement came from, other than as set out in the Full Inspection Report. He said he did not remember speaking to his tenants or his property manager about there being water in the basement or damage to the tenants’ belongings. Mr. Giamou said he did not know there was black mould in the kitchen.

[63] The Plaintiffs deny trying to conceal any issue or damage concerning the Property. There is no evidence that the Plaintiffs concealed any issue or damage concerning the Property or attempted to do so.

[64] I find that the foundation leak was a patent defect because the signs of water damage in the basement were discoverable. The water damage was discovered by inspection by Mr. Milo Petrovic and noted in the Full Inspection Report. Mr. Ahmed also admitted that the black mould which he discovered under the kitchen sink was easily seen and was in plain view in the kitchen cupboard under the sink. The Plaintiffs were not required to draw attention to patent defects: Gebre-Hiwet et al v. McPherson, 2022 ONSC 1421, paras 102-105.

[65] There is no evidence of fraud or negligent misrepresentation concerning the foundation leak. There is no dispute that Mr. Ahmed did not speak to either of the Plaintiffs before the trial. There is also no dispute that no one speaking on behalf of the Plaintiffs told the Defendant that there was no leak in the foundation or no water in the basement.

[66] There is no evidence that the Plaintiffs knew anything more about the condition of the foundation or water in the basement, than what was contained in the Full Inspection Report. There is no evidence they actively tried to conceal the foundation leak.

[67] Mr. Ahmed submitted that it was improper for the Plaintiffs to list the Property for sale for $999,000 in order to invite a bidding war when they really wanted to sell the Property for $1,200,000 and that this conduct constituted a misrepresentation.

[68] Mr. Giamou said the Plaintiffs relied on advice from their real estate agent in employing this strategy.

[69] It was not improper for the Plaintiffs to rely on this strategy of listing the Property for a lower amount to invite a bidding war and doing so is not a misrepresentation. In any event, Mr. Ahmed did not give evidence that he relied on the listing at $999,000 to his detriment. Before he entered into the APS, Mr. Ahmed understood that the Plaintiffs would not sell for less than $1,200,000 and he agreed to make an offer in this amount.

[70] In any event, there is an entire agreement clause in the APS which prevents the purchaser from bringing an action in negligent misrepresentation.

[71] The APS provides:

26. AGREEMENT IN WRITING: IF there is conflict or discrepancy between any provision added to this Agreement (including any Schedule attached hereto) and any provision in the standard pre-set portion hereof, the added provision shall supersede the standard pre-set provision to the extent of such conflict or discrepancy. This Agreement including any Schedule attached hereto, shall constitute the entire Agreement between Buyer and Seller. There is no representation, warranty, collateral agreement or condition, which affects this Agreement other than as expressed herein. For the purposes of this Agreement, Seller means vendor and Buyer means purchaser. This Agreement shall be read with all changes of gender or number required by the context (emphasis added).

[72] The plain wording of the contract precludes reliance on representations other than those expressed in the APS: Ó Murchú v. DeWeert, 2020 YKSC 41, para 125; Stanziano v. Wolfe, 2022 ONSC 3823, paras 76-79; Ashrafi v. Carraro, 2019 ONSC 6326, para 52, citing Soboczynski v. Beauchamp, 2015 ONCA 282, paras 38-68.

[73] Mr. Ahmed’s counterclaim is dismissed.

Damages

[74] The Plaintiffs are entitled to judgment under the VTB in the amount of $320,000.

[75] The Plaintiffs also claim special damages as set out in the Notice of Sale. They claim $8,475.00 for legal fees and $2,000 for “Notice of Sale Under Mortgage”. The Plaintiffs did not submit any evidence to prove that these damages were incurred by them. I do not allow any amount for special damages.

Prejudgment and Post-Judgment Interest

[76] In their Statement of Claim, the Plaintiffs claim prejudgment interest at the contractual rate of 18% per annum. Generally, courts should give effect to interest rates contained in an agreement unless the terms are vague, unclear or infringe a statutory provision such as the Interest Act, RSC 1985, c I-15: Capital One Bank v. Matovska; Capital One Bank v. Blackwell; Capital One Bank v. Semple, para 13; Gyimah v. Bank of Nova Scotia, 2013 ONCA 252, para 10. Absent exceptional circumstances, it is appropriate and fair to use a contractual interest rate to which the parties have agreed: Bank of America Canada v. Mutual Trust Co., 2002 SCC 43, paras 49-50; Professional Court Reporters Inc. v. Pistachio Financier Corp., 2022 ONCA 669. The plaintiff is entitled to pre-judgement interest in the amount of $101,470.72.

[77] The post-judgment interest rate is 18%.

Costs

[78] I encourage the parties to agree on costs. If they cannot agree, I will consider brief written submissions. These costs submissions shall not exceed five pages in length (not including any bill of costs or offers to settle). The Plaintiffs shall file their written submissions within ten days of the date of these reasons. The Defendant’s responding submissions shall be delivered within five days of receipt of the Plaintiffs’ costs submissions. The Plaintiffs may submit reply submissions which shall be delivered within three days of receipt of the Defendant’s responding submissions and shall be no more than three pages long. Costs submissions shall be uploaded to CaseCenter and delivered to me by way of email to my Judicial Assistant.

Wendy L. Merritt
Released: April 16, 2025