Jun 4, 2020

BLANEY'S APPEALS: COURT OF APPEAL SUMMARIES (MAY 25-29, 2020)

Bowman v. Martineau, 2020 ONCA 330 (CanLII)

[Rouleau, Hourigan and Roberts JJ.A.]

Counsel:

Paul Le Vay and Stephen Aylward, for the appellants

David A Morin and Peter Reinitzer, for the respondents

Facts:

The appellant real estate agents acted both for the vendors, AE and SE, and the respondent purchasers on the sale of a house. The trial judge found the vendors liable to the respondents for non-disclosure and concealment of water damage. He also determined that the appellants were negligent in the execution of their professional responsibilities and therefore liable to the respondents. Specifically, the trial judge determined that the appellant real estate agent, SM, had failed to review and verify with the vendors and then with the respondents the information contained in the Sellers Property Information Statement (“SPIS”), concluding that if she had done so, SM would have discovered that the property suffered from ongoing water leakage.

The trial judge assessed the respondents’ damages at $450,215.35: $332,706.59 for the cost to repair the property; $10,282.13 for out of pocket expenses for time and materials spent on the tearing out of the damaged portions of the house; $101,500 for the respondents’ alternative living expenses from September 2014 to July 2019; $726.63 for hydro and insurance costs thrown away; and $5,000 in general damages. He apportioned the appellants’ liability at 70% and the vendors’ liability at 30%. Accordingly, judgment was granted against the appellants in the amount of $315,150.74 (70% of $450,215.35) and costs of $144,679.55.

Issues:

(1) Did the trial judge err by applying a cost of repair rather than a diminution in value measure of damages?

(2) Did the trial judge err in concluding that the respondents had not failed to mitigate their damages?

(3) Did the trial judge err in determining that the frost heave damages were reasonably foreseeable?

Holding:

Appeal allowed.

Reasoning:

(1) Yes. Diminution in value was the proper measure of damages against the real estate agents. In cases where the harm to be compensated for is property damage, the Court noted that damages have typically been assessed either as the cost to repair the property or its resulting diminution in value. The historical common law position was that damage caused to real property was measured by the diminution in the value of the land (C.R. Taylor (Wholesale) Ltd. and others v. Hepworths Ltd., [1977] 2 All E.R. 784 (Q.B.)) but found that later English cases held that the cost of repair could be awarded in appropriate cases (Dominion Mosaics and Tile Co. Ltd. and another v. Trafalgar Trucking Co. Ltd. and another, [1990] 2 All E.R. 246 (C.A.), jurisprudence later adopted in Canada (James Street Hardware and Furniture Co. v. Spizziri, 1987 CanLII 4172 (Ont. C.A.)). The application of one or the other of these approaches has been governed by the specific facts of the particular case and the further regulating factors of causation, reasonableness and proportionality. In professional negligence cases involving real property, the jurisprudence is split as to whether the professional negligence actually caused the property damage. The Court found that the professional negligence of the appellants did not cause the water and mould damage to the property. Rather, the negligence amounted to causing the respondents to enter into a transaction they otherwise would have avoided. The trial judge misinterpreted the decision in Jarbeau v. McLean, 2017 ONCA 115 in finding that it stood for the general proposition that “cost to repair is a more appropriate measure of damages” when assessing loss related to defective property. The trial judge erroneously equated the respondents’ loss with the loss of a house free of mould and water damage and the Court held that the loss that the respondents suffered as a result of the appellants’ negligence was not property loss of this nature. Rather, the respondents’ loss consisted of entering into a transaction to purchase a house damaged by water and mould (Avrom Evenchick (Trustee of) v. Ottawa (City) (1998), 111 O.A.C. 132 (C.A.)). The respondents were only ever entitled to damages to compensate them for entering into a bad transaction they would have otherwise avoided being their overpayment for the defective property: its diminution in value.

(2) No. The respondents were required to make reasonable efforts to mitigate their damages. It was the appellants’ onus to demonstrate they failed to do so: Janiak v. Ippolito, [1985] 1 S.C.R. 146. The Court saw no error in the trial judge’s conclusion that the appellants did not meet that onus. There was no evidence establishing that the respondents could have sold or walked away from the property, or that it was reasonable for them to take either course in their circumstances, which included their strained finances and obligations under the vendor-take-back mortgage.

(3) No. The appellants argued that the trial judge erred in his consideration of this issue in that the trial judge made inconsistent findings concerning the question of whether the frost heave damage was reasonably foreseeable. The Court found that the appellants were conflating the trial judge’s findings on mitigation with those on remoteness of damages. The trial judge determined that it was fair and reasonable for the respondents to shut down the house rather than reinstate a heating system that they could not afford to operate in order to heat a house that was not insulated because of the gutting required by the water and mould damage. He also found that it was reasonable for the respondents to follow the measures recommended by a professional engineer to try to protect the house. As a result, he found that the appellants had failed to satisfy their onus to demonstrate that the respondents did not mitigate their damages. The trial judge’s findings concerning causation and remoteness of damages were that “it is foreseeable that a home rendered inhabitable by mould and water damage cannot be lived in, that a home not lived in will not be heated and that an unheated home subjected to the effects of freezing temperatures during the winter months could suffer from floor heaving”. In consequence, he determined that “the basement floor heaving is not so removed as to be unrecoverable”. It was clear that the trial judge concluded that the frost heave was reasonably foreseeable and hence the necessity for the respondents’ efforts to protect the empty house’s foundation with straw as recommended by their engineering expert. What was not foreseeable, and therefore not a failure to mitigate on the part of the respondents, was that the recommended protective steps would not be effective. The trial judge effectively concluded that the failure of the recommended measures to adequately protect the foundation should not be visited against the respondents as a failure to mitigate their damages. His mitigation finding was separate from his findings respecting causation and remoteness. The Court found no inconsistencies or errors in the trial judge’s findings.

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