Professional Documents
Culture Documents
Terms.......................................................................................... 22
Real Estate Agents: Standards of Conduct..................................23
Selkirk v. J. A. Willoughby & Sons Ltd. (1959), S.C.R. 75.........................23
Ocean City Realty Limited v. A & M Holdings Ltd. (1987) BCCA Scope of duty
....................................................................................................... 23_Toc405940081
Raso v. Dionigi (1993), 12 O.R. (3d) 580 (Ont. C.A.)- dual agency.........23
_Toc405940083Hodgkinson v. Simms (1994) SCC FD found.........................24
Knoch Estate v. Jon Picken Ltd. (1991) (Ont. C.A.) SA does not owe a default FD to
V, though cannot deceive/mislead, or withhold material info about offer submitted.
........................................................................................................................... 24
Century 21 Real Realty Inc. v. Campbell, (2012) BRA -;........................25
Agent as Purchaser.....................................................................25
s. 32 Real Estate and Business Brokers Act, 2002 regulations where RE is a
purchaser...........................................................................................25
Remedies: Restitutionary Damages Disgorgement of Profits, Compensatory
Damages, Remedial CT for UR (for FD Soulos), Punitive Damages....25
Calandra v. B.A. Cleaners (1990), 73 O.R. (2d) 44(As failure to disclose intent to
purchase)............................................................................................................ 25
Lee v. Chow (1990)(As failure to disclose intent to purchase).....................25
Soulos v. Korkontzilas (1997) SCC (breach of FD, failed to disclose intent to purchase)
........................................................................................................................... 26
Davies v. Bayda (2003) no breach of FD...................................................26
Gutman v Vaillaincourt (1996) dual agency, A liable, failed to make full & frank disclosure
........................................................................................................................... 26
Oscar United Group Inc. v. Chee, 2012 ONSC (like Hodgkinson, punitive damages)
........................................................................................................................... 26
27
Page |2
First City Realty Ltd. v. Hermans (2004) (cond precedent for As entitlement to
commission)
Gidda v. Malik Law Office. [2006] ONSC......................................................27
T.L. Willaert Realty Ltd. v. Fody,2013 ONSC (V liable for commission, RET did not
conclude)
Deposits...................................................................................... 28
s. 111 Crt of Justice Act: Crt right to grant relief against penalties & forfeitures.
...........................................................................................................28
DePalma v. Runnymede (1950) ONCA - PU sent payment did not specify if deposit
or PP.................................................................................................................. 28
Craig v. Mohawk Metal Ltd. (1976) OR (PU still forfeits deposit if V sells to P2 @ higher
price)
Porto v. DiDomizio (1996), 50 R.P.R. (2d) 113............................................28
Cumberland Realty Group Ltd. v. B.L.T. Holdings Lid. (1984), (Alta C.A))(MEE &
MOR).................................................................................................................. 28
Iyer v. Pleasant Developments Inc., [2006]................................................28
B.G Preeco (Pacific Coast) Ltd. v. Bond Street Developments 1989- damages for
fraud misrep..................................................................................................... 29
Conditional Agreements..............................................................29
Turney v. Zhilka, [1959] S.C.R. 578- PU could not waive TCO..................29
O'Reilly v. Marketers Diversified Inc., [1969] S.C.R PU could not waive TCP w/o
right of waiver................................................................................................. 29
Barnett v. Harrison, [1976] 2 S.C.R. 531 141 affirms Turney, no compelling reason
not to................................................................................................................. 29
_Toc405940190
SIMPLE CONDITIONS...................................................................29
Beauchamp v Beauchamp..............................................................................29
Page |3
Page |4
Smit v. Alfield Farms Ltd. (1982) (B.C.S.C.) conflict of interest arises in RET. L held
liable................................................................................................................... 35
L, should have instructed him to seek ILA and caution about relying on oral
promise............................................................................................................. 35
Korz v. St. Pierre (1987), 61 O.R. (2d) 609 (Ont. CA.)- L in joint transact not as L
........................................................................................................................... 35
Non Est Factum (Marvco) requires that the contractor or testator who now seeks
to set aside the document establish that (1)s/he had intended to sign a
document of a fundamentally different nature. (2) Cover cases of undue
influence , relationship of confidence and pressures contractor or testator to act
in a certain manner Exception: NEF defence does not apply if the donor's lack of
knowledge about the circumstances arises from laziness or carelessness as
between two innocent parties who suffer from the fraud of a third but one of the
innocent parties is negligent..............................................................35
Bulut v. Carter, 2014 ONCA 424-no NEF defence, careless did not read , or ask ?s
........................................................................................................................... 35
Marvo Color Research Ltd. v. Harris (1982)NEF defence fails if party is careless &
sophisticated...................................................................................................... 36
Shute v. Premier Trust (1994)_L held liable for negligence.....................36
Martin v. Goldfarb (1997)- obligation to disclose to other party if 1 party has criminal
record
King Lear....................................................................................37
Bertolo v. Bank of Montreal (1987), 57 O.R. (2d) 577 (Ont. H.C.)...........38
Panko v. Simmonds, [1982] .Dual L failed to prove was not negligent where mum had no
ILA
Brandon v. Brandon, [2011 OJ 2986]............................................................39
Stanciu v. Stanciu (2004)- valid conveyance of fee simple by gift does not create
implied life interest........................................................................................ 39
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Harding v. MeLeod (2004), ON mother conveys ppty of existing trust for son to daughter
........................................................................................................................... 39
Danicki v. Danicki (1995), O.J. 3995-............................................................39
valid gift to son. Law does not enforce moral laws, honour thy father and thy
mother............................................................................................................... 39
Crepeau v. Crepeau (2012) ONSC 418- down payment for mortgage from mum to
son was loan.................................................................................................... 40
_Toc405940348Premier Trust v. Beaton (1990), 1O.R. deaf mute mum indemnifed by L
against mEE...................................................................................................... 40
Pecore v Pecore 2007..................................................................................... 40
Page |6
Antorisa Investments (2006) "As is where is" . excludes V from tort liability42
Kingspan v. Brantford (City) (2011), ONSC unclear of group claim to sale ppty a latent
defect
Ricchio v. Rota (2011)- V may be liable on basis of misreps in SPIS, like Antorisa was not
latomasi v. Conciatori, 2011 ONSC 3819 follows Gronau liable for conceal of patent
defect, basement leakage and misrepresented..................................................43
Halliwell v. Lazarus, 2012 ONCA 348- limited liability clause re: building inspection not
enforced.............................................................................................................. 43
Bound v. Gray, 2011 ONSC 1567- pedo in area may not be latent defect, so no CE
........................................................................................................................... 44
Barbieri v Mastronardi 2014 ONCA 416 duty to disclose former marijuana grow-op of
ppty.................................................................................................................... 44
1784773 Ontario Inc. v. K-W Labour Association inc., 2014 ONCA -CE - haunted
ppty................................................................................................................... 44
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(1) D or Agent makes a false representation (2) knowledge of, or recklessness as to, its
falsity (3)D or A intended to deceive PL with representation (4)False representation is
subjectively material (5) False rep induced PL to act; (6) PL suffered damages 45
Liability - EC does not shield V liability, Vs can be vicariously liable for fraudulent
misrep of Agents (Semkuley; Scholl)...............................................................45
Equitable Remedy of Rescission AFTER closing , UNLESS knowledge before
close, then right to rescission is waived, but claimant can sue for damages
(Burrows; Cubukgil)........................................................................................ 45
claimant must prove representation was............................................................45
Measure of Damages : restore PL to position he would have been but for the
misrepresentation, not, the position he would have been in had rep. been true (Parna)
45
3. Negligent Misrepresentations.........................................................45
Claimant must demonstrate that (1) DOC based on spec relationship bt/w PL & D - V
& PU, (2) D made a false statement, (3) D was negligent in making false statement,
therefore breached DOC; (4) PL reasonably relied on false statement (5) PL suffering
damages as a consequence................................................................................46
Liability V or agent, V is vicariously liability for agent..............................46
EC excludes liability for statements outside of APS, not express K terms (Hayward)46
Beer says it may.............................................................................................. 46
BUT EC invalidated IF, incl statements outside of APS if:........................46
Roberts/Beer: If party does not ascent to prov or not brought to PUs attention
46
Shelanu: EC is unconscionable, ; unfair; unreasonable; otherwise contrary to public
policy.................................................................................................................. 46
Hyrsk/Kiani : Error Insubstantialibus:.........................................................46
IF representation outside of APS , consider , (Roberts/Beer)..................46
Look at where the statements were located? Whether parties were consider to have
assented to clause.............................................................................................. 46
What was the reliance ?................................................................................ 46
Who were the parties ? vulnerable or sophisticated?....................................46
What were the circumstances ?....................................................................46
Agents representing PUs?.............................................................................46
Equitable Remedy of Rescission BEFORE close; AFTER close - damages
(Chapman)........................................................................................................ 46
claimant must prove representation was............................................................46
Measure of Damages : restore PL to position he would have been but for misrep
46
Page |8
(Fraser)IF not cond, is it a warranty: (1) question of fact; (2) Does the contract
disclose a common intention of merger re warranty? express or implied (3) The K label
for warranty is a rebuttable presumption...........................................................46
Effect of C : does not shield V from liability, term collateral to the agreement .
46
AFTER close ;Remedy of Damages, UNLESS MERGER:...........................46
TEST :Did parties intend that warranty survive merger (Fraser-Reid) or insert non
merger provision (Alves); but merger is rare (DeMichele).............................46
Roberts/Beer: If party does not ascent to prov or not brought to PUs attention
46
Shelanu: EC is unconscionable, ; unfair; unreasonable; otherwise contrary to public
policy.................................................................................................................. 46
Hyrsk/Kiani : Error Insubstantialibus:.........................................................46
Fundamental breach : repudation, unnecessary to commence action:.....46
Reps/Warranties/EC....................................................................47
Anticipatory Breach............................................................................47
Morgan v. Lucky Dog Ltd refusal to close on the basis of PU not providing an estoppel
certification constitutes an anticipatory breach absent express K terms requiring P to provide
V with this........................................................................................................... 47
Waxman v. Yeandle, [1953] O.R. 367 (Ont. CA)- innocent misrep of gallonage after close
........................................................................................................................... 47
Decision: V liable for misrep, but PU not entitled to rescission after close.. P could have
independently verified gallonage, and V had no intent to lie, mistaken belief as to truth of
statement ;......................................................................................................... 47
Ratio: Ambiguous lang of a statement not likely to be interpreted as fraudulent47
Parnav. 0. & S. Properties Ltd. (1971), S.C.R. 306- V liable for negmisrep, apt buildings
........................................................................................................................... 47
Reasoning: V were first time builders, did not have accurate records; P was sophisticated,
knew more about operating an apt than V, hence P was not mislead and did not rely on rep.
even though representations were false to the knowledge of V = no fraudulent misrep 47
Ratio: Compensatory measure to assess damages; SCC damages: 4K, damages had
representation not been made, lower sale price.......................................47
Semkuley v. Clay (1982) V or A not liable for fraud misrep. Absent intent or
recklessness to deceive...................................................................................... 47
EC insulates the vendor, not the (listing) agent from negligent misrepresentation made
outside of the APS; Other cases say that EC will insulate agent also from negligent misrep
outside of APS (Hayward;Semkuley)...................................................................47
HELD :V nor Agent are liable. Agent was giving an opinion, not a representation as an expert.
........................................................................................................................... 47
Olsen v. Poirier (1978), ONCA milk farm, V liable for fraud; Agent for negligent misrep
........................................................................................................................... 47
Ratio : Silence can be recklessness that amounts to fraud misrep, for which a TP can be
liable on a non K basis (V's liability);(Hedley) (RE agent liability).....................48
Page |9
V's liability - fraud misrep, rescission granted - milk quota was a vital factor in
determining economic viability of farm, 25% reduction was a material factor - there was at
least recklessness that amounted to fraudulent missrep on part of V that induced P to enter K
and P relied on the missrep (although one part was true this was a half truth)..48
RE"s liability, negligent misrep - RE agent made negligent misrep; owed P a duty of care
from holding self out as expert, P relied on misrepresented statement and P suffered a loss
from such reliance.............................................................................................. 48
Hayward v. Mellick (1982), ON......................................................................48
Patav v. Hutchings (1989) agents liable for misrep; V sued P for breach and they settled,
Grimsby.............................................................................................................. 48
Rule A listing agent owes no FD To the purchaser (Caterprillar), but does not have the right
to protect V's interests fraudulently; A selling agent has a duty to protect the interests of the
PU client;............................................................................................................ 48
Decision: Listing agent made fraudulent misrep (misled P as to character of the property) ;
Selling agent made negligent misrep (was negligent in not ascertaining property was
appropriate for P given that he had been advised as such could have made some inquiries
at the municipality)............................................................................................. 48
Roberts v. Montex Developments (1979) (B.C.S.C.) (not a great decision)
48
misrep of soundproofing outside of APS; EC not enforced, so developer still liable48
Facts P bought condo unit advertised as designed to provide maximum sound proofing in
between homes in the advertising brochures but was not part of APS; after closing, P
complained about intolerable noise....................................................................48
Held: EC set aside b/c PU did not assent to prov. Therefore, EC does not exclude developer P
from liability for negligent misrep, precontractual negligent misrep, the brochure, induced PU
into APS or breach of warranty...........................................................................49
Fraser-Reid v. Droumtsekas (1981), S.C.R. (Warranty of no basement flood survived
MERGER)............................................................................................................. 49
HELD: clause was a warranty that the basement would not flood, damage not discovered
until after closing, and there was never an intention to merge..........................49
Urea formaldehyde.............................................................................49
Scholl v. Royal Trust (1987) (Ont. S.C.)- agent said no URF, refused to insert APS
warranty, false.................................................................................................... 49
Ratio : AN EC does not operate to relieve a V from vicariuos liability in the face of the fraud
of their agent...................................................................................................... 49
DeMichele v. Peter Kin (1985) V liable for fraud misrep for breach of warranty
49
Ratio : PL can recover damages for loss of enjoyment of life if able to establish mental injury
was foreseeable result of BOW............................................................................49
Held V liable for fraud misrep for breach of express K warranty. Lack of personal knowledge
not material to finding of liability........................................................................49
Damages: the cost of removing the insulation & additional 20% b/c of stigma involved with
the insulation and some damages for emotional turmoil....................................49
Glasner v. Royal LePage Real Estate Services Ltd. (1993)-......................49
PU entitled to rescission for fraud misrep, warranty; uniteral amendment to UFI warranty
........................................................................................................................... 49
Rule In modern commercial relations, where an important unilateral amendment is being
made it is not unreasonable to ensure that knowledge of such amendment comes to the
other side -- party must be given a real opportunity to appreciate the change ; Duty from V to
P can arise when K concluded under unilateral mistake.....................................50
Held: PU entitled to rescission for fraud misrep. V knew fact was material b/c lang of clause
was changed, instructed agent not to mention it unless specifically ask. PU refused to close
immediately after changes raisedOlsGl..............................................................50
John Levy Holdings Inc. v. Cameron & Johnson Limited (1993) V not liable for fraud
misrep................................................................................................................. 50
Ratio : Language within a Kual statement, "to best of my knowledge and belief" did not
warrant absolute truth of the statement. It was reasonable, fair & truthful........50
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HELD: V was not liable for fraud misrep for breach of warranty;, no damages for PU. Clause
did not impose on V to perform tests to confirm the presence of contamination50
WARRANTY OR CONDITION?...............................................................50
Jorian Properties Ltd. v. Zellenrath (1984) (Ont. C.A.).............................50
HELD: No damages because PU elected not to close, so no breach of warranty here
50
Reasoning: Here, sale ppty could still be used as a triplex vs. five-plex would, NOT have
deprived the plaintiff of substantially the whole benefit which the parties intended it should
obtain, rental property under K DISSENT: (1) difference in kind & degree bt/w
triplex/fiveplex in terms of revenue earning potential & capital value (warranty, more like cost
of heating of ppty). (2) If PU would have had action for ES. (3) A condition, not their mutual
intent that the PU could be forced to accept triplex instead of 5plex, P would not have
received the very purpose of the sale and the P was entitled to damages.........50
Champlain Thiskson Inc. v. 365 Bay New Holdings Ltd. (2007)...............50
Decision: Courts tend to enforce language of agreement (John Levy, DeMichele) (1) V
failed to satisfy TCP, did not perform in "all material respects" which P did not waive ; (2) P is
entitled to return of deposit with interest...........................................................51
Error Insubstantialis...........................................................................51
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Held: Crt did not accept PU's evidence as to having money to close (reviewed
correspondence, rapid market decline)..............................................................52
EXCULPATORY CLAUSES.....................................................................52
Beer v. Townsgate Limited (1997), 36 OR..................................................52
Agents reliable for innocent misrep, unsophisiticated Ps....................................52
Held: (Like Montex), Unsophisticated parties, not 34 other PUS, were entitled to equitable
rescission for negligent misrepresentation. EC not enforced against agents oral assurances
b/c they did not assent to it, and reasonably relied on agents who fabricated false sense of
security in claiming risk free investment............................................................52
Agents held liable NWS EC............................................................................52
(Vulnerable parties - 40 yr old illiterate immigrant cab driver, 59 year old cobbler)
52
Ratio: (1)RE agent (or L) has a duty to act with care and skill in reviewing APS terms,
including duty , to specifically draw to the client's attention any provisions in the agreement
that are contrary to client's interest. (2)Client does not have an obligation to read
instrument where there is reliance on a fiduciary to do so.................................52
Analysis: Evidence was selling agent specifically failed to explain that inspection clause
has been fundamentally altered. Agent should have explained that the amendment made
was that he would not be able to get out of the deal unless there was structural problem.
........................................................................................................................... 52
1018429 Ontario Inc. v. Fea Investments Ltd. (1999)- court can override K choice of
remedy............................................................................................................... 52
H: PU entitled to damages for tort of deceit for breach of warranty in lieu of
rescission, statements were so reckless.....................................................53
Ratio: Parties to K may limit a remedy by express terms in K to rescission for breach of
warranty, but courts may choose not enforce such a Kual prov where innocent party has
established claim for tort of deceit.....................................................................53
Swavze v Robertson (2001)...........................................................................53
duty to disclose still triggered IF it only renders part of sale property unfit for habitation 53
Ratio: V gave false representation that house is structurally sound despite basements water
leakage problem. This was made with an intention to mislead P, and thus EC will not shield
liability for misrepresentation here.....................................................................53
Held: V liable for fraudulent misrepresentation. PU entitled to damages..........53
Kaufmann v. Gibson, [2007] ONSC 0 PU can rely on SPIS if in APS to rescind if it contains
misreps............................................................................................................... 53
Ratio: SPIS, if within 4 corners of APS, can be relied upon to withdraw from transact if it
contains misrepresentaions in relation to matters that PU raised......................53
Held: V is NOT entitled to compensatory damages for BOK. He could not hide behind
Agents advice not to disclose. PU was entitled to rely on inaccuracy of statements as reason
for rescinding transaction...................................................................................53
Krawchuk v. Scherbak (2011) ONCA 352-PUs rely on SPIS w/o inspection, V held liable for
misrep................................................................................................................. 53
H: After closing, V was liable for negligent misrep, not fraudulent misrep. PU entitled to
damages............................................................................................................. 54
Reason: Vs were reckless as to truth of statements relating to foundation and plumbing in
SPIS attached to APS. PUS did not do an inspection but relied on SPIS, and could successful
do so................................................................................................................... 54
Cotton v. Monahan (2011), ONCA- PU not liable for cost of repairs, SPIS was truthful 54
Reasoning: CE applies. PUS should have bargained for an express warranty to
guarantee equality of repairs and did not do so. V was unaware of building codes/
standards ; Husband V was a prudent and careful person who would not have knowingly
exposed his family to risk; PU were aware V had done extensive renovations w/o permit or
inspection........................................................................................................... 54
Held: PU recovers for value of diminution of property resulting from defect. No mental injury
damages (not within reasonable contemplation of parties @ time K was formed)54
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SC Obligations............................................................................56
Rule 2 of the Rules of Professional Conduct - Relationship to Clients (Relates to
mortgages).........................................................................................56
2.01 - Competence............................................................................................. 56
2.02 - Quality of Service..................................................................................... 56
2.03 Confidentiality............................................................................................ 56
2.04 - Avoid of Conflicts of Interest....................................................................56
2.05 Conflicts from Transfer bt/w Law Firms.......................................................56
2.06 Doing Business w a Client...........................................................................56
2.07, L cares for ppty as would prudent careful owner.......................................56
2.08 Fees, Interest according to SC Act..............................................................56
2.09 Withdrawal from representation.................................................................56
RECTIFICATION...................................................................................56
Strategeas v. Lloyd Parish Holdings Limited (1991).................................56
duty to bring mistake to attention of L acting for other side (Glasner)............56
RECTIFICATION principle for cases of mistake: essence of rectification is to bring the
document which was intended to be in pursuance of a prior agreement into harmony with the
prior agreement, courts will apply if i) King parties having reduced into writing the
negotiated agreement but , ii) a mistake was made in the wording of the final written K
altering the effect of the agreement...................................................................57
Ratio Even if L is negligent in not noticing a significant change to the original agreement, the
party/lawyer making the change has an obligation to bring it to the attention of the other, or
court may apply rectification..............................................................................57
Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd. (2002), S.C.C.
22....................................................................................................................... 57
(Principles of rectification).................................................................................. 57
Purpose of rectification: to prevent a written document from being used as an engine for
fraud................................................................................................................... 57
Rectification is an available remedy FOR (i) unilateral mistake (or mutual mistake) if PL
shows, with convincing proof (slightly higher than BOP):...................................57
a)
Oral agreement not written down properly,...............................................57
b)
D (ought) to know of the error, AND taking advantage of such error would amount to
"fraud or equivalent ......................................................................................... 57
c)
P must show "precise form" in which written agreement can be made to express prior
intention............................................................................................................. 57
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d)
crt's task is corrective (to restore bargain), not speculative;.....................57
e)
Punitive damages only awarded if (1) compensatory damages are insufficient, and
(2) denunciation is necessary............................................................................. 57
Held: D PU liable for damages. (He instructed his L not to raise mistake) Court ordered
rectification and compensatory, not punitive damages. Corporate veil was pierced to hold the
principals of the P personally liable....................................................................57
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Held: L liable for negligence. He did not rebut prima facie negligence. LR was not
documented at all by memo, nor in reporting letter......................................59
Reasoning. The fact that APS was signed and client had already waived conditions does not
justify his conduct............................................................................................... 59
Yamada v. Mock (1997)- duty to verify identity of clients...............................59
Ratio SC has a duty to take reasonable steps to protect the interests of the party that she is
serving, and includes eliciting identification to validate the purported identity of her clients. It
reduces likelihood of fraud; The ID required depends on the nature of transact.; If
multimillion, then passport instead of licence....................................................59
Robinson v. Royal Bank (1996), Duty to obtain written understanding of clients IF they
choose not to follow your advice or warning regarding serious risks..................59
Held: Bank can enforced fraudulent mortgage against W. Wife was estopped from relying on
Hs forgery to avoid personal liability for mortgage. She failed duty to disclose that H
committed forgery to lender. She assumed the risk when she chose to withhold this
information......................................................................................................... 59
Ratio: L has a duty to inform client of the risks of her actions, and should obtain written
documentation where client chooses not to follow your advice despite risk of legal exposure
of her decision.................................................................................................... 59
Harelav. Powell (1998) (when L is retained before APS is signed, high onus to defend
negligence)......................................................................................................... 59
Ratio:Public expectation requires SC has a duty to know what a clients plans are where it is
clear that client intends to develop vacant land - implications of the zoning by law are
critical and should be reviewed with the client............................................60
Held: Agent and L liable for negligence. They failed to take time to inquire about clients
plans................................................................................................................... 60
Turi v. Swanick (2003), OR(L's duty to advise about risk to unsophisticated parties is
higher)................................................................................................................ 60
Ratio : Scope of duty to advise in relation to risks and consequences may depend on the
level of sophistication of the party : Lawyer should write memo of advice to client and have
her sign it............................................................................................................ 60
Held: L liable for negligence. Court believed that L advised client re proper use of corp
name but did not advise on risks for improper use or failure to do so in context of business
transactions by sending out memo.....................................................................60
60
Le Van v. Le Van (2008) Lawyer providing ILA has duty to fully disclose any potential
conflicts of interest; This L acted for Hs L during his first divorce......................60
When providing ILA especially in relation to family law matters,........................60
(1) Explain risks and consequences of domestic K; and give time for consideration; (Mrs. L
signed same day)............................................................................................... 60
(2) Refuse to act if transaction is shockingly unconscionable; or obtain clients
acknowledgement of your advice regarding serious risks..................................60
(3) Full disclosure of any conflicts of interest, like special relationship here is very important
(Korz).................................................................................................................. 60
Stevens v. Stevens; Epstein Cole et. al. (2013) ONCA..............................60
(follows Glasner, Performance regarding rectification principles)...................60
Ratio It is the SC's duty to turn the mind of the opposing lawyer to an obvious
mistake in a (marriage) K. Rectification principle: Failure to do so may result in court
exercising equitable jurisdiction to relieve a mistake in fraud/circumstances amting to
fraud/misrep. IF.................................................................................................. 60
(1) 1 party knowing of the others mistake as to the terms of an offer remain silent and, (2)
concludes a K under the mistaken terms NWS that party ought to recognize mistake
60
Outaouais Synergest Inc. v. Keenan (2011)................................................60
no good faith duty in pre-K bargaining process, follows (York Condominium))60
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Ratio: Duty that individual lawyers owe to one another is unclear .An L would expect the
other to act in fair and honest dealing; or that lawyer would disclose collect-back clause, but
V's lawyer had no obligation to do so. Held: V nor L had duty to disclose clause clause. Ps L
liable for negligence, should have requisitioned.................................................60
Meier v. Rose (2012), (SC when retained to prepare a will verify registerd owner of ppty )
........................................................................................................................... 61
Ratio (1) SC owes a DOC to a TP beneficiary created by the retainer to prepare a will for
testator; (2) The reasonable SC has an obligation to use proper care in carrying out
instructions to effectively confer intended benefit to TP beneficiary...Lawyer is not an order
taker.................................................................................................................. 61
Held: L for testator was negligent in failing to bequeath to proper beneficiary. Damages
assessed for value of land that PL beneficiary would have inherited. Time limits were not
excuse for failing to conduct title search or to request information as to registered owner of
lands in question................................................................................................ 61
What a reasonable SC in 2000 would have done................................................61
Thompson Family Trust (Re) (2011), ONSC (K barring KL from making a LSUC complaint NO)..................................................................................................................... 61
Ratio: Terms of settlement that bar a client from reporting a SC to LSUC are not enforceable
because it is a public interest issue that extends beyond the private interests of parties.
........................................................................................................................... 61
LSUC is mandated to protect public interest.......................................................61
Maranello Autobody Inc. v. Freidman (2012)..............................................61
(LSUC) Rule- When acting as an advocate, L has a duty to refrain from deliberately
withholding any binding auth that L considers to be directly on point that has not been
mentioned by the opponent; otherwise to tantamount to misrepresentation . When in
doubt, one should disclose.................................................................................61
Held: L in this case did not breach duty. He clearly believed cases were not point.
61
6038212 Canada Inc. v. 1230367 Ontario Ltd., 2014 ONCA ( follows Gunraj)
61
Ratio: A SC does not necessarily have an obligation to request environmental reports in the
absence of client's instructions. Held: Action against L dismissed., not negligent for not
requesting env reports. L for She ensured her client signed a waiver/consent acknowledging L
had recommended undertaking env assessment, BUT that A was unwilling to conduct any
further investigations.......................................................................................... 61
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Tender Clause 21 parties must be ready, willing and able to perform to tender
62
EC Clause 26- excludes Vs liability for representations outside of APS package like
schedule or SPIS................................................................................................. 62
Definitions..........................................................................................62
Requisition - necessary searches and checks on a sale ppty done by PU..62
Letter of requisition : sets out defects, objections to title (asks for answers)
62
Valid requisition - Must be submitted 5 days before close, except requisitions relating
to root of title, matter of conveyance; Lawyers who do not requisition in time liable to
negligence.......................................................................................................... 62
P's rights of V is unwilling or unable to satisfy requisition................62
P can waive the requisition (and take the title with the defect) (use title insurance) OR
dissolve K, deposit returned; V may not intend to answer if market value increased
62
Title insurance - insured pays premiums for insurance coverageprotecting against
losses due to title defects (usually even if existed before PU bought home)......62
Matters relating to root of title constitute total failure of consideration 62
Examples Planning Act Violation or encroachments , trust property.................62
Matters of conveyance (e.g. mortgage)- those matters by which the V alone (or with
other persons whose concurrence he can require) is in a position to convey title to property
62
IF V is not entitled as of right to obtain a discharge of an encumbrance then it is an
objection to title.................................................................................................. 62
P a g e | 17
Kelly v. Semple (2010), (distinguished from Koo, unique ppty, shed was an overall selling
feature)............................................................................................................... 64
Held: Requisition that shed did not comply with zoning was valid. PU 2 was entitled to
rescind................................................................................................................ 64
Reasoning: Cottage is not a conventional ppty. Here, the fact that storage shed had to be
relocated in a diff area entitles P to repudiate transact, b/c PUS are buying for their family,
incl children. One of the main uses for property is watersports. Lake-side location of the
storage shed was a a positive selling feature of the overall property. (ppty listing referred to
it))....................................................................................................................... 64
Covenant.................................................................................... 64
Todd v. Haslofer (1983) OR............................................................................ 64
Ratio P cannot requisition a restrictive covenant where clause 9 of the APS has not been
struck out - and a V has no duty to disclose such a restrictive covenant...........64
P a g e | 18
F: PU consults L on each offer in search for res ppty.. Retained L after offer accepted. L never
mentioned right of way t of when PU signed closing docs. L searched title and found right of
way .................................................................................................................... 64
Held: L negligent for failing to ever call PU's attention to registered right of way, reporting
letter................................................................................................................... 64
Ratio: SC for PU in RE T must ensure that his clients understand the contents of the initial
agreement and that all risks are clearly explained. Obviously, he must search, before closing,
and at the very least make full disclosure of all relevant information yielded by the search.
........................................................................................................................... 64
Definition of terms.............................................................................65
McFadden v. Pye (1979), 6 R.P.R. 198 (Ont. H.C.)......................................65
PU was entitled to withdraw from transaction, is entitled to return of deposit. . .65
Polischuk v. Hagarty (1983), (Ont.C.A)........................................................65
P a g e | 19
Le Mesurier v. Andrus ONCA;King Each party owes a good faith duty to the other to
try to resolve title problems and to perform K. To determine whether good faith duty
discharged, objective standard used to evaluate merits of any complaint by P AND imposes a
high not perf stand of performance on V. Once APS is signed, the courts policy is to favour
the enforcement of honest bargains...................................................................66
Breaches cannot rely on TOE......................................................................66
Not a breach can rely on TOE.....................................................................66
GF Koffmanv;Lucky Dog PU is considered to breach duty to act in good faith where he
intentionally delays notice of requisition until the closing date, and has advanced knowledge
of objection regarding a matter..........................................................................66
GF Citation Realty Inc V is in breach of good faith where he acts in dishonesty, and
would be precluded from relying TOE prov.........................................................66
(Leung) Reliance on a minor issue to avoid transact . (Vandervliet PU liable for 156
K, interests and costs) If PU ; was wrong .about issue upon which he is relying to avoid
transact, still liable PU is sued for BOK by V, takes pos that requisition on consent of
municipality for sale of residential ppty, goes to ROOT of TITLE.........................66
Carreno, Martens EstatePU not entitled to rely on TOE prov to terminate transaction on
basis of requisition to open building permit. Commitment to title insurance sufficient
66
Jackson;Union Eagle PU failed to pay deposit within time specified, 2 days after
due .Time is of the essence. If transaction is not completed as scheduled, then party relying
on time is of the essence provision is entitled to avoid transaction, unless acting in bad faith.
Here not in good faith, but not BAD:................................................................66
(Leung) extends to cases involving minor omissions or defects. If error is so minor that
it could be corrected w/in a day, then there is an obligation to disclose NWS minor defect.
67
P a g e | 20
Duty to Mitigate Innocent party has a duty to mitigate losses resulting from BOK
...........................................................................................................67
Southcott PU cannot excuse duty to mitigate on grounds that limited purpose company
has no assets Principals could have injected resources into company similarly to providing
deposit................................................................................................................ 67
De Franco D was unsuccessful . PLs claim was stronger; found to be highly credible.
67
Prager, successful , D successful Vs hardship outweighed uniqueness of ppty. Former
committed psychiatric patient, when released, continued lived alone under DRs supervision
67
Broad Application of Semelhago in Commercial Context.........................67
Residential Context......................................................................................... 67
Scope of Damages........................................................................................... 67
Closed/Open Mortgage................................................................................... 69
Acceleration clause in mortgage agreement subject to statutory protections for
borrower; cannot K out.................................................................................. 69
P a g e | 21
71
Scenario 1: IF Assumption Agreement with PU1, who then sells to PU2, mortgagee can
enforce action against:....................................................................................... 71
Grantee, 1 (pursuant to assumption agreement)..........................................71
Mortgagor-Covenantor (pursuant to personal covenant for mortgage debt) 71
Grantee/ PU 2 AS registered owner...............................................................71
Scenario 2: IF NO Assumption Agreement with PU1, who then sells to PU2, mortgagee can
enforce action against:....................................................................................... 71
Mortgagor-Covenantor (pursuant to personal covenant for mortgage debt) 71
Registered Owner (s 20, MA).........................................................................71
NOT P1 (absent AA), BUT mortgagor can sue P1 afterwards Fuciarelli.......71
P a g e | 22
Principle mortgagee, acting in good faith and w/o fraud, is entitled to sell
property subject to (1)providing mortgagee w 30 days notice of sale where
MEE is in default of mortgage debt payments = or > than except upon
tender by mortgagor of principal amount due (up to APS signed) (2)account
for surplus, (3) liability for deficiency for failing to take reasonable care to
obtain true mkt value.................................................................72
Right of MEE : (1) to sue for deficiency, where sale proceeds do not cover full
mortgage debt or right to surplus (2) right to surplus, subject to secondary
mortgagee (3)Improvident sale defence or action (Arnold;Cuckmere) To successfully
obtain an injunction against mortgagees right to exercise power of sale, mortgagee must
demonstrate extreme or exceptional circumstances that would justify a departure from the
prevailing practice to effectuate postponement of sale......................................72
Corresponding Duties of MEE to exercise of right of Power of Sale.......72
Standard of Care......................................................................... 72
Test How to determine whether MEE met SOC Broos v. Robinson (not all these
steps will be necessary or appropriate in every case):......................72
P a g e | 23
(10) ensure that efforts are conducted over a reasonable period of time...........72
1) Right to give notice of sale 15 days after date of defaulted payment from the mortgagee to
mortgagor and any subsequent encumberancer................................................74
2) No proceedings can take place between the issuance of the Notice of Sale and when it
expires................................................................................................................ 74
3) During 35 day redemption/repayment period, MTEE cannot: (1) issue writ on
covenant, (b) if issued before notice of sale, it cannot be served. (3) issue or serve a writ for
possession, or take possession or enter into sales neg......................................74
4) Any steps taken during that period will be a nullity........................................74
P a g e | 24
S.42(3)- Exception: This rule does not apply to stay or waste injury. Any other steps
require leave of court......................................................................................... 74
SS 22-23 Right to Pay Bringing Mortgage Debt into Good Standing at any time
before a sale......................................................................................74
absolute right to Pay Arrears & costs any time until MEE enters into APS the ppty after
receiving notice.................................................................................................. 74
S 23 gives mortgagor the rights to pay the arrears if mortgagee has started the
action by SOC, rarely used.................................................................74
SS 10/18 Regardless of mortgage agreement term, IF MOR ,is an individual
other than a limited co or corp, at any time after 5 years, whether a closed
mortgage or not, a mortgagor has a (1)right to pay off the mortgage at any time
upon payment of an additional 3 months interest, (2) must give notice of intent,
(3) covenantor of promise must be an individual, (4)though transferable to a
limit comp subject to ind cov. (Hone).................................................74
REMEDY FORECOSURE.............................................................75
Principle (must enforce remedy through courts)................................75
(1) serve SOC for foreclosure, naming MOR & all subsequent encumbrancers;
...........................................................................................................75
(2) interim judgement, MEE 1 can take possession;..........................75
(3) final order of foreclosure(following failure to redeem) interest of MOR /MEE2
is extinguished if they fail to redeem;................................................75
(4) MEE loses right to action on the covenant,..................................75
(5) No duty to account for surplus or liability for deficiency if MEE sells ppty at a
loss.................................................................................................................... 75
Procedure - Orders in a foreclosure:............................................................75
(1) If right to redeem filed, then judgment for foreclosure with a reference;
mortgagor can pay off the amount owing w/in 60 days of ref. If they dont act, THEN
75
(2) Final order of foreclosure :mortgagee officially becomes the owner; No duty to
account for surplus; no right of action on the covenant (in a loss).....................75
(1)Right to file notice of intention to redeem in 60 days to pay off full amount owing;
(2)court may grant extensions if payee making good faith efforts ; (3) encumbrancer may
then foreclose or sell IF maturity date has not arrived OR if amount owing is paid off by
maturity date, and prospective increase in market value..................................75
Right to file a notice of intention to sell (judicially supervised sale): request that MEE
sell rather than foreclose. If MEE cannot sell, it may reapply to reconvert action into
foreclosure.......................................................................................................... 75
P a g e | 25
a)
Mortgagee exercises power of sale (1)by way of notice via registered mail to
mortgagor , and (2)every subsequent encumbrancer , (3)if MOR in default for at least 15,
days, (40with 35 day redemption period to rectify the arreas............................75
b)
Act of sale extinguishes rights of any subsequent encumbrancer . MEE 1 has duty to
account surplus, first subsequent encumbrancers in priority, then to MOR........75
c)
Obligations of MEE 1 analysis above..........................................................75
IF there is no remaining surplus or deficiency ,.........................................75
REPAYMENTS OF MORTGAGE......................................................76
Knightsbridge Estates Trust Limited. Here, transact not unconscionable no extreme
power imbalance, was a sophisticated party. Argued that length mortg term at 24 years was
unreasonable...................................................................................................... 76
by virtue of unconscionability............................................................................. 76
(Knightsbridge) The rules of equity will protect its godchild, the mortgagor76
disability; (4) the other partys knowingly taking advantage of this vulnerability76
77
1. S 347, CC Criminal offence to charge interest more than 60% , includes sum
of costs and interest borrower must pay............................................77
(1) Is interest rate illegal under s 347;...............................................................77
(2) If yes, should public policy allow partial enforcement of K, OR declaration of nullity
........................................................................................................................... 77
(North American Test).................................................................................... 77
Would purpose or policy of s. 347 be subverted by severance; ?................77
whether the parties entered into the agreement for an illegal purpose /evil intent? 77
P a g e | 26
Triggering Mortgage.................................................................... 78
Principle: If MEE commences an action for foreclosure or judicial sale, this
triggers right of MOR to pay off closed full mortgage debt owing without penalty;
does not convert close to open mortgage.........................................78
Exception:......................................................................................................... 78
Canbook Distribution v Borins......................................................................78
Held: TJ accepts SCs arguments that docs were protected from discovery by the S&C
privilege. Canbook argued that docs were not privileged, and any privilege was waived due to
fraud allegations................................................................................................. 78
P a g e | 27
Rule: S-C privilege is waived if claimant established that SCS are liable for prima facie case
of fraud. Solicitor would be required to produce these documents.....................78
Terms
Real Estate Transactions refers to resale of residential or commercial properties
Vendor: refers to party selling the property
Listing broker: refers to vendor's agent, b/c V will have signed listing agreement auth the broker to add property to list of
properties not for sale
Listing agreement - prescribes most, not all terms of agreement of listing agent for broker and V, includes an expiry
date, agents commission , indicates when and for what services commission is to be paid , may provide for payment of
commission for certain sales made after expiry of A.
Tail period designed to prevent V from escaping obligation to pay commission by waiting until K expires and
then selling to P interested in property during currency of listing
Listing agent - auth agent to offer property for sale at specified listing price
(MLS) multiple listing service usually for residential properties, and all members of a regional real estate board will
receive the information pertaining to residential property for sale (sets out terms of exclusive, purchase price, and most
clients will sign listing agreement w/o seeing you
Open listing - A property listing that uses multiple REAS to sell property; agent that sells the property collects the
commission
P a g e | 28
Exclusive listing In effect for a fixed period of time during which listing agent will be sole recipient earns commission, V
pays less commission, but property not listed through MLS
Purchaser (buyer): refers to party buying the property. V's agent paid indirectly by P.
Buyer's Representation Agreement (BRA) - establishes written K bt/w P & agent by which agent exclusively represents
P, P can either pay commission directly to agent or to allow agent to be paid by sharing the listing agent's commission
being paid by V
Mutual good faith duty of P & V
Vendor's Remorse : V sells property and then a week later or month later, V says that I never should have sold
Closing Dates date on which conveyance takes effect
Time is of the essence - if the clause is breached or contravened, then V was not required to relinquish title to P
Holdover provisions Refers to a K term that holds seller (and/or purchase) liable to pay commission to real estate agent
after listing agreement or BRA expires if the sale property is sold within X days of the agreement expiry date (BRA - or if P
purchases a home within X days)
cts
P however, made it a condition of offer that his identity would not be disclosed to the vendor.
Offer was submitted by agent, acting as nominee for the undisclosed purchaser -- a fact clearly set out in the
offer. D vendor accepted the offer, but refused to pay the agent his commission on the grounds that he would
not have dealt with P question if he had known his identity and that the agent had been working for such
purchaser to the sacrifice of the vendor's interests. Ps agent sued for commission.
ld/
le
SCC CARTWRIGHT J
cts
Held: Agent Entitled to his Commission; Agent did not breach his duty. Full disclosure
that the offer was made on behalf of an undisclosed purchaser
RULE: Agent must act honestly and loyally w/ strictest good faith towards his
principal and for the principals exclusive benefit. There must be full disclosure
to the principal of all material circumstances within agents knowledge. If
agent has breached its duty, he will be disentitled to commission (the hallmark of FD
in a SC relationship and in agent-client relationship)
agent did have a duty to act in vendors interests but no evidence that agent sacrificed interests of the vendor
There V had choices & could have, (i) refused to consider the offer, (ii) said that he would not accept the offer
if the purchaser were a certain person, or (iii) accepted the offer.
Having decided to accept the offer, vendor could not claim the agent breached his duty by failing to disclose
here identity of purchaser was not material
Ocean City Realty Limited v. A & M Holdings Ltd. (1987) BCCA Scope of duty
Vendor listed with agent and stipulated that he was firm on his asking price. Listing agent was to get 91K
commission. Purchaser offered to pay full price on the condition that he get of the listing agents
commission. Agent agreed, but did not disclose to principle. Vendor discovered side deal, refused to pay
P a g e | 29
commission.
eld: CA agent breached her fiduciary duty by failing to disclose - not entitled to
mmission
uty to disclose not confined to instances where agent has gained an advantage, where
e info might affect the value of the property or where a conflict of interest exists
le: Whether RE agent is required to make disclosure of information in question is an objective test ; what a
asonable agent in similar circumstances would consider as likely to influence the conduct of the principal. Court
ys it is not up to the agent to make an arbitrary decision. When in doubt, agent must be disclose,
al judge held there was no conflict, no need to disclose
Unlike TD, CA found that duty of disclosure not confined to instances where agent has gained an
advantage, where the info might affect the value of the property or where a conflict of interest exists. When
in doubt agent must disclose.
Raso v. Dionigi (1993), 12 O.R. (3d) 580 (Ont. C.A.)- dual agency
P seeking for investment property hired her brother in law as sellers agent. Agent approached V who was not
listing at the time and secured a listing agreement - agent acting for P and V in this case. An offer was made in
the maiden name of the purchaser to deliberately conceal P's relationship to agent.
V discovered this; refused to closeP sued for specific performance, and agent sued for commission
ULE: If full disclosure not made then an agent is prohibited from acting for both P & V.
ELD: agent not entitled to commission b/c of breach of duty to obtain highest
ossible price for sale property, and purchasers not entitled to an equitable relief,
der for SP, b/c they were complicit in breach. No equitable relief without clean hands
al Trial: found that agent breached fiduciary duty in not disclosing but awarded specific performance and commission on
the basis that the vendor got his asking price and would have closed even if he knew identity of purchaser but would not
have signed listing agreement, instead involving own agent.
CA: this was a breach of fiduciary duty - agent failed to make full disclosure of material fact, that the price was fair
was irrelevant
consequence of breach of FID duty: Once it has been determined that there has been non disclosure of material fact by
agent (breach of fiduciary duty), ....it is not open to seek to prove that the transaction would have closed even if disclosure
made
Use of P's maiden name was a deliberate strategy used to conceal P's relationship to A (brother & sister in law)
P a g e | 30
cts
le
ld
Knoch Estate v. Jon Picken Ltd. (1991) (Ont. C.A.) SA does not owe a default FD to V
without more, though cannot deceive/mislead, or withhold material info about offer
submitted.
Manufacturer, Caterpillar, retains A, Jon Picken, to locate a property for new plant. A finds Knoch Estate.
Royal Trust - listing agent for Knoch property. A does not inform Caterpillar about this property, but advised a
developer to purchase it, Mantella & Sons, who signs purchase agreement for $2.1 million, listing price was
$2.5. J submits offer to LA, Royal Trust. No direct contact bt/w V & SA/LA though lang of offer names both
as agents in trust for V- KE, who sues J for breach of FD in failing to disclose listing price not highest price
possible. PL argues APS t treats SA and LA as vendor's agent, so duty to disclose applies to SA.
V discovered the subsequent sale (pre closing) and sued agent for BDF for not disclosing that caterpillar was
interested. Asked for damages = DIF [2 sale prices] plus commission collected by agent
Ratio: Selling Agent does not owe a FD to V unless there are (1)direct dealings such
that establish (2) V reposed trust and confidence in selling agent
Held: JP, SA owed no duty to Knoch Estate b/c no direct dealings bt/w them though APS
named him and listing agents, as agents. Knoch Estate had a listing agent, Royal Trust.
V placed no trust in D, so SA was not required to disclose the existence of other
potential purchasers.
entury 21 Real Realty Inc. v. Campbell, (2012) BRA - PUs agent is not entitled to
mmission if he fails to explain the nature of the BRA; gives rise to an unconscionable
ansact OR if duration of BRA is too long, i.e. one year;
eld: PU A did not explain BRA, so PU not required to pay commission.
cts
P a g e | 31
Agent as Purchaser
s.32. (1) without providing appropriate notice, no real estate agent shall directly or indirectly
a) purchase, lease, exchange or otherwise acquire for himself, herself, or itself, any interest in
real estate, or make an
b) offer to do so; or
c) divest himself, herself, or itself of any interest in real estate, or make an offer to do so.
S 32(2) Contents of Notice .. in subsection (1) shall be in writing and shall include,
d) a statement that the registrant is a brokerage, broker or salesperson, as the case may be;
e) full disclosure of all facts within the registrants knowledge that affect or will affect the
value of the real estate
ule: Rejection of a a PUs offer does not terminate the fiduciary relationship b/w PU agent
nd PU
PA breached FD to PU/D by failing to disclose intent to purchase, though PAs commission
as paid by V.
eld: D held liable for cost of repairs, 6.7 K. PL held liable for breach of FD, D was awarded
stitutionary damages disgorged profits + costs
cts
P a g e | 32
atio: Fiduciary must avoid conflict of interest, like reaping personal gain, with
rincipal and must always make full disclosure; value of agency relationship would be
mpletely destroyed if fiduciary allowed to act in direct competition with principal
easoning: FR found, PL relied on A for advice. A held liable for breach of FD, in failing to
sclose intent to purchase, and used comp w limited assets in Hs name to purchase ppty,
e Raso, A had actual or constructive knowledge of Ws misuse of confidential info
eld: PL was entitled to remedial CT for UR claim for breach of FD.
ote UR contribution here: confidential info that A gained from PU, PL, in course of
lationship
cts
Soulos v. Korkontzilas (1997) SCC (breach of FD, failed to disclose intent to purchase)
P wishes to purchase a building in which his bank was a tenant. PA, D, agreed to act for P who makes an
offer on his behalf for $250,000, but V told A that offer of $265,000 would be accepted. Rather than
relaying this info to P, A (D) purchases property for himself.
ULE: CT can exist w/o UR - where good conscience so dictates for breach of duty of
yaltyto deter fiduciaries from breaching their duty of loyalty ( Diss, Sopinka J, UR is a
quisite element to UR claim)
ELD: The broker breached the equitable duty of loyalty , by failing to disclose Vs preferred
ice, and submitted a 2nd offer for that price w/o disclosing to his client, enriched by title to
e asset.
cts
F: PU could not afford to buy mobile trailor, Agent does and so informs her. She rents from
him. Ppty increases in value.
Gutman v Vaillaincourt (1996) dual agency, A liable, failed to make full & frank disclosure
V retained agent, to list on his behalf .A decided to buy property personally, and suggested that the vendor
use his lawyer at closingWithin a few months of ownership, the agent subdivided the property into 5 lots and
sold for 120K (bought for 40).V discovered this and sued the agent for not disclosing that this could be done
ELD: Agent held liable for breach of FD. V was awarded disgorgement of profits, but
gent was entitled to commission. A could not prove transact was a righteous one, lacked
vidence that V had ILA about transact or that A had maintained full disclosure. He had no
oof about explaining that V could receive more. Court expected to receive a full written
atement about As discussion w V.
ULE: Where a selling agent owes a FD to vendor, the onus is on the selling agent
confirm acknowledgement of the circumstances by the vendor.
rice paid for property must be adequate and the transaction must be a righteous one", and
e price paid to the principal should be as advantageous "...as a price of obtained from a TP
P a g e | 33
Oscar United Group Inc. v. Chee, 2012 ONSC (like Hodgkinson, punitive damages)
atio: A functional approach used to assess whether a contractual term requiring a party to
ay a fee constitutes a commission payment based on all surrounding circumstances. If it is
nsidered as commission, service provider is not entitled to this payment unless a RE agent.
eld: D is not liable to pay "introduction fee" to the MB. Facts support that it is a commission
e.
cts
Metropolitan Trust Co. v. Latvala et al (1979) (clients not liable to pay commission after HP)
P and V were introduced during the listing period, formed a deal around Dec 28, and purposely waited until
after the expiry of the hold over period, after Dec 31, to sign the APS (attempt to evade commissions)
eld: "It is also clear that the parties conducted themselves deliberately designed to avoid
ayment of the commission but it's a K," so the agent did not receive commission
ULE: An agent is not entitled to commission if the deal is closed after the holdover period,
espite the deliberate, underhanded tactics of the Purchaser and Vendor.
Mon Boulot Enterprises Ltd. v. Kotschorek (1980) MB QC (clients liable for post HP
commission)
ELD: Defendant clients liable to pay commission. Agent(s) had effected sale and were
strumental to it prior to expiration of listing agreement
ULE: IF an agent is the causa causans (last link in the chain of a sale transaction) which
ecomes effective during the HP, the agent is entitled to commission although the APS was
ot signed until after H period.
P a g e | 34
First City Realty Ltd. v. Hermans (2004) (cond precedent for As entitlement to commission)
ACTS V enters into listing agreement with Agent. V signs deal, avoids contact w Agent to evade
yment of commission. V sues lawyer on the basis that lawyer should not have disclosed the private/
nfidential agreement to agent who misrepresented herself as V in order to obtain the APS
nfidential information. Secretary of office sent it.
ELD: L not held liable for negligence in releasing APS to misrepresenting agent.
ULE: V had signed a listing agreement and agreed to pay agent so, could not try to get out
it by passing the buck to the lawyer.
T.L. Willaert Realty Ltd. v. Fody,2013 ONSC (V liable for commission, RET did not conclude)
: Agent was entitled to commission. V acted in bad faith by evading agent that tried to
peatedly contact him once he found offer according to his instructions..
ule: If V enters enters into an agreement containing provision to pay commission based on
urchase,
e may be liable if acting in bad faith.
Deposits
s. 111 Crt of Justice Act: Crt has right to grant relief against penalties &
forfeitures.
Principle (deposits in re to condos are often exceptional to this rule)
V is entitled to keep deposit, IF a PU breaches APS, unless, (2) PU can show, on a BOP, that
(3)it equity intervenes to prevent an injustice if it would be unconscionable to allow V
to keep a disproportionately large sum
IF a deposit is a partial payment, (1)V must prove damages that exceed value of PP upon
breach (2)in order to retain some or all of the balance paid
DePalma v. Runnymede (1950) ONCA - PU sent payment did not specify if deposit or
PP
cts
Craig v. Mohawk Metal Ltd. (1976) OR (PU still forfeits deposit if V sells to P2 @ higher price)
The sale price of property was 1.14M; P gave 25K deposit given and defaulted. V resold property after
Purchaser breach for more ie. 1.252M; P sued to get back deposit, claiming no damages were suffered
P a g e | 35
and that there should be relief from forfeiture.
ELD: No relief from forfeiture for the defaulting buyer. Deposit was only 2 % of
ale price
endor was a shell company (no assets).
ule: To determine whether or not payment is a penalty , the court will examine all
ctual circumstances such as: Who was thePU? Company with limited assets or
hell company?
nancial viability of purchaser? What is Vs exposure to damages? When will the
ansaction close? (If longer period, deposit can be larger)What percentage of sale
rice the deposit represents?
Porto v. DiDomizio (1996), 50 R.P.R. (2d) 113
PU gives V two deposits, totaling 31.25 % of purchase price. PU gave 2 nd for later closing
ate.
V entitled to compensatory damages, and 1st deposit, 10K, but had to return 2 nd deposit of
50K
ULE: Deposits can safely vary , 3-10% of sale price depending on the time between the
urchase & close date
Cumberland Realty Group Ltd. v. B.L.T. Holdings Lid. (1984), (Alta C.A))(MEE & MOR)
cts Language in mort agreement, "parties agree this is a fair estimate of the damages, and it is not a penalty. If we
e borrowers are in breach, then commitment fee is forfeited to lender."
rrower PL seeks loan of 3M, gives 61.5 K commitment. Borrower decides to withdraw from loan, and asks for
und less costs. Lender refuses, claims he is keeping it as liquidated damages.
rrower argues amount is too high to be a fair estimate of damages, and was therefore a penalty
ULE: if word deposit is used it is a guarantee of performance and will be lost w/o
roof of damages
ELD: proportion not unconscionable and V entitled to retain whole deposit w/o proof of
amages. 10K deposit on sale price of 280, represented 3.6% (SCC gave back 700 to V;
ppeal allowed)
P a g e | 36
B.G Preeco (Pacific Coast) Ltd. v. Bond Street Developments 1989- damages for fraud
misrep
ULE: The proper award for fraudulent misrepresentation is the amount required to
ut the innocent party in the position they would have been in had there been no fraud
eld: D shell company liable for damages for 400 K. V would have been entitled to 500K but
r the fraudulent misrep. D misrepresented itself as a shelf company without assets.
ote: PU was not liable for damages incurred from subsequent sale of 1.7 M. Market went
ur after PU dropped out transact, and sold to P2 at 3M vs. original sale price for P1 at 4.7
cts
Conditional Agreements
eld: Z could not unilaterally waive "true TCP" (which depends on the existence of a TP).
ondition not satisfied, but no breach, so not entitled to SP
ule: Neither party to K can waive TCP obligation dependent upon a future uncertain &
xternal event depends upon the existence of a TP. Absent a promise, there can be no breach
K until event does occur
cts
O'Reilly v. Marketers Diversified Inc., [1969] S.C.R PU could not waive TCP w/o right
of waiver
P agrees to buy property from V on condition that he is able to buy adjoining property but this did not
occur; purchaser wanted to waive condition anyhow
ule: A true condition precedent cannot be unilaterally waived (Zhilka), unless a purchaser
inserts a agreement a right of waiver in the agreement
eld: The TCP in this case cannot be waived in the absence of the of the right of waiver
clause
cts
Barnett v. Harrison, [1976] 2 S.C.R. 531 141 affirms Turney, no compelling reason
not to
APS contained conditions inserted by P, "necessary approval as to site plan and zoning be sought
and obtained subject to certain time limits. Right of waiver was not imposed on zoning condition. P
was not able to fulfill conditions despite best efforts, and sent letter of waiver to forego all conditions.
V refused to close on grounds was APS conditions had not been fulfilled. Market value of property
increased and V wants to sell to someone else. P brings an action for SP and claims he waived
compliance of conditions solely for his benefit.
P a g e | 37
ULE: A PU does not have an implied right to waive a TCP unless he establishes a compelling
ason for doing so (diss Laskin J, PU should have implied right of waiver on conds inserted
r his benefit)
SIMPLE CONDITIONS
Beauchamp v Beauchamp
cts - APS for 15K conditional for 15 days on purchaser obtaining first mortgage at 10K and 2 nd MT for 2.5K for 5
ars. P got one mortgage for 12 K and V did not want to close arguing that condition not met
ULE: condition specifying financing is an exception to Turney so long as vendor paid in full
eld: V required to close. Cond of financing not TCP, loosely interpreted, true interest of V
as , be paid in full
ULE: If a party wishes to benefit from a right of waiver under condition, he is contractually
bliged to communicate waiver to other party within that time (time is of the essence)
ELD: PU did not waive CP; not entitled to SP; (Client could sue for L for negligence for failing
follow clients instructions)
cts
McIlroy v. Stanton (1999) (IF client instructs, his L has legal obligation to try & avoid transact)
P agreed to buy property for son returning to Canada, and decided to purchase a property for him near
Kingston, at 35K, on condition that P would receive septic tank approval by June 22. Son changed his
mind and was no longer returning. P instructed lawyer to get them out of the deal if possible, but lawyer
searched title and found no defect. Lawyer indicated that if approval is not received by June 22, then P
could get out of deal. V faxed approval to lawyer on June 24, but date of approval indicates June 22
(although it was altered to show June 22, because actual approval date is June 24). Lawyer goes to
registry to close transaction and obtains original certificate indicating that approval date was June 24,
but lawyer neglected to notice this. P sells property & take loss; V changed approval to look like the
22nd. Ps sue lawyer for failing to check against original
alysis
the lawyers retainer was originally to act on purchase of transaction, but the retainer changed and
became to get the purchasers out of the transaction: for this the lawyer should have looked at the
originals
despite that checking faxes as against original was not standard practice, times have changed: frauds
are now being perpetrated & lawyer breached retainer
P a g e | 38
Harland v. Fancsali (1994), 21 O.R. (3d) 798 fraudulent misrep & waiver of cond.
cts - P could not satisfy APS cond to sell his house w/in a few months but P wanted the ppty . V had right of first
usal cond, could require PU to waive cond if V receives 2nd offer he is willing to accept subject to notice to PU. V
ould have refused to sell to P at lower price while waiving conditions. PU agent suggested to put in another
er not at 380, but at 370K instead of conditional, in the maiden name of PUS Wife V tells PU there is another
icer, P1s dont waive the cond & V sells to the W for 370
er closing vendor finds out what had occurred, and sues the purchaser - he would not have closed if he
ew: sued for 10K
ATIO: Maiden name or shell company may be used to purchase a property unless course of
nduct is done for the purposes of misrepresentation
RAUD MISREP: D made (1) false representation of fact, (2) FR made w knowledge or
ckless as to its falsity, (3) Representation made with intention that it should be acted upon
y PL; (4) PL acted upon misrepresentation, (4) PL suffered damages by so doing.
ELD: V entitled to recover compensatory and punitive damages. P liable for tort of deceit.
US misrepresented 2nd offer by way of first PUs maiden name with intent to deceive. V acted
pon it by accepting 2nd offer at lower price and waived cond. But for the deceit, V would
ave received 380K for sale vs. 370K
cts
1375687 Ontario Ltd. v. Novatec Construction Ltd. (1999) estoppel & time limits on cond
Right of waiver on a due diligence condition imposes a time limit such that COND must be waived by Nov
15, at 4:00 PM, or agreement is void
PU had not finished due diligence to satisfy itself that it wanted to buy property and at 3:23 , L for PU calls
Vs SCr and asks for an extension of time for the waiver of condition wants one day extra
L for V, said he said he didnt think it would be a problem, but he had to check with client -- who
refused. PU waives cond after 4PM, time lmit on cond has expired, V calls off deal
ule: L cannot bind principal without instructions to act; but if they are slipshod with words,
liance may bind principal
ELD: V could not rely on the time of the essence provision due to Ls representation that V
ould probably grant the time extension, led to a clear expectation that the 4:00 deadline
ould not be insisted upon. V is estopped, b/c of PUs reliance onrepresentation, from
enying there was an extension of the COND period.
Demeri v Kwan & Kwan Ltd. [2008]- 2 notices of waiver are sent due to ambig conds clauses,
struck as null and void
eld: APS is void for want of certainty b/c the delivery of two waivers created ambiguity
ule: In an APS, Waiver conds are strictly interpreted. If a waiver cond is ambiguous, it will
e void for want of certainty, the court will not enforce it.
cts
P a g e | 39
that it got to Mckee personally that day. After 6 :00 PM the backup agreement was triggered.
V entered into a backup agreement conditional upon non-performance of initial agreement
eld: 1st Agreement is not binding b/c P did not deliver notice of waiver in accordance with
elivery requirements applicable to waiver of due diligence condition; prov interpreted
elivery as seller requiring notice be personally delivered to V in person at Vs address,
elivery to home address was not sufficient
ule: The court must contextually interpret the notice of waiver of the due diligence
ndition by examining the language of the agreement as a whole and what it contemplates,
rrounding provision, industry standards
reference plan surveyed map of the ppty, does not guarantee presence of service,
hools roads
gistered plan registered with Ministry, approval of Committee of Adjustments
What is abutting land at any point? Land that meets, Land that meets at a corner like a
checkboard does not breach the Land Planning Act
s 50: No interest in land unless s 50 of the Planning Acts is complied with; no person shall
transfer land or mortgage enter into an agreement with respect to land that involves an interest
that goes for 21 years or more unless person does not own any abutting land
s 21: If you breach any of the provs of Act, you do not acquire any interests in land. IF you give
a deed or transfer in breach of Act, PU and lender barred from title acquisition or charge/lean on
land respectively
Facts
incurred up to the limits of the policy policy issued that title has no defects ;for
certain stated risks; - no title, no marketability, no right to use the ppty as a single
fam residence, ppty access, no encumbrances, fraud
Example Purchase title insurance policy vs. spending cost of title search to ensure
residential area is zoned for residential purposes.
Aldercrest Depts. Ltd. v. Hunter (1970) ON CA affirms good faith duty in performing
TCP
Offer to purchase was subject to planning act approval for land severance; it was the Vs Kual obligation to obtain the
approval of the committee of adjustments pursuant to the act; After corresponding with members of the committee the
V was not confident about obtaining consent to transfer; never made a formal application for severance. V tried to
terminate the agreement, P brings action for specific performance
P a g e | 40
HELD: PU awarded SP. V liable for breach of good faith duty to satisfy cond. He merely
peculated app to Committee of Adjustments would fail w/o making an application based on
correspondence w committee members
RULE: Good faith duty exists upon party who bears onus of performing a TCP, is liable if in
breach.
Dynamic Transport Ltd. v. O.K. Detailing Ltd., [1978] 2 S.C.R. scope of good faith
duty
Facts
APS silent as to whether V or P would obtain this Planning Act approval. V did not make an application
to the adjustments committee. He then purported to cancel sale.
RULE: Implied term of K that the party who is responsible for satisfying the condition
precedent is under an obligation to do all that is necessary to satisfy the condition and
complete the sale.
IF party/vendor succeeds in satisfying the condition the property must be conveyed;
IF party acts in good faith and is unsuccessful, then the K is terminated;
IF party does nothing, liable for damages or injunction of performance
HELD: V liable for breach of good faith duty to perform this cond.Court ordered a mandatory
injunction that V do so
BEM Enterprises Ltd. v. Campeau Corporation (1980) BCSC, lead case, good faith duty
test
F Campeau (C), large successful and national company, owned the plaza and had Safeway as a tenant;
Safeway wished to expand the store and C approached the neighboring residents with offers to purchase their properties,
subject to 4 conditions including a condition of being able to purchase a specified number of properties and zoning approval;
If these conditions were not satisfied, C had the option to declare the agreement null and void, in which case all deposits
moneys were to be retained by the vendor(s) (unusual) ;
S later decided against expansion, as C failed to secure an anchor tenant - letters were sent early to V stating that C had
failed to satisfy the conditions; Sev Vs sued C, arguing it breached its good faith duty, sued for SP
TEST: The standard of conduct required of a party under its implied obligations is
objective, based on the party w implied obligation in like circumstances, having regard to
entire situation & parties themselves
Reasoning: C had honest belief that cond wouldnt be fulfilled after Safeway decides
against expansion, but court found it did not make one single step to try & obtain
ezoning approvals
Held: Judgment for PL Vs. Awarded damages for increase in market value from date of
breach less deposits paid. (CA reduced damages by 20% based on possible rejecting of
ezoning applications)
Evans v. Kouyas (1983) NSCA, lead case, often cited in ON good faith duty re:
financing cond
F APS was conditional on Purchaser obtaining necessary funds to complete transaction; PU meets with lender and
learns about high interest rates, which led him to conclude he could not afford financing terms. V sues 4 breach
P a g e | 41
Ratio: A reasonable PU makes financing application to satisfy good faith duty to satisfy a
financing cond OR does not decide to withdraw from APS unilaterally. TO research
prospective financing terms without more is insufficient to discharge duty. This does not
mean PU is bound to financing app he could not afford
Held: PU held liable for damages for BOK. (TC relied on fact that clause drafted so loosely to
permit PU to void w/o penalty) Here: PU met with lender, but made decision unilaterally.
Facts
737985 Ontario Ltd. v. Essex (1993) V discharged GF duty, refusal to make app not
mere speculation, unlike Aldercrest, refusal based on good auth
APS was conditional upon the P obtaining from the City of Windsor re-zoning of the property suitable to P
P wanted 155 townhouses but did not put explicitly in agreement. By-law only permits 142.
P went to the town planner in Windsor, the person instrumental in the bylaw, and the chief planner
said there was no chance to get what the P needed, so he didn't want to make a formal application
P argued he was entitled to a return of its deposit. PU is not bound to financing app he could not afford V
claimed that the deposit was forfeited. P sued for return of deposit
RULE: If a party has on good authority that a cond will not be satisfied, then duty of good
aith is fulfilled.
HELD: Deposit returned: P was not required to make application in light of Chief Planners
predicting rejected of application. PU appropriately exercised discretion honestly and in
good faith under APS cond, that rezoning obtained would not suitable.
Eastwalsh Homes Ltd. v. Anatal Developments Ltd. (1990 )- probability of approval in
awarding damages considered, like BEM Enterprises, mere probability was lower
F P bought a 100 acre parcel and entered into APS conditional on plan of subdivision being registered by the
V by a certain date prior to closing (vendor obliged to use best efforts to register plan); P bought property for
6M; By that certain date the plan was not registered; V offers back the deposit; P refuses to take it back as
property now worth 10M; V does not want to complete sale; purchaser brought an action against the vendor to
say there was no good faith dealings in seeking approval;
RULE: If P cannot prove loss of a definite benefit but only the loss of the "chance" of
eceiving a benefit, the court will estimate the value of the lost chance and award damages
proportionately
HELD
TRIAL: V liable for breach of good faith duty. Damages assessed at 20% of what PU would
have received if V were successful w registering subdivision
CA: Nominal damages & costs NWS good faith duty breach b/c V would not likely
have been successful in satisfying cond according to time limit
cts
P a g e | 42
atio: The sole discretion clause can only be relied upon (1) by a party acting honestly
and in good faith. (2)The extent to which the proper exercise of a sole discretion clause is
measured by objective or by subjective interests of a party to the agreement is a matter of
K interpretation
easoning: PUS did not rely on cond. to escape APS or purchase less expensive house, had
financial means to do so, but repairs were deficiencies that were inconveniences. Lang of
Discretionary TCP did not entitle V to repair minor deficiencies if found or to decide
whether report findings were satisfactory. Clause did not envisage such rights or it
would have been so stated.
ELD: P was entitled to return of deposit, it was too high.
cts
1061590 Ontario Limited v. Ontario Jockey Club (1995), 21 O.R. good faith issue on
SJ
82 parcel of land listed with sale price of 35 million dollars, APS subject to condition that P, at his
sole discretion, has a right to terminate if it believed that environmental contamination of the
land or soil conditions would increase the cost of or delay development
P commissioned an environmental site assessment, result was that cost of clean up was 8 million, and
there was contamination
P agreed to supply results of test, whether it closed or not
V got copy of reports; rejected the validity of the experts
V then retains is his own inspector who did not find the conclusions or estimates to be valid
P claimed it was his discretion
Motion for SJ: P argued there was no need for a trial and wanted deposit refunded
P claims acting reasonably and in good faith, and is entitled to deposit.
P a g e | 43
ELD: P acted reasonably in relying on reports, retained competent experts and was entitled
rely on the opinions of such experts informing the belief that there was environmental
ntamination
ULE: P need not prove that experts are right, just that he acted reasonably in relying on
ualified experts
Davey v. Woolley. Hames. Dale & Dingwall (1982), (Ont.C.A)- onus of test, L breached
duty
cts
Transaction was a purchase of a business. Davey's business was up for sale and negotiated terms of sale
independently with P who owned a company. Cond of APS was right of P to assign his interest to company
controlled by him, in which retained L had a financial interest. Lawyer got acknowledgement that he was acting for
both parties. V lost money after deal failed.
ULE: L had a conflict of interest which impaired or was likely to impair his ability to act with
the bests interests of both clients. . Here, V should have received ILA at minimum or
advised to go elsewhere
EST The onus is on lawyer to provide that he has acted in best interests and has
discharged duties as dual agent. . Even on a simple RE Transaction, conflicts can manifest
by not considering time limits.
ELD: Written consent and waiver obtained from clients were not sufficient acts not
exonerate L
Smit v. Alfield Farms Ltd. (1982) (B.C.S.C.) conflict of interest arises in RET. L held liable
P entered into APS for farming property (Dr. from Holland); used same lawyer as V (Vs friend); offer conditional on P
obtaining immigrant status; deposit was 50K refundable; V owed a lot of money to bank; bank noticed refundable deposit
and told V to have it changed to non refundable; condition was for 6 mo, 800K sale price; V and P met w/ lawyer to
change condition; V told P it was simply a formality and that the deposit will still be refundable (oral K); P was puzzled
but accepted Vs handshake on this; lawyer watched all of this but did not explain legal consequences in details (i.e. cursory
promise), did not suggest that P was taking significant risk of losing deposit; condition not satisfied, V kept deposit; P sued
Lawyer
P a g e | 44
ELD:L liable for negligence. Failure to exercise reasonable care, by not explaining clearly
wyer failed to difference between refundable and non-refundable advice, should have
structed him to seek ILA and caution about relying on oral promise
ULE: Lawyers must advise to conflicts of of interest as they as they become known
cts
Korz v. St. Pierre (1987), 61 O.R. (2d) 609 (Ont. CA.)- L in joint transact not as L
Lawyer entered into business transaction with his client. parties involved in this case - successful
druggist, chief of police, business person & lawyer. Bank requires that all parties sign loan
agreement jointly and severally (confers right to bank to pursue legal action against all parties to
extract assets from party with most financial resources). The lawyer protected himself b/c he had no
assets, they were all in name of spouse &failed to disclose to other parties. The bank approved financing
because there was enough security. 3 parties sued lawyer after being successfully sued by bank for
failure to disclose an absence of assets
eld Ls failure to make disclosure was a breach of FD, his judgement proof status, assets,
in his Ws name, to his former clients due to ethics of profession and fairness. to hold
herwise would put lawyers in unfair advantageous position
ULE: When transacting with client, L must make full disclosure of all material information
ven if not acting in capacity as a lawyer
cts
Non Est Factum (Marvco) requires that the contractor or testator who now seeks to set
aside the document establish that (1)s/he had intended to sign a document of a fundamentally
different nature. (2) Cover cases of undue influence , relationship of confidence and pressures
contractor or testator to act in a certain manner Exception: NEF defence does not apply if
the donor's lack of knowledge about the circumstances arises from laziness or carelessness as
between two innocent parties who suffer from the fraud of a third but one of the innocent parties
is negligent.
Bulut v. Carter, 2014 ONCA 424- sons reliance NEF defence fails due to careless, no misrep
B and , on behalf of company, (and personally) guaranteed a promissory note for C, and were engaged
in various business dealings together. Shareholders, various C family members, also executed the
guarantee. Company is now bankrupt. B seeking to enforce guarantee of promissory note of $300,000
against C.
P a g e | 45
ule: The defence of non est factum is available to someone who, as a result of
isrepresentation, has signed a document mistaken as to its nature and character and who
as not been careless in doing so.
eld: Sons not entitled to rely on defence of NEF. They were careless in signing
ocument, did not read agreement, asks questions or seek ILA. No misrepresentation found
ere.
hey thought they were acting in capacity as shareholders, not personally liable.
cts
Marvo Color Research Ltd. v. Harris (1982)NEF defence fails if party is careless &
sophisticated
Daughter's partner wishes to borrow money from her parents. He informed parents that it was an
extension of existing mortgage (loan), and parents co-signed agreement unknowingly that it was a
mortgage for daughter's partner. Bank enforces mortgage agreement security against parents
ule: The purpose of non est facum is to protect innocent parties, not those who changed
eir position due to carelenssness . Carelessness will disentitle a party to a document, from
lying on non est factum ; depends on the factual circumstances. sophistication of parties
ELD: parents were barred by their carelessness from pleading non est factum so as not to
e bound by MT
rties were English speaking, literate, had signed 3 other mortgage agreements.
cts
ELD: solicitor is liable to indemnify the bank as his actions fell below standard of care of
reasonable solicitor
ULE: L can have dual agency in mortgage transaction, (1) subject to duty of full
disclosure.
(2)Duty to ensure correct parties are executing legal docs.
L took no steps to contact H outside of country, should have)
cts
Martin v. Goldfarb (1997)- obligation to disclose to other party if 1 party has criminal record
At time of action, M was worth 18 million dollars, limited knowledge in financial matters.. He decides to enter
into an agreement with Axton, a disbarred lawyer with a criminal conviction. The partner retains a reputable
business lawyer. Axton asks lawyer not to disclose his criminal past. Martin lost everything subsequent to
partnership, and now employed as a security guard. His health is failing and alleges that he fallen from a
position of relative affluence to a discharged bankruptee due to Ax
P a g e | 46
ule: Lawyer has an obligation to make full disclosure of all material facts to a client's
interest when acting for both sides (particularly where it may impact judgement of one of
the parties)
: L liable for FD breach. He failed to discharge his FD of loyalty to PU by failing to disclose
that other party in transact had a criminal record , a material fact to PLs well-being, & may
have impacted client's judgement
d: the mortgage was of no force or effect. Lender had a duty to insist on ILA. Mum of
rower refused.
LE: The has a duty to insist upon ILA without which they must refuse the loan even absent
Where transaction is unconscionable[unfair advantage; trans clearly adverse to borrower;
undue influence where guarantor is spouse, child or family member ].
Webb v. Tomlinson. [2006] (Ont. S.C.)- Lawyer not liable, he provided ILA
W was born in 1942, she has 3 adult children and was married, separated in 84 and eventually divorced. She
had a grade 11 education, worked as admin assistant at Toronto Psychiatric Hospital. 41K salary
Ex H asks W to take out a 2nd mortgage on the house from the bank. The banks draws up paper. H & W meet
with lawyer, who refers W to a lawyer, for ILA (D).
H defaulted on loan. W did understand that if husband defaulted, W will be responsible for mortgage. W
sues Thomlinson on the basis that T did not explain the risk of new businesses.
LD: L, as a dual agent, not liable as he fulfilled duty to provide other party with
e: When giving ILA, the solicitor must explain the nature of the documents , but it may not
enough to protect against liability for negligence. LS ought to make e detailed memos, and
ply explaining the risk of the document may not be enough. (Assessment of credibility,
us on L)
y view, Jean knew what she was doing. Her decision to lend money on the home was not ill considered or rash and
bably understood the risks of the transaction even before the meeting because she'd entered into mortgage
sactions before. She believed the husband would pay back the loan
ing of fact was made that lawyer actually discussed the role or the risk of the business
ccepted evidence of L , conflicting evidence
yer testified that as an articling student he took ILAS retainers seriously, and produced 4 pages of handwritten
s during and that the conclusion of the meetings showing he that he explained, nature and consequences of the
.
P a g e | 47
Royal Bank of Canada v 2240094 Ontario Inc, 2013 ONSC ILA & guarantors
Father took out loan, 100K through a limited comp. Father signed a loan to the bank and father asked his
two children to go to the bank as guarantees. The adult children didn't receive ILA. The loan guarantors had
previously signed a guarantee under which they agreed to be jointly and severally liable for a corporations
indebtedness. When the corporation defaulted on its loan from the bank, the guarantors did not make payment.
Bank sues adult children to enforce K.
tio: A legal determination cannot be made SJ as to whether a bank can enforce a defaulted
n against the guarantor of the principal where the merit of the action depends to a great
ent on credibility.
ld: Judge refused to make a disposition on summary judgement; trial required;L would
e explained the liability on the risks of the guarantee was substantial , & would depend on
her's health & success of business
"The evidentiary record shows that the two boys were students, no personal experiences (19 and 21
years old). The father was running a business where he needed the loan (pool parlour and restaurant). The
bank also knew that the entire business depended on fathers health. Bank never told them about the risk with
the father getting sick and subsequent problems arising as a result.
King Lear
Bertolo v. Bank of Montreal (1987), 57 O.R. (2d) 577 (Ont. H.C.)
ILA from L in same firm not enough
cts
B is a widow of meagre means, not fluent in English lang, little schooling. Son had no capital, sought a bank
loan for $65,000 from BMO for a resto. Bank agrees to approve loan to mother, her house is used as security.
They went to a lawyer acting for both sides. L's partner advised mothe , made no notes, explained her
obligations, ensured she understood. Son fails business & defaults on loan, L tries to enforce loan against B.
aly
TJ found B is not fluent in Eng, unable to read, assets of a modest home, savings of $22,000 and did not take
part in negotiations for loan Bank recognized that B(mother) should have ILA
in the absence of ILA it cannot be concluded that transact was adequately explained to her: she did not
comprehend terms or make informed decision to enter K - the explanation of the lawyers was neither
sufficient nor independent
whole transact was manifestly unfair to the mother, who did not understand terms and potential
consequences
ULE: Partners or associates within same firm are not an entity sep and apart
om the firm or the member acting in a particular matter for the purpose of
voiding a conflict and providing ILA when L is acting on both side. If transact
nconscionable then equity may intervene to relieve the party from the K
ELD: Loan was manifestly disadvantageous to B in the absence of loan agreement being
dequately explained by IL representative.; unconscionable transaction . The bank ought to
ot be able to recover against B.
cts
P a g e | 48
limited to cheque signing so the bank sent their lawyer to the mothers home to have her sign a
general power of attorney - the lawyer gave the mother NO advice or explanation and she did not know
what the doc. was
The daughter took out 4 mortgages on the mothers home, $180,000"
HR clearly at fault for not disclosing knowledge of mother's mental capacity
Daughter defaults and HR seeks its security in the mothers home
eld: Lenders and Lawyers were held liable. The mother was fully indemnified. Court
tervened and mortgage was set aside
easons: Lawyers obtained consent from mother to enter into POA in slipshod and appalling
anner. She was described as not with it, and didnt know what POA instrument was.
nlike Marvco, mother lacked capacity
atio: Lawyer in dual agency is responsible for fully explaining nature of doc to person
xecuting it who must be informed of all consequences, which may require ILA in some cases,
herwise equity may intervene
cts
ule: Financial POA is only engaged if contractor is incapable of managing his own
ffairs
easoning: Here, children had financial POA. Removing an individual's autonomy is
xtremely significant. P is entitled to live his life as he wishes unless he is incompetent of
anaging his own affairs.
eld: Title be re-conveyed to father.
cts
Panko v. Simmonds, [1982] .Dual L failed to prove was not negligent where mum had no ILA
Son in law claims that M wants to transfer house. L agrees to prepare conveyance docs. P goes in alone to
lLr's office and then mother is called in. M signs deed & property is conveyed to daughter and son-in-law.
House is mortgaged for $100,000, couple defaults on mortgage agreement. House is up for foreclosure. M
sues lawyer. L testifies that he always explains significance of docs, but did not make notes.
atio: Where a lawyer acts as dual agent he ought to recommend 1 party obtain ILA if
lationship discloses elements of confidence and trust, which gives rise to a possible
onflict of interest.
eld: Lawyer held liable for negligence; failure to prove that he explained risks and
nsequences, and did not recommend mum retain ILA in light of the warning signs. Special
lationship bt/w son-in-law & donor.
alysis
P a g e | 49
appreciates the nature and effect of those documents.
The perils of practice have increased immeasurably. The duties of a SC have been greatly enlarged
It is imprudent to describe a property transfer as a simple deal
In this case, the lawyer is a respected SC with many years of experience. In a situation where he knew of
a potential for undue influence and despite warning signs, he failed to inquire into her circumstances to
fully understand the degree of information that was reaching her
tio
Ratio: A lawyer purporting to advise a client about transferring ppty rights must clarify the doc and ensure
the cilent appreciates the nature and effect of those documents...It is not enough to ensure that parent
understands the nature of property conveyance
Held: Lawyer liable for negligence
Stanciu v. Stanciu (2004)- valid conveyance of fee simple by gift does not create
implied life interest
Mother transferred all of her property to one of her children. Mother lived on transferred ppty. Mother had
another son who lost his job, and did not have any money. She invites son's family to live with her. The brother,
now the owner of the house, requires that the other brother pay rent. The owner brought an action against his
mother and brother for eviction.
ule There is no presumption of creation of a life interest on part of donor, where there is a
alid transfer of fee simple from mother to adult son. This requires express language in
strument of transfer
eld: The transfer was a gift.
Harding v. MeLeod (2004), ON mother conveys ppty of existing trust for son to daughter
cts
Mother forgot (living with dementia & advanced Alzeihmers) that she had an existing trust set up on a
ppty, for her three sons and conveys it to her youngest child.
atio A ppty within which there is an existing trust - mother as a trustee and son as
eneficiary, cannot be advanced as a gift to another; Held: Conveyance to daughter of no
gal effect.
alysis
After October 24, 1995, Mrs. Harding could not convey the farm to Linda as she had conveyed her legal
interest to the trustees. Absent her consent, the trustees could not convey the farm.
Danicki v. Danicki (1995), O.J. 3995valid gift to son. Law does not enforce moral laws, honour thy father and thy mother
asoning: Here, no undue influence, 101 year old mum had ILA re deed and made will one month later. Counsel
stified she was bright, with it, and assertive, give precise instructions.
cts
cts
Mother, 101 years old, decides to convey house to her "good son" - remainder in fee simple subject to her life
interest. They go to a lawyer that transfers property to the son. The daughter finds out about this two years
later. Mother wants to then convey to both son and daughter. Son refuses to do so.
Crepeau v. Crepeau (2012) ONSC 418- down payment for mortgage from mum to son
was loan.
Borrower goes to mother and asks for $30,000. Mother and borrower go to lender. The down payment is
being borrowed from mother. Bank wants mother to sign a gift letter, bank document, "This is to
confirm that a financial gift in the amount of $30K to assist in the purchase of a home. Thee
funds are being provided as a gift and will not ever be repaid." Without the letter, Scotiabank would
not have advanced the funds for the purchase of ppty. Mother returns home and tells her partner with
whom she is living about this. Partner starts calling son asking when money will be paid bank. These
calls become so abusive that police are called.
P a g e | 50
ule Where a gift is alleged, the law presumes a resulting trust, onus on donee to rebut the
esumption
est: donative intention, delivery, acceptance
easoning: Donative intention not met. The repayment was a means of facilitating lenders
greement. Sons gift letter contracted by donee son's oral promise by phone message to
pay his donor mother
cts
atio: An SC or firm in dual agency may be liable to indemnify a party that commences a
egligence action where SC /L does not provide adequate ILA even where that party knows
ffects of signing legal docs is vulnerable to claim that someone in the transaction was not
roperly notified, advised or protected
ELD: L liable for negligence and indemnification of Mrs Beaton against PT who
rovided security for mortg agreement. Mrs B liable to mortgage company for mortgage
rears
cts
P a g e | 51
P bought a house in Scarborough and noticed there was a retaining wall on back of ppty,which was higher
on one side than on the other. After P closes, soil leaks into house. City of Scarborough orders family to
vacate and they could not live in it for two years. P sues V In this case.
ysis
The V did not know that it was subject to a landslide. P was stuck with caveat emptor b/c P could not prove
that V knew that the defect was dangerous or likely to be dang
ld: V not liable b/c CE apply.. PU did not prove V had knowledge that retaining wall was
ject to landslide.
Gronau v. Schiamp Investments Ltd. (1974) Man QB
CE does not apply if V concealed patent def.
V sold P a building that had a structural defect, and was a crack along the side of the building. V made
cosmetic improvements to the building and then P finds out about defect after P closes.
LE: Caveat emptor does not exclude Vs liability where she actively conceals a
rceivable defect. Such conduct constitutes fraudulent misrepresentation which entitles
to sue the V after closing
ld: V liable for fraud misrep.
Dankovic v. St. Stanislaus - St. Casimirs Parish (1986), (ON) V liable, inoperable furnace
P buys a house; after closing finds that furnace is not working. Inspector says you need a new furnace, if
you keep it going it will be dangerous. It is winter time.
Marathon Realty v. Ginsberg (1982) ONCA deposit not returned, V not liable for city
downzone.
V was selling 100 acres of property, and was aware P was buying this land for redevelopment. V had an appraisal
before the property was zoned, and knew city intended to downzone the property, which would render it worthless
for P's intention to build a subdivision. P signed an agreement and before closing, P found out about this
downzoning and refused to close. P demands that deposit be returned on grounds that V knew ppty would be
rezoned and failed to disclose.
ld: V not liable for fraud misrep. CE applies; P was sophisticated , and should have entered
rranties/conds into APS; V had no direct comm with P prior to V's signing of the offer
tio: Silence as to a patent defect, discoverable upon proper diligence of other party, not
udulent in the absence of a special trust relationship. Generally there is no fiduciary duty
ed to PU by D.
Sevidal v. Chopra (1987) 64 OR disclose latent defects in vicinity of sale ppty
and before closing, P read in newspapers that area of sale ppty is contaminated. P goes to their lawyer, and
asking whether P must close transaction in light of the fact that premises for sale located on contaminated land
who advises him to close, that may lose deposit if he rescinds. L ins this case is sued. P closed but before
closing, V actually found out the property was contaminated and did not disclose.
P a g e | 52
tio: Before or after APS signed, before closing, V must disclose known latent defects of sale
perty or within its vicinity.
ld: D liable for intentionally withholding existence of latent defect . Agent & L fell below
C.
Goldstein v. Davison (1994) does not follow Marathon
P put in a clause V warrants that there will be no heritage designation on land; V takes clause out without
drawing attention to the change (he knows it may be designated property); V knew P wanted to develop the
land; Transaction closes, and heritage designation is implemented; P sues for damages b/c P was going to
develop now cant many restrictions; V says that he didnt have an obligation to disclose (not a patent/latent
defect); P says v failed to disclose a material fact and that V knew they were buying the property to develop it
and Vs failure to disclose was a fraudulent misrepresentation. In discoveries, P was able to prove that L/V/V
agent all knew
ld: CE applies. V not liable for PU failing to enter premises and inspection. Presence of
taminants was a patent defect by virtue of special pumps. Undisclosed intention to use
ustrially zoned sale ppty for residential in the future does not affect the bargain they made
tio: There may be a moral, but no legal obligation to disclose patent defect arises, unless V
vely concealed defect ( counter - or affects ppty value or makes it unusable for its
ended purpose Goldstein)
tio: Proximity of a nude beach to sale ppty, is not a defect (latent or patent) nor is there any
nger, therefore, there is no duty to disclose; Held: CE applies, no obligation to disclose
Antorisa Investments (2006) "As is where is" . excludes V from tort liability
Properties contaminated. V considers it to have been cleaned up. Put property up for bidding. No-liability
clause provided that if there was any contamination, P would be responsible for cleaning it up.
P wanted to buy this, so they did. Years later, found out there was more contamination that they expected, so
they brought a tort action based on fraud misrep Although K says no liability, argues the vendor had obligations
to disclose, especially when it is contaminated property. In this case, P could not prove there was any fraud
Kingspan v. Brantford (City) (2011), ONSC unclear of group claim to sale ppty a latent
defect
Kingspan came to Brantford to purchase ppty and transform it into an industrial state of the art office building
and purchases the property from the city. P hired architects and engineers and plan was produced after six
P a g e | 53
months. They got a permit and trucks came to build. Aboriginal were protesting at a picketing line, and no
building is permitted until a development fee is paid. The protocol of the tribe required that builder paid a
development fee and that tribe reserves right to change protocol. City hired a lawyer to obtain an injunction.
City obtained an injunction to prohibit picketing. OPP was called to enforce injunction, and to preserve the
peace. Kingspan sues City on basis that it failed to discharge obligation to disclose.
tio: Law is unclear as to whether a group claim to sale property in question for entitlement
ees for use of land, but not legal title, constitutes a latent defect where V had knowledge of
existence
y constitute a latent defect where V has knowledge thereof
ld: V citys SJ motion to dimiss action on SJ was dismissed. Law is unclear as to how
erpret clause.
te: APS contained "no claims" provision ; City represented that it was not aware of any
ms pending or threatened relating to the ownership or use of the Kingspan, but V knew FN
tests to sale were had been presented at Council.
Ricchio v. Rota (2011)- V may be liable on basis of misreps in SPIS, like Antorisa was not
here.
Action by Ricchio seeking payment of out-of-pocket expenses and punitive damages from the Rotas, for their
failure to disclose patent defects in their home prior to its sale to Ricchio.
Ricchio built home in 84, renovated basement five years later for daughter who lived in basement
until sale.
R and R enter into APS cond upon home inspection which recommended inter alia, a furnace leak be
repaired when AC was on. D undertook furnace repair, and gave letter from HVAC comp that there was no
prob with furnace itself.
P renovated basement w/in days of closing, resulting in large leakages. P obtained report indicating the
previous owners had carpet, which could have concealed the problem, & leakage would have been evidence
during rainy season. Inspector was not apprised of recent renovations, who testified had he know, report
would have been different.
latomasi v. Conciatori, 2011 ONSC 3819 follows Gronau liable for conceal of patent
defect, basement leakage and misrepresented
Action by the purchaser for negligent or fraudulent misrepresentation.
Before APS was binding, PU visited sale ppty many times. 1st time - patches in staircase from gar to
basement, V said necessary for AC installation; 2nd time - V said the repaired holes were put there for
scaffolding support ; never any basement leaking problems
After closing, PUs experienced basement leaking, and in course of investigation were informed of structural
problems . PU remedied the leaks and the structural problems and sought to recover the cost of the repairs,
which totalled $86,324, from V who took position work done was unnecessary, disproportionately expensive
The vendors made false representations to the purchasers, which they knew were false, and the purchasers
relied on those misrepresentations in entering into the agreement of purchase and sale. For the most part, the
plaintiffs had reasonably mitigated their damages and had ended up with nothing appreciably better than the
structurally sound, well-built, non-leaking home they believed they had purchased. However, as some of the
labour costs incurred by the purchasers were unreasonable, they were entitled only to damages of $70,198.
The vendors made false representations to the purchasers, which they knew were false, and the purchasers
relied on those misrepresentations in entering into the agreement of purchase and sale. For the most part, the
plaintiffs had reasonably mitigated their damages and had ended up with nothing appreciably better than the
structurally sound, well-built, non-leaking home they believed they had purchased. However, as some of the
labour costs incurred by the purchasers were unreasonable, they were entitled only to damages of $70,198.
P a g e | 54
ld: V held liable for fraudulent misrep in relation to patent defects; and cannot rely on EC.
did not fully discharge duty to mitigate, so not reimbursed for costs in relation to failure to
igate.
Halliwell v. Lazarus, 2012 ONCA 348- limited liability clause re: building inspection not
enforced
Appeal by Halliwell & cross-appeal by Lazarus from the decision in Halliwell's action for damages from
Lazarus, H's RE agent, & from Westbrook, a home inspector.
Halliwell made it clear to Lazarus that she wanted to purchase a home free from mould due to a severe allergy
to mould.Lazarus had a term inserted in the agreement pursuant to which Halliwell would take ownership of the
home in question allowing her to abort the transaction if not satisfied with the home inspector's report.
The inspection was completed in March 2006. The purchase closed May 1. By July 2006, Halliwell was
experiencing an allergic reaction to mould. She sued her agent and the home inspector.
TJ - %50 liable - inspector; PU and RE agent - 25% liable
Vendor - V was found not to be aware of mould. They were conscientious housekeepers and kept the house
very clean. Did they have children? Would they have let children play in the basement if there was mould?
P - found credible
BI investigation - was entirely cursory, not thorough
In this case, building inspector is retained by P and retainer contains limited liability clause, that in event of
any negligence, inspector is liable only for a limited amount. P signed such a retainer.
LLC does not apply in this case. It was not explained/highlighted by BI to KL. The documentation which limited
the scope of the inspection was not adequately brought to the attention of the P.
doc containing written limitation presented to P after inspection
BI's Communication fell below SOC - inconsistency bt/w oral and written forms of communication The
inspector failed to communicate adequately the concern for moisture presentation.
tio: Courts may not enforce limited liability/exclusionary clause if person retained fails to
lain nature and consequences of limited liability retainer, OR given after services provided.
ld: Building inspector 100% liable for damages for negligence. Inspector fell below SOC in
ng to explain the existence of a moisture problem. Agent did not breach SOC by breached
standard of care by failing to read, review and interpret the report for Halliwell. (It was
nd V had no knowledge, was not liable)
Bound v. Gray, 2011 ONSC 1567- pedo in area may not be latent defect, so no CE
PUs are spouses and have two young children. They discovered a person convicted of child pornography and
both V and other neighbours were aware of this knowledge. The Plaintiffs never lived in the property and do not
intend to.
tio: Law is unclear whether common knowledge of pedophile within vicinity of sale ppty
stitutes a latent defect that renders the property dangers our uninhabitable, and therefore
poses a duty of disclosure on V.
ld: Motion to dismiss action on SJ was dismissed and PL PUS awarded costs. Parties
tled.
e: Novel claim that raises policy issues - protection of children vs the reintegration of
eased sex offenders
Barbieri v Mastronardi 2014 ONCA 416 duty to disclose former marijuana grow-op of ppty
P bought a house, did not waive the right to have an inspection. Didn't get an SPIS, closed the transaction.
After closing the transaction, P found there had been a marijuana grow op operating there. After closing, P was
approached by neighbours letting them know the house had been used as a marijuana grow op.
Having failed to reach any C on the critical issues of mould, the TJ said even if the house had been completely
remediated, Vs would have to disclose due to "stigma attached to ppty".
CA said trial judge has to provide some insight into how they reached the legal conclusion, what the facts relied
P a g e | 55
upon were, and could not be decided on a summary judgement with the limited reasons the judge gave.
tio: CE may not apply, if sale property was used for purposes of marijuana grow-up, a duty
y arise on V to disclose its known existence b/c of stigma attached to property , so latent
ect, makes ppty uninhabitable
ld: Appeal allowed from D Vs b/c TJ on motion failed to give legal basis for his factual
dings. Trial required to discern whether V liable for damages for failure to disclose.
1784773 Ontario Inc. v. K-W Labour Association inc., 2014 ONCA CE applies to exclude V liability for r failure to disclose ppty may be haunted.
There is no direct evidence of economic loss or damage as a result of the stigma of a haunted property, nor is
there any direct evidence from anyone who observed any strange occurrences in the property
No evidence that P could present as to existence of ghost
D advertised that they owned a parcel of land and that it would be made into tennis courts. P brought an action
for injunction to prevent developers from developing
Condo marketed as having outdoor recreational area-. Disclosure Statement and related documents provided
that recreational area might not be built--Developer deciding to build townhouses on recreational area lands-Condominium corporation opposing use of recreation area lands for townhouses
tio : Condo developer vendor has a statutory duty of full disclosure in in K performance, but
es not extend to the bargaining process; Diss Wheeler J CML fiduciary duty of good faith
en circumstances warrant.
do docs are overloaded in favour of developer, there are certain statutory limitations now. RE brokers can create
endous hype. Legislation has come into effect allowing Pus s to opt out within ten days of signing APS.
jority: "P is required to get legal advice, review purchase material, make amendments to
S or don't buy. This not a purchase of paper plates, they were making a substantial
estment in residential housing units that most intended to be their homes. If they
ceeded without professional advice, that was their decision."
P a g e | 56
Liability - EC does not shield V liability, Vs can be vicariously liable for fraudulent
misrep of Agents (Semkuley; Scholl)
3. Negligent Misrepresentations
P a g e | 57
Claimant must demonstrate that (1) DOC based on spec relationship bt/w PL & D - V & PU,
(2) D made a false statement, (3) D was negligent in making false statement, therefore
breached DOC; (4) PL reasonably relied on false statement (5) PL suffering damages as a
consequence
(Chapman)
claimant must prove representation was
Measure of Damages : restore PL to position he would have been but for misrep
(Jorian) TEST: Warranty or Condition (1)Is the effect of the event to deprive the
innocent party, who has further undertakings still to perform, (2) of substantially the whole
benefit (that amounts to consideration for performance of further undertakings, (3) which the
parties intended innocent party would obtain according to K.;
(Fraser)IF not cond, is it a warranty: (1) question of fact; (2) Does the contract disclose a
common intention of merger re warranty? express or implied (3) The K label for warranty
is a rebuttable presumption
Effect of C : does not shield V from liability, term collateral to the agreement .
BEFORE close : Nothing. IF PU breaches before close, V may repudiate K and V is liable
for failing to close (Jonert)
AFTER close ;Remedy of Damages, UNLESS MERGER:
TEST :Did parties intend that warranty survive merger (Fraser-Reid) or insert non merger
provision (Alves); but merger is rare (DeMichele)
cts
P a g e | 58
Roberts/Beer: If party does not ascent to prov or not brought to PUs attention
Shelanu: EC is unconscionable, ; unfair; unreasonable; otherwise contrary to public policy
Hyrsk/Kiani : Error Insubstantialibus:
Fundamental breach : repudation, unnecessary to commence action:
Reps/Warranties/EC
Anticipatory Breach
Morgan v. Lucky Dog Ltd refusal to close on the basis of PU not providing an estoppel
certification constitutes an anticipatory breach absent express K terms requiring P to provide V
with this
Waxman v. Yeandle, [1953] O.R. 367 (Ont. CA)- innocent misrep of gallonage after close
Purchase of Hotel: Wording of K: offer is given on condition that the Vs represent that their sale of beer
for the year ending aug. 1950 exceeds 28K gallons; Purchaser discovered that the actual gallonage sold
was 25K and wanted an abatement - vendor refused; purchaser closed w/o prejudice, then sued. P
claimed fraudulent representation.
ecision: V liable for misrep, but PU not entitled to rescission after close.. P could have
dependently verified gallonage, and V had no intent to lie, mistaken belief as to truth of
atement ;
atio: Ambiguous lang of a statement not likely to be interpreted as fraudulent
Parnav. 0. & S. Properties Ltd. (1971), S.C.R. 306- V liable for negligent misrep, apt
buildings
cts
Offer had a statement that it was subject to satisfactory evidence being provided as to the accuracy of
representations as regards income and expenses contained in schedule A. P purchased mult apt
buildings, a sophisticated person (took 1 year legal course). V (first time builder) made a list of income and
expenses and made a stat declaration to that effect, P, after closing, expenses are higher, profit is less and
building is worth diff amount. P in this case sues for fraudulent misrepresentation and TC says if we took the
income based on what V said, and we took the expenses, the whole value of the property would be totally
different, and even though there was a $2000 discrepancy, the price would have been a $25000 difference. P
granted $25000 due to inaccuracy of statements.
aly
Reasoning: V were first time builders, did not have accurate records; P was
sophisticated, knew more about operating an apt than V, hence P was not mislead and
did not rely on rep. even though representations were false to the knowledge of V = no
fraudulent misrep
Ratio: Compensatory measure to assess damages; SCC damages: 4K,
damages had representation not been made, lower sale price.
[selling price 251K; income 36564; expenses 12,371 = 24,193 - net cash flow].After closing, P said the actual
expenses were 14, 747 - hence income was less; return on the first schedule A was 9.64% but it was less
given actual expenses; P argues the real price should be reduced to reflect the 9.64% i.e. 226,910 total not
251K
Semkuley v. Clay (1982) V or A not liable for fraud misrep. Absent intent or recklessness to
deceive
A ppty was built where four people lived in it. Legally, it was only a duplex. 2 PUS - teacher & doc, had
bought properties before. Agent advised P in clear terms that the fourplex was illegal and the zoning
only allows two, but told them that a rezoning application was to be carried out and shouldn't be any
problem at all. PUS sue Vs on basis of this oral representation. When P closed deal with $500 and got
a rezoning, they were not successful.
P a g e | 59
insulates the vendor, not the (listing) agent from negligent misrepresentation made outside
he APS; Other cases say that EC will insulate agent also from negligent misrep outside of
S (Hayward;Semkuley)
LD :V nor Agent are liable. Agent was giving an opinion, not a representation as an expert.
S knew or ought to have know that there rezoning entailed an element of risk; agent liable for negligent or fraud
ep & V is not vicariously liable in this case ; agent was merely giving an opinion, made in good faith, P could not
e reasonably believed the agent was in a better position than they as regards rezoning opinion - i.e. not reasonable
ly on the agent - simply optimistic forecasts that a reasonable person would believe to be an expression of opinion
ysi
The assurances about the zoning application were representations of opinion. The facts fall well short of
fraudulent misrepresentation and the mental element : intention to deceive or recklessness is absent.
Olsen v. Poirier (1978), ONCA milk farm, V liable for fraud; Agent for negligent misrep
P sued both V and Vs agent for fraudulent misrep. RE agent placed an ad in news advertising sale of
modern dairy farm; Upon inspection of the V farm, P was told that the farm processed approximately 1M
pounds of milk/yr. P did not know about gov. regulation that limited milk quota if the farm was transferred to
someone outside of the family. V did know about this regulation, but the RE agent did not; RE agent had no
privity on the K. P closes and brought action to rescind
Liability can be imposed on a non contractual basis on a 3P to the K (Hedley v Byrne Co. principle was
affirmed)
Liability of RE agent - Rule: In order for there to be liability for negligent misrep, 1) there must be a duty of
care; 2) a negligent misrep; 3) reliance on the misrepresentation by the plaintiff and 4) loss resulting from that
reliance.
V & P did nor negotiate directly, but V KNEW what the agent was saying
While it may not have been negligent for RE agent unfamiliar w/farm sales to know of this marketing policy,
RE agent held self out to be expert. One who holds self out as an expert has a higher duty of care.
Hedley: if someone possessed of a special skill undertakes irrespective of K to apply that skill for assistance
of another person who relies on such skill a duty of care will arise
tio : Silence can be recklessness that amounts to fraud misrep, for which a TP can be liable
a non K basis (V's liability);(Hedley) (RE agent liability)
liability - fraud misrep, rescission granted - milk quota was a vital factor in
ermining economic viability of farm, 25% reduction was a material factor - there was at
st recklessness that amounted to fraudulent missrep on part of V that induced P to enter K
d P relied on the missrep (although one part was true this was a half truth)
"s liability, negligent misrep - RE agent made negligent misrep; owed P a duty of care
m holding self out as expert, P relied on misrepresented statement and P suffered a loss
m such reliance.
Hayward v. Mellick (1982), ON
When Vs decided to sell their farm, they offered as 95 acres, and advertised as having 65 workable acres
(important). Owners really did think farm had been passed by generations and that they had 65 workable
acres. P closes transaction. After closing P discovers that it isn't 65 workable acres, it was 52.
Statements at issue made by V before agreement and not subsequently inserted
ysi
(ONCA)"The rep amounted to neg mis rep - rep made w/o personal knowledge or even info that the fields
had been carefully measured. V must have known that acreage was important to P. He said nothing to qualify
his statement. He didn't tell P go satisfy yourself. Fields were irregular in shape. It was wintertime, and he
should know that P would rely on him.
An EC/disclaimer in an APS will protect the vendor from negligent misrepresentation outside of APS (CA)
(TJ) A EC does not protect a vendor from negligent misrep- overruend on appeal
P a g e | 60
Patav v. Hutchings (1989) agents liable for misrep; V sued P for breach and they settled,
Grimsby
PU (D), at the suggestion of her doctor, seek a ppty with good clean air to improve her lung condition. They
retain a selling agent who is aware of her condition. This was communicated to listing of sale ppty, who was
aware, but did not disclose potential land fill sites that were near the sale ppty. LA made statement, "if you
need a good country clean air ppty, this is the place" .Before closing, PU discovered the plan. Her L
advised her to close. She refused to close and V sues her (who may now have to disclose when selling). She
settled and brings an action against listing and selling agents.
e A listing agent owes no FD To the purchaser (Caterprillar), but does not have the right
protect V's interests fraudulently; A selling agent has a duty to protect the interests of the
client;
cision: Listing agent made fraudulent misrep (misled P as to character of the property) ;
ing agent made negligent misrep (was negligent in not ascertaining property was
propriate for P given that he had been advised as such could have made some inquiries at
municipality)
Roberts v. Montex Developments (1979) (B.C.S.C.) (not a great decision)
misrep of soundproofing outside of APS; EC not enforced, so developer still liable
cts P bought condo unit advertised as designed to provide maximum sound proofing in
ween homes in the advertising brochures but was not part of APS; after closing, P
mplained about intolerable noise
To assess whether court will set aside exculpatory clause, court will look at circumstances surrounding
transaction - sophistication of parties, hype in purchase of new condo
ld: EC set aside b/c PU did not assent to prov. Therefore, EC does not exclude developer P
m liability for negligent misrep, precontractual negligent misrep, the brochure, induced PU
o APS or breach of warranty
LD: clause was a warranty that the basement would not flood, damage not discovered until
er closing, and there was never an intention to merge
Urea formaldehyde
Scholl v. Royal Trust (1987) (Ont. S.C.)- agent said no URF, refused to insert APS warranty,
false
Urea formaldehyde was once used in homes as insulation; One of the PUS was a doctor who was aware of
the ill health affects of UF; P asked listing agent if there was any UF and asked him to insert a warranty that
there was not ; agent said there was none and refused to insert the clause,
ysis
V claimed there was no EF in ppty, but never did due diligence / investigation
V cross claimed against the broker for negligence and won indemnity for damages
If you are acting for the P you would ask that the vendor warrant that there is no formaldehyde
P a g e | 61
tio : AN EC does not operate to relieve a V from vicariuos liability in the face of the fraud of
ir agent
Agent was fraudulent. He made that statement recklessly. V is responsible for the fraudulent acts of the
agent. V held responsible for fraudulent acts of its agent ;' P is entitled to damages against V, RE broker,
and RE agent. Broker is entitled to be indemnified against acts of agent.
DeMichele v. Peter Kin (1985) V liable for fraud misrep for breach of warranty
ts V warrants in APS "that insulation in the home is not EF"' V did not know house contained UF, nor what it was
tio : PL can recover damages for loss of enjoyment of life if able to establish mental injury
s foreseeable result of BOW.
ld V liable for fraud misrep for breach of express K warranty. Lack of personal knowledge
material to finding of liability.
mages: the cost of removing the insulation & additional 20% b/c of stigma involved with
insulation and some damages for emotional turmoil
cts
Glasner v. Royal LePage Real Estate Services Ltd. (1993)PU entitled to rescission for fraud misrep, warranty; uniteral amendment to UFI warranty
P inserted a clause that the V warrants that the building does not have urea formaldehyde AND never has; V
knew that at one time the property was insulated w/ UFI - the V changed the clause to does not contain UFI
P signed, not having seen the change; listing agent involved in negotiations felt guilty, wanted to tell P and
did; as soon as the Ps found out decided not to close the deal; P wanted a house that had never contained
UFI (stigma issues)
V argued P signed, had an obligation to read it and that the changes were clear
eld: PU entitled to rescission for fraud misrep. V knew fact was material b/c lang of clause
as changed, instructed agent not to mention it unless specifically ask. PU refused to close
mmediately after changes raised
John Levy Holdings Inc. v. Cameron & Johnson Limited (1993) V not liable for fraud
misrep
cts
After closing on land, new owner received several offers - one at over 1M profit - he decided to sell; P
inserted clause that V covenants that there is not now nor has there ever been contaminated waste
material on property (warranty) Vs lawyer tells him he can not warrant this as he does not know - changes
clause: to the best of his knowledge and belief there is not now, nor ever been contaminated
waste material P closed; in fact, the property had been contaminated
alysis
compromise bt/w P desire to have a warranty of contamination and Lawyer's advice not to give any
covenant.
For P to recover, he must establish that V had knowledge - warranty that certain facts do not exist
absolutely, there was no duty to take active steps to discover whether there were contaminants, and only
duty was to disclose contaminants of which he knew.
atio : Language within a Kual statement, "to best of my knowledge and belief" did not
arrant absolute truth of the statement. It was reasonable, fair & truthful.
ELD: V was not liable for fraud misrep for breach of warranty;, no damages for PU. Clause
d not impose on V to perform tests to confirm the presence of contamination
cts
WARRANTY OR CONDITION?
Jorian Properties Ltd. v. Zellenrath (1984) (Ont. C.A.)
Reference made to a condition (but not a condition precedents); P bought five-plex for $95,750; Clause
said V warrants to the purchaser to survive closing that the premises contains 4 one-bedroom
apartments, 1 bachelor and premises may be lawfully used as it is presently used.; V was unaware
that it was contrary to zoning for ppty to have 3+ dwelling units. P made inquiries before closing and
P a g e | 62
discovered illegality. P still wanted the property and asked for an abatement, Settlement was not successful
and V sold to TP (V2). Transaction did not close; V later sold to P2 and P1 bought property from P2, but
sues V and settled with P2 (TP).
ct APS involving sale of two commercial office buildings in DT TO, total value was 24.5 million
During due diligence process it was revealed that elevator inspection agency had directed repair work to be
done on both buildings elevators. Parties agreed to amend APS such that require that, prior to closing, the
vendors complete the directed elevator repair work and provide confirmation that the repairs were acceptable
to the inspecting agency. By the time of closing the repair work had not been completed. PL refused to close
on grounds that V did not comply with TCP - "sale is subject to all covenants and conditions being
performed by the V before closing"
al (i) work had not been completed by due date of Dec 1 as per prov; ii) sophisticated parties, V chose to accede
s to P's request - $5000 issue was a material one, did not produce unfair absurd result in comm contex, b/c
parties turned it into a material one by virtue of TCP prov - i.e. V must fulfill all obligations/cov'ts - nothing unfair
in holding parties to their bagain iii) nothing in APS required PU to advance funds to V in advance of closing, &
had no done so - V argued lacks of funds was reason for not closing
________________________________________________________________________________________
(2)purchaser may be entitled to some compensation where (i) the agreement expressly provides that the
vendor will be responsible for specified costs incurred by the purchaser, or (ii) the vendor has not acted in good
faith to satisfy the condition precedent. Neither circumstance applies in this case.
did not include lang in agreement, no bad faith on part of V, made efforts to repair elevators, CTI not entitled to
any damages re flip, non binding letter of intent bt/w CTI & P, no formal APS (would be one if transact had
proceeded)
ecision: Courts tend to enforce language of agreement (John Levy, DeMichele) (1) V
iled to satisfy TCP, did not perform in "all material respects" which P did not waive ; (2) P is
ntitled to return of deposit with interest
Error Insubstantialis
Hvrsky v. Smith (1969) ON V liable for ES. P entitled to rescission.
P bought property under notion that it was 1000x160ft. V never verified. P & V were unsophisticated; 4 yrs after
closing P discovered depth was 84 not 160. P bought property for investment purposes and
eld: P entitled to rescission. Mistake was so substantial that it fundamentally changed the
operty that was bargained for. could have searched title, but both parties were mistaken ,
ept of land 84 not 160.
cts
eld: P entitled to rescission for ES. P received an unlicensed and quota less chicken farm,
bstantially different from the licensed farm they thought they had bought
atio: The mere fact that PU got something other than what they thought they bargained for
not sufficient grounds to establish ES. It must be substantially different
cts
John Bosworth Ltd. (1979), 24 O.R. (purpose of ppty not sufficient to ground successful ES
claim)
P purchased ppty on cod that it could be zoned for industrial use; Ps Lawyer did minimal investigation and
P a g e | 63
advised him that it was zoned as such; Deal closed; Later the P decided to sell and new APS required that V2
show that it was zoned industrial - V2 discovers that the land was NOT zoned industrial as the OMB had not
yet approved by-law. V2 sues old V
ELD : PL not entitled to rescission. P could have ascertained state of zoning in advance. PU
as sophisticated unlike Kiani or Hyrsky.
eason: There was no deficiency in the quality of land conveyed. The representation here
lates to purpose of ppty.It was CP inserted for P's benefit
cts
eld: D vendor liable for damages. PU entitled to an abatement for missing square feet for
eg misrep./BOW. Sketch of apt was attached to APS, at 2688 sq feet but unit was 2100 sq
et so EC did not apply
Israel v. Townsgate Limited (1995)- PU liable for damages for BOK, not entitled to rescind
cts
PU purchased new condo, solarium was to be 8x12 on the plan; PU discovered that it was actually 4x11
during construction; claimed that they had many grandkids and it was their dream to have them all in the
room at once; P refused to close; there was an EC & right to change solarium size ; Market had
declined substantially but P argued they would still have taken it. V sues P for BOK.
alysi
reps re size and shape of solarium not sufficiently material to justify P refusing to close on account of
deviation ; market forces of soft realty market provide context of PU's misguided act of rescission
WRP to solarium, " It would not be reasonable for a purchaser viewing the matter objectively to rely on pre K
statements which are often incomplete."
eld: PU liable for damages of $105K + interest/ costs. She was not entitled to rescind due to
ze of solarium as small than expected . Representation was not a part of APS, SPIS nor
ere there any oral assurances from agent. V had right to change solarium size and EC in
PS(distinguished from Champlain)
cts
Keen v. Alterra Developments Ltd. (1994)- PU entitled to rescind for fund BOK argue this
Ps bought dream home - Ps learned at framing stage that front entrance would require 4 steps extra at the
porch and 3 extra in garage; Ps refused to close; the rendering showed only one step; V took position that
the P had to take the house as it was as there was a EC that allowed them to make such changes
nalysis(i) APS contained house type inserted by builder to specify type PUs wanted,
)oral assurances of sales rep, iii) changes to home - extra steps ; Builders created a house
at was fundamentally different than what P bargained for i.e. French country style dream
ome w/ only one step - P offered to purchase another home with one/two front step.
eld: (1)PU entitled to remedy of rescission b/c V breached fundamental cond, and entitled
recover deposit. (2) Builder could not rely on EC b/c it was a fundamental BOK
cts
Town Wood Homes Limited v. Khanna (1994) PU not entitled to rescind. Declining market
force
P paid extra for a corner lot so that he could have a double front door; during construction he discovered it
did not (builder could not get approval); the housing
P a g e | 64
eld: Crt did not accept PU's evidence as to having money to close (reviewed
rrespondence, rapid market decline)
cts
EXCULPATORY CLAUSES
Beer v. Townsgate Limited (1997), 36 OR.
Agents reliable for innocent misrep, unsophisiticated Ps
Involves a condo sale; units were advertised as luxury condos; APS was signed in an atmosphere of extreme
hype; incl EC - statements were made outside of the agreement as regards the quality of the investment and
that it was risk free and guaranteed; after units were sold, market went into rapid decline; of the 160 sold at
grand opening, 70 cancelled in 10 day cooling off period; builder gets worried, makes a deal for those who
stay, if they provide an additional deposit they will receive a price reduction of 15%; 45 took advantage of
offer; the time of closing 39 did not want to stay and refused to close
Ps claimed misrepresentation (fraudulent or negligent) b/c statements outside of the agreement
eld: (Like Montex), Unsophisticated parties, not 34 other PUS, were entitled to equitable
scission for negligent misrepresentation. EC not enforced against agents oral assurances
c they did not assent to it, and reasonably relied on agents who fabricated false sense of
curity in claiming risk free investment
gents held liable NWS EC.
Vulnerable parties - 40 yr old illiterate immigrant cab driver, 59 year old cobbler)
cts
.Wemyss v. Moldenhauer (2003) - Selling agent liable for negligence, did not explain TCP
P informs his agent that he wants to be able to get out of transact, if there is ANY problem with the septic
tank; the offer is made cond on satisfactory inspection of tank to purchasers sole discretion; V modified
the agreement such that P can only get out if the problems with the tank are structural; selling agent saw the
changes and did not notify the P; later, the tank is flawed, but not structurally, P tries to get out, but clause has
been changed; P sues agent
atio: (1)RE agent (or L) has a duty to act with care and skill in reviewing APS terms,
cluding duty , to specifically draw to the client's attention any provisions in the agreement
at are contrary to client's interest. (2)Client does not have an obligation to read instrument
here there is reliance on a fiduciary to do so.
nalysis: Evidence was selling agent specifically failed to explain that inspection clause
as been fundamentally altered. Agent should have explained that the amendment made
as that he would not be able to get out of the deal unless there was structural problem.
1018429 Ontario Inc. v. Fea Investments Ltd. (1999)- court can override K choice of
remedy
V made certain warranties re: the income potential of the ppty: APS set out the rental income, and noted .if
there is a breach of the warranty the only remedy the P would have is rescissionP closed transact, discovered
warranties were not true, and wanted to sue for damages; key parties agreed in advance on what remedy
would be if there was a breach of warranty
cts
P a g e | 65
structurally sound (misrepresentation; failure to disclose). Transact closes. 6 months later, water
leakage affects one room. P called company to fix problem, and discovers company had been to house
before to fix such a problem. APS contained an EC.
atio: V gave false representation that house is structurally sound despite basements water
akage problem. This was made with an intention to mislead P, and thus EC will not shield
bility for misrepresentation here.
eld: V liable for fraudulent misrepresentation. PU entitled to damages
Kaufmann v. Gibson, [2007] ONSC 0 PU can rely on SPIS if in APS to rescind if it contains
misreps
cts
Vs are suing PUs , retired elderly married couple. The sale ppty had water damage which V had restored. In
SPIS, Vs answered no to clause" are you aware of any moisture or water problems / any roof leaked or
unrepaired damages. SPIS was made part of APS. PU withdrew to misrep of the disclosure statements. V
sold house at 380K and original sale ppty @ time house was put on market was 500K. V sues for
expectancy damages
al
One of the Vs testified that he should have made disclosure about water leakage issue but agent advised
him against doing so because the wording of the clause was in the present tense, only requiring disclosure
of probs as of July 8
atio: SPIS, if within 4 corners of APS, can be relied upon to withdraw from transact if it
ntains misrepresentations in relation to matters that PU raised.
eld: V is NOT entitled to compensatory damages for BOK. He could not hide behind
gents advice not to disclose. PU was entitled to rely on inaccuracy of statements as reason
r rescinding transaction.
Krawchuk v. Scherbak (2011) ONCA 352-PUs rely on SPIS w/o inspection, V held liable for
misrep
PU closed transact and waived cond of offer cond on inspection. V did not disclose defects relating to
foundation and plumbing. Defects were misrepresented in SPIS, incorporated into APS. P sues V for fraud.
ysis
V was not found liable for failure to disclose latent defects resulting in BOK. (1)It contained no
warranties/guarantees as to fitness of the home, (2) Defects were too latent to impose liability on V to know
about them/disclose, would not have been revealed by a reasonable careful inspection, (3) V did not
conceal w/ purpose of deceiving PUs - children played/ storage space near plumbing issue, (4) No Kual
implied duty on V to disclose defect - did not experience probs w foundation and raised children there/
plumbing did not render ppty uninhabitable, dang, potentially dang
No fraud misrep: (1) false statement - SPIS part of listing agreement, V made false statements in sense
they were incomplete re structural integrity of home & plumbing issues, (2) V knew these statements were
false, reckless to their truth; (3) did not make misrep to induce PU into K - disclosed other defects, was
meant to inform not mislead
Neg misrep Yes - (1) DOC from buyer to seller in circumstances, (2) false statement, (3) negligence on part
of D as to truth of statements - reasonably prudent person would have made full frank and accurate
disclosure insofar as possible, (4) P relied on accuracy of statements contained in SPIS , made enquiries
and content with answers ; would not have made P had she known about plumbing & structural defects
After closing, V was liable for negligent misrep, not fraudulent misrep. PU entitled to
mages
ason: Vs were reckless as to truth of statements relating to foundation and plumbing in
S attached to APS. PUS did not do an inspection but relied on SPIS, and could successful do
P a g e | 66
Cotton v. Monahan (2011), ONCA- PU not liable for cost of repairs, SPIS was truthful
P gave uncond offer to purchase sale ppty despite agent's advice inserting cond to allow for a home
inspection. Before submitting offer, PU reviewed SPIS disclosing no building permit / inspection obtained re:
extensive renovations to home, done personally, house over 50 yrs old. After move, PU noticed
plumbing/electrical issues. Inspection reveal 16 infractions.. P sues V for damages for repairing defects ,
aggravated damages and damages for mental distress.
tio: A sophisticated party is not entitled to they did not assent to an EC if lang of prov is
ar /unambiguous unless pressured/rushed into signing K
ld: EC clause in agreement w Dominion Electric enforced. PU cannot recover damages in
ess of limited liability cause
alysis: In K, EC was highlighted in bold letters on the K, it's lang was clear and
ambigious, nothing was done to mislead the reader, P was not rushed/pressured into signing
fact that P is a small business is not enough to warrant court intervention
tio Cts have no discretion to invalidate a valid Kual exclusion unless, (i) unconscionable
ed on the circumstances of the case, OR ii) establishing, overriding paramount public
cy consideration sufficient to trump FOK and defeat otherwise K rights of parties.
e of interpretation: If ambiguity of EC cannot be resolved using construction rule, contra
ferentem applies, and it is interpreted against party who benefits from it.
ysi
Tercon points to the public interest in the transparency and integrity of the government tendering process (in
this case for a highway construction contract)
P a g e | 67
SC Obligations
Rule 2 of the Rules of Professional Conduct - Relationship to Clients
(Relates to mortgages)
01 ompetence
competent lawyer means a lawyer who has and applies relevant skills, attributes, and
values in
a manner appropriate to each matter undertaken on behalf of a client
02 - Quality of
ervice
The Act provides that a lawyer fails to meet standards of prof competence if there are
deficiencies in (1)L'ss knowledge, skill or judgement, (2)L's attention to KL's interest, (c)
records, systems or procedures L's business, or (d) other aspects of L's prof business, AND
deficiencies given rise to a reasonable apprehension that quality of service to KLs may be
adversely affected.
03
onfidentiality
L shall at all times hold in strict confidence all info re busines and affairs of client acquired in
course of prof relaitonship and shall not divulege such info unless impliedly or expressly auth
by KL or required by law to do so.
04 - Avoid of
onflicts of
terest
(2) L shall not advise or rep more than side of dispute, (3) Lnshall not act or continue to act in
a matter when there is or is likely to be a conflicting interest, unless after disclosure adequate
to make an informed decision, the client or prospective KL consents. (12) L may act for
/represent lender & borrower if (a)L practises in remote location/ no other Ls could
conveniently be retained, (b) lender is selling real ppty to borrowr and mortgage represents
part of purchase price (c) lender is a bank/trust comp/insurance comp/ CR union or finance
comp that lends money in course of its business, (d) consideration for mortgage does not
exceed $50,000, (e)lender and borrower not at arms length as defined in Income Tax Act
05 Conflicts
om Transfer
/w Law Firms
06 Doing
usiness w a
ient
(2) where a client intends to enter into trans with L or corp or other entity in which L has
interest - (a) full disclosure, b) ILA, c) obtain client's written consent, (4) (a)L shall not worry
money from client unless client is a lend/financial institution/trust or insurance, or similar
lending comp, (b)KL related person as defined by Income Tax Act and L discharges onus of
showing client's interest were fully protected. (6) - Ls in Loan/Mortgage transactions - (a)L
shall not hold a syndicated morrg/loan in trust for investlor unless each client receives (i)
complete reporting letter on transact, ii) trust delcaration signed by legal tite holder of
mortgage/security intrstument, iii) copy of duplicate registered mortg/security instrument, (b)
arrange recommend client's participation as investor in syndicated mortgage unless ILA, (c)
sell mortgages or loans to or arrange them for clients except in accordance with skill,
competence, integrity usually expected of a L in dealing with KL.
09 Withdrawal from
presentation
Preservation of KL ppty - L shall care for a client's ppty as would a prudent and
careful owner, must observe all rules
Fees & Disbursements - cannot charge interest except as permitted by
Solicitors Act
- except for justifiable cause and upon notice to KL appropriate in the
circumstances
Facts
P a g e | 68
RECTIFICATION
Strategeas v. Lloyd Parish Holdings Limited (1991)
duty to bring mistake to attention of L acting for other side (Glasner)
PU buys resto from V, who was also lessor. APS also provided for PU to lease from V the premises of
resto.5 yr lease was negotiated w/ 3 five year options - tenant could exercise each option so that it would
be entitled to a a 20 year lease min ; LE/V's lawyer prepared lease on standard forms, contained sale &
demolition clause giving landlord right to terminate lease; Vs lawyer crossed this out but a later version of
the lease still had the clause; PUs lawyer saw the lease b4close, but did not notice sale and demolition
clause; deal closed; later, LE wanted to sell the premises, and tenant was given notice of termination,
tenant goes to lawyer who notices clause
Analysi
V's lawyer should have known tenant s L made a mistake & had a duty to point out the clause as it was a
significant change - was negligent in not reviewing lease agreeent
Look to what was the real deal b/tw parties ? - In this case crts altered doc to give effect to the real deal
i.e. without sale and demolition clause
Ratio Even if L is negligent in not noticing a significant change to the original agreement,
he party/lawyer making the change has an obligation to bring it to the attention of the
other, or court may apply rectification
Facts
Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd. (2002), S.C.C. 22
(Principles of rectification)
sale of golf course to limited co (PU). V included future option to buy back a piece of land 480 yards x 110
yards to build two rows of houses; His L did not notice that final agreement read 110 feet vs. 110 yards; PU
saw the mistake, told lawyer not to say anything and knew the V had not seen the mistake prior to
close; V tried to exercise option to buy this property to start development and noticed mistake
Purpose of rectification: to prevent a written document from being used as an engine for
raud
Rectification is an available remedy FOR (i) unilateral mistake (or mutual mistake) if PL
shows, with convincing proof (slightly higher than BOP):
Oral agreement not written down properly,
D (ought) to know of the error, AND taking advantage of such error would amount to
"fraud or equivalent
P must show "precise form" in which written agreement can be made to express prior
intention
crt's task is corrective (to restore bargain), not speculative;
Punitive damages only awarded if (1) compensatory damages are insufficient, and (2)
denunciation is necessary
Held: D PU liable for damages. (He instructed his L not to raise mistake) Court ordered
ectification and compensatory, not punitive damages. Corporate veil was pierced to hold
he principals of the P personally liable..
Fact L was retained during a transact where APS from P that was already signed. There was a warranty in APS
whereby V warranted business made a certain amount of money. L turned the case over to law clerk, after
close, the warranty was not fulfilled business made much less money. But Vs Company was ltd and had no
Rul
P a g e | 69
assets. P sued lawyer on the basis that he should have acquired some security in the event that there would
be a breach of warranty
A knowledgeable lawyer would explain to client the risk of an unsecured warranty from a numbered company.
A lawyers duty to a client will vary depending on 1) clients instructions and 2) limits on the lawyers retainer
3)the sophistication of the client also has role in determining what advice lawyer should be giving to client
(business, legal where to draw the line).
HERE: L was not negligent in not attempting to renegotiate security; his retainer was to
close the deal
Ratio Retainer of L before APS is signed triggers obligation to negotiate security for
warranty;
No such duty arises if retained after APS is signed. The instruction is to conclude
ransaction
Enns v. Panju (1978) (B.C.S.C.) (L liable for not explaining deficiencies of signed APS)
Facts
A young lawyer was retained by PU after APS was signed APS - very deficient in financial protections
but b/c it was already signed, L felt he couldnt add reps/warranties. L did not advise PU of the risks
she was exposing herself to by completing transaction. He closed the transaction. The business turned
out to be a disaster. Enns sues her lawyer. Lawyer argues: had to close, as APS was already signed.
Analysis
L should have advised client of the risks associated with closing the transaction without the appropriate
clause(s) in the agreement. ; KL left exposed, to great risk, with none of the usual clauses of devices
to protect her with regard to financial result, if she closed transact
If L had fought or attacked validity of APS, then it would probably have been unenforceable. Lshouldve
advised her risks of not closing vs. closing (possible win)
Burden on the lawyer was beyond his expertise at the time but
One who holds himself out as competent practitioner and undertakes the responsibilities of
representing the interests of clients in respect of transactions of vital importance, cannot be
excused because he/she fails to command or exercise the standards of professional skill and
conduct on which those clients are entitled to rely.
Ratio: (1) SC has duty to exercise reasonable skill and care to advise client, that includes a
duty to warn clients of risks involved in a course of action contemplated by the client; (2)IF
SC fails to warn client, AND to warn of risk AND p probable that client would not take risk
had he been warned, SC will be liable
Held: D L liable for negligence. Clients agreement was missing usual clauses or devices to
protect client.
Graham v. Diamond (2010) no duty to negotiate better deal for client absent serious risk
Facts
Motion brought for summary judgment by D lawyer dismissing the action against him. DSC had acted
for the PLs in connection w closing of a residential ppty. SC received APS after all conditions had been
removed incl financing, home inspection or environmental inspection. After PUs moved in, discover
ppty was contaminated and are suing L claiming he failed to inform them about need for env/house
inspection.
Analysis
no evidence that KL ever raised env concerns to L; advising PU not to close would have subjected
them to damages/SP; no law to suggest that PUs were entitled to env/home inspection unless in APS
PUS asking the court to find that D should have closed the barn door some days after the horse had
bolted the stable. (did not instruct him to get better deal, even if so instructed - deal was already
signed)
P a g e | 70
Ratio When a L is acting PU regarding a signed APS, SC does not have duty to negotiate a
better deal for clients unless APS discloses serious deficiencies/risks
Held: Action against L dismissed on SJ. L found to have no duty to inform client about need
or env inspection
Facts
Ratio: V has a duty to ensure proper fulfillment of duties pursuant to time sensitive K
provisions
Held: L liable for negligence. V awarded nominal damages b/c chances of successfully
ulfilling condition in question would have been minimal He took no steps to ensure
eceipt of fax to ensure other side received notice of extension of provision, and could have
done so without impeding himself.
Gunraj v. Cyr (2012), Ont. duty to discuss alternatives to signed APS arises sometimes
Facts
Ps brought a ppty they intended to buy and resell. They waived APS conditions of inspection. Before
closing however, PUs became aware that there could be erosion problems that could affect ppty
development, and retained a L after signing. PUs close on advise of their counsel. They could not
develop ppty due to erosion and sold at a $4000 loss. PUs sue lawyers for BFD/BOK. Ls bring a motion
for summary judgement to dismiss action. . A
Analysis
No evidence (like reporting or opinion letter or memos) that L had discussed all of client's options PU
testified that L had directed them to close transact - were any reps made outside of agreement? Risks of
closing vs. not closing?.
Ratio : Lawyer may have a duty under certain circumstances to discuss alternative options
even after a signed APS, depends on the nature of the sale property. Law is clear. L is not a
clients insurer. Just something goes wrong doesn't mean it's our fault."
Held: Action for negligence dismissed on SJ. L not liable for negligence. APS contained
nothing about erosion problems to trigger Ls duty to discuss alternatives so PU instructed to
close. PU had waived inspection cond
Facts
669283 Ontario Ltd. v. Reilly (1996) L liable for negligence on limited retainer
PU purchases an apt building, and hires L on a limited retainer for specific tasks. After close, rent review
board restricted rental rates being charged b/c they were in excess of guidelines in effect @ that time.
PU experiences significant loss because purchase price of sale ppty proportionate to its rental income.
PU sues lawyer for negligence for failing to warn PU of rent review legislation. L claimed LR did not
involve checking rent review legis b/c PU was going to do it themselves.
P a g e | 71
Ratio:
L has a duty to ensure LR is documented in writing, and
that that client understands the risks of a LR vs. a typical retainer.
When L is acting on purchase of an apartment building, , SC has a duty to verify legality of
rent absent express contrary terms of retainer
Held: L liable for negligence. He did not rebut prima facie negligence. LR was not
documented at all by memo, nor in reporting letter.
Reasoning. The fact that APS was signed and client had already waived conditions does not
ustify his conduct.
Facts
L was retained to act for lender and borrower. L was called up by broker and was told that H and W
were coming to see him. Broker described gen characteristics of W was of Japanese origin. L met with
KLs and thought they were honest and respectable people. There was nothing to indicate that H was a
criminal and W was an impostor. The mortgage was signed. It was a forgery. The woman who
purported to be Ms. Y was an imposter
Ratio SC has a duty to take reasonable steps to protect the interests of the party that she is
erving, and includes eliciting identification to validate the purported identity of her clients.
t reduces likelihood of fraud; The ID required depends on the nature of transact.; If
multimillion, then passport instead of licence.
Robinson v. Royal Bank (1996), Duty to obtain written understanding of clients IF they
choose not to follow your advice or warning regarding serious risks
Facts
H&W separated, working on reconciliation, she finds out he forged her name and mortgaged the ppty;
she became aware of this during the initial consultation; she told L they were working on reconciliation
and she did not want charges to be laid; didnt work, they separated again, she argued she would not
pay mortgage as it was fraudulent
Held: Bank can enforced fraudulent mortgage against W. Wife was estopped from relying on
Hs forgery to avoid personal liability for mortgage. She failed duty to disclose that H
committed forgery to lender. She assumed the risk when she chose to withhold this
nformation.
Ratio: L has a duty to inform client of the risks of her actions, and should obtain written
documentation where client chooses not to follow your advice despite risk of legal exposure
of her decision.
Harelav. Powell (1998) (when L is retained before APS is signed, high onus to defend
negligence)
PU submits offer (to build cottage facing water), prepared by agent, cond upon obtaining a building permit;
Before close, L receives confirmation from BI that they could obtain building permit easily. A year later, PU
discovers there are sig building restrictions, committee approval that there are restrictions to build, work at a sig
cost. PUs got permit after huge delay, expense and not in desired location. P sued V & L
Ratio: Public expectation requires SC has a duty to know what a clients plans are where it
s clear that client intends to develop vacant land - implications of the zoning by law are
critical and should be reviewed with the client
Held: Agent and L liable for negligence. They failed to take time to inquire about
clients plans.
Facts
Turi v. Swanick (2003), OR(L's duty to advise about risk to unsophisticated parties is higher)
KL wants to incorporate a comp, Italian Trends Couture Inc to avoid any personal liabilities or debts that
might be incurred. KL never used words limited in invoices. When KL's company went under, he was sued
personally. KL did not use "Co" in invoices/service Ks. CR successfully sued KL. KL sues his L for
negligence.
P a g e | 72
Ratio : Scope of duty to advise in relation to risks and consequences may depend on the
evel of sophistication of the party : Lawyer should write memo of advice to client and have
her sign it
Held: L liable for negligence. Court believed that L advised client re proper use of corp
name but did not advise on risks for improper use or failure to do so in context of
business transactions by sending out memo.
Facts
Facts
Ratio It is the SC's duty to turn the mind of the opposing lawyer to an obvious
mistake in a (marriage) K. Rectification principle: Failure to do so may result in court
exercising equitable jurisdiction to relieve a mistake in fraud/circumstances amting to
raud/misrep. IF
1) 1 party knowing of the others mistake as to the terms of an offer remain silent and, (2)
concludes a K under the mistaken terms NWS that party ought to recognize mistake
Facts
P a g e | 73
Ratio: Duty that individual lawyers owe to one another is unclear .An L would expect the
other to act in fair and honest dealing; or that lawyer would disclose collect-back clause, but
V's lawyer had no obligation to do so. Held: V nor L had duty to disclose clause clause. Ps L
iable for negligence, should have requisitioned
Facts
Meier v. Rose (2012), (SC when retained to prepare a will verify registerd owner of ppty )
D SC was retained to prepare a will. KL wanted to bequeath part of his farm ppty to brother. The gift failed
b/c KL's company, not client, owned the shares in farm ppty.
Ratio (1) SC owes a DOC to a TP beneficiary created by the retainer to prepare a will for
estator; (2) The reasonable SC has an obligation to use proper care in carrying out
nstructions to effectively confer intended benefit to TP beneficiary...Lawyer is not an
order taker
Held: L for testator was negligent in failing to bequeath to proper beneficiary. Damages
assessed for value of land that PL beneficiary would have inherited. Time limits were not
excuse for failing to conduct title search or to request information as to registered owner of
ands in question
What a reasonable SC in 2000 would have done
Facts
Thompson Family Trust (Re) (2011), ONSC (K barring KL from making a LSUC complaint NO)
Action by Bs against lawyer acting as Executors. Bring action asking for accounting. They entered into a
settlement, Ls, who didn't think they did anything wrong, agreed to settle, reduced fees. One settlement
prov was to withdraw complaint to LSUC, we've settled it, couple sisters involved, sister said she was
going to
Ratio: Terms of settlement that bar a client from reporting a SC to LSUC are not enforceable
because it is a public interest issue that extends beyond the private interests of parties.
LSUC is mandated to protect public interest.
Facts
LSUC) Rule- When acting as an advocate, L has a duty to refrain from deliberately
withholding any binding auth that L considers to be directly on point that has not been
mentioned by the opponent; otherwise to tantamount to misrepresentation . When in
doubt, one should disclose
Held: L in this case did not breach duty. He clearly believed cases were not point.
Facts
6038212 Canada Inc. v. 1230367 Ontario Ltd., 2014 ONCA ( follows Gunraj)
Appellants purchased a contaminated ppty from respondents. At time of purchase, V(R) was in
possession of 3 env reports, two of which disclosed contamination and remediation costs of up to 150K. 3
yrs later, PUs (A) discovered contamination through migration to an adjoining ppty. PU is suing V for
failure to disclose contamination, and L for P was negligent in failing to request env info from V, and failing
P a g e | 74
to ensure env contamination incl in warranty.
Analysi
(A found not to be a credible witness) - (1) TC said he knew about contamination, had received all en
reports (denied receiving any) and chose to waive env cond in APS before close.
A was a sophisticated party - PHD in chem, experience in RE matters, obtained reduction in purchase
price of $200K
L for PU was not negligent - she had A sign waiver/consent acknowledging L had recommended
undertaking env assessment, A was unwilling to conduct any further investigations
Ratio: A SC does not necessarily have an obligation to request environmental reports in the
absence of client's instructions. Held: Action against L dismissed., not negligent for not
equesting env reports. L for She ensured her client signed a waiver/consent acknowledging
L had recommended undertaking env assessment, BUT that A was unwilling to conduct any
urther investigations
P a g e | 75
Definitions
P can waive the requisition (and take the title with the defect) (use title insurance) OR
dissolve K, deposit returned; V may not intend to answer if market value increased
Title insurance - insured pays premiums for insurance coverageprotecting against losses
due to title defects (usually even if existed before PU bought home)
Matters relating to root of title constitute total failure of consideration
Examples Planning Act Violation or encroachments , trust property
Matters of conveyance (e.g. mortgage)- those matters by which the V alone (or with other
persons whose concurrence he can require) is in a position to convey title to property
IF V is not entitled as of right to obtain a discharge of an encumbrance then it is an
objection to title.
Mason v. Freedman, [1958] S.C.R. 483- V must act reasonably& in good faith to rely on s 10
PU requisitioned that W signed away her dowry rights. Ppty value increased. V is unwilling/unable to get wife's
signature and wanted to give back deposit.. PU didn't want to rescind because of increase in ppty value, but did
not want to take defective title. PU sues on basis that V fails to make efforts to try and answer on requisition
P a g e | 76
atio: V who seeks to rely on title and rescission clause must (1)act reasonably and in
ood faith and (2)not in a capricious or arbitrary manner. Courts use objective RB
easure to assess (1) conduct, (2) reason for not fulfilling requisition
eld: V could not rely on s 10 clause. H had made no effort to answer requisition, was a
eliberate failure so cant use clause to escape his obligations.
Mink)A V's answer to the effect of satisfy yourself where PU makes a number of requisitions
not a reasonable exercise of rights under s 10.
rinciple - Defect in title must affect the use and enjoyment of the property in materially
gnificant way so as to be a valid requisition. (Equally applicable to all requisitions)
EST: Does the impediment to title in any sig way affect P's use and enjoyment of ppty;
onsider: (1) location of easement, (2) size, (3) P's subjective considerations
bjective determining of validity of PUs refusal ; if deficiency is material
ubjective element - PU's feelings, motive relevant if it casts doubt on legitimacy of refusal to
ose transact
Phinny v. Macaulav (2007) (L's obligation in case of easements- qualify your advice)
L for PU made a requisition for easement. V did not answer PU's requisition and PU refused to close
transaction.
tio: Qualify your advice to Client. Here, PU lawyer told his client that he did not have to
se, but was wrong in end because judge said requisition for easement was not valid
ld: Nominal damages awarded to V b/c damages were not mitigate. PU could have been
le for tremendous damages
cts
King Lofts Toronto Ltd. v. Emmons, 2014 ONCA 215 (title insurance, SC obligations)
Before closing L advised PU that Toronto owned laneway, built in 1919. under 1 of 4 sale ppty, 2.5 million
dollar transact. L advised PU that this was a minor issue which would be covered by title insurance. After
transaction closed,. Later PU received offer for purchase 4 ppties. P2 makes requisition to remove easement,
and City will do so for 106 K. PU1 pays city 106 K to close transact. PU1 sues L for failing to explain
easement could cost him money even w/ title insurance. L did not read insurance policy
atio: SC must exercise reasonable care to warn a client about legal consequences and risks
volved in a transaction, including legal risks and consequences for easements, title
surances limits.
eld: SC law firm liable for negligence in failing to warn PU about sig legal consequences&
sks of purchase, that City might insist being paid for lands being conveyed, & title insurance
ouldnt cover payment
P a g e | 77
ordinarily requested to determine whether property has been built in accordance with municipal
bylaws. Stefanovska: Whether or not an encroachment entitles PU to withdraw from
transaction depends on whether encroachment affects use and enjoyment of ppty (a) how long
has it been there, (b) easily removable?
Koo v. Redhill (1993)
Sale ppty encroached on neighbouring ppty from 1.5 to 3 inches. PU did not want to close for fear of being sued.
PU's lawyer took position that this was a serious matter and in a letter of requisition required that solicitors for V
requisitioned that encroachment be resolved?
ld: PU bound to transaction b/c requisition for encroachment was not valid. Building
roached from 1.5 to 3 inches, had been there for so long, so minor, that PU could have
ned possessory title through AP, therefore the encroachment did not expose PU to litigation
ld: Requisition that shed did not comply with zoning was valid. PU 2 was entitled to rescind.
asoning: Cottage is not a conventional ppty. Here, the fact that storage shed had to be
ocated in a diff area entitles P to repudiate transact, b/c PUS are buying for their family, incl
dren. One of the main uses for property is watersports. Lake-side location of the storage
d was a a positive selling feature of the overall property. (ppty listing referred to it))
cts
atio P cannot requisition a restrictive covenant where clause 9 of the APS has not been
ruck out - and a V has no duty to disclose such a restrictive covenant
Right of Way
ELD: Lawyer for PU did not make requisition on time although would have been valid if
ade in time, but PU was ou t of time, so not a valid requisition and thus no rescission; Lr
eld liable for failing to make requisition on time RULE: A Requisition must be made
ithin timeframe stipulated does not go to root of title
Moorcroft v. Doraty & Kabe (1990)
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PU consults L on each offer in search for res ppty.. Retained L after offer accepted. L never
entioned right of way t of when PU signed closing docs. L searched title and found right of
ay .
eld: L negligent for failing to ever call PU's attention to registered right of way, reporting
ter
atio: SC for PU in RE T must ensure that his clients understand the contents of the initial
reement and that all risks are clearly explained. Obviously, he must search, before closing,
d at the very least make full disclosure of all relevant information yielded by the search.
incl mortgages
equisition - P must requisition the mortgage statement. The lender will issue a mortgage
atement which states the amount owing on the mortgage .
U's options before close -1) Requisition discharge of the mortgage or 2) assume it
djustments take effect on closing date -, PU picks up mort balance, V will prepare
atement of adjustments.
ow transaction closes?
Mortgage statement requisition from P,
V answers, Direction from V,
Undertaking for Payment,
Mortgagee issues discharge,
release of money and transfer of title happen contemporaneously
OTE : IF P is short on amount owing at close, - may obtain VTB mortgage or assumes
gher mortgage
efinition of terms
ndertaking Directions: V will sign a direction to the P indicating how funds should be made payable (to law firm,
directly to mortgagee etc.)
ndertaking: L for V signs personal undertaking to issue a mortgage - pay off mortgage to mortgagee or whatever
entity applicable, give outstanding balance (less mortgage) to V.
ortgage statement: To ascertain the amount owing on the mortgage, a mortgage statement must be obtained by
he mortgagee. This sets out the amount required to obtain a discharge.
ndor take back mortgage - A type of mortgage in which the V offers to lend funds to the PU (take security on it
.e. by getting a mortgage from the P, for whom it will be secondary mortgage), V becomes lender for balance of
purchase price
ould get a higher mortgage
cts
P a g e | 79
atio
PU does not have to accept an undertaking to obtain discharge, rather has a right
to demand the actual discharge of the mortgage unless it is a term of the APS
(Now a standard APS , TREB clause 12)
alysis
cts
ati
L for PU may be liable for negligence for failure to discharge duty to get P good and clear
title in case NWS The custom of paying mortgage balance to L for V in exchange for
personal undertaking to discharge mortgage
L was negligent. He should have gotten mortgage statement and paid mortgagee directly.
P a g e | 80
Party entitled to waiver must waive cond w/in time limit specified.
King v Urban County Where a party fails to perform a K term w/in specified time limit of K
cond, K does not necessarily come to an end. Party wishing to rely on this TOE provision to
terminate the IF he shows that he is ready, willing and able to close, by way of tendering the
documents
At closing, if a party says not going to close, the other must tender to terminate A,
precondition to suing for compensatory damages.
Anticipatory breach if before closing, if party says they are not going to, the other
party need not tender as precondition to suing for compensatory damages
Fanscali v Brody - If neither party is ready to close and the closing date passes Either party, if he wishes, may reinstate the transaction subject to conds: (1) give notice
to other party (2) REASONABLE date, expressly subject to time is of the essence. Where
transact is reinstated validly and other party refuses to close, he is liable for damages for
BOK.
Towsend unreasonable - A rescheduled closing date is not reasonable if reset to after
Comm. Of Adjustment hearing date; cant be 5 years into the future
Lucky Dog Party wishing to rely on time is of the essence to be entitled to withdraw from
transact must act in good faith. If he does not fulfill good faith duty, then party is
precluded from relying on TOE prov.
NOTE: Escrow: - where document(s) or money is given to a 3P to be held in trust until certain
terms and conditions are satisfied, at which time the third party is to hand over the document
or property to the promisee.
NOTE: closing times: if no hour of closing on close date is specified, closing date is open
until midnight of following day.
Le Mesurier v. Andrus ONCA;King Each party owes a good faith duty to the other to try to
resolve title problems and to perform K. To determine whether good faith duty discharged,
objective standard used to evaluate merits of any complaint by P AND imposes a high not perf
stand of performance on V. Once APS is signed, the courts policy is to favour the enforcement
of honest bargains.
Breaches cannot rely on TOE
Not a breach can rely on
TOE
Jackson;Union Eagle PU
GF Koffmanv;Lucky Dog PU is considered to breach
failed to pay deposit within
duty to act in good faith where he intentionally delays
time specified, 2 days after
notice of requisition until the closing date, and has
due .Time is of the essence. If
advanced knowledge of objection regarding a matter.
transaction is not completed as
GF Citation Realty Inc V is in breach of good faith
scheduled, then party relying
where he acts in dishonesty, and would be precluded
on time is of the essence
from relying TOE prov
provision is entitled to avoid
P a g e | 81
(Leung) extends to cases involving minor omissions or defects. If error is so minor that it
could be corrected w/in a day, then there is an obligation to disclose NWS minor defect.
Remedy - Damages or SP
Principle: A claimant is entitled to SP in lieu of damages damages for BOK in re to real
property, if she can establish (1) the property is unique for its proposed in the sense that a
substitute would not be readily available or is not cannot be easily duplicated elsewhere
(2) objective-subjective determination (Southcott). (3)Otherwise, claimant is only entitled to
damages, (2) triggers a duty to mitigate, (4) assessment of market value at date by what is fair
in the circumstances of each case. (Semelhago)
Scope of Damages
Claimant may be entitled to damages for expenses incurred resulting from delay in SP
(Tessler) If it is in the reasonable contemplation of PU that the V is purchasing another ppty,
then PU will be in responsible for these damages. Here, V1 was sued by V2 after P1s BOK w V1.
Damages was that V1 could no longer afford to buy the other house.
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incorporate a shell company for sole purpose of buying part of a land parcel from TDSB. If it's only selling part of
land , it must obtain approval for severance from the adjustment committee. V creates agreement conditional on
taining committee of adjustment approval. TDSB getting overtures for other portions of parcel at a much higher
ce. Once conditional period begins, TDSB withdraws from transact on ground that committee approval has not
en obtained. V in this case decides to sue for SP, on grounds that PU is in breach of agreement b/c V did not act in
od faith in obtaining consent
eFranco v. Kliatri (2005) Reasoning home is one of the most sig acquisitions in one's lifetime/ Not
rprisingly, subjective factors feature prominently in the selection of a home (Objectively - V's home is located in a
w subdivision, in proximity of houses that appear to be similar); Subjectively - Special features from view of PU - 3
r garae, on a cul-de-sac, little traffic and safe for young children and PL was also pregnant .Other kids in area for
s
Mortimer THE OWNER of a property has an ongoing duty to protect and repair the property and
is responsible for maintaining potential hazards and making reasonable inspections of interior
and exterior
Ekkebus PUS held liable due to failure to cover hottub, immediate cause of injury
here despite Ls not advising them. PU bought a ppty w HT on premises absent a permit for
building HT. Neighbours child falls in uncovered HT, severely injured.
ortimer v. Cameron (1994) Facts Accounting students finished an exam and went to party one of the
udents' houses, were mildly intoxicated. M made a gesture that he was going to pour beer on C. They fell onto a
ll that buckled in.Fortunately C was unhurt. M suffered a devastating injury, and became a complete quadriplegic
hout any motor function. PL brought an action against the occupier-owner ( who bought ppty as is) , the city of
ndon
VTBM - V becomes lender for part of purchase money, becomes mortgagee, second mortgagee
Equity proprietary interest in mortgaged property ; can lend all or part to finance 1 st or additional mortgage
P a g e | 83
Principal amount owing (incl CMHC insurance premium) to lender by borrower OR amount advanced by lender
Interest (Fixed or floating)
Fixed interest rate - Where the amount of interest is an agreed amount
Floating rate - The interest amount varies on the X (prime + X) ; trend is floating; most people will not convert
Maturity Date final payment date at which remaining amount owing, principal & interest is due and payable
Amortization Loan (subject to renewal options of interest rate) a loan with periodic
scheduled payments of both principal and interest vs. interest only or balloon payments. Standard for most
residential mortgages
P a g e | 84
Closed/Open Mortgage
Closed mortgage deprives borrower of right to pay off mortgage prior to its maturity
Note: Financial institution will discuss options and advise client - it makes a diff in client's financial future ; like if
negotiating a closed payment but you have an option to pay it off with a 3 month interest penalty
Open mortgage (typical VTBM) confers right on borrower to pay off mortgage prior to maturity.
P a g e | 85
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S 20 Mortgages Act
S 20(3) IF grantee (P2) agrees to assume debt, mortgagee has right to sue registered owner
and original mortgagor, but right to judgement against owner or mortgagor, not BOTH
prevents against double recovery, but does NOT bar right to recover against other
original mortgagor(s).
S 20(2)) If Agreement to assume obligates grantee to indemnify original mortgagor wrp to
mortgagee, mortgagee only retains right to recover against grantee, not registered owner,
unless action already commenced against original mortgagor. Right of mortgagor to
recover personal judgement against 1st grantee extinguished on registration of a grant or
transfer of equity of redemption by grantee to another person
Scenario 1: IF Assumption Agreement with PU1, who then sells to PU2, mortgagee can
enforce action against:
Grantee, 1 (pursuant to assumption agreement)
Mortgagor-Covenantor (pursuant to personal covenant for mortgage debt)
Grantee/ PU 2 AS registered owner
Scenario 2: IF NO Assumption Agreement with PU1, who then sells to PU2, mortgagee
can enforce action against:
Mortgagor-Covenantor (pursuant to personal covenant for mortgage debt)
Registered Owner (s 20, MA)
NOT P1 (absent AA), BUT mortgagor can sue P1 afterwards Fuciarelli
Agreement to assume bt/w mortgagor (V) and grantee (P) creates obligation on
grantee/subsequent purchaser to indemnify V against liability for repayment/action on
covenant
Due on sale clause In any conveyance, L is entitled to call mortgage debt unless L
approves subsequent L; mortgagor still required to guarantee repayment, but COULD
negotiate release from covenant
nterest Act s, 8
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Venpax , test for injunction: (1) irreparable harm will result to MTOR if the injunction is not
granted and (2) the balance of convenience favours granting the injunction
(1)Duty to take reasonable precautions to obtain the true market value of the mortgage ppty on
the date on which the mortgagee decides to sell it. Perfection is not required, latitude given.
Courts will assess whether conduct fulfills duty based on broad consideration of all circumstances;
(2)Onus on MEE to demonstrate that conduct is plain on the wrong side of the law & does not fulfill
duty to take reasonable precautions. (3)Rebuttal by MEE.
No duty to obtain true value
No duty to delay sale until market forces are rising, can elect WHEN to sell
Onus on MOR to demonstrate the market value price that could have been obtained
BUT for MEEs negligence
No duty to mitigate losses
Duty to ensure that a ppty is brought to the attention to a wide segment of the market
place. MEE is liable for damages for improvident sale transaction, measure of damages is the
difference between actual sale price and true market value of mortgage property
Duty to obtain proper appraisals . MEE should advertise for higher than appraised market value
advertise ppty for sale = if residential, place ppty with multiple listing services
adveritse ppty, put sale for sign on ppty
P a g e | 88
Standard of Care
Test How to determine whether MEE met SOC
(Wood- duty to obtain appraisals; advertise failed; improvident sale) The courts holds
that a lender should take into account the common tendency to bargain in a real estate
transaction. Here, lender sold right away & court found appraisal duty not fulfilled.
Ppty wasn't exposed to market for a sufficient period of time.
(Sterne failure to advertise; improvident sale) Crt held that b/c it was a hobby farm,
lender had a duty to advertise in Toronto and Hamilton. But for failing to advertise, purchase
price that would have been obtained could have been 25 K..
CA Case; MEE held liable for improvident sale). Here, L for lender hired appraisal friend,
asked for appraisal back and that he not keep copies of it. Ppty sold for 12.5; mkt value, 16.
Damages for 3.5 mil and costs
P a g e | 89
(Capsule Investments) A mortgagee need not spend its own money on the mortgage
property. The mortgagee has a (1)right to collect the income of the property, apply it to the interest
owing first, and if there is a surplus, (2)then it can be spent if ppty is in disrepair. (3)Further, only
if there is a monthly surplus in excess of interest and principal payments, is the MEE
required to make repairs. If monthly income was less than the monthly payment, the mortgagee
would have no obligation to make repairs (subject to statutory duties)
Tenants
Commercial (apt building, income producing plaza) obligation to provide written
notice to tenants that you're the mortgagee. MT is in default, exercise of right to possession,
tendering instruction where and to whom for paying rent , appoint manager, enter premises,
change locks
Residential judicial power of sale used to exercise possession in lieu of power of sale
General Principle To act prudently and diligently in the management of the property
(Elgie) and account for his management upon redemption or sale. MTEE must account to the
MTOR for all revenues produced by the property. If property is mismanaged the MTEE will not
only be charged w/ rents and profits received but also w/ those that would have been received if
management had been more competent.
P a g e | 90
Right to give notice of sale 15 days after date of defaulted payment from the mortgagee to
rtgagor and any subsequent encumberancer.
No proceedings can take place between the issuance of the Notice of Sale and when it
ires.
During 35 day redemption/repayment period, MTEE cannot: (1) issue writ on covenant,
if issued before notice of sale, it cannot be served. (3) issue or serve a writ for possession,
ake possession or enter into sales neg
Any steps taken during that period will be a nullity.
2(3)- Exception: This rule does not apply to stay or waste injury. Any other steps
uire leave of court
22-23 Right to Pay Bringing Mortgage Debt into Good Standing at any
me before a sale
olute right to Pay Arrears & costs any time until MEE enters into APS the ppty after
eiving notice
23 gives mortgagor the rights to pay the arrears if mortgagee has started
e action by SOC, rarely used. MOR 2ndMEE has the right to pay the arrears if an action has
10/18 Regardless of mortgage agreement term, IF MOR ,is an individual other than
mited co or corp, at any time after 5 years, whether a closed mortgage or not, a mortgagor
a (1)right to pay off the mortgage at any time upon payment of an additional 3 months
erest, (2) must give notice of intent, (3) covenantor of promise must be an individual,
hough transferable to a limit comp subject to ind cov. (Hone)
P a g e | 91
REMEDY FORECOSURE
Principle (must enforce remedy through courts)
(1) serve SOC for foreclosure, naming MOR & all subsequent encumbrancers;
(2) interim judgement, MEE 1 can take possession;
(3) final order of foreclosure(following failure to redeem) interest of MOR /MEE2
is extinguished if they fail to redeem;
(4) MEE loses right to action on the covenant,
(5) No duty to account for surplus or liability for deficiency if MEE sells ppty at a
loss
Procedure - Orders in a foreclosure:
(1) If right to redeem filed, then judgment for foreclosure with a reference;
mortgagor can pay off the amount owing w/in 60 days of ref. If they dont act, THEN
(2) Final order of foreclosure :mortgagee officially becomes the owner; No duty to account
for surplus; no right of action on the covenant (in a loss)
(1)Right to file notice of intention to redeem in 60 days to pay off full amount owing;
(2)court may grant extensions if payee making good faith efforts ; (3) encumbrancer may
then foreclose or sell IF maturity date has not arrived OR if amount owing is paid off by
maturity date, and prospective increase in market value
Right to file a notice of intention to sell (judicially supervised sale): request that MEE
sell rather than foreclose. If MEE cannot sell, it may reapply to reconvert action into
foreclosure.
a) Mortgagee exercises power of sale (1)by way of notice via registered mail to mortgagor ,
and (2)every subsequent encumbrancer , (3)if MOR in default for at least 15, days,
(40with 35 day redemption period to rectify the arreas
b) Act of sale extinguishes rights of any subsequent encumbrancer . MEE 1 has duty to
account surplus, first subsequent encumbrancers in priority, then to MOR
c) Obligations of MEE 1 analysis above
P a g e | 92
Arnal v. Arnal SKCA 1969: Even if transact not called a mortgage, but looks and smells
like one it must be treated as a mortgage (Consider intention and relationship of parties,
financing in exchange for marketable asset akin to equity of redemption). Here: Son had right to
get property back by paying amount owing. Father lends money to son for purchase of ppty in
exchange for father as title holder. Father died, and estate argues it was loan security, not a
mortg.
Creswell 1984, BCSC He HELD: B had the right to pay it back with an interest rate. Loan
from P to D on security of their lands .Document was an obvious attempt to disguise a loan
agreement by naming it a sale with option back.
Instead of lending, lender purchased ppty and entered into a sale with an option with party,
option that party (PU) could buy back ppty at any time during the year at sale price of 380K
and interest of 77K, not greater than 635K , 10 K fee to Ds agent. borrowed out of sheer
desperation.
L refuses to sell back on grounds that time in which to exercise option was during year, NOT
end of year
REPAYMENTS OF MORTGAGE
Knightsbridge Estates Trust Limited. Here, transact not unconscionable no extreme power
imbalance, was a sophisticated party. Argued that length mortg term at 24 years was
unreasonable
by virtue of unconscionability.
(Knightsbridge) The rules of equity will protect its godchild, the mortgagor
(Titus ABCA)A party is relieved of duty to perform K term that is established to be
unconscionable so as to render it unenforceable (a) a grossly unfair &improvident
transaction; (2) the victims lack of ILA ; (3) overwhelming power imbalance caused by
victims ignorance of bus, illiteracy, lang barrier, blindness, deafness, senility or other
disability; (4) the other partys knowingly taking advantage of this vulnerability
P a g e | 93
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North American Express , s 347(1). Applied notional severance vs. blue pencil
severance
Flexible remedy warranted in this case. Lender did not violate s 347(1)(A), K served a commercial
purpose, no illegal intention, commercially experienced parties, ILA , equities of situation favour
lender in presence ILA, parties knew obligations
Facts: Borrower had to pay royalty + certain commissions. It looked as if there were a lot of
other factors other than the rate of interest. In the end, the net interest rate came to 89%.
Triggering Mortgage
Principle: If MEE commences an action for foreclosure or judicial sale, this triggers right of
MOR to pay off closed full mortgage debt owing without penalty; does not convert close to open
mortgage
Exception: Issue action for arrears or notice of sale DOES not trigger mortgage OR take
possession to preserve the security
Canbook Distribution v Borins
Held: TJ accepts SCs arguments that docs were protected from discovery by the S&C privilege.
Canbook argued that docs were not privileged, and any privilege was waived due to fraud
allegations.
Rule: S-C privilege is waived if claimant established that SCS are liable for prima facie case of
fraud. Solicitor would be required to produce these documents.
Facts: Canbook claims that that SCs of debtor, Edwards, bookstore supply chain, a subsidiary to Edseds, in bankruptcy,
engaged in a calculated and deliberate fraud against Canbook and all other unsecured creditors of Edwards, that
immediately before bankruptcy, Edwards withheld payments to suppliers while applying proceeds of sales to repay the
indebtedness of Edwards to Edsed. Canbook sought production of documents.
Partition Act Where a dispute arises in context of a business venture or joint partnership or
joint tenancy, court may exercise discretion to sell property or sever the joint tenancy absent a
express agreement between partners. Onus on claimant to demonstrate intention of
parties
P a g e | 95
Feher v Healey
Held: claimant, nephew of H, had not established transfer of MH from W to children was a
fraudulent conveyance, NWS sep agreement was never signed, there was an oral promise.
Reason for transfer was part of a comprehensive settlement of all financial matters involving
couple and children. W had waived CS and SS in exchange for transfer or MH.
Stone v. Stone A lawyer may have an obligation to TPS other than client where purposes
of transact amounts to delaying creditors or escape spousal obligations and responsibilities.
Held: Crt set aisde transact.
F: H was dying, instructed L at hospital to transfer all assets to children. W sought to set aside
transacts under Fraudulent Conveyances Act. L was sued but settled action.