



COURT OF APPEAL FOR ONTARIO

CITATION: Bowman v. Martineau, 2020 ONCA 330

DATE: 20200529

DOCKET: C66751

Rouleau, Hourigan and Roberts JJ.A.

BETWEEN

Aden Bowman personally
and as executor for the estate of Shirley Bowman

Plaintiffs
(Respondents)

and

Alma Emond, Shelley Emond, Paul Studholme
,
Suzanne Martineau
and Re/Max Hallmark Realty Limited

Defendants
(
Appellants
)

Paul Le Vay and Stephen Aylward, for the appellants

David A. Morin and Peter Reinitzer, for
    the respondents

Heard: March 12, 2020

On appeal from the judgment of
    Justice Guy P. Di Tomaso of the Superior Court of Justice dated March 4, 2019, with
    reasons reported at 2019 ONSC 1468, and from the costs judgment dated April 4,
    2019, with reasons reported at 2019 ONSC 2141 and 2019 ONSC 2328.

Roberts
    J.A.:

A.

Overview

[1]

The appellant real estate agent and broker appeal from the judgment ordering
    them to pay damages to the respondent purchasers of a residential home. The
    trial judge ordered the appellants to pay for the costs necessary to repair water
    and mould damage that the respondents discovered only after their purchase due
    to the appellant real estate agents negligence.

[2]

The appellants do not appeal the trial judges finding or apportionment of
    liability but submit that the trial judge erred in his assessment of damages.

[3]

For the following reasons, I would allow the appeal, set aside judgment
    in respect of the damages awarded for the costs to repair the property, and
    remit the matter to the trial judge to determine the diminution in value of the
    property given its damaged state.

B.

BACKGROUND

[4]

The appellants acted both for the vendors, Alma and Shelley Emond, and the
    respondents on the sale of a house. The trial judge found the vendors liable to
    the respondents for non-disclosure and concealment of water damage. He determined
    that the appellants were negligent in the execution of their professional
    responsibilities and therefore liable to the respondents.

[5]

Specifically, the trial judge determined that the appellant real estate
    agent, Ms. Martineau, had failed to review and verify with the vendors and then
    the respondents the information contained in the Seller Property Information
    Statement (SPIS), the checklist of information about the property. The trial judge
    concluded that if she had done so, Ms. Martineau would have discovered that the
    property suffered from ongoing water leakage. As a result, the respondents were
    left without the means to find out about the ongoing roof leakage and mould problems.

[6]

The trial judge assessed the respondents damages at $450,215.35, calculated
    as follows: $332,706.59 for the cost to repair the property; $10,282.13 for out
    of pocket expenses for time and materials spent on the tearing out of the
    damaged portions of the house; $101,500 for the respondents alternative living
    expenses from September 2014 to July 2019; $726.63 for hydro and insurance costs
    thrown away; and $5,000 in general damages. He apportioned the appellants liability
    at 70% and the vendors liability at 30%
[1]
.
    Accordingly, judgment was granted against the appellants in the amount of $315,150.74
    (70% of $450,215.35) and costs of $144,679.55.

C.

Issues

[7]

The appellants submit the trial judge erred in his assessment of the respondents
    damages as follows:

1.

The trial judge erred by applying a cost of repair rather than a diminution
    in value measure of damages;

2.

The trial judge erred in concluding that the respondents had not failed
    to mitigate their damages; and

3.

The trial judge erred in determining that the frost heave damage was
    reasonably foreseeable.

D.

Analysis

(1)

The Measure of Damages

(a)

Applicable Legal Principles

[8]

The general, well-settled rule for the assessment of compensatory damages
    in tort actions is that, as far as damages can accomplish this, the plaintiff
    is entitled to be put into the position he or she would have occupied but for
    the injury caused by the defendant:
Nan v. Black Pine Manufacturing Ltd.
(1991),
    80 D.L.R. (4th) 153 (B.C.C.A.), at p. 157.

[9]

Restoration of the plaintiffs position should not amount to under or
    over compensation but only result in the amount of compensation that will make the
    plaintiff whole. Accordingly, limits are placed on compensation: a plaintiff
    can generally only recover for actual injury caused by the defendants conduct,
    and not for damages that are too remote in that they are speculative or not reasonably
    foreseeable:
Clements v. Clements
, 2012 SCC 32, [2012] 2 S.C.R. 181,
    at para. 13;
Deloitte & Touche v. Livent Inc.
, 2017 SCC 63, [2017]
    2 S.C.R. 855, at para. 77.

[10]

Achieving
    the restoration of the plaintiffs position requires an approach that is not
    unnecessarily complicated or rule-ridden but responsive to the facts of each
    given case:
James Street Hardware and Furniture Co. v. Spizziri
, 1987
    CanLII 4172 (Ont. C.A.), at pp. 27-28.

[11]

In
    cases where the harm to be compensated for is property damage, damages have typically
    been assessed either as the cost to repair the property or its resulting
    diminution in value.
The historical common law
    position was that damage caused to real property was measured by the diminution
    in the value of the land:
C.R. Taylor (Wholesale) Ltd. and others v.
    Hepworths Ltd.
, [1977] 2 All E.R. 784
    (Q.B.) at pp. 790-91, citing
Jones v. Gooday
(1841), 8 M. & W. 146. However, later English
    cases held that the cost of reinstatement, or repair, could be awarded in an appropriate
    case:
Dominion Mosaics and Tile Co. Ltd. and another v. Trafalgar
    Trucking Co. Ltd. and another
, [1990] 2 All
    E.R. 246 (C.A.), at pp. 249-50;
Hepworths
, at p. 791,

citing
Harbutts Plasticine Ltd. v. Wayne Tank and Pump Co. Ltd.
, [1970] 1 All E.R. 225 (C.A.). These later authorities
    have been received into the law of this country:
James Street
    Hardware
;
Nan
, at pp. 157-158
. The application of one or the
    other of these approaches is governed by the specific facts of the particular
    case and the further regulating factors of causation, reasonableness and
    proportionality that I have already referenced.

[12]

In
    professional negligence cases involving real property, like the present, careful
    attention must be paid to the causal link between the injury suffered and the
    act of negligence. Depending on the facts, the negligence may not actually have
    caused property damage, rendering the case law concerning the assessment of damages
    for harm to property inapplicable.

[13]

In
    some cases, the professional negligence will actually have caused the defect in
    the property or will have caused the plaintiff to lose the right to recover for
    that defect. For example, in
Kienzle v. Stringer
(1981), 35 O.R. (2d)
    85 (C.A.), leave to appeal refused, [1982] S.C.C.A. No. 252, the solicitors negligence
    in conveying the property caused a defect in title and the plaintiff was entitled
    to recover the cost of putting the title in good order. In
Jarbeau v. McLean,
2017 ONCA 115, 410 D.L.R. (4th) 246, the solicitor negligently failed to
    commence an action against an engineer who negligently certified the defective
    construction of a new home. But for the negligence, the plaintiffs would have recovered
    the cost to repair the property against the negligent engineer, whose negligence
    had, in turn, caused the defect in the property. Finally, in
Tabata v. McWilliams
    et al.
(1982), 40 O.R. (2d) 158 (C.A.), the
    solicitor negligently failed to warn the client, who was purchasing a home, of
    the need for an occupancy permit prior to occupation of the property. But for
    the negligence, the plaintiff could have insisted on an occupancy permit being
    obtained by the vendors prior to closing, which would have in all probability
    involved the repair of the property
. Given these cases involve defects
    in property, the case law concerning the assessment of damage to property applies.

[14]

In
    other cases, however, the professional negligence will not have caused damage
    to property, but rather will have merely caused the plaintiff to enter into a
    transaction they would otherwise have avoided. For example, in
Messineo et
    al. v. Beale
(1978), 20 O.R. (2d) 49 (C.A.), a solicitor negligently
    failed to discover and report a pre-existing defect in the vendors title but
    did not cause the defect. In
Toronto Industrial Leaseholds Ltd. v. Posesorski
(1994), 119 D.L.R. (4th) 193 (Ont. C.A.), a solicitor negligently failed to
    report the existence of an option to rent the purchased property at below
    current market rents but did not bring the option into existence. Finally, in
Krawchuk
    v. Scherbak
, 2011 ONCA 352, 106 O.R. (3d) 598, leave to appeal refused,
    [2011] S.C.C.A. No. 319, the real estate agent negligently failed to take any
    steps to inquire into the accuracy of the vendors representations concerning the
    condition of the property, but did not cause its poor condition. In these cases,
    damages were assessed by looking to the overpayment paid by the plaintiff and
    their consequential damages, rather than the cost to repair or remove the defect.

(b)

The Trial Judge Erred by Mischaracterizing the Nature of the Harm Suffered
    by the Respondents

[15]

Relying
    on the approach followed by this court in
Messineo
and
Posesorski
,
    the appellants submit that the trial judge erred in measuring damages as the cost
    to repair the premises because the appellants professional negligence did not
    cause the water and mould damage to the property.

[16]

The
    respondents argue that diminution of value is not the appropriate measure of
    damages. In their submission, in the case of the loss of a family home, where
    there is a reasonable desire to rebuild, cost to repair provides the appropriate
    measure of damages.

[17]

I
    agree with the appellants position. The difficulty with the respondents
    argument is that it conflates the cause in fact of their damages with the reasonableness
    of the quantum. In my view, the trial judge erred in his approach to causation.
    Specifically, the trial judge mischaracterized the respondents loss flowing
    from the appellants negligence and misinterpreted this courts decision in
Jarbeau.

[18]

The
    trial judge properly concluded that but for the appellants negligence, the respondents
    would not have entered into the agreement of purchase and sale to buy the
    house. This finding was supported by the respondents pleading and Mr. Bowmans
    evidence at trial. It is not contested on appeal.

[19]

However,
    the trial judge erred by mischaracterizing the respondents resulting loss as
    their entitlement to a house free of mould and water damage. He also
    misinterpreted
Jarbeau
as standing for the general proposition that cost
    to repair is a more appropriate measure of damages when assessing loss related
    to defective property. These errors led the trial judge to reject the diminution
    in value calculation and apply the cost to repair approach without considering
    whether the latter measure of damages compensated for the injury actually
    caused by the appellants negligence.

[20]

Referring
    to
Jarbeau
, the trial judge explained his reasoning as follows:

I reject the diminution in value approach for the following reasons.
    This approach fails to take into account the purpose of damages in a tort claim
     to ensure that the damages awarded to a plaintiff should put him or her in the
    same position as they would have been in had they not sustained the wrong for
    which they are receiving compensation or reparation.
In the context of property
    loss matters, where a purchaser believes it had purchased a home free of
    defects, the fairest measure of damages is that which would provide the
    [plaintiffs] with what they bargained for  a home free of defects.
 [Emphasis
    added.]

[21]

Jarbeau
does not stand for the general proposition espoused by the trial judge that cost
    to repair invariably represents the fairest measure of damages regardless of
    the causal link.
Jarbeau
was a solicitors negligence action. The plaintiffs
    claimed damages against their solicitor for failing to commence an action within
    the requisite limitation period against the engineer who negligently certified
    the design and construction of the plaintiffs brand-new, but defective home. The
    plaintiffs were entitled to be put into the position they would have occupied had
    the action been commenced in time against the negligent engineer. In their proposed
    action against the negligent engineer, the plaintiffs would have been entitled
    to be put into the position they would have occupied had the engineer not been
    negligent, namely, they would have received the new, defect-free house for which
    they had bargained. It was in those particular circumstances that this court upheld
    the cost of reinstatement as the reasonable and proportionate measure of damages.

[22]

In
    the present case, the trial judge erroneously equated the respondents loss
    with the loss of a house free of mould and water damage. This reasoning is reflected
    in the trial judges observations that: No evidence was tendered at trial
    suggesting that damages calculated on a diminution in value basis would permit [the
    respondents]
to obtain a home similar to the one they purchased that is free
    of mould and water damage
 (emphasis added). However, the loss that the
    respondents suffered as a result of the appellants negligence was not property
    loss of this nature.

[23]

The
    respondents loss consisted of entering into a transaction to purchase a house
    damaged by water and mould. The appellants negligent provision of professional
    services caused the respondents to enter into a transaction that they would not
    have otherwise undertaken. But the appellants did not cause the water and mould
    damage to the property. In other words, even if the appellants had not been negligent,
    the respondents would still not have received a water and mould-free property;
    they would merely have avoided this bargain. This takes this case outside the
    scope of
Jarbeau
,
Nan
, and other cases where the negligence was
    causally related to property damage.

[24]

As
    the appellants wrong did not cause the property defect, the respondents are
    not entitled to demand what they could never have had even if the appellants
    had not been negligent, namely, a house free of mould and water damage:
Posesorski
,
    at p. 210;
Avrom Evenchick (Trustee of) v. Ottawa (City)
(1998), 111 O.A.C. 132 (C.A.)
, at para. 12;
Samson
    v. Lockwood
, 1998 CanLII 1920 (Ont. C.A.)
,
    at p. 13. They are only entitled to damages to compensate them for entering
    into a bad transaction they would have otherwise avoided. These damages will include
    their overpayment for the defective property, namely, its diminution in value.
[2]


[25]

I
    do not accept the respondents additional argument that the cost of repair is the
    default method for ascertaining damages in this case. Awarding cost to repair would
    over-compensate the respondents and therefore not put them in the position they
    would have occupied but for the appellants negligence:
Evenchick
, at para. 12;
Esso Petroleum Co. Ltd. v.
    Mardon
, [1976] 2 All E.R. 5

(C.A.), at p. 16; see also
Downs and another
    v. Chappell and another
, [1996] 3 All E.R.
    344

(C.A), at p. 358.

[26]

As
    a result, the trial judges cost to repair approach to damages that awarded the
    equivalent of a house free of mould and water damage to the respondents was not
    the true measure of the respondents loss caused by the appellants negligence
    and must be set aside.

(c)

The Assessment of Damages Must be Remitted

[27]

While
    I conclude that the cost to repair the home was not an appropriate measure of
    damages in this case, it is not possible on the record before us to assess the damages
    flowing to the respondents from the appellants negligence. There is, for example,
    no admissible evidence concerning the value of the property given the mould and
    water damage, which is necessary to calculate the magnitude of overpayment. The
    trial judge rejected the evidence of the real estate expert called by the
    appellants and the appellants have not challenged that ruling on appeal.

[28]

In
    consequence, I would remit the assessment of damages to the trial judge for his
    determination, as well as the case management of what further evidence and submissions
    from the parties will be required for the determination of this issue.

(2)

Mitigation

[29]

The
    appellants argue that the trial judge erred in rejecting their submission that
    the respondents failed to mitigate their damages. Specifically, they say the respondents
    should have simply walked away from the property and the mortgage.

[30]

I
    disagree.

[31]

The
    respondents were required to make reasonable efforts to mitigate their damages.
    It is the appellants onus to demonstrate they failed to do so:
Janiak v.
    Ippolito
, [1985] 1 S.C.R. 146, at p. 163. I see no error in the trial
    judges conclusion that the appellants did not meet that onus. The trial judges
    determination of the mitigation issue was reasonable in the circumstances of
    this case. His conclusion is therefore entitled to deference on appeal.

[32]

There
    was no evidence establishing that the respondents could have sold or walked
    away from the property, or that it was reasonable for them to take either
    course in their circumstances, which included their straitened finances and obligations
    under the vendor-take-back mortgage. Even accepting the appellants real estate
    expert evidence of property value at $165,000, the respondents would not have
    been able to recoup enough money from a sale to repay the vendor-take-back
    mortgage. The unchallenged evidence at trial showed that the respondents were
    in difficult financial circumstances: they could not afford to buy another property,
    remediate this property, or maintain the property while paying the mortgage and
    renting alternative living accommodations. As a result, it was not unreasonable
    for them to retain the property and seek damages from the appellants.

(3)

Frost Heave Damage

[33]

The
    appellants submit that the trial judge erred in his consideration of this issue
    in that the trial judge made inconsistent findings concerning the question of
    whether the frost heave damage was reasonably foreseeable. Specifically, the appellants
    say that the trial judge erred by determining that while the respondents could
    not have foreseen the cause of the heaving of the foundation, the frost heave
    damage was a reasonably foreseeable consequence of the negligence.

[34]

I
    do not accept these submissions. In my view, the appellants are conflating the
    trial judges findings on mitigation with those on remoteness of damages.

[35]

At
    trial, the appellants argued that the frost heave damage was too remote and not
    causally connected to the appellants negligence; and, further, that the
    respondents had failed to mitigate their damages. A fair reading of the trial
    judges reasons shows that the trial judge dealt with both these issues.

[36]

With
    respect to the issue of mitigation, the trial judge determined that it was fair
    and reasonable for the respondents to shut down the house rather than reinstate
    a heating system that they could not afford to operate in order to heat a house
    that was not insulated because of the gutting required by the water and mould damage.
    He also found that it was reasonable for the respondents to follow the measures
    recommended by Mr. Korner, a professional engineer, to try to protect the
    house. As a result, he found that the appellants had failed to satisfy their onus
    to demonstrate that the respondents did not mitigate their damages.

[37]

Turning
    next to the trial judges findings concerning causation and remoteness of damages,
    he found that it is foreseeable that a home rendered inhabitable by mould and
    water damage cannot be lived in, that a home not lived in will not be heated and
    that an unheated home subjected to the effects of freezing temperatures during
    the winter months could suffer from floor heaving. In consequence, he determined
    that the basement floor heaving is not so removed as to be unrecoverable.

[38]

It
    is clear that the trial judge concluded that the frost heave was reasonably foreseeable
    and hence the necessity for the respondents efforts to protect the empty houses
    foundation with straw as recommended by their engineering expert. What was not
    foreseeable, and therefore not a failure to mitigate on the part of the respondents,
    was that the recommended protective steps would not be effective. The trial
    judge effectively concluded that the failure of the recommended measures to
    adequately protect the foundation should not be visited against the respondents
    as a failure to mitigate their damages. His mitigation finding was separate from
    the trial judges findings respecting causation and remoteness.

[39]

I
    see no inconsistencies or errors in the trial judges findings concerning the issues
    of mitigation, causation and remoteness of the frost heave damage. They were available
    to him on the record.

(4)

Conclusion

[40]

Awarding
    the cost of repair was an error in this case because the defect in the property
    did not result from the negligence. This head of damage should be replaced with
    the diminution in value of the property as a result of the now-revealed defects.
    In light of my conclusions above that the respondents have not failed to mitigate
    their damages and that the frost heave damage is a reasonably foreseeable
    consequence of being negligently advised into this transaction, the relevant measure
    is the difference between the purchase price paid and the actual value of the
    property in its damaged state at the time of trial, including as a result of
    the frost heaving.

E.

Disposition

[41]

Accordingly,
    I would allow the appeal in part and set aside the trial judges March 4, 2019 judgment
    in relation to his award of costs to repair against the appellants in the amount
    of $232,894.61. The balance of the trial judges award is not affected by this
    result. I would also set aside his April 4, 2019 judgment of costs, fixed in
    the amount of $144,679.55, against the appellants.

[42]

I
    would remit to the trial judge the assessment of the respondents damages arising
    from the overpayment and diminution in value of the property caused by the
    appellants negligence and the issue of the costs from the first trial.

[43]

In
    my proposed disposition of the appeal, since the appellants would succeed on only
    their first ground of appeal, the results would be mixed, and I would make no
    order as to costs of the appeal.

Released: May 29, 2020 (P.R.)

L.B.
    Roberts J.A.

I
    agree. Paul Rouleau J.A.

I
    agree. C.W. Hourigan J.A.





[1]

The respondents and the vendors entered in to a proportionate
    share agreement in settlement of the respondents claim against them.


[2]
These
  damages are not limited to overpayment. As reflected in the portion of the
  trial judges damages award that is not challenged on this appeal, there may be
  various consequential losses suffered as a result of being wrongfully advised
  into the transaction:
Posesorski
, at p. 40
.

