



COURT OF APPEAL FOR ONTARIO

CITATION: Orr v. Metropolitan Toronto Condominium Corporation
    No. 1056, 2014 ONCA 855

DATE: 20141202

DOCKET: C54309, C54310, C54311, C54315 & C54320

Feldman, Tulloch and Lauwers JJ.A.

BETWEEN

C54309

Kelly-Jean Marie Orr also known as Kelly-Jean
    Rainville

Plaintiff (Appellant)

and

Metropolitan Toronto Condominium Corporation No.
    1056, Gowling, Strathy & Henderson, Brookfield LePage Residential
    Management Services a division of Brookfield Management Services Ltd., Patrick
    Post, Pamela Cawthorn, Bruce Ward, Larry Boland, Francine Metzger, Michael
    Kosich and Richard Dorman

Defendants (Respondents)

and

Richard Weldon

Third Party (Respondent)

C54310

Kelly-Jean Marie Orr

Applicant (Appellant)

and

Metropolitan Toronto Condominium Corporation No.
    1056

Respondent (Respondent)

C54311

Metropolitan Toronto Condominium Corporation No.
    1056

Plaintiff (Respondent)

and

Kelly-Jean Marie Orr

Defendant (Appellant)

C54315

Kelly-Jean Marie Orr also known as Kelly-Jean
    Rainville

Plaintiff (Respondent)

and

Metropolitan Toronto Condominium Corporation No.
    1056,
Gowling, Strathy & Henderson
, Brookfield
    LePage Residential Management Services a division of Brookfield Management
    Services Ltd., Patrick Post, Pamela Cawthorn, Bruce Ward, Larry Boland,
    Francine Metzger, Michael Kosich and Richard Dorman

Defendants (
Appellant
/Respondents)

and

Richard Weldon

Third Party (Respondent)

C54320

Kelly-Jean Marie Orr also known as Kelly-Jean
    Rainville

Plaintiff (Respondent)

and

Metropolitan Toronto
    Condominium Corporation No. 1056
, Gowling, Strathy & Henderson,
    Brookfield LePage Residential Management Services a division of Brookfield
    Management Services Ltd., Patrick Post, Pamela Cawthorn, Bruce Ward, Larry Boland,
    Francine Metzger, Michael Kosich and Richard Dorman

Defendants (Respondent)

and

Richard Weldon

Third Party (Appellant)

Geoffrey D.E. Adair, Q.C., for Kelly-Jean Marie Orr,
    also known as Kelly-Jean Rainville

Barry A. Percival, Q.C. and Theodore B. Rotenberg, for
    Metropolitan Toronto Condominium Corporation No. 1056, Bruce Ward, Larry Boland
    and Richard Dorman

Robert J. Clayton, for Brookfield LePage Residential
    Management Services, a division of Brookfield Management Services Ltd., Patrick
    Post and Pamela Cawthorn

David Gadsden, J. Brian Casey and Matt Saunders, for
    Gowling, Strathy & Henderson

Thomas W. Arndt, for Richard Weldon

Heard: February 19 & 20, 2014

On appeal from the judgment of Justice Darla A. Wilson of
    the Superior Court of Justice, dated August 18, 2011, with reasons reported at
    2011 ONSC 4876.

Lauwers J.A.:

[1]

Kelly-Jean Rainville (formerly Kelly-Jean Marie Orr) bought what she believed
    was a three-storey condominium townhouse unit from Richard Weldon in the Grand
    Harbour development in Etobicoke, Ontario. The condominium documentation,
    however, revealed that the unit was only two storeys. The third floor was
    illegally built into the common element attic space. This is a set of grouped
    appeals about where liability falls for the difference in the number of
    permitted storeys.

[2]

Ms. Rainvilles unit, townhouse 113, is located in a building governed
    by Metropolitan Toronto Condominium Corporation No. 1056 (MTCC 1056). Ms. Rainville
    and her real estate lawyer at Gowlings did not know that the third floor of the
    townhouse was illegally constructed when she purchased the unit. When Ms.
    Rainville found out, she brought claims against MTCC 1056, Gowlings, Brookfield
    LePage Residential Management Services (Brookfield), which was the property
    manager for MTCC 1056, and several individual defendants. The defendant MTCC
    1056 added Mr. Weldon as a third party.

[3]

The trial judge dismissed Ms. Rainvilles claims against Brookfield and
    the individual defendants, but found Gowlings, MTCC 1056, and Mr. Weldon liable
    and ordered damages against them. She ordered Ms. Rainville to close up the
    third floor and to pay MTCC 1056 occupation rent for the third floor.

A.

factual overview

[4]

The factual overview is largely taken from paras. 15-109 of the trial
    judges reasons.

(1)

The Condominium Development

[5]

In the late 1980s, Mr. Weldon and Larry Boland, principals of Rylar Development
    Ltd., built the Grand Harbour condominium development. The development was
    composed of two high-rise tower buildings and an arrangement of townhouses. The
    three portions of the development were governed by three separate condominium
    corporations. The real estate market deteriorated in the early 1990s and many
    unit purchasers refused to close their deals. Mr. Weldon and Mr. Boland each agreed
    to buy one unit in the development. Mr. Weldon took townhouse 113.

[6]

Mr. Weldon decided to expand the size of townhouse 113, which was originally
    3000 square feet over two storeys, by building a third floor into the common element
    attic above his unit. Mr. Boland, with whom Mr. Weldon discussed the idea, told
    him that the additional third floor area might cause the development to exceed
    its permitted square footage, and advised him to seek approval from the
    Committee of Adjustment. Mr. Boland and Lou Andre, the construction manager for
    the development, both urged Mr. Weldon to obtain a building permit. Mr. Weldon
    did not follow their advice.

[7]

Construction of the third floor began in the spring of 1993, and was largely
    complete when Mr. Weldon and his family took possession of the townhouse on
    July 17, 1993. The third floor held a large family room with two skylights, a
    fourth bedroom, an ensuite bathroom, a storage area and a small furnace room. Mr.
    Weldon took title to the unit on April 7, 1994, and paid approximately $400,000
    for it.

[8]

MTCC 1056 became a condominium corporation on July 5, 1993 with
    registration of its Declaration.

[9]

Mr. Weldon was president of MTCC 1056 from 1994 to 1997, but he did not take
    steps to have the Declaration amended to add the third floor to the units
    title. As a result, the description of townhouse 113 that formed part of the
    Declaration continued to show that it was a two-floor unit with common element
    attic space on the third floor. The description referenced the survey sheets that
    had been deposited in the Land Registry Office when the condominium was
    registered, which also showed that townhouse 113 was two storeys.

(2)

Ms. Rainvilles Purchase of Unit 113

[10]

Mr.
    Weldon listed townhouse 113 for sale in late 1996 or early 1997, with an asking
    price of $1,075,000. In September 1997 Ms. Rainville and her then husband
    Michael Orr were looking to buy a home in Toronto. She and her real estate
    agent, Joy Garrick, visited a number of units in the development. She was
    attracted to townhouse 113 in particular due to its large size, as a result of
    the third floor. Mr. Weldons listing agent, Ed Wery, was present. Ms. Rainville
    was given a copy of the listing agreement, which described the townhouse as a
    three-storey unit. The unit appealed to Ms. Rainville, and after viewing it a
    second time and discussing potential renovations with her husband, on September
    29 she offered to buy it for $975,000, with a closing date of December 19, 1997.
    Mr. Weldon accepted the offer.

[11]

All
    three condominium corporations associated with the Grand Harbour development were
    initially managed by CBS Property Management. Brookfield took over as property
    manager for MTCC 1056 on October 1, 1997. According to Brookfield, the records
    CBS kept were unsatisfactory and were transferred to Brookfield in dribs and
    drabs.

[12]

Brookfield
    had a contractual obligation under its management agreement with MTCC 1056 to
    complete estoppel certificates for prospective purchasers on behalf of the
    corporation. In late October 1997, Ms. Rainville received an estoppel
    certificate prepared by Karin Stevens, a Brookfield employee. The certificate stated
    that there were restrictions on pets, that the reserve fund was less than Ms. Rainville
    had initially been told, and that there were continuing violations of the Declaration.
    Patrick Post, who was the regional manager for Brookfield and also assistant
    secretary to MTCC 1056, signed the estoppel certificate on behalf of MTCC 1056.
    However, it soon came to light that the estoppel certificate was incorrect, because
    it referred to another condominium corporation within the Grand Harbour
    development.

[13]

As
    a result, Brookfield completed a second estoppel certificate for townhouse 113,
    which Pamela Cawthorn of Brookfield sent to Gowlings on December 12, 1997. This
    certificate stated that there were no continuing violations of the
    declaration, by-laws, and/or rules of the Corporation. After reviewing the unit
    file for townhouse 113 Mr. Post signed the certificate.

[14]

Ms.
    Rainville testified that she was comforted by the second estoppel certificate.
    However, because she owned several cats, she continued to worry about the certificates
    restriction on pets. Ms. Rainville claimed that she would not have closed the
    purchase transaction for the townhouse if the estoppel certificate had identified
    an issue about ownership of the third floor.

[15]

Ms.
    Rainville and her husband sought to rescind the deal based on their concerns about
    the pet restriction and certain other possible misrepresentations made by Mr.
    Weldon, but ultimately decided to move forward with the purchase, at a reduced
    price, after Mr. Weldon threatened to sue. The parties extended the closing
    date to January 16, 1998. That day, Ms. Rainville went to the Gowlings office to
    sign the closing documents. She thought she was meeting with Katherine Latimer,
    the lawyer who was to handle the transaction, but she actually met Cathy
    Ridout, a law clerk.

[16]

Ms.
    Rainville testified that Ms. Ridout advised her that the boundaries of townhouse
    113 extended from the upper most surface of the drywall to the concrete level
    in the basement, which Ms. Rainville understood to mean from the ceiling of
    the third floor to the basement floor. Ms. Ridout did not show Ms. Rainville any
    plans of survey depicting the unit boundaries. At trial, Ms. Rainville alleged
    that Gowlings had a copy of the listing agreement, which incorrectly indicated
    that townhouse 113 was three storeys, in its file when she attended at its
    office. Ms. Latimer had no recollection of seeing the agreement until after the
    illegality of the third floor was discovered. The trial judge concluded on the
    balance of probabilities that the listing agreement was in Gowlings file at
    the time of closing.

(3)

The Renovations Reveal Defects

[17]

Before
    moving into the townhouse, Ms. Rainville began renovations, which soon revealed
    defects in the units construction, including mould, water damage, and leakage
    problems with the roof. Her litigation lawyer, Martin Doane of Gowlings, sent
    letters to both MTCC 1056 and Brookfield to advise them of the various problems.
    MTCC 1056s lawyers responded by letter dated February 19, 1998, telling Ms.
    Rainville to stop all further work in the unit until further notice. Ms.
    Rainville wanted to move in by the end of April and did not want a delay, so
    she did not tell her contractor, Mark Penman, to stop work. Mr. Penman advised
    her that she could pursue compensation from the Ontario New Home Warranty
    Program (ONHWP).

[18]

MTCC
    1056 retained an engineering firm, Halsall Associates Limited, to provide an
    opinion on the work that was necessary to fix the units leaky roof. The
    Halsall engineer visited townhouse 113 in February 1998. The engineer noticed
    the third floor and wondered if it encroached on common element space. Halsall
    reviewed the Declaration and survey sheets and advised Mr. Post that townhouse
    113 was supposed to have two storeys, and that the third floor was built in
    common element space. MTCC 1056s lawyers sent a letter to Ms. Rainville dated
    April 1, 1998, advising her that the third floor was common element space. This
    was Ms. Rainvilles first indication that she might not have title to the third
    floor.

[19]

Except
    for a brief period during the first week of April 1998, Ms. Rainville continued
    with the renovations, including the third floor, even though she knew its
    legality was in question. She described Brookfield as being supportive during
    this period and expected MTCC 1056 to pay for repairs she had made to the common
    elements to remedy water penetration.

[20]

The
    ongoing construction prevented Ms. Rainville and Mr. Orr from moving in at the
    end of April as they had intended. They leased a house in the interim, ultimately
    moving into the Grand Harbour townhouse on December 19, 1998.

(4)

Litigation Starts

[21]

Litigation
    began once it became clear that the third floor was built in the condominiums
    common elements. MTCC 1056 issued an application, returnable April 16, 1998,
    for an injunction and compliance. That application was eventually converted
    into one of the actions that was consolidated for trial.

[22]

In
    the spring of 1998, MTCC 1056s lawyers made an offer of settlement to Ms.
    Rainville under which it would repair the roof and grant her a lease for the
    third floor. Ms. Rainville refused to sign the release, on the advice of her
    counsel, and continued with the renovations.

[23]

On
    September 3, 1998, Ms. Rainville started an action against Mr. Weldon, the City
    of Toronto and the real estate agents involved in the purchase and sale of the
    townhouse. She claimed damages for negligence and misrepresentation. The
    parties exchanged pleadings, but this action proceeded no further.

[24]

In
    November 1998, MTCC 1056s lawyers withdrew the offer to settle and demanded
    strict compliance with all terms and provisions of the Declaration, by-laws,
    and rules. MTCC 1056 also demanded that Ms. Rainville cease using, altering,
    repairing, occupying or entering the third floor of the townhouse. Ms. Rainville
    testified that MTCC 1056s change in position shocked her.

[25]

On
    March 5, 2001, Ms. Rainville started the action against Gowlings, MTCC 1056,
    Brookfield and a number of individual defendants. MTCC 1056 cross-claimed
    against Ms. Rainville and sought an order directing her to stop all work on her
    unit and to close up the third floor at her own expense. MTCC 1056 issued a
    third party claim against Mr. Weldon, alleging that he had breached the
    fiduciary duty he owed to MTCC 1056 as a member of the Board of Directors. MTCC
    1056 also claimed contribution and indemnity from Mr. Weldon for any damages
    the corporation owed to Ms. Rainville.

B.

The decisions below

[26]

A
    number of proceedings were consolidated and heard together by the trial judge.

(1)

Ms. Rainvilles Claims

[27]

To
    recapitulate, Ms. Rainville sued Gowlings, MTCC 1056 and several individuals
    who were at different times members of MTCC 1056s Board or unit owners. She
    also sued Brookfield, together with Brookfield employees Mr. Post and Ms. Cawthorn.

[28]

The
    trial judge granted Ms. Rainville judgment against Gowlings for solicitors
    negligence, and awarded damages of over $400,000 inclusive of prejudgment
    interest. She ordered Gowlings to pay to MTCC 1056, on behalf of Ms. Rainville,
    the cost of restoring the third floor to common element attic space, with such
    cost to be determined on a reference before a construction lien master. She
    also ordered Gowlings to reimburse Ms. Rainville for certain decorating and
    renovation costs associated with the third floor, with the sum to be determined
    on a reference to a construction lien master.

[29]

The
    trial judge allowed Ms. Rainvilles actions against MTCC 1056 and Brookfield in
    part. She ordered MTCC 1056 to reimburse Ms. Rainville in the amount of about $20,000
    for her repairs to common elements defects.

[30]

The
    trial judge refused, however, to make an order under s. 109(2) of the
Condominium
    Act
, 1998, S.O. 1998, c. 19 (the former Act), amending the Declaration to
    regularize the third floor.

(2)

MTCC 1056s Cross-Claim Against Ms. Rainville

[31]

The
    trial judge allowed MTCC 1056s action against Ms. Rainville, and ordered that
    she pay MTCC 1056 about $56,000 plus per diem interest for her use of the
    common elements in the third floor of the townhouse and that she close up the
    third floor, returning it to attic space. The trial judge directed a reference
    before the construction lien master for directions on the implementation and costs
    of the remedial close-up work.

(3)

MTCC 1056s Third-Party Action against Mr. Weldon

[32]

The
    trial judge granted MTCC 1056 judgment in its third party action against Mr. Weldon
    for breach of fiduciary duty. She ordered him to pay occupation rent for the
    third floor of more than $18,000 plus interest. She also ordered him to
    indemnify MTCC 1056 for the sum of about $20,000 plus interest, which MTCC 1056
    was to pay Ms. Rainville for her repairs to the common element defects. The
    trial judge also ordered Mr. Weldon to pay punitive damages of $50,000 to MTCC 1056.

(4)

Costs

[33]

The
    costs of the proceedings, which included a three-month trial, were
    considerable. The trial judge ordered Gowlings to pay costs to Ms. Rainville in
    the sum of $300,000 inclusive of fees, disbursements and applicable taxes. She ordered
    costs in the total amount of $200,000 inclusive of fees, disbursements and
    taxes to be paid to the Brookfield defendants, in the proportion of $150,000 by
    Ms. Rainville and $50,000 by Gowlings. The trial judge ordered Gowlings to pay
    $500,000 inclusive of fees, disbursements and taxes to MTCC 1056, divided
    equally between the insured and uninsured claims. She ordered Mr. Weldon to pay
    MTCC 1056 costs in the amount of $25,000.

C.

The Appeals

[34]

Ms.
    Rainville asks this court to allow her appeal against Brookfield and MTCC 1056.
    She argues: first, that the trial judge erred in dismissing her case against
    Brookfield and MTCC 1056 in view of the strong evidence of negligence on their
    part in issuing the estoppel certificate; second, that the trial judge made a
    palpable and overriding error in finding that Ms. Rainville did not rely on the
    estoppel certificate; and third, that the damage award was too low to restore her
    to the position she would have been in but for the negligence of Gowlings, Brookfield
    and MTCC 1056.

[35]

Gowlings
    appeals against the finding of liability on the basis that: first, it provided
    legal services to Ms. Rainville at the standard of care expected of a real
    estate solicitor in the late 1990s; and second, that as a matter of law, Ms. Rainville
    did obtain title to the third floor of the townhouse when she purchased it. Gowlings
    also asks that its appeal from the dismissal of its cross-claim for
    contribution, indemnity and relief from MTCC 1056 be allowed. This cross-claim
    is relevant only if Ms. Rainvilles appeal against MTCC 1056 is successful.

[36]

MTCC
    1056 cross-appeals against the trial judges decision to award Ms. Rainville
    one-half of the value of the common element repairs that she made before she
    was ordered to stop work by MTCC 1056.

[37]

Mr.
    Weldon appeals on the basis that the trial judge made an error in principle in awarding
    punitive damages against him.

D.

Analysis

[38]

For
    convenience, I will break the issues down by each appeal.

(1)

Ms. Rainvilles Appeal Against Brookfield and MTCC 1056

[39]

In
    this appeal, Ms. Rainville argues that Brookfield and MTCC 1056 were negligent
    in completing the estoppel certificate. The trial judge concluded Brookfield was
    not liable for negligence on the basis that its employees did not fall below the
    applicable standard of care and that Ms. Rainville did not rely on the estoppel
    certificate in deciding to purchase the townhouse. In my view, with respect, the
    trial judges reasoning on this issue reveals reversible errors. These are
    detailed below.

[40]

The
    basis for Ms. Rainvilles claim is some important text in the second estoppel certificate,
    which provided:


T
here

are

no

conti
n
uing
    violations
o
f

the

de
c
laration,
b
y
-laws

and/or

r
ules

o
f

the

C
o
r
po
r
ation,
    ap
a
r
t

f
r
om

a
n
y

involv
i
ng a
s
s
e
ss
m
ent obligations

f
or

which

the

cur
r
e
n
t

unit

owner

is
r
e
s
pon
s
ible

and

t
h
e

s
t
a
t
us

o
f

whi
c
h

is

di
s
cl
o
s
e
d

in

parag
r
aph

1
    of

this

c
e
r
ti
f
i
c
ate.

[41]

The
    Declaration described townhouse 113 as a two-storey unit, and indicated that
    the third storey was common element space. The survey sheets referenced in the
    Declaration were consistent with this description. As a result, the existence
    of the built-out third floor was a violation of the Declaration and the
    statement in the estoppel certificate to the contrary was incorrect.

[42]

Ms.
    Rainvilles claim against Brookfield and MTCC 1056 sounds in negligent misstatement
    or misrepresentation. The elements of that cause of action are set out in
Queen
    v. Cognos Inc
.
, [1993] 1 S.C.R. 87:

(1) there must be a duty of care based on a "special
    relationship" between the representor and the representee; (2) the
    representation in question must be untrue, inaccurate, or misleading; (3) the
    representor must have acted negligently in making said misrepresentation; (4)
    the representee must have relied, in a reasonable manner, on said negligent
    misrepresentation; and (5) the reliance must have been detrimental to the
    representee in the sense that damages resulted. (Para. 33, p. 110)

[43]

I
    address each element in turn.

(a)

MTCC 1056 Owed Ms. Rainville a Duty of Care

[44]

The
    first element of negligent misstatement is somewhat complicated by the nature
    of the relationship between MTCC 1056 and Brookfield. Nonetheless, in my view, there
    is no need at this stage of the analysis to distinguish between these two
    parties with respect to the completion of the estoppel certificate. The actions
    of Brookfields employees in completing the certificate are, in law, MTCC 1056s
    actions. This flows from MTCC 1056s statutory obligations, even though Brookfield
    was contracted by MTCC 1056 to complete the estoppel certificates. As a result,
    Brookfield was MTCC 1056s agent for the purpose of the estoppel certificates.

[45]

The
    version of the management agreement in evidence was not signed, but MTCC 1056
    and Brookfield agreed that its terms were accurate. Brookfield agreed to:

Prepare for execution by the Corporation ... Certificates of
    lien in the form prescribed by Regulation pursuant to the Act and to issue and
    provide Estoppel Certificates together with the statements and information
    required pursuant to the Act to any person or person acquiring or proposing to
    acquire an interest in any unit ...
The Manager shall be
    responsible for inspecting the common elements appurtenant to the unit
and when the Manager has reason to believe that the unit has been unoccupied or
    may have been altered without permission by the Owner or occupant and upon the
    direction of the Board, the Manager shall inspect the unit to determine whether
    or not the corporation has any claim for damages against an owner as
    contemplated by section 41(6) and (7) of The Act or whether any violation
    exists prior to issuing the Estoppel Certificate.
The
    Manager is responsible for the accuracy and completeness of all information
    contained in the Estoppel Certificate
, however, the Manager shall not be
    liable for any information within the knowledge of the board but not
    communicated to the manager and which should be included in the estoppel
    certificate. [Emphasis added]

Mr. Post was appointed as assistant secretary to MTCC 1056,
    which enabled him to sign the certificates for MTCC 1056. In reviewing and signing
    the completed certificates, Mr. Post was acting on behalf of MTCC 1056 as its
    agent.

[46]

The
    trial judge erred in her analysis by focusing on Brookfields duty and ignoring
    that of MTCC 1056. A condominium corporation, such as MTCC 1056, is obliged by s.
    32(8) of the former Act and s. 76 of the current
Condominium Act
, S.O.
    1998, c.19 (the current Act),

to provide estoppel certificates (called
    status certificates under the current Act) if requested by prospective
    purchasers. Section 32(8) of the former Act, which was in force at the time the
    estoppel certificate for Ms. Rainvilles townhouse was issued, provided:

Any person acquiring or proposing to acquire an interest in a
    unit from an owner may request the corporation to give a certificate in the
    prescribed form in respect of the common expenses of the owner and of default
    in payment thereof, if any, by the owner, together with such statements and
    information as are prescribed by the regulations, and the certificate binds the
    corporation as against the person requesting the certificate in respect of any
    default or otherwise shown in the certificate, as of the day it is given.

[47]

As
    the condominium corporation for the unit Ms. Rainville was purchasing, MTCC
    1056 owed Ms. Rainville a duty of care in the preparation of the estoppel
    certificate (
Fisher v. Metropolitan Toronto Condominium Corporation No. 596
(2004), 31 R.P.R. (4th) 273 (Ont. Div. Ct.), at para. 8). The two-stage test for
    establishing a duty of care set out by the Supreme Court at paras. 30-31 of
Cooper
    v. Hobart
, 2001 SCC 79, is satisfied. First, the relationship between MTCC
    1056 and Ms. Rainville is sufficiently proximate that it was reasonably
    foreseeable that carelessness by MTCC 1056 in executing the estoppel
    certificate could cause harm to Ms. Rainville.

[48]

As
    for the second stage of the
Cooper
test, there are no policy
    considerations that should negative recognizing a duty of care in the
    circumstances. To the contrary, the purpose of estoppel certificates supports recognizing
    a duty of care. One of the main goals of the
Condominium Act

is
    consumer protection (
Lexington on the Green Inc. v. Toronto Standard
    Condominium Corp. No. 1930
, 2010 ONCA 751, 102 O.R. (3d) 737, at para.
    49). Estoppel certificates must be interpreted in light of this objective; they
    are the vehicle through which condominium corporations provide important
    information to prospective purchasers. MTCC 1056 could not escape this special
    relationship and its duty of care by contracting out or delegating the
    completion of estoppel certificates to Brookfield.

[49]

Brookfield
    employees may have done much of the work necessary to complete the certificates
    as agents for MTCC 1056. MTCC 1056 was still ultimately responsible for the contents
    of the certificates. This is evidenced by the requirement that Mr. Post sign
    each certificate in his role as an MTCC 1056 secretary.

[50]

The
    trial judge found that, under the former Act, the limited role of an estoppel
    certificate was to provide financial information about a condominium that
    would not otherwise be available to a potential purchaser (para. 217), not to
    report whether the unit was in violation of the declaration (para. 219). However,
    in this case Brookfield had inserted into its form of the estoppel certificate,
    which it executed on behalf of MTCC 1056, an assertion that there were no
    continuing violations of the declaration, by-laws, and/or rules of the
    Corporation.

[51]

The
    fact that this provision went beyond the minimum statutory requirements does
    not mean that MTCC 1056 had no duty to make an effort to verify its accuracy.

(b)

The Second Estoppel Certificate was Incorrect

[52]

The
    trial judge found, at para. 235: It is beyond dispute that the estoppel
    certificate was incorrect. This conclusion was based on the statement in the estoppel
    certificate that there were no violations of the Declaration. The existence of
    the third floor was a violation of the Declaration, since the Declaration
    described townhouse 113 as a two-storey unit. As a result, the trial judges
    conclusion on this point is unassailable.

(c)

MTCC 1056 Fell Below the Standard of Care in Completing the
    Estoppel Certificate

[53]

The
    trial judge found that neither Ms. Cawthorn nor Mr. Post of Brookfield was
    negligent in the preparation of the second estoppel certificate (para. 229). In
    my view, for the reasons set out below, her reasoning regarding the applicable
    standard of care reveals errors.

[54]

The
    standard of care applicable to negligent misstatement is that of an ordinary, reasonable
    and prudent person in the position of the representor, in the circumstances (
Queen
    v. Cognos Inc
.
, at p. 121, para. 56;
Ryan v. Victoria (City)
,
    [1999] 1 S.C.R. 201, at para. 28). In other words, the representor must
    exercise such reasonable care as the circumstances require to ensure that the
    representation is accurate and not misleading (
Queen v. Cognos
, at p.
    121, para. 56). What is reasonable must be determined on an objective basis with
    consideration for the context of the particular case, such as the likelihood of
    a foreseeable harm, the gravity of the harm, and the cost of avoiding the harm (
Ryan
,
    at para. 28). The court may consider external indicators of what is
    reasonable, such as custom, trade practice, and statutory or regulatory
    standards (
Ryan
, at para. 28).

[55]

The
    purpose of the estoppel certificate was to ensure Ms. Rainville was given
    sufficient information regarding the property to make an informed purchase
    decision (
Durham Condominium Corp. No. 63 v. On-Cite Solutions Ltd
.
,
    2010 ONSC 6342, 99 R.P.R. (4th) 68 (S.C.),

at para. 21). It follows that
    there was an obligation on MTCC 1056 to take reasonable steps to ensure the
    information in the estoppel certificate was correct, even if the information
    was not statutorily mandated. This obligation flows from the common law and not
    from the statute.

[56]

There
    was no expert evidence at trial on the standard of care applicable to a
    condominium corporation or its delegate, such as a property manager like
    Brookfield. The trial judge appears to have considered the standard of care
    applicable to Brookfield and MTCC 1056 to be, in fact, Brookfields actual
    practice. She described this practice as follows:

Post testified that it was not the
    practice at the time to conduct a physical inspection inside the unit unless
    there was something in the documentation that raised a flag. To enter a unit
    required permission from the owner. In his practice, each unit had its own file
    that contained correspondence with the owners and prior estoppel certificates.
    In the usual course of business, Post did not go beyond the unit file and other
    records from the corporation. He did not, for example, review the as-built
    drawings to determine if there was a breach of the Declaration or By-Laws.

...

The evidence was clear from Post
    about the procedure followed prior to completing estoppels certificates and
    there was nothing to suggest that the appropriate procedure was not followed in
    this case. (Paras. 223, 232)

[57]

As
    a matter of principle, however, the actual practice of Brookfield and MTCC 1056
    in and of itself is not capable of setting the standard, and it was an error
    for the trial judge to conduct her negligence analysis on this basis.

[58]

In
    no way can Brookfields work be seen as reasonable and prudent, to borrow
    words from
Cognos
. The transition between property managers was
    chaotic. The trial judge found that the records kept by the previous property
    manager were unsatisfactory and were transferred to Brookfield in dribs and
    drabs. With respect, this should reasonably have heightened Brookfield and
    MTCC 1056s vigilance and diligence; it cannot justify their poor performance.

[59]

Inexperienced
    Brookfield employees prepared both estoppel certificates. Mr. Post then
    reviewed and signed them. This exercise can only be described as woefully sloppy.
    For the first certificate, the employees relied on materials in their files,
    which they knew were incomplete. Mr.
P
ost
c
on
ce
d
e
d

that

the
    first certificate, which is not at issue in this appeal, w
a
s

w
r
o
n
g

in

i
t
s

e
nt
i
r
e
t
y
. He testified that he


m
i
ssed

the

fa
c
t

t
h
a
t

the

fi
r
st

e
stopp
e
l

c
e
rtifi
ca
te

w
a
s

i
n
c
o
r
r
ec
t

in stating

that

the
r
e

w
e
r
e

c
ont
i
nuing

vio
l
a
t
i
ons

of

the

Dec
l
a
r
a
t
i
on.


[60]

Brookfields
    performance did not improve with the second estoppel certificate  which is at
    issue in this appeal. The trial judge made a specific finding that Brookfield
    did not have "possession of, or certainly access to, all relevant
    documents which would have disclosed the building of the third floor". (Para.
    229) While this statement is technically correct, since the knowledge of the third
    floors illegality did not surface until Halsalls involvement in 1998, it is unduly
    exculpatory.

[61]

On
    the evidence, it is clear that
B
rook
f
ield
h
a
d the Declaration, which described
    townhouse 113 as two storeys, in

i
t
s possession

a
t

the t
i
me

it

p
re
p
a
r
e
d the
s
ec
ond
e
stopp
e
l c
e
rtifi
ca
te
.
In
    completing the estoppel certificate Brookfield employees confined their
    inquiries to the condominium documentation and the information in the townhouses
    unit file. Although the management agreement stated that Brookfield should
    inspect the common elements appurtenant to the unit, which would include the
    third storey of Ms. Rainvilles townhouse, before completing the estoppel
    certificate, it failed to do so. Although Mr. Post did not conduct a formal
    inspection, he admitted that in October 1997 he noticed a window on the third
    floor of townhouse 113, which led him to believe that there was in fact a
    third floor built up there. Even though Mr. Post would have known that the
    vast majority of the townhouses were two floor units, he did not make any
    further inquiries when the time came to sign the estoppel certificate.

[62]

In
    the absence of evidence and expert testimony as to appropriate industry practice,
    this court is not equipped to set out a detailed list of steps a condominium
    corporation or a property manager must take to comply with the standard of care
    in completing an estoppel or status certificate. I conclude simply that Brookfields
    failure to make virtually
any

inquiries into the veracity of the
    representation that townhouse 113 complied with the Declaration was not
    reasonable or prudent in the circumstances, and could not meet any reasonable standard
    of care. The management agreement expressed the common expectation of
    Brookfield and MTCC 1056 that the estoppel certificates would be accurate and
    complete. As the standard of care set out in
Queen v. Cognos

suggests,
    MTCC 1056 was obliged to take steps to ensure that the estoppel certificate was
    correct. The failure to do so amounted to a breach of any reasonable standard
    of care.

[63]

MTCC
    1056 should not be surprised at being held to their representation that there
    were no violations of the Declaration. I agree with Professor Bruce Feldthusen that
    there is much to be said for approaching this area as a modification to
    traditional contract law  The law should be such that a reasonable defendant
    would not be surprised when legal consequences flow from her negligent
    information or advice (Bruce Feldthusen,
Economic Negligence
,

6th
    ed. (Toronto: Carswell, 2012), at p. 27).

(d)

Ms. Rainville Detrimentally Relied on the Estoppel Certificate

[64]

If
    the estoppel certificate had been completed correctly, it would have stated
    that there were ongoing violations of the Declaration, since the third floor of
    the townhouse was illegally built into the common elements, contrary to the
    description and survey sheets. The trial judges recitation of the facts makes
    it clear that the existence of the third floor was significant to Ms.
    Rainville. The trial judge found that [i]t is clear that had Rainville been
    advised that the third floor did not form part of the unit she was purchasing,
    she would not have gone ahead with the transaction. (Para. 278)

[65]

As
    noted in the trial judges reasons, the agreement of purchase and sale was
    signed on September 30, 1997. Ms. Rainville did not receive the first estoppel
    certificate until sometime around October 31, 1997. The second estoppel certificate
    was delivered even later, with a letter dated December 12, 1997.

[66]

The
    trial judges self-instruction that Ms. Rainville must prove that she relied on
    the information contained in the estoppel certificate to establish a negligent misstatement
    claim was correct in law.

[67]

Ms.
    Rainville testified that she relied on the estoppel certificate. She was not
    cross examined on this testimony. Even so, the trial judge concluded that Ms.
    Rainville did not rely on the certificate:

While the Plaintiff said that she felt "comforted" by
    the estoppel certificate, in my view that falls far short of demonstrating that
    she relied on it to ensure she was getting proper title to the townhouse or
    that it gave her any assurance about the number of floors the unit had. (Para.
    235)

[68]

Ms.
    Rainville could not prove reliance, according to the trial judge, because she
    had signed the agreement of purchase and sale without reviewing an estoppel
    certificate or indeed without reviewing the agreement with her lawyer. (Para.
    233)

[69]

This
    statement shows that the trial judge misapprehended the role of an estoppel
    certificate in the purchase of a condominium unit. Estoppel or status certificates
    are virtually never provided by the condominium corporation to the purchaser before
    the agreement of purchase and sale is signed. Instead, the request for a
    certificate or permission to request a certificate is typically contained
within

the agreement of purchase and sale, as it was in this case (see Ontario
    Real Estate Association Standard Form Agreement of Purchase and Sale 
    Condominium Resale (Form 101, 2014), at para. 13). The contents of the estoppel
    certificate become relevant after the agreement of purchase and sale is signed but
    prior to closing. If the certificate identifies a serious breach of the Declaration,
    for example, then the purchaser may be able to rescind the agreement. It is now
    common for a purchaser to make his or her offer expressly conditional on
    receipt and review of the status certificate (Audrey Loeb,
Condominium Law
    and Administration
, loose-leaf (Toronto: Carswell, 1995), at p. 9-4).

[70]

The
    usual practice is precisely what occurred in this case. The agreement of
    purchase and sale contained a provision stating that [t]he Vendor consents to
    a request by the Purchaser or his authorized representative for an Estoppel
    Certificate from the Condominium Corporation.

[71]

When
    the question of reliance is focused on the date Ms. Rainville closed on the condominium
    unit rather than the date when she signed the agreement of purchase and sale,
    the trial judges other findings show conclusively that Ms. Rainville relied on
    the estoppel certificate. As the trial judges recitation of the facts demonstrates,
    in addition to restrictions on pet ownership, the size of the townhouse was of
    primary importance to Ms. Rainvilles decision to purchase the unit. She expressed
    concerns about possible violations of the Declaration after receiving the first
    estoppel certificate, and even sought to rescind the agreement. However, the
    second estoppel certificate provided comfort to her. Ms. Rainville reasonably relied
    on the statement that there was no violation of the Declaration in making the final
    decision to purchase the unit.

[72]

As
    a result of her reliance, Ms. Rainville suffered harm. She purchased a
    condominium that was one floor smaller than she anticipated and wanted. This
    impacted her use of the unit as an inhabitant and also decreased the units
    resale value. Detrimental reliance  the final element of negligent misstatement
     is therefore established.

(e)

Conclusion on MTCC 1056s Liability for Negligent Misstatement

[73]

In
    my view, effect should be given to this ground of appeal against MTCC 1056. Ms.
    Rainville successfully made out the elements of liability for negligent
    misstatement on the part of MTCC 1056 in respect of the second estoppel
    certificate, and is entitled to damages against MTCC 1056.

[74]

I
    would dismiss Ms. Rainvilles appeal against Brookfield. While the trial
    judges ultimate holding that Brookfield is not liable was correct, I would
    reach that conclusion on the basis that Brookfield was MTCC 1056s agent and
    did not owe Ms. Rainville an independent duty of care. Nor is there evidence that
    Ms. Rainville relied specifically on Brookfield, as opposed to MTCC 1056.

[75]

It
    follows from this conclusion and the incorrect statement in the estoppel
    certificate that MTCC 1056 is estopped from demanding that Ms. Rainville close
    up the third floor and restore the unit to its two storey configuration at her
    own expense and that she pay occupancy rent for the third floor. Those elements
    of the judgment below must be set aside.

[76]

It
    also follows that MTCC 1056s cross-appeal against Ms. Rainville for one-half
    of the value of the common element repairs that she made before she was ordered
    to stop work must be dismissed.

(2)

The Gowlings Liability Appeal

[77]

Gowlings
    contests the finding of liability on two bases: first, that the trial judge
    erred in finding that the law firm did not provide legal services to Ms.
    Rainville at the standard of care expected of a real estate solicitor in the
    late 1990s; and, second, that, as a matter of law, Ms. Rainville obtained title
    to the third floor of the unit. Gowlings also asks that its cross-claim for
    contribution, indemnity and relief against MTCC 1056 be allowed.

(f)

Did the Legal Services Gowlings Provided Fall Below the Applicable
    Standard of Care?

[78]

The
    trial judge considered the expert evidence on this issue at paras. 259-278. Ms.
    Rainville called Robert Aaron and Gowlings called Donald Thomson. The trial
    judge preferred the evidence of Mr. Aaron, and concluded that Latimer fell
    below the standard of care of a real estate lawyer practising in Toronto in 1998.
    (Para. 270)

[79]

The
    trial judge considered that the lawyers primary responsibility in a
    condominium transaction is to ensure that the client is getting title to what
    they believe they have transacted for. (Para. 271) She went on to explain that
    in order to confirm this, the client must be shown the plans to ensure that
    their unit is the one identified, in the correct location, the size, whether it
    has a terrace which might be an exclusive use common element, whether it is a
    single storey unit or multi-level.

[80]

The
    trial judge noted, at para. 275, that the main point of contention between the
    two experts was whether the standard of practice required the vertical plan to
    be shown to the client. While Mr. Aaron testified that it did, Mr. Thomson
    testified that only the horizontal plan had to be shown to the client.

[81]

The
    trial judge rejected Gowlings submission that even if the horizontal plan had
    been reviewed with Ms. Rainville, it would not have revealed that there was an
    illegal third floor. (Para. 272) She stated:

The horizontal plan shows the Plaintiff's unit, first floor,
    and there is a staircase that is shown to another level. I agree with Mr.
    Aaron's statement that this should have led the lawyer to look for the next
    floor of the unit, which would require a review of the plan showing the cross
    sections illustrating unit boundaries. That document clearly shows unit 7 level
    1 as having a rather small basement, a first floor, a second floor above which
    appears to be open space going to a peaked roof. It is clear that the area
    above the second floor is not part of the unit. Had Rainville been shown this
    plan, as she ought to have been, it would have been obvious that the unit being
    purchased was not a 3 storey unit, but rather a 2 storey unit with a basement. (Para.
    272)

[82]

In
    argument before this court, Gowlings took the position that the horizontal plan
    did not show the staircase, so the trial judge must have been mistaken. This
    was shown in reply to be an error on counsels part. The relevant plan was
    attached to Mr. Aarons report.

[83]

The
    trial judge stated more than once that she preferred Mr. Aarons evidence, and
    her assessment of the expert evidence is entitled to deference. Gowlings has not
    identified any palpable and overriding error. There is no basis for disturbing
    the trial judges finding that Gowlings was negligent.

(g)

Did Ms. Rainville Obtain Title to the Third Floor of the Townhouse
    Unit?

[84]

Gowlings
    argues that, as a matter of law, title to the third floor was conveyed to Ms.
    Rainville and was never a condominium common element.

[85]

Gowlings
    does not dispute that the Declaration and the survey sheets describe or show
    the third storey as part of the common elements, not part of townhouse 113. Nonetheless,
    Gowlings argues that the controlling document with respect to title is not
    the survey sheet or sheets, but the actual physical features of the unit. This
    argument is based on s. 4 of the Declaration, which provides:

Boundaries of Units

The monuments controlling the extent of the units are the
    physical surfaces mentioned in the boundary of the units contained in Schedule
    C attached hereto.

Schedule C then sets out the legal boundaries for
    this unit as follows:

BOUNDARIES OF RESIDENTIAL UNITS

Horizontally (see cross-sections on Part 1, Sheet 3 of the
    Descriptions)



b) The upper surface and plane of the concrete floor slabs in
    the basements of Units  4, 5, 6 and 7 on Level 1.



g) The upper surface and plane of the drywall ceiling in the
    uppermost story of  Units 2 to 9 inclusive on Level 1.

The ceiling of the third floor in townhouse 113 would
    fit within this description in these provisions.

[86]

Gowlings
    argues that there is an error on the survey sheets since they show only two
    storeys and not three. Gowlings asserts that this error occurred because the survey
    sheets for the unit were prepared by the surveyor when the framing was in place
    for the two storey unit. Gowlings argues that the surveyor ought to have been
    called back after the construction was finished to complete the survey for the
    unit, which would then have included the third storey. The survey sheets ought
    to be corrected, but they do not control title. According to Gowlings, albeit
    quite by accident perhaps, by operation of law Ms. Rainville got what she
    bargained for as a result of the law firms work, being title to all three
    floors of the unit.

[87]

I
    do not agree with this argument for two reasons. First, the argument that the
    physical features of the unit trump the Declaration and the survey sheets was
    never put to the trial judge. The evidence necessary to explore that issue
    properly was not led by the parties. The experts were not examined on the
    practice that is followed in situations where a units physical features
    diverge from the Declaration and the survey sheets. The argument, in short,
    smacks of novelty and implausibility. It cannot be resolved on the evidence presented
    at trial or before this court (
767269 Ontario Ltd. v. Ontario Energy
    Savings L.P
.
, 2008 ONCA 350, at para.
3;
Pirani
    v. Esmali
, 2014 ONCA 145, 94 E.T.R. (3d) 1, at para.
74). The
    courts normal practice of refusing to entertain entirely new issues on appeal
    should apply (
Pirani
, at para. 74;

Kaiman v. Graham
, 2009
    ONCA 77, 75 R.P.R. (4th) 157, at para. 18).

[88]

Second,
    it is not clear to me that accepting the validity of this argument would eliminate
    Gowlings liability. Instead of delivering Ms. Rainville a unit with clear
    title, Gowlings would have delivered her into a lawsuit with MTCC 1056 about
    the enforceability of the Declaration. This is not what a domestic real estate client
    reasonably expects from her lawyer. Gowlings failure to discover the basic
    problem with the size of the unit was negligent, as the trial judge concluded.

(h)

Gowlings Cross-Claim Against MTCC 1056

[89]

Gowlings
    asks that its cross-claim for contribution, indemnity and relief against the
    negligent MTCC 1056 be allowed. In my view, there is no merit in the
    cross-claim, for the reasons expressed by the trial judge. She rejected the
    submission that Ms. Latimer was entitled to rely on the estoppel certificate
    for title purposes:

While Latimer testified under cross-examination that she relied
    "in part" on an estoppel certificate that stated compliance with the
    Declaration, I found this evidence self-serving. Latimer had only the vaguest
    recollection of the documents she reviewed in the file prior to closing.
    Certainly, she did not rely on the certificate in terms of guiding her actions
    concerning what steps she needed to take to ensure her client received proper
    title to her townhouse. The estoppel certificate was never intended to provide
    evidence of proper title to a property. (Para. 276)

[90]

I
    see no error in this conclusion.

(3)

Ms. Rainvilles Damages Appeals Against Gowlings and MTCC 1056

[91]

The
    trial judge devoted more than 100 paragraphs of her decision to assessing
    damages. Her lament throughout, with which I agree, was the absence of credible
    evidence to substantiate many of Ms. Rainvilles damage claims. Mr. Adair, who
    was not trial counsel for Ms. Rainville, stated in his factum, with his customary
    candour:

On

the

m
atter

of

t
h
e

r
ep
a
i
r
,

r
enov
a
tion

and

d
e
corating

co
s
t
s
,

it

is

a
c
k
nowledg
e
d

th
a
t
f
or

wha
t
ev
e
r

r
e
a
s
on

the

eviden
c
e

w
a
s

poo
r
l
y

p
r
e
s
ented

in

a

di
s
o
r
gan
i
z
e
d w
a
y

t
h
at

m
ade

the a
s
s
e
ss
m
ent

o
f

d
a
m
ag
e
s

very

di
f
f
icult

f
or

t
h
e

t
r
i
al

judge.

[92]

The
    damages awarded by the trial judge against Gowlings and MTCC 1056 are set out
    in the following table:



Damage item and
          amount claimed

Disposition

Reasoning



1.

Fees paid
          to contractor Penman [$205,000]

Not awarded

There was no explanation of what the amount claimed
          represented. [Para. 284]



2.

Renovations
          to all floors of the unit [$106,475.89]

Not awarded

Damages not proven. [Para.287]



3.

Redecoration
          and renovations to third floor [$89,966.59]

Awarded against
          Gowlings

Decorating costs were owed, but it was impossible to
          determine which invoices related to work on the third floor versus other
          portions of the unit. Master appointed to conduct a reference and determine
          amounts spent by Ms. Rainville on third floor decorating and renovations. [Para.
          372]



4.

Gowlings
          Account [$44,521.97]

Gowlings obliged to
          repay $18,542.19

Ms. Rainville was entitled only to reimbursement of amounts
          paid to Gowlings to complete real estate deal and related to the third floor
          dispute. [Paras. 311-314]



5.

Cost of
          delay in moving into unit in 1998  [$94,442.53]

Not awarded

The costs for alternative housing in 1998 were not
          reasonable and not caused by the defendants actions. [Para.321]



6.

Loss of
          value of third floor [$225,000]

Awarded against  Gowlings

This loss flows directly from the negligence of
          Gowlings. [Para. 307]



7.

Cost of
          removing third floor [$179,126.26]

Awarded against 
          Gowlings

Gowlings to pay provisional amount of
$84,000
          into court, with remaining balance to be determined on reference to a master.
          [Paras. 337, 343]



8.

Costs
          associated with conversion of third floor [$53,095.91]

Awarded against
          Gowlings

Ms. Rainville was entitled to cost of converting third
          floor back into attic space. [Para. 323]



9.

Registration
          costs [$43,183.76]

Not awarded

Not analyzed by trial judge. Not clear from record what
          these are.



[93]

Ms.
    Rainvilles focus at trial was on the legalization of the third floor. She
    sought damages in two measures: the first was on the premise that the trial
    judge would legalize the third floor, and the second was on the premise that
    the third floor would not be legalized. Since the trial judge rejected Ms.
    Rainvilles request for legalization of the third floor, she was left to deal
    with the damages claim on that basis. Before this court Ms. Rainville is
    pursuing damages as the primary remedy, and legalization of the third floor
    only in the alternative.

[94]

On
    appeal, Ms. Rainville altered her damages claim to include recovery for the
    repair, renovation and decorating costs related to the entire unit. She claims
    she

is
e
nt
i
t
l
e
d

to

d
a
ma
g
e
s

p
a
y
a
ble

b
y

G
o
wlin
g
s,
B
r
o
okfi
e
ld

a
nd

MTCC
    1056

in

a
n

a
mount

e
q
u
a
l

to

that

incu
r
red

for

t
h
e

e
nt
i
re
r
e
p
a
ir,

r
e
nov
a
t
i
on
a
nd

d
ec
o
r
a
t
i
ng

c
osts

in

r
e
spe
c
t

of

To
w
nhou
s
e

113

during the

p
e
riod

f
r
om
J
a
nu
a
r
y
    16,

199
8
-
D
e
cem
b
e
r

1,

1998

t
o
g
e
th
e
r

with

p
re
ju
d
g
ment

in
t
e
re
st
    the
re
on.

[95]

This
    was not how the case was argued at trial. Appeal counsel proposes a new
    approach given the lamentable state of the evidence:

I
t

app
e
ars

ne
c
e
s
s
ary

in

o
r
der

to

do

ju
s
tice

betw
e
en

the

part
i
es

t
h
at

the

i
ss
ue

o
f

t
h
e
    total

a
s
s
e
s
s
ment
o
f

r
e
pa
i
r
,

r
enov
a
t
i
on
    and

d
e
corating

c
o
s
ts

incur
r
ed

at

t
he

t
i
m
e

o
f

pu
r
ch
a
s
e
    and

in

the

m
ont
h
s

therea
f
ter

ought

to

be

the

s
ubject

of

a

r
efe
r
en
c
e

to

a

C
on
s
t
r
uction

L
ien
M
a
s
t
er

at
T
o
r
onto.

T
his

will

not

c
a
u
s
e

any

und
u
e

delay

or

inconven
i
en
c
e

to
    the

part
i
es

given that

a

re
f
ere
n
ce

h
a
s

alr
e
ady

be
e
n

o
rd
ered

on

ot
h
er

nec
e
s
s
a
r
y

a
s
pe
c
t
s

o
f

t
he

d
a
m
ag
e
s
.

[96]

Since
    Ms. Rainville did not advance this approach to damages at trial, I would decline
    to grant the requested relief. This court generally will not allow an appellant
    a second opportunity to prove damages that should have been shown at trial as
    an essential element of the cause of action (
Lombardo v. Caiazzo

(2006),
    52 C.L.R. (3d) 187 (Ont. C.A.), at para. 19). There are some exceptions to this
    rule, such as where the nature of the damages render proof and quantification
    inherently complex (
Eastern Power Ltd. v. Ontario Electricity Financial
    Corp
.
, 2010 ONCA 467, 101 O.R. (3d) 81), or where the significance
    of the loss merits more than nominal damages despite evidentiary deficiencies (
Martin
    v. Goldfarb
(1998), 41 O.R. (3d) 161 (C.A.);
Rosenhek v. Windsor
    Regional Hospital
, 2010 ONCA 13). Neither of the exceptions apply to this
    case.

[97]

This
    courts role is to consider whether the relief the trial judge granted was
    appropriate. The standard of review that applies to a trial judges assessment
    of damages is highly deferential. To interfere, an appellate court must find
    that the trial judge made an error in principle or a palpable and overriding
    error:
de Montigny v. Brossard
, 2010 SCC 51, [2010] 3 S.C.R. 64, at
    para. 27.

[98]

The trial judge made some such errors with respect to damages. First,
    the trial judge erred by refusing to award Ms. Rainville the entire proven cost
    of her repairs to the common elements. Second, in requiring Gowlings to reimburse
    Ms. Rainville for only a portion of her legal fees, the trial judge failed to
    apply the appropriate test for damages in negligence. Finally, the trial judge
    erred in the manner of setting damages to account for the fact that Ms.
    Rainville did not get the three-storey townhouse she paid for. I address each
    of these issues in turn.

(a)

Repairs to Common Elements

[99]

At trial Ms. Rainville sought to recover what she paid to remedy common
    element defects in 1998, and claimed $201,880.51. The trial judge noted that [b]oth
    the Act and the declaration of MTCC No. 1056 make it clear that it is the
    corporation who has the responsibility to repair and maintain the common
    elements. (Para. 351) Despite difficulties with quantification, the trial
    judge accepted the calculation of MTCC 1056s expert quantity surveyor for the
    cost of the repairs to the common elements at $41,681. Nonetheless, she awarded
    Ms. Rainville only half of that amount, at $20,840.50 against MTCC 1056. (Para.
    369)

[100]

The trial judge
    appears to have based this reduced recovery on the letter from MTCC 1056 to Ms.
    Rainville dated February 19, 1998. She explained that while it was permissible
    for Ms. Rainville to proceed with repairs when she took possession of the
    townhouse because the situation was dire, she should have ceased repairs when
    she got the stop work letter from MTCC 1056. Having attended to the urgent
    work, after receiving the letter she proceeded at her own peril. (Para. 368)

[101]

With respect, there is no legal basis for apportioning the damages in
    this manner. Pursuant to both the former and current versions of the
Condominium
    Act
,

MTCC 1056 had a statutory obligation to repair the common
    elements (see s. 41 of the former Act and ss. 89-90 of the current Act). MTCC
    1056s Declaration contained a similar requirement. The stop work letter did
    not shift this responsibility from MTCC 1056 to Ms. Rainville. The trial judge
    made a factual finding that Ms. Rainville incurred reasonable expenses of $41,681
    to make necessary repairs to the common elements (although Ms. Rainville claimed
    to have spent far more). Under both the relevant legislation

and MTCC
    1056s Declaration, MTCC 1056 must reimburse Ms. Rainville for this full
    amount, not simply one-half as the trial judge concluded.

[102]

In its cross-appeal, MTCC 1056 takes the position that Ms. Rainville
    should have applied to ONHWP for reimbursement for her repairs to the common
    elements. MTCC 1056 argues that given this alternative possibility for
    reimbursement, Ms. Rainvilles damages were avoidable and are not recoverable from
    MTCC 1056.

[103]

I disagree. This argument ignores MTCC 1056s statutory responsibility
    to repair the common elements. Further, MTCC 1056 itself submitted an
    application to ONHWP and recovered more than $180,000 for major structural
    defects.

[104]

Not only was Ms. Rainville not required to avoid her loss by applying to
    ONHWP, it would also have been impossible for her to do so. She submitted a
    claim to ONHWP in 1999. Although by then the applicable ONHWP warranty period
    had expired, ONHWP noted in its response that Ms. Rainville was not entitled to
    reimbursement since many of the claimed damages related to common elements,
    which were the responsibility of MTCC 1056. As a result, MTCC 1056 is not
    entitled to any diminution in the damage award as a result of a potential ONHWP
    claim.

(b)

Recovery of Legal Fees Paid by Ms. Rainville to Gowlings

[105]

As discussed above, the trial judge properly concluded that Gowlings was
    negligent in its provision of legal services to Ms. Rainville. While this finding
    of liability was correct, the trial judge erred in her assessment of the associated
    damages. The trial judge concluded that Ms. Rainville was entitled to
    reimbursement for her legal fees related to both the purchase of the townhouse and
    the dispute regarding the third floor. However, the trial judge denied Ms.
    Rainville any recovery for legal fees stemming from the dispute regarding the
    common element repairs. This distinction was justified on the basis that the
    work related to the common element problems was not reasonably foreseeable as a
    result of the negligence of Latimer. (Para. 311)

[106]

This conclusion
    ignores the guiding principle for assessing damages in negligence: as Ms.
    Rainville argues, the appropriate remedy is to return the plaintiff to the position
    she would have been in had the negligence at issue not occurred (
Athey v.
    Leonati
, [1996] 3 S.C.R. 458,

at para. 32). The trial judge did not
    advert to or apply this principle in her reasons.

[107]

On this basis Ms.
    Rainville is entitled to reimbursement for all fees paid to Gowlings. But for
    Gowlings negligence, Ms. Rainville would not have purchased the townhouse. Had
    she not done so, she would not have incurred any expenses related to the common
    element repairs and associated legal disputes. In order to return Ms. Rainville
    to her prior position, she must be reimbursed for these legal fees, plus
    pre-judgment interest based on the interest calculation method set out by the
    trial judge at para. 307.

(c)

Damages for Negligence

[108]

Ms. Rainville is
    entitled to damages for loss of the value of the third floor as a result of the
    trial judges undisturbed finding that Gowlings was negligent and based on my
    finding that MTCC 1056 is liable for negligent misstatement in the estoppel
    certificate. Both Gowlings and MTCC 1056 caused Ms. Rainvilles injury. As a
    result,
under
s. 1 of the
Negligence Act
, R.S.O. 1990, c.
    N.1, their liability is joint and several.

[109]

The remedy for negligent
    misstatement is ordinarily to award damages to return the plaintiff to the
    position he or she would have been in had the misrepresentation not occurred (
BG
    Checo International Ltd. v. British Columbia Hydro & Power Authority
,
    [1993] 1 S.C.R. 12,

at p. 37, para.46). The trial judge measured Ms.
    Rainvilles damages as the loss of the extra value of the third floor. She relied
    on the evidence of an appraiser called by Ms. Rainville, who set the value of
    the third floor when the unit was purchased in 1998 at $225,000. I note that
    the appraiser fixed the relative value in 2009 at $400,000.

[110]

The circumstances of
    this case render valuation on the date of purchase inappropriate. As noted
    above, had Ms. Rainville been aware that the third floor was a violation of the
    Declaration, she would not have closed the purchase transaction for the unit. Nonetheless,
    she ultimately relied on the misstatement in the estoppel certificate and completed
    the transaction, which cannot now be undone.

[111]

This is not to say
    that Ms. Rainville should be denied any remedy. There is no doubt that she has
    suffered significant damages as a result of the negligence of Gowlings and MTCC
    1056. In my view, Professor Feldthusens suggestion that the principles of
    contract law may be relevant to negligent misstatement is helpful here. While
    this court must be cautious not to collapse the distinction between contract
    damages and tort damages, the unique circumstances of this case necessitate an
    adaptation of the normal
principles
governing remedies for negligent misstatement.
    As the Supreme Court has held, while there is a conceptual difference between damages
    in contract and in tort ... in many instances the same quantum will be arrived
    at, albeit by somewhat different routes. (
V.K. Mason Construction Ltd. v.
    Bank of Nova Scotia
, [1985] 1 S.C.R. 271, at p. 285, para. 28)

[112]

Ms. Rainville
    reasonably believed that she was buying a three-storey townhouse, and
    reasonably expected that eventually she would sell it as a three-storey
    townhouse. She invested heavily to improve the property. The negligence of
    Gowlings and MTCC 1056 has deprived her of the opportunity to sell townhouse 113
    as a renovated three-storey unit.

[113]

In my view, justice in
    this case can only be done if Ms. Rainvilles damages are measured by the loss
    she will suffer from losing the opportunity to sell her property as if it had
    been a renovated three-storey townhouse. She lost this opportunity because she
    relied on MTCC 1056s representations in the estoppel certificate.

[114]

In my view, the
    Supreme Courts approach to damages for negligent misstatement adopted in

V.K.
    Mason Construction Ltd
.
is appropriate for this appeal. The Court adopted
    a measure of damages for negligent misrepresentation which recognized that a
    plaintiff can recover the value of its lost opportunity. In that case, a
    contractor claimed against a bank for negligent misrepresentation stemming from
    the banks advice that a property developer was adequately financed. The Court
    concluded that but for the banks misrepresentation, the contractor would have
    undertaken a different project on which it would have earned a profit. In other
    words, the banks misrepresentation caused the contractor to lose an
    opportunity to profit. The measure of damages was fixed as the anticipated
    profit the contractor lost as a result of the misrepresentation  in other
    words, its expectation damages.

[115]

Applying the
    principles of
V.K. Mason

to this appeal, the existence of the
    third floor was crucial to Ms. Rainvilles decision to purchase townhouse 113. The
    trial judge found that, had Ms. Rainville known the unit was not three floors,
    she would not have completed the purchase. It is also fair to say that Ms.
    Rainville would not have spent what she did on renovating the townhouse. The
    negligence of Gowlings and MTCC 1056 cost Ms. Rainville the opportunity to sell
    her townhouse as a renovated three-storey unit. Her inability to crystallize
    her real loss up to this point is attributable in part to the ongoing uncertainty
    about legal title to the third storey resulting from the trial and appeal
    process.

[116]

In the unique circumstances,
    I would find that Gowlings and MTCC 1056 are liable to Ms. Rainville for the
    difference between the value of townhouse 113 as a renovated three-storey unit
    and as a two-storey unit. Since the value of the condominium is likely to rise
    and fall over time due to the vagaries of the real estate market, in order to
    provide the parties with certainty and finality, I would set the valuation date
    as the date this decision is released.

(d)

Legalizing the Third Floor

[117]

At trial, Ms.
    Rainville requested that the trial judge use her discretionary power under s.
    109(3) of the current Act to order MTCC 1056 to amend the Declaration and legalize
    the third floor. MTCC 1056 resisted legalization of the third floor and
    insisted that it be returned to common element attic space. The trial judge
    agreed with MTCC 1056s position. However, MTCC 1056 anticipated that the
    reconstruction would be at someone elses cost. That has changed. Ms. Rainville
    has no obligation to close up the third floor, and is not liable to MTCC 1056
    for occupation rent. Any reconstruction would be at MTCC 1056s own cost.

[118]

The trial judge
    refused to make an order under s. 109(2) of the former Act amending the Declaration
    to regularize the third floor. This was based on her finding that the failure
    to include the third floor as part of the description of townhouse 113 in the
    Declaration was not an error or an inconsistency (paras. 127, 130). She was
    also persuaded that this remedy would be undesirable since it would be unfair
    to the other townhouse owners, and MTCC 1056 would thereafter be unable to
    refuse applications from other owners who had similar third floor potential. It
    would also result in a dispute with the two other condominium corporations
    within the Grand Harbour development about proportional expenses under a shared
    facilities agreement. The other two corporations had the view that MTCC 1056
    was already unfairly advantaged as a result of the larger size of the
    townhouses. Increasing the size of the units within MTCC 1056 even more raised
    the prospect of the other corporations demanding re-negotiation of these
    proportional expenses, which could have resulted in higher common expenses for
    the townhouse unit owners (paras. 137-150).

[119]

Ms. Rainville has not
    demonstrated any error in the trial judges analysis on this issue.

[120]

That said, the
    interests of the parties now array somewhat differently. Perhaps the way for
    the parties to sort out their respective liabilities at the least cost would be
    for the third floor to be legalized. MTCC 1056 may now wish to consider whether
    the appropriate course of action is to legalize the third floor of townhouse
    113.

(4)

Claims Between MTCC 1056 and Brookfield

[121]

At trial Ms. Rainville
    argued that both MTCC 1056 and Brookfield breached the duties they owed to her
    by issuing an incorrect estoppel certificate. MTCC 1056 and Brookfield
    cross-claimed against each other for contribution, indemnity and relief over
    for any amount each party was required to pay to Ms. Rainville.

[122]

Brookfield argued that
    although its management agreement with MTCC 1056, excerpted above, provided
    that Brookfield was responsible to MTCC 1056 for the accuracy and completeness
    of the information in the estoppel certificates, the exception within that
    provision was engaged. The exception provided that Brookfield was not
    responsible to MTCC 1056 for any information within the knowledge of the Board
    but not communicated to the manager and which should be included in the estoppel
    certificate. Brookfield argued that knowledge of the third floor on the part
    of both Mr. Weldon and Mr. Boland was to be attributed to MTCC 1056, and that as
    a result, Brookfield had no obligation to indemnify MTCC 1056.

[123]

MTCC 1056 argued in
    response that the undisclosed knowledge of one or two condominium corporation directors
    should not be attributed to the corporation. If the estoppel certificate
    contained errors or omissions, it was the fault of Brookfield. MTCC 1056 claimed
    contribution and indemnity from Brookfield in the event it was found liable in
    relation to the estoppel certificate.

[124]

Given the trial
    judges conclusion that neither Brookfield nor MTCC 1056 was liable for
    negligent misstatement arising from the estoppel certificate, she did not go on
    to address whether the knowledge of the third floor on the part of Mr. Weldon
    and Mr. Boland should be attributed to MTCC 1056. However, she did consider
    this issue in the context of Gowlings argument that MTCC 1056 should be deemed
    to have the same knowledge as Mr. Boland.

[125]

Although the trial
    judge acknowledged that in some circumstances it may be appropriate to impute
    the knowledge of one director to the board as a whole, she concluded this would
    not be appropriate in the case of Mr. Boland. At paras. 206-208 she
    distinguished the situation before her from
On-Cite Solutions
, where
    the knowledge of a board member was attributed to the condominium corporation, on
    the basis that Mr. Boland was not the president of the Board, he did not learn
    of the illegality of the third floor through his position on the Board, and
    unlike in
On-Cite Solutions
,

where the president signed the
    certificate, Mr. Boland played no role in the execution of the estoppel
    certificate.

[126]

I see no error in this
    reasoning, and I would extend it to Mr. Weldon. I am reluctant to impute the
    knowledge of a condominium director to its board as a general matter. Doing so
    would have the potential to vastly increase the liability of condominium
    corporations and would certainly make risk management on their part all but
    impossible.

[127]

In the result,
    Brookfield cannot rely on the exception in the management agreement to avoid
    liability to MTCC 1056 for its error in completing the second estoppel
    certificate. Brookfield must indemnify MTCC 1056 for the damages it owes Ms.
    Rainville as a result of the negligent estoppel certificate.

(5)

Mr. Weldons Appeal and MTCC 1056s Cross-Appeal on Punitive Damages

[128]

Mr. Weldon argues that
    the trial judge erred in requiring him to pay punitive damages of $50,000 to
    MTCC 1056. MTCC 1056 argues in its cross-appeal that this court should increase
    the punitive damage award to $140,000.

[129]

The trial judge
    addressed this issue at paras. 401- 420. She found that Mr. Weldons failure to
    advise Ms. Rainville and the Board of the illegal status of the third floor was
    intentional, and that his culpability was enhanced by the fact that this
    failure breached his fiduciary duties as a director. At para. 417, she put the
    blame for the various lawsuits squarely on Mr. Weldon:

It is the intentional conduct of Weldon, his fraudulent
    misrepresentation, that is responsible for the years of litigation that have
    ensued since 1998 and the associated costs. The objective of punitive damages
    is to punish, not compensate. They are to be imposed "
only
if
    there has been high-handed, malicious, arbitrary or highly reprehensible
    misconduct that departs to a marked degree from ordinary standards of decent
    behaviour."
Whiten
, [
Whiten v. Pilot Insurance Co
., 2002
    SCC 18, [2002] 1 S.C.R. 595] at paragraph 94.

[130]

In setting the award
    at $50,000, the trial judge expressly took account of the Supreme Courts
    direction in
Whiten
, at paras. 112-126, that an award must be
    proportional, taking into account the blameworthiness of Mr. Weldons conduct,
    which she found to be reprehensible, the vulnerability of the other parties
    and the potential harm to them, the need for deterrence, the other penalties
    likely to be inflicted on him for the same misconduct and the advantage
    wrongfully gained from the misconduct.

[131]

It is also noteworthy
    that the standard of appellate review of a punitive damage award is quite high.
    It is whether a reasonable jury, properly instructed, could have concluded
    that an award in that amount, and no less, was rationally required to punish
    the defendant's misconduct. (
Whiten
, at para. 107)

[132]

Mr. Weldon asserts
    that his conduct was not sufficiently egregious or outrageous to warrant
    punitive damages, that the quantum is too high, and that the trial judge
    failed to notice that awarding punitive damages would result in double
    recovery. He argues that the punitive damages were excessive and thus irrational,
    and that a lesser award would have fully satisfied the objective of deterrence.
    Further, Mr. Weldon argues that the trial judge failed to articulate the basis
    of that quantum or to indicate whether it was the lowest amount that would
    achieve the objectives of the law.

[133]

Mr. Weldons argument regarding
    double recovery is rooted in the fact that he was ordered to pay occupancy
    costs for the third floor of townhouse 113 in the amount of almost $19,000 and
    to indemnify MTCC 1056 for the amount that it owed Ms. Rainville for her share
    of the common element repair costs, which was approximately $20,000,

[134]

It is noteworthy that the
    trial judge made the following observation in the costs award:

[Mr. Weldons] conduct was the subject of my comments in my
    Reasons and I ordered that he pay punitive damages as a result of his deceitful
    behaviour. In these circumstances, it would not be fair to order that he pay
    the costs of Mr. Rotenberg in defending the action on behalf of the condominium
    and I decline to do so. (Para. 69 of the costs award, 2012 ONSC 4919)

[135]

In my view, there is
    no merit to Mr. Weldons appeal. The trial judge was fully aware of the legal principles
    at play and applied them appropriately. The award is not outside the applicable
    range (see
Pate Estate v. Galway-Cavendish (Township
)
, 2013
    ONCA 669, 117 O.R. (3d) 481, at para. 140 and following). I would, accordingly,
    dismiss Mr. Weldons appeal.

[136]

MTCC 1056 argues in
    its cross-appeal, on the other hand, that the punitive damages award should be
    increased from $50,000 to $140,000 on the basis that Mr. Weldon has been left
    with a $90,000 benefit from the sale of the third floor of townhouse 113, and that
    a significant part of that benefit  $40,000  remains with him. MTCC 1056
    asserts that based on the criteria in
Whiten
, the trial judge made a
    palpable and overriding error in failing to award a sum for punitive damages
    that was proportionate to Mr. Weldons conduct. MTCC 1056 argues that Mr. Weldons
    conduct was deceitful, that it had a devastating impact on the people involved
    and that he failed to show remorse or acknowledge responsibility for his
    actions. As a result, MTCC 1056 argues that, as a matter of principle, no
    element of financial benefit for the third floor should be left in his pocket.

[137]

I am unable to
    conclude that the trial judge made a palpable and overriding error in her award
    of punitive damages against Mr. Weldon. She was applied the correct principles
    and considered appropriate facts. Her conclusion is entitled to deference. I
    would dismiss MTCC 1056s cross-appeal on the punitive damages issue.

E.

Disposition

[138]

Based on the foregoing
    analysis, I would dispose of the claims of the various parties as follows.

[139]

I would allow Ms.
    Rainvilles appeal and find that MTCC 1056 is liable for negligent misstatement
    in relation to the estoppel certificate.

[140]

I would set damages
    for negligence and negligent misstatement, for which Gowlings and MTCC 1056 are
    jointly and severally liable, as the difference between the value of townhouse
    113 as a two-storey unit and a three-storey unit with the valuation date set as
    the date this decision is released.

[141]

I would dismiss Ms.
    Rainvilles appeal against Brookfield.

[142]

I would allow Ms.
    Rainvilles appeal against MTCC 1056 regarding reimbursement for common element
    repairs and substitute judgment for $41,681. It follows that I would dismiss
    MTCC 1056s related cross-appeal against Ms. Rainville.

[143]

I would also allow Ms.
    Rainvilles appeal against Gowlings regarding legal fees and substitute an
    award of $28,379.02.

[144]

I would dismiss
    Gowlings appeal, and its cross-appeal against MTCC 1056 for indemnity.

[145]

I would allow MTCC
    1056s claim over against Brookfield under the management agreement for indemnity
    for the damages MTCC 1056 owes Ms. Rainville as a result of negligent
    misrepresentation.

[146]

Finally, I would
    dismiss Mr. Weldons appeal and MTCC 1056s related cross-appeal.

[147]

The trial judges
    damage awards that are not consistent with these reasons would be set aside.

[148]

Interest would be
    payable on the awards to be calculated in the manner set by the trial judge.

F.

Costs

[149]

This is a case in
    which the perils of disproportionality are on full display. It exemplifies
how
undue process and protracted trials, with
    unnecessary expense and delay, can
prevent
the fair and just
    resolution of disputes,
in the words of
the
    Supreme Court in
Hryniak v. Mauldin
, 2014 SCC 7,
[2014] 1 S.C.R. 87, at para. 24
.

[150]

The trial took 43
    hearing days over three months, including the argument over costs. The legal
    costs of such a lengthy, multi-party and multi-counsel trial were considerable.
    The trial judge gave extensive reasons for her awards of costs, and the
    consequences are set out in paras. 70- 73 of the costs decision:

The Defendant Gowlings shall pay to the Plaintiff her costs
    fixed at $300,000 inclusive of fees, disbursements and taxes.

The Plaintiff shall pay to Brookfield 75% of its costs fixed at
    $200,000 inclusive of fees, disbursements and taxes and the Defendant Gowlings
    shall pay the remaining 25%.

A Sanderson order shall issue requiring the Defendant Gowlings
    to pay the costs of the Defendant MTCC 1056 fixed at $500,000 inclusive of
    fees, disbursements and taxes, payable in the sum of $250,000 for the insured
    claims and $250,000 for the uninsured claims.

The Third Party Weldon shall pay to the Defendant MTCC 1056 the
    sum of $25,000 in costs for the claim for his occupancy of the illegal third
    floor.

[151]

Gowlings seeks leave
    to appeal costs, and argues that saddling the firm with almost $900,000 in
    costs would be outlandish given its limited trial involvement, especially
    since the acrimonious relationship between MTCC 1056 and Ms. Rainville caused
    unnecessary delay and complexity. MTCC 1056 also seeks leave to appeal costs
    and pursues approximately $87,000 in additional costs against Ms. Rainville on
    a substantial indemnity basis.

[152]

The outcome of this
    appeal will no doubt affect the submissions of the parties on costs. In the
    circumstances, I would direct the parties to file supplementary arguments on
    costs of not more than five pages each within 45 days, if they are unable to
    agree on the appropriate quantum and allocation of costs following their review
    of these reasons.

Released:  December 2, 2014 K.F.

Peter
    Lauwers J.A.

I
    agree K. Feldman J.A.

I
    agree Michael Tulloch J.A.


