Real Estate Fall 2014 - Rosenblatt (Long Summary)

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Terms.......................................................................................... 22 Real Estate Agents: Standards of Conduct..................................23 Selkirk v. J. A. Willoughby & Sons Ltd. (1959), S.C.R. 75.........................23 Ocean City Realty Limited v. A & M Holdings Ltd. (1987) BCCA – Scope of duty ....................................................................................................... 23_Toc405940081 Raso v. Dionigi (1993), 12 O.R. (3d) 580 (Ont. C.A.)- dual agency.........23 _Toc405940083Hodgkinson v. Simms (1994) SCC – FD found.........................24 Knoch Estate v. Jon Picken Ltd. (1991) (Ont. C.A.) – SA does not owe a default FD to V, though cannot deceive/mislead, or withhold material info about offer submitted. ........................................................................................................................... 24 Century 21 Real Realty Inc. v. Campbell, (2012) – BRA -;........................25

Agent as Purchaser.....................................................................25 s. 32 Real Estate and Business Brokers Act, 2002 – regulations where RE is a purchaser...........................................................................................25 Remedies: Restitutionary Damages – Disgorgement of Profits, Compensatory Damages, Remedial CT for UR (for FD Soulos), Punitive Damages....25

Calandra v. B.A. Cleaners (1990), 73 O.R. (2d) 44(A’s failure to disclose intent to purchase)............................................................................................................ 25 Lee v. Chow (1990)(A’s failure to disclose intent to purchase).....................25 Soulos v. Korkontzilas (1997) SCC (breach of FD, failed to disclose intent to purchase) ........................................................................................................................... 26 Davies v. Bayda (2003) – no breach of FD...................................................26 Gutman v Vaillaincourt (1996) –dual agency, A liable, failed to make full & frank disclosure ........................................................................................................................... 26 Oscar United Group Inc. v. Chee, 2012 ONSC (like Hodgkinson, punitive damages) ........................................................................................................................... 26

Listing Agreement and Conditions..............................................27 s. 32 Real Estate and Business Brokers Act, 2002.............................27 only allows RE agents may sue or bring an action to recover commission

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Moore v. Morad (only RE agents are statutorily entitled to commission payments) 27 Metropolitan Trust Co. v. Latvala et al (1979) (clients not liable to pay commission after HP) Mon Boulot Enterprises Ltd. v. Kotschorek (1980) MB QC – (clients liable for post HP commission)....................................................................................................... 27 Statute of Frauds -, agreements related to RE must be in writing, so if it's not in writing, it's not enforceable unless there are elements of part performance......27

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First City Realty Ltd. v. Hermans (2004) (cond precedent for A’s entitlement to commission) Gidda v. Malik Law Office. [2006] ONSC......................................................27 T.L. Willaert Realty Ltd. v. Fody,2013 ONSC (V liable for commission, RET did not conclude)

Deposits...................................................................................... 28 s. 111 Crt of Justice Act: Crt right to grant relief against penalties & forfeitures. ...........................................................................................................28

DePalma v. Runnymede (1950) ONCA - PU sent payment did not specify if deposit or PP.................................................................................................................. 28 Craig v. Mohawk Metal Ltd. (1976) OR (PU still forfeits deposit if V sells to P2 @ higher price) Porto v. DiDomizio (1996), 50 R.P.R. (2d) 113............................................28 Cumberland Realty Group Ltd. v. B.L.T. Holdings Lid. (1984), (Alta C.A))(MEE & MOR).................................................................................................................. 28 Iyer v. Pleasant Developments Inc., [2006]................................................28 B.G Preeco (Pacific Coast) Ltd. v. Bond Street Developments 1989- damages for fraud misrep..................................................................................................... 29

Conditional Agreements..............................................................29 Turney v. Zhilka, [1959] S.C.R. 578- PU could not waive TCO..................29 O'Reilly v. Marketers Diversified Inc., [1969] S.C.R – PU could not waive TCP w/o right of waiver................................................................................................. 29 Barnett v. Harrison, [1976] 2 S.C.R. 531 141 – affirms Turney, no compelling reason not to................................................................................................................. 29 _Toc405940190

SIMPLE CONDITIONS...................................................................29 Beauchamp v Beauchamp..............................................................................29

Matters Relating To lawyers...............................................................29 Gaywood-Hall Developments Ltd. v. Wilkes (1972)- time is of the essence 29 McIlroy v. Stanton (1999) _Toc405940200Harland v. Fancsali (1994), 21 O.R. (3d) 798 – fraudulent misrep & waiver of cond................................................................................................. 30 1375687 Ontario Ltd. v. Novatec Construction Ltd. (1999) – estoppel & time limits on cond.................................................................................................................... 31 Demeri v Kwan & Kwan Ltd. [2008] McKee v. Montemarano, (2008)....................................................................31

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Obligation to Satisfy Conditions..................................................31 Planning Act.......................................................................................31 Aldercrest Depts. Ltd. v. Hunter (1970) ON CA –good faith duty in performing TCP ........................................................................................................................... 32 Dynamic Transport Ltd. v. O.K. Detailing Ltd., [1978] 2 S.C.R. – scope of good faith duty................................................................................................................... 32 BEM Enterprises Ltd. v. Campeau Corporation (1980) BCSC, lead case, good faith duty test Evans v. Kouyas (1983) NSCA, lead case, often cited in ON – good faith duty re: financing cond................................................................................................. 32 737985 Ontario Ltd. v. Essex (1993) – V discharged GF duty, refusal to make app not mere speculation, unlike Aldercrest, refusal based on good auth. .33 Eastwalsh Homes Ltd. v. Anatal Developments Ltd. (1990 )- probability of approval in awarding damages considered, like BEM Enterprises, mere probability was lower ........................................................................................................................... 33

Discretionary Conditions Precedent............................................33 Sole discretion clause -refers to provisions in agreements that make the performance of the agreement conditional or subject to the "satisfaction, the discretion or the opinion of a party to the agreement or of a third party 33

Marshall v. Bernard Place Corp. (2002),......................................................33 _Toc4059402581061590 Ontario Limited v. Ontario Jockey Club (1995), 21 O.R. – good faith issue on SJ............................................................................................... 34

Acting on Both Sides - Independent Legal Advice.......................34 Principle: Obligation to disclose to clients when acting on both sides of a transaction, onus on L to discharge burden of proof that obligation was fulfille ...........................................................................................................34 RE agent: If conflict of interest, agent cannot act on both sides.......................34 Lawyer: can act for both sides, for the reality of the business world and often economics dictate this course of conduct subject to compliance with LSUC.......................34  Consent in writing (and notify parties......................................................34  Element of disclosure – if L has a history or special relationship with the other client 34  Non-confidentiality – (1)if retained, (2)duty to disclose all material facts; duty not to keep anything confidential from one side to the other ;(3) if future conflict of interest arises, L may not be able to continue acting for either.................................................34

Principle of ILA Requirement in Dual Agency (Davey V Woolley).......34 Lawyer must require that a party obtain ILA when acting on both sides if there is an improper conflict of interest that exists or subsequently arises:.....34 (1) (a) If L’s duties to another client, a former client, or a TP (b)create a substantial of material and adverse effect on the representation of a client................34 (2) Risk of L using confidential information obtained from client to her detriment/disadvantage..................................................................................... 34 (3) If L an improper benefit or advantage as a result of SC relationship............34 Davey v. Woolley. Hames. Dale & Dingwall (1982), (Ont.C.A)- onus of test, L breached duty.................................................................................................................... 34 _Toc405940276

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Smit v. Alfield Farms Ltd. (1982) (B.C.S.C.) – conflict of interest arises in RET. L held liable................................................................................................................... 35 L, should have instructed him to seek ILA and caution about relying on oral promise............................................................................................................. 35 Korz v. St. Pierre (1987), 61 O.R. (2d) 609 (Ont. CA.)- L in joint transact not as L ........................................................................................................................... 35

Non Est Factum (Marvco) requires that the contractor or testator who now seeks to set aside the document establish that (1)s/he had intended to sign a document of a fundamentally different nature. (2) Cover cases of undue influence , relationship of confidence and pressures contractor or testator to act in a certain manner Exception: NEF defence does not apply if the donor's lack of knowledge about the circumstances arises from laziness or carelessness as between two innocent parties who suffer from the fraud of a third but one of the innocent parties is negligent..............................................................35 Bulut v. Carter, 2014 ONCA 424-no NEF defence, careless did not read , or ask ?s ........................................................................................................................... 35 Marvo Color Research Ltd. v. Harris (1982)NEF defence fails if party is careless & sophisticated...................................................................................................... 36 Shute v. Premier Trust (1994)_L held liable for negligence.....................36 Martin v. Goldfarb (1997)- obligation to disclose to other party if 1 party has criminal record

Circumstances where ILA is required (Smit, higher onus for unsophisticated parties)...............................................................................................36 (1) Unfair advantage (Korz)..............................................................36 (2) transact clearly adverse to borrower (Korz)................................36 (3) undue influence..........................................................................36 (4) ignorance of circumstance..........................................................36 (5) complexity of transact (Davey)...................................................36 Mackay v. Bank of Nova Scotia (1994), 20 O.R..........................................36 Webb v. Tomlinson. [2006] (Ont. S.C.)- Lawyer not liable, he provided ILA 37 Royal Bank of Canada v 2240094 Ontario Inc, 2013 ONSC – ILA & guarantors 37 Ratio: A legal determination cannot be made SJ as to whether a bank can enforce a defaulted loan against the guarantor of the principal where the merit of the action depends to a great extent on credibility..........................................................................37

King Lear....................................................................................37 Bertolo v. Bank of Montreal (1987), 57 O.R. (2d) 577 (Ont. H.C.)...........38

POA – Financial or Health...................................................................38

McMullen v. McMullen [2006] B.C.J..............................................................38

Conveyance of Property by Gift – Donors cannot retract gifts (Crepeau;Danicki) ...........................................................................................................39

Panko v. Simmonds, [1982] .Dual L failed to prove was not negligent where mum had no ILA Brandon v. Brandon, [2011 OJ 2986]............................................................39 Stanciu v. Stanciu (2004)- valid conveyance of fee simple by gift does not create implied life interest........................................................................................ 39

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Harding v. MeLeod (2004), ON – mother conveys ppty of existing trust for son to daughter ........................................................................................................................... 39 Danicki v. Danicki (1995), O.J. 3995-............................................................39 valid gift to son. Law does not enforce moral laws, honour thy father and thy mother............................................................................................................... 39 Crepeau v. Crepeau (2012) ONSC 418- down payment for mortgage from mum to son was loan.................................................................................................... 40 _Toc405940348Premier Trust v. Beaton (1990), 1O.R. –deaf mute mum indemnifed by L against mEE...................................................................................................... 40 Pecore v Pecore 2007..................................................................................... 40

Caveat Emptor Doctrine (Absence of Warranty) & Obligation to Disclose40  Risk of quality of condition lies upon PU absent fraud or mistake. V has no duty to disclose patent (perceivable) defects readily apparent upon inspection................................................................................... 40  Exception(Mcgrath) Vendor owes a duty to PU to disclose existence of (1)latent defects that the (2)V knows render the sale property, (3)dangerous, likely to be dangerous, or uninhabitable. (4)Onus on claimant to establish on a BOP, (5) D can use CE to rebut prima facie case...............................40  Doctrine of Merger terminates V’s responsibilities........................41 Representations and promises contained in APS merge on closing absent express terms to the contrary, or unless warranties/representations41

Exclusionary, Limitation of Liability, Exemption, Clause (para 26).........41 No representation, warranty or collateral conditions other than as expressed herein 41  Limit, qualify or exclude V’s liability for warranties, representations outside of APS, attached schedules or SPIS...........................................................................41 SPIS (Seller's Property Information Statement)........................................41 Voluntary disclosure statements about sale property; possible basis for claims for rescission for tort of deceit or negligent misrepresentation...............................................41 McGrath v. MacLean et al (1979) ONCA.......................................................41 V had no duty to disclose, did not know wall subject to landslide......................41 _Toc405940370Gronau v. Schiamp Investments Ltd. (1974) Man QB...........41 CE does not apply if V concealed patent def, fraudulent misrep........................41 Dankovic v. St. Stanislaus - St. Casimir’s Parish (1986), (ON) V liable, inoperable furnace............................................................................................................... 41 Marathon Realty v. Ginsberg (1982) ONCA Sevidal v. Chopra (1987) 64 OR – disclose latent defects in vicinity of sale ppty 41 Goldstein v. Davison (1994) does not follow Marathon............................42 Tony’s Broadloom & Floor Covering Limited v. N.C.M.Canada Inc.(1996),42 Surnmach v. Allen, [2003] B.C.S.C. – no duty to disclose nearby nude beach42

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Antorisa Investments (2006) "As is where is" . excludes V from tort liability42 Kingspan v. Brantford (City) (2011), ONSC – unclear of group claim to sale ppty a latent defect Ricchio v. Rota (2011)- V may be liable on basis of misreps in SPIS, like Antorisa was not latomasi v. Conciatori, 2011 ONSC 3819 follows Gronau – liable for conceal of patent defect, basement leakage and misrepresented..................................................43 Halliwell v. Lazarus, 2012 ONCA 348- limited liability clause re: building inspection not enforced.............................................................................................................. 43 Bound v. Gray, 2011 ONSC 1567- pedo in area may not be latent defect, so no CE ........................................................................................................................... 44 Barbieri v Mastronardi 2014 ONCA 416 – duty to disclose former marijuana grow-op of ppty.................................................................................................................... 44 1784773 Ontario Inc. v. K-W Labour Association inc., 2014 ONCA -CE - haunted ppty................................................................................................................... 44

Condominiums and Representations..................................................44 Peel Condominium Corp. No. 505 v. Cam - Valley Homes Ltd., (2001)- no pre K good faith duty............................................................................................................ 44

Representations, Warranties & Exculpatory Conditions.............45 Consider what does client want; are you able to characterize and prove statements that support clients preferred remedy?......................................................................45

1. Innocent Misrepresentation Principle.............................................45

 Claimant must demonstrate that representation is a (1)statement thought to be true by parting making representation; (2)independently verifiable; (3)must be objectively of the type that would influence a person to enter into a K;...............................45 (4) absence of EC, presence thereof excludes V liability, UNLESS.................45  Roberts/Beer: If party does not ascent to prov or not brought to PU’s attention 45  Shelanu: EC is unconscionable, ; unfair; unreasonable; otherwise contrary to public policy.................................................................................................................. 45  Hyrsk/Kiani : Error Insubstantialibus:.........................................................45 substantial diff bt/w thing bargained for & thing purchased, so as to constitute a failure of consideration, relates to quality of land..............................................................45  (Waxman)Equitable Rescission of Rescission BEFORE closing, unless ES, but invoked only in rare circumstances.............................................................45 claimant must prove representation was............................................................45  false statement............................................................................................. 45  material - must of a type that would influence party's decision to enter K...45  statement must have induced K-ing party to enter into K.............................45

2. Fraudulent Misrepresentation/ Tort of Deceit Principle...................45 

Claimant must demonstrate that............................................................45

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(1) D or Agent makes a false representation (2) knowledge of, or recklessness as to, its falsity (3)D or A intended to deceive PL with representation (4)False representation is subjectively material (5) False rep induced PL to act; (6) PL suffered damages 45  Liability - EC does not shield V liability, V’s can be vicariously liable for fraudulent misrep of Agents (Semkuley; Scholl)...............................................................45  Equitable Remedy of Rescission AFTER closing , UNLESS knowledge before close, then right to rescission is waived, but claimant can sue for damages (Burrows; Cubukgil)........................................................................................ 45 claimant must prove representation was............................................................45  Measure of Damages : restore PL to position he would have been but for the misrepresentation, not, the position he would have been in had rep. been true (Parna) 45

3. Negligent Misrepresentations.........................................................45

 Claimant must demonstrate that (1) DOC based on spec relationship bt/w PL & D - V & PU, (2) D made a false statement, (3) D was negligent in making false statement, therefore breached DOC; (4) PL reasonably relied on false statement (5) PL suffering damages as a consequence................................................................................46  Liability – V or agent, V is vicariously liability for agent..............................46  EC excludes liability for statements outside of APS, not express K terms (Hayward)46 Beer says it may.............................................................................................. 46 BUT EC invalidated IF, incl statements outside of APS if:........................46  Roberts/Beer: If party does not ascent to prov or not brought to PU’s attention 46  Shelanu: EC is unconscionable, ; unfair; unreasonable; otherwise contrary to public policy.................................................................................................................. 46  Hyrsk/Kiani : Error Insubstantialibus:.........................................................46 IF representation outside of APS , consider , (Roberts/Beer)..................46  Look at where the statements were located? Whether parties were consider to have assented to clause.............................................................................................. 46  What was the reliance ?................................................................................ 46  Who were the parties ? vulnerable or sophisticated?....................................46  What were the circumstances ?....................................................................46  Agents representing PUs?.............................................................................46  Equitable Remedy of Rescission BEFORE close; AFTER close - damages (Chapman)........................................................................................................ 46 claimant must prove representation was............................................................46  Measure of Damages : restore PL to position he would have been but for misrep 46

4. Collateral Warranties (survive closing, stat imposed warranties by ON New Home Warranties Plan Act)................................................................46 Statement is not a representation and (2) is collateral warranty (Jorian) to the main agreement, not go to root of K, expresses some lesser obligation (Fraser-Reid)46  (Jorian) TEST: Warranty or Condition – (1)Is the effect of the event to deprive the innocent party, who has further undertakings still to perform, (2) of substantially the whole benefit (that amounts to consideration for performance of further undertakings, (3) which the parties intended innocent party would obtain according to K.;...........................46

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 (Fraser)IF not cond, is it a warranty: (1) question of fact; (2) Does the contract disclose a common intention of merger re warranty? – express or implied (3) The K label for warranty is a rebuttable presumption...........................................................46  Effect of C : does not shield V from liability, term collateral to the agreement . 46  AFTER close ;Remedy of Damages, UNLESS MERGER:...........................46  TEST :Did parties intend that warranty survive merger (Fraser-Reid) or insert non merger provision (Alves); but merger is rare (DeMichele).............................46

5. Conditions (fundamental terms of APS)no remedies, right to repudiation 46  Apply CONDITION test; consider market forces and credibility (Townood) 46  Effect of C : does not shield V from liability ; Rights for breach : Innocent party has a right to treat other party’s breach as a repudiation of the K (Keen).....46

5. Universal Remedies – EC invalidated IF:.........................................46

 Roberts/Beer: If party does not ascent to prov or not brought to PU’s attention 46  Shelanu: EC is unconscionable, ; unfair; unreasonable; otherwise contrary to public policy.................................................................................................................. 46  Hyrsk/Kiani : Error Insubstantialibus:.........................................................46  Fundamental breach : repudation, unnecessary to commence action:.....46

Reps/Warranties/EC....................................................................47 Anticipatory Breach............................................................................47 Morgan v. Lucky Dog Ltd – refusal to close on the basis of PU not providing an estoppel certification constitutes an anticipatory breach absent express K terms requiring P to provide V with this........................................................................................................... 47 Waxman v. Yeandle, [1953] O.R. 367 (Ont. CA)- innocent misrep of gallonage after close ........................................................................................................................... 47 Decision: V liable for misrep, but PU not entitled to rescission after close.. P could have independently verified gallonage, and V had no intent to lie, mistaken belief as to truth of statement ;......................................................................................................... 47 Ratio: Ambiguous lang of a statement not likely to be interpreted as fraudulent47 Parnav. 0. & S. Properties Ltd. (1971), S.C.R. 306- V liable for negmisrep, apt buildings ........................................................................................................................... 47 Reasoning: V were first time builders, did not have accurate records; P was sophisticated, knew more about operating an apt than V, hence P was not mislead and did not rely on rep. even though representations were false to the knowledge of V = no fraudulent misrep 47 Ratio: Compensatory measure to assess damages; SCC damages: 4K, damages had representation not been made, lower sale price.......................................47 Semkuley v. Clay (1982) – V or A not liable for fraud misrep. Absent intent or recklessness to deceive...................................................................................... 47 EC insulates the vendor, not the (listing) agent from negligent misrepresentation made outside of the APS; Other cases say that EC will insulate agent also from negligent misrep outside of APS (Hayward;Semkuley)...................................................................47 HELD :V nor Agent are liable. Agent was giving an opinion, not a representation as an expert. ........................................................................................................................... 47 Olsen v. Poirier (1978), ONCA – milk farm, V liable for fraud; Agent for negligent misrep ........................................................................................................................... 47 Ratio : Silence can be recklessness that amounts to fraud misrep, for which a TP can be liable on a non K basis (V's liability);(Hedley) (RE agent liability).....................48

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V's liability - fraud misrep, rescission granted - “ milk quota was a vital factor in determining economic viability of farm, 25% reduction was a material factor - there was at least recklessness that amounted to fraudulent missrep on part of V that induced P to enter K and P relied on the missrep (although one part was true this was a half truth)..48 RE"s liability, negligent misrep - RE agent made negligent misrep; owed P a duty of care from holding self out as expert, P relied on misrepresented statement and P suffered a loss from such reliance.............................................................................................. 48 Hayward v. Mellick (1982), ON......................................................................48 Patav v. Hutchings (1989) – agents liable for misrep; V sued P for breach and they settled, Grimsby.............................................................................................................. 48 Rule A listing agent owes no FD To the purchaser (Caterprillar), but does not have the right to protect V's interests fraudulently; A selling agent has a duty to protect the interests of the PU client;............................................................................................................ 48 Decision: Listing agent made fraudulent misrep (misled P as to character of the property) ; Selling agent made negligent misrep (was negligent in not ascertaining property was appropriate for P given that he had been advised as such – could have made some inquiries at the municipality)............................................................................................. 48 Roberts v. Montex Developments (1979) (B.C.S.C.) (not a great decision) 48 misrep of soundproofing outside of APS; EC not enforced, so developer still liable48 Facts P bought condo unit advertised as designed to provide maximum sound proofing in between homes in the advertising brochures but was not part of APS; after closing, P complained about intolerable noise....................................................................48 Held: EC set aside b/c PU did not assent to prov. Therefore, EC does not exclude developer P from liability for negligent misrep, precontractual negligent misrep, the brochure, induced PU into APS or breach of warranty...........................................................................49 Fraser-Reid v. Droumtsekas (1981), S.C.R. (Warranty of no basement flood survived MERGER)............................................................................................................. 49 HELD: clause was a warranty that the basement would not flood, damage not discovered until after closing, and there was never an intention to merge..........................49

Urea formaldehyde.............................................................................49 Scholl v. Royal Trust (1987) (Ont. S.C.)- agent said no URF, refused to insert APS warranty, false.................................................................................................... 49 Ratio : AN EC does not operate to relieve a V from vicariuos liability in the face of the fraud of their agent...................................................................................................... 49 DeMichele v. Peter Kin (1985) – V liable for fraud misrep for breach of warranty 49 Ratio : PL can recover damages for loss of enjoyment of life if able to establish mental injury was foreseeable result of BOW............................................................................49 Held V liable for fraud misrep for breach of express K warranty. Lack of personal knowledge not material to finding of liability........................................................................49 Damages: the cost of removing the insulation & additional 20% b/c of stigma involved with the insulation and some damages for emotional turmoil....................................49 Glasner v. Royal LePage Real Estate Services Ltd. (1993)-......................49 PU entitled to rescission for fraud misrep, warranty; uniteral amendment to UFI warranty ........................................................................................................................... 49 Rule In modern commercial relations, where an important unilateral amendment is being made it is not unreasonable to ensure that knowledge of such amendment comes to the other side -- party must be given a real opportunity to appreciate the change ; Duty from V to P can arise when K concluded under unilateral mistake.....................................50 Held: PU entitled to rescission for fraud misrep. V knew fact was material b/c lang of clause was changed, instructed agent not to mention it unless specifically ask. PU refused to close immediately after changes raisedOlsGl..............................................................50 John Levy Holdings Inc. v. Cameron & Johnson Limited (1993) –V not liable for fraud misrep................................................................................................................. 50 Ratio : Language within a Kual statement, "to best of my knowledge and belief" did not warrant absolute truth of the statement. It was reasonable, fair & truthful........50

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HELD: V was not liable for fraud misrep for breach of warranty;, no damages for PU. Clause did not impose on V to perform tests to confirm the presence of contamination50

WARRANTY OR CONDITION?...............................................................50 Jorian Properties Ltd. v. Zellenrath (1984) (Ont. C.A.).............................50 HELD: No damages because PU elected not to close, so no breach of warranty here 50 Reasoning: Here, sale ppty could still be used as a triplex vs. five-plex would, NOT have deprived the plaintiff of substantially the whole benefit which the parties intended it should obtain, rental property under K DISSENT: (1) difference in kind & degree bt/w triplex/fiveplex in terms of revenue earning potential & capital value (warranty, more like cost of heating of ppty). (2) If PU would have had action for ES. (3) A condition, not their mutual intent that the PU could be forced to accept triplex instead of 5plex, P would not have received the very purpose of the sale and the P was entitled to damages.........50 Champlain Thiskson Inc. v. 365 Bay New Holdings Ltd. (2007)...............50 Decision: Courts tend to enforce language of agreement (John Levy, DeMichele) (1) V failed to satisfy TCP, did not perform in "all material respects" which P did not waive ; (2) P is entitled to return of deposit with interest...........................................................51

Error Insubstantialis...........................................................................51

Hvrsky v. Smith (1969) ON – V liable for ES. P entitled to rescission.. . .51 Held: P entitled to rescission. Mistake was so substantial that it fundamentally changed the property that was bargained for. could have searched title, but both parties were mistaken , dept of land 84 not 160...................................................................................... 51 Kiani v. Abdullah (1989) – PU entitled to rescission for ES......................51 Held: P entitled to rescission for ES. P received an unlicensed and quota less chicken farm, substantially different from the licensed farm they thought they had bought....51 Ratio: The mere fact that PU got something other than what they thought they bargained for is not sufficient grounds to establish ES. It must be substantially different........51 John Bosworth Ltd. (1979), 24 O.R. (purpose of ppty not sufficient to ground successful ES claim)............................................................................................................. 51 HELD : PL not entitled to rescission. P could have ascertained state of zoning in advance. PU was sophisticated unlike Kiani or Hyrsky.............................................................51 Reason: There was no deficiency in the quality of land conveyed. The representation here relates to purpose of ppty.It was CP inserted for P's benefit...............................51

Condos - Champlain v. H.L.S. York Development (1988), OR............51 Held: D vendor liable for damages. PU entitled to an abatement for missing square feet for neg misrep./BOW. Sketch of apt was attached to APS, at 2688 sq feet but unit was 2100 sq feet so EC did not apply...................................................................................... 51 Israel v. Townsgate Limited (1995)- PU liable for damages for BOK, not entitled to rescind ........................................................................................................................... 51 Held: PU liable for damages of $105K + interest/ costs. She was not entitled to rescind due to size of solarium as small than expected . Representation was not a part of APS, SPIS nor were there any oral assurances from agent. V had right to change solarium size and EC in APS(distinguished from Champlain).............................................................52 Keen v. Alterra Developments Ltd. (1994)- PU entitled to rescind for fund BOK – argue this...................................................................................................................... 52 Analysis(i) APS contained house type inserted by builder to specify type PUs wanted, (ii)oral assurances of sales rep, iii) changes to home - extra steps ; Builders created a house that was fundamentally different than what P bargained for i.e. French country style dream home w/ only one step - P offered to purchase another home with one/two front step. ........................................................................................................................... 52 Held: (1)PU entitled to remedy of rescission b/c V breached fundamental cond, and entitled to recover deposit. (2) Builder could not rely on EC b/c it was a fundamental BOK 52 Town Wood Homes Limited v. Khanna (1994) PU not entitled to rescind. Declining market force....................................................................................................... 52

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Held: Crt did not accept PU's evidence as to having money to close (reviewed correspondence, rapid market decline)..............................................................52

EXCULPATORY CLAUSES.....................................................................52 Beer v. Townsgate Limited (1997), 36 OR..................................................52 Agents reliable for innocent misrep, unsophisiticated Ps....................................52 Held: (Like Montex), Unsophisticated parties, not 34 other PUS, were entitled to equitable rescission for negligent misrepresentation. EC not enforced against agent’s oral assurances b/c they did not assent to it, and reasonably relied on agents who fabricated false sense of security in claiming risk free investment............................................................52 Agents held liable NWS EC............................................................................52 (Vulnerable parties - 40 yr old illiterate immigrant cab driver, 59 year old cobbler) 52 Ratio: (1)RE agent (or L) has a duty to act with care and skill in reviewing APS terms, including duty , to specifically draw to the client's attention any provisions in the agreement that are contrary to client's interest. (2)Client does not have an obligation to read instrument where there is reliance on a fiduciary to do so.................................52 Analysis: Evidence was selling agent specifically failed to explain that inspection clause has been fundamentally altered. Agent should have explained that the amendment made was that he would not be able to get out of the deal unless there was structural problem. ........................................................................................................................... 52 1018429 Ontario Inc. v. Fea Investments Ltd. (1999)- court can override K choice of remedy............................................................................................................... 52 H: PU entitled to damages for tort of deceit for breach of warranty in lieu of rescission, statements were so reckless.....................................................53 Ratio: Parties to K may limit a remedy by express terms in K to rescission for breach of warranty, but courts may choose not enforce such a Kual prov where innocent party has established claim for tort of deceit.....................................................................53 Swavze v Robertson (2001)...........................................................................53 duty to disclose still triggered IF it only renders part of sale property unfit for habitation 53 Ratio: V gave false representation that house is structurally sound despite basement’s water leakage problem. This was made with an intention to mislead P, and thus EC will not shield liability for misrepresentation here.....................................................................53 Held: V liable for fraudulent misrepresentation. PU entitled to damages..........53 Kaufmann v. Gibson, [2007] ONSC 0 PU can rely on SPIS if in APS to rescind if it contains misreps............................................................................................................... 53 Ratio: SPIS, if within 4 corners of APS, can be relied upon to withdraw from transact if it contains misrepresentaions in relation to matters that PU raised......................53 Held: V is NOT entitled to compensatory damages for BOK. He could not hide behind Agent’s advice not to disclose. PU was entitled to rely on inaccuracy of statements as reason for rescinding transaction...................................................................................53 Krawchuk v. Scherbak (2011) ONCA 352-PUs rely on SPIS w/o inspection, V held liable for misrep................................................................................................................. 53 H: After closing, V was liable for negligent misrep, not fraudulent misrep. PU entitled to damages............................................................................................................. 54 Reason: Vs were reckless as to truth of statements relating to foundation and plumbing in SPIS attached to APS. PUS did not do an inspection but relied on SPIS, and could successful do so................................................................................................................... 54 Cotton v. Monahan (2011), ONCA- PU not liable for cost of repairs, SPIS was truthful 54 Reasoning: CE applies. PUS should have bargained for an express warranty to guarantee equality of repairs and did not do so. V was unaware of building codes/ standards ; Husband V was a prudent and careful person who would not have knowingly exposed his family to risk; PU were aware V had done extensive renovations w/o permit or inspection........................................................................................................... 54 Held: PU recovers for value of diminution of property resulting from defect. No mental injury damages (not within reasonable contemplation of parties @ time K was formed)54

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Fraser Jewellers v. Dominion Electric Protection (1997)- EC enforced against jewellery store................................................................................................................... 54 Ratio: A sophisticated party is not entitled to they did not assent to an EC if lang of prov is clear /unambiguous unless pressured/rushed into signing K..............................54 Held: EC clause in agreement w Dominion Electric enforced. PU cannot recover damages in excess of limited liability cause..........................................................................54 Analysis: In K, EC was highlighted in bold letters on the K, it's lang was clear and unambigious, nothing was done to mislead the reader, P was not rushed/pressured into signing K. ; fact that P is a small business is not enough to warrant court intervention 54 Tercon Contractors Ltd. v. BC (Minister of Transportation &Highways (2010), (S.C.C.).............................................................................................................. 54 Ratio Cts have no discretion to invalidate a valid Kual exclusion unless, (i) unconscionable based on the circumstances of the case, OR ii) establishing, overriding paramount public policy consideration sufficient to trump FOK and defeat otherwise K rights of parties. 54 Rule of interpretation: If ambiguity of EC cannot be resolved using construction rule, contra preferentem applies, and it is interpreted against party who benefits from it. 54

SC Obligations............................................................................56 Rule 2 of the Rules of Professional Conduct - Relationship to Clients (Relates to mortgages).........................................................................................56 2.01 - Competence............................................................................................. 56 2.02 - Quality of Service..................................................................................... 56 2.03 Confidentiality............................................................................................ 56 2.04 - Avoid of Conflicts of Interest....................................................................56 2.05 Conflicts from Transfer bt/w Law Firms.......................................................56 2.06 Doing Business w a Client...........................................................................56 2.07, L cares for ppty as would prudent careful owner.......................................56 2.08 Fees, Interest according to SC Act..............................................................56 2.09 Withdrawal from representation.................................................................56

RECTIFICATION...................................................................................56 Strategeas v. Lloyd Parish Holdings Limited (1991).................................56 duty to bring mistake to attention of L acting for other side (Glasner)............56 RECTIFICATION principle for cases of mistake: “essence of rectification is to bring the document which was intended to be in pursuance of a prior agreement into harmony with the prior agreement”, courts will apply if i) King parties having reduced into writing the negotiated agreement but , ii) a mistake was made in the wording of the final written K altering the effect of the agreement...................................................................57 Ratio Even if L is negligent in not noticing a significant change to the original agreement, the party/lawyer making the change has an obligation to bring it to the attention of the other, or court may apply rectification..............................................................................57 Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd. (2002), S.C.C. 22....................................................................................................................... 57 (Principles of rectification).................................................................................. 57 Purpose of rectification: to prevent a written document from being used as an engine for fraud................................................................................................................... 57  Rectification is an available remedy FOR (i) unilateral mistake (or mutual mistake) if PL shows, with convincing proof (slightly higher than BOP):...................................57 a) Oral agreement not written down properly,...............................................57 b) D (ought) to know of the error, AND taking advantage of such error would amount to "fraud or equivalent “......................................................................................... 57 c) P must show "precise form" in which written agreement can be made to express prior intention............................................................................................................. 57

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d) crt's task is corrective (to restore bargain), not speculative;.....................57 e) Punitive damages only awarded if (1) compensatory damages are insufficient, and (2) denunciation is necessary............................................................................. 57 Held: D PU liable for damages. (He instructed his L not to raise mistake) Court ordered rectification and compensatory, not punitive damages. Corporate veil was pierced to hold the principals of the P personally liable....................................................................57

Duty when retained after APS is signed.............................................57 Wong v. 407327 Ontario Ltd. (1999) (L not liable for closing transact with shell co. V) ........................................................................................................................... 57 HERE: L was not negligent in not attempting to renegotiate security; his retainer was to close the deal.............................................................................................................. 57 Ratio Retainer of L before APS is signed triggers obligation to negotiate security for warranty;............................................................................................................ 57 No such duty arises if retained after APS is signed. The instruction is to conclude transaction ........................................................................................................................... 57 Enns v. Panju (1978) (B.C.S.C.) (L liable for not explaining deficiencies of signed APS) ........................................................................................................................... 57 Ratio: (1) SC has duty to exercise reasonable skill and care to advise client, that includes a duty to warn clients of risks involved in a course of action contemplated by the client; (2)IF SC fails to warn client, AND to warn of risk AND p probable that client would not take risk had he been warned, SC will be liable................................................................58 Held: D L liable for negligence. Client’s agreement was missing usual clauses or devices to protect client...................................................................................................... 58 Graham v. Diamond (2010) – no duty to negotiate better deal for client absent serious risk ........................................................................................................................... 58 Ratio When a L is acting PU regarding a signed APS, SC does not have duty to negotiate a better deal for clients unless APS discloses serious deficiencies/risks................58 Held: Action against L dismissed on SJ. L found to have no duty to inform client about need for env inspection............................................................................................... 58 835039 Ontario Limited v. Fram Development Corp. (1994)....................58 duty to take care proper care re time is of the essence provs............................58 Ratio: V has a duty to ensure proper fulfillment of duties pursuant to time sensitive K provisions........................................................................................................... 58 Held: L liable for negligence. V awarded nominal damages b/c chances of successfully fulfilling condition in question would have been minimal He took no steps to ensure receipt of fax to ensure other side received notice of extension of provision, and could have done so without impeding himself.................................................................................... 58 Gunraj v. Cyr (2012), Ont. – duty to discuss alternatives to signed APS arises sometimes ........................................................................................................................... 58 Ratio : Lawyer may have a duty under certain circumstances to discuss alternative options even after a signed APS, depends on the nature of the sale property. “Law is clear. L is not a client’s insurer. Just something goes wrong doesn't mean it's our fault."...........59 Held: Action for negligence dismissed on SJ. L not liable for negligence. APS contained nothing about erosion problems to trigger L’s duty to discuss alternatives so PU instructed to close. PU had waived inspection cond................................................................59 669283 Ontario Ltd. v. Reilly (1996)– L liable for negligence on limited retainer 59 Ratio:................................................................................................................. 59  L has a duty to ensure LR is documented in writing, and.............................59 that that client understands the risks of a LR vs. a typical retainer....................59  When L is acting on purchase of an apartment building, , SC has a duty to verify legality of rent absent express contrary terms of retainer..............................................59

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Held: L liable for negligence. He did not rebut prima facie negligence. LR was not documented at all by memo, nor in reporting letter......................................59 Reasoning. The fact that APS was signed and client had already waived conditions does not justify his conduct............................................................................................... 59 Yamada v. Mock (1997)- duty to verify identity of clients...............................59 Ratio SC has a duty to take reasonable steps to protect the interests of the party that she is serving, and includes eliciting identification to validate the purported identity of her clients. It reduces likelihood of fraud; The ID required depends on the nature of transact.; If multimillion, then passport instead of licence....................................................59 Robinson v. Royal Bank (1996), Duty to obtain written understanding of clients IF they choose not to follow your advice or warning regarding serious risks..................59 Held: Bank can enforced fraudulent mortgage against W. Wife was estopped from relying on H’s forgery to avoid personal liability for mortgage. She failed duty to disclose that H committed forgery to lender. She assumed the risk when she chose to withhold this information......................................................................................................... 59 Ratio: L has a duty to inform client of the risks of her actions, and should obtain written documentation where client chooses not to follow your advice despite risk of legal exposure of her decision.................................................................................................... 59 Harelav. Powell (1998) (when L is retained before APS is signed, high onus to defend negligence)......................................................................................................... 59 Ratio:Public expectation requires SC has a duty to know what a client’s plans are where it is clear that client intends to develop vacant land - implications of the zoning by law are critical and should be reviewed with the client............................................60 Held: Agent and L liable for negligence. They failed to take time to inquire about client’s plans................................................................................................................... 60 Turi v. Swanick (2003), OR(L's duty to advise about risk to unsophisticated parties is higher)................................................................................................................ 60 Ratio : Scope of duty to advise in relation to risks and consequences may depend on the level of sophistication of the party : Lawyer should write memo of advice to client and have her sign it............................................................................................................ 60 Held: L liable for negligence. Court believed that L advised client re proper use of corp name but did not advise on risks for improper use or failure to do so in context of business transactions by sending out memo.....................................................................60

Obligations of SC in relation to Independent Legal Advice & Marriage Ks

60

Le Van v. Le Van (2008) – Lawyer providing ILA has duty to fully disclose any potential conflicts of interest; This L acted for H’s L during his first divorce......................60 When providing ILA especially in relation to family law matters,........................60 (1) Explain risks and consequences of domestic K; and give time for consideration; (Mrs. L signed same day)............................................................................................... 60 (2) Refuse to act if transaction is shockingly unconscionable; or obtain client’s acknowledgement of your advice regarding serious risks..................................60 (3) Full disclosure of any conflicts of interest, like special relationship here is very important (Korz).................................................................................................................. 60 Stevens v. Stevens; Epstein Cole et. al. (2013) ONCA..............................60 (follows Glasner, Performance regarding rectification principles)...................60 Ratio It is the SC's duty to turn the mind of the opposing lawyer to an obvious mistake in a (marriage) K. Rectification principle: Failure to do so may result in court exercising equitable jurisdiction to relieve a mistake in fraud/circumstances amting to fraud/misrep. IF.................................................................................................. 60 (1) 1 party knowing of the other’s mistake as to the terms of an offer remain silent and, (2) concludes a K under the mistaken terms NWS that party ought to recognize mistake 60 Outaouais Synergest Inc. v. Keenan (2011)................................................60 no good faith duty in pre-K bargaining process, follows (York Condominium))60

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Ratio: Duty that individual lawyers owe to one another is unclear .An L would expect the other to act in fair and honest dealing; or that lawyer would disclose collect-back clause, but V's lawyer had no obligation to do so. Held: V nor L had duty to disclose clause clause. P’s L liable for negligence, should have requisitioned.................................................60 Meier v. Rose (2012), (SC when retained to prepare a will – verify registerd owner of ppty ) ........................................................................................................................... 61 Ratio (1) SC owes a DOC to a TP beneficiary created by the retainer to prepare a will for testator; (2) The reasonable SC has an obligation to use proper care in carrying out instructions to effectively confer intended benefit to TP beneficiary...Lawyer is not an order taker.................................................................................................................. 61 Held: L for testator was negligent in failing to bequeath to proper beneficiary. Damages assessed for value of land that PL beneficiary would have inherited. Time limits were not excuse for failing to conduct title search or to request information as to registered owner of lands in question................................................................................................ 61 What a reasonable SC in 2000 would have done................................................61 Thompson Family Trust (Re) (2011), ONSC (K barring KL from making a LSUC complaint NO)..................................................................................................................... 61 Ratio: Terms of settlement that bar a client from reporting a SC to LSUC are not enforceable because it is a public interest issue that extends beyond the private interests of parties. ........................................................................................................................... 61 LSUC is mandated to protect public interest.......................................................61 Maranello Autobody Inc. v. Freidman (2012)..............................................61 (LSUC) Rule- When acting as an advocate, L has a duty to refrain from deliberately withholding any binding auth that L considers to be directly on point that has not been mentioned by the opponent; otherwise to tantamount to misrepresentation . When in doubt, one should disclose.................................................................................61 Held: L in this case did not breach duty. He clearly believed cases were not point. 61 6038212 Canada Inc. v. 1230367 Ontario Ltd., 2014 ONCA ( follows Gunraj) 61 Ratio: A SC does not necessarily have an obligation to request environmental reports in the absence of client's instructions. Held: Action against L dismissed., not negligent for not requesting env reports. L for She ensured her client signed a waiver/consent acknowledging L had recommended undertaking env assessment, BUT that A was unwilling to conduct any further investigations.......................................................................................... 61

TITLE & TREB APS.......................................................................62 Real Estate Board Form clauses in APS..............................................62  Closing or Competion Date Clause 2 – (condos – occupancy and closing date) 62  Requisition submission deadline Clause 8............................................62  Marketable title, Clause 10 – valid objections on title that V cannot remove, remedy or satisfy entitle PU to withdraw from transactionP conclusively deemed to have accepted the title if no requisitions made by requisition date .PU is buying good and marketable title free from encumbrances except for (a) registered easements, (b) registered restrictive covenants);......................................................................................................... 62 o Cross out save and except for any registered restrictions and covenants… that run. REPLACE with search not done yet, so I don’t know if there are reg restrictions or RC 62  Binding undertaking ,Clause 12 - binds PU to accept personal undertaking from corporation/trust company if V unable to provide discharge(but not to individual undertakings)..................................................................................................... 62 o change boiler plate before APS signed if applicable......................................62  Apportionment Clause 18 – adjustment of fees upon conveyance like ppty tax and utilities payable by Buyer after closing day........................................................62  Time is of the Essence Clause 20– obligation to perform condition within K’s deadlines subject to negotiations between V & P...............................................................62

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 Tender Clause 21 parties must be ready, willing and able to perform to tender 62  EC Clause 26- excludes V’s liability for representations outside of APS package like schedule or SPIS................................................................................................. 62

Definitions..........................................................................................62  Requisition - necessary searches and checks on a sale ppty done by PU..62  Letter of requisition : sets out defects, objections to title (asks for answers) 62  Valid requisition - Must be submitted 5 days before close, except requisitions relating to root of title, matter of conveyance; Lawyers who do not requisition in time liable to negligence.......................................................................................................... 62  P's rights of V is unwilling or unable to satisfy requisition................62  P can waive the requisition (and take the title with the defect) (use title insurance) OR dissolve K, deposit returned; V may not intend to answer if market value increased 62  Title insurance - insured pays premiums for insurance coverageprotecting against losses due to title defects (usually even if existed before PU bought home)......62  Matters relating to root of title constitute total failure of consideration 62 Examples Planning Act Violation or encroachments , trust property.................62  Matters of conveyance (e.g. mortgage)- those matters by which the V alone (or with other persons whose concurrence he can require) is in a position to convey title to property 62 IF V is not entitled as of right to obtain a discharge of an encumbrance then it is an objection to title.................................................................................................. 62

Objections to Title and Rescission Clause...................................63 (Koffmanv. Fischstein (1985)P has right to requisition encumbrances or leans on title ........................................................................................................................... 63 Mason v. Freedman, [1958] S.C.R. 483- V must act reasonably& in good faith to rely on s 10....................................................................................................................... 63 Ratio: V who seeks to rely on title and rescission clause must (1)act reasonably and in good faith and (2)not in a capricious or arbitrary manner. Courts use objective RB measure to assess (1) conduct, (2) reason for not fulfilling requisition..............63 Held: V could not rely on s 10 clause. H had made no effort to answer requisition, was a deliberate failure so can’t use clause to escape his obligations.........................63 (Mink)A V's answer to the effect of satisfy yourself where PU makes a number of requisitions is not a reasonable exercise of rights under s 10................................................63

Easements (not a matter of conveyance)...................................63 TP right of access to land for or specific purpose (such as sewer, utilities etc).; 63 Often requisitioned to legally escape requisition on a technicality in accordance with s 98 ........................................................................................................................... 63 Stefanovska v. Kok (1990) (enjoyment and use of ppty test)........................63 Principle - Defect in title must affect the use and enjoyment of the property in materially significant way so as to be a valid requisition. (Equally applicable to all requisitions) 63 TEST: Does the impediment to title in any sig way affect P's use and enjoyment of ppty; ........................................................................................................................... 63 Consider: (1) location of easement, (2) size, (3) P's subjective considerations.63 Objective – determining of validity of PU’s refusal ; if deficiency is material......63 Subjective element - PU's feelings, motive relevant if it casts doubt on legitimacy of refusal to close transact..................................................................................................... 63 Held: Requisition of easement invalid, not grounds to escape transaction........63 Reasoning: PU would not have built over easement; could Easement did not preclude landscaping, only extensive and expensive landscaping. Court took judicial notice that market decline was P’s true motive.............................................................63

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Phinny v. Macaulav (2007) (L's obligation in case of easements- qualify your advice).............................................................................................................. 63 Ratio: Qualify your advice to Client. Here, PU lawyer told his client that he did not have to close, but was wrong in end because judge said requisition for easement was not valid 63 Held: Nominal damages awarded to V b/c damages were not mitigate. PU could have been liable for tremendous damages..........................................................................63 King Lofts Toronto Ltd. v. Emmons, 2014 ONCA 215 (title insurance, SC obligations) ........................................................................................................................... 63 Ratio: SC must exercise reasonable care to warn a client about legal consequences and risks involved in a transaction, including legal risks and consequences for easements, title insurances limits................................................................................................. 63 Held: SC law firm liable for negligence in failing to warn PU about sig legal consequences& risks of purchase, that City might insist being paid for lands being conveyed, & title insurance wouldn’t cover payment..................................................................................... 64

Encroachments (goes to root of title)..........................................64 Principle Requisitionscan be made out of time. They cannot be detected without a survey, ordinarily requested to determine whether property has been built in accordance with municipal bylaws. Stefanovska: Whether or not an encroachment entitles PU to withdraw from transaction depends on whether encroachment affects use and enjoyment of ppty (a) how long has it been there, (b) easily removable?.........................................................................64 Koo v. Redhill (1993)....................................................................................... 64 Held: PU bound to transaction b/c requisition for encroachment was not valid. Building encroached from 1.5 to 3 inches, had been there for so long, so minor, that PU could have gained possessory title through AP, therefore the encroachment did not expose PU to litigation.............................................................................................................. 64

Zoning & Work Orders (not a matter of conveyance)..................64 Must be made in accordance with s 8 deadlines, not a matter of conveyance ...........................................................................................................64

Kelly v. Semple (2010), (distinguished from Koo, unique ppty, shed was an overall selling feature)............................................................................................................... 64 Held: Requisition that shed did not comply with zoning was valid. PU 2 was entitled to rescind................................................................................................................ 64 Reasoning: Cottage is not a conventional ppty. Here, the fact that storage shed had to be relocated in a diff area entitles P to repudiate transact, b/c PUS are buying for their family, incl children. One of the main uses for property is watersports. Lake-side location of the storage shed was a a positive selling feature of the overall property. (ppty listing referred to it))....................................................................................................................... 64

Covenant.................................................................................... 64 Todd v. Haslofer (1983) OR............................................................................ 64 Ratio P cannot requisition a restrictive covenant where clause 9 of the APS has not been struck out - and a V has no duty to disclose such a restrictive covenant...........64

Right of Way (not root of title, s 8 deadline)................................64 Blinkhorn v. Ainsworth (1986) (Ont. C.A.)...................................................64 HELD: Lawyer for PU did not make requisition on time although would have been valid if made in time, but PU was ou t of time, so not a valid requisition and thus no rescission; Lr held liable for failing to make requisition on time RULE: A Requisition must be made within timeframe stipulated – does not go to root of title.......................64

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F: PU consults L on each offer in search for res ppty.. Retained L after offer accepted. L never mentioned right of way t of when PU signed closing docs. L searched title and found right of way .................................................................................................................... 64 Held: L negligent for failing to ever call PU's attention to registered right of way, reporting letter................................................................................................................... 64 Ratio: SC for PU in RE T must ensure that his clients understand the contents of the initial agreement and that all risks are clearly explained. Obviously, he must search, before closing, and at the very least make full disclosure of all relevant information yielded by the search. ........................................................................................................................... 64

How RET works wrp to Mortgages...............................................65 Principle on Requisitions for Matters of Conveyance – incl mortgages. 65 Requisition - P must requisition the mortgage statement. The lender will issue a mortgage statement which states the amount owing on the mortgage.............................65 PU's options before close -1) Requisition discharge of the mortgage or 2) assume it 65 Adjustments take effect on closing date -, PU picks up mort balance, V will prepare statement of adjustments................................................................................... 65 How transaction closes?................................................................................65  Mortgage statement requisition from P,........................................................65  V answers, Direction from V,.........................................................................65  Undertaking for Payment,.............................................................................65  Mortgagee issues discharge,.........................................................................65  release of money and transfer of title happen contemporaneously..............65 NOTE : IF P is short on amount owing at close, - may obtain VTB mortgage or assumes higher mortgage................................................................................................. 65

Definition of terms.............................................................................65 McFadden v. Pye (1979), 6 R.P.R. 198 (Ont. H.C.)......................................65 PU was entitled to withdraw from transaction, is entitled to return of deposit. . .65 Polischuk v. Hagarty (1983), (Ont.C.A)........................................................65

Time Provisions/Tender/Good Faith.............................................66 Steps of analysis:............................................................................................ 66 (1) Did claimant act in good faith, consider market conditions and surrounding circumstances, ........................................................................................................................... 66 (2) Was there TOE breach – Anticipatory? ; Was claimant ready, willing & able to tender? ........................................................................................................................... 66

Principle“Time is of the Essence”, requisite duty on claimant to act in good faith ...........................................................................................................66  Party entitled to waiver must waive cond w/in time limit specified...............66  King v Urban County Where a party fails to perform a K term w/in specified time limit of K cond, K does not necessarily come to an end. Party wishing to rely on this TOE provision to terminate the IF he shows that he is ready, willing and able to close, by way of tendering the documents.......................................................................................................... 66  At closing, if a party says not going to close, the other must tender to terminate A, precondition to suing for compensatory damages..............................................66  Anticipatory breach if before closing, if party says they are not going to, the other party need not tender as precondition to suing for compensatory damages.....66  Fanscali v Brody - If neither party is ready to close and the closing date passes - Either party, if he wishes, may reinstate the transaction subject to conds: (1) give notice to other party (2) REASONABLE date, expressly subject to time is of the essence. Where transact is reinstated validly and other party refuses to close, he is liable for damages for BOK..................................................................................................................... 66

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 Towsend unreasonable - A rescheduled closing date is not reasonable if reset to after Comm. Of Adjustment hearing date; can’t be 5 years into the future..........66  Lucky Dog Party wishing to rely on time is of the essence to be entitled to withdraw from transact must act in good faith. If he does not fulfill good faith duty, then party is precluded from relying on TOE prov....................................................................66  NOTE: Escrow: - where document(s) or money is given to a 3P to be held in trust until certain terms and conditions are satisfied, at which time the third party is to hand over the document or property to the promisee...............................................................66  NOTE: closing times: if no hour of closing on close date is specified, closing date is open until midnight of following day...................................................................66

Principle Good Faith............................................................................66

 Le Mesurier v. Andrus ONCA;King Each party owes a good faith duty to the other to try to resolve title problems and to perform K. To determine whether good faith duty discharged, objective standard used to evaluate merits of any complaint by P AND imposes a high not perf stand of performance on V. Once APS is signed, the court’s policy is to favour the enforcement of honest bargains...................................................................66 Breaches – cannot rely on TOE......................................................................66 Not a breach – can rely on TOE.....................................................................66  GF Koffmanv;Lucky Dog PU is considered to breach duty to act in good faith where he intentionally delays notice of requisition until the closing date, and has advanced knowledge of objection regarding a matter..........................................................................66  GF Citation Realty Inc V is in breach of good faith where he acts in dishonesty, and would be precluded from relying TOE prov.........................................................66  (Leung) Reliance on a minor issue to avoid transact . (Vandervliet – PU liable for 156 K, interests and costs) If PU ; was wrong .about issue upon which he is relying to avoid transact, still liable PU is sued for BOK by V, takes pos that requisition on consent of municipality for sale of residential ppty, goes to ROOT of TITLE.........................66  Carreno, Martens EstatePU not entitled to rely on TOE prov to terminate transaction on basis of requisition to open building permit. Commitment to title insurance sufficient 66 Jackson;Union Eagle PU failed to pay deposit within time specified, 2 days after due .Time is of the essence. If transaction is not completed as scheduled, then party relying on time is of the essence provision is entitled to avoid transaction, unless acting in bad faith. Here not in good faith, but not “BAD”:................................................................66  (Leung) extends to cases involving minor omissions or defects. If error is so minor that it could be corrected w/in a day, then there is an obligation to disclose NWS minor defect. 67

Remedy - Damages or SP...........................................................67 Principle: A claimant is entitled to SP in lieu of damages damages for BOK in re to real property, if she can establish (1) the property is unique for its proposed in the sense that a substitute would not be readily available or is not cannot be easily duplicated elsewhere...............................................................67 (2) objective-subjective determination (Southcott). (3)Otherwise, claimant is only entitled to damages, (2) triggers a duty to mitigate, (4) assessment of market value at date by what is fair in the circumstances of each case. (Semelhago) ...........................................................................................................67 Certificate of Pending Litigation.........................................................67 To be entitled to a certificate of pending litigation, PU must establish that sale ppty is unique… on a motion. PU seeks this when he thinks V is in BOK, and does not want V to sell land.......................................................................67

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Date and Measure of Damages.....................................................................67

 Southcott If damages assessed at date of trial, claimant must have mitigated. Otherwise, assessed at date of breach..............................................67 

If V retains property to speculate on market, damages will be assessed at date of closing 67

Duty to Mitigate Innocent party has a duty to mitigate losses resulting from BOK ...........................................................................................................67  Southcott PU cannot excuse duty to mitigate on grounds that limited purpose company has no assets Principals could have injected resources into company similarly to providing deposit................................................................................................................ 67

SP Defence – Financial Hardship: determining hardship vs. uniqueness of ppty ...........................................................................................................67 

De Franco D was unsuccessful . PL’s claim was stronger; found to be highly credible. 67  Prager, successful , D successful – V’s hardship outweighed uniqueness of ppty. Former committed psychiatric patient, when released, continued lived alone under DR’s supervision 67 Broad Application of Semelhago in Commercial Context.........................67 Residential Context......................................................................................... 67 Scope of Damages........................................................................................... 67

OCCUPIER’S LIABILITY ACT..........................................................68 what is the exposure that the lender, mortgagee has when he takes possession of the properties?.................................................................................... 68 Principle – Act imposes positive obligation onto occupier or owner to maintain the premises in a safe condition. An occupier includes a person who is in physical possession of the premises, and owes a duty to take reasonable care to ensure the safety of persons entering the premises.............................................68  Mortimer THE OWNER of a property has an ongoing duty to protect and repair the property and is responsible for maintaining potential hazards and making reasonable inspections of interior and exterior.....................................................................68  Ekkebus PUS held liable due to failure to cover hottub, immediate cause of injury here despite Ls not advising them. PU bought a ppty w HT on premises absent a permit for building HT. Neighbour’s child falls in uncovered HT, severely injured.68 Mortimer v. Cameron (1994) Facts...............................................................68

LAW of Mortgages – TERMS.........................................................69 Purchase money mortgage............................................................................69 VTBM................................................................................................................. 69 Equity................................................................................................................ 69 Types of mortgages : conventional, secondary, CMHC insured loan...................69 Principal............................................................................................................ 69 Interest (Fixed or floating)............................................................................69 Maturity Date................................................................................................... 69

Amortization Loan (subject to renewal options of interest rate)........69

Closed/Open Mortgage................................................................................... 69 Acceleration clause in mortgage agreement subject to statutory protections for borrower; cannot K out.................................................................................. 69

Rights and Duties of Lender and Borrower.........................................69

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Rights of Lender , IF borrower in default of payment for 15 days, subject to 30 days of notice.................................................................................................................. 69  Right to sue on acceleration enforce acceleration clause, call mortgage debt balance 69  K right of lender to power of sale or to claim judicial sale.............................69  If exercised, duty of lender to borrower to account for surplus, difference bt/w loan amount + sale price subject to secondary mortgagee’s rights, entitled to amount owed from surplus................................................................................................................ 69  Right of lender to take possession................................................................69  (SC action) Right of lender to foreclose borrower’ (action in SC) redemption of equity within time limit, after which time the lender becomes owner in equity and CML69  Right of action on covenant to recover from original mortgagor , guarantor (if any) or currently registered owner, or undisclosed principals absent express contrary K terms;................................................................................................................. 69  20(1) Stat right right to sue mortgagor’s grantee even where agreement to assume w or w/o express terms imposed on successor/grantee.............................................69  INTEREST Stat duty of lender not to charge increased interest rates if mortgagee in default or late on payments................................................................................ 69 Rights of Borrower.......................................................................................... 69  Right to 30 days of notice of L’s intent to enforce acceleration clause, sell ppty, take possession or foreclose....................................................................................... 70  Right to sue for deficiency following sale of ppty by lender subject to secondary mortgagee’s rights............................................................................................. 70  Statutory right to put mortgage debt in good faith by making payments in arrears until mortgagee sells ppty, i.e. until APS is signed.....................................................70  CML Duty of original mortgagor to perform personal covenant with mortgagee -covenantee even if there is agreement to assume in APS.................................70  INTEREST , Stat right of borrower not to be charged interest on late or mortgage payments in default............................................................................................ 70

Remedy Actions on the Covenant...............................................71 S 20 Mortgages Act......................................................................................... 71  S 20(3) IF grantee (P2) agrees to assume debt, mortgagee has right to sue registered owner and original mortgagor, but right to judgement against owner or mortgagor, not BOTH prevents against double recovery, but does NOT bar right to recover against other original mortgagor(s)....................................................................................................... 71  S 20(2)) If Agreement to assume obligates grantee to indemnify original mortgagor wrp to mortgagee, mortgagee only retains right to recover against grantee, not registered owner, unless action already commenced against original mortgagor. Right of mortgagor to recover personal judgement against 1st grantee extinguished on registration of a grant or transfer of equity of redemption by grantee to another person...........................................71

Classes liable to Mortgagee for Action on Covenant/Right of Repayment Consider who has assets when deciding who to sue.........................71

71

Scenario 1: IF Assumption Agreement with PU1, who then sells to PU2, mortgagee can enforce action against:....................................................................................... 71  Grantee, 1 (pursuant to assumption agreement)..........................................71  Mortgagor-Covenantor (pursuant to personal covenant for mortgage debt) 71  Grantee/ PU 2 AS registered owner...............................................................71 Scenario 2: IF NO Assumption Agreement with PU1, who then sells to PU2, mortgagee can enforce action against:....................................................................................... 71  Mortgagor-Covenantor (pursuant to personal covenant for mortgage debt) 71  Registered Owner (s 20, MA).........................................................................71  NOT P1 (absent AA), BUT mortgagor can sue P1 afterwards Fuciarelli.......71

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Options of Express K terms to proactively protect mortgagee’s interests against breach of personal covenant..............................................................71

Assumption agreement creates privity of K bt/w grantee and mortgagee, G agrees to assume mortgage, may but not necessarily be negotiated to release original mortgagor against all liabilities............................................................................................ 71 Agreement to assume bt/w mortgagor (V) and grantee (P) creates obligation on grantee/subsequent purchaser to indemnify V against liability for repayment/action on covenant............................................................................................................. 71 “Due on sale” clause In any conveyance, L is entitled to call mortgage debt unless L approves subsequent L; mortgagor still required to guarantee repayment, but COULD negotiate release from covenant........................................................................71 “No Prejudice Clause” reservation that no extension of time given, or waiver, failure to enforce rights or any other dealings, on part of mortgagor shall in any way affect or prejudice the rights of the mortgagee against mortgagor for payment of amounts secured by Mortgage (against registered owner or new agreement w B).............................71

Interest Act s, 8..........................................................................71 Principle mortgagee can’t charge interest when mortgage payments in default ...........................................................................................................71

Power of Sale Remedy................................................................72 Steps of Analysis............................................................................................. 72 (1) Improvident sale action or defence............................................................72 (2) What is the alleged duty that has been breached?....................................72 (3) Did MEE fall below SOC expected of a reasonable MEE?............................72

Principle mortgagee, acting in good faith and w/o fraud, is entitled to sell property subject to (1)providing mortgagee w 30 days notice of sale where MEE is in default of mortgage debt payments = or > than except upon tender by mortgagor of principal amount due (up to APS signed) (2)account for surplus, (3) liability for deficiency for failing to take reasonable care to obtain true mkt value.................................................................72 Right of MEE : (1) to sue for deficiency, where sale proceeds do not cover full mortgage debt or right to surplus (2) right to surplus, subject to secondary mortgagee (3)Improvident sale defence or action (Arnold;Cuckmere) To successfully obtain an injunction against mortgagee’s right to exercise power of sale, mortgagee must demonstrate extreme or exceptional circumstances that would justify a departure from the prevailing practice to effectuate postponement of sale......................................72 Corresponding Duties of MEE to exercise of right of Power of Sale.......72

Standard of Care......................................................................... 72 Test – How to determine whether MEE met SOC Broos v. Robinson (not all these steps will be necessary or appropriate in every case):......................72

(1) act bona fides in the exercise of the power of sale;......................................72 (2) attempt to realize fair market value in the sale;...........................................72 (3) give some consideration to the interests of the mortgagor as well as the mortgagee's own interests;............................................................................................................. 72 (4) do not conduct the sale in bad faith (which is the reverse side of (1));.........72 (5) see that the property comes to the attention of a wide segment of the market; 72 (6) obtain proper appraisals;.............................................................................. 72 (7) advertise the property for sale;.....................................................................72 (8) place "For Sale" signs on the property;.........................................................72 (9) place the property with the Multiple Listing Service; and..............................72

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(10) ensure that efforts are conducted over a reasonable period of time...........72

Examples of improvident sale............................................................73 (Wood- duty to obtain appraisals; advertise failed; improvident sale) The courts holds that a lender should take into account the common tendency to bargain in a real estate transaction. Here, lender sold right away & court found appraisal duty not fulfilled. 73 Ppty wasn't exposed to market for a sufficient period of time............................73 (Sterne – failure to advertise; improvident sale) Crt held that b/c it was a hobby farm, lender had a duty to advertise in Toronto and Hamilton. But for failing to advertise, purchase price that would have been obtained could have been 25 K..............................73 CA Case; MEE held liable for improvident sale). Here, L for lender hired appraisal friend, asked for appraisal back and that he not keep copies of it. Ppty sold for 12.5; mkt value, 16. Damages for 3.5 mil and costs........................................................................... 73

REMEDY - MORTGAGEE IN POSSESSION......................................73 Principle Mortgagee is entitled to take possession if (1)MOR is in default of payment within one day. There is no notice requirement. . (2) If MEE takes possession, he assumes statutory duties. Occupier’s Liability Act, Residential Tenancy, Environmental Act (i.e. assumes legal personality of MOR in default –what applies to former applies to MEE) (3) When he decides to sells notice of sale requirement is triggered...........................73 Environmental, if mortgage property is contaminated, statutory onus on mortgagee in possession to clean up the property. MEE would often do environmental assess. If cost of clean up exceeds cost of mortgage, then wouldn’t use this option.....................................................................73 Tenants...............................................................................................73

Commercial (apt building, income producing plaza) – obligation to provide written notice to tenants that you're the mortgagee. MT is in default, exercise of right to possession, tendering instruction – where and to whom for paying rent , appoint manager, enter premises, change locks.............................................................................73 Residential – judicial power of sale used to exercise possession in lieu of power of sale..................................................................................................................... 73

General Principle To act prudently and diligently in the management of the property (Elgie) and account for his management upon redemption or sale. MTEE must account to the MTOR for all revenues produced by the property. If property is mismanaged the MTEE will not only be charged w/ rents and profits received but also w/ those that would have been received if management had been more competent........................................................................73

Mortgages Act , SS 22-3, 42........................................................74 S 42 – Notice of Sale and Redemption Period – No action during redemption period.................................................................................................74

1) Right to give notice of sale 15 days after date of defaulted payment from the mortgagee to mortgagor and any subsequent encumberancer................................................74 2) No proceedings can take place between the issuance of the Notice of Sale and when it expires................................................................................................................ 74 3) During 35 day redemption/repayment period, MTEE cannot: (1) issue writ on covenant, (b) if issued before notice of sale, it cannot be served. (3) issue or serve a writ for possession, or take possession or enter into sales neg......................................74 4) Any steps taken during that period will be a nullity........................................74

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S.42(3)- Exception: This rule does not apply to stay or waste injury. Any other steps require leave of court......................................................................................... 74

SS 22-23– Right to Pay Bringing Mortgage Debt into Good Standing at any time before a sale......................................................................................74 absolute right to Pay Arrears & costs any time until MEE enters into APS the ppty after receiving notice.................................................................................................. 74

S 23 gives mortgagor the rights to pay the arrears if mortgagee has started the action by SOC, rarely used.................................................................74 SS 10/18 – Regardless of mortgage agreement term, IF MOR ,is an individual other than a limited co or corp, at any time after 5 years, whether a closed mortgage or not, a mortgagor has a (1)right to pay off the mortgage at any time upon payment of an additional 3 months interest, (2) must give notice of intent, (3) covenantor of promise must be an individual, (4)though transferable to a limit comp subject to ind cov. (Hone).................................................74

REMEDY – FORECOSURE.............................................................75 Principle (must enforce remedy through courts)................................75 (1) serve SOC for foreclosure, naming MOR & all subsequent encumbrancers; ...........................................................................................................75 (2) interim judgement, MEE 1 can take possession;..........................75 (3) final order of foreclosure(following failure to redeem)– interest of MOR /MEE2 is extinguished if they fail to redeem;................................................75 (4) MEE loses right to action on the covenant,..................................75 (5) No duty to account for surplus or liability for deficiency if MEE sells ppty at a loss.................................................................................................................... 75 Procedure - Orders in a foreclosure:............................................................75 (1) If right to redeem filed, then judgment for foreclosure with a reference; mortgagor can pay off the amount owing w/in 60 days of ref. If they don’t act, THEN 75 (2) Final order of foreclosure :mortgagee officially becomes the owner; No duty to account for surplus; no right of action on the covenant (in a loss).....................75

In Foreclosure (Encumbrancer & Mortgagor).....................................75

 (1)Right to file notice of intention to redeem in 60 days to pay off full amount owing; (2)court may grant extensions if payee making good faith efforts ; (3) encumbrancer may then foreclose or sell IF maturity date has not arrived OR if amount owing is paid off by maturity date, and prospective increase in market value..................................75  Right to file a notice of intention to sell (judicially supervised sale): request that MEE sell rather than foreclose. If MEE cannot sell, it may reapply to reconvert action into foreclosure.......................................................................................................... 75

Secondary Mortgagees (& Mortgagors) and Rights.....................75  Right of action on the covenant / right of repayment (survives foreclosure of equity of redemption) – if MOR has no assets, MEE2 will not enforce75  Right of action for improvident sale..............................................75  Right of to put mortgage in good standing...................................75  (ME only) Right of foreclosure subject to first mortgagee rights. No one will prefer judicial sale to foreclosure, if appraisal measures ppty value is below MT value..................................................................................................75 Power of Sale Principle & Steps of Analysis........................................75

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a) Mortgagee exercises power of sale (1)by way of notice via registered mail to mortgagor , and (2)every subsequent encumbrancer , (3)if MOR in default for at least 15, days, (40with 35 day redemption period to rectify the arreas............................75 b) Act of sale extinguishes rights of any subsequent encumbrancer . MEE 1 has duty to account surplus, first subsequent encumbrancers in priority, then to MOR........75 c) Obligations of MEE 1 analysis above..........................................................75 IF there is no remaining surplus or deficiency ,.........................................75

Action on the Covenant, engage this analysis...................................75 a) If surplus does not cover mortgage debt owing to second encumbrancer, MEE 2 has right to sue on the covenantor mortgagor on the covenant / right of repayment75

Once a mortgage always a mortgage.........................................76 Whether or a transaction is a disguised form of mortgage is one of fact – evidence of all surrounding circumstances; intention of parties. If an agreement discloses characteristics of mortgage agreement, then the situation establishes rights and responsibilities of a mortgagor-mortgagee ................................................................................................... 76 Arnal v. Arnal SKCA 1969: Even if transact not called a mortgage, but looks and smells like one it must be treated as a mortgage (Consider intention and relationship of parties, financing in exchange for marketable asset akin to equity of redemption). Here: Son had right to get property back by paying amount owing. Father lends money to son for purchase of ppty in exchange for father as title holder. Father died, and estate argues it was loan security, not a mortg. ...........................................................................................................76 Creswell 1984, BCSC He HELD: B had the right to pay it back with an interest rate. Loan from P to D on security of their lands .Document was an obvious attempt to disguise a loan agreement by naming it a sale with option back................................................76  Instead of lending, lender purchased ppty and entered into a sale with an option with party, option that party (PU) could buy back ppty at any time during the year at sale price of 380K and interest of 77K, not greater than 635K , 10 K fee to D’s agent. borrowed out of sheer desperation............................................................................................... 76  L refuses to sell back on grounds that time in which to exercise option was during year, NOT end of year.................................................................................................. 76

REPAYMENTS OF MORTGAGE......................................................76 Knightsbridge Estates Trust Limited. Here, transact not unconscionable – no extreme power imbalance, was a sophisticated party. Argued that length mortg term at 24 years was unreasonable...................................................................................................... 76 by virtue of unconscionability............................................................................. 76  (Knightsbridge) The rules of equity will protect its godchild, the mortgagor76 disability; (4) the other party’s knowingly taking advantage of this vulnerability76

UNCONSCIONABLE TRANSACTIONS/ CRIMINAL CODE, S 347 ANALYSIS

77

1. S 347, CC Criminal offence to charge interest more than 60% , includes sum of costs and interest borrower must pay............................................77 (1) Is interest rate illegal under s 347;...............................................................77 (2) If yes, should public policy allow partial enforcement of K, OR declaration of nullity ........................................................................................................................... 77 (North American Test).................................................................................... 77  Would purpose or policy of s. 347 be subverted by severance; ?................77  whether the parties entered into the agreement for an illegal purpose /evil intent? 77

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 Relative bargaining powers of parties, conduct in reaching agreement?......77  the potential for the debtor to enjoy an unjustified windfall.........................77 (3) Contextual approach based on all surrounding circumstances: severance, nullity, reduce interest :............................................................................................................. 77  IF SEVERANCE – Notional or Blue Pencil , The preferred severance technique is the one that, in light of the particular contractual context involved, would most appropriately cure the illegality while remaining otherwise as close as possible to the express intentions of parties in K.......................................................................................................... 77

2. If not illegal, consider whether transact unconscionable under. 77 Unconscionable Transactions Relief Act, RSO....................................77 Court may (1) exercise discretion to relieve debtor, (2)IF at least in part, of the obligations of a contract to which in all the circumstances of the case he cannot be said to have given a free and valid consent,....................................................................................... 77 3. Harsh and unreasonable mortgage defence (4) Party relying on defence must show unconscionable transact (a) grossly unfair improvident transact (b) debtor’ s ILA, sophistication, (c) power imbalance caused by ignorance, illiteracy, language barrier or other disability, (d) other part knowingly takes advantage of vulnerability (Titus AB)77 S 347, Barrie v. 687844 Ontario Ltd.............................................................77 (Action for recovery of mortgage moneys, or damages for negligence against MOR & L) 77 Held: (1) L for D found liable under s 347, agreement to pay interest, void and unenforceable,, pay able at maturity rate 30 days after mortg agreement, several from loan agreement; (2)L acting for lender has an obligation to verify legality of lending arrangements so as to contravene s 347, otherwise is liable for negligence.............................77 Here: B goes to friend to borrow 180K, 10K interest, repayment in 30 days. B refuses to pay 10K bonus b/c in excess of legal interest rate per annum.. L sues her lawyer.. .77 S 347 & Prov Act Creswell v Ryan Bay Holdings.........................................77 Held: PL did not discharge onus under s 347. Loan price of 380K + interest at 77K, total purchase price not to exceed 635K, and fees to D’s agent.................................77 Onus not discharged b/c Ps could not proof D was obliged to pay agent’s fee & that D agreed to make loan only on condition that P enter into an agreement where they pay the fee. No evidence that D would have refused to advance credit if fee not paid, P willing to pay customary finder’s fee........................................................................................ 77 Unconscionability defence, Richmond v James..........................................77 D claims harsh and unconscionable defence to an action on the covenant against her by mortgagee.......................................................................................................... 77 Held:.................................................................................................................. 77 North American Express , s 347(1). Applied notional severance vs. blue pencil severance......................................................................................................... 77 Flexible remedy warranted in this case. Lender did not violate s 347(1)(A), K served a commercial purpose, no illegal intention, commercially experienced parties, ILA , equities of situation favour lender in presence ILA, parties knew obligations.....................77 Facts: Borrower had to pay royalty + certain commissions. It looked as if there were a lot of other factors other than the rate of interest. In the end, the net interest rate came to 89%. ........................................................................................................................... 77

Triggering Mortgage.................................................................... 78 Principle: If MEE commences an action for foreclosure or judicial sale, this triggers right of MOR to pay off closed full mortgage debt owing without penalty; does not convert close to open mortgage.........................................78

Exception:......................................................................................................... 78 Canbook Distribution v Borins......................................................................78 Held: TJ accepts SC’s arguments that docs were protected from discovery by the S&C privilege. Canbook argued that docs were not privileged, and any privilege was waived due to fraud allegations................................................................................................. 78

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Rule: S-C privilege is waived if claimant established that SCS are liable for prima facie case of fraud. Solicitor would be required to produce these documents.....................78

Partition Act Where a dispute arises in context of a business venture or joint partnership or joint tenancy, court may exercise discretion to sell property or sever the joint tenancy absent a express agreement between partners. Onus on claimant to demonstrate intention of parties.....................................78

Fraudulent Conveyance Act, ss 2-3.............................................78 S 2, Every conveyance of real property ... made with intent to defeat, hinder, delay or defraud creditors ... of their just and lawful actions ... are void as against such persons.........................................................................78 S 3 - S 2 does not apply....................................................................78 …. to an estate or interest in real property ... conveyed upon good consideration and in good faith to a person not having at the time of the conveyance to the person notice or knowledge of the intent set forth in that section....78 Feher v Healey...................................................................................78 Held: claimant, nephew of H, had not established transfer of MH from W to children was a fraudulent conveyance, NWS sep agreement was never signed, there was an oral promise. Reason for transfer was part of a comprehensive settlement of all financial matters involving couple and children. W had waived CS and SS in exchange for transfer or MH.........................................78 Stone v. Stone – A lawyer may have an obligation to TPS other than client where purposes of transact amounts to delaying creditors or escape spousal obligations and responsibilities.................................................................................................... 78 Held: Crt set aisde transact...............................................................................78 F: H was dying, instructed L at hospital to transfer all assets to children. W sought to set aside transacts under Fraudulent Conveyances Act. L was sued but settled action...78

Terms Real Estate Transactions refers to resale of residential or commercial properties Vendor: refers to party selling the property Listing broker: refers to vendor's agent, b/c V will have signed listing agreement auth the broker to add property to list of properties not for sale Listing agreement - prescribes most, not all terms of agreement of listing agent for broker and V, includes an expiry date, agent’s commission , indicates when and for what services commission is to be paid , may provide for payment of commission for certain sales made after expiry of A.

Tail period designed to prevent V from escaping obligation to pay commission by waiting until K expires and then selling to P interested in property during currency of listing Listing agent - auth agent to offer property for sale at specified listing price (MLS) multiple listing service usually for residential properties, and all members of a regional real estate board will receive the information pertaining to residential property for sale (sets out terms of exclusive, purchase price, and most clients will sign listing agreement w/o seeing you Open listing - A property listing that uses multiple REAS to sell property; agent that sells the property collects the commission

P a g e | 28 Exclusive listing In effect for a fixed period of time during which listing agent will be sole recipient earns commission, V pays less commission, but property not listed through MLS Purchaser (buyer): refers to party buying the property. V's agent paid indirectly by P. Buyer's Representation Agreement (BRA) - establishes written K bt/w P & agent by which agent exclusively represents P, P can either pay commission directly to agent or to allow agent to be paid by sharing the listing agent's commission being paid by V Mutual good faith duty of P & V Vendor's Remorse : V sells property and then a week later or month later, V says that I never should have sold Closing Dates – date on which conveyance takes effect Time is of the essence - if the clause is breached or contravened, then V was not required to relinquish title to P Holdover provisions Refers to a K term that holds seller (and/or purchase) liable to pay commission to real estate agent after listing agreement or BRA expires if the sale property is sold within X days of the agreement expiry date (BRA - or if P purchases a home within X days)

Real Estate Agents: Standards of Conduct Principle Agent must make full and fair disclosure to the principal of all material circumstances likely to influence the conduct of the principal (here the duty to get the best price for the appellant vendors conflicted with his duty to respondents) (conflict of interest) (Raso); TEST: What a reasonable agent would consider as likely to influence the conduct of the principal in similar circumstances (Selkirk) Selkirk v. J. A. Willoughby & Sons Ltd. (1959), S.C.R. 75

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P however, made it a condition of offer that his identity would not be disclosed to the vendor. Offer was submitted by agent, acting as nominee for the undisclosed purchaser -- a fact clearly set out in the offer. D vendor accepted the offer, but refused to pay the agent his commission on the grounds that he would not have dealt with P question if he had known his identity and that the agent had been working for such purchaser to the sacrifice of the vendor's interests. P’s agent sued for commission.

ld/ le

SCC CARTWRIGHT J

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Held: Agent Entitled to his Commission; Agent did not breach his duty. Full disclosure that the offer was made on behalf of an undisclosed purchaser RULE: Agent must act honestly and loyally w/ strictest good faith towards his principal and for the principal’s exclusive benefit. There must be full disclosure to the principal of all material circumstances within agent’s knowledge. If agent has breached its duty, he will be disentitled to commission (the hallmark of FD in a SC relationship and in agent-client relationship) agent did have a duty to act in vendor’s interests but no evidence that agent sacrificed interests of the vendor There V had choices & could have, (i) refused to consider the offer, (ii) said that he would not accept the offer if the purchaser were a certain person, or (iii) accepted the offer. Having decided to accept the offer, vendor could not claim the agent breached his duty by failing to disclose here identity of purchaser was not material

Ocean City Realty Limited v. A & M Holdings Ltd. (1987) BCCA – Scope of duty Vendor listed with agent and stipulated that he was firm on his asking price. Listing agent was to get 91K commission. Purchaser offered to pay full price on the condition that he get ½ of the listing agent’s commission. Agent agreed, but did not disclose to principle. Vendor discovered side deal, refused to pay

P a g e | 29 commission.

eld: CA agent breached her fiduciary duty by failing to disclose - not entitled to mmission uty to disclose not confined to instances where agent has gained an advantage, where e info might affect the value of the property or where a conflict of interest exists

le: Whether RE agent is required to make disclosure of information in question is an objective test ; what a asonable agent in similar circumstances would consider as likely to influence the conduct of the principal. Court ys it is not up to the agent to make an arbitrary decision. When in doubt, agent must be disclose, al judge held there was no conflict, no need to disclose Unlike TD, CA found that duty of disclosure not confined to instances where agent has gained an advantage, where the info might affect the value of the property or where a conflict of interest exists. When in doubt agent must disclose.

Raso v. Dionigi (1993), 12 O.R. (3d) 580 (Ont. C.A.)- dual agency P seeking for investment property hired her brother in law as seller’s agent. Agent approached V who was not listing at the time and secured a listing agreement - agent acting for P and V in this case. An offer was made in the maiden name of the purchaser to deliberately conceal P's relationship to agent. V discovered this; refused to closeP sued for specific performance, and agent sued for commission

ULE: If full disclosure not made then an agent is prohibited from acting for both P & V. ELD: agent not entitled to commission b/c of breach of duty to obtain highest ossible price for sale property, and purchasers not entitled to an equitable relief, der for SP, b/c they were complicit in breach. No equitable relief without clean hands

al Trial: found that agent breached fiduciary duty in not disclosing but awarded specific performance and ½ commission on the basis that the vendor got his asking price and would have closed even if he knew identity of purchaser but would not have signed listing agreement, instead involving own agent.

CA: this was a breach of fiduciary duty - agent failed to make full disclosure of material fact, that the price was fair was irrelevant consequence of breach of FID duty: “Once it has been determined that there has been non disclosure of material fact by agent (breach of fiduciary duty), ....it is not open to seek to prove that the transaction would have closed even if disclosure made” Use of P's maiden name was a deliberate strategy used to conceal P's relationship to A (brother & sister in law)

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Hodgkinson v. Simms (1994) SCC LAW OF FD

ULE – DAMAGES : The proper approach to determining damages for breach of FD is restitutionary in order to restore the victim to the position he would have been in had the breach not occurred = restitutionary damages DISGORGEMENT REMEDY/ PUNITIVE DAMAGES – measure of damages are disgorgement of profits due to breach of FD; Law of FD has always carried with an element of deterrence, awarded where necessary to deter conduct. D Rule "The presence of loyalty trust and confidence distinguishes FR from merely a tortious liability. A FO carries with it elements of trust, loyalty and confidentiality". FD Test: Onus on party seeking to rely on existence of a FD to establish reliance in fact determined by the substance of the relationship bt/w party alleged to owe FD and the party claiming benefit of that relationship. Phillips v RD Realty Ltd ELD : D accountant owed FD to KL PL. PL was awarded D’s commission, full refund and unitive damages b/c it would be unjust to put the risk of mkt fluctuations on the investor ho would not have entered into the T but for the accountant’s wrongful conduct who made secret profit, failed obliation to disclose his interest in advice given to PL.

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le ld

Knoch Estate v. Jon Picken Ltd. (1991) (Ont. C.A.) – SA does not owe a default FD to V without more, though cannot deceive/mislead, or withhold material info about offer submitted. Manufacturer, Caterpillar, retains A, Jon Picken, to locate a property for new plant. A finds Knoch Estate. Royal Trust - listing agent for Knoch property. A does not inform Caterpillar about this property, but advised a developer to purchase it, Mantella & Sons, who signs purchase agreement for $2.1 million, listing price was $2.5. J submits offer to LA, Royal Trust. No direct contact bt/w V & SA/LA though lang of offer names both as agents in trust for V- KE, who sues J for breach of FD in failing to disclose listing price not highest price possible. PL argues – APS t treats SA and LA as vendor's agent, so duty to disclose applies to SA. V discovered the subsequent sale (pre closing) and sued agent for BDF for not disclosing that caterpillar was interested. Asked for damages = DIF [2 sale prices] plus commission collected by agent

Ratio: Selling Agent does not owe a FD to V unless there are (1)direct dealings such that establish (2) V reposed trust and confidence in selling agent Held: JP, SA owed no duty to Knoch Estate b/c no direct dealings bt/w them though APS named him and listing agents, as agents. Knoch Estate had a listing agent, Royal Trust. V placed no trust in D, so SA was not required to disclose the existence of other potential purchasers.

entury 21 Real Realty Inc. v. Campbell, (2012) – BRA - PU’s agent is not entitled to mmission if he fails to explain the nature of the BRA; gives rise to an unconscionable ansact OR if duration of BRA is too long, i.e. one year; eld: PU A did not explain BRA, so PU not required to pay commission.

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Agent as Purchaser

s. 32 Real Estate and Business Brokers Act, 2002 – regulations where RE is a purchaser 

s.32. (1) without providing appropriate notice, no real estate agent shall directly or indirectly a) purchase, lease, exchange or otherwise acquire for himself, herself, or itself, any interest in real estate, or make an b) offer to do so; or c) divest himself, herself, or itself of any interest in real estate, or make an offer to do so.  S 32(2) Contents of Notice .. in subsection (1) shall be in writing and shall include, d) a statement that the registrant is a brokerage, broker or salesperson, as the case may be; e) full disclosure of all facts within the registrant’s knowledge that affect or will affect the value of the real estate

Consider Remedies: Restitutionary Damages – Disgorgement of Profits, Compensatory Damages, Remedial CT for UR (for breach of FD or F unjustly enriched if permitted to keep property, Soulos), Punitive Damages Calandra v. B.A. Cleaners (1990), 73 O.R. (2d) 44(A’s failure to disclose intent to purchase) D was a commercial tenant within a plaza, and its landlord, the plaza owner was selling the property. D sought assistance from PL to make an offer as it's selling agent, who submitted two offers not accepted by the landlord. PL, SA, submitted an offer to purchase @ a higher price and had not terminated his FR. D's lease agreement with lessor contained a sale and demolition clause, stating that lessor will retain right to terminate lease upon sale or desired demolition of building. PL sends letter of termination to D, former purchasers, with intent that they will stay and renegotiate higher price.

ule: Rejection of a a PU’s offer does not terminate the fiduciary relationship b/w PU agent nd PU PA breached FD to PU/D by failing to disclose intent to purchase, though PA’s commission as paid by V. eld: D held liable for cost of repairs, 6.7 K. PL held liable for breach of FD, D was awarded stitutionary damages –disgorged profits + costs

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Lee v. Chow (1990)(A’s failure to disclose intent to purchase) P retained agent to assist with purchase of a residential property worth 1M; negotiations broke off. Thinking that P was no longer interested, RE agent bought property in H’s name; deal closed and agent notified P that she had bought the property

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atio: Fiduciary must avoid conflict of interest, like reaping personal gain, with rincipal and must always make full disclosure; value of agency relationship would be mpletely destroyed if fiduciary allowed to act in direct competition with principal easoning: FR found, PL relied on A for advice. A held liable for breach of FD, in failing to sclose intent to purchase, and used comp w limited assets in H’s name to purchase ppty, e Raso, A had actual or constructive knowledge of W’s misuse of confidential info eld: PL was entitled to remedial CT for UR claim for breach of FD. ote UR contribution here: confidential info that A gained from PU, PL, in course of lationship

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Soulos v. Korkontzilas (1997) SCC (breach of FD, failed to disclose intent to purchase) P wishes to purchase a building in which his bank was a tenant. PA, D, agreed to act for P who makes an offer on his behalf for $250,000, but V told A that offer of $265,000 would be accepted. Rather than relaying this info to P, A (D) purchases property for himself.

ULE: CT can exist w/o UR - where good conscience so dictates for breach of duty of yalty…to deter fiduciaries from breaching their duty of loyalty ( Diss, Sopinka J, UR is a quisite element to UR claim)

ELD: The broker breached the equitable duty of loyalty , by failing to disclose V’s preferred ice, and submitted a 2nd offer for that price w/o disclosing to his client, enriched by title to e asset.

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Davies v. Bayda (2003) – no breach of FD  Ratio: The agent will not be held in breach of FD if agent properly communicates his intent to buy the property initial purchaser seeks  Held: No breach of FD. the agent acted appropriately by notifying the principal of his intent to purchase. 

F: PU could not afford to buy mobile trailor, Agent does and so informs her. She rents from him. Ppty increases in value.

Gutman v Vaillaincourt (1996) –dual agency, A liable, failed to make full & frank disclosure V retained agent, to list on his behalf .A decided to buy property personally, and suggested that the vendor use his lawyer at closingWithin a few months of ownership, the agent subdivided the property into 5 lots and sold for 120K (bought for 40).V discovered this and sued the agent for not disclosing that this could be done

ELD: Agent held liable for breach of FD. V was awarded disgorgement of profits, but gent was entitled to commission. A could not prove transact was a righteous one, lacked vidence that V had ILA about transact or that A had maintained full disclosure. He had no oof about explaining that V could receive more. Court expected to receive a full written atement about A’s discussion w V.

ULE: Where a selling agent owes a FD to vendor, the onus is on the selling agent confirm acknowledgement of the circumstances by the vendor. rice paid for property must be adequate and the transaction must be a righteous one", and e price paid to the principal should be as advantageous "...as a price of obtained from a TP

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Oscar United Group Inc. v. Chee, 2012 ONSC (like Hodgkinson, punitive damages)

ule: Egregious, intentional, outrageous, deceptive warrants an award of punitive damages. A fiduciary is liable for breach of duty where he consciously and/or deliberately does not act in the best interests of his principal. ELD (claim only for punitive/ exemplary damages): Consultant owed a FD To PL. He felt no obligation to disclose purchasing ppty, in relation to which PL retained C, to provide an opinion on whether lands could be developed. D deliberately acted in his own best interests to the detriment of client

Listing Agreement and Conditions s. 32 Real Estate and Business Brokers Act, 2002 only allows RE agents may sue or bring an action to recover commission Moore v. Morad (only RE agents are statutorily entitled to commission payments)

atio: A functional approach used to assess whether a contractual term requiring a party to ay a fee constitutes a commission payment based on all surrounding circumstances. If it is nsidered as commission, service provider is not entitled to this payment unless a RE agent.

eld: D is not liable to pay "introduction fee" to the MB. Facts support that it is a commission e.

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Metropolitan Trust Co. v. Latvala et al (1979) (clients not liable to pay commission after HP) P and V were introduced during the listing period, formed a deal around Dec 28, and purposely waited until after the expiry of the hold over period, after Dec 31, to sign the APS (attempt to evade commissions)

eld: "It is also clear that the parties conducted themselves deliberately designed to avoid ayment of the commission but it's a K," so the agent did not receive commission

ULE: An agent is not entitled to commission if the deal is closed after the holdover period, espite the deliberate, underhanded tactics of the Purchaser and Vendor.

Mon Boulot Enterprises Ltd. v. Kotschorek (1980) MB QC – (clients liable for post HP commission)

ELD: Defendant clients liable to pay commission. Agent(s) had effected sale and were strumental to it prior to expiration of listing agreement

ULE: IF an agent is the causa causans (last link in the chain of a sale transaction) which ecomes ‘effective’ during the HP, the agent is entitled to commission although the APS was ot signed until after H period.

tatute of Frauds -, agreements related to RE must be in writing, so if it's not in riting, it's not enforceable unless there are elements of part performance

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First City Realty Ltd. v. Hermans (2004) (cond precedent for A’s entitlement to commission)

ULE: If an agent seeks to pursue a commission on a listing agreement, the agreement be construed strictly ELD: D client not liable to pay commission for comm. property, only res property. he purpose of the clause is more than a formality - widespread use of standard form listing agreements and commercial certainty require the courts to enforce the term easoning: A was required to be provide V with a list of all PUS introduced during listing period in order to be entitled to commission, and failed to do so re: comm. property

Gidda v. Malik Law Office. [2006] ONSC

ACTS V enters into listing agreement with Agent. V signs deal, avoids contact w Agent to evade yment of commission. V sues lawyer on the basis that lawyer should not have disclosed the private/ nfidential agreement to agent who misrepresented herself as V in order to obtain the APS – nfidential information. Secretary of office sent it.

ELD: L not held liable for negligence in releasing APS to misrepresenting agent. ULE: V had signed a listing agreement and agreed to pay agent so, could not try to get out it by passing the buck to the lawyer. T.L. Willaert Realty Ltd. v. Fody,2013 ONSC (V liable for commission, RET did not conclude)

: Agent was entitled to commission. V acted in bad faith by evading agent that tried to peatedly contact him once he found offer according to his instructions.. ule: If V enters enters into an agreement containing provision to pay commission based on urchase, e may be liable if acting in bad faith.

Deposits s. 111 Crt of Justice Act: Crt has right to grant relief against penalties & forfeitures. Principle (deposits in re to condos are often exceptional to this rule)

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V is entitled to keep deposit, IF a PU breaches APS, unless, (2) PU can show, on a BOP, that (3)it equity intervenes to prevent an injustice if it would be unconscionable to allow V to keep a disproportionately large sum IF a deposit is a partial payment, (1)V must prove damages that exceed value of PP upon breach (2)in order to retain some or all of the balance paid

DePalma v. Runnymede (1950) ONCA - PU sent payment did not specify if deposit or PP

ULE: IF payment was given as a guarantee of performance, and therefore, it was a eposit forfeited to V who need not prove damages (PU ordered steel, sent a cheque for PP, d not specify if it was deposit or PP

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Craig v. Mohawk Metal Ltd. (1976) OR (PU still forfeits deposit if V sells to P2 @ higher price) The sale price of property was 1.14M; P gave 25K deposit given and defaulted. V resold property after Purchaser breach for more ie. 1.252M; P sued to get back deposit, claiming no damages were suffered

P a g e | 35 and that there should be relief from forfeiture.

ELD: No relief from forfeiture for the defaulting buyer. Deposit was only 2 % of ale price endor was a shell company (no assets). ule: To determine whether or not payment is a penalty , the court will examine all ctual circumstances such as: Who was thePU? Company with limited assets or hell company? nancial viability of purchaser? What is V’s exposure to damages? When will the ansaction close? (If longer period, deposit can be larger)What percentage of sale rice the deposit represents? Porto v. DiDomizio (1996), 50 R.P.R. (2d) 113

PU gives V two deposits, totaling 31.25 % of purchase price. PU gave 2 nd for later closing ate. V entitled to compensatory damages, and 1st deposit, 10K, but had to return 2 nd deposit of 50K ULE: Deposits can safely vary , 3-10% of sale price depending on the time between the urchase & close date

Cumberland Realty Group Ltd. v. B.L.T. Holdings Lid. (1984), (Alta C.A))(MEE & MOR)

cts Language in mort agreement, "parties agree this is a fair estimate of the damages, and it is not a penalty. If we e borrowers are in breach, then commitment fee is forfeited to lender." rrower PL seeks loan of 3M, gives 61.5 K commitment. Borrower decides to withdraw from loan, and asks for und less costs. Lender refuses, claims he is keeping it as liquidated damages. rrower argues amount is too high to be a fair estimate of damages, and was therefore a penalty

ule: Whether deposit is extravagant and unconscionable depends on nature of ansaction. If deposit does not exceed greatest loss that could be suffered, then probably ot unconsc. : Lender was entitled to keep payment, it was a general pre-estimate of damages. ote: Borrower puts mortgage funds into investment.. Short term interest rates much lower an long term.

Iyer v. Pleasant Developments Inc., [2006]

ULE: if word deposit is used it is a guarantee of performance and will be lost w/o roof of damages ELD: proportion not unconscionable and V entitled to retain whole deposit w/o proof of amages. 10K deposit on sale price of 280, represented 3.6% (SCC gave back 700 to V; ppeal allowed)

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B.G Preeco (Pacific Coast) Ltd. v. Bond Street Developments 1989- damages for fraud misrep

ULE: The proper award for fraudulent misrepresentation is the amount required to ut the innocent party in the position they would have been in had there been no fraud eld: D shell company liable for damages for 400 K. V would have been entitled to 500K but r the fraudulent misrep. D misrepresented itself as a shelf company without assets. ote: PU was not liable for damages incurred from subsequent sale of 1.7 M. Market went ur after PU dropped out transact, and sold to P2 at 3M vs. original sale price for P1 at 4.7

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Conditional Agreements

Turney v. Zhilka, [1959] S.C.R. 578- PU could not waive TCO Z signed an agreement to purchase property from T, and agreement contained term that transaction was condition on property being annexed to village of Streetsville ("Providing the property can be annexed to the Village of Streetsville and a plan is approved by the Village Council for subdivision"). V refuses to close b/c cond was not met.

eld: Z could not unilaterally waive "true TCP" (which depends on the existence of a TP). ondition not satisfied, but no breach, so not entitled to SP ule: Neither party to K can waive TCP – obligation dependent upon a future uncertain & xternal event depends upon the existence of a TP. Absent a promise, there can be no breach K until event does occur

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O'Reilly v. Marketers Diversified Inc., [1969] S.C.R – PU could not waive TCP w/o right of waiver P agrees to buy property from V on condition that he is able to buy adjoining property but this did not occur; purchaser wanted to waive condition anyhow

ule: A true condition precedent cannot be unilaterally waived (Zhilka), unless a purchaser inserts a agreement a “right of waiver” in the agreement eld: The TCP in this case cannot be waived in the absence of the of the right of waiver clause

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Barnett v. Harrison, [1976] 2 S.C.R. 531 141 – affirms Turney, no compelling reason not to APS contained conditions inserted by P, "necessary approval as to site plan and zoning be sought and obtained subject to certain time limits. Right of waiver was not imposed on zoning condition. P was not able to fulfill conditions despite best efforts, and sent letter of waiver to forego all conditions. V refused to close on grounds was APS conditions had not been fulfilled. Market value of property increased and V wants to sell to someone else. P brings an action for SP and claims he waived compliance of conditions solely for his benefit.

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ULE: A PU does not have an implied right to waive a TCP unless he establishes a compelling ason for doing so (diss Laskin J, PU should have implied right of waiver on conds inserted r his benefit)

SIMPLE CONDITIONS Beauchamp v Beauchamp

cts - APS for 15K conditional for 15 days on purchaser obtaining first mortgage at 10K and 2 nd MT for 2.5K for 5 ars. P got one mortgage for 12 K and V did not want to close arguing that condition not met

ULE: condition specifying financing is an exception to Turney so long as vendor paid in full eld: V required to close. Cond of financing not TCP, loosely interpreted, true interest of V as , be paid in full

Matters Relating To lawyers Gaywood-Hall Developments Ltd. v. Wilkes (1972)- time is of the essence . Plaintiff P called lawyer D to waive condition on Aug 15. P explicitly instructed lawyer on August 15 of waiver, but Solicitor neglected to comply with P’s instructions until it was too late.

ULE: If a party wishes to benefit from a right of waiver under condition, he is contractually bliged to communicate waiver to other party within that time (time is of the essence) ELD: PU did not waive CP; not entitled to SP; (Client could sue for L for negligence for failing follow client’s instructions)

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McIlroy v. Stanton (1999) (IF client instructs, his L has legal obligation to try & avoid transact) P agreed to buy property for son returning to Canada, and decided to purchase a property for him near Kingston, at 35K, on condition that P would receive septic tank approval by June 22. Son changed his mind and was no longer returning. P instructed lawyer to get them out of the deal if possible, but lawyer searched title and found no defect. Lawyer indicated that if approval is not received by June 22, then P could get out of deal. V faxed approval to lawyer on June 24, but date of approval indicates June 22 (although it was altered to show June 22, because actual approval date is June 24). Lawyer goes to registry to close transaction and obtains original certificate indicating that approval date was June 24, but lawyer neglected to notice this. P sells property & take loss; V changed approval to look like the 22nd. Ps sue lawyer for failing to check against original

ULE: IF SC is instructed that client wishes to avoid K obligation if legally possible, s duty is triggered to look for such technicalities that entitle client to do so, like verifying uplicate docs against original (here fax in this cas, photocopy of rezoning approval against iginal. ounter - Per Rosen, advised on this case)LS don’t have an obligation to operate on sumption fraud is being perpetrated in RE. (could argue SOC in context of increased fraud ises obligation) eld: L negligent for failure to fulfill obligation to client

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the lawyer’s retainer was originally to act on purchase of transaction, but the retainer changed and became to get the purchasers out of the transaction: for this the lawyer should have looked at the originals despite that checking faxes as against original was not standard practice, times have changed: frauds are now being perpetrated & lawyer breached retainer

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Harland v. Fancsali (1994), 21 O.R. (3d) 798 – fraudulent misrep & waiver of cond.

cts - P could not satisfy APS cond to sell his house w/in a few months but P wanted the ppty . V had right of first usal cond, could require PU to waive cond if V receives 2nd offer he is willing to accept subject to notice to PU. V ould have refused to sell to P at lower price while waiving conditions. PU agent suggested to put in another er not at 380, but at 370K instead of conditional, in the maiden name of PUS Wife V tells PU there is another icer, P1s don’t waive the cond & V sells to the W for 370 er closing vendor finds out what had occurred, and sues the purchaser - he would not have closed if he ew: sued for 10K

ATIO: Maiden name or shell company may be used to purchase a property unless course of nduct is done for the purposes of misrepresentation RAUD MISREP: D made (1) false representation of fact, (2) FR made w knowledge or ckless as to its falsity, (3) Representation made with intention that it should be acted upon y PL; (4) PL acted upon misrepresentation, (4) PL suffered damages by so doing. ELD: V entitled to recover compensatory and punitive damages. P liable for tort of deceit. US misrepresented 2nd offer by way of first PU’s maiden name with intent to deceive. V acted pon it by accepting 2nd offer at lower price and waived cond. But for the deceit, V would ave received 380K for sale vs. 370K

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1375687 Ontario Ltd. v. Novatec Construction Ltd. (1999) – estoppel & time limits on cond Right of waiver on a due diligence condition imposes a time limit such that COND must be waived by Nov 15, at 4:00 PM, or agreement is void PU had not finished due diligence to satisfy itself that it wanted to buy property and at 3:23 , L for PU calls V’s SCr and asks for an extension of time for the waiver of condition à wants one day extra L for V, said “he said he didn’t think it would be a problem, but he had to check with client -- who refused. PU waives cond after 4PM, time lmit on cond has expired, V calls off deal

ule: L cannot bind principal without instructions to act; but if they are slipshod with words, liance may bind principal

ELD: V could not rely on the time of the essence provision due to L’s representation that V ould probably grant the time extension, led to a clear expectation that the 4:00 deadline ould not be insisted upon. V is estopped, b/c of PU’s reliance onrepresentation, from enying there was an extension of the COND period.

Demeri v Kwan & Kwan Ltd. [2008]- 2 notices of waiver are sent due to ambig conds clauses, struck as null and void

eld: APS is void for want of certainty b/c the delivery of two waivers created ambiguity ule: In an APS, Waiver conds are strictly interpreted. If a waiver cond is ambiguous, it will e void for want of certainty, the court will not enforce it.

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McKee v. Montemarano, (2008) schedule to APS, dictated that was not binding unless condition waived by Feb 1, i.e. "Unless there is a waiver, the agreement is null and void". If it is not waived time announced, then there is a deal. Notice had to be delivered in accordance w/ APS terms P & agent went to V's house, they left notice of waiver at the house within the time set out for the delivery of the waiver. D admits he made no effort to ensure V Was there to accept delivery. He made no effort to see

P a g e | 39 that it got to Mckee personally that day. After 6 :00 PM the backup agreement was triggered. V entered into a backup agreement conditional upon non-performance of initial agreement

eld: 1st Agreement is not binding b/c P did not deliver notice of waiver in accordance with elivery requirements applicable to waiver of due diligence condition; prov interpreted elivery as seller requiring notice be personally delivered to V in person at V’s address, elivery to home address was not sufficient

ule: The court must contextually interpret the notice of waiver of the due diligence ndition by examining the language of the agreement as a whole and what it contemplates, rrounding provision, industry standards

Obligation to Satisfy Conditions Planning Act  An owner of abutting parcel of land (or on a reference plan and remains an owner of abutting land) cannot subdivide, convey or sell parcel w/o Committee of Adjustments approval  to create a subdivision a registered plan is required, incls services, may take up to 3 years  APS typically on cond of approval or compliance with the Planning Act, cannot be waived  A party that bears the obligation of fulfilling a TCP has a good faith duty of performance

reference plan – surveyed map of the ppty, does not guarantee presence of service, hools roads gistered plan – registered with Ministry, approval of Committee of Adjustments What is abutting land at any point? Land that meets, Land that meets at a corner like a checkboard does not breach the Land Planning Act

 s 50: No interest in land unless s 50 of the Planning Acts is complied with; no person shall 

transfer land or mortgage enter into an agreement with respect to land that involves an interest that goes for 21 years or more unless person does not own any abutting land s 21: If you breach any of the provs of Act, you do not acquire any interests in land. IF you give a deed or transfer in breach of Act, PU and lender barred from title acquisition or charge/lean on land respectively

 Title insurance - is a L to indemnify a purchaser, owner or lender for actual losses

Facts

incurred up to the limits of the policy policy issued that title has no defects ;for certain stated risks; - no title, no marketability, no right to use the ppty as a single fam residence, ppty access, no encumbrances, fraud 

Example – Purchase title insurance policy vs. spending cost of title search to ensure residential area is zoned for residential purposes.

Aldercrest Depts. Ltd. v. Hunter (1970) ON CA – affirms good faith duty in performing TCP Offer to purchase was subject to planning act approval for land severance; it was the V’s Kual obligation to obtain the approval of the committee of adjustments pursuant to the act; After corresponding with members of the committee the V was not confident about obtaining consent to transfer; never made a formal application for severance. V tried to terminate the agreement, P brings action for specific performance

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HELD: PU awarded SP. V liable for breach of good faith duty to satisfy cond. He merely peculated app to Committee of Adjustments would fail w/o making an application based on correspondence w committee members RULE: Good faith duty exists upon party who bears onus of performing a TCP, is liable if in breach.

Dynamic Transport Ltd. v. O.K. Detailing Ltd., [1978] 2 S.C.R. – scope of good faith duty

Facts

APS silent as to whether V or P would obtain this Planning Act approval. V did not make an application to the adjustments committee. He then purported to cancel sale.

RULE: Implied term of K that the party who is responsible for satisfying the condition precedent is under an obligation to do all that is necessary to satisfy the condition and complete the sale.  IF party/vendor succeeds in satisfying the condition the property must be conveyed;  IF party acts in good faith and is unsuccessful, then the K is terminated;  IF party does nothing, liable for damages or injunction of performance HELD: V liable for breach of good faith duty to perform this cond.Court ordered a mandatory injunction that V do so

BEM Enterprises Ltd. v. Campeau Corporation (1980) BCSC, lead case, good faith duty test

F Campeau (“C”), large successful and national company, owned the plaza and had Safeway as a tenant;

Safeway wished to expand the store and C approached the neighboring residents with offers to purchase their properties, subject to 4 conditions including a condition of being able to purchase a specified number of properties and zoning approval; If these conditions were not satisfied, C had the option to declare the agreement null and void, in which case all deposits moneys were to be retained by the vendor(s) (unusual) ; S later decided against expansion, as C failed to secure an anchor tenant - letters were sent early to V stating that C had failed to satisfy the conditions; Sev Vs sued C, arguing it breached its good faith duty, sued for SP

TEST: The standard of conduct required of a party under its implied obligations is objective, based on the party w implied obligation in like circumstances, having regard to entire situation & parties themselves Reasoning: C had honest belief that cond wouldn’t be fulfilled after Safeway decides against expansion, but court found it did not make one single step to try & obtain ezoning approvals Held: Judgment for PL Vs. Awarded damages for increase in market value from date of breach less deposits paid. (CA – reduced damages by 20% based on possible rejecting of ezoning applications)

Evans v. Kouyas (1983) NSCA, lead case, often cited in ON – good faith duty re: financing cond

F APS was conditional on “Purchaser obtaining necessary funds to complete transaction”; PU meets with lender and learns about high interest rates, which led him to conclude he could not afford financing terms. V sues 4 breach

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Ratio: A reasonable PU makes financing application to satisfy good faith duty to satisfy a financing cond OR does not decide to withdraw from APS unilaterally. TO research prospective financing terms without more is insufficient to discharge duty. This does not mean PU is bound to financing app he could not afford

Held: PU held liable for damages for BOK. (TC relied on fact that clause drafted so loosely to permit PU to void w/o penalty) Here: PU met with lender, but made decision unilaterally.

Facts

737985 Ontario Ltd. v. Essex (1993) – V discharged GF duty, refusal to make app not mere speculation, unlike Aldercrest, refusal based on good auth APS was conditional upon the P “obtaining from the City of Windsor re-zoning of the property “suitable to P P wanted 155 townhouses but did not put explicitly in agreement. By-law only permits 142. P went to the town planner in Windsor, the person instrumental in the bylaw, and the chief planner said there was no chance to get what the P needed, so he didn't want to make a formal application P argued he was entitled to a return of its deposit. PU is not bound to financing app he could not afford V claimed that the deposit was forfeited. P sued for return of deposit

RULE: If a party has on good authority that a cond will not be satisfied, then duty of good aith is fulfilled.

HELD: Deposit returned: P was not required to make application in light of Chief Planner’s predicting rejected of application. PU appropriately exercised discretion honestly and in good faith under APS cond, that rezoning obtained would not suitable. Eastwalsh Homes Ltd. v. Anatal Developments Ltd. (1990 )- probability of approval in awarding damages considered, like BEM Enterprises, mere probability was lower

F P bought a 100 acre parcel and entered into APS conditional on plan of subdivision being registered by the V by a certain date prior to closing (vendor obliged to use best efforts to register plan); P bought property for 6M; By that certain date the plan was not registered; V offers back the deposit; P refuses to take it back as property now worth 10M; V does not want to complete sale; purchaser brought an action against the vendor to say there was no good faith dealings in seeking approval;

RULE: If P cannot prove loss of a definite benefit but only the loss of the "chance" of eceiving a benefit, the court will estimate the value of the lost chance and award damages proportionately HELD TRIAL: V liable for breach of good faith duty. Damages assessed at 20% of what PU would have received if V were successful w registering subdivision CA: Nominal damages & costs NWS good faith duty breach b/c V would not likely have been successful in satisfying cond according to time limit

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Discretionary Conditions Precedent Sole discretion clause -refers to provisions in agreements that make the performance of the agreement conditional or subject to the "satisfaction, the discretion or the opinion of a party to the agreement or of a third party Marshall v. Bernard Place Corp. (2002), Resident property listed at 1.5 million. APS is conditional upon the inspection of the Property by a home inspector of the Purchaser's choice and at the Purchaser's own expense, and receipt of a report satisfactory to him in his sole and absolute discretion. Unless P delivers notice or waivers, cond is fulfilled, agreement is null and void and deposit returned. APS also includes right of waiver. The resulting inspection report identified various deficiencies relating to the construction, design or condition of the house. P relies on cond &(does not fulfill it) and withdraws from transaction. One month after terminating agreement, P entered into another APS in the same neighbourhood and paid less and paid $1.6 million in renovating

atio: The sole discretion clause can only be relied upon (1) by a party acting honestly and in good faith. (2)The extent to which the proper exercise of a sole discretion clause is measured by objective or by subjective interests of a party to the agreement is a matter of K interpretation easoning: PUS did not rely on cond. to escape APS or purchase less expensive house, had financial means to do so, but repairs were deficiencies that were inconveniences. Lang of Discretionary TCP did not entitle V to repair minor deficiencies if found or to decide whether report findings were satisfactory. Clause did not envisage such rights or it would have been so stated. ELD: P was entitled to return of deposit, it was too high.

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1061590 Ontario Limited v. Ontario Jockey Club (1995), 21 O.R. – good faith issue on SJ 82 parcel of land listed with sale price of 35 million dollars, APS subject to condition that P, at his sole discretion, has a right to terminate if it believed that environmental contamination of the land or soil conditions would increase the cost of or delay development P commissioned an environmental site assessment, result was that cost of clean up was 8 million, and there was contamination P agreed to supply results of test, whether it closed or not V got copy of reports; rejected the validity of the experts V then retains is his own inspector who did not find the conclusions or estimates to be valid P claimed it was his discretion Motion for SJ: P argued there was no need for a trial and wanted deposit refunded P claims acting reasonably and in good faith, and is entitled to deposit.

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ELD: P acted reasonably in relying on reports, retained competent experts and was entitled rely on the opinions of such experts informing the belief that there was environmental ntamination ULE: P need not prove that experts are right, just that he acted reasonably in relying on ualified experts

Acting on Both Sides - Independent Legal Advice Principle: Obligation to disclose to clients when acting on both sides of a transaction, onus on L to discharge burden of proof that obligation was fulfille RE agent: If conflict of interest, agent cannot act on both sides Lawyer: can act for both sides, for the reality of the business world and often economics dictate this course of conduct subject to compliance with LSUC  Consent in writing and notify parties  Element of disclosure – if L has a history or special relationship with the other client  Non-confidentiality – (1)if retained, (2)duty to disclose all material facts; duty not to keep anything confidential from one side to the other ;(3) if future conflict of interest arises, L may not be able to continue acting for either

Principle of ILA Requirement in Dual Agency (Davey V Woolley) Lawyer must require that a party obtain ILA when acting on both sides if there is an improper conflict of interest that exists or subsequently arises: (1) (a) If L’s duties to another client, a former client, or a TP (b)create a substantial of material and adverse effect on the representation of a client (2) Risk of L using confidential information obtained from client to her detriment/disadvantage (3) If L an improper benefit or advantage as a result of SC relationship

Davey v. Woolley. Hames. Dale & Dingwall (1982), (Ont.C.A)- onus of test, L breached duty

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Transaction was a purchase of a business. Davey's business was up for sale and negotiated terms of sale independently with P who owned a company. Cond of APS was right of P to assign his interest to company controlled by him, in which retained L had a financial interest. Lawyer got acknowledgement that he was acting for both parties. V lost money after deal failed.

ULE: L had a conflict of interest which impaired or was likely to impair his ability to act with the bests interests of both clients. . Here, V should have received ILA at minimum or advised to go elsewhere EST The onus is on lawyer to provide that he has acted in best interests and has discharged duties as dual agent. . Even on a simple RE Transaction, conflicts can manifest by not considering time limits. ELD: Written consent and waiver obtained from clients were not sufficient acts not exonerate L

Smit v. Alfield Farms Ltd. (1982) (B.C.S.C.) – conflict of interest arises in RET. L held liable P entered into APS for farming property (Dr. from Holland); used same lawyer as V (V’s friend); offer conditional on P obtaining immigrant status; deposit was 50K refundable; V owed a lot of money to bank; bank noticed refundable deposit and told V to have it changed to non refundable; condition was for 6 mo, 800K sale price; V and P met w/ lawyer to change condition; V told P it was simply a formality and that the deposit will still be refundable (oral K); P was puzzled but accepted V’s handshake on this; lawyer watched all of this but did not explain legal consequences in details (i.e. cursory promise), did not suggest that P was taking significant risk of losing deposit; condition not satisfied, V kept deposit; P sued Lawyer

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ELD:L liable for negligence. Failure to exercise reasonable care, by not explaining clearly wyer failed to difference between refundable and non-refundable advice, should have structed him to seek ILA and caution about relying on oral promise ULE: Lawyers must advise to conflicts of of interest as they as they become known

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Korz v. St. Pierre (1987), 61 O.R. (2d) 609 (Ont. CA.)- L in joint transact not as L Lawyer entered into business transaction with his client. parties involved in this case - successful druggist, chief of police, business person & lawyer. Bank requires that all parties sign loan agreement jointly and severally (confers right to bank to pursue legal action against all parties to extract assets from party with most financial resources). The lawyer protected himself b/c he had no assets, they were all in name of spouse &failed to disclose to other parties. The bank approved financing because there was enough security. 3 parties sued lawyer after being successfully sued by bank for failure to disclose an absence of assets

eld L’s failure to make disclosure was a breach of FD, his judgement proof status, assets, in his W’s name, to his former clients due to ethics of profession and fairness. to hold herwise would put lawyers in unfair advantageous position

ULE: When transacting with client, L must make full disclosure of all material information ven if not acting in capacity as a lawyer

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Non Est Factum (Marvco) requires that the contractor or testator who now seeks to set aside the document establish that (1)s/he had intended to sign a document of a fundamentally different nature. (2) Cover cases of undue influence , relationship of confidence and pressures contractor or testator to act in a certain manner Exception: NEF defence does not apply if the donor's lack of knowledge about the circumstances arises from laziness or carelessness as between two innocent parties who suffer from the fraud of a third but one of the innocent parties is negligent.

Bulut v. Carter, 2014 ONCA 424- son’s reliance NEF defence fails due to careless, no misrep B and , on behalf of company, (and personally) guaranteed a promissory note for C, and were engaged in various business dealings together. Shareholders, various C family members, also executed the guarantee. Company is now bankrupt. B seeking to enforce guarantee of promissory note of $300,000 against C.

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ule: The defence of non est factum is available to someone who, as a result of isrepresentation, has signed a document mistaken as to its nature and character and who as not been careless in doing so.

eld: Sons not entitled to rely on defence of NEF. They were careless in signing ocument, did not read agreement, asks questions or seek ILA. No misrepresentation found ere. hey thought they were acting in capacity as shareholders, not personally liable.

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Marvo Color Research Ltd. v. Harris (1982)NEF defence fails if party is careless & sophisticated Daughter's partner wishes to borrow money from her parents. He informed parents that it was an extension of existing mortgage (loan), and parents co-signed agreement unknowingly that it was a mortgage for daughter's partner. Bank enforces mortgage agreement security against parents

ule: The purpose of non est facum is to protect innocent parties, not those who changed eir position due to carelenssness . Carelessness will disentitle a party to a document, from lying on non est factum ; depends on the factual circumstances. sophistication of parties ELD: parents were barred by their carelessness from pleading non est factum so as not to e bound by MT rties were English speaking, literate, had signed 3 other mortgage agreements.

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Shute v. Premier Trust (1994)_L held liable for negligence H & W owned a property. W born in England, and trained in banking and financing. H had a secondary school education. L retained to execute mortg agreement for H and W borrowers. H away on holiday. When L received docs, he did not communicate w H when he was outside country upon receipt of docs. . W forged H’s signature on mortgage docs; mortgage was null and void. Premier Trust sued L

ELD: solicitor is liable to indemnify the bank as his actions fell below standard of care of reasonable solicitor ULE: L can have dual agency in mortgage transaction, (1) subject to duty of full disclosure. (2)Duty to ensure correct parties are executing legal docs. L took no steps to contact H outside of country, should have)

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Martin v. Goldfarb (1997)- obligation to disclose to other party if 1 party has criminal record At time of action, M was worth 18 million dollars, limited knowledge in financial matters.. He decides to enter into an agreement with Axton, a disbarred lawyer with a criminal conviction. The partner retains a reputable business lawyer. Axton asks lawyer not to disclose his criminal past. Martin lost everything subsequent to partnership, and now employed as a security guard. His health is failing and alleges that he fallen from a position of relative affluence to a discharged bankruptee due to Ax

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ule: Lawyer has an obligation to make full disclosure of all material facts to a client's interest when acting for both sides (particularly where it may impact judgement of one of the parties) : L liable for FD breach. He failed to discharge his FD of loyalty to PU by failing to disclose that other party in transact had a criminal record , a material fact to PL’s well-being, & may have impacted client's judgement

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Circumstances where ILA is required (Smit, higher onus for unsophisticated parties) (1) Unfair advantage (Korz) (2) transact clearly adverse to borrower (Korz) (3) undue influence (4) ignorance of circumstance (5) complexity of transact (Davey)

Mackay v. Bank of Nova Scotia (1994), 20 O.R. unconscionable transaction triggers Lender’s duty to require ILA , improvident transaction Daughter wanted to buy a trailer for $40,000. If she sold her trailer for $25,000. then she would need another $15000. The bank refused to grant loan to daughter without her paying back existing debt, and then daughter will approve daughter financing at 45000 on condition of security. Mother had a condo and daughter asks her to be guarantor. Mother was fairly sophisticated, somewhat education, worked steadily. Bank asks mother to sign waiver to right to seek independent legal advice b/c she refused to seek independent legal advice by reason of cost and she trusted her daughter. Daughter defaults on mortgage and bank sues for condo.

d: the mortgage was of no force or effect. Lender had a duty to insist on ILA. Mum of rower refused. LE: The has a duty to insist upon ILA without which they must refuse the loan even absent Where transaction is unconscionable…[unfair advantage; trans clearly adverse to borrower; undue influence – where guarantor is spouse, child or family member ].

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Webb v. Tomlinson. [2006] (Ont. S.C.)- Lawyer not liable, he provided ILA W was born in 1942, she has 3 adult children and was married, separated in 84 and eventually divorced. She had a grade 11 education, worked as admin assistant at Toronto Psychiatric Hospital. 41K salary Ex H asks W to take out a 2nd mortgage on the house from the bank. The banks draws up paper. H & W meet with lawyer, who refers W to a lawyer, for ILA (D). H defaulted on loan. W did understand that if husband defaulted, W will be responsible for mortgage. W sues Thomlinson on the basis that T did not explain the risk of new businesses.

LD: L, as a dual agent, not liable as he fulfilled duty to provide other party with

e: When giving ILA, the solicitor must explain the nature of the documents , but it may not enough to protect against liability for negligence. LS ought to make e detailed memos, and ply explaining the risk of the document may not be enough. (Assessment of credibility, us on L)

y view, Jean knew what she was doing. Her decision to lend money on the home was not ill considered or rash and bably understood the risks of the transaction even before the meeting because she'd entered into mortgage sactions before. She believed the husband would pay back the loan ing of fact was made that lawyer actually discussed the role or the risk of the business ccepted evidence of L , conflicting evidence yer testified that as an articling student he took ILAS retainers seriously, and produced 4 pages of handwritten s during and that the conclusion of the meetings showing he that he explained, nature and consequences of the .

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Royal Bank of Canada v 2240094 Ontario Inc, 2013 ONSC – ILA & guarantors Father took out loan, 100K through a limited comp. Father signed a loan to the bank and father asked his two children to go to the bank as guarantees. The adult children didn't receive ILA. The loan guarantors had previously signed a guarantee under which they agreed to be jointly and severally liable for a corporation’s indebtedness. When the corporation defaulted on its loan from the bank, the guarantors did not make payment. Bank sues adult children to enforce K.

tio: A legal determination cannot be made SJ as to whether a bank can enforce a defaulted n against the guarantor of the principal where the merit of the action depends to a great ent on credibility. ld: Judge refused to make a disposition on summary judgement; trial required;L would e explained the liability on the risks of the guarantee was substantial , & would depend on her's health & success of business

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"The evidentiary record shows that the two boys were students, no personal experiences (19 and 21 years old). The father was running a business where he needed the loan (pool parlour and restaurant). The bank also knew that the entire business depended on father’s health. Bank never told them about the risk with the father getting sick and subsequent problems arising as a result.

King Lear Bertolo v. Bank of Montreal (1987), 57 O.R. (2d) 577 (Ont. H.C.) ILA from L in same firm not enough

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B is a widow of meagre means, not fluent in English lang, little schooling. Son had no capital, sought a bank loan for $65,000 from BMO for a resto. Bank agrees to approve loan to mother, her house is used as security. They went to a lawyer acting for both sides. L's partner advised mothe , made no notes, explained her obligations, ensured she understood. Son fails business & defaults on loan, L tries to enforce loan against B.

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TJ found B is not fluent in Eng, unable to read, assets of a modest home, savings of $22,000 and did not take part in negotiations for loan Bank recognized that B(mother) should have ILA in the absence of ILA it cannot be concluded that transact was adequately explained to her: she did not comprehend terms or make informed decision to enter K - the explanation of the lawyers was neither sufficient nor independent whole transact was manifestly unfair to the mother, who did not understand terms and potential consequences

ULE: Partners or associates within same firm are not an entity sep and apart om the firm or the member acting in a particular matter for the purpose of voiding a conflict and providing ILA when L is acting on both side. If transact nconscionable then equity may intervene to relieve the party from the K ELD: Loan was manifestly disadvantageous to B in the absence of loan agreement being dequately explained by IL representative.; unconscionable transaction . The bank ought to ot be able to recover against B.

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POA – Financial or Health Thibeault v. Household Realty Corp. (1993)- Unconscionable transact. Mortgage not enforced Plaintiff T was 84 year old woman, her daughter owed money to HR, HR discovered she had power of attorney for her mother and wanted her to sign mother’s home over as security; the power of attorney was

P a g e | 48 limited to cheque signing so the bank sent their lawyer to the mother’s home to have her sign a general power of attorney - the lawyer gave the mother NO advice or explanation and she did not know what the doc. was The daughter took out 4 mortgages on the mother’s home, $180,000" HR clearly at fault for not disclosing knowledge of mother's mental capacity Daughter defaults and HR seeks its security in the mother’s home

eld: Lenders and Lawyers were held liable. The mother was fully indemnified. Court tervened and mortgage was set aside easons: Lawyers obtained consent from mother to enter into POA in slipshod and appalling anner. She was “described as not with it”, and didn’t know what POA instrument was. nlike Marvco, mother lacked capacity atio: Lawyer in dual agency is responsible for fully explaining nature of doc to person xecuting it who must be informed of all consequences, which may require ILA in some cases, herwise equity may intervene

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McMullen v. McMullen [2006] B.C.J. P is an 86 year old retired gentleman. He had three children. His wife of 60 years ago passed. The loss was very difficult for him and his family. After W's death, he continued to be active and travelled. He had a number of health concerns. He was not considered in any way incompetent to manage his affairs. He gave his three children he POA. IT was alleged P was being financially exploited by a friend Marie, encouraged to invest $30,000 in reggae band she sang in, and would be manager Under POA, children transfer condo to themselves and leave father with 1% interest so that condo can't be sold, leased or mortgaged without father's approval.

ule: Financial POA is only engaged if contractor is incapable of managing his own ffairs easoning: Here, children had financial POA. Removing an individual's autonomy is xtremely significant. P is entitled to live his life as he wishes unless he is incompetent of anaging his own affairs. eld: Title be re-conveyed to father.

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Conveyance of Property by Gift – Donors cannot retract gifts (Crepeau;Danicki)

Panko v. Simmonds, [1982] .Dual L failed to prove was not negligent where mum had no ILA Son in law claims that M wants to transfer house. L agrees to prepare conveyance docs. P goes in alone to lLr's office and then mother is called in. M signs deed & property is conveyed to daughter and son-in-law. House is mortgaged for $100,000, couple defaults on mortgage agreement. House is up for foreclosure. M sues lawyer. L testifies that he always explains significance of docs, but did not make notes.

atio: Where a lawyer acts as dual agent he ought to recommend 1 party obtain ILA if lationship discloses elements of confidence and trust, which gives rise to a possible onflict of interest. eld: Lawyer held liable for negligence; failure to prove that he explained risks and nsequences, and did not recommend mum retain ILA in light of the warning signs. Special lationship bt/w son-in-law & donor.

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Brandon v. Brandon, [2011 OJ 2986] Lawyer should go beyond merely explaining what mother was doing but should offer suggestions. A lawyer purporting to advise a client about transferring ppty rights must clarify the doc and ensure the client

P a g e | 49 appreciates the nature and effect of those documents. The perils of practice have increased immeasurably. The duties of a SC have been greatly enlarged It is imprudent to describe a property transfer as a simple deal In this case, the lawyer is a respected SC with many years of experience. In a situation where he knew of a potential for undue influence and despite warning signs, he failed to inquire into her circumstances to fully understand the degree of information that was reaching her

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Ratio: A lawyer purporting to advise a client about transferring ppty rights must clarify the doc and ensure the cilent appreciates the nature and effect of those documents...It is not enough to ensure that parent understands the nature of property conveyance Held: Lawyer liable for negligence

Stanciu v. Stanciu (2004)- valid conveyance of fee simple by gift does not create implied life interest Mother transferred all of her property to one of her children. Mother lived on transferred ppty. Mother had another son who lost his job, and did not have any money. She invites son's family to live with her. The brother, now the owner of the house, requires that the other brother pay rent. The owner brought an action against his mother and brother for eviction.

ule There is no presumption of creation of a life interest on part of donor, where there is a alid transfer of fee simple from mother to adult son. This requires express language in strument of transfer eld: The transfer was a gift. Harding v. MeLeod (2004), ON – mother conveys ppty of existing trust for son to daughter

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Mother forgot (living with dementia & advanced Alzeihmers) that she had an existing trust set up on a ppty, for her three sons and conveys it to her youngest child.

atio A ppty within which there is an existing trust - mother as a trustee and son as eneficiary, cannot be advanced as a gift to another; Held: Conveyance to daughter of no gal effect.

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After October 24, 1995, Mrs. Harding could not convey the farm to Linda as she had conveyed her legal interest to the trustees. Absent her consent, the trustees could not convey the farm.

Danicki v. Danicki (1995), O.J. 3995valid gift to son. Law does not enforce moral laws, honour thy father and thy mother

atio: (1)Gifts have 3 fund characteristics: an intention to donate; acceptance; and an t of delivery. Once a gift is perfected, it is irrevocable unless a defense such as duress or ndue influence applies; ) The law will not intervene to hold parties liable for moral transgressions (Son refused to ow mother to reverse transact to be able to convey equally to son and daughter). eld: Inter vivos gift was valid, not resulting trust.

asoning: Here, no undue influence, 101 year old mum had ILA re deed and made will one month later. Counsel stified she was bright, with it, and assertive, give precise instructions.

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Mother, 101 years old, decides to convey house to her "good son" - remainder in fee simple subject to her life interest. They go to a lawyer that transfers property to the son. The daughter finds out about this two years later. Mother wants to then convey to both son and daughter. Son refuses to do so.

Crepeau v. Crepeau (2012) ONSC 418- down payment for mortgage from mum to son was loan. Borrower goes to mother and asks for $30,000. Mother and borrower go to lender. The down payment is being borrowed from mother. Bank wants mother to sign a gift letter, bank document, "This is to confirm that a financial gift in the amount of $30K to assist in the purchase of a home. Thee funds are being provided as a gift and will not ever be repaid." Without the letter, Scotiabank would not have advanced the funds for the purchase of ppty. Mother returns home and tells her partner with whom she is living about this. Partner starts calling son asking when money will be paid bank. These calls become so abusive that police are called.

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ule Where a gift is alleged, the law presumes a resulting trust, onus on donee to rebut the esumption est: donative intention, delivery, acceptance easoning: Donative intention not met. The repayment was a means of facilitating lender’s greement. Son’s gift letter contracted by donee son's oral promise by phone message to pay his donor mother

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Premier Trust v. Beaton (1990), 1O.R. – deaf and mute mum liable for mortg; L liable to her for negligence Widow is largely deaf, unable to speak and primary means of communication by ASL. She has 3 children, one of whom is Thomas. He is 31 years of age, and for relatively brief periods, has lived at home with his mother. He operates a motorcycle trust with limited and sporadic success, and suffered from a cocaine addiction. He wanted to go into business of renovating, buying and selling homes with a view to making money. Son goes to Premier Trust for mortgage on mum’s home, and retained lawyer does not suggest ILA for mum. No ASL interpreted provided to explain nature and consequences of document. Mother had signed mortgages before and knew it was a mortgage. Son defaults, PT sues mum on SJ. , mum 3P sues L.

atio: An SC or firm in dual agency may be liable to indemnify a party that commences a egligence action where SC /L does not provide adequate ILA even where that party knows ffects of signing legal docs is vulnerable to claim that someone in the transaction was not roperly notified, advised or protected ELD: L liable for negligence and indemnification of Mrs Beaton against PT who rovided security for mortg agreement. Mrs B liable to mortgage company for mortgage rears

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Pecore v Pecore 2007 Father opens joint bank account w daughter. Father dies and daughter claims entire amount

atio: Presumption of resulting trust applies to adult children. Presumption of dvancement limited to minor children (1) Where title holder conveys an asset in the ame of his child, (2)and the asset is purchased with title holder's funds,(3) the transferee is esumed to hold asset in trust for transferor,(4)unless transferee can establish it was a ansfer by gift. Wilson J, should also apply to adult children w disabilities (how to define) eld : The joint bank account was a gift; Daughter presented numerous facts to rebut esumption.

Caveat Emptor Doctrine (Absence of Warranty) & Obligation to Disclose  Risk of quality of condition lies upon PU absent fraud or mistake. V has no duty to disclose patent (perceivable) defects readily apparent upon inspection  Exception(Mcgrath) Vendor owes a duty to PU to disclose existence of (1)latent defects that the (2)V knows render the sale property, (3)dangerous, likely to be dangerous, or uninhabitable. (4)Onus on claimant to establish on a BOP, (5) D can use CE to rebut prima facie case Remedy : Failure to disclose existence of a known latent defect that renders the premises, dangerous, likely to be dangerous or unfit for habitation entitles PU to rescission  Doctrine of Merger terminates V’s responsibilities Representations and promises contained in APS merge on closing absent express terms to the contrary, or unless warranties/representations

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Exclusionary, Limitation of Liability, Exemption, Clause (para 26) No representation, warranty or collateral conditions other than as expressed herein  Limit, qualify or exclude V’s liability for warranties, representations outside of APS, attached schedules or SPIS SPIS (Seller's Property Information Statement) Voluntary disclosure statements about sale property; possible basis for claims for rescission for tort of deceit or negligent misrepresentation

McGrath v. MacLean et al (1979) ONCA V had no duty to disclose, did not know wall subject to landslide

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P bought a house in Scarborough and noticed there was a retaining wall on back of ppty,which was higher on one side than on the other. After P closes, soil leaks into house. City of Scarborough orders family to vacate and they could not live in it for two years. P sues V In this case.

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The V did not know that it was subject to a landslide. P was stuck with caveat emptor b/c P could not prove that V knew that the defect was dangerous or likely to be dang

ld: V not liable b/c CE apply.. PU did not prove V had knowledge that retaining wall was ject to landslide. Gronau v. Schiamp Investments Ltd. (1974) Man QB CE does not apply if V concealed patent def.

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V sold P a building that had a structural defect, and was a crack along the side of the building. V made cosmetic improvements to the building and then P finds out about defect after P closes.

LE: Caveat emptor does not exclude V’s liability where she actively conceals a rceivable defect. Such conduct constitutes fraudulent misrepresentation which entitles to sue the V after closing ld: V liable for fraud misrep. Dankovic v. St. Stanislaus - St. Casimir’s Parish (1986), (ON) V liable, inoperable furnace

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P buys a house; after closing finds that furnace is not working. Inspector says you need a new furnace, if you keep it going it will be dangerous. It is winter time.

Marathon Realty v. Ginsberg (1982) ONCA – deposit not returned, V not liable for city downzone. V was selling 100 acres of property, and was aware P was buying this land for redevelopment. V had an appraisal before the property was zoned, and knew city intended to downzone the property, which would render it worthless for P's intention to build a subdivision. P signed an agreement and before closing, P found out about this downzoning and refused to close. P demands that deposit be returned on grounds that V knew ppty would be rezoned and failed to disclose.

ld: V not liable for fraud misrep. CE applies; P was sophisticated , and should have entered rranties/conds into APS; V had no direct comm with P prior to V's signing of the offer tio: Silence as to a patent defect, discoverable upon proper diligence of other party, not udulent in the absence of a special trust relationship. Generally there is no fiduciary duty ed to PU by D. Sevidal v. Chopra (1987) 64 OR – disclose latent defects in vicinity of sale ppty and before closing, P read in newspapers that area of sale ppty is contaminated. P goes to their lawyer, and asking whether P must close transaction in light of the fact that premises for sale located on contaminated land who advises him to close, that may lose deposit if he rescinds. L ins this case is sued. P closed but before closing, V actually found out the property was contaminated and did not disclose.

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tio: Before or after APS signed, before closing, V must disclose known latent defects of sale perty or within its vicinity. ld: D liable for intentionally withholding existence of latent defect . Agent & L fell below C. Goldstein v. Davison (1994) does not follow Marathon P put in a clause “V warrants that there will be no heritage designation on land”; V takes clause out without drawing attention to the change (he knows it may be designated property); V knew P wanted to develop the land; Transaction closes, and heritage designation is implemented; P sues for damages b/c P was going to develop now can’t many restrictions; V says that he didn’t have an obligation to disclose (not a patent/latent defect); P says v failed to disclose a material fact and that V knew they were buying the property to develop it and V’s failure to disclose was a fraudulent misrepresentation. In discoveries, P was able to prove that L/V/V agent all knew

o V has a duty to disclose patent defects if they affect a property’s value ntrary to Marathon, weak precedent) soning: Judge found V knew property was to be redeveloped, and to be designated as age property. d: V liable for damages for negligent misrep. CE does not apply Tony’s Broadloom & Floor Covering Limited v. N.C.M.Canada Inc.(1996), P buying property for industrial use; PU intends to eventually change the use to residential but V did not know; On sale ppty there had been metal stamping factory – soil and ground water was contaminated; In order to minimize the effect of the contamination, Vhad inserted special pumps on the property; V was aware of the contamination at all material times; P had opportunity to inspect prior to signing agreement; P failed to conduct investigation of the property before or after signing APS; When PU attempted to get a development permit to build residential units it was denied b/c of contamination;

ld: CE applies. V not liable for PU failing to enter premises and inspection. Presence of taminants was a patent defect by virtue of special pumps. Undisclosed intention to use ustrially zoned sale ppty for residential in the future does not affect the bargain they made tio: There may be a moral, but no legal obligation to disclose patent defect arises, unless V vely concealed defect ( counter - or affects ppty value or makes it unusable for its ended purpose Goldstein)

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Surnmach v. Allen, [2003] B.C.S.C. – no duty to disclose nearby nude beach P’s buy a property conditional on inspection and they gave a deposit of $100 000 (valuable house); before the cheque was cashed, P found out there was a nude beach next door; the P refused to close and went to court to determine whether V had an obligation to disclose

tio: Proximity of a nude beach to sale ppty, is not a defect (latent or patent) nor is there any nger, therefore, there is no duty to disclose; Held: CE applies, no obligation to disclose

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Antorisa Investments (2006) "As is where is" . excludes V from tort liability Properties contaminated. V considers it to have been cleaned up. Put property up for bidding. No-liability clause provided that if there was any contamination, P would be responsible for cleaning it up. P wanted to buy this, so they did. Years later, found out there was more contamination that they expected, so they brought a tort action based on fraud misrep Although K says no liability, argues the vendor had obligations to disclose, especially when it is contaminated property. In this case, P could not prove there was any fraud

tio: As is where is no liability clause protects V from tort liability, unless udulent misrep. blic policy dictates that PUS seeking protection in relation to fitness or quality of sale ppty uld openly negotiate specific protections as matter of K. Law will not intervene to do so ld: V not liable for fraud misrep due to this clause. PU failed to prove fraud.

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Kingspan v. Brantford (City) (2011), ONSC – unclear of group claim to sale ppty a latent defect Kingspan came to Brantford to purchase ppty and transform it into an industrial state of the art office building and purchases the property from the city. P hired architects and engineers and plan was produced after six

P a g e | 53 months. They got a permit and trucks came to build. Aboriginal were protesting at a picketing line, and no building is permitted until a development fee is paid. The protocol of the tribe required that builder paid a development fee and that tribe reserves right to change protocol. City hired a lawyer to obtain an injunction. City obtained an injunction to prohibit picketing. OPP was called to enforce injunction, and to preserve the peace. Kingspan sues City on basis that it failed to discharge obligation to disclose.

tio: Law is unclear as to whether a group claim to sale property in question for entitlement ees for use of land, but not legal title, constitutes a latent defect where V had knowledge of existence y constitute a latent defect where V has knowledge thereof ld: V city’s SJ motion to dimiss action on SJ was dismissed. Law is unclear as to how erpret clause. te: APS contained "no claims" provision ; City represented that it was not aware of any ms pending or threatened relating to the ownership or use of the Kingspan, but V knew FN tests to sale were had been presented at Council.

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Ricchio v. Rota (2011)- V may be liable on basis of misreps in SPIS, like Antorisa was not here. Action by Ricchio seeking payment of out-of-pocket expenses and punitive damages from the Rotas, for their failure to disclose patent defects in their home prior to its sale to Ricchio. Ricchio built home in 84, renovated basement five years later for daughter who lived in basement until sale. R and R enter into APS cond upon home inspection which recommended inter alia, a furnace leak be repaired when AC was on. D undertook furnace repair, and gave letter from HVAC comp that there was no prob with furnace itself. P renovated basement w/in days of closing, resulting in large leakages. P obtained report indicating the previous owners had carpet, which could have concealed the problem, & leakage would have been evidence during rainy season. Inspector was not apprised of recent renovations, who testified had he know, report would have been different.

ld: No latent defect found. CE applies. V not liable (basement leakage) asoning: Rotas did not actively conceal patent defect, no evidence nor from neighbours, not make misleading representations about dryness of basement. PUS could have reviewed S, contracted for a more extensive, home inspection, or included more extensive resentations and warranties in APS & did not do so.

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latomasi v. Conciatori, 2011 ONSC 3819 follows Gronau – liable for conceal of patent defect, basement leakage and misrepresented Action by the purchaser for negligent or fraudulent misrepresentation. Before APS was binding, PU visited sale ppty many times. 1st time - patches in staircase from gar to basement, V said necessary for AC installation; 2nd time - V said the repaired holes were put there for scaffolding support ; never any basement leaking problems After closing, PUs experienced basement leaking, and in course of investigation were informed of structural problems . PU remedied the leaks and the structural problems and sought to recover the cost of the repairs, which totalled $86,324, from V who took position work done was unnecessary, disproportionately expensive The vendors made false representations to the purchasers, which they knew were false, and the purchasers relied on those misrepresentations in entering into the agreement of purchase and sale. For the most part, the plaintiffs had reasonably mitigated their damages and had ended up with nothing appreciably better than the structurally sound, well-built, non-leaking home they believed they had purchased. However, as some of the labour costs incurred by the purchasers were unreasonable, they were entitled only to damages of $70,198. The vendors made false representations to the purchasers, which they knew were false, and the purchasers relied on those misrepresentations in entering into the agreement of purchase and sale. For the most part, the plaintiffs had reasonably mitigated their damages and had ended up with nothing appreciably better than the structurally sound, well-built, non-leaking home they believed they had purchased. However, as some of the labour costs incurred by the purchasers were unreasonable, they were entitled only to damages of $70,198.

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ld: V held liable for fraudulent misrep in relation to patent defects; and cannot rely on EC.

did not fully discharge duty to mitigate, so not reimbursed for costs in relation to failure to igate.

Halliwell v. Lazarus, 2012 ONCA 348- limited liability clause re: building inspection not enforced

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Appeal by Halliwell & cross-appeal by Lazarus from the decision in Halliwell's action for damages from Lazarus, H's RE agent, & from Westbrook, a home inspector. Halliwell made it clear to Lazarus that she wanted to purchase a home free from mould due to a severe allergy to mould.Lazarus had a term inserted in the agreement pursuant to which Halliwell would take ownership of the home in question allowing her to abort the transaction if not satisfied with the home inspector's report. The inspection was completed in March 2006. The purchase closed May 1. By July 2006, Halliwell was experiencing an allergic reaction to mould. She sued her agent and the home inspector. TJ - %50 liable - inspector; PU and RE agent - 25% liable

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Vendor - V was found not to be aware of mould. They were conscientious housekeepers and kept the house very clean. Did they have children? Would they have let children play in the basement if there was mould? P - found credible BI investigation - was entirely cursory, not thorough In this case, building inspector is retained by P and retainer contains limited liability clause, that in event of any negligence, inspector is liable only for a limited amount. P signed such a retainer. LLC does not apply in this case. It was not explained/highlighted by BI to KL. The documentation which limited the scope of the inspection was not adequately brought to the attention of the P. doc containing written limitation presented to P after inspection BI's Communication fell below SOC - inconsistency bt/w oral and written forms of communication The inspector failed to communicate adequately the concern for moisture presentation.

tio: Courts may not enforce limited liability/exclusionary clause if person retained fails to lain nature and consequences of limited liability retainer, OR given after services provided. ld: Building inspector 100% liable for damages for negligence. Inspector fell below SOC in ng to explain the existence of a moisture problem. Agent did not breach SOC by breached standard of care by failing to read, review and interpret the report for Halliwell. (It was nd V had no knowledge, was not liable)

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Bound v. Gray, 2011 ONSC 1567- pedo in area may not be latent defect, so no CE PUs are spouses and have two young children. They discovered a person convicted of child pornography and both V and other neighbours were aware of this knowledge. The Plaintiffs never lived in the property and do not intend to.

tio: Law is unclear whether common knowledge of pedophile within vicinity of sale ppty stitutes a latent defect that renders the property dangers our uninhabitable, and therefore poses a duty of disclosure on V. ld: Motion to dismiss action on SJ was dismissed and PL PUS awarded costs. Parties tled. e: Novel claim that raises policy issues - protection of children vs the reintegration of eased sex offenders Barbieri v Mastronardi 2014 ONCA 416 – duty to disclose former marijuana grow-op of ppty

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P bought a house, did not waive the right to have an inspection. Didn't get an SPIS, closed the transaction. After closing the transaction, P found there had been a marijuana grow op operating there. After closing, P was approached by neighbours letting them know the house had been used as a marijuana grow op.

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Having failed to reach any C on the critical issues of mould, the TJ said even if the house had been completely remediated, Vs would have to disclose due to "stigma attached to ppty". CA said trial judge has to provide some insight into how they reached the legal conclusion, what the facts relied

P a g e | 55 upon were, and could not be decided on a summary judgement with the limited reasons the judge gave.

tio: CE may not apply, if sale property was used for purposes of marijuana grow-up, a duty y arise on V to disclose its known existence b/c of “stigma attached to property” , so latent ect, makes ppty uninhabitable ld: Appeal allowed from D Vs b/c TJ on motion failed to give legal basis for his factual dings. Trial required to discern whether V liable for damages for failure to disclose. 1784773 Ontario Inc. v. K-W Labour Association inc., 2014 ONCA CE applies to exclude V liability for r failure to disclose ppty may be haunted.

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After closing, P sues V for failing disclose house was haunted.

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There is no direct evidence of economic loss or damage as a result of the stigma of a haunted property, nor is there any direct evidence from anyone who observed any strange occurrences in the property No evidence that P could present as to existence of ghost

Condominiums and Representations Peel Condominium Corp. No. 505 v. Cam - Valley Homes Ltd., (2001)- no pre K good faith duty

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D advertised that they owned a parcel of land and that it would be made into tennis courts. P brought an action for injunction to prevent developers from developing

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Condo marketed as having outdoor recreational area-. Disclosure Statement and related documents provided that recreational area might not be built--Developer deciding to build townhouses on recreational area lands-Condominium corporation opposing use of recreation area lands for townhouses

tio : Condo developer vendor has a statutory duty of full disclosure in in K performance, but es not extend to the bargaining process; Diss Wheeler J – CML fiduciary duty of good faith en circumstances warrant.

do docs are overloaded in favour of developer, there are certain statutory limitations now. RE brokers can create endous hype. Legislation has come into effect allowing Pus s to opt out within ten days of signing APS.

jority: "P is required to get legal advice, review purchase material, make amendments to S or don't buy. This not a purchase of paper plates, they were making a substantial estment in residential housing units that most intended to be their homes. If they ceeded without professional advice, that was their decision."

Representations, Warranties & Exculpatory Conditions Consider what does client want; are you able to characterize and prove statements that support clients preferred remedy?

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1. Innocent Misrepresentation Principle 

Claimant must demonstrate that representation is a (1)statement thought to be true by parting making representation; (2)independently verifiable; (3)must be objectively of the type that would influence a person to enter into a K; (4) absence of EC, presence thereof excludes V liability, UNLESS  Roberts/Beer: If party does not ascent to prov or not brought to PU’s attention  Shelanu: EC is unconscionable, ; unfair; unreasonable; otherwise contrary to public policy  Hyrsk/Kiani : Error Insubstantialibus: substantial diff bt/w thing bargained for & thing purchased, so as to constitute a failure of consideration, relates to quality of land  (Waxman)Equitable Rescission of Rescission BEFORE closing, unless ES, but invoked only in rare circumstances claimant must prove representation was  false statement  material - must of a type that would influence party's decision to enter K  statement must have induced K-ing party to enter into K

2. Fraudulent Misrepresentation/ Tort of Deceit Principle



Claimant must demonstrate that (1) D or Agent makes a false representation (2) knowledge of, or recklessness as to, its falsity (3)D or A intended to deceive PL with representation (4)False representation is subjectively material (5) False rep induced PL to act; (6) PL suffered damages  Liability - EC does not shield V liability, V’s can be vicariously liable for fraudulent misrep of Agents (Semkuley; Scholl)  Equitable Remedy of Rescission AFTER closing , UNLESS knowledge before close, then right to rescission is waived, but claimant can sue for damages (Burrows; Cubukgil) claimant must prove representation was  Measure of Damages : restore PL to position he would have been but for the misrepresentation, not, the position he would have been in had rep. been true (Parna)

3. Negligent Misrepresentations

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

Claimant must demonstrate that (1) DOC based on spec relationship bt/w PL & D - V & PU, (2) D made a false statement, (3) D was negligent in making false statement, therefore breached DOC; (4) PL reasonably relied on false statement (5) PL suffering damages as a consequence  Liability – V or agent, V is vicariously liability for agent   EC excludes liability for statements outside of APS, not express K terms (Hayward) Beer says it may BUT EC invalidated IF, incl statements outside of APS if:  Roberts/Beer: If party does not ascent to prov or not brought to PU’s attention  Shelanu: EC is unconscionable, ; unfair; unreasonable; otherwise contrary to public policy  Hyrsk/Kiani : Error Insubstantialibus: IF representation outside of APS , consider , (Roberts/Beer)  Look at where the statements were located? Whether parties were consider to have assented to clause  What was the reliance ?  Who were the parties ? vulnerable or sophisticated?  What were the circumstances ?  Agents representing PUs?

Equitable Remedy of Rescission BEFORE close; AFTER close - damages



(Chapman) claimant must prove representation was  Measure of Damages : restore PL to position he would have been but for misrep

4. Collateral Warranties (survive closing, stat imposed warranties by ON New Home Warranties Plan Act) Statement is not a representation and (2) is collateral warranty (Jorian) to the main agreement, not go to root of K, expresses some lesser obligation (Fraser-Reid) 

(Jorian) TEST: Warranty or Condition – (1)Is the effect of the event to deprive the innocent party, who has further undertakings still to perform, (2) of substantially the whole benefit (that amounts to consideration for performance of further undertakings, (3) which the parties intended innocent party would obtain according to K.; (Fraser)IF not cond, is it a warranty: (1) question of fact; (2) Does the contract disclose a common intention of merger re warranty? – express or implied (3) The K label for warranty is a rebuttable presumption Effect of C : does not shield V from liability, term collateral to the agreement .

 

BEFORE close : Nothing. IF PU breaches before close, V may repudiate K and V is liable for failing to close (Jonert)  AFTER close ;Remedy of Damages, UNLESS MERGER: 

TEST :Did parties intend that warranty survive merger (Fraser-Reid) or insert non merger provision (Alves); but merger is rare (DeMichele)

5. Conditions (fundamental terms of APS)no remedies, right to repudiation  

Apply CONDITION test; consider market forces and credibility (Townood) Effect of C : does not shield V from liability ; Rights for breach : Innocent party has a

right to treat other party’s breach as a repudiation of the K (Keen)

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5. Universal Remedies – EC invalidated IF:    

Roberts/Beer: If party does not ascent to prov or not brought to PU’s attention Shelanu: EC is unconscionable, ; unfair; unreasonable; otherwise contrary to public policy Hyrsk/Kiani : Error Insubstantialibus: Fundamental breach : repudation, unnecessary to commence action:

Reps/Warranties/EC Anticipatory Breach

Morgan v. Lucky Dog Ltd – refusal to close on the basis of PU not providing an estoppel certification constitutes an anticipatory breach absent express K terms requiring P to provide V with this

Waxman v. Yeandle, [1953] O.R. 367 (Ont. CA)- innocent misrep of gallonage after close Purchase of Hotel: Wording of K: “offer is given on condition that the Vs represent that their sale of beer for the year ending aug. 1950 exceeds 28K gallons”; Purchaser discovered that the actual gallonage sold was 25K and wanted an abatement - vendor refused; purchaser closed “w/o prejudice”, then sued. P claimed fraudulent representation.

ecision: V liable for misrep, but PU not entitled to rescission after close.. P could have dependently verified gallonage, and V had no intent to lie, mistaken belief as to truth of atement ; atio: Ambiguous lang of a statement not likely to be interpreted as fraudulent Parnav. 0. & S. Properties Ltd. (1971), S.C.R. 306- V liable for negligent misrep, apt buildings

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Offer had a statement that it was “subject to satisfactory evidence being provided as to the accuracy of representations as regards income and expenses contained in schedule A. P purchased mult apt buildings, a sophisticated person (took 1 year legal course). V (first time builder) made a list of income and expenses and made a stat declaration to that effect, P, after closing, expenses are higher, profit is less and building is worth diff amount. P in this case sues for fraudulent misrepresentation and TC says if we took the income based on what V said, and we took the expenses, the whole value of the property would be totally different, and even though there was a $2000 discrepancy, the price would have been a $25000 difference. P granted $25000 due to inaccuracy of statements.

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Reasoning: V were first time builders, did not have accurate records; P was sophisticated, knew more about operating an apt than V, hence P was not mislead and did not rely on rep. even though representations were false to the knowledge of V = no fraudulent misrep Ratio: Compensatory measure to assess damages; SCC damages: 4K, damages had representation not been made, lower sale price.

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[selling price 251K; income 36564; expenses 12,371 = 24,193 - net cash flow].After closing, P said the actual expenses were 14, 747 - hence income was less; return on the first schedule A was 9.64% but it was less given actual expenses; P argues the real price should be reduced to reflect the 9.64% i.e. 226,910 total not 251K

Semkuley v. Clay (1982) – V or A not liable for fraud misrep. Absent intent or recklessness to deceive A ppty was built where four people lived in it. Legally, it was only a duplex. 2 PUS - teacher & doc, had bought properties before. Agent advised P in clear terms that the fourplex was illegal and the zoning only allows two, but told them that a rezoning application was to be carried out and shouldn't be any problem at all. PUS sue Vs on basis of this oral representation. When P closed deal with $500 and got a rezoning, they were not successful.

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insulates the vendor, not the (listing) agent from negligent misrepresentation made outside he APS; Other cases say that EC will insulate agent also from negligent misrep outside of S (Hayward;Semkuley) LD :V nor Agent are liable. Agent was giving an opinion, not a representation as an expert.

S knew or ought to have know that there rezoning entailed an element of risk; agent liable for negligent or fraud ep & V is not vicariously liable in this case ; agent was merely giving an opinion, made in good faith, P could not e reasonably believed the agent was in a better position than they as regards rezoning opinion - i.e. not reasonable ly on the agent - simply optimistic forecasts that a reasonable person would believe to be an expression of opinion

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The assurances about the zoning application were representations of opinion. The facts fall well short of fraudulent misrepresentation and the mental element : intention to deceive or recklessness is absent.

Olsen v. Poirier (1978), ONCA – milk farm, V liable for fraud; Agent for negligent misrep P sued both V and V’s agent for fraudulent misrep. RE agent placed an ad in news advertising “sale of modern dairy farm”; Upon inspection of the V farm, P was told that the farm processed approximately 1M pounds of milk/yr. P did not know about gov. regulation that limited milk quota if the farm was transferred to someone outside of the family. V did know about this regulation, but the RE agent did not; RE agent had no privity on the K. P closes and brought action to rescind Liability can be imposed on a non contractual basis on a 3P to the K (Hedley v Byrne Co. principle was affirmed) Liability of RE agent - Rule: In order for there to be liability for negligent misrep, 1) there must be a duty of care; 2) a negligent misrep; 3) reliance on the misrepresentation by the plaintiff and 4) loss resulting from that reliance. V & P did nor negotiate directly, but V KNEW what the agent was saying “While it may not have been negligent for RE agent unfamiliar w/farm sales to know of this marketing policy, RE agent held self out to be expert. One who holds self out as an expert has a higher duty of care. Hedley: “if someone possessed of a special skill undertakes irrespective of K to apply that skill for assistance of another person who relies on such skill a duty of care will arise

tio : Silence can be recklessness that amounts to fraud misrep, for which a TP can be liable a non K basis (V's liability);(Hedley) (RE agent liability)

liability - fraud misrep, rescission granted - “ milk quota was a vital factor in ermining economic viability of farm, 25% reduction was a material factor - there was at st recklessness that amounted to fraudulent missrep on part of V that induced P to enter K d P relied on the missrep (although one part was true this was a half truth)

"s liability, negligent misrep - RE agent made negligent misrep; owed P a duty of care m holding self out as expert, P relied on misrepresented statement and P suffered a loss m such reliance. Hayward v. Mellick (1982), ON

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When Vs decided to sell their farm, they offered as 95 acres, and advertised as having 65 workable acres (important). Owners really did think farm had been passed by generations and that they had 65 workable acres. P closes transaction. After closing P discovers that it isn't 65 workable acres, it was 52. Statements at issue made by V before agreement and not subsequently inserted

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(ONCA)"The rep amounted to neg mis rep - rep made w/o personal knowledge or even info that the fields had been carefully measured. V must have known that acreage was important to P. He said nothing to qualify his statement. He didn't tell P go satisfy yourself. Fields were irregular in shape. It was wintertime, and he should know that P would rely on him.

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An EC/disclaimer in an APS will protect the vendor from negligent misrepresentation outside of APS (CA) (TJ) A EC does not protect a vendor from negligent misrep- overruend on appeal

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Statement was not found as fraudulent, but negligent (CA) statement amounted to neg mis, but disclaimer protected V from liability

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Patav v. Hutchings (1989) – agents liable for misrep; V sued P for breach and they settled, Grimsby PU (D), at the suggestion of her doctor, seek a ppty with good clean air to improve her lung condition. They retain a selling agent who is aware of her condition. This was communicated to listing of sale ppty, who was aware, but did not disclose potential land fill sites that were near the sale ppty. LA made statement, "if you need a good country clean air ppty, this is the place" .Before closing, PU discovered the plan. Her L advised her to close. She refused to close and V sues her (who may now have to disclose when selling). She settled and brings an action against listing and selling agents.

e A listing agent owes no FD To the purchaser (Caterprillar), but does not have the right protect V's interests fraudulently; A selling agent has a duty to protect the interests of the client;

cision: Listing agent made fraudulent misrep (misled P as to character of the property) ; ing agent made negligent misrep (was negligent in not ascertaining property was propriate for P given that he had been advised as such – could have made some inquiries at municipality) Roberts v. Montex Developments (1979) (B.C.S.C.) (not a great decision) misrep of soundproofing outside of APS; EC not enforced, so developer still liable

cts P bought condo unit advertised as designed to provide maximum sound proofing in ween homes in the advertising brochures but was not part of APS; after closing, P mplained about intolerable noise

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Argument : sound proofing as guarantee, but WASN'T in AGREEMENT Argument that it was negligent misrepresentation, but there was an exculpatory clause P did not have a solicitor at time of agreement. They looked at the fact that P did not know about exculpatory clause, nor was it pointed out to her

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To assess whether court will set aside exculpatory clause, court will look at circumstances surrounding transaction - sophistication of parties, hype in purchase of new condo

ld: EC set aside b/c PU did not assent to prov. Therefore, EC does not exclude developer P m liability for negligent misrep, precontractual negligent misrep, the brochure, induced PU o APS or breach of warranty

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Fraser-Reid v. Droumtsekas (1981), S.C.R. (Warranty of no basement flood survived MERGER) In APS, Clause fixed a closing date "providing that the V has disclosed to P all outstanding infractions and orders requiring work to be done issued by municipal authorities", but prov did not specifically address leakage in basement After closing, P found weeping tiles not properly installed and basement floods in heavy rainV contravened municipal requirements. committed this breach of the building by law knowingly (P sues ); There was actually a breach of bylaw BUT nothing in K that said basement was free of seepage;

LD: clause was a warranty that the basement would not flood, damage not discovered until er closing, and there was never an intention to merge

Urea formaldehyde Scholl v. Royal Trust (1987) (Ont. S.C.)- agent said no URF, refused to insert APS warranty, false

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Urea formaldehyde was once used in homes as insulation; One of the PUS was a doctor who was aware of the ill health affects of UF; P asked listing agent if there was any UF and asked him to insert a warranty that there was not ; agent said there was none and refused to insert the clause,

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V claimed there was no EF in ppty, but never did due diligence / investigation V cross claimed against the broker for negligence and won indemnity for damages If you are acting for the P you would ask that the vendor warrant that there is no formaldehyde

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tio : AN EC does not operate to relieve a V from vicariuos liability in the face of the fraud of ir agent

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Agent was fraudulent. He made that statement recklessly. V is responsible for the fraudulent acts of the agent. V held responsible for fraudulent acts of its agent ;' P is entitled to damages against V, RE broker, and RE agent. Broker is entitled to be indemnified against acts of agent.

DeMichele v. Peter Kin (1985) – V liable for fraud misrep for breach of warranty

ts V warrants in APS "that insulation in the home is not EF"' V did not know house contained UF, nor what it was

tio : PL can recover damages for loss of enjoyment of life if able to establish mental injury s foreseeable result of BOW. ld V liable for fraud misrep for breach of express K warranty. Lack of personal knowledge material to finding of liability. mages: the cost of removing the insulation & additional 20% b/c of stigma involved with insulation and some damages for emotional turmoil

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Glasner v. Royal LePage Real Estate Services Ltd. (1993)PU entitled to rescission for fraud misrep, warranty; uniteral amendment to UFI warranty P inserted a clause that the V warrants that the building does not have urea formaldehyde AND never has; V knew that at one time the property was insulated w/ UFI - the V changed the clause to “does not contain UFI” P signed, not having seen the change; listing agent involved in negotiations felt guilty, wanted to tell P and did; as soon as the P’s found out decided not to close the deal; P wanted a house that had never contained UFI (stigma issues) V argued P signed, had an obligation to read it and that the changes were clear

ule In modern commercial relations, where an important unilateral amendment is being ade it is not unreasonable to ensure that knowledge of such amendment comes to the her side -- party must be given a real opportunity to appreciate the change ; Duty from V to can arise when K concluded under unilateral mistake

eld: PU entitled to rescission for fraud misrep. V knew fact was material b/c lang of clause as changed, instructed agent not to mention it unless specifically ask. PU refused to close mmediately after changes raised John Levy Holdings Inc. v. Cameron & Johnson Limited (1993) –V not liable for fraud misrep

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After closing on land, new owner received several offers - one at over 1M profit - he decided to sell; P inserted clause that V covenants that there is not now nor has there ever been contaminated waste material on property (warranty) V’s lawyer tells him he can not warrant this as he does not know - changes clause: “to the best of his knowledge and belief there is not now, nor ever been contaminated waste material” P closed; in fact, the property had been contaminated

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compromise bt/w P desire to have a warranty of contamination and Lawyer's advice not to give any covenant. For P to recover, he must establish that V had knowledge - warranty that certain facts do not exist absolutely, there was no duty to take active steps to discover whether there were contaminants, and only duty was to disclose contaminants of which he knew.

atio : Language within a Kual statement, "to best of my knowledge and belief" did not arrant absolute truth of the statement. It was reasonable, fair & truthful. ELD: V was not liable for fraud misrep for breach of warranty;, no damages for PU. Clause d not impose on V to perform tests to confirm the presence of contamination

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WARRANTY OR CONDITION? Jorian Properties Ltd. v. Zellenrath (1984) (Ont. C.A.) Reference made to a condition (but not a condition precedents); P bought five-plex for $95,750; Clause said “V warrants to the purchaser to survive closing that the premises contains 4 one-bedroom apartments, 1 bachelor and premises may be lawfully used as it is presently used.”; V was unaware that it was contrary to zoning for ppty to have 3+ dwelling units. P made inquiries before closing and

P a g e | 62 discovered illegality. P still wanted the property and asked for an abatement, Settlement was not successful and V sold to TP (V2). Transaction did not close; V later sold to P2 and P1 bought property from P2, but sues V and settled with P2 (TP).

ELD: No damages because PU elected not to close, so no breach of warranty here easoning: Here, sale ppty could still be used as a triplex vs. five-plex would, NOT have eprived the plaintiff of substantially the whole benefit which the parties intended it should btain, rental property under K DISSENT: (1) difference in kind & degree bt/w plex/fiveplex in terms of revenue earning potential & capital value (warranty, more like cost heating of ppty). (2) If PU would have had action for ES. (3) A condition, not their mutual tent that the PU could be forced to accept triplex instead of 5plex, P would not have ceived the very purpose of the sale and the P was entitled to damages. Champlain Thiskson Inc. v. 365 Bay New Holdings Ltd. (2007)

ct APS involving sale of two commercial office buildings in DT TO, total value was 24.5 million During due diligence process it was revealed that elevator inspection agency had directed repair work to be done on both buildings elevators. Parties agreed to amend APS such that require that, prior to closing, the vendors complete the directed elevator repair work and provide confirmation that the repairs were acceptable to the inspecting agency. By the time of closing the repair work had not been completed. PL refused to close on grounds that V did not comply with TCP - "sale is subject to all covenants and conditions being performed by the V before closing"

al (i) work had not been completed by due date of Dec 1 as per prov; ii) sophisticated parties, V chose to accede s to P's request - $5000 issue was a material one, did not produce unfair absurd result in comm contex, b/c parties turned it into a material one by virtue of TCP prov - i.e. V must fulfill all obligations/cov'ts - nothing unfair in holding parties to their bagain iii) nothing in APS required PU to advance funds to V in advance of closing, & had no done so - V argued lacks of funds was reason for not closing ________________________________________________________________________________________ (2)purchaser may be entitled to some compensation where (i) the agreement expressly provides that the vendor will be responsible for specified costs incurred by the purchaser, or (ii) the vendor has not acted in good faith to satisfy the condition precedent. Neither circumstance applies in this case. did not include lang in agreement, no bad faith on part of V, made efforts to repair elevators, CTI not entitled to any damages re flip, non binding letter of intent bt/w CTI & P, no formal APS (would be one if transact had proceeded)

ecision: Courts tend to enforce language of agreement (John Levy, DeMichele) (1) V iled to satisfy TCP, did not perform in "all material respects" which P did not waive ; (2) P is ntitled to return of deposit with interest

Error Insubstantialis Hvrsky v. Smith (1969) ON – V liable for ES. P entitled to rescission. P bought property under notion that it was 1000x160ft. V never verified. P & V were unsophisticated; 4 yrs after closing P discovered depth was 84’ not 160’. P bought property for investment purposes and

eld: P entitled to rescission. Mistake was so substantial that it fundamentally changed the operty that was bargained for. could have searched title, but both parties were mistaken , ept of land 84 not 160.

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Kiani v. Abdullah (1989) – PU entitled to rescission for ES PU of Chicken farm; required license to farm; neither V nor Vs agent knew that the license could not be transferred automatically; P discovers this after close, farm as a chicken farm now useless; there was an EC

eld: P entitled to rescission for ES. P received an unlicensed and quota less chicken farm, bstantially different from the licensed farm they thought they had bought atio: The mere fact that PU got something other than what they thought they bargained for not sufficient grounds to establish ES. It must be substantially different

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John Bosworth Ltd. (1979), 24 O.R. (purpose of ppty not sufficient to ground successful ES claim) P purchased ppty on cod that it could be zoned for industrial use; Ps Lawyer did minimal investigation and

P a g e | 63 advised him that it was zoned as such; Deal closed; Later the P decided to sell and new APS required that V2 show that it was zoned industrial - V2 discovers that the land was NOT zoned industrial as the OMB had not yet approved by-law. V2 sues old V

ELD : PL not entitled to rescission. P could have ascertained state of zoning in advance. PU as sophisticated unlike Kiani or Hyrsky. eason: There was no deficiency in the quality of land conveyed. The representation here lates to purpose of ppty.It was CP inserted for P's benefit

cts

Condos - Champlain v. H.L.S. York Development (1988), OR PU was very sophisticated, well educated and had bought many condos.; Sketch said that condo was 2688 sq. ft. which was attached to agreement. Architect told owner the units might be smaller so they should remeasure, but they did not and left it; Size of unit was not confirmed and the sales people were not informed of this discrepancy; Transaction closed – family felt cramped, lived there for a year – measured the unit b/c of statutory warranties – find out unit is 2100 sq. ft. There was EC

eld: D vendor liable for damages. PU entitled to an abatement for missing square feet for eg misrep./BOW. Sketch of apt was attached to APS, at 2688 sq feet but unit was 2100 sq et so EC did not apply Israel v. Townsgate Limited (1995)- PU liable for damages for BOK, not entitled to rescind

cts

PU purchased new condo, solarium was to be 8’x12’ on the plan; PU discovered that it was actually 4’x11’ during construction; claimed that they had many grandkids and it was their dream to have them all in the room at once; P refused to close; there was an EC & right to change solarium size ; Market had declined substantially but P argued they would still have taken it. V sues P for BOK.

alysi

reps re size and shape of solarium not sufficiently material to justify P refusing to close on account of deviation ; market forces of soft realty market provide context of PU's misguided act of rescission WRP to solarium, " It would not be reasonable for a purchaser viewing the matter objectively to rely on pre K statements which are often incomplete."

eld: PU liable for damages of $105K + interest/ costs. She was not entitled to rescind due to ze of solarium as small than expected . Representation was not a part of APS, SPIS nor ere there any oral assurances from agent. V had right to change solarium size and EC in PS(distinguished from Champlain)

cts

Keen v. Alterra Developments Ltd. (1994)- PU entitled to rescind for fund BOK – argue this Ps bought “dream home” - Ps learned at framing stage that front entrance would require 4 steps extra at the porch and 3 extra in garage; P’s refused to close; the rendering showed only one step; V took position that the P had to take the house as it was as there was a EC that allowed them to make such changes

nalysis(i) APS contained house type inserted by builder to specify type PUs wanted, )oral assurances of sales rep, iii) changes to home - extra steps ; Builders created a house at was fundamentally different than what P bargained for i.e. French country style dream ome w/ only one step - P offered to purchase another home with one/two front step.

eld: (1)PU entitled to remedy of rescission b/c V breached fundamental cond, and entitled recover deposit. (2) Builder could not rely on EC b/c it was a fundamental BOK

cts

Town Wood Homes Limited v. Khanna (1994) PU not entitled to rescind. Declining market force P paid extra for a corner lot so that he could have a double front door; during construction he discovered it did not (builder could not get approval); the housing

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eld: Crt did not accept PU's evidence as to having money to close (reviewed rrespondence, rapid market decline)

cts

EXCULPATORY CLAUSES Beer v. Townsgate Limited (1997), 36 OR. Agents reliable for innocent misrep, unsophisiticated Ps Involves a condo sale; units were advertised as luxury condos; APS was signed in an atmosphere of “extreme hype”; incl EC - statements were made outside of the agreement as regards the quality of the investment and that it was risk free and guaranteed; after units were sold, market went into rapid decline; of the 160 sold at grand opening, 70 cancelled in 10 day cooling off period; builder gets worried, makes a deal for those who stay, if they provide an additional deposit they will receive a price reduction of 15%; 45 took advantage of offer; the time of closing 39 did not want to stay and refused to close Ps claimed misrepresentation (fraudulent or negligent) b/c statements outside of the agreement

eld: (Like Montex), Unsophisticated parties, not 34 other PUS, were entitled to equitable scission for negligent misrepresentation. EC not enforced against agent’s oral assurances c they did not assent to it, and reasonably relied on agents who fabricated false sense of curity in claiming risk free investment gents held liable NWS EC. Vulnerable parties - 40 yr old illiterate immigrant cab driver, 59 year old cobbler)

cts

.Wemyss v. Moldenhauer (2003) - Selling agent liable for negligence, did not explain TCP P informs his agent that he wants to be able to get out of transact, if there is ANY problem with the septic tank; the offer is made cond on satisfactory inspection of tank to purchasers sole discretion; V modified the agreement such that P can only get out if the problems with the tank are structural; selling agent saw the changes and did not notify the P; later, the tank is flawed, but not structurally, P tries to get out, but clause has been changed; P sues agent

atio: (1)RE agent (or L) has a duty to act with care and skill in reviewing APS terms, cluding duty , to specifically draw to the client's attention any provisions in the agreement at are contrary to client's interest. (2)Client does not have an obligation to read instrument here there is reliance on a fiduciary to do so. nalysis: Evidence was selling agent specifically failed to explain that inspection clause as been fundamentally altered. Agent should have explained that the amendment made as that he would not be able to get out of the deal unless there was structural problem. 1018429 Ontario Inc. v. Fea Investments Ltd. (1999)- court can override K choice of remedy V made certain warranties re: the income potential of the ppty: APS set out the rental income, and noted “.if there is a breach of the warranty the only remedy the P would have is rescission”P closed transact, discovered warranties were not true, and wanted to sue for damages; key parties agreed in advance on what remedy would be if there was a breach of warranty

: PU entitled to damages for tort of deceit for breach of warranty in lieu of scission, statements were so reckless atio: Parties to K may limit a remedy by express terms in K to rescission for breach of arranty, but courts may choose not enforce such a Kual prov where innocent party has tablished claim for tort of deceit

cts

Swavze v Robertson (2001) duty to disclose still triggered IF it only renders part of sale property unfit for habitation PU (doctor) of home that underwent many renovations. PU receives inspection report indicating a potential water leakage prob. PU asks whether there are any water leakage problems. V discloses house is

P a g e | 65 structurally sound (misrepresentation; failure to disclose). Transact closes. 6 months later, water leakage affects one room. P called company to fix problem, and discovers company had been to house before to fix such a problem. APS contained an EC.

atio: V gave false representation that house is structurally sound despite basement’s water akage problem. This was made with an intention to mislead P, and thus EC will not shield bility for misrepresentation here. eld: V liable for fraudulent misrepresentation. PU entitled to damages

Kaufmann v. Gibson, [2007] ONSC 0 PU can rely on SPIS if in APS to rescind if it contains misreps

cts

Vs are suing PUs , retired elderly married couple. The sale ppty had water damage which V had restored. In SPIS, Vs answered no to clause" are you aware of any moisture or water problems / any roof leaked or unrepaired damages. SPIS was made part of APS. PU withdrew to misrep of the disclosure statements. V sold house at 380K and original sale ppty @ time house was put on market was 500K. V sues for expectancy damages

al

One of the Vs testified that he should have made disclosure about water leakage issue but agent advised him against doing so because the wording of the clause was in the present tense, only requiring disclosure of probs as of July 8

atio: SPIS, if within 4 corners of APS, can be relied upon to withdraw from transact if it ntains misrepresentations in relation to matters that PU raised. eld: V is NOT entitled to compensatory damages for BOK. He could not hide behind gent’s advice not to disclose. PU was entitled to rely on inaccuracy of statements as reason r rescinding transaction.

Krawchuk v. Scherbak (2011) ONCA 352-PUs rely on SPIS w/o inspection, V held liable for misrep

s

PU closed transact and waived cond of offer cond on inspection. V did not disclose defects relating to foundation and plumbing. Defects were misrepresented in SPIS, incorporated into APS. P sues V for fraud.

ysis

V was not found liable for failure to disclose latent defects resulting in BOK. (1)It contained no warranties/guarantees as to fitness of the home, (2) Defects were too latent to impose liability on V to know about them/disclose, would not have been revealed by a reasonable careful inspection, (3) V did not conceal w/ purpose of deceiving PUs - children played/ storage space near plumbing issue, (4) No Kual implied duty on V to disclose defect - did not experience probs w foundation and raised children there/ plumbing did not render ppty uninhabitable, dang, potentially dang No fraud misrep: (1) false statement - SPIS part of listing agreement, V made false statements in sense they were incomplete re structural integrity of home & plumbing issues, (2) V knew these statements were false, reckless to their truth; (3) did not make misrep to induce PU into K - disclosed other defects, was meant to inform not mislead Neg misrep Yes - (1) DOC from buyer to seller in circumstances, (2) false statement, (3) negligence on part of D as to truth of statements - reasonably prudent person would have made full frank and accurate disclosure insofar as possible, (4) P relied on accuracy of statements contained in SPIS , made enquiries and content with answers ; would not have made P had she known about plumbing & structural defects

After closing, V was liable for negligent misrep, not fraudulent misrep. PU entitled to mages ason: Vs were reckless as to truth of statements relating to foundation and plumbing in S attached to APS. PUS did not do an inspection but relied on SPIS, and could successful do

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Cotton v. Monahan (2011), ONCA- PU not liable for cost of repairs, SPIS was truthful P gave uncond offer to purchase sale ppty despite agent's advice inserting cond to allow for a home inspection. Before submitting offer, PU reviewed SPIS disclosing no building permit / inspection obtained re: extensive renovations to home, done personally, house over 50 yrs old. After move, PU noticed plumbing/electrical issues. Inspection reveal 16 infractions.. P sues V for damages for repairing defects , aggravated damages and damages for mental distress.

asoning: CE applies. PUS should have bargained for an express warranty to arantee equality of repairs and did not do so. V was unaware of building codes/ ndards ; Husband V was a prudent and careful person who would not have knowingly osed his family to risk; PU were aware V had done extensive renovations w/o permit or pection ld: PU recovers for value of diminution of property resulting from defect. No mental injury mages (not within reasonable contemplation of parties @ time K was formed)

s

Fraser Jewellers v. Dominion Electric Protection (1997)- EC enforced against jewellery store H and W had jewellery store. They could not afford insurance so purchased an alarm system. In purchase agreement, it read that consumers would receive a response if alarm was triggered. Comp was robbed, P triggered alarm & ADT did not response. Agreement contained EC/limited liability clause - if neg, only liable to pay 1 yr prem.

tio: A sophisticated party is not entitled to they did not assent to an EC if lang of prov is ar /unambiguous unless pressured/rushed into signing K ld: EC clause in agreement w Dominion Electric enforced. PU cannot recover damages in ess of limited liability cause alysis: In K, EC was highlighted in bold letters on the K, it's lang was clear and ambigious, nothing was done to mislead the reader, P was not rushed/pressured into signing fact that P is a small business is not enough to warrant court intervention

s

Tercon Contractors Ltd. v. BC (Minister of Transportation &Highways (2010), (S.C.C.) Tercon bid on a contract tendered by the Prov of BC awarded contract to another bidder. Tercon sued Province for breach of terms of the bidding contract.. Province attempted to rely on exculpatory clause

tio Cts have no discretion to invalidate a valid Kual exclusion unless, (i) unconscionable ed on the circumstances of the case, OR ii) establishing, overriding paramount public cy consideration sufficient to trump FOK and defeat otherwise K rights of parties. e of interpretation: If ambiguity of EC cannot be resolved using construction rule, contra ferentem applies, and it is interpreted against party who benefits from it.

ysi

Tercon points to the public interest in the transparency and integrity of the government tendering process (in this case for a highway construction contract)

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SC Obligations Rule 2 of the Rules of Professional Conduct - Relationship to Clients (Relates to mortgages)

01 ompetence

“competent lawyer” means a lawyer who has and applies relevant skills, attributes, and values in a manner appropriate to each matter undertaken on behalf of a client

02 - Quality of ervice

The Act provides that a lawyer fails to meet standards of prof competence if there are deficiencies in (1)L'ss knowledge, skill or judgement, (2)L's attention to KL's interest, (c) records, systems or procedures L's business, or (d) other aspects of L's prof business, AND deficiencies given rise to a reasonable apprehension that quality of service to KLs may be adversely affected.

03 onfidentiality

L shall at all times hold in strict confidence all info re busines and affairs of client acquired in course of prof relaitonship and shall not divulege such info unless impliedly or expressly auth by KL or required by law to do so.

04 - Avoid of onflicts of terest

(2) L shall not advise or rep more than side of dispute, (3) Lnshall not act or continue to act in a matter when there is or is likely to be a conflicting interest, unless after disclosure adequate to make an informed decision, the client or prospective KL consents. (12) L may act for /represent lender & borrower if (a)L practises in remote location/ no other Ls could conveniently be retained, (b) lender is selling real ppty to borrowr and mortgage represents part of purchase price (c) lender is a bank/trust comp/insurance comp/ CR union or finance comp that lends money in course of its business, (d) consideration for mortgage does not exceed $50,000, (e)lender and borrower not at arms length as defined in Income Tax Act

05 Conflicts om Transfer /w Law Firms

L or firm is disqualified from representing a client where transferring lawyer actually possesses relevant info re: a former client that is confidential, and if disclosed to a member of the new la frim shall prejudice former client, exceptions in sub 4 like client consents or in the interests of justice

06 Doing usiness w a ient

(2) where a client intends to enter into trans with L or corp or other entity in which L has interest - (a) full disclosure, b) ILA, c) obtain client's written consent, (4) (a)L shall not worry money from client unless client is a lend/financial institution/trust or insurance, or similar lending comp, (b)KL related person as defined by Income Tax Act and L discharges onus of showing client's interest were fully protected. (6) - Ls in Loan/Mortgage transactions - (a)L shall not hold a syndicated morrg/loan in trust for investlor unless each client receives (i) complete reporting letter on transact, ii) trust delcaration signed by legal tite holder of mortgage/security intrstument, iii) copy of duplicate registered mortg/security instrument, (b) arrange recommend client's participation as investor in syndicated mortgage unless ILA, (c) sell mortgages or loans to or arrange them for clients except in accordance with skill, competence, integrity usually expected of a L in dealing with KL.

07, L cares for ppty as ould prudent careful owner

08 Fees, Interest according SC Act

09 Withdrawal from presentation

Preservation of KL ppty - L shall care for a client's ppty as would a prudent and careful owner, must observe all rules Fees & Disbursements - cannot charge interest except as permitted by Solicitors Act - except for justifiable cause and upon notice to KL appropriate in the circumstances

Facts

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RECTIFICATION Strategeas v. Lloyd Parish Holdings Limited (1991) duty to bring mistake to attention of L acting for other side (Glasner) PU buys resto from V, who was also lessor. APS also provided for PU to lease from V the premises of resto.5 yr lease was negotiated w/ 3 five year options - tenant could exercise each option so that it would be entitled to a a 20 year lease min ; LE/V's lawyer prepared lease on standard forms, contained sale & demolition clause giving landlord right to terminate lease; V’s lawyer crossed this out but a later version of the lease still had the clause; PUs lawyer saw the lease b4close, but did not notice sale and demolition clause; deal closed; later, LE wanted to sell the premises, and tenant was given notice of termination, tenant goes to lawyer who notices clause

RECTIFICATION principle for cases of mistake: “essence of rectification is to bring the document which was intended to be in pursuance of a prior agreement into harmony with he prior agreement”, courts will apply if i) King parties having reduced into writing the negotiated agreement but , ii) a mistake was made in the wording of the final written K altering the effect of the agreement

Analysi

V's lawyer should have known tenant’ s L made a mistake & had a duty to point out the clause as it was a significant change - was negligent in not reviewing lease agreeent Look to what was the real deal b/tw parties ? - In this case crts altered doc to give effect to the real deal i.e. without sale and demolition clause

Ratio Even if L is negligent in not noticing a significant change to the original agreement, he party/lawyer making the change has an obligation to bring it to the attention of the other, or court may apply rectification

Facts

Performance Industries Ltd. v. Sylvan Lake Golf & Tennis Club Ltd. (2002), S.C.C. 22 (Principles of rectification) sale of golf course to limited co (PU). V included future option to buy back a piece of land 480 yards x 110 yards to build two rows of houses; His L did not notice that final agreement read 110 feet vs. 110 yards; PU saw the mistake, told lawyer not to say anything and knew the V had not seen the mistake prior to close; V tried to exercise option to buy this property to start development and noticed mistake

Purpose of rectification: to prevent a written document from being used as an engine for raud Rectification is an available remedy FOR (i) unilateral mistake (or mutual mistake) if PL shows, with convincing proof (slightly higher than BOP): Oral agreement not written down properly, D (ought) to know of the error, AND taking advantage of such error would amount to "fraud or equivalent “ P must show "precise form" in which written agreement can be made to express prior intention crt's task is corrective (to restore bargain), not speculative; Punitive damages only awarded if (1) compensatory damages are insufficient, and (2) denunciation is necessary

Held: D PU liable for damages. (He instructed his L not to raise mistake) Court ordered ectification and compensatory, not punitive damages. Corporate veil was pierced to hold he principals of the P personally liable..

Duty when retained after APS is signed Wong v. 407327 Ontario Ltd. (1999) (L not liable for closing transact with shell co. V)

Fact L was retained during a transact where APS from P that was already signed. There was a warranty in APS whereby V warranted business made a certain amount of money. L turned the case over to law clerk, after close, the warranty was not fulfilled – business made much less money. But Vs Company was ltd and had no

Rul

P a g e | 69 assets. P sued lawyer on the basis that he should have acquired some security in the event that there would be a breach of warranty A knowledgeable lawyer would explain to client the risk of an unsecured warranty from a numbered company. A lawyer’s duty to a client will vary depending on 1) client’s instructions and 2) limits on the lawyer’s retainer – 3)the sophistication of the client also has role in determining what advice lawyer should be giving to client (business, legal – where to draw the line).

HERE: L was not negligent in not attempting to renegotiate security; his retainer was to close the deal Ratio Retainer of L before APS is signed triggers obligation to negotiate security for warranty; No such duty arises if retained after APS is signed. The instruction is to conclude ransaction Enns v. Panju (1978) (B.C.S.C.) (L liable for not explaining deficiencies of signed APS)

Facts

A young lawyer was retained by PU after APS was signed APS - very deficient in financial protections but b/c it was already signed, L felt he couldn’t add reps/warranties. L did not advise PU of the risks she was exposing herself to by completing transaction. He closed the transaction. The business turned out to be a disaster. Enns sues her lawyer. Lawyer argues: had to close, as APS was already signed.

Analysis

L should have advised client of the risks associated with closing the transaction without the appropriate clause(s) in the agreement. ; KL left exposed, to great risk, with none of the usual clauses of devices to protect her with regard to financial result, if she closed transact If L had fought or attacked validity of APS, then it would probably have been unenforceable. Lshould’ve advised her risks of not closing vs. closing (possible win) Burden on the lawyer was beyond his expertise at the time but… One who holds himself out as competent practitioner and undertakes the responsibilities of representing the interests of clients in respect of transactions of vital importance, cannot be excused because he/she fails to command or exercise the standards of professional skill and conduct on which those clients are entitled to rely.

Ratio: (1) SC has duty to exercise reasonable skill and care to advise client, that includes a duty to warn clients of risks involved in a course of action contemplated by the client; (2)IF SC fails to warn client, AND to warn of risk AND p probable that client would not take risk had he been warned, SC will be liable Held: D L liable for negligence. Client’s agreement was missing usual clauses or devices to protect client.

Graham v. Diamond (2010) – no duty to negotiate better deal for client absent serious risk

Facts

Motion brought for summary judgment by D lawyer dismissing the action against him. DSC had acted for the PLs in connection w closing of a residential ppty. SC received APS after all conditions had been removed incl financing, home inspection or environmental inspection. After PUs moved in, discover ppty was contaminated and are suing L claiming he failed to inform them about need for env/house inspection.

Analysis

no evidence that KL ever raised env concerns to L; advising PU not to close would have subjected them to damages/SP; no law to suggest that PUs were entitled to env/home inspection unless in APS PUS asking the court to find that D should have closed the barn door some days after the horse had bolted the stable. (did not instruct him to get better deal, even if so instructed - deal was already signed)

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Ratio When a L is acting PU regarding a signed APS, SC does not have duty to negotiate a better deal for clients unless APS discloses serious deficiencies/risks Held: Action against L dismissed on SJ. L found to have no duty to inform client about need or env inspection

Facts

835039 Ontario Limited v. Fram Development Corp. (1994) duty to take care proper care re time is of the essence provs Developer PU is buying parcel of land from a builder V for 6.8 million on cond th that V service land prior to closing date, July 27 1990. V & P a right to extend cond for 6 months (on the vendor’s side--in case the market declines). The market does decline, and V instructs L to extend cond. L dictated notice and left it on secretary's desk. Notice is not received in time by PU, so cond never extended, so PU exercised option to rescind from transact. V sues his L

Ratio: V has a duty to ensure proper fulfillment of duties pursuant to time sensitive K provisions Held: L liable for negligence. V awarded nominal damages b/c chances of successfully ulfilling condition in question would have been minimal He took no steps to ensure eceipt of fax to ensure other side received notice of extension of provision, and could have done so without impeding himself.

Gunraj v. Cyr (2012), Ont. – duty to discuss alternatives to signed APS arises sometimes

Facts

Ps brought a ppty they intended to buy and resell. They waived APS conditions of inspection. Before closing however, PUs became aware that there could be erosion problems that could affect ppty development, and retained a L after signing. PUs close on advise of their counsel. They could not develop ppty due to erosion and sold at a $4000 loss. PUs sue lawyers for BFD/BOK. Ls bring a motion for summary judgement to dismiss action. . A

Analysis

No evidence (like reporting or opinion letter or memos) that L had discussed all of client's options PU testified that L had directed them to close transact - were any reps made outside of agreement? Risks of closing vs. not closing?.

Ratio : Lawyer may have a duty under certain circumstances to discuss alternative options even after a signed APS, depends on the nature of the sale property. “Law is clear. L is not a client’s insurer. Just something goes wrong doesn't mean it's our fault." Held: Action for negligence dismissed on SJ. L not liable for negligence. APS contained nothing about erosion problems to trigger L’s duty to discuss alternatives so PU instructed to close. PU had waived inspection cond

Facts

669283 Ontario Ltd. v. Reilly (1996)– L liable for negligence on limited retainer PU purchases an apt building, and hires L on a limited retainer for specific tasks. After close, rent review board restricted rental rates being charged b/c they were in excess of guidelines in effect @ that time. PU experiences significant loss because purchase price of sale ppty proportionate to its rental income. PU sues lawyer for negligence for failing to warn PU of rent review legislation. L claimed LR did not involve checking rent review legis b/c PU was going to do it themselves.

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Ratio: L has a duty to ensure LR is documented in writing, and that that client understands the risks of a LR vs. a typical retainer. When L is acting on purchase of an apartment building, , SC has a duty to verify legality of rent absent express contrary terms of retainer Held: L liable for negligence. He did not rebut prima facie negligence. LR was not documented at all by memo, nor in reporting letter. Reasoning. The fact that APS was signed and client had already waived conditions does not ustify his conduct.

Yamada v. Mock (1997)- duty to verify identity of clients

Facts

L was retained to act for lender and borrower. L was called up by broker and was told that H and W were coming to see him. Broker described gen characteristics of W was of Japanese origin. L met with KLs and thought they were honest and respectable people. There was nothing to indicate that H was a criminal and W was an impostor. The mortgage was signed. It was a forgery. The woman who purported to be Ms. Y was an imposter

Ratio SC has a duty to take reasonable steps to protect the interests of the party that she is erving, and includes eliciting identification to validate the purported identity of her clients. t reduces likelihood of fraud; The ID required depends on the nature of transact.; If multimillion, then passport instead of licence. Robinson v. Royal Bank (1996), Duty to obtain written understanding of clients IF they choose not to follow your advice or warning regarding serious risks

Facts

H&W separated, working on reconciliation, she finds out he forged her name and mortgaged the ppty; she became aware of this during the initial consultation; she told L they were working on reconciliation and she did not want charges to be laid; didn’t work, they separated again, she argued she would not pay mortgage as it was fraudulent

Held: Bank can enforced fraudulent mortgage against W. Wife was estopped from relying on H’s forgery to avoid personal liability for mortgage. She failed duty to disclose that H committed forgery to lender. She assumed the risk when she chose to withhold this nformation. Ratio: L has a duty to inform client of the risks of her actions, and should obtain written documentation where client chooses not to follow your advice despite risk of legal exposure of her decision.

F

Harelav. Powell (1998) (when L is retained before APS is signed, high onus to defend negligence) PU submits offer (to build cottage facing water), prepared by agent, cond upon obtaining a building permit; Before close, L receives confirmation from BI that they could obtain building permit easily. A year later, PU discovers there are sig building restrictions, committee approval that there are restrictions to build, work at a sig cost. PUs got permit after huge delay, expense and not in desired location. P sued V & L

Ratio: Public expectation requires SC has a duty to know what a client’s plans are where it s clear that client intends to develop vacant land - implications of the zoning by law are critical and should be reviewed with the client Held: Agent and L liable for negligence. They failed to take time to inquire about client’s plans.

Facts

Turi v. Swanick (2003), OR(L's duty to advise about risk to unsophisticated parties is higher) KL wants to incorporate a comp, Italian Trends Couture Inc to avoid any personal liabilities or debts that might be incurred. KL never used words limited in invoices. When KL's company went under, he was sued personally. KL did not use "Co" in invoices/service Ks. CR successfully sued KL. KL sues his L for negligence.

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Ratio : Scope of duty to advise in relation to risks and consequences may depend on the evel of sophistication of the party : Lawyer should write memo of advice to client and have her sign it Held: L liable for negligence. Court believed that L advised client re proper use of corp name but did not advise on risks for improper use or failure to do so in context of business transactions by sending out memo.

Facts

Obligations of SC in relation to Independent Legal Advice & Marriage Ks Le Van v. Le Van (2008) – Lawyer providing ILA has duty to fully disclose any potential conflicts of interest; This L acted for H’s L during his first divorce W and H are to marry. H is very wealthy and has informed W that a prenuptial agreement must be entered into before they get married. W dismissed 1st L and H refers W to a 2nd lawyer in a large firm who acted for H's lawyer during their first divorce. L2 gives advice about prenuptial agreement to W. W goes to L and notes that prenuptial agreement is terrible. W signed it. H did not make full disclosure of assets initially to W.

When providing ILA especially in relation to family law matters, (1) Explain risks and consequences of domestic K; and give time for consideration; (Mrs. L igned same day) 2) Refuse to act if transaction is shockingly unconscionable; or obtain client’s acknowledgement of your advice regarding serious risks 3) Full disclosure of any conflicts of interest, like special relationship here is very important Korz)

Facts

Stevens v. Stevens; Epstein Cole et. al. (2013) ONCA (follows Glasner, Performance regarding rectification principles) Marriage broke down. Before this happened, MK established - H was to pay 1/2 of value of MH. W & L were not aware that marriage K signed containing drafting error. Covering letter says we agree to pay H one half of MH, but K said W would pay 100%. H's lawyer did not see it but H did. When W finds out,asks for marriage K to be set aside b/c realizing she was giving her H too much vs. rectification

Ratio It is the SC's duty to turn the mind of the opposing lawyer to an obvious mistake in a (marriage) K. Rectification principle: Failure to do so may result in court exercising equitable jurisdiction to relieve a mistake in fraud/circumstances amting to raud/misrep. IF 1) 1 party knowing of the other’s mistake as to the terms of an offer remain silent and, (2) concludes a K under the mistaken terms NWS that party ought to recognize mistake

Facts

Outaouais Synergest Inc. v. Keenan (2011) no good faith duty in pre-K bargaining process, follows (York Condominium)) V & municipality, enter into an agreement such that whoever is going to develop ppty has to pay city $950,000, and that when city acquires this payment, parcel would be returned to V. K was not registered on title (V & L know about K), V sells ppty. PU's experienced L searches title, sees City's 1 foot reserve, and thinks it would cost very little remove. V and PU close deal. When PU proceeds with removing 1 foot reserve, discovers cost is 1 million. He sues V, V'L, and his K for failure to disclose

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Ratio: Duty that individual lawyers owe to one another is unclear .An L would expect the other to act in fair and honest dealing; or that lawyer would disclose collect-back clause, but V's lawyer had no obligation to do so. Held: V nor L had duty to disclose clause clause. P’s L iable for negligence, should have requisitioned

Facts

Meier v. Rose (2012), (SC when retained to prepare a will – verify registerd owner of ppty ) D SC was retained to prepare a will. KL wanted to bequeath part of his farm ppty to brother. The gift failed b/c KL's company, not client, owned the shares in farm ppty.

Ratio (1) SC owes a DOC to a TP beneficiary created by the retainer to prepare a will for

estator; (2) The reasonable SC has an obligation to use proper care in carrying out nstructions to effectively confer intended benefit to TP beneficiary...Lawyer is not an order taker Held: L for testator was negligent in failing to bequeath to proper beneficiary. Damages assessed for value of land that PL beneficiary would have inherited. Time limits were not excuse for failing to conduct title search or to request information as to registered owner of ands in question What a reasonable SC in 2000 would have done

Facts

Thompson Family Trust (Re) (2011), ONSC (K barring KL from making a LSUC complaint NO) Action by Bs against lawyer acting as Executors. Bring action asking for accounting. They entered into a settlement, Ls, who didn't think they did anything wrong, agreed to settle, reduced fees. One settlement prov was to withdraw complaint to LSUC, we've settled it, couple sisters involved, sister said she was going to

Ratio: Terms of settlement that bar a client from reporting a SC to LSUC are not enforceable because it is a public interest issue that extends beyond the private interests of parties. LSUC is mandated to protect public interest.

Facts

Maranello Autobody Inc. v. Freidman (2012) Parties were involved in action in Small Claims Court. PL was mostly successful, and made submissions re costs. PL — was entitled to compensation for D's unreasonable behaviour, but it should not be compensated for lawyers' inefficiency.

LSUC) Rule- When acting as an advocate, L has a duty to refrain from deliberately withholding any binding auth that L considers to be directly on point that has not been mentioned by the opponent; otherwise to tantamount to misrepresentation . When in doubt, one should disclose Held: L in this case did not breach duty. He clearly believed cases were not point.

Facts

6038212 Canada Inc. v. 1230367 Ontario Ltd., 2014 ONCA ( follows Gunraj) Appellants purchased a contaminated ppty from respondents. At time of purchase, V(R) was in possession of 3 env reports, two of which disclosed contamination and remediation costs of up to 150K. 3 yrs later, PUs (A) discovered contamination through migration to an adjoining ppty. PU is suing V for failure to disclose contamination, and L for P was negligent in failing to request env info from V, and failing

P a g e | 74 to ensure env contamination incl in warranty.

Analysi

(A found not to be a credible witness) - (1) TC said he knew about contamination, had received all en reports (denied receiving any) and chose to waive env cond in APS before close. A was a sophisticated party - PHD in chem, experience in RE matters, obtained reduction in purchase price of $200K L for PU was not negligent - she had A sign waiver/consent acknowledging L had recommended undertaking env assessment, A was unwilling to conduct any further investigations

Ratio: A SC does not necessarily have an obligation to request environmental reports in the absence of client's instructions. Held: Action against L dismissed., not negligent for not equesting env reports. L for She ensured her client signed a waiver/consent acknowledging L had recommended undertaking env assessment, BUT that A was unwilling to conduct any urther investigations

TITLE & TREB APS Real Estate Board Form clauses in APS   

    

Closing or Competion Date Clause 2 – (condos – occupancy and closing date) Requisition submission deadline Clause 8 Marketable title, Clause 10 – valid objections on title that V cannot remove, remedy or satisfy entitle PU to withdraw from transactionP conclusively deemed to have accepted the title if no requisitions made by requisition date .PU is buying good and marketable title free from encumbrances except for (a) registered easements, (b) registered restrictive covenants); o Cross out save and except for any registered restrictions and covenants… that run. REPLACE with search not done yet, so I don’t know if there are reg restrictions or RC Binding undertaking ,Clause 12 - binds PU to accept personal undertaking from corporation/trust company if V unable to provide discharge(but not to individual undertakings) o change boiler plate before APS signed if applicable Apportionment Clause 18 – adjustment of fees upon conveyance like ppty tax and utilities payable by Buyer after closing day. Time is of the Essence Clause 20– obligation to perform condition within K’s deadlines subject to negotiations between V & P Tender Clause 21 parties must be ready, willing and able to perform to tender EC Clause 26- excludes V’s liability for representations outside of APS package like schedule or SPIS

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Definitions   

Requisition - necessary searches and checks on a sale ppty done by PU Letter of requisition : sets out defects, objections to title (asks for answers) Valid requisition - Must be submitted 5 days before close, except requisitions relating to root of title, matter of conveyance; Lawyers who do not requisition in time liable to negligence  P's rights of V is unwilling or unable to satisfy requisition  P can waive the requisition (and take the title with the defect) (use title insurance) OR dissolve K, deposit returned; V may not intend to answer if market value increased  Title insurance - insured pays premiums for insurance coverageprotecting against losses due to title defects (usually even if existed before PU bought home)  Matters relating to root of title constitute total failure of consideration Examples Planning Act Violation or encroachments , trust property  Matters of conveyance (e.g. mortgage)- those matters by which the V alone (or with other persons whose concurrence he can require) is in a position to convey title to property IF V is not entitled as of right to obtain a discharge of an encumbrance then it is an objection to title.

Objections to Title and Rescission Clause (Koffmanv. Fischstein (1985)P has right to requisition encumbrances or leans on title

Mason v. Freedman, [1958] S.C.R. 483- V must act reasonably& in good faith to rely on s 10 PU requisitioned that W signed away her dowry rights. Ppty value increased. V is unwilling/unable to get wife's signature and wanted to give back deposit.. PU didn't want to rescind because of increase in ppty value, but did not want to take defective title. PU sues on basis that V fails to make efforts to try and answer on requisition

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atio: V who seeks to rely on title and rescission clause must (1)act reasonably and in ood faith and (2)not in a capricious or arbitrary manner. Courts use objective RB easure to assess (1) conduct, (2) reason for not fulfilling requisition eld: V could not rely on s 10 clause. H had made no effort to answer requisition, was a eliberate failure so can’t use clause to escape his obligations.

Mink)A V's answer to the effect of satisfy yourself where PU makes a number of requisitions not a reasonable exercise of rights under s 10.

Easements (not a matter of conveyance) TP right of access to land for or specific purpose (such as sewer, utilities etc).; Often requisitioned to legally escape requisition on a technicality in accordance with s 98 Stefanovska v. Kok (1990) (enjoyment and use of ppty test) Title search uncovered Easement in favour of Markham, allowing for maintenance of storm sewers, “lands must remain clear and unencumbered by buildings, improvements, structures or expensive landscaping” which precludes extensive landscaping by owner. V offered abatement, yet P requisitioned for removal of easement, or otherwise rescission. P held that this would restrict her in enjoyment of land since would restrict landscaping desires of P ; P refuses to close - and the market is going down

rinciple - Defect in title must affect the use and enjoyment of the property in materially gnificant way so as to be a valid requisition. (Equally applicable to all requisitions) EST: Does the impediment to title in any sig way affect P's use and enjoyment of ppty; onsider: (1) location of easement, (2) size, (3) P's subjective considerations bjective – determining of validity of PU’s refusal ; if deficiency is material ubjective element - PU's feelings, motive relevant if it casts doubt on legitimacy of refusal to ose transact

eld: Requisition of easement invalid, not grounds to escape transaction. easoning: PU would not have built over easement; could Easement did not preclude ndscaping, only extensive and expensive landscaping. Court took judicial notice that arket decline was P’s true motive

s

Phinny v. Macaulav (2007) (L's obligation in case of easements- qualify your advice) L for PU made a requisition for easement. V did not answer PU's requisition and PU refused to close transaction.

tio: Qualify your advice to Client. Here, PU lawyer told his client that he did not have to se, but was wrong in end because judge said requisition for easement was not valid ld: Nominal damages awarded to V b/c damages were not mitigate. PU could have been le for tremendous damages

cts

King Lofts Toronto Ltd. v. Emmons, 2014 ONCA 215 (title insurance, SC obligations) Before closing L advised PU that Toronto owned laneway, built in 1919. under 1 of 4 sale ppty, 2.5 million dollar transact. L advised PU that this was a minor issue which would be covered by title insurance. After transaction closed,. Later PU received offer for purchase 4 ppties. P2 makes requisition to remove easement, and City will do so for 106 K. PU1 pays city 106 K to close transact. PU1 sues L for failing to explain easement could cost him money even w/ title insurance. L did not read insurance policy

atio: SC must exercise reasonable care to warn a client about legal consequences and risks volved in a transaction, including legal risks and consequences for easements, title surances limits. eld: SC law firm liable for negligence in failing to warn PU about sig legal consequences& sks of purchase, that City might insist being paid for lands being conveyed, & title insurance ouldn’t cover payment

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Encroachments (goes to root of title) Principle Requisitionscan be made out of time. They cannot be detected without a survey,

ordinarily requested to determine whether property has been built in accordance with municipal bylaws. Stefanovska: Whether or not an encroachment entitles PU to withdraw from transaction depends on whether encroachment affects use and enjoyment of ppty (a) how long has it been there, (b) easily removable? Koo v. Redhill (1993) Sale ppty encroached on neighbouring ppty from 1.5 to 3 inches. PU did not want to close for fear of being sued. PU's lawyer took position that this was a serious matter and in a letter of requisition required that solicitors for V requisitioned that encroachment be resolved?

ld: PU bound to transaction b/c requisition for encroachment was not valid. Building roached from 1.5 to 3 inches, had been there for so long, so minor, that PU could have ned possessory title through AP, therefore the encroachment did not expose PU to litigation

s

e

Zoning & Work Orders

(not a matter of conveyance)

Must be made in accordance with s 8 deadlines, not a matter of conveyance Kelly v. Semple (2010), (distinguished from Koo, unique ppty, shed was an overall selling feature) Purchase of cottage ppty. Its lakeside storage shed did not comply with zoning by laws (cottage did). It was convenience to store watersport items beside dock. PU requisitioned that shed did not comply with zoning. V responded that requisition was not valid on grounds that it was a shed, not actual ppty in question cottage. Shed was there for years and V never had a problem w city (Stefanovska) test , places greater emphasis on needs of PU if frustrated, but legitimate

ld: Requisition that shed did not comply with zoning was valid. PU 2 was entitled to rescind. asoning: Cottage is not a conventional ppty. Here, the fact that storage shed had to be ocated in a diff area entitles P to repudiate transact, b/c PUS are buying for their family, incl dren. One of the main uses for property is watersports. Lake-side location of the storage d was a a positive selling feature of the overall property. (ppty listing referred to it))

cts

Covenant (root of title) Todd v. Haslofer (1983) OR L acting for PU while searching title he sees that a restriction was registered on title saying you can’t build on the rear part of the lot, thereby restricting how ppty could be used; THUS P could not get a building permit where he wanted; V knew P wouldn’t be able to get building permit where he wanted but did not disclose to P; P requisitions that RC be resolved; V, PU purchased ppty according to clause 10

atio P cannot requisition a restrictive covenant where clause 9 of the APS has not been ruck out - and a V has no duty to disclose such a restrictive covenant

Right of Way

(not root of title, s 8 deadline)

Blinkhorn v. Ainsworth (1986) (Ont. C.A.)

ELD: Lawyer for PU did not make requisition on time although would have been valid if ade in time, but PU was ou t of time, so not a valid requisition and thus no rescission; Lr eld liable for failing to make requisition on time RULE: A Requisition must be made ithin timeframe stipulated – does not go to root of title Moorcroft v. Doraty & Kabe (1990)

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PU consults L on each offer in search for res ppty.. Retained L after offer accepted. L never entioned right of way t of when PU signed closing docs. L searched title and found right of ay . eld: L negligent for failing to ever call PU's attention to registered right of way, reporting ter atio: SC for PU in RE T must ensure that his clients understand the contents of the initial reement and that all risks are clearly explained. Obviously, he must search, before closing, d at the very least make full disclosure of all relevant information yielded by the search.

How RET works wrp to Mortgages

rinciple on Requisitions for Matters of Conveyance –

incl mortgages

equisition - P must requisition the mortgage statement. The lender will issue a mortgage atement which states the amount owing on the mortgage .

U's options before close -1) Requisition discharge of the mortgage or 2) assume it

djustments take effect on closing date -, PU picks up mort balance, V will prepare atement of adjustments.

ow transaction closes? Mortgage statement requisition from P, V answers, Direction from V, Undertaking for Payment, Mortgagee issues discharge, release of money and transfer of title happen contemporaneously

OTE : IF P is short on amount owing at close, - may obtain VTB mortgage or assumes gher mortgage

efinition of terms

ndertaking Directions: V will sign a direction to the P indicating how funds should be made payable (to law firm, directly to mortgagee etc.)

ndertaking: L for V signs personal undertaking to issue a mortgage - pay off mortgage to mortgagee or whatever entity applicable, give outstanding balance (less mortgage) to V.

ortgage statement: To ascertain the amount owing on the mortgage, a mortgage statement must be obtained by he mortgagee. This sets out the amount required to obtain a discharge. ndor take back mortgage - A type of mortgage in which the V offers to lend funds to the PU (take security on it .e. by getting a mortgage from the P, for whom it will be secondary mortgage), V becomes lender for balance of purchase price ould get a higher mortgage

cts

McFadden v. Pye (1979), 6 R.P.R. 198 (Ont. H.C.) P made two requisitions - one requisition involved an easement running through the rear 20-30% of the land, could not plant trees or structures, P requisitioned the removal of the easement and a discharge of the mortgage; V’s lawyer replied that requisition wrt easement was out of time (though affected use & enjoyment of ppty); V also said WRT the discharge of the mortgage that a direction would be given to make funds payable to the firm, and the lawyer would undertake to discharge MT at closing; P’s lawyer wanted an actual discharge and refused to accept the undertaking

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atio

PU does not have to accept an undertaking to obtain discharge, rather has a right to demand the actual discharge of the mortgage unless it is a term of the APS (Now a standard APS , TREB clause 12)

alysis

cts

ati

V could not produce discharge so PU was entitled to withdraw from transact. Had requisition relating to easements been made on time, could have been used by PU to get out of deal

PU was entitled to withdraw from transaction, is entitled to return of deposit Polischuk v. Hagarty (1983), (Ont.C.A) L for PU requisitioned discharge of mortgage. Practice at time was that L for PU would pay balance due to L for V in exchange for personal undertaking that V would give a mortgage discharge. L for PU gives mortgage amount to V's L. L for V commits suicide. He'd taken funds, but did not discharge mortgage. P paid money but still has mortgage registered on title, and criminal compensation fund didn't pay enough so PU sues L for negligence in failing to acquire good and clear title as instructed.

L for PU may be liable for negligence for failure to discharge duty to get P good and clear title in case NWS The custom of paying mortgage balance to L for V in exchange for personal undertaking to discharge mortgage L was negligent. He should have gotten mortgage statement and paid mortgagee directly.

Time Provisions/Tender/Good Faith Steps of analysis: (1) Did claimant act in good faith, consider market conditions and surrounding circumstances, (2) Was there TOE breach – Anticipatory? ; Was claimant ready, willing & able to tender?

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Principle“Time is of the Essence”, requisite duty on claimant to act in good faith

 

   

Party entitled to waiver must waive cond w/in time limit specified. King v Urban County Where a party fails to perform a K term w/in specified time limit of K cond, K does not necessarily come to an end. Party wishing to rely on this TOE provision to terminate the IF he shows that he is ready, willing and able to close, by way of tendering the documents  At closing, if a party says not going to close, the other must tender to terminate A, precondition to suing for compensatory damages.  Anticipatory breach if before closing, if party says they are not going to, the other party need not tender as precondition to suing for compensatory damages  Fanscali v Brody - If neither party is ready to close and the closing date passes Either party, if he wishes, may reinstate the transaction subject to conds: (1) give notice to other party (2) REASONABLE date, expressly subject to time is of the essence. Where transact is reinstated validly and other party refuses to close, he is liable for damages for BOK. Towsend unreasonable - A rescheduled closing date is not reasonable if reset to after Comm. Of Adjustment hearing date; can’t be 5 years into the future Lucky Dog Party wishing to rely on time is of the essence to be entitled to withdraw from transact must act in good faith. If he does not fulfill good faith duty, then party is precluded from relying on TOE prov. NOTE: Escrow: - where document(s) or money is given to a 3P to be held in trust until certain terms and conditions are satisfied, at which time the third party is to hand over the document or property to the promisee. NOTE: closing times: if no hour of closing on close date is specified, closing date is open until midnight of following day.

Principle Good Faith 

Le Mesurier v. Andrus ONCA;King Each party owes a good faith duty to the other to try to resolve title problems and to perform K. To determine whether good faith duty discharged, objective standard used to evaluate merits of any complaint by P AND imposes a high not perf stand of performance on V. Once APS is signed, the court’s policy is to favour the enforcement of honest bargains. Breaches – cannot rely on TOE Not a breach – can rely on TOE Jackson;Union Eagle PU  GF Koffmanv;Lucky Dog PU is considered to breach failed to pay deposit within duty to act in good faith where he intentionally delays time specified, 2 days after notice of requisition until the closing date, and has due .Time is of the essence. If advanced knowledge of objection regarding a matter. transaction is not completed as  GF Citation Realty Inc V is in breach of good faith scheduled, then party relying where he acts in dishonesty, and would be precluded on time is of the essence from relying TOE prov provision is entitled to avoid  (Leung) Reliance on a minor issue to avoid transact . transaction, unless acting in (Vandervliet – PU liable for 156 K, interests and bad faith. Here not in good costs) If PU ; was wrong .about issue upon which he is relying to avoid transact, still liable PU is sued for BOK by faith, but not “BAD”:. V, takes pos that requisition on consent of municipality for sale of residential ppty, goes to ROOT of TITLE  Carreno, Martens EstatePU not entitled to rely on TOE prov to terminate transaction on basis of requisition to open building permit. Commitment to title insurance sufficient

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

(Leung) extends to cases involving minor omissions or defects. If error is so minor that it could be corrected w/in a day, then there is an obligation to disclose NWS minor defect.

Remedy - Damages or SP Principle: A claimant is entitled to SP in lieu of damages damages for BOK in re to real

property, if she can establish (1) the property is unique for its proposed in the sense that a substitute would not be readily available or is not cannot be easily duplicated elsewhere (2) objective-subjective determination (Southcott). (3)Otherwise, claimant is only entitled to damages, (2) triggers a duty to mitigate, (4) assessment of market value at date by what is fair in the circumstances of each case. (Semelhago)

Certificate of Pending Litigation To be entitled to a certificate of pending litigation, PU must establish that sale ppty is unique… on a motion. PU seeks this when he thinks V is in BOK, and does not want V to sell land. Date and Measure of Damages  Southcott If damages assessed at date of trial, claimant must have mitigated. Otherwise, assessed at date of breach.  If V retains property to speculate on market, damages will be assessed at date of closing

Duty to Mitigate Innocent party has a duty to mitigate losses resulting from BOK  Southcott PU cannot excuse duty to mitigate on grounds that limited purpose company has no assets Principals could have injected resources into company similarly to providing deposit

SP Defence – Financial Hardship: determining hardship vs. uniqueness of ppty  De Franco D was unsuccessful . PL’s claim was stronger; found to be highly credible.  Prager, successful , D successful – V’s hardship outweighed uniqueness of ppty. Former committed psychiatric patient, when released, continued lived alone under DR’s supervision    

Broad Application of Semelhago in Commercial Context (Levy Suntrack)Applies to land assembly if PU has already bought surrounding land A unique lot may entitle PL To SP (Barzec Windsor )Not usually applicable to RET re: apartment buildings absent qualities of uniqueness re architecturally unique, location not aesthetically irreplaceable (Canamed) PL granted SP for purchase of building. Only 3 sim buildings for PU’s purposes. Had already purchased 2. Residential Context Court will look at religious, educational, children, family: in determining whether property is unique, like proximity to mosque

Scope of Damages  Claimant may be entitled to damages for expenses incurred resulting from delay in SP  (Tessler) If it is in the reasonable contemplation of PU that the V is purchasing another ppty, then PU will be in responsible for these damages. Here, V1 was sued by V2 after P1’s BOK w V1. Damages was that V1 could no longer afford to buy the other house.

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outhcott Estates Inc. v. TCDSB 2012 – Facts

incorporate a shell company for sole purpose of buying part of a land parcel from TDSB. If it's only selling part of land , it must obtain approval for severance from the adjustment committee. V creates agreement conditional on taining committee of adjustment approval. TDSB getting overtures for other portions of parcel at a much higher ce. Once conditional period begins, TDSB withdraws from transact on ground that committee approval has not en obtained. V in this case decides to sue for SP, on grounds that PU is in breach of agreement b/c V did not act in od faith in obtaining consent

eFranco v. Kliatri (2005) – Reasoning home is one of the most sig acquisitions in one's lifetime/ Not

rprisingly, subjective factors feature prominently in the selection of a home (Objectively - V's home is located in a w subdivision, in proximity of houses that appear to be similar); Subjectively - Special features from view of PU - 3 r garae, on a cul-de-sac, little traffic and safe for young children and PL was also pregnant .Other kids in area for s

OCCUPIER’S LIABILITY ACT what is the exposure that the lender, mortgagee has when he takes possession of the properties? Principle – Act imposes positive obligation onto occupier or owner to maintain the premises in a safe condition. An occupier includes a person who is in physical possession of the premises, and owes a duty to take reasonable care to ensure the safety of persons entering the premises.

 Mortimer THE OWNER of a property has an ongoing duty to protect and repair the property and is responsible for maintaining potential hazards and making reasonable inspections of interior and exterior  Ekkebus PUS held liable due to failure to cover hottub, immediate cause of injury here despite Ls not advising them. PU bought a ppty w HT on premises absent a permit for building HT. Neighbour’s child falls in uncovered HT, severely injured.

ortimer v. Cameron (1994) Facts Accounting students finished an exam and went to party one of the udents' houses, were mildly intoxicated. M made a gesture that he was going to pour beer on C. They fell onto a ll that buckled in.Fortunately C was unhurt. M suffered a devastating injury, and became a complete quadriplegic hout any motor function. PL brought an action against the occupier-owner ( who bought ppty as is) , the city of ndon

LAW of Mortgages – TERMS Purchase money mortgage Refers to mortgage arrangements made by PU to assist w paying purchase price usually pursuant to a conditional upon financing prov in APS.

VTBM - V becomes lender for part of purchase money, becomes mortgagee, second mortgagee Equity – proprietary interest in mortgaged property ; can lend all or part to finance 1 st or additional mortgage

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Types of mortgages : conventional, secondary, CMHC insured loan conventional: term used in practice of law. where lender loans up to 80% of purchase price. For financial institutions in Bank Act, lender cannot lend more than 80% of ppty value. For e.g. house is 500K, L cannot be mortgagee for more than 200K (What happens when you only have 10%, then goto a second mortgage lender) secondary lenders: Borrow seeks add funds from secondary lender, VTBM or private lender insured loan: government of Canada incentivizes people to buy homes by enacting legislation to allow people to buy once securing minimum of 5% of purchase price. CMHC (Canada Mortgage and Housing corporation) owned by the government of also licensed to provide insured loans. Legislation permits CMHC toprotect the financial lender against loss for giving mortgage to borrower in excess of 80% and has less than 20% equity, CMHC charges an insurance premium that borrower pays, added onto mortgage amount.

Principal amount owing (incl CMHC insurance premium) to lender by borrower OR amount advanced by lender Interest (Fixed or floating) Fixed interest rate - Where the amount of interest is an agreed amount Floating rate - The interest amount varies on the X (prime + X) ; trend is floating; most people will not convert

Maturity Date – final payment date at which remaining amount owing, principal & interest is due and payable Amortization Loan (subject to renewal options of interest rate) – a loan with periodic scheduled payments of both principal and interest vs. interest only or balloon payments. Standard for most residential mortgages

Amortization date (subject to renewal options if payment schedule is satisfied) : date by which mortgage will be paid in full according to periodic loan payment schedule

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Closed/Open Mortgage Closed mortgage deprives borrower of right to pay off mortgage prior to its maturity Note: Financial institution will discuss options and advise client - it makes a diff in client's financial future ; like if negotiating a closed payment but you have an option to pay it off with a 3 month interest penalty Open mortgage (typical VTBM) – confers right on borrower to pay off mortgage prior to maturity.

Acceleration clause in mortgage agreement subject to statutory protections for borrower; cannot K out.

Rights and Duties of Lender and Borrower Rights of Lender , IF borrower in default of payment for 15 days, subject to 30 days of notice  Right to sue on acceleration enforce acceleration clause, call mortgage debt balance  K right of lender to power of sale or to claim judicial sale  If exercised, duty of lender to borrower to account for surplus, difference bt/w loan amount + sale price subject to secondary mortgagee’s rights, entitled to amount owed from surplus  Right of lender to take possession  (SC action) Right of lender to foreclose borrower’ (action in SC) redemption of equity within time limit, after which time the lender becomes owner in equity and CML  Right of action on covenant to recover from original mortgagor , guarantor (if any) or currently registered owner, or undisclosed principals absent express contrary K terms;  20(1) Stat right right to sue mortgagor’s grantee even where agreement to assume w or w/o express terms imposed on successor/grantee  INTEREST Stat duty of lender not to charge increased interest rates if mortgagee in default or late on payments Rights of Borrower  Right to 30 days of notice of L’s intent to enforce acceleration clause, sell ppty, take possession or foreclose  Right to sue for deficiency following sale of ppty by lender subject to secondary mortgagee’s rights  Statutory right to put mortgage debt in good faith by making payments in arrears until mortgagee sells ppty, i.e. until APS is signed  Statutory right to pay off amount owing of mortgage in 60 days after service for lender’s foreclosure claim  If successor/grantee defaults, Right of original mortgagor against grantee/registered owner to recover for liability for repayment to mortgagee  CML Duty of original mortgagor to perform personal covenant with mortgagee -covenantee even if there is agreement to assume in APS  INTEREST , Stat right of borrower not to be charged interest on late or mortgage payments in default

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Remedy Actions on the Covenant

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S 20 Mortgages Act

S 20(3) IF grantee (P2) agrees to assume debt, mortgagee has right to sue registered owner and original mortgagor, but right to judgement against owner or mortgagor, not BOTH prevents against double recovery, but does NOT bar right to recover against other original mortgagor(s). S 20(2)) If Agreement to assume obligates grantee to indemnify original mortgagor wrp to mortgagee, mortgagee only retains right to recover against grantee, not registered owner, unless action already commenced against original mortgagor. Right of mortgagor to recover personal judgement against 1st grantee extinguished on registration of a grant or transfer of equity of redemption by grantee to another person

Classes liable to Mortgagee for Action on Covenant/Right of Repayment Consider who has assets when deciding who to sue

Scenario 1: IF Assumption Agreement with PU1, who then sells to PU2, mortgagee can enforce action against: Grantee, 1 (pursuant to assumption agreement) Mortgagor-Covenantor (pursuant to personal covenant for mortgage debt) Grantee/ PU 2 AS registered owner Scenario 2: IF NO Assumption Agreement with PU1, who then sells to PU2, mortgagee can enforce action against: Mortgagor-Covenantor (pursuant to personal covenant for mortgage debt) Registered Owner (s 20, MA) NOT P1 (absent AA), BUT mortgagor can sue P1 afterwards Fuciarelli

Options of Express K terms to proactively protect mortgagee’s nterests against breach of personal covenant

Assumption agreement creates privity of K bt/w grantee and mortgagee, G agrees to assume mortgage, may but not necessarily be negotiated to release original mortgagor against all liabilities

Agreement to assume bt/w mortgagor (V) and grantee (P) creates obligation on grantee/subsequent purchaser to indemnify V against liability for repayment/action on covenant

“Due on sale” clause In any conveyance, L is entitled to call mortgage debt unless L approves subsequent L; mortgagor still required to guarantee repayment, but COULD negotiate release from covenant

“No Prejudice Clause” reservation that no extension of time given, or waiver, failure to enforce rights or any other dealings, on part of mortgagor shall in any way affect or prejudice the rights of the mortgagee against mortgagor for payment of amounts secured by Mortgage (against registered owner or new agreement w B)

nterest Act s, 8

Principle mortgagee can’t charge interest when mortgage payments in default

(Weirdale Investments 1981) Mortgagee is also barred from incentivizing Mortgagor to make timely payments by reducing mortgage payment. Here, Mortgage Interest is 12% per annum, but if payments are made on time, then "benefit/bonus" is given of 5% reduction in interest rate (Lougheed Block) Mortgagee could vary mortgage interest near maturity date. In ON,

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customary forbearance from doing so. No regulatory schemes in ON for this.

Power of Sale Remedy Steps of Analysis (1) Improvident sale action or defence (2) What is the alleged duty that has been breached? (3) Did MEE fall below SOC expected of a reasonable MEE?

Principle mortgagee, acting in good faith and w/o fraud, is entitled to sell property subject to (1)providing mortgagee w 30 days notice of sale where MEE is in default of mortgage debt payments = or > than except upon tender by mortgagor of principal amount due (up to APS signed) (2)account for surplus, (3) liability for deficiency for failing to take reasonable care to obtain true mkt value Right of MEE : (1) to sue for deficiency, where sale proceeds do not cover full mortgage debt or right to surplus (2) right to surplus, subject to secondary mortgagee (3)Improvident sale defence or action (Arnold;Cuckmere) To successfully obtain an injunction against mortgagee’s right to exercise power of sale, mortgagee must demonstrate extreme or exceptional circumstances that would justify a departure from the prevailing practice to effectuate postponement of sale 

Venpax , test for injunction: (1) irreparable harm will result to MTOR if the injunction is not granted and (2) the balance of convenience favours granting the injunction

Corresponding Duties of MEE to exercise of right of Power of Sale 

(1)Duty to take reasonable precautions to obtain the true market value of the mortgage ppty on the date on which the mortgagee decides to sell it. Perfection is not required, latitude given. Courts will assess whether conduct fulfills duty based on broad consideration of all circumstances; (2)Onus on MEE to demonstrate that conduct is plain on the wrong side of the law & does not fulfill duty to take reasonable precautions. (3)Rebuttal by MEE.  No duty to obtain true value  No duty to delay sale until market forces are rising, can elect WHEN to sell Onus on MOR to demonstrate the market value price that could have been obtained BUT for MEE’s negligence  No duty to mitigate losses

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Duty to ensure that a ppty is brought to the attention to a wide segment of the market place. MEE is liable for damages for improvident sale transaction, measure of damages is the difference between actual sale price and true market value of mortgage property Duty to obtain proper appraisals . MEE should advertise for higher than appraised market value advertise ppty for sale = if residential, place ppty with multiple listing services adveritse ppty, put sale for sign on ppty

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Standard of Care Test – How to determine whether MEE met SOC

Broos v. Robinson (not all these

steps will be necessary or appropriate in every case):

(1) act bona fides in the exercise of the power of sale; (2) attempt to realize fair market value in the sale; (3) give some consideration to the interests of the mortgagor as well as the mortgagee's own interests; (4) do not conduct the sale in bad faith (which is the reverse side of (1)); (5) see that the property comes to the attention of a wide segment of the market; (6) obtain proper appraisals; (7) advertise the property for sale; (8) place "For Sale" signs on the property; (9) place the property with the Multiple Listing Service; and (10) ensure that efforts are conducted over a reasonable period of time.

Examples of improvident sale

(Wood- duty to obtain appraisals; advertise failed; improvident sale) The courts holds that a lender should take into account the common tendency to bargain in a real estate transaction. Here, lender sold right away & court found appraisal duty not fulfilled. Ppty wasn't exposed to market for a sufficient period of time.

(Sterne – failure to advertise; improvident sale) Crt held that b/c it was a hobby farm, lender had a duty to advertise in Toronto and Hamilton. But for failing to advertise, purchase price that would have been obtained could have been 25 K..

CA Case; MEE held liable for improvident sale). Here, L for lender hired appraisal friend, asked for appraisal back and that he not keep copies of it. Ppty sold for 12.5; mkt value, 16. Damages for 3.5 mil and costs

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REMEDY - MORTGAGEE IN POSSESSION Principle Mortgagee is entitled to take possession if (1)MOR is in default of payment within one day. There is no notice requirement. . (2) If MEE takes possession, he assumes statutory duties. Occupier’s Liability Act, Residential Tenancy, Environmental Act (i.e. assumes legal personality of MOR in default –what applies to former applies to MEE) (3) When he decides to sells notice of sale requirement is triggered. 

(Capsule Investments) A mortgagee need not spend its own money on the mortgage property. The mortgagee has a (1)right to collect the income of the property, apply it to the interest owing first, and if there is a surplus, (2)then it can be spent if ppty is in disrepair. (3)Further, only if there is a monthly surplus in excess of interest and principal payments, is the MEE required to make repairs. If monthly income was less than the monthly payment, the mortgagee would have no obligation to make repairs (subject to statutory duties)

Environmental, if mortgage property is contaminated, statutory onus on mortgagee in possession to clean up the property . MEE would often do environmental assess. If cost of clean up exceeds cost of mortgage, then wouldn’t use this option

Tenants Commercial (apt building, income producing plaza) – obligation to provide written notice to tenants that you're the mortgagee. MT is in default, exercise of right to possession, tendering instruction – where and to whom for paying rent , appoint manager, enter premises, change locks Residential – judicial power of sale used to exercise possession in lieu of power of sale

General Principle To act prudently and diligently in the management of the property

(Elgie) and account for his management upon redemption or sale. MTEE must account to the MTOR for all revenues produced by the property. If property is mismanaged the MTEE will not only be charged w/ rents and profits received but also w/ those that would have been received if management had been more competent.

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Mortgages Act , SS 22-3, 42

42 – Notice of Sale and Redemption Period – No action during demption period

Right to give notice of sale 15 days after date of defaulted payment from the mortgagee to rtgagor and any subsequent encumberancer. No proceedings can take place between the issuance of the Notice of Sale and when it ires. During 35 day redemption/repayment period, MTEE cannot: (1) issue writ on covenant, if issued before notice of sale, it cannot be served. (3) issue or serve a writ for possession, ake possession or enter into sales neg Any steps taken during that period will be a nullity. 2(3)- Exception: This rule does not apply to stay or waste injury. Any other steps uire leave of court

22-23– Right to Pay Bringing Mortgage Debt into Good Standing at any me before a sale

olute right to Pay Arrears & costs any time until MEE enters into APS the ppty after eiving notice

23 gives mortgagor the rights to pay the arrears if mortgagee has started e action by SOC, rarely used. MOR 2ndMEE has the right to pay the arrears if an action has

n started until judgement granted.

10/18 – Regardless of mortgage agreement term, IF MOR ,is an individual other than mited co or corp, at any time after 5 years, whether a closed mortgage or not, a mortgagor a (1)right to pay off the mortgage at any time upon payment of an additional 3 months erest, (2) must give notice of intent, (3) covenantor of promise must be an individual, hough transferable to a limit comp subject to ind cov. (Hone)

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REMEDY – FORECOSURE Principle (must enforce remedy through courts) (1) serve SOC for foreclosure, naming MOR & all subsequent encumbrancers; (2) interim judgement, MEE 1 can take possession; (3) final order of foreclosure(following failure to redeem)– interest of MOR /MEE2 is extinguished if they fail to redeem; (4) MEE loses right to action on the covenant, (5) No duty to account for surplus or liability for deficiency if MEE sells ppty at a loss Procedure - Orders in a foreclosure: (1) If right to redeem filed, then judgment for foreclosure with a reference; mortgagor can pay off the amount owing w/in 60 days of ref. If they don’t act, THEN (2) Final order of foreclosure :mortgagee officially becomes the owner; No duty to account for surplus; no right of action on the covenant (in a loss)

In Foreclosure (Encumbrancer & Mortgagor) 

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(1)Right to file notice of intention to redeem in 60 days to pay off full amount owing; (2)court may grant extensions if payee making good faith efforts ; (3) encumbrancer may then foreclose or sell IF maturity date has not arrived OR if amount owing is paid off by maturity date, and prospective increase in market value Right to file a notice of intention to sell (judicially supervised sale): request that MEE sell rather than foreclose. If MEE cannot sell, it may reapply to reconvert action into foreclosure.

Secondary Mortgagees (& Mortgagors) and Rights  Right of action on the covenant / right of repayment (survives foreclosure of equity of redemption) – if MOR has no assets, MEE2 will not enforce  Right of action for improvident sale  Right of to put mortgage in good standing  (ME only) Right of foreclosure subject to first mortgagee rights. No one will prefer judicial sale to foreclosure, if appraisal measures ppty value is below MT value Power of Sale Principle & Steps of Analysis

a) Mortgagee exercises power of sale (1)by way of notice via registered mail to mortgagor , and (2)every subsequent encumbrancer , (3)if MOR in default for at least 15, days, (40with 35 day redemption period to rectify the arreas b) Act of sale extinguishes rights of any subsequent encumbrancer . MEE 1 has duty to account surplus, first subsequent encumbrancers in priority, then to MOR c) Obligations of MEE 1 analysis above

IF there is no remaining surplus or deficiency ,

Action on the Covenant, engage this analysis a) If surplus does not cover mortgage debt owing to second encumbrancer, MEE 2 has right to sue on the covenantor mortgagor on the covenant / right of repayment

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Once a mortgage always a mortgage Whether or a transaction is a disguised form of mortgage is one of fact – evidence of all surrounding circumstances; intention of parties. If an agreement discloses characteristics of mortgage agreement, then the situation establishes rights and responsibilities of a mortgagor-mortgagee

Arnal v. Arnal SKCA 1969: Even if transact not called a mortgage, but looks and smells like one it must be treated as a mortgage (Consider intention and relationship of parties, financing in exchange for marketable asset akin to equity of redemption). Here: Son had right to get property back by paying amount owing. Father lends money to son for purchase of ppty in exchange for father as title holder. Father died, and estate argues it was loan security, not a mortg.

Creswell 1984, BCSC He HELD: B had the right to pay it back with an interest rate. Loan from P to D on security of their lands .Document was an obvious attempt to disguise a loan agreement by naming it a sale with option back.  Instead of lending, lender purchased ppty and entered into a sale with an option with party, option that party (PU) could buy back ppty at any time during the year at sale price of 380K and interest of 77K, not greater than 635K , 10 K fee to D’s agent. borrowed out of sheer desperation.  L refuses to sell back on grounds that time in which to exercise option was during year, NOT end of year

REPAYMENTS OF MORTGAGE Knightsbridge Estates Trust Limited. Here, transact not unconscionable – no extreme power imbalance, was a sophisticated party. Argued that length mortg term at 24 years was unreasonable by virtue of unconscionability.  (Knightsbridge) The rules of equity will protect its godchild, the mortgagor  (Titus ABCA)A party is relieved of duty to perform K term that is established to be unconscionable so as to render it unenforceable – (a) a grossly unfair &improvident transaction; (2) the victim’s lack of ILA ; (3) overwhelming power imbalance caused by victim’s ignorance of bus, illiteracy, lang barrier, blindness, deafness, senility or other disability; (4) the other party’s knowingly taking advantage of this vulnerability

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UNCONSCIONABLE TRANSACTIONS/ CRIMINAL CODE, S 347 ANALYSIS 1. S 347, CC Criminal offence to charge interest more than 60% , includes sum of costs and interest borrower must pay

(1) Is interest rate illegal under s 347; (2) If yes, should public policy allow partial enforcement of K, OR declaration of nullity (North American Test)  Would purpose or policy of s. 347 be subverted by severance; ?  whether the parties entered into the agreement for an illegal purpose /evil intent?  Relative bargaining powers of parties, conduct in reaching agreement?  the potential for the debtor to enjoy an unjustified windfall. (3) Contextual approach based on all surrounding circumstances: severance, nullity, reduce interest :     IF SEVERANCE – Notional or Blue Pencil , The preferred severance technique is the one that, in light of the particular contractual context involved, would most appropriately cure the illegality while remaining otherwise as close as possible to the express intentions of parties in K

2. If not illegal, consider whether transact unconscionable under Unconscionable Transactions Relief Act, RSO. Court may (1) exercise discretion to relieve debtor, (2)IF at least in part, of the obligations of a contract to which in all the circumstances of the case he cannot be said to have given a free and valid consent, 3. Harsh and unreasonable mortgage defence (4) Party relying on defence must show unconscionable transact (a) grossly unfair improvident transact (b) debtor’ s ILA, sophistication, (c) power imbalance caused by ignorance, illiteracy, language barrier or other disability, (d) other part knowingly takes advantage of vulnerability (Titus AB)

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S 347, Barrie v. 687844 Ontario Ltd (Action for recovery of mortgage moneys, or damages for negligence against MOR & L) Held: (1) L for D found liable under s 347, agreement to pay interest, void and unenforceable,, pay able at maturity rate 30 days after mortg agreement, several from loan agreement; (2)L acting for lender has an obligation to verify legality of lending arrangements so as to contravene s 347, otherwise is liable for negligence. Here: B goes to friend to borrow 180K, 10K interest, repayment in 30 days. B refuses to pay 10K bonus b/c in excess of legal interest rate per annum.. L sues her lawyer. S 347 & Prov Act Creswell v Ryan Bay Holdings Held: PL did not discharge onus under s 347. Loan price of 380K + interest at 77K, total purchase price not to exceed 635K, and fees to D’s agent. Onus not discharged b/c Ps could not proof D was obliged to pay agent’s fee & that D agreed to make loan only on condition that P enter into an agreement where they pay the fee. No evidence that D would have refused to advance credit if fee not paid, P willing to pay customary finder’s fee. Unconscionability defence, Richmond v James D claims harsh and unconscionable defence to an action on the covenant against her by mortgagee. Held: Defence failed. Mortg was not harsh and unconscionable, or unreasonable in light of risks MEE incurred in entering into agreement and all surround circumstances, bonus of 25K if some costs of borrowing paid in 3 months. MOR was an educated woman, low credit rating and refused to produce banking documents, purchase of home improved her finances

North American Express , s 347(1). Applied notional severance vs. blue pencil severance Flexible remedy warranted in this case. Lender did not violate s 347(1)(A), K served a commercial purpose, no illegal intention, commercially experienced parties, ILA , equities of situation favour lender in presence ILA, parties knew obligations Facts: Borrower had to pay royalty + certain commissions. It looked as if there were a lot of other factors other than the rate of interest. In the end, the net interest rate came to 89%.

Triggering Mortgage Principle: If MEE commences an action for foreclosure or judicial sale, this triggers right of MOR to pay off closed full mortgage debt owing without penalty; does not convert close to open mortgage Exception: Issue action for arrears or notice of sale DOES not trigger mortgage OR take possession to “preserve the security” Canbook Distribution v Borins Held: TJ accepts SC’s arguments that docs were protected from discovery by the S&C privilege. Canbook argued that docs were not privileged, and any privilege was waived due to fraud allegations. Rule: S-C privilege is waived if claimant established that SCS are liable for prima facie case of fraud. Solicitor would be required to produce these documents. Facts: Canbook claims that that SCs of debtor, Edwards, bookstore supply chain, a subsidiary to Edseds, in bankruptcy, engaged in a calculated and deliberate fraud against Canbook and all other unsecured creditors of Edwards, that immediately before bankruptcy, Edwards withheld payments to suppliers while applying proceeds of sales to repay the indebtedness of Edwards to Edsed. Canbook sought production of documents.

Partition Act Where a dispute arises in context of a business venture or joint partnership or joint tenancy, court may exercise discretion to sell property or sever the joint tenancy absent a express agreement between partners. Onus on claimant to demonstrate intention of parties

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Fraudulent Conveyance Act, ss 2-3 S 2, Every conveyance of real property ... made with intent to defeat, hinder, delay or defraud creditors ... of their just and lawful actions ... are void as against such persons. . S 3 - S 2 does not apply …. to an estate or interest in real property ... conveyed upon good consideration and in good faith to a person not having at the time of the conveyance to the person notice or knowledge of the intent set forth in that section.

Feher v Healey

Held: claimant, nephew of H, had not established transfer of MH from W to children was a fraudulent conveyance, NWS sep agreement was never signed, there was an oral promise. Reason for transfer was part of a comprehensive settlement of all financial matters involving couple and children. W had waived CS and SS in exchange for transfer or MH. Stone v. Stone – A lawyer may have an obligation to TPS other than client where purposes of transact amounts to delaying creditors or escape spousal obligations and responsibilities. Held: Crt set aisde transact. F: H was dying, instructed L at hospital to transfer all assets to children. W sought to set aside transacts under Fraudulent Conveyances Act. L was sued but settled action.