2023 QCCA 1545, 2023 QCCA 1545

Cvesper c. Melatti 2023 QCCA 1545 COURT OF APPEAL CANADA PROVINCE OF QUEBEC REGISTRY OF MONTREAL No.: 500-09-030200-224 ( 500-17-106500-195 ) MINUTES OF HEARING DATE: December 8, 2023 CORAM: THE HONOURABLE MARIE-FRANCE BICH, J.A. GENEVIÈVE COTNAM, J.A. PETER KALICHMAN, J.A.

APPELLANTS/INCIDENTAL RESPONDENTS COUNSEL Eduard Cvesper Anna Griggle Cvesper Mtre JEAN TROTTIER ( Me Jean Trottier, avocat ) Absent RESPONDENT/INCIDENTAL APPELLANT COUNSEL Dany Melatti Mtre ANAS QIABI ( Gattuso Bouchard Mazzone ) Absent On appeal from a judgment rendered on July 28 th , 2022 and rectified on August 4 th , 2022 by the Honourable Marie-Anne Paquette Chief Justice of the Superior Court , District of Montreal . NATURE OF THE APPEAL: Sale ─ Seller's obligations ─ Warranty of quality ─ Latent defect ─ Immovable ─ Soil contamination ─ Hydrocarbons ─ Oil tank ─ Notice of defect ─ Cost of work.

Clerk at the hearing : Anne Dumont Courtroom: Pierre-Basile-Mignault

HEARING Continuation of the hearing held on December 6, 2023. The parties were excused from appearing in Court. BY THE COURT: Judgement – see page 4. Anne Dumont, Clerk at the hearing JUDGMENT [ 1 ] The Respondent, Dany Melatti, discovered that the property he purchased to build his residence was contaminated by oil which had leaked from an underground tank. He therefore had to proceed with extensive remedial work and is claiming compensation from the Appellants who owned the property for more than 30 years.

The trial judge granted in part his claim for latent defects and ordered the Appellants, in solidum , to pay the sum of $ 195 209,18 plus legal interest and additional indemnity. [ 2 ] The Appellants submit that the judge committed an error when she concluded that the property was affected by a latent defect since the Respondent had failed to inspect prior to purchasing it. They also argue that the claim should have been dismissed since they suffered a prejudice due to the Respondent’s failure to notify them within a reasonable time after discovering the defect.

In addition, the Appellants maintain that the Respondent should have sued the company from which he purchased the Property, 6045111 Canada Inc. (“Canada Inc.”), rather than suing them directly. Finally, they submit that the judge should have dismissed objections to questions they had asked regarding a possible settlement between the Respondent and Canada Inc. The Respondent filed an incidental appeal claiming additional damages. [ 3 ] In order to properly examine these grounds of appeal, it is necessary to review the chronology of events.

FACTUAL BACKGROUND [ 4 ] On May 13,1980, the Appellant Anna Griggle Cvesper purchased a property located in Ville LaSalle (the “Property”) on which had been built a multi-unit building with seven apartments and a small house. At that time, Mrs. Cvesper had been living with her husband, the Appellant Eduard Cvesper, in one of the apartments for nearly four years. They then moved into the house. [ 5 ] On March 14, 2003, for reasons that remain obscure, Mrs. Cvesper transferred the Property without legal warranty of quality to her husband for the sum of $ 1.

The couple continued to reside in the house while renting the apartments. [ 6 ] On May 22, 2012, Mr. Cvesper sold the Property to Canada Inc. for $ 739 000 with legal warranty. Following this transaction, the buildings were unoccupied and left abandoned. [ 7 ] On January 19, 2015, the Respondent acquired the Property from Canada Inc. for $ 860 000, for the sole purpose of building a new private residence. Once again, the sale was concluded with legal warranty of quality. [ 8 ] Construction began in the early summer of 2017.

After demolishing the existing buildings, the Respondent’s contractor undertook the excavation required for the new residence which included an underground garage. On June 27, 2017, he discovered an underground oil tank which was in poor condition. The contents of the tank had apparently spilled and contaminated the surrounding soil. The contractor removed the tank and set it aside. Once informed of the situation, the Respondent hired a consultant specializing in environmental remediation.

Under its supervision, the contractor proceeded to excavate and dispose of the contaminated soil until he was satisfied that the levels of contamination in the remaining soil respected the criteria for residential use. The tank was disposed of, after being decontaminated. Although details of the progress of the remedial work remain unclear, it appears that on July 5, 2017, the consultant confirmed that the contamination levels of the remaining soil were acceptable and therefore that construction work could resume.

ANALYSIS [ 9 ] Although the Appellants raise four grounds of appeal, the principal issue before the Court concerns the potential prejudice caused by the absence of a timely notice of the defect to the Appellants.

[ 10 ] In the present case, the contamination of the soil is clearly a latent defect that gives rise to a claim under the warranty of quality provided to the buyer of property under

article 1726 of the Civil Code of Quebec (“ CCQ ”). In this case, as the judge correctly determined, the Respondent was not required to inspect the Property as he intended to demolish the buildings and had no reason to suspect the existence of an underground oil tank or to proceed to an environmental assessment of the Property prior to the purchase. The above-ground oil tank that remained outside the existing buildings was in good condition and there was no other evidence of potential contamination.

The Appellants, who resided on the Property for more than 35 years, never noticed anything either. [ 11 ] The buyer of a property who discovers a latent defect may, depending on the nature and the gravity of the problem, ask for the resolution of the sale [1] or a reduction of the purchase price. [2] In order to do so, he must, however, comply with

article 1739 CCQ which provides: 1739. A buyer who ascertains that the property is defective shall give notice in writing of the defect to the seller within a reasonable time after discovering it. Where the defect appears gradually, the time begins to run on the day that the buyer could suspect the seriousness and extent of the defect. 1739. L’acheteur qui constate que le bien est atteint d’un vice doit, par écrit, le dénoncer au vendeur dans un délai raisonnable depuis sa découverte.

Ce délai commence à courir, lorsque le vice apparaît graduellement, du jour où l’acheteur a pu en soupçonner la gravité et l’étendue. The seller may not invoke the tardiness of a notice from the buyer if he was aware of the defect or could not have been unaware of it.

Le vendeur ne peut se prévaloir d’une dénonciation tardive de l’acheteur s’il connaissait ou ne pouvait ignorer le vice. [ 12 ] The buyer must therefore notify the seller in writing of the discovery of the problem in order to succeed in a claim for latent defects. [3] Such a notice allows the seller to ascertain the problem, to evaluate the evidence and to proceed to the repairs itself or at least to limit their cost. [4] Giving notice in a timely manner also guarantees the fairness of the proceedings by allowing the seller to assess the nature and the cause of the problem while gathering the necessary evidence which sometimes requires retaining an expert. [5] Generally speaking, the notice will only serve its purpose if it is given before remedial work is undertaken. [ 13 ] The tardiness of the written notice is usually fatal to a latent defect claim [6] although, in some circumstances, courts have recognized that a timely verbal notice may suffice [7] and that the failure to send a notice may be justified in case of emergency or where the seller clearly refuses to acknowledge any liability or waives his right to such notice. [8] [ 14 ] Courts have also accepted that the failure to send a timely notice will result in the dismissal of the buyer’s claim only if it causes the seller real prejudice, as opposed to a simple prejudice in law. [9] [ 15 ] In the case at hand, the evidence clearly establishes that the Appellants were informed of the problem only after the remediation work had been completed and the oil tank disposed of. [ 16 ] The Respondent’s contractor discovered the tank on June 26, 2017.

The Respondent submits that he verbally informed his seller, Canada Inc., of the problem, although the exact date of this conversation remains unclear. [ 17 ] A meeting took place between the Respondent and a representative of Canada Inc. on June 29, 2017. At that date, the Respondent had already paid $ 85 000 to the contractor for the excavation of the contaminated soil. Even though Canada Inc. seemed open to discuss some form of financial arrangement, no amount was put forward by the Respondent. [ 18 ] The Respondent then asked his real estate broker to contact the Appellants.

While the date on which this request was made is unknown, the broker did speak to Mrs. Cvesper on the phone on July 17, 2017. He explained to her that a problem arose during the excavation without giving any specific details. They agreed to meet on site three days later. [ 19 ] On July 20, 2017, the Appellants met with the Respondent, the broker and the representative of Canada Inc. The meeting, which took place next to the construction site, lasted about 20 minutes and the Respondent insisted that he wanted to find a way to settle the matter without suggesting anything specific.

The Appellants did not have the chance to inspect the Property. They simply saw a large excavation and noticed the newly poured foundation of the residence. The tank had apparently been disposed of. The Appellants mentioned that they did not consider themselves liable as they had no knowledge of the existence of an underground tank. There was no further discussion, but the Appellants met with their notary and a lawyer in the following days. [ 20 ] A first written notice was sent to Canada Inc. by the Respondent on the day of the meeting.

In this letter, the Respondent invites Canada Inc. to visit the Property to assess the situation and mentions that he intends to proceed to the repairs in the following weeks.

This statement is surprising since the evidence shows that the remedial work had been completed two weeks earlier and that the Respondent had already paid $ 150 000 to the contractor. [ 21 ] On August 18, 2017, a similar and equally surprising letter was sent to the Appellants by Canada Inc. which granted them a delay of 15 days to assess the situation with the help of the expert of their choice and indicated that the Respondent was evaluating his options to address the contamination. [ 22 ] The broker also reached out to the Appellants on two occasions in order to discuss a possible settlement, although he never made any specific offer. [ 23 ] On April 30, 2018, the Appellants received a demand letter from the Respondent claiming $ 200 000 for the remediation costs.

[ 24 ] It is clear from this chronology that the Appellants were only informed of the discovery of the tank and the contamination after the remedial work had been completed. [ 25 ] The trial judge acknowledges this fact, but concludes that the Appellants did not suffer any real prejudice: [48] If there was any delay in the denunciation, there was clearly no prejudice to the Defendants as they showed then, and now, no interest or belief that they needed to investigate or intervene on this matter.

Defendants maintained from the beginning that they have no responsibility whatsoever with regards to the underground tank and soil contamination. They cannot fault the Buyer for having allegedly notified them too late or proceeding too quickly with the decontamination. [49] The Court notes that by doing so, Mr. Melatti avoided delaying the construction of his residence, and potentially incur additional delays and costs as a result. [50] The Court of Appeal has already stated that a default in notification, if it exists, must lead to a real prejudice to the seller.

There is no such prejudice here. [10] [ 26 ] In the Court’s view, this conclusion is unsupported by the evidence. The trial judge committed a palpable and overriding error in concluding that the Appellants had suffered no real prejudice because they showed a lack of interest in investigating or intervening in the matter. With respect, the judge failed to take into account the fact that by the time the Appellants were informed of the situation, they were presented with a “fait accompli” as the remedial work had been completed and the foundations of the residence had even been poured.

In the specific circumstances of this case, there was nothing for them to investigate. This was not a situation in which the seller denied liability or formally refused to assess the problem when it was still possible to do so. [ 27 ] Both Canada Inc. and the Appellants were never given the opportunity to examine the oil tank, assess the extent of the contamination, evaluate the options for remediation or control the costs. This situation is exactly what

article 1739 CCQ purports to prevent. [ 28 ] This case is clearly distinguishable from the facts in Joyal [11] where the property, purchased from a professional seller who was presumed to have knowledge of the defect, was destroyed and therefore could not be examined for a reason that had nothing to do with the buyer. Here, the Respondent decided to pursue the excavation work despite the fact that no notice had been given. [ 29 ] Furthermore, the remedial work was not urgent. The soil had apparently been contaminated for years.

Other than the fact that the Respondent did not want to delay his construction project any further, there was no reason why he could not have given a reasonable delay to Canada Inc. and the Appellants to assess the situation and possibly retain expert advice. [ 30 ] The simple fact of denying them this possibility establishes, prima facie , the existence of a prejudice. The Respondent had the burden of proving that the Appellants would have been in the same situation had a timely notice been given. [ 31 ] Such a demonstration was not made.

Although the remediation work was done under the supervision of a professional consultant, there is little evidence pertaining to the situation on the site. The few photos taken during the work, including one poor quality picture of the tank, do not show the extent of the contamination nor the progression of the decontamination work. The Appellants cannot ascertain if the excavation costs claimed are limited to what was necessary to reach the level of contamination acceptable for a residential use of the Property. In addition, the invoices provide few details.

The Appellants have no way of knowing if the contractor potentially aggravated the situation when he hit the tank or removed it from the premises. [ 32 ] Furthermore, the evidence establishes that the buyer had no trouble finding the sellers. Once the broker contacted them, they readily agreed to a meeting three days later, only to discover there was nothing to see once they arrived on site [ 33 ] For these reasons, the lack of timely notice is fatal to the Respondent’s claim. The appeal must therefore be allowed and the incidental appeal, dismissed.

FOR THESE REASONS, THE COURT: [ 34 ] GRANTS the appeal; [ 35 ] SETS ASIDE the judgment rendered by the Superior Court on July 28, 2022 and rectified on August 4, 2022; [ 36 ] DISMISSES the Respondent’s Originating judicial application for latent defects ; [ 37 ] DISMISSES the incidental appeal; [ 38 ] THE WHOLE , with legal costs both in first instance and on appeal. MARIE-FRANCE BICH, J.A. GENEVIÈVE COTNAM, J.A.

PETER KALICHMAN, J.A.