2015 QCCQ 5870, 2015 QCCQ 5870

Vosberg c. Lallis 2015 QCCQ 5870 COURT OF QUEBEC Small Claims Division CANADA PROVINCE OF QUEBEC DISTRICT OF MONTREAL Civil Division No: 500-32-139068-136 DATE: June 22, 2015 ______________________________________________________________________ PRESIDED BY THE HONOURABLE DAVID L. CAMERON, J.C.Q. ______________________________________________________________________ LENORE VOSBERG […] Hampstead (Québec) […] Plaintiff v.

GEORGE LALLIS […] Montréal (Québec) […] and GEORGE LECAT […] Brossard (Québec) […] Defendants Patricia Hamelin […] Lachine (Québec) […] and RE/MAX DU CARTIER G.B. 1290, avenue Bernard Ouest Montréal (Québec) H2V 1V9 Impleaded Parties ______________________________________________________________________ JUDGMENT ______________________________________________________________________ [ 1 ] Lenore Vosberg, who purchased a condominium unit in the Holtham Hall Condominium building from the Defendant, George Lecat, on March 28, 2012, sues Mr Lecat as well as George Lallis, the collaborating broker who represented her in the sale, for an amount of $ 6,865.

This is the amount she had to contribute as a co-owner toward an assessment raised by the Syndicate Holtham Hall for her share of the costs of major repairs to the elevators of the building. [ 2 ] The assessment was made in April 2012, shortly after the deed of sale was formalised with the notary, on March 28, 2012. [ 3 ] Mrs Vosberg learned of the need for these major repairs and of the fact that the costs would paid out of the new assessment, not of out the reserve fund, when she saw a notice of a general meeting posted in the building after she took possession. [ 4 ] She asserts the self-evident fact that, had she known of the likelihood of a major expense of this type before agreeing to the sale, she would not have paid so high a price.

She alleges against Mr Lecat that he failed to provide this information prior to the transfer of the building and, with respect to her broker, George Lallis, she asserts that he failed to guide her through the transaction, more particularly

with respect to the vendor’s obligation to disclose this type of information. [ 5 ] Mr Lecat impleaded, as additional parties, Patricia Hamelin, the broker who handled the sale on his behalf as broker, and the agency with whom she works, Re/Max du Cartier G.B. [ 6 ] His claim against these parties is based on the allegation that he provided all relevant documentation to his broker and that, if she failed to pass it on, he should be held harmless from this claim.

ISSUES [ 7 ] To resolve this four-party conflict, the Court must answer the following questions: 1) Is Mrs Vosberg entitled to be indemnified by one or more of the other parties for the $ 6,865 assessment she paid as a share of the common expenses ? 2) If more than one of the other parties is responsible, how should their responsibility be shared among them ? 3) Should Mr Lecat be indemnified by his broker and her agency ?

FACTS [ 8 ] A brief chronology is necessary to explain the anomalous circumstances of non-disclosure that occurred in the present case. [ 9 ] Mr Lecat decided to put his property on the market on July 1 st , 2011, when he entered into a broker’s contract with Re/Max du Cartier G.B. He was dealing with a broker within the agency, Patricia Hamelin. [ 10 ] Ms Hamelin explained that, although at the time the vendor’s declaration was not compulsory, Re/Max du Cartier G.B. insisted on sellers making the disclosure to perspective purchasers.

With respect to the elevator, the declaration that Mr Lecat drafted with the assistance of Ms Hamelin, reads as follows: “Elevators brought up to RBQ standards, further modernization work pending (2010-paid by condo association)” (DL-001, Exhibit C). [ 11 ] Mr Lallis indicated to the Court that his attitude toward this declaration was positive and that it seems that the elevators were up to standards and he interpreted “modernization” to refer to architectural or decorative changes, not repairs or refurbishing of the mechanical components required for safety reasons. [ 12 ] The bilateral offer to purchase included “Annex B” (CP-1) containing under “B-2 optional conditions”, several conditions. [ 13 ] The one that is of interest to us is “B-2.5, Review of co-ownership documents”.

The clause provides that the Promise to purchase is conditional on the buyer’s satisfaction after examining the Declaration of co-ownership, including the regulations of the immovable and the following documents: 1) Last two years of the financial statements; 2) Reserve fund [illegible] proof; 3) Declaration of co-ownership documents; 4) Registered minutes of the last 2 years. [ 14 ] The items that are important for our consideration in this case are the financial statements and minutes of the Syndicate, for the last two years, i.e. 2010 and 2011.

The Syndicate has a financial year that ends April 30, such that the period ending April 30, 2010, is reported in notice-to-reader financial statements issued May 18, 2010 attached to the minutes of the annual general meeting of June 29, 2010. [ 15 ] A draft financial statement for the year ending April 30, 2011, is dated May 6, 2011. The copy provided (DL-5) is a draft, being a “mark-up” of a previous document.

Mr Lecat had it in his possession, probably because he had been, up until deciding to put his property on the market, the president of the Syndicate. [ 16 ] He explains to the Court that when he decided in July 2011 to sell, he felt that it would not be appropriate for him to remain as an officer of the Syndicate. [ 17 ] The bilateral offer to purchase was accepted on December 17, and on that same day, Mrs Vosberg received through her broker, Mr Lallis, several documents, including these financial statements and the minutes of the annual general meeting of June 29, 2010.

Mr Lallis was quite aware that no minutes were provided for the 2011 annual general meeting, and he asserts that Patricia Hamelin told him they were not available, which he understood to mean that they had not been written. [ 18 ] He states that as being the reason why he did not propose an extension to the process to await disclosure of these documents. [ 19 ] The review of documentation was to expire on or about December 25 and, after discussing the matter with Mrs Vosberg, it was decided to not act under the condition that would have permitted Mrs Vosberg to annul the sale, but to simply accept the disclosure. [ 20 ] The documents that Mr Lecat provided to Patricia Hamelin did not include a set of minutes dated August 1 st , 2011 (P-5), recording the annual general meeting that took place on June 21, 2011.

In the covering notice, the board advises the owners:

An additional General Meeting will be called to approve costs and proposed financing, for the repair / replacement of the elevators, as reported in the Minutes. Casey Faria and the Board of Directors are currently meeting with several elevators companies to obtain independent assessment and to have several bids to choose from. We urge all owners to attend the General Meeting as important decisions must be made regarding current and future plans for the building. [ 21 ] Under item 9 of the minutes is the following text: 9.

New project - discussion & suggestions Elevators – will have to be a priority for repair/replacement since people are getting trapped frequently in them. It was proposed that Casey coordinate getting quotes from 3 different companies (for comparison) before bringing information back to a general meeting for a vote on whether to spend more on repairs or get new elevators. At that time, proposals for covering the cost will be presented.

NOTE: Thyssen-Krupp estimated a cost of $250,000 to replace both elevators or up to $90,000 for repairs to replace parts causing current problems. [ 22 ] Mr Lecat testified, and the Court accepts the sincerity of his testimony, that he had intended to include these minutes in the package he sent by PDF to Patricia Hamelin.

Patricia Hamelin, for her part, testified that when she was drafting the brokerage contract, signed a bit more than a week after the meeting of June 21, 2010, she understood that the elevators had been repaired, but that no information about major repairs was known at that time. [ 23 ] She states, and the Court accepts the sincerity of what she says, that she never had seen a copy of the minutes drafted one month later on August 1, 2011, and she therefore could not have referred to them in her discussions with her collaborating broker, nor did she receive them to pass along to him during the disclosure, between December 17 and December 25, 2011. [ 24 ] When the period for the acceptance of the disclosure terminated December 25, 2011, there were still other conditions that had to be met and the deal was not yet final and unconditional in February 2012.

On February 2, 2012, Mr Lecat was no longer an officer of the Syndicate, but he received from the building manager, Mr Faria, copy of a memo dated February 1, 2011 (DL-001, exhibit

F) sent to all co-owners relating to plans to improve the elevators. A special meeting was foreseen for the spring to review the matter. [ 25 ] The memo addressed to all owners states: Due to the unreliable operation of our aging elevator over the past months, it was decided at the Annual General Meeting in June to look into the cost of repair or replacement of one or both elevators. We have had a number of incidents where residents or visitors were trapped in an elevator causing great distress. There have been incidents of the elevator either not opening at a designated floor, or stopping short of a floor.

These incidents indicate that the controlling system is working erratically. Service calls are costly, with weekend & evening calls costing over $ 1000. The Condo Executive & the Property Manager, Casey Faria, have contacted four leading elevator companies: Thyssen-Krupp (our current contractor), Otis, Kone, and Schindler. In each case the company sent a qualified representative to assess the condition of the existing elevators and to make recommendations with regard to improving safety, performance and reliability.

Their assessments agree that our 45-year old elevators are in need of serious improvements involving replacement of major components. We have received estimates in the range of $ 200,000 and $ 250,000 to replace both elevators. A project of this magnitude represents a serious financial commitment which will necessitate a special assessment on the co-owners. There is a joint responsibility on the part of the owners of this building to maintain safe elevators that conform to the building code. It will be especially important that all owners participate in the decision-making process.

Please plan to be available when we call a general meeting in the early Spring.

We will be offering our best recommendations to address this situation. [ 26 ] Mr Lecat received this message from the building manager on February 2 nd , at 11:16 a.m., and at 1:00 p.m., he forwarded it by email to Patricia Hamelin. [ 27 ] Her reflex, which was a good one for a real estate broker, was to recommend sending it to her collaborating broker: “to get it out of the way so there are no surprises”. [ 28 ] The next day, in the late afternoon, she send an email to Mr Lallis reading: My client received this e-mail yesterday regarding the possible renovation of the elevators.

Even though you had already acknowledged the condo minutes and the deceleration of the seller we still want your client to have all the updated information we have concerning the matter. Nothing has been decided yet from the condo association but it seems this will be one of their priorities for the next few years.

We are looking forward to hearing the final outcome of the sale of her house. [ 29 ] But a glitch occurred; the document that she attached to her email was not the memo concerning the elevators she had received from Mr Lecat, but a different document that really had no relevance to the issue. [ 30 ] Another error occurred when Mr Lallis opened the email.

He read the attachment but failed to read the text of the email. [ 31 ] He was therefore unaware that this was an email about a major expense to the elevators, thinking it related to something else that he saw in the attachment that was of no relevance. [ 32 ] He did not forward a copy of the email to his client, having not read it.

[ 33 ] All of the conditions of the bilateral promise were eventually met, and the deal became final with the closing with the notary on March 28. [ 34 ] Mrs Vosberg took possession, learned of the general meeting, was assessed for her share, $ 6,865.00 of an expense of $ 225,000 for the renovation of the elevators, and paid the assessment, having no choice but to do so. [ 35 ] Her immediate complaint was against her broker for not having properly guided her through the transaction and then, when she learned that her broker had not been given the information from the seller’s side, she also blamed the seller for the nondisclosure. [ 36 ] Her broker’s insurers denied liability and Mr Lecat, through a reply drafted with his lawyers, FMC Law, asserted that there was no liability.

The letter contains a rather robust assertion: We wish to emphasise that the question of renovations of the elevators were made explicitly clear to your client […] the transaction was only concluded on March 28, 2012, being a long period of time during which your client received or could have received all information relevant to her decision.

First, the financial statements for the year ended April 30, 2011 were available and in fact they were put as an attachment in an email to the agent acting on behalf of your client date December 17, 2011 that includes drafts financial [sic] indicating the cash position of the syndicate at the time. In addition, on February 8, 2012, the buying agent received the notification that was sent to all co-owners of a meeting to be held in regard renovations to the elevators; this email was sent seven weeks before the signing date at the notary.

Copy of this email is attached. [ 37 ] Mr Lecat, very candidly, admitted to the Court that when he had his lawyer prepare this letter, he knew that he had not sent to his broker, as part of the December 17, 2011 disclosure, the minutes containing the very explicit reference that, had had it been sent, would have made it explicitly clear to the Plaintiff that there were major expenses on their way. [ 38 ] In making the claim, Mrs Vosberg, therefore, now knew the following facts: 1) Neither the vendor’s declaration, nor the disclosures made by the vendor prior to the critical date of December 25, 2011 contained any reference to the fact that major expenses were seriously contemplated for an elevator problem that was apparent to the co- owners and viewed by them as persistent; 2) Her own agent had counselled her to accept the disclosure, although it was, to a professional observer, incomplete not having any minutes for the general meetings, post June 2010.

By December 2011, these minutes, in the ordinary course, should had been made available; 3) When the vendor attempted to update the situation in February 2012 by sending the most recent and explicit information about what was going on at the board in connexion with the elevator issue, his own agent introduced the subject to the collaborating broker in an email, but failed to attach the relevant document; 4) When Mrs Vosberg’s broker received the email, he failed to past it on to her. [ 39 ] She did not know, but the facts now reveal, that her broker did not read the email and that it was an incomplete communication, not having the proper attachment.

ANALYSIS [ 40 ] When Mr Lecat put the property on the market, he made a vendor’s declaration that was laconic.

It did not state a fact that he knew, which was that the board he presided had made a presentation to the co-owners on June 21, 2011, stating that repair / replacement of the elevators will have to be a priority “since people are getting trapped frequently in them”. [ 41 ] At that time, Thyssen-Krupp had assessed a cost of $ 250,000 to replace both elevators or up to $ 90,000 for repairs to replace parts causing problems. [ 42 ] The statement made under D15: “Major improvements to the immovable and details”, understates the situation and artificially reassures the reader that standards have currently been met and it is simply a question of further “modernization”. [ 43 ] The form on which he made the declaration states: Given the importance of the declarations that follow, the seller must provide the information to the best of his knowledge, adding details as needed.

The seller provides all available documents pertaining to his declarations such as any documents related to work, warranties, invoices, receipts, plans, permits, letters, reports, notices, etc., and to provide details regarding any positive answers under clause D15. [ 44 ] The inadequacy of this declaration could have been overcome, had Mr Lecat successfully provided to his broker the copy of the minutes he had intended to send, in order to meet the seller’s obligation to disclose under the bilateral offer to purchase. [ 45 ] His failure to do this is a fault of omission and, although there was no bad faith on his part, this fault is sufficient to establish his liability. [ 46 ] Mr Lallis failed in his duty of counsel to Mrs Vosberg when he accepted, as normal, the nondisclosure of any minutes in the post- June 2010 period while, it would have been obvious to a reasonable broker that there should normally have been minutes of the subsequent annual meeting.

[ 47 ] He lulled his client into a false sense of security that she didn’t have to worry about documents that were not made available. [ 48 ] The notion that these documents were not available or did not exist should have been a warning sign to the broker that something could go wrong in the transaction. [ 49 ] When the February 2 nd communication was mishandled by both brokers, a final opportunity for the Plaintiff to withdraw from the transaction or to attempt to renegotiate a lower price was lost. [ 50 ] The fault was contributed to equally by both brokers: by Mrs Hamelin in failing to check to see that she had incorporated the attachment that was intended to be disclosed and Mr Lallis in reading the attachment but not failing to read the body of the email. [ 51 ] Mrs Hamelin could also have called Mr Lallis or he could have called her.

Perhaps they were both too busy. This could, perhaps, be an explanation but it is not an excuse for a lack of care on their

part in following up on a very important detail of the transaction. It would have been very apparent to Mrs Hamelin and to Mr Lallis that something as significant as $ 250,000 to replace both elevators, would be, as the memo to owners indicates: “[…] a serious financial commitment which will necessitate a special assessment on the co- owners.

There is a joint responsibility on the part of the owners of this building to maintain safe elevators that conform to the building code”. [ 52 ] To answer, then, the first question raised in the issues above, the Court concludes that Mrs Vosberg is entitled to be made whole for the amount of $ 6,865 she was compelled to pay in her new capacity as co-owner.

This was a significant financial prejudice that she could have avoided if she have known of it at the relevant time, prior to waiving the condition relating to disclosure on December 25, 2011. [ 53 ] As well, by not receiving the update, which would have enabled her to refuse to complete the sale unless she got a price reduction, she was deprived of that opportunity. [ 54 ] This prejudice is a result of the separate faults of the seller and of the two agents. [ 55 ] The procedure of the Small Claims Division enables the Court to treat impleaded parties as co-defendants and the Court, therefore, considers all three Defendants responsible in solidum for the amount of the claim. [ 56 ] As between the Defendants, the primary responsibility is that of the vendor.

It was he who made the laconic vendor’s declaration and then failed to disclose the information at the relevant time in December but, he should be held harmless from the fact that his broker failed to follow his instructions, thereby making him liable for the incomplete disclosure made in February. [ 57 ] Mr Lallis is responsible to Mrs Vosberg, but he has no right to be indemnified by the other two responsible parties: his fault was that of being inadvertent, and for that, he has no claim against anyone but himself. [ 58 ] The simplest way to resolve the respective liabilities of these three parties is to have each of them share in one third of the liability, as between themselves. [ 59 ] The intent of the conclusions that follow is to make each of the parties liable toward Mrs Vosberg for the whole amount, but that as between themselves, the liability should be apportioned 1/3 each, Re/Max le Cartier G.B. and Patricia Hamelin to be considered as one party for the purpose of this apportionment, but distinct parties in solidum respecting the Plaintiff.

BY THESE REASONS, THE COURT: CONDEMNS George Lecat, Re/Max le Cartier G.B., Patricia Hamelin, and George Lallis in solidum , to pay the Plaintiff the sum of $6,865, with interest at the legal rate, plus the additional indemnity provided for in

section 1619 of the Civil Code of Québec , calculated from the date of the first putting in default, as well as costs for the judicial stamp incurred by the Plaintiff of $ 167. DETERMINES, to avail between the Defendants and Impleaded Parties only, their respective share of the responsibility as follows: George Lecat: 1/3 Re/Max Le Cartier G.B. and Patricia Hamelin: 1/3 George Lallis: 1/3 __________________________________ DAVID L. CAMERON, J.C.Q. Date of hearing: May 15, 2015