Martin W. Lacey v. Marcia Gutierrez, 2017 SKPC 91

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2017 SKPC 091 Date: November 14, 2017 File: SC#469 of 2016 Location: Saskatoon _____________________________________________________________________________ Between: Martin W. Lacey and Marcia Gutierrez - and - Grant Ostapowich Galen R. Richardson For the Plaintiff Colin D. Clackson, Q.C. For the Defendant _____________________________________________________________________________ JUDGMENT D.A.

LAVOIE , J _____________________________________________________________________________ [ 1 ] At the commencement of the trial, counsel for the parties dealt with a number of preliminary matters. Of note, counsel for all parties agreed by consent, that the names of the defendants would be amended in that Grant Ostapowich in his personal capacity would be the sole defendant. The names of the original two corporate defendants would be removed as parties to the action. [ 2 ] This is an action in negligence. The plaintiffs are suing Grant Ostapowich as an individual agent alleging he failed to

exercise due care in listing a house on Multiple Listing Service (MLS), in that the square footage set out in the listing documents (Exhibit PD1, tab 3) and the Home Features Sheet (Exhibit PD1, tab 2) was overstated and incorrect. [ 3 ] The plaintiffs claim damages based upon an allegation that the price they paid was greater than what the house was actually worth because the square footage advertised was less than the actual square footage. [ 4 ] The particulars of negligence are set out in para 21 of the plaintiffs’ Statement of Claim as follows: Plaintiffs hold that both Defendants were negligent in failing to carry out their responsibilities with (

i) reasonable care and diligence, (ii) failing to check the City record and hence reconciling the obvious discrepancy, and (iii) failing to disclose conflict of interest from the onset of the negotiations. [ 5 ] The Court summarizes the issues as follows: 1) Whether there was any negligent misrepresentation, as to the square footage; 2) Damages, if any, that would flow from any negligent misrepresentation; 3) Pre-judgment interest, if any; and 4) Costs if any. [ 6 ] The following is a

summary of the evidence and background information forthcoming from the witnesses. [ 7 ] Mr. Lacy testified that in late 2010 he entered into a five year contract to provide professional engineering services to a mining company, having offices in Saskatoon, with a start date of January 10, 2011. At the time he and his wife were residents of the United States. [ 8 ] Some time around March 8, 2011, he retained the services of a real estate agent to assist him with the process of purchasing a house.

His wife was apparently away assisting some family members with health issues and not present in Saskatoon at that time. A series of emails, filed during the proceedings disclose, around March 17, 2011, his agent brought 315 Thode Avenue to the attention of Mr. Lacey. [ 9 ] Mr. Lacey viewed the property with his agent and in the process was given two documents being a printed MLS listing sheet (tab 3) and a “Features” sheet (tab 2) to look at. Both had been created by Mr. Ostapowich, in his professional capacity as listing agent of the said property.

Of note and the evidentiary basis of this action is that both documents set the square footage of the house as follows: Bungalow 1,740 square feet. [ 10 ] Mr. Lacey submitted a first written Offer to Purchase dated March 21, 2011for $570,000.00. [ 11 ] There were subsequent offers and counter offers with a final agreement dated March 25, 2011 for a purchase price of $585,000.00.

Final conditions were removed by the purchasers on April 7, 2011 with a possession date of May 20, 2011. [ 12 ] The plaintiffs resided in the home for a number of years and did approximately $30,000.00 in renovations during that time period.

[ 13 ] After the five year employment contract concluded in April, 2016 the plaintiffs listed their house for sale with Mr. Henry Moulin, a professional real estate agent. [ 14 ] It is at that time that they became aware of the square footage discrepancy and commenced this legal action. Mr. Moulin testified he has been an agent for some 31 years, and while preparing the listing agreement he calculated the square footage of the property to be 1,635 square feet (tab 1) and in his opinion the square footage of 1,740 square feet stated by Mr. Ostapowich was in error.

The property was sold, pursuant to a written agreement dated September 30, 2016 for $540,000.00 with a possession date of November 17, 2016. [ 15 ] Mr. Moulin indicated there were a number of factors that influenced the final sale price including: 1) the actual square footage was less than the stated square footage at the time of purchase in 2011; and 2) the resale market had clearly softened in 2015/16 as compared to 2011. [ 16 ] Mr. Don Junor, a certified real estate appraiser, with numerous years of experience in the industry, also testified.

His written appraisal dated August 31, 2017 stated the following: On August 2, 2017 I personally inspected and measure 315 Thode Avenue. As a result of my measurement the building size for 315 Thode Avenue is 1629 sq.ft. on 1 level (see enclosed drawing). I also obtained a copy of the City of Saskatoon assessment sheet dated July 12, 2017 which states 315 Thode Avenue is 1629 sq.ft. on 1 level (see enclosed sheet).

Listing agent involved in the listing that reported 315 Thode Avenue to be 1730 sq.ft. and 1740 sq.ft. on one level, agent Grant Ostapowich clearly miscalculated the sq.ft. on one level for 315 Thode Avenue. It is in my opinion that the error in sq.ft. for 315 Thode Avenue could have an effect on market value of approximately $5,000.00 I am aware that as an expert witness I owe a duty to the Court to provide opinion evidence that is objective and non-partisan, and related only to matters that are within my area of expertise.

I am also aware that I owe a duty to the Court to provide any additional assistance that the Court may reasonably require to determine a matter in issue. I confirm that I have authored this report in conformity with this duty. If called to give oral or written testimony before the Court I will give such testimony in conformity with that duty. [ 17 ] It should be noted both Mr. Moulin and Mr. Junor admitted when looking at the written working diagrams, Mr. Ostapowich prepared in calculating square footage, he appeared to have similar outside measurements as they had. Mr. Junor proffered that Mr.

Ostapowich made a significant mathematical error in arriving at the figure of 1740 sq. ft. It is noted that this is approximately 110 sq. ft. greater than the figure Messrs. Junor and Moulin arrived at. [ 18 ] Of some significance is that both Messrs. Junor and Moulin indicated as part of their appraisal process they both did an online check of the City of Saskatoon property tax assessment records. Those records set out the square footage of the house as being 1629 sq. ft., which is clearly at odds with the Ostapowich listing. [ 19 ] Shortly after being made aware of the square footage differences Mr.

Lacey, drafted the within Statement of Claim. He also filed a complaint in relation to Mr. Ostapowich’s error, with the Saskatchewan Real Estate Commission, the governing and discipline body for the real estate industry in Saskatchewan. The findings of their investigation were put forth by the defendant in his defence.

[ 20 ] The evidence of the defendant establishes that all the information set forth in the listing documents in 2011 was gathered by himself and he was responsible for the same. Over the years he had been involved in a number of different careers and in July 2009 he obtained his real estate licence and began selling real estate. The property, 315 Thode Avenue, was owned by his brother and sister-in- law. They had tried selling the property a couple of times with other agents with no success. [ 21 ] In early 2011 his brother retained him to sell the property.

At that time his brother was in ill health and was somewhat anxious to sell his home. In fact the MLS listing had the following comments: “Must sell ASAP, seller very ill, price far below appraisal”. [ 22 ] He stated at the time of preparing the listing he calculated the square footage twice, created two measurement diagrams, and came up with two values: 1 st 1745 sq. ft. (tab 44) and 2 nd 1737.6 sq. ft. (tab 45). [ 23 ] From that he decided to use the number of 1740 sq. ft.

He acknowledged that for unknown reason he did not check the City of Saskatoon property assessment records which showed 1629 sq. ft., which was different from his figure. [ 24 ] He also filed and relied upon the Saskatchewan Real Estate Commission investigation report dated July 21, 2016 which in part stated (tab 33): Our investigation did not produce evidence showing that Mr. Ostapowich has committed professional misconduct. While his determination of the square footage is not consistent with the square footage determined by another registrant and the Property Assessment, Mr.

Ostapowich took reasonable steps to obtain information about the Property. He conducted his own exterior measurements of the Property. The method of calculating the square footage Mr. Ostapowich used appears to be correct, but the process was complicated by the irregular shape of the Property. While the advertisement Mr. Ostapowich created does appear to include an inaccurate statement of the size of the Property, he completed the due diligence required of him in this case. Mr. Ostapowich did not use the Disclosure of Interest in Trade form properly.

A registrant must disclose the fact that the seller is an immediate family member before entering into any negotiations with the buyer or buyer ’ s agent. Completing a Disclosure of Interest in Trade form after conditions have been removed defeats the purpose of making the disclosure at all. Mr. Ostapowich did not provide this document to you until after conditions were removed on the purchase of the Property. As such, the public interest is better served by providing Mr. Ostapowich with a written warning and recommendations for future practice.

As a result of your complaint and our investigation, we will be discussing this matter with Mr. Ostapowich and providing him with a written warning and recommendations for future practices as to avoid the likelihood of similar complaints in the future. [ 25 ] This report was of assistance to the Court in clarifying the sequence of events. However in the end its role was to determine if “Mr. Ostapowich has committed professional misconduct” in the context of disciplinary proceedings while the role of the Court here is to determine if there was “negligent misrepresentation” and not misconduct.

The plaintiffs have not pled nor are they alleging “fraudulent misrepresentation” which might entail an element of misconduct.

Accordingly, the said report is of limited assistance for the Court to make a determination at this stage. [ 26 ] The defendant also relied on two disclaimer clauses which read as follows: 1) Residential Contract of Purchase dated March 21, 2011 (tab 11), clause 6.4: The Seller and the Buyer acknowledge that, except as otherwise described in this contract, there are no other warranties, representations or collateral agreements made by or with the other party, the Seller ’ s Brokerage and the Buyer ’ s Brokerage about the property, any neighbouring lands and this transaction, including any warranty, representation or collateral agreement relating to the size/measurements of the land and buildings or the existence of any environmental condition or problem and the Buyer hereby agrees to purchase the above described property as it stands at the price and terms and subject to the conditions above set forth. 2) Feature Sheet (tab 2). “ Information contained in this Feature Sheet is believed to be accurate, but not warranted to be so by the Broker

and/or Agent”. The Law Negligent Misrepresentation [27] A significant and often cited case in Saskatchewan on misrepresentation by real estate agents is Forbes v Morrison, 2014SKQB 40, 437 Sask R 124 J.A. Ryan-Froslie (as she then was) stated at paras 59 and 60: [59] The tort of negligent misrepresentation originated with the House of Lords decision in Hedley Byrne & Co. Ltd. v. Heller & PartnersLtd., [1964] A.C. 465. [60] The leading case in Canada on negligent misrepresentation is the Supreme Court of Canada decision in Queen v. Cognos Inc., (SCC), [1993] 1 S.C.R. 87.

In that case, Justice Iacobucci, speaking for a majority of the court, set out the elementsnecessary to establish the tort at para. 33 (QL) as follows: …(1) there must be a duty of care based on a “special relationship” between the representor and the representee; (2) the representation inquestion must be untrue, inaccurate, or misleading; (3) the representator must have acted negligently in making said misrepresentation;(4) the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and (5) the reliance must have beendetrimental to the representee in the sense that damages resulted. … In order to be successful, the plaintiffs must establish each of those five elements on a balance of probabilities. [28] See other significant Saskatchewan decisions: 1) Genereux v Gulaga and Hallmark Realty, 2002 SKPC 121, 226 Sask R 276 [Hallmark] (T.

White, J); 2) Hack and Bugera v Rusnak and Royal Lepage et al, 2013 SKPC 128, 428 Sask R 251 [Rusnak] (R. Green, J); 3) Polley v Ford and Century 21 Dome, 2007 SKPC 25 (R.D. Jackson, J); 4) Mlazgar v Brick, 1999 SKQB 91, 185 Sask R 178 (Allbright, J); and 5) Remax Crown Real Estate Ltd. v Thieu 2002 SKQB 384, 225 Sask R 316 (Sask QB) (Kyle, J). Analysis 1. Is a duty of care owed in the circumstances? [29] This Court finds that the case law clearly establishes that there is a duty of care owed between real estate agents and the clientselling or purchasing real estate. In addition, Mr.

Ostapowich concedes that he owed a common law duty of care in the circumstances ofthis case. Thus the first element of the tort of negligent misrepresentation has been met.

2. Was there an inaccurate representation of fact? [30] In this case there was a clear difference in the square footage calculated as follows: 1. Ostapowich 1740 sq ft 2. Moulin 1635 sq ft 3. Junor 1629 sq ft 4. City of Saskatoon 1629 sq ft [31] This Court is satisfied on a balance of probabilities that the square footage figure calculated by Mr. Ostapowich was in factinaccurate. 3. Was the representation made negligently? [32] Whether the defendant acted negligently depends on what the appropriate standard of care is for a seller’s agent in theseparticular circumstances.

While expert evidence is often adduced to show the standard of care, it is often not a necessity. [33] In Rusnak, supra, Green J at para 37 stated: [37] The Saskatchewan Real Estate Commission was created by the Saskatchewan Legislature through provisions of The Real EstateAct. Amongst other duties and responsibilities, the Commission sets standards regarding the manner and method of real estate practice.The bylaws of the Commission provide standards for real estate agents in Saskatchewan (who are called “registrants”). The relevantstandard to be observed by a seller’s agent is set out in Bylaw 714: 714.

A registrant shall take reasonable steps to discover facts pertaining to every property for which the registrant accepts an agencyagreement that a prudent registrant would take in order to fulfil the obligation to avoid error, misrepresentation or concealment ofpertinent facts. [34] The error in square footage is in excess of 100 square feet. Two other agents and the City of Saskatoon calculated a lesserfigure.

The evidence shows that the square footage is included in prominent positions on two documents, used during the sale process. [35] The defendant measured twice but made a mathematical error twice in arriving at a final figure. For whatever reason hedidn’t take steps to verify his figure either with City records or previous listings, or otherwise. Many factors or features are taken intoaccount in valuating and ultimately marketing residential property.

This Court is satisfied that square footage ranks in the top two orthree criteria rather than at the bottom, of what may often be a lengthy list. [36] The numerous cases presented to the Court deals with that very square footage issue. The Court can also infer that in thisparticular case the defendant was feeling some pressure to market the property at top dollar and as soon as possible. [37] As stated earlier the Court places marginal weight in the finding of the Commission in a discipline hearing as opposed to anegligence hearing.

In all the circumstances this Court finds that as a professional the defendant did not meet the standard he wasexpected to possess and exercise the skill, knowledge and diligence of a real estate agent of his class. His stating the square footage, ashe did, amounted to a negligent misrepresentation as contemplated in R v Cognos Inc., (SCC), [1993] 1 SCR 87 (SCC). 4. The plaintiff must have relied, in a reasonable manner, on the representation?

[38] The defendant agent held himself out to be a “professional” creating a standard for individuals to rely on their representationsand expertise. Real estate listings invariably set out the square footage of a residential property. Though not the sole determining factorin the plaintiffs choosing to purchase the property in 2011, it was clearly a significant factor in this case. [39] The defence strenuously argued and relied on the disclaimer clause in the Feature Sheet and para 6.4 in the Sale Agreement.

The legal effect of said claims was discussed at length in Lawson v Re/Max Landon Real Estate, 2017 ABPC 44; Fraser River Pile &Dredge Ltd. V Can-Drive Services Ltd, (SCC), [1999] 3 SCR 108 (SCC); and Anchor Fence Inc. v Polaris RealtyCorp., (AB KB), [1994] 10 WWR 574 (Alta QB) (Master Funduk) [40] The position stated by Green, J in Rusnak, is in contrast, to the above decisions, in that the disclaimer clause did not protect athird party agent in the context of negligent misrepresentation as opposed to a claim in contract. This Court accepts the reasoning ofGreen J.

In the Rusnak decision, as opposed to the Alberta decisions. [41] The Court finds it was reasonable for the plaintiffs to rely on the statement of square footage advertised by the defendant. They relied on that figure in a significant manner while weighing all factors in deciding to purchase the house in 2011. 5) Was the plaintiffs’ reliance detrimental to them, and if so what are the damages, if any? [42] From the evidence, the Court can draw the conclusions the plaintiffs relied on the representation to their detriment.

One canlogically infer a smaller square footage disclosure would have clearly been a factor in the negotiations in arriving at a final purchaseprice. [43] The Saskatchewan decisions, supra, set out the principles to be applied in assessing quantum of damages and the Court neednot review them at length. [44] In Hallmark at para 15, White J stated: The method of valuation used by the expert called by the Defendants was market-based and comparative to other homes of similarsquare footage.

Under that analysis the evidence is that the house was worth more than what the Plaintiff bargained for at the time ofsale and considerably more at this juncture in 2002. The question ultimately is whether this valuation method is a fair measure of thePlaintiff's damages (loss) or gain. Each case will turn on its own facts when considering this kind of question.

In this case, I haveconcluded that the comparative method of market valuation of the house is the only satisfactory way of addressing the issue of loss ordamages. . . . [45] In Re/Max Crown v Thieu, 2002 SKQB 384, 225 Sask R 316 Kyle J stated it is an error to try and quantify damages on amathematical formula of cost per square foot.

Rather the proper approach is to use comparable sales to similar houses in the area at thetime of the initial purchase. [46] In Forbes v Morrison, 2014 SKQB 40, 437 Sask R 124 Ryan-Froslie J (as she then was) at para 81 stated: The measure of damages for negligent misrepresentation entitle plaintiffs to be put in the position they would have been in had themisrepresentation not been made.

In cases involving real property, such damages are measured by the diminution of the land’s value,that is, the difference between what the plaintiffs paid for the land and what it was actually worth at the time they purchased it. (See: BG Checo International Ltd. v. British Columbia Hydro and Power Authority, (SCC), [1993] 1 S.C.R. 12 at para. 39;Parna v. G. & S. Properties Ltd. (1969), (ON CA), 5 D.L.R. (3d) 315 (Ont. C.A.) at paras. 7 and 8 (QL); Brown v. Fritz,supra at paras. 48 and 49; and Hepting v. Schaaf, (SCC), [1964] S.C.R. 100)

[47] The evidence with respect to the diminution of the value of the property in issue as of the date of purchase was less than ideal. The plaintiffs called Mr. Junor and filed his written evaluation. [48] Defence skilfully cross-examined him as to certain deficiencies, in comparator property values within the report.

As well the defence profered that the initial purchase price was near or somewhat below the actual fair market value of the property at the time of purchase. [49] Defence puts forth and the Court agrees that the measure of damages is the difference between the purchase price paid by the plaintiffs and the actual fair market value of the home at time of purchase in 2011. [50] The plaintiffs claim is for $30,000.00. The appraisal report of their expert Mr.

Junor states: It is my opinion that the error in sq.ft. for 315 Thode Avenue could have an effect on market value of approximately $5,000.00. [51] Though challenged by the defence, the Court finds that evidence establishes on a balance of probabilities that the damages suffered by the plaintiffs in relation to reduction in value in relation to the actual purchase price was $5,000.00. [52] The plaintiffs shall have judgment in that amount. Costs [53] The damages awarded are significantly less than that claimed by the plaintiffs.

This is a small claims matter where the plaintiffs’ expectations for whatever reason, were somewhat inflated. [54] The Court will only award costs to the plaintiffs in the amount of their cost to issue the claim, being $100.00. Pre-judgment Interest [55] Based on the observations made in relation to costs, the Court awards no pre-judgment interest. ___________________ D.A. Lavoie, J