Barrett v. Reynolds et al., (1997) 163 N.S.R.(2d) 127 (SC)

• Judge: Anderson, J.
• Court: Supreme Court of Nova Scotia (Canada)
• Case Date: September 30, 1996
• Jurisdiction: Nova Scotia
• Citations: (1997), 163 N.S.R.(2d) 127 (SC)

Barrett v. Reynolds (1997), 163 N.S.R.(2d) 127 (SC);

    487 A.P.R. 127

MLB headnote and full text

Temp. Cite: [1997] N.S.R.(2d) TBEd. DE.001

Wayne Barrett and Marlene Barrett (plaintiffs) v. David W. Reynolds and Brenda Hartlin and Pat King Financial Limited, carrying on business as HomeLife Pat King Real Estate and Gilbert L. Gaudet, Canadian Imperial Bank of Commerce and Brunswick Capital Incorporated (defendants)

(S.H. Nos. 74633; 77332)

Indexed As: Barrett v. Reynolds et al.

Nova Scotia Supreme Court

Anderson, J.

July 4, 1997.

Summary:

The purchasers agreed to buy the vendors' home subject to obtaining mortgage financ­ing within 14 days, which was deemed to have been obtained unless notice to the contrary was given. The sale agreement was not conditional on the purchasers selling their existing home, but mortgage financing was conditional on such a sale. One lawyer represented both the vendors and the pur­chasers. The real estate agent advised the vendors that financing was approved, as did the bank. The vendors did not ask if financ­ing was conditional, nor was that informa­tion volunteered. Before closing, the pur­chasers obtained a line of credit from the bank and began construction of a new home. The purchasers never sold their existing home, financing was accordingly not avail­able and the sale fell through. The vendors were unable to sell the home until two years later, at $55,000 less than the agreement price. Additionally, the vendors' line of credit went into default and the bank demanded full payment. The vendors sued the purchasers for breach of the purchase and sale agreement; the bank for breach of fiduciary duty and negligent misrepresenta­tion; the real estate company for breach of fiduciary duty and negligent misrepresenta­tion; and the lawyer for breach of fiduciary duty. The bank counterclaimed for payment of the line of credit balance.

The Nova Scotia Supreme Court found the purchasers liable for breach of the purchase and sale contract; dismissed the action against the bank; found the real estate com­pany and lawyer liable for breach of fiduciary duty and held it was not an appro­priate case for joint and several liability. The court assessed the damages attributable to each defendant. The court awarded solicitor and client costs against the lawyer and party and party costs against the other defendants found liable. The court allowed the bank's counterclaim.

Agency - Topic 3084

Relations between principal and agent - Agent's duty - Fiduciary duty - The pur­chasers agreed to buy the vendors' home subject to obtaining mortgage financing within 14 days, which was deemed to have been obtained unless notice to the contrary was given - The sale agreement was not conditional on the purchasers selling their existing home, but mortgage financing was conditional on such a sale - The real estate agent representing the vendors advised the vendors that financing was approved, when in fact financing was conditional and never obtained - The false information was based on a misunder­standing between the real estate agent approached by the purchasers and the vendor's agent - Both agents worked for the defendant real estate company - The Nova Scotia Supreme Court held that the defendant company breached its fiduciary duty to provide full and frank disclosure by passing on false and misleading infor­mation - The company failed to show that the vendors did not rely on the information to their detriment - See paragraphs 59 to 78.

Banks and Banking - Topic 745

Duties of banks - Fiduciary relationships - Conditions precedent - Purchasers agreed to buy a home subject to financing being obtained - If the purchasers could not obtain financing, they had to notify the vendors within the 14 day period or be bound by the agreement - The sale was not conditional upon the purchasers selling their existing home, but mortgage financ­ing was approved subject to the sale of that home - The vendors, wishing to open a line of credit at the bank to construct a new home, asked whether the financing had been approved - The bank advised financing had been approved, but did not state approval was subject to conditions - The vendors did not ask if approval was conditional - The sale fell through and the vendors defaulted on their line of credit - The vendor sued the bank for breach of fiduciary duty for failing to advise them that financing approval was conditional - The Nova Scotia Supreme Court held that the bank owed no fiduciary duty to the vendors respecting the inquiry - See para­graphs 43 to 48.

Barristers and Solicitors - Topic 1548

Relationship with client - Duty to client - Fiduciary duty - A lawyer acting for both the vendors and purchasers in a real estate transaction possessed relevant financial information as to the purchasers' mortgage financing - He failed to disclose that information to the vendors - The Nova Scotia Supreme Court found the lawyer liable for breach of fiduciary duty and assessed damages accordingly - Further the court awarded costs against the de­fendant lawyer on a solicitor-client basis - See paragraphs 91 to 95.

Barristers and Solicitors - Topic 1604

Relationship with client - Conflict of interest - Acting for both sides - [See Barristers and Solicitors - Topic 1548 ].

Brokers - Topic 3152

Duties of broker to principal - Real estate brokers - Fiduciary duty - [See Agency - Topic 3084 ].

Damages - Topic 5706

Contracts - Breach of contract - Injured feelings or emotional upset - [See Equity - Topic 3655 and Sale of Land - Topic 7672 ].

Damages - Topic 6151

Contracts - Sale of land - Breach by buyer - Measure of damages - [See Sale of Land - Topic 7672 ].

Equity - Topic 3655

Fiduciary or confidential relationships - Breach of fiduciary relationship - Dam­ages - The purchasers agreed to buy the vendors' home subject to obtaining financ­ing within 14 days, which was deemed obtained unless notice to the contrary was given - The sale agreement was not con­ditional on the purchasers selling their existing home, but mortgage financing was conditional on such a sale - The defendant real estate company breached its fiduciary duty to the vendors by providing false information (i.e., that financing approved, when in fact it was never obtained because the condition was not satisfied) - The vendors had obtained a line of credit as bridge financing to construct a new home - The purchasers did not close and were liable for breach of contract - The vendors took two years to sell the home at a lesser price - They also defaulted on the line of credit and the bank demanded payment - The Nova Scotia Supreme Court assessed the damages for which the real estate company was liable, including $5,000 for mental distress - See paragraphs 80 to 90.

Fraud and Misrepresentation - Topic 2508

Misrepresentation - Negligent misrepre­sentation - Purchasers agreed to buy a home subject to financing being obtained - If the purchasers could not obtain financ­ing, they had to notify the vendors within the 14 day period or be bound by the agreement - The sale was not conditional upon the purchasers selling their existing home, but mortgage financing was approved subject to the sale of that home - The vendors, wishing to open a line of credit at the bank to construct a new home, asked whether the financing had been approved - The bank advised financing had been approved, but did not state ap­proval was subject to conditions - The vendors did not ask if approval was condi­tional - The sale fell through and the vendors defaulted on their line of credit - The vendor sued the bank for damages for negligent misrepresentation, claiming the bank's statement that financing was approved was, in all the circumstances, untrue - The Nova Scotia Supreme Court held that there was no misrepresentation - The statement was true and it was not reasonable to imply that the bank was representing that approval was uncondi­tional - See paragraphs 49 to 55.

Fraud and Misrepresentation - Topic 2705

Misrepresentation - What constitutes - Falsity - By omission - [See Fraud and Misrepresentation - Topic 2508 ].

Practice - Topic 7452

Costs - Solicitor and client costs - Enti­tlement to - Neglect or misconduct - [See Barristers and Solicitors - Topic 1548 ].

Sale of Land - Topic 6038

Completion - Conditions precedent and subsequent - Condition respecting financ­ing to be arranged - A purchase and sale agreement was conditional upon the pur­chaser obtaining mortgage financing within 14 days, but not conditional on the sale of the purchaser's existing home - The pur­chaser was bound by the contract unless he gave notice within that 14 days that fi­nancing could not be obtained - Mortgage financing was approved subject to the sale of the purchaser's existing home - The purchaser's home did not sell, mortgage financing was therefore not available and the purchaser was unable to close - The Nova Scotia Supreme Court held that absent notice the purchaser was bound by the agreement and was liable for breach of contract - See paragraphs 20 to 23.

Sale of Land - Topic 7672

Remedies of vendor - Damages - Measure of - The purchasers breached a purchase and sale agreement by being unable to close due to the inability to obtain mort­gage financing - The vendors, before closing, had relied on representations that financing had been approved and obtained a line of credit as bridge financing for construction of a new home - The line of credit was used and the vendors went into default, because they were unable to sell the home until two years later, for $55,000 less - The Nova Scotia Supreme Court held that the vendors were entitled to damages for the loss on the subsequent sale of the house, landscaping costs incurred to facilitate a sale, municipal taxes after closing and the vendors' pack­ing and unpacking costs - The court dis­missed claims for damages for mental anguish, physical injuries, depression and employment losses and lost sick days resulting from such depression - These losses did not result from a separate ac­tionable tort and the losses were not within the reasonable contemplation of the con­tracting parties - The court also rejected claims for damages respecting the line of credit and costs relating to construction of the new home - Those damages were too remote - See paragraphs 24 to 42.

Cases Noticed:

McNabb v. Smith et al. (1981), 124 D.L.R.(3d) 547 (B.C.S.C.), refd to. [para. 21].

Nichol v. Myers et al. (1992), 111 N.S.R.(2d) 150; 303 A.P.R. 150 (T.D.), refd to. [para. 22].

Laird v. Pim (1841), 171 E.R. 852, refd to. [para. 26].

Gaspari v. Creighton Holdings Ltd. (1984), 13 D.L.R.(4th) 570 (B.C.S.C.), refd to. [para. 26].

Lozcal Holdings Ltd. v. Brassos Develop­ments Ltd. (1980), 22 A.R. 131; 111 D.L.R.(3d) 598 (C.A.), refd to. [para. 28].

Addis v. Gramophone Co., [1909] A.C. 488 (H.L.), refd to. [para. 30].

Jarvis v. Swan Tours, [1973] 1 All E.R. 71 (C.A.), refd to. [para. 30].

Vorvis v. Insurance Corp. of British Col­umbia, [1989] 1 S.C.R. 1085; 94 N.R. 321; 58 D.L.R.(4th) 193; [1989] 4 W.W.R. 218; 36 B.C.L.R.(2d) 273; 90 C.L.L.C. 14,035; 25 C.C.E.L. 81, refd to. [para. 31].

Gourlay v. Osmond (1991), 104 N.S.R.(2d) 155; 283 A.P.R. 155 (T.D.), refd to. [para. 31].

Standard Investments Ltd., Brentwood Realty Ltd., Cohen and Ellen v. Cana­dian Imperial Bank of Commerce (1985), 11 O.A.C. 318; 22 D.L.R.(4th) 410 (C.A.), refd to. [para. 43].

Lloyds Bank Ltd. v. Bundy, [1975] Q.B. 326 (C.A.), refd to. [para. 45].

Mason (V.K.) Construction Ltd. v. Bank of Nova Scotia and Courtot Investments Ltd., [1985] 1 S.C.R. 271; 58 N.R. 195; 8 O.A.C. 381; 16 D.L.R.(4th) 598, refd to. [para. 49].

Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 147 N.R. 169; 60 O.A.C. 1; 99 D.L.R.(4th) 626, refd to. [para. 51].

R. v. Kelly, [1992] 2 S.C.R. 170; 137 N.R. 161; 9 B.C.A.C. 161; 19 W.A.C. 161; 92 D.L.R.(4th) 643, refd to. [para. 61].

Henderson v. Thompson (1909), 41 S.C.R. 445, refd to. [para. 62].

Carmichael v. Bank of Montreal (1972), 25 D.L.R.(3d) 570 (Man. Q.B.), refd to. [para. 63].

Knoch Estate v. Picken (Jon) Ltd. et al. (1991), 49 O.A.C. 321; 18 R.P.R.(2d) 250 (C.A.), refd to. [para. 65].

Wypych et al. v. McDowell et al. (1990), 11 R.P.R.(2d) 89 (Ont. Dist. Ct.), refd to. [para. 68].

International Corona Resources Ltd. v. LAC Minerals Ltd., [1989] 2 S.C.R. 574; 101 N.R. 239; 36 O.A.C. 57; 61 D.L.R.(4th) 14; 69 O.R.(2d) 287; 35 E.T.R. 1, refd to. [para. 70].

Frame v. Smith and Smith, [1987] 2 S.C.R. 99; 78 N.R. 40; 23 O.A.C. 84; 42 D.L.R.(4th) 81, refd to. [para. 70].

Parks v. Atlantic Provinces Special Educa­tion Authority Resource Centre for the Visually Impaired (1992), 109 N.S.R.(2d) 113; 297 A.P.R. 113 (C.A.), refd to. [para. 75].

Ridge View Development & Holding Co. v. Simper, [1989] 5 W.W.R. 133; 95 A.R. 282 (Q.B.), refd to. [para. 78].

Commerce Capital Trust Co. v. Berk, Wall, Chadwick et al. (1989), 33 O.A.C. 373; 5 R.P.R.(2d) 177 (C.A.), refd to. [para. 78].

Hedley Byrne & Co. v. Heller & Partners Ltd., [1963] 2 All E.R. 575 (H.L.), refd to. [para. 79].

Smith and Smith v. Fearon (1988), 87 N.S.R.(2d) 119; 222 A.P.R. 119 (T.D.), dist. [para. 85].

Pizzo v. Crory, Laws and Charterhouse Equities Ltd. et al. (1986), 71 N.S.R.(2d) 419; 171 A.P.R. 419 (T.D.), refd to. [para. 96].

Statutes Noticed:

Judicature Act, R.S.N.S. 1989, c. 240, sect. 41(i) [para. 40].

Authors and Works Noticed:

Ellis, Mark V., Fiduciary Duties in Canada (1993), pp. 5-7 to 5-8.3 [para. 62].

Fridman, Gerald H.L., The Law of Agency (4th Ed. 1976), p. 8 [para. 60].

McLachlin, Beverley M., Damages: The Inter­face Between Contract, Tort and Equity (Canadian Judicial Council Sem­inar, July 1993), generally [para. 18].

Perell, Paul M., Remedies and the Sale of Land (1988), p. 170 [para. 24].

Counsel:

J. George Byrne, William L. Mahody and William M. Leahey (Sept. 30), for the plaintiffs;

David and Brenda Reynolds, on their own behalf;

Philip Chapman, for Pat King Financial Ltd.;

Harry E. Wrathall, Q.C., and Michelle C. Awad, for Gilbert L. Gaudet;

D. Kevin Latimer and Daniel W. Ingersoll, for CIBC;

William L. Ryan, Q.C., for Brunswick Capital Inc.

This action was heard on March 1-4 and April 25-27, 1994, and September 30, 1996, at Halifax, N.S., before Anderson, J., of the Nova Scotia Supreme Court, who delivered the following judgment on July 4, 1997.