Forbes et al. v. Morrison et al.,

• Jurisdiction: Saskatchewan
• Judge: Ryan-Froslie
• Neutral Citation: 2014 SKQB 40
• Date: 05 February 2014
• Court: Court of Queen's Bench of Saskatchewan (Canada)

Forbes v. Morrison (2014), 437 Sask.R. 124 (QB)

MLB headnote and full text

Temp. Cite: [2014] Sask.R. TBEd. FE.047

Terry Forbes and Terry Hein (plaintiffs) v. Leo Morrison, Norland Realty Ltd. (doing business as "Sutton Group-Norland Realty Ltd." and Sutton Group-Norland Realty), John Morrison, Evelyn Morrison and "John Doe" (defendants/plaintiffs by cross-claim/defendants by cross-claim) and John Morrison and Evelyn Morrison (defendants/defendants by cross-claim/plaintiffs by cross-claim)

(2006 Q.B. No. 270; 2014 SKQB 40)

Indexed As: Forbes et al. v. Morrison et al.

Saskatchewan Court of Queen's Bench

Judicial Centre of Saskatoon

Ryan-Froslie, J.A.(ex officio)

February 5, 2014.

Summary:

The plaintiffs purchased a cabin from John and Evelyn Morrison. John and Evelyn's son, Leo, a realtor with Norland Realty Ltd., acted as a "dual agent" with respect to the sale. The plaintiffs claimed damages as a result of Leo's negligent and/or fraudulent misrepresentations. They also alleged breach of fiduciary duty (Leo), breach of contract (Leo, John and Evelyn) and that John, Evelyn and Norland were vicariously liable for Leo's representations and actions. Norland acknowledged it was vicariously liable.

The Saskatchewan Court of Queen's Bench held that Leo was liable for damages rising out of his fraudulent and negligent misrepresentations, breach of his fiduciary duty and breach of his agency contract ($27,979). John and Evelyn were liable for breach of the sale and purchase agreement ($26,927). The portion of the damages for Leo's misrepresentations that related to the cost to cure the encroachments ($21,544) was offset against the total award to avoid double compensation with respect to those costs. The plaintiffs were thus entitled to damages of $33,362, apportioned as follows: John and Evelyn were liable for 49%; Leo, for 51%.

Agency - Topic 3084

Relations between principal and agent - Agent's duty - General - Fiduciary duty - [See Brokers - Topic 3152 ].

Agency - Topic 3086

Relations between principal and agent - Agent's duty - General - Dual agency - Requirements of - [See Brokers - Topic 3152 ].

Agency - Topic 3603

Relations between principal and agent - Particular agencies - Real estate agents - [See Brokers - Topic 3152 ].

Brokers - Topic 3026

Duties of broker to principal - General principles - Duty of disclosure - The plaintiffs purchased a cabin - The defendant realtor (the sellers' son) acted as a "dual agent" with respect to the sale - Shortly after taking possession, the plaintiffs found that the boundaries did not conform to the description given by the realtor - The plaintiffs claimed damages as a result of the realtor's breach of contract - The parties acknowledged that the realtor entered into a contract with the plaintiffs when the dual agency arose - The Saskatchewan Court of Queen's Bench stated that the realtor "had an obligation to disclose anything that might reasonably affect the plaintiffs' decision to purchase the property or affect the sale price. In failing to disclose his lack of knowledge with respect to the property's actual boundaries and in representing that the property was owned to the lake, he breached his contract with the plaintiffs" - See paragraph 137.

Brokers - Topic 3030

Duties of broker to principal - General principles - Dual agency - Requirements of - [See Brokers - Topic 3152 ].

Brokers - Topic 3144

Duties of broker to principal - Real estate brokers - Negligence (incl. duty of care, standard of care, etc.) - [See first Brokers - Topic 3150 ].

Brokers - Topic 3144

Duties of broker to principal - Real estate brokers - Negligence (incl. duty of care, standard of care, etc.) - The plaintiffs purchased a cabin - Shortly after taking possession, the plaintiffs found that the property's boundaries did not conform to the description given by the defendant realtor - They claimed damages as a result of the realtor's negligent misrepresentation - The Saskatchewan Court of Queen's Bench stated that the fact that the realtor was found guilty of breaches of the code of ethics which governed the conduct of real estate agents, and was sanctioned for his misdescription of the property was evidence of his breach of the required standard of care - See paragraph 75.

Brokers - Topic 3150

Duties of broker to principal - Real estate brokers - Misrepresentation - The defendant realtor was a "dual agent" in the sales transaction, and acknowledged this amounted to a "special relationship" - The Saskatchewan Court of Queen's Bench stated that, as a result of that special relationship, the realtor owed a duty of care to the plaintiffs, which he breached when he misrepresented the property's boundaries - It was uncontroverted that his representations were not true - The court disagreed with the contention that it was not reasonable for the plaintiffs to rely on those representations - As a professional, the realtor was expected to possess and exercise the skill, knowledge and judgment of the average real estate agent of his class - The duty of care included, but was not limited to, a duty to be fair to both parties, to avoid conflicts, to be scrupulously honest and to disclose all relevant information he possessed or might reasonably be expected to possess about the property or the transaction in general which might reasonably affect its sale - In addition, the realtor had an obligation to verify any pertinent facts with respect to the property which he was representing as true - See paragraphs 71 to 74.

Brokers - Topic 3150

Duties of broker to principal - Real estate brokers - Misrepresentation - The Saskatchewan Court of Queen's Bench stated that "[b]ecause real estate agents are 'professionals', individuals who retain their services are entitled to rely on their representations and expertise ... . As a general rule, clients of real estate agents do not have an obligation to independently verify what the real estate agent is telling them. If a real estate agent does not know if something is correct or accurate, they have an obligation to advise their clients so that the client may take steps to obtain the information or direct the agent to do so." - See paragraph 76.

Brokers - Topic 3150

Duties of broker to principal - Real estate brokers - Misrepresentation - The plaintiffs claimed damages as a result of the defendant realtor's negligent misrepresentations - The boundaries of the property they had purchased did not conform to the description given by the realtor - The realtor contented that the detriment suffered by the plaintiffs did not result in actual damage to them, and thus had not established the fifth element of their claim for negligent misrepresentation - The Saskatchewan Court of Queen's Bench disagreed, as the plaintiffs paid more for the property than it was actually worth - The damages were measured by the diminution of the property's value, i.e., the difference between what the plaintiffs paid for the property and what it was actually worth at the time they purchased it - See paragraphs 80 to 122.

Brokers - Topic 3150

Duties of broker to principal - Real estate brokers - Misrepresentation - The plaintiffs claimed that the defendant realtor's misrepresentations regarding the property they had purchased were made fraudulently - They contended that the realtor purposely misrepresented the boundaries, to hide the encroachments onto a public reserve - The Saskatchewan Court of Queen's Bench was satisfied that the representations were false, that the plaintiffs believed those representations and were induced by them to purchase the property - The court was also satisfied that the realtor knew what he was representing was false or that he made the representations "recklessly" without believing them to be true - That, coupled with the knowledge that the plaintiffs would rely and act upon that information, was sufficient to establish fraudulent misrepresentation - The court's view was reinforced by the realtor's prior ownership and involvement with the property - See paragraphs 123 to 126.

Brokers - Topic 3152

Duties of broker to principal - Real estate brokers - Fiduciary duty - The dual agency agreement made the defendant realtor an agent of the plaintiff purchasers - The Saskatchewan Court of Queen's Bench stated that the realtor "was expected, and in fact his professional duty required, that he act in the best interests of the plaintiffs and that he fully disclose anything that might reasonably affect their decision to purchase the property. As their real estate agent, [the realtor] had influence over the plaintiffs, and the evidence establishes they relied on him to be honest in his representations with respect to the property. The plaintiffs were in a vulnerable position and reliant upon [the realtor's] knowledge and advice. In circumstances similar to this case, real estate agents have been found to owe a fiduciary duty to their clients" - Based on the evidence, the court was satisfied that the realtor owed a fiduciary duty to the plaintiffs, which he breached when he misrepresented the property's boundaries - Equitable damages were not appropriate as the plaintiffs were already being compensated for the realtor's negligent and fraudulent misrepresentations - See paragraphs 131 to 136.

Damages - Topic 6151

Contracts - Sale of land - Breach by seller - Measure of damages - The plaintiffs' damages for the defendant sellers' breach of the sale and purchase agreement were measured as if their representation with respect to there being no encroachments was true - The plaintiffs were also awarded damages for the defendant realtor's negligent and fraudulent misrepresentations and breach of contract - The damages relating to the misrepresentations also took into account the cost to cure the encroachments - The Saskatchewan Court of Queen's Bench stated that the plaintiffs were entitled to be fully compensated for their losses but they were not entitled to be doubly compensated - The portion of the damages for the realtor's misrepresentations that related to the cost to cure the encroachments was offset against the total award to avoid double compensation with respect to those costs - See paragraphs 170 to 177.

Damages - Topic 6153

Contracts - Sale of land - Breach by seller - Time for assessment - [See Sale of Land - Topic 8774 ].

Equity - Topic 3718

Fiduciary or confidential relationships - Commercial relationships - Broker (incl. agent) and principal - [See Brokers - Topic 3152 ].

Fraud and Misrepresentation - Topic 404

Fraudulent misrepresentation (deceit) - Remedies - Damages - [See Damages - Topic 6151 ].

Fraud and Misrepresentation - Topic 2508

Misrepresentation - General principles - Negligent misrepresentation - [See third Brokers - Topic 3150 ].

Fraud and Misrepresentation - Topic 2829

Misrepresentation - Defences - Contributory negligence - The plaintiffs purchased a cabin - Shortly after taking possession, they found that the property's boundaries did not conform to the description given by the defendant realtor (the vendors' son), and that the cabin and a shed encroached onto public reserve - The plaintiffs claimed damages as a result of negligent and/or fraudulent misrepresentations - The realtor argued that the plaintiffs were contributorily negligent for not requesting a survey to verify the property's boundaries - The Saskatchewan Court of Queen's Bench found that the plaintiffs were not contributorily negligent - Unless alerted to a problem, purchasers did not have an obligation to independently verify a realtor's representations - To require them to do so would negate a key reason for having professional realtors - If the realtor had told the plaintiffs that he was not sure where the boundaries were, they would have had an obligation to make further inquiries - Further, the plaintiffs believed a surveyor's certificate was being provided by the vendors - See paragraphs 178 to 186.

Sale of Land - Topic 943

The contract - Conditions and warranties - Breach - What constitutes - The residential contract of purchase and sale entered into between the plaintiff purchasers and the defendant vendors provided that there were no encroachments with respect to the property in issue - The evidence established that the vendors breached the contract as the property (an additional room and a shed) encroached onto an adjacent municipal public reserve - The Saskatchewan Court of Queen's Bench held that the fact that the encroachments were not deliberate did not save the vendors from liability - It was their decision not to obtain a building permit when they built the addition and moved the shed onto the property - They acted without knowing where the property's boundaries were - Their wilful blindness does not militate in their favour - They knew or ought to have known of the encroachments, and they were responsible for them - See paragraphs 148 to 150.

Sale of Land - Topic 1965

The contract - Breach of contract - What constitutes - [See Sale of Land - Topic 943 ].

Sale of Land - Topic 8774

Remedies of purchaser - Damages - Measure of - The contract for sale and purchase was breached by the existence of encroachments onto an adjacent municipal public reserve - The contract itself warranted that no such encroachments existed - The evidence established that the encroachments decreased the value of the property by an amount equal to the cost necessary to cure them - The Saskatchewan Court of Queen's Bench rejected the defendants' position that because the municipality had not acted to force the purchasers to "cure" the encroachments that the plaintiffs had suffered no damage - The damages were to be assessed as if the defendants had performed the contract as promised, i.e., as if there were no encroachments - "[T]he consequences of having such encroachments was clearly within the reasonable contemplation of both parties when they entered into the contract and was thus reasonably foreseeable. The parties knew or ought to have known at that point that the existence of encroachments would negatively affect the value of the property. That negative impact on the value of the property is the damage caused by the breach. ... There is no legal requirement that damages paid to a plaintiff for a breach of contract must be used for a specific purpose. ... Whether the plaintiff actually remedies the breach (in this case, cures the encroachments) is irrelevant to the question of whether they are entitled to damages." - See paragraphs 151 to 160.

Torts - Topic 2500

Vicarious liability - General principles - General - The defendant realtor was the real estate agent for the defendant vendors (his parents), for the purpose of selling their cabin - The Saskatchewan Court of Queen's Bench held that the vendors were vicariously liable for the realtor's misrepresentations - The representations (where the boundaries were physically located and that the lot extended all the way to the water) were made in the course of his role as their real estate agent - Those representations were thus "sufficiently" connected to the conduct authorized by the vendors (i.e. the sale of their cabin) to make them vicariously liable - One of the vendors knew the realtor was incorrectly describing the property's size - The vendors lack of knowledge and blameworthiness with respect to the other misrepresentations was irrelevant to the issue of whether vicarious liability existed - "Vicarious liability is often referred to as 'no fault' liability because it makes individuals who may have done nothing wrong liable for the acts of others in their control who have acted inappropriately" - Nor were the vendors protected from vicarious liability by their contract for sale and purchase, because the representations were not only negligent, but fraudulent - See paragraphs 138 to 147.

Cases Noticed:

Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465 (H.L.), refd to. [para. 59].

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

Power v. Goodram et al. (2012), 529 A.R. 195; 2012 ABQB 50, refd to. [para. 69].

Hack et al. v. Rusnak et al. (2013), 428 Sask.R. 251; 2013 SKPC 128, refd to. [para. 69].

Idzan v. Broadfoot et al. (2011), 525 A.R. 327; 2011 ABPC 208, refd to. [para. 72].

Roske et al. v. Overs et al., [2008] Sask.R. Uned. 87; 2008 SKPC 63, refd to. [para. 72].

Crescent Restaurants Ltd. v. ICR Brokerage Inc. et al. (2010), 359 Sask.R. 149; 494 W.A.C. 149; 322 D.L.R.(4th) 299; 2010 SKCA 92, refd to. [para. 73].

Brown v. Fritz et al., [1993] B.C.T.C. Uned. 541 (S.C.), refd to. [para. 74].

Lyle v. Burdess, 2008 YKSM 5, refd to. [para. 76].

Wong et al. v. 407527 Ontario Ltd. et al. (1999), 125 O.A.C. 101; 179 D.L.R.(4th) 38 (C.A.), refd to. [para. 77].

BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1993] 1 S.C.R. 12; 147 N.R. 81; 20 B.C.A.C. 241; 35 W.A.C. 241, refd to. [para. 81].

Parna v. G. & S. Properties Ltd. (1969), 5 D.L.R.(3d) 315 (Ont. C.A.), refd to. [para. 81].

Hepting v. Schaaf, [1964] S.C.R. 100, refd to. [para. 81].

Hamilton v. Open Window Bakery Ltd. et al., [2004] 1 S.C.R. 202; 316 N.R. 265; 184 O.A.C. 209; 2004 SCC 9, refd to. [para. 118].

Parna v. G. & S. Properties Ltd. et al., [1971] S.C.R. 306, refd to. [para. 124].

Derry v. Peek (1889), 14 A.C. 337 (H.L.), refd to. [para. 124].

McLenaghan v. Beaver Lumber Co. (1982), 21 Sask.R. 65; 143 D.L.R.(3d) 139 (C.A.), refd to. [para. 127].

Hodgkinson v. Simms et al., [1994] 3 S.C.R. 377; 171 N.R. 245; 49 B.C.A.C. 1; 80 W.A.C. 1, refd to. [para. 129].

Frame v. Smith and Smith, [1987] 2 S.C.R. 99; 78 N.R. 40; 23 O.A.C. 84, refd to. [para. 129].

Snider v. Karpinski et al. (2009), 342 Sask.R. 235; 2009 SKQB 394, refd to. [para. 132].

K.M. v. H.M., [1992] 3 S.C.R. 6; 142 N.R. 321; 57 O.A.C. 321, refd to. [para. 135].

Milburn v. Wilson (1901), 31 S.C.R. 481, refd to. [para. 138].

P.A.B. v. Children's Foundation et al., [1999] 2 S.C.R. 534; 241 N.R. 266; 124 B.C.A.C. 119; 203 W.A.C. 119, refd to. [para. 140].

Bazley v. Curry - see P.A.B. v. Children's Foundation et al.

Fullowka et al. v. Pinkerton's of Canada et al., [2010] 1 S.C.R. 132; 398 N.R. 20; 474 A.R. 1; 479 W.A.C. 1; 2010 SCC 5, refd to. [para. 140].

Gilbert v. Giffin (2010), 296 N.S.R.(2d) 183; 940 A.P.R. 183; 2010 NSCA 95, refd to. [para. 141].

Redmond v. Densmore and French (1997), 153 Nfld. & P.E.I.R. 181; 475 A.P.R. 181 (Nfld. C.A.), refd to. [para. 142].

Betker v. Williams (1991), 8 B.C.A.C. 265; 17 W.A.C. 265; 86 D.L.R.(4th) 395 (C.A.), refd to. [para. 142].

Underwood v. Ocean City Realty Ltd., [1985] B.C.J. No. 728 (S.C.), affd. (1987), 12 B.C.L.R.(2d) 199 (C.A.), refd to. [para. 142].

Hauck v. Dixon (1975), 64 D.L.R.(3d) 201 (Ont. S.C.), refd to. [para. 142].

Roy v. Thiessen (2005), 257 Sask.R. 239; 342 W.A.C. 239; 252 D.L.R.(4th) 475; 2005 SKCA 45, refd to. [para. 145].

Ballard v. Gaskill, [1955] 2 D.L.R. 219 (B.C.C.A.), refd to. [para. 146].

Aucoin and Aucoin v. Young (1988), 87 N.B.R.(2d) 170; 221 A.P.R. 170 (C.A.), refd to. [para. 147].

Domokos v. Phillips, [1996] N.B.R.(2d) (Supp.) No. 1 (T.D.), refd to. [para. 147].

Kopec v. Pyret and Borys (1983), 25 Sask.R. 280; 146 D.L.R.(3d) 242 (Q.B.), varied (1987), 55 Sask.R. 172; 36 D.L.R.(4th) 1 (C.A.), refd to. [para. 151].

Baud Corp., N.V. v. Brook, [1979] 1 S.C.R. 633; 23 N.R. 181; 12 A.R. 271, refd to. [para. 156].

Asamera Oil Corp. v. Sea Oil and General Corp. - see Baud Corp., N.V. v. Brook.

M.J. O'Brien Ltd. v. Freedman (1923), 54 O.L.R. 455 (S.C.), refd to. [para. 164].

Ratych v. Bloomer, [1990] 1 S.C.R. 940; 107 N.R. 335; 39 O.A.C. 103, refd to. [para. 175].

Indian Head Credit Union Ltd. v. Hosie (A.) & Co. et al., [1994] 4 W.W.R. 674; 120 Sask.R. 73; 68 W.A.C. 73 (C.A.), refd to. [para. 179].

Spiewak v. 251268 Ontario Ltd. (1987), 43 D.L.R.(4th) 554 (Ont. H.C.), refd to. [para. 180].

Semkuley and Patterson v. Clay, Bell and Doherty Brothers Realty Ltd. (1982), 39 A.R. 526; 140 D.L.R.(3d) 489 (Q.B.), refd to. [para. 180].

Shaw v. Chopra, [1992] O.J. No. 1878 (Gen. Div.), refd to. [para. 180].

Kotowich v. Petursson et al., [1994] 3 W.W.R. 669; 91 Man.R.(2d) 160 (Q.B.), refd to. [para. 180].

Authors and Works Noticed:

Cassels, Jamie, and Adjin-Tettey, Elizabeth, Remedies: The Law of Damages (2nd Ed. 2008), pp. 54, 55 [paras. 127, 165], 250 [para. 134].

Fleming, John G., The Law of Torts (10th Ed. 2011), p. 719 [para. 125].

Foster, William, Agency Law and Real Estate Brokerage: Current Issues, A Review of the Case Law and Some Industry Practices (2003), generally [para. 132].

Counsel:

James H. Gillis, appearing for the plaintiffs;

Heather J. Laing, Q.C., appearing for Leo Morrison and Norland Realty Ltd.;

Kaylea M. Dunn, appearing for John and Evelyn Morrison.

This action was heard before Ryan-Froslie, J.A.(ex officio), of the Saskatchewan Court of Queen's Bench, Judicial Centre of Saskatoon, who delivered the following judgment, dated February 5, 2014.