Motkoski Holdings Ltd. v. Yellowhead (County), 2010 ABCA 72

• Judge: Fraser, C.J.A., Martin and Slatter, JJ.A.
• Court: Court of Appeal (Alberta)
• Case Date: March 05, 2010
• Citations: 2010 ABCA 72;(2010), 474 A.R. 367 (CA)

Motkoski Holdings Ltd. v. Yellowhead (2010), 474 A.R. 367 (CA);

      479 W.A.C. 367

MLB headnote and full text

Temp. Cite: [2010] A.R. TBEd. MR.057

Motkoski Holdings Ltd. (respondent/plaintiff) v. Yellowhead County (appellant/defendant) and Her Majesty The Queen in right of Alberta (not a party to the appeal/third party)

(0903-0022-AC; 2010 ABCA 72)

Indexed As: Motkoski Holdings Ltd. v. Yellowhead (County)

Alberta Court of Appeal

Fraser, C.J.A., Martin and Slatter, JJ.A.

March 5, 2010.

Summary:

The plaintiff negotiated the purchase of land from the defendant county for a motel development. The county knew that the lands could be "nuisance lands" because it was a possible former landfill site. A report commissioned by the county recommended further investigation and disclosure to any purchaser. The county did not investigate and did not disclose this information to the plaintiff. Information in the county's possession confirmed the landfill. Soil testing undertaken by the plaintiff indicated the existence of waste which could only be removed at great expense. The plaintiff, unable to proceed with its development unless the waste was removed from its lands and adjacent lands owned by the county, sued the county for damages. The county pleaded caveat emptor based on the "sale as is" provisions of the purchase and sale agreement.

The Alberta Court of Queen's Bench, in a judgment reported (2008), 452 A.R. 31, found the county liable for fraudulent misrepresentation (deceit) or, alternatively, for concealment of a latent defect. Both were exceptions relieving the plaintiff from the application of the caveat emptor doctrine. The court assessed $885,854 damages for actual loss ($185,854 out-of-pocket expenses) and consequential loss (lost opportunity to earn $700,000 profits over for two years). The plaintiff applied for formal judgment and costs on a solicitor-client or multiple column 4 basis. The county sought a stay of the judgment.

The Alberta Court of Queen's Bench, in a judgment reported (2008), 452 A.R. 59, determined the content of the formal judgment and awarded the plaintiff costs at double Column 4, including second counsel fees, expert fees and costs of exhibit books. The court stayed the judgment for one year or until there was a decision on appeal, whichever was sooner, subject to conditions. The county appealed the finding of liability and the assessment of damages.

The Alberta Court of Appeal allowed the appeal on the basis of errors in defining and applying legal tests and palpable and overriding error in fact findings and inferences drawn from those fact findings. A new trial was ordered for liability only. If the plaintiff established liability, damages were limited to $185,854.

Courts - Topic 562

Judges - Powers - To grant relief not withstanding pleadings - The Alberta Court of Appeal stated that "it is an error of law for a trial judge to decide the case on a basis that is not pleaded" - See paragraph 20.

Damage Awards - Topic 700

Torts - Injury to economic or business relations - Deceit - Fraudulent misrepresentation - [See first Fraud and Misrepresentation - Topic 6 ].

Damages - Topic 1422

Special damages - Loss of corporate opportunity - [See first Fraud and Misrepresentation - Topic 6 ].

Damages - Topic 3625

Deceit and misrepresentation - Fraudulent misrepresentation - [See first Fraud and Misrepresentation - Topic 6 ].

Fraud and Misrepresentation - Topic 6

Fraudulent misrepresentation (deceit) - General principles - What constitutes deceit or fraudulent misrepresentation - The plaintiff negotiated the purchase of a lot from the defendant county for a motel development - It was common knowledge that there had been a landfill somewhere on the parcel the lot was carved out of - It was not known whether the landfill was on the to be purchased lot - A report commissioned by the county recommended further investigation and disclosure to any purchaser - The plaintiff had documentation concerning the landfill, but chose not to read it - Information in the county's possession, which surfaced after the purchase, confirmed the landfill and its location - Soil testing undertaken by the plaintiff indicated the existence of waste which could only be removed with great expense - The plaintiff, unable to proceed with its development unless the waste was removed from its lands and adjacent lands owned by the county, sued the county for damages for fraudulent misrepresentation - The county pleaded caveat emptor based on the "sale as is" provisions of the purchase and sale agreement - The trial judge found the county liable for fraudulent misrepresentation (deceit) or, alternatively, for concealment of a latent defect - Both precluded reliance on the caveat emptor doctrine - The county deliberately concealed information, with an intention to deceive the plaintiff - The Alberta Court of Appeal ordered a new trial - The trial judge erred in stating and applying the legal principles and committed palpable and overriding error in finding, on the evidence, that an actionable misrepresentation had been made and that there had been fraud or concealment - On the evidence, those fact findings, whether direct or by inference, could not be sustained - Absent fraud or deceit, the purchase and sale agreement provisions respecting "sale as is", and suitability of the soil, governed - The court noted that the statement of claim did not plead concealment, latent defect or breach of contract - The trial judge assessed $885,854 damages for actual loss ($185,854 out-of-pocket expenses) and consequential loss (lost opportunity to earn $700,000 profits over for two years) - If the new trial resulted in liability, damages were limited to $185,854 - The plaintiff would not be entitled to damages for loss of profits that it never suffered - See paragraphs 39 to 123.

Fraud and Misrepresentation - Topic 6

Fraudulent misrepresentation (deceit) - General principles - What constitutes deceit or fraudulent misrepresentation - The Alberta Court of Appeal stated that "fraud ordinarily arises from the making of false statements, knowing they are false. The necessary deceitful intention cannot arise if the key decision makers are ignorant of the incorrect fact. Knowledge and ignorance are incompatible opposites. Statements cannot be made recklessly, without caring whether they are true or false, unless the person making the representation is aware, at least, that there is some issue about the truth of the fact. A person who is ignorant of the existence of information that might throw the fact into doubt cannot be reckless in this sense of the word." - See paragraph 90.

Fraud and Misrepresentation - Topic 305

Fraudulent misrepresentation (deceit) - Actions - Defences - Exclusionary clauses - [See first Fraud and Misrepresentation - Topic 6 ].

Fraud and Misrepresentation - Topic 404

Fraudulent misrepresentation (deceit) - Remedies - Damages - [See first Fraud and Misrepresentation - Topic 6 ].

Fraud and Misrepresentation - Topic 2502

Misrepresentation - General principles - Elements of actionable misrepresentation - The Alberta Court of Appeal stated that "an action for misrepresentation generally cannot be based on a representation about how the speaker intends to act in the future, unless the representation amounts to a covenant that the speaker will act in that way" - See paragraph 44.

Sale of Land - Topic 6217

Completion - Sellers' duties - General - Latent defects - [See first Fraud and Misrepresentation - Topic 6 ].

Sale of Land - Topic 8108

Defences of vendor - Caveat emptor - Exceptions - [See first Fraud and Misrepresentation - Topic 6 ].

Sale of Land - Topic 8624

Remedies of purchaser - For quality defects - Where property purchased on "as is" basis - [See first Fraud and Misrepresentation - Topic 6 ].

Sale of Land - Topic 8762

Remedies of purchaser - Damages - Concealment of defects - [See first Fraud and Misrepresentation - Topic 6 ].

Sale of Land - Topic 8762

Remedies of purchaser - Damages - Concealment of defects - The Alberta Court of Appeal stated that "in the law of vendor and purchaser 'concealment' is a term of art. There is a distinction between 'concealment' and non-disclosure, or mere silence, even though in ordinary speech those terms might sometimes be synonymous. Concealment requires a positive step to hide a defect in the land, coupled with an intention to withhold knowledge of the defect from the purchaser. If a defect is concealed, it is treated the same way as a representation that the defect does not exist; concealment therefore often amounts to fraud. Non-disclosure or mere silence, on the other hand, is just a failure to volunteer information that might be of interest to the other side. Non-disclosure is sometimes unhelpfully referred to in the case law as 'mere concealment', as compared to true 'active concealment'. Absent a duty to disclose, non-disclosure generally has no legal consequences, except in those rare cases where the silence amounts to fraud ... A party who chooses to sign an agreement without reading it cannot then say the terms of the contract were concealed from him. He cannot turn his own negligence in conducting his affairs into concealment by the appellant" - See paragraphs 59 to 60, 71.

Cases Noticed:

Poulos v. Caravelle Homes Ltd. et al. (1997), 196 A.R. 138; 141 W.A.C. 138; 49 Alta. L.R.(3d) 385 (C.A.), refd to. [para. 20].

M.N.P. v. Bablitz - see M.N.P. v. Whitecourt General Hospital et al.

M.N.P. v. Whitecourt General Hospital et al. (1997), 397 A.R. 333; 384 W.A.C. 333; 64 Alta. L.R.(4th) 1; 2006 ABCA 245, refd to. [para. 20].

Magnan v. Brandt Tractor Ltd. (2008), 440 A.R. 35; 438 W.A.C. 35; 96 Alta. L.R.(4th) 247; 2008 ABCA 345, refd to. [para. 20].

Pond (Peter) Holdings Ltd. v. Shragge (2003), 346 A.R. 135; 320 W.A.C. 135; 22 Alta. L.R.(4th) 41 (C.A.), refd to. [para. 20].

McDonald v. Fellows, Doherty Brothers Realty Ltd. and Wilkinson, [1979] 6 W.W.R. 544; 17 A.R. 330 (C.A.), refd to. [para. 20].

Rodaro et al. v. Royal Bank of Canada et al. (2002), 157 O.A.C. 203; 59 O.R.(3d) 74 (C.A.), refd to. [para. 20].

Kalkinis et al. v. Allstate Insurance Co. of Canada (1998), 117 O.A.C. 193; 41 O.R.(3d) 528 (C.A.), refd to. [para. 20].

Phillips v. Ford Motor Co. of Canada Ltd., [1971] 2 O.R. 637; 18 D.L.R.(3d) 641 (C.A.), refd to. [para. 20].

Housen v. Nikolaisen et al., [2002] 2 S.C.R. 235; 286 N.R. 1; 219 Sask.R. 1; 272 W.A.C. 1; 2002 SCC 33, refd to. [para. 35].

H.L. v. Canada (Attorney General) et al., [2005] 1 S.C.R. 401; 333 N.R. 1; 262 Sask.R. 1; 347 W.A.C. 1; 2005 SCC 25, refd to. [para. 35].

Diegel v. Diegel, [2008] A.R. Uned. 304; 100 Alta. L.R.(4th) 1; 2008 ABCA 389, refd to. [para. 38].

Alberta Importers and Distributors (1993) Inc. et al. v. Phoenix Marble Ltd. et al. (2008), 432 A.R. 173; 424 W.A.C. 173; 2008 ABCA 177, refd to. [para. 38].

Fenrich v. Wawanesa Mutual Insurance Co. (2005), 371 A.R. 53; 354 W.A.C. 53; 46 Alta. L.R.(4th) 207; 2005 ABCA 199, refd to. [para. 38].

McDonald Crawford v. Morrow (2004), 348 A.R. 118; 321 W.A.C. 118; 2004 ABCA 150, refd to. [para. 38].

Jiro Entreprises Ltd. v. Spencer, [2008] A.R. Uned. 42 (C.A.), refd to. [para. 38].

Double N Earthmovers Ltd. v. Edmonton (City) (1998), 213 A.R. 81 (Q.B.), refd to. [para. 38].

Porky Packers Ltd. v. The Pas (Town), [1977] 1 S.C.R. 51; 7 N.R. 569, refd to. [para. 42].

R. v. Hodson (B.S.) (2001), 281 A.R. 76; 248 W.A.C. 76; 2001 ABCA 111, refd to. [para. 42].

Queen (D.J.) v. Cognos Inc., [1993] 1 S.C.R. 87; 147 N.R. 169; 60 O.A.C. 1, refd to. [para. 43].

PD Management Ltd. v. Chemposite Inc. et al. (2006), 231 B.C.A.C. 283; 381 W.A.C. 283; 58 D.L.R.(4th) 197; 2006 BCCA 489, refd to. [para. 43].

Kelly v. Lundgard et al. (2001), 286 A.R. 1; 253 W.A.C. 1; 95 Alta. L.R.(3d) 11; 2001 ABCA 185, refd to. [para. 43].

Arrow Construction Products Ltd. v. Nova Scotia (Attorney General) (1996), 150 N.S.R.(2d) 241; 436 A.P.R. 241; 27 C.L.R.(2d) 1 (C.A.), refd to. [para. 44].

Prather v. King Resources Co., [1973] 1 W.W.R. 700; 33 D.L.R.(3d) 112 (Alta. C.A.), refd to. [para. 45].

Entreprises Sibeca Inc. v. Frelighsburg (Municipalité), [2004] 3 S.C.R. 304; 325 N.R. 345; 2004 SCC 61, refd to. [para. 53].

Holtslag v. Alberta (2006), 380 A.R. 133; 363 W.A.C. 133; 55 Alta. L.R.(4th) 214; 2006 ABCA 51, refd to. [para. 53].

Klein v. American Medical Systems Inc. et al. (2006), 219 O.A.C. 49; 84 O.R.(3d) 217 (Div. Ct.), refd to. [para. 53].

Syl Apps Secure Treatment Centre v. B.D. - see B.D. et al. v. Children's Aid Society of Halton Region et al.

B.D. et al. v. Children's Aid Society of Halton Region et al., [2007] 3 S.C.R. 83; 365 N.R. 302; 227 O.A.C. 161; 2007 SCC 38, refd to. [para. 53].

X. v. Bedfordshire County Council - see P1 et al. v. Bedfordshire County Council.

P1 et al. v. Bedfordshire County Council, [1995] 2 A.C. 633; 185 N.R. 173 (H.L.), refd to. [para. 53].

Attis et al. v. Canada (Minister of Health) et al. (2008), 254 O.A.C. 91; 93 O.R.(3d) 35; 2008 ONCA 660, leave to appeal refused [2009] 1 S.C.R. v; 396 N.R. 397; 260 O.A.C. 394, refd to. [para. 53].

Derry v. Peek (1889), 14 App. Cas. 337 (H.L.), refd to. [para. 57].

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. 57].

TWT Enterprises Ltd. et al. v. Westgreen Developments (North) Ltd. et al. (1992), 127 A.R. 353; 20 W.A.C. 353; 3 Alta. L.R.(3d) 124 (C.A.), refd to. [para. 57].

Ryan v. Moore et al., [2005] 2 S.C.R. 53; 334 N.R. 355; 247 Nfld. & P.E.I.R. 286; 735 A.P.R. 286; 2005 SCC 38, refd to. [para. 60].

Freeman v. Perlman (1999), 118 B.C.A.C. 116; 192 W.A.C. 116; 169 D.L.R.(4th) 133; 65 B.C.L.R.(3d) 97; 1999 BCCA 40, refd to. [para. 60].

Leeson v. Darlow, [1926] 4 D.L.R. 415 (Ont. C.A.), refd to. [para. 61].

Peek v. Gurney (1873), L.R. 6 H.L. 377 (H.L.), refd to. [para. 61].

688350 Ontario Ltd. et al. v. Piron et al., [1994] O.J. No. 2844 (Gen. Div.), affd. [1999] O.A.C. Uned. 156 (C.A.), refd to. [para. 62].

Home Exchange (Alberta) Ltd. v. Goodyear Canada Inc. (2007), 418 A.R. 1; 80 Alta. L.R.(4th) 143; 2007 ABQB 371, refd to. [para. 63].

Martel Building Ltd. v. Canada, [2000] 2 S.C.R. 860; 262 N.R. 285; 2000 SCC 60, refd to. [para. 75].

BG Checo International Ltd. v. British Columbia Hydro and Power Authority, [1990] 3 W.W.R. 690; 44 B.C.L.R.(2d) 145 (C.A.), affd. [1993] 1 S.C.R. 12; 147 N.R. 81; 20 B.C.A.C. 241; 35 W.A.C. 241, refd to. [para. 89].

Catre Industries Ltd. v. Alberta (1989), 99 A.R. 321; 63 D.L.R.(4th) 74 (C.A.), refd to. [para. 118].

Gainers Inc. v. Pocklington Financial Corp. - see Gainers Inc. v. Pocklington Holdings Inc.

Gainers Inc. v. Pocklington Holdings Inc. (2000), 255 A.R. 373; 220 W.A.C. 373; 81 Alta. L.R.(3d) 17; 2000 ABCA 151, refd to. [para. 118].

Counsel:

R.J. Wasylyshyn, for the respondent;

D.R. Syme, Q.C., for the appellant.

This appeal was heard on November 26, 2009, before Fraser, C.J.A., Martin and Slatter, JJ.A., of the Alberta Court of Appeal.

On March 5, 2010, the following memorandum of judgment was delivered by the court.