Brian Madigan LL.B., Broker
BRMadigan@iSourceRealEstate.com

RE/MAX West Realty Inc.,
Brokerage
Independently owned and operated

96 Rexdale Blvd. 
Toronto, Ontario 


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False Representation Made by Agent without Liability

September 6, 2016 - Updated: September 6, 2016

False Representation Made by Agent without Liability

 

This is the “buildable lot” case, Drolet v. Re/Max Riverview (2016) and the “issue” of the false representation.

 

If the agent indeed made a false statement, why was there no liability?

 

The Facts

 

My comments throughout will appear in Italics in that portion which is drawn from the Judgment.

 

This summary is drawn directly from the Trial Judge’s Reasons for Judgment:

 

4.      The Defendant, Brittany Holtzberg (“Holtzberg”) was a real estate agent employed by the co-Defendant, ReMax Riverview Realty Ltd. (“Riverview”) at the time of the Plaintiff’s purchase of the Property. 

 

Holtzberg was the Plaintiff’s agent at all material times.

 

5.      Holtzberg initially had the listing for the property from the Vendor. 

 

Holtzberg prepared the MLS listing for the property based on information from the Vendor, and described the Property in the online MLS listing as

 

 “Suitable for Building Your Dream Home” and the zoning as “Residential”.

 

6.      When Holtzberg’s listing agreement with the Vendor expired, the Vendor re-listed the property with another broker (Ron Edgley of Royal Lepage Proalliance Realty) who continued to use an MLS Listing which was, for all practical purposes, identical to the MLS listing prepared by Holtzberg.

 

This is noteworthy because the representation was now being made by another real estate agent, not Holtzberg.

 

7.      The Plaintiff and his wife had expressed some interest in the Property while Holtzberg had the listing, but did not make an offer at that time.

 

8.      A few months after Holtzberg’s listing had expired, she contacted the Plaintiff and his wife, Jessica Thompson (“Thompson”), to enquire as to whether they were still interested in the Property, and advising that the price now appeared to be more negotiable.

 

This is very common practice. The listing expired, the property was listed with another agent, but the original Listing agent still has a connection to potential buyers.

 

9.      In an email exchange between Thompson and Holtzberg in early August, 2012, the Plaintiff indicated that she and her husband were still interested in the Property, but raised a concern regarding water potability. 

 

It was clear from the emails from Thompson and subsequent discussions between Holtzberg, Thompson and the Plaintiff that the Plaintiff wanted to purchase the Property for the purpose of building a new home on the Property.

 

There clearly was no mistake, the Buyer needed a building lot.

 

10.  Holtzberg responded by email advising Thompson that La Rue Mills Road had a dump on it “years and years ago”,

 

which could not be built on for another 5 years,

 

but the Township had advised her that the Property was safe to build on.

 

………

 

15.  During the course of the trial,

 

Holtzberg testified that prior to contacting the Plaintiff in August 2013,

 

she was advised by the Vendor that the Property was zoned residential and suitable for a building lot.

 

The first thing that the Buyer’s agent did when she was the original Listing agent was to consult with the Seller. Is this a buildable lot? And, it was according to the Seller. That’s the first step in due diligence.

 

16.  Having lived in the area, and recalling that there had been a dump in the vicinity of the Property,

 

Holtzberg testified that she called the Township, and

 

spoke to an unknown male who advised her that the Property was zoned residential and could be built upon.

 

This is the next step in due diligence process “calling the Township”. This is a very reasonable and important step to take, because the Seller could have it wrong. As well, the Seller has a vested interest in saying that the lot is buildable. So, investigation and verification of the material facts are the next step in the process.

 

17.  During the Plaintiff’s case, Thompson testified that after receiving Holtzberg’s email, she attended the Township’s office and spoke directly with two Township staff, who advised her that the Property was zoned residential and could be built on.

 

This is an indication that the Buyer wanted to “double-check”, and that is quite reasonable. But, at the same time, it clearly points out that the better and more reliable source for this information would be the Township itself. Both the Buyer and the real estate agent would agree with that.

 

……..

 

19.  When Thompson was asked in cross-examination if she was aware of any evidence to suggest that Holtzberg was not told the same thing by the Township that Thompson was told, she answered in the negative.

 

They both received the very same response from the Township, namely, that it was a “buildable lot”.

 

…….

 

24.  I accept the evidence of Thompson and Holtzberg that both spoke with Township staff prior to closing and received some form of assurance that the Property was zoned residential and eligible for a building permit. 

 

I find that Thompson’s recollection bolsters the evidence of Holtzberg on this issue, since both appear to have received similar and consistent assurances from Township staff.

 

25.  The issue is whether the Defendant Holtzberg negligently misrepresented to the Plaintiff, on the MLS sheet, verbally and in her emails, that the Property was suitable for building.

 

The Law and Findings

 

27.  The general requirements for imposing liability based on negligent misrepresentation are set out in the Queen v. Cognos [1993] 2 S.C.R. 206 as follows:

 

“… (1) there must be a duty of care based on a “special relationship” between the representor and the representee;

 

(2) the representation in question must be untrue, inaccurate, or misleading;

 

(3) the representor must have acted negligently in making said representation;

 

(4) the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and

 

(5) the reliance must have been detrimental to the representee in the sense that damages resulted.” 

 

28.  I find that the Plaintiff clearly satisfies items (1), (2) and (5) of the Cognos test.

 

29.  The MLS sheet provided to the Plaintiff was prepared by the Vendor’s agent, and not by Holtzberg, although she acknowledged preparing an essentially identical MLS sheet when she was the listing agent for the Vendor. 

 

However Holtzberg clearly adopted and communicated statements to Thompson and the Plaintiff to the effect that the Property was “safe” for building lot purposes.

 

It is interesting here that the action was not instituted against the current Listing agent whose MLS statements were also clearly false.

 

30.  This representation was clearly untrue, as subsequent events would bear out. 

 

The Property was not eligible as a building lot under the Township’s zoning regulations, because it lay within 500 meters of a former waste site.

 

31.  I accept that the Plaintiff suffered damages as a result of the misrepresentation, and

 

had the Plaintiff’s claim succeeded I would have reduced the Plaintiff’s damage claim by $1,500.00 (the approximate value of building plans that the Plaintiff

 

ultimately used in respect of a new home subsequently constructed) and assessed the Plaintiff’s damages at $17,979.53.

 

32.  However I find that the Plaintiff has failed to satisfy items (3) and (4) of the test for negligent misrepresentation set out in Cognos.

 

33.  As to item (3), I find that

 

Holtzberg did not act negligently

 

in making statements to the effect that the Property was suitable as a building lot.

 

She had two sources of information: the Seller and the Township.

 

34.  No expert evidence was called

 

as to the standard of care of a real estate agent in circumstances such as those in this case.

 

35.  I find that Holtzberg relied on statements from the Vendor and Township staff

 

when she advised Thompson and the Plaintiff that the Property was suitable for a building lot, and that

 

it was not negligent for her to do so.

 

36.  The statement in the MLS sheet was the statement of the Vendor and the Vendor’s agent, not of Holtzman.

 

There was also the nearly exact statement previously by the Buyer’s agent, in the orginal MLS listing.

 

37.  In this case, there is no evidence which would allow me to conclude that Holtzman failed to meet the usual or customary standard of a purchaser’s agent with respect to her efforts to verify the accuracy of the Vendor’s information regarding the suitability of the Property as a building lot.

 

This is directed in part to the failure of any Expert evidence being offered. So, we are just looking at exactly what happened rather than additional duties or responsibilities that the agent might have had. The standard of care and the failure to meet that standard were not placed in issue here.

 

Other than perhaps obtaining a zoning certificate in respect of the Property,

 

no evidence was led by the Plaintiff as to the standard practice of real estate agents with respect to confirmation of zoning or suitability of a property for building.

 

Possibly, the matter could have been reduced to writing. Perhaps an email could have been sent. Perhaps a letter could have been sent. The Township might also have cautioned that the only way to find out “for sure” would have been to send an official inquiry, pay an inquiry fee, wait 30 days for a written response. Sometimes, that’s the case! But, that didn’t happen in this situation. Again, this was not placed in “issue”.

 

38.  John Jonkman, an experienced real estate broker and the owner of Riverview,

 

testified that it is not standard practice for a purchaser’s real estate agent to obtain a zoning certificate to confirm zoning for a purchaser.

 

This is dangerous to have the only possible expert be one of the defendants.

 

However, this is a true statement. If there are issues, this is a matter of inquiry for the buyer’s solicitor. It’s a “conveyancing issue” in most cases. But, assuming it’s important enough, it’s also a contract issue.

 

What we don’t know here is whether there should have been something in the Agreement in addition to the standard form. This issue could have been made a condition, but it wasn’t. If it were, then this entire mess might have been avoided.

 

39.  As to item (4) of the Cognos test, I also find that the Plaintiff and Thompson chose not to rely on the statement in the MLS sheet or Holtzman’s assurances regarding the suitability of the Property as a building lot,

 

but instead chose to make their own independent enquiries of the Township regarding the suitability of the Property as a building lot.

 

This is an absolutely CRUCIAL finding of fact. This is the WHOLE case! There was no detrimental reliance here. They went directly to the source and were misinformed, just like their agent.

 

40.  Both Thompson and the Plaintiff testified that they had no reason to believe that Holtzman had been given any different information by the

 

Township as to the suitability of the Property as a building lot than they themselves were given by Township staff.

 

41.  By making their own independent enquiries of the Township, the Plaintiff and Thompson

 

chose not to rely on Holtzman’s statements or the MLS sheet. 

 

There was no reliance. They relied upon the Township. The agent’s statements were wrong, but really who cares at this point?

 

I find that, but for the assurances that Thompson and the Plaintiff received as a result of Thompson’s direct enquiries of Township staff, the Plaintiff would not have purchased the Property.

 

This is another finding of fact which doesn’t help the Plaintiff. If the Township had not said that it was a buildable lot, the Buyers would not have purchased, nothing would have happened. That’s key!

 

42.  In these circumstances, the Defendants can have no liability based on negligent misrepresentation and the Plaintiff’s claim is dismissed.

 

 

COMMENT

 

False Statements in the Original Listing

 

These did not matter, even though they were wrong. Nevertheless, they were taken into consideration by the Judge.

 

False Statements while acting as the Buyer’s Agent

 

The statement that it was a buildable lot continued and this was false.

 

The Law – Hedley Byrne

 

The law about false and negligent statements was changed by the well-known case in England in 1964, known as Hedley Byrne v. Heller and Partners. It set out a test that was subsequently adopted by the Supreme Court of Canada in Cognos v. The Queen.

 

The Law Cognos v. The Queen

 

This is the Canadian Hedley Byrne. It is a 5 part test:

 

(1) there must be a duty of care based on a “special relationship” between the representor and the representee;

 

(2) the representation in question must be untrue, inaccurate, or misleading;

 

(3) the representor must have acted negligently in making said representation;

 

(4) the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and

 

(5) the reliance must have been detrimental to the representee in the sense that damages resulted.

 

No Detrimental Reliance – No Liability

 

This case is important because it illustrates the fine distinctions in the law related to false and negligent statements. If you really don’t rely upon them, then, you can’t come back later and say that you did.

 

This is an example of failed lawsuit. It is not a case of setting the standards for real estate agents, there was no proper evidence of that. This case was solely based upon the false statement, and proceeding to trial with knowledge that the Township had said the same thing.

 

Brian Madigan LL.B., Broker

www.iSourceRealEstate.com


Tagged with: false statement negligent statement no reliance no liability buildable lot ontario law
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Brian Madigan LL.B. Broker

RE/MAX West Realty Inc. Brokerage

Independently owned and operated

96 Rexdale Blvd. , Toronto Ontario,

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