The trial of the action took 42 court days and involved nine lawyers representing the parties. I was one of the many expert witnesses called to testify about some of the legal issues in the dispute.
Back in September 1997, Kelly Jean Rainville signed an agreement of purchase and sale to buy one of 39 condominium townhouses in the Grand Harbour complex on Lake Shore Blvd. W. in Toronto.
Richard Weldon was one of the developers of the project. He bought one of the townhouse units for $402,366.09 from the court-appointed official receiver when the development ran into financial difficulties. Weldon’s unit was finished as a two-storey unit, with common element attic space above the second floor and a basement below the main floor.
The following spring, Weldon began construction to expand the unit into the attic. The added third-floor area consisted of a new set of stairs, new windows and skylights, a bathroom, sitting area and bedroom, totalling 862.2 square feet.
When the condominium corporation was registered in 1993, the surveyor’s floor plans filed in the Land Registry Office did not account for the finished attic space. The plans showed that the upper boundary of the townhouse was the second floor ceiling. No steps were ever taken to amend the condominium declaration, and plans to legalize the third-floor attic build-out, which would have converted it from common elements to a part of the unit below.
Four years after moving in, Weldon sold the unit to Rainville for $975,000. The certificate she obtained from the property managers as part of the purchase stated that there were no continuing violations of the condominium declaration, bylaws or rules.
In January, 1998, Rainville went to her lawyer’s office and met with a law clerk to review and sign the closing documents. Although she was under the impression that she owned from the ceiling of the third floor right down to the basement, she was not shown any condominium plans.
Before moving in, Rainville began a $700,000 renovation to the townhouse. During construction, it was discovered that there was mould in the third floor due to water leaking through the roof. The condominium board and property managers became involved to resolve the water issues, and it was soon revealed that the third floor of the townhouse had been built into the attic space without permission of the condominium corporation.
In 2001, Rainville sued her lawyer, the condominium corporation, the property manager and two of its employees, as well as a number of individuals who were condominium board members at various times.
In her claim, Rainville asked for the attic to be legalized as part of her unit, approval of the work she had done, and extensive damages for the cost of renovating and repairing the unit.
The trial took place before Madam Justice Darla A. Wilson in late 2009 and early 2010. I was one of the expert witnesses called to testify as to whether Rainville’s lawyer was negligent in failing to show her the horizontal and vertical plans, which would have revealed that the third floor was not part of the townhouse.
It was my opinion that Rainville’s lawyer’s clerk was negligent in failing to show the purchaser both the horizontal and vertical floor plans on the townhouse. In a detailed 69-page decision, Wilson agreed with my opinion and ruled that the law firm had indeed been negligent.
The judge, however, dismissed Rainville’s claim to have the third floor legalized. She was ordered to close up the third floor and restore it to attic space.
The law firm was ordered to pay Rainville almost $300,000 in damages, plus close-up costs and renovation costs to the third floor.
Sadly, the legal costs of having nine lawyers involved in a 42-day trial far exceeded the damages awarded. My guess is that the combined legal bills were several million dollars.
Sometimes in litigation, nobody wins.
Orr v. Metropolitan Toronto Condominium Corp. No. 1056
Kelly-Jean Marie Orr also known as Kelly-Jean
Rainville, Plaintiff, and
Metropolitan Toronto Condominium Corporation No. 1056,
Gowling Strathy & Henderson, Brookfield Lepage
Residential Management Services, a Division of
Brookfield Management Services Ltd., Patrick Post,
Pamela Cawthorn, Bruce Ward, Larry Boland, Francine
Metzger, Michael Kosich and Richard Dorman,
Richard Weldon, Third Party
 O.J. No. 3898
2011 ONSC 4876
Court File No. 01-CV-206672 CM
Ontario Superior Court of Justice
D.A. Wilson J.
Heard: October 26-29, November 2-6, 9-10, 12, 18-20,
23-26, 30, December 4, 7-10, 14, 16-17, 2009; January
11-15, 18-21, 25-28, February 1, 2010; and written
submissions subsequently received.
Judgment: August 18, 2011.
Jack B. Berkow and Ranjan Das, Counsel for the Plaintiff.
Barry A. Percival Q.C., David Young and Theodore B. Rotenberg for the Defendant MTCC No. 1056, Ward, Boland, Kosich, Metzger & Dorman.
Timothy Bates and Robin Squires for the Defendant Gowling.
Robert Clayton and Brett Rideout for the Defendants Brookfield, Post and Cawthorn.
Richard Weldon, Self-represented.
Table of Contents
CLAIMS BEFORE THE COURT
THE DEVELOPMENT OF GRAND HARBOUR
THE PLAINTIFF'S PURCHASE OF UNIT 113 AND SUBSEQUENT
THE INVOLVEMENT OF BROOKFIELD
THE CLAIM AGAINST GOWLINGS
THE THIRD PARTY CLAIM AGAINST WELDON
ISSUES FOR DETERMINATION
1. Is the present action an abuse of process?
2. (a) Is the Plaintiff entitled to a remedy for the third floor and if so, what is it?
Is the Plaintiff entitled to an amendment to the Declaration pursuant to the statutory oppression remedy -- section 135?
Should the court order the third floor legalized pursuant to section 32(8) of the Old Act/section 98(1) of the New Act?
2. (b) Should the Plaintiff be ordered to comply with the Declaration and close up the third floor pursuant to the Court's discretion under section 134 of the New Act or should the Plaintiff be granted a lease or a license to the third floor?
2. (c) If the Plaintiff is ordered to close up the third floor, who should compensate her for her damages and the cost of closing up the third floor? Which Defendants, if any, are liable for payment of damages to the Plaintiff? Did the Plaintiff fail to mitigate her damages?
Vicarious Liability Argument
Failure of Plaintiff to call Michael Orr as witness
3. Was Brookfield negligent and did its actions constitute a breach of its duties pursuant to the Condominium Act and/or a breach of its fiduciary duty? What is the legal effect of the estoppel certificate? Pursuant to section 32(8) of the Old Act,
4. Was the Defendant Gowlings negligent in the handling of the real estate transaction? If so, did the negligence cause any damages and if so, what are the damages flowing from the negligence?
5. If any of the defendants are found to be liable to the Plaintiff, what are damages owing to her?
Diminution in value of the unit
Reimbursement of legal fees paid to Gowlings
The costs for alternative living accommodations 1998
The close up costs of the third floor, and associated moving and storage costs
Costs of restoring the third floor to attic space
Costs of repairing the common element defects in the Plaintiff's unit
Redecoration and renovation expenses to third floor
The costs incurred for rental housing and other expenses to December 1998 when the townhouse was in move-in condition
6. Should the Plaintiff be reimbursed the monies she paid towards the legal expenses incurred by the MTCC No. 1056?
7. Should MTCC No. 1056 repair or replace the roof over townhouse 113?
8. Is this an appropriate case for an award of punitive and/or aggravated damages against the Defendants (with the exception of Gowlings) and/or the Third Party?
9. Should the Plaintiff and Weldon be required to pay for the use of the third floor during their ownership and if so, in what amount?
10. Is the Defendant MTCC No. 1056 entitled to compensation from Weldon in the Third Party action?
REASONS FOR JUDGMENT
1 D.A. WILSON J.:-- On September 30, 1997 Kelly Jean Orr ("Rainville") executed an agreement of purchase and sale with the Defendant Richard Weldon ("Weldon") to buy his condominium located in the Grand Harbour complex. That act spawned, over the next 12 years, numerous pieces of litigation which culminated in the trial of this action and other related actions before me over the course of three months. The trial was a complex proceeding with evidence from numerous expert witnesses and the filing of 385 exhibits.
CLAIMS BEFORE THE COURT
2 The Plaintiff, Rainville, brings her action against the following Defendants:
* Metropolitan Toronto Condominium Corporation No. 1056 ("MTCC No. 1056"), and several individuals who were, at different times, members of the Board of Directors or unit owners;
* Gowling Strathy & Henderson ("Gowlings"), the law firm she retained to handle the purchase of the condominium; and
* Brookfield Lepage Residential Management Services ("Brookfield"), the property managers of the condominium and Patrick Post ("Post") and Pamela Cawthorn ("Cawthorn") who held positions within Brookfield.
3 Richard Weldon, from whom Rainville purchased the unit, is not a named Defendant.
4 The Plaintiff requests several grounds of relief from this Court in action number 01-CV-206672 ("the main action"), including:
* an order amending the Declaration of MTCC No. 1056 to correct the error inconsistency in the Declaration and to correctly describe her unit as a 3 storey unit;
* damages for the monies that she spent on repairs and renovations to her unit; or
* alternatively, damages of $4.5 million dollars which is said to be the amount paid for purchasing the unit, repairing the common elements, renovations, renting other premises and the cost of converting the third storey to attic space.
* An order that she not be required to pay a proportionate share of any amount that MTCC 1056 is ordered to pay.
5 In the further alternative, the Plaintiff seeks:
* an order requiring MTCC No. 1056 to grant her a 99 year lease for the third storey; or
* an order requiring MTCC No. 1056 to approve all of the work done to the third storey; or
* a Declaration that the conduct of MTCC 1056 was oppressive towards the Plaintiff.
6 Punitive damages are sought against all of the Defendants, except Gowlings, and a declaration is requested that the conduct of MTCC No. 1056 has been oppressive to the Plaintiff.
7 All of the Plaintiff's allegations are denied by the various Defendants. The action against Latimer was discontinued and the action against Boland was dismissed prior to this trial.
8 In the amended Statement of Claim, the Plaintiff pleads that she retained the Defendant Gowlings to "ensure that the Plaintiff received title to the property for which she had negotiated." It is further pleaded that Gowlings failed to review the registered Declaration of MTCC No. 1056 in Schedule "C" and failed to determine that her unit was registered as a 2 storey townhouse unit instead of as a 3 storey unit. It is stated that had the Plaintiff known this information, she would not have agreed to close the purchase transaction of the unit. Gowlings denies these allegations and pleads that its title opinion was accurate and it had no knowledge that the unit the Plaintiff had purchased was a 3 storey unit and not a 2 storey.
9 The Plaintiff launched an application (Court File No. CV-09-378415) shortly before this trial, in July 2009, seeking a declaration that MTCC No. 1056 breached its duty by failing to replace/repair/maintain the roof above the Plaintiff's townhouse and requesting an order that MTCC No. 1056 replace and/or repair it immediately. By an order dated July 22, 2009, Justice Code directed the Application to be consolidated with the main action.
10 MTCC No. 1056 brings its own action against Rainville (Court File No. 98-CV-145778 CM) in which it seeks:
* an order directing Rainville to cease any work on her unit without first obtaining consent of the Board of Directors; and
* a mandatory order directing her to essentially close up the third floor and restore it to its original state (an unusable attic space) and to do so at her own cost plus payment for the use of the common element space on the third floor from the date she purchased the unit onwards.
11 The Defendant MTCC No. 1056 brings a Third Party Claim (Court File No. 01-CV-206672A CM) against Weldon for contribution and indemnity for any amounts for which it is found to be responsible to the Plaintiff. The Defendant also seeks damages from Weldon as well as a declaration that Weldon breached his fiduciary duty to MTCC No. 1056 as a director. MTCC No. 1056 alleges that Weldon converted the third floor attic into living space and by doing so contravened the Declaration. This is denied by Weldon.
12 Another action was brought by Rainville in 1998 against Weldon, the city of Toronto and the real estate agents involved in the purchase and sale of the condominium. That action was settled and dismissed in 2001 and reference will be made to that claim later in these reasons.
13 An order for a consolidated trial of these actions and others was made in 2005. The trial of these actions was adjourned by Justice Blenus Wright on October 27, 2008 at the Plaintiff's request and it was set for trial October 26, 2009 with a scheduled time of four weeks. The Plaintiff changed counsel in September 2009 and her new counsel brought a motion at the opening of trial for an adjournment. For oral reasons given at the motion, I refused the request for an adjournment and the trial proceeded.
14 Because of the protracted nature of the proceedings, I will set out a brief history of the events giving rise to the various actions.
THE DEVELOPMENT OF GRAND HARBOUR
15 The Third Party, Weldon and the Defendant Larry Boland ("Boland") were the principals of a company called Rylar Development Limited ("Rylar"), which was formed in 1987. Rylar had developed a couple of projects in Montreal. Weldon and Boland decided to build a condominium development near the waterfront that would be different from any other development in Toronto. They found the land, put a deposit on it and obtained financing through Central Capital. The money for the construction was obtained from National Bank. It was an ambitious project with an approximate cost of $120 million.
16 The condominium complex was to be built in 3 phases: phase 1 was MTCC No. 965 ("965"), which was a tower with 276 units; phase 2, MTCC No. 1031 ("1031"), also a tower with 119 units, which was connected to 965 by means of a bridge; and phase 3, MTCC No. 1056 ("1056"), which consisted of townhouse units. The townhouses were located closer than the two towers to the lake. Some of the townhouses, were constructed with bricks while others were built with wooden frames.
17 Phase 1 was offered for sale in 1988 when the condominium market was strong and the units sold quickly. Construction commenced in late 1988 or early 1989 with the firm of Bradsil who was the general contractor for the project. Lou Andre ("Andre") was the construction manager and was basically in charge of Bradsil.
18 The sale of the units in phase 2 (the other tower, 1031) also went well.
19 In 1990, phase three, the townhouses with large-sized units, were offered for sale at very high prices. By this time, the real estate market in Toronto had crashed and sales were slow. It was determined that the design of the townhouses with large-sized units needed to be re-done to attract purchasers. From the initial plan of 32 townhouses, the design was changed to 39 smaller townhouses. This required an increase to the gross floor area of the project. The necessary approval was obtained from the Committee of Adjustment on June 9, 1989 [exhibit 225].
20 By 1992, the real estate market for condominiums in Toronto had collapsed. The project was in deep financial trouble, as were Weldon and Boland who had personally guaranteed $40,000,000.00 of the financing. National Bank, the largest investor, was concerned and in late 1992 or early 1993, it appointed Pelican Management Ltd. ("Pelican") as a monitor.
21 Initially, Pelican was just overseeing the project but was not controlling the finances. However, this changed on December 7, 1993 when Pelican became the court-appointed official receiver [exhibit 104]. At this point, Pelican was the entity actually running the project and Weldon and Boland became employees. Weldon and Boland were able to negotiate a reduction in their personal exposure to $500,000.00 each.
22 Because of the deterioration in the real estate market, many purchasers who had bought units refused to close the deals and litigation ensued. Weldon and Boland worked to sell as many of the remaining units as possible. This was a chaotic time and the bank wanted the units sold and the condominium registered as quickly as possible. Both Weldon and Boland had an agreement with the lending institution National Bank to purchase one of the units in the development. In the fall of 1992, Weldon chose townhouse unit 113 and Boland selected townhouse unit 117. It was agreed that they could use management fees and commissions from sales against the purchase price of the units.
23 Boland did some minor upgrades to his unit, which were accounted for in the final sale price. These modifications were done by Lou Andre and Boland moved in to his unit in July 1993.
24 Weldon's unit, number 113, was 3000 square feet. However, Weldon wanted a unit that was larger than 3000 square feet. The as-built drawings of the architect [exhibit 246] show unit 113 as a two storey unit with attic space above plus a basement. Unit 113 was finished by April of 1992 as a 2 storey unit. The surveyor, Roger Avis ("Avis"), had to perform an inspection to ensure the construction of the townhouse units was in accordance with the as-built drawings. This inspection was done in September of 1992 and at that time, unit 113 was a 2 storey.
25 In order to get the additional space he desired, Weldon decided to build a third floor in the attic space and to account for this cost on closing. Weldon discussed the addition of the third floor with Boland, who indicated that it might exceed the permissible square footage of the development. Boland told him he needed Committee of Adjustment approval in order to make it legal. Weldon did not feel this was an issue, given that the project was 57,000 square metres. Boland also told him to get a building permit, as did Lou Andre. Weldon admitted, he never obtained a building permit, because he did not feel it was his responsibility as the purchaser. He recalled that Boland told him he was "nuts" to go ahead without these documents.
26 According to Boland, Weldon indicated that he would take the necessary steps to ensure the build-out was legal. Helyar, the bank's quantity surveyors, was to establish a price for the third floor. Construction to unit 113 commenced in the spring of 1993. It included:
* the installation of three skylights, additional windows, and stairs going from the second to the third floor;
* the creation of a bathroom, sitting area, and bedroom; and
* the installation of a heat pump.
27 The new space on the third floor comprised of 862.2 square feet. New drawings were done by Sigma Engineering Group Ltd. [exhibit 212]. Weldon testified that no attempt was made to conceal the third floor construction. Pelican was aware of it, as was the bank.
28 MTCC No. 1056 became a condominium corporation on July 5, 1993 when the Declaration [exhibit 104] was registered. Schedule C of the Declaration describes the boundaries of the units and refers to the survey sheets that have to be deposited in the Land Registry Office when the condominium is registered. These sheets [exhibit 246] show that the upper boundary of unit 113 did not include any space above the second floor ceiling.
29 Weldon took no steps to amend the Declaration prior to registration or indeed at any time, despite the fact that he was president of the condominium from 1994-1997. He did not want to encounter any problems with the project and he did not want to lose his third floor. Further, he testified that he believed that obtaining these documents was not his responsibility. Of paramount concern to Weldon at that time was getting the condominium registered so that the funds from the purchasers would be obtained. The lenders did not want any delays in the registration.
30 Weldon and his family took possession of unit 113 on July 17, 1993 and most of the construction was complete. The deal closed on April 7, 1994. There was an agreement of purchase and sale done in June 1993 [exhibit 208] but it was never signed. This document makes no reference to the unit being 3 storeys. The purchase price was $402,366.09. After allowance for his commissions and management fees, the amount Weldon owed on closing was $280,124.51 [exhibit 210]. The cost of finishing the third floor was $103,948.58. Weldon testified that the unit was finished to a high standard and there were no problems with leaking or mould while he lived in it.
31 Weldon listed the unit for sale in late 1996 or early 1997. His real estate agent did a market analysis and the asking price was $1,075.000.00. In the listing agreement [exhibit 3], it was described as a 3 storey unit. Weldon testified that he believed the third storey was his to sell. The illegality of the third floor of unit 113 was not brought to the attention of the Board during the time that Weldon and Boland were on the Board.
THE PLAINTIFF'S PURCHASE OF UNIT 113 AND SUBSEQUENT EVENTS
32 The Plaintiff and her husband, Michael Orr ("Michael" or "Michael Orr"), moved to Toronto from Thunder Bay in 1995. They purchased an extremely large home at 37 Edgehill Road for the sum of $2.7 million dollars. In the summer of 1997, Michael was offered a job in Texas, which he accepted. The Orrs decided to sell the house on Edgehill and purchase one in Texas along with a smaller place in Toronto where they would live during the summers. They hired a real estate agent, Joy Garrick ("Garrick"), to find a suitable residence in Toronto, preferably a condominium, which would permit them to keep their numerous cats. Rainville had not owned a condominium before but she liked the idea of the security it offered, given that she and her husband would be away for long stretches of time. They sold the Edgehill Road house on August 11, 1997 for $3.57 million with a closing date of April 29, 1998.
33 In September of 1997, Garrick took Rainville to see the Grand Harbour condominium complex on Lakeshore Blvd. West, which was close to Lake Ontario. Rainville was struck by the development which she testified was unlike any she had seen previously. She was especially drawn to the townhouse complex due to its view of the lake and park-like setting. Garrick took Rainville to see townhouse unit 116, which was approximately 2500 square feet. It had a floor at ground level, a second floor and a pull-down ladder from a trap door in the ceiling, which led to a third floor that was unfinished.
34 As Rainville left unit 116, the owner of the unit next door, number 115, told her that there were other units for sale, namely units 113 and 114. Appointments were made to view these two units. Rainville and Garrick attended at unit 114 first. According to Rainville's evidence, it was a very pretty unit. It had 2 floors and a narrow spiral staircase led to a third floor which contained 2 additional bedrooms and a bathroom. Rainville was concerned that her furniture would not fit and felt that it was not sufficiently private.
35 Rainville and her real estate agent then went to view unit 113, which was owned by Weldon. Weldon's listing agent, Ed Wery ("Wery"), was present during Rainville's initial visit to unit 113. Rainville was given a copy of the listing agreement dated July 1997 [exhibit 3] which described it as a 3 storey unit with a listing price of $1,075,000.00. Rainville was shown a first floor, which contained a living room, dining room, kitchen, office and a bathroom. On the second floor, there were 3 bedrooms, 2 bathrooms and a family room. From the master bedroom, there was a beautiful view of the lake and marina. From the second floor, Rainville ascended a staircase which was approximately three and a half feet wide. There was a second landing with a Juliet balcony and a few more stairs that led to the landing on the third floor. There was a skylight at the top of the stairs and French doors which opened into a large family room that had 2 skylights. The third floor also contained a fourth bedroom that had an ensuite bathroom, a storage area and a small furnace room with a heat pump for the third floor. Unit 113 had a view across the lake, to the lighthouse.
36 Rainville testified that unit 113 had all of the features that she desired and that other units she had seen lacked. She would still need to do renovations. She asked a few questions of Wery and learned that multiple pets were permitted in the condominium and that this unit was one of only 2 units that contained a third floor. Further, she was told that the reserve fund for MTCC No. 1056 stood at one million dollars.
37 Rainville made arrangements for her husband to view the unit. Rainville and her husband, Michael, went through the unit together and discussed the renovations that would be necessary. Michael was concerned about the cost of the renovations. Rainville went through unit 113 again, with her friends Barb and Joe Goebbels who owned a design company and had done the renovations on her other house. On September 29, 1997, Rainville made an offer to purchase the unit for the sum of $975,000.00 with a closing date of December 19, 2007. She did not have an inspection of the unit done before signing an offer nor did she did not ask her lawyer to review the offer before it was made. Weldon accepted the offer on September 30, 1997 [exhibit 5].
38 On October 20, 1997, Rainville attended at the townhouse along with her real estate agent, Garrick; her friends, the Goebbels; and her renovator, Mark Penman ("Penman"). They walked through the unit and Rainville indicated what she wanted changed. In particular, she did not like the dark wood floors and she planned on putting in an entirely new kitchen. Penman quoted a price for the work of $130,000.00. Rainville was not certain if that price included the kitchen installation.
39 That day, for the first time, she met Weldon, who was there with his agent, Wery. Weldon told her that he was president of the condominium corporation and that he thought the renovations she planned would be fine. Garrick did not have with her the estoppel certificate, which she indicated to Rainville was an important document.
40 Sometime around Halloween, Garrick brought over the estoppel certificate dated October 20, 1997 [exhibit 7]. It had been completed by a representative of Brookfield, the property management company. It indicated:
* Weldon was in arrears on the common expenses;
* there were restrictions on pets;
* there were continuing violations of the Declaration;
* an incorrect listing of the members of the Board of Directors;
* the reserve fund was less than the amount that was indicated to the Plaintiff; and
* there was an outstanding lawsuit against MTCC No. 1056.
41 This was different than the information Rainville had been provided with when she decided to purchase the unit and she felt that Weldon had misrepresented things to her.
42 Subsequently, she learned that this estoppel certificate that had been provided was not the correct one; it referred to another condominium corporation in the complex, number 965. Rainville and her husband, Michael Orr, retained Martin Doane ("Doane"), a litigation lawyer at the Gowlings firm to handle the condominium deal. Doane had done work for Michael Orr concerning various business deals. The purchase and sale agreement was sent to Gowlings on October 21, 1997. Doane asked one of his partners, Katherine Latimer ("Latimer"), who practised in the area of real estate transactions, to handle the purchase on behalf of the Orrs because he was not a real estate practitioner.
43 By letter dated December 12, 1997, Cawthorn from Brookfield sent Gowlings the correct estoppel certificate [exhibit 9] along with the Declaration and By-laws for MTCC No. 1056. The second estoppel certificate indicated that Weldon was in arrears in the sum of $1,050.14 for common expenses, that there was a lawsuit against the corporation, and there was a limitation on the permissible number of pets. It correctly listed the Directors of the Corporation. It stated:
There are no[t] continuing violations of the declaration, by-laws and/or rules of the Corporation, apart from any involving assessment obligations for which the current unit owner is responsible and the status of which is disclosed in paragraph 1 of this certificate. [Emphasis mine]
44 Rainville felt "comforted" by this information but was worried about the pets issue because she had several cats. Around this time, Rainville was undergoing medical testing. She and her husband, Michael had just returned from Texas where they had put in an offer on a house. Michael Orr was concerned about the various misrepresentations that had been made by Weldon. He was also concerned about the fact that they had bought a house in Texas and the additional expenses associated with the Toronto condominium. According to Rainville, after learning of these problems, she and her husband wanted to "pull the plug on the deal."
45 Doane sent a letter to Weldon's lawyer, Eric Feige ("Feige") rescinding the agreement of purchase and sale and requesting a return of the deposit due to what he alleged were material misrepresentations. Letters went back and forth between the lawyers and the closing date was extended. Weldon was unwilling to rescind the deal and threatened to sue. Rainville and her husband decided to go ahead with the purchase. Eventually, it was agreed between the parties that the deal would close, with a date of January 16, 1998 and an abatement in the price of $20,000.00. This sum was paid by the real estate agents.
46 On January 16, 1998, Rainville went to Gowlings to sign the documents for the condominium deal. She had not met with anyone at the firm with respect to the purchase prior to this time. She met with a woman, Cathy Ridout ("Ridout"), who she thought was Katherine Latimer, the lawyer who was to handle the transaction. Ridout was a law clerk who worked in the real estate department. It is not disputed that Rainville never met with solicitor Latimer prior to the closing of the transaction.
47 Rainville signed the closing documents that she was asked to sign by Ridout. Rainville testified that Ridout explained to her what she owned and what were common elements. She was not shown any plans. Rainville's understanding was that she owned from the drywall on the top ceiling of the third floor to the concrete floor in the basement. Rainville testified that she advised Ridout that she intended on doing renovations to the townhouse. The meeting lasted less than an hour and she was given the keys to the townhouse.
48 On the same day, January 16, 1998, the Plaintiff prepared a letter to be sent to the president of MTCC No. 1056 and to Brookfield setting out the renovations that she was planning to undertake on the unit [exhibit 21]. She had her sister fax the letter as she was anxious to commence the work. She wanted to re-do the bathrooms and the floors, add a new fireplace, and totally renovate the kitchen. Rainville denied the renovations included any structural changes and testified that the work was all cosmetic.
49 The contractor, Penman, started demolition work January 19, 1998. He was working on all 3 floors, as time was short. He started demolition of the bathrooms, removing drywall, and ripping out the kitchen. Rainville anticipated that the work would take approximately six weeks. She did not get a building permit as she had been advised it was not necessary because all of the work was interior.
50 Construction floor plans were prepared, likely by Penman, in October 1997 [exhibit 177]. They indicate the changes to the second floor included eliminating one of the bedrooms to make a larger master bedroom and the utilization of steel beams, which the Defendant MTCC No. 1056 argues clearly constitute structural changes as opposed to cosmetic renovations. Under the terms of the Declaration, any structural changes require the written approval of the Board. The Plaintiff received a letter from Cawthorn advising that the renovations were fine as long as they did not impact on exterior walls. Her request for a new fireplace was denied as it constituted an exterior design change.
51 On January 22, 1998 Penman started to sand the hardwood floors and Rainville was asked to attend at the unit. Penman showed Rainville that the floors were rotten. Mark Penman's brother, Jeff ("Jeff"), was in business with him and was the project manager. He came on site January 31, 1998 and smelled mould. He lifted up the floor boards and saw that the floor joists were rotting due to leaking through the walls. He pulled off the baseboards and saw moisture damage at the base of the walls. There was mould in the insulation in the walls. Jeff showed Rainville that there was water damage to the drywall and mould. The electrical wiring was deficient and there was evidence of charring. There was missing insulation in the kitchen and the plumbing was sub-standard. In short, there were many deficiencies in the construction. According to the Plaintiff, Jeff told her "You have a lemon; patch it up, paint it and sell it."
52 Jeff Penman testified that he told Rainville that she could pursue Ontario New Home Warranty Program ("ONHWP") for some of the damages. She could not recall if she discussed this issue with Doane. The Plaintiff testified she did not call ONHWP because Patrick Post from Brookfield did not want the information about the mould getting out to other unit owners. She gave evidence that she "trusted" Post to advise her as to what was covered by ONHWP because he was most familiar with the process.
53 Rainville was very concerned about the state of the unit she had just purchased. She knew that the condominium had the obligation to repair the common elements and any consequential damage caused by a defect located in the common elements. Her lawyer, Doane, advised her to take photographs and videotapes to document the problems.
54 Two videos taken February 5, 1998 and February 17, 1998 were filed as exhibit 130 at the trial, showing the water penetration into unit 113. A series of photographs taken in this time frame documenting many deficiencies and water damage were filed as exhibit 26.
55 The Plaintiff called Cawthorn and took her through the townhouse to show her the problems. On February 10, 1998 there was a meeting at the townhouse with the Plaintiff, her husband Michael, Penman, and Post, who was the regional manager for Brookfield. The condition of the unit was "horrific" according to the Plaintiff: there was mould throughout the unit and water damage along with sub-standard workmanship. They asked Post what could be done about the situation. Michael Orr indicated that he wanted a meeting with the Board of Directors.
56 Because of the state of the renovations, it was clear that it would be difficult to determine what damages were related to the common elements and what related to other work that had been done prior to Rainville taking possession.
57 On February 17, 1998, there was a meeting with Rainville's husband and Penman which was attended by their lawyer, Doane. The Plaintiff and her husband hired a number of experts to provide opinions on what remedial work needed to be done. Dan Boone ("Boone"), a consulting engineer, viewed the unit in early February and prepared a letter [exhibit 27] that set out the deficiencies in the unit and stated that it ought not to have passed inspection. Boone noted the third floor was a later addition and not part of the original unit. Brentwood Roofing [exhibit 28] provided comments on what needed to be done to correct the deficiencies in the roof. An electrician attended to advise of the deficiencies in the wiring.
58 The Plaintiff and her husband instructed Doane to send letters to the MTCC No. 1056 and to Brookfield. MTCC No. 1056 retained lawyers, the firm of Fine & Deo, who responded by letter dated February 19, 1998 that the condominium would repair the common elements and/or consequential damage caused to a unit by a defect in the common elements [exhibit 32]. Rainville acknowledged being advised that the condominium corporation would not pay for any repairs that it did not authorize in writing. According to the evidence of Rainville, by the beginning of March she had paid approximately $90,000.00 to Penman for the construction work.
59 The letter from Fine and Deo dated February 19, 1998 advised that she could not have her own contractors perform work on the common elements and further, that MTCC No. 1056 had a right to be advised of the repairs necessary and an opportunity to review the problem and to have its own contractors repair the problem. The letter stated that the condominium would not pay for any repairs that it did not authorize.
60 While the letter advised the Plaintiff to "stop all further work in the unit until further notice," Rainville testified that both Post and Cawthorn were aware of the type of renovations being done. She did not instruct Penman to cease working on her unit. During this period of time, no one from the condominium corporation told her that her third storey was illegal. At the end of March, Cawthorn asked for a copy of the building permit which was only applied for March 6, 1998 [exhibit 176].
61 MTCC No. 1056 retained an engineering firm, Halsall Associates Limited ("Halsall"), to provide an opinion on the work that was necessary to fix the roof. The engineer, Templeton, attended townhouse unit 113 on February 23 and 26, 1998 and took photographs [exhibits 265 and 292]. While examining the roof and interior of the third story for water penetration, Templeton wondered whether the third story encroached on common element space. He discussed the issue with other engineers at Halsall. By an e-mail dated March 13, 1998 [exhibit 35], Sally Thompson from Halsall advised Post that their review of the Declaration and survey drawings indicated that the unit was meant to have only 2 storeys and that the third storey was constructed in common element space.
62 This information was communicated to MTCC No. 1056, who in turn sent it on to their lawyers to review the issue from a legal perspective. Rainville and her husband received from Doane a copy of a letter from MTCC No. 1056's lawyers dated April 1, 1998 [exhibit 347]. The letter stated, "The Corporation's engineer, in his investigations, requested information as to whether the attic space which your client is occupying, is common element or unit space. Our search of the condominium description indicates that this is indeed common element space." This was the first notification that the Plaintiff had that there was an issue with the legality of the third floor.
63 Shortly thereafter, by a letter dated April 9, 1998 [exhibit 39], the Plaintiff received the reporting letter from Katherine Latimer on the real estate transaction confirming she had "a good and marketable title in fee simple to the unit ...". The Plaintiff testified that she would not have purchased townhouse unit 113 if she had known the third floor was illegal as she needed that space. According to Rainville, the estoppel certificate gave her much comfort as it indicated that there were no violations of the Declaration or By-laws and she relied on it.
64 Following the discovery that the third floor was built into the common elements, the litigation commenced. An application for an injunction and compliance [exhibit 178] returnable April 16, 1998 was issued by MTCC No. 1056. The parties, through their solicitors, attempted to resolve the issue of the third floor and Rainville's claim for the costs of repairs to her unit and the common elements. Rainville was adamant the roof be replaced, not repaired. Eventually, that application was converted into one of the actions that proceeded to trial before me.
65 Because of the ongoing construction, Rainville and her husband were unable to move into the unit at the end of April as planned and their house deal in Toronto closed April 29, 1998, leaving them with no place to live because Rainville and her husband failed to close the Texas house purchase and forfeited their $75,000.00 deposit. They leased a house at 50 Viewmount for a price of $5,500.00/month and moved in at the beginning of May.
66 The Plaintiff continued with the renovations although she was forced to stop the work briefly on her unit during the first week of April 1998 when the City issued a stop work order until the proper building permits were issued. Apart from this, however, the work was on-going in the unit, including the third floor which by this point the Plaintiff knew was illegal. She testified that she did not receive anything in writing to tell her to stop. On the contrary, she described Brookfield as being "supportive".
67 Rainville thought MTCC No. 1056 was going to pay her for the repairs that she had done to her townhouse as a result of water penetration and they would fix the other problems themselves. Rainville and her husband were discussing with Doane the possibility of bringing an action to legalize the third floor. MTCC No. 1056 had requested that Brodak, a contractor, assess the roof and determine if it needed to be repaired and/or replaced.
68 During this time period, the lawyers continued to exchange letters concerning the roof issue and further assessments were obtained. On April 22, 1998, Fine & Deo sent a letter to Doane enclosing a copy of the report of the engineers, Halsall. By letter dated May 26, 1998 [exhibit 51] MTCC No. 1056's lawyers advised that the roof would be repaired, not replaced.
69 MTCC No. 1056's lawyers and Doane were attempting to come to an agreement on the outstanding issues to avoid the court attendance for the application, which had been adjourned to July 1998. Fine & Deo made an offer of settlement [exhibit 58], which included the following terms:
* MTCC No. 1056 would repair the roof according to a quotation from Avenue Road Roofing;
* MTCC No. 1056 would repair the dormer;
* the patio doors would either be repaired or replaced;
* the cedar decking would be replaced on the balcony;
* a determination would be made as to whether there was sufficient gross-floor area to allow the third floor to be permitted;
* if a minor variance was required, the Plaintiff would undertake the application to effect the variance and MTCC No. 1056 would support it;
* if the third floor existed at the time the condominium was registered, the Board would grant a lease to the Plaintiff and she would pay the additional share of common expense costs related to the square footage of the third floor;
* alternatively, the Plaintiff would bring an application to obtain legalization of the third floor, which would be supported by MTCC No. 1056.
70 Although Rainville was anxious to resolve everything, she refused to sign the release on the advice of her counsel that it was too broad.
71 At this time, in the summer of 1998, the Plaintiff continued on with the work on her unit. By this point, she testified she had spent perhaps $700,000.00 on the renovations, including a payment of $270,000.00 to Penman. The contract with Penman, invoices and receipts from Penman were not produced at trial.
72 By this point, Rainville and her husband were no longer moving to Texas. She wanted the roof repaired immediately. There were on-going negotiations through the lawyers. Rainville testified that she continued on with the renovation work, because no one told her to stop.
73 On September 3, 1998, the Plaintiff issued a Statement of Claim against Weldon, the City of Toronto and the real estate agents involved in the purchase and sale claiming damages for negligence and misrepresentation. Pleadings were exchanged but the action proceeded no further.
74 Rainville was anxious to have the third floor legalized. By a letter dated November 13, 1998 [exhibit 61] from its counsel, MTCC No. 1056 withdrew its previous offer to settle the dispute with the Plaintiff and advised: "You are hereby put on notice that the Corporation is demanding strict compliance with all the terms and provisions of the declaration, by-laws and rules of Metropolitan Toronto Condominium Corporation No. 1056 and specifically demands that your client cease and desist from using, altering, repairing, occupying or entering any portion of the common element attic, effective immediately ..."
75 Rainville testified that she was shocked by this letter as it represented a completely different position than had been taken previously. She instructed Doane to send a letter in response [exhibit 62] with a proposal for settlement which included an application to amend the Declaration to indicate the boundaries of her unit included the third floor.
76 There was an annual general meeting of MTCC No. 1056 December 17, 1998 which the Plaintiff attended. The issue of her third floor was discussed at the meeting.
77 On December 19, 1998, the Plaintiff and her husband moved into the townhouse.
78 In January of 1999, David Mitchell ("Mitchell") became the president of the Board of MTCC No. 1056. On April 1, 1999, Doane drafted a letter to ONHWP for Rainville to sign to advise of the structural defects which had been discovered in her unit. She believed that this constituted notice of her claim. She did not send any receipts or photographs. She was aware that MTCC No. 1056 was dealing with ONHWP in an effort to obtain compensation under the warranty.
79 Shortly thereafter, she received a letter from Post advising that she was not permitted to do any repairs to the attic area or roof as they were common elements [exhibit 68]. By a letter dated June 9, 1999 [exhibit 70], Brookfield requested copies of invoices for work that had been done to common elements. Rainville testified that she could not get the invoices from Penman and consequently, she did not send any. She did not, however, advise Brookfield of this at the time.
80 ONHWP sent an engineer to inspect the unit June 1, 1999. On July 30, 1999 ONHWP sent a letter [exhibit 73] denying the Plaintiff's claim. It advised that the claim was outside the limitation period and further, many of the items she had identified as deficient were common elements and therefore, she could not make a claim. The Plaintiff did not appeal this decision.
81 MTCC No. 1056 submitted a claim to ONHWP in the sum of $343,335.36 for major structural defects in September 1999 [exhibit 356]. MTCC No. 1056 relied on the report of its engineers, Halsall. After some negotiation, in April of 2000, the claim was settled for the sum of $181,401.00 for the defects.
82 During this time period, the roof continued to leak. Rainville was still hoping to legalize the third floor and her lawyer continued to correspond with MTCC No. 1056's counsel in this regard. At the end of September 1999, the Plaintiff received the Halsall report dated June 1, 1999 [exhibit 69] which indicated that the roof repairs had to be completed before winter.
83 On October 15, 1999 Rainville received a letter and package from Grand Harbour advising that the Annual General Meeting would be held on October 27, 1999 and one of the items on the agenda was the "Exception Policy." She did not know what that referred to. She received a letter dated October 27, 1999 [exhibit 79] from Grand Harbour addressed to all unit owners which stated:
... the entire attic space above all of the townhouses in this Condominium Corporation is common element space and belongs to all of the owners of all of the units. Notwithstanding that definition, townhouses #113 and #114 have developed this attic space above the units and has [sic] become part of the living space of the townhouse. These alterations were done without the approval of the Board of Directors. The alterations to townhouse #113 were completed by a previous owner who was one of the original developers of this project as well as a previous Board member ... Your Board of Directors is opposed in principle to the expansion of units into the common elements for a variety of reasons and has determined that the most satisfactory solution to the existing problem with townhouses #113 and #114 is to grant temporary approval for the completion of the common element attic space until such time as these units are no longer occupied by the current owners ...
84 Before the AGM, members of the Board met with Rainville and her husband, Michael Orr, to explain the Exception Policy. Michael Orr rejected the policy as being completely unacceptable.
85 Rainville attended the October 27, 1999 meeting and a lawyer for the condominium corporation, Audrey Loeb, was present and the Exception Policy was discussed. It provided that Rainville and the owner of unit 114 Michael Kosich ("Kosich") be permitted to continue to use their third floors as long as they paid the additional costs for the extra space and upon sale of the units, converted the third floor back into attic space at their expense. One of the Board members, Wayne Carson ("Carson"), presented overheads [exhibit 364] setting out the positive and negative features of the proposed policy.
86 The president of MTCC No. 10566, Mitchell, testified that he thought it was fair to all owners and permitted Rainville and Kosich to continue to use their third floors while prohibiting the other owners who had potential to create a third floor from doing so. None of the other owners of MTCC No. 1056 opposed its adoption and the Plaintiff abstained from the vote. Instead, she asked a question about the roof repairs. When questioned at trial about her silence on the exception policy at the AGM in 1999, Rainville testified that she had been assured by the Board, specifically Mitchell and another member Arnold Hoffmann, that her third storey would be legalized. This was vociferously denied by both Mitchell and Hoffmann.
87 Subsequently, counsel for MTCC No. 1056 wrote to the Plaintiff for her agreement with the policy [exhibit 81]. A letter to Doane followed [exhibit 82]. Doane responded by correspondence dated December 30, 1999 [exhibit 84] rejecting the exception policy and instead, suggesting that MTCC No. 1056 commence an application under the Condominium Act to correct the
Bob Aaron is a Toronto real estate lawyer and frequent speaker to groups of home buyers and real estate agents.
He can be reached by email at email@example.com, phone 416-364-9366 or fax 416-364-3818.
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