Negligent Misrepresentation

Gladu v Robineau, 2017 ONSC 37 (CanLII)

[283] Even where the representation is not made to mislead, there will be liability in negligence if the representation was not a “full, frank, and accurate” disclosure: see Krawchuk, at para. 39.

[284] The duty to speak truthfully and completely is not limited to the completion of a SPIS. Information not required to be disclosed, but actually disclosed in an agreement of purchase and sale will trigger the duty. Lord Cairns said this about half-truths: “a partial and fragmentary statement of fact as that the withholding of that which is not stated makes that which is stated absolutely false.”: see Alevizos, at para. 22.

[285] In order to succeed in a claim based on negligent misrepresentation, a plaintiff has to establish that:

(a) The defendant owed the plaintiff a duty of care based on a “special relationship:

(b) The defendant made a statement or representation that was untrue, inaccurate or misleading;

(c) The defendant acted negligently in making the statement;

(d) The plaintiff reasonably relied on the statement; and

(e) The plaintiff suffered damages as a result.

See Krawchuk, at para. 68, citing Queen v. Cognos Inc., 1993 CanLII 146 (SCC), (1993) 1 S.C.R. 87 (S.C.C.), at p. 110.

[286] The standard of care extends beyond honest intentions. Honest intentions, by themselves are insufficient to avoid liability for inaccurate representations. The obligation is to provide, to the extent possible, accurate and complete information: see Krawchuk, at para. 79.

[287] The words “buyers must still make their own inquiries” in the SPIS, although alerting a purchaser to the possibility that the information in the document may be lacking in some way and putting an onus on a purchaser to make reasonable inquiries, does not “absolve the seller of liability for misstatements.”: see Krawchuk, at para. 85.

[288] Paragraph 86 of Krawchuk refers to McQueen v. Kelly (1999), 25 R.P.R. (3d) 248 (Ont. S.C.), where Kurisko J. held at paras. 63-64:

Ordinarily the [principle of] caveat emptor would have required the Plaintiffs to inspect the basement. If they had done so, the water stains in the Laundry Room would have been discovered. However, I accept the Plaintiffs’ explanation for not inspecting before and after signing the Agreement, namely, they relied on the Information Statement and oral assurances of Mr. Kelly [the vendor] there had never been any water problems in the basement.

[289] A warranty in the standard form agreements of purchase and sale, with the words “to the best of the Seller’s knowledge and belief” is not an absolute warrantee. It is a qualified warrantee: see Vokey v. Edwards, [1999] O.J. No. 1706 (S.C.).

[290] In John Levy Holdings Inc. v. Cameron & Johnstone Ltd. (1992), 26 R.P.R. (2d) 130 (Ont. Gen. Div.), the court considered whether the qualifying phrase was reasonably fair and truthful to the best of that person’s knowledge and belief: see para. 64.

[291] In Carrington v. Thom, [1977] O.J. No. 1099 (C.A.), the court considered whether the person was reckless in making the statement not caring whether it was true or false, or, whether the person could be said to have had an honest belief in its truth.

[292] The distinction between patent and latent defects is described in Halsbury’s Laws of England, at para. 51: Defects of quality may be either patent or latent. Patent defects are such as are discoverable by inspection and ordinary vigilance on the part of a purchaser, and latent defects are such as would not be revealed by any inquiry which a purchaser is in a position to make before entering into the contract for purchase.

[293] A home inspection is not intended to find latent defects. At para. 76 of Lyle v. Burdess, 2008 YKSM 5 (CanLII), Cozens Terr. Ct. J. agreed with the comments of Killeen J. in Kaufmann v. Gibson (2007), 59 R.P.R. (4th) 293 (Ont. S.C.), stating:

In circumstances where there is no [Property Disclosure Statement] prepared, a prudent purchaser would be expected to contract for a more thorough home inspection if the buyer wished to avoid future costly surprises. Where a PDS has been prepared, however, the buyer should be able to rely on the truthfulness and accuracy of the representations in the PDS in deciding the extent to which a contractor will be instructed to conduct a home inspection.

Dufferin St. v. Medrehab, 2013 ONSC 532 (CanLII)

Given that the defendant’s grounds for denying liability under the lease agreement is that they were the victim of negligent misrepresentations, it is appropriate to first summarize the law on this doctrine before analyzing the defendant’s evidence. Both counsel for the plaintiff and the defendant concede that the main authority for a claim for negligent misrepresentation is the Supreme Court of Canada’s decision in Queen v. Cognos, 1993 CanLII 146 (SCC), 1993, 1 SCR 87.

Five requirements must be met for a finding of negligent misrepresentation. These are:

1) The representor must owe the representee a duty of care;

2) The representor must have made a representation that was untrue, inaccurate or misleading;

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

4) The representee must have relied in a reasonable manner on the negligent representation; and

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

This decision, however, does not define two key components of the doctrine of negligent representation and duty of care.

In Hercules Managements Ltd. v. Ernst & Young, 1997 CanLII 345 (SCC), (1997) 146 DLR (4th) 577 (SCC), La Forest J. noted that a duty of care will exist where,

Proximity can be seen to inhere between a defendant-representor and a plaintiff-representee when two criteria relating to reliance may be said to exist on the facts: (a) the defendant ought reasonably to foresee that the plaintiff will rely on his or her representation; and (b) reliance by the plaintiff would, in the particular circumstances of the case, be reasonable. To use the term employed by my colleague ... in Cognos, supra, at p. 110, the plaintiff and the defendant can be said to be in a “special relationship” whenever these two factors inhere.

The standard of care alluded to has also been held to be an objective one. See Cognos, supra, p. 121.

Memory Lane Restorations and Collectables Ltd. v Turple, 2020 CanLII 36672 (ON SCSM)

[39] The Plaintiff makes a claim for damages for negligent misrepresentation in addition to the claim based on contract.

[40] In Doumouras v. Chander, 2019 ONSC 6056 (CanLII), the court outlined the five requirements for a claim of negligent misrepresentation:

[41]

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 the misrepresentation;

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

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

[42] The Claim must include material facts to establish each of these five requirements.

[43] There is little in the Plaintiff’s Claim, which extends to 39 paragraphs, which would assist the Defendant or the court in understanding how the facts pleaded relate to the five requirements set out above. One might guess that the claim relates to the Plaintiff’s allegation that it reduced its final invoices on the promise of quick payment by the Defendant who then stopped payment on the cheque although that is far from clear from the pleadings.

[44] Although this is Small Claims Court, both parties are represented and more specificity on this point should be expected. The Plaintiff provided no final submissions on this issue. The court finds that this claim for damages for negligent misrepresentation should be dismissed for lack of detail in the claim and on the basis that the court finds no “special relationship” between the Plaintiff and the Defendant.