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Contracts - Suing in Contract and Tort Concurrently. Zhang v. Primont Homes (Caledon) Inc.
In Zhang v. Primont Homes (Caledon) Inc. (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal from a trial judgment that found the real estate professional defendants negligently misrepresented the location of a property for which the plaintiffs entered into an APS as purchasers.
Here the court considers when a plaintiff may assert tort damages in a contractual (breached APS) context:[23] The appellants’ first causation argument is that the respondents could not legally establish that they suffered any loss as a result of the misrepresentation because they did not complete the purchase. To put it another way, the respondents were required to prove that they had the right to repudiate the APS as a condition precedent to any recovery against the appellants.
[24] The appellants rely on Kaltenegger v. Cao, 2022 BCSC 2203 for this proposition. In that case, Mr. Kaltenegger sued Ms. Cao after she repudiated her agreement to buy his house. Ms. Cao took the position that she was entitled to abandon the contract because both Mr. Kaltenegger and Ms. Cao’s realtor, Mr. Liu, had misrepresented the property’s boundaries. The B.C. Supreme Court trial judge who heard both actions concluded that Ms. Cao had not proved that she was entitled to repudiate her contract with Mr. Kaltenegger and that she must accordingly compensate him for the difference between the price she agreed to pay for the house and the price he ultimately obtained for it from another buyer. Although Ms. Cao had proved that Mr. Liu made negligent misrepresentations that induced her to enter into the contract, the trial judge held that this “negligence did not entitle Ms. Cao to break her contract with Mr. Kaltenegger.” As a result, Ms. Cao was not entitled to recover any damages for Mr. Liu’s misrepresentations.
[25] Based on Kaltenegger, the appellants contend that, since the respondents did not comply with their obligations pursuant to the APS, they cannot recover any damages flowing from the appellants’ misrepresentation.
[26] I reject this argument. I am not persuaded that Kaltenegger establishes a general rule that any plaintiff who agrees to buy property based on misrepresentations of any kind by a third party, such as a realtor or lawyer, is legally foreclosed from recovering damages for that misrepresentation if they fail to complete the purchase. The result in Kaltenegger was, on my reading, specific to the facts of that case. Alternatively, if Kaltenegger does purport to establish a general rule, I reject it. The appellants have not pointed to any other authority supporting their argument on this point. Their position is moreover inconsistent with the Supreme Court of Canada’s jurisprudence on concurrent liability.
[27] The appellants are conflating the issue of causation with the respondents’ entitlement to assert a separate cause of action against the appellants because of their negligent misrepresentation. The two issues are distinct. A party who has suffered damages may have concurrent claims in contract and tort. In a case “where a given wrong prima facie supports an action in contract and in tort, the party may sue in either or both, except where the contract indicates that the parties intended to limit or negative the right to sue in tort”: BG Checo, at p. 26, citing Central Trust Co. v. Rafuse, 1986 CanLII 29 (SCC), [1986] 2 S.C.R. 147. As stated in Rafuse, at p. 206, “the plaintiff has the right to assert the cause of action that appears to be most advantageous to him in respect of any particular legal consequence”.
[28] In Edgeworth Construction Ltd. v. N. D. Lea & Associates Ltd., 1993 CanLII 67 (SCC), [1993] 3 S.C.R. 206, the principle of concurrent liability was applied where a plaintiff had concurrent claims in contract and tort against two different parties. A contractor successfully bid on a road building contract and entered into a contract with the province of British Columbia for the work. It alleged that it lost money on the project due to errors in the specifications and construction drawings by an engineering firm hired by the government. The contractor sued the engineers who had done the work and their firm for negligent misrepresentation. The action was struck on the basis that the plaintiff’s sole recourse was a claim in contract against the government. Citing BG Checo, the Supreme Court of Canada allowed the plaintiff’s appeal, rejecting the argument that the plaintiff’s contract terminated any duty of care between the contractor and the engineers. In short, “the presence of a contract does not bar the right to sue in tort”: Edgeworth, at p. 217.
[29] Citing BG Checo as well as Rafuse, the Court also rejected the argument that the contractor ought to have sued the province, which could then in turn bring a third-party claim against the engineers. It held that “the notion that there is only one right way to proceed – in contract – undercuts the philosophy expressed by this Court … that plaintiffs may sue concurrently in contract and tort, provided the contract does not negate the imposition of a duty of care in tort”: Edgeworth, at p. 220.
[30] There is no suggestion that anything in the APS in this case precluded the respondents from suing their own real estate agent or broker for a negligent misrepresentation. There was therefore nothing preventing the respondents from suing the appellants, whether or not they chose to pursue a claim in contract (or tort) against Primont. Whether or not the respondents, by failing to close the transaction with Primont, were themselves the authors of the damages they claim against the appellants, is a separate question, to which I now turn. . De Rita v. 1266078 Ontario Inc.
In De Rita v. 1266078 Ontario Inc. (Ont CA, 2024) the Ontario Court of Appeal dismissed an appeal of a successful negligence judgment, here where the fault was breach of a "contractual obligation to timely discharge a mortgage":[2] The application judge found that the delay in discharging the mortgage deprived the respondent of the opportunity to use the Ouellette property to obtain financing to fund the purchase of a property on Bruce Avenue in Windsor, which he had contracted to do at an extremely favourable price. By the time the respondent obtained a discharge by court order, the Bruce Avenue purchase agreement had lapsed. The application judge awarded damages based on the difference between the purchase price of the Bruce Avenue property and her estimate of what the property was worth when the respondent was able to re-enter the market, less certain deductions and adjusted for certain contingencies. . Beer v. Townsgate I Ltd.
In Beer v. Townsgate I Ltd. (Ont CA, 1997) the Court of Appeal stated as follows regarding actions commenced in both contract and tort:The existence of a contractual relationship between the parties does not preclude a claim in tort: see Central Trust Co. v. Rafuse, 1986 CanLII 29 (SCC), [1986] 2 S.C.R. 147, 31 D.L.R. (4th) 481. In BG Checo International Ltd. v. British Columbia Hydro & Power Authority, 1993 CanLII 145 (SCC), [1993] 1 S.C.R. 12, [1993] 2 W.W.R. 321, the Supreme Court of Canada addressed the issue of concurrent liability in tort where a clause in the contract may exclude or limit such liability. In that case, the court held that the contract did not negate or limit the defendant's common law duty not to negligently misrepresent certain facts, nor did it negate or limit the plaintiff's right to sue in tort. As to whether the right to sue in tort was precluded, the court said at p. 27 S.C.R., p. 331 W.W.R.:
The rule is not that one cannot sue concurrently in contract and tort where the contract limits or contradicts the tort duty. It is rather that the tort duty, a general duty imputed by the law in all the relevant circumstances, must yield to the parties' superior right to arrange their rights and duties in a different way. In so far as the tort duty is not contradicted by the contract, it remains intact and may be sued upon.
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