CITATION:
Krawchuk v. Scherbak, 2011
      ONCA 352

DATE: 20110506

DOCKET: C50902

COURT OF
          APPEAL FOR ONTARIO

Rosenberg, Cronk and Epstein JJ.A.

BETWEEN

Zoriana Krawchuk

Plaintiff
          (Respondent/
Appellant by way of cross-appeal)

and

Timothy Scherbak and Cherese Scherbak

Defendants
          (Appellants)

and

The City of
          Greater Sudbury, Trow Associates Inc.,
Wendy Weddell
,

Re/Max Sudbury Inc.
, Stanley Malecki, Ferdinand Nagel,
Dwight Roy Cockburn and Linda June Cockburn, Danny Gamble and
Lina Gamble and Tarion Warranty Corporation

Defendants (
Respondents
/

Respondents by way of cross-appeal
)

D. Peter Best, for the
          appellants

David S. Steinberg,
          for Zoriana Krawchuk, respondent/appellant by way of cross-appeal

Amelia M. Leckey, for Wendy
          Weddell and Re/Max Sudbury Inc., respondents/respondents by way of
          cross-appeal

Heard: October 18 and 19,
          2010

On appeal from the
          judgment of Justice Robbie D. Gordon of the Superior Court of Justice dated July
          30, 2009, with reasons reported at (2009), 85 R.P.R. (4
th
) 262.

Epstein J.A.:

I.

INTRODUCTION

[1]

This appeal arises out of a sale of a house that,
    unbeknownst to the purchaser, had serious defects.  While the appeal involves an analysis of the
    nature of the obligations between the various participants in the transaction,
    the issue of primary importance raised in this appeal is the duty of a real
    estate agent to verify information provided by the vendor about the property
    that is the subject of the transaction.

[2]

In June of 2004, the respondent, Zoriana Krawchuk,
    purchased her first home. Shortly after moving in, Ms. Krawchuk discovered serious
    structural problems.  The City of Sudbury
    issued an order requiring that the problems be rectified.  The repair process, during which Ms. Krawchuk
    was forced to live elsewhere, disclosed plumbing problems as well.  The repair costs exceeded the $110,100 she had
    paid for the property.  Ms. Krawchuk
    recovered almost this amount through her claim under the title insurance policy
    she had acquired at the time of closing.

[3]

Notwithstanding this recovery, Ms. Krawchuk sued the
    vendors  the appellants, Timothy Scherbak and Cherese Scherbak  for breach of
    contract or, in the alternative, for fraudulent or negligent misrepresentation.  She also sued Wendy Weddell, the agent acting
    for both she and the vendors, and the brokerage for which Ms. Weddell worked,
    Re/Max Sudbury Inc. (collectively, the real estate respondents)
,
for fraudulent or negligent misrepresentation and in negligence.
[1]
The Scherbaks and Ms. Weddell crossclaimed
    against each other for contribution and indemnity in relation to any damages
    for which they may be held liable to Ms. Krawchuk.

[4]

The trial judge found the Scherbaks liable for negligent
    misrepresentation and awarded Ms. Krawchuk damages in the amount of $110,742.32
    ($105,742.32 based on the diminution in value of the property by reason of the
    defects and consequential losses and $5,000 for mental distress and loss of
    health).  He dismissed both Ms.
    Krawchuks claim and the Scherbaks crossclaim against the real estate
    respondents.  He did not address the real
    estate respondents crossclaim against the Scherbaks, which in any event was
    moot given his dismissal of Ms. Krawchuks claim against them.

[5]

On their appeal, the Scherbaks submit that the trial
    judge erred in his finding of negligent misrepresentation.  They put forward three main arguments in
    support of this position.  First, they
    contend that the trial judge erred in basing liability on a cause of action not
    pleaded.  Second, the Scherbaks submit
    that the trial judge, in addition to making a number of findings of fact that
    were not supported by the evidence, erred in concluding that they owed Ms.
    Krawchuk a duty of care based on information they provided about the
    property.  Third, they argue that the
    trial judge erred in holding that they owed a duty of care to Ms. Krawchuk in
    the light of the entire agreement clause contained in the agreement of
    purchase and sale.

[6]

The Scherbaks further contend that the trial judge
    erred in law by allowing Ms. Krawchuk to recover both under her title insurance
    policy and through damages awarded at trial.

[7]

Ms. Krawchuk, on her cross-appeal, argues that the
    trial judge erred in dismissing her claim against Ms. Weddell.  She submits that Ms. Weddell breached her duty
    to recommend that she seek professional advice regarding the possible
    structural problems with the house and to advise her of the risks associated
    with making an offer that was not conditional on a satisfactory home
    inspection.  Ms. Krawchuk further submits
    that Ms. Weddell was also liable for negligent misrepresentation in conveying to
    her incomplete and inaccurate information about the house.

[8]

In their appeal from the dismissal of their crossclaim
    against the real estate respondents, the Scherbaks contend that the trial judge
    erred in failing to conclude that Ms. Weddell had a duty to advise them with
    respect to their obligations arising from the information they provided Ms.
    Weddell concerning the house and that she breached that duty.

[9]

Finally, on this appeal, the real estate respondents
    continue to advance their claim against the Scherbaks for contribution and
    indemnity if they are found liable to Ms. Krawchuk.  This claim is based on the real estate
    respondents argument that any misrepresentations made to Ms. Krawchuk were as
    a result of the failure of the Scherbaks to disclose the full condition of the
    property to Ms. Weddell.

[10]

For the reasons that follow, I would dismiss the Scherbaks
    appeal in relation to the judgment against them in favour of Ms. Krawchuk.  I would allow Ms. Krawchuks cross-appeal from
    the dismissal of her action against the real estate respondents.  I would dismiss the Scherbaks appeal from
    the dismissal of their crossclaim against the real estate respondents and dismiss
    the real estate respondents crossclaim against the Scherbaks.

II.

FACTUAL
    BACKGROUND

[11]

In March of 2004, the Scherbaks met Ms. Weddell at an
    open house and hired her as their agent to assist them in finding a new
    home.  Following the signing of an offer
    to purchase a new property, the Scherbaks retained Ms. Weddell as their listing
    agent to sell their existing home on Boland Avenue in Sudbury.  On April 13, 2004, the Scherbaks and Ms.
    Weddell signed a listing agreement.

[12]

Ms. Weddell assisted the Scherbaks in completing a
    document known as a Seller Property Information Sheet (SPIS) with respect to
    the property. The SPIS is a two-page, pre-printed standard form document
    prepared by the Ontario Real Estate Association, the stated purpose of which is,
    in part, to protect sellers by establishing that correct information concerning
    the property is provided to prospective buyers.

[13]

The SPIS completed by the Scherbaks contains the
    following instructions at the top of the first page:

ANSWERS
    MUST BE COMPLETE AND ACCURATE
This statement is designed in part to protect Sellers by establishing that
    correct information concerning the property is being provided to buyers.  All of the information contained herein is
    provided by the Sellers to the broker/sales representative.  Any person who is in receipt of and utilizes
    this Statement acknowledges and agrees that
the information is being provided for information purposes only and is
    not a warranty as to the matters recited hereinafter even if attached to an
    Agreement of Purchase and Sale.
The
    broker/sales representative shall not be held responsible for the accuracy of
    any information contained herein.

BUYERS
    MUST STILL MAKE THEIR OWN ENQUIRIES
Buyers must still make their own enquiries notwithstanding the
    information contained on this statement.  Each question and answer must be considered and where necessary, keeping
    in mind that the Sellers knowledge of the property may be incomplete,
    additional information can be requested from the Sellers or from an independent
    source such as the municipality.  Buyers
    can hire an independent inspector to examine the property to determine whether
    defects exist and to provide an estimate of the cost of repairing problems that
    have been identified.
This statement does not provide information
    on psychological stigmas that may be associated with a property.
[Emphasis
    in original.]

[14]

It also contains the following statement near the
    bottom of the second page:

The sellers
    state that the above information is true based on their current actual
    knowledge as of the date below.  Any
    important changes to this information known to the sellers will be disclosed by
    the sellers prior to closing.  Sellers
    are responsible for the accuracy of all answers.  Sellers further agree to [indemnify] and hold
    the broker harmless from any liability incurred as a result of any buyer
    relying on this information.  The sellers
    hereby authorize that a copy of this seller property information statement be
    delivered by their agent or representative to prospective buyers or their
    agents or representatives.  The sellers
    hereby acknowledge receipt of a true copy of the statement.

[15]

In furtherance of its objective, the SPIS contains a
    series of questions for the sellers to answer in relation to the property being
    sold.  The questions fall into three main
    categories  (1) general, (2) environmental, and (3) improvements and
    structural.

[16]

As completed by the Scherbaks, with the assistance of
    Ms. Weddell, the SPIS provided the following information germane to this appeal.
     With respect to the structural integrity
    of the home, the question was:  Are you
    aware of any structural problems?  The Scherbaks
    response was: NW corner settled.  See
    note *.  Under additional comments
    they added:  *to the best of our
    knowledge the house has settled.  No
    further problems in 17 years.  Concerning the plumbing, the question was:  Are you aware of any problems with the
    plumbing system?  The Scherbaks answered
    No.

[17]

Once the listing arrangements were finalized, Ms.
    Weddell scheduled an open house for Sunday, April 18, 2004.

[18]

Ms. Krawchuk attended the open house.  She met Ms. Weddell and agreed to have her
    act as her agent in submitting an offer to purchase the Scherbaks home.  With the consent of all parties, Ms. Weddell therefore
    became a dual agent, acting for both the Scherbaks and Ms. Krawchuk.

[19]

Ms. Krawchuk walked through the house on her own and
    with Ms. Weddell.  She also asked two
    friends to come over and look at the house with her.  Ms. Krawchuk admitted to noticing a number of
    visible defects in the home, including the sloped floors, the foam-filled crack
    in the northwest corner of the crawl space, and the sloping brick and block
    work at the exterior of the northwest corner of the home.  Ms. Krawchuk discussed the significance of
    these visible defects with Ms. Weddell, who told Ms. Krawchuk that the
    Scherbaks had advised her that the house had settled, been repaired, and that
    there had been no further problems in 17 years.  Ms. Krawchuk and Ms. Weddell discussed the listing documents, including
    the SPIS, and a confirmation of Ms. Weddells role as a dual agent.  They also discussed terms of a possible offer
    to purchase, including whether or not it should be conditional on a home
    inspection.

[20]

During the evening of April 18, 2004, Ms. Weddell
    presented the Scherbaks with Ms. Krawchuks offer to purchase.  The offer was for a price $10,100 above asking
    and contained no conditions.  The
    Scherbaks accepted the offer with an agreed-upon closing date of June 30, 2004.

[21]

The sale was completed as scheduled.  On closing, Ms. Krawchuk acquired title
    insurance through the Stewart Title Guaranty Company (Stewart Title).

[22]

On July 10, 2004, after performing some minor home
    improvements, Ms. Krawchuk moved into the home.  Within days, she noted recurring accumulations
    of sand near the north wall of the crawlspace under the living room.

[23]

Upon investigation, it was discovered that the entire
    north foundation wall and the northern portion of the east and west foundation
    walls had settled and were continuing to settle.  This settlement resulted in significant
    weakness in the floor joists and ultimately jeopardized the stability of the
    building itself.  The investigation of
    the foundation also disclosed plumbing problems.

[24]

The City of Sudbury was contacted and it ordered that
    the structural problems be rectified.  Remedying
    the structural problems required the removal of the house from its foundation,
    excavation of the cement floor, replacement of the subsoil with engineered
    fill, installation of new footings, foundation and cement floor and, finally,
    the replacement of the house on its new foundation.  Further repair was required as a result of
    significant cracking of the interior finish that was caused by moving the house
    to the extent necessary to effect the repairs.  Ms. Krawchuk estimated the total money spent on repairs to be
    $191,414.94.

[25]

Ms. Krawchuk claimed against Stewart Title for her
    losses.  Stewart Title initially rejected
    the claim on the basis that the City had not issued any work orders or notices
    of violation that would qualify Ms. Krawchuk for coverage under her policy.  Later, after the City issued the order to
    comply, the insurer agreed that Ms. Krawchuk then qualified for coverage under
    a provision of her policy that Stewart Title said, in a letter to Ms. Krawchuk,
    provided coverage in the event that the insured suffers a loss or damage as a
    result of being forced to remove [the] existing structure or a portion of it as
    a result of any portion of the structure being built without a building permit
    from the proper government office or agency, provided one would have been
    required at the time and the Municipality is forcing its removal as a result of
    not obtaining a building permit.

[26]

After some negotiation, Stewart Title agreed to settle Ms.
    Krawchuks claim for $105,742.32, based on the following calculation:

Your Policy
    Amount is $110,100.00, this is what you paid for your home. From this amount we
    subtracted the value of the land itself, without the house on it. The land
    value was estimated at $41,000.00 by Appraisals North Realty Inc., certified
    appraisers. Then we added the cost of removing and remediating the soil to allow
    for building, totalling $29,318.00 and the cost of the Terraprobe report, which
    cost $4,952.54. Then we added your quote for moving expenses of $2,371.78.
    Therefore, the calculation is $110,000.00  $41,000.00 + $29,318.00 + $4,952.54
    + $2,371.78 = $105,742.32.

[27]

As part of the final settlement agreement, Ms. Krawchuk
    agreed to indemnify Stewart Title and her lawyer from any claims by third
    parties.  In exchange, Stewart Title
    agreed to transfer its subrogated interest to Ms. Krawchuk.

[28]

Ms. Krawchuk then commenced this action.

[29]

At trial, Ms. Krawchuk submitted a damage claim in the
    amount of $191,414.94 for the amounts she claimed to have spent or would in the
    future be spending to place the property in the condition she believed it to be
    in when she purchased it.  She also sought
    damages for emotional upset and loss of health, as well as aggravated,
    punitive and exemplary damages.

III.

THE TRIAL
    DECISION

A.

Ms.
    Krawchuks claim against the Scherbaks

[30]

Two defects formed the basis of Ms. Krawchuks claim
    the instability of the foundation and the faulty plumbing system.  With respect to the foundation, the trial
    judge found that the house was constructed on unsuitable soil leaving it
    without appropriate support.  As a
    result, the foundation walls were settling into the earth to an unacceptable
    degree.  With respect to the plumbing, the
    trial judge concluded that there was a defect in the plumbing system making the
    house prone to sewer backups.  While the
    trial judge found that many of the problems, including the sloped floors and
    cracks, were patent defects that Ms. Krawchuk was obliged to accept, he also found
    that both the full nature and extent of the structural problems and the
    existence of the plumbing problem were latent defects.

1.

Claim based on contract

[31]

The trial judge dismissed Ms. Krawchuks claim against
    the Scherbaks in contract.  He noted that,
    in the absence of any warranties or guarantees as to the fitness of the
    property or home, the starting point for the analysis is the principle of
caveat emptor
 buyer beware.

[32]

Ms. Krawchuk argued that there were two reasons why
    this principle did not apply:  (1) the
    defects were latent and had been deliberately concealed by the vendors; and (2)
    the defects were such as to render the home uninhabitable, dangerous or
    potentially dangerous so that they required disclosure by the Scherbaks.

[33]

The trial judge rejected both arguments.  He was unable to find, on the evidence, that
    the Scherbaks concealed problems for the purpose of misleading prospective
    purchasers.  He also found that the
    plumbing defects did not render the home uninhabitable, dangerous or
    potentially dangerous and, with respect to the structural problems, he was
    unable to conclude that the Scherbaks knew the property to be uninhabitable,
    dangerous or potentially dangerous, given that they had resided there with
    their children for 17 years.

2.

Claim based on fraudulent or negligent misrepresentation

[34]

The trial judges analysis of Ms. Krawchuks claim
    against the Scherbaks based on fraudulent or negligent misrepresentation focused
    on the SPIS.

[35]

He dismissed Ms. Krawchuks fraudulent
    misrepresentation claim.  While he
    concluded that the Scherbaks knowingly or recklessly made false representations
    of fact in the SPIS with respect to the foundation and the plumbing, he was not
    satisfied that the statements were made for the purpose of misleading Ms.
    Krawchuk.  He accepted that the Scherbaks
    were attempting to be forthright in their disclosure.

[36]

With respect to the claim of negligent
    misrepresentation, the trial judge concluded that the Scherbaks intended that
    the representations they made in the SPIS would be relied upon by prospective
    purchasers in deciding whether to submit an offer for the property.  He thus found a special relationship between
    the Scherbaks and Ms. Krawchuk that gave rise to a duty of care.

[37]

He held that the information provided about the
    foundation of the house was false in the sense of being incomplete.  The Scherbaks knew that the structural
    problems were not restricted to the northwest corner of the home and were more
    serious than they had disclosed.  In 1991
    during their renovation of the family room in the eastern half of the basement,
    the Scherbaks had discovered a significant sinking of the foundation and its
    rotation in a northward direction.  In
    dealing with the problem, Mr. Scherbak had carried out a very perfunctory repair
    and drywalled over it without applying for a building permit.

[38]

The trial judge also held that the Scherbaks response
    to the question in the SPIS about the plumbing was false as the Scherbaks had regularly
    experienced and were continuing to experience sewer backups once or twice per
    year.

[39]

The trial judge, at paragraph 61, summarized his
    reasoning behind his conclusion that the Scherbaks were negligent in the manner
    in which they completed the SPIS, as follows:

Notwithstanding
    that they had not experienced any difficulties with the foundation during their
    period of ownership it was known to them that there had been substantial
    settling of the entire north wall of the foundation.  Although whatever repair had been made had
    resolved the issue during their period of ownership, it was apparent at least
    to Mr. Scherbak that the repairs did not accord with good building
    practices.  I would venture to say that
    this would be obvious to almost anyone viewing the state of the foundation as
    it existed in the photographs taken by the Scherbaks during their renovation
    work in 1991/92.  Although I accept that
    the representation was not made to mislead Ms. Krawchuk, certainly it was not
    full, frank, and accurate disclosure of the structural problems of the
    house.  In my view, a reasonably prudent
    person in similar circumstances would have disclosed the following:  (1) that there had been significant
    settlement of the entire north wall of the foundation and the northern portion
    of both the east and west walls of the foundation prior to their becoming
    owners of the property; (2) that although there had not been further settlement
    noted during their 17 years of ownership, they are unaware of what repair work
    was done to address the settlement before they became owners; (3) that in
    observing the northern portion of the east wall of the foundation, there was
    reason to believe that the foundation may not have been properly repaired; (4) and
    buyers should satisfy themselves that the foundation is sound.  Obviously, the [Scherbaks] representation
    with respect to the structure fell far short.  Negligence is established.  It is
    also my view that the Scherbaks were negligent in indicating that there were no
    problems with the plumbing.  Reasonably
    prudent persons in their circumstances would have disclosed that once or twice
    per year they experienced a sewer line blockage that prevented water and sewage
    from discharging into the municipal system.

[40]

The trial judge accepted that Ms. Krawchuk reasonably relied
    upon the truth and accuracy of the Scherbaks statements in the SPIS, both with
    respect to the foundation and with respect to the plumbing.

[41]

He further accepted Ms. Krawchuks evidence that she
    would not have made the offer had she known of the structural or plumbing
    problems.  It followed that based on her reliance
    on the information provided by the Scherbaks in the SPIS, Ms. Krawchuk
    purchased a defective property and suffered damages as a result.  Thus, the tort of negligent misrepresentation
    had been made out.

B.

Damages

1.

Quantum of damages

[42]

In addressing the issue of damages, the trial judge
    identified the general rule that tort damages should, to the extent possible,
    restore the aggrieved party to the position he or she would have been in had
    the defendant properly discharged her duty of care.

[43]

The trial judge held that Ms. Krawchuk did not act
    reasonably in spending approximately $190,000 to restore property she had
    purchased for $110,100.  Referencing
Messineo et al. v. Beale
(1978), 20 O.R.
    (2d) 49 (C.A.), he held that Ms. Krawchuk was entitled to damages calculated on
    the basis of the difference between the price paid for the property and its
    fair market value when the duty to mitigate arose.

[44]

The trial judge found that Ms. Krawchuks dealings with
    Stewart Title, as set out above, provided him with sufficient information to conclude
    that the appropriate amount of damages in this regard was the value of Ms.
    Krawchuks settlement with Stewart Title:  $105,742.32.

[45]

The trial judge also accepted that Ms. Krawchuk
    suffered emotional distress as a result of what transpired surrounding the
    purchase of the home and that such distress was reasonably foreseeable but held
    that she may have avoided a considerable amount of that stress if she had
    mitigated her damages by selling the house.  He awarded her $5000 for emotional upset and loss of health bringing
    the total damages to $110,742.32.

[46]

Given his earlier finding that the Scherbaks did not
    intentionally mislead Ms. Krawchuk, the trial judge dismissed Ms. Krawchuks
    claim for aggravated, punitive and exemplary damages.

2.

The issue of double recovery

[47]

The trial judge rejected the Scherbaks argument that
    since Ms. Krawchuk had been paid close to the full amount of her compensable
    damages by her title insurer, to make a further award in her favour would
    amount to double recovery and run afoul of the established tort principle that
    an aggrieved person should be entitled to nothing more than compensation for
    the full amount of his or her loss.  The
    trial judge held that the private insurance exception, discussed at length in
Cunningham v. Wheeler
, [1994] 1 S.C.R.
    359; see also
Kosanovic v. Wawanesa
    Mutual Insurance Co.
(2004), 70 O.R. (3d) 161 (C.A.), at paras. 8-9,
    applied to Ms. Krawchuk to allow the double recovery.

C.

Ms.
    Krawchuks claim against the real estate respondents

[48]

The trial judge rejected Ms. Krawchuks claim that Ms.
    Weddell was also liable for her damages based on fraudulent or negligent misrepresentation
    of the condition of the house and in negligence for failing to take reasonable
    steps to protect Ms. Krawchuks interests by properly advising her in relation
    to the importance of a home inspection.

[49]

The trial judge dismissed Ms. Krawchuks claim of fraudulent
    or negligent misrepresentation on the basis that Ms. Weddell relayed to Ms.
    Krawchuk what was told to her by the Scherbaks, that she had no reason to doubt
    the veracity of their representations, and that she had no obligation to
    inquire further about information relevant to the condition of the house.

[50]

In terms of the
    negligence claim, the trial judge rejected the argument that Ms. Weddell
    breached her duty of care to Ms. Krawchuk by failing to recommend that she seek
    professional advice regarding the possible structural problems with the house
    and failing to advise her of the perils of making an offer that was not
    conditional on a satisfactory home inspection.

[51]

He noted that, prior to the open house, Ms. Weddell had
    prepared the offer to purchase that was ultimately used by the parties.  She had included, in Schedule A, two
    conditions for the purchasers benefit:  a
    condition to allow a period of time for the purchaser to obtain financing and a
    condition that allowed the purchaser an opportunity to obtain a satisfactory
    home inspection.

[52]

Given the amount of interest in the house, Ms. Krawchuk
    and Ms. Weddell discussed ways to enhance the attractiveness of Ms. Krawchuks
    offer, one of which was to make the offer unconditional  a clean offer.  The trial judge accepted Ms. Weddells evidence
    that Ms. Krawchuk had initially wished to have the inspection clause left in,
    but that she was instructed to remove it once she advised Ms. Krawchuk that if
    there were another offer made without conditions, it might be accepted over
    hers.  He further held that Ms. Krawchuk,
    with an understanding of the value of having a satisfactory inspection
    completed as a condition of closing, made her own decision to submit a clean
    offer.

[53]

In these circumstances, the trial judge found that Ms.
    Weddell had not breached her duty of care to Ms. Krawchuk and dismissed Ms.
    Krawchuks claim in negligence against the real estate respondents.

D.

The
    Scherbaks crossclaim against the real estate respondents

[54]

The focus of the Scherbaks crossclaim against the real
    estate respondents was the advice Ms. Weddell gave them concerning the SPIS
    disclosure requirements.  They argued
    that Ms. Weddell should have warned them about the consequences of completing
    the SPIS and inquired further of them to ensure that they made full and fair
    disclosure.

[55]

The trial judge held that the Scherbaks understood that
    they had an obligation to complete the SPIS accurately to the best of their
    knowledge.  They sought Ms. Weddells
    advice about how to answer certain questions and composed their answers based
    on that advice.  He found that Ms.
    Weddell had no reason to question the accuracy of the information the Scherbaks
    were including in the SPIS as it appeared consistent with her visual inspection
    of the property.

[56]

He concluded that Ms. Weddell met her obligations to
    the Scherbaks and therefore dismissed the Scherbaks crossclaim against the
    real estate respondents.

E.

The real
    estate respondents crossclaim against the Scherbaks

[57]

The trial judge did not address the real estate
    respondents crossclaim against the Scherbaks in his reasons or in his
    order.

IV.

THE ISSUES

[58]

The Scherbaks appeal from the judgment awarded against
    them in favour of Ms. Krawchuk raises the following issues:

1.

Did the trial judge err in finding the Scherbaks liable
    for negligent misrepresentation?

2.

Did the trial judge err in granting the judgment he did
    in favour of Ms. Krawchuk in the light of her recovery from Stewart Title?

[59]

Ms. Krawchuks appeal from the dismissal of her claims
    against the real estate respondents raises the following issues:

1.

Did the trial judge err in his analysis of the standard
    of care?

2.

If so, is this court able to determine whether the real
    estate respondents were negligent in their representation of Ms. Krawchuk?

3.

If so, were the real estate respondents negligent in
    their representation of Ms. Krawchuk?

[60]

The Scherbaks appeal from the dismissal of their crossclaim
    against the real estate respondents, and the real estate respondents crossclaim
    against the Scherbaks raise the following issues:

1.

Was Ms. Weddell negligent in failing to provide
    adequate guidance to the Scherbaks in their completion of the SPIS?

2.

Were the Scherbaks negligent in their disclosure to Ms.
    Weddell of information pertaining to the problems associated with the house?

3.

What are the consequences, if any, of a finding of
    negligence as claimed by the Scherbaks and the real estate respondents against
    each other?

V.

ANALYSIS

A.

The
    Scherbaks appeal from the judgment awarded against them in favour of Ms.
    Krawchuk

1.

Did the trial judge err in finding the Scherbaks liable
    for negligent misrepresentation?

[61]

Before turning to the Scherbaks substantive arguments
    on this issue, I will deal with two preliminary points.

The pleadings

[62]

First, I will deal briefly with the Scherbaks argument
    that the trial judge erred in finding liability on the basis of a theory of
    liability not pleaded or dealt with at trial.  The Scherbaks submit that this error caused them prejudice.

[63]

I would dismiss this ground of appeal.

[64]

Paragraphs 16, 29 and 30 of the statement of claim
    refer to Ms. Krawchuks claim in negligence.  Paragraph 30 specifically alleges that the
    Scherbaks were negligent in the manner of their representations to Ms. Krawchuk
    through Ms. Weddell.  Paragraph 29
    details this representation and para. 16 explains that this same statement was
    made in the SPIS and was read by Ms. Krawchuk.  The Scherbaks joined issue on this allegation in para. 25 of their
    statement of defence where they denied that they negligently misrepresented any
    aspect of the condition of the house.  It
    would thus appear from the pleadings that the Scherbaks understood that
    negligent misrepresentation was being alleged by Ms. Krawchuk.

[65]

Furthermore, as the trial judge observed when he was
    asked to consider this issue after the delivery of his reasons, the tort was not
    only raised in the claim and responded to in the defence, it was also argued,
    without objection, by Ms. Krawchuks counsel in closing submissions.

Errors in findings of fact

[66]

As will be explained throughout the analysis that
    follows, the trial judges findings in relation to facts material to his
    conclusions concerning the Scherbaks liability were supported by the evidence.
     Where the evidence conflicted, he was
    entitled to choose, on the basis he explained, the version of events he preferred.  I would not, therefore, interfere with any of
    the trial judges findings of fact relevant to his conclusions concerning the
    Scherbaks liability for Ms. Krawchuks losses.

The tort of negligent
    misrepresentation

[67]

I now turn to whether, given his findings of fact, the
    trial judge erred in concluding that the tort of negligent misrepresentation
    was made out against the Scherbaks.

[68]

To succeed in her action against the Scherbaks based on
    negligent misrepresentation, Ms. Krawchuk had to prove that:

·

the Scherbaks owed her a duty of care based
    on a special relationship;

·

the Scherbaks made statement(s) to her that
    were untrue, inaccurate or misleading;

·

the Scherbaks acted negligently in making the
    statement(s);

·

she reasonably relied on the statement(s);
    and

·

she sustained damages as a result.

See
Queen v. Cognos Inc.
,
    [1993] 1 S.C.R. 87, at p. 110.

The Scherbaks duty of care to Ms.
    Krawchuk

[69]

The Scherbaks
    advance two arguments in support of their submission that the trial judge erred
    in finding a special relationship duty of care based on the statements in the
    SPIS.  First, they submit that since the
    statements were not warranties, they cannot give rise to liability, absent
    fraudulent misrepresentation or deliberate concealment.  Second, they submit that the trial judge
    erred by ignoring the entire agreement clause contained in the agreement of
    purchase and sale.

[70]

As for
    the first argument, I agree with Killeen J.'s conclusion in
Kaufmann v. Gibson
(2007), 59 R.P.R. (4
th
)
    293 (Ont. S.C.),

that even though
    statements made in an SPIS are not warranties, they may still be the basis of
    liability as representations.  After
    citing the complete first two paragraphs in the SPIS, Killeen J. said, at para.
    100:

As can be
    seen in the opening words of para. 1, ANSWERS MUST BE COMPLETE AND
    ACCURATE.
While this paragraph goes on to say that the answers do not constitute
    warranties, there cannot be any doubt that they can have legal consequences as
    representations
, especially if they were read by the purchasers before
    submitting their offer, as here, and were then incorporated into the terms and
    conditions of the agreement. [Emphasis added.]

[71]

This
    takes me to the Scherbaks second argument that the trial judge erred in finding
    a duty of care in the face of what is commonly referred to as an entire
    agreement clause, also called an integration clause, contained in the
    agreement of purchase and sale.

[72]

The
    entire agreement clause contains the following wording:

This Agreement including any Schedule attached hereto, shall constitute
    the entire Agreement between Buyer and Seller. There is no representation,
    warranty, collateral agreement or condition, which affects this Agreement other
    than as expressed herein.

[73]

The
    clause excludes reliance on representations that are alien to [t]his Agreement
    or any Schedule attached hereto.  In
    this case, the SPIS was specifically referred to in Schedule A to the
    agreement through the wording: Included with the offer is the property
    information statement.  Thus, the
    representations in the SPIS are not alien to the agreement; they have been
    specifically incorporated into the agreement by the parties and are available
    to the parties for the purposes of establishing liability if they are found to
    be untrue, inaccurate or misleading.

[74]

It follows that neither the fact that the statements in
    the SPIS were not warranties nor the entire agreement clause precludes a
    finding that the Scherbaks owed a duty of care to Ms. Krawchuk.

[75]

The trial judge found that the representations made by
    the Scherbaks in the SPIS were meant to be disclosed to prospective buyers and
    that it was reasonable to expect such buyers to rely on those representations.  For the reasons discussed above, I agree with
    his conclusion that these facts are sufficient to establish a special
    relationship giving rise to a duty of care.

Did the Scherbaks make statements to
    Ms. Krawchuk that were untrue, inaccurate or misleading?

[76]

The trial judge found that the information the Scherbaks
    provided in the SPIS was incomplete with respect to the structural issues and
    false in relation to the plumbing situation.  These findings are well supported by the evidence.  The structural problems were not restricted
    to the northwest corner of the house and they were more serious than
    disclosed.  In contrast to their response
    that there were no plumbing problems of which they were aware, the Scherbaks
    were experiencing varying degrees of sewer backups once or twice per year on an
    ongoing basis.

Were the Scherbaks negligent as to
    the truth of the statements?

[77]

Although the completion of an SPIS is not
    mandatory, once a seller decides to fill one out, he or she must do so honestly
    and accurately and the purchaser is entitled to rely on the representations
    contained in the SPIS.  In
Kaufmann
, Killeen J. held at para. 119
    that once a vendor breaks his silence by signing the SPIS, the doctrine of
caveat emptor
falls away as a defence
    mechanism and the vendor must speak truthfully and completely about the matters
    raised in the unambiguous questions at issue.  See also
Alevizos v. Nirula
(2003), 180 Man. R. (2d) 186 (C.A.), at
    para. 38.

[78]

The
    Scherbaks submit that given the trial judges finding of honest intentions on
    their part, it was an error in law for him to hold them liable to Ms. Krawchuk
    for their statements.  In support of this
    argument, the Scherbaks rely on the following statement in
Alevizos

v. Nirula
, at
    para. 36, adopted by Killeen J. in
Kaufmann
at para. 113:  If the vendor answers
    the PCS honestly and does not deliberately intend to mislead, then liability
    will not follow even if the representation turns out to be inaccurate.

[79]

For a
    number of reasons, I do not accept this submission.  First, I note that the statement adopted by
    Killeen J. in
Kaufmann
is
obiter
since
Alevizos
is a case involving fraudulent misrepresentation.  Second, I do not interpret the statement as
    meaning that honest intentions, by themselves, are sufficient to avoid
    liability for inaccurate representations.  Third, if that is what the court meant in
Alevizos
, I respectfully disagree.  The standard of care extends beyond honest intentions.  The obligation is to provide, to the extent
    possible, accurate and complete information.

[80]

In this case,
    the trial judge, correctly in my view, found liability notwithstanding his
    conclusion that the Scherbaks tried to be honest.  The key to the basis of the Scherbaks'
    liability is the trial judges conclusion, set out at para. 39 above, that a
    reasonable person in similar circumstances would have disclosed more.

Did Ms. Krawchuk reasonably rely on the statements?

[81]

In examining the issue of Ms. Krawchuks reliance on
    the statements in the SPIS, the distinction between patent and latent defects
    must be kept in mind.  Latent defects,
    unlike patent ones that are obvious, are not readily apparent to someone
    exercising reasonable care in his or her inspection of the property.

[82]

I agree with the trial judges conclusion that many of
    the defects in the house were patent and thus Ms. Krawchuk was obliged to
    accept them.  However, I also agree with
    his further conclusion that the more serious underlying structural defects and
    the extent of those defects, together with the plumbing problems, were
    latent.  There were no obvious
    manifestations of the undisclosed extent of the structural problems or the
    plumbing problems.

[83]

The trial judges finding that Ms. Krawchuk relied on
    the representations the Scherbaks made in the SPIS is unassailable.  The evidence supports his  findings that prior to entering into the
    agreement of purchase and sale, Ms. Krawchuk not only reviewed the SPIS,
    particularly the information relating to the structure, but also specifically
    asked Ms. Weddell
about the
    sloping floors and seemed content with the answer.  The trial judge
accepted, as he was
    entitled to do, Ms. Krawchuks evidence that she would not have made the offer
    had she known of the extent of the structural defects and of the plumbing
    problems.

[84]

But was her reliance reasonable in the light of the
    wording of the SPIS?  I refer to the
    clause in the SPIS that provides that, [b]uyers must still make their own
    enquiries notwithstanding the information contained on this statement and
    urges the buyer to bear in mind that the sellers knowledge of the property may
    be incomplete.  This clause alerts the
    purchaser to the possibility that the information in the SPIS may be lacking in
    some way and puts an onus on the purchaser to make reasonable inquiries.

[85]

In my view, this warning does not absolve the seller of
    liability for misstatements.

[86]

In
McQueen v.
    Kelly
(1999), 25 R.P.R. (3d) 248 (Ont. S.C.), Kurisko J. found that the purchasers
    of a house could recover against the vendors even though they had failed to
    adequately inspect the basement and, consequently, had missed patent defects
    that were concealed by the vendors.  He
    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.

...

I agree
    with Mr. Kelly that a person purchasing a $150,000 house should take
    appropriate steps to discover defects.
The Plaintiffs were foolish not to take
    advantage of the inspection clause because a vendor is not required to inspect
    the house as part of the process of completing the Information Statement and
    may very well be unaware of moisture problems.  However, this does not mean a vendor can aver a lack of awareness with
    impunity.
The Defendants
    representations coupled with the intentional concealment of the evidence of the
    water stains vindicate the decision of the Plaintiffs to rely on the
    Defendants representations and absolved the Plaintiffs from inspecting the
    basement for patent evidence of moisture problems. [Emphasis added.][Footnote
    omitted.]

[87]

Although
McQueen
can be distinguished in that it involved patent defects that were actively
    hidden by the vendors, the decision has been relied upon in other cases that
    are more similar to the circumstances here.  See, for example,
Ohler v. Pye
,
    [2009] O.J. No. 3434 (Sm. Cl. Ct.);
St. Germain
    v. Schaffler
(2003), 37 R.P.R. (4
th
) 116 (Ont. S.C.); and
Kaufmann
, at paras. 123-124.

[88]

Furthermore, while the SPIS emphasizes the purchasers
    duty to enquire in order to fill in gaps in the vendors knowledge, such an
    inquiry does not necessarily include a duty to challenge the vendors honesty
    and forthrightness.

[89]

In
Lyle v.
    Burdess
, 2008 YKSM 5, Cozens Terr. Ct. J. considered the purpose of the
    Yukon Territorys equivalent of the SPIS, the Property Disclosure Statement
    (PDS).  He said at para. 68 that, [t]he
    primary purpose of the PDS is to disclose latent defects that would not be
    easily discoverable to a prospective purchaser in the time frame generally
    associated with completing a purchase and sale transaction.  A prospective purchaser should be able to
    rely on the questions and answers in the PDS to inform him or her about past,
    as well as present, issues.  He agreed
    with the comments of Killeen J. in
Kaufmann
that waiver of a home inspection clause does not waive the right to rely on
    representations in an SPIS, saying at para. 76:

A home
    inspection should reveal any patent defects and, if disclosed to the buyer,
    allow for a more thorough investigation into any latent defect in order to
    determine the nature of the defect.  A
    home inspection is not intended to find latent defects.  In circumstances where there is no PDS
    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.
[Emphasis added.]

[90]

I agree with Quinn J. in
Whaley v. Dennis
(2005), 37 R.P.R. (4
th
) 127 (Ont. S.C.),
    where he rejected, at para. 28, the suggestion that the purchaser is required
    to investigate the honesty of the vendor:

If Counsel
    is suggesting that the plaintiffs should have gone beyond the Seller Property
    Information Statement (and behind the answer given therein regarding the
    absence of moisture or water problems in the basement), this is a bold and
    erroneous suggestion:  it means that the
    plaintiffs should have disbelieved [the vendors].

[91]

Thus, there is ample support for the trial judges
    finding that, notwithstanding the warning in the SPIS, Ms. Krawchuk was
    entitled to rely on the representations that the Scherbaks made in that
    document.

[92]

Finally, I note that while the SPIS highlights that the
    purchaser may wish to make further enquiries considering that the [s]ellers
    knowledge of the property may be incomplete; this is not what happened here.  The Scherbaks have not been found liable
    because their knowledge of the condition of the property was incomplete, but
    because they failed to disclose their full knowledge of the condition of the
    house.  They knew that there were serious
    structural problems all along the north wall and in the northwest and northeast
    corners of the house and that there were ongoing sewer problems.  They did not disclose these facts.

[93]

Thus, in my view, Ms. Krawchuks reliance on the
    information the Scherbaks provided in the SPIS was reasonable.

Did Ms. Krawchuk sustain damages as a
    result of the Scherbaks negligent misrepresentation?

[94]

The trial judge accepted that Ms. Krawchuk would not
    have made the offer to purchase if she had known the full extent of the
    structural defects or the plumbing problems.  Her reliance on the Scherbaks representations contributed to her
    decision to offer to purchase and ultimately purchase the house.  She suffered damages as a result.

Conclusion on negligent
    misrepresentation

[95]

Based on this analysis, I conclude that the trial judge
    was correct in deciding that Ms. Krawchuk successfully established a claim against
    the Scherbaks based on negligent misrepresentation.

Contributory negligence

[96]

The Scherbaks argue that Ms. Krawchuk admitted
    negligence on her part when she stated in her statement of claim that Ms.
    Weddell caused her to act improvidently in her acquisition of the home.  They submit that the trial judge erred by
    disregarding this admission of contributory negligence.

[97]

I disagree.  Ms.
    Krawchuks allegation that Ms. Weddell caused her to act improvidently, taken
    in context, was simply a claim that Ms. Weddells advice was a causal factor in
    her decision to purchase the house that turned out to have serious
    defects.  I do not see it as an admission
    of contributory negligence.

2.

Should Ms. Krawchuk be able to recover damages at trial
    even though she already recovered from Stewart Title for her losses?

[98]

The Scherbaks and the real estate respondents both
    argued that Ms. Krawchuk suffered little or no loss given her recovery from
    Stewart Title and that she should not be allowed to double recover.

[99]

My rejection of this argument lies in the concept of
    the private insurance exception, often referred to as the
Bradburn
rule, which provides that where a plaintiff recovers
    under an insurance policy for which he has paid the premiums, the insurance
    moneys are not deductible from damages payable by the tortfeasor:
Hussain
    v. New Taplow Paper Mills Ltd.
,

[1988]
    1 All E.R. 541 (H.L.), at pp. 544-45.

[100]

In
Cunningham v.
    Wheeler
, the Supreme Court re-affirmed that the private insurance exception
    remains part of Canadian law.  According
    to Cory J., writing for the majority, the basis for the private insurance
    exception is that the plaintiff has made a sacrifice and planned for possible
    contingencies by purchasing private insurance and the wrongdoer should not be
    allowed to benefit from the plaintiffs sacrifice and forethought through a
    reduction in the amount he or she must pay.

[101]

The Scherbaks and the real estate respondents both argue
    that the exception does not apply to the circumstances of this case.  The Scherbaks argue that Ms. Krawchuk did not
    incur out-of-pocket costs as a result of purchasing the title insurance:  she made a small, one-time payment that saved
    her more than that amount in other expenses relating to her purchase that she
    would otherwise have incurred without the insurance.  The real estate respondents submit that the
    exception has no application to title insurance as it is not indemnity insurance;
    it covers a past, rather than a future event.

[102]

I do not agree with either submission.

[103]

The policy reason behind the application of the private
    insurance exception is that a wrongdoer should not benefit from the prudent decisions
    of the person wronged.  As Cory J. said
    in
Cunningham
, at p. 400, the
    exception is based on fairness.  It is
    unfair to allow a wrongdoer to benefit from the individual foresight and
    sacrifice made by the plaintiff, regardless of the nature or extent of the
    sacrifice.  Here, it would be unfair to
    allow the Scherbaks to benefit from Ms. Krawchuks decision to make a
    sacrifice, however small, to protect her from potential losses.

[104]

I next turn to the real estate respondents argument
    that title insurance is fundamentally different from other types of insurance
    covering possible future events such as property damage or wage loss.  They submit that the latter are forms of
    indemnity insurance purchased to protect against an unforeseen future event
    whereas title insurance is purchased to protect against existing defects.  They say that this difference precludes the
    application of the private insurance exception.

[105]

In my view, title insurance is a contract of indemnity,
    designed to compensate for actual loss:  see
Grunberger v. Iseson
, 75
    A.D. (2d) 329, 331 (N.Y. App. Div. 1980).  While title insurance is different from most insurance products in that
    it has not traditionally insured against a future event but has been used only
    to insure against loss from a title defect in existence at the date of the policy,
    it is nonetheless designed to respond as well to a future loss.  Ms. Krawchuks loss from the existing defects
    in the house crystallized when it became necessary for her to spend the money
    to do the repairs required by the Citys order to comply, an event that took
    place after the policy was in place.  In
    any event, I do not see how the specific nature of the risk covered in title
    insurance is relevant to the policy reasons that support the application of the
    private insurance exception.  There is no
    principled reason to exclude title insurance from the private insurance
    exception.

[106]

I add that there is a further reason why Ms. Krawchuk
    should not be required to deduct her insurance proceeds from her recoverable damages
    at trial:  that is the effect of
    subrogation.  Cory J. held at pp. 415-16
    in
Cunningham
that while subrogation generally
    has no relevance in considering the deductibility of benefits found to be in
    the nature of insurance, when the benefits are not insurance then the issue
    of subrogation will be determinative:

However, if
    the third party who paid the benefits has a right of subrogation then there
    should not be any deduction.  It does not
    matter whether the right of subrogation is exercised or not.  The exercise of the right is a matter that
    rests solely between the plaintiff and the third party.  The failure to exercise the right cannot in
    any way affect the defendants liability for damages.  However, different considerations might well
    apply in a situation where the third party has formally released its
    subrogation right.

[107]

This idea is echoed by Dubin J.A. in
Boarelli v. Flannigan
, [1973] 3 O.R. 69
    (C.A.), at p. 79:

I cannot
    conclude that there is any equitable principle which should permit a tortfeasor
    to obtain the advantage of benefits earned by the person who has been
    injured.  It is for the contracting
    parties to determine whether such benefits are to be subrogated and it is of no
    concern of the party otherwise liable in damages.

[108]

Finally, academic authority also supports this position.  As stated by Professor Waddams in
The Law of Damages
, 2d

ed.,
    looseleaf (Aurora:  Canada Law Book, 2010)
    at para. 15.880:

If a person
    who had insured against loss were unable to recover from the wrongdoer,
    anomalous distinctions would appear.
One who burns a building causes a loss
    whether the building is insured or not.  The loss does not disappear because, by prior arrangement, an insurer
    has agreed to share the loss or to indemnify the owner.
If the owner could not recover, justice would
    require the wrongdoer to be liable to the insurer for the economic loss
    suffered by the latter.  In the case of
    co-insurance and re-insurance, complex proceedings would be required.  The present law, whereby the owner recovers
    in full from the wrongdoer in a single action and the insurers rights to
    subrogation are determined as between insurer and insured, is a convenient way
    of achieving the appropriate result.
If the insurer has not contracted for the
    right of subrogation, it might appear that the plaintiff is over-compensated,
    but that will be because of the terms of the insurance contract, for the
    benefit of which the plaintiff will have paid in full by premiums.
[Emphasis added.]

[109]

Here, Stewart Title had a contractual subrogation right
    under Ms. Krawchuks insurance policy.  As
    quoted above, Cory J. in
Cunningham
stated that different considerations may apply in a situation where the third
    party has formally released its subrogation right.  In my view, Cory J.s reasoning applies to
    the facts of this case.  Although Stewart
    Title released its subrogation right, it did so in the course of a negotiated
    settlement with Ms. Krawchuk in which she released her claim against Stewart
    Title for any further liability and agreed to indemnify Stewart Title and her
    lawyer against any future third party claims.  It is clear that Stewart Title suffered a loss as a result of the
    Scherbaks negligent misrepresentation through the payment to Ms. Krawchuk.  Stewart Titles agreement to transfer its
    subrogated interest to Ms. Krawchuk is a private contractual arrangement
    between Ms. Krawchuk and Stewart Title that has no effect on the Scherbaks
    responsibility to Ms. Krawchuk.

[110]

Therefore, under the private insurance exception and by
    virtue of Ms. Krawchuks settlement agreement with her insurance company
    regarding the release of subrogation rights, Ms. Krawchuk should be allowed to
    collect tort damages without deducting her insurance proceeds.

[111]

The Scherbaks advance no other argument in relation to
    the trial judges damages award.  I would
    therefore dismiss their appeal on this ground.

3.

Conclusion

[112]

For these reasons, I would dismiss the Scherbaks appeal
    from the judgment against them in favour of Ms. Krawchuk.

B.

Ms.
    Krawchuks cross-appeal from the dismissal of her claims against the real estate
    respondents

1.

The claims

[113]

Ms. Krawchuk submits that the trial judge erred in
    failing to find that the real estate respondents should be held liable for her
    losses on two bases: 1) for negligently misrepresenting the fact that there
    were no structural problems by essentially acting as a conduit to the
    Scherbaks assurances that there had been no indication of any such problems
    within the 17 years prior to the listing of the property, and 2) for failing to
    recommend that she have a qualified inspector provide an opinion about material
    issues affecting the house, as well as for failing to explain the risks of not
    making her offer conditional on a home inspection.
[2]

[114]

In her claim
    based on negligent misrepresentation, Ms. Krawchuk argues that, in response to
    her specific inquiries prompted by her observations of the outward
    manifestations of structural problems, Ms. Weddell did nothing other than
    repeat the information provided by the Scherbaks that the house had settled, been
    repaired and that there had been no further problems.   As the trial judge found, this information was
    false and incomplete.

[115]

Ms. Krawchuk
    submits that Ms. Weddell was negligent in relaying this unverified statement to
    her: she had a duty to take reasonable steps to ascertain the accuracy and
    completeness of the statement and failed to do so.  As a result, Ms. Krawchuk relied on incorrect
    information in deciding to purchase the property that turned out to be defective.

[116]

In her negligence claim against Ms. Weddell, Ms.
    Krawchuk submits that, given the obvious signs of foundation problems, Ms.
    Weddell breached her duty to protect her from the purchase of significantly
    defective property by failing to recommend that she have an inspector examine
    the property before considering whether to make an offer or by failing to specifically
    explain the risks of making an offer that did not contain an inspection
    condition.

[117]

As discussed above, there were patent defects in the
    house, including sloped floors and multiple cracks in the walls.  Ms. Weddell knew the house had a reputation
    of experiencing settlement problems.  She
    knew the house was being offered at a price that reflected the settlement
    concerns. She admitted on cross-examination that the sloped floors indicated to
    her that there could be on-going structural problems.  She specifically asked the Scherbaks about
    their experience and knowledge concerning settlement.

[118]

The opportunity to obtain professional advice to assist
    in informing a potential purchaser in a real estate transaction generally
    presents itself on two occasions - while the purchaser is considering whether
    to submit an offer and as a term of the offer itself.

[119]

Ms. Weddell testified that when Ms. Krawchuk asked her whether
    there were any problems with the house, she replied, referring to the SPIS,
    that that was all she knew about the house and that she was not a qualified
    inspector.  Significantly, she did not
    recommend that Ms. Krawchuk consult someone who was qualified.

[120]

The trial judge did not comment on Ms. Weddells
    failure to recommend that Ms. Krawchuk obtain a satisfactory inspection before
    submitting an offer.

[121]

As previously summarized, the evidence concerning the
    circumstances surrounding the submission of the offer is as follows.  The draft offer Ms. Weddell prepared on
    behalf of Ms. Krawchuk included a term making the offer conditional on receiving
    a satisfactory home inspection.  The trial
    judge found that this was what Ms. Krawchuk initially wanted.  Regarding their conversation leading up to
    the removal of the term, the trial judge accepted the evidence of Ms. Weddell
    and found that Ms. Krawchuk knew the value of an inspection but was concerned
    about losing her opportunity to purchase the house.  Ms. Krawchuk accepted Ms. Weddells advice
    that her offer would be more attractive to the Scherbaks if it was
    clean.

[122]

In concluding that Ms. Weddell met her obligations to
    Ms. Krawchuk with respect to the home inspection condition, the trial judge
    reasoned that Ms. Krawchuk must have known the value of having an inspection
    since she initially wanted the clause included in the offer and then chose to
    remove the condition to give her offer a better chance of being accepted.  In the light of what Ms. Krawchuk knew about
    the house from the SPIS, her visual inspection and her discussions with Ms.
    Weddell, the trial judge held that it was not unreasonable for Ms. Krawchuk to
    decide to have the condition removed from her offer.

2.

Standard of Care
[3]

[123]

In my view,
    the difficulties associated with the trial judges analysis of Ms. Krawchuks
    claims against the real estate respondents started with the issue of the
    standard of care.  His analysis of this issue
    is, with respect, faulty, for two reasons.  First, the trial judge erred by holding that he could determine the
    standard of care without expert assistance: against this backdrop he refused to
    admit the only expert evidence tendered on this issue. Then, he erred by not
    identifying the standard of care.  See
Fullowka v. Pinkertons of Canada Ltd.
,
    [2010] 1 S.C.R. 132, at para. 80.

[124]

As will be seen, the error of primary importance for
    the purpose of my analysis is the trial judges ruling that he could assess the
    various claims without having the benefit of expert evidence.  I start with some general observations.

[125]

To avoid liability in negligence, a real
    estate agent must exercise the standard of care that would be expected of a
    reasonable and prudent agent in the same circumstances.  This general standard,
    a question of law, will not vary between cases and there is no need for it to
    be established through the use of expert evidence. see
Wong v. 407527 Ontario Ltd.
(1999), 179 D.L.R. (4
th
) 38 (Ont.
    S.C.), at para. 23,
Fellowes, McNeil v.
    Kansa General International Insurance Co.
(2000), 138 O.A.C. 28 (C.A), at
    para. 11. The translation of that standard into a particular set of obligations
    owed by a defendant in a given case, however, is a question of fact (
Wong
at para. 23,
Fellowes
at para. 11). External indicators of reasonable conduct,
    such as custom, industry practice, and statutory or regulatory standard, may
    inform the standard.  Where a debate
    arises as to how a reasonable agent would have conducted himself or herself,
    recourse should generally be made to expert evidence.

[126]

In Ontario, real estate brokers and salespersons are
    required to be registered under the
Real
    Estate and Business Brokers Act, 2002
, S.O. 2002, c. 30, Sch. C,

in order to trade in real estate as an
    agent or broker.  At the time of the
    transaction at issue in this case, the conduct of real estate agents and
    brokers in Ontario was governed by the Real Estate Council of Ontarios
Code of Ethics
,
1998
(the Code).

[127]

Counsel for Ms. Krawchuk tendered the Code into
    evidence to assist the trial judge in determining the standard of care by which
    Ms. Weddells conduct should be measured.  While the trial judge accepted this evidence, he refused to admit the
    expert evidence that Ms. Krawchuks counsel sought to introduce in order to
    explain the duties of a real estate broker when acting under a dual agency
    agreement and the requirements of various documents, including the Code.  The main basis for the trial judges refusal
    to admit the evidence was his view that he did not need the assistance of an
    expert to determine whether Ms. Weddell met the requisite standard of care: the
    Code was before him and he was competent to determine, on his own, whether Ms.
    Weddell had complied with a particular provision.

[128]

Unfortunately, however, the trial judge did not refer
    to the Code in his reasons.  In fact, he
    did not address the standard of care that applied to Ms. Weddells
    representation of Ms. Krawchuk at all, save for the reference at para. 67 of
    his reasons where he said that there was no obligation on Ms. Weddell to
    inquire further or independently of [the Scherbaks] to discern what if any
    other structural defects might exist.

[129]

In my opinion, in the particular circumstances of this
    case, the trial judge erred in concluding that he could identify the applicable
    standard of care without the benefit of expert evidence. This error was
    compounded by his failure to identify the standard of care that he thought was
    applicable and by his failure to address the import of the Code in relation to
    the question of the governing standard of care.

[130]

The jurisprudence indicates that, in general, it is
    inappropriate for a trial court to determine the standard of care in a
    professional negligence case in the absence of expert evidence.  See:
Zink v. Adrian
(2005), 37 B.C.L.R. (4
th
)
    389 (C.A.), at para. 43, Southin J.A., concurring;
Gavreau v. Paci
, [1996] O.J. No. 2396 (C.A.), at para. 1;
Precision Remodeling Ltd. v. Soskin, Soskin
    & Potasky LLP
, 2008 CanLII 31411 (Ont. S.C.), at para. 57;
Dinevski v. Snowdon
, 2010 ONSC 2715, at
    paras. 68-69;
Adeshina v. Litiwiniuk
    & Co.
(2010), 24 Alta. L.R. (5
th
) 67 (Q.B.), at paras.
    160-175.

[131]

In
Walls v. Ross
, 2001 BCPC 187 at paras.
    66-74, Stansfield A.C.J. offers a lengthy discussion of the circumstances in
    which expert evidence will be necessary to define the standard of care in the
    real estate professional context:

Counsel
    for the realtors in this case argued I could not find negligence in the absence of expert evidence as to the standard of care the law requires of
    realtors in circumstances such as those disclosed by the evidence in this case.
    The claimant did not call any such expert evidence.

In
Roberge
    v. Huberman
[(1999), 172 D.L.R. (4
th
)] it was argued that absent
    expert evidence there was "no evidence" upon which the court could
    determine the standard of care in a solicitor's negligence action. Esson J.A.,
    said:

(at
    para 54) the trial judge referred to no authority in support of the proposition
    that, without expert evidence as to the "appropriate documentation",
    there was no evidence of breach of the standard of care. In this court, the
    defendants made no effort to support that conclusion. In my respectable view,
    it cannot be supported.

(and
    at para 58) ... What the court was called upon to do... was to consider and
    assess, with the assistance of counsel's submissions, any evidence that was
    adduced by the plaintiff which was potentially relevant to the question whether
    there had been a breach of duty by the solicitor. That process involves the
    court applying its experience and knowledge in the way that judges and juries
    do every day, most often without expert evidence.

It
    is clear there can be cases in which expert evidence is not required to prove a
    realtor's failure to meet what the court will determine to be the standard of
    care expected of realtors in particular circumstances. An example is
Brown
    v. Fritz
, [1993] B.C.J. No. 2182 (B.C. S.C.), about which I will say more
    in due course.

It
    seems that whether expert evidence is or is not required is a question which
    falls to be determined on the facts (and most especially, one imagines, the
    egregiousness of the conduct or the very specialized or technical nature of the
    activity) in the particular case. So, for example, in
Shaak v. McIntyre
,
    unreported, (September 6, 1991), Doc. Vancouver A852424 (B.C.S.C.) Madam
    Justice Ryan (then of the trial court) dealt with a case of alleged negligence
    by a solicitor for failing to advise a plaintiff to obtain a survey certificate
    where the plaintiff called no evidence of the standards of the profession in
    that regard. She observed that:

[T]here
    may be cases where the defendant has so clearly fallen below the standard
    required of him or her that expert evidence is not required

although
    she said on the facts before her that "this is not one of those
    cases".

In
Haag
    v Marshall
(1989), 61 D.L.R. (4th) 371 (B.C.C.A.), Mr. Justice Locke, concurring
    with two others in the result in a case of alleged solicitor's negligence,
    said:

[T]he
    professional evidence led in this case was unsatisfactory ... nowhere was it
    said that what was not done fell short of a professional standard of conduct.
    In cases of professional negligence above
    all, with the many difficult and varied situations met, if a plaintiff hopes to
    succeed on the grounds of lack of competency it must be fairly demonstrated
    that it has fallen below an established standard or practice in the profession.

To
    similar effect in
Mileos v. Block Bros. Realty Ltd.
(September 30,
    1994), Doc. Vancouver C913338 (B.C. S.C.), unreported, Mr. Justice Thackray, in
    the context of alleged realtor's negligence, said (at page 8):

...
    I am of the opinion that the onus is on the plaintiff to show that there was a
    certain standard of care required by the real estate agent and the agency, that
    that standard was breached, and that the breach caused damages. No evidence was
    called to establish the standard.

In
Shaak v. McIntyre
(
supra
),
    Madam Justice Ryan said:

[T]he
    (selling) broker is under a duty to check information of which he or she is in
    doubt (or ought to have been in doubt) before passing it on to the purchaser
    ... The selling agent must also check the completeness and accuracy of all
    information which it is usual or customary for brokers to verify.
In the
    case at bar there is no evidence of the usual or customary information which
    selling agents check. I cannot find that (the selling agent) fell below that
    standard, whatever it may be
. (emphasis added)

The
    same difficulty was identified by Mr. Justice Drost in
Snijders v. Morgan
,
    unreported, (January 27, 1997), Doc. Nelson 4747 (B.C. S.C.) where he said:

"[I]t
    is alleged that (the selling realtors) were negligent in failing to properly
    investigate the nature, identity and extent of the property they advertised for
    sale. There is no evidence whatsoever of that being a duty or responsibility
    that the law or the custom or the nature of that business imposes upon persons
    in that type of business in this province.

Similarly,
    ... the allegation that they were negligent in failing to advise the Plaintiffs
    that a plot plan or survey should be obtained at any time, and more
    particularly once they became aware that a misdescription of the property was
    involved, there is no evidence of a standard of care that would impose upon
    them a duty to so advise the Plaintiffs accordingly.

A
    review of the cases referred to in these reasons suggests that unless conduct
    is particularly egregious, the court
likely
requires expert evidence of
    the usual or customary standard in the real estate industry regarding:

a)
    the kind of information that must be checked or verified by realtors, where it
    has not been demonstrated that the realtor had cause to doubt the information;

b) a
    duty to take positive steps to confirm the nature, identity and extent of the
    property they advertise, including any duty to recommend a purchaser secure a
    plot plan or survey; and

c) a
    duty to recommend that the purchaser secure an inspection regarding the
    soundness of premises, including any structural defects.

[132]

While the authorities discussed above indicate
    that, as a general rule, it will not be possible to determine professional negligence
    in a given situation without the benefit of expert evidence, they do indicate
    two exceptions to this general rule.

[133]

The first exception applies to
    cases in which it is possible to reliably determine the standard of care
    without the assistance of expert evidence. As explained by Southin J.A. at
    para. 44 of
Zink
, this will be the
    case only where the court is faced with nontechnical matters or those of which
    an ordinary person may be expected to have knowledge.

[134]

This exception is not engaged in
    this case, a case that involves the determination of obligations arising out of
    a property with unique issues, an SPIS that contained incorrect representations
    negligently made and a dual agency relationship  issues that cannot be said to
    be of a non-technical nature within the knowledge and experience of the
    ordinary person.

[135]

The second exception applies to
    cases in which the impugned actions of the defendant are so egregious that it
    is obvious that his or her conduct has fallen short of the standard of care,
    even without knowing precisely the parameters of that standard: see
Cosway v. Boormans Investment Co.
, 2008
    BCSC 1482, at para. 35. As can be seen, this second exception involves
    circumstances where negligence can be determined without first identifying the parameters
    of the standard of care rather than identifying a standard of care without the
    assistance of expert evidence.

[136]

On the basis of the trial
    judges finding that Ms. Weddell had no reason to question the veracity of the
    information the Scherbaks provided about the foundation of the house, it would
    seem that this exception is also not available in this case.

[137]

However, this observation begs
    the question of whether the record supports this finding.  In my view, it does not.

[138]

I appreciate that the trial
    judges findings of fact attract considerable deference and ought not to be
    interfered with absent palpable and overriding error.  This standard of review for findings of fact
    was discussed at length by Fish J., writing for the majority in
H.L. v. Canada (Attorney General)
,
    [2005] 1 S.C.R. 401. At paras. 53-56, he explains:

The
    standard of review for error has been variously described. In recent years, the
    phrase "palpable and overriding error" resonates throughout the
    cases. Its application to
all
findings of fact  findings as to
    "what happened"  has been universally recognized; its applicability
    has not been made to depend on whether the trial judge's disputed determination
    relates to credibility, to "primary" facts, to "inferred"
    facts or to global assessments of the evidence.

Nor
    has the standard been said to vary according to whether we are concerned with
    what Hohfeld long ago described as "evidential" or
    "constitutive" facts (see W. N. Hohfeld,
Fundamental Legal
    Conceptions as Applied in Judicial Reasoning and Other Legal Essays
(1923),
    at p. 32. Nor, put differently, has the standard been said to vary according to
    whether our concern is with direct proof of a fact in issue, or indirect proof
    of facts from which a fact in issue has been inferred.

"Palpable
    and overriding error" is at once an elegant and expressive description of
    the entrenched and generally applicable standard of appellate review of the
    findings of fact at trial. But it should not be thought to displace alternative
    formulations of the governing standard. In
Housen
, for example, the majority (at
    para. 22) and the minority (at para. 103) agreed that inferences of fact at
    trial may be set aside on appeal if they are "clearly wrong". Both
    expressions encapsulate the same principle: an appellate court will not
    interfere with the trial judge's findings of fact unless it can plainly
    identify the imputed error, and that error is shown to have affected the
    result.

In my
    respectful view, the test is met as well where the trial judge's findings of
    fact can properly be characterized as "unreasonable" or
    "unsupported by the evidence".

[139]

In the present case, the trial
    judges finding, at para. 67 of his reasons, that Ms. Weddell had no reason to
    question the veracity of the information provided by the Scherbaks about the
    foundation of the house is an inference drawn from the following evidence:

·

Upon noticing the sloping floors Ms. Weddell
    asked the Scherbaks about them;

·

The Scherbaks responded that the house had
    settled 17 years earlier but had been fixed and there had been no further
    problems; and,

·

The evidence did not support the conclusion that
    Ms. Weddell had additional information about the foundation.

[140]

However, there were other
    important factors relevant to the assessment of whether it was reasonable for
    Ms. Weddell to believe the Scherbaks representations about the house.

[141]

First, Ms. Weddell testified
    that the Scherbaks presented as honest people.  However, the problem with taking this into account is that the issue is
    not whether the Scherbaks seemed creditworthy.  Rather, it is whether there was any reason to doubt their assurances,
    something that may be (and in this case was) unrelated to their honesty.

[142]

Second, Ms. Weddell testified that
    she did not notice any signs of recent settlement, such as fresh paint. The
    problem is that Ms. Weddell also testified that she was no home inspector.  It seems somewhat contradictory for Ms.
    Weddell to suggest that, on the basis of her personal inspection, she had
    confidence in the Scherbaks representations notwithstanding the evidence to
    the contrary, while at the same time acknowledging her limitations in assessing
    the significance of what she saw and knew.

[143]

In
    my view, Ms. Weddell had plenty of reasons to question the veracity of the Scherbaks
    assurances that the settlement problems had long since been resolved.  She

was a real estate agent with 33 years experience specializing
    in residential houses.  She knew that the
    house had a history of settlement problems and accordingly was underpriced.  As well, her visual inspection of the property
    disclosed settlement problems, the manifestation of which was sufficiently
    significant that it prompted her to further question the Scherbaks.  Against this background and Ms. Weddells
    admission that she was no home inspector, it seems to me that she had
good reason to look behind the
    Scherbaks representations.

[144]

In my opinion therefore, the
    trial judges conclusion that Ms. Weddell had no reason to doubt the Scherbaks
    representations, was clearly wrong.   The only available inference is to the contrary.  The circumstances were such that Ms. Weddell
    should have verified the accuracy of the Scherbaks representations about the
    house and she did not.

3.

Were the real estate respondents negligent in their
    representation of Ms. Krawchuk?

[145]

It is most unfortunate that there is no evidence that
    bears directly on the standard of care the real estate respondents owed to Ms.
    Krawchuk in protecting her interests in this transaction.  In such circumstances, this court would
    ordinarily have to order a new trial.

[146]

However,
    I am of the view that, on this record and in the light of my conclusion that
    the evidence supported a finding that Ms. Weddell was put on her inquiry as to
    the accuracy of the Scherbaks representations, this court is in a position to determine
    whether the real estate respondents were negligent in their representation of
    Ms. Krawchuk.

[147]

First, there is the Code.  The due diligence requirements of a real
    estate agent mandated by the Code, while not dispositive, are of considerable
    importance in informing what is expected of real estate agents in terms of
    verifying information about a property listed for sale.  I refer to the reasons of Binnie J. in
Hodgkinson v. Simms
, [1994] 3 S.C.R.
    377, at p. 425, in which he says, the rules set by the relevant professional
    body are of guiding importance in determining the nature of the duties flowing
    from a particular professional relationship.  See also
Ault v. Canada (Attorney
    General)
, 2011 ONCA 147, at para. 86.

[148]

The rules in the Code relevant to this analysis are rules
    7 and 11.

[149]

Rule 7 provides that an agent shall not discourage the
    Parties to a Transaction from seeking outside professional advice.  A Licensee
shall encourage the Parties to a Transaction to seek appropriate
    outside professional advice when appropriate
 (emphasis added).

[150]

Rule 11 requires that an agent discover
and verify
the pertinent facts relating
    to the Property and Transaction relevant to the Licensees client that a
    reasonably prudent Licensee would discover in order to fulfill the obligation
    to avoid error, misrepresentation or concealment of pertinent facts (emphasis
    added).

[151]

Then, there are authorities that support the proposition
    that a purchasers agent has a duty to verify material facts about a property; interestingly
    not only in circumstances where the court has found that the agent has been put
    on his or her inquiry with respect to the accuracy of the vendors
    representations but also in cases where the court has found no such red
    flag.

[152]

In
Sedgemore v.
    Block Bros. Realty Ltd.
(1985), 39 R.P.R. 38 (B.C.S.C.), supp. reasons at
    (1985) 39 R.P.R. 38;
Fletcher v. Hand et
    al.
(1994), 156 A.R. 142 (Q.B.)
;

Martin v. Mayo
(1997), 11 R.P.R. (3d)
    150 (B.C.S.C.); and
Brown v. Fritz,
1993 CanLII 1475 (B.C.S.C.), the court took a reason to doubt the vendors
    information into account in concluding that the buyers agent had a duty to
    verify the information provided by the seller.  Then again, in
Johnstone v. Dame
(1995), 49 R.P.R. (2d) 279 (B.C.S.C.);
Bond
    v. Richardson
(2007), 324 N.B.R.(2d) 64 (N.B.Q.B. (T.D.));
Posthumas v. Garner
(1995), 48 R.P.R.
    (2d) 286 (Ont. C.J. (Gen. Div.)); and
11
    Suntract Holdings Ltd. v. Chassis Service & Hydraulics Ltd.
(1997), 36
    O.R. (3d) 328 (C.J. (Gen. Div.)) the purchasers agents duty to verify the vendors
     information about the property was found
    to exist without reference to the agents having been put on inquiry.

[153]

In my opinion, in the circumstances of this case, given
    the requirements set out in the Code and the fact that Ms. Weddell had reason
    to doubt the veracity of the Scherbaks representations about the house, the
    authorities that indicate that a real estate agents duty to his or her client
    includes a duty to investigate material information about the property, are
    applicable.

[154]

Whatever
the standard of
    care, given the obvious defects in this house, Ms. Weddell had to either
    further verify the assurances herself or recommend, in the strongest terms,
    that Ms. Krawchuk get an independent inspection either before submitting an
    offer or by making the offer conditional on a satisfactory inspection.  The failure to do either was an egregious
    lapse.

4.

Conclus
ions
    regarding Ms. Krawchuks claims against the real estate respondents

[155]

Even without being in
    a position to identify the precise parameters of the standard of care that the
    real estate respondents owed Ms. Krawchuk, the following considerations support
    a finding that they did not meet their obligations to their client:

1)

The trial judge found that Ms. Wedd
ell was aware of
    settling problems.  The evidence of this
    was, in fact, manifest;

2)

There
    was reason for Ms. Weddell to be on her inquiry as to the veracity of the
    Scherbaks representations;

3)

Ms.
    Weddell made no inquiry at all of the Scherbaks as to what precisely they knew
    about the settlement problems, including how they believed them to have been
    fixed;

4)

Ms.
    Krawchuk asked for reassurance specifically with respect to the issue of
    settlement problems; and,

Ms. Weddell, on her
    own admission, had no expertise in addressing the evidence of settlement.

[156]

As a consequence of the real estate respondents failure
    to meet their obligations to Ms. Krawchuk in this respect, she purchased
    defective property and suffered a loss.

[157]

I would therefore allow Ms. Krawchuks appeal from the
    dismissal of her claims against the real estate respondents and award judgment
    against them in the amount of $110,742.32.

C.

The
    Scherbaks and the real estate respondents claims for contribution and
    indemnity

[158]

The Scherbaks crossclaimed against the real estate
    respondents for contribution and indemnity.  They submit that because Ms. Weddell provided them with professional
    advice regarding the exact wording of their answers in the SPIS, the real
    estate respondents should indemnify them for any liability for
    misrepresentation based on that wording.  The real estate respondents, in turn, claim contribution and indemnity
    from the Scherbaks.  They submit that the
    Scherbaks should assume responsibility for any liability they are found to have
    to Ms. Krawchuk because any misrepresentations made by Ms. Weddell to Ms.
    Krawchuk were caused by the Scherbaks failure to accurately disclose the
    condition of the property.

[159]

I am satisfied that neither party is entitled to full
    indemnity from the other.  Both the
    Scherbaks and Ms. Weddell were negligent in their dealings with Ms. Krawchuk
    and contributed to her loss.  As
    emphasized by Linda D. Rainaldi in
Remedies
    in Tort
, looseleaf (Toronto:  Carswell, 1987) vol. 4, at p. 26-53, s. 61:

The party asserting the right to indemnity
    must himself have been without fault
in the occasion which caused the damage; otherwise he is not entitled
    to claim indemnity. [Emphasis added.]

[160]

The question that remains, then, is the appropriate
    apportionment of fault between the Scherbaks and the real estate respondents.

1.

The Scherbaks claim against the real estate
    respondents

[161]

The Scherbaks submit that Ms. Weddell breached her duty
    of care to them by failing to provide them with adequate advice concerning
    their obligations to complete the SPIS.  They
    say that the SPIS was all Ms. Weddells idea.  They were unfamiliar with it and looked to Ms. Weddell for guidance in
    how to complete it, particularly with respect to answering the questions about the
    structure of the house and its plumbing.  They relied on her to their detriment.

[162]

First, I note that the SPIS emphasizes the importance
    of completeness and accuracy in statements on the form.  This means that, apart from anything Ms.
    Weddell said to them, the Scherbaks were made aware of their obligation to
    honestly and accurately disclose all that they knew in response to the specific
    questions on the form.  The SPIS also
    makes clear that it is solely the vendor who is the source of the information in
    the form and that the broker is not responsible for the accuracy of the
    information.

[163]

However, in my view, the wording of the SPIS is not
    determinative of the limits of Ms. Weddells duty to the Scherbaks.

[164]

I share the views expressed in
Lyle v. Burdess
, where, in extensive
obiter
, the trial judge referred with approval to the proposition
    that a real estate agent has a duty to provide a certain level of guidance when
    a client is filling out or receiving a property disclosure statement, citing
    with approval Professor Fosters paper,
Agency
    Law and Real Estate Brokerage:  Current
    Issues, A review of the Case Law and some Industry Practices
(January
    2003), Supplementary Paper No. 1 to the
Report
    of the Agency Task Force
(Canadian Regulators Group, June 2004).  In this paper Foster endorses the proposition
    that an agent has a duty to provide specific warnings about the implications of
    completing an SPIS and, in that context, of the importance of ensuring complete
    and accurate answers to the questions posed in an SPIS.

[165]

These warnings include the fact that sellers who
    complete an SPIS may be providing information that they are not legally
    obligated to provide.  If they choose to
    complete an SPIS, the agent should emphasize to his or her client the importance
    of providing information that is complete and accurate.  If the sellers agent plays a role in the
    completion of the SPIS, as was found to be the case here, he or she must
    exercise reasonable care and skill in ensuring its accuracy:  see
Posthumas,
at para. 31;
11 Suntract Holdings
    Ltd.
,

at p. 341.

[166]

The focus in this case on the SPIS leads me to endorse the
    concern expressed in a number of cases about the risks associated with the use of
    the SPIS and similar documents used in other provinces.  In
Kaufmann
,
    Killeen J. commented at para. 109 that use of the forms has [a]lmost
    inevitably ... given rise to litigation over their meaning and reach.  In
Alevizos
,
    Scott C.J.M commented at para. 36 that the use of SPIS forms:

seems to
    present a ripe ground for litigation.  Doubtless this is due in no small measure to the problems inherent in an
    informal fill in the blank form which can have such serious legal
    consequences when problems subsequently develop in a real estate
    transaction.  The wisdom of maintaining
    in use a form fraught with such inherent difficulties, exacerbated by the
    conflicting statements within the form concerning its purpose and effect,
    should be addressed by lawyers and real estate agents alike.

[167]

In his concurring reasons, Kroft J.A. took this warning
    even further, commenting at para. 47:

This
    judgment should, in my view, be taken as a warning about the routine use of the
    PCS.  The purchase and sale of a home is
    for many people the most significant business transaction they will ever enter
    into.  Representations as to the condition
    of the property are inevitably going to be requested and given.  I do not believe that these concerns are ever
    going to be safely dealt with by filling in the blanks on a short form carried
    in the real estate agents briefcase with his or her other supplies.

[168]

I am again mindful of the fact that there is no expert
    evidence to inform an identification of the specific standard of care that
    applies to the Scherbaks claim against the real estate respondents in this
    respect.  However, for many of the same
    reasons as I concluded that negligence had been established in the case of the
    real estate respondents obligations to Ms. Krawchuk, I am of the view that
whatever the standard of care, it is clear that the real
    estate respondents failed to meet that standard. There were obvious structural defects
    in this house, Ms. Weddell was put on her inquiry about the settlement problems.  The Scherbaks specifically sought Ms.
    Weddells advice about answering the question on the SPIS concerning the
    settlement issues. At the very least, Ms. Weddell had an obligation to question
    the Scherbaks further about their experience with the settlement issues -
    whether they had performed any work on the house that shed light on the state
    of the foundation of the house and then appropriately counsel them with respect
    to the implications of the representations they made in the SPIS.

[169]

Ms. Weddells failure to do so represented a cavalier
    treatment of the settlement issue - an issue that was on the minds of everyone
    involved. This failure amounted to an egregious lapse in terms of her duty to
    the Scherbaks.

[170]

It follows that I am of the view that Ms. Weddell was
    negligent in her representation not only of Ms. Krawchuk but also of the
    Scherbaks.

[171]

While this does not entitle the Scherbaks to
    indemnification because, as set out above, they were also negligent, Ms.
    Weddells negligence vis-à-vis the Scherbaks must be taken into account in the
    overall apportionment of fault.

2.

The real estate respondents claim against the
    Scherbaks

[172]

The real estate respondents submit that any
    misrepresentations made to Ms. Krawchuk were as a result of the failure of the
    Scherbaks to disclose to Ms. Weddell complete and accurate information with
    respect to the property.  They therefore
    claim that they should be compensated by the Scherbaks for their losses arising
    from Ms. Weddells reliance on this information in her efforts to inform Ms.
    Krawchuk about the property.

[173]

The trial judge found that the Scherbaks were negligent
    in failing to provide accurate and complete information about the
    property.  As I have said, there is ample
    evidentiary support for this finding.  It
    is clear that the Scherbaks did not disclose to Ms. Weddell the full extent of
    their knowledge of the structural and plumbing problems.  They did tell her about some structural
    issues in the northwest corner of the house but they did not disclose the
    problems in the northeast corner of the house that they discovered during their
    basement renovations.  They did tell her
    about historical plumbing problems but failed to indicate that there were any
    ongoing issues.

[174]

The Scherbaks assured Ms. Weddell that the structural problems
    with the house had been fixed and Ms. Weddell repeated these assurances to Ms.
    Krawchuk.

[175]

Against this background, the real estate respondents
    submit that the Scherbaks, who were in the best position to know the true
    condition of the house, should bear ultimate responsibility for any liability
    they are found to have in relation to Ms. Krawchuk, as the representations Ms.
    Weddell made to her were based on information the Scherbaks provided.

[176]

The decision in
Pavenham
    Development Corp. v. Sladen
, 1997 CanLII 4295 (B.C.S.C.),

dealt with, in addition to a number of other
    claims comparable to those made in this case, a claim of a listing agent
    against the vendor for failure to provide the agent with accurate information
    about the property.

[177]

In
Pavenham
, the
    vendor owned a property that he rented out.  An Environmental Health Officer visited the property
    and concluded that the septic system was malfunctioning.  An order was issued prohibiting the rental of
    the house as a residence until the system was repaired or replaced.  The tenant vacated the property and the vendor
    listed it for sale.  The septic system
    was never repaired or replaced.

[178]

When listing the property, the vendor completed a
    disclosure statement similar to an SPIS.  One of the questions on the disclosure form asked about septic
    problems.  The vendor, in answering the
    question, failed to mention the order prohibiting the property from being
    rented due to septic problems, although he did indicate a "leakage"
    issue.

[179]

The purchaser, to the knowledge of the vendor and his
    agent, wanted to buy the property for rental purposes.  They also knew that the purchaser was not aware
    of the Environmental Health Order that prohibited the house from being rented.  The disclosure statement was never provided to
    the purchaser.

[180]

After purchasing the property, the purchaser rented out
    the house.  When the Environmental Health
    Officer became aware of this, the tenancy had to be terminated. The purchaser
    was held liable to the tenants for their damages.

[181]

The trial judge held that the manner in which the
    vendor filled out the disclosure statement represented to potential purchasers
    that the house could be occupied as a residence and that the vendor failed to
    disclose that an Environmental Health Order precluded the house from being
    occupied as a residence.  The vendor was
    therefore found liable to the purchaser for fraudulent misrepresentation.

[182]

The vendor's agent was also found liable to the
    purchaser in negligence.  The trial judge
    found that the agent should have delivered the disclosure document to the purchaser's
    agent.  He also should have inquired of the
    vendor as to the meaning of the entries on the disclosure statement.  In failing to do so, he did not satisfy his
    duties to provide the purchaser with all the information he had about the
    property and to ensure he had taken reasonable steps in obtaining listing
    information.

[183]

In dealing with the real estate agent's claim against
    the vendor for contribution and indemnity in relation to the damages for which
    he was found liable to the purchaser, the trial judge concluded at para. 51:

[The vendor] had an obligation to his realtor
    and its employees to be candid and frank. [The vendor] was selling a house
    which was not habitable.  He should have
    told them that.  He did not. [The vendor]
    must indemnify [his real estate agents] for the liability which they have
    incurred as a result of his deception.

[184]

The trial judge concluded that the damages arising from
    the lack of disclosure were two thirds attributable to the vendors
    insufficient disclosure, and one third attributable to the agents failure to
    make inquiries and carelessness in failing to pass on the disclosure form.  As a result, the vendor was required to
    indemnify the agent for two thirds of the damages.  Indemnification was not available to the agent
    for the remaining one third because this portion of the damages was found to
    have been attributable to the agents own failings.

[185]

While this decision does not support the real estate
    respondents argument that the Scherbaks owed them a free-standing duty of care
    in the circumstances of this case, it does support the conclusion that the
    Scherbaks lack of disclosure and its contribution to the real estate
    respondents liability for Ms. Krawchuks losses must be taken into account in
    the overall apportionment of fault.

3.

Overall apportionment of fault

[186]

I have concluded that both the Scherbaks and the real
    estate respondents are liable to Ms. Krawchuk in negligence.  I have also concluded that Ms. Weddell was
    negligent in her representation of the Scherbaks, that the Scherbaks failed to
    satisfy their disclosure obligation to Ms. Weddell, and that these actions also
    contributed to Ms. Krawchuks losses.

[187]

Under s. 4 of the
Negligence
    Act
, R.S.O. 1990, c. N.1, if it is not practicable to determine the
    respective degrees of fault as between the parties, the parties shall be deemed
    to be equally at fault.  In this case, I
    am satisfied that this default is the appropriate apportionment of fault.

[188]

Both the Scherbaks actions and the real estate
    respondents actions contributed to Ms. Krawchuks damages.  While the Scherbaks were in the best position
    to have accurate and complete information about the condition of the property,
    Ms. Weddell should have done more to protect both of her clients.  I am satisfied that they are equally
    responsible for Ms. Krawchuks losses.

VI.

CONCLUSION

[189]

The Scherbaks knew that the foundation of the house was
    seriously compromised and that there were ongoing plumbing problems.  The Scherbaks made incomplete disclosure about
    these problems to Ms. Krawchuk.  Ms.
    Weddell took no steps to verify the accuracy of the information supplied by the
    Scherbaks or to otherwise protect Ms. Krawchuk from the adverse consequences of
    this inaccurate information.  Misinformed
    by the Scherbaks and badly served by Ms. Weddell, Ms. Krawchuk purchased a
    house with serious latent defects.  She
    was forced to move out while she repaired her home at considerable expense.

[190]

My conclusion that Ms. Weddell is liable in negligence
    to Ms. Krawchuk renders her a concurrent tortfeasor with the Scherbaks.  The Scherbaks and the real estate respondents
    are therefore jointly and severally liable to Ms. Krawchuk.  In the circumstances, I would apportion fault
    at 50% to the Scherbaks and 50% to the real estate respondents.

VII.

DISPOSITION

[191]

For the above reasons, I would dismiss the Scherbaks appeal
    from the judgment against them in favour of Ms. Krawchuk.

[192]

I would allow Ms. Krawchuks cross-appeal from the
    dismissal of her claims against the real estate respondents.  I would set aside that part of the judgment
    dismissing the action against the real estate respondents and order that they, along
    with the Scherbaks, pay Ms. Krawchuk the damages determined by the trial judge
    in accordance with the true apportionment of fault set out in these reasons.

[193]

I would dismiss the Scherbaks appeal from the
    dismissal of their crossclaim for contribution and indemnity from the real
    estate respondents and the real estate respondents crossclaim for contribution
    and indemnity from the Scherbaks.

[194]

I would award Ms. Krawchuk her costs of the appeal in
    the amount of $25,000 including disbursements and applicable taxes. I would
    award Ms. Krawchuk the costs of her cross-appeal against the real estate
    respondents in the amount of $25,000 including disbursements and applicable
    taxes.  I would not award costs in
    respect of the competing crossclaims of the Scherbaks and the real estate
    respondents.

RELEASED:

MR                                                  Gloria
    Epstein J.A.

May -6 2011                                 I
    agree M. Rosenberg J.A.

I
    agree E.A. Cronk J.A.

[1]
It is
    not disputed that Re/Max Sudbury Inc. is vicariously liable for the acts of Ms.
    Weddell in this transaction.

[2]
The
    existence of a fiduciary relationship between Ms. Weddell and her clients was
    neither pleaded nor argued.  Thus, there
    was no claim for breach of fiduciary duty.

[3]
These
    reasons consider the duty of care owed by real estate agents to their clients
    only.  They do not deal with any
    differences that may exist between the duties a real estate agent owes to a
    customer as opposed to a client.