In the decision of Bowman v. Martineau, 2020 ONCA 330, the Ontario Court of Appeal overturned an award of damages for the costs to repair mould and water damage to a residential home on the basis that the damages should reflect what the negligence caused, which was not the mould and water.
The appellant real estate agent and broker acted both for the vendors and purchasers on the sale of a residential house. The trial judge found the vendors liable to the respondents for non-disclosure and concealment of water damage. The trial judge determined that the real estate agent had failed to review and verify with the vendors and then the purchasers the information contained in the Seller Property Information Statement, which left the purchasers unable to find out about the ongoing roof leakage and mould problems. The trial judge awarded damages based upon the costs to repair the house.
The Court of Appeal commented that the general, well-settled rule for the assessment of compensatory damages in tort actions is that, as far as damages can accomplish this, the plaintiff is entitled to be put into the position the plaintiff would have been in but for the injury caused by the defendant. This restoration of the plaintiff’s position should not amount to under or over compensation, but only on making the plaintiff whole, which brings into play factors of causation, reasonableness and proportionality. The approach to damages should be focused on the facts of the case, not overly rule ridden.
Damage caused to real property is measured either by the diminution in the value of the land or, in appropriate circumstances, the cost to repair. The application of one or the other of these approaches is governed by the specific facts of the particular case and the other regulating factors of causation, reasonableness and proportionality.
The Court of Appeal admonished that attention must be paid in professional negligence cases to the causal link between the injury suffered and the act of negligence. In some cases, the professional negligence will actually have caused the defect in the property or will have caused the plaintiff to lose the right to recover for that defect, such that the case law concerning the assessment of damage to property applies. In other cases, the professional negligence will not have caused damage to property, but rather will have merely caused the plaintiff to enter into a transaction they would otherwise have avoided.
The trial judge in Bowman properly concluded that but for the appellants’ negligence, the purchasers would not have entered into the agreement of purchase and sale to buy the house. The resulting loss was, therefore, not the purchasers’ entitlement to a house free of mould and water damage, contrary to the conclusion of the trial judge. The Court of Appeal clarified that Jarbeau v. McLean, 2017 ONCA 115, 410 D.L.R. (4th) 246, a solicitor’s negligence action, does not stand for the general proposition that cost to repair invariably represents “the fairest measure of damages” regardless of the causal link. Jarbeau involved the loss, due to negligence, of the ability to pursue a claim against an engineer. In Jarbeau, absent the engineer’s negligence, the purchasers would have been able to obtain the new, defect-free house. In that fact scenario, the cost of repair was appropriate. By contrast, in Bowman, the result, absent negligence, would not have been a defect free house, but rather the purchasers would not have bought the house. As the negligence of the real estate agent and broker did not cause the property defect, the purchasers are not entitled to demand what they could never have had even absent the negligence, namely, a house free of mould and water damage. They are only entitled to damages to compensate them for entering into a bad transaction they would have otherwise avoided - overpayment for the defective property, namely, its diminution in value.
This decision is a good reminder to carefully scrutinize negligence cases to ensure that the appropriate measure of damages takes into account the factors of causation, reasonableness and proportionality that are relevant to the particular circumstances. The question is not what the plaintiff’s losses are, but rather what losses did they sustain that were caused by the defendant’s negligent act.
