Overview

[1]           The plaintiffs seek to recover a deposit paid to Saba Investments Inc., as well as certain of their expenses.

[2]           In 2011, Alexis Christopher Youssef and his mother Dr Donna Tataryn made a down payment of $78,722 to Saba Investments for the purchase of a penthouse apartment under construction.  Saba Investments was the promoter of the condominium project.  Waguih Saba is the company’s president.  Roger Vassallo is a real estate agent who was retained by Saba Investments to find buyers for the apartments.

[3]           Tataryn’s deposit was made by a cheque written “in trust” to Saba Investments.  However, Tataryn agreed to strike out the words “in trust” at the request of Saba and Vassallo after she received assurances that the deposit would be returned if she and her son were not fully satisfied with the finished apartment.

[4]           Youssef and Tataryn were not satisfied with the apartment.  Before agreeing to purchase, they compiled a list of deficiencies, which they gave to Saba and Vassallo.  The plaintiffs also hired an architect, who found additional problems.

[5]           Youssef and Tataryn asked that the deficiencies be remedied before closing the sale, but Saba insisted that he first receive full payment.  Youssef and Tataryn asked for the return of their deposit, and Saba refused.  Given the stalemate, the sale was never finalized.  Months later, Saba Investments sold the apartment to a third party at a much lower price.

[6]           Youssef and Tataryn claim the return of their deposit from the defendants, as well as the sum of $4,254.08 that they spent to install a custom bedroom closet in the apartment.  Saba Investments has counter-claimed for $196,607 alleging its resale loss on the apartment.

[7]           This case raises three questions:

1.    were the plaintiffs entitled to cancel the sale and recover their deposit and expenses?

2.    if so, can they recover these amounts from Saba personally?

3.    is Saba Investment’s cross-demand well founded?

[8]           For the reasons that follow, the Court concludes that the plaintiffs were entitled to cancel the sale and recover their deposit and expenses from Saba Investments. This is because the company failed to deliver an apartment of superior quality, free of defects.  However, Saba is not personally liable for these amounts, since there are no grounds to lift the corporate veil or to conclude that he committed a personal fault.  Since the plaintiffs were entitled to cancel the sale, Saba Investments’ cross-demand is unfounded. 

Analysis

a)      Were the plaintiffs entitled to cancel the sale and recover their deposit and expenses?

[9]           The conclusion that the plaintiffs were entitled to cancel the sale and recover their deposit is based on the terms of the parties’ written and oral agreements.

[10]        Youssef and Saba Investments signed a standard form agreement for the purchase of the new apartment.[1]  This agreement was in a form approved of by the provincial builders’ association,[2] and contained a performance guarantee on behalf of the vendor as required by provincial law.[3]

[11]        Section 30 of the agreement P-2 provided that if Saba Investments failed to respect its obligations as vendor it was required to return the purchaser’s deposit.  Under the agreement’s guarantee provisions a third party insurer, La Garantie Abritat Inc., undertook to repay up to $39,000 of any such deposit.  The agreement did not require the vendor to hold the purchaser’s deposit in trust.

[12]        According to the plaintiffs, Saba and Vassallo told them the penthouse apartment would have superior, “superlative” interior finishing.  Their testimony was not contradicted by the defendants.

[13]        Upon signing the agreement, Tataryn wrote a deposit cheque in trust to Saba Investments for $78,722, corresponding to 10% of the purchase price.[4]

[14]        A day or two later, Saba and Vassallo told Tataryn the trust deposit was not acceptable because Saba Investments needed the funds to pay for construction.

[15]        At the hearing, Saba confirmed that his company needed the cash in order to secure mortgage financing.

[16]        Tataryn says she agreed to strike out the words “in trust” on the cheque after Vassallo assured her the deposit would be returned if she was not fully satisfied with the finished apartment.  Vassallo denies saying this, but he must have given Tataryn some kind of assurance to cause her to modify the cheque.  For this reason, the Court prefers Tataryn’s testimony.

[17]        Based on the evidence, the parties’ agreement was that Saba Investments would deliver a penthouse apartment to Youssef and Tataryn with superior finishings, and that if they were not fully satisfied with the apartment they could cancel the sale and recover their deposit.

[18]        Youssef and Tataryn were unhappy with the apartment as it neared completion in August 2012.  They made a list of deficiencies.  Amongst these, they noted that the wooden floors in the living and dining rooms had buckled in places.  One window was cracked and others were improperly sealed.  The kitchen cabinets were not built to the proper size and had been installed too high over the counters.  The cabinet doors were warped and misaligned. Most alarmingly, a significant quantity of water had collected on the roof, which did not appear to have adequate drainage.  The plaintiffs expressed their concern to Saba and Vassallo that the accumulated water would cause considerable damage if it leaked through the penthouse ceiling.

[19]        Given their concerns, in September 2012, the plaintiffs hired an architect to inspect the premises.  He noted a number of defects: while some were minor, others, like those noted above, he considered more significant.  The expert testified that he found an unusual number of deficiencies for a new construction.  He was also concerned by the water on the roof, and was not convinced by Saba’s explanation that the drainage had been restricted in order to comply with city requirements.

[20]        The plaintiffs’ evidence of defects was not contradicted by the defendants.  At trial, Vassallo stated that some of the deficiencies were corrected, while Saba testified that “a majority” of them were.  By implication, some of the defects were not corrected before the plaintiffs decided to cancel the sale.

[21]        At the hearing, it was disclosed that Saba Investments corrected the roof’s drainage in 2013, a year after the plaintiffs first identified the problem.  This confirms the existence of a serious problem with the roof when the sale was aborted.

[22]        Given the defendants’ failure to correct the defects, the plaintiffs were justified in not concluding the sale.  As vendor, and in accordance with its verbal assurances, Saba Investments was obliged to deliver an apartment with a superior finishing, free from defects.

[23]        Under section 30 of the agreement P-2, the plaintiffs were therefore entitled to cancel the sale and recover their deposit.   The plaintiffs were also entitled to recover the cost of the bedroom closet, the benefit of which went to Saba Investments when it resold the apartment.

b)      Can the plaintiffs recover the deposit and expenses from Saba personally?

[24]        There is no doubt that Saba Investments is liable to repay these amounts.  However, Waguih Saba is liable for the amounts only if there are grounds to lift the corporate veil between him and his company, or if he committed a personal fault.

[25]        After the events in question, Saba Investments defaulted on its mortgage loan and its lender foreclosed on a number of apartments in the building.  One can understand the plaintiffs’ concern that a judgment against Saba Investments may not be of much value to them.

[26]        However, there is no justification in the present case to hold Saba personally responsible for the amounts owing to the plaintiffs.

[27]        The plaintiffs argue that the corporate veil should be lifted because Saba violated a rule of public order requiring him not to mix the plaintiffs’ deposit with other funds administered by his company.  In support, they point to section 44 of the Règlement sur le plan de garantie des bâtiments résidentiels neufs,[5] which provides that the manager of a guarantee plan must manage the plan separately from his other business affairs and maintain separate accounting and bank transactions.

[28]        The agreement signed by Youssef and Saba Investments contained such a guarantee plan.  The problem with the plaintiffs’ argument is that neither Saba nor Saba Investments was the manager of the plan insuring the plaintiffs’ deposit.  As indicated in the agreement P-2, the plan manager was La Garantie Abritat Inc.

[29]        Accordingly, section 44 of the regulation did not apply to the defendants and there is no proof that Saba acted improperly or that he violated a rule of public order by mixing the plaintiffs’ deposit with other funds.

[30]        The plaintiffs also failed to point to a personal fault committed by Saba.  According to the evidence, it was Vassallo, the company representative, who assured the plaintiffs their deposit was safe, not Saba.  Moreover, the company’s failure to deliver the apartment free from defects cannot be attributed to Saba personally, since there is no evidence he caused this to happen by acting in a faulty manner outside the scope of his regular corporate duties.

c)      Is Saba Investments’ cross-demand well founded?

[31]        Given the Court’s conclusion that the plaintiffs were entitled to cancel the sale, Saba Investments’ cross-demand is groundless.

[32]        In all events, even if the Court’s conclusion were incorrect, Saba Investments’ resale loss was not proven.  The amount of the loss is huge ($196,607) and was not adequately explained by the defendants who argued - without any corroborating evidence - that the condo market fell sharply after the plaintiffs refused to purchase.  Furthermore, the defendants offered very little evidence of their efforts to resell the apartment after October 2012, except to file an advertisement placed by Saba Investments in a local Westmount newspaper in February 2013.

[33]        The cross-demand is accordingly dismissed.

[34]        FOR THESE REASONS, THE COURT:

[35]        GRANTS the plaintiffs’ action in part;

[36]        CONDEMNS Saba Investments Inc. to pay to the plaintiff Donna Tataryn the sum of $78,722, plus interest at the legal rate and the additional indemnity provided at article 1631 CCQ, since the notice of default dated November 9, 2012 (exhibit P-10);

[37]        CONDEMNS Saba Investments Inc. to pay to the plaintiffs Donna Tataryn and Alexis Christopher Youssef the sum of $4,254.08, with interest at the legal rate and the additional indemnity provided at article 1631 CCQ, since November 9, 2012;

[38]        DISMISSES Saba Investment Inc.’s cross-demand;

[39]        WITH COSTS.