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PAGE 6 COMMENT Law Times Group Publisher . . . . . . . Karen Lorimer Editorial Director . . . . . . . Gail J. Cohen Editor . . . . . . . . . . . . . . . . . . Glenn Kauth Staff Writer . . . . . . . . . . . . . Robert Todd Staff Writer . . . . . . . Michael McKiernan Copy Editor . . . . . . . . . Heather Gardiner CaseLaw Editor . . . . . Adela Rodriguez Art Director . . . . . . . . . . Alicia Adamson Account Co-ordinator . . . . Catherine Giles Electronic Production Specialist . . . . . . . . . . . . . Derek Welford Advertising Sales . . . . Kimberlee Pascoe Sales Co-ordinator . . . . . . . . . Sandy Shutt ©2011 Thomson Reuters Canada Ltd. All rights reserved. No part of this publication may be reprinted or stored in a retrieval system without written permission. The opinions expressed in articles are not necessarily those of the publisher. Information presented is compiled from sources believed to be accurate, however, the publisher assumes no responsibility for errors or omissions. Law Times disclaims any warranty as to the accuracy, completeness or currency of the contents of this publication and disclaims all liability in respect of the results of any action taken or not taken in reliance upon information in this publication. June 13, 2011 • Law Times Law Times Thomson Reuters Canada Ltd. 240 Edward Street, Aurora, ON • L4G 3S9 Tel: 905-841-6481 • Fax: 905-727-0017 www.lawtimesnews.com Publications Mail Agreement Number 40762529 • ISSN 0847-5083 Law Times is published 40 times a year by Thomson Reuters Canada Ltd., 240 Edward St., Aurora, Ont. L4G 3S9 • 905-841-6481. clb.lteditor@thomsonreuters.com CIRCULATIONS & SUBSCRIPTIONS $165.00 + HST per year in Canada (HST Reg. #R121351134) and US$259.00 for foreign address- es. Single copies are $4.00 Circulation inquiries, post- al returns and address changes should include a copy of the mailing label(s) and should be sent to Law Times 240 Edward St., Aurora, Ont. L4G 3S9. Return postage guaranteed. Contact Jacquie Clancy at: jacquie.clancy@ thomsonreuters.com or Tel: 905-713-4392 • Toll free: 1-888-743-3551 or Fax: 905-841-4357. ADVERTISING Advertising inquiries and materials should be directed to Sales, Law Times, 240 Edward St., Aurora, Ont. L4G 3S9 or call Karen Lorimer at 905-713-4339 karen.lorimer@thomsonreuters.com, Kimberlee Pascoe at 905-713-4342 kimberlee.pascoe@thomson- reuters.com, or Sandy Shutt at 905-713-4337 sandra. shutt@thomsonreuters.com Law Times is printed on newsprint containing 25-30 per cent post-consumer recycled materials. Please recycle this newspaper. Editorial Obiter Articling group must act quickly "T he task force is convinced that the articling program cannot continue to drift." Th ose were the words from the Law Society of Upper Canada's licensing and accreditation task force consul- tation report a couple of years ago. Since then, the crisis — as one LSUC bencher described the situation — has only deepened. Now, Treasurer Laurie Pawlitza has said she'll establish yet an- other working group to fi nd solutions. Working groups have value, par- ticularly since the law society would want to avoid making radical changes without due consideration. But as the number of law school graduates with- out articles has now doubled since 2008, it's clear that those involved in this second study need to act quickly. At the same time, Convocation needs to be willing to make bold decisions to address the issue. Th e articling conundrum isn't easy, of course. As the earlier task force had noted, there was little support for abol- ishing the articling requirement. But with the shortage of articling place- ments growing to alarming numbers, the LSUC may want to consider revis- iting the issue. Still, it's probably more reasonable for the law society to consider aggres- sive actions to try to fi x the articling program fi rst. Th e actions recommend- ed by the last task force, such as a com- munications eff ort to inform schools, students, and the profession about the articling program, clearly didn't go far enough. One area the LSUC should focus on is expanding the pool of placements outside of Toronto. As its own articling survey found, the overwhelming ma- jority of placements are in the provin- cial capital. Not including government agencies and court clerkships, Toronto accounted for 830 positions, or 65 per cent of them, in 2009-10. In the eni- tre northwest region, which includes places like Th under Bay, Ont., just 11 articling placements were available. Th at data isn't surprising, and there certainly are barriers to small-fi rm and sole practitioners in some towns and cit- ies in taking on articling students. At the same time, many law graduates are likely to want positions in major cities. But the data shows that smaller communities are precisely the places where new articling positions could come from, particularly given the fact that many fi rms and sole practitioners could use the extra help and given that those towns and cities face a looming shortage of lawyers as people retire. Graduates, of course, would then face the option of relocating, something it's not unreasonable to expect them to do. If students won't follow the jobs, the responsibility for their situation falls on their shoulders. But as with many things, money is often a key factor. So if the LSUC wants to encourage articling positions around the province, it likely will have to come up with some sort of fi nancial incentive for fi rms. In the meantime, letting the articling issue drift once again isn't an option. — Glenn Kauth of the so-called seller property information statement (also known as voluntary disclosure statements), the recent decision of the Ontario Court of Appeal in Krawchuk v. Scherbak also expands the scope of Realtor liability and expounds on some arguably counterintuitive doc- trines in the law of damages. Th e facts of the case are A relatively simple. A purchaser buys a home from a vendor for $100,000. (All fi gures are round- ed off for simplicity). Th e pur- chaser foregoes the usual home inspection, ostensibly in reliance on favourable statements from the vendor related to structural fi tness contained in the disclo- sure. Alas, the statements prove false. Th e foundation walls of the house were sinking badly into the soil, which necessitated extensive repairs costing nearly double the original price. Luckily, the purchaser had taken out a title insurance policy. Although not a title defect per se, the policy also indemnifi ed the Krawchuk a big strike against disclosure statements The lthough it will probably become known as an- other stake in the heart purchaser from "loss or damage as a result of being forced to re- move [the] existing structure or a portion of it as a result of any portion of the structure being built without a building permit." In addition to shoddy construc- tion, there had been no proper building permit. After a bit of negotiation, the title insurer cut the purchaser a cheque for $100,000, which was eff ectively the entire original purchase price of the house. Th e purchaser, however, also sued the vendor and the vendor's real estate agent for the full repair costs of just under $200,000. At trial, Superior Court Justice Robbie Gordon refused to award the purchaser the full $200,000 claimed since it wasn't reason- able to spend that much to re- pair a house bought for just over $100,000. Th e trial court did, however, award the purchaser a little over $100,000 to refl ect what was eff ectively the oblitera- tion of the house's value together with a relatively nominal amount for emotional suff ering. In a decision written by Justice Gloria Epstein last month, the Dirt By Jeffrey W. Lem Court of Appeal upheld the trial court's award notwithstanding the fact that the disclosure statement had disclaimer language expressly denying that the information constituted warranties; that it had exculpatory language absolving both the vendor and agent for any misinformation therein; and that the agreement of purchase and sale had "entire contract" lan- guage that excluded the disclosure statement altogether. Th e Court of Appeal deci- sion has reignited complaints against the use of the disclosure statements. Lawyer Bob Aaron is perhaps the best-known op- ponent of them. Aaron accur- ately forecasted the dangers for sellers in using them well before the Krawchuk appeal and re- mains stalwart in his cautionary approach to the issue. In a signifi cant reversal of the trial court, the Court of www.lawtimesnews.com Appeal also found the Real- tor to be jointly liable for the misstatements in the disclo- sure statement. Th e case is now authority for the proposition that Realtors can also be held accountable for such errors if they're aware of the true facts surrounding the property. While other cases have been critical of the disclosure state- ment, the Krawchuk appeal also guarantees itself immortality as a contract-damage case by im- plicitly affi rming the applicability in Canada of the rule in the U.S. case of Peevyhouse v. Garland Coal & Mining Co. In Peevyhouse, the Supreme Court of Oklahoma affi rmed that "diminution in market value" is the only true quantifi cation of loss for property damage, regardless of how much the owner really needs to spend on repairs. In Krawchuk, like in Peevyhouse, the purchaser could only recover the diminution in the market value of the house of approximately $100,000 even though it actually cost almost $200,000 to fully repair the sink- ing foundation. Krawchuk also expressly reaffi rmed the continuing ap- plicability in Canada of the rule in Cunningham v. Wheeler, a rare exception to the concept of com- pensatory damages that permits double recovery by a plaintiff al- ready compensated by insurance. In Krawchuk, there was an argu- ment that because the purchaser had already received approxi- mately $100,000 from the title insurer, it was no longer possible to sue the vendor or the Realtor for losses. Th e Court of Appeal applied the rule in Cunningham to permit the purchaser to recover yet another $100,000 from the vendor and the real estate agent. At the time of writing this article, there was still no word as to whether Krawchuk would be going to the Supreme Court of Canada. But for the time being, the purchaser has double recov- ery, and title insurers, sellers, and Realtors alike are all talking about the future of disclosure statements. Jeff rey W. Lem is a partner in the real estate group at Davies Ward Phillips & Vineberg LLP. His e-mail address is jlem@dwpv.com.

• Cover
• Summary Judgement
• Native Impasse
• Focus On Real Estate Law