COURT FILE NO.: 06-DV-1195 04-SC-089184

DATE: 2006/10/20

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

B E T W E E N:

PAULINE CARREAU

Allison A. Russell, for the Plaintiff (Respondent)

Plaintiff (Respondent)

• and -

SIMON TURPIE and MICHELLE TURPIE

Jean-François Lalonde, for the Defendants (Appellants)

Defendants (Appellants)

HEARD: September 5, 2006

DECISION ON APPEAL

M. Linhares de Sousa, J.

INTRODUCTION

1This case is an appeal from the judgment of Deputy Judge Houlahan of the Ontario Superior Court of Justice, Ottawa Small Claims dated February 9, 2006. The facts and background of this litigation are succinctly stated in the first seven pages of the decision of the Deputy Judge (tab 2 of the Appellants’ Appeal Book and Compendium) and need not be repeated here.

DECISION OF THE TRIAL JUDGE

2On the evidence presented before him the Trial Judge found that the patched hole and crack in the east basement of the home sold to the Respondent by the Appellants constituted a latent defect in the premises. He further found that the Appellants were sufficiently aware of the latent defect in the property so as to impose on them the obligation to disclose it to the Respondent. Furthermore, the Trial Judge found that the answers of the Appellants in the Disclosure Statement were false. In that Disclosure Statement the Appellants related their knowledge of dampness or leakage into the basement. The Trial Judge found that, given the knowledge and experience that the Appellants had had with the house, they answered the relevant questions in a reckless manner without regard as to whether the answers were true or not. He found that they did not have an honest belief in the truth of the answers provided, as a result of which the Respondent entered into the Agreement of Purchase and Sale. The Appellants were therefore liable for fraudulent misrepresentation.

3After his findings, the Trial Judge went on to assess damages against the Appellants for the sum of $6,371.665 and the Respondent’s costs of the action.

GROUNDS OF APPEAL

4The Appellants appeal the decision of the Deputy Judge on the following grounds:

(a) That the Trial Judge made an error of mixed fact and law in finding that the condition of the east foundation wall constituted a latent defect and that the issue of caveat emptor could not, therefore, be raised.

(b) That the Trial Judge made an error of mixed fact and law in finding that the Appellants were liable for fraudulent misrepresentation.

(c) With respect to grounds (a) and (b) above, the Trial Judge in coming to his conclusions disregarded, misapprehended or failed to appreciate all the relevant evidence and hence made the errors that he did.

(d) That the Trial Judge erred in his determination and calculation of damages.

POSITION OF THE RESPONDENT

5The Respondent contests the appeal and takes the position that no error in his findings of law and of fact can be found in the detailed and considered reasons of the Trial Judge based on the evidence that was before him. With respect to the issue of the assessment of damages, the Respondent submits that there was sufficient evidence before the Trial Judge to make the determination with respect to damages, which he did.

STANDARD OF REVIEW

6The parties agreed on the standard of review to be applied by this Court to the Trial Judge’s decision. This appeal is not a retrial of the case, nor a simple exercise of replacing the Trial Court’s view of the evidence with that of this Court. The Supreme Court in Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235 (S.C.C.) established the following principles of review. The standard of review on a question of law is that of correctness.

7The standard of review on questions of fact is that of palpable and overriding error which affected the conclusions of fact or factual inferences. A palpable error is one that is plainly seen and evident.

8Questions of mixed fact and law involve the application of a legal standard to a set of facts. For that reason the standard of review applied to findings of mixed fact and law fall somewhere along a spectrum of particularity. Where the error concerns an application of an incorrect standard, a failure to consider properly and completely a legal test or a similar principle then the error can be considered as one approaching an error of law and the standard of correctness will apply. Where the legal question is intertwined with the factual question or is not readily extricable from the factual question, the matter is one of mixed fact and law and is subject to the more stringent standard of review, such as “palpable and overriding error”, calling for more deference to be given to the Trial Judge’s conclusions.

DECISION

9The Trial Judge’s finding that the condition of the east foundation was a latent defect is one of mixed fact and law. Whether a defect is latent or obvious (patent) will depend on its discoverability upon reasonable inspection by the purchaser (see Whaley v. Dennis (2005), 37 R.P.R. (4th) 127 (Ont. Sup. Ct.). This is a question of fact determined by the nature and location of the defect and the circumstances of its discovery.

10The Trial Judge had before him two expert reports, one from each party, about the defect’s estimated age and characteristics. With respect to this expert evidence, the Trial Judge could reasonably have come to the conclusion that he did, namely that the leakage problems in the basement of the house had existed for some time including at the time of the sale.

11In his reasons the Trial Judge specifically mentioned the expert evidence of the Respondent, the report of Trow Associates Inc. and made no specific mention of the Appellants’ expert evidence, the report of Mr. Otto. However, one cannot conclude from that, that the Trial Judge did not consider the expert evidence presented by the Appellants. A Trial Judge is not required to refer to every piece of evidence put before him. Furthermore, upon examination of the two expert reports one can reasonably come to the conclusion that they do not conflict in a substantial way with respect to their respective conclusions concerning the estimated age and characteristics of defect.

12The Trial Judge also had before him evidence to indicate that there was no external or apparent indications of any water seepage into the basement and that without tearing down the finished inside wall to the basement prior to the purchase of the house by the Respondent the leak would not have been discovered.

13Finally, he also had the full home inspection report conducted by The Home Inspection Company of Ottawa engaged by the Respondent upon the purchase of the house. That report made reference to the condition of the foundation of the house and made certain recommendations for repair if future problems were to be avoided.

14On the basis of that evidence the Trial Judge could reasonably have come to the conclusion that he did that the condition of the east foundation, namely a water leak that had existed for some time, was a latent defect. In coming to this conclusion the Trial Judge did not misapprehend the evidence. I cannot find any palpable or overriding error.

15Having come to the conclusion that the condition of the east foundation wall was a latent defect, the Trial Judge correctly stated the law when he indicated that in Ontario the law is clear that the vendor of property is required to disclose latent defects of which he or she is aware to the purchaser.

16Whether the Appellants were aware of the latent defect is also a question of fact. Based on the Appellants very early leakage problems with the property, the Trial Judge concluded that those early problems should have led the Respondent to answer the Disclosure Statement in a different manner. That early experience and knowledge of leakage into the basement, despite the lack of obvious problems since that time, along with the expert evidence indicating that there had been actual leakage for some time, rendered those answers false. I cannot find that the Trial Judge misapprehended the evidence.

17Based on all of that evidence before the Trial Judge he could reasonably have come to the conclusion that he did, namely that the Appellants, at least, answered the relevant questions in a reckless manner without regard to whether the answers were true or not and that they did not have an honest belief in the truth of the answers provided. I cannot find any palpable or overriding error. It is not for this Court to substitute its view of the evidence for that of the Trial Judge in the absence of any palpable or overriding error.

18I do not find the conclusions of the Trial Judge that the Appellant, Mr. Turpie, was a sincere and honest man, but that the answers he and his wife gave in the Disclosure Statement amounted to fraudulent misrepresentation to be inconsistent. The Trial Judge stated correctly the legal definition of “fraudulent misrepresentation” as stated by Leitch J. in Moriani v. McCormack (1999), O.J. No. 1697, as approved by the Supreme Court of Canada in Redican v. Nesbitt, (1923), (1924), S.C.R. 135 (S.C.R.). One may be liable for fraudulent misrepresentation without necessarily intending to cheat or injure the person to whom the misrepresentation was made. Answers that were made with recklessness of their truth or falsity also qualify which is what the Trial Judge found happened in this case.

19Having come to the conclusion that the defect in question was latent and that the Appellants could be found to be liable for fraudulent misrepresentation, the Trial Judge concluded, in law, that the facts as found by him do not raise the issue of caveat emptor which would have obliged the Respondent to conduct further investigation with respect to the latent defect, which in essence would have necessitated taking the finished basement walls down before purchase to discover the leakage. I can find no error in the Trial Judge’s application of legal principles.

20With respect to the Trial Judge’s determination and calculation of damages, I can find no palpable or overriding error. A Trial Judge’s calculation of damages is a question of fact. Based on the evidence before the Trial Judge there was sufficient evidence to permit the Court to come to the determination that it did with respect to damages.

21For the above-mentioned reasons, the appeal is dismissed and the decision of the Trial Judge is confirmed.

22With respect to the costs of the appeal, if the parties cannot otherwise agree on costs, both parties may file and serve their written submissions on costs in accordance with the following schedule. The Respondent shall have two weeks from the date of this endorsement to file and serve her submissions on costs. The Appellants shall have one week from that date to file and serve their submissions on costs. The Respondent shall then have one week from that date to file and serve any response if she so wishes.

M. Linhares de Sousa, J.