Petersen v. Matt, 2014 ONSC 896

CITATION: Petersen v. Matt 2014 ONSC 896

COURT FILE NO.: 12-679

DATE: 2014/02/18

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

JUSTICE RICK LEROY

BETWEEN:

THEODORE PETERSEN AND ANNIE PETERSEN

Plaintiffs/Appellants

– and –

ASTRID MATT, RUDOLF MATT, MAURICE SAUVE, SAUVE REAL ESTATE LTD AND JOHN REDMOND, HOME INSPECTION

Defendants/Respondents

Self-represented

Robert Tolhurst for the Defendants

HEARD: January 29, 2014

Justice Rick Leroy

REASONS FOR JUDGMENT

Issues and introduction

Issues and introduction

1The issue on this appeal is whether Small Claims Court Deputy Judge Ault made a reversible error by dismissing the plaintiffs’ claims without a trial.

2There were two matters before Deputy Judge Ault on June 12, 2012. The first involved a request for consolidation of the actions. The second was defendants` request for summary judgment dismissing the plaintiffs’ claims because they were caught by the Limitations Act, 2002 interdiction.

3The discoverability issue was the main focus.

4The Court may grant summary judgment when there is no genuine issue requiring a trial. Such is the case when the judge is able to reach a fair and just determination on the merits of the case. The process involves necessary fact-finding and application of the law and can lead to a proportionate, more expeditious and less expensive means to achieve a just result. The issue is whether the summary process provides a fair and just adjudication and serves the goals of timeliness, affordability and proportionality – Hryniak v. Mauldin, 2014 SCC 7.

5The Court’s ruling on whether there is a genuine issue requiring a trial is one of mixed fact and law and, in the absence of an error of law, attracts deference. Where there is no extricable error in principle, findings of mixed fact and law, should not be overturned, absent palpable and overriding error – Housen v. Nikolaisen, 2002 SCC 33, at para. 36. Palpable error equates with injustice and requires review. Where the court applies an incorrect principle of law, the decision is reviewed to a standard of correctness – Housen at para 8.

6Deputy Judge Ault heard viva voce testimony in the course of reaching her conclusions, as she is entitled to do under the rules. As the result, she was afforded that opportunity of hearing mixed evidence and submissions relevant to the discoverability issue, as well as substantive ones.

Factual Background

Factual Background

7The plaintiffs and defendants Matt entered into an agreement of purchase and sale for the purchase and sale of parts 1, 2 and 3 of Plan 14R-350 in lot 1, Concession 4 in the Township of North Glengarry on August 28, 2004 for $310,000.00. Maurice Sauve of Sauve Real Estate Ltd. was the seller’s agent. John Redmond inspected the real property and reported to the plaintiffs. The home was 30 years old in 2004.

8The Matts completed the Seller Property Information Form. Based on the plaintiffs` experiences, there were a number of inaccuracies.

9The home inspection revealed issues with the heating system, which led to further negotiations. On September 4, 2004 the contracting parties entered into an amending agreement whereby the Matts undertook to service the oil furnace so that it was in good working condition on closing, fill the oil tank and, if the oil supplier red tagged the tank, to replace it. On September 10, 2004, the contracting parties entered into a further amending agreement whereby the plaintiffs agreed to perform all the updating and repairs on the furnace, oil tank, ducts and chimneys at their expense, in return for a reduction in the sale price of $7,000.00.

10The deal closed on October 27, 2004. On taking possession, the Petersens quickly discovered problems with the house. One of the ovens had an electrical short that Mr. Petersen had to repair. An element was burned out in another. The kitchen was mice infested. The pool and its heating system needed repair. The wall studding was 4 inch and not 6 inch. Some of the plumbing required work. After the first rainfall, the plaintiffs realized that the ground surrounding the home sloped inward and there was a significant crack in the foundation so that rainwater flowed into the basement.

11The plaintiffs acknowledge that the passage of time precludes remedy for claims arising relative to those deficiencies.

12There are other deficiencies they say were not discoverable until 2011 and not impeded by the Limitations Act, 2002. Those claims relate to the balcony, the wall dry rot, the chimney and the parquet floor. The plaintiffs challenge Deputy Judge Ault`s ruling dismissing these claims.

The balcony/wall dry rot

The balcony/wall dry rot

13The plaintiffs claim that the balcony was not caulked so that moisture penetrated the support structure and, not only created the environment to promote decay in the balcony sub-structure, but crafted a conduit for rain water penetration into the interior framing resulting in a total failure of the studding and the window frame below the balcony. The plaintiffs assert that following a heavy rainstorm in 2010, when rainwater poured into the area beneath the balcony, inspection revealed that someone had covered in the problem in the past by stuffing paper in the area over the window and covering with tape and paint to conceal a known water penetration problem. Further inspection in 2011 revealed that the balcony structure was rotten.

The Parquet Floor

The Parquet Floor

14The plaintiffs assert that portions of parquet flooring in a hallway lifted in August 2011. Inspection revealed that the floor was installed over a painted floor and the allegation is that there was insufficient adhesive applied to ensure longevity. The photographs depict a humidity-based expansion buckling.

The chimney

The chimney

15The plaintiffs assert that they only discovered the reason for Matts’ offering to reduce the sale price, instead of completing the necessary improvements to the heat system, in 2011.

16In 2004, wood and oil furnaces placed side by side in the basement, both venting to the same chimney flue, heated the house. It is common ground that the oil furnace and tank were original equipment and had to be replaced. That is what the inspection report recommended. The equipment was 30 years old, the same age as the house. Mr. Petersen said that a representative of Moose Creek Sheet Metal told him that he could not install an oil furnace in the existing chimney in 2004. Mr. Petersen denies knowing that the refusal related to the fact of a single flue serving two furnaces.

17The situation with the heating system remains as it was ten years ago. Heating the home through the ensuing winters was problematic. The Petersens installed an autonomous wood boiler-based system in 2008, at significant expense.

18Mr. Petersen laments that the existing chimney flue is undersized and does not comply with the Building Code. He acknowledges that he could have installed a new oil furnace with a chimney liner. That is good as far as it goes. His real grievance is that there is only one chimney flue instead of the two needed to accommodate the dual furnace (wood and oil) system.

Routes to liability asserted by Plaintiffs

Routes to liability asserted by Plaintiffs

19The plaintiffs issued individual claims in the amount of $25,000 each against the vendors – Matts, the realtor – Sauve and the inspector – Redmond.

20The claims against the Matts involved misrepresentations regarding the balcony and damage to the window, the parquet flooring, the swimming pool, the mice and the withholding of important information about the chimney and heating system.

21The claims against the realtor involved allegations of conspiracy with the Matts, knowing that the furnace system could not be replaced as a dual heat source system, to change the agreement by shifting responsibility for upgrade onto the plaintiffs.

22The claims against the inspector relate to negligence in failing to expose the one-chimney deficiency, the dry rot in the balcony structure and interior wall damage, the swimming pool degradation and Building Code deficits in the trusses above the garage and living room.

Consolidation

Consolidation

23Deputy Judge Ault’s decision to consolidate the actions into one was the correct one. The monetary jurisdiction of the Small Claims Court obliges plaintiffs to proceed in the Ontario Superior Court when the damages claimed exceed $25,000 or agree to forfeit the balance.

24Rule 6.02 prohibits the division of a cause of action to bring the claim within the Small Claims Court monetary jurisdiction.

25The cause of action is the heart of the complaint. In this case the cause of action relates to assertions of deficiencies in the property subject to the purchase and sale agreement. The importance of the breach or violation lies in its legal effect and in how the facts and circumstances relate to applicable law. The routes to liability for each defendant may be different but the property deficiencies are the same. But for the deficiencies identified, the routes to liability would not be in issue.

26Accordingly, whether the route to liability arises from misrepresentation, conspiracy or negligence that allowed the misrepresentation, it is the deficiencies that centre the cause of action.

27If the plaintiffs had taken this file to the Superior Court, the claims would be consolidated without concern for the monetary cap. The opportunity of transfer to Superior Court was offered to the plaintiffs, who declined.

28Separate trials would involve duplication of parties, arose from the same series of transactions, had common questions of law and there is a significant risk that separate trials would result in inconsistent verdicts on the same facts.

Discoverability Ruling

Discoverability Ruling

29Limitation periods run separately with respect to each independently discoverable deficiency.

Legal Context

Legal Context

30Although the substantive legal context is largely peripheral to the appeal, the following is included incidentally to facilitate understanding.

31The general law of the sale of property is caveat emptor (let the buyer beware) and buyers are under a general duty to inspect their purchase before taking possession. However, inspection is often insufficient to detect deficiencies that can only be discovered through destructive testing or other means that a seller could not reasonably be expected to allow under normal conditions. For example, wood beams and cracks in the walls of a finished basement, covered electrical or plumbing work often cannot be fully assessed without destructive testing, and it would be unreasonable for the seller to allow the buyer to destroy parts of the property in order to discover such defects.

32There is no automatic right to indemnity for a buyer against a seller for latent defects when they are discovered, absent an agreement in contract. However, if a latent defect is discovered, there is often a presumption against the seller when a claim is made in misrepresentation that the seller knew about the latent defect. As such, the seller is required to show that he or she could not possibly have known of the defect, rather than the buyer having to show that the seller did know about the defect. However, if it can be shown the seller could not have known about the defect and was not wilfully blind to the possibility, then the buyer's claim will not succeed.

33In all cases, where a seller actively misrepresents the condition of the property, such as by taking steps to make an inspection impossible or by lying about problems when directly asked, the buyer will almost always succeed unless it can be shown that the buyer was independently aware of the defect and completed the transaction nevertheless.

Effect of misrepresentation on the tolling of time under the Limitations Act, 2002

Effect of misrepresentation on the tolling of time under the Limitations Act, 2002

34The plaintiff argues that the operation of the limitation period is suspended during any period of time that the defendant fraudulently concealed the fact of the deficiency for which relief is sought. He cites the Limitations Act for the province of Alberta.

35In Ontario, the operation of the limitation period is suspended until the date that a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the deficiency basing the claim. While a misrepresentation may contribute to delay in discovery, as may many other factors specific to the particular case, the clock begins to run when the discovery of the cause of action is made.

36Sections 4 and 5 of the Limitations Act, 2002 provide that:

4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

5. (1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

Presumption

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.

Heating system deficiencies

Heating system deficiencies

37The facts are that the plaintiffs were alerted to significant heating system deficiencies before closing and undertook the risk in return for a price reduction of $7,000. The defendant Redmond recommended that the system be replaced and alerted the plaintiffs to the age of the tank before closing. The plaintiffs were advised that the incumbent configuration could not be sustained with a new oil furnace in October 2004.

38The plaintiffs installed a new wood-based boiler system to heat the house in 2008.

39The plaintiffs argue that the cause of action is driven by the fact of the single undersized chimney flue, which they say was only discovered in 2010. Every installer that the plaintiffs would have consulted between 2004 and 2010 declined to replace the oil furnace and maintain the combination. It is inconceivable that the plaintiffs would not have asked “why”.

40Deputy Judge Ault concluded that the plaintiffs discovered this “cause of action”, if there was one, well outside the limitation period. The known facts, buttressed by Mr. Petersens testimony, confirm that the full extent of the heating system problems were discovered no later than 2008. Deputy Judge Aults ruling is the correct one and stands.

The Parquet Floor

The Parquet Floor

41The photographs of the flooring and its intersection with the carpet illustrate the poor quality of workmanship in the installation. Whoever did the work was not a craftsman. A craftsman could not tolerate that product. Cursory inspection during the first showing would reveal the installation flaws. The fact that there might have been insufficient adhesive applied is but one of many mistakes in the application. The qualitative need to change the flooring would be apparent during the initial walk through. If somehow it were overlooked before closing, it would be apparent within days of possession.

42Even though the Court’s focus was centered on the discoverability issue, Mr. Petersen insisted on narrating his theory of their case on substance so that it was impossible to avoid intruding into substantive areas of the case. The floor is a patent qualitative defect and to which caveat emptor applies.

43Deputy Judge Ault did not address the discoverability issue in her reasons for barring the flooring claim; rather the learned deputy judge relied on substantive grounds, namely, that the plaintiffs did not adduce evidence to show that the Matts were aware of the flooring defects and surmised that since it took the Petersens 6 years to notice the adhesive deficiency, then a predecessor owner would not conceivably know. Mr. Petersen conceded, for his own reasons, that the Matts were unaware of the adhesive deficiency. That would eliminate the realtor from a conspiracy with Matts to misrepresent and the inspector from failing to discover.

44Deputy Judge Ault heard the plaintiffs’ substantive evidence on this issue. She did not review the photographs. I did. She made a finding of fact. The photographs tend to validate her conclusion. She did not commit a palpable error in factual conclusion and the decision stands on appeal.

The rotten wood

The rotten wood

45The effect of water on man-made product is insidious. If the trial deputy judge believes the plaintiffs about the date of discovery and the tape over the window designed to conceal the effects of water penetration, then the Matts would have some explaining to do.

46As stated earlier, the hearing deputy judge’s findings of fact are entitled to deference. Findings of mixed fact and law should not be overturned, absent palpable and overriding error. Deputy Judge Ault rejected Mr. Petersen’s evidence on the date of discoverability citing the improbability of failing to immediately notice the presence of dry rot and his experience as a carpenter. The appeal process does not permit the Appeal Court to replace hearing deputy judge’s conclusions because the Appeal Court might have come to another conclusion.

47I am satisfied that the process Deputy Judge Ault followed allowed her to make necessary findings of fact and to apply the law in a summary fashion that provided a fair and just adjudication and served the goals of timeliness, affordability and proportionality. She was entitled to make the findings she did based on the evidence she heard. On appeal, I went a step further and reviewed the photographs that Mr. Petersen sought to adduce. I understand Mr. Petersen’s frustration. I conclude their probative value could be significant on the substantive issues that would have properly been before the Court, but for the interdiction that is the Limitations Act, 2002. The plaintiffs bought a house in poor repair. They exacerbated their position by delaying the pursuit of legal remedy for way too long.

48The appeal is dismissed. The respondents shall have costs on the appeal fixed in the amount of $3,500.00.