Court File and Parties

COURT FILE NO.: 7162/13 DATE: 20160829 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN: Eric Brown and Louise Brown Plaintiffs – and – Gary Robert Cassidy and Wanda Kim Cassidy Defendants

Counsel: Ronald W. Bildfell, for the Plaintiffs Donald J.C. Elliott, Q.C., for the Defendants

HEARD: April 4, 5, 6 and 7, 2016

Raikes J.

Overview

[1] The plaintiffs, Eric and Louise Brown, purchased the property at 59 MacHenry St. in the Town of Forest, Ontario (“the property”) from Gary and Kim Cassidy on October 14, 2011.

[2] The Browns seek damages from the defendants for the costs to remediate mold and water damage discovered in the home soon after their purchase, to replace the perimeter drainage system and for repair of the rear deck.

[3] The plaintiffs’ claim is framed in fraudulent misrepresentation and latent defect.

FACTS

a. The Parties

[4] In 2011, Eric Brown and his mother, Louise, resided on Queen St. in Forest. They occupied a small bungalow that did not have a basement.

[5] Mr. Brown was on long-term disability from Lanxess where he had worked for 20 years as an operator in the waste-water plant and lab. He previously worked as a power engineer and, for 18 months, as a real estate agent in Alberta. Mr. Brown has a grade 12 education and has taken courses at Lambton College.

[6] Gary and Kim Cassidy purchased the property in 1983. They believe the house was constructed in 1977. The Cassidy family resided on the property until the sale to the Browns closed in October, 2011. Mr. and Mrs. Cassidy have three children: Michael, the oldest, now 26 years, and twins who are 23 years.

[7] Mr. Cassidy is a paramedic and operations supervisor with the Lambton County EMS. He has been a supervisor since 2011. Mrs. Cassidy is the manager of Food Services at the Strathroy Hospital. She has worked at the hospital for 30 years and travelled to Starthroy daily for her job.

b. The Property

[8] The house on the property is a bungalow with a basement. When purchased in 1983, the basement was only partially finished. The following improvements were made to the basement after the Cassidy’s acquired the property:

• In 1984, a wood burning stove was installed in the corner of the existing finished recreation room. A raised brick hearth was constructed for the wood stove. The brick surrounding two sides of the stove went up the adjacent walls approximately 5 feet. The existing carpeting in that corner was cut for the hearth.
• In 1991, a furnace was installed in the basement. Previous to that date, the house had electric heat.
• In 1994, a sub-floor throughout most of the basement was installed, and the Cassidy’s contracted the addition of a bedroom adjoining the recreation room that was initially used as a playroom for the children until Michael was old enough to take it over as his bedroom.
• In 1994, at the same time as the creation of Michael’s bedroom, a bathroom was installed with a vanity, toilet and shower. A home office was framed in on the same side of the basement as Michael’s bedroom but separated from it by the furnace room which remained unfinished.

[9] The defendants also contracted for the construction of a wooden deck at the rear of the house in 1994. The deck is accessible from the house via French doors and has steps which lead to the backyard.

[10] Mr. Cassidy and his brother-in-law installed the subfloor in 1994 before Michael’s bedroom and the office were framed by the contractor. They affixed strapping to the floor with cement screws and then screwed the subfloor to the strapping.

[11] There was at the time a concrete curb running the length of the basement which separated the recreation room side from the bedroom/furnace/office side. That concrete curb was broken in order to frame in a door for the bedroom.

c. Earlier Water Issues

[12] In the mid-1990s, the Cassidy’s found “a couple of spots of mold” on the carpet in the recreation room in the basement. Mr. Cassidy testified that he was not sure what the spots were, but “scooped up” what there was and put them in the garbage. He cleaned the carpet in that area. According to Mr. Cassidy, they had water in the basement on “a few occasions” in this period.

[13] I find it likely that the carpet in the basement recreation room became wet from time to time from the mid-1990’s to 2002. This happened more than a few times and with sufficient regularity that the Cassidy’s decided to permanently repair the problem.

[14] As a result, the defendants contracted with Hollingsworth Excavating in 2002 to fix the water problem. A trench was dug around the perimeter of the house except under the front porch and driveway. A membrane was applied to the exterior walls. This membrane is honeycombed. It is designed to keep water from contact with the wall and to discharge water into a stone bed that contained porous O-ring. The O-ring was buried below ground around the perimeter of the house and led to a catch basin/cistern that was installed with a submersible sump pump.

[15] The cistern is depicted in photographs made exhibits at trial. It is located in the backyard between the rear deck and the corner of the house. It is a cement fixture which is clearly visible above ground. The cistern had an alarm system that would alert the homeowner if it was not working or if the level of water in the cistern was too high.

[16] At the same time as this exterior work was done, an upgraded interior sump pump was installed. The interior sump pump was located in an unfinished portion of the basement adjacent to the bathroom. The sump pump was at all times accessible.

[17] In order to install the membrane and O-ring across the rear of the house, the existing deck had to be moved. The contractor cut the support posts on which the deck rested so that the deck could be lifted and moved back temporarily. Once the O-ring was installed and the trench backfilled, the deck was moved back to its original position and tied into the existing posts by connecting boards.

[18] The purpose of the installation of this drainage system was to move water, be it groundwater or rainfall, away from the house. According to Mr. Cassidy, this solution worked. They had no further problems with water coming into the basement of the house.

[19] In 2004, approximately two years after the exterior drainage work was done, the defendants installed new carpeting in the recreation room and carpeted the playroom which had, until then, not had carpet. Michael occupied the bedroom in the basement without incident for years after 2004.

[20] Numerous photographs of the interior of the house and deck were made exhibits at trial. They generally depict an attractive, well-maintained home which is consistent with the impression that the Browns had on their visits to the property prior to their purchase.

[21] As at 2011, the main floor was comprised of three bedrooms, including the master bedroom, a bathroom, kitchen, living room, various closets and hallways/common areas. The basement was comprised of a recreation room, bedroom, bathroom, home office, furnace area, sump pump and hot water tank area, a short hallway from the stairs to the main level, and a storage area under the stairs. There was also an insulated garage attached to the home.

d. First Inspection

[22] The defendants marketed the property on Kijiji and by a “For Sale” sign on their front lawn.

[23] In September, 2011, Mr. Brown was looking to purchase a larger home with a basement that he could use as a sound studio to play his bag pipes. He was driving by the property with his mother when he spied the For Sale sign. It is his recollection that he stopped, knocked on the door and spoke to Gary Cassidy who showed him the house.

[24] Mr. Brown testified that he noticed what he thought was a membrane on the foundation of the house. He asked Mr. Cassidy what the membrane was and was told that it had been installed years ago. Mr. Brown testified that he asked Mr. Cassidy if they had had any water problems and was told “no”. Mr. Brown recalled that Mr. Cassidy said, “We had the membrane installed and there was never any problems [with water].”

[25] Mr. Brown and Mr. Cassidy then went inside where Mr. Brown saw the rooms on both levels. He testified that “the place looked really nice”.

[26] In his examination in-chief, Mr. Brown testified that while in the basement, he saw the wood stove and asked Mr. Cassidy if there had been any fire or water problems. Mr. Cassidy told him that there had not. He recognized Mr. Cassidy as a Mason, and accepted what he told him at face value.

[27] According to Mr. Brown, they then went outside on the deck where he observed the cistern. Mr. Cassidy explained that the perimeter tile drained into the cistern which had a submersible pump. They discussed how the cistern, pump and alarm system worked.

[28] Mrs. Brown testified that she and Eric went up to the house to knock. Mr. Cassidy showed them inside the house and the backyard. She did not testify as to any conversation about the membrane. She was not present for any discussion in the basement about water or fire issues as she used the bathroom. She was also looking at the gardens when the two men were together at the cistern and did not hear their conversation.

[29] Mr. Cassidy testified that he knew Mrs. Brown but had not met Eric previously. His wife was at work. He showed them the interior of the house and backyard. He did not recall any discussion with Eric Brown about fire or water damage. At the end of the tour, they told him that they wanted to think about it and left.

e. Second Inspection and Negotiation

[30] A second visit to the property took place soon after the first. In the interim, the Browns discussed and agreed between them that they would like to purchase the property for $170,000. Mr. Brown testified to that he intended to upgrade the carpet in the basement and upstairs for soundproofing reasons.

[31] The second visit was less impromptu. The Browns called and made arrangements to come over. Gary and Kim Cassidy were both present. They all sat at the kitchen table where Eric Brown laid out the purchase price that he wanted to pay. Mr. Brown testified that:

• he explained how they had arrived at the figure of $170,000;
• they talked about a home inspection but he decided that they did not need one. He told the defendants that as they had lived there for 20 years, they would know if there was something amiss. He pointed out that they were both Masons and could trust each other;
• there was no other discussion about the condition of the property; and,
• there was no discussion about the sub-floor in the basement or potential water under the sub-floor.
• Mr. Brown testified that if he had known that there had been a problem with water in the basement, it was “a deal killer”. That never came up. I note at this point that, in his cross-examination, Mr. Brown agreed that he was told by Mr. Cassidy there had been a water problem in 2002, but it was fixed.

[32] Mrs. Brown did not recall anything of the discussion on the second visit. It was her recollection that she and Kim Cassidy talked about other things.

[33] By contrast, Kim Cassidy testified that when the Browns came over to the house, she took Mrs. Brown for another tour including the basement. They sat at the kitchen table talking about a lot of things. Mrs. Brown told her that she liked the gardens. They also talked about the renovations that the Cassidy’s had done over the years including the furnace in 1991 and the renovations in 1994. At no time did either of the Browns make any specific inquiry about the house or its fitness. She recalled that Eric Brown told them that they could leave anything they want including the fridge and stove. There was very little in the way of negotiation of the purchase price.

[34] Gary Cassidy agrees that the second visit was arranged by telephone with Eric Brown. All parties were present. Mr. Cassidy recalls that in addition to sitting and talking for a long while at the kitchen table, they went outside again to look at the cistern. He believed that the purpose of the second visit was for a more detailed inspection of the property.

[35] Mr. Cassidy testified that they had a discussion on that visit about past water problems and what the Cassidy’s had done to remedy the problem. He testified that:

• Eric Brown asked him about the black barrier visible around the foundation of the house;
• he explained to Mr. Brown that they had water in the basement in the past but had no water problems since they dug around the house;
• he told Mr. Brown that they had dug around the house and put a filter down about eight or nine years earlier; viz. the O-ring.

[36] In addition, Mr. Cassidy testified that they had the following discussions on this second visit:

• they discussed the price that the Browns were prepared to pay;
• Mr. Brown indicated that the Cassidy’s could leave anything they wanted that might cause the damage by being moved;
• Mr. Brown told them about his history selling real estate and told a story about damage done when professional movers were not used;
• Mr. Brown told him that they were going to get a home inspection done as they would need one for the mortgage. Mr. Cassidy indicated that that was fine and would not be a problem;
• Mr. Brown did not discuss how he arrived at the purchase price.

[36] It is undisputed that the Browns made a verbal offer of $170,000. Mr. Brown asked Mr. Cassidy to have his lawyer draft up an agreement for that amount. He told Mr. Cassidy that he did not need a lawyer. The Cassidy’s decided after the Browns left that they were going to accept the $170,000 offer and contacted Philip Walden, a real estate lawyer, to prepare the agreement.

f. Purchase of the Property

[37] On September 17, 2011, the parties signed an agreement of purchase and sale by which the Browns agreed to purchase the property from the defendants for a purchase price of $170,000. Mr. Brown provided a deposit of $500.

[38] The agreement of purchase and sale contains the usual clause that says that there are no representations, warranties, collateral agreements or conditions affecting the agreement or the property other than as expressed in the agreement in writing. Although Mr. Brown testified that it was important to him that the property had not had any water problems, the agreement is entirely silent on that score. The agreement contained no right of inspection or condition that the agreement was subject to a satisfactory inspection.

[39] The purchase price was subsequently reduced to $167,500 at Mr. Brown’s request, and the closing date was extended from September 30, 2011 (the date in the agreement of purchase and sale) to October 14, 2011. Mr. Brown explained that he was unable to obtain a mortgage sufficient to pay the full price agreed upon, although he did give the Cassidy’s a further $1,000 cash after they had agreed to the reduction.

[40] None of the closing documents before the court make reference to the condition of the home, past water problems, mold contamination, or the fitness of the house and deck for habitation. There are no documents that touch upon Mr. Brown’s stated concern about a dry basement or that confirm alleged pre-contractual statements made by the defendants on these subjects.

[41] Title to the property passed to the plaintiffs unremarkably on October 14, 2011.

[42] No pre-closing inspection was done by the defendants or anyone engaged for that purpose.

g. Discovery of Mold

[43] Eric Brown hired a fellow Mason, Christopher Leonard, to sand, prime and paint throughout the house after closing and before the Browns moved in.

[44] Mr. Leonard is an unlicensed carpenter who has worked in construction for many years. He has done several renovations. He also did basement repairs for a company in Kitchener that dealt with wet basement issues.

[45] Mr. Leonard was doing some painting in the Forest area. My sense is that he was between jobs at the time. He met Mr. Brown at the house to look over the job. He did not give a firm quote for the painting but simply indicated that he would charge $15 per hour. Mr. Brown was responsible for paying for paint and other supplies.

[46] Mr. Leonard testified that he did not observe any striking deficiencies when he first looked at the walls. He started painting upstairs. When he finished painting upstairs, he moved to the basement. It was while painting in the basement that Mr. Leonard first discovered a water problem. He was kneeling on the carpet to paint at the doorway leading to Michael’s former bedroom when his knees got wet. He had been through that doorway a number of times before and did not experience anything unusual.

[47] Mr. Leonard pulled back the carpet and observed “water flowing” along the floor. He immediately called Mr. Brown. On further investigation, they observed

• the floor strapping was completely black with mold;
• there was no vapour barrier separating the concrete and wood strapping;
• the water was flowing under the plywood but over the strapping.

[48] The flowing water was in the area that was previously part of a concrete curb running in a north-south direction across the basement separating the recreation room from the bedroom and furnace area. That concrete curb is part of the load bearing wall supporting the house above.

[49] Mr. Leonard observed water seeping through the floor where the curb had been. He marked at trial the location of the wet spot with an X on the diagram showing the layout of the basement.

[50] According to Mr. Leonard, he gutted the basement and tried to let things at dry out. He removed all of the carpet and the wet sub-floor lumber which he described as “rotted”. He found extensive mold. All of the moldy materials had to be bagged to prevent airborne dispersal.

[51] He removed the sub-floor throughout the whole of the basement, including in the sump pump room. He observed that the basement floor sloped to the sump pump. That was the direction that the water was flowing.

[52] He also removed the baseboards and found mold behind them. There was black mold on the drywall behind the baseboard heaters. He cut into the drywall up to four feet and found it dry like chalk. He explained that when drywall gets wet, it bonds and turns to chalk. On Mr. Brown’s instructions, he removed all of the drywall in the basement.

[53] With the drywall removed, Mr. Leonard was able to make observations of the metal studs in place. He found several affected, viz. the bottom plate rotted and in need of replacement. The insulation on the exterior walls was saturated and had to be removed. Approximately 15 to 20 of the studs were likewise removed. Those studs not removed were treated with a mold killer and sealant.

[54] At Mr. Brown’s request, he removed the ceiling drywall to look for mold spores. He testified that “it was everywhere”. He covered the ceiling with poly (plastic) to prevent the spread of the mold spores.

[55] He removed the brick on the walls of the hearth because he felt confident that there would be more mold there, which there was.

[56] With Mr. Brown’s approval, Mr. Leonard contacted and engaged Basement Boss to install a trench in the concrete basement floor to drain the water. Basement Boss attended the property twice, once in December 2011 and again in March 2012. Basement Boss initially installed 30 feet of Big-O in a trench installed in the concrete floor leading to the sump pump. After another heavy rain, the basement again had water so he called Basement Boss back. A second trench with Big-O was installed which fixed the problem. There were no further problems with water in the basement after the second attendance by Basement Boss in March 2012.

[57] Mr. Leonard then restored the basement. In doing so, he

• insulated the exterior walls and insulated the interior load bearing wall,
• put a vapour barrier on the warm side of the insulation,
• placed poly on the basement floor, then strapping and a sub-floor once the floor was dry,
• put up drywall using a brand noted for damp applications (mold will not grow on it) that is one third more expensive than ordinary drywall,
• installed the ceiling drywall using the same material, and
• finished the floor using laminate flooring throughout.

[58] In restoring the ceiling, Mr. Leonard found electrical wires on heating vents and water pipes which was potentially dangerous. An electrician was called in to rectify that issue.

[59] The basement bathroom was also dismantled to remove the sub-floor and to check for mold which was found. The shower stall was removed. Mr. Leonard testified that the PVC pipe was not properly connected to the drain in the basement floor. As a result, water draining from the shower would flow into a hole in the basement floor leading to the drain pipe with the potential for the water to pool, erode the dirt around the drain or to spill onto the concrete floor on which the shower stall rested.

[60] Mr. Leonard found the stairs leading from the basement to the landing were damaged. He cut the stringers and replaced them.

[61] Mr. Leonard then inspected the upstairs more closely and discovered mold in four locations: in the bathroom, in the kitchen where the sink was leaking, along the bedroom wall adjoining the living room, and in the attic. The mold contamination was much less extensive and the repairs needed were correspondingly more modest.

[62] Mr. Leonard was asked in cross-examination and agreed that all water issues in the house were resolved by March, 2012.

h. Notice to Mr. Cassidy

[63] Mr. Brown called Mr. Cassidy soon after the basement water and mold problem was discovered. He invited Mr. Cassidy to come by to see.

[64] According to Mr. Brown, Mr. Leonard was removing and tossing bricks out the basement window from the hearth to get at the mold behind when Mr. Cassidy attended the house. Mr. Brown showed him what they had discovered. They inspected the water level in the cistern which was at a normal level. Mr. Brown recalls that Mr. Cassidy said: “That’s too bad” which he took to mean that Mr. Cassidy was saying that it was Mr. Brown’s problem.

[65] Mr Cassidy agrees that he received a call from Mr. Brown about the basement. He went to the house. He did say “That’s too bad” but meant it in the sense that it was unfortunate.

[66] In any event, Mr. Brown made no demands of Mr. Cassidy at the time, nor did Mr. Cassidy volunteer any assistance or advice.

i. New Perimeter Drainage

[67] In July 2013, Mr. Brown engaged Robert Dale, a consulting engineer, to conduct a building condition assessment to determine whether the water damage experienced in 2011 could have been an ongoing occurrence during the Cassidy’s ownership.

[68] At Mr. Dale’s direction, test holes were dug to allow for examination of the perimeter drainage (the O-ring). I observe that Mr. Dale was not a strong witness. He testified that six holes were dug when according to Mr. Leonard only three were dug. Mr. Dale testified that he observed two O-rings which was contradicted by Mr. Brown. It struck me that Mr. Dale had little independent recollection of what he actually did and observed.

[69] The work done by Mr. Brown was in anticipation of litigation with the Cassidy’s. There was no new water problem in the basement. The solution installed by Basement Boss was working. The exterior sump pump was running frequently but that was not cause for alarm.

[70] Mr. Dale concluded that the O-ring installed in 2002 was no longer functioning. As of July 2013, the O-ring was congested with silt which prevented the drainage of water through that tile to the cistern. He testified that the Basement Boss installation would be a “band-aid solution”; exterior tiling was essential to take away water from the walls of the house to prevent the build-up of water pressure and further leakage into the house.

[71] In cross-examination, Mr. Dale was shown photographs taken of the 2002 installation of the O-ring which also showed the membrane applied to the exterior basement walls. He agreed that the work depicted appeared to be what he would reasonably expect would be done by an experienced contractor.

[72] Mr. Dale also opined that from his observation of the photographs taken by Mr. Brown and Mr. Leonard in 2011, the mold was long-standing. It was the result of water leakage over a period of time but he did not fix in time when that likely occurred, viz. pre-2002 or post-2002. I note that Mr. Dale was not present in 2011 and made no direct observations. Further, he did not opine as to whether the Cassidy’s would have or should have known of the mold discovered in 2011.

[73] In any event, on Mr. Dale’s recommendation, the Browns had a trench dug around the house to install new O-ring with a mesh covering to prevent the infiltration of silt. The new O-ring went around the rear porch which was not moved as it was in 2002.

j. Rear Deck

[74] In 2013, two years after the purchase of the property, Mr. Brown stumbled on the rear deck. It felt unsteady. When he checked it, he discovered that the deck was not securely connected to the original posts on which it was constructed. He asked Mr. Leonard to look at the deck. Mr. Leonard observed other deficiencies.

[75] The deck was redone and the plaintiffs seek the cost of replacement as part of their damages.

[76] The Cassidy’s tendered various photographs of the deck taken after 2002 and before the sale to the Browns. These photographs show people sitting and standing on the deck. The Cassidy’s had no issues with the stability of the deck, nor did Mr. Brown and his mother before his stumble in 2013.

k. Damages Sought

[77] The Browns seek damages of $85,100.17 comprised of 3,914 hours expended by Mr. Leonard for labour at $15/hour, materials purchased for the repairs and remediation of the interior of the house and exterior drainage system and deck, and out-of-pocket expenditures to third parties like Basement Boss.

[78] Mrs. Brown suffers from asthma. Her breathing was dramatically impacted by the mold in the house once it was discovered and exposed. The Browns were absent from Ontario for a planned trip to Florida while much of the repairs were done. They extended the length of the trip so that the remedial work on the interior could be completed by Mr. Leonard.

[79] While they were away, Mr. Leonard kept Mr. Brown informed of his efforts and progress via email and telephone. Mr. Brown left cash in the hands of a friend who paid for materials purchased by Mr. Leonard at local stores using his contractor discount where possible.

Law

[80] The doctrine of caveat emptor [“let the buyer beware”] applies to residential real estate transactions in Ontario. The underlying rationale for the doctrine rests on a policy decision as to which party should bear the risk of any deficiencies in property purchased. In general, that risk is to be borne by the purchaser unless the circumstances fall within recognized exceptions. The buyer may otherwise protect him or herself by contractual terms.

[81] The courts have recognized four exceptions to the rule of caveat emptor:

1. where the vendor fraudulently misrepresents or conceals;
2. where the vendor knows of a latent defect rendering the house unfit for habitation;
3. where the vendor is reckless as to the truth or falsity of the statements relating to the fitness of the house for habitation; and
4. where the vendor has breached his or her duty to disclose a latent defect that renders the premises dangerous: McCluskie v. Reynolds, 1998 CarswellBC 1543 (B.C. S.C.) at para 53.

[82] The plaintiff must prove the following to establish a fraudulent misrepresentation was made by the vendor:

1. the vendor made a representation of fact;
2. the representation was false;
3. the vendor knew the representation was false or made it recklessly; and
4. the representation did, in fact, induce the plaintiff to enter into the agreement to his or her prejudice: Cartwright v. Benke, 2011 ONSC 2011 at para 25.

[83] The law distinguishes between latent and patent defects. A patent defect is one that would be apparent to a purchaser without further inquiry or inspection. A purchaser does not need the vendor to point out a patent defect because it is plain to the senses. A purchaser is expected to protect himself from patent defects by ordinary inspection or inquiry: Cardwell v. Perthen, [2006] BCSC 333 at para 122. A purchaser can also protect himself by including contractual warranties that survive closing.

[84] A latent defect is a defect not readily apparent to an ordinary purchaser during a routine inspection of the property. A vendor can be liable to a purchaser if he or she knows of a latent defect that renders the premises unfit for habitation. The onus rests on the purchaser to show that the vendor knew of the latent defect, concealed the latent defect or made representations with reckless disregard for the truth: Cotton v. Monahan, 2011 ONCA 697 at para 3. See also Swayze v. Robertson, 2001 CarswellOnt 818 at para 27; and Jung v. Ip, [1988] CarswellOnt 643 (Ont. S.C.) at paras 16 and 18.

[85] “Concealment” in the context of a latent defect connotes an act done with an intention to hide from view some defect of which the vendor is aware or wilfully blind: Cotton v. Monahan, supra, at para 6. Silence about a known major latent defect is the equivalent of an intention to deceive: Jung v. Ip, supra, para 18.

Issues

[86] This action raises the following issues:

1. Did the Cassidy’s fraudulently misrepresent the condition of their home and, in particular, that there was no water problem in the home or the home was in good condition; viz. fit for habitation?
2. Was the water and mold discovered by the Browns after purchase a latent defect?
3. Did the Cassidy’s have knowledge of the water and mold issues before closing?
4. If so, did the Cassidy’s conceal the water and mold?
5. Were the Cassidy’s reckless and/or wilfully blind to the water and mold issues?

Analysis

i. Fraudulent Misrepresentation

[87] I observe at the outset that although Mr. Brown testified that water leakage was a significant concern to him, the agreement of purchase and sale is entirely silent on that issue. As someone with prior experience as a real estate agent, it is clear that Mr. Brown knew or should have known that there were covenants or warranties that could have been used to protect against his concerns.

[88] I find that Mr. Cassidy disclosed to Mr. Brown the fact that the Cassidy’s previously had water leaking into the basement. Whether he did so on the first inspection/visit or the second is immaterial. Mr. Cassidy showed and discussed with Mr. Brown the cistern as well as the interior sump pump. Mr. Cassidy explained the membrane visible along the exterior foundation walls in response to Mr. Brown’s inquiry. Mr. Cassidy further related to Mr. Brown the exterior drainage work done to remedy water getting into the basement which included the cistern.

[89] By the same token, I am satisfied that Mr. Cassidy advised Mr. Brown that they had had no water problems since the work done in 2002. In other words, I find that Mr. Cassidy disclosed the past water problem, the steps taken to remedy that problem and represented that there had been no further water leakage problems since then.

[90] Neither party testified to any discussion with respect to mold prior to completion of the purchase of the property. Although past water leakage was disclosed, no inquiry was made nor any statement made on the subject of mold contamination.

[91] The determination of the claim in fraudulent misrepresentation in this case depends entirely on whether the Cassidy’s knew of or were wilfully blind or reckless as to ongoing water problems and mold contamination.

[92] I am not satisfied that the plaintiffs have met their burden of proof to establish on a balance of probabilities that the Cassidy’s knew of, were wilfully blind or reckless as to ongoing water leakage or mold contamination in their house. In coming to that conclusion, I note the following:

1. the absence of any visible physical evidence in the basement or other affected areas of the house that would have alerted the Cassidy’s that the water problem was recurring or that there was a mold contamination problem. There were no stains on the walls, tile, base boards or carpets;
2. there is no direct evidence from the Cassidy’s or anyone else who had been in the home previously to evidence knowledge of these issues;
3. the Cassidy’s waited two years after the exterior drainage work was done to ensure that there were no ongoing leakage problems before finishing the basement;
4. the Cassidy’s son, Michael, lived in the bedroom in the basement. It seems to me highly unlikely that the Cassidy’s would permit their son to live in a water and mold infested bedroom, particularly in light of Mr. Cassidy’s occupation as a paramedic and healthcare provider;
5. Mr. Cassidy and his two sons regularly used the basement bathroom to shower without any problems for years preceding the sale; and
6. the Browns testified and the photographs bear out that the basement was attractively decorated and appeared to be in good condition. It was regularly used by the Cassidy’s and their family which would hardly be the case if they knew it was contaminated with mold or suffered from regular or even intermittent water problems.

[93] In summary, I find that the Cassidy’s were unaware of any ongoing water leakage in the basement and were unaware of mold contamination which was only discovered by Mr. Leonard when he lifted up and removed the carpeting, subfloor and drywall. Similarly, I find they were unaware of the mold discovered by Mr. Leonard upstairs and in the attic.

[94] The representation made by Mr. Cassidy that they had had no further water leakage in the basement was an innocent misrepresentation at most.

[95] With respect to the deck, no representations of any kind were made by the Cassidy’s. There is nothing in the evidence to indicate that the deck was not secure and stable at the date of purchase.

ii. Latent Defect

[96] The Browns did not conduct an inspection of the property prior to closing although they certainly had the opportunity to do so. After closing, the initial water problem was detected by Mr. Leonard when he knelt to paint in the doorway between the recreation room and what was Michael’s bedroom. The damp carpet in that location was not visible to Mr. Leonard or at least he did not notice it before he knelt on it.

[97] Neither the water leakage or mold contamination were visible to the Browns before closing. Likewise, the O-ring running along the outside of the foundation walls was buried and clearly not visible for inspection.

[98] The water leakage and mold contamination issues are latent defects. They were not visible on ordinary inspection. The status of the O-ring could only be determined by excavating test holes which were then filled with water. The mold contamination only became visible as and when drywall, brick and carpet was removed.

[99] I am satisfied that the water leakage in the basement was likely caused by the fact that the exterior O-ring was not fully or properly functioning. It became clogged with silt over time. As a result, water did not to drain away from the foundation walls as intended and the water made its way into the basement.

[100] As above, I find that the Cassidy’s were ignorant of the water drainage/leakage and mold contamination issues anywhere in or around the house. They acted at all times consistent with the belief that the water leakage issues were remedied by the work done in 2002. It was entirely reasonable for them to do so. They hired experienced contractors. They waited a reasonable period to be sure the problem was fixed. They saw nothing that led them to understand the problem was recurring, nor was there anything that should have led them to that conclusion.

[101] This is also not a case where once the Cassidy’s belongings were removed from the house, stains and other indicators of water leakage were apparent. Both Mr. Leonard and Mr. Brown were in the house on several locations before the wet spot on the basement floor was found. Neither testified to observing previously unseen stains. The mold only became visible as carpet, drywall, brick etc. were removed. This is not a case of concealment.

[102] Likewise, there is no evidence from which I could reasonably infer that they were aware of or were wilfully blind to the mold on the main floor or attic which was discovered by Mr. Leonard after a comprehensive search.

[103] With respect to the deck, I find that:

1. The fact that the supports were re-attached by connecting boards could have been observed upon inspection before closing. This was a raised deck. An inspection would have revealed same. As such, this complaint is a patent defect which is captured by the doctrine of caveat emptor;
2. In any event, there is absolutely no evidence that the deck was unsafe or unfit for use in the two years after the closing of the purchase. By then, it was a deck with many years of service;
3. There is no evidence that the Cassidy’s knew or should have known at closing that the deck was unsafe; and
4. There is nothing in the Statement of Claim with respect to the deck.

[104] As a result, I conclude that the plaintiffs’ claim in latent defect must fail.

Conclusion

[105] For the above reasons, I conclude that the plaintiffs’ claim should be dismissed. If the parties cannot agree on costs, they may make written submissions not exceeding 5 pages in length within 15 days of release of this decision.

Released: August 29, 2016 Raikes J.