Gladu v. Robineau, 2017 ONSC 37

COURT FILE NO.: C-1255-11-SR

DATE: January 4, 2017

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Patrick J. Gladu and

Danielle M. Boyer-Gladu

Plaintiffs

– and –

The Estate of Michel Robineau and

Diane Guindon-Robineau

Defendants

Marc A.J. Huneault, for the Plaintiffs

Chantal Beaupré, for the Defendants

HEARD: December 2, 2016

REASONS FOR JUDgment

gAUTHIER j.:

Overview

[1] The plaintiffs seek judgment against the defendants for damages suffered by them as a result of alleged deceit, misrepresentation and breach of duty of disclosure respecting the residential property located at 650 Chemin Lac Deux Milles (the “property”), in Sturgeon Falls, in the Northeast Region. The subject property was sold to the plaintiffs by the defendant vendors on October 15, 2009.

[2] The statement of claim, which was issued on April 18, 2011, included a claim for a rescission of the agreement of purchase and sale relating to the property. That claim was abandoned.

[3] Specifically, the plaintiffs allege that:

(a) the septic system installed by the defendants as part of the conditions of the transaction, is insufficient to service the property; it needs to be replaced at a cost of approximately $45,000;

(b) they have suffered a loss of rental income as a result of the insufficiency of the septic system to support the main dwelling as well as the one-bedroom apartment located in the loft of the detached garage on the property;

(c) the well water is not potable and does not meet the needs of the occupants of the property;

(d) there was damage to the retaining wall that existed prior to the closing of the transaction, and which was not discoverable prior to closing (latent defect); and

(e) the sprinkler system was represented as being in good working order, but in fact was inoperable.

[4] The defendants deny having made any representations to the plaintiffs. They maintain that the septic system in question was appropriate for the property and they rely on the Permit and Inspections and Approvals by the North Bay Mattawa Conservation Authority (“NBMCA”). They submit that the plaintiffs relied on their own inspection and did not avail themselves of the right to a third party inspection, provided for in the agreement of purchase and sale.

[5] At the resumption of the trial on November 21, 2016, I granted the plaintiffs’ motion to amend the statement of claim to increase the claim for damages from $100,000 to $130,000 to reflect the ongoing claim for lost rental income.

Facts of the Case

[6] On May 12, 2009, the defendants signed a listing agreement with Remax Legend Real Estate Ltd. Brokerage (“Remax”), to market and sell the property. The vendors’ agent was Richard Sanderson. The listing price for the property was $441,900.

[7] Also on May 12, 2009, the vendors signed the document entitled North Bay Real Estate Board Multiple Listing Service (“MLS”) data entry form, acknowledging and confirming the accuracy of all the information contained in that form, relating to their property.

[8] The data entry form included the following information about the property:

(a) The buildings were approximately twenty-one years old;

(b) There were “2+2 bedrooms”;

(c) There were “2/2 bathrooms”;

(d) The dimensions of the detached garage were 30 x 28 feet;

(e) There was no rental income being generated by the property;

(f) The living room and dining room combined measured 27 x 13 feet;

(g) The kitchen measured 18’6 x 14 feet;

(h) The master bedroom was 22 x 18 feet;

(i) Three other bedrooms were identified as such and had the following dimensions, respectively: 21 x 10’8 feet, 15 x 10’6 feet, and 10’6 x10 feet;

(j) The main floor included both a 3-piece bath and a 2-piece bath;

(k) The laundry room measured 8 x 6 feet;

(l) The sunroom was 12 x 11 feet; and

(m) The upper level of the residence had both a 3-piece and a 2-piece bath.

[9] The data entry form contained additional information such as the inclusion of certain chattels, i.e., a fridge and stove in the garage loft.

[10] Under the “Remarks” portion of the data entry form, one could read this:

Gorgeous Lake Nipissing 4 bdr Cape Cod style home custom built by Conte offers a fabulous floor plan. Formal LR & DR with fieldstone tile by Roger Point. Eat in kitchen with French Doors to 4 seasons sunroom. Mn floor laundry & 2 bedrooms. All principle[sic] rooms with fabulous lake views. Det.triple garage with loft guest apartment. Private fenced setting Must See!

[11] This description of the property was repeated, verbatim, on the signature (last) page of the document.

[12] The MLS listing document, which resulted from the listing agreement between the defendants and Remax, contained a description of the property that was very similar to that contained in the data entry form. It described the property as a four bedroom Cape Cod with four bathrooms (two three-piece, and two two-piece). It added this: “Private fenced lot with sprinkler system and concrete retaining wall at lakeshore….New $20,000 Ecoflow septic system to be installed.”

[13] As part of his dealings with the defendants, Richard Sanderson requested that they remove their Kijiji advertisement, which advertised their Lake Nipissing property for sale, for a price of $499,000. The Kijiji ad described the property as follows:

Lake Nipissing lakefront home. Situated 6.5 km from the center of Sturgeon Falls and 30 minutes from North Bay, on a sheltered, clean, sandy-bottomed bay, swimming suitable for all ages. Approximately 120 ft of lakefront, 135 ft deep and 185 ft. on road. Level, landscaped with mature maple trees. This Cape Cod style home has 2500 sq. ft on one and one half floors, four bedrooms, a field-stone fireplace, ceramic and oak floors, carpeting and ensuite in the master bedroom, four bathrooms, sauna. There is a large detached garage with a one bedroom apartment.

[14] The defendants had severed the lot they were looking to sell from the adjacent lot on which the original septic system which served the property was located. The defendants were to, at their own expense, install a septic system to serve the property they were listing for sale.

[15] The plaintiffs first became aware of the property after receiving a copy of the MLS listing, from which they gleaned that the property was 2,500 square feet in size, had four bedrooms and four bathrooms, as well as an apartment in the loft of the garage.

[16] At the time, they were living and working in Toronto and occupying a home they owned, which also contained a rental unit. Both plaintiffs, originally from Sudbury, wished to return to the area to be closer to family.

[17] They first saw the property while driving on Chemin Lac Deux Milles in July of 2009. According to their testimony, the defendant Diane Guindon-Robineau was outside the property and allowed them to walk around the outside. She declined their request to go inside as she said the house was not in a condition to be viewed.

[18] Danielle Gladu contacted Shawn Lavigne, a real estate agent, and arranged to visit four homes, including the property that is the subject of these proceedings.

[19] The property was the last of four properties the plaintiffs visited. Danielle Gladu was very impressed with the home: its size, the views of the lake, the apartment in the loft of the garage, which could be of assistance to the plaintiffs in connection with the mortgage. She described the property as “her dream home.”

[20] According to Danielle Gladu’s testimony, her husband was not as enthusiastic as she was about the property. The purchase price was higher than the range they had been contemplating, which, according to Patrick Gladu, was $250,000 to $300,000.

[21] Patrick Gladu ultimately agreed to purchase the property because it was Danielle’s dream home, and because of the potential for rental income from the apartment in the loft of the garage.

[22] The plaintiffs instructed their realtor to prepare an offer to purchase and that was done on August 31, 2009. The plaintiffs were offering to purchase the property for $420,000. The vendors countered with a sale price of $432,500, which price the plaintiffs accepted. The closing date was to be October 30, 2009.

[23] The agreement of purchase and sale included the following conditions:

FUTURE USE: Seller and Buyer agree that there is no representation or warranty of any kind that the future intended use of the property by the Buyer is or will be lawful except as may be specifically provided for in this Agreement.

This offer is conditional upon the inspection of the subject property by a third party and the obtaining of a report satisfactory to the Buyer at the Buyer’s own expense….the Seller agrees to co-operate in providing access to the property for the purpose of this inspection. This condition is included for the benefit of the Buyer and may be waived at the Buyer’s sole option by notice in writing to the Seller within the time period….

The Seller agrees to install at the Seller’s own expense a new eco-flow septic system on or before the 23rd day of October, 2009.

The Seller represents and warrants, to the best of the Seller’s knowledge and belief, that at the time of installation:

(1) all sewage systems serving the property are wholly within the setback requirements of the said property, and had received all required Certificates of Installation and Approval pursuant to the Environmental Protection Act;

(2) all sewage systems serving the property had been constructed in accordance with the said Certificates of Installation and Approval;

(3) all sewage systems serving the property had received all required use permits under the said Act or any other legislation; and

Further, all sewage systems serving the property have been maintained in good working order during the seller’s occupancy and will be in good working order on closing.

Further, the Seller agrees to provide any and all documentation relating to the sewage system, within the Seller’s possession, or which may be made available to the Seller by the appropriate authorities, and given to the Buyer prior to the last date set for examining title. The Parties agree that these representations and warranties shall survive and not merge on completion of this transaction, but apply only to the state of the property existing at the completion of this transaction.

The Seller agrees to supply to the Buyer, prior to the last date set for examining title, a current Bacteriological Analysis of Drinking Water from the local health authority having jurisdiction over the area, with a rating indicating that there is no significant evidence of bacterial contamination.

[24] The defendants executed a Seller Property Information Statement (“SPIS”), about which I will have more to say.

Before Closing

[25] The plaintiffs visited the property several times between the date of the agreement of purchase and sale and the closing date, either alone, or with family members.

[26] During the first visit to the home by the plaintiffs and their realtor, they inspected the entire residence as well as the garage and loft apartment.

[27] In the residence, Patrick Gladu observed four bedrooms, each with a closet.

[28] Michel Robineau invited Patrick Gladu to taste the water from the faucet in the kitchen of the residence.

[29] Patrick Gladu described the apartment as being about 450 square feet in dimension, and included a bedroom with a small closet, a washroom with a shower stall, a combined living room and kitchen with a refrigerator, stove and sink. He observed water in the toilet, but did not turn on faucets.

[30] Outside the residence, Patrick Gladu observed the retaining wall, but could only see the top portion given the high level of the lake water. He did not observe any holes in the retaining wall, nor any sandbags, which were discovered after the sale of the property was completed.

[31] Patrick Gladu saw the sprinkler system, but he could not test it, he said, because the pump with which it functioned with had been removed for the season.

[32] The loft apartment had been rented out at one point in time.

[33] At some point before the transaction closed, the realtor took a sample of the drinking water in the residence and had it tested, as provided for in the agreement of purchase and sale. The results of the tests were satisfactory.

[34] No third party inspection was conducted as provided for in the agreement. Rather, Patrick Gladu conducted his own inspection with Michel Robineau and he testified that he was satisfied with what he had observed and with the representations made to him by Michel Robineau. I will have more to say about those representations later in these reasons for judgment.

After Closing

[35] The plaintiffs waived the conditions on September 23, 2009, and the transaction was completed on October 15, 2009.

[36] The vendors had installed an Ecoflo septic system on the property, purportedly in accordance with the terms of the agreement of purchase and sale. The system was a ST-650 Fiberglass Ecoflo Biofilter (suitable for three to four bedrooms.)

[37] The plaintiffs took possession of the property and planned to modernize the loft apartment the following spring so they could rent it out and use the rental income to assist with their mortgage payments. Both plaintiffs testified about the plan to rent out the loft apartment, and how they would not have purchased the property if they could not bring in some rental income.

[38] Two days after closing, the plaintiffs detected a bad smell from the well water in the home, which had become discoloured. Attempts were made by the plaintiffs to “shock” the well (put chlorinated pellets into the well). That did not solve the water problem.

[39] In May 2010, the plaintiffs had Northern Water Treatment of Noelville remove the galvanized plumbing in the crawl space in the home and replace it with brass and install a water treatment system to remove iron, sulphur and unpleasant odours. This appeared to resolve the well water issue; however, the bad odour came back after about three months. Northern Water Treatment made numerous visits to the home to attempt to rectify the problem, but to no avail.

[40] The plaintiffs testified that the well water problems have persisted consistently since the summer of 2010. Some days the water coming out of the faucets is black, and leaves a film on everything it comes into contact with.

[41] As the water is not potable, the plaintiffs keep a five-gallon camping water jug for boiling, and for cooking. In addition, they have a water cooler which supplies their drinking water.

[42] On some occasions, according to Danielle Gladu, they have to run the water in the shower for five to ten minutes, in order to have it clear enough to be able to shower.

[43] At some point following the closing of the transaction, Patrick Gladu was approached by a third party, Garry Serre, who told him that he should look into the adequacy of the septic system installed by the vendors. Garry Serre had been interested in purchasing the vendors’ property and had visited it on at least three occasions. He had discussed with Michel Robineau the proposed installation of the Ecoflo ST-650 system. Garry Serre did some research on the particular system that Michel Robineau proposed to install on the property, and he formed the opinion, based on his research and calculations, that the system proposed was too small for the property. Garry Serre testified that he raised his concerns with Michel Robineau. According to Garry Serre, Michel Robineau told him that he had not included the loft apartment in his calculations for the septic system. Garry Serre would not purchase the property with a septic system which, as stated, he viewed as inadequate. Garry Serre required a septic system which would permit him to have his parents-in-law live in the loft apartment.

[44] After his discussions with Garry Serre, Patrick Gladu made inquiries of the NBMCA regarding the adequacy of the septic system installed by the vendors. He received the opinion, based on his description of the property, that the septic system installed by the vendors was inadequate.

[45] The damages brief sets out the amounts claimed by the plaintiffs, relating to the septic system, well water, the retaining wall, and the sprinkler system. I will return to this later in these reasons.

The Evidence

[46] I note at the outset that there was considerable communication between the plaintiffs and the defendants, after the closing, about the alleged defects complained about by the plaintiffs. There was also considerable correspondence from Michel Robineau to the plaintiffs, to the municipality, and to the NBMCA. I will refer to that correspondence in the analysis section of these reasons.

Patrick Gladu

[47] This plaintiff described his visits to the property between the date of the offer and the date of closing.

[48] On one such visit, Michel Robineau had Patrick Gladu perform a taste test by giving him water from the faucet to taste and then water from a bottle. The tap water tasted good to Patrick Gladu. Michel Robineau is reported to have said words to the effect that the water from the faucet (and thus the well) was as good as bottled water.

[49] According to Patrick Gladu, it was on this occasion that Michel Robineau suggested that the plaintiffs could rent out the loft apartment to help out with the mortgage, or it would be a perfect place for Patrick Gladu’s in-laws.

[50] At no time did Michel Robineau say that the apartment was not rentable.

[51] Patrick Gladu did not include a clause in the agreement of purchase and sale regarding the ability to rent out the loft apartment. Nor did he check for compliance with the Ontario Fire Code, O. Reg. 213/07. He did, in preparation for the trial, obtain advice from the municipality to the effect that the loft apartment was a legal-non conforming use. This means that rental of the loft apartment would not be in violation of the zoning by-law.

[52] Patrick Gladu was very clear that he was never given the four page application for the septic system (Exhibit 6), including the sketch showing the hook up to the residence (but not the garage). Nor did he observe them to be laid out anywhere in the home during his visits to the property.

[53] On another occasion, Patrick Gladu and Shawn Lavigne attended the property. They went into the garage and up to the loft. He observed water in the toilet. He did not recall having turned on any faucets.

[54] During a visit in mid-October, Patrick Gladu went to the garage and observed that Michel Robineau had effected repairs to the cold water pipes. Michel Robineau showed him how to winterize the apartment. Patrick Gladu was given the document marked as Tab 11 of Exhibit 1, being notes prepared by Michel Robineau and dealing with the maintenance of the property.

[55] Page two of the document has the heading “Apartment” and says the following:

For winter, close off the water valve in the house crawl space. Open all the valves in the apartment. Leave the heat set for minimum heat. Plug in the heated line in the garage. This has worked correctly for twenty years. Closing off the heat and draining the lines has not worked.

[56] The apartment did not have a hot water tank. Patrick Gladu testified that he asked Michel Robineau to install a hot water tank, but Michel Robineau refused that request. He did offer to come and help Patrick Gladu when he purchased a new hot water tank.

[57] Since the hot water was not operational Patrick Gladu was unable to inspect the condition of the hot water pipes. After closing, Patrick Gladu observed damage to the hot water pipes. It cost $2,373 to repair.

[58] On one of the visits, Patrick Gladu inquired about the sprinkler system. Michel Robineau told him that it was disconnected and the pump had been put away for the season. Patrick Gladu says he had no opportunity to inspect the pump.

[59] Neither was Patrick Gladu able to inspect the condition of the retaining wall, given the high level of the water. After closing, Patrick Gladu observed the crack or hole in the wall and he also observed sandbags. His theory is that the defendants placed the sandbags there because they knew about the damage to the retaining wall and did not disclose it.

[60] With regard to the quality of the well water, the plaintiffs theorize that the defendants manipulated the test results, and that they did so knowing that the water quality was poor. The plaintiffs have claimed the cost of constructing a new well.

Danielle Gladu

[61] Danielle Gladu confirmed that the plan was to modernize the loft apartment and rent it out to help out with the mortgage payments. She further confirmed the problems with the water coming from the well shortly after closing: offensive odour, discolouration, and sediment or film residue. She confirmed that the iron conditioner ceased to function within days of closing.

[62] She confirmed a conversation with Diane Guindon-Robineau about how the defendants had lived in the apartment when the house was being constructed, and that there had been a tenant at one time.

[63] Danielle Gladu confirmed that she and Patrick Gladu first saw the SPIS after they had made the offer to purchase. Despite having some concerns about the comments relating to the iron conditioner, and the possibility of water in the crawl space, the plaintiffs asked no questions of the vendors.

[64] Danielle Gladu also had no recollection of having seen the septic system permit in advance of closing.

[65] Danielle Gladu testified about having personally served the statement of claim on the defendants when the defendants were present on the adjacent vacant lot.

[66] She indicated that Michel Robineau was visibly upset. He told Danielle Gladu a number of things including that he had a 27-page letter that he was going to send to the Chief of Police and the Chief Administrative Officer of the municipality and, if he did not get a satisfactory response, he would go to the North Bay Police Service.

[67] Danielle Gladu testified that Michel Robineau said “Tu vas payer cher, ma belle, tu vas payer vraiment cher.” Danielle Gladu told me that she felt threatened by Michel Robineau on that occasion. She felt that he was threatening Patrick Gladu’s job.

Gerard Dignard

[68] Michel Gladu called Gerard Dignard to opine on the adequacy of the septic system installed by Michel Robineau on the subject property.

[69] Gerard Dignard holds a diploma in agricultural technology, with specializations in soils and business management relating to the expertise required to conduct assessments and prepare designs for the disposal of wastewater treated effluent. He also is the holder of a registered building code identification number issued by the Ministry of Municipal Affairs and Housing, a certification that allows him to practice under Part 8 of the Ontario Building Code, O. Reg. 332/12 (the "Code"), relating to sewage systems. In addition, Gerard Dignard is certified as a trainer for persons who conduct business under Part 8 of the Code.

[70] In addition to his training and accreditations, Gerard Dignard has considerable experience, having installed over 5000 septic systems in Ontario and abroad.

[71] He was qualified by me as an expert in the areas of (a) installation and costing of septic systems; (b) the Code requirements for the installation of septic systems; and (c) the risks associated with defective or undersized septic systems.

[72] Gerard Dignard described the steps that are taken when looking to install a new or replacement septic system. The first step is to collect the necessary information from the owner of the property on which the system will be installed: size (square feet) of the residence, number of bedrooms, and number of fixture units, which includes toilets, showers, sinks, dishwashers, etc. The information is required to calculate the daily flow to be managed by the proposed system (i.e., how many litres flow through the system per day). A site review is conducted to determine the location of the well, clearance distances to property lines, and surface water if applicable. A soil sample is taken and submitted to a laboratory for examination. Once that has been done, the system can be designed. The required application is then submitted to the registered Code agency involved, such as the NBMCA, for review and approval, in accordance with Part 8 of the Code.

[73] Once the permit is issued, the installation work begins, and once installation is complete, an inspector approves same and permission is granted to cover the system and for it to be used.

[74] Gerard Dignard was very clear that ultimately, it is the owner's sole responsibility, under the Code, to provide accurate and truthful information, to the designer, the installer, and the regulator (in this case the NBMCA), in order for the designer to formulate the proper design.

[75] Calculating the daily flow, or design switch flow, is the same regardless of the current use of the property. It is the infrastructure, and not the use or occupancy level, that dictates the design and flow rate capacity, in accordance with Code requirements. In other words, whether bedrooms are in use as such, and regardless of the number of persons occupying the residence, a system must be designed to full capacity. There are no exemptions.

[76] This witness specified that, whether or not the apartment was in use, is irrelevant. If the area is part of the infrastructure, it must be included.

[77] The only deviation from this principle is if a registered Code agency has received and approved a change of use request, i.e., to convert a four-bedroom home to a three-bedroom home with a sewing room. This was not the case at the Lac Deux Mille property.

[78] According to this expert, on the basis of a 2,500 square foot home, with four bedrooms and 32 fixtures involved, including the loft apartment in the garage, the design flow required was 3,100 litres per day.

[79] The risk with an undersized or insufficient system is that the system can fail, allowing improperly treated effluent into the environment, contaminating or potentially contaminating surface or ground water, well water, lake water. Many of these risks are associated to health and safety, to blue algae, and environment degradation and environmental health, and finally, public health.

[80] Gerard Dignard opined that the cost of the proper system would have been double what Michel Robineau paid for the system he had installed.

[81] Gerard Dignard provided Patrick Gladu with an estimate outlining what is required to bring the existing septic system into compliance with Part 8 of the Code, and how much it would cost. The estimate included the following:

• The existing septic tank is undersized. Would have to be replaced with a larger tank to meet code and access risers installed to allow for regular maintenance.

• In dept (sic) site assessment.

• A new system design and application to be submitted to NBMCA

• The pump and pump station size would have to be upgraded.

• Pressure line tested for pressure test to assure constant flow if not sufficient pressure line would have to be replaced.

• A second Ecoflo would have to be installed as per code.

• The access to property would have to be via existing fence area – “dismantling replacing.”

• Removal of a few trees to accommodate installation of second Ecoflo.

• A retaining type wall to be installed to contain the newly installed Ecoflo since of close proximity to house and ease landscaping maintenance, erosion.

• New landscaping affected areas.

[82] As of October 31, 2011, the cost would have been $36,695 plus HST. This amount did not include the value of the trees that would have to be removed to accommodate the larger system.

[83] As of October 23, 2014, the cost had risen to $41,425 plus HST.

[84] Gerard Dignard also provided the opinion that, once the required system is installed, the "building envelope" would be at capacity, meaning any additions to the residence or the garage would not be possible. As the actual daily flow requirements exceed what was installed, the remedial work would result in a bigger "footprint" by the proper system, occupying more area than the existing system.

Robert Palin

[85] I heard from Robert Palin, the Manager of the Septic System Program for the NBMCA. He occupied that position when the permit was issued for the property.

[86] He referred to Exhibit 6, the notice of completion for the system installed by the defendants. The document is dated April 22, 2010. The permit that was issued for that property was for a three-bedroom home having an area of 114 square metres (1,227 square feet), and containing 27.5 fixture units.

[87] The Conservation Authority relies on the information provided by the applicant. It does not send someone to verify the information provided about dimensions, number of bedrooms, or number of fixture units.

[88] Robert Palin confirmed that whether a bedroom is used as such or not is not relevant to the application for the permit. It is the number rather than the occupancy or use of the room that governs.

[89] Robert Palin explained that the information, which appears on Exhibit 6, and the basis upon which the permit was issued, was provided by the owner, Michel Robineau. The calculation of the flow rate was governed by that information. The flow rate, based on that information, was 2,200 litres per day.

[90] Robert Palin provided Patrick Gladu with a letter dated September 21, 2010, which was part of the joint book of documents in the trial. Included in that letter are the following statements:

Septic permit 21/SP/08 identifies a sewage system that was designed for a 3 bedroom, 144 m² living area and 27.5 fixture units. The daily design sewage flow was estimated to be 1975 litres per day. Based on this flow estimate the septic permit requires a septic tank sized at 4500 litres and an Ecoflo Biofilter ST-650 with an area bed of 27 m². Records indicate that a 4700 litre septic tank, an Ecoflo Biofilter ST-650 unit and a 42.9 m² area bed was installed on or about September 24, 2009 by Ray’s Septic. The system installed is of sufficient size to accommodate a daily design sewage flow of 2350 litres per day. The most restrictive component is the septic tank at 4700 litres the daily flow is 2350 litres. The next most restrictive component is the Ecoflo Biofilter unit which is rated at maximum design daily sewage flow of 2500 litres per day.

Based on the information you provided, the house is a 5 bedroom, 226m² living area and 32 fixture units. Based on this configuration the daily design sewage flow for such a structure would be estimated at 3100 litres per day. This would require a 6200 litre septic tank, two Ecoflo Biofilter ST-650 units and an area bed of 62 m². The daily design sewage flow exceeds all of the components of your existing sewage system and therefore your system must be upgraded. Please be advised that a sewage system permit is required for any alteration made to the system. Permits for the sewage system must be obtained from this office prior to construction.

The comments contained herein are limited to the application of Ontario Regulation 350/06 of the Ontario Building Code. The investigation undertaken by the NBMCA with respect to this letter and any conclusions or recommendations made herein reflect the NBMCA’s judgment based on information provided on the application and on the site conditions observed at the time of the site inspection on the date set out in our file and on information available at the time of the writing of this letter. Nothing in this letter is intended to constitute or provide a legal opinion.

[91] He testified that based on the size of the residence, the number of bedrooms, the number of fixture units, and the resulting daily flow capacity required, the existing system is insufficient, and a work order could be issued by the NBMCA.

Richard Sanderson

[92] Richard Sanderson, the vendors’ agent, testified that while he had dealings with the defendants, Remax was using a website provider called Your On-Line Agents. He described that as a questionnaire that potential vendors fill out and email to their real estate agent.

[93] Richard Sanderson identified Tab 16 of Exhibit 1 as the completed questionnaire that he received from Michel Robineau on May 10, 2009. It described the property as being zoned single family residential, having four bedrooms, four bathrooms, and two ensuites, among other descriptions.

[94] Under the heading “!!!!!!!‘Special Features/Upgrades’”, the following information was provided:

The final sales [sic] price includes a brand-new complete Eco-Flow [sic] septic system, quoted at approx. 20,000$, to be installed by Ray’s Septic, Sturgeon Falls. The approved permits have been issued.

There is a one bedroom apartment over the garage, with a separate entrance.

[95] Richard Sanderson attended at the defendants’ residence on May 12, 2009, to discuss the listing and marketing of the property.

[96] According to Richard Sanderson, those discussions included the septic system to be installed. The agreement was that a new septic system would be installed prior to the sale of the home, adequate to service the home and the apartment. Richard Sanderson testified that, when the listing agreement was initially drawn up, he and Michel Robineau walked the front of the property. Richard Sanderson asked how the apartment was going to be hooked up to the new septic system. Michel Robineau apparently replied that the line was going to go across the front of the house and tie into the system that was to be installed.

[97] The advertisement to be used by Remax to market the property, marked as Exhibit 22, described the loft as a “one bedroom loft guest apartment” in the garage.

[98] According to Richard Sanderson’s testimony, the defendants wanted to have the apartment advertised as a legal apartment. It was Richard Sanderson’s decision to use the specific words “loft guest apartment”, to ensure that the advertising did not imply that it was “legal” apartment. It could only be used for guests, according to Richard Sanderson; he offered that the zoning did not permit its use as an apartment.

[99] Richard Sanderson agreed with the suggestion that the defendants paid attention to details. In one instance, they pointed out to Richard Sanderson that he had, in one document, provided an incorrect legal description and lot size.

[100] Richard Sanderson further indicated that the defendants had reviewed and approved the feature sheet on the listing for the property. That feature sheet referred to “one bedroom loft guest apartment” under the heading “Property Specifications” and the heading “Features of this Property.” The feature sheet further made referenced to the “private fenced level landscaped lot with sprinkler system.”

Shawn Lavigne

[101] Shawn Lavigne, the purchasers’ agent, is the one who inserted the septic system clause in the agreement of purchase and sale, recognizing the importance of having proper septic service to the property that was “up to code.”

[102] He had no specific recall of any discussions with purchasers about their proposed use of the property.

[103] He had no recall of seeing any papers about the septic system on a table in the residence when he showed the property; he said perhaps there were some utility bills.

Diane Guindon-Robineau

[104] Diane Guindon-Robineau testified about having occupied the loft above the garage for several months, during the time the main residence was being constructed in 1987.

[105] From mid-1988 until 1991, and from 1994 until the sale, the loft was used primarily for storage. Occasionally, there would be guests who occupied the loft. However, according to Diane Guindon-Robineau, they could not use the bathroom as the water was not connected to the loft; the guests would have to come and use the facilities in the main residence.

[106] She indicated that the loft was rented for a two-year period, being the academic years 1991-1992 and 1993-1994. The defendants stopped renting the apartment as a result of changes made to the laws governing rentals in 1994 by the NDP government. It would have cost too much money doing renovations to be in compliance with the new laws, and the amount of rent the apartment would generate would not make it worth their while, as it would result in the defendants being in a higher tax bracket.

[107] Diane Guindon-Robineau spoke about having converted the smallest of the four bedrooms in the house to a study and later a sewing room. Essentially, the fourth bedroom was never used as such. The doors of the closet had been removed and shelving had been installed. When they began to market the house for sale, they put the closet doors back on.

[108] The defendants decided in 2008 to sell the property. The initial plan was to sell both lots: the one on which the residence was located, and the adjacent vacant lot.

[109] Diane Guindon-Robineau testified about the contact the defendants had with their first realtor from Century 21. No offers were received during the listing period with Century 21. The defendants later decided to attempt to sell only Lot 19 (the residence) and to keep the adjacent lot and perhaps build a cottage on it. As the septic system that was servicing the residence at that time was not wholly on Lot 19, new surveys were required to redraw the lot lines. A new septic system would be required for Lot 19.

[110] They met with Denis Lafreniere, of Ray’s Septic Service, in the fall of 2008 to apply for a permit to install the new septic service. Denis Lafreniere walked around the outside of the residence, then all three of them sat at the kitchen table and Denis Lafreniere filled out the necessary papers to apply for the approval of a new septic system by the NBMCA.

[111] According to Diane Guindon-Robineau, when asked about the size of the house, the defendants advised Denis Lafreniere that the house was 2,500 square feet. Denis Lafreniere indicated that he only required the size of the “living space” and that closets, stairs, fireplaces, etc., were not included in the calculation of the size of the house.

[112] The defendants indicated to Denis Lafreniere that there were three bedrooms in the house plus a study. All of the information they gave was based on their own use of the property at the time.

[113] According to Diane Guindon-Robineau and contrary to the evidence given by Denis Lafreniere, the defendants asked Denis Lafreniere about including the garage apartment loft in the calculation and in the system. Apparently, Denis Lafreniere advised the defendants that it would be too much for the system. Diane Guindon-Robineau understood this to mean that there was not enough room on the lot to accommodate a larger system to include the loft. Additionally, she testified that she saw no point in hooking up the garage to a septic system as the loft was not usable, except for occasional guest use.

[114] According to Diane Guindon-Robineau’s testimony, it was the issue of space, and not the cost of a larger system, which informed the decision to not include the garage in the septic system.

[115] It is at this point, says Diane Guindon-Robineau that she decided that the loft was condemned; she used the French word “condamné.” She used that word, she said, because the septic system they were installing would not service the loft. She understood that you could not have both the residence and the apartment on that system.

[116] It was Denis Lafreniere who wrote the information on the application and who recommended the model of Ecoflo system to be installed. The defendants signed the application form and certified the truth of the information provided, to the best of their knowledge.

[117] In cross-examination, Diane Guindon-Robineau admitted that she did not read the documents before signing them. She did not, at the time, appreciate that the defendants, as the owners of the property, were responsible for ensuring that the information provided was accurate.

[118] Diane Guindon-Robineau’s evidence was that she believed, at the time of the installation of the septic system, that is late September 2009, that it was adequate for the property, that is, adequate for a three to four bedroom house. She understood that the garage and loft were not to be connected to the new system.

[119] As indicated, the defendants listed their home for sale with Richard Sanderson of Remax on May 12, 2009. Richard Sanderson suggested that they market the property as a four-bedroom home, rather than a three bedroom home; the defendants agreed.

[120] Contrary to the evidence of Richard Sanderson, Diane Guindon-Robineau maintained that there was no discussion whatsoever between the defendants and Richard Sanderson about the septic system or its requirements.

[121] There was a great deal of evidence about the number of bedrooms in the home. At the end of the day, I am finding that it was a four-bedroom house. Diane Guindon-Robineau agreed that it was reasonable for prospective purchasers to conclude that the residence had four bedrooms and not three.

[122] The defendants told Richard Sanderson that the loft was not rentable; they also believed, she said that, with the lot severance, the zoning would no longer permit a rental.

[123] Diane Guindon-Robineau testified that she believed that it was Richard Sanderson’s idea to add the word “guest” to the description of the loft apartment. She testified further that the words “loft guest apartment” were meant to promote the property and create interest in it; to let prospective purchasers know that there was a space that could be used for guests on occasion.

[124] According to Diane Guindon-Robineau, the defendants had copies of the application for the permit (pages 2 to 5 inclusive of Exhibit 6), together with utility bills and other documents fanned out on a table in the living room for prospective purchasers to view or take, at all times when the property was shown, including when it was shown to the plaintiffs.

[125] Diane Guindon-Robineau first met the plaintiffs after the agreement of purchase and sale had been entered into. With regard to Patrick Gladu’s evidence about having met her before they visited the property with Shawn Lavigne, Diane Guindon-Robineau explained that Patrick Gladu must have met her relative who was housesitting for the defendants at the time that Patrick Gladu first walked around the outside of the property.

[126] Diane Guindon-Robineau testified about a number of visits by the plaintiffs alone, together, or with other persons, before the closing of the transaction.

[127] She recalled that on September 23, 2009, Patrick Gladu came to the property with his father. They inspected the residence. It was during this visit that the “taste test” was conducted. Diane Guindon-Robineau testified that Michel Robineau was very proud of the quality of their well water, and he would frequently have guests conduct a taste test, comparing the tap water and bottled water.

[128] The next day, Danielle Gladu came to the home with her mother, having called ahead to ensure it was convenient to the defendants. Diane Guindon-Robineau accompanied the visitors up to the loft. According to her evidence, Danielle was chatting about being able to work in the loft. Danielle’s mother said something to the effect that she could stay there when she and her husband visited in the summer. Diane Guindon-Robineau did not, at that time, or at any other time, point out that there was no water connection to the loft, or that the garage was not hooked up to the septic system.

[129] Diane Guindon-Robineau recalled that Danielle Gladu asked her, on that occasion, why they had stopped renting the loft. This surprised this defendant, she said, because she did not know how the plaintiffs knew that the defendants had, at one time, rented out the loft. This is consistent with Patrick Gladu’s evidence about his discussion with Michel Robineau about rental of the loft apartment in the absence of Diane Guindon-Robineau.

[130] Diane Guindon-Robineau testified that she did not, at that time, or at any other time, know that the plaintiffs were contemplating being able to rent the loft.

[131] Diane Guindon-Robineau related the events of another visit on October 13, 2009. Michel Robineau requested this visit to allow him to review with Patrick Gladu information about how to maintain the property. She indicated that Michel Robineau and Patrick Gladu went out to the garage where Michel Robineau showed Patrick Gladu the repairs he had recently made to the cold water pipes leading to the loft. Apparently, Michel Robineau wanted to ensure that the water system to the loft was functioning properly. He had tested it, had observed cracks in the cold water pipes and had repaired them. Diane Guindon-Robineau said that she had been quite surprised to see Michel Robineau doing repairs and testing the running of the water to the loft at that time, as there had not been any water to the loft for many years.

[132] On that same visit, she observed Michel Robineau and Patrick Gladu holding some papers in their hand. The suggestion was that it was the document marked as Exhibit 11, the property maintenance note written by Michel Robineau, about which I will have more to say later in these reasons.

[133] Diane Guindon-Robineau testified that, after the closing of the transaction, she received a phone call from Danielle Gladu who was complaining about the water, this would have been on or about November 20, 2009.

[134] Diane Guindon-Robineau’s evidence was to the effect that, during the defendants’ period of ownership, the well water was always of sufficient quantity and of good quality. She always drank that water. She indicated that it required a lot of effort to keep the water to such a high quality and there were specific steps to be taken and specific equipment used. She testified that, at closing, the water was of good quality, the water softener was functioning, and the iron conditioner, although noisy, was functioning.

[135] This defendant’s description of the sprinkler system was that it was a homemade, or “cobbled together” system that Michel Robineau had put together to water the flowerbeds, at a total cost of approximately $150. There never was a professional system, or any “lawn sprinkler system.” The system involved the use of a pump on the break wall, which had been disconnected and put away for the season when Patrick Gladu was doing his inspection of the property. She agreed that he could not have carried out an inspection of the system. She also indicated that the lines or pipes to the system had been accidentally cut during the installation of the septic system. Denis Lafreniere had assured the defendants that he would repair the damage. Apparently, that did not occur.

[136] Diane Guindon-Robineau testified that there was a fissure or crack in the retaining wall; it was approximately eight inches long and three inches wide. It was observable if you leaned over the wall, or if you were on the water. It was visible and not hidden by the lake water.

[137] The defendants did not place any sandbags at the retaining wall. Their neighbour did have some sandbags at his retaining wall. Diane Guindon-Robineau offered that perhaps those sandbags had drifted over to their property.

[138] Diane Guindon-Robineau testified that after the sale, and after Patrick Gladu had made complaints about the property to the defendants as well as to other individuals, she and Michel Robineau considered taking the house back. She reiterated this fact several times in the course of her testimony. This is completely contrary to the position that was being taken by Michel Robineau about the litigation and the possible outcome, as can be seen in the “advisories” written by Michel Robineau and forwarded to the plaintiffs in early January 2011.

[139] It was Diane Guindon-Robineau’s evidence that the defendants sold in good faith. They at no time attempted to conceal or misrepresent anything to the plaintiffs.

[140] In cross-examination, Diane Guindon-Robineau testified that in 2008, when the property was listed with Century 21 and their ad used the word “potential,” it was (as it was with the term “guest loft apartment”) to generate interest in the property. She said that she contemplated having a discussion with a potential purchaser and explaining what had to be done to the apartment to comply with the provincial laws governing rentals.

[141] She admitted that the Kijiji ad, which she initially testified had expired, was still active in May 2009, and therefore available to any prospective purchaser.

[142] Diane Guindon-Robineau indicated that she had her doubts about Richard Sanderson being the person who selected the word “guest” for the marketing material. She pointed out that she does not have a good relationship with Richard Sanderson, and does not trust him. I note, however, that in none of the material that was prepared by Michel Robineau in connection with the property, prior to Richard Sanderson taking over, does the word “guest” appear. I note further that Diane Guindon-Robineau indicated at least twice in chief that the word “guest” being added to the description they had provided to Richard Sanderson, came from Richard Sanderson.

[143] She agreed that she had not, at any time, indicated to the plaintiffs that the garage and therefore the guest loft apartment was not hooked up to the septic system.

[144] When asked about the passage in Exhibit 11 that deals with maintenance of the apartment, and with closing off the water for the winter, “This has worked for twenty years” and how this contradicted her evidence that there had been no water to the apartment for many years, she offered that Michel Robineau “must have figured that it was working.” She was very clear in her testimony that there was no running water to the loft and she conceded that the actual state of affairs was different from what Michel Robineau had indicated in that document. She agreed that the notes had been given to Patrick Gladu prior to closing, and that it was reasonable for him to rely on their contents.

[145] Diane Guindon-Robineau admitted that it was reasonable for Patrick Gladu to conclude that there was running water to the guest loft apartment, given that he observed Michel Robineau effecting repairs to the cold water pipes, but she added that “if he had run the water, (i.e., turned on the faucets), he would have known that there was no water supply to the apartment, and therefore his guests would not have running water.”

[146] When asked about Michel Robineau doing the repairs to the water pipes in the garage before closing, Diane Guindon-Robineau said, “I had found that very bizarre.”

[147] Diane Guindon-Robineau conceded that her position that there was no properly functioning water system to the guest loft apartment is not consistent with the information contained in the “advisories,” authored by Michel Robineau, and to the effect that “...we left you with a functioning water system.”

[148] This defendant agreed that, possibly, they should have indicated in the portion of the SPIS document dealing with the “lawn sprinkler system,” that it was a system to water the flowerbeds only, and not a lawn sprinkler system. She also agreed that, not only could Patrick Gladu not inspect the sprinkler system, there was no way for him to determine if it was a homemade system designed to water the flowerbeds, as opposed to a lawn sprinkler system because the system was not functional at the time.

[149] This defendant admitted she did the work required to present the guest loft apartment to prospective purchasers as an apartment and not a storage area or studio. She added however that it was meant to be represented as a temporary place, not a place to live full time.

[150] She had removed all the boxes and Christmas decorations and cleaned the guest loft apartment. She “staged” it for marketing purposes.

[151] When it was put to her that a prospective purchaser seeing the kitchen (with appliances) and the bathroom, would reasonably conclude that the loft was hooked up to the septic system, she agreed, but added that a prospective purchaser would also have tried the fixtures.

[152] Although Diane Guindon-Robineau had indicated, during examination in chief that the information provided to the NBMCA was true as it was based on their own use, she admitted that, the ONLY reason they applied for a new septic system was because they were going to sell the house.

[153] She only realized, during the course of the trial, that Michel Robineau had said, in his examination for discovery, that the garage was hooked up to the septic system. She had always thought that it was not connected.

[154] Diane Guindon-Robineau conceded that the garage and the loft are connected to the septic system, contrary to the permit that was issued. She further conceded that it was a reasonable expectation that guests could use the apartment and the fixtures.

Michel Robineau

[155] Michel Robineau died before the trial. His evidence consists of portions of the transcript of his examination for discovery, which was held on February 25, 2013. As part of the evidence in this case, there are also documents authored by Michel Robineau to which I will refer.

[156] Michel Robineau contradicts Diane Guindon-Robineau regarding water hook up to loft. Page 12 of the transcript says, “The cold water was turned off for the whole - that whole period of the sale… It had been closed since the previous summer until mid-October, that’s when I tested it.”

[157] Diane Guindon-Robineau testified that there was no water to the loft for 15 years.

[158] Michel Robineau testified that they had thrown out the hot water tank at “the end of the ‘90s”: see p. 13, question 53.

[159] Michel Robineau agreed the defendants have a four-bedroom house: see p. 24, question 102.

[160] Michel Robineau said the word “guest” was used to indicate “that there was a bunky or a guesthouse or a small place for the extra guest to go in the summertime.”: see p. 25, question 104.

[161] Michel Robineau admitted that there was a kitchen, bedroom and bathroom in the loft: see p. 25, questions 108-111.

[162] Michel Robineau indicated that rent charged for the apartment was $425 per month between 1992 and 1994, inclusive of utilities.

[163] The defendants ceased to rent the apartment for the following reason given by Michel Robineau: “After 1994 the rules to register apartments of that type were outlined more specifically by the NDP government. And we stopped using it or renting it in order to adhere to the NDP rules.”: see p. 26, question 113. This accords with Diane Guindon-Robineau’s evidence on this point.

[164] Michel Robineau believed that the zoning permitted rental: see p. 27, question 117. Their apartment was a permitted rental in an area zoned single-family dwelling.

[165] Michel Robineau was well aware that the house was 2,398 square feet if measured from the inside walls and 2,500 square feet if measured from the outside walls, as referenced by the Municipal Property Assessment Corporation (“MPAC”): see p. 39, questions 170-172.

[166] Michel Robineau believed that the living space dimensions are 2,400 square feet: see p. 43, question 176.

[167] Michel Robineau agreed that the house has two three-piece bathrooms and two two-piece bathrooms, but disagreed that they could be added up to arrive at the total of four bathrooms: see p. 45, questions 184-187.

[168] Michel Robineau did advise the Century 21 realtor in 2008, when asked about the possibility of renting the apartment in the future, that it was possible: see p. 47, question 195.

[169] Michel Robineau admitted that the Kijiji ad that he authored contains a clear representation that there is a one-bedroom apartment above the garage: see p. 51, question 213. And he agreed that it was reasonable for someone to believe that there is an apartment above the garage: see p. 51, question 215.

[170] Michel Robineau agreed that he was responsible for providing accurate information to the NBMCA, that the Conservation Authority would be relying on that information, but he would not concede that he understood that the purchasers would be relying on the information the defendants supplied to the Conservation Authority: see p. 58, questions 245-247.

[171] Michel Robineau maintained that the defendants’ responsibility was to provide the purchasers with a system that was suitable for the house: see p. 59, question 249.

[172] Michel Robineau said: “the permit was in our name and it was for the – it had to meet our needs for the use that we made of the house. And we never had more than three bedrooms in use at any time.”

[173] He conceded the septic system was installed after entering into the agreement of purchase and sale with the plaintiffs

[174] “We took that into consideration and we had a septic system installed for – that met the needs of four bedrooms and thirty fixtures.”: see p. 90, questions 371-373.

[175] Michel Robineau’s evidence was that the loft above the garage was hooked up to the septic system, at all times. During the existence of the first system, and after installation of the new system in 2009: see p. 60, questions 253-258.

[176] This contradicts the information on the application for the permit, which Michel Robineau agreed did not take into account the apartment: see p. 87, question 358. It contradicts the evidence of Diane Guindon-Robineau that there was no water to the garage, and it appears to contradict the position that the defendants applied for a permit for the house only because the guest loft apartment could only be used as a studio or for storage; in such a case why would you hook it up to the septic system?

[177] Michel Robineau testified that they put “N/A” for the question dealing with an outdoor lawn sprinkler on the SPIS, because they understood the question to relate to a professional lawn sprinkler system with a timer. What they had was a simple system that he had put together.

[178] When asked about having put the words “sprinkler system” in the ad, etc., Michel Robineau said:

“…this is an ad that would be given – provided for potential buyers. If they had an inspection done, the inspector would tell them exactly what the lawn sprinkler system had….The information contained in the listing form is from sources believed to be reliable, however, it may be incorrect. This information should not be relied upon by a buyer without personal verification. Do you have an inspection report that says otherwise?” See p. 69-70, questions 284-285.

[179] Michel Robineau said that there were periods of time during their ownership, maybe for two or three years at a time, when the water to the loft was “closed off,” but he would “open it sometimes to test it to make sure that it was working.”: see p. 85, questions 343-344.

[180] Michel Robineau “opened the water in early October and that’s where I discovered that there was a water leak.” He disclosed it to Patrick Gladu: see p. 85, questions 346-347.

[181] Michel Robineau “never had any discussions with Mr. Serre about the size of the septic system and the permit.”: see p. 109, question 436. But he did tell Garry Serre that “the garage was not included.”: see p. 112, question 450.

Advisories

[182] On November 17, 2010, Patrick Gladu emailed Michel Robineau to express his complaints about the (a) inadequate septic system, (b) the inability to rent the apartment, (c) the quality of the well water, (d) damage to the water pipes to the loft apartment, and (e) the sprinkler system. No mention was made about the retaining wall.

[183] By way of a lawyer’s letter dated December 20, 2010, the defendants were put on notice of the plaintiffs’ intention to commence legal proceedings against them.

[184] On December 30, 2010, the defendants responded to the letter of December 20, 2010. I reproduce the relevant portions of that correspondence:

At no time was there a representation of the property during the Re/Max sale, written or otherwise, on our part that included a rental unit, an in-law suite or any other secondary living unit. In fact, the zoning by-laws specifically exclude the use of any type of secondary living units. We have known this since our purchase of the property in 1986. We doubled checked the zoning regulations this last month with the Planning Office of the Municipality. The garage loft is thus an illegal living unit. It can be used for a variety of other reasons, including hosting an occasional guest.

At the time of their first visits (referring to the plaintiffs) until their removal of all conditions, including a home inspection, the loft had no water and no hot water tank. It was a storeroom and painting studio and shown as thus….for the past fifteen years….That is the way it was presented to our agent prior to closing and the way it was presented to all prospective purchasers.

[185] The defendants then began sending the plaintiffs what they called “advisories.” There were seven such “advisories” in total.

[186] Those further communications reiterated that the loft had been used as a storeroom and painting or craft studio for the past fifteen years, and was excluded from the septic permit, that it had been presented as such to all potential purchasers, that the zoning did not permit a secondary rental unit, in-law suite, or other secondary living unit, that “its function was not for habitation,” that the plaintiffs were free to apply for a zoning change, that the sprinkler system was to water flower gardens only, and that the well water was always good.

[187] The last “advisory” suggested that the plaintiffs sell the property. This is completely contrary to Diane Guindon-Robineau’s evidence that the defendants had been contemplating taking back the house, which she said explained the numerous letters written by the defendants to the Municipality between March 26, 2012, and March 27, 2013, containing self-serving statements and allegations against the plaintiffs, i.e., their contravention of the zoning by-laws and the Fire Code.

[188] In one of the communications, the defendants say this:

At this time, we have not had communications with the municipality concerning this situation and we will not be sending it any correspondence without advising you first. We do not wish to compromise Patrick’s position as a municipal employee. However, sooner or later, we will be approaching municipal authorities, unless there is a satisfactory and rapid conclusion to this situation.

[189] The plaintiffs understandably interpreted this as a form of threat to Patrick Gladu’s employment, and an attempt to discourage the plaintiffs from proceeding any further with their proposed legal action.

Denis Lafreniere

[190] Denis Lafreniere is the Solid Waste Manager for the Municipality of West Nipissing, and has been so employed for 12 years.

[191] He is also the owner of Ray’s Septic System, which is in the business of installing septic beds, and which business Denis Lafreniere took over from his father in 1994. Denis Lafreniere has worked in the septic system business since he was 15 years old. He is also licensed to install septic systems, having been so certified in the 1980s. He testified that he has installed at least 300 septic systems in the past 20 years, many of them along the shores of Lake Nipissing.

[192] The vendors approached Denis Lafreniere in 2008 with regard to their plan to sever Lots 18 and 19. They were contemplating selling the property they had been occupying, that is Lot 19, and installing a new septic system on that lot. The septic system, which was servicing Lot 19 at the time, was partially on Lot 18.

[193] Denis Lafreniere met with the defendants at their home on September 29, 2008, and filled out the paperwork required for a permit to install the new septic system.

[194] According to Denis Lafreniere, he paced the outside of the residence to get an idea of the size of the house, and he had some discussions with the vendors about the number of bedrooms and the number of fixtures.

[195] Denis Lafreniere did not go to the upper level of the residence, and did not perform specific measurements. Rather, he concluded that the residence was less than 200 square metres, by having paced the area of the home outside and having considered what he described as “the living space,” which does not, according to him, include stairways, fireplaces, and storage areas.

[196] Denis Lafreniere completed the permit application, which indicated that the residence had three existing bedrooms, a total floor area of 144 square metres (approximately 2,100 square feet) and 27.5 fixtures (toilets, sinks, tubs, etc.).

[197] The above numbers are (and were) used to calculate the total design flow, that is, the number of litres per day that the system must accommodate. The total was 1,975 litres per day. That number is doubled for residential occupancy resulting in a daily sewage flow of 3,950 litres per day. The proposed working capacity was 4,500 litres per day.

[198] The application was for an Ecoflo Biofilter ST-650, with a daily flow rate of 2,200 litres, and a septic tank having a volume of 4,500 litres.

[199] The application included a drawing, prepared by Denis Lafreniere, showing the location of the house, the garage, the septic bed, the Ecoflo Biofilter, and the connections to the residence. The diagram does not indicate any connection to the garage.

[200] According to Denis Lafreniere, the vendors told him that the home had three bedrooms, and another room, which was not being used as a bedroom; he was unsure of exactly what that room was being used for.

[201] He did not ask the vendors, nor did they tell him that the size of the residence was 2,500 square feet. Denis Lafreniere agreed that it was possible that the defendants had told him the house was 1,500 square feet, but he did not recall this.

[202] He did not recall having told the defendants that he was only concerned about the dimensions of the main floor, but admitted it was possible that he had done so.

[203] Denis Lafreniere was clear that the vendors made no reference to the garage with the “guest loft apartment.” That did not form part of their discussions, according to his evidence. Nor was there any discussion about the availability or cost of a system with higher capacity than the one he ultimately installed.

[204] He testified that if he had been made aware of the loft apartment, he would have included that information in the application, and it would have resulted in a higher fixture count.

[205] The NBMCA issued a sewage system permit, in accordance with the application on October 10, 2008. The permit had an expiration date of October 10, 2009.

[206] In late September 2009 the new system was installed. Most of the work was done by Denis Lafreniere’s employees. Denis Lafreniere was not present during the installation to observe whether or not the septic system was connected to the garage. A tank having a total volume capacity of 5,000 litres (1,100 gallons) was installed.

[207] Denis Lafreniere recalled meeting with Patrick Gladu after the installation of the system to discuss the system that had been installed. That appeared to be the extent of his recall of that event.

The Plaintiffs’ Position

[208] The defendants were fixated on their “bottom line”; they were determined to end up with $400,000 in their pockets after the sale of their property. This was communicated to Richard Sanderson. Their determination to walk away with that sum of money affected how they conducted themselves and what representations they made to the plaintiffs.

[209] The defendants provided false and incorrect information to the NBMCA, and installed an inadequate septic system, that is, a system that is not designed to service the property that was marketed and sold to the plaintiffs. Robert Palin’s evidence establishes that. It is irrelevant whether that was done fraudulently or recklessly.

[210] The defendants certified that the information was true, when they knew it to not be true (four bedrooms not three, 2,500 square feet not 1,500 square feet, and omitting the fixtures in the loft).

[211] The defendants persisted in following through with the installation of the inadequate system, despite having been advised by their realtor that the new system had to service both the house and the loft apartment. They did so as well, after another prospective purchaser, Garry Serre, pointed out to them that the Ecoflo ST-650 would be inadequate to service the house and the apartment. And they did so, despite having told their agent that the garage would be hooked up to the septic system.

[212] The position of the statutory authority, the NBMCA, which position was made clear from the evidence of Gerard Dignard, is that the septic system installed at the property is inadequate for it.

[213] It was the legal obligation of the defendants, as the owners of the property, to provide accurate information to the statutory authority. The defendants cannot, in answer to the claim, take the position that they relied on the expertise of Denis Lafreniere, and therefore are discharged of their statutory duty under the Building Code Act, 1992, S.O. 1992, c. 23.

[214] Despite the information provided to the NBMCA, and despite the permit which was issued based on that information, it is now clear that the garage and apartment are in fact hooked up to that system, illegally.

[215] The defendants breached the agreement of purchase and sale and they made fraudulent and/or negligent misrepresentations, which induced the plaintiffs to purchase the property.

[216] The defendants breached their duty of honest contractual performance.

[217] The defendants failed to disclose the extent of the damage to the retaining wall, the sprinkler system and the pipes to the loft apartment.

[218] The defendants argued that the zoning did not permit rental of the apartment. There is no evidence to support this position. In fact, Tab 54 of Exhibit 1 establishes that “the accessory dwelling located at the above noted address is a legal non-conforming use; having been in existence since prior to the passing of the West Nipissing Comprehensive Zoning By-Law.”

[219] The defendants did not provide complete information on the SPIS. They answered “no” to the question dealing with structural issues, despite the hole in the retaining wall. They answered “no” to the question relating to deficiencies or non-compliance with the Fire Code, when the defendants’ evidence at trial was that the loft was not in compliance with the Fire Code. They answered “no” to the plumbing question, when there were problems with the plumbing going to the garage. It was not sufficient for the defendants to leave copies of the application for the septic system in the residence. This did not meet the obligation of honesty and good faith. They indicated “N/A” to the inquiry about the outdoor lawn sprinkler system; they should have added comments to the effect that it was a hand-made system designed for flowerbeds only, particularly in the face of having advertised “a private lot with sprinkler system”: see Exhibit 14. They denied any problems with the quality of the well water, but failed to provide information about the high sulphur content, nor did they disclose any problems (other than noise) with the iron conditioner, which the plaintiffs say never worked well, nor any problems with the water softener which stopped working within weeks of the closing. They did not disclose the construction of the apartment above the garage after the granting of the building permit. They did not disclose that the septic system they had approval for was based on their own use of the property: a three-bedroom house and storage space/studio above garage.

[220] The very last omission referred to in the above paragraph prevented the plaintiffs from considering the possibility that the septic system would not meet the needs of the property, and thus considering the need to make further inquiries.

[221] The plaintiffs point to schedule “A” of the agreement of purchase and sale, which includes the warranty that the defendants had received all “required” Certificates of Installation and Approval pursuant to the Environmental Protection Act, R.S.O. 1990, c. E.19. That warranty survived the closing of the transaction.

[222] The plaintiffs suggest that the defendants manipulated the results of the water testing submitted to the authorities by Shawn Lavigne. The staging of the “taste test” by Michel Robineau was a misrepresentation about the quality of the well water, on which the plaintiffs relied. Patrick Gladu confronted Michel Robineau about his suspicion and it was Patrick Gladu’s evidence that Michel Robineau never denied it.

[223] The plaintiffs would not have completed the transaction if they had been made aware of the fact of the inadequate septic system, or the poor quality of the well water.

[224] The plaintiffs did discharge their duty to inspect, to the extent that they could, and, they were entitled to rely on the representations made to them by or on behalf of the vendors. They were entitled to rely on the vendors’ honesty and good faith.

[225] The vendors, by having chosen to provide information, were obligated to provide full, complete and accurate information.

[226] The defendants misrepresented the conditions of the loft apartment by staging it, by having water in the toilet, repairing the pipes to suggest hook up to the septic system, and showing Patrick Gladu how to winterize the system. Further, Michel Robineau suggested to Patrick Gladu that (a) he could rent out the apartment, or (b) Patrick Gladu’s in-laws could stay there when they visit.

The Defendants’ Position

[227] The defendants rely on the doctrine of caveat emptor and maintain that the plaintiffs failed to do their due diligence by not thoroughly inspecting the property, and by not having made their own independent inquiries about the suitability of the septic system to be installed.

[228] The defendants deny that they concealed anything from the plaintiffs.

[229] They did not know there was a problem with the plumbing to the loft until after they signed the SPIS. The problem related to the cold water pipes and was resolved by Michel Robineau prior to closing. The plaintiffs were aware of this.

[230] Any issues with the hot water pipes were latent defects that were not observable to the naked eye. Those problems were not known by the defendants at the time of the sale and could not have been known, as there was no hot water tank servicing the loft apartment. Patrick Gladu’s evidence about the plumbing problems relate to the hot water pipes. Additionally, they may have arisen post-closing, for which the defendants would not be responsible.

[231] The defendants never held out that they had an outdoor lawn sprinkler system. In fact, they indicated “N/A” for this item on the SPIS. No further information was required. The plaintiffs, armed with the SPIS, should have made further inquiries about the existing system. They did not. Additionally, the claim is for the installation of a much more costly and sophisticated sprinkler system than was in place when the property was sold.

[232] The plaintiffs’ complaint, as it relates to the sprinkler system, is that the heads were rusted, not that the pipes or lines had been damaged. The rust could have been observable on inspection. The plaintiffs chose not to inspect this chattel, which was included in the sale price. Responsibility for that does not lie at the feet of the defendants.

[233] With regard to the quality of the well water, the defendants rely on the results of the test, which was taken by the plaintiffs’ agent prior to closing. The condition in the agreement of purchase and sale was satisfied by that test.

[234] The defendants point out that they disclosed to the plaintiffs that an earlier test they had conducted on the water had been returned as “UNSUITABLE FOR TESTING.” The water sample “could not be analyzed due to interfering substances in the sample.” Why would they have voluntarily disclosed this fact, if they were trying to conceal anything relating to the quality of the well water?

[235] The well water was, throughout the defendants’ period of ownership, of high quality, although to keep it as such required a lot of work. Properly treating well water is “a bit of an art.” This fact, the defendants submit, is reflected in the extent of the information provided to the plaintiffs from the defendants, about water quality control in the document at Tab 11 of Exhibit 1.

[236] At the time of closing, the machines relating to water softening and treatment were functional. There were no issues except for the noisy iron conditioner, which had been disclosed in the SPIS.

[237] There is no evidence to the contrary. Richard Sanderson’s evidence that the defendants were “having problems with the iron conditioner” related to the noise and nothing else.

[238] The defendants suggest that any problems with the colour or odour of the water, or of it leaving a dark film on the fixtures, etc., relates to the treatment of the water and not to the quality of it. There is no need for a new well to be dug, as the plaintiffs’ claim. The water will continue to come from the same source and will continue to contain sulphur, which requires careful and thorough treatment. Other than the plaintiffs’ belief that a new well is required, there is no expert evidence in that regard.

[239] There is no evidence that there was anything more than a small crack in the retaining wall at the time of closing, which crack was visible to the naked eye, on inspection. The “problem” with the retaining wall was not a “structural problem,” but rather an aesthetic one, therefore the defendants’ information regarding the retaining wall, on the SPIS, was accurate and sufficient.

[240] The damages claimed with regard to the retaining wall are excessive. There is no evidence to establish the labour cost claimed, and the cost of the supplies is disproportionate to the state of the retaining wall at the time of closing.

[241] The plaintiffs’ reliance on the 2008 listing information, or the Kijiji ad (if they even saw it, which is denied) was misplaced. Both the listing and the Kijiji ad had expired.

[242] Further, the differences in the descriptions used for the property in the Century 21 listing and the Remax listing, should have raised questions for the plaintiffs.

[243] The defendants are not responsible for the plaintiff’s failure to make inquiries regarding the septic system. The SPIS contained the words “See Permit.” This equates with “here is the permit, satisfy yourselves regarding the adequacy of the system.”

[244] The application for the permit was available in the residence. It contained the information the defendants had provided about the size of the house, the number of bedrooms, and the number of fixtures, and included a diagram which shows clearly that the garage was not to be hooked up to the septic system that was being installed. Garry Serre’s evidence confirms this. In fact, as a result of having reviewed the document, Garry Serre did make further inquiries, which resulted in no agreement of purchase and sale being entered into between that witness and the defendants.

[245] It is not clear, from the evidence, whether the garage is in fact hooked up to the septic system.

[246] The vendors had no knowledge that the plaintiffs’ plan was to rent the loft apartment to assist with their mortgage payments. No condition relating to the ability to rent the loft apartment was included in the agreement of purchase and sale, and, in fact, the plaintiffs’ own real estate agent could not recall any discussion with his clients the plaintiffs about plans to rent.

[247] Other than the plaintiffs’ own evidence, there is no other evidence to establish that the ability to rent the loft apartment was a condition precedent to the closing of the transaction.

[248] Patrick Gladu’s evidence with regard to the conversation with Michel Robineau about rental possibilities suggests the presence of another person or persons, who could corroborate Patrick Gladu’s evidence in this regard. No such witnesses were called. I should draw an adverse inference from the failure to call such evidence.

[249] The only other evidence relating to discussions about the possibility of renting the loft apartment came from Michel Robineau who said that Patrick Gladu had inquired about that possibility and that Michel Robineau had replied that he was doubtful about that because of suspected fire code issues.

[250] Counsel for the defendants referred me to s. 13 of the Ontario Evidence Act, R.S.O. 1990, c. E.23, which states that “an interested party shall not obtain a verdict, judgment or decision on his or her own evidence in respect of any matter occurring before the death of the deceased person, unless such evidence is corroborated by some other material evidence.”

[251] Counsel submits that I should not, as a result of s. 13, accept as fact Patrick Gladu’s evidence that Michel Robineau suggested to him that he could rent the apartment or use it as an in-law suite.

[252] The issue about the rentability of the apartment relates to the septic system, and not to the zoning.

[253] The plaintiffs’ own evidence about the intention to rent is not convincing, as that evidence suggested three different time frames for the rental to be in effect. Further, and again, other than the plaintiffs’ own evidence, there is no evidence of the amount of rent the loft apartment could fetch. The claim makes no adjustment for utilities, maintenance, and turnover of tenants.

[254] It is further submitted that if the plaintiffs’ claim is granted on the basis of the tort of civil fraud, the award for lost rental income claim (i.e., a claim based on prospective gains which the plaintiffs were entitled by the contract, to expect, come in) is not available; the plaintiffs are only entitled to an award of damages that serves to put them into the position they would have been in if the representations had been true.

[255] The plaintiffs could have included a condition on the ability to rent out the loft apartment but chose not to do so. There was no implied term that the loft apartment could be used to generate rental income.

[256] The defendants submit that the plaintiffs have failed not only to prove their case against the defendants; they have failed to mitigate their damages. They complain about problems which they say have persisted for now more than six years, yet they have taken no steps with regard to the water or the septic system to correct those problems.

[257] According to the evidence, the plaintiffs could have installed a replacement system in 2011 for approximately $36,000 plus HST. If they had done so, they could have rented out the apartment.

[258] At all times the defendants acted in good faith. They did not make any false representations about the quality of the well water, the state of the plumbing to the loft apartment, the condition of the retaining wall, or the sprinkler system. They never represented that the loft apartment was habitable; it was for guest use only.

[259] In order for the plaintiffs to succeed with their claim, there must be evidence of fraud. There is none. It was reasonable for the defendants to rely on Denis Lafreniere’s expertise when they answered his questions about the size and use of the property.

[260] The defendants state that the warranties contained in the agreement of purchase and sale are not absolute, but are limited to “the best of their knowledge.” The warranties apply to the state of the property as it was on closing. On closing, there was no existing, rentable apartment.

[261] The defendants rely on the future use clause contained in the agreement of purchase and sale. The submission is that I cannot consider any extrinsic evidence of the use of the loft apartment as having income generating potential by reason of the parol evidence rule and the future use clause.

[262] The defendants raise the issue of betterment. The plaintiffs are seeking “bigger and better” than what existed at the time of the purchase.

The Law

The [Building Code Act, 1992](https://www.canlii.org/en/on/laws/stat/so-1992-c-23/latest/so-1992-c-23.html)

[263] The installation of a septic system falls under the definition of both building and construction in the Building Code Act, 1992:

1. (1) In this Act,

“building” means,

(a) A structure occupying an area greater than ten square metres consisting of a wall, roof and floor or any of them or a structural system serving the function thereof including all plumbing, works, fixtures and service systems appurtenant thereto,

(c) plumbing not located in a structure,

(c.1) a sewage system

“construct” means to do anything in the erection, installation, extension or material alteration or repair of a building and includes the installation of a building unit fabricated or moved from elsewhere and “construction” has a corresponding meaning

1.1(1) It is the role of every person who causes a building to be constructed,

(a) to cause the building to be constructed in accordance with this Act and the building code and with any permit issued under this Act for the building;

(b) to ensure that construction does not proceed unless any permit required under this Act has been issued by the chief building official;

[264] Furthermore, s. 1.1.2.3. (1) of the Code states that “Subject to Article 1.1.2.6., Part 8 of Division B applies to the design, construction, operation and maintenance of all SEWAGE SYSTEMS and …”

[265] Nothing in these sections relieve any person from the duty to comply with any part of this Act or the Code or affects the rights or duties of a person not mentioned in this section in respect of the construction of a building.

[266] Pomerance J. had the following to say about the statutory duties imposed by the Building Code Act, 1992, in Essex Condominium Corp. No. 43 v. Lasalle (Town) (2009), 69 M.P.L.R. (4th) 44 (Ont. S.C.), at para. 8:

The BCA was enacted in order to ensure that construction in the province meets standards assuring the health and safety of members of the public. The BCA, through the building code establishes minimum standards that must be met in order to satisfy safety concerns. As it was described by the Supreme Court of Canada in Ingles v. Tutkaluk Construction Ltd., 2000 SCC 12, [2000] 1 S.C.R. 298 (S.C.C.) at para. 23:

The legislative scheme is designed to ensure that uniform standards of construction safety are imposed and enforced by the municipalities…The purpose of the building inspection scheme is clear from these provisions: to protect the health and safety of the public by enforcing safety standards for all construction projects.

Contractual Obligations

[267] “[I]n Ontario, as a general proposition, a vendor is, apart from express contract, under no general duty to disclose defects relating to title or quality”: see Outaouais Synergest Inc. v. Lang Michener LLP, 2013 ONCA 526, 116 O.R. (3d) 742, at para. 76.[^1]

i. Caveat Emptor

[268] A vendor is not obligated to disclose all known facts affecting the use or value of the property, which may be material to a purchaser’s judgment. A purchaser must form his or her own judgment: caveat emptor.

[269] The doctrine of caveat emptor will not be displaced by silence about defects, unless the silence relates to some material fact, which there is a duty on the silent party to disclose to the other. Put another way, mere silence, without more, on the part of a vendor regarding a defect subsequently discovered by a purchaser, will not normally found a cause of action for misrepresentation or for fraud: see Alevizos v. Nirula, 2003 MBCA 148, 180 Man. R. (2d) 186, at para. 19.

ii. Duty of Honesty and Good Faith

[270] Canadian common law imposes a duty on parties to perform their contractual obligations honestly and in good faith: see Bhasin v. Hrynew, 2014 SCC 71, [2014] 3 S.C.R. 494.

[271] At para. 65 of Bhasin, the Supreme Court of Canada said this:

…in carrying out his or her own performance of the contract, a contracting party should have appropriate regard to the legitimate contractual interests of the contracting partner. While “appropriate regard” for the other party’s interests will vary depending on the context of the contractual relationship, it does not require acting to serve those interests in all cases. It merely requires that a party not seek to undermine those interests in bad faith.

[272] Bhasin goes on to say at para. 86:

A party to a contract has no general duty to subordinate his or her interest to that of the other party. However, contracting parties must be able to rely on a minimum standard of honesty from their contracting partner in relation to performing the contract…

[273] A vendor is under a duty to act in good faith and to take all reasonable steps to complete the sale: see Dynamic Transport Ltd. v. O.K. Detailing Ltd, 1978 CanLII 215 (SCC), [1978] 2 S.C.R. 1072, at p. 1084.

[274] Vendors are under a positive duty to not lie. There is a duty to not conceal.

[275] Concealment: “an act done with an intention to hide from view some defect of which the vendor is either aware or wilfully blind”: see Cotton v. Monahan, 2011 ONCA 697, at para. 6.

Tort of Civil Fraud

[276] Anson on Contract defines fraud as:

Fraud is a false representation of fact, made with a knowledge of its falsehood, or recklessly, without belief in its truth, with the intention that it should be acted upon by the complaining party, and actually inducing him to act upon it.

See Parna v. G. & S. Properties Ltd., 1970 CanLII 25 (SCC), [1971] S.C.R. 306, p. 316.

[277] At para. 87 of Hryniak v. Mauldin, 2014 SCC 7, [2014] 1 S.C.R. 87, the Supreme Court of Canada set out what a plaintiff must prove, on a balance of probabilities, in order to succeed on a claim for civil fraud:

(a) A false representation by the defendant;

(b) Some level of knowledge of the falsehood of the representation on the part of the defendant (whether knowledge or recklessness);

(c) The false representation caused the plaintiff to act; and

(d) The plaintiff’s actions resulted in a loss.

[278] The Ontario Court of Appeal has confirmed, in Krawchuk v. Scherbak, 2011 ONCA 352, 106 O.R. (3d) 598, that silence and half-truths can amount to fraudulent misrepresentation, and that, “once a vendor ‘breaks his silence’ by signing the SPIS, the doctrine of caveat emptor falls away as a defence mechanism and the vendor must speak truthfully and completely about the matters raised in the unambiguous questions at issue.”: see para. 77.

[279] In addition to silence and half-truths that mislead or imply something that is not true, active concealment “by the vendor of defects which otherwise would be patent is treated as fraudulent…” and will make the defence of caveat emptor unavailable: see Halsbury’s Laws of England, 4th ed. vol. 42 Reissue (London: Butterworths, 1998), at para. 46.

[280] The person relying on the representation is entitled to so rely. A waiver of a home inspection is not a waiver of the right to rely on the representations made.

[281] Dealing with the truth or falsity of a representation, the court in Curtis v. Chemical Cleaning and Dyeing Co., Ltd., [1951] 1 K.B. 805, [1951] All. E.R. 631 (C.A.), at p. 634, had this to say:

A representation might be literally true but practically false, not because of what it said, but because of what it left unsaid. In short, because of what it implied. This is as true of an innocent misrepresentation as it is of a fraudulent misrepresentation.

[282] A defence of lack of due diligence is not available in a fraud case. This was clearly explained in May v. Platt, [1900] 1 Ch. 616, at p. 623:

The appellants concept of a due diligence defence in a fraud case was rejected over 125 years ago by Lord Chelmsford L.C. who said, “when once it is established that there has been any fraudulent misrepresentation or wilful concealment by which a person has been induced to enter into a contract, it is no answer to his claim to be relieved from it to tell him that he might have known the truth by proper inquiry. He has a right to retort upon his objector, ‘You, at least, who have stated what is untrue, or have concealed the truth, for the purpose of drawing me into a contract, cannot accuse me of want of caution because I relied implicitly upon your fairness and honesty’”: Central R. Co. of Venezuela v. Kisch (1867), L.R. 2 H.L 99 at pp 120-21.

Negligent Misrepresentation

[283] Even where the representation is not made to mislead, there will be liability in negligence if the representation was not a “full, frank, and accurate” disclosure: see Krawchuk, at para. 39.

[284] The duty to speak truthfully and completely is not limited to the completion of a SPIS. Information not required to be disclosed, but actually disclosed in an agreement of purchase and sale will trigger the duty. Lord Cairns said this about half-truths: “a partial and fragmentary statement of fact as that the withholding of that which is not stated makes that which is stated absolutely false.”: see Alevizos, at para. 22.

[285] In order to succeed in a claim based on negligent misrepresentation, a plaintiff has to establish that:

(a) The defendant owed the plaintiff a duty of care based on a “special relationship:

(b) The defendant made a statement or representation that was untrue, inaccurate or misleading;

(c) The defendant acted negligently in making the statement;

(d) The plaintiff reasonably relied on the statement; and

(e) The plaintiff suffered damages as a result.

See Krawchuk, at para. 68, citing Queen v. Cognos Inc., 1993 CanLII 146 (SCC), [1993] 1 S.C.R. 87 (S.C.C.), at p. 110.

[286] The standard of care extends beyond honest intentions. Honest intentions, by themselves are insufficient to avoid liability for inaccurate representations. The obligation is to provide, to the extent possible, accurate and complete information: see Krawchuk, at para. 79.

[287] The words “buyers must still make their own inquiries” in the SPIS, although alerting a purchaser to the possibility that the information in the document may be lacking in some way and putting an onus on a purchaser to make reasonable inquiries, does not “absolve the seller of liability for misstatements.”: see Krawchuk, at para. 85.

[288] Paragraph 86 of Krawchuk refers to McQueen v. Kelly (1999), 25 R.P.R. (3d) 248 (Ont. S.C.), where Kurisko J. held at paras. 63-64:

Ordinarily the [principle of] caveat emptor would have required the Plaintiffs to inspect the basement. If they had done so, the water stains in the Laundry Room would have been discovered. However, I accept the Plaintiffs’ explanation for not inspecting before and after signing the Agreement, namely, they relied on the Information Statement and oral assurances of Mr. Kelly [the vendor] there had never been any water problems in the basement.

[289] A warranty in the standard form agreements of purchase and sale, with the words “to the best of the Seller’s knowledge and belief” is not an absolute warrantee. It is a qualified warrantee: see Vokey v. Edwards, [1999] O.J. No. 1706 (S.C.).

[290] In John Levy Holdings Inc. v. Cameron & Johnstone Ltd. (1992), 26 R.P.R. (2d) 130 (Ont. Gen. Div.), the court considered whether the qualifying phrase was reasonably fair and truthful to the best of that person’s knowledge and belief: see para. 64.

[291] In Carrington v. Thom, [1977] O.J. No. 1099 (C.A.), the court considered whether the person was reckless in making the statement not caring whether it was true or false, or, whether the person could be said to have had an honest belief in its truth.

[292] The distinction between patent and latent defects is described in Halsbury’s Laws of England, at para. 51:

Defects of quality may be either patent or latent. Patent defects are such as are discoverable by inspection and ordinary vigilance on the part of a purchaser, and latent defects are such as would not be revealed by any inquiry which a purchaser is in a position to make before entering into the contract for purchase.

[293] A home inspection is not intended to find latent defects. At para. 76 of Lyle v. Burdess, 2008 YKSM 5, Cozens Terr. Ct. J. agreed with the comments of Killeen J. in Kaufmann v. Gibson (2007), 59 R.P.R. (4th) 293 (Ont. S.C.), stating:

In circumstances where there is no [Property Disclosure Statement] prepared, a prudent purchaser would be expected to contract for a more thorough home inspection if the buyer wished to avoid future costly surprises. Where a PDS has been prepared, however, the buyer should be able to rely on the truthfulness and accuracy of the representations in the PDS in deciding the extent to which a contractor will be instructed to conduct a home inspection.

Basis for Damages

[294] Damages available to a party may differ, depending on whether they arose from a breach of contract or a tort.

[295] Contract vs. Tort:

A representation has been defined as “a statement or assertion made by one party to the other before or at any time of the contract of some matter or circumstances relating to it.” Such statements may indeed be, or become terms of the contract, in which event they will have effect as such. However, if a representation is not and never becomes a term, its legal character and consequences are different.

Terms are contractual and the failure to fulfill the promise contained in a term gives rise to an action for breach of contract. Representations are non-contractual. If they are not true the appropriate remedy is not a an action for breach of contract, but the avoidance or rescission of a contract entered into in consequence of the representation, and, possibly, a tort action for damages.

See Alevizos v. Nirula, 2003 MBCA 148, 180 Man. R. (2d) 186, at para. 36.[^2]

[296] In circumstances where vendors intend that the representations they make in a SPIS be relied upon by prospective purchasers in deciding whether or not to offer to purchase the property, a special relationship is created between the vendor and the prospective purchasers that gives rise to a duty of care (for tort claim): see Krawchuk, at para. 75.

[297] Damages for breach of contract are compensatory in nature, based on the value of the contractual right. Essentially, the “contract breaker is bound to make good the loss caused by the breach, a loss measured by the value of the performance promised”: see S.M. Waddams, The Law of Damages, loose-leaf (consulted on 8 December 2016), (Toronto: Canada Law Book, 2015), at p. 5-1; and Simpson v. Hatzipetrakos, [2009] O.J. No. 3728, at para. 24.

[298] This differs from damages for the tort of fraudulent misrepresentation, which seek to put the plaintiff in the position it would have been in had the misrepresentation not been made; see Waddams, at p. 5-19.

[299] A court will not award more than “a nominal sum of damages for the loss of a mere chance of possible benefit except upon evidence proving that there was some reasonable probability of the plaintiff realizing therefrom an advantage of some real substantial monetary value”: see Kinkel v. Hyman, 1939 CanLII 7 (SCC), [1939] S.C.R. 364, at p. 383.

[300] The general rule is that the breach must cause the loss. “[T]he burden is on the plaintiff to establish on the balance of probabilities that as a reasonable and probable consequence of the breach of contract, the plaintiff suffered the damages claimed: see Eastwalsh Homes Ltd. v. Anatal Developments Ltd., 1993 CanLII 3431 (ON CA), 12 O.R. (3d) 675 (C.A.), at p. 687.

The Issues

[301] The issues to be addressed are as follows:

1. Did the defendants breach the agreement of purchase and sale by installing a septic system that did not meet the needs of the property they were selling?

2. Did the defendants make representations to the plaintiffs about the use the plaintiffs could make of the “guest loft apartment”?

3. Did the defendants misrepresent the quality of the well water servicing the property?

4. Did the defendants make false or incomplete representations about the state or condition of other structures, equipment, or chattels, now being complained of: the hot and cold water pipes to the guest loft apartment, the retaining wall, and the sprinkler system?

5. What damages, if any, are the plaintiffs entitled to if they establish a breach of contract, and/or the tort of civil fraud?

[302] In accordance with the principles set out in Bhasin, the first question will involve an assessment of the evidence of (a) what the defendants were marketing for sale; (b) what the defendants actually sold; (c) the defendants’ knowledge, if any, of any factors that would have rendered the information provided to the NBMCA inaccurate or incomplete, at any time; and (d) whether or not the defendants failed to comply with their duty of honesty and good faith.

[303] The third issue will involve an assessment of the strength of the evidence with regard to the state and quality of the water and the related water treatment equipment up to the day of closing and thereafter.

[304] The fifth issue will involve a consideration of the evidence supporting the claims, and will also involve a consideration of the duty to mitigate.

[305] Underpinning all of these issues, is the question of whether or not the plaintiffs discharged their duty to conduct themselves with due diligence – did they inadequately inquire and/or inspect the property before closing waiving conditions and closing the transaction.

Findings of Fact and Analysis

1. Adequacy of the septic system installed by the defendants

[306] For the following reasons, the plaintiffs have successfully established that the vendors breached the agreement of purchase and sale by installing a septic system inadequate for the property being marketed and sold. In so doing they have also made out the claim of civil fraud.

[307] The defendants first took active steps to sell their property (both lots) in 2008 and listed it with Century 21. Tab 13 of Exhibit 1 is evidence that, at that time, they intended to market their property as four-bedroom, four-bathroom, 2,500 square foot main residence with “detached insulated garage with loft apartment” with potential to generate rental income.

[308] The document at Tab 13 is “alien” to the agreement of purchase and sale between the parties’ contract. However, it does establish the defendants’ intention, in 2008, to market their property as described in that document.

[309] No offers were received. The defendants tried to market the property on their own, thus the Kijiji ad, which once again advertised the property as 2,500 square feet, with four bedrooms and a “large detached garage with a one bedroom apartment.”

[310] The defendants were looking to spark interest in the property and attract potential purchasers, and therefore chose the descriptors they did, for that purpose.

[311] Once the decision was made to sell the property on Lot 19 only, the defendants began the process of obtaining a new survey and of making application for a replacement septic system to service the property they were looking to sell.

[312] The information that they provided to Denis Lafreniere was inaccurate and incomplete. It did not take into account the correct number of bedrooms, nor did it include the information about the loft apartment which they were looking to market and sell as such.

[313] It is now admitted that the residence has four bedrooms and is 2,500 square feet, and not 1,500 square feet. While I accept that the 1,500 figure may well have come from Denis Lafreniere and not from the defendants, I do not accept that the defendants disclosed the garage to Denis Lafreniere while filling in the forms, or at any time. This resulted, ultimately, in the approval for the installation of a septic system that was inadequate for the property. While the defendants may not have known that at the time they were making the application, they either became aware of that, or were reckless in disregarding the information that was being provided to them about the system being inadequate, and about the need to install a system that would service the property as it existed and was being marketed.

[314] Even if I accepted Diane Guindon-Robineau’s evidence that they did raise the issue of the garage and loft apartment with Denis Lafreniere, this fact does not assist the defendants. It supports the proposition that, at the time that they made the application for the septic system, they were aware that they would not have the garage hooked up to the system. Yet they marketed and showed the garage and loft apartment to the plaintiffs as if it were.

[315] Even if the information provided to the NBMCA had been complete and accurate at the time they gave it, it was no longer accurate when they proceeded with the installation.

[316] The defendants’ duty to comply with the Building Code Act, 1992 was breached. Because of the non-delegable nature of the duty imposed on the defendants by the Act, it is no answer to say that they relied on the expertise of Denis Lafreniere in determining the size and capacity of the septic system.

[317] As well, I accept the evidence of Garry Serre that he specifically told Michel Robineau that the septic system the defendants had received approval for was inadequate to service the residence and the loft apartment in the garage. Garry Serre would not be purchasing the property with the approved system; his second offer to purchase included a condition for the system to be “acceptable to the buyer,” to address his concern about the adequacy of the system proposed for which approval had been obtained. The defendants did not accept that condition and insisted on limiting any condition to installing a system according to the permit that they had received.

[318] I am also referring to Richard Sanderson’s evidence, which I accept, that the understanding between himself and the defendants was that the new septic system that was to be installed, would be adequate to service the home and the loft apartment. I accept Richard Sanderson’s evidence that Michel Robineau showed him, outside, how the loft apartment was going to be hooked up to the new septic system.

[319] I had no reason to doubt the veracity of Richard Sanderson’s evidence. I accept all of his evidence and I find that it establishes the defendants’ clear intention to market their property as including a usable, functioning apartment. By that, I mean one with running water. It is unreasonable, in the face of Richard Sanderson’s evidence, to suggest, as did Diane Guindon-Robineau, that the defendants never meant to convey to potential purchasers that the apartment was anything but usable, and not just for storage or a craft studio.

[320] Richard Sanderson’s evidence further confirms that in May 2009, the defendants were not only seeking to market the property as having an apartment in the garage, they wanted to include the words “legal.” This can only mean that the defendants were seeking to represent that rental income could be generated from the apartment. That necessarily means that there would be running water hooked up to the apartment and that the apartment was hooked up to the septic system to be installed.

[321] Richard Sanderson’s position that the marketing information had to include the word “guest” resulted from his concern that the zoning did not permit use of the apartment as a second dwelling. Based on his discussions with the defendants, or at least with Michel Robineau, his concern about rental potential was not with the septic system which he understood would be adequate for the property as marketed, but rather with the zoning.

[322] The evidence establishes that the defendants understood, in May 2009, that the septic system for which they had received approval was inadequate for the property.

[323] By pursuing the installation of the inadequate septic system, the defendants breached the agreement of purchase and sale. They were and are in breach of the warranty in the agreement. The septic system installed, although in accord with the certificates received, was not and is not capable of “serving the property.” The “Certificates of Installation and Approval pursuant to the Environmental Protection Act” are invalid.

[324] The design flow required for the property including the loft apartment was 3,100 litres per day.

[325] The permit issued by the NBMCA was for a three-bedroom residence having an area of 144 square metres (1,550 square feet) and 27.5 fixture units.

[326] The system that Michel Robineau chose to install, the Ecoflo Biofilter ST-650, was inadequate for the property as its maximum capacity was 2,200 litres. It was undersized for a 2,500 square foot residence with the number of bedrooms and fixture units involved, including the loft apartment.

[327] The daily design sewage flow for the property, based on size, number of bedrooms, and number of fixture units, exceeds the capacity of the system that was installed by Michel Robineau.

[328] While the defendants may have believed that the system was adequate to service just the house that is not what the defendants were actively marketing for sale. In addition, the only reason they were seeking a permit was because they would be selling (and therefore no longer occupying) the property. As well, no change of use request was made to convert the loft apartment to a storage area/studio.

[329] The “YourOnLineAgents” email to Richard Sanderson, the advertising information prepared from the defendants’ description of the property, and the data entry form all described the loft above the garage in a manner that can only suggest it is habitable and has the usual amenities associated with an apartment, i.e., kitchen, bathrooms, etc. None of the documents referred to the loft above the garage as a storage area and/or craft studio. And, notwithstanding that in the past the defendants had used the apartment for storage or as a studio, at no time was it presented as such. It was reasonable for prospective purchasers, including the plaintiffs viewing the property, to conclude there was running water to the apartment, and, of necessity, a hook up to the septic system. Both defendants admitted this.

[330] At the time of signing the agreement of purchase and sale, the defendants were fixed with the knowledge as I have found it to be.

[331] The defendants now cannot rely on the limiting clause “to the best of the seller’s knowledge and belief,” in the agreement.

[332] In addition to having breached the agreement of purchase and sale, I am also satisfied that the defendants actively misrepresented the state of the loft apartment.

[333] The defendants breached their duty of care in indicating simply “N/A” and the description “New Ecoflow Septic System to be installed for buyer” in response to the question “are you aware of any problems with the sewage system?”

[334] The representation in the SPIS was not a full, frank, and accurate disclosure of the suitability of the system to be installed. It did not disclose that the proposed system specifically excluded the loft apartment, and was based on inaccurate descriptions of the main residence.

[335] For her part, Diane Guindon-Robineau not only kept silent about the fact, based on her belief at the time, that the loft apartment was not hooked up to the septic system, she took active steps (the “staging”) to convey a false message: that the loft apartment was usable for habitation purposes.

[336] For his part, Michel Robineau went even further. He effected repairs to the cold water pipes running to the apartment, left notes dealing with the maintenance of the apartment (“it has worked this way for 20 years”), and after closing, reiterated, in writing, that the defendants had left the plaintiffs with a functioning system of cold running water to the apartment. All of this is in complete contradiction to Diane Guindon-Robineau’s evidence that there had been no water to the loft apartment for years.

[337] As well, Michel Robineau prepared Exhibit 11, explaining how to maintain the water system in the apartment. All of this could only lead to the reasonable conclusion that the loft apartment was hooked into the septic system.

[338] Michel Robineau’s evidence is very problematic. Although he denies having discussed with Garry Serre, the size and adequacy of the septic system proposed to be installed, he did admit telling Garry Serre that the apartment was not to be hooked up to the septic system. In contrast, Michel Robineau clearly indicated on February 25, 2013, during his examination for discovery, that the garage was hooked up to the septic system installed in September 2009, and had been hooked up to the septic system that had served the house before the sale.

[339] The defendants cannot have it both ways. And, in any event, no matter which version is correct, the defendants either installed a system that was inadequate for the property, or installed a system that was not in compliance with the approvals obtained. And they did so knowingly or, in the case of Diane Guindon-Robineau, at least recklessly.

[340] The defendants’ conduct amounted to fraud, as it was a false representation of fact, made with a knowledge of its falsehood, or recklessly, without belief in its truth, with the intention that it should be acted upon by the complaining party, and actually induced the plaintiffs to act on the false representations that the loft apartment was habitable.

[341] The plaintiffs have sustained damages.

[342] Thus, all of the elements of civil fraud enumerated in Hryniak have been made out and I do not need to consider the test for negligent misrepresentation.

[343] It follows then that the defendants cannot rely on the defence of lack of due diligence. May v. Platt. To be clear, the defendants cannot rely on the due diligence defence in connection with their misrepresentation regarding the habitability of the loft apartment, that is, to be able to use it as habitable space with running water and a hook up to the septic system.

[344] I want to make an observation about Diane Guindon-Robineau’s evidence that the septic system permit was visible and readily available to the plaintiffs during their visit to the home. The plaintiffs were clear that they observed no such documents in plain view in the home. I note that the agent Shawn Lavigne also had no recall of having observed any papers about the septic system in the home, although he seemed to recall utility bills being placed for easy reference.

[345] A further piece of evidence is of interest: the email request from Richard Sanderson to the defendants on October 1, 2009, requesting, among other things, “documentation for the septic system.” The email reply from Michel Robineau ways “the septic system should be completed in a few days with documentation to follow shortly.”

[346] The email goes on to say “we have the utility bills here.” Nothing is said about the septic system documents having been in the house. The nature of the septic documents sought is not specified, permit or otherwise.

[347] I also find as fact that the plaintiffs were not given the septic permit application, nor were there documents available in the home when the plaintiffs visited the property.

[348] I turn now to the plaintiffs’ claim for lost rental income, based on the representation by Michel Robineau that the apartment was rentable.

2. Representations about use of the loft apartment

[349] Unlike the evidence about the septic system, the evidence regarding possible rental of the apartment and the claim for lost rental income falls short of establishing the tort of civil fraud.

[350] Patrick Gladu believed, based on Michel Robineau’s representation, that there was potential for rental income, but did not, on the evidence, clearly make known to the defendants that the ability to rent the apartment and generate rental income was a condition precedent to the closing of the transaction.

[351] The plaintiffs could have, but did not, insert such a condition in the agreement of purchase and sale; in fact, their real estate agent had no recall of any discussions with the plaintiffs regarding their plans to rent the loft apartment to assist with their mortgage payments.

[352] If the word “potential” for rental income, in the expired MLS listing, was important to the plaintiffs, it was up to them to draft appropriate contractual protection into the agreement of purchase and sale: see Sirizzotti v. Douglas, 2005 CarswellOnt 9007.

[353] The information provided by the defendants in the SPIS regarding the property is of significance. In answer to the question “what is the zoning on the subject property?” the defendants answered (incorrectly, it turns out), that the property was zoned “single family residential.” That, together with the information on the Remax MLS listing to the effect that there was no rental income, should have been a flag to the purchaser regarding the possibility of renting the loft apartment to generate income to assist with the mortgage.

[354] The plaintiffs did not discharge their duty to act with due diligence and inquire about the rental opportunity. They did not, at any time before closing the transaction, inquire about whether renting the apartment would comply with the zoning or whether there were Fire Code issues that could have prevented legal rental of the apartment.

[355] It turns out that the zoning permits rental. There is no evidence before me regarding compliance with the Fire Code. I cannot therefore conclude that, but for the inadequate septic system to the property, the apartment would have been capable of generating rental income, and, if so, as of what date.

[356] The evidence does not impart on the defendants knowledge of the plaintiffs’ position, that is, that they would not have purchased the property if they had known that they could not rent it. Other than the plaintiff’s own evidence, there is no evidence to establish that the ability to rent the loft apartment was a condition precedent to the closing of the transaction.

[357] The claim for lost rental is a tort claim, and not a breach of contract claim. There was no express or implied condition in the agreement of purchase and sale that the performance of the contract was conditional upon the ability of the plaintiff to rent the apartment.

[358] As such, and in accordance with Derry v. Peek, (1889) 14 A.C. 337:

It is not an action for breach of contract, and, therefore, no damages in respect of prospective gains which the person contracting was entitled by his contract to expect come in, but it is an action of tort – it is an action for a wrong done whereby the plaintiff was tricked out of certain money in his pocket; and therefore, prima facie, the highest limit of his damages is the whole extent of his loss, and that loss is measured by the money which was in his pocket and is now in the pocket of the company. That is the ultimate, final highest standard of his loss.

[359] I would have been unable to award anything other than a nominal sum for those damages, as the evidence presented fell short in several ways. The plaintiffs’ evidence about when they intended to begin receiving income was not specific. In addition, other than the plaintiffs’ opinion, there was no evidence establishing what a unit such as the loft apartment could generate given the market conditions in that municipality, vacancy rates, etc. I was provided with no evidence regarding any maintenance costs that would necessarily be incurred by renovating and renting out that space, or regarding the utility costs for the apartment, nor the tax implications of rental income for the plaintiffs. The amount claimed further did not take into account any periods of vacancy that could have been expected to occur during the period the plaintiffs claimed lost rental income.

[360] Further, the future use clause in the agreement of purchase and sale precludes the claim for damages based on future lost rental income.

3. Quality of the well water

[361] The plaintiffs’ claim relating to the quality of the well water must fail.

[362] There is no doubt that the purchasers began to experience problems with the quality of the well water within days of the closing of the transaction. The iron conditioner ceased working. The water became discoloured, malodorous, and left a dark film on whatever it came in contact with.

[363] These problems persisted despite much effort on the part of the plaintiffs, including installing a water treatment system and adjusting the water treatment machines. The plaintiffs suggest that they need to install a new well to rectify the problems.

[364] The plaintiffs’ theory that the defendants somehow manipulated the water test results to mislead the plaintiffs is not supported by the evidence. The sample for testing was collected by the plaintiffs own agent and the results showed no bacteria. No additional tests were conducted.

[365] I cannot conclude, from the taste test, that Michel Robineau was attempting to conceal a problem with the quality of the well water.

[366] Insofar as the plaintiffs’ position that the defendants knew, before closing, that the iron conditioner was damaged or somehow defective, that is also not supported by the evidence. Richard Sanderson’s testimony on this point was that the iron conditioner was noisy, but functional:

It was discussed that there was problems but it was working but it was requiring maintenance by the seller at that time. I can’t say anything more than that. It was working, but it was noisy.

[367] The noise problem was identified in the SPIS. The plaintiffs made no further inquiries nor did they conduct any inspection of the iron conditioner or any other water treatment equipment.

[368] There is no evidence to suggest that the defendants, prior to closing, were aware of any functional difficulties with any of the water treatment equipment.

4. Representations about other structural chattels

Damage to the pipes to the loft apartment

[369] The plaintiffs seek to recover the sum of $2,373 to repair damage to the hot water pipes, which was discovered after closing. This claim must fail.

[370] No inspection of the hot water pipes was possible before closing, as there was no hot water tank.

[371] In order to succeed on this claim, the plaintiffs would have to establish that the defendants knew about the defect and failed to disclose it, or they were negligent in that regard.

[372] The evidence does not support such a finding. The evidence is that there had not been any hot water tank to service the apartment since the 1990s. That evidence is uncontradicted. That being the case, any problems with the hot water pipes could not have been known by the defendants at the time of closing.

The sprinkler system

[373] This claim must fail as well.

[374] The marketing information relied upon by the plaintiffs does not contain the word “lawn” when describing the sprinkler system.

[375] I am also not able to conclude that a reasonable person, reading the Remax marketing material, would necessarily come to the conclusion that the “private fenced lot with sprinkler system” must mean that the property includes a professionally installed lawn sprinkler system.

[376] The agreement of purchase and sale likewise does not describe the system as anything but a “sprinkler system.”

[377] The inquiry in the SPIS about “the outdoor lawn sprinkler” being in working order, was answered “Not Applicable.” This would necessarily suggest that there is no outdoor lawn sprinkler system. If that is not what the plaintiffs understood when they received the SPIS, or, if the answer appeared to the plaintiffs to be contradictory, further inquiry was required. The “Not Applicable” should have caused a cautious purchaser to conclude that there was a need to make further inquiry.

[378] The evidence about the pump being disconnected and put away is not contradicted. This fact did prevent a simple inspection of the sprinkler system. However, it did not preclude questions about the type of system, and how it worked being asked of the defendants, especially in light of the information in the SPIS about this chattel.

[379] The plaintiffs failed to make any inquiries about the sprinkler system and therefore did not discharge their duty of due diligence. They cannot now look to the defendants for compensation for the lack of a proper functioning lawn sprinkler system which never existed.

The retaining wall

[380] I am satisfied that the plaintiffs have successfully made out this claim.

[381] Diane Guindon-Robineau admitted that, at the time of closing, there was a crack in the retaining wall, eight inches in length and three inches wide. The defendants’ position is that the defect was aesthetic only and not structural, and it would have been visible to someone on the lake side of the retaining wall, or someone leaning over the wall.

[382] A retaining wall or breakwater is meant to keep water out. Holes or cracks in the wall may affect the ability of the wall to serve its purpose. It is more reasonable, in my view, to characterize the crack, which needed repair, as a structural problem and not an aesthetic one.

[383] I accept Patrick Gladu’s evidence about the crack and the fact that he could not have detected that defect on a regular inspection given the high level of the water. Neither leaning over the wall, nor viewing the wall from the lake side would have disclosed the crack.

[384] I also accept Patrick Gladu’s evidence that the crack was significant enough to require repair and the only proper way to repair the crack was to patch the entire section of the retaining wall, which required a significant amount of rebar and cement. He had to rent a cement mixer twice because of difficulties with the availability of helpers to assist him in the repair.

[385] The plaintiffs claim the sum of $447.92 for the materials to repair the wall, and the sum of $1,000 to compensate for the labour required to effect the repairs.

[386] Although I do not have any evidence to establish how the $1,000 figure for labour costs was arrived at, it is reasonable to conclude that some time and effort would have been required to do the repair work. It is appropriate to award $500 for the labour involved.

5. Damages and the duty to mitigate

[387] The cost to replace the existing septic system was estimated to be $36,695, plus H.S.T. in 2011. This cost rose to $41,425, in late 2014. Both estimates include the cost of removing certain trees and performing new landscaping to the affected areas.

[388] The defendants complain about the failure of the plaintiffs to take any steps to remedy the problem of the inadequacy of the septic system to serve the property.

[389] The duty to mitigate is a well-established legal principle. Succinctly stated, a plaintiff is not entitled to recover compensation that could have, by taking reasonable steps, been avoided or lessened: see Toronto Industrial Leaseholds Ltd. v. Posesorski (1994), 1994 CanLII 7199 (ON CA), 21 O.R. (3d) 1 (C.A.), at p. 10.

[390] In this case, the duty to mitigate did not arise until the plaintiffs discovered the defendants’ civil fraud: see Performance Industries Ltd. v. Sylvan Lake Gold & Tennis Club Ltd., 2002 SCC 19, [2002] 1 S.C.R. 678, at p. 707.

[391] Although the statement of claim in this matter, alleging deceit, misrepresentation and breach of duty of disclosure was issued in 2011, it was not until the examination for discovery of Michel Robineau on February 25, 2013, that the plaintiffs discovered that in fact, the loft apartment was connected to the septic system, and that the latter was non-compliant with the permit granted to the defendants.

[392] Once the duty to mitigate arises, the crucial consideration is whether or not the plaintiffs conducted themselves reasonably: see Posesorski, at p. 10.

[393] The plaintiffs could and should have begun the process of replacing the inadequate septic system by the spring of 2013. I note that even if they had begun the process of making an application for the approval of a new septic system in the early spring of 2013, such new system, if approved, could not have been installed until late spring or summer of 2013. However, the claim would be in the same amount, that is, the cost of replacing the septic system. The best evidence of that cost is the 2014 estimate.

[394] Based on that, I conclude that it is appropriate to base the award of damages to replace the septic system on the 2014 estimate.

Conclusion and Judgment

[395] The defendants are liable for damages to the plaintiffs, based on both breach of contract and tort, in the amount of $47,758.17 composed of (a) $46,810.25, being the cost to replace the existing septic system, inclusive of HST, and (b) $947.92, being the cost to repair the crack in the retaining wall.

[396] The plaintiffs are entitled to pre-judgment interest in the accordance with the Courts of Justice Act, R.S.O. 1990, c. C.43.

Costs

[397] In the event that the parties are unable to agree on costs, they may file written submissions of no more than five pages, double-spaced, in addition to any pertinent offers and draft bills of costs, within 45 days. If no submissions are received within that time frame, the parties will be deemed to have settled the issue of costs as between themselves.

The Honourable Madame Justice Louise L. Gauthier

Released: January 4, 2017

CITATION: Gladu v. Robineau, 2017 ONSC 37

COURT FILE NO.: C-1255-11-SR

DATE: January 4, 2017

ONTARIO

SUPERIOR COURT OF JUSTICE

BETWEEN:

Patrick J. Gladu and

Danielle M. Boyer-Gladu

Plaintiffs

– and –

The Estate of Michel Robineau and

Diane Guindon-Robineau

Defendants

REASONS FOR JUDGMENT

Gauthier J.

Released: January 4, 2017

[^1]: Citing Bora Laskin, Q.C. (as he then was), "Defects of Title and Quality: Caveat Emptor and the Vendor's Duty of Disclosure", in Special Lectures of the Law Society of Upper Canada 1960: Contracts for the Sale of Land (Toronto: Richard De Boo Ltd., 1960), at p. 401; Professor John D. McCamus, "Caveat Emptor: The Position at Common Law", in Law Society of Upper Canada Special Lectures 2002: Real Property Law: Conquering the Complexities (Toronto: Irwin Law Inc., 2003), at p. 102.

[^2]: Citing G.H.L. Fridman, Q.C., The Law of Contract in Canada, 4th ed. (Toronto: Carswell, 1999), at p. 474.