Superior Court of Justice - Ontario

Court File No.: CV-16-348 Date: July 6, 2017

Between:

JANET BURNS and JAMES CASWELL Plaintiffs

Counsel for Plaintiffs/Respondents: James B. Barnes

- and -

1681758 ONTARIO INC., SONIA PHYLLIS BUCH, STEVE BUCH, KIMBERLY GALE DICK, JASON TINNEY and ABC CONTRACTING CO. Defendants

Counsel for Defendants/Moving Parties: Timothy J. Girard

Heard: April 5, 2017

Reasons for Decision

James, J.

Introduction

[1] The Defendants have moved for an order dismissing the plaintiff’s claims under Rule 20 on the basis that the action was commenced after the applicable limitation period had expired. For the reasons that follow, I have determined that the motion ought to be dismissed.

Facts

[2] The house at 53 Pembroke Street in Cobden, Ontario had been sitting vacant without heat for several years. In August, 2008 it was purchased by Kimberley Dick and 1681758 Ontario Inc. (168) on an “as is” basis for the sum of $78,000. The plan was to renovate and resell it. The defendant Sonia Buch, a principal of 168, retained her husband, the defendant Steve Buch, to perform the renovations.

[3] The plaintiffs were interested in buying a house in Cobden. In or about October, 2008 they looked at the Pembroke Street property and decided to make an offer to purchase it. By this time the renovations were well underway but not complete. Mr. Buch had framed the basement walls and installed drywall.

[4] In November the plaintiffs arranged for a house inspection by Brian Yolkowskie. His comments included the following points:

Exterior

• Brick above west side basement window needs repair
• Face plate and mud board under front door show severe rot and need to be replaced
• Cracks are evident in foundation and the blocks are pushed in at footings along west wall. Contractor stated that metal “I” beams were placed along the west wall for support however, the walls are covered with gyprock and this has not been proven
• The owner states that “Blueskin” membrane and tar were applied to the entire exterior of the foundation in the summer of 2008 however older paved driveway next to south side of the house shows no evidence of recent disturbance

[5] A statutory declaration sworn by the vendors on November 20, 2008 included a representation that “there has been no structural modification to the home since we purchased but we have … finished the basement … patched the foundation and completed the landscaping. A building permit was not required for any of the work noted here in.”

[6] The plaintiffs completed the purchase on November 25, 2008.

[7] A few months later the plaintiffs discovered a leak along the west wall of the basement in a bedroom area. They say that the leak was confined to a small portion of the corner of the room and the carpet underlay and the concrete floor in that area were wet.

[8] They contacted the Buchs and Mr. Buch performed a temporary repair that included some trenching to assist in draining ground water away from the basement wall in the area of the leak.

[9] In the spring of 2009 the Buchs arranged for a contractor to parge the basement wall. The plaintiffs also installed eavestroughing around the house.

[10] No further leaks were encountered until two and a half years later, in August 2011, when water penetrated along the east wall of the basement. This leak was much larger than the leak in 2009.

[11] The plaintiffs arranged for a contractor, Schutt Restoration Services Inc., to investigate and provide a report. The contractor removed some drywall along the inside of the east wall and found that the bottom row of concrete blocks at the base of the basement wall were badly deteriorated and that a portion of the row of blocks above the damaged blocks had shifted between one to three inches. Someone had installed steel posts every four to five feet along this section of wall to take the weight of the structure off the damaged blocks.

[12] The steel posts were not visible until the drywall was removed. They were located in a different area than had been mentioned in the Yolkowskie house inspection report in 2008 and where leakage had been reported in 2009.

[13] This action was commenced about two years after the report by Schutt Restorations.

Position of Moving Parties (the Buchs)

[14] Summary judgment is an efficient method of disposing of questions relating to limitations issues in the building construction context.

[15] The Buchs say that the plaintiffs knew or ought to have known they had a problem with basement leaks long before the lawsuit was commenced and the right to bring an action expired before the claim was commenced. The Buchs point to the following factors in support of their position:

a) The plaintiffs walked away from an earlier deal in the spring-summer of 2008 because of the risk of building deficiencies and this indicated they were cognizant of potential problems;

b) The Yolkowskie report referred to issues with the basement wall and foundation;

c) The leak in 2009 put the plaintiffs on notice that there were actual problems with the impermeability of the basement wall;

d) The plaintiffs failed to exercise reasonable diligence, firstly, in 2008 when they received the Yolkowskie report, then secondly, when the 2009 leak occurred;

e) The plaintiffs’ delay in bringing proceedings has prejudiced the moving parties because they are no longer in the renovation business, memories have faded and records have not been kept;

f) Expert’s reports are not always necessary to inform a potential claimant that proceedings should be commenced;

Position of the Plaintiffs (Respondents)

[16] The plaintiffs point to ambiguities during the course of the renovations such as whether any structural work was done and whether a building permit was required.

[17] They say that the Yolkowskie report was unclear whether steel posts had actually been installed and incorrectly referred to their possible location.

[18] They also say that the leak which occurred in 2009 was in a different area and they had no reason to investigate the east wall of the basement.

Discussion

[19] Summary judgment can be well-suited to determining questions respecting “discoverability” in the context of the expiry of limitations periods. If the evidence is clear that the claimants waited too long before commencing proceedings, this issue should be determined summarily without incurring the costs of a full-blown trial if possible.

[20] The presiding judge must determine if there is a genuine issue requiring a trial. If so, the court should consider whether the issue can be resolved without a trial by utilizing the enhanced fact-finding tools available on motions for summary judgment.

[21] In addition, where the motion to terminate the lawsuit is not completely successful, the presiding judge should consider if there are measures available to resolve any remaining issues without proceeding to trial in the ordinary course. Where appropriate, the presiding judge should remain involved in the case in order to minimize expenses for both parties so long as the matter can be determined justly. This is such a case and I will expand on the procedural steps that ought to be taken later in this decision.

[22] I have considered whether the plaintiffs engaged in willful blindness in agreeing to complete the purchase in the face of information from Mr. Yolkowskie that cracks were evident in the foundation and the blocks were pushed in at footings along the west wall. The transaction closed five days later on November 25th. There is nothing in the agreement of purchase and sale that made the purchase conditional upon receipt of a favourable building inspection. There is no evidence that the plaintiffs tried to escape from the deal. It may be that the plaintiffs considered themselves bound to complete the purchase despite the cautionary comments by Mr. Yolkowskie.

[23] When one considers what action ought to have been taken by the plaintiffs when they received the Yolkowskie report, I think it is important that Mr. Yolkowskie was reporting what he had been told by Mr. Buch. Somehow he erroneously believed that the west wall, not the east wall, had been reinforced.

[24] This secondhand information should be weighed against the representations made by the vendors that no structural modifications were made to the house during the renovations and that the foundation had been patched. The plaintiffs were entitled to rely upon these representations.

[25] The photographs of the damage at the bottom of the easterly basement wall disclose a failure of the structural integrity of that portion of the base of the basement wall. It is important to remember that this damage was covered by drywall and was not visible upon ordinary inspection.

[26] While it may have been prudent in hindsight for the plaintiffs to be more proactive with their investigations, they had the right to rely on what they were told by the Buchs and to expect the workmanship was performed to a reasonable standard.

[27] As for the situation regarding the property the plaintiffs chose not to purchase earlier in 2008, in my view this is simply not relevant. Also, the evidence regarding the other transaction was not well-developed and it would be unfair to make comparisons to a different property on incomplete information.

[28] I have considered the case authorities presented on behalf of the parties in support of their respective positions and would observe that each case turns on its own particular facts. In this case it appears to me that the Buchs misrepresented the scope of work they performed by neglecting any mention of the reinforcing of the basement wall and concealed the problem of the deteriorated blocks.

[29] I do not agree with the submission that “the crucial exercise of due diligence that the plaintiffs failed to exercise in this case is that they failed to retain a contractor…to open the drywall and investigate the condition of the foundation properly after the first leak occurred in early 2009.” Recall that the 2011 leak was on the opposite wall to the leak in 2009. Would it have been reasonable to remove segments of drywall on all four basement walls to investigate? I would say that it would not. Who would have been responsible for restoration costs if no problems were found?

[30] Also, a contractor should be given an opportunity to correct a deficiency in his work before commencing a lawsuit.

[31] Another consideration is that concealment of deficiencies and the making of factual misrepresentations (including misrepresentation by omission) can operate to displace the usual governing principle of “buyer beware”.

[32] In the result, the motion is dismissed.

[33] A case conference shall be convened to determine the procedure to be followed in preparing for and conducting a summary trial. The case conference will include a discussion of the following topics:

(a) The issue or issues to be tried. Should the issue for trial be confined to the problem with the east wall?

(b) Are expert’s reports required? If so, on what issues? What is the timing of the reports?

(c) What cost-saving measures can be implemented? For example, can the affidavits and cross-examinations be accepted as trial evidence in place of examinations-in-chief?

(d) Should cross-examination be time-limited? If so, what is a reasonable limitation?

(e) Is there adequate documentary disclosure or are affidavits of documents required?

(f) How are prospective damages to be handled? Can the parties agree on damages?

(g) What facts can be agreed to in a statement of agreed facts to reduce trial time?

(h) Other matters that may be raised by the parties.

[34] On the issue of legal costs, both sides have filed costs outlines. If either party wishes to provide additional submissions, they may do so within 20 days.

Mr. Justice Martin James

Date Released: July 6, 2017