BRACEBRIDGE COURT FILE NO.: CV-15-43-00 DATE: 20190304 ONTARIO SUPERIOR COURT OF JUSTICE

BETWEEN:

ADEN BOWMAN and SHIRLEY BOWMAN Plaintiffs – and – ALMA EMOND, SHELLEY EMOND, PAUL STUDHOLME, SUZANNE MARTINEAU and RE/MAX HALLMARK REALTY LIMITED Defendants

Counsel: David A. Morin and Peter Reintzer, for the Plaintiffs Hans Engell, for the Defendants, Suzanne Martineau and Re/Max Hallmark Realty Limited

HEARD: November 19, 20, 21, 22, 23, 26, 27 and 28, 2018

REASONS FOR JUDGMENT

DiTOMASO J.

INTRODUCTION

[1] The plaintiffs, Aden and Shirley Bowman (“the Bowmans”), purchased a home from the defendants, Alma Emond and Shelley Emond (“the Emonds”), with a view to accommodating the Bowman family. After the Bowmans took possession and during the course of some renovations, they discovered their newly-purchased home suffered from severe water and mould damage due to water penetration through the building envelope. They bring this action claiming damages against the vendors the, Emonds, their home inspector, Paul Studholme (“Mr. Studholme”) and their real estate agent, Suzanne Martineau (“Ms. Martineau”) and real estate brokerage, Re/Max Hallmark Realty Limited (“Re/Max”).

BACKGROUND - THE FACTS

[2] While there are no agreed facts, all documents are agreed to be authentic. All documents disclosed by Ms. Martineau were made exhibits at her examination for discovery and admitted for the truth of their contents. Further, submitted by the parties and marked as Exhibit 1 was a Joint Document Brief (“JDB”) often referred to during the trial and in these Reasons for Judgment.

[3] Many of the facts are not disputed, as evidenced during the trial by the testimony of the witnesses and the documents. However, there are some critical facts in dispute touching on the issues to be determined.

[4] The following are the background facts.

[5] The plaintiffs purchased 775 Raymond Road, Bracebridge, Ontario (“the Property”) on July 15, 2014 [1]. In May 2017, Ms. Bowman was killed in a car accident and the action is continued by Mr. Bowman in his personal capacity and as Estate Trustee.

[6] The defendants, Emond, are mother and daughter. They are the former owners and vendors of the Property. The home on the Property was built by Alma Emond’s husband in or around 1976 and was a 1200 square foot, single-storey, five-bedroom, one-bath home with a full basement [2]. The Emonds have settled their dispute with the Bowmans on the basis of a Pierringer Release and Settlement Agreement, dated October 22, 2018.

[7] The defendant, Mr. Studholme, is the certified master inspector who performed a home inspection for the Bowmans prior to their purchase of the Property. Mr. Studholme has settled his dispute with the Bowmans on the basis of a Pierringer Release and Settlement Agreement, dated September 25, 2018.

[8] The defendant, Ms. Martineau, is the real estate agent representing both the Bowmans and the Emonds with respect to the sale of the Property. She is employed by the defendant, Re/Max, a real estate brokerage and listing brokerage with respect to the Property at the time of its sale to the Bowmans.

The Purchase of the Property

[9] The Bowmans relocated to Muskoka some years ago. In the past, they had experienced some financial difficulties. Originally raised a Mennonite in the Kitchener/Waterloo area, Mr. Bowman has a grade eight education and has been a farmer, furniture builder and woodworker by trade. Ms. Bowman was a homemaker. They have seven children, one remains at home and one is away at university. For the past seven or eight years, the Bowmans rented a home in the Village of Utterson, Ontario, located between Bracebridge and Huntsville.

[10] The Bowmans wanted to buy a rural property, large enough for their family, preferably with a shop or room for a shop to provide Mr. Bowman with space to start his intended carpentry business. The mortgage payments needed to be less than their current rent payments of $1,750 per month. At trial, Mr. Bowman confirmed that he has been paying $1,750 per month in rental payments continuously since roughly 2009, well before he purchased the Property.

[11] In March 2014, the Emonds listed the Property for $194,500. Then elderly, Alma Emond wished to move with her daughter, Shelley, to Bracebridge.

[12] Mr. Bowman saw the “for sale” sign and picked up a listing from a box at the end of the driveway. Ms. Martineau’s listing described it as a “solid well-built home with good bones”, with room to build a workshop [3]. At trial, Mr. Bowman and Shelley Emond confirmed that the brochures in the box at the end of the driveway did not contain a Seller Property Information Statement (“SPIS”) form. The Bowmans contacted Ms. Martineau, viewing the Property twice in April 2014. At that time, they did not make an offer as they were unable to obtain financing.

[13] On May 22, 2014, despite twelve other viewings, the Emonds had received no offers on the Property. The Emonds dropped the price to $189,000 [4]. In June 2014, Ms. Martineau unsolicited, contacted the Bowmans to advise that the Emonds would be willing to provide a vendor-take-back mortgage, solving the Bowmans’ financing problems.

[14] On June 12, 2014, Ms. Martineau agreed to represent both parties with respect to the transaction. Both parties were aware and agreed to her dual agency representation. She prepared an offer to purchase for $170,000, conditional upon home inspection, financing, insurance, the Bowmans satisfying themselves that they could move the driveway and build a shop [5], and due diligence with septic and well service providers on the installation of both a new septic system and a new drilled well.

[15] The Emonds countered the offer seeking $180,000 but agreeing that they would hold a vendor-take-back mortgage for 95% of the purchase price, together with the legal fees associated with preparing and registering the mortgage [6].

The Emonds’ Knowledge of Roof Leaks

[16] At the time of the purchase, the Bowmans were unaware that the Emonds had experienced both historical and ongoing roof leaks at the Property. In early 2005, the roof had leaked due to ice damming, for which the Emonds sought and received insurance coverage for consequential damage, though not to repair the cause of the leak itself. They informed Ms. Martineau of this loss. Shelley Emond confirmed at trial that the Property experienced water damage in 2005 and that she had informed Ms. Martineau of this loss [7]. At trial, Ms. Martineau agreed that Shelley Emond had told her about this previous roof leak and repair.

[17] In addition, the Emonds experienced roof leakage in the Spring of both 2013 and 2014 during the Spring thaw. At trial, Shelley Emond testified that she had advised Ms. Martineau of the leaks in 2013, but she did not specifically tell her of the leaks after listing the Property in 2014 as the leaks had not yet occurred, and as Ms. Martineau had already been told about the previous roof leaks. Ms. Emond said it was obvious.

[18] Ms. Martineau’s evidence at trial was different. She testified that while she knew of a past leak and repair, she was never told by Shelley Emond about ongoing leaks or about leaks during either the Spring thaw of 2013 and 2014. Further, upon Ms. Martineau’s inspection and tour of the Property, she did not see any sign of leaks, particularly on the living room ceiling. Similarly, Mr. Studholme testified that he did not see any evidence of roof leaks, particularly on the living room ceiling. However, Mr. Bowman testified that when he attended with Ms. Martineau and toured the inside of the home, he did see a stain on the living room ceiling and asked about it.

[19] Shelley Emond confirmed that the conversation about the roof leaks was short and that Ms. Martineau did not ask further questions. Shelley Emond testified at trial that she painted over the ceiling stains following the leaks in 2013 and again in the beginning of June, 2014, before the house inspection, but said the stains were still visible. Shelley Emond further testified that she told Ms. Martineau about the leak in 2013 and that there was ongoing leaking due to the ice damming. This evidence was absolutely denied by Ms. Martineau.

[20] Ms. Martineau knew of historical leaks that had been repaired but did not note this in her listing notes. While she stated at her examination for discovery that she did not remember asking the Emonds any questions about the SPIS [8], she testified at trial that she did in fact have extensive discussions about these answers.

The SPIS

[21] At one of his viewings of the Property, Mr. Bowman asked Ms. Martineau if there was a “checklist” with respect to the Property that would list and comment on items such as the septic system and the roof. He now knows that this is called a SPIS.

[22] Mr. Bowman’s evidence at trial was that despite the fact that the MLS Listing indicated that an SPIS was available, Ms. Martineau advised the Bowmans that the Emonds had been given one to complete, but they had not signed it yet, so she could not give the Bowmans a copy. Mr. Bowman testified at trial that he had never seen the SPIS until the document was given to him by his counsel for review during the examination for discovery process.

[23] The Bowmans have now learned that an SPIS did exist and had been completed and executed by the Emonds [9].

[24] The Emonds disclosed in the SPIS that yes, they were aware of problems with the septic system, though they did not elaborate. They also disclosed that: (a) They are not aware of any structural problems; (b) They are not aware of any moisture and/or water problems; (c) They are aware of roof leakage but not any unrepaired damage; (d) The roof covering is 10 years old; (e) They have carried out repairs with respect to roof leakage; and (f) They are not aware of any damage due to wind, fire, flood, insects, termites, rodents, pests or wood rot.

[25] By way of explanation for these issues, in the SPIS under Additional Comments, Shelley Emond added: Question 9b. We have a roof heating line in the valleys for ice build up. But it is insufficient. The first room my dad put on – he overlapped the shingles ¾ - 1”. This eliminates the ice from being able to lift the tiles. We assumed our builder would do the same and didn’t. Using the minimal overlap is not wise.

[26] Ms. Martineau testified at trial that she left a blank SPIS with the Emonds to fill out on their own. Shelley Emond confirmed that Ms. Martineau did not review the SPIS with her or her mother after they filled it out.

[27] Shelley Emond thought that Ms. Martineau had given a copy of the SPIS to the Bowmans, as she had helped her insert copies inside a brochure at the home. She left Ms. Martineau upstairs when she answered the door for the Bowmans’ first viewing. She answered some questions that the Bowmans had for her, but did not mention the roof leaks as she said these were disclosed in the SPIS. Shelley Emond testified at trial that she saw Ms. Martineau give the Bowmans a brochure and therefore she believed they had received an SPIS. She did not say that she saw Ms. Martineau hand the Bowmans an SPIS.

[28] Mr. Bowman’s evidence was that he was not sure if he received or took the brochure while he was inside the house. Ms. Martineau testified she gave a brochure to Mr. Bowman when the Bowmans visited the house on April 6, 2014.

[29] It is undisputed that Ms. Martineau did not review an SPIS with the Bowmans, nor did she obtain their signature confirming they had received and reviewed the document [10]. While she testified at trial that she reviewed the SPIS with the Emonds, this is inconsistent with her testimony at her examination for discovery [11].

[30] In her Statement of Defence, Ms. Martineau does not mention the SPIS nor does she allege that the Bowmans received a copy and were aware of roof leakage.

Pre-Purchase Viewings

[31] Prior to making their offer, the Bowmans had looked at the Property on three occasions, twice in April inside the home with Ms. Martineau, and once on an exterior viewing with their son in May 2014.

[32] The Emonds were present at the two April viewings, but after asking a few questions of Shelley Emond at the door, the Bowmans were advised by Ms. Martineau not to ask any questions directly. Ms. Martineau instructed the Emonds to give the Bowmans privacy during their viewing.

[33] At the second viewing on April 14, 2014, Mr. Bowman testified that he saw this same water stain on the living room ceiling as he had observed on his visit of April 6, 2014. According to Mr. Bowman, it was in the same place and had not gone away. Mr. Bowman testified that in front of the Emonds, he asked Ms. Martineau if there was any issue with the water stain. Ms. Martineau replied that as far as she knew, there was no issue with the roof and it was only ten years old. The Emonds made no response.

[34] Ms. Martineau testified that there was no water stain visible in the living room. She took photos of the interior of the house, likely on March 20, 2014 [12], and there was no evidence of water staining. She was shown the photograph taken by Mr. Bowman of a water stain in the living room. The photo was taken after he took possession [13]. Ms. Martineau maintained there was no water stain visible in the house when she went through it, took her photos and showed the home.

[35] According to Ms. Martineau’s evidence, on the second viewing of April 14, 2014, she was in the living room with Shelley Emond and Mr. Bowman where Shelley Emond talked about shoveling snow from the roof and seeing a damming problem. Mr. Bowman was part of the conversation. Ms. Martineau then testified that she asked Shelley Emond, “Didn’t you have a roof leak?” to which Shelley Emond responded, “Yes.” Shelley Emond gave Mr. Bowman a ladder which he used to access the attic hatch and he looked inside the attic.

[36] Shelley Emond testified that at the time she completed the SPIS, she knew the roof was leaking. Ms. Martineau was also aware the roof was leaking. Ms. Martineau testified that there was no sign of water leaks and she saw no sign of a leak on any ceiling. If Shelley Emond had said there had been water leaks, it would have been in her notes. Her notes prepared before listing the property show no indication of water leaks [14].

[37] Mr. Bowman looked inside the attic space from the hatch to confirm the level of insulation but did not note any evidence of water infiltration.

The Home Inspection

[38] Shelley Emond testified at trial that after the Spring thaw in 2013, and following further roof leaks in 2014, she painted over the stains on the ceiling again at the beginning of June 2014.

[39] The Bowmans were given a list of home inspectors by Ms. Martineau. From that list they retained Mr. Studholme to conduct a home and septic system inspection. Mr. Studholme was busy and was not available until June 26, 2014. At Mr. Bowman’s request, Ms. Martineau obtained an extension on the date for waiving conditions to June 27, 2014. Ms. Martineau sent Mr. Studholme the MLS Listing, which indicated the existence of the SPIS. However, she did not send him a copy of the SPIS or advise him of the prior roof leaks. She felt that to do so might colour his objectivity during the inspection [15].

[40] The inspection was supposed to proceed at 3:00 p.m. [16] Mr. Studholme’s report indicates that the inspection was completed between 3:30 p.m. and 6:30 p.m. with Ms. Martineau, and both Aden and Shirley Bowman present [17]. Ms. Martineau also stated she was present. However, Mr. Bowman’s unequivocal evidence is that the inspection started later than planned and Ms. Martineau advised that she was unable to attend as she had a meeting.

[41] Although she insisted at discovery that she would never give a purchaser a lock box number, Ms. Martineau did indeed give Mr. Bowman the number which he recorded in his notebook [18]. Mr. Bowman gave the home inspector access and the home inspection proceeded. It was a non-invasive inspection. According to Mr. Bowman, he asked Mr. Studholme four specific questions about the roof, the septic system, a mouldy smell in the house and the water stain on the living room ceiling.

[42] According to Mr. Bowman, Mr. Studholme’s response was that: (a) The roof shingles had a year or two left but needed two vents; (b) The septic looked like an 800 gallon tank sufficient for a three-bedroom home; (c) The smell was likely old carpets and there was no sign of mould; and (d) The water stain did not appear to indicate an active leak [19].

[43] Ms. Bowman left shortly after the inspection started to tend to a sick daughter. It seems that Ms. Martineau did come to the home inspection late, taking pictures of the septic inspection at 4:05 p.m. [20] The Bowmans met with Ms. Martineau at Oliver’s Coffee shop in Bracebridge (a 15-minute drive from the Property) at 4:50 p.m., a little over an hour after the home inspection had started, to sign a Notice of Fulfilment of Condition, waiving all conditions including the home inspection [21]. Ms. Martineau did not advise them to wait for the full written report. Mr. Bowman testified that he was satisfied with Mr. Studholme’s verbal responses and that Mr. Bowman did not require the written report. Mr. Studholme’s evidence confirms this. However, Mr. Studholme emailed Mr. Bowman his written report anyway on the day following the inspection, which Mr. Bowman admits receiving prior to closing.

Closing of the Transaction

[44] The Property transaction completed on July 15, 2014 [22]. The Emonds financed 95% of the purchase price to enable the transaction to close, secured by a life insurance policy.

[45] Ms. Martineau did not first ensure that the Emonds dug a new well so that the Property had access to potable water, which Mr. Studholme identified at trial as a necessary pre-condition to be able to obtain a mortgage. Nor did Ms. Martineau divide the vendor-take-back mortgage into multiple instruments to provide the Emonds with the ability to sell or borrow against one of the mortgage loans, as would have been prudent to protect the Emonds’ interests, according to Barry Lebow’s testimony at trial. Mr. Lebow was the real estate agent expert witness who testified on behalf of the Bowmans on the standard of care of a real estate registrant and mortgage brokering in the real estate industry.

[46] Prior to closing, Ms. Martineau went to the home on July 10 or 11, 2014 to give it a last once-over. Her evidence at trial was that everything was in good condition. However, Shelley Emond went there on July 12, 2014 and testified at trial that she discovered puddles of water on the kitchen floor and a wet dining room carpet from serious roof leaks which she said she reported to her real estate lawyer but not to Ms. Martineau or to Mr. Studholme.

[47] On the date of closing, and after they had signed all paperwork necessary to close the transactions, the Bowmans were advised by their real estate lawyer that the Emonds’ lawyer had written requiring them to replace the roof shingles before October 21, 2014 [23]. The Bowmans were surprised that the Emonds required this at the last minute, particularly given that Ms. Martineau had advised that the roof was only ten years old, and the home inspector said they had at least one or two years before shingles would need replacing.

The Discovery of Deficiencies

[48] The Bowmans had arranged further private borrowing of $25,000. Of this, $10,000 was for the down-payment, $10,000 for a new well and interior renovations, and $5,000 was for a new roof shingles.

[49] Approximately two weeks after closing, Mr. Bowman started to remove the kitchen wall with a view to expanding the kitchen/dining room area. During this work, he discovered extensive and apparent long-standing water infiltration and mould growth. In the process of removing wet insulation, wall and ceiling finishes, he found further evidence of water infiltration and mould growth throughout the wall and floor cavities of the home.

[50] In the process of removing the code non-compliant fireplace on the main floor, Mr. Bowman discovered rotting of the wall structure and mould throughout the wall cavity as a result of long standing water and roof issues. What he found was documented by the photographs he took during his work and supported by his testimony at trial [24].

[51] Mr. Bowman gutted the home to remove all water and mould damaged drywall and insulation. During this investigation, he noticed fresh over-paint marks on the wood ceiling moulding, indicating that the ceilings were recently repainted.

[52] Ron Koerth, P. Eng., an expert forensic engineer, attended the Property on November 20, 2014 to inspect the home for damages. Mr. Koerth identified the following deficiencies: (a) Substantial wood rot of the wall and floor framing at the northwest corner of the house where the masonry fireplace had been located; (b) Water staining on many of the wall studs and some floor joists; and (c) Rot of the rim joist, sill plate and ends of the floor joists beneath the front door.

[53] At this point, the Bowmans were paying both $1,750 per month in rent [25] and mortgage payments of $1,085.20 to the Emonds, for a home that they could neither inhabit nor afford to repair.

[54] Mr. Bowman testified at trial that had he been warned of ongoing roof leakage, he would have made additional inquiries to verify the possibility of damage. Had he been aware of roof leakage and the septic problem, he would not have completed the purchase on July 15, 2014.

THE ISSUES

A. LIABILITY

(i) Did Ms. Martineau’s conduct as a real estate agent fall below the standard of care? (ii) If so, did her professional negligence cause the Bowmans’ damages? (iii) Should liability be apportioned between Ms. Martineau and Re/Max, the Emonds and/or Paul Studholme and, if so, to what extent?

B. DAMAGES

(i) What damages, if any, flow from Ms. Martineau’s professional negligence? (ii) Who is responsible for the damages caused by the heaving of the foundation? (iii) What is the measure of damages – diminution in value vs. repair costs?

POSITION OF THE PARTIES

Position of the Bowmans

[55] This dispute arises from the Bowmans’ discovery that their newly-purchased home suffers from severe water and mould damage due to water penetration through the building envelope.

[56] Ms. Martineau of Re/Max represented both the sellers Emond and the purchasers Bowman in the transaction, completed by way of a vendor-take-back mortgage.

[57] The Emonds disclosed the existence of historic and ongoing roof leaks to Martineau verbally and in an SPIS. Ms. Martineau did not disclose this information or the SPIS to the Bowmans.

[58] The Bowmans retained a home inspector, Mr. Studholme, on the recommendation of Ms. Martineau, to inspect the Property and to inform them of any problems with the Property. Ms. Martineau did not provide the SPIS to Mr. Studholme, nor did she impart her knowledge of ongoing roof leaks. Mr. Studholme identified only that the shingles needed replacing and the roof required additional ventilation to prevent ice damming (for which cables had been installed to avoid the damaging consequences that can arise). He did not identify any signs of roof leakage, water damage or mould. Mr. Studholme could not do an invasive inspection and there was no evidence that his inspection was in any way negligent.

[59] The Bowmans relied on Ms. Martineau to provide them with all material facts regarding the Property that she had received from the Emonds. Ms. Martineau was aware that the Property suffered from actual water penetration but did not provide that information to the Bowmans, let alone discuss it with them, nor did she review the SPIS with them.

[60] In so doing, Ms. Martineau fell below the standard of care required of her as a real estate agent, and caused the Bowmans to suffer damages. The Bowmans believed they were purchasing a home they could live in, free from mould and water damage. What they got was the complete opposite. Had Ms. Martineau informed them of the Property’s history of water penetration, the Bowmans would never have purchased the severely damaged home in circumstances where they could barely afford the purchase, let alone to conduct any substantial repairs.

Position of Ms. Martineau and Re/Max

[61] The Bowmans’ claim against Ms. Martineau is that she failed to provide and review with them with a copy of the SPIS prior to their agreement to purchase the Property from the Emonds. In particular, the Bowmans allege that the SPIS would have disclosed roof leakage and problems with the septic system.

[62] At trial, Mr. Bowman appeared to advance other claims of negligence against Ms. Martineau, relating to water potability and the vendor-take-back mortgage. These latter two claims were not pleaded in the now twice-amended statement of claim and, as will be submitted below, are, in any event, without merit.

[63] The issue of whether Ms. Martineau provided a copy of the SPIS to the Bowmans will turn on the court’s credibility findings. Various witnesses gave differing accounts on that issue, but Ms. Martineau and Re/Max submit that Ms. Martineau’s evidence must be considered in light of the testimony by both Mr. Bowman and Ms. Emond that she acted professionally during her representation of them, statements that are borne out by her written communications to Mr. Bowman prior to his entering into the agreement of purchase and sale.

[64] If the court finds that Ms. Martineau did not provide the SPIS to Mr. Bowman, it must then decide whether that caused him damages. Ms. Martineau and Re/Max submit that on a “but for” test, Mr. Bowman would have done what he did do: inspect the roof himself and observe the large water stain on the living room ceiling, have a home inspection, discuss the stain with the inspector, budget for a new roof and then waive the conditions in the agreement of purchase and sale.

[65] The Bowmans also seek to apportion liability to those defendants who settled vis-à-vis the Pierringer agreements. Ms. Martineau and Re/Max submit that the settling defendants must bear all of the liability for the Bowmans’ damages, save for the damage he himself caused by leaving the house unheated and unprotected from the elements.

[66] Ms. Martineau and Re/Max submit that Mr. Bowman’s stripping out of all the insulation and electric heaters caused the foundation to heave, which greatly exacerbated the damage to the house. Mr. Bowman not only failed to repair the roof but he left a hole in the roof where he had removed the chimney. Thus, water has continued to leak into the house during the four years it took for this case to come to trial.

A. LIABILITY – ANALYSIS

Credibility

[67] Mr. Bowman, Shelley Emond, Ms. Martineau and Mr. Studholme gave evidence at trial, together with other witnesses on damages. Depending on the topic, some of the evidence varied from witness to witness. Not all of their evidence was consistent or reliable. Accordingly, a discussion of credibility is necessary.

Reviewing the SPIS with the Emonds

[68] The consistent evidence at trial was that Ms. Martineau left the SPIS with the Emonds as Alma Emond was too tired to review the document. The SPIS would be completed by the Emonds on their own and Ms. Martineau would retrieve a completed copy later. Shelley Emond testified that Ms. Martineau reattended the property, retrieved the completed SPIS, and gave the Emonds a copy. The Emonds produced their copy of the SPIS as one of their productions. Ms. Martineau’s SPIS copy was never produced.

[69] Whether Ms. Martineau reviewed this information with the Emonds is of key importance to this dispute. Mr. Lebow’s evidence at trial was that one of Ms. Martineau’s professional obligations was to review the answers on the SPIS with the Emonds. Without reviewing the answers, she would be ill-equipped to satisfy her duty to explain the significance of the answers to the Bowmans.

[70] I find Shelley Emond’s evidence was consistent and should be preferred over Ms. Martineau’s contradictory evidence on this point.

[71] Specifically, one of the concerns Ms. Martineau alleged she had with the SPIS after reviewing it is inconsistent with the knowledge she alleged she had about the condition of the house. At trial, Ms. Martineau testified that at her March 10, 2014 meeting at the Property with the Emonds, she became aware that the water from the Property’s dug well was not potable, and that during one year in the past, the dug well was unable to provide sufficient volume of water to service laundry.

[72] In cross-examination, counsel for the Bowmans pointed out to her that question 1c on the SPIS addressed water quantity and quality, and that the Emonds had indicated that there were no issues. In cross-examination, Ms. Martineau agreed that these answers were incorrect and that prospective purchasers would rely on the SPIS. However, Ms. Martineau testified in-chief regarding the SPIS that “everything looked good until I came across roof leakage 9a; 9b.”

[73] It is submitted that, had Ms. Martineau actually reviewed the SPIS with the Emonds, she would have corrected the incorrect answers in 1c regarding the water quality and quantity to ensure people would not rely on incorrect disclosure in the SPIS.

[74] Similarly, Shelley Emond testified at trial that her answer to question 1b indicating that she was aware of problems with the septic system was incorrect, and that the answer should have said she was not aware of any problems with the septic. It is submitted that, had Ms. Martineau actually reviewed the SPIS with the Emonds, the Emonds would have alerted Ms. Martineau to this incorrect answer and would have changed it accordingly.

[75] I find Shelley Emond’s testimony should also prevail as she testified that their answers to questions 9b and 9d of the SPIS were intended to convey that the ice damming was causing roof leakage and that this was an ongoing issue. Ms. Martineau testified that her interpretation of these answers was that there had been past roof leakage, but there were no present issues. Had Ms. Martineau reviewed the Emonds’ answers on the SPIS with them, I find there is no question but that she would have been aware that the answers to questions 9b and 9d were intended to convey that there was an ongoing leakage issue.

[76] The conclusion that Ms. Martineau did not review the SPIS with the Emonds is further bolstered by the fact that, in her testimony at discovery, Ms. Martineau did not recall reviewing the SPIS with the Emonds [26].

Provision of the SPIS and Information Regarding Water Leakage to the Bowmans

[77] Ms. Martineau testified at trial that she provided a copy of the SPIS to the Bowmans and that she informed them of the water leakage issues that Shelley Emond had conveyed to her.

[78] However, Ms. Martineau has never plead that she provided the SPIS to Mr. Bowman. In fact, the SPIS is not mentioned at all in her Statement of Defence.

[79] Ms. Martineau’s Statement of Defence is similarly silent on the issue of providing the Bowmans with information regarding the Property’s water leakage issues.

[80] Mr. Bowman has always been consistent in his assertion that he did not receive a copy of the SPIS. His uncontroverted testimony is that he obtained a brochure from a box at the end of the driveway which Shelley Emond confirmed would not have had an SPIS.

[81] Shelley Emond and Ms. Martineau both testified at trial that Ms. Martineau handed a brochure to Mr. Bowman that presumably had an SPIS inserted into it. Neither Shelley Emond nor Ms. Martineau stated that they saw Mr. Bowman remove an SPIS from the brochure, nor did either of them state that they saw him read the SPIS. While both Shelley Emond and Ms. Martineau claim Mr. Bowman received the SPIS, their claims are based on the assumptions that (a) the brochure Ms. Marineau handed to Mr. Bowman did in fact have an SPIS inside, and (b) that Mr. Bowman, if handed such a brochure, in fact became aware of, removed and read the SPIS insert. Mr. Bowman never made such a claim; indeed, his testimony at trial and throughout the litigation has always been that he never received a copy of the SPIS.

[82] To the extent that the testimony of Shelley Emond and Ms. Martineau conflicts with Mr. Bowman’s evidence on this point, I accept Mr. Bowman’s testimony as it does not rely on assumptions and has been consistent. I accept Mr. Bowman’s evidence that he never saw a copy of the SPIS until it was presented to him by his counsel during the examination for discover process. He testified about his unhappy reaction to what was contained in the document. I further accept his evidence that if the SPIS was provided to him before he signed the Agreement of Purchase and Sale (the “APS”), he would have checked out what he read much deeper. He did not want to buy a mouldy building. His daughter was allergic to mould. Also, he had no money to deal with the extra expenses. He was adamant that Ms. Martineau never gave him a copy of the SPIS and never reviewed it with him. He testified that if he had known about the leaks and the septic problem disclosed in the SPIS, he would have walked away as it meant spending a lot more money which he did not have.

[83] Furthermore, Ms. Martineau provided an undertaking at her examination for discovery to advise specifically what documents were inserted into the marketing brochures. Her response was that the brochure had black and white documents inserted, but she did not specify what those documents were. Ms. Martineau did not confirm that an SPIS was part of this package. When confronted with this fact during cross-examination at trial, Ms. Martineau admitted that her response to the undertaking did not specify the SPIS and stated that the answer to the undertaking was incorrect and that it did not reflect her answer. I find Ms. Martineau’s answer to the undertaking is inconsistent with her testimony at trial.

[84] Further, Ms. Martineau’s position regarding the existence of the SPIS has changed during the course of the litigation and at trial. Originally, her position was that the SPIS never existed. On discovery, her position was that she could not recall anything about the SPIS until she did further searching, which is different than stating that no SPIS ever existed.

[85] She testified at trial that the SPIS was more of a checklist for herself to be handed to other realtors and not to the public. However, Ms. Martineau testified that she used the SPIS as more than a personal brochure. Lastly, she testified at trial that she enclosed the SPIS in the marketing brochure available for anyone to pick up at the Property – available not just for realtors – but for the public at large.

[86] Regarding the question whether an SPIS existed, I find Ms. Martineau took the position that an SPIS did not exist until she was confronted with a copy produced by the Emonds. Also noteworthy, the MLS Listing prepared by Ms. Martineau in March 2014 indicated that an SPIS did indeed exist.

[87] I find Ms. Martineau’s conflicting testimony tends to weaken her credibility as a witness particularly with respect to the SPIS. I conclude that the SPIS did exist and that it was neither reviewed with the Emonds nor the Bowmans by Ms. Martineau.

The Agreement of Purchase and Sale

[88] The APS contains five conditions concerning: financing, home inspection, insurance, driveway/workshop, new septic/new well [27]. The conditional period for all the conditions expired on June 24, 2014.

[89] Mr. Bowman chose Mr. Studholme from the list of inspectors provided by Ms. Martineau. When it was clear that he was having trouble obtaining the inspection prior to the expiry of the conditional period, he emailed Ms. Martineau on June 23, 2014 requesting an extension of the conditional period to June 27 [28]. The agreement was then amended to extend the conditional period [29].

[90] I find Mr. Bowman clearly understood the importance of getting a home inspection done within the conditional period. Immediately following the home inspection, which took place on June 256, 2014, he waived all his conditions [30], even though he had not received the inspector’s written report then and had one more day to waive his conditions. This was his decision not Ms. Martineau’s. Notwithstanding Mr. Bowman’s decision that he did not require the written report, Mr. Studholme emailed Mr. Bowman the written report later, which Mr. Bowman admitted receiving prior to the closing date [31].

[91] I reject any suggestion that Mr. Bowman’s waiver of all conditions was untimely or Ms. Martineau ought to have advised otherwise after the house inspection. Mr. Bowman was clear that he was satisfied with the verbal report by Mr. Studholme and that he did not want to receive the written report. He was satisfied with what Mr. Studholme had told him about Mr. Bowman’s concerns. When he met with Ms. Martineau at Oliver’s Coffee shop after the home inspection, she had carefully reviewed the conditions with Mr. and Mrs. Bowman. He testified that Ms. Martineau had carefully explained the conditions and that the Bowmans understood what she had said and the conditions were waived.

The SPIS

[92] I have discussed the existence of the SPIS and the fact that Ms. Martineau did not review it with either the Emonds or the Bowmans. I have found the Bowmans never received a copy of the SPIS from Ms. Martineau. Further, I will discuss the evidence of expert witness, Mr. Lebow, and how Ms. Martineau’s conduct fell below the standard of care.

Prior Roof Leakage

[93] Ms. Martineau’s evidence on her examination for discovery was that she could not recall reviewing the SPIS with Shelley Emond. At trial, Ms. Martineau gave conflicting evidence. She testified about the SPIS and asking Shelley Emond if there had been a previous roof leak, to which Shelley Emond said yes, and that the leak was repaired by the Emonds some five or six years prior to the listing. Shelley Emond’s evidence was that Ms. Martineau never reviewed the SPIS with the Emonds.

[94] Quite apart from the SPIS, Shelley Emond testified that she told Ms. Martineau that the roof heating line was insufficient and that there had been a Spring run-off leak in 2013. She had not told Ms. Martineau about a Spring leak in 2014 as the thaw had not yet happened. Shelley Emond testified this problem had not been fixed. She testified that Ms. Martineau knew this was an ongoing problem and had not been repaired because she told Ms. Martineau so.

[95] I prefer the evidence of Shelley Emond to that of Ms. Martineau on this point. Shelley Emond’s evidence is more reliable. I accept that she told Ms. Martineau about prior water damage to the house that had been repaired.

[96] Shelley Emond further testified that she experienced no roof leaks from the time of the earlier roof leakage in 2005 up until 2013. Her evidence suggests that there was only one event of water seepage since 2005. It is significant that the Spring 2013 roof leakage was not mentioned in the SPIS completed by the Emonds on March 21, 2014.

[97] Further, Shelley Emond failed to advise anyone of the Spring 2014 seepage that she observed. Also, she failed to advise the Bowmans and Ms. Martineau of the serious flooding she observed in the house a day before closing. In contrast to her description of the 2013 water seepage, she described this latter event as a “huge problem” which she only disclosed to her lawyer. We do not know what her lawyer did about this critical disclosure, except that the transaction closed on the closing date in accordance with the APS.

[98] Engineer, Ron Koerth’s evidence at trial was that the water damage to the Property resulted from prolonged exposure over the course of many years. I accept the evidence of Mr. Koerth that this damage would have existed prior to the July 2014 water penetration.

[99] I find the prior roof leakage was an ongoing active problem up to and after the date of closing. I find Shelley Emond failed to disclose the ongoing water infiltration to the Bowmans and Ms. Martineau. I accept that she told her real estate solicitor about the July 2014 flooding immediately before closing.

Water Stain on the Ceiling

[100] After he took possession and experienced roof leakage, Mr. Bowman took photos including a photo of a significant water stain on the ceiling of the living room [32]. Mr. Bowman was not sure if he asked Ms. Martineau about the stain on his first visit to the property.

[101] On the second visit to the Property, Mr. Bowman testified that he asked Ms. Martineau in front of Shelley Emond if there was any issue with the roof. Ms. Martineau replied that as far as she knew, there was no issue with the roof as it was only ten years old. Ms. Emond made no response.

[102] On the second visit, Mr. Bowman testified that he did not notice any water penetration except for the living room ceiling stain and he did not notice any mould growth or damage. He testified that the water stain remained largely unchanged from that time to the time he took possession.

[103] Shelley Emond also testified that there was a water stain on the living room ceiling at the time of the listing and that the stain was there to be seen. She testified that she did not show Ms. Martineau where the stain was located. She testified she told Ms. Martineau the roof leaked. There were leaks in the living room and kitchen. Mr. Bowman did not see the alleged water stain in the kitchen, nor did anyone else.

[104] Ms. Martineau denies that the water stain in the living room was present. The home inspector, Mr. Studholme, also denies that the water stain was present at the time of his inspection. He stated that had he seen it, he would have taken a photograph of it and put it in his report.

[105] In the fact of this contradictory testimony, it is important to look at the photos of the living room ceiling taken by Ms. Martineau as part of the listing: none of them show any water stains on the living room ceiling. The living room ceiling is depicted in several photos taken by Ms. Martineau [33].

[106] When shown photo 12, which depicts the living room ceiling, Ms. Emond testified that the water stain was close to the window adjacent to the fireplace (as she put it, “between the two chairs”).

[107] Mr. Bowman, on the other hand, located the water stain in the foreground of the same photo, away from the ceiling light/fan that is depicted in the photo. The two alleged locations are not close to one another.

[108] In any event, no water stain is visible in either location in photo 12, nor is one visible in photo 13, which depicts more of the foreground than one can see in photo 12.

[109] Ms. Emond stated that the water stain was not visible in photo 12 because the light from the ceiling light obscured it. However, I find the light would reveal the stain, rather than obscure it, had it been present.

[110] Further, I find it is more likely that had there been a water stain on the living room ceiling, it had been painted over by Ms. Emond prior to the listing. She freely admitted that she had painted over water stains in 2013 and again in 2014 to obscure them, prior to the home inspector’s inspection, so that her mother would not have to look at the stains. However, she testified that the stains were still visible.

[111] I find Shelley Emond has painted over the water stains whenever they first became visible and that staining was not present during the listing. I accept Ms. Martineau’s evidence on this point, which is consistent with the listing photos she took. Not only did Shelley Emond paint over the stains in 2013 after the Spring run-off leakage, she also painted over the stains again in the beginning of June 2014, after the APS was entered into with the Bowmans and before the home inspection by Mr. Studholme took place on June 26, 2014.

[112] I accept the evidence of Mr. Studholme that he did not see any stains during his home inspection and if he did, he would have taken photos and would have noted same in his report. I accept his evidence that he definitely did look at the ceilings. Specifically put to him was Mr. Bowman’s photograph of the stained living room ceiling tile, taken after Mr. Bowman took possession [34]. Mr. Studholme testified he saw no stain. He did not remember seeing that stain. If there was staining, he would have taken a photo. As for Mr. Bowman’s photo, Mr. Studholme testified, “this looks like a drip.” If Mr. Studholme did have a conversation with Mr. Bowman about the water stain on the living room ceiling, Mr. Bowman made a note in his notebook: “doesn’t appear to be an active leak”, which is consistent with Mr. Studholme’s evidence [35].

Roof Inspection

[113] Ms. Emond testified that she attempted to eavesdrop on a conversation between Ms. Martineau and Mr. Bowman on one of his pre-agreement visits to the property.

[114] She could not hear what they were saying but she recalled them gesturing toward the roof and it was obvious to her that they were discussing the condition of the roof. This evidence militates against Mr. Bowman’s position at trial that Ms. Martineau attempted to hide the evidence of a prior roof leak. The evidence at trial was that Ms. Martineau, Ms. Emonds, Mr. Bowman and Mr. Studholme all knew that the roof was an issue.

[115] The roof was, of course, inspected by Mr. Studholme in the presence of Mr. Bowman, and Mr. Studholme’s observations are recorded in his home inspection report, which will be discussed below. Mr. Bowman recalled that Mr. Studholme warned him that the presence of heat lines in the roof valleys was “not a good sign”.

[116] Mr. Bowman had a keen interest in the condition of the roof. He testified that not only did he accompany Mr. Studholme on the roof during the latter’s inspection, but that he also viewed it on his own at least twice, by climbing the antenna next to the house. On his second pre-agreement visit, he looked into the attic using a ladder supplied by Ms. Emond.

[117] As a result of his inspections of the roof and on receiving the advice of Mr. Studholme, he decided to install a new roof when he took possession of the house, as was expressed in his and his wife’s letter to Ms. Emond, complaining about the condition of the house after they took possession [36].

[118] In that letter, beginning at the fifth line from the top, the Bowmans state: Our original plan before we move [sic], was to put in a new well, a new roof on the house, freshen up the inside with paint, and remove a few walls, to make an open concept dining room.

[119] Mr. Studholme testified that had he been told of the 2013 ice damming during the Spring run-off (as described in the SPIS) he would have looked at the walls and ceilings where they join, which he did in any event. He found nothing of significance at that location.

[120] Mr. Studholme was cross-examined on what he would have done had he seen the SPIS prior to his inspection. He noted that it appeared that the roof leakage was in the past and that there was no unrepaired damage.

The Home Inspection and Report

[121] Mr. Studholme attended at the Property on June 26, 2014 and did a home inspection. As part of his inspection, he inspected the septic system. Mr. Martineau was also in attendance.

[122] At one point in his testimony, Mr. Bowman stated that he did not receive the home inspection report until after closing (the closing date was July 15, 2014). He said he specifically asked that Mr. Studholme mail him a copy, which he received after closing. Mr. Studholme testified that he was not asked to mail a copy and not did not do so; instead, he emailed Mr. Bowman and made the report available online. He was surprised that Mr. Bowman did not want his written report immediately following inspection. Later in his testimony, Mr. Bowman conceded that he accessed the report online prior to closing.

[123] Mr. Studholme produced an “Activity” list, which shows that he emailed the report to Mr. Bowman on July 9, 2014 and that it was downloaded on the same day [37].

[124] Mr. Studholme’s report is found at Exhibit 1, JDB at Tab 43. Under the heading, “Main Concerns” found at page 1 of 39, he lists the following:

1. Deterioration of roof shingles
2. Lack of ventilation of attic, missing Moore vents
3. Missing gutters and downspouts
4. Proper finishing of exterior and interior of basement windows
5. Removal of uncertified wood stove in basement
6. Any electrical repairs, corrections or upgrades
7. Replace toilet
8. Septic tank to be pumped and new baffles installed
9. Fireplace hearth needs to be extended
10. The septic tank is not even minimum size for a 3 bedroom dwelling and this is a five bedroom

[125] His specific comments about the septic system are found at page 38. He warns that the tank is less than 2700 litres and that 3600 litres is required.

[126] Notably, upon receiving the report, Mr. Bowman did not raise any issue with Mr. Studholme regarding the size of the septic tank even though Mr. Studholme allegedly said the tank was of sufficient capacity at the time of the inspection.

[127] Mr. Bowman admitted that Mr. Studholme warned him of ice damming during the inspection of the roof.

[128] Mr. Studholme was definite in his testimony that he would have discussed the summary of his findings with Mr. Bowman at the time of the inspection and he would have put his observations in his written report.

The Septic System

[129] Ms. Emond stated in her examination-in-chief that her indication in the SPIS that there was a problem with the septic system (question 2b – “Schedule for Water Supply, Waste Disposal, Access, Shoreline, Utilities”) was an error [38]. She stated that she never had any problems with the septic system. Mr. Bowman’s evidence was that on taking possession, there was a problem with the septic system. He installed a new toilet but the problems continued.

[130] Mr. Studholme inspected the septic system. His evidence was that his verbal remarks to Mr. Bowman about the septic system were the same as those outlined in his report. Mr. Bowman denied this, testifying that Mr. Studholme’s verbal advice was that the capacity of the septic system was sufficient for the house but that his report stated that it was under-capacity.

[131] I question Mr. Bowman’s credibility in respect of his evidence regarding the septic system. Mr. Bowman did not recall discussing with Ms. Martineau anything about the septic system. He testified that Ms. Martineau did not tell him that the Emonds advised her that they had problems with the septic system. Shelley Emond testified that she never had any problems with the septic system. Mr. Bowman testified that he was never aware of putting in a new septic system because he had no money to do so. His evidence is inconsistent with the evidence of Ms. Martineau, which I accept on this point. Ms. Martineau reviewed all the conditions, including conditions contained in the APS, including condition 5 as it related to the new septic system and new well. Ms. Martineau testified that she carefully explained the conditions which the Bowman’s understood. I find that the issue about the septic system was always in play. That is why Ms. Martineau included the septic system as condition 5 in the APS, and that is why a home inspection and septic system inspection was conducted by Mr. Studholme.

[132] Mr. Bowman testified that he spoke with Mr. Studholme at the property. According to Mr. Bowman, he and Mr. Studholme inspected the septic system. It looked like an 800 gallon tank, which was alright as far as Mr. Bowman was concerned. Mr. Bowman testified that he was going to cut back on the number of bedrooms anyway to “make it work”.

[133] In his notebook, Mr. Bowman noted under “Septic System”, Condition: good flow. Size: looks like 800 gallon, good for 3 bedroom, needs baffles. He later learned that the tank had a 600 gallon capacity, not 800 gallons. He testified that if someone brought the septic problem to his attention before he entered into the APS, he would not have purchased the Property. If he knew about the leaks and the septic problem, he would have walked away because it meant a lot more money, which he did not have to spend.

[134] Mr. Studholme’s evidence was that when the septic inspection was conducted, both Mr. Bowman and Ms. Martineau were there. Mr. Studholme testified that he definitely had discussions with Mr. Bowman on site. He told Mr. Bowman that the septic system was half the size that it should have been for a 5-bedroom home. Mr. Studholme was definite that this discussion was had with Mr. Bowman during the inspection. He went on to testify that he attempted to educate Mr. Bowman by telling him about “Septic 101” and referring to some literature that he had with him about septic systems. He testified that he definitely reviewed this main concern with Mr. Bowman during and at the end of the inspection. Mr. Studholme testified that Mr. Bowman was watching and listening, but was occupied with what he was going to do with the dwelling afterwards.

[135] I find that neither Ms. Martineau nor Mr. Studholme are liable regarding the septic system. The conditions were inserted into the APS to protect the Bowmans, particularly condition 5. Mr. Bowman retained Mr. Studholme to conduct a home and septic system inspection. I find that Mr. Bowman was told that the septic system was undersized. The conditions were explained to the Bowmans by Ms. Martineau and they were understood. Mr. Bowman did not want Mr. Studholme to send him a copy of the written report. He was emailed a copy of the written report anyway. Mr. Bowman did not read the report, and even if he did, he did not make any complaint to either Ms. Martineau or Mr. Studholme about the problem with the undersized septic tank. I accept that Mr. Studholme told Mr. Bowman that the septic tank was not even a minimum size for a 3 bedroom dwelling and this home was a 5 bedroom dwelling, as per his report. I find that Mr. Bowman purchased the property with a septic tank that was undersized, original to the property and not pumped out.

[136] Mr. Bowman had previous experience with septic systems from his various rural properties and had a new septic system installed at his Shea Road property when he built a new house and replaced the old septic system on his Foresters Falls property. Mr. Bowman had some familiarity with septic systems, and knew that the septic system was a concern regarding the property.

The Well and Water Potability

[137] The issue of the potability of the well water was raised by Mr. Bowman’s counsel in his cross-examination of Ms. Martineau. Mr. Bowman testified in-chief that he planned all along to install a new well. This is reflected in the Bowmans’ letter to Ms. Emond after they experienced flooding [39]. In that letter the Bowmans state: “Our original plan before we move [sic], was to put in a new well…”

[138] This plan is also reflected in the fifth condition in the APS [40] which states, This Offer is conditional upon: … 5. The Buyer(s) performing due diligence with septic and well service providers on the installation of both a new septic system and a new drilled well and obtaining information satisfactory to the Buyer(s).

[139] Clearly, Mr. Bowman was contemplating installing both a new well and a new septic system at the time of the APS. Mr. Studholme recalled that Mr. Bowman told him that the water was not potable.

[140] This issue was not pleaded in the Bowmans’ twice-amended statement of claim and was raised for the first time at trial. The Court of Appeal stated in Rodaro v. Royal Bank of Canada, 2002 ONCA 41834, 59 O.R. (3d) 74 [41] that “It is fundamental to the litigation process that lawsuits be decided within the boundaries of the pleadings [at para. 60].”

[141] The Bowmans identified two issues in the statement of claim: the roof leakage/water problem and the septic system. Nowhere was it pleaded that they had an issue with the well or that they were claiming damages for the well. In their written submissions, they confirm that they are not seeking damages regarding the well, but they raised this as an issue of negligence at trial.

The Vendor-Take-Back Mortgage

[142] Mr. Bowman admitted that he lost a previous property where he had built a new house because he could not pay back a business loan and he went bankrupt. He admitted that he could not obtain conventional bank financing to purchase a house. His only option, if he wanted to buy a home, was to obtain private financing.

[143] He approached his friend and landlord, Steve Strickland, who is also a contractor, to see if he would offer a private mortgage. Mr. Strickland declined, describing the house as a tear-down.

[144] Nonetheless, Mr. Bowman still wanted to buy the property. The Emonds offered him a vendor-take-back mortgage, which he accepted. This was his decision. He was aware of his financial straits. He could have continued to rent but he wanted to buy a house. The only way he could buy a property was to get private financing, which carries a higher interest rate than bank financing. This is precisely what he did.

[145] As the Bowmans’ expert, Mr. Lebow, stated, a fiduciary must follow their client’s instructions, as long as they are lawful. Mr. Bowman wanted a property even if it meant getting private financing. It was not up to Ms. Martineau to dissuade him from doing so: indeed, had she tried to do so, she would have been in breach of her fiduciary duty to him. Her job was to ensure he had access to information regarding financing.

[146] There is nothing wrong with obtaining a vendor-take-back mortgage. The dilemma for Mr. Bowman was that because of the poor condition of the Property, the extent of which only became apparent to him after he took possession, the Property was not worth what he paid for it, but neither he nor Ms. Martineau knew this at the time.

[147] As stated above, nowhere in the amended claim is there any reference to the mortgage or any suggestion that Ms. Martineau was negligent in failing to dissuade Mr. Bowman from obtaining the mortgage.

[148] She gave him a list of mortgage specialists and followed up with the name of one in particular. They could not assist Mr. Bowman, but he wanted to buy the Property nonetheless.

[149] Ms. Martineau also mentioned the possibility of getting mortgage insurance to protect the Bowmans as previously discussed [42].

[150] Again, Ms. Martineau and Re/Max rely on Rodaro in the discussion about the water potability issue. I agree. Ms. Martineau and Re/Max should not be expected to respond at trial to a negligence claim that has not been pleaded.

PROFESSIONAL NEGLIGENCE OF SUZANNE MARTINEAU

[151] The leading case regarding professional negligence of a real estate agent is Krawchuk v. Scherbak, 2011 ONCA 352. Epstein JA characterizes a real estate agent’s duty of care in para 125 as follows: To avoid liability in negligence, a real estate agent must exercise the standard of care that would be expected of a reasonable and prudent agent in the same circumstances. This general standard, a question of law, will not vary between cases and there is no need for it to be established through the use of expert evidence: see Wong v. 407527 Ontario Ltd., 1999 ONCA 3788, at para. 23; Fellowes, McNeil v. Kansa General International Insurance Co., 2000 ONCA 22279, at para. 11. The translation of that standard into a particular set of obligations owed by a defendant in a given case, however, is a question of fact (Wong, at para. 23; Fellowes, at para. 11). External indicators of reasonable conduct, such as custom, industry practice and statutory or regulatory standard, may inform the standard. Where a debate arises as to how a reasonable agent would have conducted himself or herself, recourse should generally be made to expert evidence.

[152] Counsel for the defendants acknowledged at trial that Re/Max is vicariously liable for any negligence found on behalf of Ms. Martineau.

The SPIS

[153] Mr. Lebow, an expert realtor called by the Bowmans, confirmed at trial that Ms. Martineau was obligated to adhere to the Real Estate Code of Ethics, O Reg 580/05 (“RECO”). Mr. Lebow’s evidence was that Ms. Martineau’s obligation pursuant to section 20 of RECO was to verify the facts stated on the SPIS, to ask probing questions, to provide the SPIS to the Bowmans and to carefully explain its contents.

[154] There is no mention of an SPIS in Ms. Martineau’s defence and her counsel at that the time denied that an SPIS existed. It was only on the eve of Ms. Martineau’s examination for discovery that a further file was found, including 5 copies of the SPIS. Ms. Martineau’s evidence then changed and she then took the position that she did provide an SPIS to the Bowmans, which she said was tucked in a pamphlet, at the first viewing. Mr. Bowman denies that he or his wife ever saw an SPIS. They did not have a pamphlet, only the MLS listing.

[155] Where the evidence does not diverge is that Ms. Martineau did not review the SPIS with the Bowmans to ensure that they understood its contents, nor did she ask them to sign the SPIS. Ms. Martineau similarly did not review the SPIS with the Emonds when they completed it. She did not point out to the Bowmans that there had been roof leakage in the past and the heat cables on the roof were “insufficient”.

[156] Mr. Bowman’s evidence regarding the SPIS should prevail over Ms. Martineau’s to the extent that they conflict. Ms. Martineau’s evidence that Mr. Bowman had a copy of the SPIS rests on the assumption that not only did she provide a marketing pamphlet, but it did indeed have an SPIS document inserted. Mr. Bowman’s evidence is unequivocal and does not rely on assumptions.

[157] Ms. Martineau’s failure to ask probing questions of the Emonds about the contents of the SPIS, and her failure to provide the SPIS to the Bowmans or to discuss its contents with them, are all breaches of her duty of care as identified by Mr. Lebow.

[158] I find that Ms. Martineau knew, as did the Bowmans and Emonds, that she was acting in a dual agency capacity. Ms. Martineau failed to review the SPIS with the Emonds to clarify any questions arising out of previous leaks, repairs or ongoing water roof leakage. Further, she was obliged to review with the Emonds, any issues with the septic system to ensure that the Emonds understood that the import of the SPIS and that the completed form was correct. Ms. Martineau never reviewed the SPIS with the Emonds, never assisted them with a view to obtaining full material facts, never to correct any mistakes so that Ms. Martineau could properly advise the Bowmans who were also her clients.

[159] Further, Ms. Martineau never provided the SPIS form to the Bowmans. She never advised them about material facts arising out of that document so that they could ultimately decide after receiving an explanation of the information contained in that form by Ms. Martineau whether or not they wanted to purchase this property. I find the evidence is clear that Ms. Martineau never provided them with the SPIS and never reviewed any of the information contained in that documentation.

[160] Accordingly, I find that Ms. Martineau is negligent as she breached her duty of care to both the Emonds and to the Bowmans.

Waiver of Inspection Clause

[161] The Bowmans required a vendor-take-back mortgage for 95% of the $180,000 purchase price to be able to complete the transaction. The deposit was only $1,000. These circumstances indicate that both the Emonds and the Bowmans were in financially precarious positions.

[162] Mr. Lebow’s evidence at trial was that, especially given the Bowmans’ financially precarious situation, a reasonable real estate agent should have encouraged the Bowmans to wait to view a full inspection report before waiving their inspection condition.

[163] It is important to note that Mr. Studholme inspected the Property thoroughly and did not identify evidence of ongoing roof leakage, mould or water infiltration that would have indicated the extensive damage that the Bowmans ultimately discovered.

[164] The Bowmans submit that Ms. Martineau’s failure to encourage the Bowmans to obtain the full inspection report before waiving the condition is another indicator of her lack of concern for her clients and it did result in their not learning of the fact that the septic required not just baffles, but was well undersized. I disagree.

[165] Mr. Studholme sent his full report by email the next day (or on July 9, 2014) to Mr. Bowman. Mr. Bowman did not want to receive the written report. He felt it was not necessary for Mr. Studholme to send him the full written report. Mr. Studholme did so anyway. It was Mr. Studholme’s evidence that Mr. Bowman signed off on the inspection after the inspection of the property without seeing the written report.

[166] At Oliver’s Coffee shop, Ms. Martineau went through the conditions in the APS with the Bowmans and ensured they were satisfied. Mr. Bowman did not have any concerns about the conditions. He testified that they were explained very well by Ms. Martineau and were understood by the Bowmans. In this case, I find that there was no professional negligence on the part of Ms. Martineau, as alleged, for failure of her duties regarding the waiver of the inspection clause.

[167] Mr. Bowman received the full written report following the inspection. The evidence is clear that he never contacted either Ms. Martineau or Mr. Studholme about anything contained in the written report.

Conclusion Regarding Liability

[168] Mr. Bowman’s testimony was that the Bowmans were never provided a copy of the SPIS, which Mr. Lebow confirmed is a breach of Ms. Martineau’s professional obligations. Ms. Martineau and Shelley Emond both claim that Ms. Martineau provided Mr. Bowman with the SPIS as they believed it was inside a brochure. However, those claims are merely assumptions. Furthermore, neither Shelley Emond nor Ms. Martineau could confirm that they saw the Bowmans read the SPIS.

[169] I have found the Bowmans were not provided with a copy of the SPIS. Mr. Bowman’s unchallenged testimony is that Ms. Martineau never reviewed the SPIS document with him to ensure he understood the information contained therein. Again, this constitutes a breach of Ms. Martineau’s professional obligations confirmed by Mr. Lebow at trial.

[170] Also, she failed to review the information on the SPIS with the Emonds so as to uncover the several mistakes it contained. Shelley Emond testified that the answer regarding the septic system was incorrect. Ms. Martineau confirmed that the answers regarding water quality, and possibly water quantity, were incorrect.

[171] So far as roof leakage was concerned, Ms. Martineau testified that she had doubts about Shelley Emond’s honesty regarding disclosure of the Property’s issues. At trial, Ms. Martineau characterized Ms. Emond as being “evasive about the leak” but stated that she decided not to share this concern with the Bowmans, as she was not sure if she was allowed to compromise one client over another without proof. Ms. Martineau testified at trial that she wanted prospective purchasers to use the SPIS as a source, but did nothing to alert readers of the SPIS to the possibility that it may be correct or incomplete. Despite the obvious position of conflict, she did nothing to satisfy herself that the representations on the SPIS were accurate.

[172] Furthermore, Shelley Emond and Ms. Martineau had different views of the meaning of the answers to questions 9b and 9d regarding roof leakage. Shelley Emond stated that these answers conveyed a problem of ongoing leakage while Ms. Martineau believed they conveyed past leakage. Had Ms. Martineau in fact reviewed these answers with the Emonds, she would have detected and corrected the incorrect answers. More importantly, she would have understood that Shelley Emond was conveying that the Property suffered from ongoing leakage and she would have been able to convey this information to the Bowmans and to Studholme.

[173] I find Ms. Martineau’s failure to verify the truth of those statements in the SPIS, and to properly inform herself of the meaning of the Emonds’ answers, left the Bowmans without the means to learn of the ongoing roof leakage problems. I find Ms. Martineau incorrectly believed that the problems were in the past and not ongoing.

[174] I find Ms. Martineau failed to give the Bowmans the SPIS, that she failed to review the SPIS with the Bowmans, and that she failed to review the SPIS with the Emonds. Mr. Lebow confirmed that each of these failures constitutes a breach of her professional obligations to the Bowmans. I accept his evidence. Ms. Martineau thus breached her duty of care owed to the Bowmans and is therefore liable for the consequent damages.

APPORTIONMENT OF LIABILITY

Liability of Emonds

[175] For the following reasons, I find the Emonds liable in negligence to the Bowmans and for their consequent damages. The Emonds’ negligence is based upon the concealment of the serious and ongoing leakage problem in the house. My findings are supported by the evidence set out below, regarding the conduct of Shelley Emond:

• She was silent, according to Mr. Bowman, when, during his second visit to the property, Ms. Martineau allegedly advised him, in Ms. Emond’s presence, that the roof was in good condition (Ms. Emond denied that there was any discussion of the roof leak during the second visit.);
• She painted over the water stains on the ceiling after the Spring 2013 run-off and again at the beginning of June 2014, prior to the home inspection;
• She did not disclose the roof leakage that occurred in 2014, during the listing but prior to the APS;
• She failed to advise the Bowmans or Ms. Martineau that there was serious flooding in the house just before closing;
• Mr. Bowman discovered a green basin on top of the insulation in the attic, depicted in one of Mr. Bowman’s post-possession photos [43], which his expert, Mr. Koerth, during his cross-examination, agreed was a red flag and evidence of an ongoing leakage problem. Mr. Studholme testified that in his home inspection when he was accompanied by Mr. Bowman, no green basin was seen in the attic;
• Mr. Bowman saw that the ceiling had been freshly painted as evidenced by paint marks on the unpainted wood moulding around the ceiling edges, which he believed showed that Ms. Emond had painted over signs of prior water damage;
• She failed to respond to the Bowmans’ letter advising her of the serious water and mould problems that they were experiencing [44]. She did not care at that point; and,
• Based upon Mr. Koerth’s accepted evidence, the water infiltration problem had been occurring over “decades”.

[176] I find as the occupant and owner of the house, Ms. Emond had knowledge of its condition, sourced from her living there day-to-day, which went far beyond what a home inspector could detect based on a one-time inspection. There was an ongoing water infiltration and she knew it. The musty smell was not old carpets, but mould.

[177] The leading case regarding a vendor’s liability for latent defects is McGrath v. MacLean, 1979 ONCA 1691, 22 O.R. (2d) 784 (C.A.) [45]. The court stated: “I am prepared to assume that, in an appropriate case, a vendor may be liable to a purchaser with respect to premises which are not new if he knows of a latent defect which renders the premises unfit for habitation.” [at page 792] In this case, there is ample evidence that Ms. Emond had knowledge that there was a latent defect (the long-standing water leakage with resulting mould) and that this rendered the house uninhabitable.

[178] With respect to the septic system, Ms. Martineau ensured that Ms. Emond provided a vendor’s warranty, which did not merge on completion of the transaction. The warranty is found at Schedule A to the APS [46]. The Seller represents and warrants, to the best of the Seller’s knowledge and belief, that, during the Seller’s occupancy of the building, the sewage system has been and will be in good working order on closing. The Parties agree that this representation and warranty shall survive and not merge on completion of this transaction.

[179] The Bowmans’ claim for a deficient septic system against the Emonds would be based upon this warranty, which survives closing.

Liability of Studholme

[180] Regarding Mr. Studholme, there is no expert evidence establishing what Mr. Studholme’s standard of care was in respect of his home inspection or whether his actions fell below this standard. However, I find none is required in this case. In fact, the preponderance of the evidence at trial demonstrated that Mr. Studholme diligently inspected the Property and discussed all of his observations and related conclusions both verbally and in his written inspection report with the Bowmans. He did not identify any longstanding water penetration. Nor is there any evidence suggesting that he should have identified longstanding water penetration on the basis of his non-invasive inspection.

[181] While it may be argued that the water stains should have alerted Mr. Studholme that there was longstanding water penetration, I find there is no evidence suggesting that this inference is warranted.

[182] Mr. Studholme testified that he would have expected Ms. Martineau to inform him of the water penetration issues disclosed to her by the Emonds, both verbally and on the SPIS. Mr. Studholme confirmed that this information would have caused him to conduct a deeper investigation into the possibility of hidden water damage beyond what is normally expected as part of a non-invasive home inspection. Ms. Martineau did not disclose this information to him. She cannot now limit her liability by claiming that Mr. Studholme should have identified and disclosed the very information of which she was aware but failed to disclose to him.

[183] I find that Mr. Studholme conducted a thorough home and septic system investigation. He delivered a detailed verbal and written report. I find that Mr. Studholme has no liability.

Liability of Suzanne Martineau and Re/Max Hallmark Realty Limited

[184] For reasons discussed above, I find Ms. Martineau liable and Re/Max vicariously liable for the negligence of Ms. Martineau.

[185] Accordingly, I would apportion liability as follows:

• Alma Emond and Shelley Emond: 30%
• Paul Studholme: 0%
• Suzanne Martineau and Re/Max Hallmark Realty Limited 70%
• Total: 100%

B. DAMAGES – ANALYSIS

Discussion and Findings

[186] I find the Bowmans are entitled to be put in the position they would have been in if the negligent conduct had not taken place. The Bowmans thought they were purchasing a house free from mould and water damage. I disagree that they thought they were purchasing a house with a septic system sufficient for a 3-bedroom home. That is what Mr. Bowman incorrectly thought. The house had 5 bedrooms.

[187] The septic system is a different matter. The septic system and original tank were original to the house. It was old and undersized. The baffles required repair. Mr. Bowman was told so by Mr. Studholme both verbally and in his written report. Nevertheless, it was Mr. Bowman’s decision to try to make the septic system work by reducing the number of bedrooms they would use. His decision to do so was his alone and is not founded in any negligence on the part of Mr. Studholme or Ms. Martineau. Ms. Martineau protected the Bowmans by the insertion of conditions in the APS which were carefully explained by Ms. Martineau to the Bowmans and fully understood by them. A new septic system and a new drilled well were live considerations regarding which the Bowmans were aware.

[188] It was Mr. Bowman who did not want Mr. Studholme’s written report, which Mr. Studholme emailed to him following the septic system inspection anyway. It is doubtful Mr. Bowman reviewed such report. Even if he did, he did not contact Ms. Martineau or Mr. Studholme about anything he found in the report to which he took objection.

[189] For these reasons, I find Mr. Bowman received what he paid for, and neither Ms. Martineau, Re/Max, nor Mr. Studholme are liable in damages to the Bowmans regarding the cost of a new septic system. That cost remains Mr. Bowman’s problem. I have found Ms. Martineau is not liable for failure to encourage the Bowmans to obtain the full inspection report before waiving the inspection condition.

[190] However, I come to quite a different conclusion regarding the mould and water damage issues. Shelley Emond testified at trial that her answer to questions 9b and 9d on the SPIS conveyed a problem with ongoing roof leakage to the Property. Because Ms. Martineau failed to disclose the SPIS to the Bowmans or review its contents, the Bowmans were unaware of the Property’s history of water penetration and the risk of consequential damage, including mould.

[191] I have found that Mr. Bowman knew about the septic issues and decided to proceed to purchase the house with 5 bedrooms and somehow “make it work” by reducing the number of bedrooms that they would use to 3. The Bowmans knew that the septic system was undersized, old and insufficient. They bought the Property anyway and regardless. But they did not buy the Property expecting it to be full of mould and extensive water damage.

[192] In Jarbeau v. McLean, 2017 ONCA 115, para 54 [47], where a purchaser believed it had purchased a home free of defects, “the fairest measure of damages is that which would provide the [plaintiffs] with what they bargained for – a home free of defects.”

[193] Following the reasoning in Jarbeau, I find the fairest measure of damages would be damages that provide the Bowmans with a home that is free of mould and water damage, as well as any consequential damages flowing therefrom, and out-of-pocket expenses.

[194] The evidence of mould and water damage caused by water penetration in the building envelope is overwhelming. I accept the evidence of Mr. Bowman, his photographs [48] and the supporting evidence of Ms. Martineau and Mr. Studholme when they attended to inspect the home after the Bowmans took possession. They were both shocked at what they saw. I accept Mr. Bowman’s testimony that he gutted the house, removing all wet insulation and wall and ceiling finishes, mould and rotting structures after the Bowmans took possession of the Property.

[195] The Bowmans called two experts to give evidence on the issue of damages. Ronald Koerth, P. Eng., is a forensic engineer who is qualified to give expert opinion evidence in the areas of building code assessment, masonry engineering, building sciences, building and construction failures, and structural failure analysis, including mould investigation [49]. He inspected the property and found evidence of extensive water/mould damage. He testified as to the scope of repairs to eliminate the damage.

[196] Ronald Dahl of First General Services has worked as a contractor and loss estimator for 33 years. He was qualified to give expert opinion evidence in insurance loss adjusting following assignment of claims, and reconstruction and the cost of reconstruction. He prepared a report to reflect the revised cost of repairs as of August 28, 2018.

Mould and Water Damage

[197] Mr. Koerth and Mr. Bowman attended the house on November 20, 2014. When they attended the house on that date, Mr. Koerth found the interior essentially bare, as Mr. Bowman had already gutted the interior. Mr. Koerth’s evidence at trial regarding water/mould damage was as follows: (a) That mould and wood rot at the northwest corner of the house was likely caused by deficient flashing around the chimney projection and that water had been leaking for an extended period, but was hidden behind the masonry fireplace. (b) Wood rot in the main level wall framing was caused by escape of water from areas of vapour barrier in the ceiling in which it had pooled, and had been exacerbated by the presence of insulation in the interior wall cavities which trapped the water. (c) That the source of the water in the roof space was likely leakage and not condensation. (d) That water had likely been leaking in to the roof space as a result of ice damming for decades.

Eliminating Mould and Water Damage

[198] Mr. Koerth testified the house could be saved, repaired and remediated. A mould specialist would be required, after which the house would be restored to its state prior to damage occurring. Mr. Koerth had identified the necessary scope of repair. The defendants have not suggested an alternate scope of repair: (a) Remove and replace all wood framing with more than 1mm of mould and rot; (b) Perform a full mould remediation and clearance by a mould expert; (c) Replace the exterior wall sheathing, if it cannot be remediated for mould cost effectively; (d) Window and door replacement, if necessary, to reduce leakage through these openings; (e) Increase attic ventilation and reinstate R40 insulation; (f) Replace shingles and repair or replace eaves and downspouts; (g) Grade away from the home; and, (h) Reinstate all electrical, plumbing, cladding, trim, flashings, insulation vapour barrier, drywall and interior fixtures.

Consequential Damage

[199] Mr. Bowman removed the home’s baseboard electric heaters during the tear out shortly following purchase. They were old and exhibited extensive rust as a result of exposure to water infiltration. Unable to afford repairs to install a heat source or maintain heat in a home they could not use, Mr. Bowman insulated the foundation and closed the house for the winter.

[200] Mr. Koerth and Mr. Bowman attended the house on July 3, 2015. Mr. Bowman had explained that he had insulated the perimeter footings in the basement with straw. Mr. Koerth and Mr. Bowman testified that Mr. Bowman had done so on the recommendation of Mr. Koerth.

[201] In the Spring of 2015, despite insulating the foundation, the basement slab heaved to such an extent that it lifted the top course of foundation blocks by 1.5 inches and damaged the roof trusses beyond repair.

[202] Mr. Koerth’s evidence at trial was that insulation of the foundation should have prevented the slab from heaving, but that the underlying soil provided insufficient drainage such that the moisture in the soil froze and caused the floor slab to heave. In Mr. Koerth’s opinion, the amount of frost heave could not have been reasonably anticipated.

[203] Mr. Koerth testified about the photos taken by Mr. Bowman [50] which showed the extensive damage resulting from the heave of the basement foundation. He testified about the additional work required as a result of the consequential damage as follows: (a) Remove and dispose of roof trusses, sheathing, shingles, flashings and soffits, etc.; (b) Repoint cracked foundation blocks; (c) Remove and replace basement floor slap, ensuring 6 inches of clear granular material below the slab; and, (d) Remove and replace all basement interior wall partitions.

[204] Mr. Dahl attended the house and provided his revised estimate as to the cost of repairs at August 28, 2018. He had previously been provided with the two reports of Mr. Koerth regarding the scope of repairs. Those reports were dated December 23, 2014 and July 27, 2015. Mr. Dahl provided a detailed estimate on a room-by-room and area-by-area basis, together with individual sketches and drawings. He estimated the cost of repairs for water, mould and consequential damage in the amount of $332,706.59. Mr. Dahl testified he attended the house two weeks prior to trial and nothing had changed. Mr. Dahl testified that his cost of repairs was essentially based on Mr. Koerth’s scope of repair, except he did not allow for the windows and doors requested by Mr. Koerth. No evidence was called by the defence to challenge the cost of repairs in this amount.

Heaving of the Foundation - Mitigation

[205] On behalf of Ms. Martineau, it is submitted that she had no control over how the property was maintained. This was the responsibility of Mr. Bowman, who also relied on the advice of his engineer, Mr. Koerth. It is submitted that Ms. Martineau was not responsible for the cost of repair for the heaved foundation and consequent damage. Ms. Martineau asserts any such damage is too remote and not causally connected to her negligence. It is also submitted the Bowmans failed to mitigate their damages. I disagree.

[206] I find, as a direct result of the Property’s extensive mould and water damage, the home was uninhabitable. In 2014 and early 2015, the Bowmans were making mortgage payments to the Emonds of $1,085 [51] and paying rent of $1.750 for the house that they were living in. Mr. Bowman testified at trial that they simply could not afford to heat a house that they could not live in. Ms. Martineau testified at trial that she knew of the precariousness of the Bowmans’ financial position at the time that she represented them.

[207] I find that it was both necessary and reasonable for the Bowmans to choose to insulate the Property’s basement and shut down the house rather than reinstate a heating system and pay for the cost of electric heat over the winter season to heat an uninsulated house. Mr. Bowman relied and carried out the recommendation of Mr. Koerth to insulate the footings with straw. I accept the evidence of Mr. Koerth as to the cause of the heaving of the foundation, which the Bowmans could not have foreseen.

[208] While the heaving was caused in part by the type of aggregate underlying the basement floor slab, I find the heaving would not have happened had the house been capable of occupation and heated, which is what would have happened had the mould and water damage not existed and the Bowmans moved into the Property as planned.

[209] I find the basement floor heaving is causally connected to the Property’s extensive mould and water damage. Furthermore, it is foreseeable that a home rendered inhabitable by mould and water damage cannot be lived in, that a home not lived in will not be heated and that an unheated home subjected to the effects of freezing temperatures during the winter months could suffer from floor heaving. As such, the basement floor heaving is not so removed as to be unrecoverable. Further, I find Ms. Martineau and Re/Max have failed to satisfy their onus that the Bowmans did not mitigate their damages.

[210] I accept the evidence of Mr. Koerth as to the scope of repair of the water and mould damage which includes the expanded scope resulting from the foundation heaving. I also accept the cost of repair by Mr. Dahl in the amount of $332,706.59.

Cost of Repair vs. Diminution in Value

[211] Ms. Martineau submitted that the appropriate method of calculating damages is a diminution in value rather than the cost to repair the Property, relying on the report of Kristina Smith, dated August 29, 2016. Ms. Smith is a real estate appraiser who was qualified to give expert opinion evidence on the value of residential property in Ontario, and in particular, the value of the subject property in “as is” condition as of August 29, 2016 [52].

[212] Ms. Smith testified that she did an external view of the property and searched out some comparable properties. She adopted the direct comparison approach. In her opinion, she valued the subject property in the amount of $125,000. Based on the diminution in value approach, Ms. Martineau submits that the Bowmans’ damages are the difference between the purchase price of $180,000 less the appraised value of $125,000, which produces the sum of $55,000 (plus some other heads of damages to be discussed).

[213] I reject the diminution in value approach for the following reasons. This approach fails to take into account the purpose of damages in a tort claim – to ensure that “the damages awarded to a plaintiff should put him or her in the same position as they would have been in had they not sustained the wrong for which they are receiving compensation or reparation.” In the context of property loss matters, where a purchaser believes it had purchased a home free of defects, “the fairest measure of damages is that which would provide the [plaintiffs] with what they bargained for – a home free of defects.” Jarbeau, paras 53 to 54 [53]

[214] Applied in the context of this case, where the Bowmans believed they were purchasing a home free of mould and water damage, the fairest measure of damages is that which would provide the Bowmans with what they had bargained for – a home free of mould and water damage.

[215] No evidence was tendered at trial suggesting that damages calculated on a diminution in value basis would permit the Bowmans to obtain a home similar to the one they purchased that is free of mould and water damage, particularly in light of increased real estate values since the date of Ms. Martineau’s negligence and the Bowmans’ purchase.

[216] To the contrary, calculated on a cost to repair basis, the Bowmans would indeed be provided with the home they purchased, one that is free of mould and water damage, as the repairs would ensure that is exactly what they obtain.

[217] The court in Jarbeau determined that cost to repair is a more appropriate measure of damages, and there are no grounds to depart from that reasoning in our case.

[218] I find the calculations for the diminution in value approach are based on the home appraisal report of Ms. Smith. This report contains significant shortcomings. I find the report cannot support a realistic valuation of the property. Ms. Smith admitted at trial that she based her valuation on a visual exterior inspection of the property. I understand she was not permitted to go inside the house. She admitted that it would have been helpful to her to be inside the Property. She classified the roof as being average, although in reality it was near the end of its useful life.

[219] In addition to concerns regarding the visual observations underpinning her evaluation, Ms. Smith’s report is based on 2016 market conditions and does not reflect current market conditions. The valuation is unreliable and cannot be used to substantiate a damages calculation.

[220] In conclusion, I find the measure of damages in this case is on a cost to repair basis. I accept the evidence of expert witnesses, Mr. Koerth and Mr. Dahl, as to the scope and cost of repairs to be credible and cogent. There was no expert evidence called to challenge the opinions of either Mr. Koerth or Mr. Dahl, except for the evidence of Ms. Smith, which I have rejected. I find the cost of repair is the sum of $332,706.59, which is fair and reasonable.

Betterment

[221] I have considered whether a damages award calculated on the basis of the cost to repair should be offset by an amount to reflect betterment.

[222] The court has rejected this in the past, observing Gendron v Thompson Fuels, 2017 ONSC 4009, paras 365 to 367 [54]: (a) In a case involving tortious loss of or damage to property, replacement costs will be at least the starting point for the assessment of damages. Whether an adjustment is appropriate for pre-loss depreciation or post-reinstatement, betterment will depend on what is reasonable in the circumstances. (b) Where reinstatement of a home that was damaged by a third-party leads to betterment, it is unreasonable to reduce the plaintiff’s damages by the value of the betterment, thereby requiring the plaintiffs to fund that amount of the reinstatement of their home. (c) The amount by which the plaintiff’s property is improved should be deducted from the award, but the plaintiff should be compensated to the extent the plaintiff has had to put out money prematurely to obtain that betterment. (d) In cases of doubt, the onus is on the defendant to prove the value of an alleged improvement.

[223] Ms. Martineau and Re/Max have produced no evidence of betterment. In fact, the evidence is that the home purchased by the Bowmans was represented by Ms. Martineau to be well maintained and solid. With repairs, the Bowmans will receive nothing more than they purchased; a solid well-built home, free of mould and water damage. Applying these principles to our case, I find the Bowmans’ damages should not be reduced on the grounds of betterment.

Alternative Costing Reports

[224] Ms. Martineau tendered two document as exhibits during the trial pertaining to repairs of structural and mould damage in an alternative to the estimate of Mr. Dahl [55]. I find these estimates are of little value and of no assistance to the court. The authors of these reports were not called to confirm the accuracy of the reports, explain the scope of the estimates, or to provide any details of the context in which the reports were created. They were obtained prior to the completion of a full engineering investigation and without the benefit of the engineer’s recommended scope of repair. There is a lack of evidence explaining the context in which these estimates were created in 2014, on what assumptions they rely and whether the estimates are accurate today. The estimates are not of any use in determining the issues before the court in November 2018. They have no probative value and no reliance is placed on these estimates whatsoever.

Out-of-Pocket Expenses

[225] The Bowmans had no money to hire people to repair the mould and water damage they discovered when removing the code-deficient fireplace and other interiors of the house. In order to minimize costs, Mr. Bowman elected to tear out all interior finishes incapable of remediation. The Bowmans paid for various materials and a dumpster in connection with these efforts. The time and estimated for this tear-out totals $6,604. The costs for the materials and dumpster total $3,678.13 [56]. I find the Bowmans are entitled to tear out costs in the amount of $6,604 and the costs of the material and dumpster in the amount of $3,678.13, all of which have been proven by the evidence of Mr. Bowman and the documents in evidence.

Alternative Living Expenses - Rental

[226] I find that while the Bowmans had intended to move into the Property by September 2014, with no money to perform a mould remediation, conduct repairs and reinstate the interior finishes at the home, the Bowmans were forced to continue to rent the home they lived in while they established exactly what would be necessary to remediate the deficiencies. Mr. Bowman continues to rent this home for himself and his children and will need to continue doing so while the Property is repaired – an estimate of 6 months. Defence counsel conceded this point at trial and agreed that Mr. Bowman’s landlord need not testify to confirm that Mr. Bowman has indeed been making his monthly $1,750 rental payments. Assuming a 6-month repair beginning immediately, the Bowmans’ total rental cost starting from September 2014 to July 2019 is 58 months times $1,750 per month for a total of $101,500 [57]. I find that the Bowmans are entitled to the sum for rental in the amount of $101,500.

Hydro and Insurance Bills Thrown Away

[227] I find the Bowmans are entitled to payment of the sum of $726.63 [58] for hydro and insurance bills thrown away based upon evidence tendered in support at trial.

Septic System Costs

[228] Although septic costs are claimed, none are awarded for reasons given [59].

General Damages

[229] Mr. Bowman claims general damages for the loss of use and enjoyment, as well as inconvenience and stress experienced as a result of Ms. Martineau’s professional negligence. He also claims general damages for the inability to live in the home the Bowmans purchased. The Bowman children continue to live in rented accommodation and Mr. Bowman testified he experiences substantial ongoing financial pressure. Mr. Bowman has found himself not reducing his housing costs as initially intended. Rather, his housing costs have increased with the burden of paying rent and mortgage payments. In cross-examination, Mr. Bowman testified that he has not gone to a medical doctor for his stress. Neither has he obtained any prescriptions. He coped as best as he could. In all of these circumstances, I find Mr. Bowman did suffer stress from the negligence of both Ms. Martineau, Re/Max and the Emonds. Mr. Bowman and his family did suffer the loss of use and enjoyment, being unable to live in the house they purchased. I find Mr. Bowman is entitled to general damages, which I assess in the amount of $5,000.

CONCLUSION

[230] For the reasons given, Mr. Bowman is entitled personally and as Executor of the Estate of Shirley Bowman to judgment against Shelley Emond and Alma Emond, jointly and severally, and against Suzanne Martineau and Re/Max Hallmark Realty Limited, jointly and severally, to judgment in the following amounts in accordance with their respective apportionment of liability:

Costs to repair the property: $332,706.59 Out-of-pocket expenses:

• Time spent on tear-out: $ 6,604.00
• Cost of materials and dumpster for tear-out: $ 3,678.13
• Alternative living expenses (calculated from September 2014 to July 2019): $101,500.00
• Hydro and insurance bills thrown away: $ 726.63 General damages: $ 5,000.00 TOTAL: $450,215.35

COSTS

[231] As for costs, if the parties cannot agree upon costs, within seven days from the date of these Reasons, the plaintiff Bowman shall serve and file a concise two-page summary regarding costs, together with a costs outline, Bill of Costs and any authorities. The defendants, Ms. Martineau and Re/Max shall have seven days thereafter to serve and file the same materials. If any reply is required, the plaintiff Bowman shall serve and file his reply within five days of defendants’ submissions. All materials by the parties are to be filed with my judicial assistant at Barrie. Given the existence of the Pierringer agreements, should the parties require a hearing before me, a date shall be arranged with the Trial Co-Ordinator at Barrie.

Mr. Justice G.P. DiTomaso Released: March 4, 2019