COURT FILE NO.: 73499/17
DATE: 20220816
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Jennifer Lynn Purdy
Plaintiff
– and –
Arthur John Russell, Mirabel Russell,
Ann Jennifer Garber in her capacity as
Power of Attorney for Property of Arthur
John Russell, Colin Stanley Weldon, and
Gale Company Realty Ltd.
Defendants
Teena Belland, for the Plaintiff
Richard Nishimura, for the Defendants
HEARD: May 12, 2022
ASTON J.
[1] The plaintiff bought a property from Arthur John Russell and Mirabel Russell. It turned out to need a reconstruction of the foundation. This lawsuit stems from that transaction.
[2] The Russell defendants bring this motion for summary judgment to dismiss the plaintiff’s action.
Preliminary Issues
[3] The plaintiff concedes that the claims against Ann Jennifer Garber (nee Russell) and Shirley Jane Russell ought to be dismissed. They had no interest in the subject property and were not parties to the agreement of purchase and sale.
[4] Arthur John Russell was an owner, but as a consequence of his affliction with Alzheimer’s was not a participant in the sale of the property or any relevant antecedent events. Counsel for the defendants concedes that Mr. Russell’s daughter, Ann Jennifer Garber, was his agent and that, as a point of law, her knowledge and actions are attributable to him.
[5] Mr. Russell passed away before being served with the Statement of Claim. If the action is to continue the plaintiff will need to bring a motion to engage his estate in the litigation. However, I will assume for the purposes of this motion that the motion to dismiss the claims against him ought to be addressed based upon the merits of the plaintiff’s claims, rather than on a procedural impediment that could be cured.
[6] The claims against the other litigants, Colin Stanley Weldon and Gale Company Realty Ltd. have already been dismissed or abandoned, so the entire action will be dismissed if this motion for summary judgment is successful.
Facts and Applicable Legal Principles
[7] By an Agreement of Purchase and Sale dated April 27, 2015, the plaintiff purchased the subject property from Arthur John Russell (John) and his wife, Mirabel Russell (Mirabel). Mirabel was 81 years old at the time and is now 88. John was incapacitated. His daughter Ann executed the Agreement of Purchase and Sale on his behalf pursuant to a power of attorney for property. The subject property had been the Russell family home since it was built in 1977.
[8] The transaction closed August 4, 2015. Shortly thereafter, the plaintiff discovered that the pressure-treated wood foundation was rotting. For the purposes of this motion, I assume, without finding, that the plaintiff had to replace the foundation at considerable cost because the extent of the subsequently discovered mildew, mold, and rot rendered the home unfit for habitation.
[9] The parties agree the legal test for liability is set out in McGrath v. McLean, 1979 CanLII 1691(ONCA) and as that test has developed in the other subsequent cases cited in their respective factums. The test may be summarized as follows:
A patent defect is one which can be discovered by a reasonable examination and reasonable diligence on the part of the purchaser. The principle of caveat emptor applies to defects of this kind.
Tony’s Broadloom and Flooring Covering Limited v NMC Canada Inc., (1996) CarswellOnt 4926 (ONCA) at para 19 confirms that a patent defect is one that “would have been readily discoverable by [the purchaser] had they exercised reasonable diligence in the circumstances”.
A vendor is under no obligation to disclose a patent defect since a purchaser should have discovered that defect upon reasonable inspection.
Even in circumstances where the vendors are entitled to remain silent, they cannot actively conceal or cover up a patent defect. In those circumstances the rule of caveat emptor no longer applies. The purchaser is entitled, at their option, to rescind the contract or to compensation for damages.
A latent defect is a fault not readily discoverable during a routine inspection.
In the case of a latent defect, it is incumbent on the purchaser to establish that (a) the defect was known to the vendors and the vendors were guilty of active concealment or (b) the vendors made a false representation about the defect in reckless disregard for the truth or falsity of that representation.
[10] This framework for the liability test frames the evidence that is germane to the test for summary judgment. I start by observing that there is no reason to refrain from using the expanded fact-finding powers in Rule 20.04(2.1). For example, if summary judgment is granted, the entire action will be over, the claims against the other defendants having already been resolved. There is no danger of conflicting findings of fact in this or any other proceeding. The only issue is whether there is sufficient evidence in the motion record to support a conclusion that “there is no genuine issue requiring a trial”.
Was the foundation defect a “patent” defect?
[11] The defendants claim that the foundation mold, mildew, and wood rot were patent defects, actually discovered or reasonably discoverable by the plaintiff and by her home inspector. They say she assumed all the risk of a defective foundation when she waived the condition in the agreement of purchase and sale concerning a satisfactory home inspection.
[12] The plaintiff had retained Mike Hayes (Bytown Home Inspection Services) for her home inspection. She met with Mr. Hayes May 11, 2015 and reviewed his written report. That report identified a number of necessary or advisable repairs not related to the foundation. There is no doubt from the evidence on this motion that there were signs of water infiltration when the plaintiff, her agent, and her home inspector looked at the property on multiple occasions. There was a leak from a wall-mounted exterior air vent. There were drainage channels in the concrete floor and a sump pump to evacuate minor water infiltration that would occasionally come up from the ground, typically in the spring. None of these problems are the subject of this lawsuit. The plaintiff’s claims are limited to a defective foundation. These observable problems do not constitute evidence of a defective foundation.
[13] The salient terms of the Hayes report that relate to the foundation are:
“Overall the condition of the basement, foundation, moisture and possible mold pose a major concern.”
“Risk of hidden damage, mold, wood rot. This could be a major expense to repair.”
[14] The Bytown Home Inspection Services report of Mike Hayes defines a “major concern” as “a system or component which is considered significantly deficient or unsafe”. It states that such deficiencies “need to be corrected” and “are likely to involve significant expense”.
[15] Though the Hayes report identified “major concerns” with respect to the building foundation, some areas of the foundation were covered with drywall and insulation so the extent of any foundation problem was not apparent, only the signs that there might be a major problem. Mr. Hayes specifically recommended removal of the drywall and vapour barrier to allow for a full inspection by a wood foundation expert.
[16] Regarding the foundation, the report describes mold, dampness, and wood rot “in rim joist at base”. These actual observations supported Mr. Hayes’ conclusion that “overall the condition of the basement, foundation, moisture and possible mold pose a major concern”. On cross-examination, the plaintiff acknowledged that before waiving the condition in the agreement of purchase and sale, she knew the foundation was “a significant unknown” which “could pose a major concern”. She explained she took no steps regarding those concerns because “nobody could see” the underlying structure [question 167].
[17] After reviewing the report with Mr. Hayes on May 11, the plaintiff had until May 15 to raise any concerns arising from his report. She did not obtain any legal advice or apparently even speak to her own real estate agent about the report. Instead, she waived the condition in the agreement of purchase and sale. She asserts in her affidavit that Mr. Hayes told her she could wait until after the closing to investigate the underlying structure of the foundation. There is no evidence from him on this motion. Even if she had that impression from Mr. Hayes, she surely knew or should have known that her waiver of the home inspection condition would bind her to the purchase.
[18] What is the extent of a purchaser’s obligation to inspect and make inquiries? At para 47 of Cardwell v Perthen, 2007 CarswellBC 1269, the British Columbia Court of Appeal endorsed the principle that “while on a casual inspection the purchaser may not discover a patent defect, when the purchaser makes the reasonable inquiries required, they may lead to the discovery by a qualified person of a discoverable, thus patent, defect. In some cases, the onus on the purchaser necessitates a purchaser retaining the appropriate experts to inspect the property”.
[19] The defects to the foundation of the subject property were readily discoverable by the plaintiff had she exercised reasonably diligence. In failing to heed the advice of her own home inspector a discoverable defect was not discovered because of her conscious decision to take a risk. The principle of caveat emptor is engaged.
[20] However, that is not the end of the analysis. As noted already, vendors may be held responsible for concealing defects or for making false or reckless representations.
Did the defendants actively conceal a defect?
[21] An analysis of whether the defendants actively concealed foundation defects starts with a consideration of what they knew about the state of the foundation.
[22] Before listing the property for sale, Mirabel commissioned Arkadi Abramovitch of Artech Home Inspection Inc. to inspect the property. He was recommended to Mirabel by her daughter Ann, a licensed realtor. According to Ann the purpose of retaining Mr. Abramovitch was to ascertain what repairs needed to be done before listing the property for sale. His report dated January 11, 2014, (more than a year before the sale to the plaintiff) recommended a number of repairs, all of which were undertaken before the property was listed. His report also identified “moisture penetration and pressure-treated wood discolouration”. He recommended a consultation with a pressure-treated wood specialist but also opined that there were “no major visual defects on the visible portions of the foundation” and that “given its age, the foundation appears to be in satisfactory condition.” His cautionary advice about a consultation with a pressure-treated wood specialist is in sharp contrast to the dire warning sounded by Mr. Hayes. It falls short of supporting a conclusion that the Russells recklessly disregarded a potential defect in the foundation.
[23] The same report identified visible water infiltration and the need to repair a portion of the foundation adjacent to the exterior porch. Mirabel hired a contractor to effect that repair which consisted of replacing an air vent and damaged insulation, adding drywall, and re-grading the outside soil to increase drainage away from the repaired area. The contractor, Mr. Swarbrick, did not observe any structural damage to the foundation and did not identify any other remedial concern to Mirabel.
[24] The Artech report notes “there were no major visual defects observed on the visible portions of the foundation”. This includes the portion of the foundation later covered by insulation and drywall work by Mr. Swarbrick.
[25] Mirabel gave the Artech home inspection report to the listing agent, Colin Weldon, when the property was listed on February 3, 2015. That action is inconsistent with an intention to conceal anything, and it constitutes disclosure of what she knew about any defects. Her agent would have provided a copy to a potential purchaser if requested. I do not accept the plaintiff’s submission that the Russells had a positive obligation to provide a copy of the Artech report in the absence of any request, particularly when the Agreement of Purchase and Sale included a home inspection condition for the benefit of the purchaser.
[27] It is evident from the affidavit material and photographs in the motion record that the work done by Mr. Swarbrick to repair a leak also included replacement of insulation and installation of drywall that incidentally covered any view of some of the foundation. The plaintiff relies on this evidence to establish that the defective foundation ought to be characterized as a latent defect. I disagree. Moreover, even if the plaintiff’s characterization is correct there is no evidence to support a finding that the defendants knew of any such defect, “actively concealed” it or made any false or reckless representation about the foundation.
[28] “Active concealment” means the vendor knew of the defect and acted to prevent that knowledge from coming to the notice of the purchaser. Such conduct is treated as if it were a false assertion of the absence of such defect, a form of fraud.
[29] Mr. Swarbrick noted signs of moisture on the basement floor and channels in the cement floor for the sump pump which had been fitted to address minor and occasional groundwater infiltration. Those observations are not germane to this motion. These particular observations were obviously apparent to the plaintiff, her agent, and her home inspector and were actually discussed with the plaintiff. There is no evidence to link this particular water infiltration to any problem with the foundation itself. If it is a defect, it is clearly a patent defect and it falls outside the parameters of the Statement of Claim.
[30] The repair work done by Mr. Swarbrick was to fix a leak and to reduce heat loss. It was not to cover-up any problem with the foundation. In Cappel v Martin, 2008 CarswellOnt 1738, there was a finding of fact that the vendor “actively concealed” a latent defect. So too in Kelly v Pires, 2015 ONSC 2871. This case is distinguishable from those precedents in that critically important respect.
[31] There is not a scintilla of evidence that the defendants knew about a foundation defect and deliberately concealed it. In fact, the Statement of Claim does not even allege that they did so, it only alleges that they “should have known” the foundation was fundamentally defective. The evidence of Mr. Swarbrick supports the defendants’ assertion that they had no reason to think that there was a defect respecting the foundation.
[32] In summary, I find that:
The plaintiff’s home inspector was able to see mold and wood rot. Based upon that observation, he alerted the plaintiff to the need to investigate further. The foundation defect was discoverable but was not discovered because the plaintiff did not exercise reasonable diligence. She chose to ignore the risk that the foundation was defective.
The repair work done by Mr. Swarbrick had the incidental effect of concealing some of the foundation, but there was no intention by him, or by the defendants, to conceal any defect.
The defendants did not know the foundation was defective.
The defendants did not make any representation respecting the fitness of the foundation, expressly or otherwise.
[33] The plaintiff acknowledges her obligation to present her evidence completely on a motion for summary judgment. The evidentiary record on this motion is sufficient to support the conclusion there is no genuine issue for trial.
[34] The motion is granted, and the action is dismissed. If counsel are unable to agree on costs brief written submissions may be made by the defendants within the next 20 days and by the plaintiff within 10 days thereafter.
Justice David Aston
Released: August 16, 2022
ONTARIO
SUPERIOR COURT OF JUSTICE
JENNIFER LYNN PURDY
– and –
Arthur John Russell, Mirabel Russell,
Ann Jennifer Garber in her capacity as
Power of Attorney for Property of Arthur John Russell, Colin Stanley Weldon, and Gale Company Realty Ltd.
REASONS FOR JUDGMENT
Justice David Aston
Released: August 16, 2022