Wright v. Lyons, 2013 ABQB 20

Court of Queen ’ s Bench of Alberta Citation: Wright v. Lyons, 2013 ABQB 20 Date: 20130108 Docket: 0906 00159 Registry: Lethbridge Between: David Wright and Niki Wright Plaintiffs - and - Alexander Lyons and Jennifer Lyons and Alberta Permit Pro Defendants _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice D.K. Miller _______________________________________________________ Introduction [ 1 ] David Wright and his wife Niki Wright sold their home in Calgary, took their life savings, and put those savings into a home in the Town of Magrath.

They purchased a home from the Defendants Alexander Lyons and Jennifer Lyons by way of a standard Real Estate Purchase Contract dated August 3, 2007, with a closing date of October 4, 2007. [ 2 ] The Defendant Alexander Lyons built the home and was responsible for all permits and code requirements. He was also the main contractor, arranging for and hiring some sub-trades.

[ 3 ] The Defendants lived in the home over the summer months from May 2007 into November, but did not spend a winter in the house. [ 4 ] After taking possession the Wrights promptly rented the house to a tenant for a fixed term tenancy which was to end on May 31, 2009. The tenant Cyril Courage and his partner and child moved in, but did not reside there the entire term. After the first significant cold snap in the fall of 2007, the Plaintiffs received a phone call from the tenant, who complained that the water in the upstairs bathroom wouldn’t work. [ 5 ] After initially contacting Mr.

Lyons, the Plaintiffs employed a well respected plumbing company in Lethbridge, Alberta, to fix the problem, eventually determined to be a frozen pipe. Further investigation by Rick Neudorf of Neudorf Plumbing and Heating Inc. revealed numerous other problems with respect to the plumbing. His report reveals 25 deficient items. The bulk of those deficiencies are Safety Code violations. [ 6 ] During several attendances, Mr. Neudorf effected various repairs. He has also provided an estimate for further items in need of repair.

The Plaintiffs claim a total of $11,547.38 for plumbing problems in the home. [ 7 ] Due to the numerous defects and code violations uncovered by the plumber Rick Neudorf, the Plaintiffs retained the services of Gordon Huolt, a former home building inspector and former Alberta New Home Warranty Program Inspector. He was qualified as an expert entitled to give opinion evidence in relation to new home construction. The list of defects detected by Gordon Huolt is as follows: a. Inadequate insulation of a wall adjoining the garage; b. Inadequate insulation of the garage ceiling; c.

Inadequate insulation or lagging of water lines; d. Lack of, or inadequate, vapour barriers in external walls; e. Inadequate flashing and sealant of windows (where obscured by siding); f. Improperly connected ventilation system; g. Insecure handrail to upper floor; h. Flooring installed parallel to floor joists contrary to good industry practice; i. Lack of weather-stripping to attic access panel; j. Gas leak to fireplace unit; k. Inadequate support to gas line to fireplace unit; l. Reversal of live and ground electrical wiring; m. Inoperable ground-fault circuit interrupters in electrical outlet; n.

The master bedroom bath was not vented directly to the outside and posed a hazard to occupants and inhabitants; and, o. The dishwasher was not properly secured and could have tipped and fallen on a small child. [ 8 ] Having received this list of deficiencies and defects that needed to be fixed, the Plaintiffs engaged the services of a well recognized contractor in Crestwood Homes and Contracting Ltd., owned by Brian Dotinga. This company spent a considerable amount of time repairing, correcting and finishing incomplete work on the home.

The total bill from Crestwood Homes and Contracting Ltd. amounted to $36,344.78. [ 9 ] In closing argument, the Plaintiffs stated that their total claim is $47,892.16: $36,344.78 for the payment provided to Crestwood Homes, and $11,547.38 to cover the repaired and outstanding plumbing problems.

[ 10 ] Alberta Permit Pro Inc. ceased operations and was never served. The sole issue is whether Jennifer Lyons or Alexander Lyons, in constructing the home in 2007 and selling it pursuant to the Contract, are guilty of breach of contract, negligence, or negligent misrepresentation. Credibility of Alexander Lyons [ 11 ] Mr. Lyons testified he had been in the home building industry for a number of years, mostly working on framing. For this home, he did almost all the work.

He testified that the only things that he did not do were the pouring of the floors and the basement; heating; shingling; siding; eavestroughing; carpet; and cupboard installation. He had some help with the electrical work, but did the bulk of that himself. [ 12 ] In his testimony and previously during questioning, Mr. Lyons admitted that much of the work he performed he had never done before. He acknowledged that he had never done plumbing or electrical work. With respect to drywall, he had done some, but didn’t like it, and “hadn’t done enough that I thought I knew what I was doing”. Overall, Mr.

Lyons was aware that the Alberta Building Code governed the construction of residences in Alberta. In questioning, he stated that he could not recall whether he ever bought or reviewed the Code prior to starting the house. He stated that he “just did it according to what I did down in the States”. It is difficult to understand what Mr. Lyons meant by this, for his testimony was that he was not experienced with much other than framing. [ 13 ] At trial, Mr.

Lyons admitted that he never purchased nor referred to the Alberta Building Code while he was constructing the home, even though he knew that the Code was to be followed. Instead, he relied on the new home building inspectors. He testified that he told them that he had never done electrical and plumbing and he needed all the help he could get. Mr. Lyons testified that they told him they would make sure that he did it right, and that: The inspectors made sure [the Code was] followed, that’s the way it was. If you didn’t build it right, it was -- it wasn’t passed. That’s the way it is.

Regardless of whether its plumbing, heating, framing, if its not up to code, you -- it doesn’t pass. [ 14 ] This obviously did not turn out to be accurate. [ 15 ] However, Mr. Lyons’ own actions do not demonstrate that he placed much, if any, reliance on the inspectors. For example, Mr. Lyons was referred to the final Site Inspection Report dated August 7, 2007. He stated this report was ‘the final inspection for us moving into the house, so we could move in. So that was granted to us, otherwise we wouldn’t be able to move into the house”. Despite this testimony, Mr.

Lyons indicated that he and his wife moved into the house in May of 2007. [ 16 ] Further, despite Mr. Lyons’ assertions that he relied on the home inspectors to ensure compliance with all building requirements, and that he did not proceed until the inspectors had confirmed that all previous deficiencies were fixed, Mr. Lyons accepted the offer to purchase and signed the Real Estate Purchase Contract on August 3, 2007, four days before receiving the final Site Inspection Report. This action is yet another indication that Mr.

Lyons did not use the knowledge and skill of the building inspectors to ensure he was constructing a safe and defect-free home. [ 17 ] Mr. Lyons also testified that whenever an inspection noted an infraction, he would fix the infraction and then call for a re- inspection. He testified he could not “go any further” until the infractions were fixed and re-inspected. Particularly with respect to the electrical and plumbing work, Mr. Lyons testified that he could not insulate around the work unless the work had been signed off. [ 18 ] Despite this general characterization, Mr.

Lyons agreed that the inspectors did not and could not always verify everything on inspection. For example, on cross-examination, he acknowledged that the flooring and drywall were already covering the vapour barrier by the time the inspectors came in, and unless they had forced Mr. Lyons to tear out drywall or flooring, which they did not do, there was no way they could verify that the vapour barrier was properly installed throughout the home. Coincidentally, later invasive investigation by Mr. Neudorf revealed that the vapour barrier was inadequate. [ 19 ] Mr.

Lyons’ characterization of the influence and control the inspectors have over the home-building process was therefore not supported by his own testimony. It was also not supported by other witnesses. For example, Mr. Huolt testified that if a builder didn’t

meet the minimum requirements of the Alberta Building Code and wasn’t a member of the warranty programs, there was littleconsequence for non-compliance because of a lack of enforcement of the building code process. [20] The Plaintiffs also called Brian Pace, former building inspector with Alberta Permit Pro. He testified that inspectors neveropened any walls: all they carried was a tape measure and a flashlight, and they accepted the owner’s signature as confirmation that thebuilding requirements were met.

He also stated that once an inspection was completed, the inspection report was left on site, and it wasthe owner’s responsibility to correct any deficiencies and ensure compliance. In fact, contrary to Mr. Lyons’ evidence, Mr. Pace testifiedthat there was no mandated further inspection if deficiencies were noted. He stated, “We’re not a babysitting company, we just do theinspections and they’re supposed to fix it up to -- to compliance.” He agreed that at the time Mr. Lyons was building the home, thesystem mandated a tremendous amount of trust between the builder and the inspector. [21] Mr.

Lyons’ attitude towards his home building obligations can best be described as cavalier. He freely admitted that he hadlimited or no experience in many areas of home construction, and he took few steps, often none, to ensure he was building a home thatwas safe and habitable. Mr. Lyons came across as someone who was very confused. Confused as to what he did when building thehouse, confused in terms of the process in dealing with the inspectors, and I found him confused as to his own experience as a builder.This was Mr. Lyons’ first sojourn into building a home in Alberta.

He was unprepared, ill-equipped and unaware of his responsibilities. [22] Through his testimony, Mr. Lyons argued that he was relying upon the home inspection process to catch any deficiencies hecreated. There is no legal basis upon which to conclude that such a process is reasonable, for the evidence regarding the home inspectionprocess demonstrates that it does not ensure homes are built in a safe and habitable manner. Even Mr. Lyons’ own evidence suggests thathe knew this, for he agreed that inspectors did not always verify everything on their inspections. Most notably, Mr.

Lyons did not feelcompelled to await the inspector’s verification of compliance in the final Site Inspection Report before moving into his home and beforesigning a Real Estate Purchase Contract in which he verified that he was unaware of any latent defects that could render the homedangerous, potentially dangerous, or unfit for human habitation. [23] McCluskie v Reynolds, (1998) (BC SC), 65 BCLR (3d) 191, 19 RPR (3d) 218 (BCSC), establishes thatactual knowledge of a defect is not required for a finding of liability. Bennett J stated: 54 ...

The law also supports the imposition of a duty to disclose latent defects on the vendor where he is not subjectively aware of thosedefects, but where he is reckless as to whether or not they exist. It is up to the plaintiff to prove this degree of knowledge or recklessness. [24] This Court finds that the Plaintiffs have shown that Mr. Lyons was reckless as to the existence of defects in the home he built.

Characterization of the Defects as Latent or Patent [25] In order to find a defendant builder liable, it is not sufficient that the defendant be found reckless: the defects at issue mustalso be patent but actively concealed, or latent, and either dangerous or capable of rendering the home unfit for habitation.

A recklessdefendant will not be liable if the defects are readily apparent to a purchaser on inspection, or if they cause mere inconvenience asopposed to actual hardship: McCluskie; Temple v Thomas; (2007), 76 Alta LR (4th) 128, 2007 ABQB 316; Stone v Stewart, (2009), 83 RPR (4th) 309 (Ont Sup Ct). [26] Most, if not all, of the defects at issue here are clearly latent. For example, on one occasion when Mr. Neudorf was called tothe house to address a lack of water, he opened the ceiling just outside the garage entry to determine the problem.

The source of theproblem could not have been determined without this invasive measure. Similarly, the problems with the gas venting for the fireplacewere not discovered until other work was being performed. [27] The Defendants have argued that in spite of these examples, many of the defects were indeed patent, and should have beenviewed by the Plaintiffs themselves, or by the home inspection which was done prior to completion of the purchase. It is of note thatSullivan J dealt with much the same argument in Temple. He concluded:

52 Furthermore, while it is true that Mr. Korol stated under cross examination that invasive techniques such as the removal of drywall were only necessary to detect a small percentage of the problems he observed, he was a trained plumber with over twenty years of experience, an expert in his field. The fact that the defects were readily observable to him does not make them patent defects. This is because the test as to whether or not something is a latent defect is whether or not it is "some fault in the structure that is not readily apparent to an ordinary purchaser during a routine inspection." ( Swayze v.

Robertson (2001), 39 R.P.R. (3d) 114 (Ont. S.C.J.) at para 27 ). [ 28 ] This analysis also applies here. Mr. Neudorf was a plumber with roughly 30 years of experience, and Mr. Huolt had conducted inspections for over 20 years before moving into his own quality control consulting business. Both ought to be expected to observe defects not apparent to the ordinary purchaser. [ 29 ] With respect to the plumbing deficiencies, Mr. Neudorf testified that he observed many Safety Code violations, but even those items that were not actual code violations posed a risk or hazard to the occupants. Similarly, in his report Mr.

Huolt noted numerous defects which were either dangerous or could, in short order, render the home unfit for habitation. I find the defects identified by Mr. Neudorf or Mr. Holt were latent, and created a situation that was either dangerous, or which rendered the home unfit for habitation. Liability of Alexander Lyons [ 30 ] The Plaintiffs have claimed against Mr. Lyons for breach of contract, negligence, and negligent misrepresentation.

While the defendants argued that negligence was not pled in the Statement of Claim, I find that negligence is pled, most notably, at paragraphs 11 and 15. [ 31 ] This Court has found that Mr. Lyons was reckless as to the existence of latent defects which rendered the home dangerous or unfit for habitation. These findings create an exception to the principle of caveat emptor , and in the circumstances of this case, render Mr. Lyons liable for most, if not all of the defects on all three of the alleged grounds. (

a) Breach of Contract [ 32 ] Mr. Lyons testified that he relied upon the home inspectors to ensure everything was done correctly, yet despite this reliance, he executed the Real Estate Purchase Contract prior to receiving the final Site Inspection Report. [ 33 ] The Real Estate Purchase Contract explicitly contains representations and warranties. Of relevance here are clauses 6.1(

b) and (h), which state: 6.1 The Seller represents and warrants to the Buyer that: (

b) the Attached Goods and included Unattached Goods are in normal working order and are free and clear of all encumbrances [In Clause 1.3, the dishwasher and the gas fireplace in the living room are designated as unattached goods included in the Contract.] ... (

h) except as otherwise disclosed, the Seller is not aware of any defects that are not visible and that may render the Property dangerous or potentially dangerous to occupants or unfit for habitation. [ 34 ] If Mr. Lyons relied on the home inspectors to the extent that he testified he did, then Mr. Lyons was in no position to make these representations and warranties prior to receipt of the final Site Inspection Report. Further, this Court has found that it was not reasonable for Mr. Lyons to place such a reliance upon the inspectors. Therefore, the Plaintiffs are entitled to damages for the home defects based upon the terms of the Real Estate Purchase Contract. (

b) Misrepresentation

[35] The cases establish that silence as to the existence of defects can amount to a misrepresentation: Temple, at paragraphs 47 and55, McCluskie at paragraph 74. The same principle applies here. (

c) Negligent Construction [36] Unlike breach of contract and misrepresentation, an action for negligent construction is only successful if the latent defectcreates a dangerous situation; defects which render the property inhabitable are not actionable under this ground: Mariani v Lemstra, (2004), (ON CA), 246 DLR (4th) 489, 27 CCLT (3d) 261 (Ont CA) at paragraph 26. [37] Not all of the defects at issue here create a situation of dangerousness, but as Mr.

Lyons is liable for all the defects under theclaims for breach of contract and misrepresentation, it is not necessary to define which defects are dangerous and hence caught undernegligent construction. Conclusion [38] There is no evidence that Jennifer Lyons was engaged in the construction of the home or made any representations regardingits condition. There is no evidence that she knew or ought to have known of the defects.

The claim against her is dismissed. [39] On the basis of breach of contract and misrepresentation, Alexander Lyons is liable to the Plaintiffs for $47,892.16, consistingof the $11,547.38 for plumbing repairs and $36,344.78 for the work performed by Crestwood Homes to correct the non-plumbingdefects. [40] The Plaintiffs are entitled to their costs and if the parties cannot agree they have leave to approach me within 60 days of thisjudgment. Heard on the 6th day of June, 2012 to the 8th day of June, 2012. Dated at Lethbridge, Alberta this 7th day of January, 2013. D.K. Miller J.C.Q.B.A. Appearances:

Peterson & Purvis LLP Kevin D. Ronan for the Plaintiffs Huckvale Wilde Harvie MacLennan LLP Nolan B. Johnson for the Defendants