McKenzie v Smith, 2016 ABQB 114

Court of Queen ’ s Bench of Alberta Citation: McKenzie v Smith, 2016 ABQB 114 Date: 20160224 Docket: 1503 02673 Registry: Edmonton Between: Joy Carol McKenzie and Shane Michael McKenzie Plaintiffs/Applicants - and - Carlyle Robert Smith and Elizabeth Marion Smith Defendants/Respondents Corrected judgment: A corrigendum was issued on March 21, 2016; the corrections have been made to the text and the corrigendum is appended to this judgment. _______________________________________________________ Reasons for Judgment of Sandra L. Schulz , Master in Chambers _______________________________________________________ [ 1 ] This is an application for

summary judgment on the issue of liability only brought by the Plaintiffs. The Statement of Claim alleges an undisclosed latent defect in the residential real property purchased from the Respondents. For the reasons that follow, I find the Vendors/Defendants are liable and direct an assessment of damages. Background Facts [ 2 ] From approximately October of 1974 to April of 2014, approximately 40 years, the Vendors/Defendants resided at the subject property.

This property is a single family residential property with a well-treed public green space behind it and two large trees at the back of the property. [ 3 ] There may have been sewer issues back to 2004, but the first time that there is clear evidence that sewer problems occurred

on the subject property is in October of 2007 when a sewer back up occurred. The City was called in to address tree roots blocking the sewer. The City used foam and an auger to remove tree roots that were blocking the sewer. [ 4 ] The sewer was attended to by the City on a variety of dates as set out in Exhibit B to the joint Affidavit of Joy Carol MacKenzie and Shane Michael MacKenzie sworn on September 2, 2015.

Of note are the following entries as set out in the City Reports at Exhibit B (page references are to the hand written page numbers in the lower right hand corner of Exhibit B): p. 10.1 Measure to Property Line 15.0 M. Measure to Blockage 21.0 M. - ROOTS ... Sewer Trouble...10/09/2007... [Capitals in Original] p. 10-2: Date Created: 10/09/2007 Does this property have a history of this?

YES, THEY HAVE HAD ROTO ROUTER & SIMUAL COMPANIES COME BEFORE TO CLEAN OUT, BUT HAVE NEVER CONTACTED THE CITY If so, when did this last occur? 3 YEARS AGO ...IT MUST BE ON THE CITY PROPERTY BECAUSE 72 FEET IS WELL BEYOND THE CITIZENS PROPERTY LINE ... BOB VIEWED TAPE OCT 15/07. NO PRIORS. MODERATE ROOTS SEVERAL JOINTS THROUGHOUT PRIVATE PORTION & LIGHT ROOTS MOST JOINTS ON CITY. PIPE AT 21 M HAS LONGITUDINAL CRACKS THAT ARE NOT IMPAIRING FLOW. RECOMMEND FOAM. [Capitals in Original, Emphasis added] p. 10-9: Date Created: 07/13/2009 ...CREW 611 AUGERED AND STV’D FOR FOAM.

PRIVATE AND CITY CLAY TILE, FROM 7 TO 8.5M THERE IS A SAG ON PRIVATE. MAINLINE OKAY. PRIVATE TREES. CLEAN OUT PIT IN LAUNDRY ROOM... [Capitals in Original, Emphasis added] p. 10-13: Date Created: 01/03/2012 ...CREW 611 AUGERED AND STV’D. SAG ON PRIVATE FROM 5 TO 6M ... [Capitals in Original, Emphasis added] [ 5 ] In approximately 2011, the property became part of a City Maintenance Program (“City Program”) intended to prevent tree roots on city property from interfering with the sewer service.

Periodically, the City would issue a notice to property owners in the City Program requesting the property owners to contact the City to arrange for access by the City to residential sewer lines for auguring and biochemical foaming of tree roots that have infiltrated the city’s portion of the sewer service. In particular, the second page of the January 2014 Notice (Exhibit C to the Affidavit of Ingrid Smith sworn on May 5, 2015) contained a warning about the problems caused by tree roots in the sewer system: Drainage Operations records indicate a history of tree roots in the sewer service at this location.... ...

Scope of the Root Problem Roots growing inside sewer pipes are probably the most expensive sewer maintenance item encountered by city residents and the City Drainage Department. The roots from trees can cause flooded basements and damaged sewer pipes. ... Problems caused by Roots Roots damage pipes in two ways: first by causing structural damage , and secondly by obstructing the flow inside the pipe. Structural damage may allow backfill material to accumulate inside the pipe or result in a complete collapse of the pipe.

Root growth into the pipe traps grease and debris which increase risk of blockage. [ Emphasis added ] [ 6 ] In January of 2014, shortly before the Vendors entered into the sale agreement with the Plaintiffs/Purchasers, one such notice from the City was received by the Vendors. The Vendors did not respond to that notice and did not take steps to have the sewer

inspected. [7] On March 9, 2014, the Vendors entered into a sale agreement with the Purchasers. That agreement contained the followingclauses: 6.1 The Seller represents and warrants to the Buyer that: ... (

h) Except as otherwise disclosed, the Seller is not aware of any defects that are not visible and that may render the Property dangerousor potentially dangerous to occupants or unfit for habitation. 6.4 The Seller and the Buyer each acknowledge that, except as otherwise described in this Contract, there are no other warranties,representations, or collateral agreements made by or with the other party, the Seller’s brokerage and the Buyer’s brokerage about theproperty, any neighboring Property, and this transaction, including any warranty, representation, or collateral agreement relating to thesize/measurements of the Land and Buildings or the existence or non-existence of any environmental condition or problem. [8] The sale agreement was silent with respect to any issues with respect to the sewer.

At no time did the Vendors advise thePurchasers of any past problems with the sewer, the January 2014 letter from the City, or the involvement of the property in the CityProgram. [9] On March 19, 2014, the Purchasers lifted the house inspection condition, based on the inspection conducted by the twofathers of the Purchasers, one of whom is currently building his own home and the other who owns a property maintenance company. [10] On March 27, 2014, the Purchasers took possession of the property. [11] On October 9, 2014, the sewer backed up causing an emergency auguring by the City on October 10, 2014.

The cause of theblockage was determined to be “Roots”. The form issued by the City for this service indicated that the homeowner would be charged forthe service if the blockage is found to be on private property. The purchasers were not charged for this service. [12] On February 25, 2015, the Purchasers received a letter from the City offering a free sewer inspection and auguring.

Position of the Plaintiffs/Purchasers [13] The Purchasers argue that there was a latent defect in the property and point to the reports from the City to show that the treeroots causing the sewer backup were on the residential property, and in particular point to the evidence of the “sagging” sewer pipe onthe residential portion of the sewer pipe. They further allege that the Vendors had knowledge that the tree roots invading the sewer pipewould result in a sewer backup if not periodically treated, yet they failed to respond to the January 2014 notice from the City requestingpermission to access the sewer service.

Alternatively, the Purchasers point to the alleged failure of the Vendors to notify the Purchasersof the Notice from the City so that they might take timely action to prevent the sewer backup.

Position of the Defendants/Vendors [14] The Vendors argue that the tree roots are an environmental problem for which the vendor is not responsible pursuant toparagraph 6.4 of the sale agreement. [15] Alternatively, the Vendors argue that the tree roots are a patent defect for which the Vendors are not responsible.Alternatively, if it is a latent defect, they argue that they are not liable because a latent defect which attracts liability must occur on theresidential property ( not on the city property), must be causally connected to the sewer backup, and must cause the property to berendered dangerous or potentially dangerous to the occupants or unfit for human habitation.

They argue that the absence of expertevidence on this point is fatal to the Purchasers’

summary judgment application on liability. [16] Finally, the Vendors argue that failing to conduct or facilitate or advise the parties about preventative maintenance is not alatent defect for which they are responsible. Caveat Emptor [17] At common law, caveat emptor generally applies to the purchase of used residential real estate unless the Vendor fails todisclose, through active misrepresentation or passive silence, a known latent defect in the property. The onus is on the Plaintiff to provethe degree of knowledge or recklessness: McCluskie v Reynolds (1998), (BC SC), 65 BCLR (3d) 191 at para 54(BCSC) (“McCluskie”). [18] This principle is augmented by sections 6.1 (

h) and 6.4 in the sale agreement. The sale agreement defines a latent defect asone that is not visible and may render the property dangerous or potentially dangerous to occupants or unfit for habitation. It alsoprovides that there are no other warranties, representations, or collateral agreements about the property or any neighboring property, northe existence or non-existence of any environmental condition or problem. [19] This principle and the contractual provisions raise the following questions:

a) Is there a defect(s)?

b) Is there an actionable defect(s)?

c) Did the Vendors have knowledge of, or were the Vendors reckless, as to the existence of the latent defect?

d) Did the latent defect(

s) render the premises dangerous or potentially dangerous to the occupants or make it unfit for habitation? Is there a defect(s)? [20] A defect is defined as a fault in a component of the improvements to the property. Judge O’Ferrall, as he then was, defined adefect as “a shortcoming or a failing or as the lack of something essential”: See Connie v Sampson, 2009 ABPC 61 , [2009] AJNo. 383 at para 20 (“Connie”). [21] The evidence here supports a sag in the sewer pipe on the residential side of the property line as well as tree roots on both theresidential property and the city.

A sewer back up is indicative of a defect in the integrity of the sewer system and constitutes a defect orlack of something essential in the waste management system. [22] The problem was located on the residential side of the property line. This is supported by the City Reports which state that thesag was on the residential side of the property line as well as tree roots on both sides of the property line.

The Vendors argue that thefailure of the City to charge them for the work supports their position that the problems lay on the City side of the property line,however the City Reports contain evidence to the contrary. [23] Accordingly, I find that the sag in the sewer line and the root infiltration constitute a defect located on the residential side ofthe property line. [24] In addition, the Provincial Court of British Columbia in Yue v Stones and Emnace, 2009 BCPC 81 , 2009 BCPC0081 at paras 38 to 40 (“Yue”) found that the registration with a city sewer maintenance program was evidence of a defect with theoverriding defect being the fact that the sewer only worked for 2 or 3 years without being cleaned out.

I find that to be the case here too. Is there an actionable defect(s)? [25] With respect to latent versus patent defects, only a latent defect is actionable: [19] The distinction between what constitutes a patent or a latent defect is a prerequisite to determining the extent of a vendor’sobligation of disclosure under the principle of caveat emptor. Patent defects are those that can be discovered by conducting a reasonableinspection of the property and making reasonable inquiries into its qualities. The vendor is not obliged to call patent defects to thepurchaser’s attention.

In the case of patent defects, the purchaser must rely upon their own personal inspection. Accordingly, absentconcealment of such defects by the vendor, the purchaser cannot complain of such defects and caveat emptor will apply. On the otherhand, a latent defect is one that could not have been identified by a purchaser upon a reasonable inspection of the property. For thatreason, a latent defect known to a vendor must be disclosed to the purchaser.

Should a vendor fail to disclose to a purchaser a knownlatent defect, caveat emptor will not bar a purchaser’s claim for damages resulting from such failure to disclose. Gibb v Sprague, 2008 ABQB 298 at para 19 [26] Accordingly, a latent defect is a fault in a component of the improvements to the property which cannot be detected onreasonable inspection.

It requires some fault in the structure that is not readily apparent to an ordinary purchaser during a routineinspection (See: Temple v Thomas, 2007 ABQB 316 at para 52 (“Temple”) relying on Swayze v Robertson (2001), 39 RPR (3d) 114 atpara 27 (“Swayze”); McGrath v MacLean

(1979) DLR (3d) 144 at p 8 (Ont CA)). [27] Here, the defects were underground and out of sight. [28] The fact that there were large trees in the yard and in the adjacent green space is not sufficient to put the Purchasers on noticeof a latent defect and does not constitute a patent defect. Counsel for the Vendors points to the case of Doherty v Rethman, 2015 NSSM13 at page 9 where the Small Claims Court in Nova Scotia found that tree roots from an orchard growing over a septic field constituted apatent defect.

The facts are very distinguishable and not at all helpful to the Court in this case. [29] There is no evidence that there were any telltale signs of previous flooding or sewer back up. The basement panelling andcarpet were described in the evidence as “dated” but otherwise in good condition. [30] The Purchasers had no way of observing the defect or knowing of the existence of the defect.

I conclude that the sag in thesewer pipe and the tree roots that infiltrated on the residential side of the property line are defects that could not have been detected on areasonable inspection by the Purchasers or their house inspectors (professional or otherwise). [31] The Court in Yue found that registration with the city sewer maintenance program was a latent defect (para 41) which shouldhave been disclosed, in the same nature as the Court discussed in McCluskie.

I would not go so far as to say that registration itself was adefect but rather that it is evidence of a defect. [32] I find these to be latent defects. [33] Counsel for the Vendors argues that the tree roots are an environmental defect and therefore excluded from actionability bySection 6.4 of the sale agreement. However, here there is also a structural defect located on the residential side of the property, being asag in the sewer line. This is sufficient to take the problem outside the realm of an environmental defect. The Vendors are not saved by

this provision. [34] Counsel for the Vendors argues that the failure to conduct or facilitate or advise the parties about preventative maintenance isnot an actionable latent defect and I agree with that submission. It is the sag in the sewer line and the tree roots that constitute the latentdefect. Did the Vendors have knowledge of, or were the Vendorsreckless, as to the existence of the latent defect? [35] The Vendors failed to disclose the latent defect.

The Vendors clearly had knowledge of the defect and the implications of thedefect from a number of sources: personal experience with sewer blockages in the property in question, the need for auguring andfoaming of the root problem every two years to avoid sewer back up, participation in the City Program, and the information in thenotices provided by the City as part of the City Program. [36] Counsel for the Vendors argues that actual knowledge must be proved in both Defendants. The evidence before the Court isthat the male Defendant has dementia, effectively making it impossible to prove actual knowledge.

The female defendant is described asa senior but there is no suggestion that she has any mental disabilities. In the circumstances, the knowledge from the sources listed in theprevious paragraph is sufficient to fix the Defendants with actual knowledge or at the least, a reckless disregard of the latent defect.There is no reason to believe that the Vendors thought that the problem had been resolved. Their participation in the City Programclearly indicates that they knew this was an ongoing problem. [37] I find that the Vendors had knowledge of the latent defect. Did the latent defect(

s) render the premises dangerous orpotentially dangerous to the occupants or make it unfit forhabitation? [38] For a latent defect to be actionable, paragraph 6.1 (

h) of the sale agreement expressly provides that the latent defect must“render the property dangerous or potentially dangerous to the occupants or unfit for habitation”. [39] In Connie and Gibbs, the Alberta Courts have cited with approval the approach to the phrase “unfit for habitation” as set outby the Ontario Superior Court of Justice in Swayze: [31]...I am of the opinion that the term ‘premises unfit for habitation’ does not mean that the defect must be such that the entire residencemust be rendered uninhabitable.

Rather, in cases such as this I am of the view that application of the principle can, and must meansomething more qualified. [32] I take the position that any decisions regarding habitability of the premises must be made on a common sense and reasonedapproach based on the facts of each case. It seems to me that the correct approach must be to consider it in the context of whether thelatent defect has caused any loss of use, occupation and enjoyment of any meaningful or material portion of the premises or residencethat results in the loss of enjoyment of the premises or residence as a whole...

Swayze at para 30-32 [Emphasis added] [40] In the case at bar, the Purchasers have continued to reside in the premises but have been deprived of the use and enjoyment ofthe finished basement. Given that a working sewer connection is essential to the liveability of a home, a “common sense and reasonedapproach” leads me to take judicial notice that sewer backups are dangerous or potentially dangerous to occupants of a residence, therebymaking the area in question unfit for human habitation. The absence of expert evidence on this point is not fatal to the claim.

The factthat the purchasers continued to remain in the home but were unable to use that area does not detract from that finding. The Court in Yuealso took this approach (para 41) and I agree with it.

Summary Judgment [41] The Foundational Rules of the Alberta Rules of Court, as well as the Supreme Court of Canada and the Alberta Court ofAppeal encourage a cultural shift that creates an environment that enhances, and does not obstruct, access to justice. Guidance on theapproach to be taken on a

summary judgment application is set out by the Court of Appeal in the case of 776826 Alberta v Ostrowercha,2015 ABCA 49: [9] The governing test for

summary judgment in Alberta finds expression in Windsor v CPR, 2014 ABCA 108 at para 13, 572 AR 317; Sherwood Steel Ltd v Odyssey Construction Inc., 2014 ABCA 320 at paras 7 and 8, 59 CPC(7th)22; Maxwell v Wal-Mart, 2014 ABCA383 at para 12; W.P. and cases mentioned therein, inter alia. From the process perspective,

summary judgment can be given if adisposition that is fair and just to both parties can be made on the existing record by using that alternative method for adjudication: Hyrniak v Mauldin, 2014 SCC 7 , 2014 SCC7, [2014] 1 SCR 87. [10] From the substantive perspective,

summary judgment can be granted if, in light of what that fair and just process reveals, there is nomerit to the claim. No “merit” means that, even assuming the accuracy of the position of the non-moving party as to any material and

potentially decisive matters—matters which would usually require ordinary forensic testing through a trial procedure with viva vice evidence and which could not be resolved through the fair and just alternative—the non-moving party’s position viewed in the round has no merit in law or in fact. [11] Stated another way, in order for the non-moving party’s case to have merit, there must be a genuine issue of a potentially decisive material fact in the case which cannot be summarily found against the non-moving party on the record revealed by the “fair and just process”.

The mere assertion of a position by the non-moving party that something will turn up at trial, does not suffice.

The key is whether the circumstances require viva voce evidence in order to properly resolve the case: see Canada v Lameman , 2008 SCC 14 at paras 10to 11, [2008] 1SCR 372. [12] The concept of “merit” in this respect is to be distinguished from the test for striking out pleadings under Rule 3.68 which involves deciding “whether there is any reasonable prospect that the claim will succeed, erring on the side of generosity in permitting novel claims to proceed.”: compare Ernst v Alberta (Energy Resources Conservation Board), 2014 ABCA 285 at paras 13 to 15 , 85 CELR (3d) 39 under motion [2014] SCCA No 497 (QL). [13] As to the substantive aspect of the test, then, this Court has also put the test for

summary dismissal into the following terms in W.P., at para. 26:

Summary judgment is therefore no longer to be denied solely on the basis that the evidence discloses a triable issue. The question is whether there is in fact any issue of “merit” that genuinely requires a trial, or conversely whether the claim or defence is so compelling that the likelihood it will succeed is very high such that it should be determined summarily: Windsor at para 16 ; Beier at paras 56, 59-68 and 70. [ 42 ] The issue to be addressed here is the effect of the Hyrniak approach on a

summary judgment application to deal with liability only. Unfortunately, neither counsel addressed this question in their written briefs and counsel for the Vendors raised it at oral argument by handing up a copy of the decision of Swan Group Inc v Bishop , 2013 ABCA 29 (“ Swan ”). Handing up cases that are not addressed in written argument does a disservice to the Court and to opposing counsel.

There was little oral argument on this issue but it is a live issue that must be addressed. [ 43 ] Counsel for the Vendors argues that our Court of Appeal has counselled against separating issues in matters more conveniently tried in one piece: Swan at para 35 referring to Gallant v Farries , 2012 ABCA 98 (“ Gallant ”). [ 44 ] Gallant is a detailed and thoughtful discussion of the application of the law on splitting trials. Among other things, Gallant concludes that the cases decided before the introduction of the 2010 Rules of Court are still applicable (See

section C of Gallant ) and confirms that the warnings contained in those prior cases are still applicable. It reviews the purpose and intention of the Rules as set out in Rule 1.2 and focuses in particular on the reference in Rule 1.2 to the facilitation of the quickest means of resolving a claim at the least expense. [ 45 ] The Gallant decision goes on at length to discuss the dangers of splitting a trial into two (or more) segments (See paragraphs 13, 23, and 54 and the cases cited therein).

In particular, it raises the spectre of numerous appeals of the different segments defeating any well-intentioned goal of saving time and costs. It cautions the Court to recognize the reality of appeals (See paragraphs 29 and 32 to 47). [ 46 ] This caution and concern must be weighed against the subsequent decision in Hyrniak and the subsequent cases from our Court of Appeal that follow Hyrniak . Should the possibility of an appeal hold the Court hostage and prevent it from deciding an issue on

summary judgment that, in the words of Hyrniak , “is fair and just to both parties ...on the existing record by using that alternative method for adjudication”? Should the fear of every possible appeal scenario prevent the Court from ever deciding to proceed with anything other than a full trial of all issues? [ 47 ] In my opinion, there is a difference between splitting a trial into two, for example a trial on liability followed by a trial on quantum, and using

summary judgment to determine liability and directing an assessment of damages. This is especially so where there is no overlap between the issues of liability and damages. In this case, there is no overlap. Everyone agrees that the sewer back up occurred. Everyone agrees that the “before” condition of the room was dated but otherwise in good condition. The only remaining evidence to be called relates to the type and extent of the damages. [ 48 ] The Rule 7.1(

a) test set out in Gallant is “a real likelihood that the net result will save time and money for all concerned”. Based on the facts before me, I find there is a real likelihood that proceeding with

summary judgment on liability will save time and costs. The criteria set out in Rule 7.1(

a) are met. I am satisfied that this has been a fair and just process and there is no issue of merit with respect to liability that requires a trial. A finding of liability on these facts is fair and just to all parties. I am also satisfied that it is advantageous to the proceedings as a whole to grant

summary judgement on the issue of liability and direct the parties to continue with an assessment of damages. This approach is consistent with the Foundational Rules and the approach in Hyrniak . Referral to a Referee [ 49 ] Counsel for the Purchasers has requested that this matter be referred to a Referee to assess damages. I am not satisfied that the damages issue is restricted to the amount only as required by Rule 7.3(b). This relief was not fully argued at the application before me. Without further argument and without the consent of all parties, I am not prepared to direct the assessment to a Referee.

Counsel may both see me on this issue if they wish to pursue this. Conclusion and Costs [ 50 ] In accordance with the principles set out in Hyrniak , I find

summary judgment on this issue of liability and direct the parties

to proceed to an assessment of damages. The Plaintiffs are entitled to costs of this application under the appropriate column. Heard on the 12 th day of January, 2016. Dated at the City of Edmonton, Alberta this 24 th day of February, 2016. Sandra L. Schulz M.C.C.Q.B.A. Appearances: John Andreassen Weir Bowen LLP for the Applicants Neil Fenna Neil Fenna Professional Corporation for the Respondents _______________________________________________________ Corrigendum of the Reasons for Judgment of Sandra L. Schulz, Master in Chambers _______________________________________________________ The Appearances were revised to correct the name of counsel that attended from Weir Bowen LLP.