Robert Wesley Devlin Hancock - v. -, 2012 SKPC 132

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2012 SKPC 132 Date: August 20, 2012 File: 53 / 2012 Location: Saskatoon ____________________________________________________________________________ Between: Robert Wesley Devlin Hancock - and - James Glen Richardson and Stephanie Erin Richardson Self Represented Plaintiff Davin R. Burlingham For the Defendants _____________________________________________________________________________ JUDGMENT SHEILA P. WHELAN , J _____________________________________________________________________________ Introduction [ 1 ] The Plaintiff, Mr.

Hancock, purchased a house from the Defendants, James and Stephanie Richardson, in 2007. In 2010 Mr. Hancock observed that water was coming in the basement. This led to further investigation by him and he discovered that a large portion of the foundation had caved in. Mr. Hancock claims that the Richardsons knew or should have known of the problem and covered it over, preventing him from discovering it before the purchase.

He further claims that the Richardsons’ statement in the Property Condition Disclosure Statement: “some cracking in the house footing on the north side of the dwelling” was misleading and was relied

upon by him. He said that had he known of the true condition of the foundation prior to purchase, he would not have purchased the house for the same price or at all. He has repaired the foundation and claims reimbursement in the sum of $19,606.74. [ 2 ] The Richardsons took possession of the house on May 1, 2005. Mr. Richardson testified that nothing during that transaction or in their own investigation and repair in the following two years alerted them to a problem with the foundation beyond what they disclosed in the Property Condition Disclosure Statement. They deny covering the wall to conceal a problem.

They rely upon the Property Condition Disclosure Statement which they say was accurate to the best of their knowledge. They further maintain that the Plaintiff could have inspected the house more carefully to determine the state of the foundation at the time of the purchase. They do not accept that the foundation of the house in the years that they were in possession, from 2005 to 2007, was in the state in which the Plaintiff found it in 2010. [ 3 ] The matter was reserved for decision to consider the evidence and the Defendants’ brief which was filed and given to the Plaintiff at the conclusion of the trial.

While the Court was prepared to grant a further adjournment, the Plaintiff did not require more than a few minutes, to review the brief and argument was presented at the conclusion of the evidence on the trial date. [ 4 ] The Plaintiff successfully established on a balance of probabilities that the Defendants knowingly concealed a structural defect in the north basement wall of the house.

In so doing, they converted a patent defect into a latent defect and have been found liable to the Plaintiff for fraudulent misrepresentation and damages in the sum of $18,006.74 together with interest and costs as set out below. [ 5 ] These were the issues: a. Did bias affect the reliability of the expert’s testimony? b. Application of caveat emptor and whether the sellers knowingly concealed the defect. c. Did the sellers make a fraudulent or negligent misrepresentation in the Property Condition Disclosure Statement and was the purchaser entitled to rely upon the statement? d. What if any damages are payable?

Discussion of the Evidence [ 6 ] Mr. Hancock attached two conditions to the contract which are pertinent to this claim:

i) viewing and approval of a property condition disclosure statement, which was to form part of the contract, and ii) receiving and approving of a home inspection. Those conditions were fulfilled and removed by Mr. Hancock. [ 7 ] Pertinent questions, answers and explanations were provided by the Defendants in the Property Condition Disclosure Statement, set out below: 3. General

g) Are you aware of any roof leaks or moisture or water problems or unrepaired water damage in the dwellings/improvements? Response: No

h) Are you aware of any past or present flooding or drainage problems on the property? Response: Yes Additional Comments and Explanations: minor flooding in the basement (before rain gutters were installed) app. 1 inch deep (summer of 2005) no water since.

j) Are you aware of any structural defects in the dwellings/improvements? Response: Yes Additional Comments and Explanations: Some cracking in the house footing on the north side of the dwelling.

l) Are you aware of any improvements, additions or alterations made without the required permits? Response: Yes Additional Comments and Explanations: The south, east and north basement walls have been replaced with 2 x 6 pressure treated lumber. ¾” pressure treated plywood backs the lumber with vapour barrier and insulation. ½” drywall was used to finish off the walls.

Upstairs light fixture was added in 2006. [ 8 ] The Property Condition Disclosure Statement states: BUYERS SHOULD MAKE THEIR OWN INQUIRIES BUYERS are strongly urged to make their own inquiries after receiving a Disclosure Statement, keeping in mind that: 1. the SELLER'S knowledge of the property may be incomplete or inaccurate; 2. in some cases, it may not be possible to claim against the SELLER if the SELLER cannot be found or is insolvent or bankrupt or if the legal costs of pursuing the claim are too high; 3. some SELLERS may simply not know the answers to some of the questions in this Statement or may not have sufficient expertise to provide a BUYER with the information the BUYER requires; and 4. in some of the answers, the SELLER is only obligated to disclose defects that he is personally aware of, there may be defects that the SELLER is not aware of and therefore has not disclosed.

Prudent BUYERS will use this Disclosure Statement as the starting point for their own inquiries. BUYERS are urged to carefully inspect the property and, if desired, to have the property inspected by an inspection service of their choice, at their expense. BUYERS can hire an independent inspector to examine the property to determine whether defects exist and to provide an estimate of the cost of repairing old problems that have been identified on a Disclosure Statement or on an inspection report.

The buyers and sellers were asked to indicate at the foot of the Property Condition Disclosure Statement, by their signature, that they had read and understood the information contained in the Statement. [ 9 ] The Plaintiff did not file a home inspection report. He testified that there were no issues with the foundation as a result of the inspection. He said that the siding on the exterior of the home, extending all the way to the ground, and the interior walls in the basement prevented a thorough inspection. [ 10 ] Mr.

Hancock said that he relied upon the following representation in the Property Condition Disclosure Statement:

j) Are you aware of any structural defects in the dwellings/improvements? Response: Yes

Additional Comments and Explanations: Some cracking in the house footing on the north side of the dwelling. He didn’t think that description was outside what one would expect as the house was 80 years old and he did not interpret this statement to refer to a structural defect, notwithstanding the question referring to structural defects. [ 11 ] Mr. Hancock relied upon both the Property Condition Disclosure Statement and a home inspection, in removing the conditions and proceeding with the purchase of the house. The concrete foundation was not inspected.

He did not ask for a more thorough inspection and in particular to remove the drywall for a closer look. [ 12 ] Mr. Hancock took possession September 4, 2007 and lived in the home from then until June 2010, when he was first alerted to the extent of the problem after a heavy rainstorm. He saw water coming in on the north wall behind the washer and dryer. He removed the drywall to better investigate the source of the problem and at that point he saw that a large chunk of concrete appeared to have caved in. He also saw an older wall behind the newer drywall.

He suggested that the house initially had a shallow crawl space and at a later date it appeared that it was excavated out in the centre and walls were constructed to hold back the dirt. An addition was also constructed on the west side of the house. He found no older inner wall on the east or south sides of the basement and this puzzled him. [ 13 ] Mr. Hancock presented evidence with a view to convincing the Court that the structural defects that he found existed prior to his purchase of the house from the Defendants and that the Defendants knew or should be taken to have known of these same structural defects.

It was his position as well that the walls constructed by Mr. Richardson covered a problem that would have been relatively easily observed. [ 14 ] Mr. Richardson testified for the Defendants, stating that he was not aware of the defects. He testified that when purchasing the house, he viewed the basement with a home inspector who questioned the state of the north, east and south walls which were said to be in “poor shape”, especially the south wall which had a large bow. The inspector told him that he couldn’t explain this, without taking anything apart. Mr.

Richardson specifically testified that the south and east walls were in “questionable shape” and that the north wall “was in similar condition to the rest”. [ 15 ] Mr. Richardson constructed the three new interior basement walls in the summer of 2006. Before putting in new walls, he removed the old south and east walls completely. He said that upon further inspection, he felt that the north wall was straight enough and intact enough to build a wall over top of it.

He said the old north wall had been constructed to a height of about five feet; it was a retaining wall to keep the dirt from falling into the basement. He could see over the old wall and behind it. He then observed, as he stated in the Property Disclosure Statement, that there was cracking. He denied seeing other signs of rotten wood or a collapsed footing. The cracking was vertical and less than the width of a small finger. The Plaintiff questioned him about the inspector’s ability to see behind the five foot retaining wall at the north end of the basement: Q: There’s one thing I want to clarify.

You mentioned that the home inspector that you got; he wasn’t able to tell what was going on behind those interior walls because he couldn’t see behind them. But later on you mentioned that at some point the top part of those walls were exposed so can you explain what you meant. A: Yeah well when he originally did the home inspection, they, like this south wall had a very prominent bow in it and so he couldn’t tell me why that was. Uhm and yeah, now I come to think of it, I don’t know why he said that. Like obviously there was that uhm portion, but yeah I don’t know.

Q: So you’re saying that they were exposed at the time you built the new wall. A: What was exposed? Q: The top portion of the existing walls. A: Yeah, I know for sure the south wall, obviously the south and east walls were taken out and taken down. Uhm, I don’t clearly remember if that north wall was completely exposed. I don’t think it was exposed at the time we bought the house but when I did make the repair, when I did build those walls I had took at least a portion of it out to look. There was some exposure there because I know I could see that concrete back behind. Mr.

Richardson said that he took down the old south wall because of the bow and he took down the old east wall because the southeast corner was further west than the rest of the wall and it was at a very odd angle. He took it down to square up the room. [ 16 ] When shown Exhibit P-7, photo 2, Mr. Richardson said that when he observed this aspect of the basement in the summer of 2006, the concrete piece was intact and that the photo depicted a much more serious condition than he described in the Property

Condition Disclosure Statement. He said that the wood support beam was into the foundation and it did not look to be rotten. He said that he saw nothing that would suggest a structural problem. He agreed that once he constructed the interior walls, one could not ascertain the state of the foundation. He put the house up for sale in July 2007 because they wanted a larger home to accommodate their two children. The Defendant produced some photos of the state of the basement after he removed the old walls, they do not depict the north wall; Exhibit D-1 depicts the northeast corner. [ 17 ] Mr.

Richardson described the materials that he used in constructing the three new basement walls. The old walls were fir 2 x 4 studs, faced with ¼ inch plywood that had been painted. He replaced those with 2 x 6 pressure treated wood. On the top of the wall framing toward the dirt, he put ¾ inch pressure treated plywood. Once the walls were framed in, he insulated, put vapor barrier in, followed by ½ inch drywall. The insulation was put in with a view to retaining a bit more heat. [ 18 ] A plumber by trade, Mr. Richardson testified to having some experience with renovations, construction and framing.

As a student he worked off and on for a company that did residential renovations. [ 19 ] Mr. Hancock took a number of photos of the basement, presented a sketch and offered as an expert witness, Mr. Aubin, who examined and repaired the basement. Mr. Hancock claimed reimbursement for that portion of the repair work undertaken by Mr. Aubin for which he believes the Defendants should be responsible. [ 20 ] The Defendants’ counsel took exception to some very strong statements about the Richardsons’ actions in Mr.

Aubin’s report of December 2011, including that the Defendants deliberately covered up the structural problem. His report is reproduced below: December 11, 2011 To Whom it May Concern: In May 2011 I, Joey Aubin, of Mighty Joe's Contracting performed an estimate at Robert Hancock's residence at 515 Avenue J North, to find a solution to a seepage and structural problem. I have been in the foundation repair business for 18 years and have seen a lot of cover-up tricks to sell a house with as little cash loss as possible, as quickly as possible.

Most often the former owners have little or no carpentry skills. 515 Avenue J North was a good example of this ongoing problem. I found a false wall that was built to cover a broken grade beam. The grade beam is the foundation that the house sits on. Sections of it were broken and falling into the space between the false wall and where the grade beam held the weight of the house. The only thing supporting that side of the house was the false wall - there was no intact footing or grade beam in this area. From the outside you could not see that the grade beam was holding no load.

This wall was sheeted on both sides so I had to cut out a

section to see inside. From the inside, once the new wall was removed it wasn't hard to see that over 11feet of the outside wall had no support whatsoever. The false wall was built 4 feet in from the outside wall, suggesting it was done hastily, meaning they didn't take the time to remove the soil that had caved in. There were many ways in which the former owner broke the law and building code. For example, any time you move a load-bearing wall you must have a stamped engineer's drawing.

A wood support beam, which once sat in a beam pocket supported by the concrete grade beam which had broken, was rotten three feet back from the wall. This was visible after removing the new wall. Even a child would know this was not right. If this work was not done, the structural integrity of the house would be compromised. Luckily we were able to correct the problem before a disaster could result. In this time I have seen every trick in the book that sellers use to hide foundation issues, but I have never seen such total disregard and greed.

In this case it could even have cost someone's life. . . . (underlining added for emphasis)

[21] Mr. Aubin’s testimony was considerably more measured than his report. He initially used an inspection camera to see whatwas going on with the foundation and then cut out a part of the wall to look inside. He ascertained that the foundation had suffered“major catastrophic failure”. He believed that it had failed many years before. The concrete footing and the concrete grade beam whichstood on top of the footing were broken and the pile which stood below the footing was broken off the footing.

The concrete grade beamwas broken in half and the pile was right below where the break had occurred (Exhibit P-7, photo 2). The pile had slid down in the dirtinto the open space around it. (The construction methods of the day which did not include rebar, was that the pile was not attached to thefooting.) The triple-ply beam was extremely rotten at the beam pocket and was no longer part of the house (Exhibit P-7, photo 16). [22] Mr. Aubin observed that the load of the house was transferring onto the 2 x 6 wall that the Richardsons had constructed.

The2 x 6 wall was against Code which was 2 x 8 was not strong enough to hold up a two storey house. This wall was four feet in from theoutside. Asked what he concluded from the construction of this wall, he replied: It’s really hard to say but, like I said, it does look as though, the wall, in any case, the wall was put there to stop dirt fromrolling in. You could not have put that wall there without noticing the fact that the foundation was compromised completely and wason its way to catastrophic failure and something should’ve been done upon noticing something of that magnitude.

He was asked to assume that the foundation was in the state that he saw it in; he agreed that whoever built the wall would have seen thedamage to the concrete foundation. [23] Mr. Aubin was asked about the end of the triple ply beam (Exhibit P-7, photo 16) that he described as being rotten and howlong he thought it might have been exposed to the elements. He testified: To be rotten to the stage that it was, we’re talking 20 years of exposure. There’s no doubt in my mind. . .

It was rottenback at least, because . . .we had to completely replace that cause it was rotten so far back that I couldn’t pick up that weight at the newwall that we were putting in without replacing it completely. [24] Asked how far the concrete had shifted inward, he testified that at the back it was probably 18 inches. He was then asked howlong it takes for the foundation to shift. He testified that it depends and he referred to the rains in 2010: . . . we had torrential rains . . .

That could’ve pretty much eroded a path for the soil to give way underneath it, I meanthere’s a million different theories to what could’ve moved it inward. The bottom line is that that concrete was broken long beforeregardless of where it was, whether it was in the hole, whether it was still right up beside the . . . adjacent piece of concrete. Mr. Aubin did not find a lot of relevance in discussing the movement of the earth. He did find the appearance of the broken edges of theconcrete to be indicative of time passing.

He went on to discuss his experience with breaking concrete and the weathered appearance ofthe concrete where the break had occurred. Upon cross-examination he agreed he knew of no test to determine the age of the break in theconcrete. [25] Mr. Aubin discussed the materials used by Mr. Richardson in constructing the interior walls. The wall was not constructedsuch that it would provide structural stability to the two storey house. The wall was level and plumbed in but it was 2 x 6 and Code is 2 x8; “whether 2 x 6 will hold a house or not; it’s not Code”.

Discussion of the Issues [26] In arriving at the conclusions in this matter it was necessary to make findings of fact and this required some findings ofcredibility and reliability. This was done having regard to the civil burden of proof which is on a balance of probabilities. The Plaintiff’sevidence and that of his expert witness was found to be credible and reliable. With respect to the evidence of the Defendants and inparticular the testimony of the Defendant, Mr. Richardson regarding knowledge and motivation, I found that it was not supported by thefacts as I found them.

With respect to the whole of the evidence, where there was an inconsistency between the evidence of theDefendants and that of the Plaintiff, I accepted the evidence of the Plaintiff. a. Did bias affect the reliability of the expert’s testimony? [27] Counsel for the Defendants cross-examined Mr. Aubin about statements that he made regarding the motivation of theDefendants. He cited Huerta v. College of Physicians and Surgeons of Saskatchewan, (SK KB), [1999] S.J. No. 164,178 Sask. R. 52 (SKQB), but it is distinguishable on the facts. Mr.

Aubin was critical of the actions of the Defendants, using some fairlyaggressive phrases in his report, including: “cover-up tricks” and “total disregard and greed”. However, when confronted with this, heacknowledged that he might have been hasty because there were some things that he did not know about the Defendants’ actions. Hisqualifications and his testimony as to the structural problems that he observed were not questioned. His testimony about the age of thebreak in the grade beam was qualified on cross-examination; evidencing balance in his testimony. The following exchange is illustrative

of Mr. Aubin’s flexibility: Q: So you didn’t have all the facts before you wrote this report did you? A: No. I didn’t. I didn’t have the facts enough . . . . . . Q: My point is you’re biased against the people who sold the house? A: That’s ridiculous. Okay whatever. Q: That’s ridiculous. You accused them of fraud. You’re biased against them. A: Okay but that’s really got nothing to do with the facts about the foundation. We’re talking about a foundation here.We’re not talking about their credibility as decent people. Q: No we’re not talking about their credulity, talking about yours. A: Oh. Okay.

Q: You just admitted to me that you wrote very carelessly without having all the facts when you wrote this report,right? A: Well I didn’t write very. .. Nothing is careless about the facts when it comes to the foundation on that house. Okay.Nothing was written carelessly. Maybe I a little bit jumped the gun on pointing the finger at somebody for somethingthat I didn’t know that what they had intended. But I can tell you that when I see guys that buy and sell houses that are kind of handymen, they do that kind of thing and maybe sometimes people do that kind of thingnot knowing the consequences. Okay.

I’m not saying that these people did this specifically for any kind of a gain. I’msaying that he did this without knowing what he was doing okay and in doing that he put Mr.Hancock in a bad position. Mr. Aubin was the only expert witness called and he provided useful, reliable evidence concerning his observations of the foundation.Some of his more colourful or inflammatory statements, especially in his report, were discounted and the Court took from his testimonyand report that evidence which it found credible and reliable, having regard to the civil burden of proof. b.

Application of caveat emptor and whether the sellers knowingly concealed the defect. [28] The principle of caveat emptor or buyer beware is the starting point in the law regarding the sale of land. See Britt v.Klimczak, [2010] S.J. No. 657 (SKQB). This principle applies, unless there was active concealment of the defect by the sellers. SeeFrank v. Wade, [2011] S.J. No. 485 (SKPC), at paragraph 21 and Britt v. Klimczak, supra, at paragraph 41. [29] With Mr. Richardson’s construction of the walls in the basement, what had been a patent defect became a latent defect whichwas structural in nature.

In this regard I was guided by Frank v. Wade, supra, which provided at paragraph 20: 20 The word "patent" means obvious. Thus, a patent defect is one that is "...apparent and easily discoverableupon inspection" (see Nowasad v. Hanson, 2005 SKQB 233). A latent defect, by contrast, is not "apparent andeasily discoverable upon inspection". I noted this well-known excerpt regarding patent and latent defects, found in Hanson v.

Dumont, 2005 SKQB 158 , [2005] S.J.No. 207 (SKQB) at paragraph 42, from Victor Di Castri's, Law of Vendor and Purchaser, 3rd ed., vol. 1 (loose leaf; updated March 1998(V & P) (1998-Rel. 5) (Toronto: Thomson Carswell Limited) at s. 236, pp. 7-19 and 7-20: s. 236 Patent and Latent Defects as to Quality A patent defect which can be thrust upon a purchaser must be a defect which arises either to the eye, or by necessary implicationfrom something which is visible to the eye. . . . A latent defect, obviously, is one which is not discoverable by mere observation.

In the case of a patent defect, as distinguished from a latent defect as to quality or condition, and where the means of knowledge areequally open to both parties and no concealment is made or attempted, a prudent purchaser will inspect and exercise ordinary care: caveatemptor. However, while inspection by a purchaser bars him from complaint as to matters patent, the mere means of knowledge, or theopportunity to inspect when he has relied solely upon a representation by the vendor, does not have this result.

Neither is a purchaserwho is unqualified to make an effective inspection, and where, in any event, an inspection could not be conclusive, necessarily barredfrom relief. . . . It would seem that in the case of a latent defect of quality, at any rate where unknown to the vendor, and not resulting in his purchaserbeing compelled to take something substantially different from what he contracted for, a purchaser has no remedy either in damages orby way of rescission, unless he pleads and proves fraud or breach of warranty.

The conduct of the vendor in concealing the true nature ofa patent defect will be treated as fraudulent where it has the effect of lulling the suspicions of the purchaser. Thus, damages arerecoverable in the same way as though there were a fraudulent misrepresentation. [30] In Roske and Whitely v.

Overs, 2008 SKPC 63, at paragraph 33, Bogdasavich J. of this Court discussed latent defects,discovered after the purchaser takes possession and the application of the principle of caveat emptor: The liability of a seller of a house to a buyer, respecting defects only discovered after the date of possession, has been the subject of manycourt cases in Saskatchewan (Thomas v. Blackwell, 1999 SKQB 168 , [1999] S.J. No. 769; Johnson v. Erdman, [2002] S.J. No.651; Paton v. Little, 2003 SKQB 43 , [2003] S.J. No. 65; Hanson v. Dumont, 2005 SKQB 158; McMillan and Richards v.Green, 2005 SKQB 382; Stann v.

Lukan, 2007 SKQB 366; Nowosad v. Hanson, 2005 SKQB 233; Bakken v. Harris, [2005] S.J. No. 10).The following

summary would appear to be the law in Saskatchewan. First, a distinction must be drawn between patent defects andlatent defects. Patent defects are those which are discoverable by inspection and ordinary vigilance on the part of the purchaser. Apurchaser of a house who discovers patent defects after taking possession has no claim against the seller as the doctrine of caveat emptoror "buyer beware" applies. However, if it can be proven that there was fraud or

an act of concealment by the seller with respect to thepatent defect then caveat emptor has no application. The act of concealment by the seller must be such as to turn the defect from a patentone to a latent one. Latent defects are those defects which are not readily discoverable by the purchaser through a prudent inspection.Latent defects that go to "quality only" and not the structural integrity of the building are also subject to the rule of caveat emptor unlessthere has been active concealment by the seller.

Latent defects that go to the structural integrity of the house, and that are known to theseller give rise to liability if they significantly affect (sic) the value of the property and the seller fails to disclose them. Silencerespecting structural latent defects has been held to be

an act of concealment. The rationale for the liability is this: had the latent defectbeen known to the purchaser, the purchaser would either not have bought the house or would have negotiated a price that would reflectthe repair costs. There is the possibility that a seller will even be liable for latent structural defects not known to the seller, if the defect isso significant that the buyer can argue fundamental breach of contract. That is, the buyer did not get what was bargained for. (Underlined emphasis added) [31] In McMillan v. Green, 2005 SKQB 382 , [2005] S.J.

No. 550 (SKQB) at paragraph 19, Justice Klebuc wrote: 19 . . . 1. A latent defect is one that is not discoverable by mere observation upon a reasonable inspection of a property. See Hanson atparas. 41 and 42. 2. Non-disclosure or concealment of a latent defect of which the vendor of real estate has knowledge will set aside the rule ofcaveat emptor and entitle the purchaser to rescind its purchase contract with the vendor or to recover damages resulting from the vendor'sfailure to disclose. See Rowley v. Isley, (BC SC), [1951] 3 D.L.R. 766. 3.

Silence by the vendor regarding a known major latent defect is equivalent to an intention to deceive. See Hamel v. Racioppi(1993), 32 R.P.R. (2d) 302 (Ont. Ct. (Gen. Div)). In Thomas v. Blackwell, 1999 SKQB 168 , [1999] S.J. No. 769, 1999 (SKQB), and in Hanson v. Dumont, supra, the Courtsdiscussed a number of cases that involved covering defects. As Wilkinson J. stated at paragraph 23; it’s an issue of degree regarding theknowledge and actions of the sellers. [32] In Unrau v. Gray, (NS SC), [1983] N.S.J. No. 54 (NSSC), the Court found that the seller had no fraudulent

intent but nevertheless was held liable for having concealed a patent defect. In Hamel v. Racioppi, [1993] O.J. No. 1393 (ONCJ) the Court cited Unrau v. Gray in holding that the Defendants’ concealment of defects that would have been patent was fraudulent, at paragraph 15: 15 Unhappily for the defendants the plaintiff draws my attention to the case of Unrau v. Gay (1983), 30 R.P.R. 198 , a decision of the Nova Scotia Supreme Court (Trial Division). In this case Mr.

Justice Clarke, after citing 42 Halsbury (4th ed.) held that where work done on a house resulted in the concealment of a patent defect then an action for recovery of damages arises in the same way as though there was a fraudulent misrepresentation. In this he relies on paragraph 52 of Halsbury at page 48 and the statement that; Any act of concealment by the vendor of defects which would otherwise be patent is treated as fraudulent and the contract is voidable by the purchaser if he has been deceived by it. See also Hipperson v. Williamson, [2012] S.J. No. 187 (SKQB) and Gumbmann v. Cornwall , [1986] O.J.

No. 1418 (ONSC) . These four cases were determined having regard to the knowledge and actions of the sellers. [ 33 ] I found that there was a structural defect in the north basement wall of the house during the time that the Richardsons owned the house and that they were aware of the seriousness of the defect. I was persuaded of this on a balance of probabilities by the evidence which revealed: a. The Defendants’ statement in the Property Condition Disclosure Statement, referred to above, disclosed:

j) Are you aware of any structural defects in the dwellings/improvements? Response: Yes Additional Comments and Explanations: Some cracking in the house footing on the north side of the dwelling. b. Mr. Richardson was told by his home inspector that three basement walls, including the north wall were in “poor” and “questionable” shape. c. Mr.

Richardson constructed three interior walls in the basement and in doing so removed the old walls on the south and east sides of the basement, but did not remove the old wall on the north side of the basement which he felt was “straight enough” and “intact enough” to build a new wall in front of the old wall. It was the north basement wall where the structural problems were found. d. The new interior wall on the north side was four feet in from the outside. Mr.

Aubin testified that when he first observed the north wall, the concrete had shifted 18 inches at the back and he was of the view that the new wall was built so as to permit the collection of dirt. e. Mr. Richardson is a plumber by trade and has some experience in residential renovation and framing. f. The interior walls installed by Mr. Richardson were of 2 x 6 construction and were not “according to Code” or with the appropriate permits. He said his work was not structural but cosmetic in nature. g. Mr.

Aubin was of the view that one could not have put the north wall in place without noticing that the foundation was compromised. He was of the view that the Defendants would have been able to observe that the concrete grade beam was broken in half and the triple-ply beam was extremely rotten, three feet back from the wall at the beam pocket and was no longer part of the house; it had shifted off its supports. While there was uncertainty about the timing of the broken concrete grade beam, Mr. Aubin testified that rotten triple-ply beam had been a problem for over ten years. h. Mr.

Richardson said that he was able to look over the old north wall, which was only about five feet high, before constructing the new wall and that he saw that the concrete grade beam was intact and he did not detect signs of rotten wood or a collapsed footing. He said that the wooden support beam did not look rotten and it was in the foundation. He saw no problems with the structure. i. Mr. Richardson identified some cracking on the house footing on the north side in the Property Condition Disclosure Statement. Mr.

Aubin did not identify cracking in the footing and in his description indicated that it sits under the concrete grade beam.

[34] I did not accept Mr. Richardson’s account or the reasons he gave for the manner of construction of the new basement walls. Iaccepted the evidence of Mr. Aubin regarding his observations and his opinion regarding the seriousness of and the length of time thatthe structural problem had existed. While the concrete grade beam may not have been broken when Mr. Richardson looked over the fivefoot retaining wall, I found that the triple-ply beam was rotten and observable as such. Mr. Richardson constructed new walls in thebasement, covering the old wall left in place on the north wall.

In doing so he concealed a structural defect. For this damages arerecoverable as for fraudulent misrepresentation. See Gray v. Unrau, supra. c. Did sellers make a fraudulent or negligent misrepresentation in the Property Condition Disclosure Statement andwas the purchaser entitled to rely upon the statement? [35] In Hanson v. Dumont, 2005 SKQB 158 , [2005] S.J. No. 207 (SKQB), Gunn J. discussed the significance ofstatements in a property condition disclosure statement. 59 The Property Disclosure Statement required the Dumonts to disclose problems of which they were aware.

In Zaenker v.Kirk (1999), 30 R.P.R. (3d) 9; [1999] B.C.J. No. 3033, 27 B.C.T.C. 141 (B.C.S.C.), Lamperson J. stated at para. 19: (

i) Although the property condition disclosure statement forms part of the agreement for a purchase and sale, it is not necessarily awarranty. Its main purpose is to put purchasers on notice with respect to known problems. ... It merely indicates that the statementstherein are true according to the seller's "current actual knowledge. ..." [36] Mr. Hancock maintained that the statements in the Property Condition Disclosure Statement were misleading and that herelied upon these statements to his detriment. He has made a claim of fraudulent or negligent misrepresentation.

Caveat emptor does notapply in the face of a fraudulent or negligent misrepresentation. In Britt v. Klimczak, supra, the Court found that the sellers wereprobably aware of the defect and because the property condition disclosure statement disclosed a problem but not the full extent of it, thestatement was found to have been potentially misleading. The case is distinguishable because the purchaser was found not to have reliedupon that statement as a thorough home inspection was conducted. Mr.

Hancock had a home inspection done but it was not thorough andthe conclusions were impacted by the construction of the interior walls in the basement. [37] At paragraph 41, in Britt v. Klimczak, supra, the Court discussed the requirements for a successful claim of negligentmisrepresentation: (

d) There are six (sic) requirements for a successful claim of negligent misrepresentation: (

i) there must be a duty of care based on a "special relationship" between the representor and the representee; (ii) the representation in question must be untrue, inaccurate, or misleading; (iii) the representor must have acted negligently in making said misrepresentation (iv) silence may constitute misrepresentation where what is left unsaid distorts the truth about a material fact (Desmond v. McKinlay(2000), (NS SC), 188 N.S.R. (2d) 211 conf'd at (2001), 2001 NSCA 24 , 193 N.S.R. (2d) 1 (C.A.); Alevizosv. Nirula, 2003 MBCA 148, 180 Man.R. (2d) 186 at para. 24 (Man. C.A.)); (

v) the representee must have relied, in a reasonable manner, on said negligent misrepresentation (Stann v. Lukan, 2007 SKQB 366, 308Sask. R. 81 (Q.B.)); and (vi) the reliance must have been detrimental to the representee in the sense that damages resulted (Zaenker v. Kirk, [1999] B.C.J. No.3033 at para. 15 (B.C.S.C.) (Q.L.).) [38] Mr. Hancock’s

interpretation of the representation was reasonable and reliance upon the statement was reasonable. Mr.Richardson agreed that the description of “some cracking in the house footing on the north side of the dwelling” did not describe thekind of structural damage that was depicted at trial.

[ 39 ] The Defendants’ counsel has maintained that Mr. Hancock was put on notice by the statement in the Property Condition Disclosure Statement regarding structural defects and should have done a more in-depth investigation of his own prior to purchase. [ 40 ] As my colleague, Judge Bogdasavich stated in Roske and Whitely v. Overs, supra , referred to in paragraph 30 of this judgment, caveat emptor has no application and known latent structural defects when not disclosed give rise to liability: . . . if it can be proven that there was fraud or

an act of concealment by the seller with respect to the patent defect then caveat emptor has no application. The act of concealment by the seller must be such as to turn the defect from a patent one to a latent one. Latent defects are those defects which are not readily discoverable by the purchaser through a prudent inspection. . . Latent defects that go to the structural integrity of the house, and that are known to the seller give rise to liability if they significantly affect ( sic ) the value of the property and the seller fails to disclose them. Silence respecting structural latent defects has been held to be

an act of concealment. The rationale for the liability is this: had the latent defect been known to the purchaser, the purchaser would either not have bought the house or would have negotiated a price that would reflect the repair costs. [ 41 ] The Defendants were told by their home inspector that three of the walls in the basement were in poor or questionable shape. Two of the walls were addressed. The Richardsons did not share this information with Mr. Hancock. Mr. Richardson was able to look over the old retaining wall on the north basement wall when he was working in the basement. Mr.

Hancock did not have that opportunity. Mr. Richardson substituted his opinion regarding the state of the north wall for that of the home inspector and he relied on his own experience to address the problem with the north wall. He covered the old retaining wall converting what was a patent defect or one that was readily discoverable into a latent defect. Mr.

Richardson acted negligently with respect to the steps he took in the basement and he acted fraudulently when he left the old retaining wall in place and simply covered it with a new wall. [ 42 ] The Defendants compounded the problem by making a representation in the Property Condition Disclosure Statement that did not accurately describe the situation with the north wall and Mr. Hancock was misled. He was entitled in the circumstances to rely upon the representation and he did so to his detriment. In addition to the finding of a fraudulent misrepresentation, I found that all of the criteria in Britt v.

Klimczak, supra, have been met for a case of negligent misrepresentation. d. What if any damages are payable? [ 43 ] The Plaintiff has established on a balance of probabilities his entitlement to damages representing the difference between the house he believed that he bargained for and the house that he received or for the cost of repair of the basement which was necessitated by the structural defect in the north basement wall. [ 44 ] Mr.

Hancock submitted a contract for repairs to the north basement wall (Exhibit P-8) and with respect to that contract claimed reimbursement for Jobs #3 and #4 and a further sum for electrical, plumbing and insulation supplies which he states were necessary to restore the basement to its former state or to electrical code for a total sum of $19,606.74. He further claimed interest and costs.

Exhibits P-8 and P-9 set out the following: Job #3 = $14,848.00 • Using Badger Daylight, excavate approx. 15 ft + 7 ft deep, 2 ft wide. • Remove approx. 15 ft of concrete grade, beam remove from property. • Remove soil, clay from 15 x 4 ½ ft space. • Dismantle PFW wall form and pour 2 ft x 8 inch footing. • Frame 2 x 8 PFW wall, drain rock, and drain tubes every 18 ft into sump system. Job #4 = $3,500.00

• Additional 3 ft of footing and wall, remove old grade beam. • Pour new footing at grade frame, new 2 ft grade beam on footing. . . . • Additional footing and wall

section to be installed to join up with existing support wall on front of house if required. . . . . . The total claimed may be summarized as follows: Job #3 $14,848.00 Job #4 3,500.00 18,348.00 + .05 GST 917.40 19,265.40 Supplies 341.34 Total $19,606.74 [ 45 ] Mr. Hancock described the work done under Job #3 and #4, pertaining to the north wall of the basement.

In addition he claimed reimbursement for supplies pertaining to work that he personally performed: - Excavating the damaged concrete and soil, - pouring footing, - building a new pressure treated wood foundation, and - supplies pertaining to re-installation performed by Mr. Hancock: - insulation, - vapour barrier, - plumbing, and - electrical. [ 46 ] During cross-examination, counsel questioned Mr. Aubin about the installation of a sump pump system. On re-examination Mr. Aubin clarified that he had installed 18 feet of drain tubes into the sump pump system. That item cost $1,600.00.

He said that there was no point to installing a new foundation without a sump pump system but this item pertained to the drain tubes only. The sum of $1,600.00 is not recoverable. Decision [ 47 ] The Plaintiff shall have judgment against the Defendants in the sum of $18,006.74, together with interest pursuant to The Pre- Judgment Interest Act from September 4, 2007 to date of judgment, plus costs in the sum of $100.00. ______________________________ S. P. Whelan, J