DAVID McCARTHY v. DEBBIE MacNEIL, 2014 NSSM 36

Claim No: 428650 IN THE SMALL CLAIMS COURT OF NOVA SCOTIA Cite as: McCarthy v. Halifax Home Inspections, 2014 NSSM 36 BETWEEN: DAVID McCARTHY and DEBBIE MacNEIL Claimants - and - DARREN SMITH c.o.b. as HALIFAX HOME INSPECTIONS Defendant REASONS FOR DECISION BEFORE Eric K. Slone, Adjudicator Hearing held at Halifax, Nova Scotia on August 19, 2014 Decision rendered on August 21, 2014 APPEARANCES For the ClaimantS self-represented

For the Defendant Jeffrey Flinn, counsel BY THE COURT: 1 The Claimants are suing their home inspector for having failed to alert them to the lack of a central ventilation system in the home that they were thinking of purchasing. They say that this breached his standard of practice as a member of the professional organization, the Canadian Association Of Home & Property Inspectors (CAHPA), with which he is affiliated. The Claimants say that this credential was part of what they relied on in hiring him. 2 The home was bought in May 2013, after the Claimants received a positive inspection report from the Defendant.

Later that year, significant amounts of mold began to develop around many of the windows in the home. It became clear to the Claimants that they had a moisture build up problem. The solution suggested by people they consulted was to retrofit the house with a Heat Recovery Ventilation (HRV) system. This cost of approximately $5,000.00 was unanticipated, and they seek to recover this from the Defendant. 3 During his inspection, the Defendant did not notice any mold or even moisture. In retrospect, there are two main reasons for this: a.

It turns out that the home was unoccupied, and had been possibly for some time, although it had been staged with furniture and such for marketing appeal. The Claimants only learned of this fact shortly before closing. As such, with no one taking showers in the home or cooking, or even breathing, there would have been little or no moisture being generated which might have been noticeable on inspection. The home was, by all accounts, pristine at that time. b.

Also, because it was already spring, it was possible to have windows open - even minimally - to allow for some air circulation. 4 The Defendant made note in his report that the bathrooms both had fans which appeared to be in working order. He noted that the range hood in the kitchen was not ventilated to the outside. He did not suggest in his report that there was any inadequacy to the existing ventilation.

According to the Claimants, they later replaced these bathroom fans because they were weak and inadequate. 5 It is a fact that prior to the 1995 amendments to the National Building Code, HRV systems were not required in new construction. The home in question here had been built in the late 1980's and was compliant with the Code that had existed at the time. The 1995 Code did not require existing homes to be retrofitted. 6 In January 2014, as the Claimants were grappling with their problem, they asked the Defendant to come over and advise them.

He had little to see because the Claimants had cleaned up the mold, though not before photographing it. This visit did little except alert the Defendant to the fact that he had a potential claim on his hands. 7 The Defendant raises four issues: a. He argues that his inspection did not breach the standard of care for a home inspector. b. He argues that the Claimants signed a pre-inspection agreement which limits his liability to the amount paid for the report, which in this case was $400.00.

c. He argues that the same agreement also limits his liability by requiring a claimant to bring any action within one year of thedate of the inspection. Here the claim was not filed until about 14 months later. d. He argues that the damages have not been proved. Standard of care 8 The issue of professional liability for home inspectors is quite familiar to me, having decided the case of Burgess v. Rickard,2008 NSSM 15, in which I quoted extensively from the leading decision of Smith, ACJ, in Gesner v. Ernst (2007) 2007 NSSC 146, 254 N.S.R. (2d) 284.

The facts in the Burgess case were very different, but the legal principles are the same. 9 In that case I applied the five-point test set out in Gesner: ¶ 23 Because the core of the service provided by the home inspector is the advice given regarding the condition of the home, claimsagainst home inspectors in superior courts have been pleaded and considered by the court in the context of the tort of negligentmisrepresentation. The five elements to be proven in that tort, as articulated by the Supreme Court of Canada in Queen v.

Cognos Inc.(1993) (SCC), 99 D.L.R. (4th) 626, are well established: 1. there must be a duty of care based on a special relationship between the parties, 2. the representation made by one party to the other must be false, inaccurate or misleading, 3. the representation must be made negligently, 4. the person to whom the representation is made must have reasonably relied on the representation and, 5. the reliance must have been detrimental to that person with the consequence of his suffering damages. ¶ 24 The third requirement that "the representation must be made negligently" one presumes will fall to be determined by application ofthe test applicable to other types of "professional negligence", namely, that the home inspector failed to meet the standard of careexpected of a reasonably prudent home inspector in those circumstances and at that time. 10 I do not think there is any real question that there was a special relationship, given that the Defendant was hired for hisexpertise.

Also there was reliance, in the sense that the Defendant would have known that the Claimants were relying on his advice toinform their decision whether to purchase. I further accept the Claimants’ evidence to the effect that they are unsophisticated in homerepair or mechanical matters, and that they did not want any surprises. I also accept that they might have walked away from the purchasehad they known that a major repair was needed.

I also believe that it is established that their reliance was detrimental, in the sense thatthey have suffered expense. 11 This leaves the issues as to whether the representation made by the Defendant was “false, inaccurate or misleading” and whetherit was made “negligently.” 12 The issue here is a bit different from many others, in the sense that it was what the Defendant failed to say, rather than what hesaid. The allegation is that he ought to have noted the lack of an HRV system and commented on the adequacy or inadequacy of what

was there. 13 The 2012 National Standards of Practice of the CAHPI have a

section that deals specifically with ventilation. Under

section 14 the inspector is directed to inspect ventilation of various parts of the home and report on “ the absence of ventilation in areas where moisture is generated such as kitchens, bathrooms and laundry rooms. ” 14 The Defendant contends that his report did that. He reported on fans in the bathrooms, the range hood in the kitchen (which did not vent to the outside) and the fact that the dryer appeared to be vented to the outside. 15 In my view, the Defendant ’ s report fell short of the spirit, if not the letter, of this standard.

Although he noted that the range hood was not vented to the outside, he did not flag this as a potential problem. He did not test the bathroom fans beyond turning them on and noting that they sounded OK and appeared to be pulling air. He did not turn his mind, nor direct his report, to the question of the adequacy of the ventilation in the home, overall.

If the applicable standards do not explicitly direct the inspector to comment on the totality of ventilation, in my opinion this would have been a negligent standard. 16 It is well known that the reason HRV ’ s are now considered necessary has to do with the issue of “ tight houses. ” As homes have become more energy efficient, there is less incidental leakage of air. Newer windows do a much better job of sealing in warm (and possibly moist) air. The Defendant noted that the windows were much more modern than the late 1980's home would have had originally.

In my view, this would have led a reasonably prudent home inspector to question whether there was enough ventilation in the home. 17 The fact that there was no visible moisture was certainly relevant, but he had no way of knowing whether there was any moisture actually being moved out of the home or whether there was little or none being generated. 18 The fact that the kitchen range hood was not vented was noted, but not flagged. It was little more than a factoid buried in the report. He ought to have alerted the Claimants to the fact that there was no ventilation in the kitchen.

He might also have done a bit more to test the bathroom fans to determine how effective they were. 19 I therefore find that the Defendant was negligent and produced a report that was misleading. Limitation of liability to $400.00 20 The Pre-Inspection Agreement has a bold warning at the top that says “ This agreement limits our liability.

Please read carefully and understand before signing. ” Later on, in the finer print, it states that the inspector ’ s “ total liability to the client for mistakes, errors or omissions in the inspection and inspection report shall be limited to the amount paid for the Inspection, and not to exceed. ” 21 While courts look skeptically on clauses limiting liability, they are obliged to enforce them where there is no deception and no inequity of bargaining power. A deal is a deal. Here the limitation is clear and noted up front. There is no basis to override it.

The claim would be limited to $400.00, which is the amount the Claimants paid. Limitation of action 22 The same part of the report states: “ any action arising from this agreement or from the inspection services or report must be commenced prior to one year from the date of inspection. ” This is also clear.

23 The Claimants argue that their letter in January 2014 fulfills this requirement. I disagree. An action is generally understood to be a legal proceeding. This was not commenced until after one year. 24 This does not end the inquiry because there is a saving provision in the Nova Scotia Limitation of Actions Act , which gives the court discretion to extend a limitation period. The relevant provisions are: 3

(1) In this Section, (a) "action" means an action of a type mentioned in subsection (1) of

Section 2; [of which this is such an action] (c) "time limitation" means a limitation for either commencing an action or giving a notice pursuant to ..... (iii) the provisions of an agreement or contract.

(2) Where an action is commenced without regard to a time limitation, and an order has not been made pursuant to subsection (3), the court in which it is brought, upon application, may disallow a defence based on the time limitation and allow the action to proceed if it appears to the court to be equitable having regard to the degree to which (

a) the time limitation prejudices the plaintiff or any person whom he represents; and (

b) any decision of the court under this

Section would prejudice the defendant or any person whom he represents, or any other person.

(3) Where a time limitation has expired, a party who wishes to invoke the time limitation, on giving at least thirty days notice to any person who may have a cause of action, may apply to the court for an order terminating the right of the person to whom such notice was given from commencing the action and the court may issue such order or may authorize the commencement of an action only if it is commenced on or before a day determined by the court.

(4) In making a determination pursuant to subsection (2), the court shall have regard to all the circumstances of the case and in particular to (

a) the length of and the reasons for the delay on the part of the plaintiff; (

b) any information or notice given by the defendant to the plaintiff respecting the time limitation; (

c) the extent to which, having regard to the delay, the evidence adduced or likely to be adduced by the plaintiff or the defendant is or is likely to be less cogent than if the action had been brought or notice had been given within the time limitation; (

d) the conduct of the defendant after the cause of action arose, including the extent if any to which he responded to requests reasonably made by the plaintiff for information or inspection for the purpose of ascertaining facts which were or might be relevant to the plaintiff's cause of action against the defendant; (

e) the duration of any disability of the plaintiff arising after the date of the accrual of the cause of action; (

f) the extent to which the plaintiff acted promptly and reasonably once he knew whether or not the act or omission of the defendant, to

which the injury was attributable, might be capable at that time of giving rise to an action for damages; (

g) the steps, if any, taken by the plaintiff to obtain medical, legal or other expert advice and the nature of any such advice he may have received. 25 In my view, this is a situation that demands such relief. It is equitable to allow the claim to proceed. The Claimants appear to have been unrepresented, at the relevant time, and most likely did not read the fine print of the agreement. The delay was not lengthy. The Defendant had received timely notice of a possible claim, and there was no evidence that he was prejudiced in any way by the delay of two months in commencing the legal action.

In particular, there is no reason to believe that anyone ’ s recollection was any less cogent. 26 I would therefore disallow the limitation defence. Damages 27 There is no real point considering whether the damages have all been proved. There is more than sufficient evidence of damages to reach and extend way beyond $400.00. Conclusion 28 In conclusion, the Claimants have essentially made out their case, but are caught by the limitation of liability that limits their damages to $400.00. 29 I therefore allow damages of $400.00, plus their costs in the amount of $285.55, for a total judgment of $685.55. Eric K.

Slone, Adjudicator