Knight v. White Date:, 2014 BCPC 226

Citation: Knight v. White Date: 20140723 2014 BCPC 0226 File No: C21356 Registry: Port Alberni IN THE PROVINCIAL COURT OF BRITISH COLUMBIA BETWEEN: EDWIN MARRIOTT KNIGHT and PATRICIA IRENE KNIGHT CLAIMANTS AND: KEARWOOD BEVERLY WHITE and MARIA VILDA WHITE DEFENDANTS REASONS FOR JUDGMENT OF THE HONOURABLE JUDGE J.P. MacCARTHY Appearing on their own behalf: E.M. Knight and P.I. Knight Counsel for the Defendants: D.A. Stofer Place of Hearing: Port Alberni , B.C. Date of Hearing: October 25, November 25, 2013, May 12, 2014 and July 23, 2014

Date of Judgment: July 23, 2014 Introduction [ 1 ] THE COURT (orally): Edwin Marriott Knight and Patricia Irene Knight (collectively the "Claimants") entered a contract of purchase and sale on August 27, 2007, with Kearwood Beverly White and Maria Vilda White (collectively the "Defendants") to purchase a vacant residential lot in Port Alberni, British Columbia (hereinafter referred to as "Lot 12").

The transaction completed on January 3, 2008. [ 2 ] In October of 2010, having completed their design and having obtained their building permits from the City of Port Alberni, the Claimants commenced construction of their new house on Lot 12. They had planned and designed the house as a single-level bungalow with a foundation that would provide them with a four-foot crawlspace rather than a full basement. [ 3 ] During the excavation of the crawlspace foundation, it became apparent that un-compacted mixed fill material (the "Fill") had previously been placed on Lot 12.

This Fill was not suitable for construction of any foundations without extensive excavation and removal of the Fill. [ 4 ] The Claimant sought the advice of a geotechnical engineering firm. In order to construct the planned crawlspace foundations, an extensive amount of new packed fill material would have to be placed on Lot 12 following the removal of the Fill.

The engineering firm recommended that a full basement be constructed rather than placing a deep compacted structural fill on Lot 12 in order to build the planned crawlspace foundation. [ 5 ] The Claimants followed that advice, which they say resulted in significant additional unplanned expenses for them in completing the construction of the new house. [ 6 ] The Claimants filed a notice of claim on November 21, 2012. In the notice of claim, they frame their claim against the Defendants as follows: We the Claimants argue that the Defendants are liable for damages in contract and in tort.

It is our position that the Defendants knew or ought to have known about the latent defect of an excessively filled property (rubble and loose dirt) and that they have made a fraudulent or a negligent misrepresentation by their omission of the condition.

The claimants allege that the defendants breached their common law obligation when they failed to disclose this latent defect or in the alternative the defendants have breached the contract of purchase and sale by not disclosing this condition. [ 7 ] The Claimants allege that their damages exceed $25,000, being the monetary jurisdiction of this court, and they waive any amounts in excess of that limit. [ 8 ] The Defendants deny the claims.

In their filed reply, they say that: There was no condition, warranty or representation made concerning suitability of the land for any particular type of construction and we had no knowledge of the soil conditions discovered by the [Claimants]. [ 9 ] In addition, the Defendants state that the form of the contract of purchase and sale "expressly excluded any warranties, representations, et cetera" and say that in any event, they made none to the Claimants. Background and Facts Undisputed Facts The parties [ 10 ] The Claimant Mr.

Knight, at age 66, can be fairly characterized as a renaissance man with a 26-year background in teaching at the elementary, high school, and college levels. He holds a two-year college diploma in law that qualified him as an Ontario paralegal. He has trained and worked in professional theatre in North America and Europe.

He holds a certification as a certified divorce financial analyst and has been trained and practises as a family mediator, is a certified sailing instructor, has studied engineering and science at university and, being self-taught, has designed and built his own homes. [ 11 ] The evidence about the Claimant Mrs. Knight's background is more sparse, but her talents include professional theatre and a high level of community involvement. [ 12 ] As a couple, they have bought and sold homes four times in Ontario. Much of this was handled by Mrs.

Knight with the assistance of a realtor. [ 13 ] The Defendants are retired and are long-time residents of Port Alberni. Mr. White used to be a logging truck driver. They have had some experience in buying and selling property and in having a residence constructed on one of their purchased lots. They have no

practical experience in home construction or in geotechnical issues. Development of Lot 12 [ 14 ] Lot 12 was part of a 60-lot subdivision developed and completed by Alberni Horizon Development Ltd. (the "Developer"). The original acreage was purchased from the City of Port Alberni in or around late 1982 or 1983 by the Developer.

The plan of subdivision approved by the approving officer of the City of Port Alberni occurred on February 24, 1983, and the subdivision plan was filed in the Victoria Land Title Office on March 31, 1983. [ 15 ] In accordance with the disclosure requirements of the Real Estate Act in force at that time, the Developer filed a prospectus with the Superintendent of Insurance which was apparently accepted on June 15, 1983 (the "Prospectus").

In completing the Prospectus, the Developer utilized a pro forma document which contained a number of headings, stipulated language, and several blanks to be filled in by the Developer. [ 16 ] There are several sections of the Prospectus which are noteworthy. Under s. 2.03, entitled "Building and Use Restrictions," it states, as part of the stipulated language, as follows [as read in]: The Developer is not aware of any substantial costs or works required to obtain a building permit in the subdivision.

Under s. 2.04, entitled "Changes From the Natural State,” it states, as part of the stipulated language, as follows: (

i) There have been no changes from the natural state in any of the lots in the subdivision other than normal clearing. [ 17 ] The alternative provision under subsection (ii) in which any exceptions to this statement would have been disclosed has been deleted. [ 18 ] Under s. 2.06, entitled "Foundations," it states, as part of the stipulated language, as follows: (

i) The Developer knows of no extraordinary requirements for foundations for buildings in the subdivision necessitated by the conditions of the soil, subsoil, or otherwise. [ 19 ] The alternative provision under subsection (ii) in which any exceptions to this statement would have been disclosed has been left blank. [ 20 ] Under s. 3.05, entitled "Litigation," it discloses that the Developer and its contractor were engaged in litigation and specifically that the contractor had sued the Developer claiming damages for breach of contract and that the Developer had filed a defence and a counterclaim alleging damages against the contractor and for a set-off. [ 21 ] Under s. 3.02 of the Prospectus, entitled "State of Title," are listed a number of encumbrances, both existing and proposed, on the lands comprising the subdivision.

No mention is made of any liens or notices relating to any fill being placed on any of the lots within the plan of subdivision. In fact, nowhere in the Prospectus is any mention made of any fill being placed on any of the lots within the subdivision. The Acquisition and Ownership of Lot 12 By the Defendants [ 22 ] According to the evidence of Dalsem Singh Saal, an investor in the Developer, the subdivision project ran into financial difficulties as interest rates rose and property values fell and as the contractor who was doing the subdivision roads and servicing took too long to complete it.

Accordingly, the 10 investors each took back two lots for their original $100,000 investment, and the Developer proceeded with an auction of the 40 remaining lots. [ 23 ] Based on an advertisement appearing in the September 13, 1984, edition of the Alberni Times , the auction took place on September 15, 1984.

The newspaper advertisement for this public auction apparently placed by the Developer says, in part, as follows [as read in]: May we suggest you take advantage of the opportunity to view and do the prospectus of the site, also to make bank arrangements. [ 24 ] The Defendants saw the auction advertisement in the Alberni Valley Times and accordingly decided to attend the auction. It was the first time that they had ever been in or had viewed the various lots comprising the subdivision. They made a spontaneous decision to enter the bidding.

They selected Lot 12 because it was the largest available lot with a potential view. [ 25 ] Prior to placing their bid, they visually inspected the lot from the top and did not proceed to walk to the lower portion of Lot 12. Their due diligence was limited to this walkabout. They had no tests completed or inspections performed on Lot 12 prior to or after the purchase. [ 26 ] Their motivation at that time in purchasing Lot 12 was to hold it as an investment, although over the course of holding the lot

for several years, they did occasionally discuss the possibility of building on Lot 12. No plans were ever drawn up or obtained by them for construction on Lot 12. [ 27 ] The Defendants made a successful bid to purchase Lot 12 for $14,800. They did receive a copy of the Prospectus, which they reviewed. They are uncertain if the Prospectus was received prior to the auction or after the completion of the conveyance of the title into their names by their notary public. That occurred on or about October 9, 1984.

There was nothing in the Prospectus that was of concern to them when they reviewed it. [ 28 ] The Defendants retained Lot 12 for approximately 23 years until at some point in July or August of 2007 they decided to offer Lot 12 for sale for an asking price of $115,000. They did not engage the services of a licensed realtor to market the property but simply placed a "for sale" sign "by owner" on Lot 12 with a contact telephone number. [ 29 ] During their ownership of Lot 12, the Defendants did some work to maintain the vegetation growth on Lot 12, including cutting grass, broom, and some brush.

They made limited use of Lot 12. [ 30 ] In June 1986, they obtained two truckloads of fill from the City of Port Alberni. The Defendant Mrs. White signed a release in favour of the City of Port Alberni in connection with the fill material described in the release as "surplus fill." [ 31 ] The purpose of these two loads of fill was to help level the front area to make cutting of the grass growing on it easier. Mrs. White understood from her discussions with the City of Port Alberni that they should not put any more fill on the property in order to avoid municipal permitting requirements.

The Defendants did not have the fill levelled on Lot 12. [ 32 ] In around 2007, the Defendants were excavating for a garage for their own residence on another lot and removed two or three loads of fill material which were then transported and deposited on Lot 12.

There they remained at the time that the Claimants were viewing Lot 12. [ 33 ] Compared to neighbouring lots, Lot 12 was flatter and more covered in grass at the front of the property but did slope downward towards the rear of the property which was covered by trees and other shrub vegetation. [ 34 ] According to the evidence of David Cappus, a building inspector with the City of Port Alberni, it has retained records on fill placement from at least around 1986 onward. A search of the City of Port Alberni municipal records revealed a copy of the release signed by Mrs.

White but contained no record of any permit having been issued in order to place fill on Lot 12. Mr. Cappus was uncertain what, if anything, occurred before 1986. [ 35 ] He also testified that a permit was issued in April 1984 in order to permit the placement of fill on the adjacent Lot 13. Parenthetically, I note that the Claimants became aware of the necessity of having a municipal fill permit when the City told them to stop dumping fill on Lot 12 in the period prior to commencing construction on their property.

A subsequent application made by the Claimants for a fill permit was rejected by the city as it was made after the fact. Dealings Between the Claimants and the Defendants [ 36 ] The Claimants and the Defendants met for the first time in connection with Lot 12 around August 14, 2007. The Claimants were at that time residing in Ontario but were planning on a move to Vancouver Island. They had looked at properties in several communities.

They saw the Defendants' "for sale" sign and called them on the telephone for a meeting. [ 37 ] There is a discrepancy in the evidence as to whether or not the Claimants and the Defendants all met with each other on Lot 12. What is common to their evidence is that the Defendants were in the process of preparing for an immediate upcoming trip to Ontario.

It is also common that there were at least some discussions that took place on that day regarding the possible sale and purchase of Lot 12, and arrangements were made in order to have a further meeting. [ 38 ] It is also common ground that the parties met once again around August 27, 2007, in Ontario regarding the possible sale and purchase of Lot 12. There again is conflict in the evidence as to the nature and the extent of those discussions. [ 39 ] Prior to the first meeting, the Claimants spoke with owners of lots adjacent to Lot 12.

From their discussions with the neighbours, they learned of those neighbours' own experience in the construction of their residence with crawlspaces. [ 40 ] Between the meeting of August 14, 2007, and the August 27, 2007 meeting, the Claimants attended at the Planning Department of the City of Port Alberni likely on or about August 15, 2007. They were seeking to inform themselves as to the suitability of Lot 12 for their intended home construction. According to the evidence of Mr.

Knight, their purpose of attending at the Planning Department was to learn about the building and zoning requirements in the subdivision. From the Planning Department official, they learned about the nature of the ground in the subdivision.

They understood that they would have to excavate down a minimum of about 18 inches to get solid ground, and possibly up to a distance of between two to four feet. [ 41 ] There were no questions raised about geotechnical issues, and no information was provided by City officials with respect to that topic. [ 42 ] Although soil conditions were a matter of concern for the Claimants, they took no further steps to obtain any geotechnical advice or to conduct any tests or further investigations on their own behalf. [ 43 ] At the second meeting in Ontario, the Claimants made a written offer prepared by Mr.

Knight dated August 21, 2007, to purchase Lot 12 for $96,000. The Defendants rejected that offer based on their asking price of $115,000 and the fact that another lot a few blocks away was being marketed for $129,000. [ 44 ] The parties finally did settle on a purchase price of $109,000. Mr. Knight prepared a contract of purchase and sale dated August

27, 2007 (the "Contract of Purchase and Sale"). Although it named himself and his spouse as the buyers, it was signed only by Mr. White since Mrs. White was away at the time. [ 45 ] The form of the agreement was downloaded from the Internet. It was the form of sale and purchase agreement utilized by the Vancouver Island Real Estate Board.

Besides being made subject to financing, the Contract of Purchase and Sale contained a proviso that the Defendants, as sellers, would provide a "survey current to August 2007 satisfactory the buyer and the requirement of the buyers' lender (bank or mortgage/loan company)." [ 46 ] The form of the survey contemplated was a topographic map of Lot 12 prepared by a British Columbia land surveyor and containing the location of a statutory right-of-way adjacent to the southeasterly boundary that encumbered Lot 12 and was also registered on title. The topographic map was also to address a concern raised by Mr.

White with the Claimants as to the possibility that a neighbour's driveway may be encroaching onto Lot 12. [ 47 ] The Contract of Purchase and Sale did not have a disclosure statement incorporated into it, nor did the Claimants seek one from the Defendants. [ 48 ] The Contract of Purchase and Sale contained the following provision [as read in]: 18.

Representations and Warranties: There are no representations, warranties, guarantees, promises, or agreements other than those set out in the contract and the representations contained in the property disclosure statement if incorporated into and forming part of this contract, all of which will survive completion of the sale. [ 49 ] There are, in fact, no warranties or representations in the Contract of Purchase and Sale and, in particular, none that relate to the soil quality and its suitability for construction.

Specifically, there are no warranties or representations regarding the placement of any fill on Lot 12. In addition, there are no warranties or representations concerning the suitability of Lot 12 for the construction of a bungalow on a four-foot crawlspace. [ 50 ] As part of the terms and conditions, the Contract of Purchase and Sale provided for the completion, adjustment, and possession date on August 15, 2007.

It also contained the following standard provision under paragraph 9 [as read in]: Title: Free and clear of all encumbrances except subsisting conditions, provisos, restrictions, exceptions and reservations, including royalties contained in the original grant or contained in any other grant or disposition from the Crown, registered or pending restrictive covenants and rights-of-way in favour of utilities and public authorities, existing tenancies as set out in Clause 5, if any, and except as otherwise set out herein. [ 51 ] The Claimants did not seek the advice of a lawyer with respect to the form of the Contract of Purchase and Sale and therefore relied upon Mr.

White’s own knowledge and expertise in its preparation, notwithstanding the fact that he had quite limited experience in drawing up contracts. He had experience in a number of real estate transactions as a buyer and a purchaser. [ 52 ] On or about October 9, 2007, the Defendants sought to delay the completion, adjustment, and possession dates to January 3, 2008. In response to that, Mr.

Knight wrote to the Defendants and their notary public on his letterhead for his paralegal practice conducted in Welland, Ontario, as "Knight Legal and Mediation Services." That faxed letter contained an addendum to the Contact of Purchase and Sale dated August 27, 2007, which was dated 9 October 2007 and consisted of two pages and 12 paragraphs of changes (the "Proposed Addendum"). [ 53 ] The Proposed Addendum again had been prepared by Mr.

Knight without the benefit of advice from a lawyer. [ 54 ] The Proposed Addendum purported to amend paragraph 18 of the Contract of Purchase and Sale so as to incorporate representations, warranties, guarantees, promises (and) agreements contained in the Proposed Addendum.

Again, no requirement for a disclosure statement was contained in the Proposed Addendum nor were there any warranties or representations or any other statements with respect to the existence of fill or the soil conditions on Lot 12 or the suitability of the lot to construct a bungalow on a four-foot crawlspace. [ 55 ] The Defendants refused to sign the Proposed Addendum. Thereafter, the parties did enter into an Addendum/Amendment of the Contract of Purchase and Sale dated October 12, 2007, which was signed and delivered by all the parties.

It evidenced the agreement to change the completion, adjustment, and possession dates from October 15, 2007, to January 3, 2008. The sale and purchase completed on that date without further incident. [ 56 ] Mr. Knight proceeded with his own design of the Claimants' new bungalow residence, apparently relying on his own expertise from the design and construction of previous homes. The evidence does not indicate that he sought any outside professional advice with respect to the design. He applied for and received a building permit which permitted construction to proceed in October 2010.

He acted as his own general contractor. [ 57 ] As the excavation for the four-foot crawlspace foundations proceeded, it became evident very quickly that a great deal of material comprising the Fill existed, which was unsuitable for building upon; it had been placed on Lot 12 ranging from depths from about six and a half to approximately 14 or more feet deep. [ 58 ] When this came to the attention of the City of Port Alberni building inspector, David Cappus, he directed that it was necessary for the Claimants to engage the services of a geotechnical engineer.

The Claimants retained the services of Lewkowich Engineering Associates ("LEA") to provide advice and recommendations and to oversee the construction of the footings for the new house.

[59] LEA concluded, in a report prepared on November 18, 2010, that the Fill was in the nature of a bulk deposit of "silt with somesand and gravel and traces of cobbles (disturbed glacial till) and inclusions such as asphaltic pavement had been placed over the lot'soriginal organic grade which hadn't been stripped of organics." [60] It was LEA who provided the recommendation to the Claimants to construct an eight-foot basement rather than excavating theFill and bringing in and compacting replacement fill materials.

The Claimants followed this advice. [61] This change necessitated several amendments that had not been foreseen during the planning and budgeting phases for thehouse construction. A larger amount of mortgage financing was required and obtained by the Claimants.

Significantly, more excavationhad to take place as several truckloads of the Fill material had to be removed in order to reach bearing soils for the placement of therequired footings. [62] After placing of the footings, new LEA-approved fill was brought in and placed to raise up and provide for the concretebasement floor, and then it was compacted into place. In addition, an additional four feet in height of foundation had to be laid. [63] Several design changes were necessary as the house would have two floors of living space rather than the planned single level.

A planned garage was replaced with a carport which required additional footings and a reinforced retaining wall. Thus significantlymore construction and more materials were required. The Claimants did convert the downstairs area into and finished it as a living areafor their adult son, who receives a form of disability payment, which payment assisted the Claimants in qualifying for the larger requiredmortgage.

Disputed Facts [64] A primary factual issue in dispute is about the nature of the discussions between the Claimants and the Defendants during thecourse of the two negotiation meetings? [65] In their evidence, the Claimants characterized the discussions as having a focus on issues important to them. They say theyspecifically informed the Defendants that they were not interested in building a house with a basement with stairs leading down to itbecause of Mrs. Knight's knee problems. They also indicated that Mrs.

Knight, in particular, did not like basements and, also, that thecost of construction of a basement was far too expensive for them.

They also indicated they had limited money to build on any lot. [66] The subtext of these discussions as described by the Claimants' evidence may be characterized as the Claimants seeking specificassurances from the Defendants that Lot 12 would be suitable for their planned retirement home notwithstanding that at the time, thishouse was only a concept and no plans had been prepared or ever shown to the Defendants. [67] On this disputed factual issue, the Defendants' testimony is that if this type of information was forthcoming from the Claimantsto the Defendants, it was only in the context of what type of property the Claimants were looking for.

It was not made to the Defendantswith the expectation that they could provide or would provide any sort of advice or assurances that Lot 12 met all of the Claimants'requirements. The discussion was conversational in nature, with Mr. Knight doing the talking and with the Defendants listening. [68] Another disputed factual issue in this matter is the suggestion by the Claimants, based on the evidence of certain of theirwitnesses, that over the years, the topography of Lot 12 had been modified in some manner such that there was significantly less gradientto the lot and an increased flatter area on the top.

The inference is that this arose from the placement of several truckloads of material toform the Fill found on Lot 12 either upon the instructions of the Defendants or that the Defendants were aware of the existence of the Filland failed to disclose this to the Claimants. [69] No direct evidence was adduced to the effect that since the Defendants’ acquisition of Lot 12 heavy machinery had beenworking on Lot 12 or that truckloads of fill material had been brought to and dumped onto Lot 12 to comprise the Fill.

In that regard, theevidence of the Defendants is that following the purchase of the fully serviced Lot 12, they had no reason to nor did they have anyequipment brought onto the property, nor were they responsible for placing the materials that formed the Fill on Lot 12. Furthermore,they had no knowledge that the Fill had been placed on Lot 12 during their period of ownership or at any time prior to their acquisition. Burden of Proof [70] The burden of proof in a civil case rests with the Claimants to prove their case on a balance of probabilities. The Supreme Courtof Canada in F.H. v.

McDougall, 2008 SCC 53 , [2008] 3 S.C.R. 41 at paragraph 49, states: [I]n civil cases there is only one standard of proof and that is proof on a balance of probabilities. In all civil cases, the trial judge mustscrutinize the relevant evidence with care to determine whether it is more likely than not that an alleged event occurred. [71] Therefore, the Claimant must prove the existence of the facts and other essential elements upon which they rely in order tosucceed in their claims against the Defendants.

If they fail to do so, they cannot succeed. [72] Accordingly, I will deal individually with each of the claims. Findings of Fact on the Disputed Evidence [73] With respect to the first factual issue in dispute, it is my view that while the Claimants may have shared information with theDefendants about what they were seeking, it was only in the context of a general discussion and not on the basis that the Claimants wereseeking or requiring those types of important assurances from the Defendants. [74] The Defendants were not in a position to provide those assurances.

No question was raised with respect to soil suitability. No

question was raised as to whether or not tests had been conducted by the Defendants on the soil or that there were any other geotechnical concerns. [ 75 ] If important assurances of this nature were the purpose of the discussions, then a prudent purchaser, having received those assurances, would have incorporated them into the form of a contract of purchase and sale. That did not occur in this case. [ 76 ] The Claimants negotiated for the seller to provide a topographic map for Lot 12.

Similarly, they could have negotiated for geotechnical tests to be performed on Lot 12 if this were a matter of concern to them. [ 77 ] With respect to the second factual issue in dispute, it is my view that the Defendants are entirely credible in their evidence as to a lack of knowledge about the Fill and were not responsible for placing the Fill that has given rise to the construction issues encountered by the Claimants. [ 78 ] The Prospectus received by the Defendants made no mention of nor raised any concern with respect to the question of existing fill.

They were not alerted to any potential problems regarding construction on Lot 12 that would lead them to make further inquiries or have further tests conducted. Furthermore, I cannot conclude that there was anything known to them that would alert them to the existence of the Fill or problems that may be encountered in any construction taking place on Lot 12. Discussion Position of the Claimants [ 79 ] In closing arguments, the Claimants indicate that they are seeking damages in contract and in tort.

At the heart of their submission is that the Defendants knew or ought to have known about the latent defect of an excessively filled property and the rubble and the loose dirt.

They state that the Defendants have been fraudulent or have made a fraudulent or negligent misrepresentation by not disclosing the existence of this condition. [ 80 ] The Claimants also indicate that the doctrine of caveat emptor does not apply to this case. [ 81 ] The presumption underlying the position advanced by the Claimants is that there were a number of matters which should have alerted the Defendants to the existence of fill material on the property. They point to the fact that the lot was flatter than the surrounding lots.

They point to the lack of shrub or treelike vegetation on the front of the lot which apparently was evident on other neighbouring lots.

They rely on the evidence adduced by them from certain neighbour witnesses who had observed the subdivision over the year and had formed the impression that there may have been topographical changes to Lot 12. [ 82 ] The Claimants further argue that the existence of the Fill amounts to a latent defect which renders the lot dangerous. [ 83 ] The Claimants challenge the credibility of the Defendants with respect to their suggestion and evidence that they knew not of the existence of any fill material and were not responsible for placing any of the Fill material on the property. [ 84 ] The Claimants rely on a series of cases and articles which have been presented to me and which I have reviewed.

These include the following: McCluskie v. Reynolds et al , [1998] B.C.J. No. 1662 ; Hartnett v. Wailea Construction Ltd. , [1989] B.C.J. No. 497 ; Yue v. Stones & Emnace , 2009 BCPC 81 ; an article, " Caveat Emptor : The Position at Common Law," by John D. McCamus, Professor of Law, Osgoode Hall Law School, York University; Fitzhenry v. Vaccaro , 2009 MBQB 97 ; Cresswell Investments Ltd. v. Pavone , 2011 BCSC 1069 ; Alevizos v.

Nirula , 2003 MBCA 148 . [ 85 ] With respect to the Claimants' position on damages, they indicate that the monies expended by them in order to deal with the Fill problem well exceeded the monetary jurisdiction of this court and indicate that in addition to the extra monies expended for construction, there has been a significant financial cost to them with respect to a larger than planned mortgage and also with respect to the loss of value that may be attributed to having a garage rather than simply a carport on the premises.

Of course, the Claimants must succeed on one of their claims against the Defendants before any assessment of damages is required. Position of the Defendants [ 86 ] It is the position of the Defendants that no representation was made by the Defendants to the Claimants. In that regard, reliance is placed on the Manitoba Court of Appeal decision in Andronyk v. Williams , 1985-09-27, which is presented for the proposition found at paragraph 53: It is only representations of fact that can give rise either to a right of rescission in equity or a right of damages in deceit, or it may be, in actionable negligence.

The law is clear as stated by Treitel ( op. cit. ) at p. 252 that no action will lie for misrepresentation unless it is "a statement of existing fact." Of course, sometimes statements of opinion contain implied statements of fact, if only that the belief in a state of affairs is genuine, but where there is simply opinion or promises expressed, it must be incorporated into a contract in order to be actionable.

The attempt in England at one time to create promissory estoppel has not succeeded, at least so far as the law of contracts is concerned. [ 87 ] Simply put, the position in the Defendants' submission is that there was no representation made either orally or contained within the Contract of Purchase and Sale with respect to the matters being asserted or relied upon by the Claimants; secondly, that no reliance was placed upon any statements that may have been advanced by the Defendants to the Claimants in the course of the discussions at the two meetings.

[88] As part of the Defendants’ submission they say that according to the evidence of Mr. Knight, the reliance by the Claimants wasactually being placed on the statements made to them by officials at the City of Port Alberni planning office as to the depth of the soilthat one could expect to have to excavate in order to build foundations on the lots in that subdivision. [89] Besides the Andronyk case, the Defendants have relied on several other cases to support their position. They rely on thedecision in Cresswell Investments Ltd. v.

Pavone, supra, and specifically to the court's review of caveat emptor, with which I will deallater. The Defendants also indicate that no evidence exists that can support the contention that the Defendants knew or should haveknown about the existence of the Fill on Lot 12. [90] The other cases relied upon by the Defendants include the following: Rogalinski v. Scorey, 2011 BCSC 1050; Perrault v. NorthVancouver (District), 2010 BCSC 182; Jam's International Ventures Ltd. v. Westbank Holdings Ltd., (BC SC).

Caveat Emptor and Latent and Patent Defects [91] It is necessary for me to analyze the Fill in the context of the doctrine of caveat emptor ("let the buyer beware") and theexceptions to that rule flowing from the differences between patent and latent defects. [92] The doctrine of caveat emptor has been described as "remaining a force to be reckoned with by a credulous or indolentpurchaser of housing property." Its operation necessitates that a purchaser must "fend for himself, seeking protection by expresswarranty or by independent examination." If the purchaser fails to do either, then "he is without remedy either at law or in equity in theabsence of fraud or fundamental difference between that which was bargained for and that obtained": see Fraser-Reid v.

Droumtsekas, (SCC), [1980] 1 S.C.R. 720 at paragraph 119. [93] In Cardwell v. Perthen, 2007 BCCA 313, our Court of Appeal, at paragraph 23, reaffirms four generally recognized exceptionsto the doctrine of caveat emptor which were relied upon by the trial judge when she cited McCluskie v.

Reynolds (1999), (BC SC), 65 B.C.L.R. (3d) 191 at paragraph 53: (1) where the vendor fraudulently misrepresents or conceals; (2) where the vendor knows of a latent defect rendering the house unfit for habitation; (3) where the vendor is reckless as to the truth or falsity of statements relating to the fitness of the house; (4) where the vendor has breached his or her duty to disclose a latent defect; [94] As was noted in the Cardwell v.

Perthen at paragraph 24: [C]aveat emptor will not apply where the vendor fails to disclose dangerous latent defects. [95] Accordingly, the distinction "between patent and latent defects is central to a vendor's obligation of disclosure under thisdoctrine." [see: Cardwell supra at para. 24] [96] I have also had the opportunity of looking at the Cardwell v. Perthen case, 2006 BCSC 333, being the trial decision of MadamJustice Balance, and specifically at paragraphs 122, 127, and 128.

She examines the patent and latent distinction and concludes: 122 Patent defects are those that can be discovered by conducting a reasonable inspection and making reasonable inquiries about theproperty. The authorities provide some guidance about the extent of the purchaser’s obligation to inspect and make inquiries. Theextent of that obligation is, in some respects, the demarcation of the distinction between latent and patent defects. In general, there is afairly high onus on the purchaser to inspect and discover patent defects.

This means that a defect which might not be observable on acasual inspection may nonetheless be patent if it would have been discoverable upon a reasonable inspection by a qualified person: 44601 B.C. Ltd. v. Ashcroft (Village), [1998] B.C.J. No. 1964 (S.C.) [Ashcroft]; Bernstein v. James Dobney & Associates, [2003] B.C.J.No. 1964, 2003 BCSC 986 [Bernstein]. In some cases, it necessitates a purchaser retaining the appropriate experts to inspect theproperty (see for example Eberts v.

Aitchison (2000), 4 C.L.R. (3d) 248, 2000 BCSC 1103. ... 127 Latent defects - being ones which are not discoverable by observation and reasonable inquiry - are treated differently. A vendorwho is aware of and fails to disclose and/or conceals or makes non-innocent misrepresentations with regard to a latent defect may wellbecome liable to the purchaser for damages suffered as a result of that latent defect.

This principle is sound because, unlike a patentdefect, a latent defect is not discoverable by a purchaser on appropriate inquiries and inspection and thus, as a matter of fairness in thecommercial transaction, the obligation to disclose and to not misrepresent will rest with the party who knows about the deficiency. 128 Every imperfection or deficiency which a reasonably careful inspection and inquiry will not reveal cannot amount to a latentdefect of the kind capable of displacing the doctrine of caveat emptor.

In order to qualify as such, the defect must carry with it aconsequence of substance; that is, it must be of such a nature as to render the house uninhabitable or dangerous: McCluskie. Beyond that,the vendor has no obligation to disparage his own property.

[97] Based on the evidence I have heard, I have concluded that the existence of the Fill in this matter amounts to a latent defect. However, that latent defect was not one of which the Defendants were aware, nor were they in a position to disclose it, nor did theymake any non-innocent misrepresentations about it, nor did they do anything to conceal the existence of the Fill. [98] In Cardwell v. Perthen, Madam Justice Ballance notes as follows at paragraph 123: 123 In Tony's Broadloom & Floor Covering Ltd. v.

NMC Canada Inc. (1996), (ON CA), 141 D.L.R. (4th) 394, 6R.P.R. (3d) 143 at para 19, the Ontario Court of Appeal noted that the plaintiff, the purchaser of contaminated industrial lands, couldhave determined that the land was contaminated prior to purchase: If I am wrong and the presence of the contaminant was a defect, I agree with the conclusion of White J. (at pp. 35-37) that the defect wasa patent one. It would have been readily discoverable by the appellants had they exercised reasonable vigilance in the circumstances.

Indeciding whether the appellants exercised reasonable vigilance, it must be remembered that the appellants were buying industrial land onwhich they proposed to build a residential condominium. A reasonable inspection of the property, reasonable inquiries of therespondents, reasonable inquiries of the local and provincial authorities would have put the appellants on notice of the existence of thecontaminant.

Indeed, had the appellants pursued the taking of soil samples with reasonable diligence after the respondents had permittedthem to take those samples, they would have learned of the existence of the contaminant before closing.

Instead, the appellants chose notto disclose their intended use of the property and to take no steps to satisfy themselves that the property could be used for that purpose. [99] In this case, if I am wrong that this is a latent defect that is unknown to the Defendants and, in fact, should be considered apatent defect, then the decision in Tony's Broadloom & Floor Covering cited by Madam Justice Ballance is of some guidance. [100] In this case, as I have determined, the evidence does not disclose that any reasonable steps were taken by the Claimants by wayof additional inquiries or investigation beyond discussions with neighbours and with the City of Port Alberni officials.

Did the Defendants make Actionable Misrepresentations? Fraudulent Misrepresentation [101] To establish a fraudulent misrepresentation, the Claimants must prove four elements: 1. that the representation was made by the Defendants to the Claimants; 2. that the representation was, in fact, false; 3. that the Defendants, making the representation, knew it was false or made it recklessly without knowing whether it was true orfalse; 4. that the Claimants were induced to enter the contract by the representation. [102] These elements are set out in Neilson v. Lam, [2010] B.C.J.

No. 2393 at paragraph 77, and the cases cited in paragraph 78,which include United Shoe Machinery Co. v. Brunet, [1909] A.C. 330 at 338 (P.C.) and affirmed in subsequent cases in BritishColumbia: RC Hotel Ventures Ltd. v. Meristar Sub 2C, L.L.C., 2008 BCSC 918 at paragraphs 16 to 17; Islip v. Coldmatic Refrigerationof Canada Ltd., 2002 BCCA 255, 100 B.C.L.R. (3d) 234 at paragraph 11; and Parallels Restaurant Ltd. v.

Yeung's Enterprises Ltd.(1990), (BC CA), 49 B.L.R. 237, 4 C.C.L.T. (2d) 59 (B.C.C.A.). [103] Based on the evidence before me in this case, the Claimants have failed to prove all four of these elements. The Contract ofPurchase and Sale prepared by Mr.

Knight and presented to the Defendants for execution contained no representations relating to the Fillor as to the suitability of the soil conditions or any other known latent or patent defect, and in fact, no property disclosure statement wasrequested, prepared, or incorporated into the Contract of Purchase and Sale. [104] No provision was made in the Contract of Purchase and Sale obligating the Defendants to make any inquiries or conduct anytests or obtain any reports.

Clearly, that was left to the Claimants to pursue on their own behalf. [105] Paragraph 18 of the Contract of Purchase and Sale excludes all other representations, warranties, guarantees, promises, oragreements not set out in the Contract of Purchase and Sale. [106] In submissions, it is suggested by the Claimants that the language contained under paragraph 9 of the Contract of Purchase andSale with the heading "title," to which I have referred to above, required the Defendants to disclose issues relating to the Fill or to similarproblems that may be encountered for construction on the lands.

In that regard, reliance is placed on the word encumbrances as beingoperative, and in the usage proposed by the Claimants with respect to that word, the Fill would be an encumbrance since it wouldamount to a "hindrance or obstacle" for the construction.

I find that a plain reading of s. 9 of the Contract of Purchase and Sale does notsupport that contention and that provision did not obligate the Defendants to either disclose or to make any investigations in order tosatisfy that particular condition. [107] Given all of the above, I am of the view that the Defendants have not been able to satisfy the burden of proof to demonstrate thatthere was anything in the nature of a fraudulent misrepresentation on the part of the Defendants either by making statements orwithholding information concerning Lot 12 and the existence of the Fill. Negligent Misrepresentation

[108] To impose liability for negligent misrepresentation, there are five requirements that the Claimants must prove: 1. there must be a duty of care based on a "special relationship" between the representor and the representee; 2. the representation in question must be untrue, inaccurate, or misleading; 3. the representor must have acted negligently in making the representation; 4. the representee must have relied in a reasonable manner on the said negligent misrepresentation; and 5. the reliance must be detrimental to the representee in the sense that damages resulted. [109] These requirements were set out by the Supreme Court of Canada in Queen v.

Cognos Inc., (SCC), [1993] 1S.C.R. 87, 99 D.L.R. (4th) 626. They have been applied in a number of cases in British Columbia including, for example, Neilson v.Lam, supra, at paragraphs 103, 104, and in Cardwell v. Perthen, supra, affirmed 2007 BCCA 313, and specifically at paragraph 135 ofthe trial decision. [110] Other authorities do confirm that a special relationship can exist between a seller and a buyer, especially if the seller knew thatthere would be a reliance on information provided by the seller to the buyer: see Neilson v. Lam.

However, in this case, the Defendantsdid not provide any information upon which the Claimants were relying beyond what was contained within the Contract of Purchase andSale. I find that the Claimants have therefore failed to prove any of the five required factors to establish liability for negligentrepresentation. [111] It is my conclusion that this is a matter of caveat emptor as described and discussed above.

The obligations to make properinquiry with respect to Lot 12 and the determination of its sufficiency for the intended purpose of the Claimants lay entirely with theClaimants and not with the Defendants. [112] Accordingly, I dismiss the claims of the Claimants against the Defendants. [113] If I am wrong in my conclusion, I am of the view that the amount claimed by the Claimants as their damages is in itselfunsustainable.

The evidence clearly indicates that the house that the Knights now enjoy, although not what they planned, is likely worthconsiderable more money than the house that they would have ended up with had they built the bungalow on the four-foot crawlspace. However, having made my findings as noted above, I need not deal with the particulars of any claims for damages advanced by theClaimants. [114] That concludes my reasons for judgment. Stand down? [115] MR. STOFER: Just one moment, Your Honour. [116] THE COURT: Yes. [117] MR.

STOFER: We do have a slight claim for out-of-pocket expenses. [118] THE COURT: Oh, thank you. That is set out in your submission? [119] MR. STOFER: Right. [120] THE COURT: Mr. Knight, you have seen, if you look at paragraph 5 -- [121] EDWIN KNIGHT: I've seen it, Your Honour. I just simply want to request-- I assume I can request - some kind of receipts,some kind of proof of the -- [122] MR. STOFER: Certainly. [123] THE COURT: All right. I will make the order for the out-of-pocket expenses that were incurred by the Defendants, and I takeit you are also claiming -- was there a filing fee for the reply? [124] MR.

STOFER: If there was, I don't know what it was. [125] THE COURT: All right. Well, I will make the order for immediate payment of the expenses set out there, upon production ofreceipts. Any dispute with respect to the amounts will be referred to the registry for a determination, and if that cannot be determined,then the matter will be referred back to me for a decision. (REASONS CONCLUDED)