Vogt v. Moravec et al Date:, 2016 BCPC 369

Citation: Vogt v. Moravec et al Date: 20161020 2016 BCPC 369 File No: C6733 Registry: Western Communities IN THE PROVINCIAL COURT OF BRITISH COLUMBIA Civil Division BETWEEN: DONNA K. VOGT, KEVIN W. VOGT, AND MICHAEL C. VOGT CLAIMANTS AND: BRIAN MORAVEC, SOUTH ISLAND INSPECTECH BUILDING INSPECTIONS INC., AND LEESA DONNALENE POFFENROTH DEFENDANTS RULING ON APPLICATION OF THE HONOURABLE JUDGE J.P. MacCARTHY Appearing on their own behalf: D. Vogt and K. Vogt Counsel for the Defendants Brian Moravec and South Island Inspectech Building Inspections Inc.: A. Atkinson For the Defendant Leesa Poffenroth : No appearance

Place of Hearing: Western Communities , B.C. Date of Hearing: October 20, 2016 Date of Judgment: October 20, 2016 Introduction [ 1 ] THE COURT: This action involves three claimants who have sued a building inspector, a building inspection company, and a seller of real estate of which they are the purchasers. [ 2 ] The claim advanced by the claimants is that the building inspector missed major visible mould and water damage from a previous flood in the crawl space of the residential real estate owned by the seller.

Furthermore that it was represented to the claimants that there was a complete inspection of the crawl space area, where there were no signs of mould or water damage.

The claimants say that the building inspection was relied upon, and that it turned out that there had been previous flooding which caused both water damage and mould. [ 3 ] The claim against the seller of the property is that there was a failure to disclose a material defect of water damage and the mould in the crawl space. [ 4 ] The defendant building inspector, Brian Moravec, and the defendant company associated with him, South Island Inspectech Building Inspections Inc., (hereinafter collectively referred to as the "Inspector") have brought an application.

That application seeks a determination of enforcement by this court of the limitation of liability clause contained within the contract (the “Building Inspection Contract”) giving rise to the building inspection conducted by Mr. Moravec and South Island Inspectech Building Inspections Inc. It is argued that the limitation of liability clause limits the claimants' claim for damages if liability is established at trial. That limitation of claim equals the amount paid for the inspection. [ 5 ] The application is opposed by the claimants. The background is that the matter is set for trial to proceed in November.

It is expected that it will be a multi-day trial with multiple witnesses. [ 6 ] The submission made on behalf of the Inspector is that this matter can be determined and liability established on the basis of accepted facts, and that the limitation provision should serve as the basis for a decision of this court to make that determination in advance of the trial proceeding.

The Overall Circumstances [ 7 ] The overall circumstances relating to this particular matter and the application before me stem from a specific provision contained in the Building Inspection Contract that was entered into by the claimants, along with the corporate defendant, South Island Inspectech Building Inspections Inc. The Building Inspection Contract provides a broad definition of who is covered as an “Inspector” under the terms of the Building Inspection Contract.

It includes: "employees and individual inspectors, whether an employee or an independent contractors and/or that independent contractor's company". [ 8 ] No issue is taken by the claimants with respect to the broad extension of the term of the "Inspector". [ 9 ] The apposite provision of the Building Inspection Contract is found at

Article 2, entitled, "Restrictions on Legal Rights". The provision reads as follows: 2.1 In the event of any errors, omissions, breach of contract, and/or negligence by the Inspector the Client hereby agrees to the following restrictions on their legal rights: (

a) The Client acknowledges and agrees that the time limit for commencement of legal proceedings by the Client against the Inspector for damages suffered by the Client as a result of alleged errors, omissions, breaches of contract, and/or negligence by the Inspector shall be not later than one (1) year from the date of the Inspection. After the expiry of one (1) year from the date of the Inspection any claim of the Client against the Inspector shall expire and cease to exist for all purposes and the Client's right to commence legal proceedings against the Inspector shall thereupon be barred. (

b) In the event that the Client claims damages against the Inspector and does not prove those damages, the Client shall pay all legal fees, legal expenses and costs incurred by the Inspector in defense of the claim; (

c) The Inspector shall not be liable to the Client for the cost of any repairs to or replacement of any system, component, or equipment undertaken by the Client without prior consultation with the Inspector. (

d) The Inspector's total liability to the Client for errors, omissions, breaches of contract and/or in negligence in any part of the Inspection or Inspection Report shall be limited to the amount of the fee paid for the Inspection. For greater clarity this means that if the Client sues the Inspector any damages awarded cannot exceed the cost of the Inspection. [ 10 ] Under

Article 3 of the Building Inspection Contract, the fee amounts for the report indicate a base fee of $425 with taxes of $21.25, for a total of $446.25. [ 11 ] There is no issue that the fee amount was paid. There is no issue, as I understand it, that the claimants commenced their action as required under the provisions of

Article 2.1(a). [ 12 ] The affidavit of Brian Moravec, filed September 26, 2016, indicates that he did complete the inspection of the property subject

of the sale and purchase by the claimants as a sub-contractor of the corporate defendant. He deposes in his affidavit that he started theinspection at approximately 1:30 p.m. on August 22, 2015. He also deposes that he met with the claimants, or at least two of theclaimants, Donna Vogt and Michael Vogt, on August 22, 2015, at approximately 4:15 p.m. He indicated that at that time, he wasprovided with the signed Building Inspection Contract. [13] He further deposes in his affidavit that he had prepared a written Inspection Report that reported on the results of theinspection.

The Inspection Report is indicated to have been incorrectly dated August 23, 2015, when in fact it actually should have beendated August 22, 2015. [14] He deposes that he gave the claimants Donna Vogt and Michael Vogt a copy of the Inspection Report, and he spentapproximately 20 to 25 minutes discussing the results of the inspection. [15] A further affidavit, filed September 26, 2016, provided by Chris Hatenboer, who is an officer manager for the corporatedefendant, deposes that instructions were received from a realtor, Dale Sheppard, with respect to the preparation of an Inspection Reportfor the property subject of the sale.

His affidavit deposes that he had received those instructions on August 14, 2015, and he emailed thearrangements concerning meeting with the inspector and the conducting of the Inspection Report, and that the required contract forsignature by the claimants was sent by email on August 18, 2015. That was the Building Inspection Contract document which waseventually signed by the claimants and returned at the time of the inspection conducted by Brian Moravec. [16] The claimants do admit this general timeframe.

Also, I do not think, there is any issue that they are the parties who signed theBuilding Inspection Contract. There does not appear to be a significant issue that they were aware of the existence of a provisioncontained within the Building Inspection Contract, as set out in

Article 2. It is not before me as to the extent of their knowledge as to themeaning and the implications of that particular provision, and the circumstances that surrounded their review, nor are the circumstancessurrounding the execution and the delivery of the Building Inspection Contract to Mr. Moravec on the day of the inspection. The Court’s Jurisdiction to hear the Application [17] The application for the relief sought brought by the defendant, Brian Moravec, and the corporate defendant is pursuant to Rule16(6)(

o) of the Small Claims Rules, made pursuant to the Small Claims Act. Rule 16(6)(

o) provides as follows and permits a judge ofthis court to make: (

o) any other order that a judge has the power to make and notice of which is served on another party. [18] The provisions of Rule 16 have been interpreted by several decisions. The most useful decision is one that has been relied uponby the applicants in this case, which is the decision in Michell v. Emond, 2007 BCPC 295.

In that particular decision, the HonourableJudge Skilnick makes it clear that the Small Claims Rules permitting dismissal of a claim prior to trial fall within the ambit of Rule 16and that the purpose of such an application is, in the words of Judge Skilnick at paragraph 4 to: . . . serve to weed out those claims which have no virtual chance of success, without having to expend the resources of a trial. [19] Judge Skilnick goes on in that paragraph to indicate that the judge who hears the applications of this nature: . . . serves as a gatekeeper whose task it is to keep out those claims which have no merit, those which are unsupported by any evidence(without weighing the existing evidence) and those whose outcome can be easily determined without a significant expenditure of courttime.

Conclusion about the Court’s Jurisdiction [20] I am satisfied, based on the authorities that have been presented to me, that the application brought by the applicants in thismatter does fall within the jurisdiction of Rule 16, and what is contemplated by that particular rule. I do not understand that any issue istaken by the claimants with respect to the issue of jurisdiction of this court to deal with this application.

Submissions of the Applicants [21] The defendants as applicants in this matter argue that the Supreme Court of Canada decision in Tercon Contractors Ltd. v.British Columbia (Transportation and Highways), 2010 SCC 4 , [2010] S.C.J. No. 4, should guide the court in terms of dealingwith this particular application.

In particular, that decision affirmed that exclusion clauses are not inherently unreasonable, and in dealingwith that analysis, the approach for assessing the applicability of an exclusion clause is set out in paragraphs 121 to 123 of Tercon, andthe law may be summarized as follows: [121] The present state of the law, in

summary, requires a series of enquiries to be addressed when a plaintiff seeks to escape the effectof an exclusion clause or other contractual terms to which it had previously agreed. [122] The first issue, of course, is whether as a matter of

interpretation the exclusion clause even applies to the circumstancesestablished in evidence. This will depend on the Court's assessment of the intention of the parties as expressed in the contract. If theexclusion clause does not apply, there is obviously no need to proceed further with this analysis. If the exclusion clause applies, thesecond issue is whether the exclusion clause was unconscionable at the time the contract was made, "as might arise from situations ofunequal bargaining power between the parties" (Hunter, at p. 462).

This second issue has to do with contract formation, not breach. [123] If the exclusion clause is held to be valid and applicable, the Court may undertake a third enquiry, namely whether the Courtshould nevertheless refuse to enforce the valid exclusion clause because of the existence of an overriding public policy, proof of whichlies on the party seeking to avoid enforcement of the clause, that outweighs the very strong public interest in the enforcement ofcontracts.

[ 22 ] The applicants rely on a series of cases in which limitation of liability clauses have been upheld with respect to home inspectors. They are as follows:

a) Rayne v. Martin , [2006] B.C.J. No. 2040(P.C.) ;

b) Calder v. Jones , [2010] B.C.J. No. 1030 (P.C.) ;

c) Di Santo v. Amerispec Home Inspection Service , 2003, a decision of the Superior Court of Justice of Ontario, Court File No. CV210571CM, rendered on March 7, 2003;

d) Gordon v. Krieg , [2013] B.C.J. No. 1002 (B.C.S.C.) [ 23 ] Another case that became subject of a fair amount of discussion during submissions is the Supreme Court of British Columbia decision of Salgado v. Toth , [2009] B.C.J. No. 2230, 2009 BCSC 1515 . That is a decision in which the exclusionary clause was not enforced by Mr.

Justice Burnyeat. [ 24 ] The cases which have been referred to all involve situations where there has been a full trial, and the hearing of the evidence with respect to all of the circumstances giving rise to the execution and the delivery of the contract, the making of the contract, and other evidence surrounding the circumstances of the completion of the inspection. [ 25 ] In this case, all of that evidence and the fullness of that evidence is not available before me.

Accordingly, I have to take that into account when deciding the application before me. [ 26 ] The first position advanced by the applicants/defendants is that there the limitation of liability clause should apply because the wording of the clause is clear and unambiguous. [ 27 ] The second position advanced by the applicant is that the limitation of liability clause is not unconscionable, and in that regard reliance is placed upon the decision contained in Loychuk v. Cougar Mountain Adventures Ltd. , [2012] B.C.J. No. 504, 2012 BCCA 122 .

In that case, the Court of Appeal reviewed the requirements to establish unconscionability, and specifically the court adopted the test set out in McNeill v. Vandenberg , 2010 BCCA 583 , and in Roy v. 1216393 Ontario Inc. [see paragraph 31] That test is contained in paragraph 30 and the test adopted is stated, in the words of Madam Justice Garson in McNeill to be as follows: [15] In order to set aside a bargain for unconscionability, a party must establish: (

a) inequality in the position of the parties arising from the ignorance, need or distress of the weaker, which left him in the power of the stronger; and (

b) proof of substantial unfairness in the bargain. [ 28 ] The third position advanced by the applicant is that there is no public policy that would make the liability clause unenforceable. Accordingly, on that basis, the applicants say that this court should rule essentially in a

summary fashion that the limitation of liability for the defendants/applicants has been established. Submissions of the Claimants [ 29 ] The claimants oppose what is essentially a dismissal against the applicants by the making of that determination at this point. They have presented and relied upon a number of other cases, in particular they rely on the Salgado v. Toth case. [ 30 ] In the course of submissions, I asked and was told that none of these cases appear to deal specifically with the application of the Business Practices and Consumer Protection Act , S.B.C. 2004, c. 2.

In considering this matter, I note that the remedy provisions contained within that legislation apply to what is defined in s. 1 of the Business Practices and Consumer Protection Act as a "consumer transaction". If that can be established, then the provisions of s. 8(3), which deals with unconscionable acts or practices, and the provisions of s. 10(1) become applicable.

Those provisions permit the court to find that the consumer transaction is not binding on the consumer or a guarantor. [ 31 ] That issue has been raised by the claimants and, interestingly enough, I am told in submissions, that there has been a relatively recent amendment made to the regulations concerning the licensing of home inspectors.

I am given to understand that the amendments are effective as of September 1, 2016, and that the changes are to regulations that are actually promulgated under the Business Practices and Consumer Protection Act . [ 32 ] Effective as of September 1st, provisions like the one here that limits the liability of the individual defendant building inspector and the corporate building inspection will no longer be permitted. The amended regulation, as I indicated, is effective September 1st and its application to the matter before the court in this case would require some retroactive application.

That certainly would not be available in the usual course without a specific statutory provision to permit it. [ 33 ] However, there is also an issue raised with respect to the standards of practice that have been allegedly utilized by the Inspector in this particular case. It relates to the nature and the scope of the Inspection Report that was provided, and specifically as it relates to the building foundation and the reporting methods and those used to inspect the under-floor crawl space area.

It is alleged by the claimants that there has been a breach of that particular standard by the Inspector in this particular case. Analysis [ 34 ] Under the procedures available for conducting actions pursuant to the Small Claims Act and the Rules , there is no opportunity to obtain a pre-trial examination for discovery or to otherwise fully know or to understand fully the case of an opposing party. The trial in Small Claims court is, in many instances, the only opportunity where evidence known only to the other party can be elicited from them

and used to assist in meeting the burden of proof imposed upon a claimant. [ 35 ] The provisions of s. 2 of the Small Claims Act indicate as follows:

(1) The purpose of this Act and the rules is to allow people who bring claims to the Provincial Court to have them resolved and to have enforcement proceedings concluded in a just, speedy, inexpensive and simple manner.

(2) Subject to this Act and the rules, in conducting a hearing the Provincial Court may make any order or give any direction it thinks necessary to achieve the purpose of this Act and the rules. [ 36 ] Applications of this nature brought in Small Claims court result in a balancing of what is just, speedy, inexpensive, and simple. Whereas it may give sophisticated or legally represented parties the opportunity to bring on

summary applications, preceding the actual trial, for a resolution which meets the end purpose of "just, speedy, inexpensive, and simple" for those applicants, on the other hand such applications may not meet the same goals and the needs and purposes of the opposing party in concluding matters in a "just, speedy, inexpensive, and simple manner". Thus the court must balance those competing needs and purposes. [ 37 ] The evidence that is before me is not full and complete. It does not deal with all aspects of the evidence which no doubt will be presented at the trial.

That full and complete evidence, in my view, may be essential in order to ensure that the test laid out in Tercon is fully examined by this court in determining whether the exclusion or liability limitation provision in the Building Inspection Contract should be upheld, on the basis of the Tercon test. [ 38 ] The decisions that have dealt with the liability of building inspectors and the application of similar type clauses have been done with the benefit of such a trial.

Conclusion and Ruling on the Application [ 39 ] On the whole of the materials before me, and on the basis of the cases that I have referred to and upon which I have relied, I am of the view that the application of the defendants in this case, Brian Moravec and South Island Inspectech Building Inspection Inc. should be dismissed and that the matter proceed to trial. [ 40 ] That concludes my reasons for judgment. I will ask that the counsel for the applicants prepare the form of the order.

I will waive the signature of the claimants and also the other defendant, Leesa Donnalene Poffenroth, who did not participate in this hearing, all on the form of that order. [ 41 ] MR. ATKINSON: And then just so -- it's fairly clear, you're not -- you're not saying that the limitation of liability clause is not enforceable, you're just saying that you can't determine that on the basis of the evidence -- [ 42 ] THE COURT: Precisely, the -- [ 43 ] MR. ATKINSON: -- and that is a live issue at trial. [ 44 ] THE COURT: That remains a live issue to be determined at trial.

I am making no determination as to whether or not that particular clause can be relied upon by the defendants, nor am I making a determination that the clause is not a proper defence for the claims being brought by the claimants against those two defendants. [ 45 ] MR. ATKINSON: Thank you. [ 46 ] THE COURT: All right, and that may be included in the form of the order that you prepare. [ 47 ] MR. ATKINSON: Yeah, I think I will do that, just so it is clear. [ 48 ] THE COURT: Thank you. (REASONS CONCLUDED)