PAMELA ROSEMARY PATERSON Claimant - v. -, 2011 NSSM 34

Claim No: 344901 IN THE SMALL CLAIMS COURT OF NOVA SCOTIA Cite as: Paterson v. Murray, 2011 NSSM 34 BETWEEN: PAMELA ROSEMARY PATERSON Claimant - and - ALLAN MURRAY and JOAN MURRAY Defendants REASONS FOR DECISION BEFORE Eric K. Slone, Adjudicator Hearing held at Dartmouth, Nova Scotia on April 26, 2011 Decision rendered on May 4, 2011 APPEARANCES For the Claimant self-represented

For the Defendants self-represented BY THE COURT: 1 The Claimant purchased a home from the Defendants in May of 2009. The Defendants had lived in that home for 35 years. 2 As part of the sale process, the Defendants signed and provided a Property Condition Disclosure Statement (PCDS) dated February 20, 2009.

In that document they made several representations which led the Claimant to believe that the Defendants had not experienced and were not aware of any problems with the sewage and/or plumbing system, and that they had not experienced and were not aware of any leakage or dampness problems in the basement. 3 The PCDS was in a standard form which contains a paragraph just above the place for the seller ’ s signature, which states: The information contained in this disclosure statement has been provided to the best of my knowledge.

I confirm receipt of a copy of the Statement and agree that it may be given to prospective buyer(s). I further agree to provide prospective buyer(

s) with a further disclosure of any changes in the condition of the property that have occurred since completion of the statement. 4 Within days of the May 14, 2009 closing, the Claimant began to experience problems that caused her to doubt whether the Defendants had truthfully disclosed what they knew. In particular, on May 15 she noticed some water on the bathroom floor that she at first attributed either to imprecise urination practice by her son, or to faulty hook up of her washing machine. About a week later, she noticed significant water after her son took a shower.

The problem got worse over the next few days which led her to call in a plumber to investigate. The investigation concluded that the sewage system was backed up and water from the toilets flushing or tubs draining could not make it all the way to the connection at the street. The result was that water (and sewage) was backing up into the house.

Workers from Halifax Regional Municipality were unable to clear the blockage using their equipment, and it was considered to be her problem to rectify. 5 In a quite separate problem, which also became evident shortly after she took ownership, during heavy rains water was getting into an area of the basement, creating some three inches of standing water and posing a threat to items kept there.

At first she thought there was a problem with the basement door, which she replaced, but that did not solve the problem. 6 It is important to mention at this point that the Claimant had the house inspected before the transaction became unconditional. Unfortunately, the Claimant did not have that report with her at the hearing, but she advised the court that the inspector did not find anything wrong with the plumbing system and made no significant comments, if any, about the situation in the basement.

The inspector ought to have expressed some concern about the basement because there was a somewhat makeshift set-up with a sump pump that suggested that water had been an issue and was being dealt with in some fashion. 7 The Claimant testified that she asked Mr. Murray about the sump pump, and that he said that it was rarely used. At trial he testified that it was only during winter thaws that any significant water came into the basement and had to be drained with the sump pump. 8 The Claimant had two separate repairs done.

The first, and probably more urgent, was the total replacement of the sewer lateral from the property line to the house. This was done after an investigation with a special camera revealed that it was hopelessly blocked. On being removed it was found to be of an old and arguably inferior type (by modern standards), well past its prime, and collapsed. 9 The repairs to the basement involved creation of a proper sump pump pit and installation of a new sump pump, and improvements to the drainage system around the basement.

10 The total costs of the two repairs was $4,237.50, and this is the amount that the Claimant seeks against the Defendants, onthe basis (she contends) that the Defendants failed to disclose the existence of these problems. The Law 11 There is a well understood and ancient principle in real estate that says “buyer beware” or “caveat emptor.” While arguablyharsh, this principle has long recognized that once a property changes hands, the new owner is largely on his or her own and takes aproperty “as is.” Both the law and real estate practice have sought to soften this principle, to an extent.

The Property ConditionDisclosure Statement is one modest initiative. 12 The limited value of the PCDS was commented upon in a 2007 decision of Associate Chief Justice Deborah Smith in Gesnerv. Ernst, 2007 NSSC 146, where she observes at paragraph 44: [44] As a general rule, absent fraud, mistake or misrepresentation, a purchaser of existing real property takes the property as he or shefinds it unless the purchaser protects him or herself by contractual terms. Caveat emptor. (McGrath v. MacLean et al. (1979), (ON CA), 95 D.L.R. (3d) 144 (Ont.

C.A.)). 13 She further notes in the decision that the PCDS is not a warranty: [54] A Property Condition Disclosure Statement is not a warranty provided by the vendor to the purchaser. Rather, it is a statementsetting out the vendor's knowledge relating to the property in question. When completing this document the vendor has an obligation totruthfully disclose her knowledge of the state of the premises but does not warrant the condition of the property (see for example:Arsenault v. Pedersen et al., [1996] B.C.J. No. 1026 and Davis v. Kelly, [2001] P.E.I.J.

No. 123.) 14 Rarely do sellers of real property make express warranties as to the property’s condition, and there is no evidence of any suchwarranty here. It is generally understood in the real estate world that buyers should perform their own inspections and, for the most part,they must take their chances.

I believe that most buyers of resale homes, and particularly of older homes such as the one here, appreciatethat there may be flaws or imperfections that they will inherit, and they anticipate having to deal with them as and when they arise or asresources permit. 15 The limitation with such a system has always been in the area of latent or hidden defects that only the sellers know about andno inspection, no matter how rigorous, could be expected to reveal.

Although the PCDS does not restrict itself to questions about latentdefects, in my view it is the potential presence of a known latent defect that the statement is designed to address. Even so, the PCDSform is somewhat limited, being expressly qualified as something only to the “best of [the seller’s] knowledge,” and quite grudging inwhat it asks and reveals. 16 Because it is not a warranty, a claim based on the PCDS is for misrepresentation. Where the seller is alleged to have beenknowingly untruthful, the claim is essentially for fraudulent misrepresentation, which is a very serious accusation.

Where it is allegedthat the seller ought to have known that the answer was incorrect, it is for negligent misrepresentation which is arguably less serious inthe sense that it does not allege dishonesty, but merely a lack of due care. 17 It is against this backdrop that I must ask myself several questions: a. Were any of the questions on the PCDS technically answered incorrectly?

b. Was there any misrepresentation, intentional or negligent? c. What remedies, if any, do the courts recognize in the event that there has been a misrepresentation in the PCDS? 18 In answering the first question, the issue is whether or not the Defendants knew or ought to have known about these problems. It must be established that the problems existed prior to closing, and that the Defendants knew about them or - in a somewhat unlikely scenario - were unreasonably ignorant of what was happening in their own house, and ought to have known. 19 Both of the Defendants testified.

They appeared to me to be decent, perhaps unsophisticated people, who were telling the truth to the best of their ability. They swore that they had no knowledge of the sewer backup problem, and stated that they had been taking showers and otherwise using the water normally right up to the day of closing, without incident.

They also claimed to be unaware of any problem in the basement, other than occasionally when the sump pump would be needed. 20 The Claimant essentially relies on what she sees as the inherent unlikelihood that these problems would occur so soon after closing, without having been evident to the Defendants. 21 Dealing first with the sewer back up, the condition as described by the Claimant was such that - at least by about ten days after closing - one could not flush a toilet or run any significant amount of water without it backing up and ending up all over the floor.

Had such a problem existed while the Defendants were still living in the home, they would have had a problem on their hands that made the house virtually unliveable by modern standards. It is very difficult to believe that they would have tried to conceal such a problem, knowing that people would be coming in to view the house including, most likely, qualified property inspectors. They would hardly have been likely to gamble that no one would flush a toilet or run the water. In fact, I would have expected the inspector to test the plumbing to some extent, such as by running the water to test its pressure.

There is nothing to indicate that any problem existed at the time of the inspection. 22 It is also significant, in my view, that the problem did not seem to be as serious on May 14 as it was ten days later. As such, it is quite possible that the problem - while developing gradually over the years - only became evident suddenly when water could no longer drain successfully. This could have happened at any time.

For the Claimant to succeed it would be necessary for me to conclude that it happened on the Defendants’ watch, so to speak, and they either lied about it or failed to correct information that they had already given. 23 On all of the evidence, I am unwilling to make such a finding. The evidence suggests that the problem did not fully manifest until well after the closing. The Claimant has simply not proved to my satisfaction that the Defendants knew that the sewer lateral was clogged or malfunctioning, or about to do so.

Nor has she proved that the Defendants ought to have known of the developing problem. 24 I make a similar finding with respect to the basement. The Defendants seemed genuinely surprised that the Claimant was experiencing the water problem that she did, and were adamant that no such problem existed to their knowledge prior to closing.

In fact, they say that one of their children had a bedroom in the basement and they would have dealt with any water problem, had one existed to their knowledge. 25 In the final analysis, I cannot say that the Claimant’s suspicions are unreasonable, but suspicion is not enough to succeed in a claim of this type. Something more would have been required. In some cases, experts are called to establish that a problem could not have developed so suddenly, in which case the denial becomes all the more improbable. There was no such evidence here. 26 For these reasons, the claim must be dismissed. Damages

27 Even if I am wrong on the question of liability, the damages would not necessarily be the amounts that the Claimant spent. 28 In a claim for misrepresentation, the task is to place the Claimant in the financial position that she would have been in, had the misrepresentation not been made. It is not to place her in a position she would have been in had the statement been true. That is a very important distinction. 29 Had the Defendants alerted the Claimant to the problems which she eventually experienced, she would have had a number of options. She could have decided not to buy the property.

She could have decided to offer less than she ultimately paid. She might have obliged the Defendants to make repairs. 30 In the result, by having made these improvements, the Claimant has something that is actually better than what she bargained for. She was buying a house with an old sewer lateral and a makeshift sump pump system. To award her the full cost of these items would actually overcompensate her. I appreciate that these were expenses that she had not anticipated, but in the end she has something better than what she purchased.

If I were obliged to assess damages, I would have awarded her something less than what she claimed on the principle known in law as “betterment.” 31 In the result, however, for all of the foregoing reasons, the claim is dismissed. Eric K. Slone, Adjudicator