Hawryliw v Smith, 2021 SKCA 53

Court of Appeal for Saskatchewan Docket: CACV3661 Citation: Hawryliw v Smith , 2021 SKCA 53 Date: 2021-04-07 Between: Frederick Hawryliw Appellant (Applicant/Defendant) And Brittany Smith Respondent (Respondent/Plaintiff) And Complete Home Inspection Services Inc. and Allan Brezenski Non-Parties (Applicants/Defendants) Before: Jackson, Tholl and Kalmakoff JJ.A. Disposition: Appeal dismissed Written reasons by: The Honourable Mr. Justice Tholl In concurrence: The Honourable Madam Justice Jackson The Honourable Mr.

Justice Kalmakoff On appeal from: 2020 SKQB 169 , Saskatoon Appeal heard: January 19, 2021 Counsel: Ryan Lepage for the Appellant Justin Luddington for the Respondent Tholl J.A. I. Introduction [ 1 ] Brittany Smith purchased a home [House] in Saskatoon from Frederick Hawryliw. After taking possession, she determined that there were problems with it. These issues included considerable fire damage to the joists in the basement. The joists were covered by drywall. As a result, Ms. Smith initiated an action against Mr.

Hawryliw, the home inspection company and the individual home inspector, alleging breach of contract, negligence and misrepresentation. Each of the defendants sought

summary judgment and were successful, except that the claim against Mr. Hawryliw for fraudulent misrepresentation by concealment was not dismissed: Smith v Hawryliw , 2020 SKQB 169 [ Chambers Decision ]. That issue was directed to trial. Key to this determination was the classification of the hidden fire damage as a latent defect or a patent defect. [ 2 ] Mr. Hawryliw appeals the decision refusing to dismiss the entirety of the claim against him. He asserts the fire damage was a patent defect and, in any event, Ms. Smith did not rely on any representations regarding the House. Ms.

Smith has not cross-appealed. [ 3 ] For the reasons that follow, the appeal must be dismissed. II. Background [ 4 ] Mr. Hawryliw purchased the House in 2007. When he bought it, he had an engineer assess its overall structural condition, an inspection was done by a heating and plumbing firm and an electrical inspection was conducted. He completed extensive repairs and renovations during the time he owned the House, but there were no structural changes made to the basement. He averred that all of the work was done by contractors. Mr. Hawryliw retained a property management company to manage it as a rental property.

He has lived in Toronto for the past 30 years and never resided in the House. [ 5 ] In June of 2013, Ms. Smith was interested in purchasing a home with a rental suite and became aware that Mr. Hawryliw wished to sell the House. By this point, the House was over 100 years old. It has two suites, one in the finished basement and the other on the top two floors of the building. She viewed the property and, even though both parties were represented by realtors, they spoke to each other several times. In those conversations, Mr. Hawryliw provided Ms. Smith with some details regarding the property and its condition.

She alleged he told her, among other things, that the House was solid and sound, recently renovated and a good investment. Ms. Smith decided she would like to purchase the House. Ms. Smith initially made her offer conditional on Mr. Hawryliw providing a Property Condition Disclosure Statement [PCDS] and a satisfactory home inspection being completed. Mr. Hawryliw declined to provide a PCDS, but agreed to the condition that a home inspection be conducted at Ms. Smith’s expense. This was agreeable to Ms.

Smith and they entered into a residential contract of purchase and sale for the House for a price of $370,000. [ 6 ] Ms. Smith retained Complete Home Inspection Services Inc. [Complete Home] to conduct the home inspection. She had used this same company the previous year to inspect a home that she ultimately did not purchase. The agreement she signed with Complete Home contained an exclusion clause that limited its liability, and that of its inspector, to the cost of the inspection. The home inspection was conducted by Allan Brezenski on June 10, 2013, who provided a written report to Ms. Smith.

It revealed numerous problems with the House, but did not note any fire damage. Despite all of the issues identified by the inspection, Ms. Smith decided to complete the

purchase. The conditions were removed and Ms. Smith took possession of the House on July 26, 2013. [ 7 ] In October of 2013, a guest caused some damage to a basement wall in the House, revealing moisture and mold in the insulation. In removing some of the drywall, Ms. Smith discovered that the joists in the ceiling were charred and burnt and had notches cut into them for electrical wiring. She obtained quotes for the repairs that ranged from $79,607 to $178,039. [ 8 ] On October 21, 2015, Ms.

Smith filed a statement of claim seeking damages from five defendants for negligence, breach of contract and misrepresentation. She subsequently amended her claim to remove two of the defendants, leaving Mr. Hawryliw, Complete Home and Mr. Brezenski as defendants. [ 9 ] After the litigation commenced, Mr. Hawryliw sought out and received confirmation that there had been a fire at the House in October of 2005, but no details were provided to him. There had also been a fire in the detached garage and shed in 2004. The previous owner did not tell him about either fire when he bought the house in 2007. Mr.

Hawryliw averred there were no fires in the House while he was the owner. [ 10 ] All of the defendants applied for

summary judgment under Rule 7-2 of The Queen’s Bench Rules and asked that the claim be dismissed in its entirety. III. Court of Queen’s Bench Decision [ 11 ] The evidence consisted of two affidavits from Mr. Hawryliw, an affidavit from his electrician, an affidavit from Mr. Brezenski and two affidavits from Ms. Smith. Both Mr. Hawryliw and Ms. Smith were cross-examined on their affidavits. [ 12 ] The Chambers judge provided a brief overview of the background and reviewed the positions of the parties. She began her analysis by examining when

summary judgment is appropriate and reviewed the applicable principles set out in Rules 7-2 to 7-5 of The Queen’s Bench Rules ; Hryniak v Mauldin , 2014 SCC 7 , [2014] 1 SCR 87; Tchozewski v Lamontagne , 2014 SKQB 71 , [2014] 7 WWR 397; White v Turanich , 2020 SKQB 5 ; and Cicansky v Beggs , 2018 SKQB 91 , 25 CPC (8th) 182. She addressed the claim against Complete Home and Mr. Brezenski separately from the claim against Mr. Hawryliw. [ 13 ] After a comprehensive analysis, the Chambers judge granted

summary judgment in relation to Complete Home and Mr. Brezenski. She found that the exclusion clause in the contract between them and Ms. Smith limited liability to the cost of fees paid for the inspection. As a result, the claim against these two defendants was restricted to $367.50. Ms. Smith has not appealed that determination. [ 14 ] Turning to the claim against Mr. Hawryliw, the Chambers judge, quoting LaBuick Investments Inc. v Carpet Gallery of Moose Jaw Ltd. , 2017 SKQB 341 at paras 29–30 , noted that the process for

summary judgment may be complicated when there is conflicting evidence. After making this observation, she stated the following with regard to the evidence in the matter before her: [69] In this case, the parties have provided significant affidavit evidence and conducted cross-examinations. In my view, there are inconsistencies in the evidence which can be addressed in the analysis that follows.

However, on the issue of concealment of the fire damage, the affidavit evidence does not permit me to comfortably reconcile the inconsistent evidence. [ 15 ] After noting this problem with the nature of the evidence, the Chambers judge set out the principles related to caveat emptor , including the pivotal role played by the determination of whether a defect is patent or latent. She also examined the role that concealment plays in the application of the doctrine of caveat emptor by reproducing paragraphs 50 to 53 from the reasons of Boswell J. in Lippa v Colletta , 2017 ONSC 1122 .

She then concluded as follows: [73] Ms. Smith alleges a number of defects, but primary among them is damage to the joists in the basement ceiling caused by a previous fire. The evidence of Ms. Smith contains contradictions as to whether this was a patent defect or a latent defect. Ms. Smith deposes that she discovered there was moisture behind the basement wall several months after taking possession. While removing drywall from the basement ceiling, she discovered there had been a fire in the house causing damage to the structure.

However, she also deposes that there was “evidence of a fire near the electrical panel as some joists were painted, while others were smoked [ sic ] damaged and discoloured and dark”, implying the fire damage should have been identified during the home inspection. In essence, Ms. Smith places responsibility on Mr. Brezenski for not observing the fire damage as a patent defect and on Mr. Hawryliw for not disclosing the fire damage as a latent defect. [74] Despite this contradiction, there appears little question the majority of the fire damage was concealed by the basement ceiling.

It is highly unlikely that an ordinary purchaser could, during the course of a reasonable inspection of the [House], have uncovered the extent of the fire damage as it was behind a finished ceiling. As a result, I intend to proceed with my analysis on the basis the fire damage was a latent defect. [ 16 ] After stating this conclusion, the Chambers judge went on to analyze the

summary judgment application in detail. She set out the verbal representations alleged to have been made by Mr. Hawryliw to Ms. Smith during their conversations in advance of the purchase. The Chambers judge reviewed the principles regarding negligent misrepresentation, fraudulent misrepresentation and breach of contract and determined that the entire agreement clause in the residential contract of purchase and sale for the House protected Mr. Hawryliw against claims for breach of contract and negligent misrepresentation.

However, she determined the allegation of fraudulent misrepresentation required further analysis. In addition to her claim for the fire damage, Ms. Smith had relied on fraudulent misrepresentation as a basis for liability for several other defects. [ 17 ] The Chambers judge examined the verbal representations alleged to have been made by Mr. Hawryliw in light of the fact that Ms. Smith had decided to proceed with the purchase in the face of a home inspection report that listed 24 separate categories of defects with the House. She determined Ms. Smith had not relied on any verbal representations made by Mr.

Hawryliw, finding the following:

[91] I do not accept that the alleged representations by Mr. Hawryliw, made prior to the home inspection, would continue to be relied upon by Ms. Smith or induce her to purchase the Property [House], particularly when faced with the numerous deficiencies identified in the Inspection Report. Even if Mr. Hawryliw had made any representations regarding the soundness of this Property or its potential as an investment opportunity, Ms.

Smith would have or should have known that there were a significant number of issues requiring further consultation, immediate repair or ongoing monitoring in this Property. [92] To state that she relied on Mr. Hawryliw’s alleged representations that this was a “solid and sound” property and a “great investment opportunity” after receiving this Inspection Report is simply not sustainable. This was a 100-year old home and there was clearly going to be significant work and expense required if Ms. Smith purchased the Property. Ms.

Smith would have known this prior to removing the home inspection and PCDS conditions the day after the home inspection. [93] Further, Ms. Smith had a roofer attend to examine the shingles and, based on his findings, she counter-offered to have Mr. Hawryliw contribute $2,600.00 to the cost of shingles, which he declined. Although the Engineering Report comments on issues with the roof, I am satisfied this is an issue Ms. Smith was aware of at the time she purchased the property. [94] The issue of negligent misrepresentation and breach of contract were dispensed with under Roy [2005 SKCA 45].

Further, the absence of representations in a PCDS in conjunction with clause 6.4 of the Contract suggests the parties had no intention of incorporating representations into the sale of the Property. I am also satisfied there would be no reliance, in a reasonable manner, to support such a claim for these same reasons. [95] I am not satisfied on a balance of probabilities that these representations caused Ms. Smith to act or that she reasonably relied on any broad or general statements made by Mr.

Hawryliw in the face of the remaining evidence. [ 18 ] The Chambers judge moved on to examine the evidence that addressed concealment. After examining this evidence, she concluded that all of the claims against Mr. Hawryliw should be dismissed except for the claim in fraudulent misrepresentation related to the fire damage. While she was satisfied that none of the verbal representations made by Mr. Hawryliw caused Ms.

Smith to act, or that she relied on any of them, the Chambers judge found that she could not confidently resolve the dispute with regard to the claim of fraudulent misrepresentation by concealment in relation to the fire damage. She determined that, given the contentious nature of the facts surrounding this one remaining issue, a trial with viva voce testimony was required in order to assess credibility and make the necessary findings of fact. IV. Issues [ 19 ] The following issues arise in this matter: (

a) Did the Chambers judge err by failing to find that the fire damage was a patent defect? (

b) Did the Chambers judge err by failing to dismiss the claim in fraudulent misrepresentation after determining that Ms. Smith did not rely on any representations from Mr. Hawryliw? V. Analysis A. Standard of review [ 20 ] The standard of review from an appeal from a

summary judgment application is set out in Hess v Thomas Estate , 2019 SKCA 26 , 433 DLR (4th) 60, where Barrington-Foote J.A. stated the following: [29] Absent an error of law, the exercise of powers under the

summary judgment rules attracts deference: Hryniak v Mauldin , 2014 SCC 7 at para 80 , [2014] 1 SCR 87 [ Hryniak ]. A decision as to whether there is a genuine issue for trial on a

summary judgment application is a mixed question of fact and law. Where there is no extricable error in principle, it should not be overturned absent a palpable and overriding error: Deren v SaskPower , 2017 SKCA 104 at para 41 ; Hryniak at para 81 . It is an error in principle to misapprehend or overlook material evidence: Housen v Nikolaisen , 2002 SCC 33 , [2002] 2 SCR 235 [ Housen ]. Questions of fact are assessed on the palpable and overriding error standard and questions of law on the correctness standard: Housen . B. Patent defect [ 21 ] Mr.

Hawryliw contends the Chambers judge erred by proceeding on the assumption that there was a latent defect, instead of finding that it was a patent defect and, as a result, failed to determine that caveat emptor applied. He argues Ms. Smith’s own evidence demonstrated that some of the damage was visible; and, therefore, the defect must have been patent. Ms.

Smith argues that the Chambers judge correctly identified the law with regard to the distinction between a latent defect and a patent one, and committed no palpable and overriding error in her determination regarding the nature of the defect. [ 22 ] There is a stark contrast between the results when a defect is found to be patent as opposed to latent. In general, if a defect is patent, the doctrine of caveat emptor , also known as buyer beware, applies; however, if the defect is latent, then caveat emptor does not apply.

A patent defect is one that is readily apparent upon observation or arises by implication from something that is apparent to the eye. As a general proposition, a seller does not have to bring these defects to the attention of a buyer. On the other hand, a latent defect – one that is not readily discoverable by reasonable diligence or prudent inspection – usually must be disclosed to the purchaser.

These principles are well summarized in the following: 1348623 Alberta v Choubal , 2016 SKQB 129 at paras 178–189 , 66 RPR (5th) 232; Britt v Klimczak , 2010 SKQB 407 at paras 41–45 , 365 Sask R 52; and Hawryliw v Smith , 2020 SKCA 92 at paras 17–21 and 30–35 , 18 RPR (6th) 179 (granting leave to appeal the Chambers Decision ).

[23] The Chambers judge was well aware of these general propositions and described them as follows: [71] The general rule when someone purchases a home is caveat emptor. Sellers are typically not liable for patent defects, which aredefects that can be discovered through ordinary vigilance. There is no obligation or duty to draw patent defects to a purchaser’s attention.Latent defects are those that cannot be found through reasonable diligence. These defects often go to the structural integrity of theproperty. If a latent defect has been concealed, the rule of caveat emptor would not apply.

There is no error in this statement of the law by the Chambers judge. However, Mr. Hawryliw argues that she erred in the application ofthis principle. He submits that Ms. Smith’s own evidence, tendered in an attempt to establish liability on the part of the home inspector,demonstrated that the fire damage was a patent defect. [24] The Chambers judge was aware of the evidence regarding Ms. Smith’s observations of the damage. As set out above, shequoted some of the exact words from Ms. Smith’s affidavit and commented on it in her judgment (at para 73).

She also took note of thefact that the majority of the damage was concealed by the basement ceiling. The Chambers judge found it to be “highly unlikely that anordinary purchaser could, during the course of a reasonable inspection of the Property, have uncovered the extent of the fire damage as itwas behind a finished ceiling” (at para 74). She then proceeded on “the basis that the fire damage was a latent defect”. [25] Mr. Hawryliw acknowledges that the Chambers judge did not overlook Ms. Smith’s evidence, but takes issue with herassumption that the fire damage was a latent defect.

He argues that the patent versus latent test does not depend on whether the majority ofthe damage is visible or to what extent the defect is apparent. In his view, the fact that Ms. Smith observed some “evidence of a fire nearthe electrical panel as some joists were painted, while others were smoked [sic] damaged and discoloured and dark”, was determinative ofwhether the defect was latent or patent because this portion of the defect was apparent to the eye or arose by necessary implication fromher observations.

He points to Roske v Overs, 2008 SKPC 63, and Fink v Thorsteinson, 2009 SKPC 89, as examples where the majority ofthe defect was not visible but was still found to be patent. I do not find this argument persuasive. [26] As I see it, the Chambers judge did not reach a finding of fact regarding whether the defect was latent or patent. Herexamination of that issue came after she had correctly set out the law regarding the two categories of defects and the doctrine of caveatemptor. She did not then simply disregard that law and blindly assume that the defect was latent.

It appears to me that, in applying the lawto the evidence, the Chambers judge was not satisfied that she could determine whether there was a patent defect or a latent defect, and,therefore, proceeded on the basis that it was latent. [27] While she was concerned about Ms. Smith’s statements, the Chambers judge considered the whole of the evidence, includingthe significant nature of the defect versus the minor nature of what could be observed. There was also evidence that some of the drywallthat concealed the damage contained date stamps that appeared to fall into the period when Mr.

Hawryliw owned the House, which couldrepresent a relatively recent attempt to conceal the damage. The evidence regarding Mr. Hawryliw’s presence and role in the renovationsand repairs was also uncertain. [28] In my view, it is implicit in the Chambers judge’s reasons that, after considering all of this evidence, she found herself unableto make a finding with regard to the type of the defect. On the evidence before her, she was not comfortable making a finding that it waspatent or latent.

That is why she used the conditional language of, “It is highly unlikely” and “I intend to proceed with my analysis on thebasis the fire damage was a latent defect” (at para 74), and determined that viva voce evidence was required on this issue, as opposed tosimply making a finding regarding the category of defect. As a result, the Chambers judge could not grant the application for

summaryjudgment on the basis that the defect was patent, because she could not determine which of the two categories it fell into. [29] The onus rested on Mr. Hawryliw to establish there was no genuine issue for trial. He failed to convince the Chambers judgethat the defect was patent and, as a result, that argument did not present a sufficient foundation upon which she could summarily dismissthe claim. Consequently, for the rest of her analysis, the Chambers judge proceeded on the assumption that the defect was latent. She didnot find as a fact that it was latent.

Bearing in mind the standard of review, I can find no error in proceeding in this fashion or in thedetermination that there was a genuine issue for trial in relation to fraudulent misrepresentation by concealment. This will include adetermination at trial of whether the defect was latent or patent. There is no palpable and overriding error revealed in the findings of theChambers judge on this issue. This ground of appeal cannot succeed. C. Reliance on representations [30] Mr. Hawryliw submits the Chambers judge found that Ms.

Smith had not relied on any of his representations and, becausereliance is a necessary element of the tort of fraudulent misrepresentation, the remainder of the claim should also have been dismissed. Asa corollary to this argument, he contends that the home inspection obtained by Ms. Smith conclusively disproves reliance on any type ofrepresentation in this matter. [31] Ms. Smith concedes the Chambers judge determined that she did not rely on any of the broad and general oral representationsmade by Mr. Hawryliw, but asserts it was the misrepresentation by concealment on which she placed her reliance.

She argues theChambers judge did not find that she had not relied on that representation. Ms. Smith contends the home inspection does not negatereliance in relation to the concealment of the fire damage. [32] It is not controversial that reliance on a representation is an essential element of the tort of fraudulent misrepresentation:Midland Resources Holdings Limited v Shtaif, 2017 ONCA 320 at para 162, 135 OR (3d) 481, leave to appeal to SCC refused,.

Concealment of a defect is equivalent to a representation that no such defect exists: Motkoski Holdings Ltd. v Yellowhead(County), 2010 ABCA 72 at paras 59–61, [2010] 5 WWR 603. However, the mere presence of a misrepresentation is not sufficient andconcealment on its own is not actionable. A person must rely on the misrepresentation created by the concealment and it must cause themto act. [33] Mr. Hawryliw contends the Chambers judge found that Ms. Smith did not rely on any of his representations; therefore, anessential element that is required for her to succeed in her claim is missing.

The answer to this assertion is found in the factual findings ofthe Chambers judge. I agree she found that Ms. Smith did not rely on any of Mr. Hawryliw’s broad and general statements made during

their negotiations for the purchase of the House. However, this finding does not speak to the issue of Ms. Smith’s reliance on a representation by concealment. The representations that the Chambers judge found Ms. Smith to have not relied upon are listed at paragraph 76 of the Chambers Decision and are discussed further in paragraphs 91 to 92. She is clearly referencing the oral statements made by Mr. Hawryliw in advance of the offer to purchase. The alleged misrepresentation that remains at issue consists of the concealment of the fire damage, not the words spoken by Mr. Hawryliw during their conversations.

The Chambers judge did not find there was no reliance on the alleged concealment. She did not make any finding of fact with regard to such reliance and its existence remains an open issue. Likewise, with regard to the alleged conclusive nature of the home inspection, the Chambers judge did not determine that Ms. Smith’s reliance on every representation of every kind, including concealment, was negated by the inspection. That remains to be determined at trial. I cannot give effect to this ground of appeal. VI. Conclusion [ 34 ] The appeal is dismissed with costs to Ms.

Smith calculated in the usual way. “Tholl J.A.” Tholl J.A. I concur. “Jackson J.A.” Jackson J.A. I concur. “Kalmakoff J.A.” Kalmakoff J.A.