Sale of land — Remedies of purchaser — For quality defects — Latent defects — Damages — Fraudulent misrepresentation — Measure of.

   Action by Mariani against the defendant Lemstra for damages for non-disclosure of certain latent defects in the construction of a house.  Lemstra purchased a piece of vacant land.  He designed and constructed a home on the property. Mariani purchased the home from Lemstra.  It was sold pursuant to a standard of agreement of purchase and sale that provided no warranties as to fitness of the property.  Prior to the sale Lemstra entered into an agreement with a listing agent. It stated that the home was well built.  After the closing Mariani observed cracking along the high centre bearing wall. The house was excessively damp.  The basement had a damp musty order.  The house also leaked and mould appeared in the basement.  Some experts felt that the repair costs were so prohibitive that the house would have to be torn down and rebuilt.  Mariani also claimed damages for damage to personal property, for mental distress and for the loss of rental revenue from a basement apartment that was unsuitable for habitation.  Mariani also sued the municipality because it issued a building permit to allow this home to be constructed.

   HELD:  Action allowed in part.  Mariani was awarded damages of $298,000.  Lemstra was liable for 75 per cent of this amount.  The municipality was liable for the balance.  There were two latent defects which rendered the premises dangerous. The centre structural wall was defective.  It made the house susceptible to shifting.  The building envelope was not properly constructed.  This caused water to leak into the walls and basement.  Although the well-built representation was not part of the agreement, Mariani was aware of it.  She relied upon it to her detriment.  Lemstra was deemed to know of the defects because he acted as his own contractor.  He was liable for fraudulent misrepresentation.  Mariani acted promptly and properly to mitigate her damages.  Her damages consisted of the removal cost of the home, which was $23,000, and for its reconstruction.  Mariani failed to prove her other damages.

Counsel:

¶ 1      DUNN J.:— The plaintiff, Sharon Ann Mariani, purchased a parcel of land known as part of Lot 10, Concession 3 in the Township of Puslinch from the defendants, John and Anne Lemstra, on May 30, 1991.  There was also a residence on the land when it was purchased.  The plaintiff's action rests on the claim that the defendants knew or ought to have known that there were certain deficiencies or latent defects in the house construction.  Since the defendants are also the builders of the house, the plaintiff submits they are in breach of an implied warranty of fitness for habitation and that as a result, the plaintiff has sustained and continues to suffer damage.  The claim is also against other defendants for breach of duty to ensure that the house was constructed in accordance with the drawings and specifications and the requirements of the Ontario Building Code.

¶ 2      As well, the plaintiff seeks damages for mental distress, vexation, general disappointment and frustration as a direct and indirect result of the negligence, misrepresentations and breach of implied warranty of the defendants.

The Corporation of the Township of Puslinch

¶ 3      At the opening of the trial the Court was informed that the plaintiff had settled her claim as against the Corporation of the Township of Puslinch.  The details of her settlement with this defendant were not made known to the Court, in other words there was at the outset of the trial the information that a "Mary Carter" agreement had been reached. Depending on the nature of the decision of this Court, such an agreement may have impact on the liability of the other defendants as they, of course, claim over against the Township for contribution and indemnity and the Township claims over against its co-defendants.

Overview of Facts

¶ 4      John and Anne Lemstra purchased part Lot 10, Concession 3 in the Township of Puslinch in 1986 and proceeded to design and construct their dream house on that property.

¶ 5      The Lemstras had little experience in construction.  John Lemstra, however, had some knowledge of home construction having served as an electrician's apprentice for some four plus years.  Together they sketched a floor plan and took it to a professional who prepared a set of drawings dated April 30, 1987.

¶ 6      The Lemstras made application to the Township of Puslinch for a building permit which was in due course issued. They then proceeded to construct the house in question with John Lemstra acting as general contractor.  For a large part of the summer and part of the fall in 1987 they resided in a trailer on the premises, not only to oversee but to actually do much of the construction work.

¶ 7      The Lemstras hired the defendant Van Engen to assist them in the construction.  Van Engen had extensive experience in constructing residential dwellings.  It was his job to frame the house and garage in accordance with the drawings and he did so, although there were a number of variations, apparently as construction went along.  Notably, among these were the following:

¶ 8      The Lemstras had by and large completed the residence in the fall of 1987 and they moved in.  They moved in without obtaining a final inspection and occupancy permit for the premises and they continued to do work on the house after occupying it.  Their evidence indicates that they observed no significant problems with the construction or with the finished home.

¶ 9      In 1990 the Lemstras decided to become chicken farmers.  Mr. Lemstra had lost his job, which he held for approximately 16 years.  The house was listed for sale and was left vacant for approximately ten months before the plaintiff offered to purchase the house in April of 1991.  The offer was accepted and the transaction closed May 30, 1991.

¶ 10      The Plaintiff Sharon Mariani was a bookkeeper by profession and for a number of years had worked for a builder of residential homes, where she kept records of various stages of construction, ordered inspections and did the paperwork for changes and upgrades to house plans.  She was shown the Lemstra property in the presence of the Lemstras' real estate agent when the house was empty.  She returned on a second occasion with friends and relatives to look over the premises. >From her evidence it is obvious that Mrs. Mariani had no special knowledge of the construction of houses.

¶ 11      Shortly after taking possession of the "dream house" Mrs. Mariani observed some cracking along the 19' high centre bearing wall.  She also noticed that the house appeared to be excessively damp and that the basement had a damp musty odour.  These problems were not apparent when she saw the house prior to making her offer.

¶ 12      She hired the defendant Mr. Van Engen through his company, Alpine Homes Ltd., to do certain kitchen renovations and she ran a dehumidifier to offset the dampness.  Mr. Van Engen also repaired the cracks.

¶ 13      In short order, the cracking in the drywall in the centre bearing wall reappeared and the plaintiff became concerned.

¶ 14      About 18 months after moving in, the ground source heat pump that serviced the residence burned out.  By this time it was Mrs. Mariani's evidence that with every rainfall a certain amount of water entered the dwelling apparently around windows and through the building envelope.

¶ 15      Mrs. Mariani was very concerned about the deficiencies in the home and contacted the first of several "experts" to give her advice as to what was wrong with the home.

¶ 16      The centre bearing wall continued to shift and present cracks.  The house leaked badly in several places in the basement and mould appeared.  In the "granny suite" beneath the garage mould was so apparent that those premises were unusable.  Personal possessions stored in the basement of the house became mildewed.  There was extensive mould not only in the basement but within the walls of the house.  The mould as it exists is of a kind dangerous to the health of the occupants of the house.

¶ 17      According to some experts the repairs necessary for the house are so prohibitive that it is more economical to tear it down and start over.  According to others, remedial work would be sufficient to render the place habitable.

The Agreement of Purchase and Sale

¶ 18      The agreement purchase and sale between Mrs. Mariani and the Lemstras was a standard Ontario Real Estate Association Agreement of Purchase and Sale without warranty for any suitability of use.  It provides that there "is no condition express or implied representation or warranty of any kind that the future intended use of the property by the purchaser is or will be lawful except as may be specifically stipulated elsewhere in the agreement".  It has a warranty against UFFI insulation that survives closing.  The agreement goes on to say that "there is no representation, warranty, collateral agreement or condition, which induced any party hereto to enter this agreement ... other than as expressed herein."

¶ 19      It is trite law that except for new housing there is no implied warranty on resale houses as to their suitability for habitation in the absence of any specific provision in the agreement of purchase and sale.  This leaves a purchaser with little recourse to a vendor of a resale house.  The Lemstras had lived in this home for over three years.  Some distinction may be made when, as here, the vendor is the person that constructed the dwelling.  That distinction lies in the fact that the vendor/builder knows or is presumed to know a lot more about the state of the dwelling than does another vendor.

¶ 20      The listing agreement entered into by the vendors with the listing agent prior to the sale to Mrs. Mariani indicated that the house was "well built".  While this statement was not part of the Agreement of Purchase and Sale, the plaintiff was aware of it and relied upon it to her detriment.

¶ 21      The evidence at trial illustrated that the house is not "well built".  Apart from the major defects of the centre wall and the building envelope there was ample evidence of a number of instances of failure to meet building code specifications.  Most of these complaints are of little impact or concern but they do generally reflect perhaps a haphazard or unprofessional approach to construction.

¶ 22      The evidence of the defendant John Lemstra controverts the findings of most of the professionals who gave evidence at trial.  He felt that the house was constructed well, at least from his viewpoint and, as stated above, the Lemstras felt that this was to be their dream house.  Again, with the assistance of various sub-trades and of the co-defendant Van Engen, Mr. Lemstra acted as his own contractor on the job and, in fact, did a large part of the work himself.  There is no evidence that Mrs. Lemstra did actual work on the building.  She was on the site for several months during construction.  Her evidence was straightforward but not helpful as to detail.  I did not find Mr. Lemstra's evidence compelling at trial.  His evidence was at times exaggerated, inconsistent and illogical when it came to describing the quality of some aspects of his construction.

The Law

¶ 23      The subject matter of fraudulent misrepresentation was recently canvassed by this Court in Hughes v. Sunbeam Corp., [2000] O.J. No. 4595.  Cumming J. stated in that case as follows:

¶ 24      In this case, while the fraud has not been specifically pleaded using the word `fraud', paragraphs 16 through 21, in my opinion are sufficient in the peculiar circumstances of this particular case to satisfy the requirements of pleading and to call upon the defence to answer the allegation of fraudulent misrepresentation.  The evidence and argument of the defendants addressed this allegation fully.

¶ 25      It is clear that there must be a false representation of fact made with knowledge of its falsehood or recklessly without belief in its truth acted upon by the "representee".

¶ 26      The defendant, John Lemstra, acting as his own contractor in the circumstances of the case, must be taken to know of at least the serious defects in construction.  The statement made in the listing agreement that the house was "well built" and which the plaintiff says came to her attention prior to making the offer, I find to be a fraudulent (or negligent) misrepresentation.  It goes beyond mere `puffery', and on the peculiar facts of this case, the plaintiff was entitled to rely on it, coming as it did from the person who built the house.

       See Lyons v. Granger (1994), 16 C.L.R. (2d) 279 where the misrepresentation was a reply in the negative to the purchaser's question as to wetness in the basement.

       See also Winnipeg Condominium Corporation No. 36 v. Bird Construction Co. et al. (1995), 121 D.L.R. (4th) 193 S.C.C. which allowed the owner of a building to recover the cost of repair where negligence in the planning or construction of it caused the building to be dangerous.  Recovery in that case was allowed in Tort for economic loss as opposed to injury to persons or damage to property.  The underlying policy consideration for allowing such recovery, to prevent or mitigate more serious loss is applicable to the facts of this case.  The repair or economic loss is, however, more drastic in that it requires the removal of the whole structure to prevent its damaged condition from affecting the health of any occupant.

¶ 27      On the evidence I find that there were two latent defects, which in my opinion rendered the premises dangerous. The first was of course the centre structural wall.  The evidence is clear that it is defective.  The various experts apparently did not conclude that it was unsafe in the sense that the house was likely to collapse but it is clear from that same evidence that the centre wall deficiencies made the house susceptible to movement or shifting in any substantial wind or, as the case may be, snow load.  There was also the suggestion in the evidence that this structural defect may have in part been responsible for the failure of the building envelope.

¶ 28      The second latent defect of importance in my opinion is the said failure of the building envelope.  The siding substituted for brick was unsuitable for vertical construction.  It looked nice but it was intended for horizontal installation only.  The experts varied as to the cause of the failure of the building envelope allowing the admission of water to the walls and basement.  I accept the evidence of those experts that the failure of the envelope was the result of negligent or improper construction and I reject those experts holding contrary views.

¶ 29      Again, since John Lemstra himself acted as his own contractor and did much of the work on the construction of the premises, he either knew or must be taken to have known of the defects.  The Lemstras' failure to advise the purchaser Mrs. Mariani of these defects, in my opinion, is actionable and sufficient to allow Mrs. Mariani recovery.

¶ 30      The failure of the building envelope has permitted water to enter the building walls and allowed flooding of the basement.  While the experts testifying at trial indicated that mould is in every house, it is clear that in this house there is a proliferation of mould, which on the evidence presented at trial, presents a danger to the occupants of the house.  While I agree that the simple incursion of water may not in itself be dangerous to persons occupying the property, the resultant mould however does.  I cannot on the evidence conclude that the proliferation of dangerous mould was simply a lack of maintenance by the plaintiff or indeed one that can even now be remedied.  On the contrary, the proliferation of mould itself has conclusively rendered this house dangerous to inhabit.

Construction - Other Complaints

¶ 31      The pleadings reflect that there are a number of other allegedly unsafe defects and I will treat them individually as they, in my opinion, are addressed by the evidence at trial:

¶ 32      I cannot, therefore, conclude that any of the other complaints represent matters which are recoverable by the plaintiff.  In contrast to these, both the centre wall and the failure of the building envelope in my opinion pose a real and substantial danger to the occupants if not an immediate risk to their safety.

Damage to personal property

¶ 33      The plaintiff claimed at trial $43,896.00 for repairing or replacing damaged personalty.  The evidence with respect to the value of these damaged goods was scanty.  It did occur.  However, I cannot conclude that the plaintiff took any appropriate measures to preserve her personalty once it was known to her that water seepage was occurring.  Her claim must fail with respect to these damages.

Other Claims

(a)  Mental Distress, etc.

¶ 34      I cannot as the plaintiff alleges conclude that the defendants have admitted liability for this heading of damages as they appear to have admitted only one of the two paragraphs, No. 26, in the statement of claim.

¶ 35      In my opinion no recovery has been justified on the evidence with respect to mental distress, vexation, etc. I have no doubt the plaintiff suffered over the years with respect to the difficulties in the house.  At trial it was pointed out to her that this Court must translate those types of claims into a monetary reward.  Given the plaintiff's inability to quantify distress, vexation, etc., recovery is not warranted.  The same reasoning applies to a claim for punitive damages, which, on occasion, in the discretion of the Court, are applied to civil matters.  This is not one of the cases in which punitive damages are appropriate.

(b)  Loss of Rental of Basement Apartment

¶ 36      The condition of the basement apartment underneath the concrete slab by the evidence clearly does not allow for habitation by reason of the prevalence of mould.  I was less impressed by the evidence presented at trial regarding the reason for this mould as opposed to the mould in the house generally.  I must say that I am left with some uncertainty as to the reason for the continuation of mould in this area and I cannot conclude on the evidence that it is necessarily a result of construction as opposed to a simple matter of proper ventilation.  The evidence of the plaintiff was not convincing on the point of whether she could have rented these accommodations.  At best she has lost the opportunity to rent.  No damages for loss of actual rent income have been proven.

(c)  Hydro Bill

¶ 37      The plaintiff produced extensive evidence with respect to the cost of heating the premises over the years. To some extent the high cost of hydro consumption was a reflection of the inability of the ground water heat pump to function efficiently.  I cannot on the evidence conclude that these damages resulted from a defect or a fraudulent misrepresentation or negligent construction by the Lemstras. The plaintiff apparently made no inquiry about the cost of electrical consumption prior to putting in the offer although the bills were available on request.  For these reasons this part of the plaintiff's claim has not been established.

(d)  Failure of Ground Source Heat Pump

¶ 38      The evidence at trial did not, in my opinion, establish on a balance of probabilities that this is a defect of a latent nature that was not discoverable by the plaintiff prior to closing or prior to making the offer on the premises. The heat pump was working at closing and continued to work for some months.

The Cross-Claims

(a)  Re:  Van Engen and Alpine Homes Ltd.

¶ 39      The evidence establishes that Van Engen's involvement in the construction was in framing only.  There are a number of defects in this framing.  Van Engen at the same time is a fairly experienced framer and from time to time builds houses himself.  He was instrumental in the framing of the centre load-bearing wall.  He did, however, build that wall according to plans and specifications provided for him by Lemstras.  He is not an engineer.  In all the circumstances here, including his other minor involvement with a small part of the siding, I cannot conclude that the plaintiff has established liability on behalf of Mr. Van Engen or his company, Alpine Homes Ltd.  Nor does the evidence establish the Lemstras' claim over against Van Engen and Alpine Homes for negligence in the construction.

¶ 40      As a consequence the plaintiff's claims against Van Engen and Alpine Homes should be dismissed.  As well, the claims of Lemstras for contribution should also be dismissed against Van Engen and Alpine Homes.

(b)  The Corporation of the Township of Puslinch

¶ 41      While the plaintiff settled her claims against the Township at the start of trial, much evidence was heard at trial concerning the Township's involvement.  That evidence establishes clearly that the Township failed in its duty to properly inspect the different stages of construction.  In addition, the Township building inspector completely missed the defects in the centre load-bearing wall.  For the purposes of the litigation I am obliged to assess the responsibility of the Township to the Lemstras.  I do so having regard to all the evidence, indicating that they should be responsible for 25% of the plaintiff's recovery against the Lemstras. Lemstras' claim for contribution indemnity will, of course, be limited to this amount, subject to any representations counsel may wish to make within 60 days of the date of this judgment to me concerning the "Mary Carter" agreement between the plaintiff and the Township.

Damages

(a)  Mitigation

¶ 42      The plaintiff began experiencing the problems with the construction of the house shortly after closing.  As early as November 1993 she obtained a quote to replace the siding and install some flashing with wind bracing for some $13,624.00.  She continued to encounter problems and did not act on the quote given by Emerald Renovations in November 1993.  Instead, from time to time, she obtained other estimates to repair and make the house safe.  In the meantime it appears that the mould as it exists at the time of trial continued to grow.  I cannot conclude, however, that the plaintiff "sabotaged her own home through deliberate neglect" as suggested by defence counsel.

¶ 43      Nor can I conclude that she took an improper or unadvised approach by continuing seeking the assistance of other experts with respect to what was wrong with the property.  Certainly, in the best of all worlds, in 1993 she could have spent substantial money to correct the problem but I cannot say that by acting as she did that she failed to mitigate the damages as a reasonable person might.

¶ 44      Having concluded on the evidence presented that the defendants Lemstra are responsible for the reasonable losses of the plaintiff, the difficult question of assessing the damages remains.

¶ 45      The plaintiff's evidence supports the proposition that the defendant should be responsible for the cost of removing the existing structure and rebuilding another home and quantifies this expense to be $300,000.00 for a 3000 sq. ft. "essential" home.  The subject structure is 3459 sq. ft.

¶ 46      The value of the existing structure today, given the evidence which I find compelling, that requires its demolition by reason of the defects and the prevalent mould is zero.  When purchased in 1991 by the plaintiff she paid $375,000.00 for the structure and real property.  The real property at that time had a value of approximately $100,000.00 having been purchased in 1987 by the Lemstras for $71,000.00. The value of the house when Mrs. Mariani purchased in 1991 was $275,000.00.

¶ 47      It would therefore be appropriate to limit the plaintiff's recovery to the lesser of the two figures, (i.e.) $275,000.00 or $300,000.00.  There should be judgment for the plaintiff, therefore, against the Lemstras for $275,000.00. To this amount must be added the cost of removing the existing structure which, on the evidence presented at trial and which I accept, was $23,000.00 plus G.S.T.  The Lemstras are responsible for 75% of the total of $298,000.00.  The responsibility of the Township I assess at 25%.

Counterclaim by Van Engen

¶ 48      The counterclaim has been made by Van Engen or Alpine Homes Ltd. with respect to unpaid accounts for renovations to the home.  The correct balance owing to him is the sum of $4,165.03 plus GST.  Given that I have found that Van Engen and Alpine Homes Ltd. have no liability in the plaintiff's action, there should be judgment for Van Engen against the plaintiff for this sum.

Costs

¶ 49      The matter of costs was not addressed in the final submissions.  I am unaware of any offers made between the parties other than the fact that the claim between Mrs. Mariani and the Township had been settled for an undisclosed sum prior to trial.  As a consequence the parties may address me with respect to costs in writing within 60 days of the date of this judgment.

DUNN J.

QL UPDATE:  20030326
cp/e/nc/qw/qlrme