Small Claims Court

Claim No: 268939

                                                                                                                             Date: 20070227

                               IN THE SMALL CLAIMS COURT OF NOVA SCOTIA

Cite as: Boychuk v. Butler, 2007 NSSM 10

BETWEEN:

                                                                   DECISION

BACKGROUND INFORMATION

(1)               The Claimants, Bob Boychuk and Sarah Donahue Boychuk (the “Buyers”), and the Defendants, Anne Butler and David Butler (the “Sellers”), entered into an Agreement of Purchase and Sale (the “Agreement”) respecting property at __________, East Lawrencetown, Nova Scotia, on January 22, 2006.  An Addendum was signed on the same date and forms part of the Agreement.

(2)               The Agreement contains the following provisions:

“3(a) This agreement is subject to the Buyer at his/her expense having the property inspected by inspector(s) of the Buyer’s choice, and the inspection(s) meeting the Buyer’s satisfaction.  The inspection(s) shall be deemed to be satisfactory unless the Seller or the Seller’s agent is notified to the contrary in writing on or before (date) Jan 30, 2006.  If said notice to the contrary is being provided it shall be accompanied by a copy of the written inspection report, following which either party shall be at liberty to terminate this contract and the Buyer’s deposit shall be returned in full without interest or penalty.

3(b) This agreement is subject to the Seller providing to the Buyer within 24 hours of the acceptance of this offer, a current Property Condition Disclosure Statement, and that statement meeting with the Buyer’s satisfaction.  The Buyer shall be deemed to be satisfied with the statement unless the Seller or the Seller’s agent is notified to the contrary, in writing, on or before (date) Jan 30/06.  The Seller warrants it to be complete and current, to the best of their knowledge, as of the date of acceptance of this agreement, and further agrees to advise the Buyer of any changes that occur in the condition of the property prior to the closing date.  If notice to the contrary is received, then either party shall be at liberty to terminate this contract.  Once received and accepted, the Property Condition Disclosure statement shall form part of this Agreement of Purchase and Sale.

11.  The Buyer shall have the right, upon providing the Seller with reasonable notice, to conduct a preclosing viewing of the property to ensure that the property is in the same state of repair as of the date of this agreement.

13.  All warranties and representations contained in this agreement shall survive the closing unless otherwise stated in this agreement.

15.  Time shall in all respects be of the essence in the Agreement.  In the event of a written agreement of extension, time shall continue to be of the essence.  This Agreement shall enure to the benefit of and be binding upon the parties hereto, their respective heirs, executors, administrators, successors and assigns.  This Agreement is to be read with all changes of gender or number required of the context.

16.  The Seller and the Buyer acknowledge having received, read and understood the brochure entitled “Working With A Real Estate Agent”, published by the Nova Scotia Association of REALTORS (or their predecessor organization), and acknowledge and confirm as follows:

a.  The Seller has an agency relationship with C-21 Classic

Realty Ltd. and Anne Butler

b.  The Buyer has an agency relationship with Sutton Group Prof. Rlty Ltd. and Cynthia Connors”

The Addendum, Form 101, Schedule “4" contains the following:

“This Agreement shall be subject to:

1.  The Seller providing to the Buyer a copy of the well certificate and a copy of the septic certificate, if available, on or before Jan 25/06.  The buyer will have until Jan 30/06 to approve of these documents.  NOTE: A septic certificate may not be available due to the age of the dwelling.  The Buyer is aware that a new system will have to be designed, approved and installed, if a problem arises with an existing septic system that does not have a valid septic certificate.

The above clauses are deemed to be satisfied unless the Seller or Seller’s Agent is notified to the contrary, in writing, within the time periods specified.  If notice to the contrary is received, either party shall be at liberty to terminate this contract and deposit to be returned to Buyer without interest or penalty.

5.  The Seller warrants that to the best of their knowledge, the septic disposal system on the said property is in good working order and has not presented any problems during their ownership.  This warranty shall survive the closing.

6.  The Seller agrees to have the septic tank pumped if it has not been pumped out within the last two years.  The Seller will provide to the Buyer a copy of the paid invoice prior to closing providing this work was completed.

7.  The seller to confirm the septic tank is concrete in writing on or before Jan. 30/06."

(3)               Addendum Form 101, Schedule “B” provides in part as follows:

“B) The sellers at sellers expense to have a professional window contractor to repair the sunroom sliding door to the outside so that it is squared and able to open and close properly and to confirm in writing with written receipt to buyers agent that the door has been repaired prior to date of close.

C) Sellers at Sellers expense to have a professional contractor inspect and determine where the unknown source of water accumulating in the utility Room beneath the window by the electric heater and also, in the laundry Room below the window behind the washer and dryer is coming from, and repair in a professional manner including repairing any removal of drywall and trim.  Sellers to confirm in writing with written receipts to the buyers agent prior to date of close warranting the repairs have been completed to prohibit any further water accumulation and dammage (See attached Fax header sheet dated 25/01/06). (sic)”

(4)               The Buyers were aware that the Seller, Anne Butler, is a licensed Real Estate Agent. 

(5)               A Property Condition Disclosure Statement dated January 8, 2006, was completed by the Sellers and was provided to the Buyers, and contained the following provisions:

11.  ADDITIONAL COMMENTS: (Attach a schedule if needed).

Front wall rebuilt Oct 02 following water damage.  New pressure tank installed Jul 04.  French drains around rear of property Summer 04 & Spring 05, Garage sided Summer 04.  Windows in living & rec rooms replaced & exterior resided to correct previous leakage problem Dec 05.”               

(6)               The closing date was scheduled for May 1, 2006, but changed by agreement to March 30, 2006.

(7)               The Buyers had a Home Inspection prepared by CEC Home Inspections Plus, and it contains the following provisions:

“Note: All doors with the exception of the sliding door in the sunroom are satisfactory.  The sunroom door is not opening at present and the lower corner has a gap present indicating possible settlement of the structure in that area.  Further investigation is required and then repairs.”

“Note: There is an unknown source of water accumulating around the baseboard heater in the utility room and there is also dampness in the corner of the laundry area that is absorbed by the dust on the floor.  Further investigation is required to determine the source so repairs can be made.”

“DRIVES/WALKS/STEPS

Type: (__)Asphalt   (T)Concrete   (T)Gravel   Other: ____________

Condition: (T)Satisfactory (__)Normal cracking (__)Reseal as needed

Note: Area was snow covered.”

“DECKS/BALCONIES/PORCHES

Type: (__)Asphalt       (T)Concrete        (T)Gravel   Other:________

Condition:   (T)Satisfactory  (__)Normal cracking   (__)Reseal as needed

Note: Area was snow covered.”

“METHOD USED TO OBSERVE ROOF:  (T)Walked on Roof (__)Observed with binoculars (__) Observed from atop a ladder (__)Observed from ground level 

Note:________________________________________

Overall Condition:     (T)Satisfactory (__)Cracks visible (__)Curling (__)Mold  (__)Surface work (__)Normal weathering commensurate with their age (__)Replacement  (__)Repairs

Note: Not all of the roof surface was visible.  Snow covered the majority of the surface.”

“FOUNDATION

Type:  (T)Poured concrete (__)Block (__)Other_______________

Note:______________

Settlement/Expansion Cracks: (__) None Observed   

(T)Crack/s is/are present

“CRACKS ARE A COMMON DEFECT IN CONCRETE FOR SEVERAL REASONS” Note: The foundation was not visible on the rear section of the house.”

“WINDOWS     (T)Wood      (T) Vinyl   (__)Aluminum

Condition:     (T)Satisfactory (__)Screen/Panes are torn/missing (__)Cracked glass    (T)Seal has failed

Note: The seal has failed in one of the sun room windows.  The seal has failed in the sun room sliding door.”

“DOORS

Sunroom (__)Wood    (T)Metal   (__)Other:______   (__)Satisfactory

Hardware: (__)Satisfactory

Framing:(__)Satisfactory (__)Parts Missing

Notes: The sliding door failed to open.  It appears that the frame is not square.  There is a gap at the house between the frame and the door.”

“WASTE PROVISIONS: (__)Municipal Sewer  

(T)Septic (Type Unknown)

When was the septic tank pumped out last?  (Every 3 to 5 years is recommended)”

“WINDOWS: Type: Wind out/Stationary

(T)Satisfactory (__)Window fails to operate (__)Degraded operation

Note: The seal has failed in one window in the sun room.”

“WEATHER CONDITIONS:

(__)Spring (__)Summer (__)Fall  (T)Winter (__)Dry  (T)Wet (__)Very Wet”

(8)               Both parties retained the services of Blair MacKinnon of Heritage House Law Office to represent their interests in respect of the purchase and sale transaction. 

SUNROOM SLIDING DOOR

(9)               During the pre-closing inspection, the Buyers noted that the sliding door in the sunroom still would not close properly.

(10)           At the time of the closing, Mr. MacKinnon was not available and a lawyer at the same office, Angus MacIntyre, looked after matters in his absence.

(11)           A written note was tendered into evidence as follows:

“Date: 30^th March 2006

To: Robert & Sarah Boychuk

cc: Angus MacIntyre

Re: Sale of _______, East Lawrencetown

Vendors confirm $5000 holdback until following has been completed: -

(1) Installation of patio door in solarium of a similar quality to existing door (but new).

(2) Installer to provide receipt with a year warranty on installation.

(3) Work to be completed within the month of April 2006, vendor will make best efforts to have work done within 2 weeks.

Signed: Anne Butler                   (1) Water shed to tighten valve to rectify leakage at vendor cost ($70.00 + HST)”

(12)           The document is signed by Anne Butler on behalf of the Sellers.  Ms. Butler testified that they agreed to replace the sunroom door as they were unable to repair it.  Based on the evidence, I find the note was prepared by or at the direction of  Ms. Butler and encapsulates an  agreement reached by the parties in regards to the pre-closing deficiencies raised by the Buyers.  The consideration for the agreement was that any claim for said deficiencies would be released upon the Buyers taking the actions set out in the note (this will be referred to as the “deficiency agreement”).

(13)           As noted previously, the problems with the sliding door and the leak in the utility room and laundry area had already been identified by the Buyers and part of the Agreement was that the Sellers would effect the necessary repairs at their expense (see Addendum Form 101, Schedule “B”, paragraphs B) and C)).

(14)           When this was raised following the pre-closing inspection, I find as a fact that the Sellers agreed to repair the patio door in the solarium and provide the Buyers with a one year warranty.

(15)           The deficiency agreement provided that the work was to be completed in the month of April 2006.

(16)           In fact, however, the work was not completed in the month of April 2006.  I find in this respect that the Sellers breached the deficiency agreement.

(17)           When the deficiency was not remedied by the Sellers, the Buyers undertook the work themselves.  At that time, they discovered that the walls surrounding the sliding door and an adjacent window had suffered extensive rot.  Contractors were hired to repair the wall and install the door.  According to the evidence of Bob Boychuk, the window had “disintegrated”.

(18)           On the change form signed by the contractor, the following notation appears: “Opening for patio and window, extensive rot.”

(19)           The Buyers advised the Sellers of the costs required in order to repair this deficiency.  Most of the costs were recovered by the holdback with the exception of the following:

(a)        An invoice from the window supplier in the amount of $929.31;

(b)        An invoice from the window installer for $595.73.

(20)           In other words, the Sellers paid for the entire cost of the repairs, including the replacement and installation of a new patio door and the replacement of the adjacent wall which subsequently was found to be full of rot.

(21)           The position of the Sellers is that the repairs to the window were not included as part of the deficiency agreement.

(22)           The burden of proof is on the Buyers on the balance of probabilities to prove that the replacement of the window was a necessary part of the work to install the patio door in the solarium such that a one year warranty could be provided.

(23)           Neither the contractor nor the window supplier or installer were called to give evidence.  I am satisfied that there is evidence that there was extensive rot both in the walls and window.  I am also able to conclude from the evidence that the reason that the door was not closing properly was that there was a gap in the lower corner and that this was likely as a result of settlement of the sunroom in that area.

(24)           According to the Home Inspection, further investigation was required.  There is no evidence that the Claimants made any further investigation following the receipt of the Home Inspection, nevertheless, the Sellers did agree to install the patio door and to provide a one year warranty on installation.

(25)           In the absence of direct evidence on this point from either the contractor or the window supplier or installer, I am unable to conclude on a balance of probabilities that it was necessary to replace the windows in order to properly undertake the replacement of the patio door in the solarium such that the work could be guaranteed for a one year period.  The balance of proof is on the Claimants, and I find in this case that it has not been met.

(26)           For these reasons, this portion of the claim is dismissed.

LEAKS IN UTILITY ROOM AND LAUNDRY AREA

(27)           The deficiency agreement made reference to the Sellers being responsible for the cost of the Water Shed to rectify the leakage which the Buyers had identified had not been repaired following the pre-closing inspection.

(28)           The cost is indicated to be $70.00 plus HST in the deficiency agreement, however, the actual invoice for the work amounted to $166.75.

(29)           Anne Butler testified that she had been provided with a quote from the Water Shed that the work could be done for $70.00 plus HST.

(30)           Based on all of the evidence, I find that the $70.00 plus HST amount was an estimate only and that the actual cost of the work was $166.75.

(31)           The Buyers should be compensated to the extent of the cost of the deficiency in this case, and I therefore find that the Sellers shall pay to the Buyers the sum of $166.75.

SEPTIC SYSTEM

Background Information and Findings of Fact

(32)           The property at _________, Lawrencetown, Nova Scotia, has an on-site septic waste disposal system. 

(33)           The Sellers stated that, although Anne Butler was a Real Estate Agent, they had no previous experience in owning a home with a septic waste disposal system and had no real familiarity with such systems.

(34)           The home had been purchased by the Sellers in July 2002.  In 2003, they experienced dampness in their yard.  They contacted Ralph Crowell, who is a local installer of septic fields and septic tanks.

(35)           Anne Butler stated that she requested that he stop down and look at the “septic system”.  He was referred to Ms. Butler by Bill Murphy, a person who is in the business of pumping septic tanks.

(36)           Based on this evidence alone, I am prepared to conclude that Ms. Butler was aware at this time that the water leakage was occurring in and around the area of the septic waste disposal system.

(37)           Mr. Crowell sent Todd Smith, a QP II with Crowell Excavating, to the site and Mr. Smith dug a test pit.  He observed that the system was malfunctioning since the effluent was not percolating properly through the soil. 

(38)           Mr. Smith reported his conclusions to Mr. Crowell.

(39)           Neither Mr. Crowell nor Mr. Smith contacted either of the Sellers directly or spoke to them concerning their conclusions, although Mr. Crowell did attempt to reach Anne Butler by telephone.

(40)           Regardless, I have no hesitation in concluding that Anne Butler knew that the water leakage problem they were having was at least associated with the septic waste disposal system.

(41)           Subsequently, Anne Butler contacted Robert Ashley, an Engineer and QP I.  Mr. Ashley has considerable experience dealing with the issue of septic system malfunctions among other qualifications. 

(42)           Mr. Ashley testified that Anne Butler called him to “have a look at the problem with the septic system”. 

(43)           Mr. Ashley met with Ms. Butler, and she explained to him that they were having a problem with water surfacing in the yard.  Mr. Ashley noticed a fairly substantial hill behind the property.  He explained to Ms. Butler the concept of hydraulic overload.  This occurs when more water is introduced into a system (such as a septic waste disposal system) than it can handle.  The water can come from various sources.  He described a septic field as being similar to a barrel, that is to say, if too much water is put into it, then one day it will overflow.

(44)           Mr. Ashley speculated that the storm water runoff from the hill behind the property might be a root cause of the problem and that it might be worthwhile to intercept the storm water and divert it away from the septic waste disposal system.

(45)           Mr. Ashley spent approximately one-half hour walking around the property with Ms. Butler.  He did not conduct a full assessment.  No further investigations were made.  He did not dig a test pit.

(46)           There were no problems reported by Ms. Butler to Mr. Ashley with respect to water backing into the house.

(47)           He explained to Ms. Butler that putting the interceptor ditches in might solve the problem. He also told her that if the storm water was the source of the problem, then putting a new septic system in would not necessarily solve the problem.

(48)           He also advised her of the estimated cost of installing a new septic system.

(49)           After this meeting he had no further contact with the Sellers.

(50)           Subsequently, the Sellers contacted a business known as “Ship To Shore” and it was again recommended to them to redirect the water away from the septic field.

(51)           In 2003, the Sellers undertook the work of diverting water away from the septic waste disposal system by a series of ditches in the manner recommended to them by Robert Ashley and Ship To Shore.

(52)           A french drain was placed at the rear of the property and connected to several ditches on the side of the property to divert storm water away from the yard.

(53)           Mr. Bennett completed his work in the spring of 2004.  The cost was significant but less than what it would have cost to replace the septic waste disposal system.

(54)           Once again, however, in the spring of 2005, the Sellers were still experiencing difficulties with water drainage problems as water was coming onto their driveway.  As a result, a second french drain was installed on the property.

(55)           Both of the Sellers testified that the drainage repairs appeared to resolve the problems considerably.  In the summer of 2004, Mr. Butler acquired a ride-on lawnmower, and he experienced no difficulty in mowing the lawn over the areas which were previously wet and marshy.

(56)           He had to use the hand mower on one area of the lawn that was too steep for him to use the ride-on mower.

(57)           The Sellers did not, at any time during their ownership of the property, notice any signs of septic system failure, such as a foul odor or a black liquid oozing out of the soil.

(58)           This is not inconsistent with Todd Smith’s evidence as, while he stated that there was a system malfunction in 2003, he could not clearly recall noticing when the test pit was dug at that time that there was any evidence of a black liquid coming up through the field, although this was evident in 2006 when Ralph Crowell was contacted by the Purchasers to examine the system.

(59)           Clearly, however, the Sellers continued to experience some further drainage difficulties, even after the initial repairs were made which led to the installation of the second drainage ditch in 2005.

(60)           In the fall of 2005, the Sellers listed their home for sale.  There were prospective purchasers but the closing fell through.

(61)           The potential Buyers at that time retained Glen Strang of AmeriSpec to conduct a home inspection.  While Mr. Strang’s report does not note any concerns with the septic system, his report does note as follows on page 7:

 “Due to the inaccessibility of the septic tank, leach field, and other components of the private sewer system,  review of the septic system is not within the scope of this inspection.”

(62)           Following the aborted sale in 2005, the Sellers carried out substantial renovations to the property, including replacement of windows which had been leaking and installation of flooring and in January 2006, re-listed the property which resulted in the within agreement with the Buyers.

(63)           At the time that the Buyers inspected the property initially, there was snow cover on the ground.  As such, any drainage problems associated with the septic waste disposal system would not have been evident upon a visual inspection of the yard.

(64)           In early June 2006, the Buyers noticed that the grass was growing taller in one portion of their yard and that the ground in that area was wet.  They contacted Ralph Crowell and Mr. Crowell again sent Todd Smith to the property to dig a test pit.

(65)           Todd Smith testified that as he noticed black material oozing through the soil, he opened up the septic field and concluded that there was system failure and that it should be replaced.

(66)           Ralph Crowell provided an estimate dated June 6, 2006, to Bob Boychuk for the following services:

(a)        QP II Service................................................................................................. $658.00

(b)        Supply material and install raise C2 disposal field with 250 gallon

settling tank - $10,650.00 + $1,597.50 HST............................................. $12,247.50

(67)           The 250 gallon tank recommended was larger than the tank which had been installed with the original system.  Mr. Crowell’s evidence was that the additional cost associated with the larger tank was $1,000.00.  Further, Mr. Crowell also testified that part of his quote included digging a further interceptor trench three feet deep which was not included as part of the original system, either, also at a further cost of $1,000.00.

(68)           I accept the evidence of Ralph Crowell and Todd Smith that there had been a complete system failure and that the septic system needed replacement as of June 2006.

(69)           The Buyers claim that the Sellers should be responsible for the cost of the septic replacement.

The Law

(70)           The principle of caveat emptor, commonly known as “Buyer Beware” applies to transactions concerning the purchase and sale of real property (Thompson v. Schofield (2005) N.S.S.C. 38, 230 N.S.R. (2d) 217, 729 A.P.R. 217).

(71)           Also, the doctrine of merger applies, that is to say, once a contract of purchase and sale has been concluded by delivery of a Deed, then the parties’ rights are merged in the Deed so that they can only look to the Deed for a remedy afterwards and can no longer rely upon the terms of the contract.  However, there are exceptions to this doctrine.  I quote from Gay v. Whelan (2006) N.S.S.C. 10, 40 R.P.R. (4^th) 78, a decision of LeBlanc J. of the Nova Scotia Supreme Court as follows at paragraph 20:

“20 There are exceptions to the doctrine of merger. The authors of Anger and Honsberger Law of Real Property refer to Di Cenzo Construction Co. v. Glassco (1978), 90 D.L.R. (3d) 127 (Ont. C.A.), at pp. 139-140:

... After the closing of the transaction, a purchaser is generally restricted to the covenants, conditions and warranties set forth in the conveyance. Apart from the conveyance, relief can only be obtained in the case of (1) fraud, (2) a mutual mistake resulting in a total failure of consideration or a deficiency in the land conveyed amounting to error in substantialibus, (3) a contractual condition, or (4) a warranty collateral to the contract which survives the closing.... Apart from these exceptional cases caveat emptor applies....”

(72)           Whether there is a collateral warranty depends upon the intentions of the parties which must be gathered from all of the circumstances.

(73)          The test for negligent misrepresentation is set out in the Supreme Court of Canada decision in  Queen v. Cognos Inc. (1993) 1 S.C.R. 87, 99 D.L.R. (4^th) 626 (S.C.C.) at page 643:

“(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 said

misrepresentations;

(4) the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and

(5) the reliance must have been detrimental to the representee in the sense that damages resulted.”

(74)          Vendors of real property must disclose latent defects which they are aware of.  The failure to disclose such latent defects may form the basis of liability against the Vendors (see Jung v. I.P., 1988 Carswell Ont. 643 (Ontario District Court).  See also Desmond v. McKinlay (2000) 188 N.S.R. (2d) 211 (N.S.S.C.).

(75)           As summarized by Justice Warner in Thompson v. Schofield at paragraph 27:

“If this court finds that the answers given in the disclosure statement, which was incorporated in the agreement, were either negligent or fraudulent misrepresentations, there is no doubt that (a) they were material, (b) they were made at the time of the entry into the contract or the agreement of sale and were relied upon, and (c) based on the law as set out in Desmond v. McKinlay at paragraphs 48 to 51, they would constitute, in addition to negligent misrepresentations, a breach of a collateral warranty and thereby constitute a breach of the agreement of sale.”

(76)           According to paragraph 3(b) of the Agreement in this case, the Property Condition Disclosure Statement forms part of same once received and accepted.

(77)           Applying the five part test in the Queen v. Cognos test, I find firstly that there is a duty of care based upon the relationship between the parties as buyers and sellers of real property (see Keirstead v. Piggott (1999) 177 N.S.R. (2d), 1 (N.S.S.C.)).

(78)           The next issue is whether the Sellers made to the Buyers a representation that is untrue, inaccurate or misleading.

(79)           The Sellers rely upon the fact that the Property Disclosure Statement contains additional comments at paragraph 11 as previously noted.  In fact paragraph 11 does contain a statement that french drains had been installed around the rear of the property in the summer of 2004 and spring of 2005.

(80)           From their perspective, however, the Buyers submit that the provisions of the Property Condition Disclosure Statement relating to the septic disposal system note no previous problems with the existing system or upgrades having been carried out to the system in the last five years.  In addition, paragraph 5 of Addendum Form 101, Schedule 4, contains a specific statement that the Seller warrants “to the best of their knowledge” that the septic disposal system is in good working order and has not presented any problems during their ownership and this warranty explicitly is stated to survive the closing.

(81)           On the whole, I find the statements in the Property Condition Disclosure Statement to be misleading to potential purchasers.  Anne Butler is a licensed Real Estate Agent.  Despite her lack of personal experience with septic waste disposal systems, she clearly was aware that the water and drainage problems they were having were related to the septic field.  She called Ralph Crowell to look at the problem.  Mr. Crowell is in the business of installing septic systems.  She told both Mr. Crowell and Mr. Ashley that they were having problems with leakage of water around the area of the septic system.  The drainage repairs were undertaken by them as a means of attempting to fix the issues they were having with their septic system.  No explanation was given concerning why the information about the french drains was noted under additional comments in the area of “Structural” in the Property Condition Disclosure Statement.  Paragraph 6A. and B. specifically refer to structural problems, unrepaired damage or leakage in the foundation, roof or walls and make no reference to problems with the septic system.

(82)           The third step of the test is to determine whether the representor acted negligently in making the representation.  I do conclude that the Vendors were negligent in making such representations in the manner in which they were made.  It would be expected of a Vendor in this case, and even more so where Ms. Butler is a licensed Real Estate Agent, to note the drainage repairs in the area in the Property Condition Disclosure Statement concerning “Sewage Disposal” which would alert potential purchasers to possible problems with the system, such that they would inquire further.  To include this information in the area of “Structural” would imply to a potential purchaser that the repairs were undertaken to deal with a problem of leakage in the foundation, roof or walls of the house.  They would not be alerted to the possible problems with the septic system which the Sellers in this case were fully aware of.

(83)           I find in this case that the Sellers were at the very least careless when preparing the Property Condition Disclosure Statement by failing to connect the drainage repairs to possible problems with the septic system.

(84)           None of the witnesses who testified, including Ralph Crowell, Todd Smith, and Rob Ashley provided evidence from which it could be concluded that the source of the problems with the septic system that the Sellers experienced were as a result of drainage issues or as a result of septic system failure, at least until the property was examined by Ralph Crowell and Todd Smith at the request of Bob Boychuk in the spring of 2006.  Thus, to place this information under the “Structural” section of the Property Condition Disclosure Statement could easily mislead a potential purchaser into believing that the aforesaid repairs concerned structural issues with the foundation, roof or walls.  This was particularly important in this case as the Sellers had in fact undertaken major structural repairs, including replacement of leaking windows before listing the property for sale.

(85)          In reaching my conclusions on this point, I have also taken into consideration that a failure to provide information may constitute a misrepresentation as much as a positive misstatement (see House of Barrs Limited v. The Toronto-Dominion Bank (1997) 43 B.C.L.R. (3d) 117 (B.C.S.C..)).

(86)          The fourth step of the test is whether the Buyers in this case relied in a reasonable manner upon the negligent misrepresentation.  Once again, I have no hesitation in finding that this is the case.  A buyer would reasonably conclude from the way that the Property Condition Disclosure Statement was prepared that the installation of the french drains was to deal with structural issues not possible problems with the sewage disposal or septic system. 

(87)           Step five of the test is clearly proven as the Buyers discovered that the system had failed entirely shortly after the snow melted from the ground. 

EXTENT OF DAMAGES

(88)           The next issue to be determined is whether the Buyers should recover the entire cost of repairs.  In that regard, I accept the submissions on behalf of the Sellers that as the quote for services by Mr. Crowell included the extra tank and ditching, totalling $2,000.00 and that these were additions to the system that was already present, that the Buyers should not be entitled to recover these amounts from the Sellers in this case.

(89)           Further, I accept the submission on behalf of the Sellers that a betterment allowance should be applied in this case.  I find as a fact that the existing system was far from a new one at the time that the Buyers purchased the home.

(90)           The purpose of a damage award in a contract case is to place the innocent party in the same position that they would have been had the breach of contract not occurred.  It has been held that such a betterment allowance may be appropriate in some cases (see Desmond v. McKinlay supra.).  I quote from Justice Wright at paragraph 62:

“However I also conclude based on the evidence that a betterment allowance should be applied against the damages figure of $17,302.28.  This is because the Plaintiff now has brand new water supply and sewage disposal systems servicing her property in contrast to what was there before.  These modern systems, which are in some respects custom designed for the property, represent a substantial betterment and it would be appropriate in my view to make an allowance for that betterment of 1/3 of the above referenced invoices which I have allowed.”

(91)           The amount of the allowance in each case should have some relation to the age of the system which the Buyers knew they were acquiring when they agreed to purchase the home at the price in question as well as all other relevant circumstances.  The home in the Desmond v. McKinlay case was 14 years old.  In this case, the home, according to the Home Inspection Report, is approximately 20 years old.  The septic system was installed at least 15 years ago according to Mr. Crowell’s evidence.  I refer to the decision of Adjudicator O’Hara of the Small Claims Court of Nova Scotia in Pettipas v. Dorion, reported at 2006 CarswellNS 549; 2006 NSSM 35.  In that case, Adjudicator O’Hara determined an appropriate betterment deduction to be 2/3 of the amount being claimed.

(92)           Based on all of the evidence, I find that a fifty percent (50%) reduction is appropriate in this case.

(93)           In conclusion the Buyers shall recover from the Sellers the following amounts in relation to the septic system:

(a)        Cost of new system................................................................................... $10,650.00

(b)        Less specific improvements from the old system.........................................   (2,000.00)

                                                                                                                                            $8,650.00

(c)        Less 50% reduction as a betterment allowance..................................... (4,325.00)

                                                                                                                              $4,325.00

(d)       HST .........................................................................................................      648.75

TOTAL................................................................................................................. $4,973.75

SUMMARY

(94)      In conclusion, the Sellers shall recover from the Buyers the following amounts:

(a)       Cost of the valve replacement.................................................................. $166.75

(b)       Damages to septic system................................................................... $4,973.75

TOTAL................................................................................................................. $5,140.50

COSTS

(95)     As both parties have had some measure of success, each party shall bear their own costs.

Dated at Dartmouth, Nova Scotia,

on February 27, 2007.                                                  ______________________________

Patrick L. Casey, Q.C., Adjudicator

                                                Form 7(c) - Order           In the Small Claims Court of Nova Scotia

Claim No: 268939

BETWEEN:

On August 29, 2006, November 8, 2006, November 9, 2006, and December 6, 2006, a hearing was held in the above matter.  The hearing was extended to January 12, 2007, for the purpose of receiving written submissions from the parties.

The following Order is made:

The Defendants shall pay to the Claimants the total sum of $5,140.50.

Dated at Dartmouth, Nova Scotia,

on February 27, 2007.                                                  ______________________________

                                                                                                Patrick L. Casey, Q.C., Adjudicator