Civil Procedure – Evidence Credibility
Civil Procedure – Evidence – Expert Evidence
Real Estate – Sale of Building – Caveat Emptor
Real Estate – Sale of Building – Failure to Disclose Defect – Patent or Latent Defect
Real Estate – Sale of Building – Misrepresentation – Fraudulent – Negligent
The plaintiff purchased an apartment building from the defendant in 2007. The building ended up having serious structural problems and had to be demolished. The accepted offer was subject to numerous conditions. The plaintiff received reports that the roof was good. The deficiencies noted that a phase one environmental study resulted in a reduction in the purchase price. The renovations started on the top floor, where increasing amounts of damage were discovered. The plaintiff said that he was not aware of the repair history of the building prior to purchase and thought that the reduction in purchase price would cover all repairs. The defendants objected to the plaintiff’s expert report on the basis that it was not based on assumptions but rather based on reports that were not in evidence. The third parties in the action were the property manager and real estate company. The property manager testified that after roof repairs in 2005 there were no further roof leaks, although some leaks had occurred due to other difficulties with the eaves. The issues were: 1) credibility; 2) if the doctrine of caveat emptor was still in force; 3) if the property was defective, and, if so, was the nature of the defect latent or patent; 4) if any misrepresentations were made to the plaintiff and, if so, by whom were they made and were they negligent or fraudulent; 5) if liability on the part of the defendants was established, were the third parties liable to the defendants; 6) if the plaintiff sustained loss or damage; and 7) what the proper cost award was.
HELD: The plaintiff’s action was dismissed. The issues were dealt with as follows: 1) the court concluded that the plaintiff was not credible and his testimony was given little or no weight; 2) Saskatchewan courts have held that caveat emptor continues to exist and apply. There are four general exceptions to the application of the principle; 3) there were defects with the building. The plaintiff ignored or minimized the reports prior to closing. The moisture and mold issues were patent defects, not latent ones. There was visible water damage. Caveat emptor applied to the patent defects; it was the plaintiff’s responsibility to detect the patent defects. If the defects were latent the court determined that defendants did not have actual knowledge of the extent of the issues with the building. The plaintiff failed to prove on a balance of probabilities that the defendants, and third parties, had knowledge as to the existence and extent of the moisture and mold issues in the building; 4) the contract of purchase and sale included terms that there were no other representations, warranties, guarantees, promises, or agreements and that the plaintiff was purchasing the building as it stood. The exclusion clause could be a defence to the plaintiff’s contract claim, but it was found not to prohibit the tort claim for negligent misrepresentation. The plaintiff claimed the manager made four representations: a) the building had a new roof. The plaintiff inspected the roof and relied on professional inspections, all prior to closing. The plaintiff was aware of the state of the roof; b) the 2007 water damage was not due to the eaves trough problem. The defendants and third parties did believe that the problems were caused by the eaves trough; c) the building was in good shape. The manager’s statement was mere trade puffery; and d) the manager would buy the building if he was not so busy. The court found the statement to be “talking up” a product much the same as the statement that the building was in good shape. The court then reviewed the five elements of negligent misrepresentation. A special relationship existed between the parties. None of the representations were untrue, inaccurate, or misleading. The plaintiff did not prove that it relied on the negligent representation. The court drew an adverse inference with respect to the plaintiff not tendering evidence of the other reports. If there was any reliance on the statements it was not reasonable in the circumstances; 5) if there were misrepresentations leading to the defendants’ liability, the court indicated that it would have no hesitation in also ordering indemnity as against the third parties, the manager and the real estate company; 6) the plaintiff never actually suffered any damages himself because he did not put any money into the purchase, but rather obtained money for the purchase from investors pursuant to a joint venture agreement. The plaintiff could not rely on rule 2-1(1) of The Queen’s Bench Rules because that was aimed at personal representatives and trustees. The joint venture agreement did not create a trust. Further, for a claim pursuant to rule 2-1 to succeed the claim had to be brought in a representative capacity. The plaintiff was also found to have failed to prove the damages alleged to be suffered; and 7) the issue of costs was reserved.