



COURT OF APPEAL FOR BRITISH COLUMBIA




Citation:



Nixon v. MacIver,









2016 BCCA 8




Date: 20160111

Docket: CA41765

Between:

William Nixon and
Carol Nixon

Appellants

(Plaintiffs)

And

Marsali MacIver

Respondent

(Defendant)






Before:



The Honourable Madam Justice Saunders

The Honourable Madam Justice D. Smith

The Honourable Madam Justice MacKenzie




On appeal from:  An
order of the Supreme Court of British Columbia, dated March 28, 2014 (
Nixon
v. MacIver
, 2014 BCSC 533, Kelowna Docket No. S68661).




Counsel for the Appellant:



T. McCaffrey





Respondent Appearing in Person:



M. MacIver





Place and Date of Hearing:



Vancouver, British
  Columbia

October 29, 2015





Place and Date of Judgment:



Vancouver, British
  Columbia

January 11, 2016









Written Reasons by:





The Honourable Madam Justice D. Smith





Concurred in by:





The Honourable Madam Justice Saunders





The Honourable Madam Justice MacKenzie








Summary:

The appellants were looking
to purchase a house that was five to six years old. They entered into a
contract of purchase and sale with the respondent that included a property
condition disclosure statement. The disclosure statement included a question as
to the age of the roof. The respondent answered it was six years old. The
contract also contained a subject clause for the benefit of the appellants that
required them to obtain a professional home inspection before completing the
purchase. The appellants waived the clause. After the purchase completed, the
appellants learned that six years earlier the house had been constructed by
incorporating a cabin from elsewhere into a newly constructed foundation and
lower level, and that the roof of the cabin was not replaced when the lower
level was roofed. The respondent experienced no problems with the roof. The
appellants commenced the underlying action, seeking rescission of the contract
or alternatively damages for fraudulent misrepresentation, negligent
misrepresentation and breach of contract. The trial judge dismissed their
claims. On appeal, the appellants submitted the judge made errors of fact and
law that affected his disposition of their claims.

Held: Appeal
dismissed. The respondent considered the house to have been constructed six
years prior, assumed a new roof had been placed over the whole of the new
structure at that time, and experienced no problems with the roof. The doctrine
of caveat emptor applies in B.C., subject to exceptions, one of which is the
duty on vendors to disclose latent defects which render the property dangerous
or uninhabitable. No latent defects existed therefore caveat emptor applied and
the purchaser bore the risk for any defects in the quality of the property. As
to disclosure statements, vendors are only obliged to disclose their current
knowledge of the state of affairs of the property in order to put prospective
purchasers on notice of any current known problems. They do not have to provide
detailed comments beyond their answers to the specific question posed. The judge
found the respondent honestly answered the question with respect to the age of
the roof based on her actual knowledge of the current state of affairs and thus
she fulfilled her obligation.

Reasons for Judgment of the Honourable
Madam Justice D. Smith:

Overview

[1]

The appellants, William and Carol Nixon, were in their 60s and looking
to buy a house that was no more than five or six years old. On May 30, 2004,
they entered into a contract of purchase and sale with the respondent, Marsali
MacIver (the Contract). Ms. MacIver owned residential property at
Killiney Beach in a rural area in the Regional District of Central Okanagan. On
the property was a house. The MLS listing described the house as having been
built in approximately 1998. The Contract incorporated a property condition
disclosure statement (PCDS) that was completed by the respondent. In answer
to a question on the age of the roof, the respondent indicated six years. The Contract
was also subject to the condition that the appellants obtain a professional
home inspection before completing the purchase. They chose not to do so and
deleted that subject clause before executing the Contract.

[2]

After they took possession, the appellants had issues with the house. In
particular, they learned that the owners previous to the respondent had built
the house in 1998 by incorporating an older cabin from elsewhere into to a
newly constructed foundation and lower level. The cabin was placed on top of
the lower level and became the second floor of the home with half the footprint
of the lower level.

[3]

On June 30, 2005, the appellants commenced the underlying action against
the respondent and the realtor. In the action they applied for rescission of
the Contract or alternatively damages for fraudulent misrepresentation,
negligent misrepresentation, and breach of contract. They alleged Ms. MacIver
deliberately concealed what they claimed were latent defects in the house and
that she misrepresented the age of the home and the age of the roof.

[4]

There were extensive delays in their prosecution of the action. Twice
the appellants amended their pleadings. In due course they settled with the
realtor. On September 10, 2013, a five-day trial commenced before Mr. Justice
Betton. At its conclusion, the judge found the appellants had failed to prove
any of the essential factual assertions necessary to establish their claims and
he dismissed all of them. See
Nixon v. MacIver,
2014 BCSC 533.

[5]

On appeal, the appellants submit the judge made errors of fact and law that
affected his disposition of their claims. The respondent submits the judge made
none of the errors alleged and correctly found that she had fulfilled her
obligations under the Contract. I am of the view that for the reasons below,
the appeal should be dismissed.

Background

[6]

The respondent purchased the property from Ron and Nalda Hughes in 2000.
In 1998 the Hughes began the process of constructing a house on the property.
The trial judge described that process as follows:

[4]        The project involved
moving a seasonal dwelling or cabin from another location in the general vicinity
of the Property and incorporating it into the construction of a larger home. In
very general terms, the construction involved building a foundation and lower
floor onto which the cabin was placed. The cabin essentially became the
second/upper floor of the new structure.

[7]

The new structure included the foundation and first floor (sometimes
referred to as the basement or lower level) with the incorporated cabin as
the second floor. The cabin was of unknown age. Its footprint was about half
the size of the habitable area of the final structure. A new roof extended over
the newly constructed lower level. The roof over the incorporated cabin was not
replaced. The new structure was completed in 1999. After obtaining all the
necessary permits and inspections, the Hughes took occupancy in July 1999.

[8]

In 2000 the Hughes sold the property to the respondent. She was a first
time owner. During the course of their dealings, the Hughes provided the
respondent with a December 3, 1998 appraisal of the property. The
appraisal included a notation that estimated the year the house was built as 1993/Bsmt.
1998; the effective age of the house as 5 years; and under comments noted:
Cabin moved [on]to new concrete foundation and basement fully developed with
good quality workmanship and materials. Average services and extras for the area.
House in good condition.

[9]

The respondent testified that she bought the two-storey, two bathroom
house knowing that a cabin had been moved to the property and incorporated into
the construction of the final house. She said that she considered the house to
have been built in 1998 and assumed the entire structure had received a new
roof at that time. She described the house as a lovely little place, that was
well-built, and in which she was very happy. She said that she experienced no
problems with the house or with the roof. Other witnesses, including Mr. Nixon,
observed that all of the roofing appeared to be of the same age and condition. In
2003 she listed it for sale and listed it again in 2004. Her listing agent on
both occasions was David Deshane.

[10]

Mr. Deshane was familiar with the property including the interior
of the home. He had viewed it before the 2004 listing on at least ten occasions.
He described the property as a very pretty place, very nicely situated on a
nice piece of land adjacent to the beach in a very quiet, attractive
neighbourhood. He described the house as very clean, but [having] a lot of
incomplete items such as kitchen cabinets, unfitted countertops, and lack of
covering over the plumbing cleanouts. He observed no differences between the
upper and bottom levels of the house.

[11]

In the MLS listing, Mr. Deshane noted that the dwelling was built
in 1998 approximate. He based that on information he said was provided to him
by the respondent and that he verified through the MLS system. No evidence was
led on his discussion with the respondent on the age of the home or the nature
of his inquiries with the MLS system. He explained that he inserted the word
approximate as a matter of practice because frequently there is a window of
time between the start of a construction project and the issuance of the final
occupancy permit.

[12]

On cross-examination, the respondent agreed that she had reviewed the information
in the MLS listing and confirmed that it was correct. She testified that she
told the appellants that a cabin had been incorporated into the larger structure
however the appellants denied they were so advised. The judge made no finding
on that disputed evidence.

[13]

The appellants viewed the property on two occasions before executing the
Contract. They did not obtain a professional home inspection and deleted the
clause in the Contract that expressly required one before executing the
Contract. The trial judge found that the appellants were satisfied with the
property, stating:

[19]      Mr. Nixon was
satisfied that the overall presentation of the Property was consistent with his
expectations regarding age. He concluded from viewing that everything appeared
to support the indication that the home was six years old and that it was
well-built. He described it as very appealing and what we were looking for.
He specifically noted that the roof appeared to be a six year old roof noting
that the top part of the roof was not visible without using a ladder.

[14]

A day after taking possession, the appellants discovered a set of
blueprints for the 1998 construction of the house. The plans indicated that a foundation
was constructed, on top of which a lower floor was built and the older cabin was
placed
in specie
onto the lower level of the new structure. The plans
also indicated that a new roof had been installed on the lower level addition
that extended beyond the second level, but not over what had been the cabin. This
led the appellants to investigate the files in the possession of the regional
district relating to the property. Their investigation confirmed that the
second floor of the house was an older cabin that had been incorporated into
the larger newer structure.

[15]

The appellants also had complaints about the condition of the house,
which they attributed to the incorporation of the cabin into the construction
of the residence. At trial, considerable time was spent reviewing these
complaints, all of which the judge found were patent defects that would have
been discoverable had the appellants undertaken a professional home inspection
before executing the Contract. Applying the doctrine of
caveat emptor,
which
I shall discuss further below, the judge dismissed the appellants claims with
respect to these problems and no appeal is taken from those findings.

[16]

In the action the appellants claimed that the respondent deliberately
concealed, and fraudulently or alternatively negligently misrepresented, the
age of the house and the roof. They applied for rescission of the Contract or
in the alternative damages for misrepresentation and breach of contract.

[17]

The judge dismissed the claim with respect to the age of the house. He found
that the reference in the MLS listing to the house having been built in 1998
was not untrue, inaccurate or misleading. He stated:

[75]       At its completion,
the residence was an entirely different structure in size and appearance from
the cabin that it incorporated. It was an entirely new structure on the
Property. It was not untrue, inaccurate or misleading to use the year 1998 as
the year built. The inclusion of the word approximate only strengthens this
conclusion. It does not matter what Mr. Deshanes reasons for including
the word approximate were since they were not known to the plaintiffs or the
defendant. That is the year in which the structure as it exists today was, in
fact, built. That is not to say that it would be unreasonable to describe the
year built differently, but a failure to do so is not fraudulent or negligent.

[18]

The judge went on to find that, in any event, it was Mr. Deshane,
not the respondent, who made the statement in the MLS listing that the house
was built in approximately 1998, based on his inquiries with the respondent and
the MLS system.

[19]

The judge also rejected the appellants claim that the respondent had a
positive obligation to disclose in the PCDS that the house had been constructed
by the incorporation of an older cabin into a newer structure. He found there was
no obligation on the respondent to disclose this information as it was not
specifically requested for in the PCDS. On this issue he explained:

[81]      In my view, to impose
such an obligation would be to drastically and inappropriately alter the law
that has developed regarding the PCDS and in respect of sales of real property
generally. The general principle of
caveat emptor
referred to above
would essentially be replaced by an obligation on the part of vendors to
articulate every conceivable issue that might exist in respect of a property.

[20]

He also noted that the appellants had not asked the respondent any
questions about the construction of the house and had made no inquiries of the
regional district about the property and its residence in advance of their
purchase.

[21]

Last, the judge found that the respondent did not knowingly misrepresent
the age of the roof in the PCDS as six years, as she honestly believed that
statement was an accurate statement at the time she made it (at para. 97).
This finding followed from the judges finding that the respondent reasonably believed
that the house she purchased from the Hughes in 2000 was constructed by them in
1998.

Issues on appeal

[22]

The appellants advanced the following grounds of appeal:

1.       The
trial judge erred in law in failing to conclude that the respondent negligently
or fraudulently misrepresented the age of the dwelling;

2.       The
trial judge erred in law by failing to conclude that the respondent
misrepresented by omission, either negligently or fraudulently, material
information with respect to (i) the age of the cabin that was incorporated
into the newer structure, or (ii) that the older cabin was moved to the
property where it was incorporated into the newer construction; and

3.       The trial
judge erred in fact and law by not concluding that the respondent breached the
Contract by misrepresenting the age of the roof on the dwelling as being six
years old.

Discussion

[23]

At the heart of this dispute, in my view, is the characterization of the
house that was constructed by the Hughes in 1998.

[24]

The trial judge found as a fact that when the respondent purchased the
house in 2000, she viewed the integrated house that was completed in 1999 as a
new structure, that she made no inquiries about the age of the cabin roof as
she didnt care, and that she assumed the roof was about six years old when
she completed the PCDS in 2004. The judge found that the respondents perception
of the age of the house when it was constructed was a reasonable one.

[25]

The appellants say this finding amounts to a palpable and overriding
error of fact because it ignores or gives insufficient weight to the
incorporation of the older cabin into the newer structure. If the house had
been properly characterized as a mixture of old and new, the appellants submit the
judge would have had to find that the statement in the MLS listing, that it was
built in approximately 1998, amounted to a negligent or fraudulent
misrepresentation. Similarly, they submit the respondent misrepresented the age
of the roof as six years, when it was in part six years (in 1998) and in part
substantially older (being the unknown age of the cabin).

[26]

With respect, I cannot agree. A structure is variously defined as the
arrangement of and relations between the parts of something complex, and a
building or other object constructed from several parts (
The Concise Oxford
English Dictionary
(2008), 11d ed. at 1431).

[27]

The trial judge accepted the respondents evidence that she considered
the house to have been constructed by the Hughes in 1998 as before that date
there was no house on the property. Over the following year, the Hughes assembled
together several parts to create the house that now sits on the property. The
fact that the integrated house included some old and some new parts did not
detract from the judges finding that the final structure was a dwelling that
was constructed between 1998 and 1999. In my view, there was an evidentiary
basis for this finding and for the judges finding that the respondent honestly
believed the house was built in 1998.

[28]

Similarly, the judge accepted the respondents evidence that she assumed
that the Hughes had placed new roofing over the whole of the completed
structure. The age of the roof was not an issue for her when she purchased the
house. She said she didnt care about the roof, had never experienced any
problems with it and made the assumption that it was of a similar age as that
of the house. This evidence was accepted by the judge and provided the evidentiary
basis for his finding that the respondents statement in the PCDS regarding the
age of the roof was honestly held.

[29]

In my respectful view, the appellants are unable to demonstrate any palpable
and overriding error with respect to either of these findings, both of which
are grounded in evidence accepted by the judge. Accordingly, both are entitled
to deference.

[30]

This brings me to the novel aspect of the appellants claims, namely
that there was a positive obligation on the respondent when completing the PCDS
to include comments about the property that extended beyond the specific
questions in the disclosure statement.

The
doctrine of caveat emptor and the obligation to disclose

[31]

The doctrine of
caveat emptor
was colourfully summarized
by Professor Laskin (as he then was) in Defects of Title and
Quality:
Caveat Emptor
and the Vendors Duty of Disclosure in Law
Society of Upper Canada,
Contracts for the sale of land
(Toronto: De
Boo, 1960) at 403:

Absent fraud,
mistake or misrepresentation, a purchaser takes existing property as he finds
it, whether it be dilapidated, bug-infested or otherwise uninhabitable or
deficient in expected amenities, unless he protects himself by contract terms.

[32]

The leading decision on the maxim is
Fraser-Reid
v. Droumtsekas
(1979), [1980] 1. S.C.R. 720 at 723,
in which Mr. Justice Dickson (as he then was) recognized the continuing
application of the doctrine of
caveat emptor
to the sale of land:

Although the
common law doctrine of
caveat emptor
has long since ceased to play any
significant part in the sale of goods, it has lost little of its pristine force
in the sale of land. In 1931, a breach was created in the doctrine that the
buyer must beware, with recognition by an English court of an implied warranty
of fitness for habitation in the sale of an
uncompleted
house. The
breach has since been opened a little wider in some of the states of the United
States by extending the warranty to
completed
houses when the seller is
the builder and the defect is latent. Otherwise, notwithstanding new methods of
house merchandising and, in general, increased concern for consumer protection,
caveat emptor
remains a force to be reckoned with by the credulous or
indolent purchaser of housing property. Lacking express warranties, he may be
in difficulty because there is no implied warranty of fitness for human
habitation upon the purchase of a house already completed at the time of sale.
The rationale stems from the
laissez-faire
attitudes of the eighteenth
and nineteenth centuries and the notion that a purchaser must fend for himself,
seeking protection by express warranty or by independent examination of the
premises. If he fails to do either, he is without remedy either at law or in
equity, in the absence of fraud or fundamental difference between that which
was bargained for and that obtained.

[33]

The doctrine continues to apply to real estate transactions in this
province, subject to certain exceptions: fraud, non-innocent misrepresentation,
an implied warranty of habitability for newly-constructed homes, and a duty to
disclose latent defects.

[34]

A vendor has an obligation to disclose a material
latent
defect
to prospective buyers if the defect renders a property dangerous or unfit for
habitation. A latent defect is one that is not discoverable by a purchaser
through reasonable inspection inquiries. See
McCluskie v. Reynolds
(1998), 65 B.C.L.R. (3d) 191 (S.C.),

and
Cardwell et al v.
Perthen et al,
2006 BCSC 333 [
Cardwell SC
]
,
affd 2007 BCCA
313 [
Cardwell CA
]
.

[35]

In
McCluskie
, the plaintiffs had purchased
a waterfront property from the defendants. Two years later, during a rainstorm,
a steep slope behind the house collapsed causing significant damage to the
house. The plaintiffs brought a claim against the defendants alleging, in part,
that the defendants had breached their duty to disclose the condition of the
slope.

[36]

In her reasons for judgment, Madam Justice Bennett
(as she then was), relying on
McGrath v. MacLean
(1979), 22. O.R. (2d)
784 (Ont. C.A.)

and
Tonys Broadloom & Floor Covering Ltd. v. NMC
Canada Inc.
(1997), 141 D.L.R. (4th) 394 (Ont. C.A.), reviewed the law of
caveat
emptor
and its various exceptions:

46        The rule that the buyer must beware is not
unassailable, however. For example, it has repeatedly been noted that the
doctrine of
caveat emptor
will not apply in cases of fraud or reckless
disregard for the truth of representations. In
Allen v. McCutcheon
(1979), 9 R.P.R. 191 (B.C. S.C.) for example, the court stated:

The rule of
caveat emptor
does not apply where, as
here, the latent defects were actively concealed by the vendors.



49        Between innocent misrepresentation, however, and
active concealment, there lie the possibilities of negligent misrepresentation,
or reckless disregard for the truth. The authorities also indicate that where
the vendor fails to disclose a latent defect that could prove dangerous, he
will be found liable.



53        In conclusion on this point, the authorities with
which I have been presented suggest that the doctrine of
caveat emptor
will not operate to deny the plaintiff's recovery in the following situations:

1. where the vendor fraudulently
misrepresents or conceals;

2. where the vendor knows of a
latent defect rendering the house unfit for human habitation;

3. where the vendor is reckless as
to the truth or falsity of statements relating to the fitness of the house for
habitation;

4. where the vendor has breached
his duty to disclose a latent defect which renders the premises dangerous.

54        In conclusion, I find
that although the law of vendor and purchaser has long relied on the principle
of
caveat emptor
to distribute losses in real estate cases, the rule is
not without exception. Two major exceptions are in the case of fraud, and in
cases where the vendor is aware of latent defects which he does not disclose.
The law also supports the imposition of a duty to disclose latent defects on
the vendor where he is not subjectively aware of those defects, but where he is
reckless as to whether or not they exist. It is up to the plaintiff to prove
this degree of knowledge or recklessness.

[37]

Bennett J. concluded that the instability of the
slope was a latent defect, which had the potential, and indeed proved, to be
dangerous, and that the defendants had breached their duty to the purchasers
in failing to disclose this defect (at para. 55). Mr. Reynolds dual
identity as both the vendor and the builder was key to her finding of liability
(at para. 55). Although Ms. Reynolds was also a vendor, Bennett J.
did not hold her liable for a breach of the duty to disclose the condition of
the slope as she was not a builder and it had not been established that she
knew or ought to have known that the slope stability was a problem.

[38]

In
Cardwell SC
, the plaintiffs purchased
a property from the defendants. The defendant had substantially renovated the
residence prior to sale. The plaintiffs did not undertake an inspection. Soon
after taking possession, the plaintiffs discovered numerous problems, including
leaks, mould, and faulty retaining walls. After selling the property for a
loss, the plaintiffs brought a claim against the defendants for breach of
contract, fraud, and negligent misrepresentation.

[39]

In her reasons for judgment, Madam Justice Ballance,
relying on
Fraser-Reid,
held that
caveat emptor
continues to endure
with validity and effect in allocating responsibility between a vendor and
purchaser in the context of the purchase and sale of real property (at para. 119).
She then considered whether the defects complained of were patent or latent,
and whether the defendants had a duty to disclose latent defects. Citing
McCluskie,
she set out the following exceptions to the doctrine of
caveat emptor
:

[121]    Although on its face
caveat emptor
appears to
offer a vendor a complete defence to any claims made by a purchaser regarding
defects in the property (absent specific contractual terms), the doctrine has
been attenuated by a number of exceptions. Circumstances where
caveat emptor
will not operate to deny a plaintiff recovery were summarized by Bennett J.
in
McCluskie v. Reynolds
(1998), 65 B.C.L.R. (3d) 191, 19 R.P.R. (3d)
218 (S.C.) [
McCluskie
]:

1.     where the vendor fraudulently
misrepresents or conceals;

2.     where the vendor knows of a
latent defect rendering the house unfit for human habitation;

3.     where the vendor is reckless as
to the truth or falsity of statements relating to the fitness of the house for
habitation;

4.    where the vendor has breached his
duty to disclose a latent defect which renders the premises dangerous.

[40]

Ballance J. distinguished latent and patent defects,
stating:

[122]    The distinction between
patent and latent defects is central to a vendors obligation of disclosure
under the doctrine. Patent defects are those that can be discovered by
conducting a reasonable inspection and making reasonable inquiries about the
property.The authorities provide some guidance about the extent of the
purchasers obligation to inspect and make inquiries. The extent of that
obligation is, in some respects, the demarcation of the distinction between
latent and patent defects.
In general, there is a fairly high onus on the
purchaser to inspect and discover patent defects. This means that a defect
which might not be observable on a casual inspection may nonetheless be patent
if it would have been discoverable upon a reasonable inspection by a qualified
person:  [citations omitted]. In some cases, it necessitates a purchaser
retaining the appropriate experts to inspect the property
... [Emphasis added.]

[41]

She added:

[128]    Every
imperfection or deficiency which a reasonably careful inspection and inquiry
will not reveal cannot amount to a latent defect of the kind capable of
displacing the doctrine of
caveat emptor
. In order to qualify as such,
the defect must carry with it a consequence of substance
;
that is, it
must be of such a nature as to render the house uninhabitable or dangerous:
McCluskie
.
Beyond that, the vendor has no obligation to disparage his own property.

[42]

In the result, Ballance J. found that the vendor
knew or was utterly reckless as to whether his sub-standard construction would
cause moisture, rot and mold problems rendering the home unfit for human
habitation and, as to the mold, unsafe (at para. 131). She characterized
the remainder of the deficiencies complained of by the purchasers as patent
defects, i.e., ones that could have been discoverable upon a reasonable
inspection and making reasonable inquiries (at para. 133).

[43]

On appeal, this Court agreed with the Ballance
J.s articulation and application of the legal test for distinguishing between
patent and latent defects (at para. 34). Writing for the Court, Madam
Justice Levine observed:

[48]      The
cases make it clear that the onus is on the purchaser to conduct a reasonable
inspection and make reasonable inquiries. A purchaser may not be qualified to
understand the implications of what he or she observes on personal inspection;
a purchaser who has no knowledge of house construction may not recognize that
he or she has observed evidence of defects or deficiencies. In that case, the
purchasers obligation is to make reasonable inquiries of someone who is
capable of providing the necessary information and answers. A purchaser
who does not see defects that are obvious, visible, and readily observable, or
does not understand the implications of what he or she sees, cannot impose the
responsibility  and liability  on the vendor to bring those things to his or
her attention.

[44]

Levine J.A. also referred to the four exceptions
to
caveat emptor
as summarized by Bennett J. in
McCluskie
(at para. 23).
In the result, the Court upheld the trial judges finding of liability against
the respondent because the defects and deficiencies the appellants complained
of were undisclosed dangerous latent defects which they were obliged to
disclose.

[45]

In
Wescan Enterprises v. Burnaby (City of)
,
2006 BCSC 1978 [
Wescan SC
], affd 2007 BCCA 517 [
Wescan CA
], the
purchaser bought a lot as is from the City of Burnaby. When it began to clear
the land for construction, the purchaser discovered a ravine and stream near
the rear of the lot. Madam Justice MacKenzie (as she then was), citing
Cardwell
SC
and
McCluskie
, found that the ravine was not a defect, and that,
even if it was, it was a patent defect that could have been discovered by [the
purchaser] on reasonable inspection of the property (at para. 38). She
also found that the presence of the ravine did not displace the maxim
caveat
emptor
because the defect did not render the property uninhabitable or
dangerous (at para. 49).

[46]

The purchaser appealed on three grounds
submitting the judge erred in finding that: (i) the ravine was a patent
defect; (ii) the heavy water flow or stream was a patent defect; and
(iii) these defects did not render the property uninhabitable or
dangerous. The Court dismissed the appeal finding that the trial judge correctly
articulated and applied the legal tests with respect to latent and patent
defects.

[47]

In summary, the doctrine of
caveat emptor
remains very much alive in the context of real estate transactions in BC:
Fraser-Reid
;
Cardwell CA
;
Wescan CA
. In general, purchasers bear the risk of defects
in the quality of a property. Liability for this risk may shift to the vendor
where there is established: (i) a breach of contract; (ii) active
concealment (i.e., fraud); (iii) non-innocent misrepresentation; or (iv) an
implied warranty of habitability in the case of newly-constructed homes.
Liability for this risk may also shift where latent defects are established that
render a property dangerous or uninhabitable. In short, a vendor has a common
law duty to disclose: (i) a latent defect that is not discoverable through
a reasonable inspection or through reasonable inquiries; and (ii) the latent
defect renders the property dangerous or unfit for habitation. If a defect does
not render a property dangerous or uninhabitable,
caveat emptor
applies
regardless of whether the defect in question is patent or latent.

Disclosure statements

[48]

Information contained in a disclosure statement
that is incorporated into a contract of purchase and sale may be a
representation upon which a purchaser can rely:
Ward v. Smith,
2001 BCSC
1366 at para. 31. However, a vendor is only obliged to disclose his or her
current actual knowledge of the state of affairs of the property to the extent
promised in the disclosure statement and need say no more than that he or she
is or is not aware of problems:
Arsenault v. Pederson,
[1996] B.C.J.
1026 (QL) (S.C.) at para. 12. In other words, the vendor must correctly and
honestly disclose his or her actual knowledge, but that knowledge does not have
to be correct. A vendor is not required to warrant a certain state of affairs
but only to put prospective purchasers on notice of any current known problems.
The purpose of a disclosure statement is to identify any problems or concerns
with the property, not to give detailed comments in answer to the questions
posed. See
Anderson v. Kibzey,
[1996] B.C.J. No. 3008 (QL) (S.C.)
at paras. 13-14;
Zaenker v. Kirk
(1999), 30 R.P.R. (3d) 9
(B.C.S.C.) at para. 19;
Kiraly v. Fuchs,
2009 BCSC 654 at paras. 47,
49; and
Roberts v. Hutton,
2013 BCSC 640 at para. 83.

Application to this case

[49]

In this case, the judge found no latent defects
with the property and applied the doctrine of
caveat emptor
to the
alleged patent defects (which finding is not under appeal). With respect to the
PCDS, the judge found the respondent answered the question on the age of the
roof based on her actual knowledge of the current state of affairs. The judge
accepted her evidence that she understood the age of the roof to be six years
and therefore any misrepresentation on that matter was an inadvertent and
innocent one.

[50]

Here the PCDS only promised that the information
provided is true based on Ms. MacIvers current actual knowledge as of the
date of the statement. Given that language, there was no positive obligation on
the vendor to disclose information that may be relevant to a purchaser if that
information was not directly responsive to one of the specific questions in the
PCDS, provided the information did not relate to a latent defect that rendered
the property dangerous or unfit for habitation.

Disposition

[51]

In the result, I would dismiss the appeal.

The
Honourable Madam Justice D. Smith

I AGREE:

The Honourable Madam Justice
Saunders

I AGREE:

The Honourable Madam Justice
MacKenzie


