IN
THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20100210

Docket:
L050980

Registry:
Vancouver

Between:

Lawrence
Ernest Perrault and
Jacqueline Margaret Perrault

Plaintiffs

And

The Corporation
of the District of North Vancouver,
Norman Sibson, Hazel Sibson, Sutton Group Realty Services Ltd.
carrying on business as Sutton Group West Coast Realty,
Jim Hendricks, Re/Max of Western Canada (1998) Inc.
carrying on business as Re/Max Crest Realty, Craig Clark

Defendants

Before: The Honourable Madam Justice Kloegman

Reasons for Judgment

BACKGROUND

[1]            
In the middle of the night on January 19, 2005, the plaintiffs awoke to
find that a large portion of their back yard had slid down the slope upon which
their house was built.  They later learned that the land slide had killed one
resident of a house below and seriously injured another.  The plaintiffs had
owned this property at 2175 Berkley Avenue, North Vancouver (the “Property”) for
about a year and were unaware of any geo-technical issues regarding it or
properties in the area.

[2]            
What followed the land slide can only be described as a nightmare for
the plaintiffs, who lost their home and suffered from the ire of the community.

[3]            
Consequently, the plaintiffs brought this lawsuit against the District
of North Vancouver (the “District”); the vendors, Norman and Hazel Sibson (the
“Sibsons”); the plaintiffs’ realtors, Mr. Hendricks and West Coast Realty Ltd.
and the Sibsons’ realtors, Mr. Clark and Crest Realty Ltd.

[4]            
The historical fact lying at the heart of the allegations against the
defendants is that in 1979 abnormally severe rain falls caused a mud slide
involving at least three properties in close proximity to the Property.  As a
result, residents in this area petitioned the District to investigate the slope
stability and perform any necessary remedial work.  In April, 1980 the District
sent a letter (the “Letter”) to residents in the area, including the Sibsons,
advising them that the District had authorized the commission of a report by geo-technical
engineers, but that it would not be commissioned, or at least not made public,
unless the residents agreed not to use it in any claims against the District.

[5]            
There was no evidence that the Sibsons agreed to the District’s terms. 
The District proceeded to commission the November 30, 1980 report of Klohn
Leonoss, Geo-Technical Engineers (“the Report”).  Mr. Bremner, who was the
Director of Parks and Engineering for the District at the time, testified that
a copy of the Report was kept in the Planning Department and a decision was
made to place a copy in the North Vancouver Public Library, but he was not sure
if this was done.

[6]            
Twenty-three years later, in August, 2003, Mrs. Sibson signed a
disclosure statement in which she stated that no notices or claims affecting
the Property had been received from any public body, and that she was not aware
of any structural problems with the premises.

[7]            
I was told at the outset of trial that the plaintiffs had settled with
the District.  All parties consented to a dismissal of the action against the
District and a dismissal of the District’s third party claim against the
Sibsons.  The settlement agreement dated November 28, 2005 provided that the
plaintiffs’ claim for physical damage to the Property, loss of the Property,
and future costs to maintain or repair the Property had all been settled. 
However, the plaintiffs continued to claim against  the defendant realtors and
vendors for the following damages:

[8]            
The claims against the two individual real estate agents and their
respective employers was founded in breach of contract, negligent
misrepresentation and breach of fiduciary duty.  The specific allegations could
be summarized as failing to adequately investigate the property and failing to
discover the Report or any information concerning the slope stability risks
described therein.  Further, the plaintiffs alleged that all the defendant
realtors were liable for failing to check the accuracy of the disclosure
statement provided to them by Mrs. Sibson, in particular clauses 1(j) and 2(i) wherein
she states that she had not received any notice or claim affecting the property
from any person or public body, and that she was not aware of any structural
problems.

[9]            
After the plaintiffs closed their case, the defendant realtors jointly brought
an application for a dismissal of the action against them on the basis that no
evidence had been adduced to establish the requisite standard of care of the
realtors or a breach thereof.  On January 14, 2010 I gave oral reasons for
judgment dismissing the case against all the realtors.

[10]        
The remaining claim against the vendors, Mr.
& Mrs. Sibson, was described in paragraphs 47, 49, 53, 57 and 58 of the amended
statement of claim as follows:

47.       The
Sibsons, as vendors, had a duty to disclose all latent and material
defects that could affect the health and safety of the residents and property
to the Plaintiff purchasers.

49.       The
Sibsons failed to disclose the issues of the geotechnical safety of the
Property with reckless disregard to the accuracy of the material provided to
the purchasers.  The Sibsons were aware of the issues, after having
received the [Letter] in 1980, but concealed the issue from the Plaintiffs.

53.       The
Sibsons owed the Plaintiffs a duty of care to properly disclose any and
all information they had in regard to the instability of the slope in the
Berkley/Riverside area, and in the area immediately at the rear of their
residence.

57.       The
risk presented by the District’s Slope represented a significant hazard that
was unknown to the Plaintiffs at the time they purchased the Property.  The
Plaintiffs relied upon the advice of … the Sibsons in deciding to
purchase the Property.  Had the Plaintiffs known of the hazard presented by the
District’s Slope they would not have purchased the Property.

58.       The failure of
the Sibsons … to disclose the long standing geotechnical issues in the
disclosure statement in regard to the Property constituted a misrepresentation
of the condition of the Property.

[11]        
Although the claim against the Sibsons is worded
in a variety of ways, it essentially arises out of alleged misrepresentations
and the failure to disclose material information.  In his submissions, counsel
for the plaintiffs urged upon me that the misrepresentations made by Mrs.
Sibson were fraudulent in that she deliberately, or recklessly, chose to keep
to herself material information concerning a danger to the premises.

[12]        
This submission was surprising.  Counsel never suggested
to Mrs. Sibson, while she was on the stand, that she had lied or deliberately
held back information, or that she was careless or reckless in how she had responded
to questions in the disclosure statement.

[13]        
I found Mrs. Sibson to be a very credible witness. 
She was 83 years old at the time of trial, with obvious physical ailments, but
she was completely coherent and mentally agile.  She properly conceded that the
disclosure statement was neither correct nor complete because she did not
disclose the existence of the Letter.  However, she was consistent and
believable in her testimony that she had no recollection of the Letter
whatsoever, even after it had been produced by the District in this
litigation.  She had signed the delivery slip acknowledging receipt of the
envelope with the enclosed Letter, but had no recollection of reading it or
being advised of its contents by her husband, now deceased.

[14]        
There was evidence from a neighbour, Mr. Cockle,
that Mr. Sibson had “mentioned one time about a letter he had received,
something to do about a geotechnical study”.  Mr. Cockle said that Mr. Sibson
felt it didn’t involve him so he was going to ignore it.  Mr. Cockle did not
recognize the Letter and had not seen the Report referred to therein, although
he had heard that a report had been prepared.

[15]        
Mrs. Sibson testified that she had never seen
nor heard about the Report before the litigation; no one had ever told her of
any low risk of instability of the soil; and she knew of no recommendation made
by anyone to reduce the risk of soil instability.  She and her husband had
lived on the property since 1958 without incident.  After the extreme rains in
1979 and consequential mud slide at three properties nearby, she had joined a
group of concerned residents to protest a proposed development at the bottom of
the hill.  They were concerned that shelving into a sandy hill could cause
things to shift.  They attended a meeting at District Hall where they were
shown pictures and told that the development was perfectly safe.  She never
heard much more about it.

[16]        
She also recalled that around this time, or
perhaps later, two men from the District came to look around the back yard and
take measurements.  She thought it had something to do with sewer installation
which took place subsequently.

[17]        
Mrs. Sibson testified that after 1979 there were
other years of heavy rain, but no new slides.  She and her husband felt safe. 
They were the only ones in the neighbourhood who had a retaining wall running
along their back yard.  Her husband had said it was “solid”.  Although the
retaining wall was underground, they had laid three levels of cinder block
along it above ground which were visible to anyone viewing the property.

[18]        
By the time Mrs. Sibson signed the disclosure statement
in 2003, she was 78 years old.  Her husband had been suffering from dementia
and other maladies for a couple of years prior and was finally hospitalized. 
The Sibsons’ daughter persuaded them to sell the home and move to a facility in
Langley close to where she lived.

[19]        
Mrs. Sibson testified that she sat down with her
daughter and Mr. Hendricks to fill in the disclosure statement.  She understood
that she must be honest and answer the questions truthfully.  She believed she
had done so.  She never thought about the 1979 slide in the area; she had no
recollection of any letter or report from the District.  She was not asked any
questions which might have triggered her to respond any differently.

[20]        
Her daughter testified that she herself had no
recollection of any heavy rains or mud slides in the area in 1979 (she would
have been 23 years old at the time).  She had no knowledge of any notice or
claim or report of any potential instability of property in the area.  She had
never heard her parents discuss this and there was nothing she was aware of to
raise any safety issues.  She recalled the realtor, Mr. Hendricks,
explaining the obligation to answer the disclosure statement questions honestly
with as much information as they had.  She recalled that her mother knew there
was an oil tank still on the premises, but did not know if it was capped or
not.  They spoke to their cousin, and the Fire Hall, and learned it was no
longer required so it was removed.  They did not know of anything else that
might affect the property.

[21]        
After reviewing all the evidence in this case, I
find that the plaintiffs have not established on a balance of probabilities
that the misrepresentation by Mrs. Sibson in paragraph 1(j) of the disclosure statement
was anything but an innocent one.  It is important to note that the actual
statement made by a vendor in a disclosure statement is that “the information
provided is true, based on the seller’s current actual knowledge as of
the date on page 1” [my emphasis].  I am satisfied that Mrs. Sibson
answered question 1(j) of the disclosure statement truthfully based on her
actual knowledge as at August 1, 2007 when she signed the disclosure statement. 
She had no recollection of the Letter received twenty-three years earlier and
there was no evidence that Mrs. Sibson had ever seen or heard of the Report, or
the information contained therein concerning her property.

[22]        
It is important to note that disclosure
statements are not warranties.  They are a tool of the B.C. Real Estate Board
and are helpful evidence in providing what representations were made or not
made by a seller to a buyer with respect to a particular transaction.  They do
not dictate the remedy for when a seller makes an inaccurate statement.  That
is a question of law depending on whether the misstatement is characterized as
fraudulent, negligent or innocent.  (Zaenker v. Kirk (1999), 30 R.P.R.
(3d) 9 (B.C.S.C.); Arsenault v. Pedersen, [1996] B.C.J. No. 1026
(S.C.).

[23]        
I further find that the plaintiffs have not
proved a misrepresentation based on Mrs. Sibson’s answer to question 2(i) on
the disclosure statement.  There was no evidence of any prior structural
problems with the premises and in fact, no evidence whatsoever that the 2005
land slide was caused by any structural problems with the subject property. 
The evidence of the plaintiffs was that they understood the slide had
originated at the base of the adjacent slope, not on their property.

[24]        
The plaintiffs rely on more than just the
inaccuracy of the disclosure statement to support their case.  They say that the
cumulative effect of failing to disclose the Letter with the failure to
disclose the 1979 mud slide and the concerns of residents in the area,
including the Sibsons, elevates Mrs. Sibson’s omission to a material
non-disclosure and an actionable representation.  They say that if they had been
given any of this information they would have pursued a line of inquiry which
would have led them to the Report.  They testified that if they had known about
the Report, they would not have bought the property.

[25]        
The governing rule in sales of real property is caveat
emptor – buyer beware.  The onus lies on the purchaser to satisfy himself
or herself as to the quality of the property being sold: Cardwell v. Perthen
2007 BCCA 313.

[26]        
There are exceptions to the rule of caveat
emptor. They do not include a misrepresentation innocently made.  These
exceptions are cited in at para. 23 of Cardwell v. Perthen, supra,
relying on McCluskie v. Reynolds (1998), 65 B.C.L.R. (3d) 191:

(1)        where the vendor fraudulently
misrepresents or conceals;

(2)        where
the vendor knows of a latent defect rendering the house unfit for 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 or her duty to disclose a latent defect that renders
the premises dangerous.

[27]        
I have already found that Mrs. Sibson was
neither fraudulent nor reckless in her failure to disclose the Letter or the
mud slide in the area that had occurred twenty-three years earlier.  Exceptions
(2) and (4) above deal with latent (as opposed to patent) defects rendering the
property unfit for habitation or danger.

[28]        
In Bracic v. Prior, 2003 BCSC 106 Warren
J. stated at para. 55:

The claim in
contract requires evidence to establish on a balance of probabilities that
there was a defect, that it was latent, and that it was known to the defendant.

[29]        
In my view, the plaintiffs’ submissions fail
because there was no evidence before me of any latent defect in the condition
of the Property.  There was absolutely no evidence as to what caused the land
slide, or how the condition of the Property contributed to the property damage
that ultimately took place.  There was no evidence that connected the 1979
rains, 1979 mud slide, or contents of the 1980 Letter or Report, to what
occurred in 2005.  The Report was not tendered into evidence for the truth of
its contents, but only to show that the defendants knew or should have known
that there were geotechnical concerns about slope stability in the area. 
However, the Report itself categorized the Property as “low risk of major
instability” and described it as “located well back from the crest of the slope
and outside any potential unstable zone”.

[30]        
The plaintiff’s argue that the Report disclosed
that the back yard of the Property was partially built on fill, but Mr. Bremner
testified that in general, it was not uncommon or problematic for a retaining
wall to be built on fill, if properly engineered.  It only becomes a problem
with over steepening and insufficient drainage.  There was no reliable evidence
before me that either of these conditions existed with respect to the Property
back in 1979, or in 2005.

[31]        
Perhaps the slope, or the soil conditions, or
the drainage of the Property did contribute to the land slide and these
conditions could be characterized as “defects”, but I would not presume to make
such a finding without evidence.  In fact, plaintiffs’ counsel advised me in
his opening that there would be no evidence on what caused the 2005 land slide
and he asked me to make no finding in that regard.  Unfortunately, without this
evidence, I do not see how I can find that the plaintiffs’ Property was
defective in any way.

[32]        
Furthermore, it was patently obvious to the
plaintiffs that the Property was built on a slope, the soil in the yard had
noticeably settled, and that there was a green belt in unknown condition beyond
the cylinder blocks.  The disclosure statement warns that:

the buyer must
still make the buyer’s own inquiries after receiving the disclosure statement. 
Each question and answer must be considered, keeping in mind that the seller’s
knowledge of the property may be incomplete.  Additional information can be requested
from the seller or from an independent source such as the Municipality.  The
buyer can hire an independent inspector to examine the property and/or
improvements to determine whether defects exist and to provide an estimate of
the cost of repairing problems that have been identified on the disclosure
statement or on an inspection report.

[33]        
Despite this admonition in the disclosure
statement, the plaintiffs chose to make no building or engineering inspection
of the premises, nor any searches at the District Hall.  The plaintiffs
testified that they had not asked any questions about the vendors, or why they
were selling the property, or what was beyond or beneath the cinder blocks.

[34]        
The Supreme Court of Canada, in Fraser–Reid
v. Droumtsekas, [1980] 1 S.C.R. 720, stated at p. 723 “caveat emptor
remains a force to be reckoned with by the credulous or indolent purchaser of
housing property”.  I did not find the plaintiffs to be either credulous or
indolent, quite the opposite.  Mr. Perrault had been buying and improving and
selling property for twenty-seven years, since age 19, and had completed about
thirty such transactions by the time he bought the Property.  Many of those
transactions were conducted by him without the assistance of a realtor.  It
cannot be said that he did not know the importance of independent inspection
and due diligence.  In this instance he deliberately undertook the risk of not
expending the resources of obtaining an inspector, or making further
inquiries.  He did so at his peril.  The unfortunate result cannot be laid at
the feet of the vendors.

[35]        
The plaintiffs have resolved the majority of
their damages claim with the District.  I do not need to analyze the role
played by the District in this catastrophe.  I have analyzed the legal duty of
the vendors in this situation and have concluded that they cannot be held
liable to the plaintiffs in contract or in tort.

[36]        
The action is dismissed against the defendant
Sibsons, and, subject to the Supreme Court Rules, the defendants are entitled
to their costs.

“The Honourable Madam Justice Kloegman”