Claim No: 414151
IN THE SMALL CLAIMS COURT OF NOVA SCOTIA
Cite as: MacIntyre v. Prosser, 2013 NSSM 31
BETWEEN:
MARIE ALAYNE MacINTYRE
Claimant
- and -
ALAN JOHN PROSSER and JUDY LYNNE PROSSER
Defendants
REASONS FOR DECISION
BEFORE
Eric K. Slone, Adjudicator
Hearing held at Dartmouth, Nova Scotia on May 21, 2013
Decision rendered on June 18, 2013
APPEARANCES
For the Claimant self-represented
For the Defendants self-represented
BY THE COURT:
1 The Claimant is seeking $6,894.25 as compensation for what she claims to be a defective solar hot water system which was included in the purchase of her home in Fletcher’s Lake, Nova Scotia.
2 The Claimant purchased the home from the Defendants by way of an Agreement of Purchase and Sale dated November 16, 2012. The agreement contained a standard inspection clause, allowing the buyer to terminate the contract in the event she was not satisfied with the home inspection. Indeed, the home was inspected on November 19, 2012 and a comprehensive report was generated. The inspector specifically noted that an inspection of the solar panels and associated elements was beyond the scope of his inspection. He recommended that an expert in that field be contacted. The Claimant chose not to do anything further at that time and the agreement became firm. The transaction closed on December 7, 2012.
3 The Claimant demonstrated to the court some understanding that the principal of caveat emptor - as pleaded by the Defendants - might stand in the way of her questioning the adequacy of the solar system. It is her position that caveat emptor does not apply because there was an express misrepresentation by the Defendants, which induced her into a belief that the solar system was as advertised, and which convinced her to buy the home. Although not expressed in precisely these terms, she is relying on the legal principle that any misrepresentation that induces a party to enter into a contract, stands apart from the contract itself and is potentially actionable either in tort, or as a separate, collateral contract.
The expert evidence issue
4 Early in the trial, the Claimant sought to introduce as evidence a report which she had commissioned by an expert with the company Creative Solar. I became concerned because this report had not been shared with the Defendants in advance, and the author of the report was not present in court to be cross examined. I immediately stopped the proceedings and had a discussion with both parties about how the matter should proceed. Both parties were unrepresented by legal counsel, and I had a concern that the requirements of natural justice not be sacrificed for expediency.
5 The Defendants did not immediately object to the introduction of this report, but I did not accept this position lightly as it would have been unfair to take advantage of their apparent lack of understanding about how expert evidence is dealt with in the courts. By the same token, I was not prepared simply to refuse to accept the report, since it was critical to the Claimant’s case. I accordingly directed that at the option of the Defendants, the matter would be adjourned to a future date with enough time for them to commission their own report, if so advised, and with a direction to the Claimant to bring the author of the report to the court to be properly qualified as an expert and to be cross examined. I gave the Defendants the further option of accepting the report and allowing the trial to continue, at the risk that this would be the only expert evidence before me. We took a short recess so that the Defendants could consider their options.
6 At the conclusion of the recess, the Defendants indicated that they wished to go ahead that evening and not to have the matter adjourned. As such, the report was admitted and stands uncontested, except to a small extent by some of the evidence of the Defendants themselves.
7 The report, which is styled a “System Appraisal” is fairly hard-hitting. In its section on conclusions, it lists the following four things:
A. The system is presently unserviceable and is not worth any further investment.
B. Adherence to any Canadian building or plumbing codes throughout the installation is not apparent (exception being the solar storage tank).
C. Most components are of unknown origin and manufacture, including the collectors.
D. Immediate safety issues need to be addressed.
8 The section of the report Presenting “System Observations” is also damning:
a. It is critical of the wiring and plumbing layout as being “unorganized”.
b. It finds that the system has no pressure and accordingly could not function.
c. It discovered at least two leaks in the glycol loop and cold water feed line.
d. It was critical of the type of glycol being used.
e. It found no CSA or other Canada approved stamps or labels, and concludes that the products would not be approved for installation under today’s standards.
f. It was critical of the type of piping insulation used for this system which, it concludes would deteriorate and melt.
g. It finds that the collectors are old and unserviceable.
h. It is unable to determine the manufacturer of the collectors and in particular could not verify what had been represented, namely that the company Thermodynamics was the manufacturer.
i. It found that some of the collectors were not properly attached to the roof.
j. It determined that the type of piping used for the glycol loop was improper.
k. It was critical of the size of the storage tank as being too small for the type of system.
9 In his last comment, the author concludes “in the opinion of the appraiser, this solar system has been unserviceable for an extended period of time, likely at least six months or more. This opinion is based on the lack of pressure in the system, it’s overall condition, and the lack of evidence otherwise.”
10 The Claimant says that she relied on representations contained both in the marketing brochure which was provided when she came to see the home, and in a separate document provided to prospective purchasers. In those documents, one of which was apparently prepared by the real estate agent for the Defendants, there are several references to the solar system. On the front of the marketing brochure it contains the statement “as a bonus, the hot water is heated by solar power.” The same words are used in the blurb contained in the MLS listing. In the separate sheet, there was a much more elaborate explanation of the system. I believe it is useful to quote this in full:
“This house was originally designed as a bungalow with a balcony off of the narrow dining room which was previously the living room. The front deck was removed and replaced with a roof covering the front deck with plans of placing solar hot air panels on this roof and blowing the solar heated air into the kitchen and dining room. The house was angled off parallel to the road by 19° to allow winter sun to hit the front windows face on, the summer sun is shaded by the 8 foot overhang. During a warm winter afternoon the sun will heat the kitchen, dining room and living room while the whole house air circulator senses this and distributes the heat throughout the house.
“Meanwhile on the roof, solar hot water panels face south east and south west to capture both the morning and afternoon sun. These panels are manufactured in Burnside by Thermodynamics, a company known worldwide for their quality products. These panels have heat sensors that connect to a controller in the basement. When the time is right, the controller turns on the pump and circulates solar heated glycol to the specially designed blue tank beside the regular hot water tank. Since the two tanks are connected together, preheated solar hot water is fed to the electric hot water tank reducing the demand for electricity. When the addition was added on in 2001-2002, a red plastic pipe was embedded in the concrete in the car garage to allow for future growth of the solar system. When the panels produce more hot water than you need, the controller will diverge the extra hot water to the cement garage floor. The items needed for this are all in place but not connected. In the summer, when the panels are in full production you will be showering and washing with all solar hot water, so hot, that a mixing valve was added to mix some cold water with the hot to prevent scalding, ball valves are added to turn this feature on or off.”
11 It was approximately two weeks after closing that the Claimant discovered a glycol leak in her basement, which prompted her to have the system inspected with the ultimate report concluding, as it did, that there were multiple serious problems with the solar system. She also obtained two quotations for what it would cost to replace the system. More will be said about that below.
12 The Claimant says that she was misled, and that this amounts to an actionable misrepresentation.
The Defendants’ evidence
13 In his evidence, the Defendant Alan Prosser explained that he purchased the solar panels secondhand, having responded to an advertisement on the website kijiji. He was told by the seller that the panels were approximately 5 to 6 years old, that they had been manufactured by the company Thermodynamics, and that they had been removed from a Laundromat. He admits that there are no specific identification stickers or logos on these panels, but stated that he believed them to be Thermodynamics products because they match pictures that he has seen on that company’s website. All of the rest of the equipment for the system was bought by himself and installed by himself, following instructions that he also obtained on the Internet. Mr. Prosser testified that he is a professional radio technician, with a great deal of experience in electronics and that he is a qualified “do-it-yourselfer.”
14 Both Mr. and Ms. Prosser testified that the system was operating properly up until sometime in the fall of 2012, when it naturally stopped producing hot water because of the colder weather. They deny the allegations of the Claimant’s expert that the system was non-operational, and insist that if the Claimant had only waited until warmer weather, she too would have experienced the system operating properly.
Findings
15 Under all of the circumstances, I cannot give much weight to the Defendants’ view. I accept the expert report to the extent that it portrays a frail, unprofessionally installed system that is no longer functional, and that may be hazardous. Even if the system worked until approximately September 2012, the Claimant is now on notice from this report that she has a system that is nonfunctional, if not outright dangerous. She can hardly be expected simply to use it and see what happens.
16 Although the statements about this system are not contained in a Property Condition Disclosure Statement (PCDS), in my opinion they stand as representations of at least as serious a nature. I believe that it was a material misrepresentation not to have made a more accurate disclosure about the system. The fact that Mr. Prosser purchased secondhand panels and accepted the hearsay statement of his vendor as to their origin, is one part of it. On the evidence before me, I cannot make a finding that these panels were manufactured by Thermodynamics. I am also concerned that the lack of professional installation was not disclosed.
17 I do not believe that someone buying this home ought to have asked for confirmation that the panels were manufactured by the manufacturer represented, or that it had been properly installed. Again, I am not suggesting that a professional installer was necessarily implied, but at least it would have been implicitly represented that the system was installed properly by someone with the proper knowledge and skill to do so. It was also an implicit representation that the system was functional. Given that I have accepted the report of Creative Solar, and that it stands uncontested, I find that the system is indeed so defective as to amount to no solar heating system at all. As such, the Defendants grossly misrepresented to the Claimant what she was getting. And I find that this misrepresentation is actionable.
18 All of the elements of a negligent misrepresentation are present. There was a sufficient special relationship between the parties such as to give rise to a duty of care, the representation was inaccurate and misleading, the Defendants knew or ought to have known that they were grossly overstating the qualities of the system, the Claimant relied on those statements to her detriment and has incurred or will incur a loss.
Damages
19 The Claimant has based her claim on quotes from two separate companies, namely Doctor Solar and Shines Renewable Energy, the latter of which is the same company that produced the expert report under its prior name Creative Solar. Both quotes are fairly close. The Doctor Solar quote adds up to $6,894.25, including HST. It does note that there is an available $1,250.00 rebate from the Nova Scotia government which would partly offset that. Shines quotes $6,702.89, and also notes that this rebate is available.
20 In my opinion, to allow her full replacement cost would amount to over-compensation, because of the element of betterment. That concept has been commented upon by the courts many times. In Byrne Architects Inc. v. A.J. Hustins Enterprises Ltd. 2003 CarswellNS 30, 2003 NSCA 21, 23 C.L.R. (3d) 217, the Nova Scotia Court of Appeal described it thus, accepting the trial judge’s approach:
98 When dealing with how the betterment of the upper parking deck should be taken into account in awarding damages the trial judge stated:
[146] The award must also reflect the fact that, notwithstanding that the membrane‑joint system failed, the plaintiff installed an entirely new system with an anticipated lifespan of 20 years. That is, his position was improved or bettered. The authors of Damages for Breach of Contract, supra describe the situation at 2‑3(c)(i):
The issue of betterment arises in situations where the court adopts the "cost of performance" test and awards the cost of carrying out the repairs or, in the extreme, awards an amount sufficient to rebuild a defective structure. As a result of the repair of (sic) replacement of the damaged product or building, the plaintiff will receive a new product or building which will have a greater value than that which existed prior to the damage being sustained. The court, therefore, must decide whether to factor the "betterment" into the calculation of damages and reduce the damage award accordingly.
For example, a plaintiff employing the use of a machine in the manufacturing business may anticipate the machine's life expectancy to be twenty‑five years. If, as a result of a breach of contract (or tort), the plaintiff is required to replace that machine after twelve and one‑half years, he or she will then be possessed of a new machine that has a life expectancy of twenty‑five years, double the life expectancy of the machine in the plaintiff's possession at the time of the breach. In another example, a roof on a commercial building is expected to have a lifespan of ten years. After four years, as a result of negligent construction, that roof must be replaced. The new roof, when installed, will have a new life span of ten years. As a result, the plaintiff will have received a "betterment" consisting of a new roof which will last an additional four years.
[147] They continue at 2‑3(c)(ii):
In the example provided earlier, it can readily be seen that unless betterment is taken into account, the plaintiff will end up with a new roof or rotor, all at the Defendants' expense. This would conflict with the basic principle of contract and tort law that the plaintiff is entitled to the recovery only of his or her losses.
21 The Claimant had to have known that she was acquiring a system that had been used for a number of years, and that it was likely to need maintenance and eventual replacement of at least some of the elements. If she purchases a new system, she will be ahead of the game.
22 It is difficult to be precise in determining how much betterment has occurred or would occur if the Claimant were able to purchase a new system. The evidence was sketchy. Courts routinely are forced to venture something of an educated guess. In my opinion, the betterment factor is approximately one-third, and I adopt that as the measure. As such, the Claimant should recover two-thirds of the cost of a new system, but must also give credit for the rebate that she will receive if she goes ahead with the work. As I have indicated, the quotes are very close, but the lower of the two is $6,702.89. The actual cost after accounting for the government rebate will be $5,452.89. Accordingly, the Defendants shall pay to the Claimant the sum of $3,635.26, which is two thirds of that sum. She is also entitled to her costs in the amount of $182.94.
Eric K. Slone, Adjudicator