Claim No: 281847
Date: 20070727
IN THE SMALL CLAIMS COURT OF NOVA SCOTIA
Cite as: Dickey v. Flagstone Home Inspections, 2007 NSSM 45
BETWEEN:
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Mitchell Robert Dickey |
Claimant |
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Flagstone Home Inspections and Robert Carter |
Defendants |
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Revised Decision: The text of the original decision has been revised to remove addresses and phone numbers of the parties on September 17, 2007. This decision replaces the previously distributed decision.
DECISION
BACKGROUND INFORMATION
(1) This proceeding is brought by Mitchell Robert Dickey against Flagstone Home Inspections and Robert Carter.
(2) The Defendant, Robert Carter, is a home inspector operating under the name, Flagstone Home Inspections, a sole proprietorship.
(3) The claim arises out of a home inspection performed by the Defendant for the Claimant in August 2005 when the Claimant purchased a property at 132 Prince Albert Road, Dartmouth, Nova Scotia.
(4) The Claimant claims that the inspection performed by the Defendant was negligent in that a major wiring problem was not found.
(5) The Defendant denies liability.
FACTS
(6) The parties entered into a Pre-Inspection Agreement on August 10, 2005. For a fee of $275.00 plus taxes of $41.25, for a total of $316.25, the Defendant, Flagstone Home Inspections, agreed to conduct a home inspection for the Claimant who was purchasing a home on 132 Prince Albert Road, Dartmouth, Nova Scotia.
(7) The Pre-Inspection Agreement states in part as follows:
“This is our report based on a visual inspection of the readily accessible areas of this building, in accordance with the terms and conditions contained in the PRE-INSPECTION AGREEMENT, which is part of this Report and incorporated herein. Please read the REMARKS printed on each page and call us for an explanation of any aspect of this Report, written or printed, which you do not fully understand.”
“Flagstone Home Inspections agrees to conduct an inspection for the purpose of informing the CUSTOMER of major deficiencies in the condition of the property, subject to the UNCONDITIONAL RELEASE AND LIMITATION OF LIABILITY below. The inspection and report are performed and prepared for the sole, confidential and exclusive use and possession of the CUSTOMER. The written report will include the following only:
C structural conditions and basement
C electrical, plumbing, hot water heater, heating and air conditioning
C condition and life expectancy of major systems
C general interior, including ceilings, walls, floors, windows, insulation and ventilation
C general exterior, including roof, gutter, chimney, drainage, and grading
C kitchen and appliances
It is understood and agreed that this inspection will be of the readily accessible areas of the building and is limited to visual observations or apparent conditions existing at the time of the inspection only. Latent and concealed defects and deficiencies are excluded from the inspection; equipment, items and systems will not be dismantled.
Maintenance and other items may be discussed, but they are not a part of our inspection. The report is not a compliance inspection or certification for the past or present governmental codes or regulations of any kind.
The inspection and report do not address and are not intended to address the possible presence of danger from any potentially harmful substances and environmental hazards including but not limited to radon gas, lead paint, asbestos, urea formaldehyde, toxic or flammable chemicals and water and airborne hazards. Also excluded are inspections of and report on swimming pools, wells, septic systems, security systems, water softeners, sprinkler systems, fire and safety equipment and the presence or absence of rodents, termites and other insects.”
“It is understood and agreed that F.H.I. is not an insurer and that the inspection and report are not intended or to be construed as a guarantee or warranty of the adequacy, performance or condition of any structure, item or system at the property address. The CUSTOMER hereby releases and exempts F.H.I. and its agents and employees of and from all liability and responsibility for the cost of repairing or replacing any unreported defect or deficiency and for any consequential damage, property damage or personal injury of any nature.
In the event that F.H.I. and/or its agents or employees are found liable due to breach of contract, breach of warranty, negligence, negligent misrepresentation, negligent hiring or any other theory of liability, then the liability of F.H.I. and its agents and employees shall be limited to a sum equal to the amount of the fee paid by the CUSTOMER for the inspection and report.”
(8) The fee was paid and the inspection was conducted.
(9) The Defendant submitted a Building Analysis Report on August 10, 2005, following the inspection.
(10) The Building Analysis Report contained the following provisions:
Page 12
“GENERAL COMMENTS: This 80 year plus in age, detached, single family dwelling appeared structurally sound and is in good condition in general. The plumbing and heating have been upgraded to today’s standards as well as the electrical. There are no major issues noted however there are typical minor issues noted within the checklist along with recommendations I advise to be addressed.”
Pages 6 and 7
“4.2 Distribution Panel Location Basement
The electrical entrance consists of a three wire 115/230 volt system.
Capacity: “200 “150 “125
T100 “60 “_____.
Protection: TBreakers “Fuses “Both
No. of Circuits- Main Panel 25 used Auxiliary Panel N/A
“Garage Panel N/A “Shed Panel N/A
Over Fused Circuits: “Some “Many “Missing Breakers
“Exposed Socket T 7 Spares “Missing Fuses
TG.F.C.I. Noted in panel 7 to protect ungrounded receptacles “Exposed Knockouts
“Improper Wiring
Comments: TPanel Appeared Satisfactory
4.3 Type of Wiring (visible)
TCopper (CU) “Aluminum
“Recommend inspection by an electrician
“Both Cu & Al “Knob and tube
4.4 Adequacy of Service
TAdequate “Marginal
“Consider upgrading to larger service
“Have electrician do a demand calculation
4.5 Receptacles
Samples that were checked were found to be:
“Grounded “Ungrounded TCombination of Both
“G.F.C.I. recommended for “Exterior “Bathrooms
Comments:______________________________
4.6 Electrical Problems Noted
... Comments: Electrical has been inspected and upgraded by a licensed electrician recently. No apparent concerns noted.”
(11) No electrical problems were noted in the provision 4.6 “Electrical Problems Noted”. There is an Owner’s Handbook attached to the Building Analysis Report and contains standard provisions, including the following under 4.3 “Type of Wiring”:
“Knob and Tube Wiring: Knob and tube wiring is invariably old, and is more likely to have suffered wear and tear, as well as the problem of brittle insulation. We recommend that this type of wiring be checked by a licensed electrician, with the possibility of having it replaced.”
(12) The purchaser proceeded to close the transaction. In the winter of 2006, he placed the home for sale. A pre-closing inspection was performed on behalf of the prospective purchasers by another home inspection company. The pre-closing inspection disclosed that there was knob and tube wiring throughout the home, and this was identified as an insurability issue.
(13) The Claimant found an electrician to replace the knob and tube wiring at a cost of $3,450.00 plus taxes of $558.60, for a total of $4,008.60.
(14) The Claimant now seeks to recover the sum of $4,008.00 from the Defendant plus costs and general damages of $100.00.
(15) His costs are the $85.44 filing fee. He did not incur bailiff fees or any other out of pocket expenses.
(16) The Defendant does not deny the essential facts as stated by the Claimant. He does state, however, that he recalls when the pre-inspection was being done, that he identified seven ground fault circuit interrupters beside what appeared to be a new electrical panel. He drew the conclusion from this that the owner of the property had hired an electrician to upgrade the wiring and panel service. He assumed that this was done so that the owner could obtain insurance to live in the home. The Defendant explained that the pre-closing inspection is limited to a couple of hours and is a visual inspection of the accessible areas of the building. Concealed defects and deficiencies are not part of the inspection as noted in the Pre-Inspection Agreement.
(17) The Defendant further recalls that when he went into the attic, he saw a knob and tube wire. He stated to the Claimant that he did not have his electric current tester with him to see if it was a live wire. He stated that even if it was a live wire, there were ground circuit interrupters which would protect it anyway. He stated that he made sure that the Claimant understood this. The Claimant does not recall this conversation but does not deny that it occurred.
(18) The Defendant stated that he drew the conclusion from this that the electrician was lazy and snipped the wire but just left a dead wire there. He assumed, once again, that the electrical job must have been done correctly if an electrician had done it. There was a new panel in the basement and a new service upgrade from 60 amps to 100 amps. This type of work would require the approval of Nova Scotia Power. The standard practice of a certified electrician would be to pull all knob and tube wiring out.
(19) The Defendant testified that he also assumed that Nova Scotia Power had given the standard permission to upgrade the power and approved the work as there was a Nova Scotia Power sticker on the outside of the home. He presumed that the wiring had been updated and everything done properly.
(20) He specifically recalls telling the Claimant that it was not possible to tell if it was a live wire or not without the electric current tester.
(21) The Claimant has some experience in purchasing homes as he has purchased and sold several homes before.
SUBMISSIONS
(22) The Claimant in this case submits that the Defendant missed a major electrical deficiency. He states that the Court should rely upon the written report only. He states that the inspector should have had an electrical tester with him on that day. He states that the Defendant should have been able to conclude from the fact that the switch plates had not been removed for some time that the wiring had not in fact been upgraded and that the presence of the Nova Scotia Power sticker on the outside of the house and the new electrical panel and the presence of the seven ground fault circuit interrupters was not sufficient evidence of a wiring upgrade for the Defendant to rely on.
(23) In his submission, the problem was extensive and easy to find and the inspection fell short of what would be expected of a reasonable home inspector. He relies upon the fact that when he first contacted the Defendant, the Defendant apologized to him for missing the problem.
(24) He states that the Defendant was negligent in this case for these reasons.
(25) The Defendant states that the Pre-Inspection Agreement is a valid contract. He states that there was considerable evidence that an electrician had been in the home and that the wiring was upgraded, there was a new panel and seven ground fault circuit interrupters beside the panel. It appeared that the upgrade had been reviewed and approved by Nova Scotia Power. When he saw the knob and tube wiring, he showed it to the Claimant, and he stated that the Claimant had an opportunity to ask an electrician to review it. He states that he is a thorough home inspector and has 14 years experience.
ANALYSIS
(26) The Claimant correctly points out that there is no reference to knob and tube wiring in the Building Analysis Report, although there are places where it could have and perhaps should have been referenced.
(27) I do, however, accept the Defendant’s evidence in this case that he did make the Claimant aware of the potential problem at the time of the inspection. The Claimant does not deny that the conversation took place, although he has no recollection of it. The Defendant’s credibility was not challenged on this point, and there is no contrary evidence before the Court.
(28) As stated in the Pre-Inspection Agreement in this case and supported by the case law concerning the potential liability of home inspectors, the purpose of a home inspection is to inform the buyer of major deficiencies in the condition of the property. The Inspection Report in this case was performed for the buyer only and not for third parties such as insurance companies and was conducted on the usual basis of a visual inspection.
(29) There was no evidence introduced in this case by either party concerning the industry standards relating to home inspectors in the Province of Nova Scotia.
(30) There is no basis upon which to award general damages.
LAW
(31) The applicable law is succinctly summarized in the recent decision of the Supreme Court of Nova Scotia in Gesner v. Ernst (2007) N.S.S.C. 146 wherein Associate Chief Justice Deborah K. Smith states as follows at page 34:
“203 In the case of Brownjohn v. Ramsay, [2003] B.C.J. No. 43 (B.C. Prov. Ct.) Stansfield, A.C.J. gave, in my view, a very useful review of the tort of negligent misrepresentation as it relates to home inspectors. He stated at paragraphs 16-24:
¶¶ 16 The point made repeatedly in the PTP contract, and mentioned consistently in the various cases to which I was referred -- but most importantly, which simply accords with common sense -- is that there are limits on what one reasonably can expect from a relatively brief visual inspection undertaken by someone who has no right to interfere with (and by that I mean no right to dismantle, nor to effect any permanent change in) the property which one must remember is not owned by the person requesting the inspection. As well, as a matter of common sense one has to recognize that a service performed for a fee of $240.00 cannot be expected to be exhaustive.
¶¶ 17 The broad purpose of securing a residential home inspection is to provide to a lay purchaser expert advice about any substantial deficiencies in the property which can be discerned upon a visual inspection, and which are of a type or magnitude that reasonably can be expected to have some bearing upon the purchaser's decision-making regarding whether they wish to purchase the property at all, or whether there is some basis upon which they should negotiate a variation in price. Broadly speaking, it is a risk-assessment tool.
¶¶ 18 In Seltzer-Soberano v. Kogut, [1999] O.J. No. 1871 (Ont. Superior Court of Justice), Justice Wright said (at paragraph 6):
The usual house inspection is general in nature and is performed by a visual inspection. A house inspector cannot be held responsible for a problem which is not readily apparent by a reasonable visual inspection. A house inspector would be held to a different standard of responsibility if requested to respond to a specific question, i.e., "we want to know if there is any evidence of termites in this house?" If that specific question was asked of a house inspector, the inspector, unless expert in that area, would probably tell the proposed purchaser to consult a pest control company.
¶¶ 19 In Drever v. Eaton, unreported, November 14, 2000, Victoria Registry No. 28199 (Provincial Court), my colleague Judge Filmer dealt with a claim against a home inspector, and mentioned in passing:
(The home inspection) was not being used as an assurance of the structural integrity of this building. To do that for $200 would be a fool's errand, in my view.
¶¶ 20 While I suggest there are obvious limitations to what one can expect from home inspections of the type undertaken in this case, one also needs to be mindful of the responsibility which is taken on by the home inspector. Persons who hold themselves out to the community as professionals prepared to provide advice for a fee -- accountants, lawyers, engineers, architects, physicians, and other professionals immediately come to mind -- must know that in marketing and providing their services, they invite reliance upon their advice and, in doing so, they create a risk that their client will suffer harm if the professional falls short of the standard of care which reasonably may be expected of that category of professional in the particular circumstances, and their advice is wrong.
¶¶ 21 The home inspector in the context of the average residential home inspection is involved in an inherently risky business. The inspector invites reliance. If prospective home purchasers did not believe they could secure meaningful and reliable advice about the home they are considering purchasing, there would be no reason for them to retain the inspector. The matters about which the inspector is asked to opine -- for example, roofs, foundations, and other basic home systems -- are of interest to the purchaser precisely because they are the aspects of the home which would give rise to the greatest financial exposure were they to be discovered to be defective after completion of the purchase.
¶¶ 22 ......................What is the test in law for "negligence" in the context of home inspections?
¶¶ 23 Because the core of the service provided by the home inspector is the advice given regarding the condition of the home, claims against home inspectors in superior courts have been pleaded and considered by the court in the context of the tort of negligent misrepresentation. The five elements to be proven in that tort, as articulated by the Supreme Court of Canada in Queen v. Cognos Inc. (1993) 99 D.L.R. (4th) 626, are well established:
1. there must be a duty of care based on a special relationship between the parties,
2. the representation made by one party to the other must be false, inaccurate or misleading,
3. the representation must be made negligently,
4. the person to whom the representation is made must have reasonably relied on the representation and,
5. the reliance must have been detrimental to that person with the consequence of his suffering damages.
¶¶ 24 The third requirement that "the representation must be made negligently" one presumes will fall to be determined by application of the test applicable to other types of "professional negligence", namely, that the home inspector failed to meet the standard of care expected of a reasonably prudent home inspector in those circumstances and at that time.”
(32) As indicated previously, the standards of practice of home inspectors in Nova Scotia or any other relevant professional association were not admitted into evidence in this proceeding.
(33) The standard of care to which a home inspector is held is the standard of care that is expected of a reasonably prudent home inspector.
(34) Using the test as set out in the Supreme Court of Canada case in Queen v. Cognos Inc., supra, I find that there is a duty of care based on a special relationship between the parties, therefore, item number 1 is satisfied.
(35) Dealing with items 2, 3, and 4 of the test in Queen v. Cognos, having accepted the Claimant’s evidence in regards to the statements made to the Defendant when the knob and tube wire was found in the attic, I am unable to conclude that there has been a false, inaccurate or misleading representation made negligently to the Claimant by the Defendant.
(36) Even if the absence of the inclusion of this item in the Building Analysis Report constituted a false representation, applying the parol evidence rule such that the written document could not be varied subsequently, I am unable to conclude that the Claimant reasonably relied upon any false representation made to him by the Defendant. The concept of reasonable reliance must be viewed in light of the knowledge of the Claimant and that knowledge includes the verbal statements made to him by the Defendant at the time that the home inspection was taking place as noted above.
(37) The test with respect to the degree of reliance is that the reliance must be reasonable, and this must be measured taking into consideration all of the circumstances. Based on what he observed and was told, the Claimant knew that there were some indicators that an electrician had in fact been into the home and inspected and upgraded the electrical. This was a reasonable conclusion to draw from all of the circumstances.
(38) Once the issue was brought to the attention of the Claimant, he could have himself contacted an electrician to check further. The existence of knob and tube wiring throughout the home could not have been and was not in this case “discerned upon a visual inspection”, to quote from Brownjohn v. Ramsay. As stated in the case law, a home inspection is not a guarantee, it is a risk assessment tool. The risk in the case had been assessed reasonably based upon the facts that were known to the Defendant at the time that the inspection was being conducted.
(39) While the Court is sympathetic to the position of the Claimant in that he bears the brunt of the unexpected costs in this case, I am unable to conclude that the legal test has been met such that the Defendant can be found legally responsible to the Claimant for damages for negligent misrepresentation.
(40) For all the above reasons, the Claimant has not proven that the Defendant is liable and, in the circumstances, the claim is therefore dismissed.
Dated at Dartmouth, Nova Scotia,
on July 27, 2007. ______________________________
Patrick L. Casey, Q.C., Adjudicator
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