Source: http://blog.myleakycondo.com/index.php?op=Default&Date=199512&blogId=1060
Timestamp: 2019-04-20 22:59:48+00:00

Document:
New twin Concord condo towers plagued by severe leaks; windows fail tests.
1 This was a Rule 18A application for judgment in a builders lien action. The lien was replaced by a bank letter of credit as security in Vancouver Registry file No. A943353.
2 The action concerns the unpaid balance on a contract to provide the supervision, labour, equipment and materials necessary for and incidental to the supply and installation of (inter alia) a window system in a mixed commercial and residential highrise tower on the False Creek waterfront in Vancouver. The windows in question comprise an aluminum frame system which is in fact the exterior cladding for most of the building surface. The defendant 356226 is the owner. Smythe was its partner and also acted as agent for the project. Ferguson Glass B.C. Ltd was the original contractor. The defendant Zurich took over the work pursuant to the provisions of a bond and entered a new contract with Smythe to complete the work. It used a new company, Ferguson Glass B.C. (1994) Ltd. to complete the contract work. The defendants have refused to pay the balance of $254,660 alleging that the window system supplied and installed by the plaintiffs has failed to meet the required performance levels for weather tightness and water tightness. The full contract price was $1,840,000 plus G.S.T.
3 In answer to the plaintiffs' claim for the contract balance, the defendants say the work has not been completed to the contract specifications and they claim a set-off and counterclaim for the cost of remedying the deficiencies. The contract consultant, which is the owner's architect, pursuant to its powers granted in the general conditions of the contract, has recommended a holdback of the whole balance against the cost of remedying the alleged defects.
4 The tower contains some 6,000 windows. The work began in August 1993. Zurich took it over in April 1994, using the new company, Ferguson Glass B.C. (1994) Ltd., as its agent to complete the work. It was finished by April 1995.
5 Between August 1994 and February 1995 Smithe and the owner's architect Mr. Eng notified the plaintiffs of 94 locations where there were leaks under normal weather conditions. The plaintiffs carried out remedial work in each case. On February 20, 1995, Mr. Shoesmith, Smithe's Contract Manager, complained of leaks in six suites. They were inspected on February 27 by the plaintiffs with Mr. Shoesmith and with Mr. Bruckner representing the architect. The plaintiffs claim only one of the areas was leaking due to any inadequacy in their contract work and that was remedied. There has been no notice of any other leaks until Mr. Shoesmith's affidavit filed November 30, 1995 reported leaks in six suites between approximately October 11 and November 23. The dates are approximate because the owners are not all resident in the suites and reporting is not necessarily done in a timely fashion.
6 The defendants' position is that the windows and window system are still subject to leaking under normal weather conditions and that the system has failed to pass the appropriate industry test for installed exterior windows. As well as the six new leaks reported in November 1995, the defendants are concerned that there may be other leaks which have not been reported because some owners of suites are absent. They are concerned that there are other leaks which let water into the building which does not show on the inside of the suites. They say the windows provided and installed by Ferguson on a twin tower project before the subject building was begun have demonstrated a severe leaking problem. They say the two window systems are identical for the present purposes and that the problems in the first tower are being reflected in the second. The defendants say that the defects reported and addressed so far by the plaintiffs in the subject tower were so many and varied that it may mean that the whole window system is defective. They say that in the present state of affairs there has been no substantial completion of the sub-contract. As of September 21, 1995 Mr. Shoesmith, Smythe's Project Manager, knew of no other specific problems with the windows but planned to retain another expert to examine the work and advise what problems still existed and how they might be remedied, see Questions 408 to 418 of his examination of that date.
7 There were tests performed on June 19 and 20, 1995 by Inchcape Testing Services, a division of Warnock Hersey Professional Services Ltd. They are agreed to be a reputable testing service. At Smithe's direction the tests were conducted on 4 window wall units in 3 of the 122 suites in the tower, chosen at random. The test consisted of spraying water at the outside of the window from a rack while negative air pressure was applied to the interior surface. The test was performed in 4 cycles of 5 minutes each with a pause of 1 minute between cycles. The test report, Exhibit A to Mr. Ryden's affidavit filed November 16, 1995, says the tests were performed in accordance with the ASTM test method E547. That is a test designed to be carried out in the field after windows have been installed. Three of the four windows tested showed leaks and were failed. The plaintiffs deny the ingress of water in those tests constituted a leak as defined in the applicable industry standard and deny their work was responsible for them.
8 The specifications forming part of the plaintiffs' contract called for the window units to perform to the standard of water tightness set in the CSA-A440 test to a B-2 performance level. I note that the contract letter called for them to be weather tight. Mr. Bruckner, the architect's representative, agreed in his examination on September 22, 1995, that the only reason the architects did not recommend payment of the sub-contract balance was because the three windows had failed the June 19 and 20, 1995 tests.
9 Mr. O'Connor launched an attack on the credibility of the Warnock Hersey test and report from June 1995 based on the conflicting answers given by Mr. Docherty in his affidavit and on cross-examination about the standards used in the tests. There seems to be a contradiction as Mr. O'Connor argued, but in my judgement that is not decisive of this matter at this stage. The tests of June 1995, whatever they showed, are not conclusive but only a guide to the question whether or not the plaintiffs have performed their work under the contract to the degree that requires payment of the balance of the contract price.
10 The question of substantial completion is to be determined by reference to the contract documents, subject to whatever other terms, if any, are to be implied into the contract by law. The contract is contained in a series of documents, the chief of which is a letter dated August 25, 1993, Exhibit A to Mr. Shoesmith's affidavit filed June 28, 1995. The other documents included Standard Construction Document Number CCDC 2-1982 which sets out the general conditions of the contract. It is Exhibit D to Mr. Shoesmith's same affidavit.
11 The contract letter specified the time of payment. Paragraph 2(g) says that payment shall be made, subject to legislated holdbacks, on a completed floor by floor basis. It goes on to say "Completed as defined by the architect will be weather tight ready for the following trade". The underlining is mine. I do it to emphasize that the standard of performance required was not "water tight" but weather tight. That, in my opinion, will probably result in a finding at trial that the windows should exclude wind and rain under conditions reasonably to be expected in the locality. Payments were made for the lower floors of the building but in August 1994 the architect became so concerned by the number of defects identified in the window system to that time that it recommended the defendants should make no further payments for the higher floors. It was feared that the costs of remedying the whole system might exceed the amount held back. The issue to be decided is whether that is reasonable at this time, bearing in mind the provisions of the contract.
12 The specification for the aluminum windows in this sub-contract is Exhibit A to Mr. Shoesmith's affidavit filed November 30, 1995. At p.08520-4 it required the windows to conform to CAN/CSA-A440-M90 A-2, B-2 and C-2 performance levels. Clause 1.5.2 of the specification required the plaintiffs to submit data showing that the windows had been tested and complied with that test. The A440-M90 test is a laboratory test for air and water tightness and structural performance. It is not intended to test the window system in place, but only to rate it by reference to the standards set out so that a purchaser can decide if that particular product is one he wishes to specify.
13 The data the plaintiffs gave the defendants to satisfy that contract requirement was a copy of a letter from Warnock Hersey to Ferguson Glass Ltd. (sic) dated October 28, 1992 stating their window system had passed the CSA A440-M84 test in the laboratory. Evidence which has recently come into the defendants' possession shows that letter was a misrepresentation of the facts. Exhibit G to Mr. Docherty's affidavit filed November 29, 1995 is the actual test report from Warnock Hersey to Concord Pacific Management Ltd. dated October 1, 1992. It dealt with the same system but with respect to a sample of the windows submitted under a different construction project. It shows that the window system passed the air and water tightness tests but failed the structural performance test. The latter test deformed the window's structural members to the degree that gaps developed between some of the members and the system then leaked when the water tightness test was repeated. For Ferguson to have sent the October 28, 1992 Warnock Hersey letter to the defendants without also telling them what the wind load resistance test result meant and what had happened during the whole test was in my view misleading. In fact there was a breach of the contract term 1.5.2 of the specification that the system should be shown by data to have complied with the CAN/CSA - A440-M90 performance test. It failed the test. The evidence permits me to make that finding now and I do so.
14 What flows from that breach of contract is not clear. Damages may result only if that has caused some loss which arose naturally from the breach or which the parties may reasonably be supposed to have had in contemplation. Both by the wording of the payment condition in the contract letter, and by common sense, the parties must have contemplated that the requirement of these windows was that they should keep out the weather. There is not much to be said about a window system which will not adequately perform that elementary task. But the issue in this lawsuit is whether or not there has been substantial completion of the contract, or, put otherwise, whether or not these windows reasonably perform that task.
15 In my judgement that issue is to be decided by deciding whether the architects have acted reasonably in refusing to certify that the windows are weather tight. That will depend upon the performance of the system as a whole. Small deficiencies will not prevent substantial completion. They may be remedied under the warranty provisions of the contract. On the other hand, a major fault in the system as a whole would make it reasonable to refuse payment on the basis that the contract is incomplete.
16 The architects decided to requisition re-testing of four windows, randomly chosen, to see how they performed after installation. There had been earlier such field tests to which the plaintiffs did not object. They now object to the subject tests carried out on June 19 and 20, 1995 and they also dispute what those tests showed.
17 The contract does not specify a field test nor does it set out any description of a suitable test. However, general condition 3.6 of the CCDC2 (1982) contract form which was part of this contract provides that the consultant, in this case the architects, shall, in the first instance, be the interpreter of the requirements of the contract documents and the judge of performance thereunder. In my judgement that clause means that the architect is to decide what is and is not weather tight. That is what paragraph 2(g) of the contract letter means too. General condition 3.8 gave the architect authority to require special inspection or testing of work done under the contract. In my judgement that gave the architects the authority to request a field test. Wile there is nothing in the clause to indicate what standard the architect should apply, the law requires it to act judicially, that is to say, fairly and reasonably in the circumstances, see Kamlee Construction Ltd. v. Town of Oakville  26 D.L.R. (2d) 166 (S.C.C.) at 180, and see Hickman v. Roberts  A.C. 229. In my judgement the architect was entitled to use the services of a testing service if it chose, to judge if the windows were weather tight within the meaning of the specifications. It had that right both as a matter of common law and under the general conditions of this contract. But any test must be one which is appropriate to these windows after installation, rather than under laboratory conditions. There is a major dispute between the parties whether these particular filed tests were adapted to the filed. Mr. Docherty's credibility on that issue is called into question, as are the competing opinions of various experts who have filed affidavits.
18 The plaintiffs argued that the defendants waived the right to defer payment until the architect accepted the work. That is based upon the fact that payment was made for some completed floors without an inspection and certificate from the architect. In my opinion that does not preclude the defendants from resorting to the payment condition now. Articles A-5 (B), 14.12 and 24.6 of the CCDC2 (1982) contract terms precludes the application of waiver with respect to the condition of payment. Moreover, for a plea of waiver to succeed the plaintiffs must show both that the defendants were aware of some right they were giving up and that the plaintiffs themselves have acted to their detriment in reliance on the defendants' failure to insist on the architects' approval. Here, the earlier payments were made before the defendants suspected there might be a serious deficiency in the plaintiff's contract performance. There is no evidence that the plaintiffs have acted to their detriment based on the defendants' omission to obtain the architects' approval before making the earlier payments. The evidence of Mr. Shoesmith, the defendants' Project Manager, is that the earlier payments were made without calling for approval by the architect as a means of keeping the administration costs down while there was no dispute between the owner and defendants and the trades. The plea of waiver has no application to the facts of this case.
19 The plaintiff's key position is that because so few leaks have been reported since February 1995, including the disputed leaks from the June 19 and 20 tests, and because those have been remedied, substantial completion has been achieved and the defendants are unreasonable in delaying final payment. If that were the only evidence, it would be an attractive argument. But there is a complicating factor. It is, that in a twin tower where the window system is substantially the same, but with some admitted modifications, there has been a serious leak problem. While each contract and window system stands alone, the evidence at this stage may suggest a conclusion that the leaks in the twin tower are of such a nature that water appearing inside the building at a lower floor originates from a leak that occurs several floors above. There is evidence that the task of locating the point of the leak and remedying it involves removing the windows for several floors above where the water shows. That involves a high potential cost. If the same remedy is found necessary for the subject building there is a possibility that the cost will exceed the balance owing on the contract. The defendants also point to the high number of leaks initially present in the subject building and the risk that the methods or remedying them do not conform to the contract standards. They are concerned that there may be other leaks which have not yet revealed themselves on the inside of the suites.
20 Some of the leaks demonstrated by the June 19 and 20, 1995 tests are said by the plaintiffs not to constitute water ingress as defined in the A440 standard. The standard specifies that water leakage only occurs when there is continuous and repeated wetting of the interior building components. That is said not to include the interior parts of the aluminum window frames themselves. With respect, that limited definition appears in the standard which these frames were required to meet before they were selected. The test of performance under the contract was that they should be weather tight. The plaintiffs' position appears to be contradictory when they first complain that the standard was wrongly used as a field test but then rely on it to say the test showed the window system met the contract criteria. I am not prepared to say the test criteria was or was not a reasonable definition of the contract requirement that the windows should be weather tight. That judgement cannot be made without extensive expert and other evidence from both sides. Nor should this case be decided without the benefit of evidence to show the causes of the leaks that remain, the likelihood of existing but undiscovered leaks and to show whether the remedial measures to date have met the contract specifications. All of that is put in issue both by the experience on this building and on its twin tower.
21 The plaintiffs rely on the case law which says that under some circumstances it is appropriate to grant judgment on a claim and leave the defendant to pursue its counterclaim independently. See for example DeGelder Construction Co. Ltd. v. Dancorp Developments Ltd. et al (unreported) June 16, 1994 New Westminster Registry No. A910895 (S.C.B.C.). In my judgement that is not applicable here. The defendants claim a set-off of the repair costs, so far unknown, against the whole of the plaintiff's claim and counterclaim for any balance of costs over that. Their position rests upon the allegation that there has been no substantial completion because the original letter of conformance to the standard was misleading and because the architects have not yet certified the windows as weather tight in accordance with the contract. Their point is that there has been no performance as required by the contract. In my judgement it would be anomalous to grant judgment for the plaintiffs as if the contract were already substantially complete and then to leave the defendants to continue their action to recover whatever repair costs prove to be necessary on the basis that the contract is still incomplete. I agree that the decision in Coba Industries Ltd. v. Millie's Holdings (Canada) Ltd.  65 B.C.L.R. 31 (B.C.C.A.), cited in United Metal Fabricators Ltd. v. Voth Bros. Construction (1974) Ltd.  42 D.L.R. (4th) 193 (B.C.C.A.) is applicable to this case. There, five principles were set out under which a plaintiff will be refused judgment on a Rule 18 or 18A application where there is a claim against it by the defendant. The evidence before me appears to bring this case squarely within principles 1, 2, 3 and 5 set out at p.199 of the United Metal decision.
22 On the history of this contract to date, I am unable to say that it has been finished to a weather tight standard. Nor am I able to say if that standard is properly represented by the field test applied by Warnock Hersey in June 1995 nor whether the results of that test are more generally applicable to other suites in the building. I am unable to say if the remedial measures already carried out by the plaintiffs constitute performance to the contract level. Nor am I able to say whether the defendants' fear that there are undetected leaks or that water appearing at one level is caused by leaks at a higher level is unfounded. If the defendants are proved right, they may have a set off that will substantially encroach on or exceed the balance owing under the contract. All of those matters will emerge more clearly by the time set for the trial of this action in 1997.
23 The guiding test for an application under Rule 18A ia set out in Inspiration Management Ltd. v. McDermid St. Lawrence Ltd.  36 B.C.L.R. (2d) 202 (B.C.C.A.). While I can find that the plaintiffs have supplied and installed all the windows required by the contract and that there have been few leaks since February 1995, I cannot find that there ae not, as alleged by the defendants, contract deficiencies that amount to a failure of substantial performance. There is in my view a strong case to be made that the system did not pass the laboratory test originally and the defendants were misled about that. I cannot at this stage tell what damages, if any, flow from that.
24 There is a substantial amount of money at issue here, both on the claim and on the potential set-off and counterclaim. But the parties are substantial corporations not likely to be financially crippled by waiting until the trial. Interest will run on any judgment under the contract and there is no suggestion the defendants cannot pay it. Rather than urgent, this is a matter which requires time to develop all the evidence about the system and its possible flaw.
25 In my judgement it would be unjust to grant the plaintiffs judgment before the defendants have had an opportunity to develop their claims against them. At the same time, the defendants are obliged to pursue their investigations expeditiously so that whatever their case is the evidence will be ready to go to trial on the date set.
26 At the beginning of the hearing, Mr. Logan informed the plaintiffs and the court that in his view the case could not be resolved by a Rule 18A application. The plaintiffs proceeded nonetheless. Under those circumstances the defendants will have the costs of the application, but in the cause.
The Defendant Dale Dame In Person.
1 When this trial commenced and was heard on May 23, 24, 25 and 26, Mr. Dame acted on his and his wife's behalf. Mr. Dame did remarkably well for a non-lawyer. It was as a result of his cross-examination of Mr. Inwards that I suggested, with the concurrence of both Mr. Avis and Ms. Hansen, that Mr. Dame ought to seek an adjournment and consult counsel. As a consequence of that adjournment, Mr. Taylor came into the case and commenced third party proceedings against Mr. Inwards and Mid-Island Realty Ltd. and represented Mr. and Mrs. Dame on that aspect of the trial.
2 As of May 26th, the case for the plaintiff and the realtors (as I shall hereinafter refer collectively to Mr. Inwards and Mid-Island Realty Ltd.) had been heard. The Dames gave evidence when the trial resumed in October. The claim of the plaintiff against the Dames and the realtors is that the plaintiff was induced to purchase the Dames' property, located at 3041 Nixon Road, in the Alberni district, by their joint and several false representations made to the plaintiff and her husband, Wayne Johnstone, who assisted the plaintiff in the purchase of this property.
iii substantial portions of the residence were improperly constructed and were structurally deficient.
4 The claim against the realtors is that Mr. Inwards, in acting as an agent for the Dames in the plaintiff's purchase of the property, owed a duty of care to the plaintiff and was negligent in the performance of those duties.
(i) The residence was not three years old as set out in the listing agreement of March 18, 1992, but was, in fact, a renovation of a building moved from City of Port Alberni by the previous owner, Leroy Ward, on or about January 5, 1984. This date is shown on the building permit Mr. Ward obtained on or about that date. The express reason for the permit was, "For moving existing building and setting up as dwelling unit".
A photograph taken of that building was entered as an exhibit and plainly showed that the building when the Dames purchased it appeared, as the evidence discloses, to be a former army hut which had been constructed sometime in the 1940's.
(ii) When the Dames purchased the building on December 8, 1987 for $10,000, it was still an army hut which had been moved on to a foundation, according to Mr. Ward's building permit, with 2 x 8 floor joists or beams.
(iii) No permit for a substantial renovation of this residential premise was ever issued to the Dames. There were no final inspections and no occupancy permits ever obtained for substantial portions of the residence which were improperly constructed and were structurally deficient. This was testified to by Allan J. McGill, a professional engineer employed to make structural evaluations of the existing building and the renovations. The cost of repairs was testified to by Mr. Ken Ross of Pacific West Renovations.
There is no other evidence as to these matters.
6 After the Dames purchased the property, Mr. Dame applied for a building permit on or about June 27, 1988. That permit, which was issued by Mr. John Hornquist, the building inspector for the Alberni District, who was called as a witness by Mr. Dame, specifically states that that building permit is restricted to the addition of interior walls. The only other permits which appear to have been issued to Mr. Dame are two permits: one relates to electrical wiring and the other to sewage. One was issued on June 26, 1986 and the other in December of 1989. In my view, Mr. Dame cannot be heard to say that he was not aware of the necessity for permits, as he seems to suggest in his evidence.
7 Mr. Hornquist testified that applicants for building permits are advised to call for inspections at various stages of construction. The renovations apparently were done as and when the Dames had funds available over a four-year period. Mr. Dame would have me believe that he was not aware of such requirements and that he was in fact a novice, or at the very least, untutored in the matter of building inspections and building permits: a contention which I reject on the whole of the evidence.
8 As will be seen, from 1988 until 1992, the only permit applied for was that which restricted construction to the interior walls. Mrs. Dame testified that a Mr. Giesbrecht, a building inspector with the District, came to the house on some unnamed date which she cannot recollect. She said he walked through the house which was then in the process of being renovated, but there is no record of any such visit in Mr. Hornquist's file. There is no issue taken that Mr. Giesbrecht very likely did visit the house. Mr. Giesbrecht unfortunately is now deceased and so could not be called as a witness.
9 I conclude on the evidence that if there was such an inspection, it must have been during the phase when the interior walls were being constructed in the existing army hut. There is no permit for removal or replacement of the roof structure; no permit for the construction of the garage; no permit for the addition and creation of new bedrooms; no permit for opening the living room wall and installing sliding glass doors. There were likewise no inspections of those significant alterations to the existing structure. There was never an inspection of the shell structure following its relocation. The foundation and perimeter drainage was never inspected; the subfloor support system was never inspected; and the connection of the structure to the foundation was never inspected.
10 Mr. and Mrs. Dame decided, at a point in the construction when, according to Mr. Dame, all that remained to be done was to put in the driveway and the cement floor in the garage and install the fascia board, to sell the property. They put a sign up outside the residence but no one responded. Subsequently, Mr. Dame went to see Mr. Inwards and entered into a listing agreement dated March 18, 1992 for a purchase price of $92,500. The age of the house is listed as "3 years". Attached to the listing agreement there is a one-page residential property information. Mr. Inwards in his testimony said that he told Mr. Dame at the time that he did not think the house had a value of $92,500 but he said that because Mr. Dame wanted to list the property at that price, he listed it.
NEAR NEW RANCHER in Cherry Creek area. Enjoy one level living in a rural setting. This 3 year old home features a spacious livingroom, dining area, bright kitchen and generous size bedrooms. Vendor will finish the driveway and garage floor in concrete.
12 On or about March 26, 1992, Sharlene Jefferson and Gary Check offered to purchase this property for the price of $85,600. This contract was accepted by Mr. and Mrs. Dame and contains the usual subject to financing by the sale of the purchasers' property clause. That contract was cancelled by a document dated May 24, 1992 whereby the vendors and the purchasers agreed to cancel and terminate the agreement and release one another from any liability thereunder. The deposit held by the realtor was paid back to the purchasers.
13 Ms. Jefferson handled the offer on behalf of herself and Mr. Check. She said in her testimony that she had seen the NRS catalogue advertisement and asked Mr. Inwards to show her the house. She said that after they made the offer, she took her father and mother to see the house. She said her father said that they had made a big mistake; that the house was more than three years old and that Leroy Ward had put an old army hut on the property some years ago and that it was 40 or 50 years old. Her father knew that because he had hauled a large amount of drain rock to the property.
14 Ms. Jefferson said that she spoke to Mr. Inwards about what she had learned from her father. He told her that they had a legal obligation to take it because they had signed all the documents with the Dames. She then told Mr. Inwards that she would sue him for false advertising. When he asked her what she meant, she said she told him that he was advertising a three-year old home that was more like 43 years old. She told him what her father had told her about the property.
15 Mr. Inwards, in his testimony, said that Ms. Jefferson was lying when she said that when, in fact, what happened was that, according to his information, she had lost her job, could not afford to buy the house and had decided to stay where she was. For many reasons I cannot accept most of Mr. Inwards' testimony. Looking through the transcript of the testimony which he gave at trial and at various examinations for discovery conducted by other parties, Mr. Inwards constantly changed his position with respect to many matters. For example, at first he said that he did not know that this was an army barracks that had been renovated. Mr. Dame, in his testimony, said that he had told Mr. Inwards that at the time of the listing. He said the reason they listed it as a three year old property was because most of the existing building had been taken down and replaced with the renovation. Later on, Mr. Inwards conceded that he may have known that this property was much older than stated.
16 Another reason that I cannot accept Mr. Inwards' evidence as to the veracity of Ms. Jefferson is because he did eventually sell her house and found another house for her which she purchased. Ms. Jefferson said that she was not concerned about her job at that time, although she expected to be shifted from her place of employment to some other role. I was impressed by Ms. Jefferson and I conclude that in fact it was at that point in time, at the very latest, on the date of the release document of May 24, 1992, that Mr. Inwards became aware that this was not a three year old house.
17 Mr. Dame, in his cross-examination of Ms. Jefferson, insisted that she admit, which she did, that the house looked like a three year old home and not an army barrack. All one has to do is look at the photographs of the renovated house and it appears to be an attractive home. It appears to have fooled Ms. Jefferson and Mr. and Mrs. Johnstone. When Ms. Jefferson was asked by Mr. Dame, "Did this house look like an army barrack to you?", the reply was, "The house was exactly what I wanted as a dream home ---- a rancher. I never looked at anything beyond that it was a rancher and new."
18 Mr. Inwards and Mr. Dame, in their testimony, suggest that they entered into the release document as a gesture of goodwill on their part because both Ms. Jefferson and Mr. Check were losing their jobs. I find as a fact that that was not true. Neither Ms. Jefferson or Mr. Check were losing their employment. In fact, following the release, Mr. Inwards continued on to sell the Jefferson/Check home and, within two weeks, wrote a new offer to purchase a home on Alwin Street where they now reside.
19 Mr. Inwards suggested that Ms. Jefferson harboured animosity because the home he sold her on Alwin was not clean. He suggested that that motivated her to give false evidence. If anyone's evidence in this case is suspect, it is that of Mr. Inwards and Mr. and Mrs. Dame.
20 There is another reason why I cannot accept Mr. Dame's and Mr. Inwards' suggestion that Ms. Jefferson is motivated by anything other than honesty and that is that Mr. and Mrs. Dame had committed to buy a building lot on Whittlestone in April of 1992. The question arises as why would they release Jefferson and Check from a binding offer to purchase when they had their own commitment that they had to meet?
21 Just one week later, on June 1, 1992, the Dames signed a listing change document, reducing the list price from $92,500 to $83,500. This was done in spite of Mr. Inwards' evidence and Mr. Dame's evidence that the real estate market was a rising market through the spring and summer of 1992. That compels me to wonder why Mr. Dame when he had an offer for $85,600 would reduce the list price to a figure less than the Jefferson/Check offer. The only reasonable conclusion that I am able to reach is that Mr. Inwards did learn the truth from Ms. Jefferson about the history of this home and told the Dames that they better reduce the list price in light of those facts.
22 Why Mr. Inwards, with that knowledge, would not totally revise the listing information contained in the NRS catalogue advertisement is difficult to understand, particularly when, as he testified on discovery, the proper practice upon discovering material errors is to revise the listing. This he did not do. From all of this I can only conclude that, like Mr. Dame, Mr. Inwards did not want to refer to this home as a 40-year-old renovation for fear that it would not sell. After all, Mr. Inwards had a vested interest; he wanted to earn a commission.
23 Mr. Avis contends in his written submissions at the conclusion of this trial that by any reasonable standard to refer to this particular home as a three year old home was to misrepresent by omission a most significant single fact ---- that this was a 40 year old structure moved to the site and renovated and not new construction.
24 It would appear that Mr. and Mrs. Dame might very well have disclosed the true history of their home with the assistance of Mr. Inwards and still sold it at a profit. They purchased the property in 1987 for $10,000 and later sold it to the plaintiff for $80,000. Certainly representing accurately the circumstances of the renovation would likely have reduced the profit because it would have discouraged potential purchasers. Mr. Dame conceded that was on his mind when he decided to describe the home as a three year old home. In fact, when Mr. Dame was asked in his examination for discovery, whether he agreed that there was nothing in the listing to alert prospective purchasers that this was an old structure moved to the site and renovated, Mr. Dame agreed and went to state, "If it was listed as a 40 year old home it would never have sold." From that answer alone, one can conclude that there was an intent to pass this house off as something it was not.
25 Mr. and Mrs. Johnstone were looking for a new home. They too saw the NRS catalogue advertisement and contacted their own realtor, Mr. Bruce Thompson of Nanaimo Realty, with whom they had dealt, and went with him to look at the Nixon Road property. They liked what they saw. Neither Mr. or Mrs. Johnstone knew anything about house construction, although they had purchased and sold at least one home in the past. Consequently, Mr. Thompson prepared an offer to purchase the property for $74,000. This contract of purchase and sale was subject to the purchasers raising a first mortgage, and subject to the purchaser being satisfied of the cost of completing the finishing work on the house by July 3, 1992 and the vendor agreeing to finish the driveway and garage floor in concrete by the completion date of the contract, July 31, 1992.
26 Mr. Dame, who obviously was the moving force in the Dame family with respect to such matters, rejected that offer and made a counteroffer for $82,500. This was subsequently reduced and agreed to at $80,000. The counteroffer is on the same form as the original offer. The clause with respect to fixing the driveway and garage floor in concrete was deleted. Addendum A was added and a clause was put in by Mr. Inwards, on the instructions of Mr. Dame, which read as follows: "The purchaser accepts the property on an 'as is' basis and will save the vendor harmless. Mr. Dame explained in his testimony that by that he meant that he was no longer obligated to do any of the work which remained to be done in the house. As well as the garage floor and the driveway, there were some other matters that needed to be attended to.
The vendor garantee's [sic] that the above said home and property dause [sic] not suffer from (a) a leeky [sic] roof, (b) flooding, (c) any structural problems at all.
The vendor garantees [sic] the work he has done.
Q. And that was Addendum A which I am now showing to you?
A. Yes, I guess that's what it was, yes, sir. The reason I said that I was guaranteeing any of the work that I did because I would guarantee the work I did. I did very little of the work on the house. I can't guarantee your work or his work. I would guarantee the work that I did.
Q. You didn't intend to guarantee your father-in-law's work?
A. I just guaranteed the work that I had done myself personally. I can't guarantee somebody else's work. I was guaranteeing that.
Q. Did you tell Mr. Inwards that you had not done most of the work?
A. Moe Inwards, from what I understand, he was aware that the house was completed by my father-in-law and I. Well, not completed, but was worked on by my father-in-law and I. He didn't ask me how many nails I pounded, how many boards I cut. Let's face it, Peter, I did some work. I assisted my father-in-law and did what I could do, but I didn't actually take on the work myself and my father-in-law followed behind me.
Q. You didn't intend to make any guarantee with respect to the work your father-in-law might have done; you only intended to guarantee the work you personally had done?
A. Not because the work my father-in-law was not up to standard. I can only just -- like, if you sell a car, you're not going to guarantee somebody else's car stereo, only the one you make.
Q. You're sure at some point you told Mr. Inwards that, "I've done some of this work and my father-in-law has done some of this work"?
A. No, I believe the exact words were, "My father-in-law and I have done this work."
Q. As though you had done it jointly?
That, in my opinion, is in itself a misrepresentation which, while not pleaded, comes very close to fraud. Indeed, it appears from the whole of the testimony that Mrs. Dame's father did most of the work on this house. There are photographs showing him at work which were produced at trial. Mr. Dame's father-in-law was not called as a witness at trial, nor was Mr. Thompson.
29 There is a well-recognized rule that the failure of a party or witness to give evidence which it was in the power of the party or witness to give by which the facts might have been elucidated justifies the court in drawing the inference that the evidence of the party or witness would have been unfavourable to the party to whom the failure is attributed. The party against whom the inference operates may explain it away by showing circumstances which prevented the production of the witness. Even the absence of a witness from the jurisdiction is not a valid explanation because of the availability of evidence by way of commission or letters rogatory.
30 Mr. Thompson was not called by the plaintiff. Mr. Avis says that what Mr. Thompson did is well documented in the exhibits to which he was a party. He also says that there is no issue between Mr. Inwards and Mr. Thompson as to what Mr. Thompson said or did. Therefore, it is the plaintiff's position that it was not necessary to call Mr. Thompson and take up the court's time with that. That appears to me to be a reasonable explanation for the failure to call Mr. Thompson and, in those circumstances, I am not prepared to draw an adverse inference.
31 However, the position with respect to the failure to call Mrs. Dame's father, Mr. Leskinen, is quite another matter. If, as Mr. Dame says, it was Mr. Leskinen who did most of the work on this house, he was a material witness. I can only conclude that his evidence would have been unfavourable. I was told by Mr. Taylor when I raised this question during submissions that Mr. Leskinen lives in the Lower Mainland and did not want to come to give evidence, or something to that effect. Accordingly, I draw an adverse inference with respect to that particular witness.
32 Neither Mr. or Mrs. Johnstone appear to have spent very much time looking at the Nixon Road residence. They liked what they saw, as did Ms. Jefferson, and accepted the house as it appeared superficially. Mr. Johnstone, in his testimony, said that he found out on June 27 1992 that this was not a new house. He said he was at work and received a telephone call from Mr. Thompson who said that Mrs. Johnstone had telephoned him to ask him to check the permits. Mr. Thompson went to the Regional District offices and found that the residence was an old structure that had been moved on to the property. He saw the permit issued when the old building was moved onto the property. Mr. Johnstone discussed the matter with his wife and they decided they were not going to complete. Mrs. Johnstone testified to the same effect.
To remove the subject of financing by June 30/92, making the above contract of purchase and sale unconditional in its entirety and may now proceed to completion.
The purchaser and vendor recognize that the home located at 3041 Nixon was brought onto the above said property in 1984 as a shell structure and was brought into its present condition between 1989 and 1992.
Vendor warrants that the above said home is up to 1992 Building Code standards.
34 The evidence of Mr. McGill, the engineer, makes it very clear that there are many structural deficiencies and many building code violations. I am somewhat perplexed as to why the Johnstones, after finding out the true history of the home, would not have followed their first inclination and simply cancelled out of this contract. The only conclusion I can come to is that Mrs. Johnstone liked the home and wanted to buy it, and as long as she received some assurances, she was prepared to complete the sale.
35 Prior to that, on June 17, 1992, Mr. and Mrs. Dame signed a disclosure statement. Around about that time this became a required document for realtors to complete. It consisted of a number of questions with "yes" and "no" columns. I suspect that there are many of the answers which are untrue, but there are certainly two which are untrue. One is under No. 2, Structural: E, "Has the final building inspection been approved or a final occupancy permit been obtained?", which was ticked "yes". The other was under No. 2, Structural: G, "Are you aware of any additions or alterations made without a required permit?", which was ticked "no". The answers to those two questions are obviously false because the fact is that the improvements for the renovation and addition were not done with any building permits except for the interior walls.
36 Mr. Inwards said that he asked Mr. Dame the questions set out in the disclosure statement and that he was the one who ticked off the answers. He said Mr. Dame did not appear at all hesitant or unsure about completing or supplying any of the information which appears on the form. He said that he remembered when it came to the question about the final occupancy permit, Mr. Dame told him, "Yes, it had been obtained." That was not true.
37 When Mr. Inwards was asked if he had any concerns about asking Mr. Dame to sign the addendum guaranteeing that the work had been done in accordance with the 1992 Building Code, he said he did not because he believed at that time that Mr. Dame was a contractor. Mr. Dame was working for a company called Ramlock Construction, so Mr. Inwards concluded that Mr. Dame was a professional contractor who was engaged in building properties in Port Alberni. Mr. Inwards said he believed at the time that Mr. Dame would be very conversant with the Building Code, more so than he would. However, and importantly, he agreed that he did not ask Mr. Dame whether or what he knew about the provisions of the Building Code, nor did he check the Regional Office to find out if building permits had in fact been applied for and issued. Also, he had never asked Mr. Dame if he was in fact a professional contractor. Mr. Dame's evidence at trial makes it clear that he was not.
Vendor's acceptance of this back-up offer is subject to the vendor ceasing to be obligated in any way under the previously accepted contract of purchase and sale by June 30, 1992.
That offer was prepared by Mr. Inwards.
39 When Mr. Dame was cross-examining Mr. Inwards he asked him some questions with respect to the Geary offer. Mr. Dame asked him if he would have been able to go ahead with the Geary offer had he not signed the addendum. Mr. Inwards replied that he thought if he had not signed the addendum he would have been exposed to legal action from the Johnstones. It was on the basis of that particular question and answer as well as other questions and answers that made me think I should advise Mr. Dame that perhaps he should see a lawyer to find out what, if any, rights he might have against Mr. Inwards and Mid-Island Realty Ltd. as a result of signing the addendum of June 27. Subsequently Mr. Dame asked for an adjournment so he could consider consulting a lawyer to institute third party proceedings, which I granted and which was not opposed.
40 In any event, the property was transferred to the plaintiff on or about July 8, 1992 and the Johnstones moved in to the Nixon Road property. Approximately a week after they moved in, Mr. Johnstone said he went to have a shower and when he turned the shower on he heard water running. He could not understand where it was coming from. He looked out the window in the bathroom and looked down and saw water running between the outside of the building where the vinyl siding was installed. He found that the problem was that when the shower was put in someone had driven a nail through the copper plate that leads up from the shower head of the outlet pipe itself. He said he spent $548.89 at that time to correct that problem. Then the floor in the kitchen started to crack.
41 He was unable to get in touch with Mr. Thompson so he called Mr. Inwards, who came over. Mr. Inwards said he would get in touch with Mr. Dame to see what could be done about the problem. Mr. Johnstone was also concerned about the roof and had that inspected. He went to look at the building inspection file and then found that the only permit in place was the one allowing for the interior walls. He said Mr. Hornquist attended at his house and looked at the garage area. He asked him to look at the whole house and Mr. Hornquist advised him to obtain the services of an engineer. He then contacted Mr. McGill to look at the house.
42 On August 26, 1992, Mr. Hornquist wrote a letter to Mr. Johnstone, confirming that he had inspected the property on August 25, 1992. He said the attached garage walls and roof hanging did not comply with the Building Code nor did the application of duroid roofing of the entire structure comply with the Building Code.
43 On November 3, 1992, Mr. Dame wrote a letter to Mr. Johnstone stating that he would agree to bring the premises at Nixon Road up to Building Code standards as per the inspection of the Local Regional Building inspector. He said the work that needed to be done would be done by his contractor in the usual time frame.
5. That all expenses incurred by McGill & Associates investigating, supervising and certifying the work, including those costs already incurred, would be settled by Mr. and Mrs. Dame and/or Mid-Island Realty Ltd.
Neither Mr. or Mrs. Dame responded to that letter. It does not appear that the realtors received a copy of that letter. There is no evidence one way or the other that they did receive a copy of the letter.
We cannot suggest that this roof system is salvageable and thus recommend re-roofing using a professional roofing company that employs skilled trades people.
1. The building does not comply with the current British Columbia Building Code.
2. The roof structure in the garage is subject to failure under current design snow load conditions.
3. The roof structure over the main section of the house is subject to failure under snow load conditions.
4. The floor joists are supported by a number of beams under the house. The beams in part are supported on blocks of wood which are subject to movement and potential failure under moderate seismic loads.
5. The blocks mentioned above are supported on what appears to be a crawlspace skim of concrete. This does not meet current code requirements and standard house building methodology.
6. The roof trusses in the garage are undersized and are not expected to withstand building code snow loads.
Mr. McGill concluded by saying it was his opinion, based on his review of the house, that it did not comply with the current code requirements and in fact it had a number of significant deficiencies that would require prompt attention.
47 In renovating this structure Mr. Dame had extended the walls to add an addition 22 feet long and 7 feet wide at the front of the house to accommodate two bedrooms. He as well constructed a garage adjacent to the living room area. All of this is illustrated in Mr. McGill's report of July 22, 1993, where he goes into all of the problems of this house in greater detail and provides a number of photographs to illustrate the problems.
48 In Mr. McGill's September 23, 1993 report, he found problems with the header above the living room window as well as footings at several holes along the north and east walls. He took some preliminary measurements that indicated that the west wall and the south wall did not meet the setback requirements of the Regional District.
Q. Mr. McGill, would you be prepared to offer an opinion as to the quality of the workmanship on this house?
A. The initial structure that was moved to the site, which I would like to describe for you is, once again, from the west wall of the living room to the east wall of the bedroom and bathroom, and right through where the bedroom and bathroom are. From the sill level to the floor to the walls is in my opinion satisfactory. What is unsatisfactory with the structure is the internal support system for the floor, the drainage system, the garage and the roof structure. That would be my opinion, my lord.
He said that the basic building was satisfactory but what had been added to it once it was moved was what was causing the problems.
50 The plaintiff called Mr. Kenneth Albert Ross who has been employed in the building trades and related fields for 25 years and has been doing renovation work for that 25 years under the trade name of Pacific West Renovation. Mr. Ross consulted with Mr. McGill and prepared a quotation of the total cost of repair and provided a price to address the issues raised in Mr. McGill's reports. His quotation totals $88,214.66.
51 No other witness was called by any other party with respect to the cost of repairing this house, so there is only Mr. Ross's evidence on this point. No other contractor was called by any other party with respect to the cost of rectifying the problems that Mr. McGill found. That is the only evidence there is in this case that can be considered in assessing damages.
52 Mr. Dame cross-examined Mr. Ross in detail as to the measures he proposed to correct the deficiencies. Mr. Dame complained that the cost of repairs Mr. Ross said were necessary was excessive. He was advised of his right to adduce his own evidence in regard to repairs, but he did not do so. The plaintiff has testified that she was prepared at all times to facilitate further inspections of the home in relation to the cost of repairs. Despite the four-month adjournment, the Dames made no effort to secure their own evidence as to the cost of repairs.
53 Mr. Dame is not a contractor, nor has he much, if any, experience in the building of houses. His father-in-law, who performed most of the work on the renovations of this house was employed as an electrician at MacMillan Bloedel in Port Alberni until he retired. Since he was not called to give evidence, there is no evidence as to his abilities to do that work. When Mr. and Mrs. Dame first met with Mr. Inwards, Mr. Dame was a principal in a company called S & D Developments, which was involved with Ramlock Construction. As such, he was involved in the development of a seniors project on Gertrude Street in Port Alberni. Ms. Hansen has put in evidence two contracts of sale that Mr. Dame had prepared. One was a contract of purchase and sale which he prepared on a Vancouver Island Real Estate Board form, where he offered to purchase a lot for $21,500, to be completed June 30, 1992. The second was a contract of purchase and sale he prepared when he sold a strata lot on Gertrude Street for $81,500. This contract is dated June 28, 1992. In these circumstances, Mr. Dame is hardly in a position to say that he was unaware of the contractual obligations of a vendor or a purchaser, since he, on one occasion, acted as a vendor for the company he was working for and as a purchaser for the property he bought.
54 Both Mr. and Mrs. Dame testified at the trial. Mr. Dame was very definite about everything he said, much of which I do not believe. Mrs. Dame, on the other hand, had only vague recollections of anything that happened. Consequently, I find her evidence to be unreliable.
55 Counsel for the plaintiff suggests to me that Mr. and Mrs. Dame were wilfully blind to the requirement calling for inspections and cannot reasonably be found to believe that one inspection at the early phase of renovation was an inspection which validated the structural integrity of work which had not yet been undertaken, or if commenced was not yet complete. He further urges me to find that Mr. and Mrs. Dame, in effect, avoided the inspection services to avoid having the quality or the method of their work called into question, or possibly because they wished to avoid the additional expense that compliance with the Building Code would have entailed.
56 Whatever may be the case, if the Dames had been concerned with the structural integrity of the work one would think that they would have called for inspections or, alternatively, would have consulted a journeymen tradesman to ensure the work was being performed in an approved manner. They did neither. They apparently relied on Mrs. Dame's father to do the work properly. It is obvious that if he is the one who did the work, as Mr. Dame says, he did not perform the work properly. If he knew anything about building houses, one would think that he would have told Mr. Dame to have the building inspected from time to time. It may be that he did tell him that, and that is why Mr. Leskinen was not called, and would not help the Dames by giving evidence.
57 It seems to be Mr. Dame's contention that there is some obligation on the building inspector to inspect the property without being called upon to do so. He does not seem to understand, or want to understand is probably more accurate, that it is his responsibility and not that of the building inspector to ask for an inspection. Building inspectors can only do what they are asked to do. That was made clear by Mr. Hornquist.
58 Mr. Avis submits that if the Dames were unconcerned and reckless as to the structural integrity of their renovation, they were even more unconcerned with respect to the representation made about inspection, and particularly when they said in the disclosure statement, representing as they did, that no addition was constructed without the required permit and that the final inspection/and or occupancy permit had been obtained and there was no basis for the representations they made. I agree.
59 Mr. Dame, for whatever reason, signed the two addenda. When one compares the addendum of June 16, 1992 with the addendum of June 27, 1992, they are remarkably similar in some respects. Aside from guaranteeing that there was not a leaky roof or flooding, Mr. Dame also guaranteed that there were no structural problems. He guaranteed the work he had done and did that with the obvious intention of deceiving the plaintiff into believing that he had done the work he was guaranteeing when, in fact, according to him, the work was done by his father-in-law. Then in the addendum of June 27, he warranted the work was up to the 1992 Building Code standard. He continued to say that in his letter to Mr. Johnstone later on. That was patently untrue.
60 Accordingly, I have no difficulty in finding that the defendants, Mr. and Mrs. Dame, are liable in damages to the plaintiff, Mrs. Johnstone, both in tort and in contract. There is no doubt that the Dames were fraudulent in their whole approach to the sale of this renovated structure. Clearly they dressed up this old army barracks to look in all respects like a contemporary three-bedroom rancher and then set out to try and pass it on to a prospective purchaser.

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