COURT OF APPEAL FOR BRITISH
COLUMBIA

Citation:

McCabe v. British Columbia
  (Securities Commission),

2016 BCCA 7

Date: 20160108

Docket: CA42515

Between:

Colin Robert Hugh
McCabe

Appellant

And

British Columbia
Securities Commission and the Executive

Director of the
British Columbia Securities Commission

Respondents

Before:

The Honourable Mr. Justice Tysoe

The Honourable Madam Justice Garson

The Honourable Mr. Justice Goepel

On appeal from:  The
decisions of the British Columbia Securities Commission, dated July 8, 2014
(liability) (
Re McCabe
, 2014 BCSECCOM 269) and
December 18, 2014 (sanctions) (
Re McCabe
, 2014 BCSECCOM 512).

Counsel for the Appellant:

S.K. Boyle

M.P. Good

Counsel for the Respondent:

W.L. Roberts

D. Chapman

Place and Date of Hearing:

Vancouver, British
  Columbia

November 2, 2015

Place and Date of Judgment:

Vancouver, British
  Columbia

January
  8, 2016

Written Reasons by:

The Honourable Mr. Justice Goepel

Concurred in by:

The Honourable Mr. Justice Tysoe

The Honourable Madam Justice Garson

Summary:

Appeal from decisions of the
British Columbia Securities Commission finding the appellant liable for
misrepresentations contrary to s. 50(1)(d) of the Securities Act, R.S.B.C.
1996, c. 418. The appellant argues that the Commission lacked the
jurisdiction to make a finding of liability under s. 50(1)(d) because the
impugned conduct took place in the United States. Held: appeal dismissed. The
Commission was correct in taking jurisdiction. A real and substantial
connection exists between the appellants conduct and the province of British
Columbia.

Reasons for Judgment of the Honourable
Mr. Justice Goepel:

INTRODUCTION

[1]

The appellant, Colin McCabe, appeals from decisions of the British
Columbia Securities Commission (the Commission). The Commission found that
Mr. McCabe contravened s. 50(1)(d) of the
Securities Act
, R.S.B.C. 1996,
c. 418 (the
Act
) when he made gross misrepresentations
concerning
Guinness Exploration
Inc. (Guinness
ˮ)
in
certain publications that were printed and distributed in the United States. The
Commission made orders against him for disgorgement of approximately $2.78
million and an administrative penalty of $1.5 million. The liability decision
is indexed at 2014 BCSECCOM 269; the sanctions decision at 2014 BCSECCOM 512.

[2]

Mr. McCabe sought leave
to appeal. In reasons indexed at 2015 BCCA 176, a judge of this Court gave
Mr. McCabe leave to appeal the single issue of whether the Commission had
jurisdiction to sanction him for breach of s. 50(1)(d).

[3]

Mr. McCabe argues that
the Commission was without jurisdiction because the impugned conduct took place
outside the province of British Columbia. He seeks an order setting aside the
Commissions finding that he contravened s. 50(1)(d) along with the
monetary sanctions that flow from this finding.

[4]

The Commission submits
that it has the jurisdiction to sanction the appellant because his conduct had
a real and substantial connection to British Columbia.

[5]

For the reasons that
follow, I would dismiss the appeal.

BACKGROUND

[6]

To put the parties submissions in context, it is first necessary to
review the underlying facts. The facts are not in dispute.

[7]

Mr. McCabe is a British Columbia resident. He is the sole shareholder,
director and officer of Jake Landon Publishing Inc. (Landon). He has no
experience in the securities industry and has never been registered as an
investment advisor under the
Act
.

[8]

Through Landon, Mr. McCabe published stock recommendations under his own
name in a monthly report known as the Elite Stock Report. He carried on his
business from his home in Abbotsford, British Columbia.

[9]

Between December 2009 and May 2010, Mr. McCabe wrote and published three
reports in the Elite Stock Report promoting shares in Guinness
(the Guinness Tout Sheetsˮ). Guinness
is
a
company incorporated
in Nevada.
Its shares are quoted on the Over-the-Counter Bulletin Board (the
OTCBB) in the United States.

[10]

The appellant wrote each of the
Guinness
Tout Sheets
at his home in Abbotsford.
He
then emailed a PDF of the documents from his home to a printing company in
South Dakota. The Guinness Tout Sheets were printed in South Dakota and
distributed by direct mail from South Dakota to approximately three million
homes in the United States. There is no evidence that the Guinness Tout Sheets
were received, read or known to any person in British Columbia or Canada other
than Mr. McCabe.

[11]

The Guinness Tout Sheets
were grossly misleading. They contained false and unfounded claims that
Guinnesss mining property had in excess of one million ounces of gold (the
Guinness Misrepresentationsˮ). The Commission found that the Guinness
Misrepresentations were intended to significantly increase trading volumes in
Guinness shares in order to inflate its stock price.

[12]

Mr. McCabe prepared the
Guinness
Tout Sheets
at the behest of Mr. Erwin Speckert, who identified himself to
Mr. McCabe only as Erwin and provided a fax number to which Mr. McCabe was to
send his invoices. Mr. McCabe invoiced Emma Marketing Services, Inc., a British
Virgin Islands corporation. He was paid a total of $2.65 million for touting
Guinness. Mr. Speckert arranged for payment through various offshore companies
and a Swiss bank account. The funds were ultimately deposited in Landons bank
account in Surrey, British Columbia.

[13]

On March 19, 2010, during the period in which Mr. McCabe was writing and
distributing the Guinness Tout Sheets, the Commission issued a Cease Trade
Order of Guinness shares for the companys failure to meet its filing
obligations as an OTC reporting issuer in British Columbia. Pursuant to BC
Instrument 51-509,
Issuers Quoted in the U.S. Over-the-Counter Markets
,
a company with a connection to British Columbia whose shares are quoted on the
OTCBB is deemed to be a reporting issuer under the
Act
.

[14]

On July 31, 2012, the Commission issued a notice of hearing alleging in
part that Mr. McCabe made misrepresentations contrary to s. 50(1)(d) of the
Act
.
Section 50(1)(d) reads as follows:

50
(1) A person, while engaging in investor relation
activities with the intention of effecting a trade in a security, must not do
any of the following:

(d) make a statement that the person knows, or ought
reasonably to know, is a misrepresentation;

[15]

Around this time, Mr. McCabes conduct also came under scrutiny in the
United States. The Guinness Misrepresentations were just one aspect of a
broader case of alleged misconduct brought by the United States Securities and
Exchange Commission (the SEC) against Mr. McCabe.

[16]

Prior to the hearing on liability before the Commission, Mr. McCabe
applied for a stay of proceedings in British Columbia on the basis of
forum
non conveniens
, arguing that the United States was the more appropriate
forum.  His application was denied:
Re McCabe
, 2013 BCSECCOM 250.

[17]

The Commissions decision on liability was issued on July 8, 2014. Its
decision on sanctions followed on December 18, 2014.

[18]

In the liability hearing, Mr. McCabe argued that the Commission lacked
jurisdiction because the Guinness Tout Sheets were only sent to residents of
the United States, and Guinness shares were only traded in the United States.
The Commission rejected this argument:

[128]    This argument overlooks the facts that McCabe, at
the time a British Columbia resident, wrote these reports from his home in
British Columbia, and received the $5 million in fees for publishing them, in
bank accounts he controlled, at least one of which was in British Columbia.

[129]    Although the targets of
the touting may have been investors in the US, and the companies concerned
traded only in the US, McCabe engaged in this misconduct in British Columbia.
Tolerance of that misconduct could not help but impugn the reputation of our
markets.

[19]

At paras. 175-177 of its decision on liability, the Commission also
stated:

[175]    McCabe says that the alleged misrepresentations
only came into existence when they were received and acted upon in the United
States and therefore there is no factual basis or jurisdiction for a finding
that McCabe contravened section 50(1)(d).

[176]    This argument has no merit.  The executive
director proved that McCabe, with the intention of effecting a trade in a
security, made untrue statements of material facts about Guinness. That
encompasses the entire prohibition contained in section 50(1)(d).

[177]    Nothing in section
50(1)(d) says anything about the notion of misrepresentations coming into
existence, much less a requirement that a misrepresentation be received or
acted upon, in the United States or anywhere else.  McCabes suggestions
otherwise are baseless inventions.

[20]

The SECs allegations against Mr. McCabe were never adjudicated. On
August 13, 2015, without admitting or denying liability, Mr. McCabe consented
to the entry of a final judgment against him in the United States.

[21]

The Commission has brought a new evidence application to introduce the
SECs settlement with Mr. McCabe as evidence in this proceeding.

THE APPEAL

A.  Overview

[22]

While the sole issue on the appeal is whether the Commission had
jurisdiction to find that Mr. McCabe contravened s. 50(1)(d) of the
Act
,
this issue requires consideration of the standard of review and the applicable
test for determining the scope of the Commissions jurisdiction.

B.  Standard of Review

[23]

Mr. McCabe submits that the question before the Court is one of
correctness. He says that the constitutional applicability of the
Act
raises a true question of jurisdiction. He argues that it can never be
reasonable for a tribunal to act beyond the constitutional territorial limits
of provincial power.

[24]

The Commission submits that the appeal does not involve a question of
true jurisdiction as contemplated by the Supreme Court of Canada in
Dunsmuir
v. New Brunswick
, [2008] 1 S.C.R. 190. It says that Mr. McCabe

has conceded
the constitutional validity of s. 50(1)(d). It argues that the question in this
case concerns the application of s. 50(1)(d) to Mr. McCabes conduct. It

submits
that, as such, the applicable standard of review is one of reasonableness.

C.  Test for Determining the Commissions Jurisdiction

[25]

Mr. McCabe

argues that the Commissions jurisdiction should be
evaluated based on the concept of constitutional inapplicability. He submits
that, where a provincial statute has extra-territorial effect, the appropriate
inquiry is whether a meaningful connection exists between the province and
the extra-territorial matter in question, and whether applying the statute will
respect the legislative sovereignty of other jurisdictions, having regard to the
factors set out in
Unifund Assurance Co. v. Insurance Corp. of British
Columbia
, 2003 SCC 40 [
Unifund
]. He also relies on the presumption
against the extra-territorial application of legislation.

[26]

Mr. McCabe submits that the facts of this case do not satisfy the
meaningful connection test. He says that the purpose of the
Act
is to
regulate conduct in British Columbia, and the purpose of s. 50(1)(d) is to
target misrepresentations concerning securities traded in British Columbia, not
misrepresentations by a resident of British Columbia concerning securities
traded in other jurisdictions. He argues that no meaningful connection exists
between a misrepresentation published outside of British Columbia and the
purpose of the
Act
or the object of s. 50(1)(d).

[27]

Mr. McCabe points to the torts of misrepresentation and defamation for
the proposition that the wrongful act of publication occurs in the jurisdiction
where an impugned statement is received and acted or relied upon. Here, he
says, publication of the Guinness Tout Sheets occurred in the United States.

[28]

While Mr. McCabe concedes that the Commission has a broad mandate
to protect the capital markets and residents of British Columbia, he submits
that its public interest jurisdiction does not extend to specific provisions of
the
Act
. He characterizes the Commissions findings under
s. 50(1)(d) as an instance of jurisdictional overreach that is damaging to
the principle of international comity.

[29]

The Commission submits that the applicable test for determining its
jurisdiction is the real and substantial connection test. It argues that this
test should account for the realities of modern securities trading and
regulation, including technology that facilitates multi-jurisdictional
securities markets and industries.

[30]

The Commission argues that a real and substantial connection exists
between British Columbia and Mr. McCabes conduct which contravened
s. 50(1)(d). It notes that Mr. McCabe resides in British Columbia,
was contacted by Mr. Speckert in British Columbia, drafted the Guinness
Tout Sheets in British Columbia, received payment in British Columbia, and that
Guinness is an OTC reporting issuer in British Columbia. On this basis, the
Commission submits that its finding of liability under s. 50(1)(d) did not
overreach its jurisdiction. It argues that the place where a misrepresentation
is received is irrelevant to a finding of liability under s. 50(1)(d).

DISCUSSION

[31]

As set out above, the parties have different views as to the appropriate
standard of review. The Commission submits that the appropriate standard ought
to be reasonableness, while Mr. McCabe urges that this is a jurisdictional
matter which should be reviewed on a standard of correctness. In the
circumstances of this case, I need not reach a final determination on the
standard of review because I have concluded that the more rigorous standard of
correctness is, in any event, satisfied.

[32]

Modern securities markets are complex and multi-jurisdictional. The
Act
is regulatory in nature and the Commission is part of a network of
administrative bodies that regulate securities markets throughout Canada and
other jurisdictions.

[33]

The Commission plays the central role in the regulation of securities
markets in British Columbia and has been granted a wide mandate to do so under
the
Act
. The primary goal of the
Act
is to serve the public
interest in British Columbia by protecting investors, fostering capital market
efficiency, and promoting public confidence in the system. The Commission is a
highly specialized regulatory tribunal that provides expertise in interpreting
and applying the
Act
, and has broad discretion to determine what is in
the public interest with respect to the securities industry.

[34]

In
Unifund
, the Supreme Court of Canada held that consideration
of a provincial statutes constitutional applicability can be conveniently
organized around the following propositions (at para. 56):

1.         The
territorial limits on the scope of provincial legislative authority prevent the
application of the law of a province to matters not sufficiently connected to
it;

2.         What
constitutes a sufficient connection depends on the relationship among the
enacting jurisdiction, the subject matter of the legislation and the individual
or entity sought to be regulated by it;

3.         The
applicability of an otherwise competent provincial legislation to
out-of-province defendants is conditioned by the requirements of order and
fairness that underlie our federal arrangements;

4.         The principles of order and
fairness, being purposive, are applied flexibly according to the subject matter
of the legislation.

[35]

The question is whether there is a real and substantial connection, not
whether a particular connection is the most real and substantial. This question
is to be answered with reference to the regulatory regime at issue, the
particular provision being applied, the impugned conduct, and the individual or
entity who is subject to the regulatory body.

[36]

In the context of securities regulation, the Commissions jurisdiction depends
on whether the impugned conduct has a sufficient connection to British Columbia,
or, as recently expressed by this Court, there is a state of facts
demonstrating circumstances in which it would be appropriate for a tribunal to
take jurisdiction over a legal issue or controversy:
Torudag v. British
Columbia (Securities Commission)
, 2011 BCCA 458 at para. 19. Whether this
connection is termed a meaningful one or a real and substantial one, the
concept is the same:
Torudag
at para. 19.

[37]

The analysis of whether a real and substantial connection exists must
reflect the realities of modern securities regulation. For instance, conduct involving
securities will often be transnational in nature, crossing provincial and state
borders.

[38]

In
Gregory & Co. v. Quebec (Securities Commission)
, [1961]
S.C.R. 584, the Supreme Court of Canada held that the Quebec Securities
Commission could order sanctions against a company whose head office and place
of business was in Quebec, but who dealt with and mailed promotional bulletins
exclusively to persons in other provinces and countries. Fauteux J. for the
majority noted at 588:

The paramount object of the Act is to ensure that persons
who, in the province, carry on the business of trading in securities or acting
as investment counsel, shall be honest and of good repute and, in this way, to
protect the public,
in the province or elsewhere
, from being defrauded
as a result of certain activities
initiated in the province by persons
therein
carrying on such a business.

[Emphasis added.]

[39]

In
R. v. W. McKenzie Securities Limited
(1966), 56 D.L.R. (2d) 56
(Man. C.A.), the accused were charged with unlawfully trading in securities contrary
to the provisions of
The Securities Act
, R.S.M. 1954, c. 237. The
accused, who were not licensed to trade securities in Manitoba, conducted their
business of promoting and selling securities entirely from Toronto by sending
letters and making telephone calls to potential investors, including the
complainant in Manitoba. The Court of Appeal underlined that an offence could
occur in more than one place. At 63, it said:

Although offences are local, the
nature of some offences is such that they can properly be described as
occurring in more than one place. This is peculiarly the case where a
transaction is carried on by mail from one territorial jurisdiction to another,
or indeed by telephone from one such jurisdiction to another. This has been
recognized by the common law for centuries.

[40]

In
R. v. Libman
, [1985] 2 S.C.R. 178, the appellant sought to
have his committal for trial on multiple counts of fraud and conspiracy to
commit fraud quashed on the basis that the alleged offences occurred outside
Canada. Pursuant to the appellants directions, sales personnel in Toronto telephoned
United States residents and attempted to induce them to buy shares in two
Central American mining companies. The sales personnel were directed to make
material misrepresentations with respect to their identity, where they were
telephoning from, and the quality and value of the shares they were selling. As
a result of these misrepresentations, a large number of United States residents
were induced to buy virtually valueless shares in the mining companies. Their
money was sent to Central America where the appellant received his share to
take back to Toronto.

[41]

The Supreme Court of Canada held that the counts of fraud for which the appellant
stood charged could be properly prosecuted in Canada. Nothing in the
requirements of international comity dictated that Canada should not exercise
jurisdiction. Mr. Justice La Forest held that all that is necessary to make an offence
subject to the jurisdiction of our courts is that a significant portion of the
activities constituting the offence took place in Canada. It is sufficient that
there be a real and substantial link between the offence and Canada.

[42]

In
Re Al-tar Energy Corp.
, 2010 LNONOSC 406, the respondents were
located in Ontario but targeted investors outside of that province. The Ontario
Securities Commission (the OSC) found that the conduct of the respondents had
significant and substantial connections to Ontario: para. 52. In determining
that it had jurisdiction, the OSC pointed to the fact that (1) the respondents
were located in Ontario, (2) their materials and telephone calls to potential
investors originated in Ontario, and (3) payments were received by the
respondents in Ontario: para. 52.

[43]

In
Crowe v. Ontario Securities Commission
, 2011 ONSC 6918, the
appellants appealed a decision of the OSC finding them liable for breach of the
Securities Act
, R.S.O. 1990, c. S.5. They argued that the OSC
lacked the jurisdiction to make this finding because the impugned securities
were sold only to offshore investors. The appeal was dismissed. The Divisional
Court upheld the OSCs finding that a substantial connection existed between
the appellants activities and the province of Ontario, and the OSCs decision
to intervene because the appellants conduct negatively affected the reputation
and integrity of Ontarios capital markets. In reaching this decision, the Divisional
Court said at para. 32:

The appellants in the present case focus on the fact that the
trades with investors occurred outside the province. However, that does not
prevent the Commission from asserting jurisdiction on the facts of the present
case. As
Gregory
makes clear, and contrary to what the appellants
assert, a province is not limited to protecting the interests of domestic
investors from unfair or fraudulent activities.
Provincial securities
legislation can also be applied to regulate corporations or individuals within
the province in order to protect investors outside the province from unfair,
improper or fraudulent activities.
Where the Commission is regulating
trades that have an extraprovincial character, the question is not the location
of the investors; rather, it is whether there is a sufficient connection
between Ontario and the impugned activities and the entities involved to
justify regulatory action by the Commission.

[Emphasis added.]

[44]

This Court recently considered the scope of the Commissions
jurisdiction

in
Torudag
, in the context of insider trading. The
Commission found that the appellant, who was not a resident of British Columbia,
used insider information to buy shares in a company listed on the TSX Venture
Exchange, contrary to s. 86 of the
Act
. Many of the sellers were
residents of British Columbia. The appellant argued, as in this case, that the
Act
was constitutionally inapplicable to the impugned conduct by reason of
extra-territoriality. This Court held otherwise, finding that the circumstances
disclosed a real and substantial connection to British Columbia and that no
error had been demonstrated in the Commissions decision to take jurisdiction.
In its analysis, the Court noted at para. 27:

The Commission has the
responsibility to regulate the activities of the Exchange to provide protection
to the investing public. This responsibility includes the duty to ensure a
level playing field for investors in exchange traded companies. Allowing the
misuse of insider information to skew fairness in the trading arena is inimical
to the operation of a fair and orderly market in securities.

[45]

The allegations in this case concern a breach of s. 50(1)(d) of the
Act
,
the material elements of which are:

(a)

the intention of effecting a trade;

(b)

must not  make a statement;

(c)

that the person knows, or ought reasonably to know;

(d)

is a misrepresentation.

[46]

Section 1(1) of the
Act
defines misrepresentation as including
an untrue statement of a material fact and defines material fact as a fact
that would reasonably be expected to have a significant effect on the market
price or value of the securities. The Commission found that the Guinness
Misrepresentations were untrue statements of a material fact. It also found
that Mr. McCabe wrote and caused the Guinness Tout Sheets to be
distributed from his home in British Columbia with the clear intent to effect a
trade in Guinness shares.

[47]

While the appellant asserts that the
Act
should be interpreted as
containing language that limits its geographical applicability, s. 50(1)(d)
does not contain any such language. I note that the
Act
does not include
reference to when a misrepresentation comes into existence, nor does it specify
that a misrepresentation must be received or acted upon. The material element under
s. 50(1)(d) is the making of the statement.

[48]

The appellant, relying on the law of both misrepresentation and defamation,
argues that the wrongful act of publication only occurs where a statement is
read or acted upon, not where it is written, because publication is incomplete
until a statement is consumed by a recipient. With respect, this analogy to
tort law is not apt. Tort law is intended to protect individuals who have been
injured by the conduct of another. Generally speaking, a tort cannot be
committed in a vacuum and there must be a victim who has been harmed. The
Act
,
however, is regulatory in nature. One of its central functions is to regulate
conduct, not remedy harm to victims. Under s. 50(1)(d), the offence is
committed when the statement is made.

[49]

I agree with the Commissions finding that the evidence discloses a real
and substantial connection between the impugned conduct and British Columbia.
The Guinness Tout Sheets were written in British Columbia, by a resident of
British Columbia, who was paid in British Columbia for his services. I find
that the Commission was correct in its analysis of the relevant factors going
to jurisdiction. I see no basis to interfere with its decision to take
jurisdiction under s. 50(1)(d).

[50]

I would dismiss the appeal.

[51]

In the circumstances, it is not necessary to deal with the Commissions new
evidence motion.

The
Honourable Mr. Justice Goepel

I AGREE:

The Honourable Mr. Justice Tysoe

I AGREE:

The Honourable Madam Justice Garson


COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Kondor v. Shea,

2016 BCCA 15

Date: 20160111

Docket: CA42577

Between:

Bernadette Kondor

Appellant

(Plaintiff)

And

Dylan Shea and
Lori Shea

Respondents

(Defendants)

Before:

The Honourable Madam Justice Saunders

The Honourable Mr. Justice Lowry

The Honourable Mr. Justice Fitch

On appeal from: an
order of the Supreme Court of British Columbia, dated
January 22, 2015 (
Kondor v. Shea
, Vancouver Registry no. M114203)

Oral Reasons for Judgment

Counsel for the Appellant:

D.W. Grunder

Counsel for the Respondent:

D.H. Taylor

Place and Date of Hearing:

Vancouver, British
  Columbia

January 11, 2016

Place and Date of Judgment:

Vancouver, British
  Columbia

January 11, 2016

Summary:

Appeal by the plaintiff of
an order made by the trial judge after judgment denying her the costs of two
interlocutory applications. Held: appeal allowed. The costs of the two
applications were effectively awarded to the plaintiff by the master who heard
them. It was not open to the judge to deny the plaintiff those costs.

[1]

LOWRY J.A.
: The question on this appeal, for which leave has been
granted, is whether an order made by the trial judge with respect to the costs
of two interlocutory applications heard by a master in the course of the litigation
of the action can be upheld.

[2]

The action is one brought by the plaintiff against the defendants for
personal injury suffered in a motor vehicle accident. A short time before trial
and outside of the time limit provided by the rules to serve an experts
report, the defendants applied for an order requiring the plaintiff to attend
an independent medical examination. The master dismissed the application. The
order made no provision for costs. The defendants subsequently applied for an
adjournment of the trial and again for an order requiring the plaintiff to
attend an independent medical examination. The master dismissed that
application as well. His order provided the plaintiff is entitled to the costs
of this application in the cause. Neither order was appealed.

[3]

Following a nine-day trial, the judge made a substantial award of
damages. He concluded his reasons, 2014 BCSC 2146, by stating the plaintiff was
entitled to costs at Scale B meaning of course the costs of the action apart
from such costs as may have already been awarded in the course of the
litigation of the action. He gave direction for written submissions in the
event that any offers of settlement that may have been made were relevant to
the costs awarded.

[4]

Thereafter, the plaintiff made application with respect to costs
unrelated to offers of settlement. She sought an order awarding her costs of a
second counsel at trial. The defendants then applied for the costs of the two
applications heard before the master with respect to an independent medical
examination. On hearing counsel, the judge made an order providing the
plaintiff was not entitled to the costs of a second counsel, nor of the two
applications heard before the master.

[5]

The plaintiff does not challenge the order with respect to the costs of
a second counsel but contends that, given the provisions of the masters two
orders, the judge was precluded from depriving her of the costs of either
application, although her counsel accepts that was not the position taken
before the judge where the plaintiffs entitlement to costs was argued on its
merits. The defendants maintain the rules afford the trial judge both the
jurisdiction and the discretion to deprive the plaintiff of the costs of the
interlocutory proceedings as he saw fit. The defendants rely on Rules 14(1)(14)
and (15) of the
Supreme Court Civil Rules
but those rules have no
application in the circumstances because the orders the master made effectively
disposed of the costs of the applications in favour of the plaintiff.

[6]

Under the heading Costs of applications, Rule 14-1(12) provides:

(12)      Unless
the court hearing an application otherwise orders,

(a)     if the
application is granted, the party who brought the application is entitled to
costs of the application if that party is awarded costs at trial or at the
hearing of the petition, but the party opposing the application, if any, is not
entitled to costs even though that party is awarded costs at trial or at the
hearing of the petition, and

(b)     if the application is refused,
the party who brought the application is not entitled to costs of the
application even though that party is awarded costs at trial or at the hearing
of the petition, but the party opposing the application, if any, is entitled to
costs if that party is awarded costs at trial or at the hearing of the
petition.

[7]

With respect to the first of the masters two orders, which makes no
provision for costs, it is clear Rule 14-1(12)(b) applies such as to entitle
the plaintiff to her costs of the first application. The master, being by
definition (Rule 1.1(1)) the court hearing an application, made no order as
to costs. The application was refused. The plaintiff, being the party who
opposed the application, is entitled to costs because she was awarded costs
at trial to be taxed on Scale B.

[8]

There is no basis on which it can be said to have been open to the judge
to make an order providing the plaintiff is not entitled to costs to which
under the rules she is entitled. The rules must govern.

[9]

With respect to the second of the masters two orders, which provides
the plaintiff is entitled to costs of the application in the cause, it is clear
the order the master made has the same effect as Rule 14-1(12)(b). Having
successfully opposed the application, the plaintiff was entitled to costs if,
but only if, she succeeded at trial such that the cause was resolved in her
favour. She was not awarded costs in any event of the cause, as is sometimes
the case, but was to be entitled to costs of the application provided her action
was not dismissed.

[10]

Thus, again, it was not open to the judge to deprive the plaintiff of
the costs she had been awarded by the master upon her action succeeding.

[11]

The judge was not hearing an appeal of the masters orders that would
have permitted him to consider whether the master had in some way erred in
making one or both of his orders. Further, the master did not refer the costs
of the applications to the judge as may be appropriate in some circumstances.
There was then no place for the judges intervention.

[12]

It follows that I would allow the appeal and set aside the judges order
depriving the plaintiff of her costs of the two applications heard before the
master. I would substitute an order dismissing both the plaintiffs application
for the costs of a second counsel and the defendants application for costs of
the two applications heard before the master. Given the divided success on the
cross applications heard before the judge, I would order that each party bear
the costs of their applications before him.

[13]

I would award the plaintiff her costs of the appeal.

[14]

SAUNDERS J.A.
: I agree.

[15]

FITCH J.A.
: I agree.

[16]

SAUNDERS J.A.
: The appeal is allowed in the terms described by
Mr. Justice Lowry, and the plaintiffs shall have the costs of the appeal.

The
Honourable Mr. Justice Lowry


COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Magdalena v. Vancouver Coastal Health Authority,

2016 BCCA 16

Date: 20160111

Docket: CA42500

Between:

Gavrieal
Magdalena, also known as Keyvan Economi

Appellant

(Plaintiff)

And

Vancouver Coastal
Health Authority, operating a Public Hospital
under the name and style of Vancouver Hospital and Health Sciences Centre
U.B.C. site, and Dr. Andrzej Buczkowski

Respondents

(Defendants)

Before:

The Honourable Madam Justice Saunders

The Honourable Mr. Justice Lowry

The Honourable Mr. Justice Fitch

On appeal from: an
order of the Supreme Court of British Columbia dated
December 11, 2014 (
Magdalena v. Vancouver Coastal Health Authority
,
Vancouver Registry No. S106678)

Oral Reasons for Judgment

Appellant appearing In Person:

Counsel for the Respondent:

J. Woznesensky

Place and Date of Hearing:

Vancouver, British
  Columbia

January 11, 2016

Place and Date of Judgment:

Vancouver, British
  Columbia

January 11, 2016

Summary:

The appellant appeals the
dismissal of his action following a summary trial. The appellant alleged that
the advice given to him during a pre-surgical medical consultation was
negligent. The appellants action was dismissed because he failed to adduce
expert evidence concerning the standard of care that the respondent failed to
meet and he failed to adduce any evidence that his current difficulties were
caused by the surgery. Held: Appeal dismissed. The summary trial judge
correctly held that the appellants failure to adduce expert evidence regarding
the applicable standard of care was fatal to his claim.

[1]

FITCH J.A.
: The appellant, Gavrieal Magdalena, appeals the
dismissal of his action following a summary trial heard December 11, 2014.

[2]

The respondent is a general surgeon. He removed the appellants
gallbladder in a surgical procedure performed October 10, 2008. Since that
procedure, the plaintiff says he has suffered from chronic diarrhea and related
symptoms that have substantially reduced his quality of life.

[3]

The action arose not out of the surgery itself, but out of a
pre-surgical medical consultation that occurred on September 19, 2008 in the
respondents office.

[4]

The appellant alleged that the advice given to him during the
pre-surgical consultation was negligent. Specifically, the appellant alleged
that the respondent: (1) failed to inform him of other less invasive forms of
treatment that could have relieved or significantly alleviated his pain,
including lithotripsy, a procedure in which ultrasound is used to break up
gallstones into smaller particles that can be passed by the body; and (2)
failed to correctly inform him of the long-term risks associated with
gallbladder removal, including chronic diarrhea and loss of the ability to
control bowel functions.

[5]

The appellants action was dismissed primarily on two grounds. First, he
failed to adduce any evidence that the respondent failed to meet the standard
of care applicable in the circumstances. Second, he failed to adduce any
evidence that his current difficulties were caused by the surgery.

[6]

The appellant submits that the summary trial judge erred in a number of
ways, including by:

1.

Finding that it
was necessary for him to tender expert evidence to prove his claim;

2.

Refusing to
grant him leave to cross-examine the respondents expert on a report prepared
by the expert and filed pursuant to Rule 9-7(5)
Supreme Court Civil Rules
;

3.

Finding that
portions of the affidavit evidence relied on by the appellant were
inadmissible;

4.

Giving too much
weight to the pre-surgical consent form signed by the appellant on September
19, 2008 and insufficient weight to his evidence about the discussions he had
with the respondent at the time of the initial consultation and on the day of
the surgery;

5.

Finding there
was no evidence upon which a reasonable conclusion could be reached that, with
more time, the appellant would be in a position to put evidence before the
court in support of his claims;

6.

Making a final
order without being satisfied that s. 5 of the
Health Care Costs Recovery
Act
, S.B.C. 2008, c. 27 had been complied with; and

7.

Failing to
recognize the significance of the potential evidence that might be given by the
only other person present at the time of the pre-surgical medical consultation
- a medical student working in the respondents office.

[7]

The procedural history of this matter and background facts may be
briefly stated.

[8]

Before being referred to the respondent by his family doctor, the
appellant had been experiencing very painful epigastric symptoms that, on at
least one occasion, led to his hospitalization.

[9]

In August 2008, he was diagnosed with gallstones and referred to the
respondent for a surgical consultation.

[10]

That consultation occurred September 19, 2008.

[11]

It is common ground that the respondent told the appellant lithotripsy
was not a reasonable option for him. The respondent deposes that lithotripsy
was not an accepted treatment for the management of symptomatic gallstone
disease in 2008. His evidence on this point is confirmed by the evidence of the
respondents expert who said in his report that the routine treatment of
gallstones with lithotripsy was abandoned in British Columbia more than 25
years ago due to complications arising from that procedure.

[12]

The appellant and respondent provided different accounts about the
discussions they had concerning the risks and post-surgical complications that
could potentially arise following removal of the gallbladder. On examination
for discovery, the appellant agreed the respondent told him that removal of the
gallbladder can result in a change in bowel functions but that it normally
lasts for no longer than about six months. The appellant says he was told that
a very small percentage of patients, mostly older people, have long-lasting
bowel complications, but that it was very unlikely he would experience post-surgical
symptoms of this kind. In his affidavit filed for use on the summary trial
application, the appellant deposed that the respondent told him the only
possible side effect of the surgery would be diarrhea for three to six months,
that this was an extremely remote possibility which affected one in 1,000
patients, and that it would never happen to him.

[13]

The respondent deposed he told the appellant he could experience
post-surgical bloating and diarrhea-like symptoms but that this normally
resolves within three to six months. He said he also told the appellant that a
small percentage of patients may experience diarrhea for longer than six
months.

[14]

Following the pre-surgical consultation, the appellant signed a generic
consent form agreeing to the surgery. The consent form did not address risks
specifically associated with gallbladder removal.

[15]

The appellant underwent the surgical procedure on October 10, 2008. He
says he attempted to alert the respondent to his ongoing concerns on the date
of the surgery but by the time the respondent arrived to perform the procedure
he was heavily sedated.

[16]

The appellant commenced the action on October 8, 2010.

[17]

Beginning in June 2012, and on multiple occasions thereafter, the
respondents lawyer gave notice to the appellants lawyer and to the appellant
personally, that expert evidence respecting the applicable standard of care was
required and that if the appellant failed to produce such evidence, the
respondent would bring a summary trial application to have his claim dismissed.

[18]

In July 2012, the action was, by consent, dismissed against the defendant,
the Vancouver Coastal Health Authority.

[19]

On July 4, 2013 the respondent filed a notice of trial setting the trial
for January 26, 2015. The deadline for the exchange of expert reports was
November 2, 2014.

[20]

On September 17, 2013 the respondent served a supportive expert report
on the appellant.

[21]

The parties agreed that the respondents proposed summary trial
application would be set down for hearing on August 22, 2014.

[22]

In late June and early July of 2014, the appellants lawyer took steps
to withdraw as counsel of record.

[23]

On July 7, 2014, the appellant was personally served with notice of the
respondents summary trial application.

[24]

On August 22, 2014 the respondents summary trial application was
adjourned at the appellants request on the basis that he was unrepresented and
seeking legal counsel. The matter was reset for November 10, 2014. On the
return date, the matter was again adjourned at the appellants request to
December 11, 2014. This date was marked as being peremptory on the appellant.

[25]

On December 3, 2014 the appellant sent an email to counsel for the
respondent requesting that the respondents expert witness attend for cross
examination at the summary trial.

[26]

The appellant did not file a response to the summary trial application
but did file affidavits on December 8 and December 10, 2014. The appellant did
not file an application for leave to cross-examine the respondents expert in
advance of the return date, nor did he seek a further adjournment of the
summary trial application.

[27]

The appellant did not tender any expert opinion evidence to support his
claim that the respondent failed to meet the applicable standard of care. The
appellant attached some medical records to his affidavit, including a
consultation report from a specialist that was sent to his family physician.
That report did not comply with Rule 11-6 and did not, in any event, opine on
the standard of care governing the respondent in his pre-surgical consultations
with the appellant. The appellant also filed some of his own internet research
and summaries of what he said other health professionals had told him about the
risks associated with gallbladder surgery.

[28]

Relying on the respondents examination for discovery, the respondents
expert concluded that the respondent appropriately discussed with the appellant
the risks associated with gallbladder removal in the consultation of September
19, 2008.

[29]

The respondents counsel alerted the summary trial judge to the
appellants request that the respondents expert be made available for cross
examination on the summary trial application. The summary trial judge ruled
that the appellant did not have a right to cross-examine the respondents
expert in the absence of his own expert report that could provide a basis for
informed cross-examination. In coming to this conclusion, the summary trial
judge relied on
Tripp v. Ur
, 2013 BCSC 785 at paras. 13-14 and
Mikhail
v. Northern Health Authority
, 2010 BCSC 1817 at para. 85.

[30]

The summary trial judge gave these reasons for allowing the respondents
application for dismissal of the appellants action:

[31]      In
order to succeed in this case Mr. Magdalena must first prove that Dr.
Buczkowski failed to meet the appropriate standard of care. The test is
conveniently summarized by Mr. Justice Savage in
Tripp v. Ur
, 2013 BCSC
785, at paragraphs 30 and 31 . In medical negligence cases the court must
judge a physician, and, for that matter, other health professionals, based on
the standard of an ordinary average specialist in the same field under similar
circumstances. Except, perhaps, in the most obvious of cases, it is not a
standard that can be determined
a priori
or in an evidentiary vacuum by
a court or tribunal. It is therefore incumbent on the plaintiff to produce
expert evidence of a standard of care that should be imposed on the defendant
or the defendants.

[33]      In
this case, the due date for delivery of any expert reports in connection with
the January 26, 2015 trial date was November 2, 2014. No report has been
delivered by Mr. Magdalena by the due date or in response to the summary trial
application. Although Mr. Magdalena has had several years, for most of which he
was represented by counsel, to assemble opinion evidence to support his case,
and ample notice of Dr. Buczkowskis intention to seek dismissal on a summary
trial, Mr. Magdalena did not submit any expert evidence going to the key issue
of standard of care. He did not submit any expert evidence diagnosing his
current medical condition or conditions and linking those conditions in any way
to the events involving Dr. Buczkowski in 2008.

[34]      There
is no opinion evidence on Mr. Magdalenas side from which I can conclude that
he would or might have been a suitable candidate in 2008 for lithotripsy rather
than laparoscopic cholecystectomy, or that in his handling of Mr. Magdalenas
case, Dr. Buczkowski failed to meet the standard of care of a surgeon
practising in British Columbia in 2008, or that any of Mr. Magdalenas current
problems are likely caused by or the result of negligence on the part of Dr.
Buczkowski.

[35]      Mr.
Magdalena also did not submit any evidence based on which I could reasonably
conclude that, with more time, he would or even might be in a position to put
evidence before the Court to support his claims.

[38]      In
this case, like in
Tripp
, Mr. Magdalena has not met the evidentiary
burden on him to adduce evidence of the standard of care that Dr. Buczkowski
failed to meet. The courts have indicated clearly that the burden is on the
plaintiff to prove that the defendant doctor fell below his or her required
standard of care and to provide evidence to support those allegations. That
simply has not been done in this case.

[39]      Dr.
Buczkowski has gone the extra step of providing evidence, in the form of Dr.
Turners opinion, to show that the standard of care has been met, and there is no
admissible evidence to the contrary. The failure of Mr. Magdalena to present
any expert evidence that Dr. Buczkowski failed to meet the standard of care
required of him is fatal to Mr. Magdalenas case.

[40]      The action is therefore
dismissed against Dr. Buczkowski with costs.

[31]

With respect to the appellants first ground of appeal, the onus was on
him to establish the respondent failed to meet the standard of care expected of
an ordinary competent surgeon practicing in British Columbia in 2008 in similar
circumstances. Subject to narrow exceptions not applicable to this case, courts
have consistently insisted that claims of negligence in diagnosis and
treatment, including the disclosure of risks, cannot be established in the
absence of expert evidence:
ter Neuzen v. Korn
, [1995] 3 S.C.R. 674 at
paras. 33 and 40;
Reibl v. Hughes
, [1980] 2 S.C.R. 880 at 895. In my
view, the summary trial judge correctly held that the appellants failure to
adduce this evidence on the summary trial application was fatal to his claim.
In addition, I am of the view that the summary trial judge correctly held that
the appellants failure to adduce any admissible evidence to establish that his
current complaints are the result of the surgery performed by the respondent
was also fatal to his claim.

[32]

With respect to the appellants second ground of appeal, the summary
trial judge concluded that the appellant failed to file an expert report which
could provide a basis for informed cross-examination, and failed to show that
the proposed cross-examination could benefit his case. She accordingly denied
the appellants oral request to cross-examine the respondents expert. The
appellant asserts that he had a right to cross-examine the respondents expert.
He did not. The summary trial judge was obliged to exercise her discretion in
considering whether to grant leave to the appellant to cross-examine the
respondents expert. That discretion is embedded in the language of Rule
9-7(12). In my view, the appellant has not shown that the summary trial judge
erred in the exercise of her discretion in relation to this issue.

[33]

I will deal with the remainder of the appellants grounds of appeal
together. The summary trial judge correctly ruled that some of the evidence
sought to be adduced by the appellant was inadmissible hearsay, while other
portions of the evidence he sought to rely on could not be admitted as opinion
evidence because it was hearsay and because it had not been tendered by a
qualified expert in admissible form. The summary trial judge was fully aware
that the specific risks associated with gallbladder removal were not identified
on the consent form. There was no error in the summary trial judges
determination that the appellant led no evidence upon which she could
reasonably conclude that, if given more time, he would be in a position to put
evidence before the Court to support his claim. Specifically, the appellant has
not shown that the summary trial judge erred in the exercise of her discretion
by determining to proceed with the summary trial application on the basis of
the material before her. With respect to the appellants assertion that the
summary trial judge failed to appreciate that significant evidence might be
given by the respondents medical student, it was the appellants obligation to
secure that evidence if he thought it to be critical to the resolution of the
summary trial. Further, the summary trial judge was aware of the evidence that
medical student might give. There is no evidence that the student could speak
to the standard of care or causation issues or that her evidence would in any
way benefit his case.

[34]

Finally, I cannot give effect to the appellants argument that the
alleged failure to give proper notice under s. 5 of the
Health Care Costs
Recovery Act
is a basis upon which the appeal should be allowed in this
case. This issue was not argued before the summary trial judge. While that fact
is not necessarily fatal to this submission, particularly if it is alleged
there has been a miscarriage of justice in respect to it, the failure to raise
this issue with the judge means there is no evidence in the record of written
advice to the government of the application which would establish s. 5 was
satisfied. We are informed by counsel for the respondent, and I accept her statement
given as an officer of the court, that such written advice was given. Thus, the
failure to raise the issue before the judge has resulted in an incomplete
record, which militates against entertaining the submission. Alternatively, we
could take it, on the advice of counsel, that the section was satisfied. Either
way, this ground of appeal does not provide a basis upon which to interfere
with the order. Last, I would observe that the purposes underlying the
Act
are to protect government in collecting health care costs paid by them
following a finding of wrongdoing. Those interests are not directly engaged in
the circumstances of this case - in other words, the substance of the order
appealed is not affected by any notice issue with the government.

[35]

For the foregoing reasons, I would dismiss the appeal.

[36]

SAUNDERS J.A.
: I agree.

[37]

LOWRY J.A.
: I agree.

[38]

SAUNDERS J.A.
: The appeal is dismissed.

The Honourable Mr. Justice Fitch


COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Nixon v. MacIver,

2016 BCCA 8

Date: 20160111

Docket: CA41765

Between:

William Nixon and
Carol Nixon

Appellants

(Plaintiffs)

And

Marsali MacIver

Respondent

(Defendant)

Before:

The Honourable Madam Justice Saunders

The Honourable Madam Justice D. Smith

The Honourable Madam Justice MacKenzie

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

Counsel for the Appellant:

T. McCaffrey

Respondent Appearing in Person:

M. MacIver

Place and Date of Hearing:

Vancouver, British
  Columbia

October 29, 2015

Place and Date of Judgment:

Vancouver, British
  Columbia

January 11, 2016

Written Reasons by:

The Honourable Madam Justice D. Smith

Concurred in by:

The Honourable Madam Justice Saunders

The Honourable Madam Justice MacKenzie

Summary:

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

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

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

Overview

[1]

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

[2]

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

[3]

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

[4]

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

[5]

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

Background

[6]

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

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

[7]

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

[8]

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

[9]

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

[10]

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

[11]

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

[12]

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

[13]

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

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

[14]

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

[15]

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

[16]

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

[17]

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

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

[18]

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

[19]

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

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

[20]

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

[21]

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

Issues on appeal

[22]

The appellants advanced the following grounds of appeal:

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

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

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

Discussion

[23]

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

[24]

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

[25]

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

[26]

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

[27]

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

[28]

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

[29]

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

[30]

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

The
doctrine of caveat emptor and the obligation to disclose

[31]

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

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

[32]

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

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

[33]

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

[34]

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

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

[35]

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

[36]

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

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

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

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

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

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

1. where the vendor fraudulently
misrepresents or conceals;

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

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

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

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

[37]

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

[38]

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

[39]

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

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

1.     where the vendor fraudulently
misrepresents or conceals;

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

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

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

[40]

Ballance J. distinguished latent and patent defects,
stating:

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

[41]

She added:

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

[42]

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

[43]

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

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

[44]

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

[45]

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

[46]

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

[47]

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

Disclosure statements

[48]

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

Application to this case

[49]

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

[50]

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

Disposition

[51]

In the result, I would dismiss the appeal.

The
Honourable Madam Justice D. Smith

I AGREE:

The Honourable Madam Justice
Saunders

I AGREE:

The Honourable Madam Justice
MacKenzie