The British Columbia Supreme Court decision in Cardwell et al. v. Perthen et al. (2006) and its review by the British Columbia Court of Appeal (2007) has reaffirmed the high onus placed on purchasers of residences to make reasonable inquiries and investigations into the integrity of same. Based soundly in jurisprudence from the Supreme Court of Canada and beyond, these decisions make it clear that courts should be loath to forgive “casual” inspection of properties by those intent upon purchase. Beyond this, however, Cardwell confirms that courts will not overlook the failure of purchasers to obtain inspections by competent professionals should they later seek redress for faulty construction or defects.
Cardwell arose out of the sale of a significantly renovated Vancouver residence. The Plaintiffs purchased the residence from the Defendants and shortly thereafter discovered a variety of defects including, inter alia, shoddy workmanship, leaks, deterioration of structural components and mould. Given the extent of the defects the Plaintiffs sold the residence some six months after purchasing same in “as is” condition at a significant loss. The Plaintiffs brought action against the Defendants for the difference between the original purchase price and the amount they realized on the subsequent sale.
The Plaintiffs toured the residence on two occasions prior to purchase and made an offer without a home inspection, or any other conditions. After some negotiation respecting price, the transaction was finalized. Unfortunately, the Plaintiffs never moved into what the court also described as a “grievously flawed residence”.
Amongst various defences, the Defendants pled caveat emptor, a Latin doctrine meaning “let the buyer beware”. The British Columbia Supreme Court noted the continuing validity of this longstanding doctrine, citing its recent affirmation by the Supreme Court of Canada in FraserReid v. Droumtsekas (1980), in which it was held that the doctrine had “lost little of its pristine force in the sale of land” and must “be reckoned with by the credulous or indolent purchaser”. The doctrine puts the onus on the purchaser to determine the state and quality of the property sold.
This is not to say that caveat emptor is without limitation. As recognized by the Court, it did not operate to deny a plaintiff recovery where:
- the vendor fraudulently misrepresents or conceals;
- the vendor knows of a “latent defect” rendering the property unfit for human habitation;
- the vendor is reckless as to the truth or falsity of his statements relating to the fitness of the property for habitation; and
the vendor has breached an obligation to disclose a latent defect which renders the property dangerous.
As rightly pointed out by the Court, “[t]he distinction between patent and latent defects is central to a vendor’s obligation of disclosure under the doctrine”. It was in this analysis that the Court clarified the reach of caveat emptor.
Patent defects, being intimately tied to the doctrine of caveat emptor, have traditionally been viewed in terms of investigations and observations made by the purchaser themselves. This has been described as a duty to “exercise reasonable vigilance in the circumstances”: Tony’s Broadloom & Floor Covering Ltd. v. NMC Canada Inc. (1996). Obviously, “circumstances” in this regard could be quite variable. Additionally, the obligation to make “reasonable inquiries” given appropriate circumstances “strictly applies” to purchasers and the standard of such inquiry will be “fairly high”: Bernstein v. James Dobney & Associates (2004). In accordance with this background, the trial judge in Cardwell concluded that “a defect which might not be observable on a casual inspection [by a layperson] may nonetheless be patent if it would have been discoverable upon a reasonable inspection by a qualified person” [my emphasis], which might necessitate the purchaser “retaining the appropriate experts to inspect the property”. Given the failure of the Plaintiffs to obtain a home inspection, the Court held that a number of the defects which, while indiscernible by the Plaintiffs themselves, would have been such as to lead a properly trained inspector or expert (e.g., an engineer) to make further inquiries of the Defendants or otherwise lead to further investigation. As a result, a substantial number of the defects in the residence were determined to be patent, to which the doctrine of caveat emptor applied.
The British Columbia Court of Appeal upheld the trial decision in Cardwell. In particular, the court considered the scope of “patent” defects as set out by the trial judge below, a consideration it described as the “crux” of a liability determination. The Court of Appeal reaffirmed the onus on a purchaser to make reasonable inquiries and inspections. Where a lay purchaser has no expertise in the area and, accordingly, “may not recognize that he … has observed evidence of defects or deficiencies”, that purchaser’s obligation then is “to make reasonable inquiries of someone who is capable of providing the necessary information and answers”.
Cardwell has been cited in subsequent decisions from the courts of British Columbia and Alberta. While one could imagine circumstances where a layperson might be unfairly treated by a strict adherence to the British Columbia Supreme Court view, in short, the decisions speak volumes to the prudence of obtaining an independent home inspection any time one contemplates purchase of a “used” residence.