Ontario Court (General Division) Small Claims Court - Goderich, Ontario. Paul Anthony McInnis and Shelley Christine McInnis. and

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1 Court File No. 141/97 Between: Counsel: Ontario Court (General Division) Small Claims Court - Goderich, Ontario Paul Anthony McInnis and Shelley Christine McInnis and James Angus Grant and Shelley Ann Grant Heard: December 2, 1998 Judgment: January 7, 1999 Plaintiffs Defendants Cheryl A. Masson, for the Plaintiffs James A. Grant, personally and on behalf of his Co-Defendant Reasons for Judgment Facts: Paul McInnis, the male Plaintiff, helped his father build a house in 1971 on Part of Lot 3, Concession 12 in the Township of Stephen in the County of Huron. In 1981 the Plaintiffs purchased that house from the male Plaintiff s father. Then in 1987 the Plaintiffs sold the house and surrounding land to the Defendants. Paul McInnis testified that during their period of ownership from 1981 until 1987, he and his wife did not have any problems with the plumbing or the septic system. In fact, he said in his evidence that everything was working fine. The Plaintiffs obviously liked the house and its location so much that they bought the property back from the Defendants in The terms of that transaction are set out in an Agreement of Purchase and Sale dated August 10, The one term that is relevant to this case is the provision that states: The vendor warrants that the septic system is in good working order and this warranty shall survive closing.

2 2 The transaction was completed on September 29, 1995, and the Plaintiffs took possession on that date. Paul McInnis testified that approximately 2 weeks later the septic system started to back up into both toilets and the bathtub on almost a daily basis. Paul McInnis testified that he called Grand Bend Sanitation to look at the problem. Grand Bend Sanitation pumped out the septic tank on November 11, Mr. McInnis said that everything worked fine for a short period of time, but that the septic system soon started to back up again. On December 5, 1995, Grand Bend Sanitation re-attended and located blockage in the weeping bed line near the north edge of the property. That blockage was removed. Grand Bend Sanitation had to re-attend in June 1996 to clean out the septic system, including the line which was again plugged. However, because of the test holes that had to be dug to locate the blockage, sewage started to seep to the surface and pond on the north edge of the subject property and on the adjacent farmer s field. Andy O Brien testified. He is the owner and operator of Grand Bend Sanitation, and has been since He is in the business of septic tank repairs, cleaning and drain cleaning. I found him to be a knowledgeable witness. He testified that when he first attended at the subject property on November 11, 1995, he found the solid content of the septic tank to be quite heavy and to be causing a blockage on the inlet side of the tank. On that date he also found that the septic tank was running above its normal operating level. In fact, he found the level of the tank was right to the top. He testified that the normal level was 6 to 8 inches below the lid of the septic tank. When he re-attended on December 5, 1995, he found that the septic tank was still running at a higher level than normal. He said that this meant that there was a blockage on the outlet side of the tank. It was then that he traced the problem to a blockage in the line near the boundary of the property. He testified that it would be difficult to say how long the blockage had been there. Mr. O Brien also testified that on November 11, 1995, he found that there was a 2 to 3 foot build-up of sludge in the bottom of the septic tank. He said that a maximum of 1 foot of sludge would be normal. He said that the amount of sludge that he found on November 11, 1995, would not be a normal amount to have built up from September 29, 1995 [ which was the date of the closing of the real estate transaction ] until November 11, The evidence of Paul McInnis and Andy O Brien was that the blockage was almost on the property line. Mr. McInnis testified that the neighbouring landowner refused to give permission to the Plaintiff and Grand Bend Sanitation to enter on the adjoining property to properly remove the blockage. This denial of access was unfortunate. Mr. O Brien testified that if he had been able to gain access to the adjacent land, he might have been able to remedy the problem once and for all relatively inexpensively. However, when permission was denied, Mr. O Brien testified that the next best alternative was to put in a new weeping bed that was wholly contained on the Plaintiffs land. Unfortunately, the neighbouring land owner did not testify and I do not know why access was denied. The Defendant, James Grant, testified that he and his wife did not have any problems with the septic system during the 8 years that they owned the property, being 1987 until He said that when his lawyer pointed out the clause (which I have quoted above) concerning the septic

3 3 system working, he did not have any problem signing the Agreement of Purchase and Sale with that clause in it. Mr. Grant said that the septic system had never backed up during his period of ownership and he was not aware of any ponding on his property during that 8-year period. He testified that he only had to have the septic tank cleaned out once, and that was shortly after he and his wife had purchased the property in Liability: Issue # 1: Merger The first issue to determine is whether the warranty regarding the septic system which is contained in the Agreement of Purchase and Sale survived the closing of the transaction. It is agreed that the Vendor did not provide any separate document on closing concerning the warranty contained in the agreement of Purchase and Sale. Should the Purchaser have insisted on obtaining a separate Warranty on closing? Counsel for the Plaintiffs provided me with two cases which I have found helpful on this subject. In Richview Construction Co. Ltd. v. Raspa, (1975) 66 D.L.R. (3d) 193 (Ontario Court of Appeal), a warranty regarding the servicing of a lot was provided in an Agreement of Purchase and Sale. However, unlike our case, there was no provision in the Agreement to indicate that the warranty was to survive the closing of the transaction. Mr. Justice Arnup stated (at page 196): It is small comfort to recognize that no problem would have arisen if the offer to purchase had read: The vendor warrants that this is a fully serviced lot, and agrees that this warranty shall survive the closing of the sale. Mr. Justice Dickson, in the Supreme Court of Canada decision of Fraser-Reid et al. v. Droumtsekas et al. (1979), 103 D.L.R. (3d) 385 at page 397 said: There is no presumption of merger. The proper inquiry should be to determine whether the facts disclose a common intention to merge the warranty in the deed; absent proof of such intention, there is no merger. Based on the wording in our Agreement of Purchase and Sale that this warranty shall survive closing and the evidence of the male Plaintiff and the male Defendant, I find that the warranty regarding the septic system survived closing and did not merge. It was not necessary to have a separate document prepared and signed to indicate that the warranty lasted past the time of the closing of the transaction. Issue # 2: Effect of Warranty The remaining issue for me to determine is whether the Defendant is liable to pay to the Plaintiff the amount of the damages that the Plaintiff incurred to repair and replace the septic system. Neither side could refer me to any cases concerning warranties of septic systems in real estate transactions. At the time of hearing submissions, I indicated my surprise that there were not any

4 4 cases on the subject, especially since there are many rural properties throughout the County of Huron and the Province of Ontario which are serviced by septic systems. Case Law: Using Quick Law, I have been able to find four cases which are of some assistance to our case at hand. The most recent case is Vaz-Oxlade v. Volkenstein, [ 1998 ] O.J. 5035, a decision of Mr. Justice Cullity rendered on the very same day, December 2, 1998, that the evidence in this case was being heard. In that case, the warranty read (in part) as follows: Vendor warrants that the Septic System has operated satisfactorily during his ownership of the property. The Vendor in that case testified that there had been no problems with the system during the 8 years that he had lived on the property and that at the time that he had purchased the property, he had been given the same assurance. He further testified that he had never had to pump the septic tank out during his period of ownership. The sale closed in It was not until 1995 that the Purchaser began to hear about problems with the septic system. The burden of proof was on the Purchaser to prove her case on a balance of probabilities. Mr. Justice Cullity found that the Vendor had not experienced problems with the septic system and, therefore, the Vendor was not in breach of his warranty. In Palmer v. Pepin, [ 1997 ] O.J (Ontario Court General Division), the Vendor gave a warranty which read (in part) as follows: the [vendor] warrants, such warranty to survive closing, that the septic system [is] in good working order as of the date of closing. The septic tank was small and required numerous pump-outs. It was eventually replaced with a complete tile bed system. Mr. Justice Stortini found that the septic holding tank was in good working order, and that there was no warranty with respect to the septic tank size, pump-outs or the existence of a tile bed system. Accordingly, he found that the Vendor had not breached the warranty concerning the septic system. The septic system was also discussed in McGowan v. Mulrooney, [ 1992 ] O.J (Ontario Court General Division). Mr. Justice Rutherford had this to say: I accept the evidence of the [Vendors] and the witnesses they called to testify that there was no sewage odour or sign of malfunctioning of the septic system during the occupation of the premises by the [Vendors]. While it strains credulity to think that a septic system would work adequately one day and not the next, there was no expert or even experienced evidence before me to suggest how quickly a functioning system can block up or otherwise cease its normal operation. The evidence I accept is that the system functioned as intended in June 1989 when the [Vendors] made a representation

5 5 that they had experienced no problems with it, and that was still the case when they moved out near the end of July. By the end of August however, after about a month with little use, the [Purchasers] experienced the difficulties detailed in the facts. On all the evidence I find that the [Purchasers] have failed to establish, on the balance of probabilities, that when [the male Vendor] made the representation to the [Purchasers] concerning the location of and lack of problems with the septic system, [the male Vendor] lacked an honest and reasonably based belief in the truth of what he was saying. The [Purchasers] have not discharged the burden of demonstrating by a preponderance of evidence that the [Vendors] concealed anything or were untruthful or even reckless as to the truth or falsity of their representation. Accordingly, the Plaintiffs claim in that case against the Defendants was dismissed. The last case to which I wish to refer is the decision of Mr. Justice Carnwath in Riddall v. McFarlane, [1997 ] O.J In that case, the Vendors gave a warranty that the septic system was in good working order at the time of closing, being September About 1 month after closing, the Purchasers noticed foul septic odours coming from the sump pump well in the basement and from various drains in the house. In that case, the Vendors had had the septic system installed in In the following year, the septic system experienced a minor break-out at the end of some of the tile runs. But apart from the repairs required by that break-out, the Vendors did not have any difficulty with the septic system during their time of ownership. The septic system never backed up into the house; it never caused any odour in the house. There were no problems with the septic system from 1989 until Mr. Justice Carnwath had this to say about the evidence of the Purchasers and the Vendors: Both [Purchasers] testified. Nothing in their manner or demeanour suggested in any way they were trying to deceive the court. They appeared to be reliable and trustworthy. I accept their evidence that within a few weeks after closing, they detected foul smells coming from the sump pump and drains in the house. Both [Vendors] testified. Nothing in their manner or demeanour suggested in any way they were trying to deceive the court. I find their evidence to be trustworthy and reliable. I accept their evidence that there was a minor break-out at the end of some tile runs, shortly after the septic system was installed in I accept their evidence that after the repairs described above were carried out, they had no problems with the septic system from 1989 to the closing day, September 29 th, In analyzing the facts before he dismissed the Purchasers claim against the Vendors, Mr. Justice Carnwath went on to say: The burden of proof is on the plaintiff [Purchaser] to satisfy me on the preponderance of the evidence that the septic system was not in good working order at the time of

6 6 closing. I find the plaintiff has failed to discharge the burden. Finding as I do that [the Vendors] had no problems with the system from 1989 to the date of closing, and finding as I do that [the Purchasers] detected foul odours from the sump pump and the drains, I turn to the uncontroverted evidence. I find the septic bed became inundated with water subsequent to closing which backed up ultimately into the weeping tile, around the foundation of the house, resulting in the odours described by [the Purchasers]. Since this happened in the fall and not in the wet spring season, either the system had broken down completely or an independent act filled the system with water. I find it more likely than otherwise that the temporary re-routing of the sump pump discharge through the rear of the property caused the weeping bed to fill up and back up the system. [The male Purchaser] testified that after the pumping of the septic system, the repair of the broken seal at the tank itself and the relocation of the sump discharge line, they experienced no further problems. I am unable to find that the odours were caused by the faulty design of the system. The system was in good working order in 1989 to the closing date. Analysis: I agree that the burden of proof is on the Plaintiffs to satisfy me on the preponderance of evidence that the septic system was not in good working order on September 29, 1995, being the date of closing. I found both Mr. McInnis and Mr. Grant to be credible witnesses. If the evidence stopped with their testimony, I would find that the Plaintiffs had not proven their case on a balance of probabilities. In the McGowan case (supra) there was no expert or experienced evidence for the trial judge to consider as to how the septic system may have ceased to function properly. However, in our case we have the evidence of Andy O Brien. I found Mr. O Brien to be a credible witness. While he could not say how long the blockage had been in the line, he did testify, and I accept his evidence, that the amount of sludge that he found on November 11, 1995, would not have been a normal build-up in the septic tank from September 29, 1995 until November 11, Therefore, I find that there were problems with the septic system on or before September 29, In the Van-Oxlade case (supra), 7 years elapsed from the time of closing until problems with the septic system became known. In our case, problems started occurring within approximately 2 weeks after closing. Based on all of the evidence that I heard, I do not find that the demand on the septic system changed significantly from the time during the ownership by the Defendants to the time during which the Plaintiffs used it.

7 7 Before a person signs an unqualified Warranty, that person has an obligation to have his or her thoughts verified, particularly when (as here) the testing procedure would be as easy as opening up the septic tank lid and checking the level and the content of the tank. By not conducting any verification testing prior to signing the Warranty, the Defendants were reckless in their conduct. My decision might have been different if the Warranty given by the Defendants had been qualified by the words to the best of my knowledge. But the Warranty here was not so qualified. I find that the septic system was not in good working order on the day of closing. Therefore, the Defendants breached the Warranty that was given to the Plaintiffs concerning the septic system. Damages: The Plaintiffs paid a total of $ to Grand Bend Sanitation for its efforts to repair the problems. I find those efforts and expenses were reasonable. The Plaintiffs had a new sewage disposal system installed at a total cost of $ 4, (including the Application Fee paid to the Huron County Health Unit). Based on the testimony of Mr. O Brien, I find that a new sewage disposal system was necessary and that the cost incurred by the Plaintiffs was reasonable. Thus, the total damages are $ 5, Conclusion: There be judgment in favour of the Plaintiffs against the Defendants in the total amount of the damages of $ 5,012.37, together with pre-judgment interest from April 1, 1997 at the rate of 3.3 % per annum. Costs: At the conclusion of the oral argument, I indicated that I would give each side an opportunity to deal with the issue of costs after this decision had been released. Accordingly, if the parties are unable to agree on the costs, they may make arrangements within 14 days with the Court Clerk for either a telephone conference call or a court date at which time I will hear submissions on the issue of costs. N. B. Pickell, Deputy Judge