Defective Septic System
Mr. and Mrs. Whaley purchased a small house from the vendors Mr. and Mrs. Dennis in 2002. The property was located in the Niagara Peninsula and was intended to be the retirement home of the purchasers.
The matter came on for trial in the Superior Court of Justice in October 2005 before the Honourable Mr. Justice Quinn. In issue were false statements made pursuant to the Seller Property Information Statement.
Mr. and Mrs. Dennis purchased this property in 2002. They decided to list the property for sale and in that connection executed a Seller Property Information Statement.
Earlier, in the Summer of 2001, Mr. Dennis obtained two quotations for work to the septic system. He retained one company to dig a trench but not complete the connection. He decided to do this himself, because otherwise he would require a permit. Also, Mr. Dennis constructed some drywall in the basement.
Specifically, they made certain representations which are the subject of this lawsuit:
“Are you aware of any problems with the septic system?” Answer, “Unknown.”
“Are you aware of any moisture and/or water problems in the basement or crawl space?” Answer, “No.”
An agreement of purchase and sale was executed and was conditional upon both a home inspection report and a septic inspection satisfactory to the purchasers.
The Trial Judge stated:
“The plaintiffs waived the conditions in the agreement of purchase and sale regarding both the home inspection and the septic tank inspection. I was never told why. In respect of the latter, which had not yet been carried out, it certainly was an unwise move and probably prompted by the realtor representing the plaintiffs. I doubt whether the plaintiffs understood what they were doing. However, by executing the waiver, I conclude that the plaintiffs cannot be said to have relied on the septic-system inspection in deciding to complete their purchase of the Property.”
The spring of 2003 was the first wet season encountered by the plaintiffs at the Property. They began experiencing a strong odour of sewage. In addition, the basement flooded. the leakage (or most of it, at least) seemed to originate from the front side of the house as opposed to the rear where the septic tank was situated. It was the testimony of Mr. Dennis that, while he and his wife owned the Property, they did not experience moisture in the basement.
During the exterior remedial work subsequently carried out by Robson (the purchasers’ contractor) a crack was discovered in the front basement wall about one-quarter inch in width. Robson testified that the crack seemed to be an old one, it was discoloured and had a growth of moss.
When Mr. and Mrs. Dennis purchased the Property they removed the existing drywall in the basement and replaced it with new drywall. The crack would have been visible to them then and they concealed it with the new drywall. It is also curious that, while they occupied the Property, Mr. and Mrs. Dennis did not place covering of any kind on the basement floor and they did not use the basement as a living area. In a home having less than 700 square feet of living space, would they not occupy the basement, if it were habitable?
The seriousness of the sewage-system failure is abundantly clear from the fact that, following the inspection by Murray on May 2nd, Regional Niagara Public Health Department issued an order to the plaintiffs regarding sewage escaping “from your sewage system or septic tank onto the ground or into a water source.” The relevant parts of the order state: ….’immediately stop the discharge of sewage escaping onto the surface of the ground.’
Discussion by the Court
“patent and latent defects
 There can be no question that the problems with the septic system and the basement are defects. But, are they patent or latent defects?
 A latent defect is “some fault which one would not expect an ordinary purchaser to discover during a routine inspection”
 A patent defect is “something which an unsophisticated purchaser can discover on cursory inspection”
 Whether a purchaser should be taken to have been aware of a defect involves the application of an objective test.
 The defect in the septic system at bar is a latent defect. If it was not noticed by [the septic system inspector], it certainly is not something the plaintiffs would be expected to discover during a routine inspection of the Property.
 Where a vendor actively conceals a latent defect he or she can take no protection from the doctrine of caveat emptor (“let the buyer beware”) and the purchaser is entitled to sue for rescission or damages. In other words, a latent defect known to a vendor must be disclosed to a purchaser.
 On behalf of Mr. and Mrs. Dennis, it is argued that the answer “Unknown” recorded on the Seller Property Information Statement should have put the plaintiffs, or at least their realtor, on notice to the possibility of septic-system problems. I respectfully disagree. At the time, had the plaintiffs inquired of Mr. and Mrs. Dennis, it is likely (based on the testimony of Mr. Dennis) that the conversation would have gone something like this:
Plaintiffs: We notice that you checked ‘Unknown’ in response to the question ‘Are you aware of any problems with the septic system?’ What does that mean?
Mr. and Mrs. Dennis: Well, the septic system is very old, 40 years old in fact, and we do not know what condition it is in.
Plaintiffs: But, you were not asked to describe the condition of the system. The question relates to ‘problems with the septic system.’ So, will you say whether, during the time that you have lived on the Property, you experienced any problems with the septic system? You would know that, correct?
Mr. and Mrs. Dennis: Yes, we would. And, during the time that we have lived here, we have not had any problems with the septic system.
Therefore, it is somewhat Machiavellian to suggest that the plaintiffs should have used the answer “Unknown” as a basis for further inquiry of Mr. and Mrs. Dennis.
 As I am persuaded by the evidence of Giroux and Zwierschke that Mr. Dennis (and, undoubtedly, Mrs. Dennis, as well) knew the septic system was defective, I easily find that those defendants actively concealed the existence of the defect by not bringing it to the attention of the plaintiffs. Therefore, Mr. and Mrs. Dennis are liable to the plaintiffs for their septic-system damages.
 Regarding the basement leak, I also find that it would not have been discoverable by the plaintiffs during a routine inspection of the Property. It was actively concealed behind the drywall installed by Mr. and Mrs. Dennis.
Consequently, the trial judge found in favour of the purchasers and awarded damages against in the vendors for misrepresentation.
This is a case involving actual concealment of known problems. To say “no” to the septic system issues when the vendor had sought to repair the system does not make any sense. Further to say “unknown” when the vendors concealed the water leak by drywall also causes problems. The statement “unknown” is a further act of concealment.
A substantial difficulty for vendors and septic systems is often that the same contractors will be called by the purchasers later on to repair a problem. Invariably, they will say, “we’ve been here before….. there were all kinds of problems…. the vendors decided it was too expensive”.
That kind of response is very difficult to disprove and offers the very best evidence for a plaintiff. When there is clear evidence of deliberate false statements the Court will take steps to ensure that the plaintiff is compensated. You will note the fabricated conversation between the parties that was speculated by the Court. Obviously, if the trial Judge feels that way, about the vendors’ conduct, then they are going to be found responsible.
Brian Madigan LL.B., Broker