The legal system can be a dangerous place to go it alone, as the recent Lippa v. Colletta, 2017 ONSC 1122 (CanLII) case illustrates. The facts in the Lippa case are relatively straightforward. In October 2009, Ms. Lippa was looking to purchase a home. She retained realtor Hal Latimer to assist her, and Mr. Latimer brought her attention to a home. Ms. Lippa decided to place an offer, conditional on obtaining financing and a home inspection. Ms. Lippa hired Mr. Dellamattia to perform the home inspection. Mr. Dellamattia’s report did not identify any significant structural issues. She thereafter waived the conditions and closed the purchase.

Shortly after moving into the house, Ms. Lippa discovered a pool of water in her basement, with the water entering through a crack in her foundation wall. Ultimately, this was not a simple fix, and Ms. Lippa incurred $35,662.64 in out of pocket costs to address this problem. In response, Ms. Lippa sued the vendors, her realtor and the home inspector. While she was initially represented by a lawyer, by the time of trial, she was ‘going it alone’ as a self represented litigant. The Court termed this unfortunate, as her case was not a simple one to prove, legally speaking.

The Claim Against the Sellers:

Ms. Lippa alleged that the sellers of the home knew of the water leak and/or took steps to hide or conceal the defect. As noted by the Court, the law imposes different obligations upon sellers depending upon whether defects are patent (obvious) or latent (hidden).

1) Patent Defects:

As stated by the Court, there is generally no obligation on the part of a vendor to bring known, non-concealed defects to the attention of a purchaser.

2) Latent Defects:

Where the vendor knows of a latent or hidden defect, the Court stated that a duty may arise in either of the following situations:

1. Where the latent defect renders the property unfit for habitation; or,
2. Where the latent defect renders the premises dangerous.

While it may have been possible for Ms. Lippa to present expert evidence that the leak caused mould (which was found in the basement), and that said mould posed a danger to health, rendering the property dangerous, no such evidence was presented. As such, (and because Ms. Lippa was unable to prove active concealment) the doctrine of caveat emptor, which roughly translates to buyer beware applied. As such:

“[a]bsent fraud, mistake or misrepresentation, a purchaser takes an 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 contractual terms.“

As a result, Ms. Lippa’s claim against the vendors failed, meaning she will most likely be held responsible for their legal fees through trial, which I would guess to be in the range of $30,000.00, on a partial indemnity basis.

The Buyer’s Claim Against Her Relator:

Ms. Lippa additionally claimed that her realtor was negligent, in that he failed to advise her of the potential existence of unexpired Tarion (new home warranty) coverage. Legally speaking, this was a claim for professional negligence, which in almost all cases, requires expert evidence from an expert practitioner in the field (i.e. another realtor). As such, the Court held that without expert evidence or evidence of trade custom, the Court was unable to determine what the applicable standard of care was, and whether the realtor breached it.

As such, Ms. Lippa’s claim against her realtor failed, for which she will most likely be held responsible for his legal fees through trial, which I would guess to be in the range of $20,000.00, on a partial indemnity basis.

The Buyer’s Claim Against the Home Inspector – a Pyrrhic Victory:

Ms. Lippa also sued the home inspector, for failing to note the serious structural damage to the basement. In determining this claim (again, without the assistance of expert evidence), the Court considered the relevant standards of the American Society of Home Inspectors (as same were incorporated into the inspection contract), the cost of the inspection ($325.00) and the level of expertise of the inspector. Thereafter, the Court concluded that the inspector had breached his duty to Ms. Lippa in not inspecting the foundation from the outside, or for reporting where in the basement he was unable to inspect the foundation, due to the existence of boxes and other obstructions, and that but for the inspector’s negligence, Ms. Lippa would not have bought the house (and suffered damages).

However, the Home Inspector’s contract included a limitation of liability or exclusion clause. That clause provided:

The parties understand and agree that the Inspector and its employees and its agents assume no liability or responsibility for the costs of repairing or replacing any unreported defects or deficiencies either current or arising in the future or any property damage, consequential damage or bodily injury of any nature. If repairs or replacement is done without giving the Inspector the required notice, the Inspector will have no liability to the Client. The client further agrees that the Inspector is liable only up to the cost of the inspection.

Exclusionary clauses such as that one are analyzed pursuant to the general principles of contractual interpretation, which are:

1. The contract must be interpreted as a whole, in a manner that gives meaning to all of its terms and avoids an interpretation that would render one or more of its terms ineffective; ;
2. The intentions of the parties must be determined in accordance with the language they have used in the written document and based upon the “cardinal presumption” that they have intended to say what they have said;
3. The court may have regard to objective evidence of the factual matrix underlying the negotiation of the contract, but should not consider evidence of the subjective intention of the parties; and,
4. At all times, the contract must be assessed in a fashion that accords with sound commercial principles and good business sense, and that avoids a commercial absurdity.

As such:

“a court has no discretion to refuse to enforce a valid and applicable contractual exclusion clause unless the plaintiff can point to some paramount consideration of public policy sufficient to override the public interest in freedom of contract and defeat what would otherwise be the contractual rights of the parties.”

In this case, the Court held that it was clear that the exclusionary clause was an attempt to limit the inspector’s liability to the cost of the inspection ($325.00), including for failing to report unknown defects. As Ms. Lippa was unable to advance a paramount public policy consideration and the Court was unable to find one, the clause was upheld, and the Judgment against the inspector was limited to the cost of the inspection, or $325.00. In the event the inspector served an offer to settle prior to trial, it is possible that Ms. Lippa ends up paying thousands towards his legal fees as well, a result she almost surely didn’t contemplate when she decided to bring suit, no doubt determined that ‘justice will prevail.’

Conclusions:

Initially, this case serves as a cautionary tale about the pitfalls of moving forward with litigation as a self represented litigant. From the decision, it appears that the plaintiff was unaware or unable to develop the evidence necessary to pursue her claims against either the sellers or the realtors. Had I been her lawyer, I would have likely urged her to drop those claims prior to trial, to avoid the outcome she ended up with here, likely a large, adverse costs award. Conversely, had she come to me initially, I would have informed her of the costs generally incurred in securing expert opinions, so that she could have appreciated the expense likely required to prove her case.

In terms of the exclusionary clause that was upheld in the home inspector’s contract, the law on that issue is more nuanced or in flux (in that some are enforced, while others are not). In any event, it would have been necessary to put forth some evidence or public policy justification at trial against the application of same. Were that not possible, I would have likely urged her to drop that claim before trial as well. While the purpose of a lawyer may be said to help clients to win, it is equally true that sometimes the purpose is to help clients not lose (or not lose more than they already have). Unfortunately, the plaintiff in this case did not have a lawyer to so advise her, and she will now likely face serious financial consequences.

Are considering taking legal action in the near future? Contact Michael Lesage of Michael’s Law Firm in Toronto and Hamilton to discuss your options. Call 647-495-8995 or contact us online.

Related Articles for Homeowners:

• Homeowner’s Insurance in Ontario Explained
• When Is Water Damage Covered Under a Homeowner’s Insurance Policy in Ontario?
• Real Estate Investors Induced By Misrepresentation