No professional wants to hear their work described as “cursory at best” – particularly when the statement is made by a Justice of Alberta’s Court of Queen’s Bench in a lengthy written decision. Such was the position of a local engineer in Kent v MacDonald, 2019 ABQB 669, a recent decision which clarifies the test for “negligent misrepresentation” and, perhaps more importantly, acts as a caution to professionals of all backgrounds with respect to expected levels of competency.
Kent
v MacDonald concerned the purchase of a residential
property in Edmonton’s Parkallen neighbourhood. The standard real estate
agreement entered into by the purchasers (Edward Kent and Teresa Tomsky) and
sellers (Patrick MacDonald and Rhonda McEachen) was subject to the condition of
a satisfactory inspection. Lance White, P. Eng., who had served as both an
Edmonton city councilor and MLA before transitioning to a career in structural
engineering, was retained by the sellers to provide a professional opinion as
to the structural integrity of the house.
Mr. White inspected the home in May 2010,
concluding in part that it “far exceeds the definition of a structurally sound
house”, with “no threat of any structural damage”. Mr. White’s sole
recommendation was that the slope of the property, particularly that which was immediately
adjacent to the foundation, be regraded in the next several years. The buyers accordingly
removed the inspection condition, and the sale closed in June 2010.
Just four months later, however, the
purchasers noticed signs of concern in one corner of the basement, including a
musty smell, water staining, and the presence of mould. Portions of drywall
were removed, leading the buyers to discover “concrete spalling” (i.e. loose foundation,
broken down into smaller pieces) and a large horizontal crack, both
necessitating repairs.
The buyers proceeded with legal actions against
Mr. White (under the tort of negligent misrepresentation), as well as the
sellers (based primarily on breach of the sales agreement) for the expenses
they incurred in conducting the necessary repairs.
The Court ultimately accepted the buyers’
position that Mr. White had failed to meet the applicable standard of care in
such circumstances. In doing so, Justice Loparco found that the buyers had
discharged their burden of meeting the five-part test for negligent
misrepresentation (also known as the Hedley
Byrne principles, after an oft-cited decision of the English House of Lords).
First, because Mr. White ought to have
reasonably foreseen that the purchasers would rely on his inspection report,
the requisite “special relationship” (or duty of care) existed between the
parties. Second, as illustrated through the use of expert witnesses at trial,
Mr. White’s representations as to the home’s structural integrity were indeed
inaccurate and/or misleading. Third, Mr. White was found to have failed to exercise
the skill, care and diligence which would reasonably be expected of a
structural engineer of ordinary competence. The Court held that a mere visual
inspection, in such circumstances – as opposed to actually removing the
basement’s drywall – will often be insufficient to ensure a particular concern
is addressed. Fourth, it was clear that the purchasers had reasonably relied on
Mr. White’s inspection report in making their decision to purchase the property.
Fifth, as the expenses incurred by the purchasers were directly related to the home’s
structural problems, their losses were properly compensable in damages.
Justice Loparco concluded that the
repairs undertaken by the purchasers were “entirely reasonable in the
circumstances”, and assessed their total damages at $113,064.74. 75% of the
loss was attributed to Mr. White, while the sellers – who, for their part, had
failed to disclose a prior home inspection to the purchasers – were deemed responsible
for the remaining 25%.
Although the decision doesn’t necessarily
break new ground in terms of legal analysis, it serves as a clear reminder to
professionals as to the standard of care expected of their services. While a
range of competencies can reasonably be expected in any professional area,
allowing “cracks” to develop in the foundation of your practice can lead to the
uncomfortable consequence of having your work evaluated, and reprimanded, on
the public stage. It is imperative that such individuals stay up to date on
current industry standards, particularly when making representations
(contractual or otherwise) upon which others are likely to rely.
McLennan Ross LLP has years of experience
and a strong reputation in a variety of areas, including professional liability
and negligent misrepresentations in the context of contractual disputes. If you
or your company have questions about these, or any other litigation-related
issue, please do not hesitate to contact Eric Appelt, Peter Major, Q.C., or anyone in
the commercial litigation practice group.
