Caveat emptor: Court rules on Hacienda del Norte, a $1, 350,000 leaky rotten moldy house in West Vancouver

IN THE SUPREME COURT OF BRITISH COLUMBIA

Citation:

Cardwell et al v. Perthen et al,

2006 BCSC 333

Date: 20060228
Docket: S006866
Registry: Vancouver

Between:

Eric Cardwell and Diane Susan Cardwell

Plaintiffs

And

Juergen E. Perthen and Helga G. Perthen

Defendants


Before: The Honourable Madam Justice Ballance

Reasons for Judgment

Counsel for the Plaintiffs:

Bruce Lemer

Counsel for the Defendant, Mr. Perthen:

Frank R. Eadie

Date and Place of Trial:

Jan. 11, 12, 13, 14, 17, 18, 19, 20, 21, 24, 25, 26, 27, 28;
Feb. 21, 22; April 18 and 19, 2005

Vancouver, B.C.

INTRODUCTION

[1] The sale of used residential houses is a daily occurrence in this province. Some of those houses are new and in pristine shape. Others are decades old and in poor and or dilapidated condition, while still many others fall somewhere in between. A large number have undergone cosmetic updating or more extensive renovation to their original state. This action arises out of the sale of an older residence which had been substantially renovated over a period of a decade.

[2] The parties entered into a contract of purchase and sale dated May 21, 2000, by which the plaintiffs, Eric and Diane Cardwell, agreed to purchase a residence located at 835 Younette Drive, West Vancouver, B.C., for the sum of $1,350,000. The contract was not made subject to the Cardwells having an inspection conducted and no inspection was carried out before the transaction closed the first week of July 2000.

[3] Most unfortunately for all concerned, soon after the Cardwells took possession of the home they discovered what they allege to be problems ranging from shoddy workmanship, leaks, the presence of mold and faulty retaining walls through to the deterioration of structural components and symptoms of systemic deficiencies. The Cardwells ended up selling the home some 6-1/2 months later in “as is” condition at a significant financial loss. They claim damages in excess of $700,000, the bulk of which represents the difference between the purchase price of $1,350,000, and the selling price of $700,000.

[4] The Cardwells base their claim on negligence, (including negligent misrepresentation), fraud and breach of contract. The principal thrust of their case is the assertion that the renovations were incomplete, and therefore a warranty that the residence and out-buildings were built in a good and workmanlike manner and were reasonably fit for habitation, should be implied in their favour and was breached. They allege also that the renovations carried out by the defendant, Juergen Perthen, were performed negligently. They further assert that during the course of viewing the property prior to purchasing it, Mr. Perthen: held himself out to be an engineer; emphasized that the renovations – largely performed by him – had been done to a very high standard; stated that an independent engineer had been involved; and stated that final approval and permits had been given by the District of West Vancouver (the “District”). The Cardwells further say that during the second viewing of the home Mr. Perthen permitted them to review certain documents such as the District’s final inspection notice, a letter from an engineering firm and what they characterize as an inaccurate disclosure of condition of property statement. According to the Cardwells, in reliance upon these “representations”, they were induced to enter into the contract of purchase and sale and chose to proceed with the transaction without having the house inspected.

[5] Mr. Perthen raises a number of defences of both a legal and factual nature. He denies making any negligent misrepresentation (except for a minor incorrect statement in the disclosure of condition of property statement) and, in particular, insists that he did not hold himself out as an engineer nor commit any fraud. Mr. Perthen contends that the residence was a used, completed house and therefore no warranty can be implied. In broader terms, he says that the Cardwells’ allegations of poor and negligent workmanship are either false or grossly exaggerated.

[6] Mr. Perthen does acknowledge that due to his error there were construction deficiencies in relation to the sub-floors which he laid in two rooms: the family room, and master bedroom, but says he was unaware of their impact at the time of sale. He also says that the Cardwells’ own expert indicated that those deficiencies could have been remedied for approximately $10,000. Mr. Perthen contends that the majority of the other so-called defects were patent and would have come to the plaintiffs’ attention had they carried out a reasonable inspection. It is his position that based on the long-standing doctrine of caveat emptor, the Cardwells have no remedy in respect of those patent defects.

[7] Mr. Perthen’s counsel describes the Cardwells’ decision to sell the house for its lot value as an utterly “bizarre” way to address the manageable problems they faced and argues that the damages flowing from such bizarre conduct must not be visited upon Mr. Perthen.

[8] In addition to suing the Perthens, this action was originally brought against the Perthen’s real estate agent, the realty company for whom she worked, the District, the engineering company retained by the Perthens and one of its engineers. The Cardwells settled their claims against those defendants before trial. The settlement amount was not revealed, however, the Cardwells’ counsel confirmed, quite properly, that they do not seek excess recovery in the event that Mr. Perthen’s liability is established and will not look to Mr. Perthen for any damages that may be found attributable to any former defendant(s).

[9] Mrs. Perthen passed away prior to the trial. No steps were taken to add her estate as a party or to have a representative appointed for her estate in this action. Mr. Perthen’s counsel made it clear that he does not act for Mrs. Perthen’s estate.

[10] Mr. Cardwell suffered a stroke prior to trial and was unable to testify.

BACKGROUND

(a) Overview of Renovations

[11] Near the end of 1969, Mr. Perthen, who had done drafting in an engineering firm, opened his own design company. His company constructed commercial and industrial buildings and hired electrical engineers and other professionals to that end. It was successful and grew rapidly. In around 1975, Mr. Perthen moved into the property management business and eventually established a separate corporate vehicle for that undertaking. In 1985 or 1986, Mr. Perthen sold his design company in order to concentrate on the property management operation which managed 10-15 buildings at its peak. Through his company, Mr. Perthen had considerable exposure to defective building issues including the “leaky condo-crisis”.

[12] The Perthens purchased the Younette Drive property in 1986. At that time, it was about a 2,000 square foot, single storey bungalow. The Perthens were fond of Santa Fe residential architecture found in places like Arizona and wished to incorporate that distinctive look in their proposed renovations to their new home.

[13] Starting around 1987 or 1988, the Perthens began the construction of extensive retaining walls throughout their steeply, sloping site to support the landscaping in front, to the rear and on either side of the house. This series of walls was erected by Mr. Perthen without the benefit of an engineering design. Around the same time, the Perthens relocated the kitchen to a different area of the house, added a bar and bathroom, moved an interior wall and put a beam in the dining room and enclosed the outdoor covered patio off the living room in order to enlarge the living room area. They did so without first obtaining the necessary permits from the District. The work Mr. Perthen was doing on his house, especially the construction of the retaining walls, was a matter of consternation for his neighbours. One or more of them complained to the District and informed it Mr. Perthen had not obtained a permit for his interior work. This permit issue prompted the District to dispatch an inspector to the property and to carry out periodic inspections from that point forward. The Perthens co-operated in complying with requirements and obtaining the appropriate permits. Mr. Perthen testified, rather sheepishly, that he was simply unaware that these non-structural interior changes required a permit from the District. At the same time, he agreed it was like being caught with his “hand in the cookie jar”. Given Mr. Perthen’s experience in matters of general construction and property management, his evidence that he did not know he needed a permit is not believable.

[14] In 1990 Mr. Perthen, working alongside a designer he had retained, sought approval from the District for a variance building permit in respect of his proposed additions to the residence. The Perthens encountered a significant degree of opposition from their neighbours and a flurry of strongly worded correspondence between them, their neighbours, and the District ensued for a time. The Perthens eventually abandoned their variance application and decided to renovate the residence within the confines of the existing bylaws.

[15] In March 1991, the District wrote to Mr. Perthen describing a number of deficiencies requiring his attention. Right away Mr. Perthen obtained positive electrical and plumbing inspection reports for the new kitchen, bar and dining areas. In addition, he retained a structural engineering firm (the “Engineering Firm”) which assured the District in a letter dated April 3, 1991, that the design of the renovations proposed by Mr. Perthen conformed to the structural requirements of the current building by-law and that they would conduct structural field reviews to ascertain that the work substantially conformed in material respects to the plans and engineering documents accepted by the District for the project. Evidently, the District issued a number of permits. An early one pertained to at least some, and perhaps all, the work Mr. Perthen had carried out without a permit. Another building permit was issued on April 22, 1991. It included the new kitchen, family room, enclosure of the front patio and the roof extension over it.

[16] After the April building permit was granted, the District inspectors continued to conduct site inspections where they would make a written report on progress and deficiencies. They always left a copy of the completed inspection form at the site to inform Mr. Perthen of the matters which required his attention.

[17] The April building permit did not include a review of the westerly retaining wall. More than once the District suggested to Mr. Perthen (but did not mandate) it may be prudent to have that wall reviewed by a structural engineer. There was no evidence about whether the District had independently based concerns about the structural integrity of that wall. It was clear, however, that the neighbours of the adjacent property had complained about it to the District. In a letter dated June 3, 1991, the Engineering Firm confirmed to the District that this retaining wall along the west property line was reinforced in a particular way and grouted. The particulars of the steel rebar were stated incorrectly in this letter as being inserted every 2 feet whereas they were inserted about every 3 feet. Mr. Perthen testified that he had not provided the erroneous particulars to the engineer who wrote the letter and may not have seen that letter before the Engineering Firm sent it to the District. The engineer in question testified to the fact that he walked the length of the wall and drew his own conclusions which he then put in that letter.

[18] The District also voiced concerns about the excessive height of another of the retaining walls. Mr. Perthen eventually lowered that over-height wall to bring it in line with the applicable bylaws. Other than the foregoing instances, the walls were not the subject of review or inspection by the District.

[19] On August 9, 1991, the Engineering Firm confirmed by letter to the District Building Inspector that it had carried out the supervisory duty of the structural work outlined in the April 3 letter and found all work satisfactorily completed in accordance with the plans and designs.

[20] Around the same time, Mr. Perthen applied for a second building permit in respect of the next phase of renovations being the master bedroom and ensuite, the addition of a partial upper floor, new garage and bell tower. In a plan check document, the District identified several details of the submitted plans which required modification and requested sealed structural plans by an engineer. Mr. Perthen instructed the Engineering Firm to provide the sealed structural drawings, a site review and a letter of supervision for the renovation work. By letter of October 8, 1991, the Engineering Firm assured the District Building Inspector that the design of the proposed addition conformed to the structural requirements of the applicable bylaw and confirmed that the Engineering Firm would conduct structural field reviews.

[21] Subsequent field inspections were carried out periodically by the District throughout 1992 and, to a lesser extent, 1993, in relation to the framing, electrical and plumbing. As well, the Engineering Firm kept Mr. Perthen informed of outstanding construction details that required his attention.

[22] The majority of the second phase of the renovations were completed by mid-1990 and the renovation activity then tapered off significantly as Mr. Perthen shifted his focus to running his property management business. In 1996, Mr. Perthen renewed his building permit application to finish off the last of the work. Another series of field inspections by the District took place and in December 1998, final inspection and approval of the plumbing, electrical and building were issued by the District.

[23] In the end, the Perthens had transformed the modest bungalow into “Hacienda Del Norte”: a spacious view home with a partial upper level, extensive pitched and flat roof areas, a two storey ornamental bell tower, a covered portico supported by columns and a new second garage. Mr. Perthen had added a small family room area in front of the new kitchen, a pantry and new master ensuite, converted part of the existing living room into a sitting room/office and enlarged the living room. He had carried out most of the renovations himself, although he did hire independent contractors to install skylights, the flat roofs, new gutters and aspects of the new plumbing work.

[24] Some of the work was left unfinished or only partially completed. Missing were: parapet wall cap flashings; gutters; caulking and window sills in places; stuccoing on parts of the two garages; grouting of roof tiles; dry walling on the second level of the bell tower; and stuccoing of the breezeway (between the existing garage and the back of the house) and over a small roof area at the entrance. Nor had stucco been applied to a small area of the exterior of the dining room as Mr. Perthen said he intended to run a security wire through the particular spot, although he never did.

[25] The Perthens lived in the residence throughout the entire renovation period. In time, Mr. Perthen established a home office there where he had at least one steady employee. As well, in conjunction with their daughter, the Perthens ran an accounting business from their home which had four employees.

[26] According to Mr. Perthen, renovating his residence was for him a “labour of love” and his “life’s work” for ten years. I believe him and accept his evidence that he and his wife fully intended to live there until their final days. Sadly, in 1998 Mrs. Perthen’s health began to deteriorate and, in time, she needed a wheelchair. Within this same timeframe, the Perthens’ increasing visits to Europe to visit Mrs. Perthen’s ailing, elderly mother was becoming a financial drain. These factors prompted the Perthens to decide to downsize and sell their beloved Younette Drive property.

(b) Sale to the Cardwells

[27] In January 2000, the Perthens listed the residence for the price of $1,650,000. Mrs. Cardwell had lived on Younette Drive twenty years earlier and had even visited the property when the original owners resided there. It was situated in a school catchment which she considered desirable for her son. She was very interested in the property.

[28] The Cardwells viewed the residence on two occasions in May 2000.

[29] On the first occasion, Mr. Perthen’s real estate agent, Clara Hartree, did not attend and so Mr. Perthen guided the Cardwells and their son around the property. Ms. Hartree testified that because Mr. Perthen worked from an office in the home, it was convenient for him to tour prospective purchasers and he was happy to do so because he was very house proud.

[30] Mrs. Cardwell recalls that during this first viewing Mr. Perthen described the residence as his labour of love. The Cardwells shared the Perthens’ appreciation of the south western look of the home and Mr. Perthen pointed out the many unique design features of it. They viewed the interior of the home, the out buildings, orchard, dog run and grounds, to varying extents. Mrs. Cardwell took a cursory look over the railing at the front of the house but as there was no access down the steep frontage, she did not go down. She did not recall going inside the bell tower or the two garages but believes that her husband may have entered the older garage. They discussed the plants, arbour, and the unique electrical aspects of the house which included a special low voltage lighting system. Mr. Perthen also showed the Cardwells the extensive interior and exterior sound system which included about 40 speakers with karaoke capability. He also pointed out other high-end features such as the heated marble floor in the master ensuite bathroom and full security system. At some point, Mr. Perthen stated there was no crawl space. Mrs. Cardwell recalls that Mr. Perthen mentioned that there was a supply of stucco in the garage for the partially stuccoed breezeway and showed it to her husband.

[31] It was all very pleasant and the Cardwells were not concerned about anything they saw.

[32] Mrs. Cardwell testified that Mr. Perthen represented that he was a retired engineer who was now in property management. The Cardwells’ real estate agent, Allan Angell, who was also present, testified along the same lines saying that while Mr. Perthen escorted them throughout the property he told the Cardwells that he was a retired engineer.

CLICK ON LINK BELOW TO READ THE REST OF THE STORY

2006bcsc0333.htm

Condo developer sentenced to 70 months for illegal conversions

Friday, February 24, 2006

Condo-scheme leader sentenced to 70 months
He'll return to Idaho for seven weeks of cancer treatment.


The Orange County Register

SANTA ANA— The mastermind of a Huntington Beach condominium-conversion scheme was sentenced today to 70 months in federal prison and ordered to pay $679,000 in restitution.

Phil Benson, who is battling lung cancer, arrived to court in a wheelchair and hooked to an oxygen tank. He showed no emotion when U.S. District Judge David O. Carter announced the sentence.

Carter allowed Benson to return to Idaho to receive radiation treatment and chemotherapy for seven weeks before turning himself in to the U.S. Marshals Service.

An arrest warrant had been issued after Benson, 73, of Hayden, Idaho, failed to show for his scheduled sentencing last week.

Benson and his attorney, Chris Ayers, declined to comment after the sentencing.

Assistant U.S. Attorney Tom McConville said it was important for the case to be resolved.

"Our job is that justice gets served,’’ McConville said. "Justice is served when people who have harmed the community are sentenced.’’

Benson pleaded guilty in September to 24 counts of mail and wire fraud. Prosecutors had recommended that he receive 70 months in prison.

He was among eight people indicted in December 2004 for their roles in illegally converting Huntington Beach apartments into condominiums.


Copyright 2006 The Orange County Register

Maple Place Towers: Walls come tumbling, Burnaby Now


Siding ripped off during wind storm

Dan Hilborn, staff reporter, Burnaby Now

Tenants of a problem-plagued residential highrise in North Burnaby are seeking answers after large portions of an outside wall of their building blew away during the massive windstorm that swept through the Lower Mainland on Feb. 4.

"I want to know is it even safe to live in here?" asked Cathy Aoyama, a new resident in the Maple Place Towers, located on Halifax Street near the Burnaby Mountain golf course. "No one will give us any answers."

The building, which is owned by Cressey Development and managed by Nacel Properties, currently has work crews covering up the gaping holes that left the bedrooms in at least nine suites open to the elements.

"I can see right into the suites," said Aoyama, who is thankful her own apartment was spared the worst of the damage.

A tenant meeting was organized for last night, and several tenants are considering plans to file for arbitration with the Residential Tenancy Office in an attempt to resolve a string of complaints with the building.

Aoyama, who said she is hoping to get out of her lease, said the problems may not have occurred if Burnaby had a building standards and maintenance bylaw similar to those in New Westminster and Vancouver.

Kris Anderson, a spokesperson for the non-profit Tenant's Rights Advocacy Coalition, said the ongoing problems at Maple Place are compounded by the fact that the provincial legislation regulating the landlord-tenant relationship are weighted in favour of the building owners.

While it might be possible for angry tenants to simply move out of the building and argue their case after the fact, tenants could just as easily be left on the hook for breaking the lease without authorization, he said.

"It's pretty difficult to break a lease in B.C.," Anderson said. "The problem here is that there is a pretty immediate need, and the Residential Tenancy Office doesn't move quick enough for the resolution that the tenants want.

"A tenant could break the agreement, but there is no guarantee the landlord can't go after them for rent for the remaining term of the lease.

"The other side is municipal responsibility," he said. "There is a definite need for a standard of maintenance bylaw in Burnaby. There's a lot of older buildings in the city, especially around Metrotown, and a lot are not being adequately maintained. I think the city could certainly be doing more."

Aoyama said she has been in contact with about half a dozen tenants who have a variety of complaints about the building, including their treatment both before and after the siding blew off the building this month.

A female tenant in one of the worst affected suites said she's afraid to sleep in her two-bedroom apartment, which now has one bedroom completely sealed off while workers replace the outside cladding on the walls.

The woman, who asked to remain anonymous, said the management company offered her a "pitiful compensation package" - a $200 reduction in her $1,200 monthly rent.

George Humphrey, the chief building inspector for the City of Burnaby, said there is little his office can do except to oversee the repair work that is now underway.

"This is really not that different from the leaky condo issue," Humphrey said. "We don't have regulations in Burnaby dealing with the maintenance of buildings, but the code does kick in when structural repairs are necessary, and that's what happened here."

Humphrey said the city is now ensuring that the repairs are being done properly and that the safety of tenants is being looked after.

Meanwhile, Mayor Derek Corrigan said the city is reluctant to bring in a standards of maintenance bylaw for rental buildings because of the conflicting jurisdictions involved and the possible added costs it could bring to the city.

"There has been some hesitation to jump in because it's a pretty complicated issue," said Corrigan, who noted that the landlord-tenant relationship is already covered by provincial Residential Tenancy Act. "We're hesitant to take on new responsibilities because there's always a cost attached and nobody likes tax increases."

Aoyama, meanwhile, said the siding problems are not her only complaint with the building. She said she and other residents have experienced rent increases that appear to be greater than those allowed under the provincial regulations, mould, broken elevators and a lack security at the buildings.

Anderson, the tenants' advocacy spokesperson, said renters can take their complaints to the province's Residential Tenancy Office, but they will only win their case if they provide meticulous documentation of all their problems.

Attempts to contact Nacel Properties for comment were unsuccessful.

published on 02/22/2006 by Burnaby Now

http://www.burnabynow.com/issues06/024106/news/024106nn4.html


 


Maple Place Towers (Burnaby) - wind storm damage

 

(Click on any photo to enlarge)


Maple Place Towers is a rental complex located at 7351 and 7361 Halifax St., Burnaby. This two tower complex was developed in the early 1980s by Cressey Developments. The towers were constructed by Cressey Construction. Construction was completed in 1985. The towers have been operated and "maintained" by Nacel Properties Ltd., a Cressey corporation which manages the rental side of the Cressey Group.



Maple Place Towers is currently undergoing significant restoration due to damage caused to the walls during the February 2006 windstorm. Residents of 7351 Halifax were shocked to be woken at 3 a.m. to the sound of portions of the exterior South wall panels being ripped off and crashing to the ground. The building was immediately evacuated for fear of complete structural failure.

(Some of the debris from the exterior wall collapse)

The following picture shows the prominent "shadow effect" on the same face of the wall which experienced the windstorm damage - this shadowing appears on the West corner of the South wall, while the panel damage occured on the East corner of the South wall:


What this type of shadow pattern - which is the outline of the studs behind the stucco - indicates is the very real potential for the same catastrophic damage to occur with the panels at the West corner of the building as had happened with the panels at the East corner.

Restoration work is currently underway at 7351 Halifax:

These photos show the placement of new Densglass (yellow panels) on the new steel studs. The old studs and attaching screws had to be removed and replaced because of loss of strength due to leaks and rust.

The following photo clearly shows the extent of the windstorm damage to the East corner of the South wall, as well as the shadow effect on the West portion of the South wall extending from the ground to the top of the tower:



The building permit for the building envelope repairs is dated February 15, 2006. The permit was applied for by Cressey and the professional in charge is Mark Lawton, P.Eng., of Morrison Hershfield. Morrison Hershfield Managers Inc. is included on the Homeowner Protection Office's (HPO) registry of licensed renovators; however, the company in charge of the actual reconstruction - ConPact Systems (2004) Ltd. - is not.

The other tower in this complex, 7361 Halifax, while not experiencing the same catastrophic damage in the windstorm, is undergoing the same type of restoration work as a preventative measure:

Case Studies, Discovery Bay (Kelowna): Tribulations

Discovery Bay Tribulations

by John Thomson - Story: 16311
February 20, 2006 / 5:00 am
www.castanet.net

At the end of January CHBC-TV reported a story about a $15 million lawsuit from National Home Warranty, the insurers of the major water front condo development on Sunset Drive in the north-end.

I did try to speak with the officials at National Home Warranty in Edmonton who are handling this file but they wouldn't return my calls. This just becomes another chapter in the continuing story of Discovery Bay and its trials and tribulations.

I went back into my files and pulled out all the stories I had written on this project, the calls I had made and promises for interviews that were never kept. The only person that actually ever talked to me or returned calls was Larry Kelly who has since resigned and moved to Kelowna to become a developer on his own. Larry Kelly's first project is the Wood Lake Resort development where they are currently trying to move all the trailer tenants off the property so the company can proceed with their development plans.

Back to the Discovery Bay situation.

It was back in October of last year when the city issued their order that the foundations of the garage and residential building did not meet building codes. A new engineering group was to be brought in to solve the problems, if they could be solved. I was given to understand the costs would be born by the developer.

My story goes back to the beginning of last year when I received a call from a gentleman who worked at the project. His story was not pleasant and he spoke of many things and although I certainly am not a contractor I knew this was a serious situation.

I went with my information to city hall and was given a Pointe of View executives name in Calgary, Walter Fritz, vice president of construction and development. I made arrangements to speak with Mr. Fritz but the interviews never took place. According to their website Walter Fritz is now in San Diego on another project.

Through my own sources in the industry I checked on the design of the project and came up with the name Sven Hage structural engineer for Jacobson Hage Engineering. I was told that he had a history of marginal designs, a number of lawsuits, and he had lost his license to practice and had left the country. Just how much involvement he had in Discovery Bay has never been confirmed.

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