'[w]here a seller recklessly tells a half-truth or knows the facts but does not reveal them because he or she has not bothered to consider their significance, this may also amount to fraud' (Extracts from the judgment below)
Consider this all-too-common scenario: You buy your dream house and happily move in. Only then do you discover that the house has major defects, which were never disclosed to you by the seller. You demand the seller pays the repair costs but the seller refuses. So off to court you go, claiming either damages or a reduction in the purchase price.
What must you prove to win your case? Let’s consider a recent High Court decision addressing just that question.
Concealing the damp with paint and Polyfilla
The buyer of a house only became aware of substantial damp problems in the ceilings and walls after taking transfer and when planning renovations. The damp was caused both by rising damp and by water flowing down into the walls due to failed waterproofing.
The sellers (a divorced couple) refused to pay for the repairs (costing just under R245k) and the buyer sued them for either damages or a reduction in the purchase price.
Highly relevant – as we shall see below - was the fact that twice in the year of sale the ex-wife (living alone in the house and tasked with selling it after the divorce) had called in contractors to repaint and carry out 'cosmetic repairs' – extensive repairs judging by the drum of paint and 24kg of Polyfilla involved.
What the buyer must prove
The matter ended up in the High Court, which considered what the buyer must prove to succeed in a claim of this nature:
Defects: That there were defects in the property at the time of the sale which 'affected the use and value of the property'. The buyer had no difficulty in proving that the damp problems qualified as defects for this purpose.
Latent, not patent: That the damp was a latent defect, not 'obvious or patent' to the buyer. That’s important because latent defects are defects that 'would not have been visible or discoverable upon inspection by the ordinary purchaser' – so if the damp was a 'patent' defect, the buyer should have picked it up. The buyer in this case was able to convince the Court that the damp was not discoverable by her at the time of sale because all traces of it had been concealed by the remedial work referred to above.
Fraud: That the damp as a latent defect was not covered by the voetstoots clause, a standard clause in deeds of sale which specifies that the property is sold 'as is' and without any warranty. The effect of such a clause is that the buyer agrees to carry the risk of latent defects but only if there was no fraud on the part of the seller. So the buyer had to establish fraud, by proving two things:
That the sellers were aware of the damp and its consequences.
That they deliberately concealed it with the intention to defraud.
Proving fraud – how relevant is the 'property condition report'?
Fraud, said the Court, 'is not lightly imputed [but] it may nevertheless be inferred when such inference is supported by the objective facts revealed by the evidence'. The following factors were central to the Court’s conclusion that both sellers had acted with fraudulent intent:
The sellers’ protestations that either they were unaware of the damp problems or had not intended to fraudulently conceal them found no favour with the Court on the facts – which included the extent and nature of the re-painting carried out.
The ex-wife’s claim to have been ignorant of the damp issues, despite the extent and nature of the 'cosmetic repairs' she carried out, was rejected. As the Court put it: 'At best for her, she remained wilfully ignorant of the underlying cause of the issues in the paintwork; she could not honestly have believed that the core issue had been remediated.'
The ex-husband for his part admitted that he had known of damp issues in two rooms because of bubbling paint and a smell of damp, with the Court concluding that: 'He appears to have taken no steps to ascertain how extensive or serious those problems were – but a wilful abstention from establishing the true facts does not constitute a lack of knowledge.'
Perhaps most damningly of all, both the ex-husband and the ex-wife had signed the mandatory Property Condition Report ('defects disclosure form'), in which they specifically stated that there were no latent defects in the property, including 'dampness in walls/ floors'.
The Court held that the buyer had proved fraud by both sellers and confirmed her award of R244 855 in damages for the repairs.