I don't know about Ontario, but in Quebec we have a law that allows the buyer to sue the previous owner for "vice cach�©" (latent defect?). But you have to prove that it was really an unknown condition of the house, undetectable by a normal inspection of the house prior to the conclusion of the sale. In short, if the previous owner told you there was a "little water infiltration" in the basement, or hinted that there may be something fishy in that area, you're on your own. You insurance company will not be of help, but I could be wrong, check with your broker.
That's why I called in a professional building inspector (member of AIBQ) before we bought our current home, and did the same with the previous one - the contracts we had with the previous owners were conditional to the results of the inspections.
If the inspector didn't see it, then you may have a case, but if you bought the house without having a certified inspector go through it before, it will be harder to prove your point in court.
To get rid of it... mold is a serious issue, a very serious issue. Depending on the extent of it, you may want to call in the pros. In any case, if you stay in your home with the mold spreading, you will get sick - trust me, I see this regularly. If you want to tackle it yourself, make sure you have proper protection, and disinfect everything thouroughly (sp?)). Get rid of everything that's moldy or damaged by the water, and get that basement leak fixed! You may be able to do it yourself with epoxy injection from inside, but in most cases you have to dig out the exterior basement wall, and have it fixed from outside.
Good luck!
