LEAKY LIABILITY

by Shawn Smith

Recently the Supreme Court of British Columbia issued an important decision dealing with leaky condos. The decision of Mr. Justice Grist in The Owners, Strata Plan NW3341 et al v. Canlan Ice Sports Corp. et al is the first case to specifically address the liability of a municipal body for building envelope deficiencies.

The facts of the case are very simple. The building was constructed in late 1990 and early 1991 in Delta. In early 1992 the owners began to discover leaks in the building. A building envelope expert was engaged to inspect the building and discovered several design flaws and construction defects, which were found to be the cause of the leaks.

Although court actions were brought against the developer and others who had worked on the building, the most significant part of this case is the liability of the Municipality of Delta. Generally speaking governments (and government bodies) are exempt from liability. Liability depends on whether or not the action of the government body was a policy decision or an operational decision. Policy decisions are considered to be those involving the development of a particular policy pertaining to a particular subject. Operational decisions pertain to the implementation of policies or laws enacted. The courts have consistently held that unless a government has made a policy decision in bad faith, it will not be held liable for any loss or damage people suffer from, or as a result of, that policy decision. However, the government can be held liable for loss or damage arising out of the implementation of an operational decision.

The court in this particular instance, adopted the standard of care set out in the case of Ingles v. Tutkaluk (a recent decision of the Supreme Court of Canada). In that case it was held that, in order to avoid liability, "the government agency must exercise a standard of care in its inspection that would be expected of an ordinary reasonable and prudent person in the same circumstances." To determine what a reasonable and prudent person would have done one must consider the likelihood of a known or foreseeable harm, the gravity of that harm and the burden or cost, which would be incurred to prevent the injury. The Supreme Court of Canada, in that case, also noted that while a municipal inspector will not be expected to discover every latent (hidden) defect in a project or every derogation from the building code standards, a government agency will be liable for those defects that it could reasonably be expected to have detected and to have remedied.

One of the key factors in this decision was the bylaw passed by the Municipality of Delta adopting the provisions of the British Columbia Building Code and requiring them to be met. Delta however, only took limited steps to see that the Code was complied with. The Part 4 provisions of the Code that deal with structural integrity were not checked or inspected because the building department did not have sufficient expertise in structural design and therefore made use of the option requiring professional certification. To quote Mr. Justice Grist "Inspections performed under the bylaw were also of limited scope. There were, however, two Part 5 requirements that were inspected, installation of insulation and vapour barrier, and foundation damp proofing. Insulation and vapour barrier were inspected because there had been avoidance of these features when first introduced to the code. The reason for inspecting damp proofing of the concrete walls, that in this case enclosed the car park, was not clear. This was especially so because there was no inspection of any other element of the building envelope to ensure water would not penetrate. The department practice of not including inspections relating to Part 5 was explained as being the result of the difficulty involved in assessing performance based objectives and due to the fact that building envelope failures were not seen as a problem. The Director did not think that council would approve funds for more complete inspections in the absence of past problems."

The Court also adopted the reasoning in Ingles that "where inspection is provided for by statute, a government agency cannot immunize itself from liability by simply making a policy decision never to inspect."

The Court in the end found the Municipality of Delta liable for failing to properly enforce the Building Code once it made the decision to have it apply. Following are some of the interesting comments made in this regard made by Mr. Justice Grist:

"The approval process is important because it not only has the potential to detect breaches of the standard but also because it requires the designer to exercise foresight through the process of illustrating compliance. A failure to stipulate a design often leaves design of detail items to whomever is doing the construction."

"Inspection will not guarantee good construction but it should detect that which would be apparent to an inspector exercising reasonable care. Here the problems with the ducts and many of the flashings should have been apparent during an on-sight inspection."

"The public would reasonably expect that a municipality would put some effort into its responsibility to administer and enforce these Provincial Code provisions."

"In my view proper administration and enforcement of these sections require details to be shown on the plans to be presented for approval."

In the end the Court held that the design and construction flaws in this case materially contributed to the onset and extent of the building envelope failure. The failure to enforce the Code was a major cause of the loss suffered by the strata corporation. These defects would have been apparent on proper inspection and evaluation had the Municipality lived up to its responsibilities.

The application of this decision to other leaky condos will likely occur on a case-by-case basis. Not all municipalities will have adopted the same bylaw as Delta. Also, inspection procedures may differ from municipality to municipality as well as building to building. Once again, it should be kept in mind that the Court is not making the municipality a guarantor of the building envelope but simply requiring them to take a reasonable effort to identify clearly evident problems. This is a decision, which is of importance to all strata corporations, which are dealing with building envelope problems and should be reviewed in light of the possibility of recovering monies spent on repairs.

Shawn M. Smith is an associate lawyer with the law firm of Cleveland & Doan located in White Rock and may be reached at (604)536-5002. This article is intended for information purposes only and nothing contained in it should be viewed as the provision of legal advice.