Nielson v. Kamloops, City of, and Hughes and Hughes, (1984) 54 N.R. 1 (SCC)

• Judge: Ritchie, Dickson, Estey, McIntyre and Wilson, JJ.
• Court: Supreme Court (Canada)
• Case Date: July 26, 1984
• Jurisdiction: Canada (Federal)
• Citations: (1984), 54 N.R. 1 (SCC);10 DLR (4th) 641;29 CCLT 97;11 Admin LR 1;[1984] CarswellOnt 476;[1984] 5 WWR 1;[1984] 2 SCR 2;[1984] SCJ No 29 (QL);54 NR 1;8 CLR 1;66 BCLR 273;JE 84-603;26 ACWS (2d) 453;1984 CanLII 21 (SCC);[1984] CarswellBC 821;[1984] ACS no 29;AZ-84111034;26 MPLR 81

Nielson v. Kamloops (1984), 54 N.R. 1 (SCC)

MLB headnote and full text

Nielson v. Kamloops, City of, and Hughes and Hughes

Indexed As: Nielson v. Kamloops, City of, and Hughes and Hughes

Supreme Court of Canada

Ritchie, Dickson, Estey, McIntyre and Wilson, JJ.

July 26, 1984.

Summary:

In 1973 a contractor built a house on a hillside under a building permit from the City of Kamloops building inspector requiring footings to have a solid bearing. The city was not required to pass a construction bylaw under the B.C. Municipal Act, but did so and charged the building inspector with its enforcement. The contractor did not take the footings to solid bearing, which on a subsequent mandatory inspection the building inspector discovered and issued a stop order pending correction. The contractor refused to abide by an engineer's recommendation for correction and continued in defiance of the stop order. He conveyed the house to his father Hughes, a Kamloops Alderman, who was advised of the structural inadequacy by the City, but objected to enforcement of the bylaw and moved in in 1975. After the foundation subsided Hughes sold the house in December 1977 to the plaintiff, who was not informed of the foundation problem and whose expert's inspection failed to reveal it. In November 1978 the subsided foundation was discovered. The plaintiff brought an action against Hughes for damages for fraudulent misrepresentation, breach of contract and negligence and against the city for failing to enforce the stop order or to condemn the house.

The British Columbia Supreme Court allowed the action, found both Hughes and Kamloops liable and apportioned 75% fault to Hughes and 25% to Kamloops. Kamloops' appeal was dismissed by the British Columbia Court of Appeal in a judgment reported at [1972] 1 W.W.R. 461; 31 B.C.L.R. 311. Kamloops appealed.

The Supreme Court of Canada dismissed the appeal and affirmed Kamloops' liability. The court held that, although Kamloops was not bound to adopt a policy of construction regulation by bylaw, having done so Kamloops had a private law operational duty to enforce the bylaw for the protection of the health and safety of people who might reasonably be contemplated would be injured by a breach of the duty. The court held that the plaintiff could recover, although his damages were purely economic, because as owner or occupier of the house he was sufficiently proximate to Kamloops to benefit from the duty and the damage resulted from operational, not policy, negligence.

McIntyre, J., dissenting, Estey, J., concurring, would have allowed the appeal on the ground that Kamloops had no duty to enforce the bylaw by legal action.

Actions - Topic 1511

Cause of action - New or broadened cause of action - Opening of floodgates - The Supreme Court of Canada held that a municipality was liable for damages resulting from its failure to enforce a building bylaw, a decision which broadened the liability of municipalities - The court considered and rejected the argument that the decision would open the floodgates of claims against municipalities, explaining that the decision contained built-in barriers against such a flood - See paragraph 41.

Damages - Topic 531

Limits of compensatory damages - Remoteness - Torts - Recoverable damages - Purely economic loss - The Supreme Court of Canada allowed a homeowner's action against a municipality for damages resulting from structural defects in a house, where the municipality failed to enforce its building bylaw against the builder - The court allowed the homeowner to recover for purely economic loss, because four conditions were met: (1) having elected to enact a building bylaw, the municipality was bound by the B.C. Municipal Act by a private law duty along side its public law duty; (2) the homeowner belonged to a limited class of owners or occupiers at the time the damage manifested itself; (3) the loss was from purely operational and not policy negligence; and (4) the homeowners loss was of a type the Municipal Act was intended to guard against - See paragraphs 42 to 63.

Limitation of Actions - Topic 3010

Actions in tort - General principles - When time begins to run - A house was constructed with inadequate footings in 1973 - By the time the first owner sold the house to the plaintiff in December 1977, the foundation had subsided - The plaintiff discovered the damage in November 1978 and soon brought an action - The Supreme Court of Canada held that the action was not barred by expiry of the limitation period, because the period began to run only when the plaintiff discovered the damage or could reasonably have been expected to do so, and not at the time the damage occurred - The court held further that damage occurs not upon the inadequate construction of the foundation, but when it subsided later because of the inadequacy - See paragraphs 64 to 81.

Limitation of Actions - Topic 3011

Actions in tort - General principles - When time begins to run - Attributing knowledge of predecessor to the successor - Both the builder and first owner of a house knew that the foundation was inadequate in defiance of a municipal building bylaw and defied the municipality to enforce it - The innocent purchaser from the first owner brought an action against the municipality for damages for failure to enforce its bylaw - The municipality argued that the knowledge of the first owner of the defects should be attributed to the purchaser for the purpose of commencement of the limitation period - The Supreme Court of Canada held that the argument was not open to the municipality, because it could not be said that the purchaser was claiming through the first owner, who was aware of the construction defects and resisted enforcement of the bylaw - See paragraphs 80 to 81.

Municipal Law - Topic 1697

Liability of municipalities - Liability limited to misfeasance - The Supreme Court of Canada held that the distinction between non-feasance and misfeasance is irrelevant where there is a duty on a municipality to act or, at the very least, to make a conscious decision not to act on policy grounds - See paragraphs 26 to 34, 39.

Municipal Law - Topic 1814

Liability of municipalities - Negligence - Failure to enforce bylaw - The builder of a house did not take the footings to solid bearing as required by the building permit - When he discovered the inadequacy, the building inspector issued a stop order - The builder continued in defiance of the stop order and the municipality did not enforce the bylaw - An innocent subsequent purchaser brought an action against the municipality for damages resulting from the inadequate foundation against the municipality - The Supreme Court of Canada held that the municipality was liable for damages for failure to enforce its bylaw, which it had a private law operational duty to do for the protection of the health and safety of owner-occupiers of the house - See paragraphs 9 to 40.

Municipal Law - Topic 2991

Duties of municipalities - Enforcement of bylaws - The Supreme Court of Canada held that once a municipality exercised its policy option to enact a bylaw to regulate construction, it had a private law operational duty to enforce the bylaw for the protection of the health and safety of owner-occupiers of buildings - See paragraphs 9 to 40.

Torts - Topic 57

Negligence - Causation - Successive or consecutive causes - The builder of a house failed to take the footings to solid bearing as required by the building permit - The building inspector discovered the inadequacy and issued a stop order, but the builder continued in defiance of the stop order and the municipality failed to enforce the bylaw against either the builder or the first purchaser, who knew of the defects - An innocent subsequent purchaser brought an action against the first owner and municipality for damages after discovering the subsided foundation - The municipality submitted that only the first owner was liable - The Supreme Court of Canada held that, although the municipality's negligence in breaching its duty to protect the purchaser from the builder's negligence was not primary, it was causative - The court held that the municipality was 25% and first owner 75% at fault - See paragraphs 19 to 25.

Cases Noticed:

Anns v. Merton London Borough Council, [1978] A.C. 728, appld. [paras. 9, 87].

Kent v. East Suffolk Rivers Catchment Board, [1940] 1 K.B. 319, consd. [paras. 12, 19, 97].

Donoghue v. Stevenson, [1932] A.C. 562, consd. [paras. 13, 41].

Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd., [1964] A.C. 465, consd. [paras. 13, 47].

Dorset Yacht Co. Ltd. v. Home Office, [1970] A.C. 1004, consd. [paras. 13, 22, 88].

McCrea v. City of White Rock (1974), 56 D.L.R.(3d) 525, consd. [paras. 27, 35].

Dutton v. Bognor Regis United Building Co. Ltd. et al., [1972] 1 All E.R. 462; [1972] 1 Q.B. 373 sub nom. Dutton v. Bognor Regis Urban District Council, consd. [paras. 28, 49, 88].

Schacht v. Ontario, [1973] 1 O.R. 221, consd. [para. 29].

Barratt v. District of North Vancouver, [1980] 2 S.C.R. 418; 33 N.R. 293, dist. [paras. 32, 97].

Stevens-Willson v. City of Chatham, [1934] S.C.R. 353, consd. [paras. 34, 95].

Wing v. Moncton, [1940] 2 D.L.R. 370, refd to. [para. 34].

Neabel v. Ingersol (1967), 63 D.L.R.(2d) 484, refd to. [para. 34].

Rivtow Marine Limited v. Washington Iron Works, [1974] S.C.R. 1189, dist. [para. 42].

Cattle v. Stockton Waterworks Co. (1875), L.R. 10 Q.B. 453, consd. [para. 46].

Weller & Co. v. Foot and Mouth Disease Research Institute, [1966] 1 Q.B. 569; [1965] 3 All E.R. 560, refd to. [para. 46].

Ultramares Corp. v. Touche (1931), 255 N.Y. 170, refd to. [para. 46].

Ministry of Housing and Local Government v. Sharp, [1970] 2 Q.B. 223, refd to. [para. 49].

Caltex Oil (Australia) Pty. Ltd. v. Dredge Willemstad (1976), 136 C.L.R. 529, consd. [para. 50].

Junior Books Ltd. v. Veitchi Company Limited, [1983] A.C. 520, consd. [para. 53].

Saskatchewan Wheat Pool v. Canada (1983), 45 N.R. 425; 143 D.L.R.(3d) 9 (S.C.C.), refd to. [para. 59].

Gypsum Carrier Inc. v. R. et al., [1978] 1 F.C.R. 147, refd to. [para. 61].

Cummer-Yonge Investments Ltd. v. Agnew-Surpass Shoe Stores Ltd., [1976] 2 S.C.R. 221; 4 N.R. 547, refd to. [para. 61].

Bethlehem Steel Corporation v. St. Lawrence Seaway Authority (1977), 79 D.L.R.(3d) 522 (Fed. Ct.), refd to. [para. 61].

Ital-Canadian Investments Ltd. v. North Shore Plumbing and Heating Company, [1978] 4 W.W.R. 289 (B.C.S.C.), refd to. [para. 61].

Sparham-Souter v. Town and Country Developments (Essex) Ltd., [1976] Q.B. 858, appld. [para. 65].

Pirelli General Cable Works Ltd. v. Oscar Faber & Partners (a firm), [1983] 1 All E.R. 65, disapprvd. [para. 66].

Cartledge v. E. Jopling & Sons Ltd., [1963] A.C. 758, disapprvd. [para. 67].

Dennis v. Charnwood BC, [1982] 3 All E.R. 486, refd to. [para. 77].

McCrea et al. v. Corporation of City of White Rock et al., [1975] 2 W.W.R. 593, consd. [para. 88].

Ostash et al. v. Sonnenberg et al.; Ostash et al. v. Aeillo (1968), 63 W.W.R.(N.S.) 257, consd. [para. 88].

Brown v. Hamilton (1902), 4 O.L.R. 249, consd. [para. 94].

Bertrand v. Neilson and The City of Vancouver, [1934] 3 W.W.R. 433, consd. [para. 95].

Sheppard v. Glossop Corporation, [1921] 3 K.B. 132, refd. to. [para. 95].

Sanitary Commissioners of Gibraltar v. Orpla (1890), 15 A.C. 400, refd to. [para. 95].

City of Toronto v. Polai (1969), 8 D.L.R.(3d) 689 (Ont. C.A.), affd. [1973] S.C.R. 38, consd. [para. 96].

Wellbridge Holdings Ltd. v. Metropolitan Corporation of Greater Winnipeg, [1971] S.C.R. 957, consd. [para. 100].

Roncarelli v. Duplessis, [1959] S.C.R. 121, consd. [para. 102].

Statutes Noticed:

Limitations Act, S.B.C. 1975, c. 37, sect. 3, sect. 6 [para. 79]; sect. 8(1) [para. 80].

Municipal Act, R.S.B.C. 1979, c. 290, sect. 165 [para. 92]; sect. 714 [paras. 16, 93]; sect. 715 [para. 94]; sect. 734, sect. 735 [para. 92]; sect. 738, sect. 739 [para. 64].

Authors and Works Noticed:

Craig, Negligence Misstatements, Negligence Acts and Economic Loss (1976), 92 L.Q. Rev. 213 [para. 48].

Linden, Tort Law's Role in the Regulation and Control of the Abuse of Power, [1979] Special Lectures of Law Society of Upper Canada, p. 67 [para. 41].

Counsel:

H.J. Grey, Q.C., for the appellant;

R.J. Gibbs, Q.C., and J.A. Horne, for the respondent.

This case was heard on November 22 and 23, 1982, at Ottawa, Ontario, before Ritchie, Dickson, Estey, McIntyre and Wilson, JJ., of the Supreme Court of Canada.

On July 26, 1984, the judgment of the Supreme Court of Canada was delivered and the following opinions were filed:

Wilson, J. - see paragraphs 1 to 82;

McIntyre, J., dissenting - see paragraphs 83 to 105.

Ritchie and Dickson, JJ., concurred with Wilson, J.

Estey, J., concurred with McIntyre, J.