Winnipeg Condominium Corp. No. 36 v. Bird Construction Co. et al., (1995) 176 N.R. 321 (SCC)

• Judge: Cory, McLachlin, Iacobucci and Major, JJ.
• Court: Supreme Court (Canada)
• Case Date: January 26, 1995
• Jurisdiction: Canada (Federal)
• Citations: (1995), 176 N.R. 321 (SCC);[1995] SCJ No 2 (QL);[1995] CarswellMan 249;121 DLR (4th) 193;91 WAC 241;[1995] 1 SCR 85;52 ACWS (3d) 1398;18 CLR (2d) 1;100 Man R (2d) 241;[1995] 3 WWR 85;JE 95-274;[1995] ACS no 2;74 BLR 1;43 RPR (2d) 1;1995 CanLII 146 (SCC);23 CCLT (2d) 1;176 NR 321

Winn. Condo. Corp. v. Bird Constr. (1995), 176 N.R. 321 (SCC)

MLB headnote and full text

[French language version follows English language version]

[La version française vient à la suite de la version anglaise]

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Winnipeg Condominium Corporation No. 36 (appellant) v. Bird Construction Co. Ltd. (respondent) and Smith Carter Partners (intervenor)

(23624)

Indexed As: Winnipeg Condominium Corp. No. 36 v. Bird Construction Co. et al.

Supreme Court of Canada

La Forest, L'Heureux-Dubé, Sopinka,

Cory, McLachlin, Iacobucci and Major, JJ.

January 26, 1995.

Summary:

In 1972, Bird (general contractor) con­structed a 15 storey apartment building for Tuxedo Properties. In 1978, Winnipeg Con­dominium Corp. No. 36 purchased the building. In 1989, a section of brick cladding fell from the ninth floor. No one was injured. The Corp. was required to replace the entire cladding at a cost of over $1.5 million. The Corp. sued Bird et al. in negli­gence to recover the replacement costs. Bird applied for summary judgment or, alterna­tively, to dismiss the action for failing to disclose a reasonable cause of action.

The Manitoba Court of Queen's Bench, in a judgment reported 84 Man.R.(2d) 23, dismissed the application. Bird appealed.

The Manitoba Court of Appeal, in a judg­ment reported 85 Man.R.(2d) 81; 41 W.A.C. 81, allowed the appeal and struck the claim as against Bird. The repair costs were unre­coverable pure economic losses. The court followed a House of Lords decision that "the cost of repairing a defective structure, where the defect is discovered before it causes personal injury or physical damage to other property is not recoverable in negligence by a remote buyer of real property against the original contractor or builder". The Corp. appealed.

The Supreme Court of Canada allowed the appeal and remitted the matter for trial. The court stated that "where a contractor (or any other person) is negligent in planning or constructing a building, and where that building is found to contain defects resulting from that negligence which pose a real and substantial danger to the occupants of the building, the reasonable cost of repairing the defects and putting the building back into a non-dangerous state are recoverable in tort by the occupants".

Building Contracts - Topic 3603

Liability of builder - Defences - Caveat emptor - The Supreme Court of Canada stated that "caveat emptor cannot ... serve as a complete shield to tort liability for the contractors of a building. ... the doctrine of caveat emptor stems from the laissez-faire attitudes of the eighteenth and nineteenth centuries and the notion that purchasers must fend for themselves in seeking pro­tection by express warranty or by indepen­dent examination of the premises. The assumption underlying the doctrine is that the purchaser of a building is better placed than the seller or builder to inspect the building and to bear the risk that latent defects will emerge necessitating repair costs. However, in my view, this is an assumption which (if ever valid) is simply not responsive to the realities of the mod­ern housing market." - See paragraphs 51 to 52.

Building Contracts - Topic 3724

Liability of builder - Duty to purchaser or subsequent purchasers - For negligence - [See Damages - Topic 531 ].

Building Contracts - Topic 3724

Liability of builder - Duty to purchaser or subsequent purchasers - For negligence - The Supreme Court of Canada stated that "contractors (as well as subcontractors, architects and engineers) who take part in the design and construction of a building will owe a duty in tort to subsequent pur­chasers of the building if it can be shown that it was foreseeable that a failure to take reasonable care in constructing the build­ing would create defects that pose a sub­stantial danger to the health and safety of the occupants. Where negligence is estab­lished and such defects manifest them­selves before any damage to persons or property occurs, they should, in my view, be liable for the reasonable cost of repair­ing the defects and putting the building back into a non-dangerous state." - See paragraph 43.

Building Contracts - Topic 3724

Liability of builder - Duty to purchaser or subsequent purchasers - For negligence - The Supreme Court of Canada stated that "the reasonable likelihood that a defect in a building will cause injury to its inhabit­ants is also sufficient to ground a con­tractor's duty in tort to subsequent pur­chasers of the building for the cost of repairing the defect if that defect is dis­covered prior to any injury and if it poses a real and substantial danger to the inhab­itants of the building. ... If a contractor can be held liable in tort where he or she constructs a building negligently and, as a result of that negligence, the building causes damage to persons or property, it follows that the contractor should also be held liable in cases where the dangerous defect is discovered and the owner of the building wishes to mitigate the danger by fixing the defect and putting the building back into a non-dangerous state. In both cases, the duty in tort serves to protect the bodily integrity and property interests of the inhabitants of the building. ... Apart from the logical force of holding contrac­tors liable for the cost of repair of danger­ous defects, there is also a strong underly­ing policy justification for imposing liabil­ity in these cases." - See paragraphs 36 to 37.

Building Contracts - Topic 5465

Architects and engineers - Liability to subsequent purchasers - Negligence - [See second Building Contracts - Topic 3724 ].

Damages - Topic 531

Limits of compensatory damages - Re­moteness - Torts - Recoverable damages - Purely economic loss - The Supreme Court of Canada stated that "where a contractor (or any other person) is negli­gent in planning or constructing a building, and where that building is found to contain defects resulting from that negligence which pose a real and substantial danger to the occupants of the building, the reason­able cost of repairing the defects and putting the building back into a non-dan­gerous state are recoverable in tort by the occupants. The underlying rationale for this conclusion is that a person who par­ticipates in the construction of a large and permanent structure which, if negligently constructed, has the capacity to cause serious damage to other persons and prop­erty in the community, should be held to a reasonable standard of care." - The court added that "I do not find it necessary to consider whether contractors should also in principle be held to owe a duty to subse­quent purchasers for the cost of repairing non-dangerous defects in buildings" - See paragraphs 21, 41.

Cases Noticed:

D. & F. Estates Ltd. et al. v. Church Commissioners for England et al., [1988] 2 All E.R. 992; 94 N.R. 286 (H.L.), not folld. [para. 9].

Anns v. Merton London Borough Council, [1977] 2 All E.R. 492 (H.L.), consd. [para. 10].

Murphy v. Brentwood District Council, [1990] 2 All E.R. 908; 113 N.R. 81 (H.L.), not folld. [para. 10].

Canadian National Railway Co. v. Norsk Pacific Steamship Co. and Tug Jervis Crown et al., [1992] 1 S.C.R. 1021; 137 N.R. 241, consd. [para. 10].

Rivtow Marine Ltd. v. Washington Iron Works, [1974] S.C.R. 1189, consd. [para. 13].

Dutton v. Bognor Regis Urban District Council, [1972] 1 Q.B. 373 (C.A.), refd to. [para. 13].

Donoghue v. Stevenson, [1932] A.C. 562 (H.L.), refd to. [para. 14].

Hedley Byrne & Co. v. Heller & Partners Ltd., [1964] A.C. 465 (H.L.), refd to. [para. 19].

Central Trust Co. v. Rafuse and Cordon, [1986] 2 S.C.R. 147; 69 N.R. 321; 75 N.S.R.(2d) 109; 186 A.P.R. 109; 37 C.C.L.T. 117; 42 R.P.R. 161; 31 D.L.R.(4th) 481; 34 B.L.R. 187, refd to. [para. 23].

Houle v. Banque Nationale du Canada, [1990] 3 S.C.R. 122; 114 N.R. 161; 35 Q.A.C. 161, refd to. [para. 23].

Edgeworth Construction Ltd. v. Lea (N.D.) & Associates Ltd. et al., [1993] 3 S.C.R. 206; 157 N.R. 241; 32 B.C.A.C. 221; 53 W.A.C. 221, refd to. [para. 26].

Nielsen v. Kamloops (City) and Hughes, [1984] 2 S.C.R. 2; 54 N.R. 1; [1984] 5 W.W.R. 1; 10 D.L.R.(4th) 641; 29 C.C.L.T. 97; 8 C.L.R. 1, refd to. [para. 32].

Manolakos v. Vernon (City) et al., [1989] 2 S.C.R. 1259; 102 N.R. 249, refd to. [para. 32].

Ontario v. Fatehi, [1984] 2 S.C.R. 536; 56 N.R. 62; 6 O.A.C. 270, refd to. [para. 33].

Terlinde v. Neely (1980), 271 S.E.2d 768 (S.C. Sup. Ct.), refd to. [para. 35].

Drexel Properties Inc. v. Bay Colony Club Condominium Inc. (1981), 406 So.2d 515 (4th Dist. Ct. App. Fla.), refd to. [para. 37].

Bowen v. Paramount Builders Ltd., [1977] 1 N.Z.L.R. 394, refd to. [para. 37].

Lempke v. Dagenais (1988), 547 A.2d 290 (N.H. Sup. Ct.), refd to. [para. 41].

Richards v. Powercraft Homes Inc. (1984), 678 P.2d 427 (Ariz. Sup. Ct.), refd to. [para. 41].

Fraser-Reid and Fraser-Reid v. Droumt­sekas et al., [1980] 1 S.C.R. 720; 29 N.R. 424, refd to. [para. 41].

Ultramares Corp. v. Touche (1931), 174 N.E. 441 (N.Y.C.A.), refd to. [para. 46].

Aronsohn v. Mandara (1984), 484 A.2d 675, refd to. [para. 48].

Podkriznik v. Schwede, [1990] 4 W.W.R. 220; 64 Man.R.(2d) 199 (C.A.), refd to. [para. 55].

Vaughan v. Warner Communications Inc. (1986), 56 O.R.(2d) 242 (H.C.), refd to. [para. 55].

Statutes Noticed:

Civil Code of Quebec, S.Q. 1991, c. 64, art. 1442, art. 2118, art. 2119, art. 2120 [para. 41].

Rules of Court (Man.), Queen's Bench Rules, rule 20.01, rule 25.11 [para. 1].

Authors and Works Noticed:

Barrett, Sidney R., Recovery of Economic Loss in Tort for Construction Defects: A Critical Analysis (1989), 40 S.C. Law Rev. 891, p. 941 [para. 44].

Cooke, Sir Robin, An Impossible Distinc­tion (1991), 107 L.Q. Rev. 46, p. 70 [para. 21].

Feldthusen, Bruce, Economic Loss in the Supreme Court of Canada: Yesterday and Tomorrow (1990-91), 17 Can. Bus. L.J. 356, pp. 357, 358 [para. 12].

Jobin, Pierre-Gabriel, La vente dans le Code civil du Québec (1993), pp. 79, 142 [para. 41].

Osborne, Philip H., A Review of Tort Decisions in Manitoba 1990-1993, [1993] Man. L.J. 191, p. 196 [para. 52].

Counsel:

Kevin T. Williams and Paul Forsyth, for the appellant;

Sidney Green, Q.C., and Murdoch Mac­Kay, Q.C., for the respondent;

David I. Marr and Roger B. King, Q.C., for the intervenor, Smith Carter Partners.

Solicitors of Record:

Taylor, McCaffrey, Winnipeg, Manitoba, for the appellant;

Inkster, Christie, Hughes, MacKay, Winni­peg, Manitoba, for the respondent;

Campbell, Marr, Winnipeg, Manitoba, for the intervenor.

This appeal was heard on October 12, 1994, before La Forest, L'Heureux-Dubé, Sopinka, Cory, McLachlin, Iacobucci and Major, JJ., of the Supreme Court of Canada.

On January 26, 1995, La Forest, J., delivered the following judgment of the Supreme Court of Canada in both official languages.