Engineers & the Law: The Sky Might Be Falling

The sky is falling! That’s what Chicken Little thought when an acorn fell on his head. In the summer of 2012, pedestrians in downtown Toronto must have felt like Chicken Little as glass from balconies shattered and rained to the streets below.

What obligation does an engineer or a builder have to a resident of a building where a design or construction defect is discovered? What if the defect is discovered years after the construction is completed? The answer will depend on whether the building is found to contain defects which pose a “real and substantial danger to the occupants of the building.” And, it does not matter whether the person making the claim is the one for whom the building was constructed, or is a subsequent purchaser.

In 1972, a Winnipeg developer hired an architect to prepare plans and specifications for the construction of a 15-storey apartment building. The developer contracted with Bird Construction Co. Ltd. to construct the building, and Bird in turn subcontracted the work to various trades. The building was completed in 1974 and was initially used as an apartment building. In 1978 the building was converted into a condominium when Winnipeg Condominium Corporation No. 36 became the registered owner.

In 1989 a storey-high section of the exterior cladding approximately 20 feet long, fell from the ninth level of the building. Luckily, no one was hurt. The condominium corporation had the entire cladding removed and replaced at a cost of more than $1.5 million. They sued Bird, the architect, and the subcontractor that installed the cladding.

Bird brought a motion to dismiss the condominium corporation’s claim. Bird argued that it should not be held responsible for the cost of replacing the cladding because its contract was with the developer, not the condominium corporation. In any event, Canadian courts had traditionally held that claims by owners for the cost of repairs of defects were claims for “economic loss” (since such claims did not arise from injury to persons or property other than the defect itself) and such costs were traditionally held to be not recoverable.

Eventually the case ended up with the Supreme Court of Canada which issued its decision in Winnipeg Condominium Corporation No. 36 v. Bird Construction Co. in January, 1995. The court held that:

“[W]here 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 court further noted:

“[T]he law in Canada has now progressed to the point where it can be said 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 health and safety of the occupants. Where negligence is established … 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.”

The Supreme Court of Canada held, then, that damages for negligence will be recoverable by a property owner if it can be shown that the defect in question poses “a real and substantial danger” to the occupants of the building. Bird’s motion to dismiss the action failed and the court ruled the case could proceed to trial.

What does this mean for a purchaser or an occupant of a condominium or other building that turns out to contain a defect? It means that the purchaser or occupant could recover the cost of repairing the defect and putting the building “back into a non-dangerous state” if it can be shown that the defect poses “a substantial danger to health and safety of the occupants.” That is a determination of fact which the court would make based on the evidence at trial.

What does this mean for you, the architect or engineer who designed the building? It means that even though you may have signed a contract with the developer or the contractor, and notwithstanding that the design and construction work may have been completed years ago, you may be held responsible to pay the owner of the building for the cost of “repairing the defects and putting the building back into a non-dangerous state” – subject to any absolute limitation period that may exist in provincial legislation.

But wait, you say, my contract with the owner-developer has a limit of liability, so all I have to do is make sure the limit is low or is tied to my insurance limits. That limit may be a shield if the claim is brought by the owner-developer with whom you have a contract. But, there is no shield if the claim is brought by the owner of the property, or by a person who is injured as a result of the defective design — no contract: no shield.

So, make sure you speak to your insurance broker and discuss the appropriate insurance coverage and limits you should maintain to guard against the day when what falls on you is not an acorn.cce

Draen Bulat is a partner in the Toronto office of Miller Thomson LLP and chair of its national construction and infrastructure group. E-mail dbulat@millerthomson.com