The Duties of Contractors Involved in Design and Construction

The recent decision of the Ontario Court of Appeal in O’Dowda v. Halpenny et al. is a useful reminder of the duties of contractors, subcontractors, architects and engineers who take part in the design and construction of buildings.

In this case, the plaintiffs purchased a house in 2003 from the defendants. They discovered structural problems soon afterwards. They obtained an expert report in late 2003. One of the problems disclosed by the report had to do with the load bearing ability of the roof.

They sued the vendors and commissioned a further report, which was prepared in early 2005, identifying further problems and raising safety concerns about the roof.

In March 2006, at his examination for discovery, one of the vendors testified that the house had been designed by G.S. Morton & Associates Ltd. The Morton firm also prepared the working drawings. Later that year, the purchasers added the Morton firm as an additional defendant alleging that it had been negligent in designing the house, causing it to be a danger to safety.

The Morton firm moved for summary judgment dismissing the action on the basis that it had been added as a defendant more than two years after the cause of action arose. The judge granted the motion, concluding that the purchasers knew or should have known that the negligent design of the house had created a condition of danger to safety after they reviewed the first report, even though the words “danger” and “safety” were not used in it. The judge also ruled that the purchasers should have known that it was the Morton firm that had designed the home because soon after taking possession, they had received the plans to the home stamped with the Morton firm’s name on it. As a result, the judge ruled that the purchasers knew of the problem, and who had caused it through faulty design work, more than two years earlier.

The purchasers appealed to the Court of Appeal.

The Court of Appeal very usefully reviewed the law in this area. It referred to a 1995 Supreme Court of Canada case making it clear that contractors involved in the design and construction of buildings 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. If the negligence is established and the defects become clear before any damage occurs, such contractors are liable for the reasonable cost of repair.

In this case, there was no question that the Morton firm was potentially liable to the purchasers in tort, even though there was no direct contractual connection between the purchasers and the Morton firm. The question before the court in this case was whether or not the judge had made a mistake determining that the purchasers missed the two-year limitation period in adding the Morton firm as a defendant.

The Court of Appeal determined that the judge had indeed made a mistake. The court pointed to an affidavit that had been sworn on the summary judgment motion, which was never challenged, indicating that the purchasers were not aware that the house might be dangerous by design until they received the second report in 2005. The court found that it had been an error of law for the motion judge to ignore that uncontested sworn evidence without giving any reasons for doing so. The court considered that the motion judge had the discretion to reject that evidence but felt that the judge could only do so if he explained why he was doing so. One could reasonably suggest that the sworn evidence was rejected because the judge interpreted the first report as suggesting that the house had a design defect. However, there was no explicit statement made by the motion judge rejecting the sworn affidavit evidence for that reason. As a result, presumably the Court of Appeal could not be certain that the judge had taken the affidavit into account.

Accordingly, the summary judgment order was set aside and the matter was ordered to proceed to trial to deal with the limitation issue.

This case is a useful reminder to both contractors involved in design and construction, and purchasers of newly constructed properties, of their respective obligations and rights. It is also a useful warning to purchasers becoming aware of potential design problems of the need to obtain expert advice and act on that advice as quickly as possible.

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