By Jacob Foster and Chance Gordon
When defects arise in a building or residence, an owner’s ability to claim against those responsible for the defective work depends on a variety of factors. Where the owner was not in a contractual relationship with the trade(s) or design professional(s) responsible for a defect, the owner’s ability to claim against those persons will generally be limited to a claim for negligence, and only if the defect is dangerous.
Whether dangerous or merely shoddy, the costs of repairing building defects are considered a “pure economic loss”. The law generally does not allow for claims in negligence for pure economic loss, but there are exceptions. One of those exceptions is where a person negligently supplies dangerous goods or structures. This exception was established in the Supreme Court of Canada’s 1995 decision in Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., 1995 CanLII 146.
In Winnipeg Condominium, a piece of cladding on a building had detached and fallen nine storeys. Inspections of the building revealed defects in the masonry work, following which the entire cladding was replaced by the building owner. Had the building owner not acted to replace the cladding, the defect could have caused serious injury to people. The building owner, who was not the original owner, sought to claim against the original architect, contractor, and a subcontractor for negligence. Although the claim was for pure economic loss, the Supreme Court of Canada held that persons who take part in the design and construction of a building can be found liable in negligence if their work created a defect which posed a “real and substantial danger” to people (or property other than the building itself). Winnipeg Condominium is not limited to buildings, but can also apply to products.
In 1688782 Ontario Inc. v Maple Leaf Foods Inc., 2020 SCC 35, the Supreme Court of Canada revisited Winnipeg Condominium and the majority discussed how subsequent changes in negligence law must now be accounted for in applying Winnipeg Condominium. At the time Winnipeg Condominium was decided, a duty of care (which is required for a claim of negligence to succeed) would be found to exist if it was reasonably foreseeable that negligence by the defendant could injure the plaintiff. Subsequent changes to the law added a requirement that the parties be in “a relationship of proximity”.
The majority in Maple Leaf Foods discussed the application of the proximity analysis in claims for pure economic loss at length, noting that if a plaintiff could have allocated the risk of defects by contract, even with a third party, that weighed against a finding of proximity. Additionally, the majority described a “real and substantial danger” as being an “imminent risk of physical harm” to people (or property other than the building itself), and noted that it was also necessary that the danger “would unquestionably have caused serious injury or damage if realized”. Since the decision in Maple Leaf Foods, courts across Canada have come to different conclusions about the effect of the majority’s discussion on proximity, as well as about what the majority meant by “imminent risk”.
In some cases, including in British Columbia, courts have found that the majority in Maple Leaf Foods was just describing the existing state of the law under Winnipeg Condominium and that a risk will be “imminent” if it could manifest at any time, even if it may never occur or may take years to occur.[1] In others, courts have found that the decision in Maple Leaf Foods requires a sufficient degree of imminence to the manifestation of the risk, and that a danger that may happen in the future was inadequate.[2] The authors of at least one textbook have also commented that it seems Maple Leaf Foods dramatically changed the law, added a requirement of imminence, and held that even in the case of imminent danger a claim will not succeed if the plaintiff could have allocated the risk of dangerous defects by contract, even with a third party.[3] Some of the divergent decisions relate to the same types of alleged defects and danger, such as defective vehicle timing chains that alleged posed a risk of unexpected sudden and catastrophic failure which could lead to a collision.
There is a similar divergence in views about the effect of the majority’s proximity discussion in Maple Leaf Foods. In Maple Leaf Foods, the majority stated that “where parties are linked by way of contracts with a middle party that, taken together, reflect a multipartite allocation of risk, courts must be cautious about allowing parties to circumvent that allocation by way of tort claims” and held that “courts must ask” three questions:
- Is a party using tort law to circumvent the strictures of a contractual arrangement?
- Could the parties have addressed risk through a contractual term?
- Did they address the risk through a contractual term?
Some courts have applied these questions as a test in determining whether a duty of care exists, finding that an allocation of risk by contract, or the ability to have done so, would preclude a finding of proximity.[4] However, the British Columbia Court of Appeal has stated that it is wrong to treat these questions as a proximity template and seems to have held that an argument based on a multi-partite contractual allocation of risk may succeed in claims for negligence where there is no real and substantial danger, but that it will not necessarily succeed in claims involving dangerous defects.[5]
Conclusion
Although Maple Leaf Foods was decided in 2020, there remains a difference in views between courts about its meaning and effect on claims of negligent supply of dangerous goods or structures. Some courts and authors have taken the view that it significantly changed the law, while others have taken a narrower interpretation. Courts in Alberta, Saskatchewan, Ontario, and Nova Scotia seem to have generally taken a broader view of Maple Leaf Foods. In British Columbia, the current law is that an imminent risk is one which could manifest at any time, even if it may take a long time to manifest or may never manifest, and that a multi-partite contractual allocation of risk may not preclude a negligence claim for dangerous building defects. The courts in several provinces and territories are yet to weigh-in on the interpretation of Maple Leaf Foods. As for the future, it remains to be seen if or when the Supreme Court of Canada will revisit this issue and provide further guidance. Until then, courts may continue to interpret Maple Leaf Foods differently, and the asymmetry between provinces may continue.
[1] See for example Nissan Canada Inc. v Mueller, 2022 BCCA 338; Centurion Apartment Properties Limited Partnership v Sorensen Trilogy Engineering Ltd., 2024 BCCA 25; see also Hyundai Auto Canada Corp. v Engen, 2023 ABCA 85, which seems to implicitly apply the same reasoning.
[2] See for example Carter v Ford Motor Company of Canada, 2021 ONSC 4138; Rego v Bayerische Motoren Werke AG, 2023 ONSC 5244; Kane v FCA US LLC, 2022 SKQB 69; Murray v Windsor Brunello Ltd., 2024 ABKB 281.
[3] AM Linden et al, Canadian Tort Law, 12th ed (Toronto, Ontario: LexisNexis Canada, 2022), at pages 472, 473, and 478.
[4] See for example Tri-County Regional School Board v 3021386 Nova Scotia Limited, 2021 NSCA 4; Murray v Windsor Brunello Ltd., 2024 ABKB 281; Centurion Apartment Properties Limited Partnership v Loco Investments Inc., 2022 BCSC 2273, reversed on appeal 2024 BCCA 25; see also mention in 0790482 B.C. Ltd. v KBK No. 11 Ventures Ltd., 2021 BCSC 1761.
[5] Centurion Apartment Properties Limited Partnership v Sorensen Trilogy Engineering Ltd., 2024 BCCA 25.
