How far down the project pyramid does duty of care extend? It’s a critical question for designers and engineers, recently brought into focus by a British Columbia Court of Appeal (BCCA) decision.
Sorensen Trilogy Engineering Ltd. (STE) was retained as structural engineers for the construction of an 11-storey residential apartment in Langford, B.C., by DB Services of Victoria Inc. (DB), who were in turn retained by the project owner 113407 BC Ltd. Included in the contract between them was a clause that limited STE’s liability to the amount of fees paid to it by DB.
After completion, a series of ownership transactions resulted in the building’s beneficial interest being transferred to Centurion Apartment Properties Inc. and its parent company.
However, structural deficiencies were discovered that led the City of Langford to revoke the building’s occupancy permit. A question about engineering competency arose.
As Bennett Jones LLP partners Denise Bright, Jason Roth, Brian Reid and Graham Bowden write, “Centurion commenced an action against DB and STE for negligence and breach of contract, seeking to recover the losses they incurred from the necessary repairs to the building.”
The issue set before the British Columbia Supreme Court concerned the duty of care owed by STE to the owners. It ruled there were none owed and granted STE’s application to dismiss Centurion’s claim of negligence. Centurion appealed this decision to the BCCA.
The BCCA turned to the Anns Test from 1977 to determine the nature of the relationship between STE and the beneficial owners of the project.
As described in a 1977 Supreme Court of Canada (SCC) ruling, “Under the Anns test, a prima facie duty of care is recognized where a ‘sufficiently close relationship between the plaintiff and the defendant’ exists such that ‘in the reasonable contemplation of the (defendant), carelessness on its part may cause damage to the (plaintiff).’”
“Centurion and STE were in a relationship of proximity such that, in the reasonable contemplation of STE, carelessness on its part was likely to cause damage to Centurion,” write Bright, Roth, Reid and Bowden.
The BCCA also considered the 1995 decision of the SCC in a case between Winnipeg Condominium Corporation No. 36 and Bird Construction Company. Here, the owner had complained of defects that posed foreseeable dangers to the safety of building occupants.
Rosalie Clark, partner with Clark Wilson LLP, and associate Kim Do, summarize that SCC ruling.
“The ‘proximate relationship’ between the owners of a building, and the impact that a negligent contractor or consultant will have on the construction of the building, gives rise to a duty of care owed by the contractor or consultant to the owner. Any contracts entered into between the parties allocating risk should not negate that duty of care.”
The BCCA determined despite the fact no direct contractual relationship existed between STE and Centurion, a duty of care did exist between them.
Furthermore, STE was not shielded from liability, despite clauses that expressly allocated risk and limited STE’s liability.
“The duty to construct a building according to reasonable standards and without dangerous defects arises independently of any contractual stipulation,” the BCCA said.
As the Bennett Jones legal experts explain, this decision has implications throughout the project ownership and construction pyramid.
“Consultants and contractors owe a duty of care to owners, whether or not they have directly contracted with the owner or have sought to contractually limit their risk,” they write. “This is particularly true where the consultant’s actions create a real and substantial risk of harm.”
Clark and Do offer further suggestions as to how project parties should react to his decision.
“Parties entering into construction contracts should carefully consider the contract language around the allocation of risk and liability for defective work and errors, and, should ensure that they understand how their ‘proximate relationship’ to others in the contractual chain (and specifically the owner of a project), may impact their exposure to clams in negligence.”
STE has appealed the BCCA decision to the SCC.
John Bleasby is a freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.
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