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Legal Notes: Who’s left holding the bag for latent building defects?

John Bleasby
Legal Notes: Who’s left holding the bag for latent building defects?

A condominium tower collapses and it’s discovered certain structural reinforcing elements called for in the original design are missing.

A high wind event destroys several subdivision houses.

Later, inspectors find roof trusses were not mechanically attached to the wall structure as per the building code.

Can contractors or builders be found at least partially responsible even years after any original warranties have expired?

Rules vary across the country, but let’s take a look at Ontario for some guidance.

There are two key dates to remember when it comes to liability claims, recently clarified in a Supreme Court of Canada decision, Sahil Shoor, partner with Gowling WLG, told the Daily Commercial News. The first date to remember is the basic two-year limitation period within which a claim action must commence.

“The clock starts to run when the plaintiff has actual or constructive knowledge of material facts upon which it may make a plausible inference of the defendant’s liability.”

Shoor explained there’s a good reason behind this two-year limitation.

“It avoids unfairly depriving a plaintiff from bringing a claim before it can be reasonably expected to know the claim exists, while allowing for reasonable certainty and finality for defendants.”

However, the claim must be discoverable. In some cases, a structural problem may only become apparent after some intervening event reveals it two or more years after completion.

A new limitation period then kicks in, one that caps liability at 15 years.

To quote the act, “No proceeding shall be commenced in respect of any claim after the 15th anniversary of the day on which the act or omission on which the claim is based took place.”

“This ultimate limitation period has the effect of extinguishing claims 15 years after the act or omission that gave rise to the claim, regardless of whether the claim has been discovered or was discoverable,” said Shoor.

In the example of a building collapse or a roof failure, there would undoubtedly be forensic inspections conducted by insurance companies. It’s possible that such inspections could reveal what are termed “latent defects” that may have caused or contributed to any resultant damage.

The definition of a “latent defect” is important to understand.

Construction lawyer Jill Snelgrove of Goodmans LLP and law student Samara Friszman shared recent case law which defines the term.

“A latent defect is a defect that cannot be discovered by inspection and ordinary vigilance” and, “which an ordinary purchaser would not be expected to unearth in a routine inspection.”

Discussing the relationship between limitations and latent defects, Snelgrove and Friszman quote from a note in the 2016 edition of Archibald, Ontario Superior Court Practice.

“The purpose of the ultimate limitation period is to balance the concern for plaintiffs with undiscovered causes of action with the need to prevent the indefinite postponement of a limitation period and the associated costs relating to record-keeping and insurance resulting from continuous exposure to liability.”

At the same time, the 15-year ultimate liability limitation period does allows for the fact that some undiscoverable latent defects only make their impact felt after a considerable period of time.

As described in the Ontario Court of Appeal case, Grey Condominium Corp. No. 27 v. Blue Mountain Resorts Ltd., the existence of the deficiency, its approximate cause and the resultant damage are of paramount importance, not any responsibility for diligence in discovery.

“Evidence relating to these (cases) tended to develop, rather than disappear, over time …Diligence obligations cannot be reasonably imposed on a plaintiff who is blamelessly ignorant due to the inherently undiscoverable nature of the injury.”

Contractors, designers and builders also need to be aware that the two and 15-year liability limitation periods continue from owner-to-owner.

For project partners seeking some form of limitation period protection, there are pathways provided under Section 22 of the act that allow certain exemptions. Investigating these should be a focus of negotiation at the time of contract signing.

John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com

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