By David Miachika
David Miachika is a Partner and Lawyer at the Vancouver office of Borden Ladner Gervais LLP and he is the Regional Leader of the Construction, Engineering, Surety and Fidelity Practice Group in Vancouver. Mr. Miachika would like to recognize Greg Smith, Articled Student at the Vancouver office, who assisted in preparing this paper.
The purpose of a building code is to establish minimum and uniform standards for new construction and renovations. The BC Building Code applies to construction within the entire province and is adopted by municipalities pursuant to the Local Government Act and Municipal Building By-laws that make adjustments suitable to each municipal jurisdiction. The exception is the City of Vancouver, which is governed by the Vancouver Charter and the Vancouver Building By-laws; however, these essentially adopt the BC Building Code.
The new BC Building Code and Fire Code are based on the 2005 National Building and Fire Codes of Canada. As with previous codes adopted in BC, the new BC Building Code establishes a benchmark for expected minimum standards governing such issues as health, safety, accessibility, moisture and thermal concerns, structural and fire protection for buildings constructed in BC. The new Code has undergone changes to its format along with some technical changes and improvements. Of significance, the new Code uses an objective-based format which describes the overall goals and objectives that are intended to be achieved by complying with the specific provisions in the Code. The changes in both technical requirements and the objective based format will no doubt impose professional and legal obligations on the various participants in the construction and design industry. The purpose of this paper is to review some of the fundamental legal issues that arise from Code responsibility for these participants, with the exception of Municipal liability.
Legal Liability and Code Responsibility
Table of Contents
Developers, General Contractors, subcontractors, suppliers, architects, engineers and other design professionals may all be held liable for building deficiencies and failure to meet Building Code requirements in contract and/or tort and in some circumstances, for a breach of fiduciary duty.
Tort liability can occur as follows:
1) Liability for negligent construction.
2) Liability for misrepresentation. This may arise if a member of the construction team (including developers, general contractors, subcontractors, suppliers, design professionals and other consultants) either knowingly or negligently misrepresents the quality of construction to the owner and the owner relies on the misrepresentation.
3) Liability for fraud. Fraud may occur in a number of ways all of which involve dishonesty. Examples of fraud include concealing poor workmanship, or intentionally misleading the buyer.
Liability for negligent construction will be discussed further throughout this paper.
Negligence claims are generally limited to claims for personal injury or property damage. In a pure economic loss situation, the only damages are lost money. Pure economic loss is generally not recoverable in negligence unless there is a substantial danger to the health and safety of the people or property other than the defective property.
Liability for negligent construction includes the duty to warn of known dangers or deficiencies. For example, an engineering firm was held liable for the cost of repairs when they failed to warn the architect that certain soil tests were inadequate.
Similarly, experienced contractors or subtrades may be liable for failure to warn an owner or the design consultants of inadequate detailing or obvious design defects.
Contractual liability stems primarily from two relationships. These contractual relationships exist between the owner and the builder/consultants as well as between the developer and the purchasers. Contractual liability is founded on warranties which are binding promises about the quality of the construction. Warranties can be expressly written into the contract, or implied by law. For example, if a building is incomplete at the time of sale, the law implies a warranty on the developer/vendor that the construction will be performed in a good and workmanlike manner, with appropriate materials so that the building can be used for its intended purpose and be habitable.
Liability for a breach of fiduciary duty can arise where the following conditions are present:
1) The person who is alleged to be a fiduciary has scope for the exercise of some discretion or power;
2) The fiduciary can unilaterally exercise that power or discretion so as to affect the beneficiary's legal or practical interest;
3) The beneficiary is particularly vulnerable to or at the mercy of the fiduciary holding the discretion or power.
Architects and engineers are not often held to owe fiduciary obligations. However, architects and engineers should avoid conflicts of interest and should strictly adhere to the duty of confidentiality in relationships where complete trust or dependency is put onto the architect or engineer by the client.
Letters of assurance ("LOAs") are used to give assurances to the municipal authority having jurisdiction before issuing building and occupancy permits. The signatories to letters of assurance include owners, coordinating registered professionals, and registered professionals, as defined in the British Columbia Building Code ("BCBC"), who are bound by the obligations laid out in the letter of assurance. Their obligations include as follows:
1) Owners – assure that a coordinating registered professional and/or registred professional have been retained to undertake certain responsibilities that are explained fully in the LOA. Owners must notify the authority having jurisdiction, in writing, as soon as possible, of the termination of the coordinating registered professional.
2) Coordinating Registered Professionals – coordinate the design documents and field reviews of all applicable registered professionals for the duration of the project and, in accordance with the Guide to Letters of Assurance
as published in the BCBC, coordinate the submission of the LOAs of the various registered professionals. Coordinating registered professionals must notify the authority having jurisdiction, in writing as soon as possible, if their contract for field reviews is terminated at any time during construction.
3) Registered Professionals – provide design services for their components of the project and the necessary field reviews to assure substantial compliance in all material respects with the design drawings/specifications prepared by that professional. This also requires compliance with the BCBC and/or Vancouver Building Bylaw ("VBB") as they are expressly incorporated into the design documents and are part of the professional assurance confirmed in the LOA by each professional. Registered professionals must notify the authority having jurisdiction, in writing as soon as possible, if their contract for design or field reviews is terminated at any time during construction. The following categories of professionals are typically required to submit LOAs to the governing municipal authority:
b) Building Envelope
f) Fire Suppression
h) Geotechnical (Temporary or Permanent)
Signatories to a LOA are responsible for all requirements therein and so owners and registered professionals should be thoroughly familiar with the contents of the LOA as well as:
1) sections of the BCBC regarding professional design and field reviews including Appendix A;
2) where applicable, the VBB sections regarding professional design and field reviews including Appendix A; and
3) the Guide to the Letters of Assurance.
The duties of an architect or engineer will vary depending on the nature of the project and the extent of the involvement of the design professionals, which may be specified by the contract between these design professional and the owner. In addition to the terms of their consulting agreement, unless expressly stated otherwise, there is an implied term that the architect or engineer will exercise the skill, care and diligence which may reasonably be expected of a person of ordinary competence in the profession, measured by the professional standards at that time.
This standard is judged by the professional standards at the time the work is done and not by standards or practices accepted after the fact.
However, the standards at the time of the work must still be shown to be reasonable.
Also there is a difference between negligent conduct and an error in judgment. An architect or engineer may follow the accepted body of professional opinion despite substantial opinion to the contrary. Architects and engineers that claim to have a specialized skill or area of knowledge can be held to a higher standard of care.
A higher standard of care can also be created if it is expressly provided for in the contract.
A chief area of liability for architects and engineers is the preparation of plans, drawings and specifications. The legal duty is to use reasonable care and skill in the preparation of the design drawings, plans and specifications, as would be expected of a similar professional of ordinary competence measured by the professional standards at the time of the work. Failure to meet this duty will incur liability to pay damages for all losses suffered by the project owner, contractors, subtrades or others injured by the breach of the duty who are within the reasonable contemplation of the professional (eg. subsequent owners). This standard can be raised to a higher level both expressly in the consulting agreement and in certain circumstances, impliedly. As previously noted, the law implies that a new, incomplete building under construction will be reasonably suitable for its intended purpose.
In receiving instructions from the owner for preparation of the design, the consultant has a duty to warn the owner of any difficulties that may arise from new or experimental techniques, or requests from the owner which the consultant knows or ought to know may lead to difficulties. These warnings should be made in writing.
Approval by the Owner of the plans or design may absolve the consultant from liability for things within the expertise of the owner such as aesthetic design; however, it will not remove liability for technical defects of which the owner is ignorant or is outside his expertise.
If, during construction, defects become apparent in the design, there is a duty on the architect or engineer to fix the defect by changing the design or proposing remedial work.
Where possible, the same coordinating registered professionals and registered professionals should be responsible for the design documents as well as the field reviews. If design documents and field reviews are prepared or conducted by different registered professionals, this can lead to potential liability risks. In such cases, the professionals should consult the Guide to Letters of Assurance as published in the BCBC, and Bulletin K December 2005 Letters of Assurance and Due Diligence.
The architect or engineer has a duty to the owner to review the work and attend the project site frequently enough in his/her professional discretion to ensure that construction proceeds in substantial conformity with the design, plans and specifications. As such, given the consulting agreements, letters of assurance, and governing statutory and common law duties, this includes compliance with the Building Codes. If this duty is not met, the architect or engineer is liable to the owner or other injured parties for damages. This duty may be limited or removed in the contract. The duty of the professional to supervise the project or conduct field reviews is a primarily a duty owed to the owner and not the contractor. The contractor is still responsible to ensure that its work (and the work of its subtrades) is carried out in accordance with the plans, specifications (and Building Code). Architects and engineers are not required to note every item that falls below the specification or plan requirements. They are responsible to note defects that reasonable supervision will reveal.
This duty can be more onerous if there is greater risks or consequences involved.
Architects and engineers need not be present on the site constantly; however, they should inspect at critical phases of the work and when important aspects are to be hidden from view. Architects and engineers should require contractors and subtrades to give adequate notice before important areas are hidden from view. If failure to inspect is caused by the contractor not providing adequate notice and the work can not be opened up for subsequent inspection, the architect or engineer should alert the contractor in writing of a potential breach and inform the contractor that they will be liable for damages which could have been prevented by an inspection of the hidden area.
There is an increasing trend for Courts to allow recovery by the owner against the architect or engineer for construction defects on the grounds of negligent supervision and field reviews.
As a result, architects and engineers are increasingly employing contractual clauses exempting or limiting them from such liability.
As discussed previously, approval by the owner of the plans or design may absolve the consultant from liability for things within the expertise of the owner such as aesthetic design. In this case the owner will take on some liability. However, it will not remove liability for technical defects of which the owner is ignorant or fall within the professional responsibility of the design consultants.
If a defect in the design is discovered during construction, an owner should allow the design professional to remedy the error. If the owner hires another professional at a greater cost to correct the defect, the owner may not be able to recover the entire cost for the remedial work.
However, if the defect is so great as to render the design useless or destroy confidence in the design professional, the owner may be permitted to treat the contract as terminated due to a fundamental breach by the professional. The owner would then not be expected to continue to employ the professional.
Some construction contracts permit the owner, through the architect or engineer, to give instructions as to the method of performance. In this case, if the directions are not in accordance with proper engineering and construction practices, the contractor may recover the additional costs required to meet these instructions from the owner. The owner may then be entitled to recover these costs from the architect or engineer who delivered the instructions.
The contractor's duty is to carry out the work according to the plans and specifications in a workmanlike manner. If this duty is met, the contractor is not liable to the owner for defects related to the design, even though the contractor may have known the purpose for which the work was intended.
Express terms in a contract between the owner and contractor can create a responsibility on the part of the contractor to provide a project suitable for a particular purpose. This responsibility can also be implied through the dealings between the contractor and owner. In either case, the contractor may be responsible to the owner for defects leading from the design.
While the architect or engineer has a duty to conduct field reviews to ensure compliance with the plans and specifications, this does not require the design professional to tell the contractor how the work is to be done.
Also, the contractor must see that all stages of the work are completed properly and in accordance with the plans and specifications.
Contractors should alert design consultants when important areas are to be hidden from view in order to allow time for inspection. A contractor has been held contributorily negligent for failing to give adequate notice of installation of reinforcing steel prior to pouring of concrete, for purposes of inspection.
The architect or engineer's duty of inspection is to the owner and not to the contractor. Generally the contractor is not entitled to assistance or extra pay for work done to remedy problems with construction methods. If a contractor is sued for breach of contract, it is not a valid defence to say that the architect or engineer was on site and should have prevented the activity leading to the loss. Nor can the contractor recover from the engineer or architect by claiming that the architect or engineer should have noticed the failure to comply with the specifications and prevented it. There may be exceptions to this principle in Quebec.
The contractor may be able to seek contribution from the Architect or engineer for losses suffered if the design professionals became aware of deficient construction and failed to bring it to the attention of the contractor. However, ultimately, the responsibility lies with the contractor and subtrades to construct the work in accordance with the plans specifications and Code requirements.
A. The New Code
The application of the new BC Code is governed by B.C. Reg. 216/2006, which states that the old code will continue to apply to buildings which meet the following requirements:
1) a building permit described in Part 21 of the Local Government Act or Part 3 of the Community Charter is applied for before the effective date of this order, (the effective date is December 15, 2006)
2) the building permit applied for is issued and work commences and continues to completion without interruption, other than work stoppages considered reasonable in the building industry, and
3) all work is carried out in conformity with B.C. Reg. 295/98. (the previous Building Code regulation)
Architects and engineers must take reasonable care to ensure that all licenses and permits are obtained and are under a duty to use reasonable care to see that the construction project complies with all municipal and other government requirements.
This duty is generally limited to legislation and regulations in effect at the time of contracting, and it is unreasonable for architects and engineers to foresee all possible future legislative or policy changes.
Some contracts will expressly exempt the architect or engineer from liability for costs resulting from a change in the interpretation of by-laws or building codes or from a difference in the interpretation of the architect or engineer and that of the municipal authorities. A sample contractual term of this type is provided in McLachlin, Wallace and Grant:
Building Codes and By-Laws
The Engineer shall, to the best of his ability, interpret building codes and by-laws as they apply to the Project at the time of design, but it is expressly acknowledged and agreed by the Client that as the Project progresses, the building codes and by-laws may change or the interpretation by any public authority may differ from the interpretation of the Engineer, through no fault of the Engineer, and any extra cost necessary to conform to such changes or interpretations during or after execution of the Work will be paid by the Client in the event that the Engineer has received a prior authorization from such authorities in respect of such interpretations.
In the case of Vancouver Community College v. Phillips Barratt
, architects and engineers were not held responsible for the cost of brining the building into conformity with a code requirement created after the project was completed. Also, in Ordog v. Mission (District),
a building complied with the requirements of the building code as it was in 1976 except for a cantilever on the ground floor. The building contractor and building inspector were both liable for the cost to remedy the cantilever defect. They were not responsible for remedying problems in other areas of the house which had been built in accordance with the building code at the time of construction.
Where a building does not meet the code requirements at the time of construction and before the defects are repaired a new code is put in place which increases the cost to bring the defective part of the building into code compliance, an issue arises as to who should bear this additional cost. It is clear that the negligent party or the party in breach of contract will bear the cost to bring the defective area into compliance with the code at the time of construction. The additional cost of bringing the defective area into compliance with the new code will likely be born by this same party
, so long as there is no betterment beyond what it required by the code.
Were it not for the original negligence or breach, the building would not need to be upgraded to the current code. However, the British Columbia Supreme Court in Begin v. Fenwick
awarded only 80% of the costs to bring a building into compliance with the new electrical code despite the vendor breaching the contract and concealing the defective conditions of the electrical system.
British Columbia has been dealing with the effects of leaky condo crisis since at least the late 1980’s. A significant factor contributing to building envelope failures in multi family low and high rise structures as well as in institutional buildings, was the design and construction of face sealed exterior cladding systems. These face sealed systems are contrary to express provisions in Parts 5 and 9 of the BC Building Code and inconsistent with the nature of the wet coastal climate of BC. As such, there have been thousands of homeowners faced with expensive remediations to their buildings which has resulted in substantial litigation in BC. Although only one leaky condo case has to date been to trial and appeal in BC (where the Court found the Developer, Architect, contractor, subtrades and Municipality jointly liable), there are hundreds of lawsuits that have settled out of Court at mediations or by other alternative dispute resolution methods. In addition to claims brought on behalf of owners for specific buildings or Strata Developments, there have been some innovative attempts to seek relief for leaky condo owners by way of class actions.
In early December of 2005, a class action lawsuit for potentially all BC leaky condo owners was initiated, naming the Canada Mortgage and Housing Corp. ("CMHC") as defendants. The representative claimants spent about $65,000 to repair their share of an eight-unit, three-storey wood-frame building in White Rock. The claim alleges that internal CMHC documents show that CMHC knew the design of face sealed stucco buildings, combined with energy-efficient requirements, caused water damage and it therefore had a duty to pass along that knowledge to homeowners. The CMHC has denied all allegations. In order to proceed to trial, a law suit of this kind must be certified as a class action by the British Columbia Supreme Court in accordance with the governing legislation. A hearing to determine certification is expected in early March, 2007. If certification is granted, there will still be significant legal hurdles in establishing that CMHC bears responsibility for allowing BC leaky condos to be constructed, especially given the numerous other parties more directly involved in the design, construction and inspection of building envelopes that contravened the BC Building Code and good construction practice.
case is a previous leaky condo class action that failed to make it past the certification stage. In order to be certified for a class action, the proposed class of claimants must have a claim recognized by law. In Kimpton,
the proposed class could not satisfy the certifying Court that they had a cause of action against the Province of British Columbia or the Federal Government for the creation of building codes, or CMHC for implied misrepresentation. The judgment was based on findings that the two levels of Government did not owe the ultimate property owners a duty of care when creating building codes, and that for policy reasons no duty of care should be imposed. With respect to the claim against CMHC, the claimant failed to plead a particular misrepresentation to her personally or a special relationship of proximity. The court found that CMHC’s issuance of mortgage loan insurance could not be interpreted as a warranty regarding the physical condition of the building.
The Kimpton decision was appealed to the British Columbia Court of Appeal where the appeal was dismissed. This decision was not appealed to the Supreme Court of Canada. As such, we will have to wait and see if the leaky condo owners in the most recent White Rock class action can get past the certification stage and argue the merits on such issues as duty to warn, misrepresentation and negligence for Building Code and other breaches amounting to substandard construction. It is fair to say that in British Columbia, the leaky condo crisis has not yet “dried up”.
 Winnipeg Condominium Corp. No. 36 v. Bird Construction Co.,  1 S.C.R. 85.
 Surrey (Dist.) v. Carroll-Hatch & Associates Ltd. (1979), 14 B.C.L.R. 156, 101 D.L.R. (3d) 218 (C.A.).
 Brunswick Construction Ltee v. Nowlan  2 S.C.R. 523 at pp. 529-530.
 LAC Mineral Ltd. v. Int'l. Corona Resources Ltd.,  2 S.C.R. 574.
 McLachlin, Wallace and Grant, The Canadian Law of Architecture and Engineering, 2nd ed. (Markham: Butterworths, 1994) at p. 101.
 Hodgins v. Hydro-Electric Commn. Of Nepean, , 2 S.C.R. 501, 60 D.L.R. (3d) 1.
 Oxford County Bd of Education v. Green (1986), 23 C.L.R. 238 at 241 (Ont. H.C.J.).
 Bolan v. Friern Hospital Management Committee,  2 All E.R. 118, at p. 121.
 B.C. Rail v. C.P. Consulting Services Ltd., (1988), 29 C.L.R. 30 (B.C.S.C.) at p. 47.
 McLachlin, Wallace and Grant supra note 5 at p. 112
 Medjuck & Budovitch v. Adi Ltd. (1980), 33 N.B.R. (2d) 271
 McLachlin, Wallace and Grant supra note 5 at p. 127.
 Dabous v. Zuliani (1976), 12 O.R. (2d) 230.
 McLachlin, Wallace and Grant supra note 5 at p. 128.
 Dabous v. Zuliani supra note 16; McLachlin, Wallace and Grant supra note 5 at p. 129.
 McLachlin, Wallace and Grant supra note 5 at p. 112.
 Columbus Co. v. Clowes  1 K.B. 244 at p. 247.
 McLachlin, Wallace and Grant supra note 5 at p. 116.
 Ibid at p. 119; Steel Co. of Canada Ltd. V. Willand Management Ltd.,  S.C.R. 746.
 Auto Concrete Curb Ltd. V. South Nation River Conservator Authority,  S.C.R. 201.
 Ibid; McLachlin, Wallace and Grant supra note 5 at p. 127.
 Centre Town Dev Ltd. v. Fred E. Gray & Assoc. Ltd. (1984), 9 C.L.R. 144 (Ont. H.C.J.).
 McLachlin, Wallace and Grant supra note 5 at p. 130.
 Siegel v. Swartz,  O.W.N. 532 (H.C.J.). where an architect responsible for the design of a building was liable for costs related to an encroachment of the street line.
 Robinson v. Suffel (1984), 10 C.L.R. 303 (Ont. H.C.J.) at p. 310.
 McLachlin, Wallace and Grant supra note 5 at p. 327 Part II, Form Contract No. 3, Art. 8.1.
 26 B.C.L.R. (2d) 296, 29 C.L.R. 268.
 (1980), 110 D.L.R. (3d) 718.
 Harbutt's Plasticine Ltd v. Wayne Tank and Pump Co. Ltd.  1 Q.B. 447; Nan v. Black Pine Manufacturing Ltd.  B.C.J. No. 910, 55 B.C.L.R. (2d) 241.
 The Owners, Strata Plan NW 3341 et. Al v. Canlan Ice Sports Corp. et. Al. (2001) B.C.S.C. 1214.
  B.C.J. No. 979.
 Kimpton v. British Columbia (Attorney General),  BCSC 1645.