A recent decision of the Alberta Court of Appeal raised two questions:1. when is a summary judgment an appropriate, efficient means to resolve a matter and: 2 whether a developer owes a duty of care to subsequent homeowners to repair deficiencies in the original construction. The case is Condominium Corporation No. 0522151 (o/a Somerset Condominium) and JV Somerset Development Inc. https://canlii.ca/t/jpcn0.
JV was the property developer that had overseen the construction of a 215-unit condominium building in Edmonton back in 2004-05. Individual units started to be listed on the market in late 2004 . In accordance with the Condominium Property Act, “common property” is owned by the collective tenants in common shares proportional to the unit factor for each unit. Although each unit owner was assigned the exclusive use of an adjacent balcony, the balconies were deemed to be “’common property” of the condominium building such that they were all under the control of the condominium corporation.
Unfortunately, by 2012 the balconies were starting to show signs of structural failure. According to the statement of claim filed by the condominium corporation, there was extensive rotting because of water infiltration, and this had compromised the structural integrity of the support beams for the balconies. An inspection determined that the balconies had failed to meet the minimum load-bearing capacity under the Alberta Building Code. So, JV decided to replace all the balconies.
In 2014, the condominium corporation sued JV for the cost of repairs, framing their claim in the tort of negligence and breach of a fiduciary duty. The condominium corporation alleged that JV owed a duty of care to the individual unit owners as well as the condominium corporation. The condominium corporation argued this duty of care contained the following elements: 1) the property will be reasonably fit for habitation; 2) construction will be executed in a good and skillful manner; 3) good and proper materials will be supplied throughout construction; and 4) the final product to be delivered to the consumer will be free of defects in material and labour. The statement of claim specifically identified the defective balconies as dangerous, saying they posed a substantial risk to health and safety, including the potential for loss of life.
The developer’s defence essentially came down to denying liability in tort for the deficiencies because it was not involved in the physical construction of the balconies. At the earliest opportunity in the proceedings, JV made an application for a summary judgment in a Chambers court in accordance with the applicable Alberta Rules of Court. However, it did not base the application on Rule 7.3(2), which is called on where a party to a legal action is asserting there is no merit to a claim, and thus should be struck as a result. Rather, the developer cited Rule 5.31(1) which pertained to information gathered from the condominium corporation’s officer during pre-trial questioning. The officer’s answers had indicated that the developer had not been involved in any way with construction of the defective balconies. Consequently, the Chambers judge summarily dismissed the claim on the basis of no evidence the developer had been involved with the actual construction. The condominium corporation filed an appeal.
In its analysis, the Court of Appeal found the relationship between the developer and the original individual condominium owners to be contractual in nature, with the relevant legislation being the Condominium Property Act. Pursuant to an individual contract of sale an owner would have received title to a numbered unit plus that unit’s share in the common property. The common property is owned by the various unit owners as tenants in common in shares proportional to their unit factors. The common property is thus under the control of the condominium corporation, which has a lawful duty to repair and maintain the common property.
At the time the condominium building was built, the Condominium Property Act did not contain any mandatory covenants in the statute. Furthermore, no covenants could be implied or otherwise construed from common law regarding the quality of construction. That said, the action against the developer was pleaded in the tort of negligence. Although the relationship between the developer and the original condominium unit owners was primarily in contract, there can be parallel obligations in tort and contract.
In Winnipeg Condominium Corporation No 36 v Bird Construction Co., the Supreme Court of Canada had noted that a duty in tort might conflict with covenants contained in a contract between a builder and the original owner of a condominium unit.[1] However, the court went on to recognize that a duty in tort to take reasonable care to construct a building that was free of defects that could pose a substantial danger to the health and safety of occupants existed independent of any contractual covenant. The court found no logical reason to permit a contractor to rely upon a contract with an original unit owner to avoid liability to any subsequent purchaser who suffered loss or harm from defects in the construction.
The Court of Appeal acknowledged the prospect of a defective balcony collapsing while a person was standing on it as presenting a real and substantial risk of serious injury, even death. The court alluded to an action hypothetically arising against the contractor, based on a line of negligence cases, including Winnipeg Condominium. The question then became whether the duty in tort that would fall on a contractor should apply to a developer who was not involved in the actual, physical construction.
A key question for resolution is whether there was sufficient proximity between the contractor and unit owners who had purchased the condominiums from the original purchasers. If sufficient proximity could be determined, the Court reasoned, then it certainly was arguable that sufficient proximity could also be established between the developer and subsequent purchasers. The Court of Appeal reiterated the developer’s lack of a hands-on role in the physical construction and suggested this would be relevant in determining the applicable standard of care between it and the subsequent purchasers of the individual condominium units. Given that these matters raise tough questions, the Court decided that a summary judgment was not an appropriate means of disposing with the issues and that a trial was necessary, probably after further discovery of records. Therefore, at the end of the day, the liability in tort of a developer for repairing building deficiencies that carry a real and substantial risk of harm remains unsettled.
[1]
Winnipeg Condominium Corporation No. 36 v. Bird Construction Co., 1995 CanLII 146 (SCC), [1995] 1 SCR 85, <https://canlii.ca/t/1frm5