IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20120125

Docket: S101377

Registry:
Vancouver

Between:

Danielle Nicole
Benoit,

by her Litigation
Guardian, Theodore Joseph Benoit

Plaintiff

And

Margaret Jean
Banfield, Gregory Alan Banfield,
Gregory Alan Banfield doing business as GT Construction,
Benwall Industries Ltd., Ronald Calvin Bennett, George Goffinet,
Have Hammer Will Travel Ltd., Henry Paterson, Van City Construction Ltd.,
Canada Mortgage and Housing Corporation, John Does #3 and 4
and City of Surrey

Defendants

And

Janine Benoit, Ted
Benoit aka Theodore Joseph Benoit,
City of Surrey and Margaret Jean Banfield

Third
Parties

Before:
The Honourable Madam Justice Wedge

Oral Reasons for Judgment

[1]            
THE COURT: This claim has been brought by the infant plaintiff
as a result of a head injury she suffered when she fell from a staircase while
visiting the home of the defendant, Margaret Banfield.

[2]            
The present application is brought by one of the named defendants,
Canada Mortgage and Housing Corporation (“CMHC”). CMHC applies under Rule
9-5(1) of the Supreme Court Civil Rules to strike the pleadings with respect to
its alleged liability for the injury on the basis that none of the pleadings
disclose a reasonable claim against it. CMHC applies, in the alternative, for
an order dismissing the claim on a summary basis pursuant to Rule 9-7(2) of the
Rules. I will deal with the applications in turn.

[3]            
Briefly by way of background, the staircase on which the plaintiff
suffered her injuries was constructed by Ms. Banfield, the then-owner of
the home. The construction was funded by CMHC under a program known as the
Canadian Home Renovation Plan or CHRP. The CHRP was a one-year, $30 million
program which took the form of forgivable loans of up to $3,000 per loan to
cover home renovation costs.

[4]            
The staircase, which was on the exterior of the building leading to an
exterior deck, was constructed without handrail or guards, contrary, it is
alleged, to residential building code standards in force at the time.

[5]            
It is common ground that the relevant CHRP documents provided to
applicants for the CHRP loans included the following provisions. Two
inspections were to be carried out by CMHC at the applicant’s premises. At the
application stage, the first inspection was to verify that the quoted costs for
the project were reasonable, that the specifications were "adequate",
and that the proposed work was eligible. The second inspection was to take
place after the work was completed to ensure it had been "completed
satisfactorily".

[6]            
It is also common ground that the CHRP agreement between CMHC and the
homeowner required that the construction meet "residential standards".
The agreement also stated that the CHRP loan would be advanced "upon
satisfactory completion" of the work.

[7]            
The loan was advanced and an initial inspection was carried out. The
deck and exterior staircase were completed and a CMHC inspector signed a form
verifying completion of the work. The loan was then forgiven.

[8]            
In 1994, the defendant Banfield invited the family of the infant
plaintiff to her residence. It was during the visit that the plaintiff fell
from the staircase, suffering severe head injuries which resulted in permanent
brain damage. The lawsuit was commenced in early 2011.

[9]            
There has, as yet, been no examination for discovery of a CMHC
representative. While there has been considerable correspondence between the
plaintiff and CMHC’s counsel concerning the appropriate representative from
CMHC to be examined for discovery, agreement has yet to be reached respecting
that representative.

[10]        
CMHC has brought its application to strike the pleadings, or
alternatively summarily dismiss the action as against it, on the basis there is
no common law or statutory duty of care owed by CMHC to the infant plaintiff.

[11]        
I will turn first to CMHC’s application to strike the pleadings. In the
recent decision of R. v. Imperial Tobacco Canada Ltd., 2011 SCC 42, the
Supreme Court of Canada addressed the test for striking pleadings under our
rules. At para. 17 the Court stated, in part, the following:

A claim will only be struck if it
is plain and obvious, assuming the facts pleaded to be true, that the pleading
discloses no reasonable cause of action: Odhavji Estate v. Woodhouse,
2003 SCC 69, [2003] 3 S.C.R. 263, at para. 15; Hunt v. Carey Canada
Inc., [1990] 2 S.C.R. 959, at p. 980. Another way of putting the test
is that the claim has no reasonable prospect of success. Where a
reasonable prospect of success exists, the matter should be allowed to proceed
to trial.

[12]        
The Court went on to observe that the power to strike out claims is a
valuable housekeeping measure which weeds out hopeless claims and allows those
claims having some chance of success to go to trial. The Court went on to say
this at para. 21:

Valuable as it is, the motion to
strike is a tool that must be used with care. The law is not static and
unchanging. Actions that yesterday were deemed hopeless may tomorrow succeed. Before
Donoghue v. Stevenson, [1932] A.C. 562 (H.L.) introduced a general duty of
care to one’s neighbour premised on foreseeability, few would have predicted
that, absent a contractual relationship, a bottling company could be held
liable for physical injury and emotional trauma resulting from a snail in a
bottle of ginger beer. Before Hedley Byrne & Co. v. Heller &
Partners, Ltd., [1963] 2 All E.R. 575 (H.L.), a tort action for negligent
misstatement would have been regarded as incapable of success. The history
of our law reveals that often new developments in the law first surface on
motions to strike or similar preliminary motions, like the one at issue in Donoghue
v. Stevenson. Therefore, on a motion to strike, it is not determinative
that the law has not yet recognized the particular claim. The court must rather
ask whether, assuming the facts pleaded are true, there is a reasonable
prospect that the claim will succeed. The approach must be generous and err on
the side of permitting a novel but arguable claim to proceed to trial.

[13]        
The Court reiterated at para. 22 the fundamental point that a
motion to strike for failure to disclose a reasonable cause of action proceeds
on the basis that the facts as pleaded are true unless manifestly incapable of
being proven. No evidence is admissible on such a motion. The Court went on to
say the following:

It is incumbent on the claimant
to clearly plead the facts upon which it relies in making its claim. A claimant
is not entitled to rely on the possibility that new facts may turn up as the
case progresses. The claimant may not be in a position to prove the facts
pleaded at the time of the motion. It may only hope to be able to prove them. But
plead them it must. The facts pleaded are the firm basis upon which the
possibility of success of the claim must be evaluated. If they are not pleaded,
the exercise cannot be properly conducted.

[14]        
Accordingly, on this motion to strike, I must proceed solely on the
basis that the facts as pleaded on behalf of the infant plaintiff are true. At
paragraph 14, the amended notice of civil claim states as follows:

The Defendant CMHC provided
funding for the construction of the Staircase and did inspect or was required
to inspect the construction and design of the renovations, including the design
and construction of the Staircase, as a condition of funding.

[15]        
Paragraphs 35 to 39 of the amended statement of claim state as follows:

35.       In funding the construction of the Staircase and
inspecting the Staircase, the Defendant CMHC owed a duty of care to later users
of the Staircase to take reasonable steps to ensure that they were not exposed
to dangers caused by patent defects in the Staircase.

36.       In funding the construction of the Staircase and
inspecting of Staircase, the Defendant CMHC was materially implicated in the
creation of the Staircase and the dangers faced by later users of the Staircase
such as the Plaintiff.

37.       In funding the construction of the Staircase and
inspecting of the Staircase, the Defendant CMHC owed a duty of care to later
users of the Staircase to take reasonable steps to ensure that the renovations
reasonably conformed to building codes and construction standards in effect at
the time of the construction and did not expose users to unreasonable dangers.

38.       In its required inspections of the Staircase, the
Defendant CMHC owed a duty of care to later users of the Staircase to exercise
care in the way it carried out its inspections and to take steps to ensure
obviously unsafe conditions were rectified.

39.       The fall and injuries
suffered by the Plaintiff were the foreseeable result of the CMHC’s funding of
the construction of the Staircase and the failure of the Defendant CHMC to
exercise care in its inspection of the Staircase, further particulars of which
are listed in paragraph 40 …

[16]        
Paragraph 40, subparagraphs (a) through (l), set out further
particulars, including failing to have a system or any reasonable system of
inspection to ensure that the construction for which it provided funding was
carried out following generally accepted building standards.

[17]        
CMHC issued a request for further and better particulars of the claim,
which were provided by the plaintiff.

[18]        
CMHC vigorously disputes that it was the obligation of inspectors
inspecting the work to verify its design or safety. According to CMHC, the inspections
were carried out only to ensure that the work qualified for funding. CMHC also
disputed the contention that the final inspection was carried out for the
purpose of determining whether the work was done in accordance with the
building standards of the day. Rather, it argued, the final inspection was
carried out only to determine that the work met the funding criteria.

[19]        
The difficulty with the arguments of CMHC is that they rest on the proof
of facts which can only be established on the basis of evidence. The Court is
not permitted to consider evidence at this stage. It may only consider the
facts as pleaded.

[20]        
The infant plaintiff pleads that the purpose of CMHC’s inspections was
at least in part to ensure the proper design of the staircase. The question is
whether, on the facts as pleaded, there is at least a reasonable prospect of
establishing that CMHC owed a private duty of care to the infant plaintiff.

[21]        
In the Imperial Tobacco case cited earlier, the Court was faced
with the question of whether the facts as pleaded brought the case within a
settled category of negligence giving rise to a duty of care. If so, a prima
facie duty of care would be established. The Court cited in support of that
conclusion its earlier decision in Childs v. Desormeaux, 2006 SCC 18, at
para. 15. If the facts as pleaded do not bring the claim within a settled
category of negligence, then the Court must consider whether the general
requirements for reliability and tort are met on the test set out by the House
of Lords in Anns v. Merton London Borough Council, [1978] A.C. 728, and
somewhat reformulated by the Supreme Court of Canada in Cooper v.
Hobart, 2001 SCC 79.

[22]        
At the first stage of this test, the question is whether the facts
disclose a relationship of proximity in which failure to take reasonable care
might foreseeably cause harm or loss to the plaintiff. If so, the second stage
inquiry is whether there are policy reasons why the prima facie duty of
care should not be recognized.

[23]        
Thus, if the facts as pleaded bring CMHC’s relationship with the infant
plaintiff within a settled category or analogous to a settled category of
negligence which gives rise to a duty of care, a prima facie duty of
care will be established.

[24]        
The plaintiff argues that the facts as pleaded here bring the case
within the settled category of negligent inspections. In Kamloops v. Nielsen,
[1984] 2 S.C.R. 2, the Supreme Court of Canada held that a building inspector
had a duty of care in respect of his inspection of a property eventually owned
by the plaintiff, the subsequent buyer of the property. The relationship was of
sufficient proximity that the City of Kamloops should have contemplated that
carelessness of its inspection would cause harm to the plaintiff or the class
of persons to whom the plaintiff belongs. That class of persons included
subsequent owners of the property.

[25]        
In Kamloops, the Court discussed Anns and the Court’s
ability to impose, alongside the public law powers and duties, the private law
duty to individuals. At p. 9 the Court says:

… in some circumstances the law could impose over and
above, or perhaps alongside, these public law powers and duties a private law
duty towards individuals enabling them to sue the authority for damages in a
civil suit. The difficulty was to determine when such a private law duty could
be imposed. The first step, Lord Wilberforce said, is to analyse the powers and
duties of the authority to determine whether they require the authority to make
"policy" decisions or "operational" decisions. He said at
p. 754:

Most, indeed probably all, statutes relating to public
authorities or public bodies, contain in them a large area of policy. The
courts call this "discretion" meaning that the decision is one for
the authority or body to make, and not for the courts. Many statutes also
prescribe or at least presuppose the practical execution of policy decisions: a
convenient description of this is to say that in addition to the area of policy
or discretion, there is an operational area. Although this distinction between
the policy area and the operational area is convenient, and illuminating, it is
probably a distinction of degree; many "operational" powers or duties
have in them some element of "discretion." It can safely be said that
the more "operational" a power or duty may be, the easier it is to
superimpose upon it a common law duty of care.

[26]        
Applying the principle in Anns, the Court found the City of
Kamloops had the power to regulate construction. It did not have to do so. However,
once the decision to inspect for the purpose of determining the quality of
construction was made, the building inspectors exercising operational duties of
inspection were obliged to take due care during those inspections so as not to
injure persons whose relationship was sufficiently close that the City ought to
have their interest in mind. The Court determined that the later buyer of the
home was of sufficient proximity to have been within the mind of the inspector.

[27]        
The Supreme Court of Canada again considered the issue of negligent
building inspections in the case of Ingles v. Tutkaluk Construction Ltd.,
2000 SCC 12. In that case, the Court considered the Anns analysis
applied in Kamloops to determine whether a public body owes a private
duty of care to individuals. At para. 16 of Ingles the Court said:

These [decisions] provide the
basis for determining whether the law can impose on a public authority a
private law duty towards individuals… and for determining whether a duty of
care is owed by a public authority in [certain] circumstances.

[28]        
The Court reiterated that the two questions must be asked:  first,
whether there is a sufficiently close relationship between the public authority
and the person suffering the damage, so that in the reasonable contemplation of
the authority, carelessness on its part might cause damage to that person; and
if so, the second question is whether there are considerations which ought to
limit the scope of the duty and the class of persons to whom it is owed or the
damages to which the breach of the duty may give rise.

[29]        
The Court in Ingles went on to observe that the first step of the
test presents quite a low threshold. A prima facie duty of care is
established where a relationship of proximity existed between the parties, such
that it was reasonably foreseeable that carelessness on the part of the public
actor would result in injury to the other party. The Court said the following
at para. 17:

… as Lord Wilberforce
recognized in Anns, only in certain circumstances will a public
authority owe a private law duty of care towards individuals. Thus, under the
second step of the test, the court must examine the legislation which governs
the public authority to determine whether a private law duty should be imposed
in the circumstances.

[30]        
The Court in Ingles went on to say the following at para. 18:

Inspection schemes fall within
the second type of legislation identified by Lord Wilberforce. To determine
whether an inspection scheme by a local authority will be subject to a private
law duty of care, the court must determine whether the scheme represents a
policy decision on the part of the authority, or whether it represents the
implementation of a policy decision, at the operational level. True policy
decisions are exempt from civil liability to ensure that governments are not
restricted in making decisions based upon political or economic factors. It is
clear, however, that once a government agency makes a policy decision to
inspect, in certain circumstances, it owes a duty of care to all who may be
injured by the negligent implementation of that policy.

[31]        
Again, at para. 20, the Court in Ingles emphasized that once
an inspection has occurred at the operational level, the public authority owes
a duty of care to all who might be injured by a negligent inspection and a
traditional negligence analysis will be applied. In such a case, in order to
avoid liability, the government agency "must exercise the standard of care
in its inspection that would be expected of an ordinary, reasonable and prudent
person in the same circumstances."

[32]        
I emphasize this aspect of the Ingles case because it is clear
that the duty of care owed in those circumstances is not confined to the person
for whom the inspection was originally or initially completed. Rather, the duty
must extend to all persons who might thereafter be injured. CMHC argued that
should the duty of care be found to exist in the present case, it would be
confined to the owner of the house, the defendant Banfield. That argument
cannot be sustained. The Ingles decision makes clear that the class of persons
to whom the duty is owed consists of those persons who may use the staircase;
that is, the owner of the house and anyone else who attends at the property and
who might use the staircase.

[33]        
The next step in the analysis involves an examination of the legislative
scheme governing the public authority to determine whether there is any policy
reason to limit the prima facie duty of care. Once again, the Court in Ingles
noted at para. 22 that where the purpose of the inspection is to ensure
compliance with safety standards and where the public authority has made a
policy decision to do the inspection, the authority will owe a duty of care
"to all who it is reasonable to conclude might be injured by the negligent
exercise of their inspection powers."  That is at para. 23.

[34]        
The case as pleaded by the infant plaintiff is that CMHC required the
renovations it funded to meet residential construction standards, and that it
made a policy decision to review the plans and inspect the renovations to
determine that they were completed satisfactorily. The facts as pleaded
establish that the inspections were operational in nature, as per the Ingles
analysis.

[35]        
The National Housing Act, R.S.C. 1970, c. N‑10, under
which the CMHC is created, does not exclude the possibility of liability. In
other words, there is no statutory immunity. Further, the statute does not
create an overarching public duty which could conflict with the private duty of
care to a particular class of persons. Thus, the present case does not resemble
the facts of decisions such Cooper v. Hobart or Holtslag v. Alberta,
2006 ABCA 51. Nor, on the facts of the case as pleaded, do they resemble the
facts of cases in which the public authority is strictly the lender of funds. Thus,
cases such as McMillan v. Canada Mortgage and Housing Corporation, 2007
BCSC 1475, and Kimpton v. Canada (Attorney General), 2002 BCSC 1645,
cited by CMHC in its argument, are not on point.

[36]        
In the present case, CMHC was not acting as the insurer of a mortgage or
the researcher of construction methods. Rather, on the facts as pleaded, CMHC
was involved in the inspection of the work funded in its CHRP grants, both
before and after construction.

[37]        
Finally, this is not a case where a finding of a duty of care would
result in indeterminate liability. I do not accept that indeterminate liability
could arise in this case. The Supreme Court of Canada discussed the notion of
indeterminate liability in two recent decisions, Imperial Tobacco, which
I have cited earlier, and Fullowka v. Pinkerton’s of Canada Ltd., 2010
SCC 5. In Fullowka, the Court said at para. 70 that at the root of
the concern is that the duty of care is so broad that its extent cannot be
determined. The policy concern, said the Court:

… is closely related to
proximity; the question is whether there are sufficient special factors arising
out of the relationship between the plaintiff and the defendant so that
indeterminate liability is not the result of  imposing the proposed duty of
care.

[38]        
The Court went on to say that:  “What
is required is a principled basis upon which to draw the line between those to
whom the duty is owed and those to whom it is not.”

[39]        
In the present case, CMHC offered grants of up to $3,000 per applicant
for a one-year period. The pool of funds from which to draw was limited in the
amount of $30 million. Thus, even were one to consider the possibility of a
duty of care to all loan recipients, the number of persons is not indeterminate.
In the context of the present case, liability extends only to the class of
persons who might reasonably be foreseen as users of the defective staircase in
question.

[40]        
Thus, I conclude that on the facts as pleaded by the infant plaintiff,
there is a reasonable prospect of successfully establishing proximity. The
plaintiff’s claim is grounded in allegations of specific conduct by CMHC
concerning the creation of the defective staircase and its negligent
inspections.

[41]        
As noted by the Supreme Court of Canada in Imperial Tobacco at para. 47:

… where the asserted basis for
proximity is grounded in specific conduct and interactions, ruling a claim out
at the proximity stage may be difficult. So long as there is a reasonable
prospect that the asserted interactions could, if true, result in a finding of
sufficient proximity, and the statute does not exclude that possibility, the
matter must be allowed to proceed to trial, subject to any policy
considerations that may negate the prima facie duty of care at the
second stage of the analysis.

[42]        
This case falls squarely within the circumstances described in that
passage, and accordingly the motion to strike is dismissed.

[43]        
I turn then to CMHC’s application for dismissal of the claim pursuant to
the summary trial rule, Rule 9-7(2). The question raised by this application is
whether there is sufficient evidence to decide the issues of fact or law that
would support the application to dismiss the claim on a summary basis.

[44]        
The case concerning CMHC is still in its early stages. Discoveries, as I
have indicated earlier, have not yet been conducted. CMHC has nominated an
individual who has no knowledge of any of the issues arising from the claim. That
individual located the documents relating to the CHRP loans, but she has no
knowledge of the nature of the inspections carried out as part of the loan
program.

[45]        
There has been ongoing correspondence between counsel for the respective
parties. CMHC has advised that it cannot locate any individual who carried out
inspections specifically for the CHRP program. In the most recent
correspondence, counsel for the plaintiff has asked CMHC to nominate any
individual with knowledge or experience concerning inspections, whether or not
that individual was specifically involved in the CHRP inspections, and even if
the experience is relatively recent. No such individual has yet been nominated.

[46]        
The only evidence advanced by CMHC on its application to dismiss the
plaintiff’s claim consists of affidavits on information and belief, appending
the CHRP application forms and information booklets generated at the time of
the program, as well as the contract between the defendant Banfield and CMHC
that was signed off at the time. CMHC’s arguments are based solely on its
interpretation of those documents.

[47]        
The plaintiff’s affidavit material discloses that counsel for the
plaintiff recently located an individual who actually conducted inspections
pursuant to the CHRP loan program in 1983. That individual is retired and now
lives in Powell River. He has provided the plaintiff with a written opinion
concerning the purpose of the CMHC inspections carried out under the CHRP
program and the standards that had to be met before construction would be
approved by the inspectors. On its face, the opinion supports the allegations
of the plaintiff that the purpose of the inspections was, at least in part, to
ensure that construction complied with residential standards in place at the
time.

[48]        
Counsel for CMHC argued that the inspector’s evidence must be rejected
because it is an attempt to opine on the issue of proximity, which is a
question of law and not fact. I cannot agree. The inspector’s evidence
addresses the purpose of the CMHC inspections, which he says was to ensure
compliance with safety standards imposed for residential construction at the
material time. That evidence is advanced because it may assist the plaintiff in
establishing the facts necessary to successfully argue reasonable proximity.

[49]        
Further, the plaintiff brought an application to require CMHC to produce
more documentation. That application was adjourned and has not yet been
completed. It was only last week that the plaintiff obtained additional
relevant documents pertaining to the disputed inspection process.

[50]        
While the issues arising in the claims against CMHC may not involve
findings of credibility, a central disputed fact is the purpose for which the
inspection of the defective staircase was conducted. The plaintiff has mustered
some evidence in that regard, and it is simply too early to consider a summary
dismissal application.

[51]        
As noted by Masuhara J. in RC Hotel Ventures Ltd. v. Meristar Sub 2C,
L.L.C., 2008 BCSC 918, the Court should be reluctant to resolve factual
issues on a summary trial application in the absence of admissible evidence
where such evidence may well be tendered in an admissible form at a subsequent
trial. The evidence of fact and opinion contained in the report of the former
employee of CMHC concerning inspections will likely be advanced in admissible
form at the trial of the claim. It would be patently unfair to the plaintiff to
attempt to resolve those issues at this point in time. The action was only
commenced recently and is not set to proceed for another nine months.

[52]        
Accordingly, CMHC’s application for judgment on a summary basis is also
dismissed.

[53]        
Anything further, counsel?

[54]        
MS. WEBSTER‑EVANS:  My Lady, costs.

[55]        
THE COURT:  Yes.

[56]        
MS. WEBSTER-EVANS:  We are seeking costs of the application in any
event.

[57]        
THE COURT:  As the successful party, the plaintiff is entitled to costs
in any event.

The
Honourable Madam Justice C.A. Wedge