IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20111107

Docket: S126420

Registry:
New Westminster

Between:

Beata Ewa Rychter
and

Piotr Rychter

Plaintiffs

And

Isle of Mann
Construction Ltd. and

Whispering Ridge
Development Corp.

Defendants

And

Skyline Plumbing,
Heating & Gas Fitting Ltd.

Third
Party

Before:
The Honourable Mr. Justice Truscott

Reasons for Judgment

[1]            
The defendant Isle of Mann Construction Ltd. (“Isle of Mann”) applies
for summary dismissal of this action against it on the basis that by
established law it owed no duty of care to the plaintiffs.

[2]            
The plaintiffs oppose the application and seek its dismissal on the
basis that on a proper interpretation of established law the defendant Isle of
Mann did in fact owe them a duty of care.

[3]            
The plaintiffs have taken default judgment against the co-defendant
Whispering Ridge Development Corp. (“Whispering Ridge”) on June 16, 2011, with
damages to be assessed. I understand those damages remain to be assessed.

[4]            
The third party Skyline Plumbing, Heating & Gas Fitting Ltd.
(“Skyline”) supports the defendant Isle of Mann’s application for dismissal of
the claim against it as that will also dispose of Isle of Mann’s claim over
against it in the third party proceedings.

Background

[5]            
The plaintiffs were purchasers of a single-family residence in the City
of Surrey, from the defendant Whispering Ridge, following completion of its
construction in 2008.

[6]            
The defendant Isle of Mann was the general contractor retained by
Whispering Ridge to construct the residence and it retained the third party
Skyline as a subcontractor.

[7]            
The third party Skyline supplied and installed the plumbing works in the
residence.

[8]            
It is alleged by the plaintiffs in the Statement of Claim filed under
the former Rules that on or about February 10, 2009 a pipe in the
residence came apart causing water damage to other parts of the residence.

[9]            
It is alleged that the water damage was caused by the negligence and
breach of duty of Isle of Mann and/or its employees, servants, agents or subtrades,
the particulars of which are stated to include the failure to properly install
the pipe so it would not come apart under normal usage, failure to install it
in a proper and workmanlike manner and failure to use proper materials in the
installation.

[10]        
The plaintiffs claim they suffered loss, damage and expense in the
amount of $43,327.58 with particulars to be provided upon request.

[11]        
The particulars provided by the plaintiffs in an affidavit deposed to by
a legal assistant employed in the plaintiffs’ solicitor’s offices consist of
copies of numerous invoices for the restoration work done.

[12]        
On the hearing plaintiffs’ counsel states that the claim is not for
repair to any defect in the plumbing works itself, but for the resultant damage
to the interior of the residence caused by water escaping from a separation in
the pipe.

[13]        
In the Isle of Mann’s response to the civil claim it is alleged that it
had no contractual relationship with the plaintiffs with respect to the
residence, and owed the plaintiffs no duty of care and it denies any liability
in respect of the alleged water damage.

[14]        
It is also alleged by Isle of Mann that it contracted with Whispering
Ridge to construct the dwelling without any contemplation of the plaintiffs as
owners.

[15]        
In its Third Party Notice to Skyline, Isle of Mann alleges it retained
Skyline to supply and install the plumbing to the residence and if the pipe
defect that is alleged occurred and caused loss or damage then this was as a
result of Skyline’s breach of contract with Isle of Mann in failing to carry
out the plumbing works in a good and workmanlike manner free of defects.

Submissions

[16]        
Counsel for Isle of Mann submits that the decision of the Supreme Court
of Canada in Winnipeg Condominium Corporation No. 36 v. Bird
Construction Co., [1995] 1 S.C.R. 85 [Winnipeg Condominium] confirms
that builders owe duties of care to ultimate and subsequent purchasers only
with respect to dangerous defects in buildings and for the purpose of this
application counsel for the plaintiffs has conceded that the separation of the
pipe did not constitute a dangerous defect.

[17]        
It is submitted that the Court of Appeal in M. Hasegawa & Co.
Ltd. v. Pepsi Bottling Group (Canada), Co., 2002 BCCA 324, [Hasegawa]
provides further confirmation that a contractor does not owe a duty of care in
tort with respect to a non-dangerous defect.

[18]        
It is submitted that this is again confirmed in this Court by the
decision in Clare v. I.J. Manufacturing Ltd., 2003 BCSC 682, that the
defect must be dangerous to be actionable in tort.

[19]        
Counsel for the plaintiffs agrees that if the claim is for repair to or
replacement of the defective item itself then it must be determined to be a
dangerous defect before a claim can be made in tort for the costs of repair or
replacement of the item.

[20]        
However it is submitted that where the claim is not for repair to or
replacement of the defective item itself but to other property in the residence
caused by water from the defective pipe, whether the defective pipe is to be
considered dangerous or not, a claim can legally be made for the damage to the
other property caused by the escaping water from the defective pipe.

[21]        
Plaintiffs’ counsel distinguishes the cases relied upon by Isle of Mann
as all being claims of repair or replacement of the defective item itself and
not claims for other damage caused by the defective item.

Analysis and Decision

[22]        
On my review of the decisions cited by counsel for Isle of Mann, and
consideration of other legal authorities, I conclude that counsel for the
plaintiffs is correct when she distinguishes the case law that considers
whether the defect is dangerous or not for the purpose of tort liability, as
all confined to claims for repairs or replacement to the defective item itself
from claims for damages to other property as a consequence of the defect,
dangerous or not.

[23]        
Winnipeg Condominium was a claim for the cost of repairing
defects in the structure arising out of the negligence in its construction. The
developer of the property had entered into a general contract with the general
contractor Bird Construction to construct the building. Bird entered into a subcontract
with a masonry subcontractor to perform the masonry portion of the work
specified under the general contract.

[24]        
Subsequently Winnipeg Condominium became the registered owner of the
land and building.

[25]        
Eight years following the completion of construction of the building,
Winnipeg Condominium became concerned about the state of the exterior cladding
on the building consisting of four-inch-thick slabs of stone which had been
installed by the masonry subcontractor. Consultants were retained to inspect the
cladding but after some minor remedial work they considered that the stonework
was structurally sound.

[26]        
Seven years after that inspection a storey-high section of the cladding,
approximately 20 feet in length, fell from the ninth storey to the ground below.
Following further inspections Winnipeg Condominium had the entire cladding
removed and replaced at a cost in excess of $1.5 million.

[27]        
Action was commenced for recovery of this cost and Bird Construction
filed a motion for dismissal on the basis that the action disclosed no
reasonable cause of action. At trial the motion was dismissed but was granted
in the Court of Appeal.

[28]        
On further appeal to the Supreme Court of Canada La Forest J.,
delivering judgment for the Court, determined that the negligently supplied
building was not merely shoddy; it was dangerous, and upheld the cause of
action.

[29]        
In the course of his judgment he said the following:

12        … The negligently supplied structure in this case
was not merely shoddy; it was dangerous. In my view, this is important because
the degree of danger to persons and other property created by the negligent
construction of a building is a cornerstone of the policy analysis that must
take place in determining whether the cost of repair of the building is
recoverable in tort. As I will attempt to show, a distinction can be drawn on a
policy level between "dangerous" defects in buildings and merely
"shoddy" construction in buildings and that, at least with respect to
dangerous defects, compelling policy reasons exist for the imposition upon
contractors of tortious liability for the cost of repair of these defects.

13        Traditionally, the
courts have characterized the costs incurred by a plaintiff in repairing a
defective chattel or building as "economic loss" on the grounds that
costs of those repairs do not arise from injury to persons or damage to
property apart from the defective chattel or building itself … .The
Condominium Corporation is not claiming that anyone was injured by the
collapsing exterior cladding or that the collapsing cladding damaged any of its
other property. Rather, its claim is simply for the cost of repairing the
allegedly defective masonry and putting the exterior of the building back into
safe working condition.

[30]        
In response to a subsidiary claim of Winnipeg Condominium that the
losses could be characterized as damage to property as opposed to economic
loss, relying upon the complex structure theory presented by Lord Bridge in D
& F Estates Ltd. v. Church Commissioners for England, [1988] 2 All E.R.
992, Mr. Justice La Forest pointed out that Lord Bridge had rejected his
own complex structure theory in Murphy v. Brentwood District Council,
[1990] 2 All E.R. 908, and he expressed full agreement with Lord Bridge’s
criticisms of the complex structure theory in rejecting it himself.

[31]        
In dealing with the complex structure theory Mr. Justice La Forest
referred to what Lord Bridge had said in Murphy v. Brentwood at p. 928
as follows:

The reality is that the structural elements in any building
form a single indivisible unit of which the different parts are essentially
interdependent. To the extent that there is any defect in one part of the
structure it must to a greater or lesser degree necessarily affect all other
parts of the structure. Therefore any defect in the structure is a defect in
the quality of the whole and it is quite artificial, in order to impose a legal
liability which the law would not otherwise impose, to treat a defect in an
integral structure, so far as it weakens the structure, as a dangerous defect
liable to cause damage to ‘other property’.

 A critical
distinction must be drawn here between some part of a complex structure which
is said to be a ‘danger’ only because it does not perform its proper function
in sustaining the other parts and some distinct item incorporated in the
structure which positively malfunctions so as to inflict positive damage on the
structure in which it is incorporated. Thus, if a defective central heating
boiler explodes and damages a house or a defective electrical installation
malfunctions and sets the house on fire, I see no reason to doubt that the
owner of the house, if he can prove that the damage was due to the negligence
of the boiler manufacturer in the one case or the electrical contractor in the
other, can recover damages in tort on Donoghue v. Stevenson [[1932]
A.C. 562 (H.L.)] principles.

[32]        
Later on in the judgment Mr. Justice La Forest said the following:

21        … In my view, where a contractor (or any other
person) is negligent in planning or constructing a building, and where that
building is found to contain defects resulting from that negligence which pose
a real and substantial danger to the occupants of the building, the reasonable
cost of repairing the defects and putting the building back into a
non-dangerous state are recoverable in tort by the occupants. The underlying
rationale for this conclusion is that a person who participates in the
construction of a large and permanent structure which, if negligently
constructed, has the capacity to cause serious damage to other persons and
property in the community, should be held to a reasonable standard of care. …

…

41        Given the clear presence of a real and substantial
danger in this case, I do not find it necessary to consider whether contractors
should also in principle be held to owe a duty to subsequent purchasers for the
cost of repairing non-dangerous defects in buildings. It was not raised by the
parties. …

42        Without entering into
this question, I note that the present case is distinguishable on a policy
level from cases where the workmanship is merely shoddy or substandard but not
dangerously defective. In the latter class of cases, tort law serves to
encourage the repair of dangerous defects and thereby to protect the bodily
integrity of inhabitants of buildings. By contrast, the former class of cases
bring into play the questions of quality of workmanship and fitness for
purpose. These questions do not arise here. Accordingly, it is sufficient for
present purposes to say that, if Bird is found negligent at trial, the
Condominium Corporation would be entitled on this reasoning to recover the
reasonable cost of putting the building into a non-dangerous state, but not the
cost of any repairs that would serve merely to improve the quality, and not the
safety, of the building.

[33]        
Hasegawa was a case where the plaintiff was a Japanese company
that had purchased bottled water from a company in Canada, Aqua 1 Beverage Co.
Inc. The bottled water was found to have contained a small percentage of mould
flocs. The water had been bottled for Aqua by Pepsi and when the bottled water
was pulled from market in Japan the plaintiff suffered losses exceeding $1.5
million.

[34]        
The trial judge had dismissed the claim holding that Pepsi owed no duty
of care to the plaintiff for pure economic loss because the defective product
had caused neither personal injury nor damage to property of others, and
because the plaintiff failed to prove that the product posed a real and
substantial danger to the health of potential consumers.

[35]        
This trial decision was upheld in the Court of Appeal, Chief Justice
Finch writing the reasons concurred in by Esson J.A. and Prowse J.A.

[36]        
Chief Justice Finch concluded that the trial judge had not erred in
rejecting the argument that it was a case of damage to property, and he quoted Mr. Justice
La Forest in Winnipeg Condominium as I have set out at para. 29
of this judgment.

[37]        
He concluded that the trial judge did not err in finding no duty of care
on the basis of no evidence that the contaminated water posed a real and
substantial danger to the health of potential consumers.

[38]        
Further he said at para. 57 of the reasons:

… A legal rule which imposed
liability for the manufacture or supply of defective, but non-dangerous, goods
would create an implied warranty of product quality for the sale of commercial
products, in the absence of contract. Such a rule would be an enormous change
in the law, and would indeed create "liability in an indeterminate amount
for an indeterminate time to an indeterminate class": per Cardozo C.J. in
Ultramares Corp. v. Touche, 174 N.E. 441 (N.Y.C.A. 1931) at p. 444.

[39]        
Clare was a case of a claim for defective windows installed in
homes in Kamloops and the necessity to remove and replace them. Winnipeg
Condominium was cited as well as Hasegawa and the conclusion reached
was that as the law stands in British Columbia in order to recover in tort the
plaintiff must show the windows were not only defective but dangerous.

[40]        
The three cases cited by defence counsel were all claims for repair or
replacement of the defective item itself, similar to a claim for breach of
implied warranty of fitness.

[41]        
In Winnipeg Condominium the cladding was part of the structure
itself. Once the compact structure theory was rejected where a defect in one
part of the structure is considered to have damaged another part of the
structure, and the structure was to be considered to be one indivisible entity,
a duty of care for the cost of replacement of the cladding could only be found
to exist if the defect was considered to be a danger to people or other
property.

[42]        
While Mr. Justice La Forest left open the question of whether
contractors could also be held to a duty of care to subsequent purchasers for
the cost of repairing non-dangerous defects in buildings, Chief Justice Finch
in Hasegawa says that this would amount to an enormous change in the
law, at least for defective non-dangerous goods, if there is to be a
distinction between goods and structures.

[43]        
As to other damage caused by the defect Mr. Justice La Forest gave
examples of defective central heating boiler exploding and damaging a house or
a defective electrical installation malfunctioning and setting fire to the
house, and he confirmed that the owner can recover damages in tort on Donoghue
v. Stevenson principles in those circumstances.

[44]        
In Hasegawa the defective product was the bottled water itself
and when the plaintiff failed to prove that the product posed a real and
substantial danger to the health of potential consumers, and the product had
not caused actual personal injury nor property damage to others, there could be
no duty of care under the Winnipeg Condominium requirements.

[45]        
In Clare the claim was allowed to proceed at trial only because
the court considered that based on the evidence led to that point in time the
defective windows might be considered to have posed a real and substantial
danger to the occupants. Defence counsel’s motion for dismissal at the end of
the plaintiff’s case was denied.

[46]        
In the case of repair or replacement of parts of the structure or
product itself, and no other personal injury or property damage caused, a cause
of action in tort for damage to the structure or product itself will arise only
where the defect is determined to present a danger to persons or other property,
but not otherwise.

[47]        
As I understand Mr. Justice La Forest’s judgment in Winnipeg
Condominium, if the defective item is not part of the structure itself
and it causes damage to the structure, there is a duty of care owed for this
damage to other property. Similarly, this principle must also apply to
defective items such as the plumbing that are not part of the structure itself
that cause damage to improvements in the structure.

[48]        
As confirmed here by plaintiffs’ counsel the only claim for damage in
this case is to other property in the house and not to the pipe itself and
therefore a duty of care can be owed to the plaintiffs for the cost of repair
or replacement of that other property.

[49]        
In saying this I am not deciding that Isle of Mann owed a duty of care
to the plaintiffs for the plumbing. That is a conclusion that can only be
reached after considering all the evidence and considering the nature of any
duty of care that Isle of Mann owed to the plaintiffs and the standard of
care it owed with respect to that duty.

[50]        
The application of Isle of Mann for dismissal of the claim against it on
the basis that it cannot owe a duty of care to the plaintiffs is dismissed.

[51]        
The plaintiffs will have their costs of this application in any event of
the cause.

[52]        
The third party did not take part in the application other than to
appear on the hearing and make no submissions. It will bear its own costs.

“The
Honourable Mr. Justice Truscott”