Building Contracts and the Law of Tort - Building Contract - page 454

Held (allowing the appeal):
Contractors who take part in the construction and design of a building owe a duty in
tort to subsequent purchasers of the building if it is foreseeable that failure to take
reasonable care in constructing the building will create defects that pose a substantial
danger to the health and safety of the occupants. D & F Estates Ltd v. Church Comrs for
England (1988) 15 Con LR 35 and Murphy v. Brentwood DC (1990) 21 Con LR 1 not
followed. Anns v. Merton London Borough [1977] 2 All ER 492; City of Kamloops v.
Nielson [1984] 2 SCR 2 followed.
Per curiam:
(1) Allowing recovery against contractors in tort for the cost of repair of dangerous
defects serves an important preventative function by encouraging building owners
to repair.
(2) There is a policy difference between work which is dangerously defective and work
which is merely shoddy and substandard.
LA FOREST J: This case gives this court the opportunity once again to address the question of
recoverability in tort for economic loss. In Canadian National Rly Co v. Norsk Pacific Steamship
Co [1992] 1 SCR 1021 at 1049, 91 DLR (4th) 289 at 299, I made reference to an article by
Professor Feldthusen, 'Economic Loss in the Supreme Court of Canada: Yesterday and
Tomorrow' (1990-91) 17 Can Bus LJ 356 at 357-358, in which he outlined five different catego-
ries of cases where the question of recoverability in tort for economic loss has arisen, namely:
1. The independent liability of statutory public authorities; 2. Negligent misrepresentation; 3.
Negligent performance of a service; 4. Negligent supply of shoddy goods or structures; and 5.
Relational economic loss. I stressed in Canadian National Rly Co v. Norsk Pacific Steamship Co
that the question of recoverability for economic loss must be approached with reference to
the unique and distinct policy issues raised in each of these categories. That is because ulti-
mately the issues concerning recovery for economic loss are concerned with determining the
proper ambit of the law of tort, an exercise that must take account of the various situations
where that question may arise. This case raises issues different from that in Canadian National
Rly Co v. Norsk Pacific Steamship Co , which fell within the fifth category. The present case,
which involves the alleged negligent construction of a building, falls partially within the fourth
category, although subject to an important caveat. 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' construc-
tion 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 . . .
My conclusion that the type of economic loss claimed by the Condominium Corp is recov-
erable in tort is therefore based in large part upon what seem to me to be compelling policy
considerations. I shall elaborate in more detail upon these later in my reasons. However, before
doing so, I think it important to clarify why the D & F Estates Ltd case should not, in my view,
be seen as having strong persuasive authority in Canadian tort law as that law is currently
developing. My reasons for coming to this conclusion are twofold: first, to the extent that the