Pure Economic Loss Claim Applies To Patent Defects That Are Not Imminently Dangerous

Jeff

By: Jeffrey A. Brown, Partner


The Manitoba Court of Appeal has held that a defendants’ motion for summary judgment should be dismissed, rejecting their argument that claims for pure economic loss for patent defects that are not imminently dangerous should not proceed to trial. This is yet another in a long line of cases interpreting the seminal Supreme Court of Canada decision in Winnipeg Condominium Corp. No. 36 v. Bird Construction Co.,[1] where the Court held a defendant liable for a dangerous defect even though there had been no damage to persons or property (i.e. a pure economic loss claim).

In Winnipeg Condominium Corp. No. 613 v. Raymond S.C. Wan Architect Inc.,[2] the defendant architectural firm and its principal had provided architectural services for the design and construction of a condominium. The condominium suffered from defects including water pooling in the lower levels of the building’s parkade. The plaintiff’s expert opined that the parkade was not in danger of imminent collapse, and that it might take decades before it would be in danger of collapse. Moreover, there would be indications of a pending collapse before it occurred.

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The defendant architects stated that there were two principles arising out of the Bird Construction[3] case referred to above. First, that the reasoning in that case only applies to latent defects. Second, that recovery is limited to situations where the defect causes a real and substantial danger to persons or other property, or the imminent possibility of danger. They argued that the defect in the case at bar is patent, not latent, and that any potential danger arising out of the defect was years away from becoming dangerous, if at all.

The motion was heard by a Master at first instance.[4] The Master determined that although there was a latent defect at issue in Bird Construction, there is no mention of a latency requirement in the rest of the decision. Moreover, the Court referred to another decision of the Manitoba Court of Appeal[5] that permitted a claim for pure economic loss to proceed to trial even though it involved a patent defect (although the issue of a patent vs. latent defect was not argued before that court). With respect to the claim of an imminency requirement, the Court noted that this issue had been mentioned in Bird Construction and litigated in other decisions, and the courts have regularly permitted claims for non-imminent dangerous defects to proceed to trial. The Court noted that it would encourage reckless and hazardous behaviour if a defect was allowed to develop into an imminent defect before it could be the subject of a claim. It was more appropriate to permit the plaintiff to take steps to repair the defect before it cause injury. Thus, the Court denied the defendants’ motion and permitted the claim to proceed to trial.

This case was appealed to a judge in an unreported decision who adopted the Master’s decision and dismissed the appeal in a short endorsement. The defendants appealed to the Manitoba Court of Appeal, which dismissed the appeal. The Court agreed that since the law on liability for pure economic losses was still developing, it would be inappropriate to dismiss the claim before trial.

This case is an accurate statement of the law of pure economic loss, and protects the advances made in the Bird Construction decision. It makes little sense to require that a defect be imminently dangerous and/or a latent defect before a plaintiff could be entitled to claim for pure economic loss. We expect that if and when these issues are ultimately determined at trial, the Court will agree with the reasoning of the Court herein.

Footnotes

[1] [1995] 1 S.C.R. 85

[2] 2015 MBCA 49

[3] [1995] 1 S.C.R. 85

[4] 2014 MBQB 13

[5] Brett-Young Seeds Ltd. v. K.B.A. Consultants Inc., 2008 MBCA 36

Jeffrey A. Brown is a partner at Theall Group LLP. He is engaged in all aspects of the defence and trial of civil matters, including insurance law, commercial litigation, product liability and enforcement of secured transactions. Jeff has appeared as counsel at the Ontario Superior Court of Justice, Divisional Court and Court of Appeal. He was admitted to the Ontario Bar in 1999 after having completed his articles as a law clerk at the Federal Court of Canada for the Honourable Mr. Justice Teitelbaum. Jeff is co-author of the annually updated loose-leaf text, Product Liability: Canadian Law and Practice (Canada Law Book)

For more information, visit http://www.theallgroup.com/

Photo credit: kennymatic via Visual hunt / CC BY

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