Vancouver, Governor's Tower: Appeal Court confirms Star Masonry as defendant in leaky condo case

COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Owners, Strata Plan LMS 1725 v. Star Masonry Ltd.,

 

2007 BCCA 611

Date: 20071204

Docket: CA034486

Between:

Owners, Strata Plan LMS 1725

Respondent

(Plaintiff)

And

Star Masonry Ltd.

Appellant

(Defendant)

Before:

The Honourable Madam Justice Rowles

The Honourable Mr. Justice Hall

The Honourable Madam Justice Levine

Oral Reasons for Judgment

S.G. Cordell

Counsel for the Appellant

J.G. Mendes

Counsel for the Respondent

Place and Date of Hearing:

Vancouver, British Columbia

30 November 2007

Place and Date of Judgment:                                                         Vancouver, British Columbia

4 December 2007

[1]                LEVINE, J.A.: This is a “leaky condo” case.  The appellant Star Masonry Ltd., was added as a defendant by the order of a Supreme Court chambers judge made in September 2006, 11 years after completion of the condominiums.  It appeals, claiming the chambers judge erred in finding that the commencement of the limitation period was postponed to May 2005, when the respondent owners received a second report from their engineering consultants (the first report having been received in April 1998), and in exercising his discretion in deciding that it was just and convenient to join the appellant as a defendant on the assumption that the limitation period had expired.  The chambers judge’s reasons for judgment may be found at 2006 BCSC 1358.

[2]                For the reasons that follow, I am of the view that the chambers judge erred in deciding that the commencement of the limitation period was postponed, but that he did not err in exercising his discretion to add the appellant as a defendant on the assumption that the limitation period had expired.  I would therefore dismiss the appeal.

Background Facts

[3]                The condominiums were built between 1993 and 1995.  The appellant entered into an agreement for the installation of brick masonry work on May 12, 1994.  Its work was completed in 1994.

[4]                Water problems were noticed from the time the condominiums were completed in 1995.  In October 1997, Levelton Consultants Ltd. (the “Consultants”) were retained by the respondent to investigate the leakage problems.  In April 1998, the Consultants issued a report (the “1998 Report”) which identified several possible problems with the construction, including several deficiencies in the masonry work.  The focus of the 1998 Report, however, was the “Exterior Insulation Finish System” (“EIFS”).

[5]                The respondent authorized a more detailed investigation into the nature of the leaks.  In a November 1999 report, the Consultants concluded that problems of the EIFS were secondary causes of leakage, and that there was a “more significant problem elsewhere in the assembly” (chambers judge’s reasons for judgment, para. 9).

[6]                The respondent commenced this action by issuing a writ on November 8, 2000.  A statement of claim was filed in November 2002, which included claims relating to masonry deficiencies identified in the 1998 Report.

[7]                From 2001 to 2003, the respondent performed a mixture of maintenance and repair work, but despite this work, leaks continued.  Pierre-Michel Busque, a professional engineer employed by the Consultants, first became involved in the respondent’s problems in 2001.  He deposed that until January 2005, he was “of the opinion that the brick veneer did not require replacement”.  In January 2005, he visited a unit which had a brick veneer exterior, and “concluded that the water ingress observed might be indicative of serious problems with the brick walls and not just a window problem”.  In May 2005, the Consultants performed further tests on the brick walls, and reported their findings to the respondent in June 2005.  In their report issued in August 2005 (the “2005 Report”), the Consultants concluded that the brick walls had to be removed, the deficiencies corrected and brick veneer replaced.

[8]                In September 2005, while reviewing documents, the respondent’s solicitor found the masonry contract between the appellant and the developer of the condominiums.

[9]                The respondent applied to join the appellant as a defendant, under Rule 15(1)(a)(iii) of the Supreme Court Rules, in November 2005.  The application was heard in August 2006.  In the meantime, in April 2006, the respondent started a second action against the appellant.

Applicable Principles

[10]            Section 4(1) of the Limitation Act, R.S.B.C. 1996, c. 266, permits a defendant to be joined to an action under any “applicable law”, despite the expiry of a limitation period:

If an action to which this or any other Act applies has been commenced, the lapse of time for bringing an action is no bar to

(d)        adding or substituting a new party as plaintiff or defendant,

under any applicable law, with respect to any claims relating to or connected with the subject matter of the original action.

[11]            Rule 15(5)(a)(iii) is an “applicable law” under section 4.  It provides:

At any stage of a proceeding, the court on application by any person may

(iii)       order that a person be added as a party where there may exist, between the person and any party to the proceeding, a question or issue relating to or connected

            (A)       with any relief claimed in the proceeding, or

            (B)       with the subject matter of the proceeding,

which in the opinion of the court it would be just and convenient to determine as between the person and that party.

[12]            The summary of the applicable principles set out by Master Joyce (as he then was) in Brito (Guardian ad litem of) v. Wooley (1997), 15 C.P.C. (4th) 255, [1997] B.C.J. No. 2847 at paras. 10 and 11 (S.C.)(Q.L) is helpful:

I will begin my analysis with a summary of the applicable legal principles:

1.         The addition of a party to an action under Rule 15(5) eliminates any limitation defence which might otherwise be available to the defendant if separate proceedings were brought: see Lui v. West Granville Manor Ltd. et al. (1987) 11 B.C.L.R. (2d) 273 (C.A.) ("Lui No. 2") at 295;

2.         The court may add a new party to an action notwithstanding that its effect will be to eliminate a limitation defence if it is just and convenient in all the circumstances to do so.  The existence of a limitation defence is a factor for the court to consider in determining whether it is just to add a party but is not determinative: see Lui No. 2, supra, at 302;

3.         The degree of interrelationship between the claim that is sought to be brought through the addition of the party and the existing claim is a factor to be considered as is the delay in making the application and any reasons which are advanced to explain the delay: see Cementation Co. (Can) Ltd. v. Amer. Home Assur. Co. (1989), 37 B.C.L.R. (2d) 172 (C.A.);

4.         If a limitation period has expired, then it may be that prejudice to the defendant is to be presumed.  However, prejudice to the defendant, whether presumed or demonstrated, is only a factor; it is not necessarily fatal to the application.  In the end, the court has a broad discretion to do what is just: see Teal Cedar Products (1977) Ltd. v. Dale Intermediaries Ltd. (1996), 19 B.C.L.R. (3d) 282 (C.A.) per Finch J.A.  In Tri-Line Expressways v. Ansari (1997), 143 D.L.R. (4th) 100 (B.C.C.A.) Lambert J.A. said that any presumption of prejudice (which was first mentioned in Lui v. West Granville Manor Ltd. (1985), 61 B.C.L.R. 315 (C.A.) ("Lui No. 1")) "should be confined to the sort of context in which it was first mentioned, namely the context of third party proceedings against a new party on an entirely new cause of action”.

In my view, the proper approach to applications such as this is as follows:

1.         If it is conceded that there is no accrued limitation defence or if the court can determine that fact on the interlocutory application, then the question is really limited to one of convenience since the party can always commence a separate action in which there will be no limitation issue.  The question is whether it is more convenient to have one action or two?

2.         If it is conceded that there is an accrued limitation defence or if the court can determine that fact on the interlocutory application, then the question is whether or not it would be just and convenient to add the party notwithstanding that by doing so the defendant will lose the benefit of the limitation defence.  If the answer to that question is yes, then the order should be made.  If the answer is no, then the order should not be made. 

3.         If the defendant alleges that there is an accrued limitation defence and the plaintiff denies that fact and the court cannot determine that issue on the interlocutory application, then the court should proceed by asking this question: assuming that there is a limitation defence, would it nonetheless be just and convenient to add the party even though by doing so the defence is taken away? If the answer to that question is yes then the order should be made.  In that event it does not matter whether or not, in fact, a limitation period has expired because in either case it would be just and convenient to add the party and any limitation defence will be gone. 

Chambers Judge’s Reasons for Judgment

[13]            There was no dispute that in this case, the required connection between the subject matter of the action and the appellant’s work on the condominiums was established. 

[14]            Similarly, there is no dispute with the chambers judge’s finding that the applicable limitation period is six years. 

[15]            The chambers judge first considered whether the limitation period had expired, by addressing whether its commencement was postponed.  He concluded, relying on the decision in Strata Plan No. VR 1720 v. Bart Developments Ltd. (1998), 53 B.C.L.R. (3d) 289 (S.C.) (“first reasons”), additional reasons at (1998), 53 B.C.L.R. (3d) 304; affirmed 1999 BCCA 585, (1999), 49 C.L.R. (2d) 161, that the limitation period had not expired because it did not begin to run until the Consultants reported to the respondent in June 2005 that the brick walls required replacement (at paras. 19-22).

[16]            The chambers judge then considered whether, in the event he was wrong that the limitation period had not expired, he should exercise his discretion to add the appellant as a defendant after the expiry of the limitation period (at para. 23).  He summarized the factors to be considered:

…the extent of the delay, the reasons for the delay, any explanation put forward, the degree of prejudice caused by the delay, and the extent of connection between the existing claims and the new cause of action: Letvad v. Finley (2000), 82 B.C.L.R. (3d) 296 (C.A.).

[17]            The chambers judge concluded that the appellant would not suffer any significant prejudice other than the “possible loss of a limitation defence” (at para. 25); that there was no delay in bringing the application to join the appellant once it was determined that deficiencies in the brick wall caused or contributed to the water damage, and any delay was “reasonable and excusable given the complexity of the action, the sheer volume of documents to be reviewed, and the evolving nature of the understanding of the plaintiff of the causes and extent of the deficiencies in the condominium” (at para. 26); that any loss of documents or witnesses would be offset by the appellant’s access to the masonry walls, which are intact and available for inspection (at para. 27), and by the availability of the documents of other parties (at para. 30); and that any actual prejudice to the appellant occurred before “the expiry of the limitation period that may have expired as early as 2004” (at para. 31).  He concluded (at para. 34):

On the assumption that a limitation period has expired, I am still of the view that it would be just and convenient that Star be added as a Defendant to this Action…

Postponement

[18]            The appellant claims that the chambers judge erred in deciding the question of postponement on this application to add it as a defendant.  It points out that the onus was on the respondent to prove that the limitation period was postponed (Perron v. R.J.R. Macdonald Inc. (1990), 43 B.C.L.R. (2d) 178 at 187 (C.A.)), by providing the evidence of the “facts within [its] means of knowledge” (Limitation Act, s. 6(4)), which are (as described in Levitt v. Carr (1992), 66 B.C.L.R. (2d) 58 at para. 38 (C.A.), leave to appeal refused (1992), 70 B.C.L.R. (2d) xxxiii (note) (S.C.C.)):

…firstly, those actually known, and secondly, those which would become known if he took such steps as would have been reasonable for him to take in the circumstances.

[19]            The appellant argues that the failure of the respondent to provide any direct evidence of its actual knowledge relating to the water leaks, or the steps taken by it to determine the causes and identify the proposed defendants, from the time when the water leaks were first noticed to the date of the application to add the appellant as a defendant, was fatal to its position that the limitation period was postponed.  The appellant was refused access to the minutes of the Strata Council and Strata Corporation, and was not entitled to any discovery of documents or parties.

[20]            The chambers judge based his decision on the postponement on the date of the 2005 Report, citing Bart Developments for the proposition that it is reasonable for a strata corporation to require expert opinion before deciding it has a cause of action with a reasonable prospect of success.  In my opinion, he erred in so limiting his enquiry.

[21]            The context of the finding of postponement in Bart Developments was a summary trial under Rule 18A.  The chambers judge in that case had a body of evidence outlining the steps the plaintiff strata corporation had taken in connection with water leaks in its building.  She concluded that the plaintiff had the “means of knowledge” with respect to certain of those leaks when they received an expert report.  She made no finding of postponement with respect to the other claimed deficiencies on the basis that the matter could only be decided at trial.  The conclusion that reliance on an expert report is reasonable can only be made in the context of evidence of the owners’ “actual knowledge”, and the steps taken by it to determine its legal position.  There was no such evidence in this case.

[22]            The cases are replete with observations of chambers judges that the determination of whether a limitation period has been postponed is difficult, and may be unjust, in the absence of a factual matrix that in many cases may only become evident following at least examinations for discovery and perhaps a trial: see for example, Perron at 188; Moore v. Castlegar & District Hospital (1995), 13 B.C.L.R. (3d) 31 at 40 (C.A.); Strata Plan LMS 343 v. Coquitlam (City) (2005), 45 B.C.L.R. (4th) 373 at para. 19, 2005 BCSC 1150; Doe v. Canadian Red Cross Society (1995), 5 B.C.L.R. (3d) 158 at para. 23 (S.C.); Strata Plan VR 2124 v. Rositch (2004), 40 C.L.R. (3d) 275 at paras. 14 and 15, 2004 BCSC 1662.

[23]            It was not necessary for the chambers judge to determine the issue of postponement on the application to add the appellant as a party.  In my opinion, it was an error, on the state of the evidence before him, to do so.

Just and Convenient

[24]            The appellant claims further that the chambers judge erred in exercising his discretion in finding that it was just and convenient to add it as a defendant.  It acknowledges that an appellate court is justified in interfering with the exercise of discretion by a chambers judge only if the chambers judge “misdirects himself, acts on a wrong principle or on irrelevant considerations, or if his decision is so clearly wrong as to amount to an injustice”: see Ward v. Kostiew (1989), 42 B.C.L.R. (2d) 121 at 127 (C.A.).

[25]            The appellant maintains that the chambers judge erred in three ways in applying the legal principles for determining whether joinder was just and convenient:

(a)        Although the chambers judge stated that he was assuming the limitation period had expired, the appellant says that on his analysis of the evidence, he assumed only “the possible loss of a limitation defence” (at para. 25).

(b)        The appellant argues that in assessing delay and prejudice, the chambers judge assumed that the commencement of the limitation period had been postponed to 1998, rather than commencing at the completion of the buildings in 1995 or earlier (at paras. 26 and 31).

(c)        The appellant says that in assessing the prejudice to the appellant, the chambers judge considered prejudice only after 2005, and should have considered all prejudice accruing between the date of the actionable wrong (1995 or earlier) and the application to add it as a defendant: see Strata Plan LMS 343 v. Coquitlam (City) at para. 32, distinguishing McIntosh v. Nilsson Bros. Inc. (2005), 48 B.C.L.R. (4th) 124 at para. 8, 2005 BCCA 297.

[26]            The appellant does not take issue with the chambers judge’s statements of the applicable legal principles, but with their application.  Some of the chambers judge’s comments, such as the reference to the “possible loss of limitation defence” and the apparent assumption that the commencement of the limitation period was postponed to 1998, betray some inconsistency in reasoning.  On consideration of all of his reasons for judgment, however, I would not interfere with the exercise of his discretion in concluding that adding the appellant as a defendant to the existing action, in all the circumstances, was just and convenient. 

[27]            We were advised on the appeal that the appellant took the position before the chambers judge that the limitation period commenced no later than 1998, although it could have commenced earlier.  Thus, the chambers judge’s assessment of the circumstances based on the limitation period expiring in 2004 was not a misdirection or a consideration of an irrelevant consideration, it was a response to the submissions of counsel.

[28]            As for the reference to the “possible loss of the limitation period”, in his conclusion (at para. 34), he stated that it was just and convenient that the appellant be added as a defendant “on the assumption that a limitation period had expired”, demonstrating that he had considered the matter on the proper principle. 

[29]            The principles applicable to the addition of parties make it clear that the discretion of the chambers judge is “completely unfettered and subject only to the general rule that all such discretion is to be exercised judicially, in accordance with the evidence adduced and such guidelines as may appear from the authorities”: see Teal Cedar Products (1977) Ltd. v. Dale Intermediaries Ltd. (1996), 19 B.C.L.R. (3d) 282 at para. 45 (C.A.), per Finch J.A.

[30]            While the evidence in this case would not support a finding of postponement, considerations of prejudice and delay do not require evidence of the plaintiff’s “actual knowledge” or due diligence: see Teal Cedar Products at paras. 56-59.  There are many other “leaky condo” cases that provide guidelines to considering prejudice and delay in the circumstances of the complexity of these actions, the volume and availability of documents, and the evolving nature of the understanding of condominium owners of the causes and extent of the deficiencies.  It is in this context that the chambers judge’s decision must be assessed.

[31]            On the whole of the evidence and the circumstances in this case, I would not interfere with the decision of the chambers judge.

[32]            It follows that I would dismiss the appeal.

[33]            ROWLES, J.A.: I agree.

[34]            HALL, J.A.: I agree.

[35]            ROWLES, J.A.: The appeal is dismissed.

“The Honourable Madam Justice Levine”