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



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


2007 BCCA 611

Date: 20071204

Docket: CA034486


Owners, Strata Plan LMS 1725




Star Masonry Ltd.




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…


[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”

Vancouver, Governor's Tower and Villas: Due to conflict of interest, Court rules leaky condo owners can use RDH Building Engineering as their repair consultant but not for purposes of establishing liability



Owners, S.P. LMS 1725 v.

Pacific Place Holdings Ltd.,


2007 BCSC 1047

Date: 20070712
Docket: S006008
Registry: Vancouver


The Owners, Strata Plan LMS 1725



Pacific Place Holdings Ltd. (previously
known as Concord Pacific Holdings Ltd. and
Concord Pacific Development Ltd.) et al




United Metals Ltd. et al


Third Parties

Before: The Honourable Mr. Justice Curtis

Reasons for Judgment

Counsel for the Plaintiff

R. Lesperance

Counsel for the Defendant,

Pacific Place Holdings


James A. Doyle

& A. Hasan

Counsel for RDH Building Engineering Ltd.


T. Peters

Date and Place of Hearing:

June 15, 2007


Vancouver, B.C.

[1]                Pacific Place Holdings Ltd. has applied for an order that RDH Building Engineering Ltd. be enjoined from engaging in any capacity in any activity relating to a condominium project developed by Pacific Place Holdings.  The application is made on the grounds that RDH is in a position of conflict, having once advised Pacific concerning the project and being now retained by the Owners.

[2]                The Governor’s Tower and Villas Condominium Project, a strata plan project developed by Pacific, was substantially completed in November, 1994.  The Owners, Strata Plan LMS 1725, is the Strata Corporation for the project.  The project consisted of a tower and two lower units.  The buildings suffered from water penetration problems immediately following their construction.  Mr. David Ricketts, an engineer then with the firm of Morrison Hershfield, was consulted by Pacific in 1994 and 1995.  The Strata Corporation consulted Levelton Engineering Ltd. about the water ingress problems and Levelton prepared reports dated May 1998 and November 1999.

[3]                Mr. David Ricketts left the firm of Morrison Hershfield and founded the firm RDH Building Engineering Ltd., continuing to act as a consultant concerning water ingress problems on the project as evidenced by a bill for services to October 31, 2000.  The writ was filed in this action on November 8, 2000.  On December 21, 2000, Mr. Brian Hubbs, another principal of RDH, met with Mr. Mitchell, a lawyer for Pacific, and  Messrs. Wong, Hagkull, Ulinder, Roman and Negrin, all representatives of Pacific, and presented a PowerPoint critique of the 1998 and 1999 Levelton reports, following which there was a discussion of the court action commenced by the Strata Corporation.

[4]                In or about January 2006, Lyn Campbell of Vancouver Condominium Services Ltd., property manager for the Owners, contacted Warren Knowles, a professional engineer with RDH, to provide consulting services for the repair of the building envelope.  Mr. Knowles became aware that Mr. Hubbs had made the presentation to Concord on the project in 2000 and that RDH had made a proposal to Pacific to provide litigation support at that time, but had not been retained.  In or about August 29, 2006, Mr. Knowles sent the Strata Corporation a proposal and standard form agreement and on October 2, 2006, Mr. Knowles attended a meeting of the Strata Corporation to explain the rehabilitation process and what RDH could offer by way of consulting services.  In a letter dated November 16, 2006, Lyn Campbell instructed RDH “to proceed with the design development portion of your proposal”.  RDH had made a proposal to provide litigation support for the Owners in October 2006, but the Owners decided not to use RDH for those services. 

[5]                By letter of November 30, 2006, Mr. Negrin, on behalf of Pacific, wrote to the Strata Owners as follows:

It has been brought to our attention that RDH was recently retained by the Owners of Strata Plan LMS 1725 on the Governors Tower project.  RDH was previously retained by Concord Pacific, to provide expert assistance on this same project, following an action being commenced by the same Owners.  As well, your Mr. Ricketts, provided consulting services to Centreville Construction Ltd. on this project in 1994.

RDH received confidential information during the course of these retainers which confidential information is directly related to the issues in the action.

Given the previous relationship we do not see how RDH can now be involved on behalf of the Owners.  Accordingly, we ask that you contact us by Monday, December 4, 2006, setting out your position.  It is our expectation that you will be withdrawing from the project.

Our counsel will be following up with the Owner’s solicitors in terms of any information that may have passed between RDH and the Owners and or any of their representatives.  Please ensure that all files, documents and notes (whether electronic or hard copy) are preserved.

[6]                Upon being made aware of Pacific’s objection to its involvement, RDH took steps to ensure that Brian Hubbs and David Ricketts had no involvement on the project and did not discuss their previous involvement with other firm members.  The hardcopy file of RDH was sent to the corporate lawyer’s office to ensure that no one had access to it, and access to the electronic files was restricted to Mr. Hubbs.

[7]                The position of the Strata Owners is that they wish to retain RDH as a repair consultant only and not to provide an expert report for use in the litigation for the purposes of establishing liability on the part of the defendants.  Ms. Campbell, the property manager for the condominium owners has deposed that, “RDH has an unblemished record for quality project management service” and that “RDH is the leader in Western Canada for pursuing innovative and cost effective solutions for building envelope repairs of the magnitude recommended by Levelton at Governor’s Tower.”  The Strata Owners are concerned that if RDH is disqualified from acting as their repair consultant, the project will be delayed, the cost increased and that there is a significant chance that the trial set for January 7, 2008 will be delayed several more years.

[8]                The position of Pacific is that the Strata Owners did not actually retain RDH until November 16, 2006, two weeks after notice of the conflict was given.  Pacific’s position is that RDH received confidential information when acting as professional engineers on its behalf and that the injunction sought is necessary to prevent confidential information being used against Pacific in the litigation.

[9]                A separate set of confidential affidavits were presented to me in the absence of the owner’s counsel concerning which counsel for Pacific and counsel for RDH made submissions concerning what, if any, confidential information had passed  between Pacific, Pacific’s lawyer (Mr. Mitchell) and RDH.

[10]            The case of Schober v. Walker, 2004 BCCA 205, 26 B.C.L.R. (4th) 28, concerned the use of a lawyer’s opinion in the taxation of a legal bill.  The opinion was objected to on the grounds that the party against whom the evidence was tendered had consulted a partner of the lawyer giving the opinion.  Southin J.A., in delivering the Court’s decision referred to the decision of Lord Denning in the case of Harmony Shipping v. Davis, [1979] 3 All E.R. 177 (C.A.) at page 182 in which Lord Denning held:

There is no property in a witness as to fact.  There is no property in an expert witness as to the facts he has observed and his own independent opinion on them.  There being no such property in a witness, it is the duty of a witness to come to court and give his evidence in so far as he is directed by the judge to do so.

[11]            Southin J.A. accepted that statement of the law.

[12]            In the case of L.R. v. British Columbia, 2002 BCSC 405, 99 B.C.L.R. (3d) 386, an expert in the standards of care of deaf children in residential schools was permitted to give expert opinion for the plaintiffs even though that expert had been retained by the government as an expert in an earlier case involving the same school.  Humphries J. held at paras. 36, 37 and 38:

I accept that Dr. Sullivan took no part in discussions of litigation strategy or planning in respect of the six previous cases, and of course did not do so in the present action as it was not commenced for several years after she had rendered her initial reports. She is an independent expert witness.

Notwithstanding that confidential information may have passed between the defendant and Dr. Sullivan, although as I have said it is difficult to imagine what that might be, I am of the view that the potential to provide the court with useful evidence exists. Dr. Sullivan is not disqualified from preparing a report for the plaintiffs simply because she has also prepared a report for the defendant.

In preparing her report, she must not consider or discuss any confidential information she received.

[13]            Clearly, in this case, the Owners could call the RDH engineers as witnesses at trial to give evidence concerning the building.  The central point in issue in this application is not what evidence RDH could give concerning their opinion but whether RDH received confidential information from Pacific or its lawyer, and if so, should it be enjoined from acting any further because of that.


GCAN Insurance loses battle with Concord Pacific over duty to defend in leaky condo cases

Parkview Gardens, Concord Pacific, Vancouver, BC.

Parkview Tower, Concord Pacific, Vancouver, BC



GCAN Insurance Company v. Concord Pacific Group Inc. et al,


2007 BCSC 241

Date: 20070222
Docket: S063402


GCAN Insurance Company



Concord Pacific Group Inc. formerly known as
Concord Pacific Developments Ltd.,
Parkview Towers (No. 1) Limited, and
Centreville Construction Ltd.


-And –

Docket: S063274


GCAN Insurance Company



Pacific Place Holdings Ltd.,
Governor’s Tower Limited, and
Centreville Construction Ltd.


Before: The Honourable Madam Justice Nicole Garson

Reasons for Judgment

Counsel for Petitioner

G.S. Miller

Counsel for Respondents in both actions

A. De Jong and M. Lam

Date and Place of Hearing:

February 5, 6 and 7, 2007


Vancouver, B.C.

[1]                In these petitions, the insurer, GCAN Insurance Company (“GCAN”), applies for a declaration that it has no duty to defend the Respondents pursuant to policies of liability insurance with respect to claims against those Respondents brought in actions by two strata corporations for defective workmanship and resultant damage.

[2]                The petitions raise the issue of whether the particular wording of the policies extends coverage to the general contractor, construction manager, owner, and developer for damage caused to a building by its own faulty workmanship or that of its subcontractors.  The Petitioners contend that this court’s decision in Swagger Construction Ltd. v. ING Insurance Co. of Canada, 2005 BCSC 1269 is determinative of the issue, and is binding on me; consequently, they are entitled to a declaration that the insurer has no duty to defend the underlying actions. 

[3]                The Respondents argue that the Swagger decision is distinguishable.  They claim that although the insuring clause in the policies before me and the one in the policies before the court in Swagger are essentially the same, the exclusion clauses differ.  Based on the principle that it is the wording of the whole of the policy, and not the general principles of interpretation that govern, the Respondents argue that to find that the insuring clause does not cover damage to the building arising from the insured’s own faulty workmanship is inconsistent with the exclusion clauses.  The exclusion clauses in the policies at issue in this case would be redundant, according to the Respondents, if coverage for their own work is not covered by the insuring clause.

[4]                The Respondents also argue that the totality of the jurisprudence suggests that Swagger is an aberration that ought not to be followed since its reasoning departs from well-established lines of authority on the issue of the interpretation of the policies.  The Respondents argue that this case falls within the exceptions to the rule in  Re Hansard Spruce Mills Ltd., [1954] 4 D.L.R. 590 (B.C.S.C.), on the grounds that there was binding authority that was not considered by the chambers judge, and also on the ground that subsequent decisions have affected the validity of the judgment.


[5]                I rely on these facts for the purposes of determining the issues before me, but they are not findings of fact for any other purpose. This outline of the relevant facts is based on the pleadings as well as the affidavit evidence before me. The pleadings in the underlying actions and the affidavits provided by the Respondents are inconsistent in respect to the roles of the various Respondents in the construction of the two projects. Below, I will address the problem that arises from this inconsistency.

[6]                The claims against the Respondents in the underlying actions are brought by two strata corporations.  They are what has become known as “leaky condo” actions.  The underlying actions are styled as follows:  Owners Strata Plan LMS 990 v. Parkview Towers (No. 1) Limited et al., B.C.S.C. Action No. S035605, Vancouver Registry (the “Parkview Tower Action”), and Owners Strata Plan LMS 1725 v. Governor’s Tower Limited et al., B.C.S.C. Action No. S006008, Vancouver Registry (the “Governor’s Tower Action”) (collectively, the “underlying actions”).

[7]                The Parkview Tower Action is the subject of petition No. S063402 (the “Parkview Tower Petition”).  The Respondents in the Parkview Tower Petition, Parkview Towers (No. 1) Limited and Centreville Construction Ltd. are named as defendants in the Parkview Tower Action.

[8]                The Governor’s Tower Action is the subject of petition No. S063274 (the “Governor’s Tower Petition”).  The Respondents in the Governor’s Tower Petition, Pacific Place Holdings Ltd., Governor’s Tower Limited, and Centreville Construction Ltd., are named as defendants in the Governor’s Tower Action.



Vancouver, Governor's Tower, LMS 1725



The Owners, Strata Plan LMS 1725 v. Pacific Place Holdings Ltd. et al.

2006 BCSC 1358

Date: 20060907
Docket: S006008
Registry: Vancouver








Avalar Caulking Services Ltd. and Intertek Testing
services NA Ltd./
Services D%u2019Essais Intertek An Ltee.

Third Parties

Before: The Honourable Mr. Justice Burnyeat

Reasons for Judgment
(from Chambers)

Counsel for the Plaintiff

R.J. Lesperance

Counsel for the proposed Defendant,

Star Masonry Ltd.

S.G. Cordell

Date and Place of Hearing:

August 17, 2006

Vancouver, B.C.

[1] The Plaintiff applies for an Order that Star Masonry Ltd. (%u201CStar%u201D) be added as a Defendant to this Action and that the Plaintiff be granted leave to amend the Fifth Amended Writ of Summons and Third Further Amended Statement of Claim in order to allege that Star supplied and installed the masonry work for the condominium property which is the subject matter of this Action (%u201CCondominium%u201D), that Star owed a duty of care to the Plaintiff, that Star breached that duty of care, and that the breaches of Star caused or contributed to the %u201CConstruction Deficiencies%u201D which are set out in paragraph 29 of the Statement of Claim. In the Third Further Amended Statement of Claim, the following %u201CParticulars%u201D of the Construction Deficiencies%u201D at the Condominium are said to include the following regarding the %u201CMASONRY%u201D: %u201Cinstallation of brick window sills without a slope; poor finishing at the interface between the windows and the surrounding brick walls; failure to properly install the waterproof membrane behind the porous concrete block, stone and brick façade; lack of mortared joints at the concrete block; failure to install drip groove in masonry above windows, resulting in rusting of lintels%u201D.

[2] The amendments to the Statement of Claim do not include amendments relating to the alleged construction deficiencies relating to the masonry. It is only stated in the amendments sought that: %u201CStar%u2019s breaches of duty caused or contributed to the Construction Deficiencies set out %u2026.%u201D so that Star and all of the Defendants are jointly and severally liable for the loss and damage suffered by the Plaintiffs.


[3] The construction of the Condominium occurred between 1993 and 1995. The Defendant, Governor%u2019s Tower Ltd. (%u201CGovernor%u2019s%u201D) was the general partner of a partnership with Governor%u2019s Tower Ltd. Partnership (%u201CLimited Partnership%u201D). The Limited Partnership and Upper Nice Properties Ltd. were the developers of the Condominium (%u201CDevelopers%u201D). The Defendant, Centreville Construction Ltd. was retained by the Developers as the builder and construction manager for the construction of the Condominium.

[4] On May 12, 1993, Star entered into an agreement with Governor%u2019s for the installation of brick masonry work at the Condominium.

[5] In late October, 1997, Levelton Consultants (%u201CLevelton%u201D) was retained by the Plaintiff to investigate what the Plaintiff describes as %u201Cisolated leakage%u201D problems at the Condominium. In its April 30, 1998 Report, Levelton stated that the %u201Coverall intention of the investigation was to make a representative assessment of the building envelope, with a view to establishing maintenance or remediation requirements as they might be required. It was said that the investigation had as its objectives in order of priority the following: (a) %u201CTo develop a solution to the ongoing problems of water ingress. Such a solution to be founded on good building science construction practices rather than temporary %u2018band aids%u2019%u201D; (b) %u201CTo plan a maintenance and possible remediation program%u201D; and (c) %u201CTo prepare for the potential of litigation to cover costs of the remedial work, if any.%u201D

[6] Levelton undertook initial building envelope condition assessments and recommended targeted repairs of the problems discovered at the time. In particular, the report of Levelton identified %u201Ca number of areas of existing or potential water ingress%u201D which required the %u201Cimplementation of both a short and long-term remediation plan.%u201D The %u201Cmaintenance program%u201D and the %u201Cmanagement plan%u201D that was recommended by Levelton in 1998 were as follows:

A maintenance program for Governors should have two aspects.

1. Firstly, an immediate effort to address the numerous relatively small defects identified in the Observations is essential. This effort would have to, by necessity, consist of additional application of caulking. Much of the previous remedial caulking would have to be removed and replaced with proper materials and workmanship.

This would significantly reduce the amount of water ingress and slow the internal deterioration and corrosion processes that are expected to be occurring.

2. Secondly, it is necessary to prepare a long term plan for future maintenance.

A face seal system based on caulking means, by definition, that periodic extensive maintenance in terms of replacement of caulking will be required. Good caulking can be expected to last approximately 10 years.

However, it is anticipated that the long term maintenance program will also involve some rebuilding of the present water management system. The degree to which is required, and the methods for doing such rebuilding have yet to be determined.

A management plan should be formulated after further research and fact finding of the extent of the problem.

Immediate Implementation Stop further water from entering the wall.

Conduct further intense investigation of the as built assembly of the window wall, enclosed balconies and vent grilles. Locate and review all window drawings, shop drawing and available notes from the period of construction.

Mid Term Implementation Plan and review remedial strategies. Construct a test area(s) of possible strategies.

Long Term Implementation Undertake the remedial work on a priority basis. Undertake the scheduled maintenance of the areas that do not require major work.

[7] In 1998, Levelton had observed efflorescence and other possible problems with respect to the brick wall at the Condominium. While the brick wall was identified as a potential source of water penetration, the primary focus of the investigation and the later remediation was the window walls and the %u201CExterior Insulation Finish System%u201D (%u201CEIFS%u201D).

[8] In its April 30, 1998 %u201CBuilding Envelope Investigation Report%u201D, Levelton refers to several possible problems with respect to the brick walls: (a) some mortar was cracking, which would only be a problem if the waterproof membrane behind and below the cracked areas did not redirect the water back to the outside of the wall; (b) split face blocks allowed for some capillary action water ingress, causing darkening and moss growth; (c) supporting metal shelf angles for the brick and block were getting wet, causing rust and staining; (d) the brick window sills were installed very flat and could possibly contribute to the slow migration of water into the wall cavity; (e) efflorescence on the brick, block and mortar, indicating the possible presence of water; and (f) the finishing where the brick met the windows was poor.

[9] In 1998, Levelton was authorized to conduct a more detailed investigation into the nature of the leaks. Findings of this detailed investigation were contained in a November 15, 1999 Report. The investigation concluded that deficiencies in the caulking joints in the EIFS panels were a secondary cause of leakage due to the large volume of water ingress observed during testing. Levelton concluded that that there was %u201Ca more significant problem elsewhere in the assembly%u201D.

[10] From 2001 to 2003, the Plaintiff performed a mixture of repair and maintenance work on the buildings constituting the Condominium, consisted mostly of replacing caulking at EIFS panel joints and installing membrane at the vent duct penetrations through the window wall. Despite the maintenance and repair work performed, leaks into some units persisted.

[11] In September 2004, Mr. Busque of Levelton reviewed some repairs that were being done on one of the units at the Condominium and observed extensive deterioration of the building envelope. In January, 2005, Mr. Busque visited a different unit at the Condominium and observed further evidence of water ingress through the windows. At that time, Mr. Busque concluded that the water ingress might be indicative of problems with the brick walls. On January 18, 2005, Mr. Busque reported to the Plaintiffs that there were potential serious problems with the brick walls and recommended that Levelton conduct test openings in the brick walls.

[12] On May 11, 2005, Levelton performed test openings at the sloped sill and at the head of the windows on one of the units, at the brick clad column adjacent to that unit, and to the west side of the ground floor of the Condominium. Levelton found that there was a lack of an upturn of the waterproofing membrane at the window jamb which allowed water to migrate laterally into the wall system and, as well, found:

Mortar in the brick cavity blocked drainage of water that may have penetrated the though the joints in the brick to the cavity. A well-vented and properly drained cavity is essential to the good performance of brick veneer walls. This cavity was blocked by mortar. This is an error in the construction of the brickwall and does not meet the requirements of the Code or of the Architect%u2019s design.

[13] As a result of these test openings in the brick walls, Mr. Busque concluded that the brick walls had to be removed, the deficiencies corrected, and the brick veneer replaced. On June 20, 2005, Mr. Busque reported these findings to the Plaintiffs. It was the opinion of Levelton that: %u201C%u2026 leakage and corrosion problems at the brick walls cannot be solved without removal of the brick.%u201D

[14] On September 14, 2005, the contract between Star and Centreville was located by the Plaintiffs during a document review conducted by counsel. This application was brought on November 18, 2005 as a result of the documents discovered in the September, 2005 document review. For various reasons, this application has not come on for earlier hearing.


[15] Rule 15(5)(a) provides that the Court may order that a party be added where there exists between the proposed party and any party to the proceedings %u201C%u2026 a question or issue related 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.%u201D

[16] Star concedes that there is the necessary connection and, even if that concession had not been made, I would have found that the work undertaken by Star is necessarily connected with the Plaintiff and the work undertaken on behalf of the Plaintiff at the Condominium which is the subject matter of this Action.

[17] It is clear that the question of the alleged negligence of Star undertaking the masonry work is closely connected with the subject matter of this Action and the relief claimed. As it is only necessary to establish a possible cause of action or that there may exist a question or issue between the Plaintiff and Star, I find that the Plaintiff has met the low threshold of taking the matter above a frivolous claim: Strata Plan LMS 1212 v. Coquitlam (City) (2004), 31 B.C.L.R. (4th) 356 (B.C.S.C.). Accordingly, the question is whether it would be just and convenient to add Star.


[18] In considering whether it is just and convenient that Star be added as a Defendant, all relevant factors are to be considered and no one single factor is necessarily determinative. The lapse of a limitation period for bringing an action is not necessarily a bar to adding a defendant: Teal Cedar Products Ltd. (1997) Ltd. v. Dale Intermediaries Ltd. et al. (1996), 19 B.C.L.R. (3d) 282 (B.C.C.A.) at para. 41; Cementation Co. (Canada) Ltd. v. America Home Insurance Co. (1989), 37 B.C.L.R. (2d) 172 (B.C.C.A.) at para. 8; Yablonski v. Cranbrook (City), [2002] B.C.J. (Q.L.) No. 3214 (B.C.S.C.) at paras. 21-2; and Sun v. Sun, [2000] B.C.J. (Q.L.) No. 1813 (B.C.S.C.) at para. 10.

[19] The applicable limitation period for construction deficiency actions is six years: Workers%u2019 Compensation Board of British Columbia v. Genstar Corporation (1988), 24 B.C.L.R. (2d) 157 (B.C.C.A.). The time begins to run when a plaintiff ought to have reasonably known of the facts and taken advice on those facts so as to conclude that an action would have a reasonable chance of success: Strata Plan No. VR 1720 v. Bart Developments Ltd. (1998), 53 B.C.L.R. (3d) 304 (B.C.S.C.), aff%u2019d (1999) 49 C.L.R. (2d) 161 (B.C.C.A.). In Bart, the Court held that, once a report from a consultant regarding an assessment of deficiencies in the construction had been received, a reasonable person such as strata owners would have concluded a good cause of action lay against the developers, consultants, architects and various trades as identified in the report.

[20] In Bart, supra, a July, 1989 report identified major structural defects including adequate roofing, deficient stucco, and other defects in ventilation, drainage and balcony construction and a legal action was not commenced until November, 1995. In dealing with the question of whether the conduct of that plaintiff had been reasonable between the completion of construction and the ultimate issuance of the action, the Court in Bart reviewed the decisions in Karsanjii Estate v. Roque (1990), 43 B.C.L.R. (2d) 234 (B.C.C.A.); Levitt v. Carr (1992), 66 B.C.L.R. (2d) 58 (B.C.C.A.); and 355022 BC Ltd. v. CCS Properties Inc. (1995), 14 B.C.L.R. (3d) 107 (B.C.C.A.) and stated that the phrase %u201Cfacts within his means of knowledge%u201D meant:

%u2026facts which either were known or ought to reasonably have been known to the claimant, that is facts which would have become known to him if he had taken such steps as would have been reasonable for him to take in his circumstances. Therefore they determined when the plaintiff ought reasonably to have known of facts, and ought reasonably to have taken the appropriate advice on those facts so as to be able to conclude that an action would have a reasonable prospect of success. (at para. 23)

[21] Humphries J. in Bart then concluded that the plaintiff had followed a reasonable course of action:

In my view, the plaintiff followed a reasonable course of action throughout 1988 and 1989 until the receipt of the CSA report. They were seeking practical solutions to ever mounting problems, which, with the advantage of hindsight now appear to be symptoms and signs of large underlying deficiencies, but at the time were being dealt with by the developer and EPM/s own repairers.

There are some cases%u2026 where no expert opinion is necessary to come to a conclusion that one has a cause of action. However, in the circumstances before me it would, in my view, be reasonable to expect the plaintiff to need expert advice to determine if these matters were%u2026 discrete and individual leakage problems or if they were defects arising from negligent design or construction%u201D (at paras. 31-2)

[22] The Plaintiff here ought to have reasonably known of the facts and taken advice from those facts from its solicitors so as to conclude that an action would have a reasonable chance of success against Star after receiving the Levelton Report on June 20, 2005. Accordingly, I am satisfied that there has been no expiry of the six-year limitation period. I am satisfied that the limitation period did not begin to run until May or June, 2005. I find that it is just and convenient that Star be joined as a Defendant as that is more convenient to all of the parties than a new action naming Star as a Defendant and then a later motion to consolidate this Action and that action for all purposes.

[23] On the assumption that I am incorrect in coming to the conclusion that there was a postponement of the running of the limitation period so that it has not expired, the question is whether I should exercise my discretion after the expiry of the limitation period and, in this regard, consider 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 (B.C.C.A.).

[24] In considering the issue of prejudice, it is necessary to undertake a review of the balance of prejudice. It will clearly be a significant prejudice to the Plaintiff if Star is not added as a Defendant. The Plaintiff will suffer an irreplaceable loss of a cause in circumstances where contributory negligence has been advanced as a defence as is the case here.

[25] Star will not suffer any prejudice if it is added as a Defendant other than the possible loss of a limitation defence. In the circumstances, the loss of a cause of action far outweighs such a prejudice: Takenaka v. Stanley (2000), 91 B.C.L.R. (3d) 179 (B.C.S.C.) at para. 41; and Yablonski, supra, at paras. 39-42.

[26] I find that there was no delay in bringing the application to join Star once it was determined that deficiencies in the brick masonry wall caused or partially caused water ingress and damage to the Condominium. 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.

[27] As well, all of the evidence is intact. The brick walls are still in place at the Condominium as they have not been replaced or repaired in such a way that evidence concerning the original construction is obscured or obliterated. Star still has access to the best evidence available as to the alleged failure and alleged poor performance of the work it undertook and of the product it produced. Even if I had found that remedial work had already been undertaken so that Star could not examine the alleged deficiencies, I would come to the same conclusion as was found in Owners Strata Plan LMS 989 v. Port Coquitlam (City) (2003), 18 B.C.L.R. (4th) 358 (B.C.S.C.), where Ballance J. stated:

Redekop and Premier also argue that the remediation work on Chancellor Court has begun and may already be completed. As such, they say they have been denied an opportunity to examine the alleged deficiencies, which, in turn, will prejudice their defence. Evidently, the remediation on Chancellor Court began in 1997, continued throughout 1998 and 1999 and were on-going at the time of the hearing of this application. Therefore, even if the Proposed Defendants had been named as defendants in the initial pleading filed January 9, 2001, at least part of the remedial work would have long been under way. In my view, Redekop and Premier, as with the other named developer defendants, will have an adequate opportunity to study the same documents, reports and evidence pertaining to the deficiencies and will not be prejudiced by not having had a first-hand view of the alleged damage. (at para. 24)

[28] Star is in no different position than any other defendant who has to defend against the allegations of construction deficiencies in the masonry work performed. The Trial is not scheduled to commence until January, 2008 so Star will have ample opportunity to obtain evidence including expert evidence to defend these claims.

[29] A director and officer of Star states that there are no documents available at the offices of Star relating to the role of Star in the construction of the Condominium. In this regard, he indicates that it was the policy of Star to destroy documents that are more than seven years old and that the documents relating to their role in the construction of the Condominium were destroyed some time in 2003 in accordance with that policy. In the absence of these documents, it is said that it would be almost impossible to determine who was employed by Star at the time and, more particularly, which of its employees worked on the Condominium. He also states that Star engages subcontractors and that the absence of the documents will likely make it impossible to determine which subcontractors were engaged by Star in respect of the Condominium and the scope of their contractual obligations to Star. While the foreman at the project has been determined and while the foreman would have been responsible for many of the dealings with the owners, architects and others involved in a supervisory capacity and able to make changes in the scope of the work to be undertaken by Star and the manner in which the work was to be performed, that foreman is no longer available to Star as he died in either 2003 or 2004. Star states that none of the current employees of Star were employed by it during the period when the Condominium was constructed. As well, the liability insurer of Star added a %u201Cwater ingress exclusion%u201D to its coverage as of July 31, 2003 and it is the understanding of Star that, because a claim was not reported before this exclusion clause came into effect, there may be no insurance coverage for Star in respect of the allegations made in the Statement of Claim as the insurer has reserved its right to deny coverage.

[30] In response to the claim by Star that documents relating to their role in the construction of the Condominium have been lost or destroyed since 2003, there are tens of thousands of pages of documents produced by existing Defendants and the Plaintiff and these documents are available for the review of Star. There should be little difficulty in identifying the relevant documents and witnesses to be produced on behalf of Star given the relationship with existing defendants and the documents available: The Owners Strata Plan VR 2402 v. R. 118 Developments Inc. et al (2004), 35 C.L.R. (3d) 20 (B.C.S.C.) at para. 38.

[31] I find that the ability of Star to investigate the circumstances relating to the claim has not been hampered. I also find that the ability to investigate the circumstances or defend the claim would not have been any better one day before the expiry of the limitation period that may have expired as early as 2004 than it is presently: Endale v. Peters (1997), 47 C.C.L.I. (2d) 307 (B.C.S.C.) at para. 16; Sun, supra, at para. 26; Takenaka, supra, at paras. 18-20; and Bel Mar Developments Inc. v. North Shore Credit Union, [2001] B.C.J. (Q.L.) No. 512 (B.C.S.C.).

[32] While the foreman on the job for Star is no longer available, it is undoubtedly the case that any change orders provided by the architect or Centreville on behalf of the Plaintiffs will be available as part of the many documents which will be in evidence and which will be available for Star. Accordingly, it appears that the untimely death of the foreman will not prejudice Star particularly. As well, even if the limitation period ran from 1998 when the first Levelton report was made available to the Plaintiff so that the limitation period would have only expired in 2004, the foreman on the job would still not have been available for Star.

[33] Star submits that there are no requested changes in the %u201CMasonry%u201D part of the Statement of Claim and that this should be taken as being an indicator that the Plaintiff had all of the necessary information available to it to join Star as a Defendant much earlier. Relying on the following statement made in Bart, supra, I am satisfied that I cannot accede to this submission on behalf of Star that the amendment should not be allowed on this basis:

I do not accept that because the Statement of Claim alleges defects in construction that ought to have been knowable to the defendants, that the plaintiff themselves must have had them within their means of knowledge from the beginning. Certainly the plaintiff could have ripped the building apart at the time the first leak was discovered, but that would not be reasonable.

In my view, the plaintiff followed a reasonable course of action throughout 1988 and 1989 until the receipt of the CSA report. They were seeking practical solutions to ever mounting problems, which, with the advantage of hindsight now appear to be symptoms and signs of large underlying deficiencies, but at the time were being dealt with by the developer and EPM's own repairers. (at paras. 30-1).


[34] On the assumption that no limitation period has expired, I am satisfied that it is just and convenient that Star Masonry Ltd. be added as a Defendant in this Action. The Plaintiff is at liberty to amend the Fifth Amended Writ of Summons and the Third Further Amended Statement of Claim. 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 and that the Plaintiff be granted leave to amend the Fifth Amended Writ of Summons and the Third Further Amended Statement of Claim.

[35] The costs of this application will be within the discretion of the learned Trial Judge.

%u201CG.D. Burnyeat, J.%u201D
The Honourable Mr. Justice G.D. Burnyeat

New twin Concord condo towers plagued by severe leaks; windows fail tests.

DATE OF RELEASE: December 20, 1995                  No. A943632

                                            Vancouver Registry


BETWEEN:                           )

                                  )     REASONS FOR JUDGMENT


              and                 )

     FERGUSON GLASS B.C. LTD.           )    

                                  )     OF THE HONOURABLE

                   PLAINTIFFS )



AND:                               )     MR. JUSTICE SPENCER



              and                 )


                                  )        (IN CHAMBERS)

                   DEFENDANTS )

Counsel for the plaintiffs:            Christopher J. O'Connor

                                      David L. Miachika

Counsel for the defendants:            Donald A. Thompson

                                      John S. Logan

Place and date of hearing:             Vancouver, B.C.

                                      December 1, 1995

1          This was a Rule 18A application for judgment in a builders lien action. The lien was replaced by a bank letter of credit as security in Vancouver Registry file No. A943353.

2          The action concerns the unpaid balance on a contract to provide the supervision, labour, equipment and materials necessary for and incidental to the supply and installation of (inter alia) a window system in a mixed commercial and residential highrise tower on the False Creek waterfront in Vancouver. The windows in question comprise an aluminum frame system which is in fact the exterior cladding for most of the building surface. The defendant 356226 is the owner. Smythe was its partner and also acted as agent for the project. Ferguson Glass B.C. Ltd was the original contractor. The defendant Zurich took over the work pursuant to the provisions of a bond and entered a new contract with Smythe to complete the work. It used a new company, Ferguson Glass B.C. (1994) Ltd. to complete the contract work. The defendants have refused to pay the balance of $254,660 alleging that the window system supplied and installed by the plaintiffs has failed to meet the required performance levels for weather tightness and water tightness. The full contract price was $1,840,000 plus G.S.T.

3          In answer to the plaintiffs' claim for the contract balance, the defendants say the work has not been completed to the contract specifications and they claim a set-off and counterclaim for the cost of remedying the deficiencies. The contract consultant, which is the owner's architect, pursuant to its powers granted in the general conditions of the contract, has recommended a holdback of the whole balance against the cost of remedying the alleged defects.

4          The tower contains some 6,000 windows. The work began in August 1993. Zurich took it over in April 1994, using the new company, Ferguson Glass B.C. (1994) Ltd., as its agent to complete the work. It was finished by April 1995.

5          Between August 1994 and February 1995 Smithe and the owner's architect Mr. Eng notified the plaintiffs of 94 locations where there were leaks under normal weather conditions. The plaintiffs carried out remedial work in each case. On February 20, 1995, Mr. Shoesmith, Smithe's Contract Manager, complained of leaks in six suites. They were inspected on February 27 by the plaintiffs with Mr. Shoesmith and with Mr. Bruckner representing the architect. The plaintiffs claim only one of the areas was leaking due to any inadequacy in their contract work and that was remedied. There has been no notice of any other leaks until Mr. Shoesmith's affidavit filed November 30, 1995 reported leaks in six suites between approximately October 11 and November 23. The dates are approximate because the owners are not all resident in the suites and reporting is not necessarily done in a timely fashion.

6          The defendants' position is that the windows and window system are still subject to leaking under normal weather conditions and that the system has failed to pass the appropriate industry test for installed exterior windows. As well as the six new leaks reported in November 1995, the defendants are concerned that there may be other leaks which have not been reported because some owners of suites are absent. They are concerned that there are other leaks which let water into the building which does not show on the inside of the suites. They say the windows provided and installed by Ferguson on a twin tower project before the subject building was begun have demonstrated a severe leaking problem. They say the two window systems are identical for the present purposes and that the problems in the first tower are being reflected in the second. The defendants say that the defects reported and addressed so far by the plaintiffs in the subject tower were so many and varied that it may mean that the whole window system is defective. They say that in the present state of affairs there has been no substantial completion of the sub-contract. As of September 21, 1995 Mr. Shoesmith, Smythe's Project Manager, knew of no other specific problems with the windows but planned to retain another expert to examine the work and advise what problems still existed and how they might be remedied, see Questions 408 to 418 of his examination of that date.

7          There were tests performed on June 19 and 20, 1995 by Inchcape Testing Services, a division of Warnock Hersey Professional Services Ltd. They are agreed to be a reputable testing service. At Smithe's direction the tests were conducted on 4 window wall units in 3 of the 122 suites in the tower, chosen at random. The test consisted of spraying water at the outside of the window from a rack while negative air pressure was applied to the interior surface. The test was performed in 4 cycles of 5 minutes each with a pause of 1 minute between cycles. The test report, Exhibit A to Mr. Ryden's affidavit filed November 16, 1995, says the tests were performed in accordance with the ASTM test method E547. That is a test designed to be carried out in the field after windows have been installed. Three of the four windows tested showed leaks and were failed. The plaintiffs deny the ingress of water in those tests constituted a leak as defined in the applicable industry standard and deny their work was responsible for them.

8          The specifications forming part of the plaintiffs' contract called for the window units to perform to the standard of water tightness set in the CSA-A440 test to a B-2 performance level. I note that the contract letter called for them to be weather tight. Mr. Bruckner, the architect's representative, agreed in his examination on September 22, 1995, that the only reason the architects did not recommend payment of the sub-contract balance was because the three windows had failed the June 19 and 20, 1995 tests.

9          Mr. O'Connor launched an attack on the credibility of the Warnock Hersey test and report from June 1995 based on the conflicting answers given by Mr. Docherty in his affidavit and on cross-examination about the standards used in the tests. There seems to be a contradiction as Mr. O'Connor argued, but in my judgement that is not decisive of this matter at this stage. The tests of June 1995, whatever they showed, are not conclusive but only a guide to the question whether or not the plaintiffs have performed their work under the contract to the degree that requires payment of the balance of the contract price.

10         The question of substantial completion is to be determined by reference to the contract documents, subject to whatever other terms, if any, are to be implied into the contract by law. The contract is contained in a series of documents, the chief of which is a letter dated August 25, 1993, Exhibit A to Mr. Shoesmith's affidavit filed June 28, 1995. The other documents included Standard Construction Document Number CCDC 2-1982 which sets out the general conditions of the contract. It is Exhibit D to Mr. Shoesmith's same affidavit.

11         The contract letter specified the time of payment. Paragraph 2(g) says that payment shall be made, subject to legislated holdbacks, on a completed floor by floor basis. It goes on to say "Completed as defined by the architect will be weather tight ready for the following trade". The underlining is mine. I do it to emphasize that the standard of performance required was not "water tight" but weather tight. That, in my opinion, will probably result in a finding at trial that the windows should exclude wind and rain under conditions reasonably to be expected in the locality. Payments were made for the lower floors of the building but in August 1994 the architect became so concerned by the number of defects identified in the window system to that time that it recommended the defendants should make no further payments for the higher floors. It was feared that the costs of remedying the whole system might exceed the amount held back. The issue to be decided is whether that is reasonable at this time, bearing in mind the provisions of the contract.

12         The specification for the aluminum windows in this sub-contract is Exhibit A to Mr. Shoesmith's affidavit filed November 30, 1995. At p.08520-4 it required the windows to conform to CAN/CSA-A440-M90 A-2, B-2 and C-2 performance levels. Clause 1.5.2 of the specification required the plaintiffs to submit data showing that the windows had been tested and complied with that test. The A440-M90 test is a laboratory test for air and water tightness and structural performance. It is not intended to test the window system in place, but only to rate it by reference to the standards set out so that a purchaser can decide if that particular product is one he wishes to specify.

13         The data the plaintiffs gave the defendants to satisfy that contract requirement was a copy of a letter from Warnock Hersey to Ferguson Glass Ltd. (sic) dated October 28, 1992 stating their window system had passed the CSA A440-M84 test in the laboratory. Evidence which has recently come into the defendants' possession shows that letter was a misrepresentation of the facts. Exhibit G to Mr. Docherty's affidavit filed November 29, 1995 is the actual test report from Warnock Hersey to Concord Pacific Management Ltd. dated October 1, 1992. It dealt with the same system but with respect to a sample of the windows submitted under a different construction project. It shows that the window system passed the air and water tightness tests but failed the structural performance test. The latter test deformed the window's structural members to the degree that gaps developed between some of the members and the system then leaked when the water tightness test was repeated. For Ferguson to have sent the October 28, 1992 Warnock Hersey letter to the defendants without also telling them what the wind load resistance test result meant and what had happened during the whole test was in my view misleading. In fact there was a breach of the contract term 1.5.2 of the specification that the system should be shown by data to have complied with the CAN/CSA - A440-M90 performance test. It failed the test. The evidence permits me to make that finding now and I do so.

14         What flows from that breach of contract is not clear. Damages may result only if that has caused some loss which arose naturally from the breach or which the parties may reasonably be supposed to have had in contemplation. Both by the wording of the payment condition in the contract letter, and by common sense, the parties must have contemplated that the requirement of these windows was that they should keep out the weather. There is not much to be said about a window system which will not adequately perform that elementary task. But the issue in this lawsuit is whether or not there has been substantial completion of the contract, or, put otherwise, whether or not these windows reasonably perform that task.

15         In my judgement that issue is to be decided by deciding whether the architects have acted reasonably in refusing to certify that the windows are weather tight. That will depend upon the performance of the system as a whole. Small deficiencies will not prevent substantial completion. They may be remedied under the warranty provisions of the contract. On the other hand, a major fault in the system as a whole would make it reasonable to refuse payment on the basis that the contract is incomplete.

16         The architects decided to requisition re-testing of four windows, randomly chosen, to see how they performed after installation. There had been earlier such field tests to which the plaintiffs did not object. They now object to the subject tests carried out on June 19 and 20, 1995 and they also dispute what those tests showed.

17         The contract does not specify a field test nor does it set out any description of a suitable test. However, general condition 3.6 of the CCDC2 (1982) contract form which was part of this contract provides that the consultant, in this case the architects, shall, in the first instance, be the interpreter of the requirements of the contract documents and the judge of performance thereunder. In my judgement that clause means that the architect is to decide what is and is not weather tight. That is what paragraph 2(g) of the contract letter means too. General condition 3.8 gave the architect authority to require special inspection or testing of work done under the contract. In my judgement that gave the architects the authority to request a field test. Wile there is nothing in the clause to indicate what standard the architect should apply, the law requires it to act judicially, that is to say, fairly and reasonably in the circumstances, see Kamlee Construction Ltd. v. Town of Oakville [1960] 26 D.L.R. (2d) 166 (S.C.C.) at 180, and see Hickman v. Roberts [1911] A.C. 229. In my judgement the architect was entitled to use the services of a testing service if it chose, to judge if the windows were weather tight within the meaning of the specifications. It had that right both as a matter of common law and under the general conditions of this contract. But any test must be one which is appropriate to these windows after installation, rather than under laboratory conditions. There is a major dispute between the parties whether these particular filed tests were adapted to the filed. Mr. Docherty's credibility on that issue is called into question, as are the competing opinions of various experts who have filed affidavits.

18         The plaintiffs argued that the defendants waived the right to defer payment until the architect accepted the work. That is based upon the fact that payment was made for some completed floors without an inspection and certificate from the architect. In my opinion that does not preclude the defendants from resorting to the payment condition now. Articles A-5 (B), 14.12 and 24.6 of the CCDC2 (1982) contract terms precludes the application of waiver with respect to the condition of payment. Moreover, for a plea of waiver to succeed the plaintiffs must show both that the defendants were aware of some right they were giving up and that the plaintiffs themselves have acted to their detriment in reliance on the defendants' failure to insist on the architects' approval. Here, the earlier payments were made before the defendants suspected there might be a serious deficiency in the plaintiff's contract performance. There is no evidence that the plaintiffs have acted to their detriment based on the defendants' omission to obtain the architects' approval before making the earlier payments. The evidence of Mr. Shoesmith, the defendants' Project Manager, is that the earlier payments were made without calling for approval by the architect as a means of keeping the administration costs down while there was no dispute between the owner and defendants and the trades. The plea of waiver has no application to the facts of this case.

19         The plaintiff's key position is that because so few leaks have been reported since February 1995, including the disputed leaks from the June 19 and 20 tests, and because those have been remedied, substantial completion has been achieved and the defendants are unreasonable in delaying final payment. If that were the only evidence, it would be an attractive argument. But there is a complicating factor. It is, that in a twin tower where the window system is substantially the same, but with some admitted modifications, there has been a serious leak problem. While each contract and window system stands alone, the evidence at this stage may suggest a conclusion that the leaks in the twin tower are of such a nature that water appearing inside the building at a lower floor originates from a leak that occurs several floors above. There is evidence that the task of locating the point of the leak and remedying it involves removing the windows for several floors above where the water shows. That involves a high potential cost. If the same remedy is found necessary for the subject building there is a possibility that the cost will exceed the balance owing on the contract. The defendants also point to the high number of leaks initially present in the subject building and the risk that the methods or remedying them do not conform to the contract standards. They are concerned that there may be other leaks which have not yet revealed themselves on the inside of the suites.

20         Some of the leaks demonstrated by the June 19 and 20, 1995 tests are said by the plaintiffs not to constitute water ingress as defined in the A440 standard. The standard specifies that water leakage only occurs when there is continuous and repeated wetting of the interior building components. That is said not to include the interior parts of the aluminum window frames themselves. With respect, that limited definition appears in the standard which these frames were required to meet before they were selected. The test of performance under the contract was that they should be weather tight. The plaintiffs' position appears to be contradictory when they first complain that the standard was wrongly used as a field test but then rely on it to say the test showed the window system met the contract criteria. I am not prepared to say the test criteria was or was not a reasonable definition of the contract requirement that the windows should be weather tight. That judgement cannot be made without extensive expert and other evidence from both sides. Nor should this case be decided without the benefit of evidence to show the causes of the leaks that remain, the likelihood of existing but undiscovered leaks and to show whether the remedial measures to date have met the contract specifications. All of that is put in issue both by the experience on this building and on its twin tower.

21         The plaintiffs rely on the case law which says that under some circumstances it is appropriate to grant judgment on a claim and leave the defendant to pursue its counterclaim independently. See for example DeGelder Construction Co. Ltd. v. Dancorp Developments Ltd. et al (unreported) June 16, 1994 New Westminster Registry No. A910895 (S.C.B.C.). In my judgement that is not applicable here. The defendants claim a set-off of the repair costs, so far unknown, against the whole of the plaintiff's claim and counterclaim for any balance of costs over that. Their position rests upon the allegation that there has been no substantial completion because the original letter of conformance to the standard was misleading and because the architects have not yet certified the windows as weather tight in accordance with the contract. Their point is that there has been no performance as required by the contract. In my judgement it would be anomalous to grant judgment for the plaintiffs as if the contract were already substantially complete and then to leave the defendants to continue their action to recover whatever repair costs prove to be necessary on the basis that the contract is still incomplete. I agree that the decision in Coba Industries Ltd. v. Millie's Holdings (Canada) Ltd. [1985] 65 B.C.L.R. 31 (B.C.C.A.), cited in United Metal Fabricators Ltd. v. Voth Bros. Construction (1974) Ltd. [1987] 42 D.L.R. (4th) 193 (B.C.C.A.) is applicable to this case. There, five principles were set out under which a plaintiff will be refused judgment on a Rule 18 or 18A application where there is a claim against it by the defendant. The evidence before me appears to bring this case squarely within principles 1, 2, 3 and 5 set out at p.199 of the United Metal decision.

22         On the history of this contract to date, I am unable to say that it has been finished to a weather tight standard. Nor am I able to say if that standard is properly represented by the field test applied by Warnock Hersey in June 1995 nor whether the results of that test are more generally applicable to other suites in the building. I am unable to say if the remedial measures already carried out by the plaintiffs constitute performance to the contract level. Nor am I able to say whether the defendants' fear that there are undetected leaks or that water appearing at one level is caused by leaks at a higher level is unfounded. If the defendants are proved right, they may have a set off that will substantially encroach on or exceed the balance owing under the contract. All of those matters will emerge more clearly by the time set for the trial of this action in 1997.

23         The guiding test for an application under Rule 18A ia set out in Inspiration Management Ltd. v. McDermid St. Lawrence Ltd. [1989] 36 B.C.L.R. (2d) 202 (B.C.C.A.). While I can find that the plaintiffs have supplied and installed all the windows required by the contract and that there have been few leaks since February 1995, I cannot find that there ae not, as alleged by the defendants, contract deficiencies that amount to a failure of substantial performance. There is in my view a strong case to be made that the system did not pass the laboratory test originally and the defendants were misled about that. I cannot at this stage tell what damages, if any, flow from that.

24         There is a substantial amount of money at issue here, both on the claim and on the potential set-off and counterclaim. But the parties are substantial corporations not likely to be financially crippled by waiting until the trial. Interest will run on any judgment under the contract and there is no suggestion the defendants cannot pay it. Rather than urgent, this is a matter which requires time to develop all the evidence about the system and its possible flaw.

25         In my judgement it would be unjust to grant the plaintiffs judgment before the defendants have had an opportunity to develop their claims against them. At the same time, the defendants are obliged to pursue their investigations expeditiously so that whatever their case is the evidence will be ready to go to trial on the date set.


26         At the beginning of the hearing, Mr. Logan informed the plaintiffs and the court that in his view the case could not be resolved by a Rule 18A application. The plaintiffs proceeded nonetheless. Under those circumstances the defendants will have the costs of the application, but in the cause.

                                      "J.E. Spencer, J."

Vancouver, B.C.

December 20, 1995