Construction Industry

Construction Industry Class Actions in Canada

Construction industry class actions quickly become multi-party.  Plaintiffs bring in many defendants, including from each level of government.  No one is immune from "defendantization" – architects, lawyers, accountants, real estate agents, investment advisors, bankers, bureaucrats.  Defendants often bring others into the litigation in third party proceedings and some even counter-sue the plaintiff.

The involvement of multiple parties results in complexity that can make it tough for plaintiffs to satisfy the certification criteria.  As stated by Martin J. in Condominium Plan No. 0020701 v. Investplan Properties Inc., 2006 ABQB 224:

[83] When common issues are stated in terms of "defendants", it can be easy to lose sight of how the complexity of proceedings may increase when multiple defendants are involved.  Certain of the stated common issues do not apply to each Defendant, either at all or in the same way.

At the same time, the complexity of multi-party construction scenarios makes them suitable for resolution as class actions.  In Western Canadian Shopping Centres Inc. v. Dutton, [2001] 2 S.C.R. 534, McLachlin C.J.C. stated that in “complicated cases implicating the interests of many people, the class action may provide the best means of fair and efficient resolution.”  Class actions legislation offers case management tools to help manage complexity where many parties are involved.  Courts may stay third party proceedings and counterclaims until primary claims are resolved.

The following summarizes situations where the construction industry has been brought into a class action in Canada.  Although there is overlap, they may be categorized as those relating to: (a) bidding; (b) marketing; (c) financing; (d) deficiencies; (e) business interruption; (f) incomplete condominiums; and (g) toxic exposure.  Contact Me for full citations, footnotes, and new cases decided after Jan. 10, 2013. 

A.    BIDDING
In Controltech Engineering Inc. v. Ontario Hydro, Controltech Engineering Inc. sued Ontario Hydro and its directors and officers for damages, restitution, and exemplary, aggravated, and punitive damages for fraudulent and negligent misrepresentation, misuse of confidential information, breach of contract, inducing breach of contract, unjust enrichment, and intentionally causing economic harm through unlawful means.  Ontario Hydro issued a request for proposals (“RFP”) from bidders to provide it with electricity from renewable energy technology in 75 projects.  Applicants were narrowed down in a three step bidding process.  Detailed second-stage bids were submitted for 36 projects.  Final bids were submitted for 17 projects, from which ten projects were to be selected.  On January 19th, 1997, after bidders went through considerable expense to prepare applications, Ontario Hydro terminated the program without awarding any contracts.  The plaintiff sued on behalf of 51 parties who responded to the RFP and had submitted bids for the 75 projects.  Certification was refused as Sharpe J. characterized the claim “at its core” or resting on the assertion that the defendant “misrepresented important facts to those who participated in the RFP process” and there was no single misrepresentation.

B.     MARKETING
This category of case involves misrepresentations in marketing materials that were distributed before construction of a project or, in the case of multi-unit dwellings, before conversion from rented apartments to owned condominiums.

In Abdool v. Anaheim Management Ltd., on behalf of 325-350 condominium unit purchasers in the Mississauga Anaheim Towers project, 150 named plaintiffs sought $100 million from the project owner-developers, their lawyers and accountants, the assignees of debt instruments, and the real estate brokers.  Central Guaranty Trust Company financed unit purchases through mortgage financing and unsecured “Equity Line” promissory notes.  After Central wound up, the TD Bank and the Adelaide Capital Corporation got the notes, which the plaintiffs sought to rescind.  The plaintiffs complained that the units were not sufficiently luxurious to obtain the rents forecasted to them, and that the rents were insufficient to cover their mortgage and financing charges.  They named the accountants who reviewed the forecasts.  Montgomery J. denied certification because of the presence of individual issues, including detrimental reliance.

In Bosworth v. Jurock, on behalf of those who acquired ownership in BCS 2210 by purchase from Roosevelt Apartments and who received a transfer of that unit either from Roosevelt Apartments Ltd. or Seal Cove Properties Ltd., Gregory Bosworth sued Oswald Jurock, David Barnes, Ralph Case, Standard Apartments Ltd., Proper Tee Investments Ltd., and Greenwich Holdings Ltd. for misrepresentation pursuant to the Real Estate Development and Marketing Act, S.B.C. 2004, c. 41 (“REDMA”) and for negligent and fraudulent misrepresentation.  Shannon Stange, Frank Lonardelli, and Arlington Street Investments Inc. were added as third parties.  In 2006-07, the defendants marketed the units of the proposed stratified apartments to class members.  The REDMA required them to provide prospective purchasers with a disclosure statement.  Their Disclosure Statement said the Roosevelt buildings were “free from material defect”, but did not refer to a June 2005 review which indicated a need for chimney flashings, siding repainting, replacement of window panes, and other repairs, estimated at $35,109 per unit.  The deficiencies related to common property of BCS 2210, and there were no deficiencies in individual strata lots.

In Haddad v. Kaitlin Group Ltd., on behalf of 250-300 purchasers of lots in a subdivision in Newcastle, Ontario, Jean-Marc Haddad sued the marketers of the lots for damages or restitution in misrepresentation and waiver of tort.  The marketers represented that a golf course would be built within the subdivision and that class members would get free lifetime memberships.  Each of the purchasers signed a standard form Agreement of Purchase and Sale.  The golf course was not constructed.  The clubhouse was built, but free lifetime memberships were not given to class members.  The plaintiff sought the revenues earned from the sale of the golf course lands and the expenses saved by not building the course.

In Lee v. Georgia Properties Partnership, on behalf of purchasers of development units in the Private Residences at Hotel Georgia (the “Development”), C.H. Lee sued Georgia Properties Partnership, 0729909 B.C. Ltd., Georgia Trust (2005), and Hotel Georgia Management Ltd.  From September 2007, the defendants marketed strata lots in the Development.  The units varied in asking price from $605,000 to $18,000,000.  As the Development was unfinished by December 2011, the completion date set out in the original disclosure statement, the plaintiff asserted that the disclosure statement contained a misrepresentation under the REDMA, supra, which the defendants failed to correct until May 22, 2012.  She sought to represent those who purchased a unit before that date.
                    
In Lewis v. Cantertrot Investments Ltd., on behalf of 120 purchasers of residential condominium units in “The Residence of Beauclaire” in Thornhill, Ontario, Solly Lewis and Hersl Kalif sued the vendors of the units and the listing agent, the officers and directors of the condominium corporation, and the drafter of the documents that contained the misrepresentations for damages in negligence, negligent misrepresentation, breach of the Condominium Act, fraud, oppression, and breach of fiduciary duty.  In the disclosure statement, budget, and flyer, the defendants said that monthly assessments and maintenance fees that would be payable by purchasers of units in the project would be $0.32 per square foot.  They were ultimately 62.24% more.  The action settled for $400,000.

In Peppiatt v. Nicol, on behalf of 169 purchasers of equity memberships in a golf club near Ottawa, Paul Peppiatt, George Nichols, and Peter Wyslouzil sued the Royal Bank of Canada (“Bank”) the “Nicol” group, and the Eagle Creek Golf Club.  The Bank brought the law firm of Soloway, Wright, Victor as a third party for breach of contract and professional negligence, but those claims were ultimately dismissed.  The plaintiffs sought general, special, and punitive damages of more than $19,750,000 for negligence, misrepresentation, and breaches of contract, trust, and fiduciary duty.  In the early 1980’s, the Nicol Group built an 18 hole professional golf course.  Nicol promoted the sale of equity ownership units in the club to the public.  Class members purchased memberships in the club in reliance on written representations in four different Membership Information Packages (“MIP’s”).  The MIP’s contained various misrepresentations, including that the Club would be built for $6,500,000 within 3 years but only if 260 memberships were pre-sold.  If 260 memberships were not sold, the construction was not to proceed and all subscription proceeds were to be returned to subscribers.  Nicol was unable to sell the required 260 memberships, but began to build the course anyway.  The Royal Bank provided Nicol with the funds to purchase the remaining 92 memberships, using the club’s land for security.  When Nichol could not meet its financial commitment to the bank, the Royal Bank took over the club.  After a trial, the Court found the Bank and Nicol liable for $3,400,000 (value of the equity membership units) plus $2,917,218.82 in compounded pre-judgment interest.  The Court also found Nicol liable for $845,000 in punitive damages.

In Sharbern Holding Inc. v. Vancouver Airport Centre Ltd., on behalf of approximately 200 owners of 215 strata units in the Airport Hilton, Sharbern Holding Inc. sued Vancouver Airport Centre Ltd. (“VAC”), its affiliate and subcontractor, Larco Hospitality Management Inc. (“HMS”), and MM&R Valuation Services, Inc., in breach of trust and fiduciary duty (VAC and HMS) and in misrepresentation (VAC and MM&R) for rescission, damages, and an accounting.  Class members purchased strata units in the Airport Hilton in Richmond pursuant to VAC’s 1998 offering memorandum which, based on MM&R’s projected occupancy rates and average daily room rates, projected an average annual cash return of 16.6% over the first five years.  Unit owners ultimately incurred losses instead of obtaining the 16.6% returns.  The offering memorandum also represented that there was no conflict of interest that could reasonably be expected to materially affect a purchaser’s investment decision.  However, the parent of VAC and HMS, Larco Investments Ltd., had also developed another hotel, the Airport Marriot, that was connected to the Hilton by a retail concourse and parkade.  VAC and HMS operated and managed both the Hilton and Marriott hotels as well as a third hotel on adjacent property, the Best Western Richmond Inn.  In the hotel asset management agreements, there were additional performance based incentives for VAC and HMS respecting management of the Marriott, and Marriott unit owners were guaranteed a 12% return for the first five years of operation, whereas a 16.6% return was merely projected for the Hilton units.  As a result, it was alleged that VAC and HMS would benefit by diverting hotel guests to the Marriott instead of the Hilton, and they had an incentive to allocate common management expenses to the Hilton rather than to the Marriott.  The plaintiff asserted that it was a breach of fiduciary duty not to disclose those material differences in the offering memorandum.  The case ultimately reached the Supreme Court of Canada on the merits of the common issues.

Stachniak v. Jurock involved defendants that overlapped with Bosworth v. Jurock, supra.  In Stachniak, on behalf of approximately 82 persons who acquired units in Crestwood Estates, a group of strata titled buildings in Williams Lake, from July 2007 to March 2008, Brian Stachniak sued the developer, vendor, and marketers of the project and their principals for damages and “other relief” in misrepresentation and waiver of tort and for breach of statutory duties under the REDMA, supra, the Business Practices and Consumer Protection Act, S.B.C. 2004, c. 2 and the Competition Act, R.S.C., 1985, c. C-34.  Units in the building were being rented at below market rates, and as described in marketing materials, class members were to purchase units at less than their appraised values that the defendants would then upgrade and rent to new tenants at current market rates.  Class members were to receive profit distributions from their participation in a managed rental pool arrangement.  After the sale, the plaintiffs learned that there numerous deficiencies in the Crestwood Estates buildings that were not described in the disclosure statement provided to them pursuant to the REDMA, that their unit had not been upgraded, and that there in fact was no appraisal to indicate that the purchase price was less than the appraised value.  On behalf of the class, the plaintiff sought the profits obtained from marketing and selling the units, the difference between the purchase price paid and the fair market value of the units as of closing, the amount of the assessments required for deficiency repairs (approximately $16,000 per unit), and the cost to upgrade the units to a determined standard.

C.    FINANCING
The typical situation in this category is where investors put up money for an inadequately secured project or where their funds are misappropriated (or both).

In Collette v. Great Pacific Management Co., on behalf of 1,000-1,500 purchasers of investment units in the Multimetro Mortgage, mortgage units relating to commercial developments in Nanaimo (a hotel) and Parksville (luxury condos), Guy J. Collette sued the seller and listing agent of the units for breach of contract, negligence, and negligent misrepresentation.  The defendants brought in Multimetro Mortgage Corporation and Ken Megale as third parties (“Multimetro”).  The borrowers did not make any payments of principal and interest on the loans, and the proceeds of realization of the security was insufficient to repay investors.

In Cooper v. Hobart, on behalf of 3,350 investors, Mary Francis Cooper sued Robert J. Hobart and the province for damages in negligence.  The province brought in third parties.  Between January 1996 and July 1997, the plaintiff invested money through Eron Mortgage Corporation (“Eron”).  Eron acted as a mortgage broker for large syndicated loans.  It arranged for investors to pool funds to make loans to developers of commercial real estate.  The loans were made in the name of Eron or its related companies, who held the security in trust for the investors.  Eron misappropriated the funds for unauthorized purposes, such as paying interest on other non-performing mortgages and paying for personal items of its principals.  Only $40 million of the $222 million outstanding to investors was able to be realized from the security taken for the loans.  On October 3rd, 1997, Hobart suspended Eron’s mortgage broker’s license.  The plaintiff said he should have done so by August 26th, 1996, when it knew that Eron violated the Mortgage Brokers Act.  The courts found no cause of action against the government essentially because the Mortgage Brokers Act imposed duties to the public as a whole, not to any individual investor.

In Elms v. Laurentian Bank of Canada, on behalf of 201 investors, Peter Elms and Doyle Schmaus sued the Laurentian Bank of Canada and the Laurentian Trust of Canada Inc. (“Bank”), Oliver Drabik Carruthers & Chalcraft (“Oliver”), Taylor Ventures Ltd., Ralph Dennis Taylor, Floyd Taylor, and 413975 B.C. Ltd. (“TVL”) (land developers) for damages in negligence, breach of trust, and breach of fiduciary duty.  TVL bought 5 pieces of land and registered mortgages against it in the name of 413975 B.C. Ltd.  The plaintiffs deposited funds with the Bank into RRSP’s.  The bank sent the money to Oliver, and Oliver sent assignments to the Bank.  After the assignments were registered, Oliver advanced the money to TVL.  Class members received fractional interests in the mortgages.  Oliver drafted the conveyance documents for the land purchases and mortgage and assignment documents.  The land was worth less than what the investors had advanced.  TVL went bankrupt.  The plaintiffs asserted that the bank and law firm breached a duty to inform them that their investment far exceeded the value of the land.

In Gary Jackson Holdings Ltd. v. Eden, on behalf of 15-16 investors who contributed to a fund of $1,970,000 for use in “The Elyse”, the plaintiff sued the developer Eden and Bancorp in breach of trust and for knowing assistance in the breach.  Bancorp lent $3,005,000 to Eden to use in The Sophia, one of Eden’s projects.  Eden pledged another of its projects, The Elyse, as security for the loan.  When The Elyse was sold, there were insufficient funds to pay class members and Bancorp.  The plaintiff sought beneficial ownership in The Elyse and distribution of the available sales proceeds.

In Gillespie v. Gessert, on behalf of investors, in negligent misrepresentation, negligence, breach of contract, and breach of fiduciary duty, Rita Joyce Gillespie sued a mortgagor, original mortgagee, their principals, three known trust companies who held the RRSP’s, two lawyers who effected the transfer of the RRSP monies and/or registration of a fractional transfer of one of the mortgages, and some known and unknown persons who marketed and sold the investment throughout British Columbia, Alberta, Saskatchewan, and Ontario.  Class members invested in the mortgages using their self directed RRSP accounts.  On February 1st, 2001, Creative bought 8.48 acres of land in northern Alberta from the Government of Alberta.  On February 14th, 2001 and July 17th, 2001, though the land had a market value of only $15,000, Creative mortgaged the land to Windrose for $7,000,000.  Windrose indirectly transferred interests in the mortgages to class members in exchange for money from their RRSP accounts.  In late 2000 or early 2001, the plaintiff opened two RRSP accounts with CWT for $172,000, whom she instructed to forward the funds to Klaus Gessert, who in turn transferred a fraction of the mortgage from Windrose to CWT as trustee for Ms. Gillespie.  The money was ultimately transferred to Creative.  Ms. Gillespie did not have any dealings with Concentra, Olympia, or Knight, who acted in a similar capacity to CWT with respect to other class members.  Because she did not deal with some of the defendants, Horner J. refused to allow the class action to proceed with respect to any of the defendants on that basis alone.  He was influenced by the fact that the plaintiff believed that she was involved in a tax fraud scheme when making her investment.  Some of the defendants sued third parties, many of whom the plaintiff had added as defendants.  Some of the defendants were noted in default.

In Jin v. Canada Everich Real Estate Group Inc., on behalf of everyone who subscribed for units pursuant to a 2007 offering memorandum, Hong Jin and Xia Lei sued Canada Everich Real Estate Group Inc. (“Everich”), Chestermere East Inc., 1465907 Alberta Ltd., and solicitors for Everich in breach of trust for a return of subscription funds, damages, and interest.  Everich offered units, which class members purchased by providing money to one of the lawyers in trust.  Pursuant to the offering memorandum, money was to be returned to investors if Everich did not receive $9 million of subscriptions by August 30th, 2007.  It failed to achieve the minimum but bought the 160 acres of land near Chestermere anyway after the one law firm transferred the trust monies to another law firm to close the purchase.  The investment failed.

In McDougall v. Collinson, on behalf of 160 RRSP / RRIF investors who each invested an average of $39,000 in four syndicated mortgage funds, involving six real estate projects in the interior of British Columbia, Marilyn McDougall sued the promoters, the umbrella company and its four companies, and several others in negligence, breach of trust and fiduciary duty, and breach of contract  The four companies raised at least $6,148,069 from class members through offering memoranda.  Financing, construction, and management of the projects was undertaken pursuant to a complex arrangement of interrelated agreements.  To get investment units, investors signed a subscription agreement, a mortgage, and an agreement of nominee ownership.  The nominees advanced the funds to the four companies, issued mortgage unit certificates to investors, and held the mortgage security.  Third party proceedings were initiated, and the IMF Group and DDAI counter-sued Ms. McDougall.  Based on unparticularized pleadings of any wrongdoing and a lack of evidence to support the generalized allegations, the Court had difficulty establishing which acts were alleged to constitute the causes of action that were pled, and was therefore unable to identify the claims.  The Court referenced the plaintiffs’ “general unhappiness over their losses” and their “suspicions of misconduct”.  Certification was denied on the basis that there were no common issues and that a class action was not preferable:

The Court was also influenced by the fact that a class action could financially destroy many of the defendants.

In Metera v. Financial Planning Group, on behalf of representatives of 85 Alberta residents who invested in Barclay Las Vegas Limited Partnership, four investors sued The Financial Planning Group and the Assante Corporation for breaches of statutory, contractual, and fiduciary duties.  The Height of Excellence Management Ltd. sold limited partnership units in Barclay Las Vegas LLP through 13 mutual fund salesmen.  Most investors invested over $100,000 for the units ($40,000 cash, $60,000 by promissory note).  The plan was for Barclay to buy an apartment complex in Las Vegas and then later resell it at a profit.  In the summer of 1999, Barclay Las Vegas LLP became the subject of Chapter 11 proceedings in the U.S.  By March of 2000, the property had been foreclosed upon.  The plaintiffs asserted that the defendants:

In Nash v. CIBC Trust Corp., on behalf of RRSP and non-RRSP investors in Maters Management Ltd. (“Maters”) as of January 19th, 1990 in which Morgan Trust acted as their trustee, Dr. Lawrence Nash and seven others sued the CIBC Trust Corporation for damages in breach of contract, negligence, and breach of trust.  Class members invested in mortgages on various residential and commercial properties owned by Maters and related companies.  After the Director of Consumer Protection froze Maters' assets and forbid it from raising further funds from investors, the defendant, previously named Morgan Trust Company of Canada (“Morgan Trust”), the mortgagee in trust for investors in Maters' projects, and the trustee of the RRSP Investors’ RRSP’s, applied to the court and obtained an order appointing a receiver.  The plaintiffs said there was no authorization to do that and that Morgan Trust did not act reasonably in so doing.

In Tampa Hall Ltd. v. Canadian Imperial Bank of Commerce, on behalf of unpaid creditors who supplied materials or services to Cadillac Lumber Limited (“Cadillac”) which were incorporated into improvements as defined by the Construction Lien Act and which materials or services were paid for by the recipient to the Canadian Imperial Bank of Commerce (“CIBC”) directly or through its agents, Tampa Hall Limited sued CIBC and Ernst & Young Inc. (Trustees in Bankruptcy for Cadillac) in negligence (not inquiring as to Construction Lien Act trust beneficiaries) and for knowing receipt of funds in breach of trust.  Cadillac was a manufacturer, wholesaler, supplier, and retailer of lumber related products.  It made general lumber, plywood, particle board, etc. and also custom made stairs, trusses, trim etc. which were installed in improvements and relating to which it acted as a subcontractor.  It purchased materials for its construction from suppliers who went unpaid and filed a class action after Cadillac went into bankruptcy.  CIBC, Cadillac’s bank, appointed KPMG as a receiver.  KPMG collected unpaid accounts from Cadillac’s debtors, but did not pay any of those funds to class members.  The plaintiff asserted that KPMG collected those sums as a trustee under the Construction Lien Act and that the funds should have gone to class members.  Because Cadillac did not keep records of which suppliers’ products went to which customers, it could not trace the supply of commodities and services from class members to particular projects.  Since there were only five potential class members who had traceable claims and since the claims totaled $793,300.95, Haines J. found a class action to not be preferable as they could pursue claims in another way.

Western Canadian Shopping Centres Inc. v. Dutton involved investments in land in northern Saskatchewan through Canada’s Business Immigration Program of Employment and Immigration.  On behalf of holders of 231 Class “A”, “E” and “F” Debentures issued by Western Canadian Shopping Centres Inc. (“WCSC”), whose sole shareholder was Joseph Dutton, WCSC, Muh-Min Lin, and Hoi-Wah Wu sued 22 defendants, including directors, lawyers, and accountants for breach of fiduciary duty.  Third party proceedings were also initiated.  Pursuant to various offering memoranda distributed in different locations by different agents, Investors deposited their funds with The Royal Trust Company.  Claude Resources Inc. (“Claude”) was involved in gold exploration in northern Saskatchewan.  Pursuant to a May 1990 Purchase and Development Agreement, for $5.55 million, Claude sold rights to a Crown surface lease to WCSC on land adjacent to Claude’s “Seabee” gold deposits.  WCSC agreed to commit $16.5 million for surface improvements and for the construction of a gold mill.  WCSC raised the $22.05 million by issuing Class “A” debentures to 142 of the investors.  Other investors later contributed funds in exchange for Series “E” and “F” debentures, which were pooled with the Series “A” debentures in terms of priority to the underlying security for the investments.  Claude leased back the land and mill for rental payments that matched the amounts that WCSC was to semi-annually pay as interest to investors.  It was to make lease payments in amounts equal to the interest payments due under the debentures.  Claude’s failure to make the lease payments due in December of 1991 triggered the class action.  The plaintiffs alleged that funds were mismanaged and misdirected and that the investment was improperly secured.

D.    DEFICIENCIES
This category can be split between cases involving defective construction methods and cases involving installations of defective goods.

(a) methods
In Bunn v. Ribcor Holdings Inc., on behalf of 110 homeowners (direct and indirect purchasers), Dianne Bunn sued Ribcor Holdings Inc. (“Ribcor”) and the Corporation of the Township of Scugog (“Scugog”) in breach of contract, breach of statutory duty, negligence, and misrepresentation for compensatory damages of $5 million, punitive and exemplary damages of $1 million, interest, and costs.  Ribcor built 95 homes in a subdivision of Port Perry.  The houses were developed and sold in two stages, five years apart.  In promotional materials, Ribcor said the homes would be of high quality, modern, and energy efficient.  The plaintiff said the homes were not built according to the Ontario Building Code, and were not of a workmanlike manner, free from defects, or fit for habitation.  Scugog was alleged to have not properly detected or prevented Ribcor’s defective construction.  Ribcor counterclaimed for slander and libel.

In Condominium Plan No. 0020701 v. Investplan Properties Inc., on behalf of condominium purchasers, Condominium Corporation No. 0020701 sued developers and their directors, sales agents, and an engineer for damages in fraudulent and negligent misrepresentation, breach of statutory and common law duty to warn, breach of fiduciary duty, and negligence (against Manticore).  “The Residence” condominium project in Edmonton had 100 suites.  Between February 24th, 1998 and March 9th, 2000, The Residence was converted from an apartment building to a condominium project.  The defendants were involved in the conversion of the building and sale of the units between March 9th, 2000 and March 1st, 2003.  There were construction deficiencies relating to the conversion.  As Martin J. described:

[6]  ...  By way of overview, it is alleged that after control of the Corporation was turned over to the unit owners, the Board of the Corporation became aware of serious problems and deficiencies in respect of the common property.  Extensive work was required to repair severe deterioration of the parkade, post-tension cables, the building envelope (including mechanical lines), parkade service de-laminations, climate control issues and fire code deficiencies.

In Kimpton v. Canada (Attorney General), on behalf of those who purchased or owned a building, suite, or dwelling unit in British Columbia made with frame construction between 1985 and 2000 in accordance with either the National Building Code (“NBC”) or the BC Building Code (“BCBC”) that the province enacted as law and that developed or may develop problems resulting from the accumulation or condensation of water or vapour in exterior walls, Mary Louise Kimpton sued the provincial and federal governments and the Canada Mortgage and Housing Corporation for negligence, negligent misrepresentation, and failure to warn.  In 1990 “The Willows” condominium complex was constructed in Saanich.  It suffered building envelope failure because it was constructed in compliance with the NBC’s requirement that exterior walls be sealed by two vapour barriers.  That requirement was unsuitable for the moist environment in British Columbia because moisture that became trapped between the barriers caused structural damage with ensuing health risks.  The plaintiff said the federal government, through the National Research Council, was negligent in drafting the NBC, and that the province was negligent for adopting it by regulation and for drafting and adopting the BCBC.

In Mackie v. Toronto (City), on behalf of tenants who lived with mental health or cognitive disability and who formally complained of a problem concerning disrepair of their rental unit and whose complaint was not resolved within two weeks, Josephine Grey Mackie, Jean McCarthy, and Cornelia Harrison sued the city and the Toronto Community Housing Corporation (“TCHC”) for an order requiring the defendants to repair their buildings in accordance with regulatory standards, an order under s. 24 of the Charter,  $500 general damages for each class member, and punitive, aggravated, and exemplary damages in negligence and for breaches of the Human Rights Code and ss. 7 and 15 of the Charter.  The plaintiffs tried for a decade to get TCHC to repair their buildings.  Perell J. struck the action as the Landlord and Tenant Board under the Residential Tenancies Act, 2006 had exclusive jurisdiction over the failure to repair claims and the Human Rights Commission had exclusive jurisdiction over the Human Rights Code and- Charter claims.

In McKinnon v. Martin & Moosomin (Rural Municipalities), after $60 million had already been expended on a wind turbine project, David McKinnon sued the municipalities of Martin and Moosomin, the Red Lily Wind Energy Corp., and 7314507 Canada Inc. in nuisance and negligence for an injunction seeking to halt all construction and operation of wind turbine generators within 2000 metres of occupied homes.  The plaintiff alleged that when constructed that close, wind turbine generators are associated with sleep disturbance and deprivation and resulting health risks including cardiovascular disease, increased stress, weight changes, headaches, depression, and anxiety.

In McMillan v. Canada Mortgage & Housing Corp., on behalf of purchasers of a “residential occupancy, unit or interest in a multiple-family, building located on the West Coast of Canada” which utilized a Face-Sealed or Concealed-Barrier wall assembly, incorporating Stucco Cladding, a Wood Frame, and Air Barrier and who were required or assessed to pay costs associated with repairing any such wall assembly as a result of water or moisture ingress into the wall assembly, Alan McMillan and Linda Hepner sued the Canada Mortgage and Housing Corporation (“CMHC”) for damages in negligence, including for breach of duty to warn.  After buying a condo in the Villa Positana complex in White Rock, the plaintiffs learned that there could be a problem with water leaks and moisture-related damage to the complex.  They were assessed a share of repairs made by a contractor ($61,795.10).  A Report of the Commission of Inquiry into the Quality of Condominium Construction in British Columbia by Dave Barrett, Commissioner (Victoria: Minister of Municipal Affairs, June 1998) looked into the leaky condo problem in British Columbia.  CMHC investigated housing problems in Canada and learned of design and construction flaws in residential dwellings in the West Coast.  Through its investigations, the CMHC knew that a sealed exterior face of the walls with an energy efficient interior design would result in the trapping of moisture inside buildings, the build-up of mold and fungi, and structural deterioration.  The plaintiffs alleged that CMHC was under a duty to

They claimed that CMHC breached its duties and statutory obligations and that the plaintiffs suffered damage as a result.  Both the BCSC and the BCCA dismissed the claim because of no duty of care.  The duties alleged were not analogous to previously recognized duties and the CMHC Act and Housing Act did not indicate that a duty of care was owed to specific homeowners, but rather to the general public.

In Spencer v. Regina (City), on behalf of direct and indirect purchasers of a Norlawn home that was built by Carma Developers Ltd. (“Carma”) and inspected by the city, Douglas and Judy Spencer sued the city and Carma in negligence for damages, including the cost of repairing the homes and for their loss of value.  Between 1971 and 1974, Carma designed and constructed 40-50 “Norlawn” homes that the City inspected, approved, and permitted construction of.  In 1985, the plaintiffs bought 10 Bird Bay and had to do major repairs to the basement walls and foundation.  The plaintiffs alleged that the design of the homes was deficient.  Zarzeczny J. declined to certify the class action because of the presence of individual issues applicable to each class member and each home.

(b) installations
Some of these are brought solely against manufacturers of goods that are installed, but it is not inconceivable that similar actions could be brought against builders who select the product for use in their projects.  Builders may also become plaintiffs or class members, for example, by purchasing products whose price was impacted by illegal price fixing.

In Campbell v. Flexwatt Corp., on behalf of over 2,000 consumers living in British Columbia who installed Aztech-Flexel, Thermaflex or Flexwatt radiant ceiling heating panels (“RCHP’s”) in their homes which were subsequently ordered disconnected by the Chief Electrical Inspector for the province, Jim Campbell and Michelle Ann-Marie Isherwood sued the Flexwatt Corporation, Wintertherm Corporation, Thermaflex Limited, Aztech International Ltd., Flexel International Ltd., Adair Industries Ltd., Canadian Standards Association (“CSA”), the province, and ten municipalities for damages in negligence and misrepresentation.  CSA filed third party proceedings against 103 municipalities.  Some defendants manufactured and distributed RCHP’s.  Between 1991 and 1996, there were several incidents of overheating RCHP’s in the province.  On November 2nd, 1993, the province’s Chief Electrical Inspector issued a disconnect order for some models, on September 26th, 1994 for other models, and on November 18th and 25th, 1994 for other models.  Consumers had to acquire alternate heating sources.  CSA developed electrical standards which equipment had to meet before being used in B.C.

In Chace v. Crane Canada Inc., on behalf of persons who suffered damage from a cracked tank manufactured at Crane Canada Inc.’s B.C. Pottery Plant between specific dates, John and Ethel Chace and Yvette Houle sued Crane Canada Inc. for negligent manufacture of toilet tanks for water damage done to their homes.  Crane observed a significantly higher than normal rate of cracks and fractures in toilet tanks manufactured during an eight year period until the plant was shut down and the kiln rebuilt.  After the plant was reopened, the failure rate dropped to normal levels.  Crane said it took reasonable steps to try to find the cause once the problem came to its attention.  There was no evidence of problems with tanks after the kiln was rebuilt in late 1990.

In Chadha v. Bayer Inc., Avinder Chadha and Renu Chadha sued Bayer Inc. and Bayer Corporation.  The amount of damages sought was about $70-112 on a $150,000 home.  The plaintiff asserted that the defendants conspired to fix the price of iron oxide pigment that was used to colour various construction materials.

In Crawford v. London, on behalf of current and former owners of approximately 999 condominium units through six condominium corporations, Thelma Crawford sued the City of London for special damages for the cost of converting fireplaces from wood to gas and general damages for fear and anxiety, loss of use of wood burning fireplaces, loss of time and opportunity, and diminution of property value.  The City then brought the project architects and engineers into the litigation.  The plaintiff claimed that the City approved the building plans, but after the condos were constructed, determined that the wood burning fireplaces in each unit as installed were a fire hazard.  They were subsequently replaced by gas insert fireplaces that cost $4,000 each.  Gillese J. allowed the action to be brought as a class action, and rejected the notion that it had to be brought as a representative action by the condominium corporations for unit owners.

In Denis v. Bertrand & Frere Construction Co., on behalf of 176 class members, which included 69 “Category 1” claimants, whose homes had serious foundation problems caused by defective concrete foundations that deteriorated because it contained “fly ash” instead of cement powder, in two actions, Jean Marie Denis and seven other homeowners sued Bertrand & Frere Construction Company Limited (“Bertrand”), Lafarge Canada Inc. (“Lafarge”), The Bank of Nova Scotia and Scotia Mortgage Corporation, Charlebois & Dubuc Associés Ltée (“Charlebois”), and R. & G. Lapensée Formwork Vankleek Hill Inc. in one action and Bertrand, Raymond Bertrand, Lafarge, and Charlebois in another action for damages.  Bertrand manufactured defective ready mix concrete that caused foundations in homes to deteriorate.  Lafarge marketed the concrete.  The homeowners sued in May of 1999 although the homes were built from 1986 to 1988 between Rockland and Hawkesbury, Ontario.  Leading to trial, the Court ordered that the defendants pay the plaintiffs $855,000 in interim disbursements.  After a trial of Category 1 test cases, the plaintiffs successfully recovered approximately $250,000 per home as the cost to repair foundations and to add brick, engineering fees, moving and relocation expenses, accommodation for two months while the repairs were made, contingency, hardship and inconvenience, and pre-judgment interest.  Since this class action went to trial, it has set a standard respecting the type and quantum of loss that class members may recover for.

In Ducharme v. Solarium de Paris inc., on behalf of Ontario residents who purchased a solarium designed and manufactured by the defendant and sold in Ontario through the defendant’s franchisees, Doris Ducharme sued Solarium de Paris inc. in negligence, and for unfair trade practices under the Business Practices Act, R.S.O. 1990 c. B18 and its successor the Consumer Protection Act, S.O. 2002 c. 30.  The plaintiff purchased a solarium model 1221 and in August of 2005, installed it in her home.  The plaintiff did not apply for a building permit.  The Town of Renfrew later refused to grant a permit because the solarium did not meet the structural requirements of the Ontario Building Code.  The solarium was not designed to withstand the weight of snow.  The City ordered the plaintiff to redesign or remove the solarium, which she did for $17,949.23.

In Gariepy v. Shell Oil Co., on behalf of owners of 700,000 homes that had polybutylene plumbing systems, five individuals sued three manufacturers for damages caused by negligent manufacture and supply of acetal or polybutylene resin pellets that were in turn used by others to make polybutylene plumbing pipes and acetal insert fittings.  Because of the resin, plumbing pipes cracked and leaked.

In Hughes v. Sunbeam Corp. (Canada) Ltd., on behalf of those who purchased various brands and models of ionization smoke alarms, Trevor Hughes sued manufacturers and testers for the cost of the alarms (approx. $20) and the cost to install a replacement.  A component used in the ionization alarms could not detect smoke from smouldering fires.  He asserted that the smoke alarms were negligently designed, researched, constructed, developed, and tested.

In Olsen v. Behr Process Corp., Leonard Olsen, Paul Dennis, and Linda Dennis sued Behr Process Corporation and Behr Process Canada Ltd. for damages in negligence, breach of warranty, and breaches of the Trade Practices Act and the Competition Act.  The defendants manufactured liquid chemical wood coatings that they sold as “Natural Seal Plus” and “Super Liquid Raw Hide”.  The products did not protect wood surfaces to which they were applied, and they promoted mildew, growth, discoloration, and degradation of wood fibre.  The products caused irreparable harm to the plaintiffs’ homes and it was not financially feasible to either replace or repair the damaged wood.

In Toronto Community Housing Corporation v. Thyssenkrupp Elevator (Canada), on behalf of owners of traction elevators in Ontario who were required to replace sheave jammers following the issuance of a 2006 order from the Ontario Technical Standards and Safety Authority, the Toronto Community Housing Corporation and Housing Services Incorporated sued Thyssenkrupp Elevator for the cost of replacing “sheave jammers” (about $12,000 per jammer).


E.     BUSINESS INTERRUPTION
This category involves large scale construction that causes commercial disruption.

In Curactive Organic Skin Care Ltd. v. Ontario, on behalf of businesses located on St. Clair Avenue West in Toronto, Curactive Organic Skin Care Ltd. sued the province, the city, and the Toronto Transit Commission for damages in negligence, gross negligence, nuisance, and abuse of power.  The city and the TTC began to replace the subway with a light rail transit system, and in the process, also undertook construction of an enhanced streetscape, the upgrading of water and natural gas mains, and the burial of hydro wires along St. Clair West.  However, the project initially stalled because there was public resistance to the project and because public consultation was poor.  The provincial Ministry of the Environment insisted on further consultation with the public.  The TTC and the City prematurely and carelessly recommenced construction as public debate about the project continued.  The project was not properly supervised, and it was mismanaged and uncoordinated.  The contracting and subcontracting process was badly mishandled.  There was confusion and there were cost overruns and substantial delays and ongoing disruptions of access to and from the affected community.  More than 200 businesses failed during the delayed construction.  Notwithstanding the various categories of loss claimed, the court dismissed the action as it was a claim for “injurious affection”, which had to be brought under the Expropriations Act.

In Gautam v. Canada Line Rapid Transit Inc., on behalf of 62 persons who owned property in Cambie Village, and 215 persons who operated a business from leased premises therein, Gary Gautam, 557856 B.C. Ltd., and George and Jane King sued the Canada Line Rapid Transit Inc., Intransit BC Limited Partnership, Intransit British Columbia G.P. Ltd., and SNC-Lavalin Inc. in nuisance and waiver of tort, and for injurious affection.  The defendants were involved in building the Canada Line rapid transit system that connected Vancouver with Richmond and the Vancouver International Airport.  At issue was whether the defendants were wrong to use the “cut and cover” rather than the “bored tunnel” method of construction.  “Cut and cover” construction involved digging a trench, installing a tunnel in the trench, backfilling the trench, and restoring the street surface.  It caused disruption of vehicle and pedestrian traffic in a way that the “bored tunnel” method would not have.

F.    INCOMPLETE CONDOMINIUMS
In Cheung v. Kings Land Developments Inc., on behalf of 273 purchasers of 251 condominium units in the “The World Centre” in Richmond Hill, which was never built, Bernard K. Cheung and Ben Wing Pun Mok sued the Kings Land defendants, the law firm that held the deposits in trust, real estate agents and Living Realty Inc. for return of deposits, punitive damages, and general damages.  The law firm, real estate agency, and Kings used the $10,894,104 to pay their fees and costs.  Cumming J. certified common issues including whether Kings breached the agreements of purchase and sale and whether the deposits were contractually required to be repaid to the class members.  The Kings Land defendants consented to certification, but a plaintiff in an individual action opposed it.

Lau v. Bayview Landmark Inc. was a similar class action involving the same defendants and similar agreements and a condominium complex in Richmond Hill.  Charmaine Siu Man Lau and Peter Kong sued a developer and its principals, a lawyer and his firm, and the real estate firm that marketed the development for recovery of deposits and damages in tort and for breach of trust and participation in breach of trust.  The developer presold units pursuant to a standard form Agreement of Purchase and Sale under which deposits were to be returned if the project was not completed.  Class members paid deposits to a law firm in trust.  The law firm released the monies to the developer.  The developer used some of the funds to buy the land on which the project was to be built and “dissipated” the remaining funds to pay “the costs of sales, marketing and legal fees”.

In Holmes v. Jastek Master Builder, on behalf of approximately 37 purchasers of unbuilt condominium units at 103 Wellman Crescent in Saskatoon, Michael Holmes and Joseph Bichel sued a developer (“Jastek”) and its principal, and the principal’s brother and his development company (“GDP”) in breach of contract, inducing breach of contract, negligent misrepresentation, conspiracy, and breach of fiduciary duty.  Class members purchased units from Jastek.  After Jastek submitted its building permit application to the city, Saskatoon property prices dramatically rose.  Jastek informed class members that it would not proceed with construction.  Shortly thereafter, GDP filed building permit applications with the city on the same land.

G.    TOXIC EXPOSURE
This category of case bridges environmental class actions with construction class actions.  Examples involving construction activities are included here.

In DeFazio v. Ontario (Ministry of Labor), on behalf of everyone who accessed the Sheppard Station or were exposed to others who did, Frank and Assunta Defazio and Mike Cramarossa sued the province, the Toronto Transit Commission, and Pinchin Environmental Consultants Ltd. for damages for lost income, stress and anxiety, fear of disease, physical illness, and for exemplary and punitive damages.  The plaintiffs claimed they were exposed to asbestos during construction of the Sheppard-Yonge subway station.

In MacDonald v. Dufferin-Peel Catholic District School Board, on behalf of 22,000 students, Paula MacDonald, on her own behalf and as litigation guardian of her daughter, and Philip MacDonald sued the Dufferin-Peel Catholic District School Board in negligence and nuisance.  The school board initiated third party proceedings against suppliers, contractors and an architect.  The plaintiff alleged that the defendant’s 1,000 portable classrooms became contaminated by mold which made students ill, and that the school board constructed facilities that allowed amplification of mold and that prolonged the students’ exposure to mold.  The plaintiffs said that the defendant knew about the presence of mold but failed to remove it, test for it, and provide proper ventilation.  The school board brought in third parties on the basis that, if amplified mold was present in any of its schools, it was caused by their negligence.

 


APPENDIX

Class Definitions and Common Issues (Construction)