Ingles v. The Corporation of the City of Toronto Decision of the Supreme Court of Canada dated March 2, 2000

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1 Ingles v. The Corporation of the City of Toronto Decision of the Supreme Court of Canada dated March 2, 2000 (City Council at its regular meeting held on October 3, 4 and 5, 2000, and its Special Meetings held on October 6, 2000, October 10 and 11, 2000, and October 12, 2000, struck out and referred this Clause back to the Planning and Transportation Committee for further consideration, and the Chief Planner and the Chief Building Official were requested to: (1) consult with the Ontario Home Warranty Program and submit a report thereon to the Planning and Transportation Committee; and (2) forward a copy of such report to the plaintiffs.) The Planning and Transportation Committee recommends the adoption of the following joint report (August 16, 2000) from the City Solicitor and Chief Building Official: Purpose: To report to City Council on the result and reasons of the Supreme Court of Canada decision in Ingles v. Tutkaluk, released on March 2, 2000 and the recommendations from the City Solicitor and the Chief Building Official on steps to be taken in response to the decision. Financial Implications and Impact Statement: Not applicable. Recommendations: It is recommended that: (1) this report be received for information purposes; (2) City Council instruct the City Solicitor and the Chief Building Official to work with other municipalities and Chief Building Officials and approach the Province to request legislative changes dealing with municipal liability for building inspections similar to that contained in other provincial legislation as set out in more detail in this report; (3) the Chief Building Official with any assistance needed from the Legal Division, continue to reinforce and communicate to all building inspectors, the standard of care that they must meet in this area. The Chief Building Official, in consultation with the Legal Division, consider developing some general written guidelines, policies and practices for inspectors to follow when carrying out their inspection functions; (4) the Chief Building Official, with assistance from the Legal Division, review the permit application process and consider incorporating appropriate changes to respond to this case; and

2 (5) the Chief Building Official consider the staffing needs of the City s building inspectors and do a further report to City Council taking into account any legislative changes that the Province may be prepared to make in this area. Background: The Legislative Framework in Ontario Each of the Canadian provinces has enacted provincial legislation which sets out the duties and powers of municipalities in dealing with building construction. The Provincial statutes vary somewhat. In Ontario, the Legislative Scheme and Standards relevant to building inspectors are set out in the Building Code Act, 1992, S.O c. 23 (the Building Code Act ). Under the Act, each municipality is responsible for the enforcement of the Act in its municipality. The Act provides that the Council of each municipality shall appoint a Chief Building Official and such inspectors as are necessary for the enforcement of the Act in the areas in which the municipality has jurisdiction. (Section 3 of the Building Code Act). Pursuant to Section 8 of the Act, no person shall construct or demolish a building unless a permit has been issued therefor by the Chief Building Official. Further, under subsection 8(2) of the Act, the Chief Building Official is required to issue the permit unless the proposed building, construction or demolition will contravene the Act or the Building Code or any other applicable law. There is no express requirement in the Act that inspections must be conducted by the municipality (although it could be argued that the Act implies that some type of inspection will be conducted by municipalities). In Canada, the case law is clear that once a municipality determines to carry out an inspection, it must do so in a non-negligent manner. The standards for construction are contained in the regulation passed pursuant to the Building Code Act, known as the Building Code. The Code sets out criteria governing design and construction methods and materials to be used in the construction of all buildings falling within the Act. There are various powers contained in the Building Code Act which can be used by inspectors to enforce the provisions in the Act. For example, there are powers given to inspectors to enter buildings for the purpose of inspecting the building, powers given to order work to be uncovered; powers to issue stop work orders; powers to take remedial steps where a building is determined to be unsafe; powers to order tests, etc. The Ingles v. Tutkaluk case described below was the first time the Supreme Court of Canada considered the legislative provisions in the Ontario Building Code Act in connection with a claim for negligent inspection. Comments: Ingles v. Tutkaluk Facts

3 In 1990, the plaintiff, who resides on MacPherson Avenue in the City of Toronto, undertook renovations to his home, including lowering the basement floor by 18 inches. Lowering the basement floor involves structural changes to the foundation of the house. Underpinning to the existing foundation was required. Both the plaintiff and his wife have PH.D s and are professors at the University of Toronto. They researched how to lower their basement, which involved underpinning work. The Ingles prepared the drawings and specifications for the renovations. They knew they needed a building permit for the work and that it should be obtained before work commenced. Mr. Ingles had a written contract with Tutkaluk Construction Limited. The contract provided that Tutkaluk would apply for a building permit from the City. The Trial Judge found that the contractor told the plaintiff that there would be a delay if the work was not commenced until a building permit was obtained. The Trial Judge found that the plaintiff and his wife agreed to the work beginning as soon as possible and without the required permit. This type of construction was such that there was no requirement in the Building Code for an engineer or architect to be retained by the owner. Much of the work was commenced and completed before a permit was applied for. Two building inspections were conducted by the City after the permit was obtained. By this time, the Trial Judge found that the underpinning had already been installed. Therefore, it was impossible for the inspector to visually determine whether or not the underpinning continued for the full width of the footing as required by the building permit. The contractor completed the job and subsequently, the plaintiff noticed leaks in his basement. The contractor did not respond to the plaintiff s calls and the plaintiff eventually consulted other persons who carried out remedial work to the premises. When the work was uncovered it was clear that the contractor had not constructed the underpinning in accordance with the plans submitted, as concrete had not been poured for the full width of the existing foundation. Both of the inspectors who conducted the two inspections after the building permit was obtained and after the underpinning work had been completed spoke to the contractor, reviewed the plans and conducted a visual inspection of the work. The Trial Judge found that their inspections revealed the work was done correctly. Further, during this two week interval from the time the work was commenced to the time the permit was obtained and the first inspection was done, the Ingles admitted checking the work twice a day in the morning and in the evenings, although they never checked the width of the underpinning. Overview of Various Court Decisions Tukaluk was sued but did not appear at the trial. The City was found negligent by the Trial Judge for not carrying out a more thorough inspection. The Court said that a more thorough inspection was required as the work involved underpinning and the foundation of the house. The Court said there were powers available under the Building Code Act, which could have been used by the inspectors, including the power to order tests. The Trial Judge did find that the building permit was issued on the basis of a plan which, if followed by the contractor, would have met safety standards. He also found that both inspectors carried out a number of

4 inspections that indicated the work had been done according to the plan. It was the City s evidence at trial that the City won t require contractors or owners to rip out work or order tests unless the review done by them indicates the work was not done correctly. There was evidence before the Court that due to the number of permits issued and the files being carried by inspectors, that they attend at premises at intervals of every three to four weeks. Accordingly, a lot of work gets constructed between inspections. On this basis, it was submitted that it would be unreasonable for inspectors to order tests or rip out work, simply because they had not seen it being done at the time it was constructed. Therefore, it was submitted that the City inspectors had to have good reason for believing the work was done incorrectly. Ultimately, the Trial Judge found that the Ingles were contributorily negligent and reduced the damages of approximately $50,000 by 6 percent. The Ontario Court of Appeal reversed the Trial Judge s decision and concluded that the plaintiff s conduct was such that he took himself outside the class of persons to whom the City owed a duty of care. The Court said that the Ingles went along with Tukaluk s scheme, which they knew would preclude inspections while the underpinning work was being done and make inspections much more difficult. The court concluded that the Ingles had knowingly flouted the Building Code Act by agreeing with the contractor to commence the work prior to obtaining a permit. The Ingles knew that the City would not inspect the construction work in the absence of a building permit, and yet they chose to proceed with the work. The Court concluded that the Ingles cannot look to the City to rescue them from the chance they took, as by their own actions, they placed themselves outside the ordinary inspection scheme. The Court of Appeal said the Ingles engaged in a course of conduct that was simply incompatible with their looking to the City for compensation for the consequent loss. The Court of Appeal relied upon two Supreme Court of Canada decisions in reaching this result, being a 1989 case of Rothfield v. Manolakos and a 1996 case of Town of St. Andrews v. Hospitality Investments. The Court of Appeal s decision dealt with the plaintiff s conduct under the duty of care element in negligence which was sufficient to dispose of the appeal and action without addressing some of the other issues raised on the appeal. Supreme Court of Canada Decision The Supreme Court of Canada granted leave to the plaintiff to hear the appeal from the Court of Appeal decision. The Reasons for Decision were released on March 2, Essentially, the Supreme Court of Canada restored the Trial Judgement and reversed the Court of Appeal decision. The main issue the Court dealt with was the issue of the duty of care in negligence, although other issues were also addressed as set out below: Duty of Care The first element which must be established in order for there to be finding of negligence is the issue of duty of care. It must be found that the defendant owed a duty of care to the plaintiff. If there is no duty owed, then there can be no liability for negligence. In order to determine whether a public authority owes a private law duty of care, two questions must be asked, which are as follows:

5 (1) is there a sufficiently close relationship between the local authority and the person who has suffered the damage so that, in the reasonable contemplation of the authority, carelessness on its part might cause damage to that person? If so, (2) are there any considerations which ought to negative or limit the scope of the duty, the class of persons to whom it is owed, or the damages to which a breach of it may give rise? This two part test has been consistently endorsed by the Supreme Court of Canada as the appropriate test for determining whether a duty of care exists. In Ingles the court said that the first part of the test presents a relatively low threshold. A prima facie duty of care will be established if it can be shown that a relationship of proximity existed between the parties such that it was reasonably foreseeable that carelessness on the part of the public actor would result in injury to the other party. As such, it is not surprising that the court found that this part of the test was satisfied. It is apparent from the court s decision that this part of the test will likely be satisfied in most, if not all cases of negligent building inspection. It will likely be reasonably foreseeable that carelessness on the part of a building inspector could result in injury to either an owner builder, a subsequent owner or a third party. There are cases where a duty has been owed by a municipality to an owner, a subsequent owner and a third party who was injured at a building (Mortimer v. Cameron). Under the second part of the test, the court must examine the governing legislation to determine whether a private law duty should be imposed in the circumstances. The court found that the Building Code Act is the type of statute which confers powers but leaves the scale on which the powers are to be exercised to the discretion of the municipality. As such, once a municipality makes a policy decision to inspect under the Act, it owes a duty of care to all who may be injured by the negligent implementation of that policy. It was the City s evidence at trial that the City has a policy to inspect construction even if the building permit was issued after the construction had begun. The court held that once the City exercised its power to enter upon the premises to inspect the renovations at the Ingles home, it owed a duty of care to all who it is reasonable to conclude might be injured by the negligent exercise of that power. The Supreme Court then found that the Ontario Court of Appeal erred in holding that the plaintiff had excluded himself from the duty of care otherwise owed. The court said that despite some ambiguity in the language used in its 1989 decision in Rothfield, the Rothfield decision stands for the proposition that an owner-builder s negligence may, in very rare circumstances, be considered as a complete defence to a finding of negligence of the part of municipal inspectors. It does not stand for the proposition that an owner s negligence can remove him or her from the scope of a municipality s duty of care. Further, the Court also cast doubt on its 1996 decision in Town of St. Andrews v. Hospitality Investments. In that case, the Trial Judge, relying upon Rothfield, held that the plaintiff had by its conduct, excluded itself from the duty of care otherwise owed by the municipality. On appeal, the decision was reversed. At the Supreme Court, the court restored the Trial Judgement, albeit in brief reasons. In Ingles, the Supreme Court said as follows regarding its decision in Town of St. Andrews:

6 the respondent city argues that to interpret the decision of La Forest J. in Rothfield v. Manolakos, supra, as setting out the parameters for a defence to a claim of negligence by a negligent owner-builder against a municipality would necessitate overruling this Court s decision in Hospitality Investments Ltd. v. Everett Lord Building Construction Ltd., [1996] 3 S.C.R This decision consists of one paragraph which restores the judgement of the New Brunswick Court of Queen s Bench at (1993), 143 N.B.R. (2d) 258, and is set out, at p. 605, as follows: We agree with the trial judge that no duty of care was owed to the respondent in the circumstances of this case. Accordingly, the appeal is allowed, the judgement of the Court of Appeal (1995), 166 N.B.R. (2d) 241, is reversed, and the trial judgement (1993), 143 N.B.R. (2d) 258, is restored, the whole with costs throughout. This decision does appear to contradict the decision in Rothfield v. Manolakos, supra, as it seems to exempt the municipality from liability at the first stage of the negligence analysis. However, the Court did not adopt the reasons of the trial judge in the case and wrote only one sentence in disposing of the appeal. To the extent that the decision can be read as departing from the analysis of Rothfield v. Manolakos, it should not be followed. Therefore, the court seems to be saying that an owner-builder s negligent conduct can never be taken into consideration in determining whether the municipality owes a duty of care in the circumstances. The City will virtually always owe a duty of care to the public, third party neighbours and owner-builders, the breach of which could result in liability for negligence. Conduct of the Plaintiff that Creates a Defence In what circumstances will the owner-builder s conduct act as a complete defence to a finding of negligence on the part of the municipality? According to the court, mere negligence on the part of the owner-builder would not be sufficient. In answer to this question, the court said the following: A municipality will only be absolved completely of the liability which flows from an inspection which does not meet the standard of reasonable care when the conduct of the owner-builder is such as to make it impossible for the inspector to do anything to avoid the danger. In such circumstances, for example when an owner-builder determines to flout the building by-law, or is completely indifferent to the responsibilities that the by-law places on him or her, that owner-builder cannot reasonably allege that any damage suffered is the result of the failure of the building inspector to take reasonable care in conducting an inspection. It is clear that the court has set the standard for municipalities very high, as only in very rare circumstances will it be impossible for the inspector to do anything to avoid the danger.

7 The court elaborated as follows: The concept of flouting, therefore, must denote conduct which extends far beyond mere negligence on the part of an owner-builder. The word suggests that the owner-builder in fact mocks the inspection scheme. Certainly, an owner-builder who submitted false plans and documents to receive a permit would be mocking the scheme. Similarly, an owner-builder who never contacted an inspector to conduct an inspection would show a lack of respect for the inspection scheme and certainly no reliance on it. In conclusion, the court found that the Ingles conduct, although negligent, was not sufficiently severe so as to act as a complete defence to a finding of liability on the part of the City. In the court s opinion, the Ingles conduct did not amount to a flouting of the building code such that it could be said that they were the sole source of their own loss. According to the court, they did not participate in a conscious effort to undermine the building code regime. Standard of Care Once it is found that the City owed a private law duty of care to the Ingles, it must then be determined whether the inspectors breached the standard of care. As the court indicated, in order to avoid liability, the City must show that its inspectors exercised the standard of care that would be expected of an ordinary reasonable and prudent inspector in the same circumstances. The measure of what constitutes a reasonable inspection will vary depending on the facts of each case, including the likelihood of a known or foreseeable harm, the gravity of that harm, and the burden or cost which would be incurred to prevent the injury. In certain circumstances, inspectors will be expected to exercise greater care, for example, when the work being inspected is integral to the structure of the building and could result in serious harm if it is defective. Another example provided by the court to demonstrate when the standard of care would be higher is when an inspector is put on notice of the possibility that a construction project may be defective. In these circumstances, a more thorough inspection may be required. The court stated that while in some circumstances a more thorough inspection will be required to meet the standard of care, municipalities will not be held to a standard where they are required to act as insurers for construction work. According to the court, the City was not required to discover every latent defect in the renovations at the appellant s home. It was, however, required to conduct a reasonable inspection in light of all the circumstances. Notwithstanding this statement by the court, it is our view that the court has imposed a very high standard on municipalities, as in this case the City was found negligent for not detecting a hidden defect which was covered up. With respect to the inspections done at the Ingles home, the court accepted the trial judge s findings that the City s inspections fell below the standard of care that was required in the circumstances. According to the court, the behaviour of the contractor in failing to obtain a permit until after the underpinning had been completed, ignoring the instructions in the permit which specified that the inspector was to be notified before proceeding with the underpinning, and failing to post the permit outside the home should have made the inspector wary. In the court s view, a visual inspection of the underpinnings was not sufficient, and it was not

8 reasonable for the inspector to rely on the contractor s assurances that the work had been done properly. Furthermore, because the construction work consisted of the installation of underpinning, a higher standard of care was required. The court said that given the importance of the underpinning to the safety of the entire house, verification that its construction met the specifications of the approved plans was necessary, notwithstanding that the work was done prior to obtaining a permit. The court said that while the preconditions for issuing an Order to uncover under the 1990 Building Code Act were not present, the inspector had the power to call in an engineer. Alternatively, he could have ordered that the basement floor not be laid. He could have returned when it was not raining to dig down to determine the depth of the underpinning. Because the inspector did not avail himself of any of these powers available to him, his inspection fell below the standard of care. Contributory Negligence and Apportionment of Liability Although the court found that the Ingles conduct was not sufficiently egregious so as to amount to a complete defence to a finding of liability, it could still be taken into account in determining whether there was any contributory negligence and in apportioning liability. At trial, the judge held that the City and the contractor were jointly and severally liable to the plaintiffs, and he apportioned liability 80% to the contractor and 20% to the City. However, he found that vis-à-vis the City, the Ingles were 30% contributorily negligent. In an addendum to his reasons for judgement, he reduced this to a mathematical equation as follows: the Ingles were 6% liable, (being 30 x 20%) the City 14% liable, and the contractor 80% liable. It was our position before the Supreme Court that the judge clearly erred in this conclusion, that surely a finding of 30% contributory negligence could not be reduced by way of mathematics to a mere 6%. It was our position that, at most, the City should only be called upon to pay 70% of the damages. Despite this, the court found that apportionment of liability is primarily a matter within the province of the trial judge, and upheld the apportionment by the trial judge set out above. As such, the City is responsible to pay 94% of the damages because of the joint and several provisions in the Negligence Act. If this approach by the trial judge was correct, every time there were two defendants and a finding of contributory negligence, the defendants would substantially lose the benefit of the contributory negligence finding by combining the two calculations. Conclusions: In our view, the Ingles decision from the Supreme Court of Canada creates a high standard of care on municipal inspectors. In this case, liability was imposed even where the defect was hidden and covered up. The court also suggested the inspectors needed to verify that the underpinning was constructed properly. The courts have put the onus on municipalities rather than homeowners to ensure that contractors are properly doing their work. A higher standard will be expected when the construction work deals with a foundation or a safety matter. Further, the courts will look to what statutory powers are available to inspectors in the circumstances.

9 In our view, the following steps should be taken in response to the Supreme Court of Canada decision in Ingles: (1) the Chief Building Official, with any assistance needed from the Legal Division will continue to reinforce and communicate to all building inspectors, the standard of care that they must meet in this area. It would be appropriate as well to ensure that all inspectors are familiar with the statutory powers that are available to them under the Building Code Act and review under what circumstances they should exercise those powers. The Chief Building Official, in consultation with Legal, will consider developing some general written guidelines, policies and practices for inspectors to follow when carrying out their inspection functions. It is intended that these policies etc. will provide guidance to inspectors as to what steps should be taken by them when they encounter certain problems or situations. These guidelines will be reviewed and updated as necessary; (2) the Chief Building Official with assistance from the Legal Division will review the permit application process that is currently used. Some suggested changes/improvements in this area are described in more detail below; and (3) In consultation with other municipalities and groups, the Chief Building Official with the assistance of the City Solicitor, will approach the province for legislative changes in this area. This is discussed in more detail below. Permit Application Process: In our view, it would be helpful to expand on the information provided to owners and contractors who apply for building permits. This could be incorporated into the permit application wherein owners should be required to sign the application acknowledging such matters as: (i) (ii) (iii) (iv) (v) that they are required to comply with all provincial statutes and City by-laws; that the owner is responsible for hiring the contractor and that the owner should ensure the contractor has the requisite skill to carry out the work and should also inquire about insurance coverage; that they are required to call the City for an inspection at certain stages of construction; that they acknowledge and agree that the City only conducts periodic spot inspections and cannot insure or guarantee that the construction work has been built properly and in accordance with the plans or good construction practice; and that the City has the power to order the owner to conduct tests or retain an expert if it deems it appropriate at the owner s expense.

10 Legislative Changes There are other provinces in Canada which have adopted legislation which provides some protection to municipalities in this area. The legislation has been enacted in response to various court decisions starting with the Supreme Court of Canada s 1984 decision in Kamloops (City) v. Nielsen, which was the starting point for determining liability against a public body in these kinds of cases. Attached hereto as Schedule A are excerpts from some of the provincial legislation in this area which provides protection to municipalities. For example, the Vancouver Charter provides complete immunity to the municipality for liability in this area. We advise that this is consistent with the approach in the United States where the states have enacted full governmental immunity legislation. In our view, we should work with the Association of Municipalities, the Association of Chief Building Officials to present a joint request for changes to the provincial legislation. In our view, the result in Ingles, highlights the problems with the Ontario legislation which provides no protective provisions. In our view, the legislative changes that should be requested, at a minimum, should include additional provisions like those contained in the Manitoba and British Columbia Acts. These provincial statutes represent a middle ground between that of complete immunity and no statutory protection whatsoever (as currently exists under the Ontario legislation). In addition, the Ingles case highlighted the problem of the joint and several liability provisions in this area for municipalities. In this case, the Ingles, who had full control over who they hired, are able to collect from the City for the faulty work of the contractor. Although the Ingles are in the best position to ensure they hire a reputable contractor who will respond to any defects in construction, at the end of the day, it was the City that was found liable and responsible for paying the Ingles for the contractor s errors. In British Columbia, there are provisions in their Negligence Act which suggests that where a plaintiff is found contributorily negligent, a defendant is only severally liable to the plaintiff and not jointly and severally liable. In our view, we should be requesting that the Negligence Act provisions be changed to adopt similar provisions to those contained in British Columbia. Further, in our view, we should ask that specific provisions be incorporated into the Building Code Act to eliminate joint and several liability against municipalities in this area. In our view, a strong case can be mounted for an amendment specific to building inspection cases as an owner is in a better position than the municipality to ensure that his contractors and agents will be responsible for, and able to satisfy any judgement he may obtain against a contractor for faulty construction. Contact: H. W. O. Doyle, City Solicitor Yaman Uzumeri, Chief Building Official Per: Diana W. Dimmer, Director of Litigation Tel: Legal Services Fax: Tel: yuzumeri@city.toronto.on.ca Fax: ddimmer@city.toronto.on.ca

11 The Planning and Transportation Committee also had before it Schedule A of the foregoing joint report (August 16, 2000) from the City Solicitor and Chief Building Official, which was forwarded to all Members of Council with the agenda of the Planning and Transportation Committee for its meeting on September 11, 2000, and a copy thereof is on file in the office of the City Clerk.