Court File and Parties

Court: COURT OF APPEAL FOR ONTARIO Date: 2022-09-01 Docket: C69142

Between: Elizabeth Breen and John Breen, Plaintiffs (Respondents) And: The Corporation of the Township of the Lake of Bays, Defendant (Appellant)

Before: van Rensburg, Harvison Young, and George JJ.A.

Counsel: Steven Stieber, for the appellant David Morin and Peter Reinitzer, for the respondents

Heard: March 8, 2022 by video conference

On appeal from: the judgment of Justice Phillip Sutherland of the Superior Court of Justice, dated January 22, 2021, with reasons reported at 2021 ONSC 533.

Harvison Young J.A.:

A. OVERVIEW

[1] The appellant municipality appeals from a judgment which granted the respondent plaintiffs, Elizabeth and John Breen, (the “Breens”) damages in the amount of $361,875.33. The action arises from the municipality’s alleged negligence in granting a building permit and conducting inspections during the construction of the Breens’ cottage.

[2] The cottage was constructed between 1989 and 1991. It was purchased by the Breens in 1999. After they had used it for a number of years, they began planning for an addition. They hired an engineer, who produced a report revealing significant issues with the building, including serious water infiltration and structural issues. The Breens claimed these issues should have been flagged before the municipality issued the building permit or during construction inspection and brought this action.

[3] The trial judge found that the municipality had breached its duty of care to the Breens, and that it had failed to meet the appropriate standard of care in a number of respects, beginning with its failure to insist that building plans be attached to the application for a building permit, and continuing through its inadequate inspections as construction continued. With respect to causation, the trial judge found that the Breens’ damages had been caused by the municipality’s negligence in a number of respects and that they were, as a result, entitled to the cost of remediating these defects. However, the trial judge held that a number of the items complained of had been caused by water damage that was not properly attributable to the negligence of the municipality. Accordingly, he did not award damages for those items.

[4] At the core of this appeal is the argument that the trial judge erred by applying a standard of care that amounted to strict liability, in effect turning the municipality into an insurer. The municipality argues that the trial judge committed both extricable errors of law and palpable and overriding errors of fact in the course of his judgment.

[5] For the reasons that follow, I would find that, with two exceptions, the trial judge did not err in his articulation and application of the standard of care, nor did he fall into palpable and overriding error in applying the standard of care to the facts as he found them.

B. FACTUAL BACKGROUND

[6] On October 30, 1989, the municipality issued a building permit for a single-family dwelling to Tim Norton, an architect and the cottage’s constructor. The cottage was a large two-and-a half-storey, six bedroom, five thousand square foot building.

[7] On August 17, 1990, the municipality’s chief building inspector conducted the first of three inspections. He noted no deficiencies in the cottage’s foundation or drainage and concluded that the balance was ready to be backfilled. The second inspection occurred in June 1991. It determined that the insulation and vapour barriers in the upper levels were free of deficiencies, and that the plumbing rough-in was complete. The last inspection, nine days later, noted no deficiencies in the insulation and vapour barriers on the lower level.

[8] These three were the only inspections that took place. In January 1992, the municipality wrote to Mr. Norton advising that it would consider the project closed unless told otherwise by February of that year. Mr. Norton did not respond. In June 1993, the municipality advised that it considered the project closed, and it appears that no final inspection took place. A fire in 1996 destroyed many documents at the municipality, but the current Chief Building Inspector testified that the file that did exist with respect to the cottage in issue appeared to be the entire file, and the trial judge accepted this evidence.

[9] The Breens purchased the cottage in 1999 on a power of sale from George and Helen Norton, the parents of Mr. Norton. Before closing, they were aware of water damage in the garage but were advised that a burst pipe was the cause. They also obtained a home inspection report, which noted some minor cracks in the foundation and decay in the structural elements. It further attributed some water infiltration to drainage issues at the rear of the cottage, which the Breens remedied. Finally, their real estate lawyer warned that no records existed of a final inspection by the municipality, and a fire had occurred in the building department in 1996. Nonetheless, the lawyer was “inclined to leave things” as they were and avoid the $150 fee. The Breens agreed.

[10] The Breens used the cottage regularly for thirteen years. In the spring of 2012, they sought to renovate the cottage and expand the kitchen area. They retained an engineering firm in preparation, at which point the engineer noticed several deficiencies in the cottage’s structure. He opined that the Building Department would not permit the anticipated renovations until the structural issues and several Building Code deficiencies were addressed. The Breens were then advised that the costs of addressing these deficiencies could exceed the costs of re-construction of the cottage. Moreover, the engineer advised that parts of the house, notably the living room area, were unsafe as the joists supporting the floor had rotted as a result of moisture infiltration. They stopped occupying the cottage and commenced this litigation.

[11] The Breens claimed damages for the cost of repairing the six major derogations from the contemporaneous Building Code, O. Reg. 419/86 (the “1986 Code”):

I. The improper placement of skylights in the kitchen: The placement of the skylights led to water penetration in the kitchen area and the door leading from the kitchen to the patio.

II. Missing ground cover in the crawl space: The bottom of the crawl space was not protected or sealed with a vapour barrier. The Breens’ expert testified that the missing barrier permitted moisture to enter the crawlspace and led to the deterioration of the wood floor. Moreover, there was no open access to the crawlspace, as required under the Code.

III. Insufficient stair height clearance beneath the interior third floor stairs: The mid-level landing of the interior stairs from the second to the third floor was approximately twelve centimetres shorter than the required headroom clearance.

IV. Insulation gaps: There were numerous gaps and holes in the cathedral ceiling’s insulation. The Code required that insulation be installed in a “reasonably uniform” fashion, which meant that there could be no gaps or holes.

V. Missing roof ventilation: The Code required that every roof space or attic above an insulated ceiling be ventilated with openings to the exterior by an unobstructed vent area. The Breens’ cottage did not have these vents.

VI. Structural Issues: All three experts agreed that the cottage was infected with several structural issues. The Breens’ expert opined that two horizontal beams crossing the living room, a “Glulam” beam and a “PSL 1” beam, had insufficient structural capacity to support their respective loads. Further, engineered wood joists did not have the proper connections, the window lintels lacked the necessary structural integrity, and the dormer windows on the third floor had no trimmer joists to adequately reroute the weight of the roof. The Breens claimed a total of $360,772.47 to remedy these structural issues, including the costs of removing dry-wall, shoring up the deficient work, and to clean up pre and post-construction.

[12] The Breens ultimately sought a total of $546,372.68, which included the cost to prepare the first engineer’s report.

C. DECISION BELOW

[13] The trial judge found the municipality liable in negligence for some but not all of the deficiencies in the Breens’ cottage and awarded $361,875.33 in damages, including $15,000 in damages for mental distress.

[14] First, the trial judge concluded that the municipality owed the Breens a duty to exercise reasonable care in granting a building permit and in inspecting the construction of the building.

[15] The municipality conceded that its relationship to the Breens was sufficiently proximate to raise a prima facie duty of care. The trial judge accepted this concession and found no residual policy considerations to limit the prima facie duty of care at the second stage of the test in Anns v. London Borough of Merton, [1977] 2 All E.R. 492 (H.L.), as refined by Cooper v. Hobart, 2001 SCC 79, [2001] 3 S.C.R. 537. He reasoned that the building permit and inspection regime existed to protect the health and safety of the public and concluded that it supported imposing a duty on the municipality “to all who might be injured by its negligence”. The municipality does not appeal from this finding.

[16] With respect to the standard of care, the trial judge considered the municipality’s duty at two distinct stages: the granting of the building permit and the inspection of the construction. At both, the municipality’s liability was to be measured against that of an ordinary, reasonable and prudent building inspector. At both stages, the municipality fell short of this standard.

[17] The trial judge relied on expert evidence to illuminate the standard of care in issuing permits and in conducting inspections. He first concluded that the municipality did not review the application for a building permit in any meaningful way. The municipality granted the building permit in less than one day, and the municipality’s current Chief Building Official testified that he did not locate any plans to support the building permit application. Though some files were destroyed in a fire, other contemporaneous applications suggested that the municipality routinely granted permits without supporting plans. The municipality plainly failed to carry out a plan review in a reasonable and prudent manner, which meant that it was unable to assess the ongoing construction against the approved plans.

[18] At the construction stage, the trial judge noted that the municipality inspected the cottage on three occasions: once in August 1990, and twice in June 1991. Relying on expert testimony, he found that the municipality failed to notice and remedy five of the six major discrepancies listed above: the stairs, the crawl space, the insulation gaps, the roof ventilation, and the structural issues. However, the municipality was not liable for the water damage from of the skylights because a reasonable building inspector would not have objected to their placement.

[19] Finally, the trial judge determined that the municipality’s negligence was the cause of the cottage’s deviations because it was required to inspect for compliance with the 1986 Code and failed to do so. This was partly because of failures to notice or correct certain deficiencies (such as the missing roof vents) but was also a result of the fact that the actual deficiencies could not be assessed by reference to any approved plans because they had not been reviewed.

[20] The trial judge also rejected the submission that the Breens were contributorily negligent in failing to require a final inspection when they purchased the cottage because an inspection at that point would have revealed only minor deficiencies; the dry-wall and finishing would have obscured the more serious issues.

D. ISSUES

[21] The municipality argues that the trial judge erred in a number of respects. In particular, it claims that he imposed an unduly high standard of care amounting to strict liability. The municipality raises the following specific issues, which I will address in turn below:

1. Did the trial judge err by finding that the municipality owed the Breens a duty to inspect without a request from the builder?
2. Did the trial judge err by imposing the burden of proof on the municipality to prove that the building permit was properly issued?
3. Did the trial judge err by applying an excessively strict standard of care?
4. Did the trial judge err in finding that the municipality’s breaches of their duty of care caused the Breens to suffer damages for which the municipality was responsible?

[22] The municipality does not take issue with the trial judge’s articulation of the legal principles governing the standard of care. Rather, it claims that the trial judge erred in applying these principles to the facts of the case. Further, as I will discuss, it takes issue with the facts as found by the trial judge in a number of instances.

E. LEGAL FRAMEWORK

[23] It will be useful to briefly set out the legal framework governing construction permits and inspection. This informs the interpretation and application of both the duty of care and the standard of care issues in this appeal.

[24] At the time that the cottage was designed and constructed, the governing legislation was the Building Code Act, R.S.O. 1980 c. 51 as operationalized through the 1986 Code, as amended, and the municipality’s own By-Law No 80-19, By-Law to Make Provisions for the Issuance of Building Permits in the Area of the Municipality of the Township of the Lake of Bays Under Section 5 of the Building Code Act, 1974, (March 11, 1980).

[25] The introduction of the first Building Code Act in 1974 provided for a set of uniform construction standards that municipalities were required to enforce but could not vary. The resulting regulatory regime, which continues to the present day, is composed of three elements:

i. Plans Review, providing an opportunity to assess conformance of the proposed construction with building code requirements;

ii. Permit Issuance, providing an opportunity to assess conformance of the proposed construction with applicable laws, including zoning; and

iii. Inspection, providing an opportunity to ensure construction conforms with the construction authorized.

See Jeffrey L. Levitt & John Mascarin, Annotated Ontario Building Code Act, 2022 ed. (Markham: LexisNexis, 2022), at Building Code Act, 1974.

[26] The leading case with respect to a municipality’s duty of care in enforcing building codes is Ingles v. Tutkaluk Construction, 2000 SCC 12, [2000] 1 S.C.R. 29. There, dealing with inspection of construction after it had commenced without a permit, and prior to the 2001 amendments that clarified the legislation to explicitly mandate inspections, the duty is laid out clearly at para. 67:

The purpose of the building inspection scheme is clear from these provisions: to protect the health and safety of the public by enforcing safety standards for all construction projects. The province has made the policy decision that the municipalities appoint inspectors who will inspect construction projects and enforce the provisions of the Act. Therefore, municipalities owe a duty of care to all who it is reasonable to conclude might be injured by the negligent exercise of their inspection powers.

[27] The parties agree that Ingles remains good law and the appeal was argued on that basis. For the purposes of the present appeal, I would agree with that approach, with the caution that in the future, a duty of care analysis should take account of the SCC developments in recent years: Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, [2017] 2 SCR 855; 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2020 SCC 35, 450 DLR (4th) 181; and Charlesfort Developments Limited v. Ottawa (City), 2021 ONCA 410, 156 O.R. (3d) 10 (leave to appeal refused, 39818 (17 February 2022)).

F. ANALYSIS

(a) Standard of Review

[28] This appeal is governed by the traditional appellate standards of review. Questions of law are assessed for correctness and errors of fact are assessed for palpable and overriding errors: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R. 235, at para. 8. Similarly, issues of mixed fact and law are reviewable for palpable and overriding error unless there is a readily extricable legal principle: Housen, at para. 27.

(b) Expert Evidence

[29] There is one preliminary issue to consider. The municipality submits that the trial judge either made errors of principle or materially misapprehended the evidence in permitting the Breens’ expert, Ron Koerth, to give expert opinion evidence as to the cottage’s compliance with the 1986 Code. The municipality further argues that the trial judge erred in giving weight to Mr. Koerth’s evidence. It submits that Mr. Koerth “simply did not have any qualifications to be permitted to testify” with regard to the standard of care of municipal building departments.

[30] I see no merit to this argument for two reasons. First, the municipality did not object to Mr. Koerth’s qualification at trial, raising only the concern that he had a lack of experience in the field of municipal inspection that should go to weight. In effect, the municipality is now taking issue with the apparent weight given to his evidence by the trial judge, which is at the heart of the trial judge’s function and which was grounded in the record at trial.

[31] Second, the record supports Mr. Koerth’s qualification as an expert. At the time of trial, he was Senior Vice-President for Envista Forensics’ Canada and UK/Europe Forensic Consulting divisions, with 30 years of combined experience as a civil and forensic engineer. He described the role of a forensic engineer as investigating “something that was already there but failed, and we need to put the pieces together to figure out why it did fail.” His appearance in this case was his seventeenth in matters relating to construction inspection before the Superior Court of Justice. Faced with these credentials, the trial judge did not err in qualifying Mr. Koerth as an expert.

(c) Did the trial judge err in finding that the municipality was under a duty to inspect in the absence of a request?

[32] At trial and on appeal, the municipality argued that it could not be faulted for failing to conduct a given inspection because it was not required to do so by the legislative regime. As in Ingles, the Act at the time that the building permit was granted in this case did not expressly require that inspections be carried out. The municipality’s expert, Allison Orr, testified that the 1986 Code did not obligate the municipality to conduct inspections upon receipt of these notices for inspection. Rather, it included a list of possible stages of construction that could require notice be given by the builder before the obligation to inspect was triggered. A municipal by-law defined which stages required notice.

[33] The municipality’s contemporaneous By-Law No 80-19 provided that the applicant for the building permit must give at least 48 hours notice before the start of excavation and foundation work, 24 hours before the start of the foundation wall, and 24 hours before the start of interior finishes. The building department could then choose to carry out an inspection. The trial judge referred to the obligation to notify without a commensurate obligation to inspect as a “gap” in the legislation.

[34] In 2001 the Ontario Legislature passed Bill 124 entitled An Act to improve public safety and to increase efficiency in building code enforcement: S.O. 2002, c. 9. This Bill was intended to amend the Building Code Act, 1992, S.O. 1992, c. 23, and the procedure for notice and inspections, and included requirements that specifically set out the obligation to inspect.

[35] Accordingly, the municipality argues that it can not be faulted for failing to carry out inspections of the Breens’ cottage without first receiving notice. It submits that the trial judge imposed an impossible standard on it, and other municipalities like it, by requiring building inspectors to unilaterally determine whether to carry out an inspection in direct contravention of the 1986 Code.

[36] The Breens submit that this argument effectively seeks to read down or limit the duty of care of a municipality to a potential purchaser in a manner that is unsupported either in law or by the policy of the regulatory regime whose overall purpose has been to ensure the health and safety of the public.

[37] The trial judge rejected the municipality’s argument on this issue, finding that there was no policy reason for limiting or negating the duty of care. After reviewing Ingles and Rothfield v. Manolakos, [1989] 2 S.C.R. 1259, he specifically found that the municipality owed a duty of care to the Breens to “not negligently exercise its power to grant a building permit and in the inspection of the construction of the building which is the subject matter of the building permit pursuant to the Act and requisite regulations.” As he explained, at paras. 71, 72:

The purpose of the construction scheme - the granting of the building permit and subsequent inspection of construction is the same: to protect the health and safety of the public. The legislative scheme grants powers to the [appellant] to not only inspect the construction but also to grant or reject an application for a building permit or later revoke said building permit, if the circumstances warrant.

The [respondents] are subsequent owners of a building that the [appellant] granted a building permit for construction and inspected the construction as the construction was ongoing. It is reasonable to conclude that the [appellant] would owe a duty of care to the [respondents] who might be injured by the [appellant’s] negligent exercise of their authority not only to inspect the progress of the construction but also in the process of granting a building permit, not to subsequently revoke said building permit which is the subject matter of the construction, pursuant to the provisions of the Act and requisite regulations.

[38] I do not agree with the municipality that the trial judge erred in this analysis.

[39] First, in implementing this by-law, issuing the building permit, and inspecting the Breens’ cottage on three occasions, the municipality made the policy decision to inspect construction projects and enforce the provisions of the Act. Having done so, it “owe[d] a duty of care to all who it is reasonable to conclude might be injured by the negligent exercise of [its] inspection powers”: Ingles, at para. 23.

[40] This duty was especially applicable to the Breens. As subsequent purchasers, they had “no say in the actual construction of a building that proves defective. It is therefore reasonable that they should be entitled to rely on the municipality to show reasonable care in inspection of the progress of the construction”: Rothfield, at p. 1267.

[41] Specifically, I would not accept the municipality’s argument that the absence of an explicit requirement to inspect effectively rendered all inspections optional. Taken to its logical conclusion this risks undermining the purpose of the legislative scheme. As stated by the trial judge, at para. 115, “I am of the view that once a building permit is granted, the municipality has an obligation to inspect the building to comply with the Act and the requisite Building Code. Anything less would make the whole building permit and inspection process meaningless” (emphasis added). If a municipality were to decide to conduct limited or no inspections of known and permitted construction, it would be incapable of ensuring that the construction underway conformed with the permit granted, and that it met the uniform standards of the Ontario Building Code.

[42] Consequently, having made the policy decision to inspect, the municipality was bound to implement this decision with the care that would be expected of an ordinary, reasonable and prudent municipality in the same circumstances: Ingles, at para. 20. In my view, the municipality fell short of this standard when it declared the construction of the cottage closed without conducting further inspections.

[43] Second, and regardless, the municipality must make the policy decision to inspect in a manner that accords with the Act’s purpose: Ingles, at para. 19. In this case, there is no dispute that the regulatory scheme reflected in the Act was intended to ensure the health and safety of the public. It did so by providing a province-wide framework for the required enforcement of building regulations, while also providing for municipalities to operationalize this framework through its own by-laws, of which the municipality’s By-Law No. 80-19 was an example.

[44] The municipality is a creature of statute, with “clear responsibilities for health and safety in the area.” It therefore could not “immunize itself from liability by simply making a policy decision never to inspect”: Ingles, at para. 19. Rather, the decision to not inspect would leave the implementation of the universal standards in the Act to the builders, not the municipality who is charged with its enforcement.

[45] However, this obligation does not go nearly as far as to make an insurer of the municipality. In implementing the inspection regime, as in negligence generally, the municipality’s obligation and, accordingly, its liability is limited by what is reasonable: Allen M. Linden et al, Canadian Tort Law, 12th ed. (Markham, Ont.: LexisNexis, 2022) at pp. 176-77.

[46] The trial judge did not impose tortious liability for failing “to attend every building site daily to determine if it is an opportune time to carry out an inspection,” as the municipality argues. Rather, he found fault where the municipality carried out its statutory mandate unreasonably. Choosing not to inspect everyday was reasonable, but failing to conduct any inspection after June 1991 was not.

(d) Did the trial judge err by imposing the burden of proof on the municipality to prove that the building permit was properly issued?

[47] The question of whether construction plans had been submitted was significant for a few reasons. First, s. 3(a) of the municipality’s own by-law required that plans be filed and reviewed before a construction permit was issued. Second, once approved, the plans operate as a reference point against which the construction inspections are conducted. Indeed, some of the deficiencies discussed below would have been impossible to examine and assess without building plans.

[48] The municipality does not dispute that plans were necessary preconditions to the issuance of a building permit. Rather, it submits that the trial judge reversed the burden of proof by concluding that no plans existed because the municipality failed to produce them. The municipality cites expert evidence that building a cottage of this scale and complexity would be impossible without some formal plans. Further, the municipality’s current chief building inspector testified that a fire destroyed many of the municipality’s records. Therefore, faced with an absence of conclusive evidence, the municipality submits that the trial judge should have found that the Breens failed to meet their burden of proving that no plans existed. His failure to do so was an error.

[49] I would not accept this argument. The municipality effectively is taking issue with the trial judge’s finding of fact without showing palpable and overriding error. The trial judge carefully reviewed the record, and there was ample evidence to ground the conclusion that no plans had been attached to the application as required.

[50] In fact, the same expert that testified to the fire gave evidence that, as a matter of practice, the municipality did not seem to require plans generally before issuing a building permit. Many contemporaneous applications were not supported by plans and, indeed, the application for the Breens’ cottage seemed to have been recovered, in its entirety and without attached plans, despite the 1996 fire.

[51] Further, the municipality concedes that it reviewed the application and issued the permit in a single day. It is difficult to contemplate that such a short timeframe would have permitted the municipality to conduct a reasonable review of the proposed cottage, with its gables, dormers, and engineered beams, even if plans had been submitted. That is particularly true in light of the scale and complexity of the structure proposed, which was not in dispute. Accordingly, it was open to the trial judge to make this finding of fact, and it is not open to this court to interfere with it on appeal absent palpable and overriding error: Housen, at para. 10.

(e) Did the trial judge apply an excessively strict standard of care?

[52] The municipality argues that the trial judge imposed such a strict standard of care that it essentially rendered it an insurer against any construction defects. It does not take issue with the trial judge’s legal articulation of the standard of care to be applied. Rather, it takes issue with the manner in which the trial judge applied this standard. It says that the trial judge eschewed any concept of reasonableness by basing the municipality’s liability entirely on whether the Breens’ cottage derogated from the provisions of the 1986 Code.

[53] The trial judge found the municipality liable for five “major deficiencies” in the Breens’ cottage. First, the crawl space had no vapour barrier and no insulation on the exterior block walls. Section 9.18.6.1 of the 1986 Code required these components, and their absence led to the water penetration, floor decay, and cracks in the foundation. Indeed, there was not even a point of access to the crawl space, such that the Breens could not regularly inspect it.

[54] Second, the stairs leading from the second floor to the third were not in compliance with s. 9.8.3.6 of the Code because the head clearance was twelve centimetres lower than required. Third, there were gaps in the cathedral ceiling’s insulation, such that it was not “reasonably uniform”, and fell afoul of ss. 9.26.4.1 and 9.26.4.2 of the Code. Fourth, the Code requires roof ventilation where the ceiling is insulated, and none were installed here.

[55] Finally, the expert witnesses observed a number of structural deficiencies. Mr. Koerth, the forensic engineer, identified six such issues. They were (i) the overloading of a third floor “Glulam” beam; (ii) the overloading of a beam supporting the loft floor (the “PSL 1” beam); (iii) the joists on the end of the loft beam did not provide adequate support; (iv) the window lintels were of inadequate size; (v) trimmer rafters on each side of the dormers required doubling; and (vi) the rafters were improperly connected.

[56] The trial judge accepted the Breens’ expert evidence that the municipality was liable for these structural deficiencies. He wrote, at para. 135:

The court is of the view that an inspector should have concluded that the issues with the lintels, the 11 dormers and connections/bracing of the beams, did not comply with the Code. In addition, the court is satisfied that the [appellant’s] inspectors did not know whether the engineered beams/ joists would be able to carry the load required for the Cottage pursuant to the Code.

[57] With two exceptions, I would not find any error on the part of the trial judge regarding the standard of care.

[58] To begin with, the standard of care is a question of mixed fact and law: Housen, at para. 31, citing Galaske v. O’Donnell, [1994] 1 S.C.R. 670, at pp. 690-91. In my view, the trial judge’s conclusion with respect to the crawl space, the roof ventilation, and the structural issues are findings of fact. They are the result of casting these deficiencies in the light of the ordinary, reasonably prudent building inspector to determine whether they should have been noticed. Accordingly, they can be disturbed only for palpable and overriding errors.

[59] With respect, the municipality has failed to identify any such error here. In my view, the ordinary, reasonably prudent building inspector – armed with building plans – should have noticed that the design provided no access to the crawl space, or that the engineered beams could not carry their assigned weight. Similarly, had the municipality conducted a final inspection as required by the overall purpose of the legislation, it would have noticed that the cottage’s insulated roof had no ventilation.

[60] The trial judge’s findings with respect to these three deficiencies do not fault the municipality merely because the cottage deviates from the 1986 Code. Instead, the municipality is liable to the Breens because it was unreasonable for it to issue a building permit without insisting on plans, and to abstain from a final inspection after it had already made the decision to inspect. In other words, the trial judge set reasonableness as the appropriate marker, and found the municipality liable for failing to reach that threshold. I see no error with this analysis.

[61] However, I agree with the municipality that the trial judge imposed an overly exacting standard of care with respect to the clearance in the stairs and the insulation in the cathedral ceiling.

[62] This error is most apparent in the trial judge’s discussion of the insulation, where he writes “[i]f the Code mandates a certain way of construction and the construction does not adhere to that mandate, as far as I am concerned, subject to compelling evidence otherwise, failure to comply is enough [to establish tortious liability].”

[63] In my view, this reasoning reflects a derogation from the “ordinary, reasonably prudent building inspector” standard for adherence to the Code. In doing so, the trial judge erred by lowering the negligence threshold from unreasonable conduct to imperfect conduct.

[64] At p. 1268 of Rothfield, La Forest J. wrote:

It must be borne in mind that a municipality, once it has made the policy decision to inspect construction, is not bound to discover every latent defect in a given project, nor every derogation from applicable standards. That would be to hold the municipality to an impossible standard. Rather a municipality is only called upon to show reasonable care in the exercise of its powers of inspection.

[65] Bastarache J. echoed these comments at para. 20 of Ingles, by stating that “the municipal inspector will not be expected to discover every latent defect in a project, or every derogation from the building code standards”.

[66] With respect to the clearing in the stair and the insulation gaps, however, the trial judge did fault the municipality for failing “to discover every latent defect”. He simply found that the “headroom is not in compliance” and that “the insulation and drywall were not ‘ok’ in that it did not comply with the Code” without considering whether the reasonable building inspector would have noticed these deficiencies.

[67] Doing so is an extricable error of law. As the trial judge himself noted, the purpose of the permit and inspection regime is to protect the health and safety of the public. I find it difficult to contemplate that an ordinary, reasonably prudent building inspector tasked with that mandate would turn their mind to a twelve-centimetre gap in the headroom, or whether gaps in the insulation fell short of it being “reasonably uniform”.

[68] Consequently, assigning liability for the stairs and the insulation essentially imposed a standard akin to that of a guarantor or insurer. This is to be contrasted with the standard the trial judge imposed with respect to the crawl space, the structural deficiencies, and roof vents. All deviate from the 1986 Code, but only the latter would have been apparent to an ordinary, reasonably prudent building inspector. Ascribing liability for the former erroneously finds the appellant negligent for mere non-compliance with the Act, even though its reasonable care would not have discovered these deficiencies.

[69] The trial judge’s finding on the stairs and the insulation impermissibly creates legal liability without fault: See e.g., The Queen v. Saskatchewan Wheat Pool, [1983] 1 S.C.R. 205. For that reason, I would set these findings aside.

(f) Did the trial judge err in finding that the municipality’s breaches of their duty of care caused the Breens to suffer damages for which the municipality was responsible?

[70] As with the standard of care, the municipality does not dispute that the trial judge applied the appropriate standard of causation. Rather, it argues that the trial judge erred by failing to find the Breens responsible for at least some of the deficiencies because they chose to forego a final building inspection. The municipality submits that waiving the final inspection was unreasonable, and that liability for the defects that could have been observed on a final inspection should fall on the Breens.

[71] Citing from Clements v. Clements, 2012 SCC 32, [2012] 2 S.C.R. 181, the trial judge applied the “but for” test at the causation stage, emphasizing that the municipality’s negligence must be necessary to the Breens’ injury. Accordingly, he divided the Breens’ damages into two categories: (1) costs to remedy and rectify Code violations, and (2) damages flowing from those Code violations, such as damages caused by water penetration.

[72] The trial judge determined that the municipality was liable for the first category of damages, but not the second. The former fell squarely within the municipality’s duty of care. Any derogation from the Code that the reasonable building inspector should have noticed was caused by the municipality’s failure to conduct reasonable inspections. Conversely, the latter could be caused by poor workmanship extraneous to the Code or even the Breens’ own poor maintenance. Accordingly, the municipality’s negligence was necessary to the first category of damages, but not the second.

[73] Further, the trial judge accorded no weight to the fact that the Breens had not requested a final inspection. He determined that the final inspection would have been worth little unless it had been invasive: “flooring removed, drywall removed, ceilings removed”.

[74] I agree. The municipality’s negligence, and consequently its liability for damages, is limited to the deficiencies in the crawl space, the roof vents, and the structural issues. The Breens failed to establish that its negligence is a necessary cause of the remaining deficiencies.

[75] Further, I agree that requesting a final inspection would have made no difference, but for a slightly different reason. Namely, at the time the Breens purchased the cottage, the last inspection was well over seven years old. While an invasive final inspection may have discovered the same deficiencies sooner, it would not have revealed fewer deficiencies.

[76] Because the trial judge only ascribed liability for the first category of damages, an earlier final inspection would have made no material difference. The municipality had already conducted their negligent review of the permit applications, and had already failed to conduct a reasonable inspection of the cottage’s construction as it progressed. Thus, the deficiencies at the heart of this action were already present, and from the trial judge’s refusal to award damages for the second category one can conclude that they did not get worse over time.

[77] Accordingly, I see no error in the trial judge’s causation analysis. The Breens’ decision to waive the final inspection on purchasing the cottage was not a cause of the damages they were awarded by the trial judge.

G. DISPOSITION

[78] For the reasons described above, I would allow the appeal in part. I would set aside the trial judge’s findings with respect to the headroom in the stairs and the insulation and reduce the damages from $361,875.33 to $315,879.07. I would dismiss the balance of the appeal.

[79] The parties had agreed beforehand to costs set in the amount of $30,000 to the successful party, inclusive of disbursements and applicable taxes. Given the mixed result of this appeal, the Breens shall be entitled to costs in the amount of $25,000, inclusive of disbursements and applicable taxes.

Released: September 1, 2022 “K.M.v.R.” “A. Harvison Young J.A.” “I agree K. van Rensburg J.A.” “I agree J. George J.A.”