Citation: Gillham v. Lake of Bays et al, 2017 ONSC 5879

COURT FILE NO.: CV 13-90

DATE: 2017-10-03

SUPERIOR COURT OF JUSTICE - ONTARIO

RE: Jack Gillham and Heather Gillham, Plaintiffs (Respondents on Motion),

AND:

The Corporation of the Township of Lake of Bays, Defendant (Applicant on Motion)

Royal Homes Limited, Defendant (Applicant on Motion)

J.D. Mackay o/a J.D. MacKay Construction, Defendant, (Party to Pierringer Agreement with Plaintiffs)

BEFORE: E.J. Koke

COUNSEL: David Morin, Counsel, for the Plaintiffs (Respondents), Jack and Heather Gillham

David Thompson, Counsel for the Defendant (Applicant), Royal Homes Limited

Brian Grant, Counsel for the Defendant, the Corporation of the Township of Lake of Bays

HEARD: September 28, 2017

ENDORSEMENT on Summary Judgment Motion

The Motion

[1] The defendants, Royal Homes Limited and the Corporation of the Township of Lake of Bays move for summary dismissal of the plaintiffs’ action as against them on the basis that the plaintiffs failed to commence the action before the expiry of the applicable two-year limitation period. The defendant J.D. MacKay has settled with the plaintiffs by way of a so-called “Pierringer Agreement”.

The Facts

[2] There is very little disagreement among the parties with respect to the facts which gave rise to this dispute.

[3] The plaintiffs, Jack and Heather Gillham (the “Gillhams”) are retired teachers. In 1991 they purchased an older, 1950’s style cottage on Lake of Bays. The cottage was constructed on piers and was built on a property which sloped downward towards the lake.

[4] Shortly after purchasing the cottage they noticed that the cottage was tilting down towards the lake. They hired a contractor to perform remedial work on the foundational piers to correct the problem. The risk of slope failure was so great that the contractor was forced to secure the cottage to the trees on either side of the cottage, before performing the remedial work.

[5] The work performed by the contractor was not, however, a permanent solution. In his examination for discovery, Mr. Gillham stated that “by 2004, it had sloped again toward the northeast, and the bottom beam had been twisted.” The plaintiffs consulted with a contractor and considered whether to fix the existing cottage or replace it. Mr. Gillham stated that the contractor informed him that fixing the cottage would be expensive and “there’s no guarantee that it won’t tilt again in four or five years.” According to Mr. Gillham, the cottage was always tilting in the same direction, that is, towards the northeast. He believed this was because the bank was moving.

[6] The Gillhams decided to replace their old cottage with a new cottage, rather than perform additional remedial work. They entered into an agreement with the defendant, Royal Homes Limited (“Royal Homes) whereby Royal Homes was to erect a new, prefabricated home on the property. Mr. Gillham stated in his affidavit in response to this motion that “we explained our predicament with our existing cottage, and the problems we were having with movement. Royal Homes … assured us that with a full concrete foundation the new cottage would not move”.

[7] In the spring and summer of 2006, all three Defendants were involved in construction of the Gillhams’ new cottage, which was a bungalow with full walkout basement and decks on both the main floor and basement level running the full width of the cottage overlooking trees and the lake. Because the property had a steep, 40-50% slope toward the lake, the decision was made to construct a retaining wall to ensure that the foundation of the house had the required depth of backfill to satisfy the Ontario Building Code requirement for frost protection for a foundation wall. The other option would have been to dig a much deeper frost wall. The retaining wall option also provided a gentler slope up toward the cottage and made it easier to access the cottage and the ground from the basement level.

[8] The defendant, Don MacKay (“Mr. MacKay”), excavated the foundation, the pier footings for the deck, and constructed a stacked rock retaining wall, backfilling it, in May of 2006. Royal Homes constructed the footings and foundation for the home and deck, then assembled the prefabricated home and deck, completing its work in July, 2006. The Township of Lake of Bays (The “Township”) was involved throughout, issuing a permit for construction, requiring a sketch for the retaining wall, inspecting and granting necessary approvals.

[9] In the summer of 2009, the Gillhams noticed that one of the deck piers behind the retaining wall had sunk about 1 ¼ inches, pulling the deck post away. In his affidavit Mr. Gillham stated that he thought, “the bigfoot [under that deck post] wasn’t dug deep enough”, and in his cross-examination, he stated that he was “concerned that the deck would fall off.”

[10] The Gillhams contacted Royal Homes, saying, “I think we’ve got a problem.”

[11] The work order created by Royal Homes upon Jack Gillham’s call stated,

Please call this client as he is very concerned the corner deck post, which has sunk about 1¼” is hanging onto the deck actually pulling it down and creating some stress on the next post.

Please make arrangements to make a site visit tomorrow if possible to see what’s happening. Maybe you could undue [sic] it so it’s not stressed and nail a 2 x 6 alongside to support for now.

[12] When Royal Homes attended at the property they jacked up the deck post and shimmed it.

[13] Royal Homes recommended that the Gillhams retain the engineering firm Trow Associates Inc. to investigate the slope movement. At his examination, Mr. Gillham stated that they followed this recommendation of Royal Homes because “time was of the essence”.

[14] Trow conducted a site inspection on August 21, 2009 and prepared a report for the plaintiffs dated September 15, 2009 (the “Trow report”). In that report, geotechnical engineers, Leigh Knegt and Eric Gonneau concluded that the weight that was added by the construction of the stone wall and the backfill that was placed behind it appeared to be causing a failure of the lower retaining structure, causing it to move laterally towards the northeast: In their report they stated:

Based on the observations made at the time of the site visit and the history of the site that was related to Trow, it appears that there is a localized slope failure and/or localized consolidation of the underlying soils occurring at the north east corner of the deck. At this location there are two retaining walls that allow the ground surface to rise approximately 10 to 12 feet over an approximate horizontal distance of 6 feet. The weight that was added by the construction of the stone retaining wall and the backfill that was placed behind it to raise the grade appears to be causing a failure of the lower retaining structure, causing it to move laterally towards the northeast. This movement is evident by the dislocation of the support post for the lower landing. As this lower level translates to the northeast, the upper level is also moving in a northeast direction as well as in a downward direction, taking the foundation for the corner deck post (and its adjacent neighbours) with it. While this does not appear to have affected the dwelling yet, there is a hairline crack (less than 1 mm in width - typical of shrinkage cracks) in the basement floor that is located in the northeast corner of the basement.

[15] Both the Gillhams and Royal Homes received a copy of this report. At his cross-examination, Mr. Gillham confirmed that he read the report, that he understood it, and that he did not disagree with the engineers’ conclusions.

[16] The engineers recommended a number of investigative and remedial steps, including:

the removal of the additional loadings and associated backfill with respect to the stone wall to slow further movement of the wall;

reconstruction of the deck pier foundations and underpinning of a portion of the dwelling foundation at a lower elevation to maintain frost cover;

slope stability investigation to be carried out in order to ensure that the resulting configuration is stable and that the dwelling, as well as deck, does not continue to move.

[17] Following the receipt of the Trow Engineering Report, the Gillhams spoke with Mr. MacKay, who indicated that the stone wall might find its own level. In his cross-examination, Mr. Mackay stated that by commenting that the wall might find its own level, he was expressing his “hope” and that he “figured they (the Gillhams) were hoping on that”. He stated that he was not providing the statement as an expert opinion and he did not intend that the statement be relied on by the Gillhams; nor did he believe that the Gillhams were relying on this statement.

[18] The Gillhams agree that at the time this statement was made to them by Mr. MacKay they had not given him a copy of the Trow Report, they knew Mr. MacKay was not an engineer and they knew that this was the first stone retaining wall Mr. MacKay had ever built.

[19] The Gillhams agree that following their conversation with Mr. MacKay, they did not speak with the Trow engineers about Mr. Mackay’ statement that the stone wall might “find its own level”. They admit that they were hoping that the slope would find its own level and that they would not have to spend the $8,000 to $15,000 that the Trow report estimated would be necessary for the recommended investigative and remedial steps.

[20] The Gillhams did not adopt any of the recommendations for remediation or additional investigation made by the Trow engineers in the September 2010 report, nor did they speak to them about the “wait and see” approach they had decided to adopt with respect to the stone wall.

[21] In the spring of 2010, Mr. Gillham observed further downhill movement and horizontal movement of the north-east deck pier. From September 2009 to April 2012, the north-east deck pier continued to move towards the lake. Mr. Gillham periodically use a jack to make adjustments to attempt to maintain the integrity of the deck

[22] In April 2012, the Gillhams retained Fowler Construction Company Ltd. to inspect the property.

[23] Like the Trow engineers, the representative of Fowler Construction recommended a soil study be undertaken. Fowler Construction retained Terraprobe Inc. to conduct a site inspection and soil study.

[24] Terraprobe Inc. conducted site inspections and a soil study in June 2012 and prepared a report dated July 30, 2012. In that report, engineers Blair Gross and Kirk Johnson concluded that the stone wall was failing and recommended that it be removed and reconstructed:

Based on our site observations and the results of the field investigation, it appears that the wall and backfill materials have moved due to some construction issues. The sand backfill behind the wall is generally very loose to loose. The base of the wall appears to be founded on loose to very loose sand and fills without adequate support of the wall base/toe from the downgrade slope.

In order to correct the ongoing wall movement and related settlement observed at the top of the deck piers, the wall should be removed and reconstructed using suitable construction details and techniques.

[25] In his cross-examination Mr. Gillham agreed that the Terraprobe report made the same recommendation as the Trow report regarding the failing wall, that the wall and backfill should be removed. He denied however that he was aware that the retaining wall and backfill was failing due to “construction issues”. He stated that the Trow report did not say who was responsible for the problem he was experiencing; there was no indication of negligent construction or suggestion that he should look to Royal Homes or Don MacKay for a repair. It was not until he reviewed the Terraprobe report that he realized that construction issues were the cause of the problem.

[26] Fowler Construction was retained to remove and replace the stone wall. This work was completed over the summer of 2013, before this action was commenced.

[27] The plaintiffs’ statement of claim was issued on October 21, 2013. They claim that Royal Homes and Mr. Mackay were negligent in the construction of their home and that the Township breached its statutory duty towards them. They claim damages against the defendants for the cost of reconstructing the retaining wall and stabilizing and underpinning the foundation of their cottage. Their claim was issued more than four years after they received a copy of the Trow report.

Analysis

[28] The plaintiffs’ claim against the defendants is governed by the Limitations Act, 2002, S.O. 2002, Chapter 24, Schedule B (hereinafter referred to as “the Act”).

[29] Section 4 of the Act sets out the basic limitation period for the commencement of an action as follows:

Basic limitation period

4. Unless this Act provides otherwise, a proceeding shall not be commenced in respect of a claim after the second anniversary of the day on which the claim was discovered.

[30] Section 5 of the Act establishes the test for determining when a claim is discovered:

5.(1) A claim is discovered on the earlier of,

(a) the day on which the person with the claim first knew,

(i) that the injury, loss or damage had occurred,

(ii) that the injury, loss or damage was caused by or contributed to by an act or omission,

(iii) that the act or omission was that of the person against whom the claim is made, and

(iv) that, having regard to the nature of the injury, loss or damage, a proceeding would be an appropriate means to seek to remedy it; and

(b) the day on which a reasonable person with the abilities and in the circumstances of the person with the claim first ought to have known of the matters referred to in clause (a).

Presumption

(2) A person with a claim shall be presumed to have known of the matters referred to in clause (1) (a) on the day the act or omission on which the claim is based took place, unless the contrary is proved.

[31] The Court of Appeal has held that the focus of the discoverability analysis is on knowing basic, essential facts. In its recent decision in Kowal v. Shyiak, 2012 CarswellOnt 9202, 2012 ONCA 512 [Kowal], at paras 18 and 19, the Court explained that certainty of a tortfeasor’s responsibility for a loss is not required. It is sufficient for the plaintiffs to have “prima facie grounds to infer that the acts or omissions were caused by the party or parties identified.”

[32] The Court of Appeal has also held that “[t]he discovery of a new fact that might help the plaintiff’s case does not restart the limitations period”. Rather, “the question to be posed is whether the prospective plaintiff knows enough facts on which to base its allegations” (see The Investment Administration Solution Inc. v. Silver Gold Glatt & Grosman LLP, 2011 ONCA 658 at para 15).

[33] In this context, the relevant “facts” do not include either the extent or the type of damage allegedly suffered by the plaintiffs. Rather, as the Court of Appeal has stated, “[t]he authorities make it very clear that ‘some damage’ is sufficient for the cause of action to accrue and to start the limitation period” (see Hamilton (City) v. Metcalfe & Mansfield Corporation, 2012 ONCA 156 at para 61).

[34] In my view, the plaintiffs were aware that they had a claim against one or more of the defendants on September 15, 2009, when they received the Trow report. That report identified that there was a failure of the stone wall constructed by J.D. MacKay, who they believed was under the supervision of Royal Homes. As indicated above, the report states:

The weight that was added by the construction of the stone retaining wall and the backfill that was placed behind it to raise the grade appears to be causing a failure of the lower retaining structure, causing it to move laterally towards the northeast.

[emphasis added}

[35] This Trow engineering report, which the plaintiffs commissioned because of identified issues with the foundation of the cottage (which they knew the retaining wall to be a part of), alerted or ought to have alerted the plaintiffs to the fact that the problems were construction related and that they had a cause of action against the defendants.

[36] The plaintiffs also knew who the defendants were because they were actively involved in the construction process; in my view they were aware that some damage had occurred and that remedial steps were needed. While the plaintiffs may not have known the precise cause of the issues with the wall or the extent of the damages, the law is clear that it was not necessary for them to know this in order to properly discover their claim.

[37] In his submissions, counsel for the plaintiff attempted to distinguish between his clients’ knowledge of the site conditions and their knowledge of the defendants’ negligence in the construction of the cottage. In the circumstances of this case, this is not a distinction which helps his clients. The plaintiffs had known for many years that their cottage property had challenging site conditions. Their original cottage was literally sliding down the hill towards the lake. This is why they demolished it and this is why they built a new cottage. They admit that they were assured that their new cottage would be built on a stable foundation and that they could leave their problems with the site conditions behind once the new cottage was built. In my view, as soon as they became aware that their new cottage was experiencing the same problems as their old cottage, they had the requisite knowledge that their cottage was not constructed properly, and that they had a claim against the defendants. They would have had this knowledge even without the Trow report. Simply stated, they had relied on the defendants but had not received the house they had contracted for.

[38] In his cross-examination Mr. Gillham admits as much. His responses at paragraphs 287 through 292 of his examination are revealing:

Q. Okay. So, did you have any understanding what “site conditions” meant at the time in 2009?

A. Just that there was something going on. I had no idea.

Q. Was this something that you had expected to happen? Did you expect some local settling to happen?

A. No, sir.

Q. Okay. So, at the time you knew that –again, back in 2009, you knew that something was wrong, something had gone wrong. You didn’t know who was responsible, but…

A. That’s correct.

Q. – This shouldn’t have happened. You paid for a cottage and a retaining wall and your expectation was that it wasn’t going to move.

A. That’s correct.

Q. So you knew that there was some problem with the construction – by 2009 there was some problem. You didn’t know what it was. Whether it was the town supervision, whether it was MacKay or Royal, you knew that there was some problem with the construction.

A. There was some problem.

Q. And you knew that in 2009?

A. Yes.

Decision

[39] For the above reasons, I find that the plaintiffs knew the basic essential facts which gave rise to a claim against the defendants once they had reviewed the Trow report. As per the decision in Kowal, they had “prima facie grounds to infer that the acts or omissions were caused by the party or parties” identified as defendants in this claim.

[40] Accordingly, I am granting summary judgment in favour of the applicants, and dismissing the action against them.

Costs

[41] If the parties cannot agree on costs, they have 15 days from the release of this decision to make submissions with respect to costs. Upon receipt of each other’s submissions, they have 10 days to make submissions in reply.

[42] In considering costs, I trust that the applicants will take into consideration the usual factors set out in Rule 57 of the Rules of Civil Procedure, but will also consider the fact that the respondents’ circumstances are very unfortunate. It remains my view that absent the provisions of the Limitations Act, the respondents appear to have a strong prima facie case in negligence and breach of duty against the defendants.

E.J. Koke S.C.J.

Date: October 3, 2017