COURT OF APPEAL FOR BRITISH COLUMBIA

Citation:

Howe Sound School District No. 48 v. Killick Metz Bowen Rose Architects and Planners Inc.,

 

2008 BCCA 195

Date: 20080507

Docket: CA034725; CA034909

Docket: CA034725

Between:

The Board of School Trustees of

School District No. 48 (Howe Sound)

Appellant

(Plaintiff)

And

Killick Metz Bowen Rose Architects and Planners Inc.

Respondent

(Defendant)

And

Zagreb Construction Ltd., Bollman Roofing & Sheet Metal Ltd.,

D.H.S. Building Products Inc., Inland Glass & Aluminium Limited,

Winwood Construction Ltd. and Inter-Coast Consultants Ltd.

Respondents

(Defendants)

And

Robert Tischer doing business as

Bob's Plastering & Stucco and the said Robert Tischer

and Killick Metz Bowen Rose Architects and Planners Inc.

Respondents

(Third Parties)

- and -

Docket: CA034909

Between:

The Board of School Trustees of School District No. 72 (Campbell River)

Appellant

(Plaintiff)

And

IBI Group Consultants Ltd., IBI Group Architects, N.A. Irwin Consulting Limited, Beinhaker Design Services Ltd., Ewen S. Fisher Management Inc.,

M. Blumberg Design Services Ltd., Scott Stewart & Associates Limited,

DHA Design Group Inc., E.A. Patton Design Services Inc., Peter Zurawel Design Services Ltd., and TJ McIntyre Design Group Ltd.

Respondents

(Defendants)

And

Precision Civil Installations Ltd.,

J.F. Butler & Sons Ltd., Status Electrical Corporation, Sky-Tech Products Ltd.,

 Standard Roofing Corporation, and Sunco Drywall Ltd.

Respondents

(Defendants)

And

Torry & Sons Plumbing & Heating Ltd. and Bill Torry Holdings Corp.

Respondents

(Third Parties)

Before:

The Honourable Mr. Justice Mackenzie

The Honourable Mr. Justice Lowry

The Honourable Mr. Justice Bauman

 

P.G. Foy, Q.C. and
A.M. Gunn, Jr.

 

Counsel for the Appellants (CA034725; CA034909)

K.A. Short and
D.G. Morrison

 

Counsel for the Respondent
Killick Metz (CA034725)

R.B. Lindsay, Q.C. and
G.S. Miller

Counsel for the Respondents
IBI Group to TJ McIntyre Design (CA034909)

Place and Date of Hearing:

Vancouver, British Columbia

April 17, 2008

Place and Date of Judgment:

Vancouver, British Columbia

May 7, 2008

 

Written Reasons by:

The Honourable Mr. Justice Mackenzie

Concurred in by:

The Honourable Mr. Justice Lowry

The Honourable Mr. Justice Bauman

Reasons for Judgment of the Honourable Mr. Justice Mackenzie:

[1]                The appellants are two school district trustee boards that appeal judgments dismissing their claims for negligence against certain architects after summary trials under Rule 18A of the Rules of Court.  The appellants claimed that design defects in the architects’ plans led to water leakage problems in two schools and the defects were not discovered until more than six years after the schools were occupied following construction.  The trial judges concluded that the actions were out of time based on six-year limitations on claims against the architects in the standard form contracts between the parties. 

[2]                The school boards contend that the trial judges erred in concluding that the contractual limitations excluded the discoverability postponement provisions of s. 6 of the Limitation Act, R.S.B.C. 1996, c. 266.  The school boards also contend that the trial judges erred in concluding that the cases were appropriate for disposition by summary trial under Rule 18A.

[3]                The reasons of Madam Justice Gray in the action by the Howe Sound School District No. 48 against Killick Metz Bowen Rose Architects and Planners Inc. (“the Killick action”) may be found at 2007 BCSC 28.  The reasons of Mr. Justice Rice in the action by the Campbell River School District No. 72 against IBI Group Consultants Inc. et al. (“the IBI action”) may be found at 2007 BCSC 280.

[4]                Both summary trials proceeded on essentially the same premises to raise the limitations issue.  The respondent architects agreed it could be assumed for the purposes of the summary trial that they were negligent and in breach of their contractual duties as well as duties in tort to warn of defects.  The architect in the IBI action also admitted that there had been a “fundamental breach” of contract for the purposes of the summary trial.

[5]                Both contracts contained the same limitation clause, article 3.9.6 of the Canadian Standard Form of Agreement Between Client and Architect.  It reads:

The Architect's liability for all claims of the Client arising out of this agreement shall absolutely cease to exist after a period of six (6) years from the date of:

a)         Substantial Performance of the Work,

b)         suspension or abandonment of the project,

c)         termination of the Architect's services in this agreement, or

d)         commencement of the limitation period for claims prescribed by any statute of the province or territory of the Place of the Work,

whichever shall first occur, and following the expiration of such period, the Client shall have no claim whatsoever against the Architect. The Architect's liability with respect to any claims arising out of this agreement shall be absolutely limited to direct damages arising out of the Architect's services rendered under this agreement, and the Architect shall bear no liability whatsoever for any consequential loss, injury or damage incurred by the Client, including but not limited to claims for loss of profits and loss of markets. [underlining added]

[6]                “Claims” are defined and linked to the architect’s insurance coverage by article 3.9.1, as follows:

In consideration of the premises and of provision of the services by the Architect to the Client under this agreement, the Client agrees that any and all claims which he has or hereafter may have against the Architect in any way arising out of or related to the Architect’s duties and responsibilities pursuant to this agreement (hereinafter referred to in this Article 3.9 as “claims” or “claim”), whether such claims sound in contract or in tort, shall be limited to the amount of $250,000.00 each claim and $500,000.00 for all claims during each period of coverage as provided by the Architect’s professional liability insurance or indemnity against errors and omissions in effect at the date of execution of this agreement, including the deductible portion thereof, and to the extent only that such insurance or indemnity is available to the Architect to satisfy such claims.

(The last qualifying condition in article 3.9.1 was deleted by amendment in the Killick contract, but nothing turns on that deletion.)

[7]                The school boards submitted that article 3.9.6 did not exclude the postponement provisions of s. 6 of the Limitation Act and time did not start to run against them until the defects were discovered or ought reasonably to have been discovered.  The architects’ position was that the limitation expired six years from substantial performance of the work, the date first occurring under (a) of article 3.9.6, and that the running of time under (a) was not postponed by s. 6 discoverability.  Madam Justice Gray agreed with the architects’ position for reasons she summarized, at paras. 74-76:

[74]      In my opinion, the principle of discoverability ought to be considered in construing a contract. However, as distinct from construing statutes, the court must take into account the principle of primacy of private ordering and the fact that parties to a contract allocate certain risks between them. In this case, clause 3.9.3 [sic] provides that the Architect's liability to the School Board arising out of the contract "shall absolutely cease to exist" six years after the earlier of several dates. One of those dates requires application of the Limitation Act, which includes a principle of discoverability in the postponement terms of s. 6. However, the parties agreed that the Architect's liability would end earlier if the date which was six years following other events, including Substantial Performance of the Work, occurred first.

[75]      The parties entered into a contract which required time to run from a fixed event, being Substantial Performance, which clearly occurs without regard to the School Board's knowledge. In cases where the wording of a time limitation permits time to run for example from when the "damages were sustained", as in Peixeiro v. Haberman, [1997] 3 S.C.R. 549, 151 D.L.R. (4th) 429, or after "the date on which the right to do so arose", as in Nielsen v. Kamloops (City), [1984] 2 S.C.R. 2, 10 D.L.R. (4th) 641, the court must consider if enough has occurred to cause "damage" or give rise to a cause of action. In contrast, the pivotal event in the Consulting Contract is the date of Substantial Performance of the Work as set out in clauses 3.9.6 and 1.8.

[76]      The reasons the parties would choose to enter into such a term are easy to understand. The parties allocated risks between them under the terms of the Consulting Contract, with each party agreeing to accept a particular risk. They could order their affairs accordingly, such as by securing appropriate insurance.  

Mr. Justice Rice followed the reasons of Gray J. on this point, at para. 40:

[40]      Like Madam Justice Gray … I do not find that there is anything ambiguous or vague in Clause 3.9.6 of the Client-Architect Agreement. The language is effective to exclude discoverability.

In support of her conclusion, Gray J., at para. 65, relied on the following passage from Ryan v. Moore, 2005 SCC 38, at paras. 22-24, [2005] 2 S.C.R. 53:

[22]      The discoverability principle provides that “a cause of action arises for purposes of a limitation period when the material facts on which it is based have been discovered or ought to have been discovered by the plaintiff by the exercise of reasonable diligence”: Central Trust, at p. 224. In some provinces, the discoverability rule has been codified by statute; in others, it has been deemed redundant because of other remedial provisions.

[23]      While discoverability has been qualified in the past as a “general rule” (Central Trust, at p. 224; Peixeiro v. Haberman, [1997] 3 S.C.R. 549, at para. 36), it must not be applied systematically without a thorough balancing of competing interests (Peixeiro, at para. 34). The rule is an interpretative tool for construing limitation statutes. I agree with the Manitoba Court of Appeal when it writes:

In my opinion, the judge‑made discoverability rule is nothing more than a rule of construction. Whenever a statute requires an action to be commenced within a specified time from the happening of a specific event, the statutory language must be construed. When time runs from “the accrual of the cause of action” or from some other event which can be construed as occurring only when the injured party has knowledge of the injury sustained, the judge‑made discoverability rule applies. But, when time runs from an event which clearly occurs without regard to the injured party’s knowledge, the judge‑made discoverability rule may not extend the period the legislature has prescribed.  [Emphasis added.]

(Fehr v. Jacob (1993), 14 C.C.L.T. (2d) 200, at p. 206)

See also Peixeiro, at para. 37; Snow v. Kashyap (1995), 125 Nfld. & P.E.I.R. 182 (Nfld. C.A.).

[24]      Thus, the Court of Appeal of Newfoundland and Labrador is correct in stating that the rule is “generally” applicable where the commencement of the limitation period is related by the legislation to the arising or accrual of the cause of action. The law does not permit resort to the judge‑made discoverability rule when the limitation period is explicitly linked by the governing legislation to a fixed event unrelated to the injured party’s knowledge or the basis of the cause of action (see Mew, at p. 55).

[8]                The school boards contend that Ryan and Fehr were not on point as they were concerned with the application of the common law discoverability rule, which has been supplanted by s. 6 of the Limitation Act in British Columbia, and Gray J. failed to address the question whether the contract excluded the statutory discovery extension under s. 6.  Fehr was concerned with whether the common law discoverability principle modified the two year limitation period for malpractice claims prescribed by s. 61 of the Manitoba Medical Act, R.S.M. 1987, c. M-90.  Similarly, Ryan was concerned with the asserted application of the common law principle to the six month limitation period in the Newfoundland Survival of Actions Act, R.S.N.L. 1990, c. S-32, s. 5.  Here, the question is the applicability of the statutory discoverability principles to a contractual limitation.

[9]                It would appear that the question is framed somewhat differently before us than it was before the trial judges, but as I understand the school boards’ submission here, the issue turns on the correct interpretation of art. 3.9.6(d).  The school boards contend that the date of ”commencement of the limitation period” under the Limitation Act in (d) means the date of commencement before any consideration of the s. 6 postponement provisions.  As a matter of construing the contract, (d) does not expressly exclude statutory discoverability.  It therefore implicitly applies to all of (a) to (d) as a matter of construction under the principle that statutory protections (here discoverability) are deemed not to be waived, save by clear and unequivocal language.  Thus time running from the date of substantial performance of the work under (a) is postponed until the defects are reasonably discoverable.  

[10]            In my view, the school boards’ submission cannot be sustained on the plain meaning of article 3.9.6 in conjunction with s. 6 of the Limitation Act.   Article 3.9.6 is written in strong words: “The Architect’s liability for all claims … shall absolutely cease to exist” after six years from the first occurring date in (a) to (d).  The date in (d) is “commencement of the limitation period for claims prescribed by [the Limitation Act]”.  The comparable wording of ss. 6(3) and (4) of the Act is that the running of time is postponed and “does not begin to run against a plaintiff” until discoverability of the facts.  As time does not start to run under s. 6 until discoverability, that date must also be the date of commencement of the limitation period for the purposes of (d).  There is no substantive difference in meaning between “commencement” and “begin to run”.  The postponement provisions thus become included within the limitation periods prescribed for claims by the Act, and subject to the first occurring six-year limitation from the date of substantial performance. (i.e., under article 3.9.6(a)).  There is no reason to interpret (d) as dividing “commencement of the limitation period” between the dates that time would run without postponement and with postponement, and limiting it only to the “without postponement” commencement date. 

[11]            The parties having limited the application of the postponement provisions to the statutory limitations in (d), postponement can have no application to extend the date specified in (a) for commencement of the limitation period for claims against the architects.  In my view, the trial judges did not err in concluding that the contracts exclude any application of the postponement provisions of s. 6 of the Limitation Act to the date agreed to by the parties in article 3.9.6(a), i.e., the date of substantial performance.

[12]            The school boards contend that the “claims of the Client” to which article 3.9.6 is applicable are limited to claims within the knowledge of the school boards and do not extend to latent defects not within their knowledge.  This submission is answered by article 3.9.1 which defines claims as “all claims which he has or hereafter may have against the Architect in any way arising out of or related to the Architect’s duties and responsibilities pursuant to this agreement (hereinafter referred to in this Article 3.9 as “claims” or “claim”) whether such claims sound in contract or in tort…”.  This comprehensive definition of “claims” clearly extends to latent claims.

[13]            The parties have utilized a standard form contract which demonstrates a concern for precise risk allocation and insurance.  The contracts are intended to be of general application and readily comprehensible.  Both Gray J. (at para. 68) and Rice J. (at para. 27) relied on a passage from the majority reasons of La Forest and McLachlin JJ. in BG Checo International Ltd. v. British Columbia Hydro & Power Authority, [1993] 1 S.C.R. 12 at 26-27, 99 D.L.R. (4th) 577, that parties are entitled to arrange their affairs and assume risks at variance with the duties otherwise imposed by the law of tort.  I agree with the trial judges that the contracts reflect the common intention of the parties to limit the architects’ risks of liability for tort and breach of contract by agreement.  They agreed through clear and unambiguous words to allocate risks of negligent design in a manner that limited any application of the postponement provisions of the Limitation Act to a period within six years from the date of substantial performance of the work, and there are no policy reasons to interfere with that contractual arrangement. 

[14]             These are not cases where there is a power imbalance between the parties that would prompt the court to lean in favour of a strict construction against the architects to protect the school boards.  There is no unfairness or unconscionability alleged in the relationship of these parties that could engage the application of the fundamental breach doctrine: see Guarantee Co. of North America v. Gordon Capital Corp., [1999] 3 S.C.R. 423, at paras. 52 and 60-64, 178 D.L.R. (4th) 1.

[15]            The school boards’ alternative submission is that the date of substantial performance of the work under article 3.9.6(a) could not be determined without a trial and the trial judges erred in concluding that the factual question was appropriate for summary disposition under Rule 18A.  Substantial Performance of the Work is a term defined by article 1.8 of the contracts as follows:

Substantial Performance of the Work is as defined in the lien legislation applicable to the place of the project. If such legislation is not in force or does not contain such definition, Substantial Performance shall have been reached when the Work is ready for use or is being used for the purpose intended and is so certified by the Architect.

As Gray J. noted, the Builders Lien Act, S.B.C. 1997, c. 45, does not define “Substantial Performance”.  The comparable term is “completed”, defined by s. 1 to mean “substantially completed or performed, not necessarily totally completed or performed”.

[16]            The architect in the Killick action issued a “notice of substantial completion” stating that “[t]he Contract of the above-mentioned project has been declared substantially performed as of August 21, 1996, in accordance with the Builders’ Lien Act of British Columbia.”   It was not disputed that the school board used the building in the fall of 1996.  The writ was issued 10 September 2003. 

[17]            Madam Justice Gray concluded that the use of the term “substantial completion” and the reference to the Builders Lien Act did not disqualify the notice as a notice of substantial performance for the purposes of article 3.9.6(a).  In my view, there was no error in that conclusion.  There is no significant distinction between “substantial completion” and “substantial performance” and the reference to the Builders Lien Act appropriately links the “substantial performance” to the completion terminology of that Act

[18]            The certificate in the IBI action is more attuned to the terminological nuances. The architect there issued a “Certificate of Substantial Performance” certifying that “the work described [in the contract] has been SUBSTANTIALLY PERFORMED on March 21st, 1994” and stating that substantial performance was to be regarded as the equivalent of “completed” in the applicable lien legislation.  The writ in the IBI action was issued 6 May 2004, more than ten years after the school board started using the school building.

[19]            Here, the basic facts were not controversial and were appropriate for summary trial disposition. The notices issued by the architects were exhibits attached to affidavits and it was accepted that the school boards started using the premises for their intended purpose shortly thereafter.  In both cases the writs were issued more than six years later.  In my view, those evidentiary facts more than adequately supported the findings of fact by both trial judges that the date of substantial completion for the purposes of article 3.9.6(a) was more than six years before the writs were issued.

[20]            The argument advanced in both actions is that the failure of the architects to identify the design defects invalidates the notices.  Mr. Justice Rice observed (at para. 35):

[35]      The choice of a date for substantial performance rests with the architect and it depends upon his or her impression at the time that it is declared. From that point, it is relied upon by tradesmen, contractors, and workers to facilitate payments to them of the holdback monies. …

[21]            The purpose of the certificate and the reliance placed upon it by owners going into occupation and others relying on the certificate would be defeated if the notice could be invalidated by latent defects of design or construction involving negligence of the architect.  It would introduce instability into the relationships if a declaration of substantial performance could be invalidated by latent defects discovered years after the owner occupied the premises.  The architect in the IBI action cites several cases for the proposition that certificates of architects and engineers will be upheld where there is error or negligence, so long as there is no fraud or collusion between the architect and owner: see Hutchinson v. Mathias, [1943] 1 W.W.R. 451 at 453 (B.C.S.C.); Holliston v. Zaluski (1946), 63 B.C.R. 1, [1946] 3 W.W.R. 468 at 477-478 (C.A.); Columbia Bitulithic Ltd. v. D.C. Masonry Construction Ltd. (1980), 27 B.C.L.R. 220 at 224 (C.A.); Dilcon Constructors Inc. v. British Columbia Hydro and Power Authority (1993), 7 C.L.R. (2d) 22 at para. 241, (B.C.S.C.); and Croft Construction Co. v. Terminal Construction Co. (1959), 20 D.L.R. (2d) 247 at 253-254 (Ont. C.A.).  These cases involve reliance by contractors or others on the certificate of the architect or engineer but in my view the same reasoning is applicable to limitation issues involving claims against the architect.  The context of articles 3.9.6 and 1.8 necessarily implies that the certificate of the architect should be determinative in the absence of fraud.

[22]            In any event, here, the certificates were combined with use by the owners, and the findings of the trial judges that there was substantial performance well outside the six-year period for claims does not depend on the certificates alone.  As observed above, in my view there are no grounds to disturb those findings.

[23]            For these reasons, I would dismiss the appeals.

“The Honourable Mr. Justice Mackenzie”

I AGREE:

“The Honourable Mr. Justice Lowry”

I AGREE:

“The Honourable Mr. Justice Bauman”