BC Supreme Court certifies class action building defects claim

The BC Supreme Court has certified a property damage class action concerning defective installation of insulated glass units (IGUs). We do not expect the decision to be appealed.

Class

The class includes those who had bought residential units in the Shangri-La Hotel building through a contract with the developer, or had taken an assignment of a pre-sale contract with the developer’s written consent, therefore having contractual privity with the building developers. The action alleges all IGUs that form part of the Shangri-La curtain wall exterior are defective. 

In separate but related tort actions, unit owners have sued multiple defendants (including the developers) to recover the costs of repairing damage to the building’s common property (IGU actions). Owners who had contractual privity with the developers were previously barred from seeking property loss damages through the IGU actions (relief was limited to dangerous defect repair).

Certification

Walker J found the test for certification under the BC Class Proceedings Act (CPA) was met.¹ He noted the CPA is remedial, procedural legislation that should be interpreted liberally to give effect to its objects. After establishing that the pleadings disclosed a cause of action, the plaintiff had to demonstrate “some basis in fact” for the remaining certification criteria. This required something more than a “superficial scrutiny of the sufficiency of the evidence.”

Common issues

The requirement to show the class claims raised common issues is a “low bar” to be approached purposively: an issue will be common if it is a substantial ingredient of each member’s claim. 

The liability common issues were: 

• Did the defendants breach an implied warranty owed to the class members because the IGUs that formed the exterior curtain wall were not: (i) designed and/or built in a good and workmanlike manner; (ii) constructed with suitable materials; (iii) free from defects; and/or (iv) suitable for their purpose of habitation?
• Did the defendants otherwise breach the pre-sale contract terms because of the alleged IGU defects?

The damages common issues were:

• Can an award of damages for loss of amenity be made without individual damages assessments? 
• Should the defendants pay pre- or post-judgment interest?
• Should the defendants pay the costs of distributing any award and/or any costs of determining eligibility and individual issues? 

Liability common issues

The liability common issues encompassed: alleged systemic defects, a standard form pre-sale contract, claims of a uniform breach of contract and implied warranty, the same IGUs in the same building, original purchasers or their assignees, and evidence common to all class members. The plaintiff (by way of expert evidence) had demonstrated some basis in fact for each of these common issues. There were no unresolved privity issues, and no exclusionary language prohibiting claims for breach of contract or implied warranty.

Also, the proposed liability issues were not individualized, but common to all class members, as they focused on defects instead of individual conduct. The proposed class would therefore be bound by their resolution. 

Walker J also found that liability issues can be certified in the absence of common issues relating to damages where they advance the proceeding. In a contract claim, liability is established on proof of breach; proof of loss is not an essential element.² If the plaintiff can establish breach of contract, it will establish liability – it does not need to prove causation of loss or damage, like it would to advance a tort claim. 

Damages common issues: aggregated damages for loss of amenity?

Section 29 CPA provides that an aggregate monetary award may be made if the following requirements are met:

• Monetary relief is claimed on behalf of some or all class members;
• No questions of fact or law other than those relating to the assessment of monetary relief need to be determined to establish the amount of the defendant’s liability; and
• The aggregate or a part of the defendant’s liability to some or all class members can reasonably be determined without proof by individual class members.

Walker J considered whether damages for loss of amenity, resulting from breach of contract or implied warranty, can be calculated on a class-wide basis. Put another way, can damages for each class member’s loss of use or enjoyment be determined using a generalized formula? 

BC jurisprudence indicates that while aggregate damages can be assessed on the basis of sampling and statistics, loss of amenity claims have not been decided using random sampling. The issue is also subject to debate in Ontario.

Ultimately, the court found the question is undecided and the issue was deferred until after the liability common issues are determined.³ 

Preferable procedure

A class proceeding was the preferable procedure to resolve the common issues.⁴ Regarding common issue (C) (loss of amenity), the court distinguished the IGU actions: those members in contractual privity with the developers are pursuing claims for loss that is separate from common property; this is the limit of the relief available to owners in the IGU actions. Judicial economy and access to justice are served if the liability common issues are tried at the same time as the IGU actions. Determining them through a “test case” or a representative action would not be efficient.

Commentary

This is the first class action certification concerning building envelope defects in BC. It opens the door for strata unit owners to mass under the class action umbrella and advance claims for personal losses based on breach of contract and implied warranties. These claims may then lead to joinders of other parties not in privity with owners, but with the claiming party, or even based on claims for contribution and indemnity under the Negligence Act. 

The decision’s impact on overall defence and indemnity costs is also significant for the insurance industry, and equally unpredictable in terms of setting defence and indemnity reserves.