Can a township or municipality be held liable for failing to inspect construction once a building permit is issued? In a recent decision rendered by Ontario’s Sutherland J., the answer is yes.

The case at issue, Breen v. The Corporation of the Township of Lake of Bays, 2021 ONSC 533, centres on a cottage purchased by the plaintiffs in 1999 in the Township of Lake Bays. Various improvements were performed on the property since its initial purchase until the fateful decision was made to renovate the cottage in 2011. From 2011-2012, the plaintiffs had their cottage renovated, which included a significant addition to the kitchen. During the renovation process, the plaintiffs’ architect discovered a number of structural issues, following which an engineer was retained to inspect the property. The engineer’s diagnosis was categorical: The cottage was structurally unsafe and there were several Building Code deficiencies. 

After discontinuing their occupation of the cottage and removing its contents in 2013, the plaintiffs commenced an action in the Ontario Superior Court of Justice against the Township of Lake Bays. The plaintiffs sought damages for negligent building inspections and breaches of the township’s legal duty to enforce the provisions of the Building Code Act.

Duty of Care and Building Inspection

The Court found that the township owed a prima facie duty of care to the plaintiffs as owners of a property that was constructed following the township’s issuance of a building permit and the conducting of building inspections. Even the township conceded that the sort of relationship it had with the plaintiffs was “sufficiently close that it was reasonably foreseeable that carelessness on its part might cause damages.”

The second portion of Sutherland J.’s analysis involved determining whether there were any policy reasons to limit the prima facie duty of care. After turning to Supreme Court of Canada jurisprudence for guidance, the Court concluded that the township owed a duty of care to the plaintiffs to not “negligently exercise its power” in granting a building permit, and in the inspection of the construction of a building.

The Court determined that because the purpose of the building inspection scheme is to protect the health and safety of the public, and because the policy of the legislative scheme also applies to the township’s powers to grant or reject a building permit application, the township owed a duty of care to the cottage owners.

Standard of Care in Building Inspection: Not Perfection 

The Court continued its analysis to ascertain the standard of care the township owed. Sutherland J. noted that the defendant township was not held to an insurer’s standard of care, namely, perfection. This means that a township or municipality would not be held liable for every deficiency or negligent action in the construction of a building. Notably, under the Building Code Act, the township is not considered the constructor, engineer or architect, each of whom would be held to a more exacting standard of care.

Rather, the Court applied a traditional negligence analysis, as described in Ingles v. Tutkaluk Construction Ltd., 2000 SCC 12: “To avoid liability, the government agency must exercise the standard of care in its inspection that would be expected of an ordinary, reasonable and prudent person in the same circumstances. The same standard of care applies to a municipality which conducts an inspection of a construction project.”  

As such, Sutherland J. concluded that the standard of care obligated the township to take steps to inspect the cottage during construction and to order the remedying of defects it could reasonably be expected to have detected. This finding stems from the municipality’s obligation to ensure construction complies with the Building Code Act, which the Court held is comprised of two stages. While the first stage is the granting or rejection of a building permit application, the second stage involves the inspection of the construction.

The Court concluded that the township fell below the standard of care in the first stage, that is, the granting of a building permit. The township failed to take reasonable and prudent steps to review the application to enforce the Act, Code, and the By-Law. Sutherland J. highlighted the fact that the permit was granted the same day, which indicates that no review took place or was planned.    

Turning to the second stage, the Court pointed out that the township had only conducted three inspections during the initial construction phase. Moreover, the municipal building inspectors failed to return to the property on future occasions. The Court found that the township’s building department lacked a set of plans and specifications to exercise its authority and duty of care at any stage of the construction process. The township, therefore, failed at the second stage as well.  

Breen v. The Corporation of the Township of Lake of Bays illustrates that a municipality or township will be held liable by Ontario courts for negligence involving the issuing of a building permit as well as failures to conduct appropriate inspections during the construction of a building.

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