Condominium Corporation No. 0522151 (Somerset Condominium) v JV Somerset Development Inc, 2022 ABCA 193 – Alberta Court of Appeal Opens Door for a Finding of Developer Liability for Construction Deficiencies
June 14, 2022
The Alberta Court of Appeal (the “Court”) recently heard a summary judgement application involving a condominium board that had made a claim in tort that a developer owed a duty of care regarding serious deficiencies in the design and construction of the condominium’s balconies. In Condominium Corporation No. 0522151 (Somerset Condominium) v JV Somerset Development Inc, 2022 ABCA 193, the Court held that there could potentially be a finding of liability in tort for a developer that fails to take reasonable care in constructing a building or repairing deficiencies.
The Court made reference to the seminal Canadian decision regarding construction deficiencies, Winnipeg Condominium Corporation No 36 v Bird Construction Co (“Winnipeg Condominium”), where the Supreme Court of Canada held that a contractor owed a duty of care to subsequent condominium unit owners. This duty depends on the existence of a foreseeable, real and substantial danger resulting from the building deficiencies. Ultimately, it was determined by the Court that this was not a matter that could be settled on summary judgment, and would need to go to trial. If a duty of care is found at trial, it would result in the creation of a novel duty of care owed to subsequent condominium unit owners by developers. This duty could potentially exist even when the developer had no direct involvement in the design, physical construction or inspection of the building, and when the deficiencies are not identified for years after the original sale.
The respondent, JV Somerset Development, was the developer of a condominium building that was completed during 2004/2005. The 215 units were then sold to members of the public during the same years. In 2012, defects with the balconies due to water infiltration were identified. The balconies were considered part of the condominium common property, and as such were under the control of the appellant, Condominium Corporation No. 0522151 (o/a Somerset Condominium). The appellant repaired the faulty balconies, and commenced an action against the respondent, who they claimed was jointly and severely liable with the architect and project manager, to recover the costs.
The appellant’s claim was brought in tort, arguing that as the developer, the respondent owed a duty of care to the future unit owners; the specific alleged duties (re-stated on appeal) included:
- the property will be reasonably fit for habitation;
- construction will be executed in a good and workmanlike manner;
- good and proper materials will be supplied throughout construction; and
- the final product delivered to the consumer will be free of defects in material and labour.
In its defence, the respondent asserted that a developer, unlike a contractor, does not owe a duty of care to the unit owners, as none of the named defendants were directly involved in the design, physical construction or inspection of the condominium complex.
Decision of the Chambers Judge
The respondent brought an application for a summary judgement after questioning was complete. The grounds for the application were centered around the fact that during questioning, the appellant’s officer admitted that there was no knowledge or record that the defendant had been involved in the design, physical construction or inspection of the building, and that the only known involvement of the respondent was as the original developer and vendor to the initial purchasers. The chambers judge accepted this argument and dismissed the claim, holding that a developer does not owe a duty of care, and therefore cannot be liable in tort, for construction deficiencies, unless they were actually involved in the physical construction.
Court of Appeal Decision
On appeal, the Court set out three possible categories under which a developer could be held liable for construction deficiencies: (i) contractual duties and covenants; (ii) tort duties; or (iii) statutory duties. While the application of contractual duties was discussed, the claim was brought in tort and therefore no contracts between the parties were entered into evidence.
In Winnipeg Condominium, the Supreme Court of Canada considered whether a contractor could owe a duty of care to subsequent purchasers of a building for failures that were discovered 15 years after construction. In that decision, the Supreme Court of Canada held that the foreseeability of a failure to take reasonable care in constructing the building would create defects that posed a substantial danger to the health and safety of the future occupants would establish a duty of care. If injury or damage occurred as a result, or if damage was identified and remedied, the contractor would be liable and there would be an ability to recover for the damage or economic cost of the repairs. This duty in tort exists independently of any contractual arrangement, and it was noted that there was no logical reason for a contractor to shield themselves from liability by relying on a contract made with the original owner.
The key question before the Court in Somerset Condominium was whether the duty in tort established in Winnipeg Condominium could be extended to apply to a developer who was not involved in the physical construction of the building. Winnipeg Condominium was decided before the need to establish proximity between the parties arose. However, a subsequent decision that applied Winnipeg Condominium made no indication that there was a lack of proximity between the parties.
The Court stated that the principles in Winnipeg Condominium regarding a duty of care related to construction defects could arguably extend to apply to developers as well as contractors. However, they emphasized that this area of law remains unclear and could not be determined on a summary judgement application. Ultimately, the Court directed the matter be determined at trial. On appeal, the terms of the original contracts between the parties will likely be central to the analysis, including because said contracts were not reviewable by the Court as part of the summary judgement application. Further, the standard of care to be applied is also unclear, and the fact that there was no hands-on role played by the developer may be significant consideration.
We will continue to monitor the progress of this dispute and will provide further updates as they become available.
 Condominium Corporation No. 0522151 (Somerset Condominium) v JV Somerset Development Inc, 2022 ABCA 193 (“Somerset Condominium”).
 Winnipeg Condominium Corporation No 36 v Bird Construction Co, 1995 CanLII 146 (SCC),  1 SCR 85 (“Winnipeg Condominium”).
 Somerset Condominium at paras. 2-5.
 Somerset Condominium at para. 6.
 Somerset Condominium at para. 8.
 Somerset Condominium at para. 9-10.
 Somerset Condominium at para. 12.
 Somerset Condominium at para. 13. In this case, potential statutory duties included those the New Home Buyer Protection Act, SA 2012, c N-3.2.
 Somerset Condominium at para. 26, citing Winnipeg Condominium at para. 41.
 Somerset Condominium at para. 27.
 See Deloitte & Touche v Livent Inc. (Receiver of), 2017 SCC 63 at para. 25.
 See 1688782 Ontario Inc v Maple Leaf Foods Inc, 2020 SCC 35.
 Somerset Condominium at para. 33.