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Defective Products and Building Structures

Law of Torts - Ogbogu
by

Ubaka Ogbogu

on 2 May 2016

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Transcript of Defective Products and Building Structures

Defective products and building structures
Defective products and building structures
Loss of bargain claims
Lord Bridge:
No recovery in tort for pure economic loss resulting from defective products or building structures, whether dangerous or not
Lord Bridge:
Lord Oliver:
Winnipeg Condominium v Bird
(1995)
Issue:
Debate
Was the SCC right to award damages for the cost of repairing the defect rather than removing the danger (removing the cladding)?
Donoghue
: Purchaser not in privity with negligent manufacturer
suffers injury to person (or property)
as a result of defective product
Traditional exclusionary rule
Defects, even dangerous ones, discovered before any damage, are mere defects in quality
Pure economic loss
Tort can only address
damage to

persons or property
Building/defect poses a danger to third parties,
for which P/owner might be liable
Murphy v Brentwood
Summary
Except where defect poses danger to third parties, and would result in liability to owner if danger is not removed
But what if the defect poses imminent danger to P's health and safety?
Benson:
A buys a defective product
A only has a right to that defective product
And no right
to something better than
the defective product
Because the something better does not exist yet
You cannot claim an expectation that does not exist
Unless you are a party to a contract that entitles you to a future state of affairs
Apartment building constructed in 1972 bought by plaintiff in 1978
Plaintiff was a subsequent owner
Can a contractor be held liable
in tort
for negligent construction
To a subsequent purchaser/owner of the building
For the cost of repairing defects in the building?
Recovery allowed where defect poses danger (to P or third parties) and P is seeking to mitigate danger through repair
Relational economic loss review
Relational economic loss is NOT recoverable
except
:
Possessory/proprietary interest
General average
Joint venture
Not really exceptions, but instances of harm to P's rights in person/property
Recovery is possible under "
new categories that reflect relationship of proximity
"
Analysis based on
Anns
Is it reasonably foreseeable that a negligently constructed building will harm subsequent purchasers?
Is there a sufficiently close relationship b/w parties such that D ought foresee subsequent purchase's loss?
Analysis
Exclusionary rule provides NO incentive to mitigate potential losses
Removal versus repair (Lord Oliver in
Murphy
)
Cost of repairing not recoverable because P can just remove defect/danger
Are there policy reasons negating liability?
And reward P who recklessly defers repairs until defect causes physical injury
Lord Atkin/MacMillan: a manufacturer owes a duty...not to cause foreseeable injury to a
person's bodily integrity or property
Purchaser/owner who is not in privity with negligent manufacturer/builder
spends money fixing or repairing defective product/building
A is first time buyer of a house
Discovers defects, but suffers no physical injury
So A bought a lemon
Scenario #1
A sues builder for cost of repairs
Not based on physical damage
But that subsequent purchaser bought something of substandard quality
Disappointed expectations
Pure economic loss = cost of repair
No privity, no recovery in contract
Recovery...all over the map
1970 decisions allowed recovery. Exclusionary rule re-established in
Murphy v Brentwood District Council
(1991, HL)
Allow recovery for building structures, but not for other products
Allow recovery for (residential) building structures, but not for other products
Recovery for everything, where
defect is dangerous
Legal History
Liability imposed upon contractors for dangerous defects in building structures
Liability for dangerous defects in products or building structures
Murphy v Brentwood
Municipality negligently certified foundations of a house
P purchases from builder, then noticed cracks in foundations
Unable to afford cost of repair, sold house for discounted value of 35k
Sued municipality for shortfall
Public authority/governmental liability
Owner can recover costs from builder/approver to obviate danger (and avoid liability) through repair or demolition
NO!
Because defect, when first discovered, may not have been dangerous
P in position to allow building gradually deteriorate until it is dangerous, thereby increasing loss
Bottomline: No duty owed in tort to subsequent purchaser for economic loss not resulting from physical damage
No injury or loss here
You got what you paid for (buyer's beware)
If danger ceases to be latent (hidden), it ceases to be dangerous
Injury will only occur if P (owner) acts unreasonably in failing to
remove the danger
P also cannot recover cost of repair
Agree?
In 1989, section of exterior stone cladding collapsed, necessitating repairs
P sues to recover
cost of repairs
from:
Bird moved to strike on grounds that this type of damage is not recoverable
La Forest J: YES
P can recover cost of repair of defect "discovered prior to any injury...if it poses a real and substantial danger"
Ruling:
YES
YES
NO
Rule not a circumvention of contract law
Defect if not repaired poses danger P's protected legal interests in his person and property
Maintaining exclusionary rule will penalize a responsible property owner who repairs defect before it causes injury
No need to repair - just remove cladding and danger is gone
La Forest J:
A home is a long-term investment and most homeowners will choose to fix rather than abandon
Choice between repairing one's home and discarding it is no choice at all
Makes no sense at all, especially in relation to buildings
Cheaper too!
What about
?
That may be a rule in contract, but not in tort
Because it does not conform to certain realities of modern housing market
Latent defects in a house do not manifest themselves at time of purchase
So buyer not in a position to "beware"
Construction professionals should bear risk as they are have expertise to anticipate problems and are in better position to take care
What does it mean to have a defect or product that is dangerous?
Imminent
reasonably certain
not merely possible but probable
doomed
grave and disastrous
almost certain
threatened
fraught with danger
foreseeable
Bow Valley
Defective products and building structures
Loss of bargain
Scenario #2
B orders product from retailer
Discovers defects...lemon
B sues manufacturer for cost of repairs
Claim is NOT that the building collapsed or product exploded and injured someone or something
Murphy v Brentwood DC
(HL, 1990)
Followed by SCC in
Rivtow Marine Ltd v Washington Iron Works
(1974)
Winnipeg Condominium Corp No 36 v Bird
(SCC, 1995)
Hughes v Sunbeam Corporation Canada Ltd
(ONCA, 2002)
Plas-Tex Canada Ltd v Dow Chemical of Canada Ltd
(ABCA, 2004)
Traditional exclusionary rule
Unless...
No right to non-existent defect-free product
(a) general contractor (Bird)
(b) sub-contractor that installed cladding
(c) architects
Encourages economically inefficient behaviour
Hughes v Sunbeam Corp
(ONCA)
P, subsequent purchaser, sued D for defective and unreliable smoke alarms (class action)
Sought damages for
cost of alarm
and
its removal
But also for installation of a replacement
Laskin JA:
Relying on defective smoke detectors is dangerous and unsafe
Safety justifies compensating P for costs to
eliminate dangerous reliance on defective alarm
"putting building back in non-dangerous state"
Who is not in contractual privity with contractor,
And
owner seeks to mitigate danger by fixing defect and putting building back into a non-dangerous state
Repair =
"real and substantial danger"
"not...repairs that would serve merely to improve quality"
= safety
5 reasons why
Hughes
may not succeed at trial
Appeal from motion to strike
Is a defective smoke detector a dangerous product
per se
?
Indeterminate liability
New remedy: cost of removing alarm and installing new one (not repair)
Option to eliminate defect by simply discarding smoke alarm
Product quality or breach of warranty claim?
How can one rely on a smoke alarm once defect is discovered?
Summary
In loss of bargain cases:
First, ask if the defect is dangerous
If not, exclude recovery
If yes, then ask about the purpose of remedying the dangerous defect
Recovery allowed if reason is to put product in/return to a non-dangerous state
If purpose is to improve quality, then not a dangerous defect
Recovery extended to defective products
Full transcript