| On April 6, the Court of Appeal of Québec rendered its decision in SNC-Lavalin inc. (Terratech inc. et SNC-Lavalin Environnement inc.) c. Deguise, 2020 QCCA 495.
Considering the importance of this decision for both the construction and insurance industries, RSS offers a series of newsletters discussing the main issues at stake. This is one segment of the complete series found here. |
The facts of the case are as follows: the presence of pyrrhotite in the aggregate used by concrete companies caused a deformation and degradation of the concrete provided to general contractors, which in turn caused damages to the building foundations. The owners of the damaged buildings had sued the general contractors as well as the concrete companies.
One of the arguments put forward by the concrete companies was the error of the trial judge in qualifying them as subcontractors instead of materials providers and finding them liable pursuant to the warranty of quality. The concrete companies therefore argued that they could not be held liable according to article 2118 C.C.Q. Although the Court of Appeal agreed, this finding does not change the liability of the concrete companies, which is maintained under the warranty of quality.
The presence of pyrrhotite in the aggregate is obviously a defect, but its mere presence is not sufficient to make the concrete companies liable under a vendor’s warranty of quality: the defect has to be latent and unknown to the buyer, under article 1726 C.C.Q.
The question was whether the general contractors were aware of the defect, considering the knowledge and competence as professional buyers of concrete.
The Court of Appeal reiterates that, since the Supreme Court’s decision in the ABB case, “manufacturers are subject to the strongest presumption of knowledge and to the most exacting obligation to disclose latent defects” (ABB Inc. v. Domtar Inc., 2007 SCC 50, [2007] 3 SCR 461, par 41). In this case, it was undeniable that the concrete companies were manufacturers. Even though professional buyers, by virtue of their expertise and particular knowledge, should be especially vigilant, they still benefit from the presumption of knowledge of the defect that weighs on the vendor.
Although knowledge of the defect by the general contractors is presumed when they deliver it to their own clients, this does not apply to the contractors’ relationship with the concrete companies. Thus, the contractors can take advantage of the warranty of quality, as well as of the presumption that the concrete companies were fully cognizant of the defect.
The expertise and knowledge of a buyer is nevertheless pertinent in the evaluation of how apparent the defect was, as the more sophisticated a buyer’s knowledge about a product that he is acquiring is, the more this defect is likely to be considered apparent. The appropriate test consists in assessing if a reasonable general contractor in the same circumstances could have detected the defect at the moment of the sale: was the defect apparent to a reasonably prudent and diligent professional buyer?
To evaluate the capacity of the contractors to detect the defect that was affecting the concrete, the Court of Appeal conducts an analysis of two faults of the general contractors that were pointed out by the trial judge.
The first fault relates to the ignorance of a very precise standard (CSA A23.1) regarding the composition of the concrete that is referred to in the National Building Code of Canada, which is at the heart of the obligation to accomplish their work according to the state of the art. The Court of Appeal points out that this standard is aimed primarily at the concrete manufacturers, who have an obligation to guarantee the quality of all components of their products. It also highlights that knowledge of this standard would not have give the contractors the capacity to locate a defect in the fluid concrete sold by the concrete companies.
Indeed, it is unreasonable to expect that general contractors, even if they are fully cognizant of the applicable standards, should be able to control for the quality of the aggregate used in the composition of the fluid concrete delivered on the construction site.
Furthermore, the Court of Appeal, while calling attention to the fact that the concrete companies were certified for quality (“Qualibéton”), points out that a buyer may rely on the presumption that a vendor with such a qualification will provide a product meeting all quality standards.
The second fault of the contractors’, according to the trial judge, is not asking sufficient questions regarding the product that they intended to use while the problems caused by the concrete produced by another company in the same region, Béton Maskimo, were widely known. However, as the contractors had actually attempted to verify the quality of the product by questioning several concrete companies, sometimes repeatedly, the Court of Appeal, considers that increased vigilance on their part would not have altered the chain of events.
The Court of Appeal finds that the presumption of article 1729 C.C.Q. applies in favor of the contractors and confirms the decision of the trial judge, according to whom the concrete companies are liable toward the general contractors, pursuant to 1726 C.C.Q.
Hence, the Court of Appeal concludes that the contractors were justified in filing a third-party claim against the concrete companies, which should have been held solidarily liable for any and all amount that the contractors could be condemned to pay to the plaintiffs.