| 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 rather simple: the presence of pyrrhotite in the aggregate used by concrete companies caused the concrete provided to several general contractors to swell, which damaged the foundations of numerous buildings that had been constructed using that concrete. The building owners sued the general contractors, the concrete companies, the operators of the quarry where the aggregate was extracted, as well as a geologist who had analyzed the aggregate to determine if it met the applicable standard for architectural use.
The trial judge held the general contractors liable pursuant to article 2118 C.C.Q.:
| 2118. Unless they can be relieved from liability, the contractor, the architect and the engineer who, as the case may be, directed or supervised the work, and the subcontractor with respect to work performed by him, are solidarily liable for the loss of the work occurring within five years after the work was completed, whether the loss results from faulty design, construction or production of the work, or defects in the ground. |
On appeal, the general contractors claimed that they could not be held liable according to article 2118 C.C.Q. They were essentially arguing that there was no construction defect and therefore they could only be held liable in virtue of the warranty of quality, pursuant to articles 1726 and 2103 C.C.Q.:
| 1726. The seller is bound to warrant the buyer that the property and its accessories are, at the time of the sale, free of latent defects which render it unfit for the use for which it was intended or which so diminish its usefulness that the buyer would not have bought it or paid so high a price if he had been aware of them.
The seller is not bound, however, to warrant against any latent defect known to the buyer or any apparent defect; an apparent defect is a defect that can be perceived by a prudent and diligent buyer without the need to resort to an expert. […]2103. The contractor or the provider of services supplies the property necessary for the performance of the contract, unless the parties have stipulated that only his work is required. He shall supply only property of good quality; he is bound by the same warranties with respect to the property as a seller. A contract is a contract of sale, and not a contract of enterprise or for services, where the work or service is merely an accessory in relation to the value of the property supplied. |
As the trial judge indicated in his decision, four elements must be proven for the presumption of liability provided for in article 2118 C.C.Q. to apply:
- the object of the litigation must be a real estate property (immovable);
- the property must be lost in whole or in part, or at the very least be at risk of being lost;
- such loss or risk of loss must be the result of :
- faulty design;
- faulty construction;
- faulty production;
- defects in the ground;
- the loss must occur within five years of the completion of the construction.
The trial judge ruled that these four criteria were met and that the presumption was fully applicable against the contractors. However, the latter submitted that the third element was lacking, as the loss was not the result of faulty design or construction, rather of a latent defect.
The Court of Appeal concluded that, in this case, there was both a loss of use and a defect in the use, since the defective foundations can be qualified as a latent defect pursuant to article 1726 C.C.Q. or as a faulty construction of production pursuant to article 2118 C.C.Q.
Consequently, the plaintiffs could benefit from the application of both articles. The Court of Appeal nonetheless explains that there is no need to invoke a general applicable system of reparation (articles 1726 and 2103 C.C.Q.) when a limited system is available, particularly when the general application system is called upon merely to provide more means of exoneration to a defendant.
Article 2103 C.C.Q. is part of a section of the Code called “General provisions applicable to both services and works”, while article 2118 C.C.Q. is in a subsection called “Immovable works”. However, judicial interpretation dictates that particular rules must be applied over general rules.
Subsidiarily, the contractors also invoked a defence of force majeure derived from article 1470 C.C.Q., as they admitted that the defence in article 2119 C.C.Q., which applies directly to article 2118 C.C.Q., is of no avail to them.
According to the contractors, the cause of the damages in this case was attributable to the fault of third parties, i.e. the concrete companies. They alleged that the trial judge had erred by qualifying the concrete companies as subcontractors.
The Court of Appeal agrees with the contractors in considering that the concrete companies are material providers rather than subcontractors. Nevertheless, it clearly states the trial judge’s error has no impact on the ultimate liability of the contractors pursuant to article 2118 C.C.Q.
While the trial judge considered that force majeure could not be relied upon since the cumulative criteria of irresistibility and unpredictability were not met, the Court of Appeal considers that the missing criterion is exteriority. Despite the contractors’ arguments, the Court of Appeal declares that the material providers are in no way third parties to the construction.
This is clear when considering that article 2117 C.C.Q. gives a client the right to verify the quality of the materials used by contractors or subcontractors, which of course include those acquired from providers of building materials. Furthermore, under 2726 C.C.Q., such a provider is “[a person] having taken part in the construction or renovation of an immovable”.
Ultimately, a general contractor is responsible for the materials that it incorporates in a building, since their poor quality may constitute a construction defect. The fact that article 2118 C.C.Q. does not include suppliers of building materials in the parties held solidarily liable does not make them third parties to the construction. Thus, their fault does not allow for a defence of force majeure.