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PR21S/Shutterstock.comA cautionary tale from Alberta's highest court

By Jason E. Roberts, Fillmore Riley LLP

Limitation of liability clauses are often found in con- struction contracts. These clauses generally serve to limit the amount payable as damages by a party in the event of faulty design or workmanship on its part.

However, the recent decision of the Alberta Court of Appeal in Swift v. Tomecek Roney Little & Associates Ltd. signals that parties to construction contracts should exercise caution when relying on limitation of liability clauses.

The facts of the case are reasonably straightforward and, although they involve the construction of a single-family home, there is no reason to suggest that the principles set out by the court would be inapplicable to other types of construction contracts. Mr. and Mrs. Swift owned land on Vancouver Island, on which they planned to build a home. Mr. Swift entered into an agreement with an architectural firm (the “Architects”) to design the home (the “Agreement”). The Agreement contained a limitation of liability clause, which protected the “Architects (referred to in the Agreement as the “Designer”)”:

3.8.1 With respect to the provision of services by the Designer to the Client under this Agreement, the Client agrees that any and all claims which the Client has or hereafter may have against the Designer which arise solely and directly out of the Designer’s duties and responsibilities pursuant to this Agreement (hereinafter referred to in this Article 3 as “claims”), whether such claims sound in contract or in tort, shall be limited to the amount of $500,000.00.

The Architects subcontracted the structural engineering portion of the design to a professional engineering firm (the “Engineers”). Initially, the Engineers’ design only complied with Part 9 of the 1998 British Columbia Building Code (the “Code”), which is less stringent and applicable to smaller structures. The Chief Building Inspector opined that the home needed to be designed in accordance with Part 4 of the Code, which mandates certain seismic requirements. After meeting with the Architects, the Engineers represented to them that they had redesigned the home in accordance with Part 4 of the Code. Contrary to this representation, the home, as built, contained serious deficiencies relating to the seismic aspects of the structural design.

The trial judge’s findings, which were upheld by the Court of Appeal, were summarized at paragraph 10:

The trial judge held that the structural engineering failed to satisfy Part 4, the relevant portion of the Code, and in particular certain seismic design criteria. He found that the Engineers were negligent in the performance of their obligation to provide a suitable structural design for the residence and that this failure created a real and substantial danger to the Swifts. The trial judge found no negligence on the part of the Architects, but concluded that, to the extent the structural engineering work done by their subcontractor was deficient, the Architects were in breach of the Agreement.

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