On September 1, 2022, the Ontario Court of Appeal released its decision in Breen v. Lake of Bays (Township), 2022 ONCA 626, upholding the trial judge’s finding that once a building permit is granted, a municipality has an obligation to inspect the building whether or not the building permit holder requests an inspection.
History of the Litigation
The case involved a cottage purchased by the plaintiffs in 1999 in the Township of Lake of Bays, Ontario. From 2011-2012, the plaintiffs had their cottage renovated. During the renovation process, the plaintiffs’ architect discovered a number of structural issues, following which an engineer was retained to inspect the property. The engineer concluded that the cottage was structurally unsafe and there were several Building Code deficiencies.
The plaintiffs commenced an action in the Ontario Superior Court of Justice against the Township of Lake of Bays. The plaintiffs sought damages for negligent building inspections and breaches of the township’s legal duty to enforce the provisions of the Building Code Act.
Superior Court Decision
The trial judge found that the township owed a prima facie duty of care to the plaintiffs as owners of a property that was constructed following the township’s issuance of a building permit in 1989 and the conducting of three separate building inspections between 1990 and 1991. The township conceded that the sort of relationship it had with the plaintiffs was “sufficiently close that it was reasonably foreseeable that carelessness on its part might cause damages.” 
The second portion of the trial judge’s analysis involved determining whether there were any policy reasons to limit the prima facie duty of care. After turning to Supreme Court of Canada jurisprudence for guidance, the Court concluded that the township owed a duty of care to the plaintiffs to not “negligently exercise its power” in granting a building permit, and in the inspection of the construction of a building. 
The trial judge determined that because the purpose of the building inspection scheme is to protect the health and safety of the public, and because the policy of the legislative scheme also applies to the township’s powers to grant or reject a building permit application, the township owed a duty of care to the cottage owners.
The trial judge concluded that the township fell below the standard of care in its granting of a building permit. The township failed to take reasonable and prudent steps to review the application to enforce the Act, Code, and By-Laws. Sutherland J. highlighted the fact that the permit was granted the same day as it was submitted, which indicated that no review took place or was planned. 
Furthermore, the trial judge pointed out that the township had only conducted three inspections during the initial construction phase of the property almost a decade before the plaintiffs bought the property and almost two decades before the plaintiffs began their renovations. Moreover, the municipal building inspectors failed to return to the property on future occasions during the course of construction. The township, therefore, failed to meet its duty of care in the inspection of the property as well. 
At paragraph 116, Sutherland J found the duty to inspect and maintain the building’s compliance with the Act and Code remained in effect until completion of the construction, even if no request for an inspection was made by the property owner.
Court of Appeal Decision:
Before the Ontario Court of Appeal, the municipality raised several grounds of appeal. The Court dismissed the first ground of appeal and upheld the trial judge’s finding that the municipality owed the cottage owners a duty of care to properly inspect the building construction, even in the absence of a request for inspection by the building permit owners.
The Court of Appeal found that as subsequent purchasers of the property, the plaintiffs had no say in the actual construction of a building that ultimately proved defective. It was therefore reasonable for them to rely on the municipality to show reasonable care in the inspection of the building once it had issued the building permit in 1989 and conducted three earlier building inspections in 1991-1992, before the new owners purchased the property in 1999.
Another issue that was raised was whether the trial judge had applied an excessively strict standard of care upon the municipality. The municipality argued that the standard of care imposed by the court below effectively rendered it an insurer against any construction defects. The Court of Appeal considered the five major deficiencies that the municipality was found liable for in the decision below.
It upheld the standard of care applied for three of the deficiencies (crawl space, roof ventilation and structural issues) however, found that the standard of care used by the trial judge to assess the two other building issues (stairs and insulation) was overly exacting and the findings on those issues should be set aside.
One final issue that was before the Court was whether the municipality’s breaches caused the plaintiffs’ damages. Again, the Court of Appeal upheld the trial judge’s findings that only damages and costs related to remedying and rectifying Building Code violations that ought to have been discovered by the municipality’s inspectors were recoverable. Any additional damages arising from those Code violations, such as damages from water penetration, could be caused by poor workmanship or by the plaintiff’s own poor maintenance, and so were not attributable to the municipality.
Conclusion and Takeaways:
In summary, the Court of Appeal broadly upheld the trial judge’s decision. The trial judge’s findings relating to the deficiencies with the stairs and insulation were set aside and the damages award was reduced from $361,875.33 to $315,879.07.
The Court of Appeal reiterated that the decision of Ingles v. Tutkaluk Construction, 2000 SCC 12,  1 S.C.R. 29, remains the leading case on a municipality’s duty of care in enforcing building codes in Ontario.
The Court also upheld that the municipality breached its duty of care to the plaintiffs in properly inspecting the property in question during its construction even in the absence of a formal request for an inspection. However, the municipality was only liable for the damages resulting solely from their failure to inspect at the standard of care of a reasonable and prudent building inspector.
 Breen v. The Corporation of the Township of Lake of Bays, 2021 ONSC 533, at paras 5-21.
 Ingles v. Tutkaluk Construction, 2000 SCC 12,  1 S.C.R. 29
 Ibid, at para 59.
 Ibid, at para 74.
 Ibid, at para 70.
 Ibid, at para 116.
 Breen v. Lake of Bays (Township), 2022 ONCA 626, at paras 40-46.
 Ibid, at paras 57-69,
 Ibid at paras 72-77.