Can Owners Delay Remediation Work Until Liability is Determined?

In Murray v Windsor Brunello Ltd., 2024 ABKB 291, the Plaintiff Owners engaged the Defendant Contractor to build a home, which was constructed with significant defects. The Owners sued the Contractor for negligence (among other causes of action).

As of the trial date, the Owners had not undertaken any remedial work, submitting that they were waiting for the lawsuit to be resolved as the remediation would require dismantling half of the home. The Contractor took the position that the Owners’ delay constituted a failure to mitigate and that damages should be reduced accordingly.

The main issue was whether the delay in remediation work was reasonable. The Court also considered when damages should be assessed and whether the Owners’ claim for “escalation” (inflation) was valid.

The Court confirmed that the Owners had a duty to mitigate while noting that what is reasonable in the context of mitigation must be determined on the facts of each case. The Court cited several building cases considering the circumstances in which it is legitimate for a plaintiff to await the outcome of trial before undertaking repair work. The Court considered the following issues relating to mitigation arising from these cases:

(a)    whether there is evidence of any structural or building preservation impact as a result of the plaintiff delaying taking mitigative steps; and

(b)    if the plaintiff delays taking mitigative steps:

i. when damages should be assessed; and
ii. if damages are assessed at a date before the trial, whether there can be a claim for escalation or inflation while waiting for trial.

The Court found it was not unreasonable for the Owners to delay undertaking the remedial work. The Court further found that, in the circumstances, the Owners had acted reasonably by not undertaking the remediation before the determination of the liability of the Contractor and the quantum of damages to which they were entitled. The Court provided a non-exhaustive list of factors informing its decision as follows:

the extensive nature of the remedial work;

the absence of evidence that a failure to undertake the redial work after the earliest reasonable date would have reduced the cost of the remediation;

the Contractor’s vigorous declination of liability; and

the substantial cost of remedial work.

Having determined that it was not unreasonable for the Owners to wait until the trial of the action to undertake the remedial work, the Court went on to consider the validity of the inflation claim. The Court declined to apply a proposed 17.12% inflation factor, finding that this figure was not reflective of the longer-term increases in construction costs. In the absence of evidence that the steep 17.12% inflation would carry on year-over-year, the Court decided that the rates set out in the Judgment Interest Regulation were applicable.

The key takeaway from this case is that an owner’s delay in carrying out remedial work may be reasonable where the time and cost of remediation are significant, and the owner is likely to undertake such work after the determination of liability. In these circumstances, delay does not equate to a failure to mitigate and the quantum of damages will not be reduced.