When substantial defects in project design result in delay, injury, or other damage, the project architects and engineers are typically held responsible. This often comes in the form of a claim being advanced by the project owner or general contractor against the architecture and engineering firms responsible for designing or approving the design plans. These claims typically flow through the design contract or the tort of negligent misrepresentation.
Breach of Contract
When claims flow through the contract between the design firm and the party seeking compensation for the design flaws, the design firm will be held accountable, and the individual employees responsible for the design defects are frequently shielded from the breach of contract claims. If a claim for breach of contract is made against an individual responsible for the design errors, the individual can often point to the contract to show that the agreement was entered into by the company, not themselves as an individual. In most cases, this will provide a full defence to a claim for breach of contract against an individual architect or engineer.
The same cannot be said for claims arising out of tort. In a tort claim alleging negligent misrepresentation, it is usually more difficult for individual design professionals to escape liability by hiding behind the company they work for.
In the case of London Drugs Ltd. v Kuehne & Nagel International Ltd. ("London Drugs"), the Supreme Court of Canada confirmed that an employee acting in the course of his or her employment can be held personally liable for breaching a duty of care owed to a client or customer of the employer. In the 2017 Ontario Court of Appeal decision of Sataur v Starbucks Coffee Canada Inc., the Court reaffirmed and commented on the decision of London Drugs:
"The motion judge held that the claim against the individual defendants did not disclose a reasonable cause of action because "the general rule remains that employees are not liable for what they do within the scope of their authority and on behalf of their corporation". Respectfully, the general rule is the opposite. As Justice McLachlin said succinctly in London Drugs... "It has always been accepted that a plaintiff has the right to sue the person who was negligent, regardless of whether the employee was working for someone else or not." Put in the negative, there is no general rule in Canada that an employee acting in the course of her employment cannot be sued personally for breaching a duty of care owed to a customer."
The personal liability of engineers who drafted faulty design drawings in a highway construction project was discussed in the case of Edgeworth Construction Ltd. v. N.D. Lea & Associates Ltd. ("Edgeworth"). In this case, both the engineering firm and the individual engineers were sued in tort by the contractor responsible for constructing the project; there was no contractual relationship between the engineering firm and the contractor.
The Supreme Court of Canada held that the engineering firm which drafted the faulty design plans was liable for negligent misrepresentation, even though there was no contractual relationship between the engineering firm and the contractor. However, the Court determined that the individual engineers were not personally liable. In coming to this conclusion, the Court held that to find the individual engineers personally liable, there must have been something "more" than the single fact that the engineers affixed their seals to the plans:
"The only basis upon which they are sued is the fact that each of them affixed his seal to the design documents. In my view, this is insufficient to establish a duty of care between the individual engineers and Edgeworth. The seal attests that a qualified engineer prepared the drawing. It is not a guarantee of accuracy. The affixation of a seal, without more, is insufficient to found liability for negligent misrepresentation."
Interpretation of Edgeworth
It is not precisely clear what constitutes something "more", such that it warrants personal liability; this determination has been the subject of litigation in several cases. In Strata Plan No. VR 1720 (Owners ) v Bart Developments Ltd. ("Bart"), three individual engineers were personally sued for errors contained in their building condition survey. The engineers argued that the contract was between the plaintiffs and their employer, so they should not owe an individual duty of care to the plaintiffs. The Court dismissed this argument, holding that the individual engineers did indeed owe a duty of care to the plaintiffs in creating the survey:
"While it is true that the plaintiffs did not engage CSA (the engineering firm) because they intended to rely on the skill of any individual they could identify by name, it is equally true that CSA held itself out as a firm of "consulting engineers", with "engineers, architects and technologists ...[who] focus their interests exclusively upon resolving" the very problem, building deficiencies, the plaintiffs contracted with CSA to address."
"There is no question that all three of the personal defendants had a degree of experience and technical skill nor that each was actively involved in the survey and preparation or presentation of the report to the plaintiffs. The personal defendants must have known the plaintiffs would rely on their report. The extent of their involvement distinguishes them from the engineers in [Edgeworth], who merely affixed a seal "without more"."
Bart suggests that individual design professionals may have increased exposure to personal liability when their employer markets itself on the basis of the expertise of its design staff; especially when those individual design professionals are actively working with the plaintiff.
In my next blog article, I will be addressing other factors and strategies which can limit personal liability for mistakes in design.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.