Recovery of Construction Losses in Contract + Tort

Donald and Linda Murray decided to build a large custom home. The home was over 8,800 sq. ft. on the first and second floors, with a 3,400 sq. ft. finished basement and four-car garage. Part of the home involved massive windows and sliding doors. The Murrays started their action against the project manager, project engineer, and various businesses that provided goods, alleging defective operation of the large windows and sliding doors.

The trial judge held Windsor Brunello, the project manager/construction manager, liable to the Murrays in damages. The claims against the engineer and window supplier were dismissed. The Murrays and Windsor both appealed the trial decision.

Windsor argued the trial judge erred by:

1. Determining the detailed terms of the oral agreement between Windsor and the Murrays.
2. Finding Windsor breached the oral agreement.
3. Finding Windsor’s breaches caused the Murrays’ damage.
4. Finding that the other defendants were not liable.

The Murrays argued the trial judge erred by:

1. Raising pure economic loss herself, resulting in procedural unfairness.
2. Alternatively, incorrectly applying the pure-economic-loss doctrine.
3. Finding insufficient proximity between the Murrays and the defendants to establish duties of care or duties to warn.
4. Improperly assessing certain categories of damages.

What the Court Said: Pure Economic Loss Analysis

Pure economic loss is unconnected to a physical or mental injury to a plaintiff's person, or to physical damage to property. The two categories of pure economic loss at issue in the appeal were negligent supply of shoddy goods or structures, and negligent misrepresentation or performance of a service.

Negligent Supply of Shoddy Goods or Structures

Recovery for pure economic loss caused by the negligent supply of shoddy goods or structures is only available when the defective product or structure causes a "real and substantial danger" with "the capacity to cause serious damage to other persons and property”, which is consistent with a manufacturer’s obligation to warn customers of any inherent dangers in their products. The cost of repairing non-dangerous defects in building structures does not generally implicate rights protected under tort law and is better addressed through the law of contract. Recovery in negligence is limited to the cost to repair or prevent only those real and substantial dangers identified.

The trial judge ruled that the Murrays’ damages were pure economic loss, not ordinary property loss, finding the defective operation of the great room sliding doors and windows, and master bedroom sliding doors, did not create a real and substantial danger. On this basis, she correctly found no duty of care in the negligent supply of a shoddy good or structure.

Negligent Performance of a Service

To successfully argue negligent performance of a service, the Murrays needed to show a sufficient degree of proximity and reasonable foreseeability of injury. Proximity is established by the defendants accepting an undertaking and the plaintiffs’ reliance on that undertaking. The court must consider whether previous categories of reliance that have been recognized are analogous to the one before it. If not, a full Anns/Cooper analysis is required.

The trial judge conducted a full analysis and found that due to the proximate relationship between the Murrays and Alberta Engineering, and the failure of Alberta Engineering to properly carry out the portions of its oral contract with the Murrays, there was a reasonable foreseeability of injury to the Murrays. Despite this finding, the trial judge ruled the Murrays could not succeed in an action for negligent performance of a service, suggesting that the Murrays could have, and should have, protected themselves against this risk through contract and allowing their negligence claim would be an unjustified encroachment of tort law into the realm of contract law.   

The court ruled that the trial judge erred and confirmed that nothing in the jurisprudence supports a general rule against concurrent liability in tort and contract in the context of negligent misrepresentation and negligent performance of a service. The only rule against concurrent liability is for negligent supply of shoddy goods or structures, where parties should not be allowed to use tort law to circumvent contractual arrangements.

The court ruled that Alberta Engineering was liable for negligent performance of its engineering services because:

1. The Murrays had a sufficiently proximate relationship with Alberta Engineering because Alberta Engineering had undertaken to provide engineering services.
2. The Plaintiffs reasonably relied upon that undertaking.
3. The engineering services were deficient.

Takeaways

The court clarified several relevant points around claims of pure economic loss, including the following:

1. The cost of repairing non-dangerous defects in goods or structures does not generally implicate rights protected under tort law and is better addressed under the law of contract. Recovery in negligence is limited to the cost to repair or prevent that real and substantial danger identified.
2. There is no general prohibition against concurrent liability in tort and contract. However, a properly written contract can limit a party’s ability to bring a claim in tort.
3. You must show a sufficient degree of proximity and reasonable foreseeability of injury to succeed in a claim for negligent performance of a service.

Construction disputes can involve overlapping contractual and negligence claims, and how those relationships are documented can significantly affect the remedies available. If you need assistance drafting construction agreements, assessing potential claims or responding to a construction dispute, contact Anthony Burden in Calgary, Ryan Krushelnitzky in Edmonton, or any member of Field Law’s Construction Law Group.

Link to decision: Murray v Windsor Brunello Ltd, 2026 ABCA 275.