Executive Summary: Key Legal and Evidentiary Issues

• Windsor Brunello Ltd's appeal turns on whether the trial judge properly implied roughly thirty detailed terms into an oral construction management agreement.
   
• Donald and Linda Murray challenge the trial judge's characterization of their window and door defects as pure economic loss rather than ordinary property damage.
   
• Alberta Engineering Ltd's exposure hinges on whether concurrent liability in tort and contract can coexist for negligent performance of a service.
   
• KAPO Fenster und Türen GmbH, Luxus Haus Imports Ltd, and Sebastian Bade face no surviving claims after the trial judge found no proximity supporting a duty to warn.
   
• Costs and Calderbank settlement offers raised the question of whether a Sanderson or Bullock order should shift successful defendants' costs onto Windsor.
   
• Quantum findings, including the classification of stone cladding and rejection of collateral-damage contingencies, remained largely undisturbed on appeal.
   

Facts of the case

In 2011, the Murrays decided to build a residence in Wheatland County, east of Strathmore, Alberta, designed with over 8,800 square feet on the first and second floors, 3,400 square feet of finished basement, and an attached four-car garage. After parting ways with their original custom homebuilder in May 2012, the Murrays entered a "handshake deal" with Windsor Brunello Ltd in June 2012 for Windsor to act as project manager and construction manager for a flat fee of between $550,000 and $580,000. Alberta Engineering Ltd provided engineering services, with its lead engineer also serving as Windsor's joint lead project manager. Windsor contacted Luxus Haus Imports Ltd, the Canadian importer for Austrian manufacturer KAPO Fenster und Türen GmbH, to supply Great Room windows and sliding doors and Master Bedroom sliding doors; Sebastian Bade, through his sole proprietorship CS Eurohaus, acted as Luxus's sales agent. During a November-December 2012 trip to Austria, KAPO warned that no weight should be placed on the Great Room sliding doors or the intermediate guide track, and that the Upper Glazing should hang from the roof beam rather than rest on the intermediate beam. After delivery of the windows and doors in April 2013, installer Emperor Homes raised safety concerns about hanging the Upper Glazing from the roof, and the joint project manager/consulting engineer changed the plan so the Upper Glazing would rest on the intermediate beam instead, without notifying KAPO of the change. By October 2013 the Great Room sliding doors began binding, and by April 2014 the guide track had twisted. The Murrays moved into the completed residence in September 2014. Alberta Engineering settled with the Murrays in January 2022 through a Mary Carter agreement for $125,000, admitting partial liability in negligence, and was struck from the corporate registry in July 2022. The matter proceeded to an eleven-day trial in June 2023.

Policy and legislative provisions at issue

The oral contract between the Murrays and Windsor was analyzed under the doctrine of implied contractual terms, which permits courts to imply terms based on established custom and usage, necessity to give business efficacy to the contract, or as a legal incident of a particular class of contract. The trial judge relied on customary construction-industry terms requiring that work be done in a good and workmanlike manner, that tradespeople possess ordinary skill, that materials be of good quality and fit for purpose, and that the contractor build in accordance with the Alberta Building Code. On the negligence side, the governing framework was the pure economic loss doctrine from Winnipeg Condominium Corporation No 36 v Bird Construction Co, which limits recovery for defective structures to cases involving a real and substantial danger, and the proximity/foreseeability analysis for negligent misrepresentation and negligent performance of a service drawn from 1688782 Ontario Inc v Maple Leaf Foods Inc and Deloitte & Touche v Livent Inc (Receiver of). Costs were governed by Rule 10.33 of the Alberta Rules of Court, which directs courts to weigh the result of the action, degree of success, complexity, and conduct of the parties, along with Schedule C costs columns and the settlement-offer provisions in Rule 4.24(3). The court also referenced the Alberta Business Corporations Act provision under which Alberta Engineering was struck from the corporate registry in 2022.

Reasoning and analysis

The Court of Appeal found the trial judge erred in principle by implying an overly detailed list of roughly thirty contractual terms without linking each to a specific legal or factual basis. It upheld only the more generalized implied terms supported by custom, usage, and evidence — that Windsor would coordinate trades, suppliers, and engineering consultants, conduct field inspections, and ensure work met Alberta Building Code standards — while setting aside more specific terms, such as an obligation to attend the Austria trip, that lacked evidentiary support. On breach and causation, the court found no palpable and overriding error: Windsor had failed to coordinate the installation of the KAPO windows and doors, changed the installation method without consulting KAPO, and did not provide load calculations for the Master Bedroom doors, and these breaches caused the damages the trial judge identified. Turning to negligence, the court agreed the trial judge did not breach procedural fairness by raising pure economic loss, since negligence and the underlying facts had been squarely pleaded. It also upheld the trial judge's rejection of the "complex structure" argument, agreeing that the Great Room and Master Bedroom defects formed a single interdependent structure and did not present a real and substantial danger, foreclosing recovery for negligent supply of a shoddy structure. However, the court found the trial judge erred in denying Alberta Engineering's liability for negligent performance of a service solely because a contract existed between the Murrays and Alberta Engineering; concurrent liability in tort and contract is not generally prohibited, and the trial judge's own findings on proximity and foreseeability supported a duty of care. The court found no error in dismissing all claims against KAPO, Luxus, and Bade, since none had a sufficiently proximate relationship with the Murrays or Windsor to ground a duty to warn. On damages, the court declined to interfere with the trial judge's acceptance of the Murrays' expert evidence, her classification of the stone cladding as veneer, and her rejection of speculative collateral-damage contingencies and general inconvenience damages. On costs, the court upheld the trial judge's refusal to grant a Sanderson or Bullock order, agreeing that her application of the Abt Estate factors and consideration of the House v Baird criteria were reasonable and that no principled basis existed for shifting the successful defendants' costs onto Windsor.

Ruling and overall outcome

The Court of Appeal allowed the Murrays' appeal in part, allowed Windsor's appeal in part, and dismissed the Murrays' costs appeal. Windsor's liability to the Murrays in breach of contract was affirmed for both the Great Room and Master Bedroom damage, in the amount the trial judge found: damages of $914,946.59 plus pre-judgment interest of $43,675.74, for a total judgment of $958,622.33, plus costs. The trial judge's dismissal of Alberta Engineering's liability was set aside, and Alberta Engineering was found jointly and severally liable with Windsor for the Great Room damages only, with quantum between the Murrays and Alberta Engineering already resolved through their $125,000 Mary Carter settlement; Windsor remains solely liable for the Master Bedroom damages. The dismissal of all claims against KAPO, Luxus, and Bade was affirmed. Costs remain governed by the trial judge's award of 35% of the Murrays' reasonable costs and 100% of disbursements against Windsor, with a 1.5 fees multiplier for the unaccepted Calderbank offer; the precise costs quantum was referred to an Assessment Officer and is not specified in the decision.