Court of Appeal for Ontario

Date: 2021-06-11 Docket: C67355

Judges: Doherty, Nordheimer and Harvison Young JJ.A.

Between:

Charlesfort Developments Limited Plaintiff (Respondent)

and

The Corporation of the City of Ottawa Defendant (Appellant)

Counsel: Alyssa Tomkins and Anne Tardif, for the appellant Timothy J. Hill and Mark van Zandvoort, for the respondent

Heard: December 15, 2020 by video conference

On appeal from the judgment of Justice Sally A. Gomery of the Superior Court of Justice, dated July 24, 2019, with reasons reported at 2019 ONSC 4460.

Harvison Young J.A.:

A. Overview

[1] The respondent, Charlesfort, is a property developer in Ottawa. Charlesfort purchased a property it intended to redevelop for a condominium project. It commenced an action against the appellant, the City of Ottawa, for negligent misrepresentation after the City failed to accurately inform Charlesfort of the contents of a municipal easement in 2004-2005 during the rezoning process. The easement ran along the northern edge of the project site’s lot line but was located on an adjacent property.

[2] During the rezoning process, Charlesfort believed that the easement contained a trunk sewer. It was not until a few years later, during the site plan approval process, that it learned that the easement contained a four-foot-wide water main which was old and in unknown condition. The water main sat within three or four feet of the northern lot line. Millions of gallons of water flowed through the water main every hour.

[3] The nature and location of the water main meant that Charlesfort could not excavate and construct its underground parking garage right up to the northern lot line as planned. As a result, Charlesfort was required to redesign the proposed garage and reduce the parking available to purchasers of units, which resulted in significant delays in construction and increased costs. Charlesfort claimed that the City negligently misrepresented what was in the easement during the rezoning process and that the City was liable for Charlesfort’s damages of around $6 million arising from increased construction costs, decreased project revenue, and damages associated with the delay, among other things.

[4] The trial judge held that the City made negligent misrepresentations to Charlesfort during the rezoning process about the contents of the easement. The City owed a duty of care to Charlesfort based on their close and direct relationship during the rezoning process. The City had implicitly undertaken to take reasonable care to provide Charlesfort with accurate information about infrastructure in adjacent property that was materially relevant to the proposed redevelopment. The City failed to ensure that accurate and complete information was communicated to Charlesfort, and Charlesfort reasonably relied on the information it received from the City’s planning department. The trial judge awarded damages of around $4.5 million to Charlesfort for increased development costs, lost revenue, and lost interest.

[5] The City appeals from this judgment. It says that it did not owe a duty of care to Charlesfort. I agree. I would allow the appeal for the following reasons.

B. Facts

[6] In 2004, Charlesfort purchased a property it planned to redevelop into the Continental, a condominium building. The purchase was conditional on both site remediation and the approval of a rezoning application, which was filed in 2003 by a previous developer, so that Charlesfort could build a high-rise condominium on the property.

[7] The zoning in place at the time was a general commercial designation and included setbacks of around six to seven metres at the front and rear. The rezoning application sought a change of use to a residential designation, changes to permitted height and density, and a reduction in the setbacks to allow construction above-grade to within one metre of the front of the property and right up to the northern lot line in the rear. The application proposed parking on site and included drawings of an underground parking garage that would extend from the northern to southern lot lines, with no setback.

[8] The City’s practice at the time for rezoning applications was to assign a City planner to prepare a summary of the application, which was circulated to interested parties to obtain feedback. The interested parties included internal groups, such as the Infrastructure Approvals division, and external agencies, such as school boards and pipeline companies when the rezoning application involved property within 200 metres of their pipelines. The City’s planning department passed on any comments it received through the circulation process to the applicant. The City planner would obtain additional information and assessments from the applicant, if necessary, and prepare a staff report which would indicate whether the City’s planning department recommended the proposed rezoning. The staff report, if approved by senior leadership of the City’s planning department, would be discussed at a public meeting of the Planning and Environment Committee (the “Planning Committee”). If the Planning Committee voted to approve the application, it would go to City Council for a vote.

[9] The City planner who was assigned to Charlesfort’s rezoning application circulated his summary internally to the Infrastructure Approvals division and externally in January 2004. He received some comments from the Infrastructure Approvals division, which were relevant to the site plan stage but did not require Charlesfort to do anything further for the rezoning application. He passed these comments on to Charlesfort. Charlesfort retained a local planning firm in August 2004 to assist with the rezoning application process.

[10] In the course of the rezoning application, the City planner, who was assigned to the file, erroneously advised Charlesfort’s planner that the easement contained a trunk sewer. Charlesfort’s principal was not aware of the statement at the time. The statement was repeated in the staff report, which was considered at a Planning Committee meeting on February 22, 2005. At the Planning Committee meeting, a representative for the owner of the adjacent property corrected this error, advising that the easement in fact contained a water main. Charlesfort’s principal and planner were present at the meeting.

[11] Just prior to the Planning Committee meeting, the program manager of the Infrastructure Approvals division sent an email to various City engineers about the proposed redevelopment. He asked them to recommend a sewer to connect to and to advise whether there were any issues with storm and water services at the location. An engineer with the water resources group responded by email that there were no special water distribution issues related to the site, and he also noted the presence of a four-foot transmission main just north of the property. This response was received by the Infrastructure Approvals division but was not forwarded to the City’s planning department, nor was it forwarded to Charlesfort.

[12] The rezoning application was approved by the Planning Committee, and City Council passed a site-specific zoning by-law with respect to the property in March 2005. The owner of the adjacent property, where the easement was located, appealed City Council’s decision to the Ontario Municipal Board. The parties settled the appeal, and the Ontario Municipal Board issued a decision based on the settlement, which approved a one-metre above-grade setback from the northern lot line. There was no provision for a below-grade setback. In September 2005, Charlesfort waived the conditions related to rezoning and site remediation in its agreement of purchase and acquired the property.

[13] The next step in the development approvals process required Charlesfort to obtain site plan approval. In August 2007, Charlesfort applied to the City for site plan approval for the Continental. The project included a 15-storey tower with a two-storey underground parking garage. Charlesfort expected that construction of the Continental would finish by the summer of 2009.

[14] In October 2007, the City’s planning department sent Charlesfort some preliminary comments on its site plan approval application. Among other things, the City asked for revised drawings showing the water main and the easement. Charlesfort’s principal saw this letter but did not immediately understand the implications of the reference to the water main.

[15] Charlesfort was not initially alarmed when it was told about the water main in October 2007. It had obtained a demolition permit around this time and applied for an excavation permit. Meanwhile, the City realized that the water main was very close to the property line and would need to be taken into account in the redevelopment of the property, particularly the underground parking garage which was planned to extend up to the property lot line. There were concerns about the condition of the water main given its age and that vibrations from excavation could affect its integrity and risk a breach.

[16] The company that would excavate the site for Charlesfort revised its proposed approach for excavation to reduce risks, but the City was not willing to permit construction to go ahead if the water main could not be turned off. The water main could not be shut down for the foreseeable future because the water main had no back up while the City was doing maintenance work on its water systems, and the City was not sure that the valves that needed to be turned off were functional. Even if the water main could be shut down, City engineers had concerns about construction right next to the water main, whether there would be sufficient access to repair a possible break in the water main if a structure was constructed adjacent to it, and whether the easement itself adequately protected the water main.

[17] In July 2008, Charlesfort changed its parking garage plans by moving it back from the northern lot line to increase the distance between the structure and the water main. Charlesfort signed a site plan agreement with the City in September 2008 and received an excavation permit and site plan approval. The condominium was completed in November 2011, around two years later than initially contemplated.

C. Decision below

[18] The trial judge held that the City owed a duty of care to Charlesfort in 2004-2005 during the rezoning process. She first considered whether the City had an established duty of care in existing case law. She concluded that a novel duty of care analysis was required and conducted an Anns/Cooper analysis: Anns v. London Borough of Merton, [1977] 2 All E.R. 492 (H.L. (Eng.)); Cooper v. Hobart, [2001] 3 S.C.R. 537, [2001] SCC 79. The parties on appeal do not dispute that a novel duty of care analysis was needed. The trial judge specifically cited Deloitte & Touche v. Livent Inc. (Receiver of), [2017] 2 S.C.R. 855, [2017] SCC 63, as the leading authority for the application of the Anns/Cooper test in the context of a negligent misrepresentation claim.

[19] The trial judge found that the parties had a sufficiently close and direct relationship to establish a duty of care. At the proximity stage of the analysis, she relied on a number of factors, including that, in making planning decisions such as rezoning decisions, the City had to avoid risks to public health and safety and critical infrastructure and that a water main breach would pose a serious threat to health and safety as well as the security of critical infrastructure. In addition, she determined that the City did not ask Charlesfort to conduct its own investigation of the easement, that the City had information about the size of the water main that Charlesfort could not obtain through publicly available sources, and that the parties expected that any information obtained by the City through the rezoning application summary circulation process would be shared with Charlesfort.

[20] In those circumstances, the City “implicitly” undertook to take reasonable care to provide Charlesfort with accurate information about infrastructure in adjacent property that was materially relevant to the redevelopment.

[21] The trial judge went on to find that the City could reasonably foresee that Charlesfort would rely on its representations about the contents of the easement and that Charlesfort would incur losses if the representations were inaccurate or incomplete due to negligence. The City knew that Charlesfort was seeking rezoning for the purpose of building a 15-storey condominium tower with an underground parking garage extending right up to the northern lot line. It was foreseeable that failing to tell Charlesfort about a feature that would prevent it from building the garage as planned would cause damage in the form of increased construction costs, lost profits, and delay costs.

[22] There were no policy considerations to limit the City’s duty of care because the City’s misrepresentations did not involve core policy decisions. The City’s incomplete and inaccurate representations about the contents of the easement were negligent. The trial judge also found that Charlesfort reasonably relied on the City’s representations. Charlesfort’s principal expected that the City would inform him of any serious issues affecting the rezoning application. It was also reasonable for Charlesfort not to retain its own engineer to investigate the property or assist with the rezoning application. If Charlesfort had known about the water main in 2005, it would not have waived the conditions on the purchase of the property, and it would have found another site to build the Continental. The trial judge found that Charlesfort suffered nearly $4.5 million in damages and pre-judgment interest as a result of the City’s negligence, made up of increased development costs, lost revenue, and lost interest.

D. Issues

[23] The appellant City submits that the trial judge made three errors:

1. The trial judge erred in holding that the City owed Charlesfort a duty of care;
2. The trial judge erred in finding that Charlesfort relied on the City’s misrepresentation; and
3. The trial judge erred in varying the rate of pre-judgment interest that Charlesfort was entitled to.

E. Discussion

(1) Did the City owe a duty of care to Charlesfort?

[24] The City submits that the trial judge erred by failing to apply the correct test for proximity in a case of pure economic loss arising from negligent misrepresentation. She further erred in failing to consider the purpose of any representation provided by the City. In processing Charlesfort’s rezoning application, the City was discharging a statutory duty, which does not give rise to a private law duty of care. Even if the City had undertaken to rezone the property in accordance with the Planning Act, R.S.O. 1990, c. P.13, Charlesfort was not entitled to rely on the City’s silence for the purpose of assuring itself that the project could proceed as planned and was viable prior to completing its real estate transaction.

[25] Charlesfort submits that the trial judge correctly applied the proximity test, consistent with Livent. The trial judge also identified the purpose of the undertaking. The City, in receiving its fee and Charlesfort’s rezoning application including its plans to build the parking garage up to the lot lines, undertook to take reasonable care to provide Charlesfort with accurate information about infrastructure in the adjacent easement that was materially relevant to the proposed redevelopment. The purpose was to further the interests of both parties in knowing whether the proposed redevelopment could proceed as proposed by Charlesfort. Given this purpose, the type of economic loss suffered by Charlesfort was reasonably foreseeable.

(a) Legal principles

(i) Proximity under the Anns/Cooper test

[26] Until recently, the analysis of whether there is a novel duty of care was governed by the Anns/Cooper test. That test, however, has been refined by the Supreme Court in Livent and 16688782 Ontario Inc. v. Maple Leaf Foods Inc., [2020] SCC 35, 450 D.L.R. (4th) 181. It will be useful to review this development briefly.

[27] The Anns/Cooper test sets out two stages for establishing a novel duty of care. The first stage requires the establishment of a prima facie duty of care through the application of a proximity and foreseeability analysis. The second stage asks whether there are policy reasons for why a duty of care should not be recognized: Cooper, at para. 30.

[28] As the majority of the Supreme Court explained in Livent, at para. 16, the legal principles have evolved since Anns. Under that test, a prima facie duty of care would arise where injury to the plaintiff was a reasonably foreseeable consequence of the defendant’s negligence, and where present, the relationship was labelled as one of “proximity”: Livent, para 20.

[29] It was Cooper that recognized that foreseeability alone is insufficient to establish a prima facie duty of care. Rather, the court must also undertake a proximity analysis: Cooper, at paras. 22, 29 and 31. This analysis considers whether the parties are in such a “close and direct” relationship that it would be “just and fair having regard to that relationship to impose a duty of care in law”: Cooper, at paras. 32, 34; Livent, at para. 25.

[30] In Livent, at para. 29, the court held that where an established proximate relationship cannot be found, courts must undertake a full proximity analysis:

To determine whether the “‘close and direct’ relationship which is the hallmark of the common law duty of care” exists, courts must examine all relevant “factors arising from the relationship between the plaintiff and the defendant”. While these factors are diverse and depend on the circumstances of each case, this Court has maintained that they include “expectations, representations, reliance, and the property or other interests involved” as well as any statutory obligations. [Citations omitted. Emphasis in original.]

[31] In the case of pure economic loss arising from negligent misrepresentation or the performance of a service, two factors are determinative in the proximity analysis: the defendant’s undertaking and the plaintiff’s reliance. A relationship of proximity is formed when the defendant undertakes to provide a representation or service in circumstances that invite reasonable reliance by the plaintiff, as the defendant becomes obligated to take reasonable care and the plaintiff has a right to rely on the defendant’s undertaking to do so: Livent, at para. 30; Maple Leaf, at para. 32.

[32] However, any reliance on the part of the plaintiff that falls beyond the scope of the defendant’s undertaking of responsibility necessarily falls outside the scope of the proximate relationship and, therefore, of the defendant’s duty of care: Livent, at para. 31. The purpose for which the representation was made or the service undertaken is key to the determination of the scope of the duty of care. As the court noted, at para. 31:

By assessing all relevant factors arising from the relationship between the parties, the proximity analysis not only determines the existence of a relationship of proximity, but also delineates the scope of the rights and duties which flow from that relationship. In short, it furnishes not only a “principled basis upon which to draw the line between those to whom the duty is owed and those to whom it is not”, but also a principled delineation of the scope of such duty, based upon the purpose for which the defendant undertakes responsibility. [Citation omitted. Emphasis in original.]

[33] In Livent, at para. 24, the court also observed that in cases involving negligent misrepresentation or performance of a service, the proximity analysis will be more usefully considered before the foreseeability analysis. That is because, as the court notes, at para. 34, and as will be seen from the discussion below, the factors applied in the proximity analysis will inform the foreseeability inquiry:

[T]he purpose underlying that undertaking and that corresponding reliance limits the type of injury which could be reasonably foreseen to result from the defendant’s negligence. [Emphasis added.]

[34] The most recent Supreme Court decision which addresses the proximity analysis in a duty of care determination involving negligent misrepresentation is Maple Leaf. In Maple Leaf, Mr. Sub franchisees sued Maple Leaf Foods for the lost profits and other economic loss they sustained when they experienced a shortage of product after Maple Leaf Foods recalled meat products due to a listeria outbreak at a Maple Leaf Foods factory. The majority began its analysis by noting that the franchisees were making claims for pure economic loss, observing that tort law has historically been concerned mainly with negligent interference with or injury to rights in bodily integrity, mental health and property, which explains why the common law has been slow to accord protection to pure economic loss.

[35] The Mr. Sub franchisees claimed that Maple Leaf Foods undertook to provide ready-to-eat meats fit for human consumption. In support of their allegation, they relied on Maple Leaf’s reputation for product quality and safety, and its public motto “We Take Care”. The majority held that there was no proximate relationship between Maple Leaf Foods and the Mr. Sub franchisees. The purpose and scope of Maple Leaf Foods’ undertaking was to ensure that Mr. Sub customers who ate the meats would not become ill or die. Properly construed, the undertaking was made to consumers with the purpose of reassuring them that their interests were being kept in mind, and not made to “commercial intermediaries” such as Mr. Sub or its franchisees. The business interests of the franchisees lay outside the scope and purpose of the undertaking.

[36] This decision is important to the present appeal for a few reasons. First, it held that correctness is the standard of review applicable to the determination of the existence of a duty of care between the plaintiff and the defendant: at para. 24. Second, it affirmed Cooper and Livent, both of which emphasized the importance of proximity in the duty of care analysis, at para. 33:

Taking Cooper and Livent together, then, this Court has emphasized the requirement of proximity within the duty analysis, and has tied that requirement in cases of negligent misrepresentation or performance of a service to the defendant’s undertaking of responsibility and its inducement of reasonable and detrimental reliance in the plaintiff.

[37] Third, Maple Leaf confirmed that undertakings are not to be treated as given at large. A court must consider whether the undertaking is made to the plaintiff and for what purpose: at paras. 35, 38. Further, when a defendant undertakes to do something, they assume the task of doing so reasonably, which manifests an intention to induce the plaintiff’s reliance: at para. 33. As Maple Leaf explains, at para. 34, it is the “intended effect” of the defendant’s undertaking upon the plaintiff’s autonomy that brings the defendant into a relationship of proximity:

Where that effect works to the plaintiff’s detriment, it is a wrong to the plaintiff. Having deliberately solicited the plaintiff’s reliance as a reasonable response, the defendant cannot in justice disclaim responsibility for any economic loss that the plaintiff can show was caused by such reliance. The plaintiff’s pre-reliance circumstance has become “an entitlement that runs against the defendant”. [Citation omitted. Emphasis added.]

[38] The plaintiff’s entitlement to rely operates only so far as the undertaking goes. Any reliance which falls outside of the purpose for which the representation was made or the service was undertaken necessarily falls outside the scope of the proximate relationship and therefore, of the duty of care. Citing Livent, the majority stated that “[t]his ‘end and aim’ rule precludes imposing liability upon a defendant for loss arising where the plaintiff’s reliance falls outside the purpose of the defendant’s undertaking”: at para. 35.

(ii) Reasonable foreseeability

[39] The second part of the prima facie duty of care analysis requires considering reasonable foreseeability. The question is whether an injury to the plaintiff was a reasonably foreseeable consequence of the defendant’s negligence: Livent, at para. 32.

[40] An injury to the plaintiff will be reasonably foreseeable if the defendant should have reasonably foreseen that the plaintiff would rely on their representation and such reliance would be reasonable. The reasonable foreseeability and the reasonableness of the plaintiff’s reliance is determined by the proximate relationship between the parties. A plaintiff only has a right to rely on a defendant to act with reasonable care for the particular purpose of the defendant’s undertaking, and in such situations, the plaintiff’s reliance is both reasonable and reasonably foreseeable. Reliance by the plaintiff for any other purpose would fall outside the scope of the defendant’s undertaking, and any consequential injury would not be reasonably foreseeable: Livent, at para. 35.

(iii) Claims against government bodies

[41] In addition, this is a claim against a government body. There are generally two situations that may create a prima facie duty of care in claims against a government defendant: where a duty of care arises from the statutory scheme or where a duty of care arises from interactions between the plaintiff and the government and is not negated by statute: R. v. Imperial Tobacco Canada Ltd., [2011] 3 S.C.R. 45, [2011] SCC 42, at para. 43. Proximity might also be based both on the government’s statutory duties and interactions between the parties: at para. 46.

[42] In the first situation, it “may be difficult to find that a statute creates sufficient proximity to give rise to a duty of care”: Imperial Tobacco, at para. 44. Often, statutes “are aimed at public goods” and it may be “difficult to infer that the legislature intended to create private law tort duties to claimants”: at para. 44.

(b) Analysis

(i) Proximity

[43] With respect, the trial judge erred in concluding that the City of Ottawa owed a duty of care to Charlesfort as claimed. While she correctly cited the applicable test from Livent, she erred in failing to consider adequately the scope and purpose of the undertaking that she found had been “implicitly” made. She did not have the advantage of Maple Leaf which has added clarity to the importance of the “undertaking” analysis in the course of considering whether the parties were in a sufficiently proximate relationship to ground a prima facie duty of care.

[44] The trial judge began her proximity analysis with the question of whether the parties had a sufficiently close and direct relationship to ground a prima facie duty of care. She went on to say that this required a consideration of the expectations, representations, reliance, interests, and statutory obligations of the parties in the course of the rezoning application process and cited a number of factors that led her to conclude that they were in such a relationship.

[45] These included the fact that the City’s rezoning application processing service was provided for a fee, the statutory scheme placed the onus on the municipality to obtain information on the proposed rezoning, the City’s practice of giving notice permitted it to identify existing infrastructure that could have an impact on construction, and the City had to consider whether the developer had plans to provide adequate parking and that its plan was “broadly feasible”. She also pointed to the Provincial Policy Statement issued pursuant to the Planning Act which provided that the City should avoid development that would create risks to public health and safety or to critical infrastructure. Any breach of the water main would be a serious risk to health and safety and critical infrastructure, and she noted that the City knew all along that the plan included a two-storey underground parking garage extending right up to the northern lot line where the easement was located. Both parties had an interest in knowing whether the development could proceed as planned in the course of the rezoning process.

[46] The trial judge also found that both parties expected that any information that the City obtained would be shared with Charlesfort, and the City planner assigned to Charlesfort’s rezoning application acknowledged that the City generally provided all the comments it received, even when not directly related to the rezoning. She also found that developers generally rely on information received from City planners. She concluded that the parties had a sufficiently close and direct relationship based on these factors. On receipt of the rezoning application and fee, the City at the very least undertook to transmit the comments it obtained during the circulation process to Charlesfort. Stating that the proximity analysis must inform the scope of the duty of care, she found that “the narrow scope proposed by the City does not do so”. Ultimately, she found that the City implicitly undertook to tell Charlesfort about the existence, location, and size of municipal structure such as the water main and to advise whether it played a critical role in the municipal water supply and whether the City had any knowledge of its condition.

[47] The trial judge’s central error was her analysis of the City’s undertaking. In finding that the undertakings were “implicit” she avoided analyzing whether the City manifested an intention to induce, or deliberately solicited, Charlesfort’s reliance, as well as the purpose and scope of any such undertaking. These, as Maple Leaf made clear, are critical aspects of the proximity analysis. Maple Leaf emphasized that it is the intended effect of the defendant’s undertaking that brings the defendant into a relationship of proximity and duty with the plaintiff, and it affirmed that the purpose of any undertaking limits the scope of the plaintiff’s entitlement to rely.

[48] With respect, I do not agree that the City made an undertaking to Charlesfort in the course of the rezoning application to provide Charlesfort with accurate information about municipal infrastructure in adjacent property that was materially relevant to the proposed redevelopment. Moreover, I do not agree that Charlesfort can be said to have reasonably relied on any such representation. In support of finding this implicit undertaking, the trial judge pointed to the City’s obligations under statute and other policy instruments, the City’s powers, abilities, and access to information during the rezoning process, and the typical practices and expectations of the parties. These factors do not indicate that the City intended to induce Charlesfort to rely on the City’s representations about municipal infrastructure during the rezoning process. They merely describe the respective positions and knowledge of the parties during the rezoning process.

[49] The trial judge’s finding that the City’s undertakings were “implicit” laid the groundwork for this error. While I would stop short of saying that an undertaking can never be implicit, it is much more difficult to properly consider the existence and the purpose and scope of an implicit undertaking than an explicit one. This is partly because in considering the scope of the undertaking, it is necessary, as Maple Leaf illustrates, to determine who the intended beneficiaries of any undertakings are.

[50] In my view, to the extent that the City made any undertaking to Charlesfort when it accepted the fee and Charlesfort’s application, in the sense that the City intentionally induced or deliberately solicited Charlesfort’s reliance, that undertaking was to process the rezoning application and to take the appropriate considerations into account in so doing. Any representations made by the City must be considered in the context and purpose of the rezoning process in which they were made. Even where an undertaking exists, there is a need to consider the purpose of the undertaking and whether the plaintiff’s reliance fell within or outside the purpose of the defendant’s undertaking of responsibility. These are the determinative factors in establishing a prima facie duty of care in cases of negligent misrepresentation.

[51] This point is illustrated by Maple Leaf. There was no question that Maple Leaf Foods had made representations about the quality and safety of its meat products to consumers. That did not mean that Mr. Sub was in a relationship of proximity with Maple Leaf Foods such that it could reasonably rely on a representation or undertaking made to consumers. This is because the undertaking was made for the purpose of reassuring consumers that they would not become ill or die from their meat, and not for the purpose of protecting franchisees such as plaintiffs from pure economic loss.

[52] Similarly, Charlesfort essentially submits that the purpose of any undertaking by the City included assessing the viability of the condominium project and protecting Charlesfort’s economic interests in being able to build the project as planned. I disagree. The scope and purpose of the City’s undertaking to process Charlesfort’s rezoning application was limited to fulfilling its statutory duty and acting in the public interest in doing so, for a number of reasons.

[53] First, “[z]oning is about regulating land use in the public interest and is the expression of public policy in land use areas”: Ian Rogers, Alison Butler and Greg Levine, Canadian Law of Planning and Zoning, 2nd ed. (Toronto: Thomson Reuters Canada Limited, 2021), at s. 4.2. It enables local governments, like municipalities, to control the use of land by depriving property owners of certain uses of property for the public good. The public interest purpose of zoning does not suggest that the City was guaranteeing or had Charlesfort’s economic interests in mind when it undertook to process the rezoning application.

[54] Second, the statutory scheme and other policy instruments reflect the public interest focus of zoning decisions. The Planning Act, which authorizes municipalities to pass zoning by-laws, requires that planning officials, in exercising authority that affects a planning matter, “have regard to” policy statements issued under s. 3(1) of the Planning Act. The 1997 Provincial Policy Statement, which governed at the time the rezoning took place, identified a number of key provincial interests related to land use planning and development. These included wise use and protection of Ontario’s resources, protecting the long-term health and safety of Ontario’s population, and the financial and economic well-being of Ontario and municipalities. The City also had several official plans it considered to be relevant, and these official plans included objectives and policies such as encouraging denser residential development in urban areas, compatibility with existing neighbourhoods, and promoting growth that facilitated the use of public transit.

[55] It is clear from the Planning Act, the Provincial Policy Statement, and the City’s official plans that land use planning and restrictive zoning target the protection of the public and good management of land resources. These are public goals. The trial judge identified several issues the City should have been aware of during the rezoning process based on these instruments, including risks to public health, safety, and critical infrastructure, and adequate parking. These again are public interests, concerned with public health, infrastructure that serves the public, and ensuring that local traffic flow is not impeded.

[56] This court was not referred to anything in any of the statutes or other instruments relating to planning that creates a duty to protect developers from pure economic loss. Nothing in the legislative framework suggests that the legislature intended that the exercise of zoning powers alone should also give rise to a private law duty to developers. The observation in Imperial Tobacco, at para. 44, that it may be difficult to find that a statue creates sufficient proximity to give rise to a duty of care, applies in this case:

However, more often, statutes are aimed at public goods, like regulating an industry, or removing children from harmful environments. In such cases, it may be difficult to infer that the legislature intended to create private law tort duties to claimants. [Citations omitted.]

[57] Third, the scope and purpose of the undertaking in this case also must consider the nature of the process. This was a rezoning application. There were still a number of steps that the developer had to complete before construction, including the site plan approval process, during which the City could impose conditions to an approval, and permit approvals. The only goal at the rezoning stage was to determine whether a site-specific by-law should be granted as sought by Charlesfort’s rezoning application. Even though Charlesfort paid a fee for the rezoning application and a site-specific zoning by-law was eventually passed, there is no basis in the record to support the inference that the City was intending to undertake that the ultimate project would be built or would be as profitable for Charlesfort as it had initially anticipated. Such a result could, in effect, render municipalities insurers of developers’ profits. It would, in other words, create a potentially limitless liability.

[58] Fourth, there was nothing that made the relationship between the appellant and the respondent unique. The trial judge found that the City never asked Charlesfort to investigate what the easement contained during the zoning process. She also found that developers applying for site-specific rezoning generally rely on the information provided by City planners. While I would not interfere with these findings, I would not infer from these factors that the City invited Charlesfort to rely on anything beyond the purpose and scope of the rezoning application.

[59] As the trial judge also found, the parties met and communicated with one another, and the City shared comments it received from the circulation process. In my view, this was done not to induce Charlesfort to rely on the City’s undertaking to review its rezoning application and anything resulting from the process as assurance about its economic interests or that it could proceed with its development as planned. Rather, this was done to further the purpose of the City fulfilling its statutory obligations and acting in accordance with the public interest. Sharing and receiving information as was the City’s practice may be seen to increase transparency among various interested parties and allowed the City to determine the best way to protect and advance the public interest within the planning and zoning framework. There were no interactions between the parties that went beyond regular interactions required to process a rezoning application.

[60] In summary, there is no relationship of proximity in this case. Charlesfort has not established that the City made any representations or undertakings whose purpose or scope included assuring Charlesfort that its condominium project as planned would be viable or protecting Charlesfort from pure economic loss, such that Charlesfort was induced to rely and suffered economic detriment as a consequence.

(ii) Reasonable Foreseeability

[61] Although it is not strictly necessary to consider reasonable foreseeability given the conclusion on the proximity analysis, it is useful to do so as it illustrates the effect of the proximity analysis on the subsequent reasonable foreseeability analysis.

[62] The trial judge pointed to the fact that no one at the City ever suggested to Charlesfort that it should retain an engineer to investigate the infrastructure in the property or adjacent property. Because the City knew that Charlesfort was seeking rezoning for the purpose of building a 15-storey condominium tower with a two-storey underground garage that extended right up to the northern lot line, she found that it was foreseeable that if the City failed to inform Charlesfort about a feature in the property or adjacent property that would prevent it from building the parking garage as planned, this would cause damage to Charlesfort in the form of increased construction costs, lost profits and delay costs.

[63] As I have discussed, there was no undertaking from the City that had the purpose of ensuring the viability of constructing the condominium and parking garage as planned or maintaining a particular level of profitability which was intended to induce Charlesfort’s reliance in the course of the rezoning application and process. For that reason, there can be no reasonable foreseeability of any reliance upon such an undertaking. This conclusion on reasonable foreseeability illustrates the significance of the analysis of the purpose of an undertaking as emphasized in Livent and Maple Leaf and its constraining effect on what can be reasonably foreseeable: Livent, at para. 35.

(iii) Conclusion on duty of care

[64] Charlesfort has not established a prima facie duty of care. There is no need to proceed to the second stage of Anns/Cooper to determine whether any residual policy reasons negate the imposition of a duty of care.

[65] As I have concluded that the City did not owe Charlesfort a duty of care during the rezoning process such that the City can be held liable for Charlesfort’s pure economic losses, there is also no need to consider the other grounds of appeal raised by the City.

F. Disposition and Costs

[66] For these reasons, the appeal is allowed and Charlesfort’s claim is dismissed. If the parties are unable to agree on costs, they may make written submissions on costs of the appeal and costs below, not to exceed 5 pages, the appellant City to file within 10 days of this decision, and the respondent Charlesfort to file 5 days after.

Released: June 11, 2021 “D.D.” “A. Harvison Young J.A.” “I agree Doherty J.A.” “I agree I.V.B. Nordheimer J.A.”