COURT OF APPEAL FOR ONTARIO
CARTHY, ROSENBERG and O’CONNOR JJ.A.
DATE: 20000822
DOCKET: C29278
BETWEEN:
BAHRAM MOIN ) Hillel David,
) for the appellant
Plaintiff )
(Respondent) )
) Andrew J. Reddon and
- and - ) Susan Rothfels,
) for the respondent
THE CORPORATION OF THE TOWN )
OF THE BLUE MOUNTAINS )
Defendant )
(Appellant) )
) Heard: May 17 and 18, 2000
On appeal from the judgment of The Honourable Madam Justice Jean MacFarland dated February 27, 1998
ROSENBERG J.A.
[1] The Corporation of the Town of the Blue Mountains (the municipality) appeals from the judgment of MacFarland J. granting judgment in favour of the respondent for negligent misrepresentation. The case turns on statements made to the respondent by the then Reeve at Council meetings. At these meetings, the Reeve assured the respondent that a road, the Blind Line, would be rebuilt so that the respondent could proceed with a development. The Blind Line was not rebuilt as promised, the respondent was unable to proceed with his development and he suffered substantial losses. The municipality argues that it cannot be held liable for the statements made by the Reeve and, in any event, the elements of negligent misrepresentation were not made out. For the reasons that follow, I would dismiss this appeal.
THE FACTS
[2] In 1988, the respondent purchased a property in the municipality with the intention of developing it by way of a plan of subdivision. Access to the property could only be had by way of an unimproved road allowance, the Blind Line. Heavy construction equipment that would be required for the development could not get to the property until the municipality rebuilt the Blind Line. He planned to finance the development by selling off five lots that bordered the Blind Line. He proposed to do this by way of a consent application for severance to the municipal Council. Council indicated that it would approve the applications for severance of the five lots, provided the respondent agreed to build an interior road to service the five lots and provide a surface water management plan. The respondent complied with the latter requirement in early May 1989. The respondent then focused on building the interior road. That, of course, depended on the municipality rebuilding the Blind Line.
[3] On May 29, 1989, the respondent attended a meeting of Council at which time he asked when the Blind Line would be rebuilt. The trial judge found that the Reeve told him, “There is going to be a road this summer”. The other four members of Council were present and said nothing. Unbeknownst to the respondent, the other members of Council did not agree with the Reeve as to the timing for rebuilding the Blind Line. The trial judge found that the other members of Council said nothing to indicate to the respondent that the Reeve was not speaking on behalf of the entire Council. The trial judge found that, in the circumstances, the Reeve’s representation was that of the Council. The statement that the road was going to be built “this summer” is not reflected in the minutes of the Council meeting. By the time of the trial, the Reeve had died.
[4] Work did, in fact, begin on the Blind Line in the summer of 1989. However, when crews went in to do preliminary clearing, they found that there was not a uniform 66-foot road allowance and title problems had to be investigated. There was nothing to suggest that these were insurmountable problems. In the meantime, the respondent’s severance application went before the county Planning Approval Committee and received conditional approval.
[5] On July 4, 1989, the respondent and his planner attended another meeting of Council. The Reeve again assured the respondent that the Blind Line would be upgraded. The Council minutes, however, indicate the following:
Council noted that the road would not be brought up to full Township standards in the near future, but could possibly be constructed to the standards of a builder’s road subject to budget costs and time to complete any required works. [Emphasis added.]
[6] The respondent denied that he was ever told the upgrade to the Blind Line depended upon budget costs and time to complete any works or anything else. The trial judge accepted the respondent’s evidence. She also found that none of the other Council members voiced any dissent from the statement made by the Reeve.
[7] In September 1989, the respondent and other property owners were told of title problems along the Blind Line and that municipal engineers had pointed out that a drainage plan had to be prepared for the road.
[8] By spring of 1990, nothing had been done and the respondent attended another Council meeting on March 5, 1990. The respondent testified that he told Council that he had already expended money and wanted to know when the Blind Line would be rebuilt. The Reeve told him that there would be a builder’s road that year. The other members of Council kept silent. The trial judge accepted the respondent’s evidence. There is no reference in the Council minutes to any discussion about the Blind Line.
[9] Based on the assurances he had received from the Reeve, the respondent signed a development agreement with the municipality on May 17, 1990. One of the conditions of the agreement was that the respondent would build the interior road to service the five lots within a year. That condition could not be fulfilled if the municipality did not at least upgrade the Blind Line to a builder’s road. The respondent refinanced the property to raise the necessary funds to cover engineering, planning fees, and to secure a letter of credit in respect of the cost of the interior road. The trial judge found that it was reasonable for the respondent to rely upon the statements of the Reeve. The Blind Line was not rebuilt in 1990. It was only upgraded to a builder’s road in September 1991. This was too late for the respondent who, by then, had run into serious financial difficulties. The trial judge found that the respondent’s damages totalled $187,466.47, being various expenses incurred by him as a result of the statements made by the Reeve.
[10] In the alternative, the trial judge found that the appellant was liable for breaching an implied term of the development agreement that the Blind Line would be upgraded within sufficient time that the respondent could fulfil his obligations under the agreement.
THE ISSUES
[11] The appellant raises the following grounds of appeal:
The trial judge’s finding that the statements were made by the Reeve was unreasonable in view of the contrary evidence recorded in the Council’s minutes.
The respondent’s reliance on the Reeve’s statements was unreasonable.
The Reeve’s statements were not representations regarding an existing fact.
The municipality could not be bound by the representations of a single member of Council.
The trial judge erred in awarding out-of-pocket expenses that were incurred before any representations were made by the Reeve.
The trial judge erred in implying a term into the May 1990 development agreement.
[12] In view of my conclusion on the appellant’s liability for negligence, I need not consider this last issue.
ANALYSIS
1. Proof that the statements were made
[13] The appellant argues that the evidence of the minutes of Council is virtually conclusive that, no matter what promises may have been personally made, Council as a whole clearly expressed to the respondent that the timing of the rebuilding of the Blind Line was uncertain and depended upon a number of factors including budget.
[14] The trial judge heard extensive evidence about the preparation of the Council minutes and the steps taken to ensure their accuracy. The usual procedure was for the Clerk or Deputy Clerk to take handwritten notes at the meeting. After the meeting, these notes were typed and became the draft minutes that were circulated to the Council members. At the next meeting, Council adopted the minutes after any errors raised by members had been dealt with. The Reeve then signed the minutes.
[15] There was, however, evidence casting doubt on the accuracy and comprehensiveness of the minutes. A by-law required that the Clerk’s rough notes be kept. The rough notes for this period, but not times before and after, had been destroyed. The minutes were admittedly not a verbatim account of the Council meetings. More importantly, the trial judge accepted the testimony of the respondent and his witnesses and gave reasons for accepting their viva voce evidence over the written minutes. She was not bound to accept the account of the meetings as recorded in the minutes. There is no evidentiary rule that gives a municipal council’s minutes conclusive, or virtually conclusive, effect. The appellant has not demonstrated that it was unreasonable for the trial judge to accept the respondent’s account of the representations.
2. The respondent’s reliance on the Reeve’s statements was unreasonable
[16] The elements of the tort of negligent misrepresentation are set out in Queen v. Cognos Inc. (1993), 1993 146 (SCC), 99 D.L.R. (4th) 626 (S.C.C.) at 643:
(1) there must be a duty of care based on a "special relationship" between the representor and the representee;
(2) the representation in question must be untrue, inaccurate, or misleading;
(3) the representor must have acted negligently in making said misrepresentation;
(4) the representee must have relied, in a reasonable manner, on said negligent misrepresentation; and
(5) the reliance must have been detrimental to the representee in the sense that damages resulted. [Emphasis added.]
[17] The appellant argues that the trial judge erred in finding that it was reasonable for the respondent to rely on the Reeve’s statements. The trial judge found, as a fact, that it was reasonable for the respondent to rely upon the statements. She said, in part, that “it cannot be reasonably suggested that it was unreasonable for Mr. Moin to rely on a representation that was within the ability of Council to make, not once, but three times”. This is the crux of the appellant’s argument – that it was unreasonable for the respondent to proceed with his development plans in 1990 when he knew that the 1989 “promises” by the Reeve had not been kept. However, this ignores the other evidence. To the respondent’s knowledge, the municipality had in fact begun work to rebuild the Blind Line in 1989. It ran into some problems concerning title. There was, however, nothing to indicate to the respondent that these minor difficulties would affect the completion of the road as stated by the Reeve. Moreover, he had signed a development agreement with the authorities in 1990 that required him to complete the interior road within a year. All the parties knew that this road could not be completed unless the Blind Line was rebuilt. As the trial judge noted, the agreement was entirely consistent with the representations made to the respondent by the Reeve. The appellant has not demonstrated any basis for interfering with the trial judge’s finding that it was reasonable for the respondent to rely upon the representations.
3. The Reeve’s statements were not representations regarding an existing fact
[18] The appellant submits that the tort of negligent misrepresentation cannot be based upon promises of future conduct. The appellant relies, in particular, on the decision of the Manitoba Court of Appeal in Campbell v. B. Leslie Real Estate & Development Co. (1971), 1 N.R. 90 at 94 where Freedman C.J.M. held that it “would be an unwarranted extension of the Hedley Byrne principle to apply it to matters of future expectations such as occurred here”. The Supreme Court of Canada dismissed an appeal from this judgment, (1973) 1 N.R. 89, in a brief endorsement to the effect that the Hedley Bryne doctrine had no application to the facts of the case.
[19] In the much fuller treatment of the tort of negligent misrepresentation in Cognos, Iacobucci J. at pp. 657-58 cast some doubt on whether only representations of existing facts can give rise to actionable negligence:
Obviously, some aspects of the misrepresentations made to the appellant about the employment opportunity were, by their very nature, matters in futuro. Statements about the appellant's involvement with the respondent and his responsibilities should he be offered a position are representations that relate to future conduct and events. There are authorities supporting the view that only representations of existing facts, and not those relating to future occurrences, can give rise to actionable negligence: see, for example, Williams v. Saanich School District No. 63 (B.C.S.C.), supra; Datile Financial Corp. v. Royal Trust Corp. of Canada (1991), 1991 7310 (ON SC), 5 O.R. (3d) 358, 29 A.C.W.S. (3d) 1059 (Gen. Div.); Foster Advertising Ltd. v. Keenberg (1987), 1987 5267 (MB CA), 35 D.L.R. (4th) 521, 38 C.C.L.T. 309, [1990] I.L.R. 92-697 (Man. C.A.); and Andronyk v. Williams (1985), 1985 774 (MB CA), 21 D.L.R. (4th) 557, 35 C.C.L.T. 38, 38 R.P.R. 53 (Man. C.A.).
However, assuming without deciding that this view of the law is correct, the representations most relevant to the appellant's action are not those relating to his future involvement and responsibilities with Cognos, but those relating to the very existence of the job for which he had applied. That is a matter of existing fact. It was implicitly represented that the job applied for did, in fact, at the time of the interview, exist in the manner described by Mr. Johnston. As found by the trial judge, however, such was not the case. The employment opportunity described to the appellant was not, at the time of the interview, a fait accompli for the respondent. Clearly, this misrepresentation relates to facts presumed to have existed at the time of the interview: the respondent's financial commitment to the development of Multiview and the existence of the employment opportunity offered. It is not a "remark by a defendant concerning the outcome of a future event" (Williams v. Saanich School District No. 63 (B.C.S.C.), supra, at p. 240), a "representation as to future occurrences" (Datile Financial Corp. v. Royal Trust, supra, at p. 379), a "statement of intention or forecast of the future" (Foster Advertising Ltd. v. Keenberg, supra, at p. 526), or "forecasting" (Andronyk v. Williams, supra, at p. 567). [Emphasis added. Italics in original.]
[20] The trial judge did not specifically address this issue and, in her reasons, she used the terms “specific representation” and “specific promise” interchangeably. It may be difficult in some circumstances, and this case may be one, to distinguish between a promise of future conduct and a representation of existing fact. In my view, the relevant statements, as in Cognos, were of existing fact; in particular, that the Council had already decided to upgrade the Blind Line so that it would be available when needed by the respondent. This was not a statement of intention or of future occurrences. The statements by the Reeve that, “there is going to be a road this summer [1989]” and that there would be a builder’s road by the end of 1990 implicitly represented that there was an existing commitment and ability to upgrade the Blind Line at those times. As held in Cognos at pp. 657-59, implied representations can, in some circumstances, give rise to actionable negligence. Everything said to the respondent pointed to the existence of the appellant’s commitment to rebuild the road in a timely way for use by the respondent. I would not give effect to this ground of appeal.[^1]
4. The municipality could not be bound by the representations of a single member of Council
[21] The appellant argues that it cannot be bound by the act of a single member of Council. It argues that the statement by the Reeve was, in effect, a political promise potentially involving the expenditure of public funds. To hold the municipality liable for a political promise would fetter Council’s legislative discretion since, in the result, a single member of Council could determine the priority of projects. A convenient summary of the appellant’s legal position can be found in the decision of McNeely J. in University Village (Guelph) Ltd. v. Guelph (City) (1992), 22 R.P.R. (2d) 107 (Ont. Ct. (Gen. Div.)) at 119:
A municipal corporation is a creature of statute, and the extent of its powers and the way in which they can be exercised is a matter of public law which everyone dealing with a municipality is presumed to know. In Ontario, the decision-making power of municipalities is given to the municipal council, and it is to exercise those powers by by-law. As Ritchie J. observed with respect to a municipal corporation in Silver’s Garage Ltd. v. Bridgewater (Town), 1970 196 (SCC), [1971] S.C.R. 577, 2 N.S.R. (2d) 474, 17 D.L.R. (3d) 1, at pp. 586-587 [S.C.R.]:
“It appears to me to be important at the outset to appreciate that an incorporated town, subject to the Act, is in a different position at law from a natural person or a limited company; the inhabitants constitute the corporation . . . and the powers conferred on it by the Legislature are required to be exercised by its elected governors (i.e. the council) in the manner prescribed by the Act.”
This requirement is based not only on the statutory provisions of the Municipal Act, R.S.O. 1980, c. 302, but on sound public policy. Municipalities exercise in relation to their ratepayers the coercive power of the state. The financial obligations, contractual or otherwise, that municipalities incur are discharged on the backs of their ratepayers. The little control that the ratepayers have consists in the fact that the powers of the municipality are to be exercised by a council elected by the ratepayers. Courts should be slow to erode that control beyond the exceptions already recognized by law.
[22] The appellant also relies upon the decision of the Supreme Court of Canada in Town of the Pas v. Porky Packers Ltd. (1976), 1976 147 (SCC), 65 D.L.R. (3d) 1. In that case, the plaintiff corporation sought to recover damages from the municipality for costs incurred in building a meat-packing plant on land acquired from the municipality. The plaintiff sought to hold the municipality liable, in part, for statements made by the mayor while an application brought by two ratepayers to quash a resolution of council was pending in the courts. While the application was pending, the mayor expressed an intention to carry out the necessary steps to permit the packing plant to operate no matter what the result of the application to quash. The plaintiff continued to build the plant. The court struck down the resolution and efforts by the municipality to amend its planning by-law to permit the use of the land as a packing plant failed. Spence J. held at p. 13 that “undertakings of the nature given by the mayor could not bind the town or its Council, and therefore no liability could be assessed upon the town based upon such undertaking.”
[23] Finally, the appellant argues that even if it could be held liable for the statements of the Reeve, it could only be on the basis that he was expressing the view of Council as a whole. However, the majority of the members of Council remained silent while the representations were being made and silence cannot be the basis for liability unless “the representor owes a legal duty to the representee to make the disclosure in question”: Scotsburn Co-Operative ServicesLtd. v. W.T. Goodwin Ltd., 1985 57 (SCC), [1985] 1 S.C.R. 54 at 67.
[24] The trial judge dealt with this aspect of the case by finding that the statements by the Reeve were not mere “political” promises, which would be unenforceable. As to whether the statements of a single member of Council could bind the municipality, the trial judge held that the municipality was bound in the “special circumstances” that the statement by the single member was made in the presence of the full Council.
[25] I agree with the trial judge that, in the circumstances, the appellant can be held liable for the statements by the Reeve. First, a distinction must be made between the legislative and quasi-judicial acts of a municipality, for which there is no liability to any particular person, and operational acts, for which the municipality can be held liable in negligence on the basis of the principles in Hedley Byrne. This distinction was made by Laskin J. speaking for the Supreme Court of Canada in Welbridge Holdings Ltd. v. Metropolitan Corporation of Greater Winnipeg (1970), 1970 1 (SCC), 22 D.L.R. (3d) 470 at 477-78:
The defendant is a municipal corporation with a variety of functions, some legislative, some with also a quasi-judicial component (as the Wiswell case determined) and some administrative or ministerial, or perhaps better categorized as business powers. In exercising the latter, the defendant may undoubtedly (subject to statutory qualification) incur liabilities in contract and in tort, including liability in negligence. There may, therefore, be an individualization of responsibility for negligence in the exercise of business powers which does not exist when the defendant acts in a legislative capacity or performs a quasi-judicial duty.
Its public character, involving its political and social responsibility to all those who live and work within its territorial limits, distinguishes it, even as respects its exercise of any quasi-judicial function, from the position of a voluntary or statutory body such as a trade union or trade association which may have quasi-judicial and contractual obligations in dealing with its members: cf. Abbott v. Sullivan, [1952] 1 All E.R. 226; Orchard et al. v. Tunney, 1957 57 (SCC), 8 D.L.R. (2d) 273, [1957] S.C.R. 436. A municipality at what may be called the operating level is different in kind from the same municipality at the legislative or quasi-judicial level where it is exercising discretionary statutory authority. In exercising such authority, a municipality (no less than a provincial Legislature or the Parliament of Canada) may act beyond its powers in the ultimate view of a Court, albeit it acted on the advice of counsel. It would be incredible to say in such circumstances that it owed a duty of care giving rise to liability in damages for its breach. "Invalidity is not the test of fault and it should not be the test of liability": see Davis, 3 Administrative Law Treatise (1958), at p. 487. [Emphasis added.]
[26] Later, Laskin J. distinguished the case before the court, where the plaintiff sought to hold the municipality liable for negligence in enacting, what turned out to be, an invalid by-law and negligence at the “operating level”. As he said at pp. 478-79:
[T]he risk of loss from the exercise of legislative or adjudicative authority is a general public risk and not one for which compensation can be supported on the basis of a private duty of care. The situation is different where a claim for damages for negligence is based on acts done in pursuance or in implementation of legislation or of adjudicative decrees.
Windsor Motors Ltd. v. District of Powell River (1969), 1969 697 (BC CA), 4 D.L.R. (3d) 155, 68 W.W.R. 173, a judgment of the British Columbia Court of Appeal, is a useful illustration in this connection. The Hedley Byrne case was applied against a municipality by reason of advice negligently given by its licence inspector to the plaintiff that he could lawfully open a used car business in a certain location. The inspector went further and issued a licence to the plaintiff who had gone into business in reliance on the advice and licence. In fact, the zoning regulations forbade a used car business at the particular location, and the plaintiff had to move at considerable loss. The municipality's liability, moreover, was vicarious, arising upon a conclusion that it had to answer for its employee who knew of the plaintiff's reliance on his special knowledge when the plaintiff sought the employee's advice. [Emphasis added.]
[27] The legislative or policy decision had already been made to improve the Blind Line. It was open to the trial judge to find that the statements made by the Reeve were in the appellant’s operational or business capacity rather than its legislative or quasi-judicial capacity. The council was assembled to answer questions of the type raised by the respondent. The act of answering the questions gave rise to a private duty of care: Black v. Lakefield (Village) (1997), 48 M.P.L.R. (2d) 250 at 293, affirmed (1998), 1998 4299 (ON CA), 41 O.R. (3d) 741 (C.A.). It had assumed a responsibility that in a large municipality would be delegated to staff persons: Harris v. Fredericton Junction (Village) (1993), 1993 6819 (NB KB), 109 D.L.R. (4th) 115 (N.B.Q.B.) at 124. The Council was in a position analogous to the licence inspector in Windsor Motors Ltd. v. District of Powell River, referred to by Laskin J. in Welbridge Holdings. Perhaps the strongest evidence that the decision to upgrade the Blind Line was not a legislative or quasi-judicial act is that, when it finally was upgraded, no by-law, resolution or other formal act of Council was required.
[28] I am also of the view that this is not a case of the municipality being held liable for silence or non-disclosure. This was not a case where a statement or promise was made in private by a Council member to a citizen. The Council had assembled to deal with questions from citizens and organized itself to speak through the Reeve. There was nothing in the circumstances to alert the plaintiff or any other citizen that the Reeve was speaking only for himself or that he was anything other than the spokesperson for the municipality. The issue was not whether the appellant was liable for non-disclosure, but whether it breached its duty to exercise reasonable care in its dealings with the respondent. Iacobucci J. dealt with a similar problem in Cognos at pp. 652-53 in response to the submission that the trial judge had placed a duty on the defendant to make “full disclosure”:
Rather, I read his reasons as suggesting that, in all the circumstances of this case, Mr. Johnston breached a duty to exercise reasonable care by, inter alia, representing the employment opportunity in the way he did without, at the same time, informing the appellant about the precarious nature of the respondent's financial commitment to the development of Multiview. In reality, the trial judge did not impose a duty to make full disclosure on the respondent and its representative. He simply imposed a duty of care, the respect of which required, among other things and in the circumstances of this case, that the appellant be given highly relevant information about the nature and existence of the employment opportunity for which he had applied.
There are many reported cases in which a failure to divulge highly relevant information is a pertinent consideration in determining whether a misrepresentation was negligently made: see, for example, … V.K. Mason Construction, supra. In the last case, Wilson J. said the following, speaking for this court (at p. 607):
The statement was negligent because it was made without revealing that the Bank was giving an assurance based solely on a loan arrangement which Mason had already said was insufficient assurance to it of the existence of adequate financing.
In so doing, these cases and the trial judgment in the case at bar are not applying a standard of uberrima fides to the transactions involved therein. Quite frankly, this notion is irrelevant to a determination of whether the representor has breached a common law duty of care in tort. These decisions simply reflect the applicable law by taking into account all relevant circumstances in deciding whether the representor's conduct was negligent. In some cases, this includes the failure to divulge highly pertinent information. [Emphasis added. Italics in original.]
[29] The same may be said in this case. No matter how uncomfortable it might have been for the other members of Council, it was surely incumbent upon them to speak up if, as it turned out to be the case, the Reeve did not represent their views. They must have known that the respondent was relying upon these statements and they could not simply leave the respondent with the impression that Council had approved the immediate improvement of the Blind Line. The fact that there was no such commitment was highly pertinent information. I would not give effect to this ground of appeal.
5. The trial judge erred in awarding out-of-pocket expenses that were incurred before any representations were made by the Reeve
[30] The appellant submits that the trial judge erred in awarding the respondent certain out-of-pocket expenses that were incurred before any representations by the Reeve. In his submissions, Mr. David took the court through the list of payments prepared by the respondent to demonstrate that some of them must have been for expenses incurred prior to the Council meeting in May of 1989. These expenditures total $7,007.40. This issue was not clearly addressed at trial. The respondent was not cross-examined on these matters. In her reasons, the trial judge pointed out that the respondent’s evidence respecting damages was not very satisfactory and should have been more complete. She did, however, refer expressly to the question of the timing of the expenditures and accepted the respondent’s evidence:
His out-of-pocket expenses are supported by copies of cheques, although, without corresponding invoices. He says all the moneys were expended subsequent to the former Reeve’s initial promise to him in the May 29, ’89 meeting of Council and relate entirely to the project. He said that he sorted out and did not include any charges that did not relate to these issues, and the few invoices he did have seemed to support that.
[31] I am not satisfied that the trial judge erred, particularly since the matter was not fully addressed at trial.
CONCLUSION
[32] Accordingly, I would dismiss the appeal with costs.
(signed) “M. Rosenberg J.A.”
(signed) “I agree J. J. Carthy J.A.”
(signed) “I agree D. O’Connor J.A.”
RELEASED: August 22, 2000
[^1]: It may be that a statement of present intention may also constitute a misrepresentation for the purposes of negligent misrepresentation. See The International Casualty Company v. Thomson (1913), 1913 29 (SCC), 48 S.C.R. 167 at 171-73.