COURT FILE NO.: 15-62998
DATE: July 24, 2019
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Charlesfort Developments Ltd.
Plaintiff
– and –
The Corporation of the City of Ottawa
Defendant
Timothy Hill, Jane Pepino and Mark van Zandvoort for Plaintiff
Anne Tardif, Alyssa Tomkins and Scarlett Trazo for Defendant
HEARD: February 11, 12, 14, 19, 20, 21, 22, 26, 26 and 27 and March 6 and 7, 2019
Justice SALLY GOMERY
[1] In this case, I must decide if the City of Ottawa was legally required to tell an applicant seeking rezoning approval in 2004-05 about a four foot wide, high pressure water main running alongside the property it proposed to develop.
OVERVIEW
[2] In August 2007, Charlesfort Developments Ltd. applied to the City of Ottawa for site plan approval for the Continental, a condominium project on a site near the Ottawa River. The project included a 15-storey tower with a two-storey underground parking garage. The high-rise would replace an existing low-rise building used as a rug store. Charlesfort expected that construction of the Continental would start in early 2008 and would finish by the summer of 2009.
[3] 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 a water main (the “water main”) in a municipal easement running along the project site’s northern lot line, on neighbouring property owned by a church (the “easement”).
[4] Charlesfort had thought that the easement contained a trunk sewer. But it was not alarmed when it was first told about the water main in October 2007. The City had not raised any concerns about the contents of the easement during discussions with Charlesfort when the developer applied for site-specific rezoning to build the Continental in 2004-05. The water main was not on the Continental site but on the adjacent church property. Both trunk sewers and water mains run throughout the City and typically do not present serious risks or challenges for construction.
[5] But, as Charlesfort learned in the months that followed its receipt of the October 2007 letter, the water main next to its property was different. As of 2008, only about 10% of the 2800 kilometres of water mains running through the City were two feet wide or more. This water main was four feet wide and under high pressure. Millions of gallons of water flowed through the water main every hour. It fed into a municipal reservoir, which in turn provided water to roughly half a million people in Ottawa, as well as to local hospitals and fire fighters. The water main was a part of the critical infrastructure of the City.
[6] Moroever, as Charlesfort learned, the water main’s location and condition gave rise to serious risks if construction of the Continental proceeded as planned.
[7] The City could not tell Charlesfort where exactly the water main was located within the easement. After doing its own testing, Charlesfort discovered that the main lay within a metre or so of its property. It had been installed sixty years earlier and had never been inspected. The condition of the water main was therefore unknown.
[8] The two-storey underground parking garage that Charlesfort planned to build, and that the 2005 rezoning by-law theoretically permitted it to construct, extended right up to the lot line of its property. Excavating to that depth right next to the water main would create vibrations and soil displacement that could result in a breach of the pipe.
[9] A rupture during construction of the Continental would be catastrophic, threatening the lives of those working on the site, flooding the local area, and compromising the City’s water supply. It could require the City to evacuate hundreds of thousands of residents. Simply modifying Charlesfort’s proposed excavation methods did not address concerns about a potential breach of the water main.
[10] The catastrophic consequences of a rupture during excavation could be lessened by temporarily shutting off the flow of water to the section of the water main next to the Continental site. But a shut-down was impossible for the foreseeable future. The City was doing extensive upgrades of the municipal water system. The upgrade work would not be finished until October 2009 at the earliest. Besides, the City’s engineers were not sure if the valves controlling the relevant section of the water main would work, since they had never been tested.
[11] But even if Charlesfort could wait another year or two to start construction, and even if the risks during excavation could be mitigated, the City engineers overseeing the municipal water supply and infrastructure were uncomfortable with the prospect of an underground structure within a few feet of a large, critical, ageing, high pressure water main.
[12] After being informed of the short and long term risks, Charlesfort concluded that it could not build the underground garage as planned, despite the absence of anything limiting its size or location in the site-specific zoning by-law. As Doug Casey, Charlesforth’s president, wrote in a letter to the City in July 2008, “[W]e can’t inspect the pipe. The City does not know what shape it is in, or whether there are any thrust blocks. How could a reasonable person proceed under such conditions? … We have to move the parking structure away from the lot line.”
[13] Charlesfort redesigned the garage, reducing its size and moving it eight feet back from the northern lot line of the property. It used a complex and expensive shoring method to reduce the risk of excessive vibration and soil displacement during excavation. The City nonetheless required Charlesfort, as a condition of approving its site plan, to closely monitor any possible impacts on the water main and to carry $25 million in extra liability insurance. Completion of the Continental was delayed for two years and Charlesfort could not provide the parking and storage options it had marketed to condominium purchasers.
[14] In this lawsuit, Charlesfort claims that the City negligently misrepresented what was in the easement during discussions in 2004-05 in connection with its application for the rezoning by-law, and that it is liable for Charlesfort’s additional costs of construction, lost revenue and lost profits. If it had known about the water main prior to its waiver of conditions on the purchase of the Continental site, it says that it would have found another site to develop.
[15] The City denies that it had any legal duty to tell Charlesfort about the water main at the rezoning application stage. It says that, from its perspective, the risks arising from construction right next to the water main become relevant only when Charlesfort applied for site plan approval. By waiving conditions of purchase before seeking site plan approval, and by failing to conduct its own investigation of the easement during the rezoning process, Charlesfort assumed the risk that infrastructure on a neighbouring property could impact the feasibility and cost of its proposed development.
[16] My analysis of this claim turns on whether the City had a duty of care in 2004-05 to provide Charlesfort with accurate information about the water main; whether its failure to do so was negligent; whether Charlesfort relied on the information it received from the City and; if so, what damages it suffered as a result of this reliance. I must also determine whether Charlesfort was contributorily negligent.
[17] I find in Charlesfort’s favour on all of these issues.
[18] The City had a duty of care to Charlesfort based on their close and direct relationship during the rezoning approval process in 2004-05. The proximity of the relationship was based on the statutory and policy framework for rezoning decisions, the process for rezoning approval in place at the City at the time, the imbalance in information available to each of the parties, and their respective interests.
[19] In 2004-05, a developer seeking site-specific rezoning applied to the City for rezoning approval. It paid a fee for the City to review and process its application. The City’s planning department circulated a summary of the application to various municipal departments and external bodies and sought their feedback. External bodies who received notice included pipeline companies with infrastructure within 200 metres of the property for which rezoning was sought. Municipal departments included engineering groups managing the City’s water supply, sewers and associated infrastructure.
[20] Pursuant to the Planning Act, provincial policy and the City’s official plans, the City had to ensure that a proposed development permitted through site-specific rezoning was consistent with good planning principles. This involved, among other things, assessing potential health and safety risks that might arise as a result of the property’s use, protecting existing infrastructure, deciding how much additional parking would be required, and considering the developer’s proposal to supply that parking.
[21] If existing infrastructure was incompatible with the proposed redevelopment or gave rise to unacceptable risks, the City had powers at the rezoning stage to control these risks. Under the Planning Act, it could prohibit construction of a structure either above ground or below grade within a certain distance from the lot line, by including a setback in the site-specific zoning by-law. Alternatively, it could put a hold on development at the rezoning stage. The City had no such powers at the later site plan stage.
[22] The planning department had a practice of sharing all comments received during this circulation process with the applicant, even if they did not require any action at the rezoning stage. The Act did not require an applicant to take any steps to investigate infrastructure in adjacent property, nor did the City’s planning department ever tell Charlesfort that it should do so.
[23] The City had critical information about the size and condition of the water main and its role within the municipal water supply. The City did not provide this information to Charlesfort, and it was not otherwise readily available to Charlesfort.
[24] In these circumstances, I find that, in processing Charlesfort’s rezoning application in 2004-05, 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 proposed redevelopment. This included information about the existence, location, size and condition of the water main. The City should have foreseen that Charlesfort would rely on its statements and that it would suffer a financial impact if the information was inaccurate or incomplete.
[25] The City’s representations to Charlesfort in 2004-05 about the contents of the easement were negligent. Both staff in the City’s planning department and in its infrastructure approvals division failed to take reasonable steps to ensure that accurate and complete information was communicated to Charlesfort. Staff in the City’s planning department assumed that the easement contained nothing more than a trunk sewer. They did nothing to verify if this was correct, even though information about the water main was readily available to them. The planning department’s erroneous assumption was set out in a staff report that recommended Charlesfort’s proposed rezoning for the site. Engineers in the City’s water departments flagged the size and location of the water main when they were asked to comment on the rezoning application for the Continental site in early 2005. A program manager in the infrastructure approvals division inadvertently failed to forward this note to the planning department and so it was not shared with Charlesfort.
[26] Charlesfort was not contributorily negligent. It relied on the information it received from the City’s planning department. This reliance was reasonable, because a developer at the time did not typically conduct its own investigation of infrastructure in adjacent property at the zoning stage absent some indication from the City of a potential issue. No one at the City ever suggested to Charlesfort in 2004-05 that the contents of the easement might give rise to any concern.
[27] Had Charlesfort known about the water main in 2005, it would not have waived conditions on the purchase of the property but instead found or find another site on which to build the Continental. Although it was still able to build a condominium tower with an underground garage on the site, Charlesfort incurred significant losses and additional expenses due to the water main.
[28] I find that Charlesfort suffered damages as a result of the City’s negligent misrepresentations, and award it a total of $4,496,384 in damages and pre-judgment interest.
A. APPROACH TO THE ISSUES
[29] There are five issues I must address in determining the City’s legal obligations:
(1) Did the City have a duty of care in 2004-05 to Charlesfort in the context of its application for site-specific rezoning of the Continental property in 2004-05? If so, what services and information did it undertake to provide to Charlesfort?
(2) If the City had a duty of care that included providing accurate and complete information about relevant municipal infrastructure, were the City’s representations to Charlesfort about the contents of the easement negligent?
(3) Did Charlesfort rely on the City’s negligent misrepresentations?
(4) Was Charlesfort’s reliance on the City’s representations reasonable? Even if Charlesfort’s reliance was reasonable, was it contributorily negligent?
(5) Did Charlesfort suffer damages as a result of the misrepresentations and, if so, what were they?
[30] None of these questions can be meaningfully addressed in a factual void. I will accordingly start by reviewing the statutory and policy framework for municipal planning decisions in 2004-05 and the City’s processes at that time. I will then assess the evidence regarding the parties’ interactions in the period when Charlesfort’s rezoning application was being reviewed by the City in 2004-05, and after it applied for site plan approval in August 2007. I will also consider the expert evidence at trial on the City’s rezoning processes in 2004-05. At that point I will be in a position to conduct an analysis of the five issues set out above.
B. THE STATUTORY AND POLICY FRAMEWORK
[31] In Ontario, municipal planning decisions are subject to the Planning Act, the Provincial Policy Statement, and each municipality’s official plan.
(1) The Planning Act
[32] The Planning Act (the “Act”) sets out what municipalities may address through zoning by-laws and site plan approval, and how these processes are managed.[^1] Although the Act has been amended since 2006, the relevant provisions are unchanged except where I have noted otherwise.
(i) Zoning
[33] Pursuant to section 34(1) of the Act, municipal councils may pass zoning by-laws for various purposes. Councils may designate whether land may be used for commercial or residential construction. They may prohibit the building or use of buildings for purposes except those set out in a zoning by-law. They may also prohibit building on land subject to flooding or that is subject “to natural or artificial perils”.
[34] Zoning by-laws may serve two other purposes relevant to this lawsuit.
[35] First, pursuant to ss. 34(1)4 of the Act, municipalities may pass by-laws regulating “the type of construction and the height, bulk, location, size, floor area, spacing, character and use of buildings or structures to be erected … and the minimum frontage and depth of the parcel of land and the proportion of the area thereof that any building or structure may occupy”.
[36] The power to require a minimum setback under ss. 34(1)4 may be used to prevent a property owner from building right up to the lot line of their property. Although setbacks are almost always imposed on construction above ground, they may also be used to limit below-grade construction.
[37] Municipalities in Ontario, including the City, have imposed setbacks, through zoning by-laws, to restrict the location of underground construction. In 2017, the Ontario Municipal Board (the “OMB”) held that the City of Toronto could not, through a comprehensive zoning by-law, generally restrict the right of property-owners to build below-grade structures right up to the lot line of their property.[^2] The Board however upheld the municipality’s ability to impose below-grade setbacks on property through site-specific by-laws. At trial, Peter Smith, a planning expert called by Charlesfort, identified several instances where the City of Ottawa has passed site specific zoning by-laws imposing a below-grade setback on construction.
[38] In cross-examination, Charlesfort’s president Mr. Casey agreed with the suggestion by the City’s lawyer that zoning pertains to building above grade. But Mr. Casey is not an expert nor would the court in any event be bound by this admission to the extent that it is inconsistent with the Act and with the practices of municipalities in Ontario.
[39] Second, pursuant to ss. 34(1)6 of the Act, municipalities may, through a zoning by-law, require “the owners or occupants of buildings or structures to be erected or used for a purpose named in the by-law to provide and maintain loading or parking facilities… ”. When rezoning will result in a greater demand for parking – for example where, as in this case, an applicant wants to develop property from a low-rise commercial use to a high-density residential use – a municipality must consider, as part of the zoning, how many new parking spaces will be needed and require the developer to provide them, as part of the zoning by-law it approves.
[40] The question of what exactly a municipality must turn its mind to at the zoning stage, with respect to parking, was the subject of expert evidence. I will return to this later.
[41] A person may apply to council for a site-specific by-law amendment under ss. 34(10) of the Act. An applicant must provide “prescribed information and material” to the council, failing which council may refuse to consider the application.[^3] Under the version of the Act in force today, an applicant may also be required to provide “any other information or material that the council considers it may need … if the official plan contains provisions relating to requirements under this subsection”. [^4] This provision was not in force in 2004-05.
[42] In 2004-05, the information and material that an applicant had to provide in support of a zoning amendment application was limited to what is set out in a regulation to the Act.[^5] The prescribed information includes a sketch showing various features of the property and adjacent property as well as the construction that the applicant proposes to build, if rezoning is allowed. Three required elements of the sketch are relevant to the proximity analysis in this case:
(1) The sketch must indicate the distance of any proposed buildings or structures from the lot lines;
(2) The sketch must show the approximate location of all natural and artificial features on the subject land and on adjacent land that, “in the opinion of” the applicant, may affect the application. This includes but is not limited to buildings, railways, roads, watercourses, drainage ditches, river or stream banks, wetlands, wooded areas, wells and septic tanks.
(3) The sketch must show the location and nature of “any easement affecting the subject land”.
[43] Nothing in the Regulation requires an applicant to take any steps to investigate the features on adjacent land that may affect the application, or to warrant that it has done so. At trial, Charlesfort’s planning expert Mr. Smith testified that applicants for re-zoning typically do not submit sketches showing the location of sewers and water mains, because these features generally have no impact on development.
[44] Municipalities must ensure that notice is provided of any zoning proposal to both the public and any public bodies that the council considers may have an interest in the zoning proposal.[^6] Further to the Regulation, notice of a public meeting to inform the public of a proposed zoning by-law must be given in particular to “every company operating an oil or natural gas pipeline in the local municipality or the planning area where the by-law would apply”.
[45] In addition to the power at rezoning to prohibit and limit construction and use of property under section 34, municipalities have an ability to delay development under section 36 of the Act. Section 36 allows a municipal council to permit a land use, but delay the implementation of that decision. In passing a site-specific zoning by-law, a municipality may use a “holding symbol … in conjunction with any use designation [to] specify the use to which lands, buildings or structures may be put at such time in the future as the holding symbol is removed by amendment to the by-law”.[^7]
(ii) Site plan approval
[46] Even if the zoning affecting a piece of property permits a particular use and type of construction, a land owner may not construct or substantially increase the size or usability of a building unless it first obtains site plan approval under s. 41 of the Act. As part of site plan approval, council must approve either plans or drawings or both.
[47] As a condition of site plan approval, a municipality may require a land owner to provide it with easements “for the construction, maintenance or improvement of watercourses, ditches, land drainage works, sanitary sewage facilities and other public utilities of the municipality”, and to maintain any or all of such facilities or works.[^8]
[48] There is nothing in section 41, however, that gives municipalities the right to impose a setback, either above or below grade, on construction, as a part of site plan control. Subsection 41(6) moreover states that municipalities cannot make decisions to limit “the height or density of buildings to be erected on land” at the site plan approval stage.
[49] There is also nothing that allows municipalities to delay development until council determines that it is appropriate for it to proceed. There is no mechanism equivalent to the holding symbol that may be imposed as part of a zoning by-law. Under the version of the Act in force at the time relevant to this case, if a municipality failed to approve the plans or drawings submitted for site plan approval within 30 days, a property owner could apply to the OMB for a decision.
(2) The Provincial Policy Statement
[50] Municipal planning decisions must not only respect the specific rules set out in the Act and the Regulation, but also the principles set out in the Provincial Policy Statement issued pursuant to section 3 of the Act (the “PPS”).
[51] In 2004-05, section 3 of the Act required that, in exercising any planning authority, municipalities should “have regard to” the PPS. As noted in its preamble:
Doing things right the first time can avoid the need for costly remedial measures to correct problems.
[52] The preamble recognizes that the “wise use and protection” of Ontario’s resources over the long term, including its water supply, is a key provincial interest. Another key interest is the health and safety of Ontario’s residents.
[53] This identification of key interests underpins broad principles set out in the second part of the PPS. It states that Ontario’s long term economic prosperity, environmental health and social well-being depend on, among other things “protecting resources for their economic use and/or environmental benefits” and “reducing the potential for public cost or risk to Ontario’s residents by directing development away from areas where there is a risk to public health or safety or of property damage”.
[54] Specific policies are set out in part 3 of the PPS. The scope of two particular policies were debated at trial: public health and safety, and infrastructure.
(i) Public health and safety
[55] Subsection 1.1.1(f) of part 3 of the PPS states that “Development and land use patterns which may cause environmental or public health and safety concerns will be avoided”. Section 3 is entitled “Public Health and Safety” and sets out specific policies in connection with defined natural and human-made hazards. The City contends that, having regard to the PPS, the only risks to public health and safety that it had to be concerned about, when making planning decisions, were these hazards, which would not include a water main.
[56] In my view, the City’s proposed interpretation of the broad policy at s. 1.1.1(f) ignores both the letter and spirit of the PPS.
[57] Part 4 of the PPS sets out how the PPS is to be interpreted and implemented. Section 2 states that:
Nothing in this policy statement is intended to prevent planning authorities from going beyond the minimum standards established in specific policies, in developing official plan policies and when making decisions on planning matters, unless doing so would conflict with any other policies.
The PPS Statement is to be read in its entirety, and all pertinent policies are to be applied to each situation.
[58] If I were to assume that the PPS concerned only those public health and safety concerns specifically identified in section 3, I would have to ignore or at the very least read down the broad language in the preamble and the principles in part 2. This would be inconsistent with the approach set out in part 4.
[59] The City’s proposed interpretation is furthermore inconsistent with the way in which the policies themselves are drafted. Some references to “public health and safety” within the PPS clearly refer to the specific hazards set out in section 3. But the term “public health and safety” is also mentioned at various points within the PPS without reference to section 3. I have already cited ss. 1.1.1f) itself. Public health and public safety are also mentioned in ss. 2.2.22 and 2.2.3.2. Had the Ontario government intended to confine the scope of this term to the specific hazards set out in section 3, it would have done so in these subsections, as it did elsewhere.
[60] Finally, a note below the table of contents of the PPS states that: “Italicized terms are defined in the Definitions Section. For other terms, the normal meaning of the words applies”. The term “public health and safety” is not italicized in the text of the PPS and is not a defined term. I am therefore required to give it its normal meaning.
[61] In my view, the normal meaning of “public health and safety” is not confined to risks arising from the natural and human-made hazards specifically identified at section 3 of the PPS. Consistent with ss. 1.1.1f), the City generally has to have regard as to whether proposed development would cause significant public health and safety concerns. I see no reason why hazards to public health and safety would not include those stemming from the proximity of critical municipal infrastructure to proposed development.
(ii) Infrastructure
[62] The second policy in the PPS that was the subject of debate at trial relates to infrastructure. Further to ss. 1.3.3.1:
Corridors and rights-of-way for significant transportation and infrastructure facilities will be protected.
[63] “Infrastructure” is defined in the PPS as “physical structures that form the foundation for development” and includes “sewage and water works”.
[64] The parties agree that the water main falls within the definition of infrastructure in the PPS. The City argues however that ss. 1.3.3.1 did not require it to protect the water main itself, but simply to ensure that its pathway was protected. The City contends that this requirement was met through the easement already in place. As a result, the City did not have to give any further consideration to the protection of the contents of the easement in planning decisions with respect to the Continental site.
[65] In my view, this narrow reading is patently incompatible with the PPS’s preamble and the principles set out in the second part of the PPS. The preamble recognizes that the protection of Ontario’s water supply is a key provincial interest. Section 2 mandates that development be directed away from areas where there is a risk to property damage.
[66] Subsection 1.3.3.1 cannot sensibly be read to give a municipality license to disregard the province’s interest in protecting the water supply and avoiding property damage. This is a classic example of missing the forest for the trees. The very purpose of protecting the corridors is protecting what they contain. If an existing municipal right of way does not adequately protect a critical piece of infrastructure – the very situation that arose here – the City could not disregard the PPS’s wider directives through a narrow reading of ss. 1.3.3.1. This would be the opposite of good planning and “doing things right the first time”.
[67] I therefore conclude that the PPS requires municipalities to have regard to risks to water infrastructure, and not just the corridors that contain them, when they consider proposed land development.
(3) The City’s official plan(s)
[68] Last but not least, a municipality’s planning decisions are informed by their official plan.
[69] As of late 2004, following the amalgamation of the municipalities that previously made up the Region of Ottawa-Carleton into the new and larger City of Ottawa, the City’s planning department had to take into consideration three competing official plans: the former Region’s Official Plan; the City of Ottawa’s Official Plan prior to amalgamation; and the new City of Ottawa Official Plan adopted in May 2003, but still subject to challenges before the OMB.
[70] Each of these official plans set out objectives for development. Some of the objectives relevant to the 2005 rezoning decision of the Continental site included encouraging denser residential development in urban areas, ensuring that new development was designed in such a way as to be compatible with existing neighbourhoods, and promoting growth that facilitated the use of public transit.
[71] In early 2005, a new provision, section 4.11, had been proposed within the 2003 Plan. Section 4.11 introduced “compatibility criteria” for infill development similar to the criteria under the former Ottawa Plan. Amongst these criteria was “minimizing traffic impacts on local streets and ensuring adequate on-site parking and loading”. The power to ensure an adequate number of parking spaces was based on ss. 34(1)6 of the Act, which allowed municipalities to enact site specific zoning by-laws requiring the construction of parking facilities.
[72] Although s. 4.11 was not in force in March 2005, the planning experts who testified at trial, as well as the representatives of the City’s planning department, all agreed that it was relevant to the City’s consideration of Charlesfort’s rezoning application.
C. THE CITY’S PRACTICES WITH RESPECT TO REZONING APPLICATIONS IN 2004-05
[73] Before turning to what specifically occurred in this case, I will summarize the evidence regarding the City’s zoning practice in the early 2000s.
[74] In 2003 or 2004, when the City received an application for rezoning along with an application fee, a planner from the planning group was assigned to prepare a summary of the application. The planner then circulated the summary to interested parties to obtain feedback. Based on the planner’s review of the application and feedback received through the circulation process, the planner would seek any additional required information and assessments from the applicant and draft a staff report setting out the City’s position on the proposed by-law amendment.
[75] The process then was different than the process today. When a property owner or developer seeks site-specific rezoning in Ottawa today, they must submit detailed plans and studies for a pre-consultation process set out at ss. 34(10.0.1) of the Act. Applicants are expected to hire engineers, planners and other specialists before submitting an application, so that the implications of any proposed development can be fully reviewed with City staff at an early stage. A team of people representing the applicant typically meet with City planners and engineers. The City now has the power, under the Act, to require an applicant for a zoning by-law amendment to provide any information or material that the Council considers it may need.
[76] Prior to 2006, the Act did not give municipalities the power to require participation in a pre-consultation process or to compel an applicant for rezoning to provide information beyond what was prescribed by regulation. The City’s planning department no doubt had some leverage, because applicants for site-specific rezoning had a strong interest in obtaining its staff’s support for proposed development. In the context of the application to rezone the Continental site, for example, the City’s planner asked Charlesfort’s consultants to prepare a rationale supporting the proposed development in October 2004. But, contrary to the situation today, there was no provision in the Act in 2004-05 whereby Charlesfort or any other applicant could be required to engage in detailed engineering discussions prior to submitting its rezoning application.
[77] The City’s May 2003 Official Plan instead emphasized the desirability of obtaining meaningful feedback on proposed rezoning from departments within the municipality itself. The Plan promoted a model in which a “wider range of issues” would be considered by the City when a proponent applied for a zoning by-law amendment, based on various municipal departments raising concerns and comments on a given proposal: [^9]
The development application review process … provides an opportunity for the various agencies within the municipal administration to integrate their disparate concerns through their discussion of and comments on specific land development proposals.
[78] As we have already seen, the Act required the City to provide public notice of proposed rezoning within certain deadlines. In the early 2000s, the City had a practice of circulating a summary of applications, internally and externally, much earlier than strictly required. The Regulation only required municipalities to give utility companies, for example, notice of the public meeting at which an application would be discussed. The City circulated notice of rezoning applications shortly after they were received, so that it could anticipate and deal with potential concerns or objections prior to any public meeting. The City also provided notice to a wider range of external bodies than required under regulation.
[79] The list of external agencies that would receive notice of proposed rezoning by the City varied. Some external agencies, such as school boards, also received notice of every application. Other external bodies, such as Trans Canada Pipeline and Trans Northern Pipeline, received notice if the application involved rezoning of property within 200 metres of their pipelines. Railway operators, hydro companies and cable companies also got notice in some cases.
[80] I infer that the purpose of notice to train companies, pipeline companies and cable operators was to allow them to take steps to safeguard their infrastructure if a proposed development could allow construction in proximity to it.
[81] Within the City, the Infrastructure Approvals division (the “approvals division”) got notice of any rezoning application. The division would in turn seek the input from various groups, including engineers within the City’s water departments. [^10]
[82] The City’s planning department passed on any comments it received through the circulation process back to the applicant seeking rezoning. In some cases, the comments would require an applicant to take immediate steps as a condition of the City supporting the proposed development. In other cases, the comments put the applicants on notice that, if and when they eventually applied for site plan approval, they would have to provide the City with studies or analysis at that stage.
[83] On the basis of the comments received during the circulation process, and any further studies prepared by the applicant in response to them, the City planner would prepare a staff report. The report would indicate whether the City’s planning department recommended the proposed rezoning. This staff report would have to be approved by the senior leadership of the planning department.
[84] The staff report would then be subject to discussion at a public meeting of the Planning and Environment Committee (the “Planning Committee”). If the Committee voted to approve the rezoning application, it would go to City Council for a vote.
D. THE PARTIES’ INTERACTIONS
Preliminary comments about credibility
[85] I begin by making some observations about the credibility of the ordinary (that is, non-expert) witnesses who testified at trial. I will make findings on the credibility of the expert witnesses when I discuss their evidence.
[86] Most of the witnesses at trial were fundamentally credible. They acknowledged the limits of their knowledge and experience and admitted when they could not remember a particular event. Patrick Leblanc, Linda Carkner, Tammy Rose and Terence Walker were especially forthright and candid witnesses. They made a genuine effort to assist the court and did not exhibit any clear bias towards the party who called them. Their explanations of the events that give rise to this lawsuit were detailed and credible. I place substantial weight on their evidence.
[87] I had minor reservations about the main witnesses for each of the parties. Doug James, the City planner who dealt with Charlesfort’s rezoning application, was somewhat defensive in his testimony. He attempted to justify actions he took based on after-the-fact policy rationales developed by the City in defence of this lawsuit. Mr. Casey was sometimes argumentative and even emotional in his testimony. He was clearly upset by what had occurred with respect to the Continental project and critical of the City’s perceived failures. I did not however get the impression that either Mr. James or Mr. Casey were trying to mislead the court. They did not refuse to make required admissions or take untenable positions. They simply made no secret of promoting the position of the party who called them.
[88] I had serious concerns about the evidence of only one witness, John Smit, a senior member of the City’s planning department. In his testimony, Mr. Smit advocated tirelessly for the City’s position. He was tendentious and argumentative. He gave long rambling answers to straightforward questions on cross-examination. His answers were often rooted not in the evidence but in talking points.
[89] Mr. Smit refused to make sensible concessions during cross-examination. He maintained, for example, that the prospect of no water supply for half a million Ottawa residents was not a contingency that the City’s planning department had to take into consideration pursuant to the policies set out in the PPS. He also implied that it was appropriate for City officials to delay site plan approval as a negotiating tactic to obtain concessions from a property owner that the municipality was not legally entitled to require. This and other untenable positions taken by Mr. Smit limit the weight I can place on his testimony.
Charlesfort’s conditional purchase of the property
[90] Mr. Casey founded Charlesfort in 1983. Its projects involve high-end residential infill in urban neighbourhoods in Ottawa. In the first twenty years of its operation, Charlesfort built townhomes and low-rise apartment buildings. In the early 2000s, Charlesfort began developing high-rise condominium projects.
[91] Mr. Casey came upon the future site of the Continental at 273 Richmond Road while driving in the area in January 2004. A rug store housed in a modest one-storey building was the only building on the site.
[92] Mr. Casey believed that the site had great potential. It fronted to the south onto Richmond Road in Westboro, a lively urban neighbourhood. The Ottawa River ran a few hundred metres to the north. Sandwiched between the river and the property was land owned by the First Unitarian Congregation of Ottawa. The buildings on the Unitarians’ land – a church, daycare and retirement residence – were all low rises. A thirty metre wide strip of land running along the southern boundary of the Unitarians’ land, just north of the northern boundary of the property, contained a parking lot and a wooded area. Mr. Casey envisaged a development that would give owners of condominiums in the Continental access to transit and a commercial strip outside their front door while enjoying unimpeded views of the Ottawa River to the north.
[93] Mr. Casey contacted the owners of the property, who told him that it had already been conditionally sold to another developer, DCR Phoenix Development Corporation. Mr. Casey contacted DCR and persuaded it to flip the property to Charlesfort. Charlesfort entered into an agreement with DCR in February 2004.[^11] Its agreement to purchase the property was subject to two conditions. First, it had to satisfy itself that the soil on the site could be remediated, since a gas station had previously been located there. Second, an application for rezoning already filed by Vincent Colizza, DCR’s architect in December 2003 (the “rezoning application”) had to be approved, so that Charlesfort could build a high-rise condominium building on the property.
The rezoning application
[94] The rezoning application was submitted to the City in December 2003. The City charged a $3000 fee for processing and reviewing it.
[95] The rezoning application sought a change of use from a general commercial designation to a residential designation and changes to the height and density of construction permitted on the property. The zoning in place at the time permitted a low-rise building with a setback of six metres from Richmond Road in front and a 7.6 metre setback at the rear. The application sought to reduce these setbacks to allow construction above-grade to within one metre of the front of the property and right up to the lot line in the rear.
[96] The rezoning application proposed parking on site for 118 cars. The drawings showed a two-storey underground parking garage underneath the condominium tower, providing 86 parking spaces as well as storage facilities. The garage would extend from the northern to the southern lot lines, with no setback.
[97] A plan of survey was included with the rezoning application. Colizza did not testify at trial and the City’s witnesses did not indicate what plan was filed. A site plan prepared for Charlesfort in June 2014, however, was transposed on a June 2003 topographical survey of the Property. That survey indicated that the Unitarians’ land directly north of the northern boundary of the Property was subject to the easement. The purpose of the easement was not identified on the survey, but a note on the upper right hand corner of the plan indicated a valve chamber. I find that the plan that was filed with the rezoning application, whether it was the June 2003 Stantec plan or an earlier version of the site plan, referred to both the easement and a valve chamber.
The City’s handling of the application
[98] The City planner tasked with managing the circulation process for the rezoning application was Mr. James. He had been employed by the City for many years. In 2003-05, he reported to Mr. Smit.
[99] In January 2004, Mr. James circulated his summary of the rezoning application to the City’s approvals division seeking their assistance in getting feedback from various groups, including engineers in the City’s water departments. The summary was also circulated to Enbridge Gas, four telecommunications companies and four local school boards.
[100] Mr. James did not notify any pipeline companies about the proposed rezoning, because they did not have any infrastructure within 200 metres of the property. He testified that, if a pipeline company had been notified and had had concerns about the Continental, he would have expected them to comment at that stage. Mr. James stated, more generally, that it was good planning to identify any safety issues at the zoning stage. He would also expect engineers within the City to identify any safety issues with respect to high pressure water mains.
[101] In response to the circulation, Mr. James got a memo from the approvals division on March 8, 2004. It stated that the division had reviewed the rezoning application. It provided information about storm sewer capacity, a protected right of way in front of the property pursuant to the City’s Official Plan. The memo also noted that the applicant would have to provide five reports: a traffic impact study, a noise study, a storm water management report, a geotechnical report and a waste reduction work plan summary. A further comment sheet dated March 8, 2004 states that a “phase I environmental assessment” would need to be done at the site plan stage.
[102] According to Mr. James, all of these comments were passed on to Charlesfort. None of them required Charlesfort to do anything further for the purpose of the rezoning application. All of the comments transmitted in response to the February 2004 circulation were relevant to site plan considerations, not rezoning.
[103] In August 2004, Charlesfort retained FoTenn Consultants, a local planning firm, to assist with the rezoning application process. Mr. Casey asked FoTenn to meet with the City’s planning department to discuss any issues.
[104] On September 21st, Mr. Casey and a FoTenn planner attended a meeting with Mr. James and Mr. Smit. At that meeting, the city planners asked Charlesfort to prepare and submit a planning rationale justifying the appropriateness of the proposed development from a policy perspective. This rationale, prepared by FoTenn, was provided to the City in November 2004.
[105] Following this meeting, Charlesfort submitted revised architectural drawings that pulled the building forward so that it was closer to Richmond Road and farther away from the rear or northern property line. The underground parking garage would however still extend right up to the lot line.
[106] On October 28, 2004, FoTenn met with Mr. James for a second time to discuss the proposed rezoning. Mr. Fobert, FoTenn’s founder, attended this meeting. He testified that, during the meeting, Mr. James told him that the easement contained a trunk sewer. I accept this testimony. Mr. James does not recall whether he mentioned a trunk sewer, but concedes that he might have, given his mistaken belief about the purpose of the easement at the time. A trunk sewer was also mentioned in a draft staff report that Mr. James prepared in September 2004, prior to any meeting with FoTenn.
The City’s staff report on the proposed rezoning and the final circulation process
[107] On February 9, 2005, Mr. James circulated the final staff report on the rezoning application, along with notice that it would be considered at a Planning Committee meeting on February 22, 2005. The staff report recommended that the proposed rezoning be granted. This recommendation was accepted by the senior levels of the planning department, including Mr. Smit.
[108] The staff report did not directly refer to the underground parking garage that Charlesfort proposed to build as part of the Continental. Mr. James was however clearly aware of what Charlesfort proposed to do, however, based on both the drawings submitted and a schedule to the report setting out comments received by the public with respect to the rezoning application. One of these comments raised concerns about how the construction of the underground parking structure would affect the groundwater supply in the area.
[109] On February 18, 2005, Dean Aqiqi, the program manager of the approvals division, sent an email to engineers in the water departments, including Linda Carkner and Curtis Rampersad. Mr. Aqiqi was responsible for co-ordinating input on rezoning proposals. The email read as follows:
This is kind of urgent, so I hope to hear from you by the end of Monday. Attached herewith a plan showing the Property location of 793 Richmond that is being considered for redevelopment to construction a 15 floors building including 84 units. The only sewer opposite to this Property is the West Nepean Collector, which we are not encouraged to connect to, so where would you advise the connection be made? Also, I wonder if there are any issues with storm and water services at this location?
[110] On receipt of Mr. Aqiqi’s email, Mr. Rampersad forwarded to various others for response, including Patrick Leblanc, an engineer with the City’s water resources group. Leblanc responded as follows:
“Curtis: There are no special water distribution issues related to this site. A standard service connection would be made to the 203 mm water main fronting this Property. Standard Building Permit fire protection issues would govern this project. Please note the location of a 1220 mm transmission main just north of this Property.” [Emphasis added.]
[111] Mr. Rampersad sent Mr. Leblanc’s note, as well as other comments received, to Ms. Carkner. From 2002 to 2016, Ms. Carkner was Program Manager, Right of Way Information and Approvals. In this role, she managed any requests for encroachment into a municipal easement. On receipt of Mr. Rampersad’s email, Ms. Carkner sent an email to Mr. Aqiqi that included Mr. Leblanc’s note about the water main.
[112] There is no evidence that Mr. Aqiqi forwarded the comments to Mr. James. Mr. James denied seeing them in 2005. I conclude that Mr. Aqiqi failed to forward Ms. Carkner’s email, through inadvertence or for some other reason.
The Planning Committee meeting on February 22, 2005
[113] The rezoning application was discussed and approved at the Planning Committee meeting on February 22, 2005. The meeting was attended by Mr. James and Mr. Smit, on behalf of the City’s planning department; Mr. Casey and Mr. Fobert, on behalf of Charlesfort; and members of the public interested in the proposed construction of the Continental on the site.
[114] The Unitarians remained opposed to the proposed redevelopment. At the meeting, their representative Thomas Kent filed a written submission and spoke about why rezoning should be denied. The written submission pointed out that, contrary to the representations in the staff report, the easement on the Unitarians’ land had a width of 8.6 metres, not 30 metres, and it housed both sewer and water trunk lines.
[115] Based on the Planning Committee’s approval of the proposed rezoning, City council passed a site-specific zoning by-law with respect to the property on March 9, 2005.
The OMB appeal and Charlesfort’s waiving of conditions
[116] The Unitarians appealed the council’s decision to grant the by-law amendment to the OMB. A hearing was set for August 4, 2005. Prior to the hearing, Charlesfort, the Unitarians and the City settled the appeal.
[117] On August 4, 2005, the OMB issued its decision based on the settlement. In the decision it referred to expert testimony from both Charlesfort and the City to the effect that the redevelopment represented good planning. On that basis the OMB approved a minimum rear yard above-grade setback for the condominium building of 1.0 metre from the northern lot line. There continued to be no provision for any below-grade setback.
[118] On September 1st, 2005, having obtained its desired re-zoning and specifications for site remediation, Charlesfort waived the conditions in its agreement of purchase and acquired the property for $660,000.
[119] In June 2007, Charlesfort opened a sales centre for the Continental. It pre-sold about 50% of the 84 condominium units by the end of 2007.
Charlesfort’s application for site plan approval
[120] On August 24, 2007, Charlesfort applied to the City for site plan approval (the “site plan application”). Along with its application, it submitted various plans and assessments it had prepared: a site plan, a landscape plan, and a site servicing plan, a plan of survey, floor plans and building elevations, an assessment of the adequacy of public services, a tree preservation and protection plan, a storm water site management plan and an erosion and sediment control plan. It also filed a completed environmental site screening questionnaire and an affidavit regarding an environmental site assessment.
[121] On the application, Charlesfort indicated that it expected construction to begin in November 2007, starting with demolition of the existing building, then excavation and piling work. Mr. Casey testified that he expected, based on past experience, that the City would approve the site plan application within three to four months.
[122] On October 15, 2007, John Wu, the City planner assigned to handle the site plan application, sent a letter to Charlesfort with preliminary comments he received from the water departments. He directed Charlesfort to provide revised drawings showing the water main and the easement. Mr. Casey testified that he saw this letter but did not immediately understand the implications of the reference to the water main.
[123] Charlesfort obtained a demolition permit around this time. On December 7, 2007, it applied for an excavation permit. Mr. Casey testified that he did not expect any problems because there were no buildings nearby.
[124] The company hired by Charlesfort to excavate the site, Dufresne Piling Company, proposed to shore up the soil around the excavation using tiebacks drilled into the adjacent property.[^12] It accordingly asked the City exactly where the water main was located within the easement. The City did not know, as it turned out. The City’s assumption was that the pipe ran down the middle of the easement. But when Dufresne eventually used a hydro excavator to locate the pipe, it discovered that the water main actually ran almost at the southern edge of the easement, within three or four feet of the lot line shared with the property.
[125] On February 8, 2008, Rob Cowan, a section manager in of one of the water departments, formally objected to the site plan application. In the notice of objection, he wrote:
The submitted plans do not accurately indicate the location of the existing 1220 mm water main in relationship to this proposed shoring or the proposed Tower and/or Underground Parking Structures. There is no indication or section at Phase 1 showing the setback of the shoring to the property line. This existing water main is critical to the Distribution System and cannot be shut down. Further details will be required to evaluate the effect of this shoring and pile driving in close proximity of this critical main.
[126] Mr. Cowan, like Mr. Leblanc and Mr. Rampersad before him, immediately realized that the water main had to be taken into account in the redevelopment of the property. He also knew that the water main could not be shut down for the foreseeable future, for two reasons.
[127] First, the City was in the midst of significant upgrades and maintenance work to its water systems, including replacement of some mains and upgrades to a water filtration plant (the “Lemieux Island work”). While the Lemieux Island work was ongoing, the flow to the water main could not be shut off, because it was the only source of water to one of two municipal reservoirs. Based on Mr. Leblanc’s evidence, City staff were intimately involved in the planning of the Lemieux Island work and the general upgrade work to the municipal water system. Engineers in the infrastructure approvals division were aware that replacement work would begin in 2002 and the Lemieux Island project would get underway in 2006.
[128] Second, the City’s engineers did not know if it was possible to shut down the portion of the water main running through the easement. Three valves would have to be turned off in order to isolate this portion of the pipe. Mr. Leblanc testified that, since the valves had not been tested, the City did not know if they would seize.
[129] Mr. Leblanc testified that only the City’s engineers and a small group of outside consultants would have a good understanding of the inter-relationship of the City’s infrastructure. A developer would not appreciate issues such as redundancy, even if they knew about the water main. A developer would not have any knowledge of the impact on the water main as a result of other work such as the Lemieux Island project. In fact, there was no evidence at trial that a developer would be aware that any major upgrade work was planned. Mr. Leblanc also agreed that a developer would not have any information about the state of the valves that could be used to shut off the flow in the section of the water main near the property.
[130] Charlesfort had hired ZW Group as its project manager for the Continental. Terence Walker, who testified at trial, was the main contact point at ZW Group on the project and oversaw all the work. He testified that he became aware in early 2008 of some difficulty in getting approval for Dufresne’s shoring proposal. Initially, the City told Dufresne that there was a problem with the location of the tiebacks, so Dufresne redesigned the shoring to be based on struts instead of tiebacks. Despite this, the City’s water departments was maintaining its objection to the project.
[131] Mr. Walker’s recollection of events is consistent with internal communications within the City during this period. On March 3, 2008, Fern Marcuccio, an engineer and program manager in the Drinking Water Services group, circulated an email about the Continental project. He noted that the City could not provide any assurance as to the current condition of the pipe and that vibrations caused by excavation could affect its integrity. The City had advised Dufresne that the water main was a critical element of the municipal infrastructure and could not be shut down for any length of time. The City had also advised Dufresne that it would have to revise its approach to shoring, as drilling tiebacks would risk a breach of the water main.
[132] This is what had prompted Dufresne to come up with a new proposal for shoring. It did not involve tiebacks and would produce less vibration. Despite this, the City still had concerns about the loss or movement of soil from around the water main during excavation. But the more serious issue was the lack of redundancy in the water system as a result of the Lemieux Island work. Mr. Marcuccio concluded in the March 3 email as follows:
[T]he isolation of the [water main] is no longer a viable contingency option due [sic] the reduced production flow at Lemieux through Fleet Street. Furthermore we do not have enough information to establish a timeframe as to when the situation will improve this constraint.
Although Dufresne Piling has been very receptive to making changes in their shoring methodology in order to minimise potential damage, we are not prepared to lift our objection given this information below. Unless we can think of any better alternative to minimise this high risk situation, we are requesting … that Dufresne Piling be informed that the development cannot proceed as currently proposed.
[133] In short, even if Dufresne’s proposal could reduce the risks associated with building an underground parking structure within two meters of the water main, the City’s engineers were not comfortable with permitting the construction to go ahead if the flow to the pipe could not be turned off. Furthermore, as noted by Mr. Marcuccio, the City had no idea when this would happen.
[134] On March 6, 2008, Ms. Carkner convened a meeting to discuss how the City could deal with the situation. Dave McLeod, one of Ms. Carkner’s colleagues in the approvals division, sent an email to Mr. Smit to ensure that either he or someone else from the planning department would attend. Mr. McLeod noted that, based on the zoning approved in 2005, the subsurface garage structure could be as close as 1.2 metres from the water main. He qualified any need to shut down the water main for repairs as potentially “catastrophic”. He raised the possibility of moving the structure away from the property line.
[135] In response, Mr. Smit noted that the planning department was “just about ready” to issue site plan approval and that the issue of proximity to the water main “is coming very late”. He added that, if there were no other option but to move the underground garage back from the northern lot line, this possibility would have to be raised with Charlesfort.
[136] Mr. Smit’s email, sent almost seven months after Charlesfort applied for site plan approval, tacitly acknowledges that the City should have raised concerns about the water main earlier in the process. It also suggests that, if the City’s representatives raised the possibility of moving the building with Charlesfort (as they would do a short time later), it was because they did not see any viable alternative. This is at odds with Mr. Smit’s evidence at trial, where he took the position that Charlesfort ultimately made the decision to redesign the parking garage despite any clear instruction from the City to this effect.
[137] By mid-March, Charlesfort’s project manager Mr. Walker clearly understood that the risks associated with construction right next to the water main could delay site plan approval indefinitely unless Charlesfort modified its plans. In a March 19, 2008 email to Mr. Casey, he noted that the main was approximately 60 years old and the City was concerned that it might not be stable. Furthermore, because of the Lemieux Island work, “this water main has no back up and cannot be put out of service even temporarily”. As a result, the City was not willing to issue an excavation permit or approve the site plan application.
[138] Mr. Walker suggested various options to address the situation, including eliminating some or all of the second storey of the underground parking or delaying the project until the Lemieux Island work was complete. He noted that this would add about 6% to the capital cost of the project and put it “into a potentially unknown market for buyers”. Mr. Casey testified that Charlesfort could not simply get rid of the second parking level, because they had already sold units with parking. He had also committed to deliver condominium units to buyers within a certain timeframe. This made it untenable to wait until late 2009 to start construction. The only real choice was to reduce the size of the second floor of the parking garage.
[139] On March 26, 2008, Tammy Rose, another engineer in the water departments, acknowledged that the group was not prepared to agree to the development, and would not be in a position to even assess how long the Lemieux Island upgrades might prevent any reassessment “for another 6 months or so”. As she succinctly put it: “For now, it seems like the short answer to the developer will be no.”
[140] On March 28, Ms. Carkner held an internal meeting on the water main issues. Thirteen people were invited to this meeting. Ms. Carkner acknowledged, in cross-examination, that this was not a usual or typical type of meeting in reaction to an application to approve a site plan.
[141] According to notes taken at the April 1st meeting, shutting down the water main prior to October 2009 was not an option. The notes stated that: “For long term need to favour shifting building to increase width of easement.”
[142] As Mr. Leblanc testified at trial, the engineers in the water departments wanted a greater separation between any building and the water main. He emphasized this in a power point presentation at the March 28 meeting, noting the risk of property damage if the garage were constructed right next to the water main. The PowerPoint concluded that this was “a long term issue”.
[143] Finally, in an April 1st email to Ms. Rose, Ms. Carkner noted that the delay to October 2009 “only buys us time to allow the shutdown of the pipe during construction, it does not remove the issue of allowing this construction to proceed adjacent to the 1220 water main”. In her response, Ms. Rose agreed, acknowledging that “we eventually still need to address the constructability issues”.
[144] Based on this evidence, I find that the City’s engineers objected to any plan that involved construction right next to the water main.
[145] Unaware of the extent of these objections, Charlesfort was now proposing to build a secant wall during the excavation phase. This would minimize the likelihood of a breach of the water main by reducing the vibration levels caused by a traditional shoring system. This proposal was to be submitted to a consultant hired by the City, Mike Allen, for his assessment.
[146] On June 3, Mr. Allen provided his report. He concluded that every reasonable precaution had been taken by Charlesfort. This suggested that the City could approve the site plan application and issue an excavation permit. On June 6, the City in fact sent Charlesfort’s solicitor an email stating that the Continental development could proceed subject to monitoring, contingency plan and other risk management.
[147] Internally, however, the Allen report did not allay the City’s engineers’ ongoing and significant concerns about the long term risk arising from construction in close proximity to the water main. The same day the Allen report was submitted, Mr. Leblanc sent an email to Ms. Rose saying: “My initial question would be, if this structure is constructed successfully, what is the impact of a water main break and can we repair the main with this new structure adjacent to it?”. At trial, he explained that City engineers were worried that they would not have adequate access to the water main for the purpose of any future repairs, if there (were- was) a building constructed within feet of the pipe.
[148] In effect, the engineers were concerned that the easement, by itself, did not adequately protect the water main. In a May 20087 email to Mr. Allen, a City engineer confessed that “We have no idea of the condition of the pipe as there was no inspection or test reports provided to us”. Neither the City nor the original manufacturer of the water main had any shop drawings or as-built information. At trial, Ms. Rose testified that there was not even any technology available at the time that City engineers could have used to assess the condition of the water main. The City had no risk assessment plan and no contingency plan in the event of a breach.
[149] On June 16, Charlesfort submitted a series of questions from its liability insurer to the City. In his response, Mr. Leblanc estimated that, even if the flow of water in the water main could be interrupted temporarily during excavation, a large quantity of water would remain in the three kilometre section between the shut-off valves. If this pipe were breached, there would be no way to control the release of this water. This would present a serious health and safety issue.
[150] Two weeks later, Mr. Casey received a report from Bob Wingate, an engineer retained by Charlesfort for advice on the water main issue. Mr. Wingate was of the view that, notwithstanding the Allen report, the risks of breaching the pipe during excavation were too great. He calculated that, if the water main sheared completely, 375,000 gallons of water per minute would flow out for a total of 45,000,000 gallons in a two hour period. He recommended moving the underground garage back from the lot line.
[151] On July 4, 2008, the same day he got Mr. Wingate’s report, Mr. Casey advised the City that Charlesfort had decided to move the underground parking structure back from the northern lot line.
[152] I find that Charlesfort in fact had no real choice but to redesign the parking garage to create space between the underground structure and the water main. Mr. Casey testified that, even after the Allen report was received, the City continued to stall on the approval of the site plan application. The contracts Charlesfort had signed with purchasers of condominium units did not permit Charlesfort, as a practical matter, to wait until late 2009 to begin construction. Even if it did, and even if the flow of water could be turned off temporarily when excavation began, the risks associated with a potential breach remained unacceptably high if the garage were built right to the lot line.
[153] Ms. Rose was, at the time, the manager of drinking water systems for the City. She testified at length about the potential consequences of a breach of the water main. She agreed that any water main that was over fifty years old, and any water main that was four feet or larger, would attract a “high level of concern”. Based on her testimony as a whole, I conclude that she would not have been comfortable signing off on site plan approval for the Continental if Charlesfort had not agreed to move the garage away from the lot line.
[154] On September 15, 2008, Charlesfort submitted revised drawings for the underground garage. They provided a distance of 17 to 19 feet between the water main and the below grade structure.
[155] On September 28, 2008, Charlesfort signed a site plan agreement with the City and, on this basis, received an excavation permit and site plan approval. The plan attached a schedule that imposed special conditions as a result of the water main. Charlesfort agreed to adopt the methodology and monitoring set out in the Allen report, and to cease all work if vibration levels were exceeded for more than a momentary period. It also had to maintain liability coverage of $25 million during construction, and commit to reimburse the City for any emergency repairs resulting from any negligent acts. The City reserved the right to issue a stop work order in the event of an incident that would adversely affect the safe drinking water supply. This could include a leak or a failure of the water main or a failure of one of the City’s water purification plants.
[156] The excavation process took much longer than usual, lasting from October 2008 to August 2009. A building permit was issued for the Continental on July 10, 2009. The project was completed on November 2, 2011, roughly two years later than Charlesfort had expected.
E. EXPERT EVIDENCE ON THE REZONING PROCESS IN 2004-05
[157] Four experts provided opinion evidence at trial on the considerations that a municipality such as the City take into account on an application for site-specific rezoning and on an application for site plan approval, and the standard practices of applicants for zoning and site plan approval at the relevant time. I have already referred to some of their evidence, but will now consider it in greater detail and comment on the weight I give to it.
Peter Smith
[158] Charlesfort called Peter Smith, a land use planner. Mr. Smith has worked as a planner since 1979. He has focussed in particular on residential redevelopment over the last fifteen years. Mr. Smith has spent most of his career in Toronto but has been involved in projects in Ottawa. He has been involved in well over one hundred site-specific rezoning applications and has been qualified as an expert at the OMB over 400 times.
[159] Mr. Smith was an impressive witness. He had significant experience with urban infill projects like the Continental. Of all the planners who testified, he was the most knowledgeable about below-grade setbacks. His explanation of the rationales underpinning good planning processes was cogent and consistent with a common sense reading of the PPS.
[160] Mr. Smith testified that municipalities customarily identify existing infrastructure in proximity to a site for which rezoning is sought, and consider whether it calls for any restrictions or limitations on the use of the property. Relevant infrastructure is identified through the circulation process.
[161] In Mr. Smith’s view, the contents of the easement were directly relevant to Charlesfort’s rezoning application. City staff were obliged to consider if the proposed development would have an impact on infrastructure in the adjacent land, and to communicate any concerns to Charlesfort.
[162] Mr. Smith stated that, during its consideration of the rezoning application, the City’s planning department would have had to consider how Charlesfort proposed to provide parking. The proposed structures for achieving the City’s parking standards would have to be reviewed, and their compatibility with existing uses on the adjacent property would have to be assessed. The City would not have to decide precisely how parking would be provided, at the zoning stage. But the applicant would have to identify at least one feasible alternative for providing all of the parking required under the proposed zoning by-law.
[163] Based on the principles set out in the PPS and the City’s Official Plan as well as the principles of good planning, the time to consider the impact of the water main was during the rezoning discussion. A setback could only be imposed through a zoning by-law. The City could not revisit the issue at site plan approval. It did not have the means under the Act to do so. Revising the issue would furthermore undermine the certainty that is supposed to result from the zoning process.
[164] Mr. Smith testified that the water main was a particularly relevant consideration in this case because it was critical to the City’s water distribution system and, if breached, would result in a massive flood that could potentially endanger lives and require evacuation of local homes.
[165] Finally, Mr. Smith stated that, in his experience, developers expect that impacts arising from infrastructure such as the water main will be identified during the rezoning process. The whole point of getting a site-specific zoning by-law is to get a precise idea of what exactly can be built on the property. It would not be worthwhile going through the process otherwise. The rezoning process addresses not just financial viability but the overall viability of proposed redevelopment.
[166] In cross-examination, Mr. Smith acknowledged that Charlesfort could have sought site plan approval at the same time it sought rezoning. This would have given it absolute certainty that the Continental could be built as conceived. Mr. Smith added, however, that zoning alone should give a property owner significant assurance that development could proceed.
[167] Mr. Smith also admitted that the manner of construction and construction standards are not controlled by zoning. He nonetheless noted that anticipated construction impacts on neighbours are often a “huge” issue when redevelopment is proposed. These impacts are usually discussed at length during zoning, even though the practical steps to address the impacts is deferred to the site plan approval stage. The feedback given to Charlesfort by the City during the rezoning process on issues that were not directly relevant to zoning supports Mr. Smith’s testimony on this point.
Ted Fobert
[168] Charlesfort also sought, successfully, to have Mr. Fobert qualified as an expert in land use planning.
[169] Mr. Fobert also expressed the view, based on his experience as a planner in Ottawa, that the responsibility for identifying issues relevant to setbacks in the early 2000s lay with the City. At that time, developers were not expected or required to submit an engineering and infrastructure report when they applied for site-specific rezoning. He stated that this practice changed after 2006, when the Planning Act allowed municipalities to require a pre-consultation process.
[170] In Mr. Fobert’s view, the water main was a relevant consideration at the rezoning stage. The City was required to consider the risk to public safety if a water main of this size were breached. If this in turn meant that a below-grade setback was required, this would have affected the parking arrangements, which in turn could have impacted the height and density of the proposed development.
[171] I accept Mr. Fobert’s evidence about his experience as a planner in Ottawa at the relevant time and his expectations during the rezoning process. Having said this, I place less weight on Mr. Fobert’s opinion than Mr. Smith’s opinion. Mr. Fobert’s opinion was not as well supported as Mr. Smith’s and his explanation of the policy rationales for his views was less fleshed out. Mr. Fobert’s role as Charlesfort’s representative at rezoning also, in my view, affected his objectivity to some extent.
Murray Chown
[172] Murray Chown was called by the City to provide an expert opinion on land use planning.
[173] Mr. Chown has been a professional planner for thirty-five years. In the 1980s, he worked for the City and the regional municipality. In 1990, he joined Novatech, an engineering consulting firm. At Novatech, Mr. Chown has assisted in developing large new residential communities in eastern Ontario. He has also assisted developers with rezoning and site plan applications for large and small scale commercial and residential developments. His focus in more recent years has been on residential mixed used and infill development, following the City’s adoption of a policy promoting urban intensification. Like Mr. Smith, Mr. Chown has appeared frequently as an expert at the OMB, including thirty hearings in support of small scale residential infill projects in the City of Ottawa.
[174] Although Mr. Chown was generally a credible expert, I was unable to accept his opinion on a number of points. In my view, some of his views were inconsistent with a sound interpretation of the Act or the PPS. They appeared to be tailored to support the City’s defence as opposed to a coherent view of good planning principles. Mr. Chown was also not willing to concede obvious points in cross-examination. This led me to give less weight to his evidence and to prefer Mr. Smith’s evidence.
[175] Mr. Chown testified that City staff did not need to take the size or location of the Continental’s proposed underground garage into consideration during the rezoning application process. On a rezoning application, the City’s focus would have been on the surface height and density of the buildings that Charlesfort proposed to build. The water main was not a relevant consideration because it did not affect surface height or weight. What was going on below ground was not relevant to any question that the City’s planning department had to address at the zoning stage.
[176] Mr. Chown conceded that, had he worked in the City’s planning department in February 2005, he would have shared Mr. Leblanc’s note about the water main with Charlesfort. He stated, however, that this information would have had no effect on his recommendation on the proposed rezoning, because the water main would not have any practical impact until construction of the Continental got underway.
[177] In Mr. Chown’s opinion, furthermore, Charlesfort cannot complain about the City’s misrepresentations because the proximity of the water main did not prevent it from building the Continental altogether. It simply made it more expensive and challenging to build an underground garage. In Mr. Chown’s view, the economic viability or feasibility of a proposed development is not a factor that a municipality must consider at the zoning stage.
[178] In my view, Mr. Chown’s evidence relies on an untenably narrow view of the considerations that should inform the zoning process.
[179] The PPS identifies health and safety as a consideration in planning decisions. A zoning by-law that allows a property owner to build right up to the lot line ignores this, if the permitted construction risks rupturing an adjacent, large, critical, high-pressure water main. Even Mr. Smit eventually conceded, in cross-examination, that zoning decisions involve more than a consideration of height and density, and that safety issues should be flagged by the municipality to the extent that they realize that they exist.
[180] The PPS also encourages municipalities to have regard to the protection of critical infrastructure in their planning decisions. In his written report in December 2018, Mr. Chown acknowledges that the protection of infrastructure was a valid concern in the rezoning process. He issued a correction to his report in February 2019, but did not modify his opinion on this point. When he testified at trial, however, Mr. Chown testified that the PPS only protects infrastructure corridors, and not the infrastructure itself. This was also the view expressed by Mr. Smit and Mr. James. Mr. Chown’s unexplained and last-minute change of position caused me to question whether he was acting as an advocate for his client as opposed to a neutral expert.
[181] Appropriate density in any event cannot be considered without a consideration of where people will park. This is why the number and size of parking places are set through zoning by-laws. I conclude that, in considering a rezoning application, the municipality must turn its mind to whether the proposal to provide parking is compatible with existing infrastructure. Mr. Chown advocated for a zoning process that dispenses with any realistic appraisal of whether a proposed parking solution is feasible. His suggested approach flies in the face of the planning principles embodied in the PPS.
[182] Mr. Chown stated that the exact design of the parking garage is an issue that would ordinarily be considered at the site plan stage. He did not identify, however, any mechanism available at the site plan stage that would have allowed the City to limit the footprint of the Continental’s underground garage.
[183] Mr. Chown pointed out that there may be practical reasons why a property owner cannot build what a zoning by-law theoretically permits him to build. For example, a building may not be constructed within five metres of a power line, even if a site-specific by-law imposes no setback. This is a valid point. There is however an important difference between a power line and a water main. A power line is above ground and therefore visible. A water main is not.
[184] Finally, Mr. Chown suggested that the water main’s only impact was to make the construction of the Continental less profitable for Charlesfort. But a breach of the water main could turn off the taps for up to half a million City residents. It could produce flooding that would risk the health and safety of the people working and living in the vicinity. It could compromise the ability of the fire fighters and hospitals to do their jobs. In a worst case scenario, a breach of the water main could require the evacuation of hundreds of thousands of residents.
[185] Given the potential consequences of a breach of the water main, I do not accept Mr. Chown’s evidence that the only impact of the City’s failure to identify it during rezoning was the developer’s margins on the project. Both the City and Charlesfort had an interest in identifying and mitigating the risks associated with the water main. The question is whether, in light of these interests and other criteria that inform the proximity analysis, the City undertook to provide Charlesfort with information about the water main at the rezoning stage.
Peter Riddell
[186] Mr. Riddell is a professional engineer. He is the president of Novatech, the engineering-consulting firm for which Mr. Chown works. Novatech works with developers and municipalities, including the City.
[187] Mr. Riddell testified about what an engineer would do if it were hired by a developer prior to the acquisition of property for development. He was well qualified to provide evidence on engineering issues. I will deal with his evidence further below. For now, I will simply say that Mr. Riddell, as an engineer, could not provide much if any assistance on the standard knowledge or practices of developers like Charlesfort.
F. ANALYSIS OF THE ISSUES
(1) Did the City have a duty of care in 2004-05 to Charlesfort in the context of its application for site-specific rezoning of the Continental property in 2004-05? If so, what services and information did it undertake to provide to Charlesfort?
[188] I find that the City had a duty of care, in 2004-05, to provide Charlesfort with relevant information during the rezoning process. As a result, the City was required to take reasonable care to provide Charlesfort with accurate and complete information about municipal infrastructure in the adjoining property, to the extent that it was relevant to the proposed redevelopment for which rezoning was sought. The water main fell into the category of relevant municipal infrastructure in this case.
[189] In reaching this conclusion, I considered the following four issues:
(a) What are the applicable legal principles regarding the duty of care of a municipality?
(b) Did the City have an established duty of care in 2004-05 to provide accurate information about municipal infrastructure to an applicant for site-specific rezoning under existing caselaw?
(c) If not, should I conclude that a duty of care arises in this case?
(i) Did the parties have a sufficiently close and direct relationship to found a duty of care? If so, what was the scope of that duty?
(ii) Was Charlesfort’s injury a reasonably foreseeable consequence of the City’s negligence?
(iii) Are there any policy reasons for narrowing the scope of the duty or declining to impose it altogether?
(d) If I find that a duty of care existed, did it require the City to take reasonable care to provide Charlesfort with accurate and complete information regarding the water main during the rezoning application process?
(a) What are the applicable legal principles regarding the duty of care of a municipality?
[190] To determine whether the City had a duty of care to provide accurate information to a plaintiff, I must apply the principles set out by the Supreme Court of Canada in Livent.[^13] In Livent, the Court clarified the two-stage analysis known as the Anns test.[^14]
[191] In the first stage of the Anns test, the court must consider whether a duty of care could exist between the parties. If a prima facie duty of care is established, the court goes on to the second stage of the test and considers the policy implications of imposing a duty of care on the defendant. In the second stage, the court must assess the implications of the proposed duty for the defendant’s potential legal liability beyond the circumstances of the case at issue. If the court concludes that a duty of care would give rise to unacceptably broad liability, it may decline to impose it or may limit its scope, either by construing it narrowly, by limiting the groups of persons to whom it is owed, or by limiting the damages that would flow from a breach of the duty.
[192] The Court’s analysis in Livent clarified what a court must consider in the two stages of the Anns test. In its 1997 decision in Hercules Management, the Court had held that the first stage of the test was satisfied so long as there was proximity between the parties.[^15] To establish proximity in the context of a negligent misrepresentation claim, a plaintiff had to show that the parties were in a special relationship such that (1) the defendant should have reasonably foreseen that the plaintiff would rely on its representation, and (2) the plaintiff’s reliance was reasonable in the circumstances. Based on the analysis in Hercules Management, establishing proximity was relatively straightforward. The more complex analysis – considering whether the proposed duty of care opened the door too wide from a policy perspective and, if so, how the duty should be limited as a result – was left to the second stage.
[193] In Livent, the Supreme Court held that the first stage of the Anns test required a more robust proximity analysis. Only a sufficiently close and direct relationship can give rise to the necessary degree of proximity between the parties required to ground a prima facie duty of care. Proximity is based on the parties’ expectations, representations, reliance and interests, as well as any statutory obligations.[^16] In a claim against a government actor, proximity may arise explicitly or implicitly from a statutory scheme, or from interactions between the claimant and the government, or a combination of the two.[^17] In cases of pure economic loss arising from negligent misrepresentation, the court must in the end consider what, if anything, the defendant undertook to do for the plaintiff.[^18]
[194] Using the Livent proximity analysis, a court must not only decide whether the parties’ relationship was sufficiently proximate to give rise to a duty of care, but determine the scope of the rights and duties that flowed from that relationship. An undertaking to provide information or services does not imply an unlimited duty of care. A plaintiff may only reasonably rely on representations and services that fall within the scope of the undertaking and, in particular, the purpose for which the undertaking was made.[^19] The defendant has no duty of care with respect to service and representations that fall outside this scope, and therefore no liability if they are negligent.
[195] If the court determines that a sufficiently close and direct relationship existed between the parties, the court must then consider whether the defendant could reasonably foresee that its negligence would cause the kind of injury suffered by the plaintiff. The foreseeability analysis is tied to the proximity analysis. The reasonability and foreseeability of the plaintiff’s reliance are a function of the parties’ relationship and the nature of the defendant’s undertaking. Since a plaintiff may reasonably rely on the defendant to act with reasonable care only for the particular purpose of the defendant’s undertaking, only the injuries it incurs as a result of this reliance are foreseeable.[^20]
[196] In the foreseeability analysis, a court should consider whether the defendant knew the identity of the plaintiff or the class of plaintiffs who would rely on its representations. It should also consider whether the plaintiff’s injury flows from the transaction in respect of which the defendant’s allegedly negative statement was made.[^21]
[197] Using the Livent framework, the second stage of the Anns test focusses on the impact that recognizing a duty of care could have on other legal obligations, the legal system and society more generally.[^22] The court should in particular consider whether the law already provides a remedy to the plaintiff, whether the proposed duty of care could give rise to indeterminate liability to an unlimited class, and whether there are other broad policy reasons not to recognize a duty of care in the circumstances.
[198] If a duty of care has not already recognized in a way that satisfies the more rigorous, post-Livent approach to the first stage of the Anns test, then the court must conduct its own analysis of proximity and reasonable foreseeability. Livent does not require courts to revisit all past decisions recognizing the existence of a duty of care. If a previous case has already established the existence of a duty of care or an analogous duty on the part of a defendant, a court will not necessarily need to conduct a new proximity assessment.[^23] The Court cautioned, however, that courts should not simply assume that a duty of care exists because the parties are the same as those involved in an earlier case. A finding of proximity requires the examination of “the particular relationship at issue in each case”. [^24]
(b) Did the City have an established duty of care in 2004-05 to provide accurate information about municipal infrastructure to an applicant for site-specific rezoning?
[199] Charlesfort argues that the City has a duty of care based on the Ontario Court of Appeal’s 1998 decision in Lakefield (Village of) v. Black.[^25] I conclude otherwise. Although the Court in Lakefield considered many of the circumstances relevant to a duty of care in this case, its proximity analysis was not as stringent as Livent now requires it to be.
[200] Lakefield arose after the Ontario Ministry of Municipal Affairs approved a draft plan of subdivision on property in the Village of Lakefield. During this approval process, the Ministry circulated the draft plan to various agencies, including the Village. In its response to the Ministry, the Village advised that water could be supplied to the proposed subdivision and that the plan was not premature.
[201] Following the Ministry’s approval of the draft plan, Black purchased the property so that he could build a new subdivision on it. He later discovered that the Village’s response to the Ministry’s circulation was inaccurate: it had long-standing problems with its water distribution system and had been advised by its own staff and planning consultant that no further subdivision should occur until they were resolved. Black could not proceed with the planned subdivision. He sold the property at a loss, and sued the Village for negligent misrepresentation.
[202] The Ontario Court of Appeal upheld the trial judge’s decision that the Village owed Black a duty of care, that its representations about the water supply had been negligent and that it must compensate Black for his lost investment. Applying the first stage of the Anns test as formulated in Hercules, the Court concluded that a prima facie duty of care arose because Lakefield ought reasonably to have foreseen that Black would rely on its representations. It relied in particular on Lakefield’s special knowledge of the circumstances and its formal response to Ministry’s request for information. The Court held that there was no policy reasons militating against the imposition of a duty of care. Those who might rely on the representation were a limited group and the representation was made for the very purpose of facilitating the subdivision of the property.
[203] The situation in Lakefield parallels the situation in this case in many important ways. I conclude, however, that I cannot impose a duty of care without conducting my own analysis based on the principles set out in Livent. The analysis in Lakefield focussed on foreseeability instead of proximity. It did not take into account all of the elements that a robust proximity analysis now requires. I likewise cannot assume duty of care in this case based on other pre-Livent decisions where municipalities have been held liable by Canadian courts for providing incorrect or misleading information.[^26]
[204] This does not mean that a duty of care would not be found today on the facts in Lakefield. As the Court of Appeal noted recently, however, courts must be careful about imposing a duty of care based pre-Livent caselaw.[^27]
(c) If not, should I conclude that a duty of care arises in the circumstances of this case?
[205] Applying the roadmap set out in Livent, I must consider two issues in the first stage of the Anns test:
(i) Is proximity established, that is, did the parties have a sufficiently close and direct relationship to found a prima facie duty of care?
(ii) Based on this proximity analysis, was an injury to Charlesfort a reasonably foreseeable consequence of the City’s negligence?
[206] The first stage proximity analysis requires me to consider the evidence on the parties’ expectations, reliance, representations, interests, and statutory obligations. Ultimately I must determine what services and representations, if any, the City undertook to provide to Charlesfort within the rezoning process such that it was reasonable for Charlesfort to rely on the City’s undertaking and an injury to Charlesfort was a foreseeable consequence of a breach of that undertaking.
[207] If I conclude, on the basis of the first stage of the Anns test, that the relationship between the parties gave rise to a prima facie duty of care, I must move to the second stage of the test. In this stage, I must consider if there are any policy reasons to decline to impose a duty of care or narrow it in some way.
(i) Did the parties have a sufficiently close and direct relationship to found a duty of care? If so, what was the scope of that duty?
[208] Having considered the evidence on the parties’ expectations, representations, reliance, and interests during the processing of Charlesfort’s rezoning application, and having also considered the applicable statutory and policy framework at the time, I conclude that the City and Charlesfort were in a relationship of proximity sufficient to give rise to a potential duty of care, and that the scope of this relationship extended to the City taking reasonable care to provide Charlesfort with information material to the proposed redevelopment of the property.
[209] The City argues that it never undertook to do anything for Charlesfort, because the Planning Act did not require it to do anything, and it never explicitly told Charlesfort during their interactions that it would identify adjacent below-grade critical infrastructure that might have an impact on the proposed development or that it guaranteed the accuracy of its representations. Alternatively, it argues that the scope of any duty to Charlesfort is limited to the comments it collected during the circulation process, and does not extend to other information in its possession about the water main.
[210] A municipality’s duty of care is not limited to what it is explicitly required to do pursuant to statute or to what it explicitly tells an applicant for rezoning that it will do. If the analysis of a defendant’s duty of care involved nothing more than these considerations, courts would not need to engage in the lengthy proximity analysis set out in Livent and other cases. That analysis presupposes that an undertaking may be inferred, in appropriate circumstances, on the entirety of the parties’ conduct, representations, practices and policies.
[211] Having reviewed all of the relevant evidence, I find the following points to be particularly relevant to whether the City undertook to provide any information to Charlesfort during the rezoning process and, if so, the scope of that undertaking:
• The City was providing services for a fee. The City charged a $3000 fee for processing and reviewing the rezoning application.
• The scheme of the Act placed the onus on the municipality, rather than the applicant, to obtain information relevant to proposed rezoning. During the period that the City considered the rezoning application, there was no pre-consultation process for site-specific rezoning. Pursuant to the Regulation, an applicant was required merely to submit a sketch noting the location of natural and artificial features on adjacent land which, in its opinion, could affect the application. Under the Act, it was the City that was required, through the circulation process, to obtain feedback from external and internal stakeholders.
• The City’s practice at the time permitted it to identify any existing infrastructure that could have an impact on construction, whether it belonged to the municipality or to a third party. The City gave notice of rezoning applications to third party owners of pipelines running within 200 metres of property for which rezoning was sought. The City also gave notice to engineers in its water departments. The purpose of this notice was to identify issues that would arise as a result of the proximity between existing municipal infrastructure and proposed redevelopment. Mr. James testified that he would expect engineers and third parties to identify any safety issues at the zoning stage.
• As part of its consideration of the rezoning application, the City had to consider whether Charlesfort had plans to provide an adequate amount of parking, and that its plan to do so was broadly feasible. I accept Mr. Smith’s evidence that the City’s planning department was required to consider whether the underground parking garage could provide the parking that was required pursuant to the proposed rezoning.
• On a proper interpretation of the PPS, in making planning decisions, the City had to have regard to the policy of avoiding development that gave rise to risks to public health and safety or to critical infrastructure. The rezoning decision was a planning decision. The City’s planning department therefore had to have regard to the policies set out in the PPS in determining whether to support the rezoning proposed by Charlesfort. It had to take reasonable steps to “get it right the first time” and to avoid risks both to the public health and safety of local residents and to the security of the water supply. This required it to be aware of any municipal infrastructure in close proximity to proposed development, to the extent that the development gave rise to any serious risk.
• Any breach of the water main presented a serious risk to health and safety and to the security of the City’s critical infrastructure. Witnesses described a potential breach of the water main as “catastrophic” and “devastating”. The City had not inspected the water main since its installation and were unsure of its condition. At trial, Ms. Rose testified that there was no technology available at the time that would have permitted the City to assess the condition of the pipe. According to Mr. Leblanc, a breach would affect 476,151 residents and take five to seven days to repair. A full water ban would have to be put in place within one to three days if the breach took place during summer, when demand is high. There was no City response plan in place in 2008.
• Throughout its consideration of the rezoning application, the City’s planning department knew that Charlesfort proposed to build a two-storey underground garage right up to the northern lot line of the property. The plans submitted by Charlesfort as part of the rezoning application included the construction of a two-storey underground garage right up to the lot line. As a result, critical municipal infrastructure right next to the property was relevant to the planned development.
• Charlesfort and the City both had an interest in knowing, when the application for rezoning was in process, whether the development could proceed as planned. Charlesfort’s interest was knowing whether there were any impediments to its plan to build a high-rise condominium tower on the property. The City’s interests were much wider. It had to ensure that the proposed development was consistent with good planning principles.
• The City could take steps to mitigate the risk presented by existing infrastructure at the rezoning stage, but not at the site plan stage. If existing infrastructure was incompatible with proposed redevelopment or gave rise to unacceptable health and safety risks, the City had the power under the Planning Act to seek to make rezoning subject to a below grade setback or to put a hold on development. The City had no such powers at the site plan stage.
• The City’s planning department did not ask Charlesfort to take any steps to investigate the easement or advise it that it was responsible for doing so. Mr. Casey testified that the City never asked Charlesfort for any information or studies with respect to the easement. There is no evidence that Mr. James or Mr. Smit or anyone else at the City ever told Charlesfort that it should conduct its own investigation of the easement or that it was responsible for any risk associated with the City’s infrastructure.
• The City had information about the municipal infrastructure that Charlesfort did not have and could not obtain through publicly available sources. In 2004-05, City staff and engineers knew the size of the water main and understood its role in the municipal water system as a whole; they knew that the water main and its shut off valves had never been inspected and that their condition was unknown; and they knew about ongoing and planned upgrades to municipal infrastructure that would prevent any temporary shutdown of the water main for several years.
• The City’s own water departments identified the size and location of the water main as relevant information at the rezoning stage. Engineers in the City’s water departments flagged the water main’s size and location as a relevant consideration when asked for input on the rezoning application in February 2005. Mr. Leblanc and his colleagues expected that the information would have been shared with Charlesfort, so that it could take the water main into account in the rezoning process.
• The parties expected that any information that the City obtained during the circulation process would be shared with the applicant. As acknowledged by Mr. James and Mr. Smith, any comments received as a result of circulating a summary of a rezoning application were ordinarily communicated back to applicants, even if they were not directly relevant to rezoning. For example, Mr. James provided Charlesfort with all of the feedback he received from the approvals division as a result of the circulation process in early 2004, even though all of the comments related to steps that Charlesfort would not have to take until the site plan approval stage.
• Had the size and location of the water main been communicated to the City’s planning department, they would have passed this information on to Charlesfort. Mr. James and Mr. Smit admitted that, had Mr. Leblanc’s note been forwarded to them, they would have provided it to Charlesfort even if, in their view, it was not directly relevant to zoning.
• Developers applying for site-specific rezoning generally relied on the information provided by City planners. According to Mr. Smith, whose testimony I accept, developers assume that the information provided by municipalities during the rezoning process is accurate and rely on it. In the absence of any indication from a municipality of concern about the compatibility of existing infrastructure with the use for which site-specific rezoning is sought, developers typically proceed with the purchase of property acquired subject to obtaining rezoning approval.
[212] The evidence with respect to the reaction of engineers in the City’s water departments to the proposed development in February 2005 and again in late 2007 provide particular insight into the expectations of the parties, the relevance of information about the water main to all planning decisions, and the City’s interest in taking it into account during the application for rezoning.
[213] In February 2005, just prior to the Planning Committee meeting, Mr. Leblanc mentioned the water main in his response to Mr. Aqiqi’s eleventh hour request for information about how the new high-rise would be connected to the municipal water system, and whether there were any issues with storm and water services at the site. The water main was not directly relevant to the City’s ability to provide water and sewer services to the proposed high rise; it supplied water to a municipal reservoir, and would never be connected directly to pipes flowing into a specific site. Mr. Leblanc testified that he mentioned the water main as a “word of caution” because of its proximity to the northern boundary of the site.
[214] Mr. Leblanc testified that he expected Mr. Rampersad to send the note about the water main back to Mr. Aqiqi, who would presumably have more information about the proposed development than he did. He also expected that both Mr. Rampersad and Mr. Aqiqi would have understood that a 1220 mm water main is a major water main, and that they would take it into account in dealing with the development proposal.
[215] Mr. Rampersad did not testify at trial. Asked by way of undertaking at discovery why he included Mr. Leblanc’s note about the water main in his email, he said he did so “to ensure/reinforce that all connected with the file were aware of its existence to ensure that appropriate measures could be taken to maintain the integrity of the main and its corridor during the development phases.” Based on the evidence at trial, I understand that the “appropriate measures” that could be taken would have been requiring a setback for the underground parking garage or a hold on the development. These were measures that could only be taken at the rezoning stage.
[216] At trial, Ms. Carkner was not asked why she included Leblanc’s note about the water main in her response to Mr. Aqiqi on February 20, 2005. I infer that she, like Mr. Leblanc and Mr. Rampersad, thought the information was relevant to the City’s decision on the proposed development.
[217] Mr. Leblanc testified that, when he raised the issue of the water main, he did not know that the developer was planning to build an underground garage on the site, or whether the query related to a rezoning request or a site plan request. Mr. Rampersad’s answer, which refers to development “phases”, also implies that the water main would have to be taken into account in all planning decisions. It indicates that, from the perspective of the city’s water departments, the water main was a feature that would have to be taken into account in any development of the property and during both the zoning and site plan approval processes.
[218] As mentioned in my discussion of the parties’ interactions, Mr. Aqiqi did not forward Ms. Carkner’s email to the planning department. As a result, the water main’s location and size were not shared with Charlesfort in February 2005, and Charlesfort did not incorporate this information into its application for site plan approval.
[219] On September 18, 2007, Charlesfort’s site plan application was circulated to Ms. Carkner, Mr. Rampersad and others for their comments. In response, Mr. Rampersad forwarded the email that Ms. Carkner had sent to Mr. Aqiqi on February 21, 2005, including the observation from Leblanc about “a 1200 mm transmission main located just north of this property”. He asked the approvals division to “let us know if the submission has addressed the water resources issues identified”. Mr. Rampersad’s email shows that he expected that the comments provided over a year earlier by the City’s engineers would have been passed on to the property owner at that time.
[220] Given the parties’ expectations, representations, reliance, interests, and statutory obligations, I conclude that they had a sufficiently close and direct relationship to give rise to a duty of care. On receipt of a rezoning application and accompanying fee in 2004-05, the City implicitly undertook, at the very least, to transmit the comments it obtained during the circulation process back to the applicant. This means that it was required to take reasonable care in obtaining comments on the proposed rezoning from internal and external sources, and in sharing those comments with the applicant.
[221] In my view, however, the City’s duty of care to applicants for rezoning in 2004-05 went beyond merely transmitting any comments received during the circulation process. The Supreme Court held in Livent that the proximity analysis must inform the scope of the duty of care. The narrow scope proposed by the City does not do so. It ignores the reasons why the City undertook the circulation process, the reasons why the water main was a relevant consideration at the zoning stage and the interests of both parties in identifying its impact. It also ignores the availability of relevant information to the City and its unavailability to Charlesfort.
[222] Based on the relationship between the parties, the City did not have a duty to analyze the feasibility of all of Charlesfort’s plans for development of the Property as part of its consideration of the rezoning application, or to consider the impact of planned upgrades to the water system. This would place an undue burden on the City. It would also be inconsistent with the principle that a party cannot be bound to provide anything beyond the information in its possession. The City was however required to take reasonable care to collect the information in its possession that related to the basic compatibility of the water main to the proposed rezoning and to communicate this information to the applicant.
[223] As a result, I find that the City undertook to tell Charlesfort not only about the existence, location and size of the municipal infrastructure such as the water main, but to advise if it played a critical role in the municipal water supply and whether the City had any knowledge of its condition.
(ii) Was Charlesfort’s injury a reasonably foreseeable consequence of the City’s negligence?
[224] In the circumstances of this case, 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, due to the negligence of its employees, those representations were inaccurate or incomplete.
[225] In 2004-05, the City’s rezoning application process placed the onus on its own staff to collect comments on the proposed development from interested stakeholders and to transmit this information back to applicants. There was no pre-consultation process as there is today. Developers did not typically hire engineers to meet with City officials at the zoning stage. Applicants for rezoning were not required, as part of the process at the time, to state that they had conducted any investigation into the infrastructure in the property or in adjacent property. They at most had to disclose any knowledge they had about natural or artificial features which, in their opinion, could affect the proposed redevelopment.
[226] Despite Charlesfort’s clear willingness to engage with the City and to investigate issues that could impact the proposed rezoning, neither Mr. James nor anyone else at the City ever suggested to Charlesfort that it should retain an engineer to investigate the infrastructure in the property or in adjacent property. Subsection 34(10.1) of the Act required Charlesfort to provide certain prescribed information. No one at the City ever told Charlesfort that the information that had been provided in support of the application was inadequate, or directed it to add information to the drawings it filed in support of it.
[227] 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 of the property. If the City failed to tell Charlesfort about a feature in the property or the adjacent property that would prevent it from building the garage as planned, it was foreseeable that this would cause damage to Charlesfort, in the form of increased construction costs, lost profits and delay costs.
[228] In these circumstances, the City could reasonably foresee that Charlesfort would rely on the accuracy of information about the easement provided by City staff, and that Charlesfort would suffer a loss if that information was inaccurate.
(iii) Are there any policy reasons for narrowing the scope of the duty or declining to impose it altogether?
[229] I find no compelling policy reason to limit the City’s duty of care to Charlesfort.
[230] The City argues that its representations to Charlesfort should be insulated from review because they involved core policy decisions. It relies on caselaw where courts have held that such decisions do not attract liability towards those who suffer damages as a result of them.
[231] In my view, this caselaw does not support the City’s position, because the City’s misrepresentations in this case did not involve core policy decisions.
[232] In the Imperial Tobacco case, the Supreme Court of Canada distinguished between government decisions that involve the exercise of policy and operational decisions. “Core policy” decisions are decisions “as to a course or principle of action that are based on public policy considerations, such as economic, social and political factors”.[^28] They do not give rise to a private law duty of care.
[233] The Court in Imperial Tobacco held that Health Canada’s alleged representations to cigarette manufacturers about the design of their products did not give rise to a duty of care towards them. The representations at issue were part of a government policy to encourage smokers to switch to low-tar cigarettes. This was a “core policy” that involved social and economic considerations.[^29] Since the representations were matters of core government policy, they were not actionable.
[234] The principle that core policy decisions do not give rise to a private law duty of care is not a new one. It has been invoked to shield municipalities from tort liability in certain circumstances. The City relies in particular on two of these decisions, a 1970 Supreme Court of Canada case and a 2018 decision of this court. In these decisions, however, the courts were careful to distinguish, as the Supreme Court did in Imperial Tobacco, between core policy decisions and operational decisions.
[235] In Wellbridge Holdings, a developer had purchased property and begun to build on it. He abandoned the project after the zoning by-law that permitted it was struck down due to a technical irregularity.[^30] The by-law was declared invalid because the municipality departed from its established practice of giving notice to all interested parties of the public hearing at which proposed zoning would be considered. The developer sued the municipality, arguing that it failed to exercise reasonable care to ensure that it complied with the procedural requirements when enacting the zoning by-law.
[236] The Supreme Court of Canada rejected the developer’s claim. It held that a duty of care could not be imposed on a legislative body which, exercising its powers in good faith, enacts a law or makes a decision that is invalid due to procedural irregularities. It held that a rezoning application “did not bring the applicant in respect of his particular interest into any private nexus with the defendant, whose concern is a public one in respect of the matter brought before it”.[^31]
[237] In reaching this decision, the Court distinguished between decisions by a municipality which involve its legislative or quasi-judicial function, and decisions made at its “operating level”.[^32] Decisions regarding the organization of a public hearing clearly fell within the first category:
I cannot agree that the defendant in holding a public hearing as required by statute comes under a private tort duty, in bringing it on and in carrying it to a conclusion, to use due care to see that the dictates of natural justice are observed. Its failure in this respect may make its ultimate decision vulnerable, but no right of damages for negligence flows to any adversely affected person, albeit private property values are diminished or expense is incurred without recoverable benefit.[^33]
[238] As noted by the Supreme Court in Wellbridge Holdings, however, a duty of care to affected parties may arise “where a claim for damages for negligence is based on acts done in pursuance … of legislation or of adjudicative decrees”.[^34] It noted that a municipality has, for example, been held liable for negligently misrepresenting to a property owner that site-specific zoning permitted it to do something that was not in fact permitted.[^35] In the Windsor Motors case, the defendant municipality was liable because the municipal employee knew that the plaintiff was relying on his special knowledge when he sought the employee’s advice.
[239] The decision in Wellbridge Holdings accordingly does not stand for the proposition that a municipality’s actions with respect to zoning may never give rise to a duty of care to individual property owners. Whether a duty of care exists depends on the nature of the conduct under review and the interactions which give rise to the claim.
[240] The City argues that the circumstances giving rise to the claim rejected in Wellbridge Holdings – the failure to post notices of a public hearing on a rezoning application – are similar to the circumstances in this case. I disagree.
[241] In posting notices of a public hearing, the defendant in Wellbridge Holdings was fulfilling a duty to the public at large. To the extent that any private interests were engaged, the interests were those of stakeholders who did not get notice of the hearing. The posting of adequate notice was part of the defendant’s quasi-judicial or legislative functions; without it, the rezoning decision was not made in compliance with the rules of natural justice. The remedy for this failure was the ruling striking down the by-law.
[242] This is different than the situation giving rise to Charlesfort’s claim. Although the City’s planning department had to take policy considerations into account in deciding whether or not to support the proposed rezoning and in determining who had to receive notice of the rezoning application, the conduct at issue here are its interactions with Charlesfort. These interactions were not directly pursuant to any quasi-judicial or legislative functions. Charlesfort is not challenging the zoning by-law enacted in 2005 or claiming that there were procedural irregularities in its enactment. It is challenging City staff’s handling of its rezoning application and, more specifically, what staff did and did not tell Charlesfort during the eighteen months between the time Charlesfort conditionally purchased the property and its waiver of conditions eighteen months later.
[243] The second case relied on by the City is Danforth.[^36] The plaintiff Danforth acquired land and submitted a proposal for redevelopment, including a rezoning application, to the local municipality. After receiving feedback on the proposal through a circulation process, city staff advised Danforth that a five-metre easement would be required to accommodate the planned route for a new rapid transit line then under consideration. Danforth was unhappy with the prospect of an easement and withdrew its redevelopment proposal.
[244] Two years later, the city’s municipal council passed a resolution approving a plan involving a different route for the new light rail system. The new route meant that an easement on Danforth’s property was not required. Danforth sued the city for $53 million, the damages it allegedly incurred as a result of the lost opportunity to develop its property. It alleged that the city was negligent in failing to make a decision on the routing of the transit system in a timely way.
[245] Grace J. granted a summary judgment dismissing Danforth’s action. He held that the city’s decision about the routing of the transit system was a core policy decision rather than an operational decision.[^37] Relying on Wellbridge Holdings, Grace J. concluded that the consultation process with respect to Danforth’s redevelopment proposal was “an inextricable part” of this policy decision.[^38] Recognizing a private duty of care would furthermore open the door to indeterminate liability.
[246] What was at issue in Danforth was again different than what is at issue here. The plaintiff in Danforth was attacking the way in which the defendant municipality decided where to route its rapid transit system. That decision engaged “a multitude of interests and considerations” and Danforth was only one member of a “huge constituency” affected by them.[^39]
[247] Rezoning of property in established neighbourhoods may also affect a large constituency and engage a range of interests and considerations. But the 2005 rezoning decision, and the City’s overall policies with respect to infill development in the urban core, are not the focus of this lawsuit. Its focus is, to borrow the language of Wellbridge Holdings, “acts done in pursuance” of a site-specific by-law amendment.
[248] In handling the rezoning application, staff within the City’s planning department, approvals division and water departments were working at an operational level. Collecting and transmitting external and internal feedback with respect to rezoning applications did not require them to make core policy decisions. The imposition of a duty of care here would in no way fetter the City’s discretion to make such decisions. The duty of care would simply require City staff to take reasonable care in their operations.
[249] The City’s position implies that its staff’s failure to tell Charlesfort about the water main was the result of a conscious policy not to deal with below-grade infrastructure prior to the site plan stage, or represented a choice made by the City in the development of its core policy. The evidence does not support this argument.
[250] Mr. James and Mr. Smit did not neglect to tell Charlesfort about the water main because they decided that it did not have implications for the rezoning decision, or because the City had a policy of not sharing information about subsurface infrastructure with developers. He and Mr. Smit neglected to tell Charlesfort about the water main because they did not realize that it was there. They did not realize it was there because they took no steps to verify the contents of the easement and because Mr. Aqiqi failed to forward Mr. Leblanc’s note to the planning department in February 2005.
[251] The proposed duty of care would be owed only to applicants for site-specific rezoning with respect to misrepresentations made to it by City staff during the processing of their application. Indeterminate liability to a larger group will accordingly not result from recognizing a duty of care in this case.
[252] Charlesfort has no other remedy under the Act for the City’s failure to flag the water main at the rezoning stage. In order to recover damages, its only option is to sue the City.
[253] For all of these reasons, I conclude that there are no policy considerations that militate against recognizing a duty of care on the part of the City in the second stage of the Anns test.
(d) If I find that a duty of care existed, did it require the City to take reasonable care to provide Charlesfort with accurate and complete information regarding the water main during the rezoning application process?
[254] Based on the above analysis, I conclude that, during the processing of Charlesfort’s rezoning application in 2004-05, the City undertook to take reasonable care in providing it with information about a four-foot, high pressure water main right next to the lot line that had never been inspected and the condition of which was unknown. The scope of the City’s duty to applicants for site-specific rezoning did not extend to the identification of every piece of municipal infrastructure in adjacent property. It did however extend to information about the water main, given its incompatibility with the proposed parking garage, the major health and safety risks arising from a potential rupture, and the City’s unique possession of information relevant to assessing those risks.
(2) If the City had a duty of care that included providing accurate and complete information about relevant municipal infrastructure, were the City’s representations to Charlesfort about the contents of the easement negligent?
[255] I find that the City’s inaccurate statements and incomplete representations to Charlesfort about the contents of the easement were negligent, because City staff failed to take reasonable care in collecting all relevant information and in transmitting it back to Charlesfort.
[256] Throughout the rezoning process, the City’s planning department failed to take reasonable steps to verify if the municipal infrastructure contained in the easement running alongside the property was compatible with the proposed development. Mr. James erroneously assumed that the easement contained a trunk sewer. He admitted in cross-examination that he did nothing to verify if this understanding was correct, even after he received information that suggested that his assumption was wrong. He did not flag the easement as a potential matter of concern or warn Charlesfort that it should do its own investigation. Instead he actively misled Charlesfort by preparing a staff report that incorporated his unsubstantiated and mistaken belief that the easement contained nothing more than a sewer. Mr. Smit signed off on the report.
[257] Mr. James testified that, when he was assigned to manage the City’s handling of the rezoning application, he believed that the easement contained a trunk sewer. He did not explain, at trial, why he had this belief. He took no steps to verify, at the outset, if his understanding was correct, despite his ready access to the City’s information. He testified that he did not think that the contents of the easement were important at the zoning stage.
[258] In the summer of 2004, Mr. James received a letter from the Unitarians referring to “a sewer and water main easement that runs along the south side of our property”. Although this challenged his assumption about what the easement contained, he took no steps to inquire with engineers in the City to see if the information contained in the letter was accurate or, if not, what was actually in the easement. Whether or not it was reasonable for Mr. James to assume, at the outset, that the easement contained a trunk sewer, it was negligent for him not to verify whether this was correct, once he received the letter from the Unitarians suggesting otherwise.
[259] I find that, further to the City’s standard practices at the time, Mr. James should have shared the Unitarians’ letter, or the information in it, with Charlesfort. When Mr. James received internal feedback in response to his initial circulation of the proposed rezoning in February 2004, he passed on all comments he received to Charlesfort, even though none of the comments received required any action unless and until it applied for site planning approval. According to Mr. James and Mr. Smit, sharing all comments received during the circulation process was the planning department’s standard practice. The Unitarians’ letter was such a comment. Mr. James did not however advise Charlesfort about the statement in the letter or provide its representatives with a copy of it.
[260] On October 28, 2004, Mr. James met with FoTenn to discuss the proposed rezoning. I find that he told Mr. Fobert at this meeting that the easement contained a trunk sewer as opposed to a water main, even though he had taken no steps to verify whether his understanding was accurate, and even though the Unitarians’ July letter suggested that the easement contained both a trunk sewer and a water main. Mr. James’ representation at the meeting was negligent.
[261] The staff report was negligently prepared. It did not take into account everything that the planning department was required to consider and it contained inaccurate information about the easement.
[262] The February 9, 2005 staff report repeatedly referred to a 30 metre wide utility corridor or easement on the land immediately above the northern boundary of the property which, according to the report, accommodated “a City of Ottawa trunk sewer”. There is no mention anywhere in the report of any impact that the easement or its contents might have on the proposed development. In fact, the report argued that the easement was a factor that favoured the rezoning, because it created a distance between the new condominium tower and the buildings on the Unitarians’ land.
[263] The report contained a section entitled “Performance Standards”. At trial, Mr. James admitted that the performance standards that must be met at zoning include sufficient parking to meet the needs of the condominium tower residents and their visitors. The standards require not only enough spaces but that those spaces be a minimum length and width. Mr. James acknowledged that an applicant must meet these standards if it is seeking any change from the existing by-law, as Charlesfort was here. Despite this, he maintained that he did not need to be concerned with how the developer actually proposed to provide parking at this stage or whether the proposed plan was realistic. As a result, in his report he did not mention any performance standards for parking aside from the number of spaces that Charlesfort proposed to provide.
[264] Both the report and the staff recommendation that rezoning be approved presupposed the construction of the underground parking garage. The garage was included in all of Charlesfort’s drawings. It was how Charlesfort proposed to supply the parking spaces required under the zoning by-law.
[265] The staff report did not refer to the PPS or the principles and policies set out in the PPS. At trial, Mr. James acknowledged that the PPS was in force at the time and the City was required to have regard to it in making decisions on rezoning. With respect to 3.1.1. 3, he said that it protects corridors for infrastructure as opposed to the infrastructure itself. In his words, “You have to make sure that there’s a place for the pipes”. He has come to this conclusion in reading the PPS in preparation for this case. I find that it was not in his mind in 2004-05. He simply did not consider the potential risks posed by the contents of the easement. The PPS required the City however to have regard to the protection of both the infrastructure and the corridors in which it was housed.
[266] Mr. Aqiqi’s failure to pass on comments from the City’s water departments to the planning department in February 2005 was negligent. No explanation for this failure was provided by the City beyond its argument that it was not strictly relevant to zoning considerations. I have already found that the information was relevant. Even if Mr. Aqiqi had considered that it was not, however, the City’s standard practice at the time was to share all feedback received internally to a rezoning application. Mr. Aqiqi’s failure to forward the information fell below the City’s own standards.
[267] Finally, the planning department was negligent in taking no steps to verify the contents of the easement after the Planning Committee meeting in February 2005. At his notes on the agenda for this meeting, Mr. James recorded observations by the Unitarians’ representative, Mr. Kent, about mistakes in the staff report. Mr. James crossed out the word “sewer” and written “City water main” and noted “8 m” in two places. He testified that these notes reflect either Mr. Kent’s comments during the meeting or his review of the Unitarians’ written submission.
[268] Following the meeting, Mr. James was asked by his manager to prepare talking points for a local councillor, who expected to get questions from constituents about the inaccurate information in the staff report. Mr. James’ draft memo refers to an eight metre easement along the northern boundary “for a City of Ottawa water main.”
[269] I find that, as a result of the Unitarians’ submissions at the Planning Committee meeting, Mr. James realized that the easement contained a water main rather than a trunk sewer. He did not however consider or investigate the possibility that the water main might have any impact on the proposed redevelopment, or advise Charlesfort that his earlier understanding of the contents of the easement was incorrect.
[270] Mr. James testified at trial that the water main was an issue that would be dealt with at the site plan stage, as opposed to the zoning stage. I find that this is an after-the-fact justification for his failure to turn his mind to the issue, as opposed to a reflection of his thoughts at the time. He did not fail to investigate the water main or have further discussions with Charlesfort about it because he thought it was something that would be dealt with at a later stage. He did not give any thought to the potential impact of the water main at all in 2004 or 2005. In the absence of any indication to the contrary, he assumed that the infrastructure at issue was a standard sized pipe in adjacent land that would not have any impact whatsoever on Charlesfort’s proposed redevelopment. Given his ready access to information about the water main and the risks it presented, this assumption was negligent.
[271] Mr. Smit testified that what Charlesfort proposed to build underground was not relevant at the zoning stage because it did not impact how the proposed development related to the “urban fabric” of the City. But the compatibility of a proposed development with the surrounding neighbourhood is just one consideration at the zoning stage. As Mr. James acknowledged, he expected that any safety concerns arising from the proposed redevelopment would also be identified.
[272] Charlesfort’s expert Mr. Smith testified that he had never seen an issue as fundamental as the water main identified for the first time at the site plan approval stage. In his view, it was reasonable for Charlesfort to have understood, in the absence of any indication from the City to the contrary during the rezoning process that no issues or concerns existed with respect to the compatibility of municipal infrastructure with the proposed high rise condominium development. I agree. The City’s internal communications in 2008 show that the engineers in the water departments fully expected that the location and size of the water main had been communicated to Charlesfort during the rezoning phase, and that they were dismayed to discover otherwise. Even Mr. James and Mr. Smit conceded that they would have told Charlesfort about the water main if they had themselves realized what the easement contained.
[273] Aside from the arguments I have already canvassed, the City contends that its failure to tell Charlesfort about the water main was not negligent for various reasons, which I will review in turn.
Defence #1: The damage was caused by the rezoning decision, not the misrepresentation
[274] The City argues that what Charlesfort is attacking in this lawsuit is not, in fact, the City’s failure to provide accurate information but its decision to permit zoning that permitted construction of an underground garage right up to the lot line of the Property. I have already addressed this argument in my discussion of the core policy/operations distinction in the second stage of the Anns test. The issue is not Council’s policy decision by way of the adoption of a new by-law in March 2005 but the operational negligence of City staff in the months preceding this decision.
Defence #2: The City had no way of knowing that the water main’s proximity presented a risk
[275] The City says that it only became aware of the vulnerability of its large water mains in November 2007, when the Woodroffe main, another water main in the west end of the city, ruptured. As a result of that failure, Council directed staff to prepare an assessment report, which it adopted in 2012.
[276] The City contends, more generally, that there was no way for it to know about the risks presented by the water main until its engineers looked into the issue in early 2008. They point to the complex calculations performed by Mr. Leblanc at that time with respect to the flow of water through the water main and Ms. Rose’s investigation of whether the relevant section of it could be temporarily shut down. In cross-examination, Mr. Walker, the project manager for the Continental, admitted that the City had to hire Mike Allen to assess the risks associated with excavating the property because it did not have this expertise in-house.
[277] The evidence shows that various individuals in the City were involved in determining how the risks presented by the water main could be addressed, and that Mr. Allen had to be retained for his expertise on mitigating the effects of vibration on ageing infrastructure. The evidence does not however support the City’s contention that it had no way of understanding the general level of risk presented by the water main until the site plan stage. The evidence of Mr. Leblanc in particular indicates that, on the contrary, the City had the internal engineering resources to assess the water main’s impact on the proposed development in February 2005, prior to the rezoning decision.
[278] No extensive analysis and consultation with outside experts was required for engineers in the water departments to realize that the water main was relevant to the proposed redevelopment. That is why Mr. Leblanc flagged it when he received Mr. Aqiqi’s email in February 2005, even though he did not have to refer to the water main to address how the Continental would be hooked up to the municipal water system.
[279] When engineers in the water departments learned in early 2008 that Charlesfort was going to excavate up to the lot line, they objected immediately. They did not wait until the City undertook a precise calculation of the flow of water, got an outside opinion on acceptable vibration levels during excavation, or completed an assessment report in 2012. They understood right away that construction right next to the water main would be very risky both in the short and long term. Just how dangerous it was, and whether the risks could be mitigated, were the subject of calculation, consultation with outside experts, and long discussions by engineers in the water departments. But the emails and meeting notes in early 2008 in no way suggest that the City engineers’ strong objections arose only in the wake of the 2007 rupture of the Woodroffe main, or that they were contingent on the outcome of further study.
[280] The drawings submitted with the rezoning application always showed a two-storey underground garage right up to the lot line. It was the proximity of the planned construction, as well as the risks of excavation, that the City’s engineers deemed too risky. Even if the short term risks associated with excavation and construction could be mitigated, they were uncomfortable with the long term risks arising from a building being erected within several feet of a critical, four foot wide, high pressure water main.
Defence #3: The City’s negligence would not necessarily have resulted in any damages to Charlesfort
[281] The City argues that, when Charlesfort sought rezoning, staff in the planning department had no way of knowing if and when it would actually proceed with the Continental project. Mr. Casey admitted that sometimes Charlesfort waited several years before developing property it had purchased. Mr. Chown testified that sometimes rezoning is sought for projects that never proceed.
[282] This argument fails because the water main was relevant to the City’s assessment of appropriate zoning for the property. The repercussions of the City’s negligence might not be felt until Charlesfort proceeded with the redevelopment. The City cannot however excuse its negligence by saying that Charlesfort could have decided, for reasons unrelated to the City’s actions, not to rely on its negligent misrepresentations.
Defence #4: Charlesfort could have suffered damages in the absence of any negligence
[283] The City points out that, when Charlesfort made its conditional purchase of the property in 2004, the zoning in place at the time had no underground setback. Charlesfort could therefore have applied for site plan approval for construction of an underground garage without seeking any rezoning. In that case, Charlesfort’s plans would have met with the same objections as its plans for the Continental in 2008.
[284] The existence of a hypothetical situation in which a plaintiff could suffer damages in the absence of the defendant’s negligence does not relieve the defendant of liability for damages caused by their actual negligence.
Defence #5: Below-grade setbacks are rare
[285] Charlesfort’s expert Mr. Smith admitted that below-grade setbacks are fairly unusual. Mr. James and Mr. Smit testified that they have never seen one.
[286] The rarity of this type of zoning does not mean that City staff can ignore their availability as a tool at rezoning stage. This argument also ignores the possibility that the planning department could have placed a hold on the development of the property pending the completion of further assessment of the risks presented by the water main or the completion of the upgrades to the City’s water systems in 2009.
[287] A problem arose here not because the City’s planning department lacked the tools, within the rezoning process, to address the risks posed by the water main. A problem arose because the water main was an unusual complication that no one in the planning department, or at Charlesfort, anticipated. In this action I must determine who, as between these parties, should bear that risk. I have done so by conducting a robust proximity analysis and by being mindful not to infer an undertaking on the part of a municipality that is unreasonable or that could give rise to indeterminate liability. This exercise has led me to conclude that the City undertook to take reasonable care to tell Charlesfort about relevant municipal infrastructure.
Defence #6: The easement protected the water main, so the City did not have to take any additional steps to protect it during the rezoning process
[288] Mr. Smit stated that, since the easement was already in place, City staff were not required to take any further steps to protect its contents at the rezoning stage.
[289] The evidence does not support this argument. The risks presented by most municipal infrastructure might have been addressed through the creation of a municipal right of way. But the risks presented by the water main were self-evidently not addressed through the mere existence of the easement. If that were the case, the City’s engineers would not have reacted as they did when Charlesfort applied for an excavation permit and site plan approval.
[290] As already noted in the discussion of the PPS, the existence of the easement did not liberate the City from any further consideration of health and safety risks or risks to infrastructure as a result of the proposed rezoning.
Defence #7: The water main was not relevant to zoning considerations
[291] The City relied on Mr. Chown’s expert evidence to the effect that the water main was not relevant to the assessment that had to be conducted at the zoning stage. It only became relevant at the site plan stage. It was therefore not negligent for the City to fail to communicate it.
[292] I have already indicated why I reject the premise of this argument.
(3) Did Charlesfort rely on the City’s negligent misrepresentations?
[293] I conclude that Charlesfort relied on the City’s negligent misrepresentations when it decided to waive conditions on the purchase of the property and proceed with the construction of the Continental on the site a 793 Richmond Road.
[294] The onus to prove reliance is on Charlesfort. Mr. Casey testified that, had the City’s planning department told him about the size of the water main in February 2005, or at any time prior to his waiver of conditions later that year, he would not have proceeded with the Continental project at that site. I accept this evidence.
[295] The City raises three challenges to Charlesfort’s contention that it relied on the City’s misrepresentations.
[296] First, the City argues that Charlesfort would not in fact have done anything differently, even if Mr. Casey had learned about the size of the water main in 2005. When Mr. Casey received Mr. Wu’s letter in October 2007, he did not react immediately. Charlesfort did not even hire its own engineering expert, Mr. Wingate, until June of the following year.
[297] I do not accept this argument. It is not supported by the evidence and assumes that the City’s only obligation was to tell Charlesfort about the existence and size of the water main.
[298] Mr. Casey testified that he was not immediately concerned when he received Mr. Wu’s letter, because he assumed that the water main was in the middle of the easement and therefore quite far from the lot line. In cross-examination, he admitted that he did not turn his mind to how wide the easement was in October 2007. He did not in fact appreciate the full significance of the water main until February or March 2008, when the City began to raise serious concerns about the risks it presented.
[299] In my view, Mr. Casey’s lack of any immediate reaction to Mr. Wu’s letter in October 2007 was understandable and does not undermine his assertion that he would have taken steps to investigate the water main if its size had been raised in February 2005. The evidence furthermore shows that Charlesfort took steps to assess the impact of the water main as it obtained information about the situation from the City’s engineers.
[300] The direction in Mr. Wu’s letter to “Show 48 inch water main north of site, including the easement” is item 8 in a list of eleven preliminary comments on Charlesfort’s application for site plan approval. There is nothing in the letter that indicates that the water main was particularly important or consequential. By the time he got Mr. Wu’s letter, Mr. Casey had been working on the Continental project for four years. During that entire period, no one from the City had raised any concern about the contents of the easement.
[301] On November 21st, 2007, a month after getting Mr. Wu’s letter, Charlesfort obtained a demolition permit for the Continental site. On February 11, 2008, Charlesfort sent a notice to condominium purchasers that it expected to have an excavation permit in the next 10-15 days and expected the excavation, shoring and pile installation phase would take one to two weeks to complete, with expected occupancy in summer 2009. The estimated schedule in the notice implies that, four months after Mr. Wu sent his letter, the City had still not communicated any serious concerns about the impact of the water main on the proposed development to Charlesfort.
[302] Notwithstanding the lack of any alarm raised by the City, the evidence shows that Charlesfort’s excavating contractor, Dufresne, took steps to investigate the impact of the water main following the receipt of Mr. Wu’s letter:
• On December 5, 2007, it asked the City for permission to use a hydro excavator to locate the water main in the easement.
• In this same letter, Dufresne asked for the City’s assistance in obtaining as-built drawings for the water main, as no such drawings had yet been found (and in fact never would be).
• In January 2008, after getting the City’s permission to find the water main’s exact location, Dufresne discovered that it was located within a few feet of Charlesfort’s property line.
• On February 27, 2008, Dufresne obtained an estimate from Explotech, a blasting specialist, to investigate the possible impacts of piling vibrations.
• In late February or early March, 2008, Dufresne submitted a new shoring plan to the City.
[303] Mr. Walker, Charlesfort’s project manager, testified that he became aware of a problem with the excavation plan in early 2008. Within a few weeks, he had obtained enough information to have a good grasp of Charlesfort’s options. On March 19, 2008, he sent Mr. Casey an email telling him that it would be necessary either to postpone the project until at least late 2009, or reduce or eliminate the second storey of the underground garage. This was two weeks prior to a formal meeting between Charlesfort and City officials on April 1st, 2008.
[304] Contrary to the City’s contention, the evidence shows that Charlesfort reacted promptly to Mr. Wu’s letter, despite the lack of any indication from the planning department in the letter, or over the four months that followed it, that there was a serious issue. The fact that Charlesfort did not immediately retain an engineer does not mean that it did nothing. Dufresne took steps to get more information about the water main and how its proximity might affect its excavation plan. Mr. Walker became involved. Within a relatively short time, even though it was not privy to the discussions by then taking place in the City’s water departments, Charlesfort came to the same realization as the City’s engineers had: it could not proceed with the development as planned. Based on Mr. Casey’s testimony, he hired Mr. Wingate because he was concerned about the mixed messages Charlesfort was getting from the City, and because he himself had become worried about whether building a garage right next to the water main could be done safely.
[305] It is more than a little ironic that the City is now critical of Charlesfort’s failure to react more quickly to the disclosure of the size of the water main, considering the failure of its infrastructure approvals division’s program manager to react to the note from the engineering group about it two years earlier, or even to forward it to the planning department. I would also observe that Mr. Wu himself appears to have done nothing to follow up on the water main until the City’s engineers formally objected to the issuance of an excavation permit to Charlesfort in February 2008.
[306] In any event, I have already found that the City’s undertaking to provide information to Charlesfort, in the context of the rezoning application, encompassed more than the existence and size of the water main. It was also obliged to take reasonable care to tell Charlesfort that the water main was a critical piece of the City’s infrastructure and that its condition was unknown. I cannot infer that Charlesfort would have failed to react meaningfully to the communication of all of this information in 2004-05, based on how it reacted to much more minimal information in October 2007, two years after the City had approved rezoning.
[307] The City’s second challenge to Charlesfort’s reliance claim involves its agreement to purchase the site. The City argues that, even if Mr. Casey had learned about the water main’s size and its possible impact on the Continental project in February 2005, he would not have had the legal right to back out of his agreement to purchase the property. The agreement was not conditional on Charlesfort ascertaining the location of municipal infrastructure but on the rezoning application being accepted.
[308] I find that, if Charlesfort had learned about the water main and its potential impact prior to April 22, 2005, under the terms of the February 17, 2004 agreement it could have refused to waive conditions. This would have meant that it renounced its $25,000 deposit, but it would not have been bound to proceed with the purchase. The closing date was further postponed due to the parties’ inability to address soil contamination issues. As of July 2005, Charlesfort’s option on the property had technically lapsed. It was revived when Charlesfort was able to reach a settlement with the Unitarians and the City with respect to the OMB appeal.
[309] I conclude that Charlesfort could, in fact, have declined to proceed with the purchase of the property had it learned about the water main and its implications for the construction of the Continental in 2005.
[310] Third, the City argues that Charlesfort decided on its own to reduce the size of the underground parking garage in July 2008. According to Mr. Smit, the City did not require Charlesfort to take this step. Once it obtained the Allen report, it was willing to discuss excavation right up to the lot line. Charlesfort cannot therefore claim that its reliance on the City’s misrepresentations caused its losses. Its losses were caused by its own decision to modify its development.
[311] I do not accept Mr. Smit’s evidence on this point. I accept Mr. Casey’s evidence that, as of the beginning of July 2008, Charlesfort concluded that it had no choice but to reduce the size of the underground garage. Mr. Smit’s position is at odds with the evidence of Mr. Leblanc and Ms. Carkner, who both admitted that they would have been put in a very difficult position if Charlesfort had not agreed to move the garage. It is also inconsistent with the tone and content of the City’s internal correspondence in the spring and summer of 2008. The engineers in the City’s water departments had concluded that building right alongside the water main was ill-advised.
[312] I therefore reject the City’s argument that Charlesfort’s losses were the result of a decision it made independently, as opposed to a decision that it was forced to make in the circumstances.
(4) Was Charlesfort’s reliance on the City’s representations reasonable? Even if Charlesfort’s reliance was reasonable, was it contributorily negligent?
[313] In Imperial Tobacco, the Supreme Court held that, in proving reasonable reliance on a misrepresentation, a plaintiff has to prove that it was reasonable for them to rely on the speaker’s statements as accurate. The plaintiff does not need to prove that it was reasonable to believe that the speaker was guaranteeing the accuracy of their statements.[^40]
[314] In my view, Mr. Casey’s reliance on the representations by the City’s planning department was reasonable. Mr. Casey expected that the City would advise him of any serious issues affecting the rezoning application. Neither Mr. James nor Mr. Smit ever raised any concern about the easement. Given the City’s practice of passing on information during the rezoning application process, and the myriad of other factors that inform the proximity analysis, it was reasonable for Charlesfort to rely on the City’s representations – or, in this case, lack of representations – as accurate.
[315] The City argues that Charlesfort was negligent in failing to conduct its own investigation of the easement before waiving conditions on the purchase of the Property. It argues that this made Charlesfort’s reliance on the City’s information unreasonable or, in the alternative, that Charlesfort is contributorily negligent for the damages it claims. This ignores the lack of publicly available information at the time as well as the standard practices of developers such as Charlesfort in the early 2000s.
[316] Charlesfort could have found out, through publicly available information, that the easement contained a water main rather than a trunk sewer. Information on the size of the water main and other information relevant to assessing its impact on the proposed development was not, however, readily accessible.
[317] As noted earlier, the plan that was filed with the rezoning application referred to both the easement and a valve chamber. A valve chamber was also mentioned on the new drawings prepared by the architect that Charlesfort retained prior to the OMB hearing in the summer of 2005.
[318] Charlesfort did a title search for the Unitarians’ property prior to waiving conditions on the purchase of 793 Richmond Road but did not obtain a copy of the instrument on registering the easement in 1973. This document stated that the Regional Municipality of Ottawa-Carleton had installed a water main on the property and the National Capital Commission, the owner of the property at the time, had granted an easement and the right to have access to it to “construct, maintain, inspect, alter and repair” the water main. The size of the water main, and its specific location in the easement, were not mentioned.
[319] Mr. Riddell, the engineering expert called by the City, testified that, had he seen the plan filed with the rezoning application, it would have been “immediately obvious” to him that there was a water main in the easement based on the reference to the valve chamber. As an engineer, he would have reviewed all existing information on infrastructure and topography on and around the property. He would have in particular obtained and consulted the City’s plans, a copy of which he had as a result of consulting work that Novatech had done for the City over the years. These plans show a 1220 mm water main in the easement constructed in 1959.
[320] The flaw in this argument is that it presupposes that Charlesfort should have the same practices and access to information as an engineer like Mr. Riddell. The evidence does not establish that it was standard practice for a developer such as Charlesfort to hire an engineer for the purpose of a rezoning application. Mr. Fobert testified that, in fact, it was unusual for a developer in this period to retain an engineer at the rezoning stage, unless an issue had been flagged by the City. Mr. James admitted that, in the early 2000s, some developers retained engineers to assist with rezoning applications but others did not. Charlesfort was not required to seek site plan approval at the same time it sought rezoning, nor is there evidence that this was the typical practice of developers like Charlesfort at the time.
[321] I conclude that it was reasonable for Charlesfort not to retain an engineer to assist with its rezoning application or to investigate the property it had conditionally purchased. The salient question is therefore not what a reasonable engineer such as Mr. Riddell might have done or known in 2004-05, but what a reasonable developer in Charlesfort’s position would have done or known.
[322] In my view, the City has not established that Mr. Casey, and by extension Charlesfort, were negligent in assuming that the easement contained a trunk sewer or small water main.
[323] Mr. Casey was not sure when he became aware of the easement in the property adjacent to the site he had conditionally purchased for the Continental project. He testified that he did not in any event have any concerns about it because he assumed, based on past experience, that it contained either a trunk sewer or a standard water main. A trunk sewer within a few metres of the property line would not have any impact on Charlesfort’s proposed development. Water flows through a trunk sewer due to gravity alone. If a trunk sewer is breached, this is a nuisance, but nothing more. Water that flows through water mains is subject to pressure, but the pipes are generally small. A standard water main in the neighbouring property would not present any particular challenge.
[324] In cross-examination, Mr. Casey admitted that he did not learn about Mr. James’ representation to FoTenn at the October 2004 meeting until sometime in 2013. He did not therefore rely on it. He was not even certain that he read the portion of the staff report that erroneously referred to a trunk sewer. He also did nothing to follow up on the statement by Mr. Kent, at the February 2005 Planning Committee meeting, that the staff report was wrong.
[325] In short, Mr. Casey assumed that, if the contents of the easement contained something that gave rise to serious risk or something incompatible with the proposed development, the City would have said something about it at the rezoning stage.
[326] The City did not call any expert evidence establishing the standard of care of a reasonable developer. The only developer who testified was Mr. Casey.
[327] There is no evidence that Mr. Casey had access to the City plans that Mr. Riddell referred to in his testimony. There is no record indicating that the size of the water main, or anything else about it, was mentioned at the Planning Committee meeting. The evidence of the City’s own engineers is that the vast majority of water mains in the City – 90% of them - are two feet wide or smaller. There is no evidence that the existence of 90% of the City’s water mains in an easement in adjacent property would be potentially problematic, from a developer’s perspective, or cause a reasonable developer to investigate the situation further.
[328] I do not find that the statement by Mr. Kent at the Planning Committee made Mr. Casey’s continued reliance on the City’s silence unreasonable or negligent. It was reasonable for Mr. Casey to assume that the City’s planning department had the most accurate and complete information about the easement. The City had never indicated that the easement contained a water main much less a large, critical, high-pressure water main. Neither Mr. James nor Mr. Smit followed up with Charlesfort after the meeting to let Mr. Casey know that Mr. Kent had in fact been correct. There is no evidence that the City advised Charlesfort about the size of the water main, or provided any other relevant information about it, prior to October 2007. In these circumstances, it was reasonable for Mr. Casey not to make any further inquiry about the easement.
[329] The City’s planning expert, Mr. Chown, testified that he would not rely on information passed on by a City planner. He would talk to his own engineers or to the City’s engineers. Mr. Chown has ready access to the engineers, such as Mr. Riddell, who work alongside him at Novatech. I have already concluded that developers such as Charlesfort did not, in the early 2000s, routinely retain engineers to assist with rezoning applications. I furthermore do not understand why Charlesfort would seek a conversation with the City’s engineers in 2004-05, given that the City’s planning department was already collecting their feedback through the circulation process.
[330] I conclude that Charlesfort’s reliance on the information it received from the City was reasonable and that its contributory negligence has not been established.
(5) Did Charlesfort suffer damages as a result of the misrepresentations and, if so, what were they?
[331] I find that Charlesfort suffered a total of $4,496,384 in damages and pre-judgment interest as a result of the City’s negligence. This is made up of three components: increased development costs, lost revenue, and lost interest.
(a) Increased development costs
[332] The parties reached a partial agreement on Charlesfort’s damages in the event that I concluded in its favour on the issue of liability. Further to this agreement, the City agreed that Charlesfort suffered damages of $3,000,000 in increased development costs for the Continental project as a result of the water main. These damages include costs arising from the City’s delay in issuing site plan approval and an excavation permit, additional construction costs, and increased financing costs.
(b) Lost revenue
[333] In the partial agreement on damages, the City also agreed that it would be liable for $221,384 in lost revenue on the sale of units and parking stalls as a result of the redesign of the underground parking garage in 2008.
(c) Lost profits or lost interest
[334] This is the only head of damages that the parties could not agree on. Charlesfort seeks the profit it would have made on other property it might have acquired, if its funds had not been tied up in the Continental project from 2008 to 2012. In the alternative, it seeks to recover the amount of interest it paid on its line of credit during this period. I conclude that the claim for lost profits is speculative but accept the claim for lost interest.
[335] A party who relies on a negligent misrepresentation may be entitled to recover an amount representing the additional revenue it could have earned had it not relied on the misrepresentation. The damages may be based on lost profits on an investment the plaintiff would have otherwise made or lost interest. To recover such damages, the plaintiff must prove how it would have used the money to which it would have had access, absent the defendant’s negligence.[^41]
[336] I will deal first with Charlesfort’s claim for recovery of lost profit, then with its alternative claim for lost interest.
[337] Charlesfort usually had two sites in development at any given time. One would be in an active construction phase. The other would kept on standby for the next project. This practice allowed Charlesfort to generate a steady income stream and a steady stream of work for its preferred contractors.
[338] Charlesfort had acquired the property for the Merit, the next project that it planned to undertake after the Continental was completed, when it applied for site plan approval. It says that, if the Continental project had proceeded on schedule, it would have purchased property in 2008 for its next project after the Merit. It could not do so, because it took on so much financing in connection with the Continental project that it could not get any additional loans for the purchase of more property while its construction was ongoing. If I accept this argument, Charlesfort seeks the increased value of the property it would have purchased from 2008 to 2012.
[339] I cannot accept this argument, because Charlesfort has not proved, on a balance of probabilities, that it would have acquired another property but for the City’s negligence.
[340] John Davis, Charlesfort’s Chief Financial Officer, testified that, if the company had not had $3 million tied up in the Continental project in 2008, it could have purchased another property to develop after that. He stated that Charlesfort might have been ready to market a new development on this new property in 2010, and actually construct it in late 2010.
[341] In my view, Mr. Davis’ evidence about what might have occurred is speculative. Neither he nor Mr. Casey identified any particular property that Charlesfort might have purchased in 2009, had it had funds available to do so.
[342] Mr. Casey testified that Charlesfort acquired most of its properties as a result of him spotting a site that, in his view, had a potential for development, and negotiating directly with the owner for its purchase. This is in fact how it acquired the property for the Continental project. Yet Mr. Casey did not testify about any site he found in 2007 or 2008 that Charlesfort could not buy due to the problems and delays in the construction of the Continental.
[343] Charlesfort relies on a report by John Comba, an appraiser. In his report, Mr. Comba provides an opinion on the average increase in value of properties in central Ottawa used for condominium apartment developments between January 1st, 2005 and December 31, 2011. There is however no evidence that Charlesfort ever took any steps to investigate the viability of a project on any of these properties, or that it even considered any of them as a potential project site.
[344] Since the evidence regarding Charlesfort’s lost profit on another property is speculative, I cannot award it damages for lost profits.[^42]
[345] If the court rejects the claim for lost profits, Charlesfort advances an alternative claim for lost interest. Using the standard prejudgment interest rate of 0.5% set out in s. 127 of Courts of Justice Act, Charlesfort would be entitled to prejudgment interest of $186,000 to $221,000. But Charlesfort contends that, were it not for the increased development costs and lost revenue it incurred from 2009 to the commencement of trial, it would have been able to pay down its line of credit and avoided interest it paid to its lenders at prime plus .5%. As a result, it says that it should be entitled to interest at this rate, compounded annually, rather than an amount for interest based on the annual pre judgment interest rate. According to Robert Low, an accountant, Charlesfort would have saved $1,275,000 in interest.
[346] I have discretion, under s. 130(1)(b) of the Courts of Justice Act, to award interest at a rate higher than the rate set out at s. 127.[^43] I find that, if Charlesfort were awarded only the standard prejudgment rate of interest, it would not recover the full amount of its provable loss, as a result of the City’s misrepresentations. As a result, it is entitled to the amount of interest it could have avoided paying to its lenders.
[347] I accept Mr. Davis’ evidence that Charlesfort would have used any funds that were not tied up in the Continental project to pay down the company’s outstanding debt. Because it did not have these funds, it was forced to pay more interest than it otherwise would have. In my view, this situation was a foreseeable consequence of the City’s misrepresentation. A relatively small developer such as Charlesfort does not have unlimited credit. If a project is delayed for years and construction costs are much higher than anticipated, this will have to service its debt. The City have not filed any expert reports contradicting Mr. Low’s calculations.
[348] I therefore award Charlesfort $1,275,000 in lost interest.
CONCLUSIONS
[349] Charlesfort’s action is granted. The City is ordered to pay it a total of $4,496,384 in damages and pre-judgment interest.
[350] If the parties are unable to agree on costs, Charlesfort may submit submissions that are no longer than three pages in length, along with a costs outline, by August 16, 2019. The City will have until August 30, 2019 to file submissions of up to three pages and its costs outline. Charlesfort will not have any right to file reply submissions.
Justice Sally Gomery
Released: July 24, 2019
COURT FILE NO.: 15-62998
DATE: July 26, 2019
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
Charlesfort Developments Ltd.
Plaintiff
– and –
The Corporation of the City of Ottawa
Defendant
COUNSEL:
Timothy Hill, Jane Pepino and Mark van Zandvoort for Plaintiff
Anne Tardif, Alyssa Tomkins and Scarlett Trazo for Defendant
REASONS FOR JUDGMENT
Justice S. Gomery
Released: July 26, 2019
[^1]: RSO 1990, ch. P.13. [^2]: Bahardoust v. Toronto (City), OMB file no. PL 130592, Decision issued July 12, 2017. [^3]: Subsections 34(10.1) and (10.3) respectively. [^4]: Subsection 34(10.2). [^5]: Ontario Regulation 199/96 (the “Regulation”). [^6]: Subsections 34(12) and 34(15). [^7]: Subsection 36(1). [^8]: Subsection 41(7). [^9]: Although some aspects of the City’s 2003 Official Plan were being challenged before the OMB at the time, the City planners who testified at trial agreed that they were required to take its provisions into account in 2005 planning decisions. [^10]: The particular departments, branches and groups within the City where engineers worked on water issues and water infrastructure have gone by various names over time, including Water Resources, Water Services, Drinking Water Services, Water Production, Infrastructure Management, Asset Management and Public Works and Environmental Services. Since neither the name nor any given engineer’s specific location is relevant to any issue in this case, I will refer to all of these departments, branches and groups as the City’s “water departments”. [^11]: Charlesfort subsequently entered into a conditional agreement of purchase directly with the property owner, Carastan Carpets Ltd., in July 2004. [^12]: Based on Mr. Casey’s evidence, a tieback involves drilling cables diagonally into neighbouring property until they hit rock, and attaching them to metal braces installed vertically along the edge of the excavation. [^13]: Deloitte & Touche v. Livent Inc. (Receiver of), 2017 SCC 63, [2017] 2 S.C.R. 855 (“Livent”). [^14]: The Anns test takes its name from the UK House of Lord’s 1977 decision on the duty of care of municipalities, Anns v. London Borough of Merton, [1977] 2 All E.R. 492. [^15]: Hercules Management Ltd. v. Ernst & Young, 1997 CanLII 345 (SCC), [1997] 2 S.C.R. 165. [^16]: Livent, paras. 29 and 34. [^17]: R. v. Imperial Tobacco, 2011 SCC 42, [2011] 3 S.C.R. 45 (“Imperial Tobacco”), at paras. 43 to 46. [^18]: Livent, at para. 30. [^19]: Livent, para. 31. [^20]: Livent, par. 35. [^21]: Livent, para. 39. [^22]: Livent, para.s 37 and 38. [^23]: Livent, at para. 26; and Rankin (Rankin’s Garage & Sales) v. J.J., [2018] 1 SCR 587, 2018 SCC 19 (“Rankin”), at para. 18. [^24]: Livent, at para. 28. [^25]: 1998 CanLII 4299 (ON CA), [1998] O.J. No. 4060, 41 O.R. (3d) 741 (C.A.) (“Lakefield”). [^26]: N. Tadco. Ltd. v. Winnipeg (City), 1984 CarswellMan 290 (Man.Q.B.), at para. 24, var’d on other grounds at [1985] M.J. No. 125 (Man.C.A.); Wozniak v. Erin (Town) (2001), 20 M.P.L.R. (3d) 59 (Ont.S.C.), at paras. 43, 53 and 59; Gibbs v. Edmonton (City), 2003 ABCA 138, at paras. 8-11, aff’d [2001] A.J. No. 644. [^27]: 1688782 Ontario Inc. v. Maple Leaf Foods Inc., 2018 ONCA 407 (“Maple Leaf”), at paras. 50-51 and 62. [^28]: Imperial Tobacco, at para. 90. [^29]: Imperial Tobacco, at paras. 92 to 95. [^30]: Wellbridge Holdings Ltd. v. Greater Winnipeg (Municipality), 1970 CanLII 1 (SCC), [1971] S.C.R. 957 (“Wellbridge Holdings”). [^31]: Wellbridge Holdings, at para. 18. [^32]: Wellbridge Holdings, at para. 20. [^33]: Wellbridge Holdings, at para. 22. [^34]: Wellbridge Holdings, at para. 22. [^35]: Windsor Motors Ltd. v. Powell River (District), 1969 CarswellBC 41 (B.C.C.A.) (“Windsor Motors”). [^36]: Danforth (London) Ltd. v. London (City), 2018 ONSC 4203 (“Danforth”). [^37]: Danforth, at para. 53. [^38]: Danforth, at para. 53. [^39]: Danforth, at para. 57. [^40]: Imperial Tobacco, at para. 59. [^41]: V.K. Mason Construction Ltd. v. Bank of Nova Scotia, 1985 CanLII 608 (SCC), [1985] 1 SCR 271 (“VK Mason”), at pp. 285-86. [^42]: Teva Canada Limited v. Sanofi-Aventis Canada Inc., 2014 FCA 67, at para. 123. [^43]: Cobb v. Long Estate, 2017 ONCA 717, at paras. 71 and 76-77.