Court of Appeal Finds Municipality Not Liable for Economic Interests of Developer When Processing Rezoning Application

Court of Appeal Finds Municipality Not Liable for Economic Interests of Developer When Processing Rezoning Application

Tony Fleming
Posted August 31, 2021 Category: News & Updates

The Court of Appeal recently held that a municipality had no duty of care with respect to the economic interests of a developer during a rezoning application.

In Charlesfort Development Limited v Ottawa (City), 2021 ONCA 410, the Court considered a claim arising from the rezoning of a property intended for a condominium development. The developer brought an action against the City of Ottawa for negligent misrepresentation as a result of the alleged failure of the City to inform the developer that there was a water main located on a municipal easement on an adjacent property. The water main was three or four feet from the northern lot line of the proposed development and its discovery resulted in the developer being required to redesign the project, resulting in significant delays and costs. The developer claimed against the City for $6 million in damages.

The Court overturned the finding of the trial judge that there was a duty of care owed by the City to the developer in the rezoning process. The claims made by the developer were found to fall outside the scope and purpose of any duty arising during the processing of a zoning application because:

  • Zoning has a public interest purpose which means the City is not guaranteeing or considering the developer’s economic interests when processing an application;
  • Land use planning and zoning target the protection of the public and good management of land resources;
  • The rezoning process is one of many steps in the approval process and at this stage there was no indication from the City the development would be built as planned; and
  • There were no interactions that went beyond the typical processing of an application.

Central to the analysis was the finding that a municipality does not undertake to provide accurate information about infrastructure as part of a re-zoning application; the purpose of re-zoning is land use and regulating that land use in the public interest. That is what Ottawa undertook to provide to Charlesfort; processing their zoning application under the relevant statutory test. There was no undertaking implied to give detailed infrastructure information for any purpose.  The Court considered the Provincial Policy Statement and the relevant Official Plan policies and concluded there is nothing in policy that directs a municipality to protect the economic interests of private developers; the duty of the municipality is focused on the public interest.

It is also important to note that the Court of Appeal found that the goal of re-zoning is to determine whether the proposed land use is appropriate; a municipality cannot be said to guarantee the ultimate project will be built, that it will be built as initially intended (especially given that other approvals were necessary), nor does a municipality ensure the profits of the development.

Given the above, the Court found there was no relationship between the parties that would establish a duty of care between the developer and the City. As such, the City was not liable for any damages.

Municipalities should still proceed cautiously and ensure that no statements or misrepresentations are made that a developer may rely on to its economic detriment.

The full text of the decision from the Court of Appeal can be found here.

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Tony Fleming
Posted August 31, 2021 Category: News & Updates

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