Supreme Court Judgments

Supreme Court of Canada

Welbridge Holdings Ltd. v. Greater Winnipeg [1971] S.C.R. 957

Date: 1970-12-17

Welbridge Holdings Ltd. (Plaintiff) Appellant;

and

The Metropolitan Corporation of Greater Winnipeg (Defendant) Respondent.

1970: December 17; 1970: December 17.

Present: Martland, Judson, Ritchie, Spence and Laskin JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR MANITOBA

Municipal Law—Alleged reliance of builder on validity of zoning by-law—By-law later declared in­valid—Building permit revoked and work on apartment project abandoned—Failure of municipality to carry out anterior procedural requirements for enactment of by-law—Whether any portion of builder's loss may properly be recovered from municipality as being attributable to its actionable fault.

The plaintiff leased certain lands in the City of Winnipeg with the intention of constructing thereon a multi-storey apartment building. It allegedly relied on the validity of an amending zoning by-law which, in litigation terminating in this Court, was declared to be invalid (see Wiswell et al. v. Metropolitan Corporation of Greater Winnipeg, [1965] S.C.R. 512). A building permit was not sought until shortly after the Wiswell action was instituted, and it was refused by the designated officer because of, inter alia, the pending litigation on the validity of the said by-law. An appeal was taken immediately to the Board of Adjustment which, by its decision, directed the officer to issue the requested permit for a twelve-storey buildling. Following the issue of the permit, a contract was executed by the plaintiff and a con­struction firm for the erection of the building. The trial judgment in the Wiswell case declaring the by-law to be invalid was handed down some weeks later and the building permit was thereupon revoked. Save for some subsequent protective construction, all work on the apartment project was then stopped.

An action for damages founded on negligence was brought by the plaintiff against the defendant munici­pal corporation. The action was dismissed at trial, and on appeal to the Court of Appeal it was held

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(one member of the Court dissenting) that the ap­peal should be dismissed. The plaintiff then appealed to this Court.

Held: The appeal should be dismissed.

A municipality at what may be called the operat­ing level is different in kind from the same munici­pality at the legislative or quasi-judicial level where it is exercising discretionary statutory authority. In exercising such authority, a municipality (no less than a provincial Legislature or the Parliament of Canada) may act beyond its powers in the ultimate view of a Court, albeit it acted on the advice of counsel. It would be incredible to say in such cir­cumstances that it owed a duty of care giving rise to liability in damages for its breach.

A narrower basis of liability was, however, proposed in the present case, one founded on the failure to carry out certain anterior procedural requirements for the enactment of the zoning by-law. Those re­quirements provided for notice to affected parties and although they were held in the Wiswell case to be expressions of a quasi-judicial function, this did not mean that the hearing to which they were relevant was a step unrelated to the legislative exer­cise in which the defendant was engaged. Moreover, even if the quasi-judicial function were taken in iso­lation, it was not accepted that the defendant in holding a public hearing as required by statute would, in bringing it on and in carrying it to a conclusion, come under a private tort duty to use due care to see that the dictates of natural justice were observed.

Also, there was nothing false or misleading or careless in the representations made to the plaintiff and it could not be accepted that those representa­tions involved an assumption of responsibility to the plaintiff for the procedural regularity of the rezoning proceedings.

Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd., [1964] A.C. 465, considered; McGillivray v. Kimber (1915), 52 S.C.R. 146; Windsor Motors Ltd. v. District of Powell River (1969), 4 D.L.R. (3d) 155, distinguished.

APPEAL from a judgment of the Court of Appeal for Manitoba[1], dismissing an appeal from a judgment of Hunt J. Appeal dismissed.

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C. K. Tallin, Q.C., and A. F. Kristjansson, for the plaintiff, appellant.

A. S. Dewar, Q.C., and R. J. Scott, for the defendant, respondent.

The judgment of the Court was delivered by

LASKIN J.—This appeal arises out of an action of tort for damages founded on negligence. As pleaded and argued, it involves the applicability of the principles of law canvassed in Hedley Byrne & Co. Ltd. v. Heller & Partners Ltd.[2] to a municipal corporation in certain circum­stances of alleged reliance on the validity of a zoning by-law which, in litigation terminating in this Court, was declared to be invalid. The plain­tiff-appellant in the present proceedings was not a party to the action which attacked the by-law, but in the result it abandoned plans for and work in progress on a multi-storey apartment building. There is no doubt that it suffered monetary loss; and the principal question presented here, which was decided adversely to the plaintiff-appellant in the Courts below, is whether any portion of the loss may properly be recovered from the defendant as being attributable to its actionable fault.

The facts surrounding the enactment of the by-law, and which lie at the heart of the issue now in appeal, are detailed in the judgments delivered in this Court in the action in which the by-law was originally and ultimately declared invalid: see Wiswell et al. v. Metropolitan Corporation of Greater Winnipeg[3]. It is enough to refer here only to those that bear directly on the plaintiff-appellant's cause of action, as supported by additional evidence adduced at trial in the present case.

The defendant came into being on April 1, 1961, and, as part of its assigned functions, took

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control of zoning in the City of Winnipeg. Certain Winnipeg Zoning Board orders were then in force (through periodic extensions) under which, in variance of the general zoning by-law, construction of an apartment block was authorized on lands of one Dr. B. J. Ginsburg, situated in a R1 (single family residential) zone. That owner applied for a further extension of these orders, and it was granted by the defendant on January 11, 1962, to April 30, 1963. Shortly after the extension was approved, the owner applied for a rezoning of his property from R1 to R4A (multi­ple family dwellings). The sought-after rezoning was effected under By-law No. 177 of April 13, 1962, and covered not only Dr. Ginsburg's land (comprising three lots) but also adjacent land (comprising three lots as well) owned by one Harris.

The plaintiff was incorporated on June 21, 1962, by persons who were interested in apartment land in Winnipeg. These persons had come to Winnipeg after By-law No. 177 was passed to look for apartment house land, and they ob­tained, through another company, an agreement to lease the Ginsburg land for 99 years from July 1, 1962. On August 12, 1963, the benefit of this agreement was assigned to the plaintiff, and a formal lease was executed under date of Sep­tember 6, 1963. The plaintiff had much earlier ascertained from officials of the defendant that the land was zoned R4A, and it followed up its inquiry by a letter from its solicitors dated August 10, 1962, to the defendant for the attention of its solicitor.

In his argument in this Court, counsel for the plaintiff-appellant, stressed the importance of this letter which in its material parts was as follows:

I act for Welbridge Holdings Ltd. which has ar­ranged to lease the premises known as 3 Academy Road and 587 Wellington Crescent, for a term of

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99 years, with the intention of constructing thereon a luxury multi-storey apartment building.

To ensure that there would be no prohibition against such a development, we obtained a copy of By-law No. 177 of your Corporation enacted on April 13, 1962, and have noted that the zoning by-law was amended, reclassifying Lots 40 to 45 both inclusive, D.G.S. 45 St. Boniface, Plan 308, except­ing that part of Lots 44 and 45 taken for a road diversion, as an "R4-A" Multiple Family District….

In speaking to Mr. Lennox recently, we gathered that when Mr. Irving Keith made his submissions to the Council, he indicated that Lots 40 to 45 would be developed. At the present time negotiations are pending to acquire Lots 40, 41 and 42. Although serious consideration is therefore being given to a development which would encompass all of said Lots 40 to 45 both inclusive, it may be that negotiations to acquire Lots 40 to 42 may not be concluded, as said lands are owned by a different person than the owner of Lots 43 to 45 both inclusive. We would therefore like to have an assurance that should our client finally decide only to proceed with the devel­opment of said Lots 43 to 45 both inclusive, no difficulty will be encountered by reason of no devel­opment taking place on said Lots 40 to 42 both inclusive.

What counsel sought to establish through this letter was a representation by the defendant to the plaintiff of the validity of By-law No. 177 and reliance by the plaintiff on this representation in the steps it subsequently took to put up an apartment building on the leased land. On this foundation, counsel sought to fix the defendant with a duty of care owed to the plaintiff and to show that there was a breach thereof with resulting damage exposing the defendant to liability when the by-law was declared invalid. A duty of care was alleged to exist, however, independently of the letter, and to be a continuing one originating at the time that proceedings leading to the enactment of the by-law were initiated.

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The submission based on the letter of August 10, 1962, fails in limine because the record does not disclose any reply to it, and, moreover, the letter is simply a manifestation of ordinary pru­dence on the part of a developer in assessing the risks of a project which it proposes to undertake. There is no suggestion that the defendant was importuning or encouraging the plaintiff in its proposed development or giving it any assurances save as they were assumed by the plaintiff from the fact of the enactment of the rezoning by-law.

A closer examination of this issue in connec­tion with the alleged continuing duty of care and breach thereof may properly begin with a review of the steps in the enactment of By-law No. 177 and a reference to the reasons given in this Court in the Wiswell case for declaring it to be invalid. The infirmity of the by-law resided not in any want of substantive authority, but rather in the failure to observe self-imposed antecedent proce­dures for notice to affected parties. Soon after the defendant came into being, it adopted a "Procedure for Amendments to Zoning By-Laws and Town Planning Schemes". Briefly, an applicant for an amending by-law would have to apply to the Director of Planning, then a Tech­nical Committee would give prior consideration to the proposed amendment, and thereafter the Director, having given preliminary consideration to the application with favourable results, would report fully to the Committee on Planning. This Committee, if it should recommend that the application go forward, would then give public newspaper notice of a hearing on the applica­tion, as required by the defendant's governing statute. In addition, the procedure adopted by the defendant would require the Director of Planning at this stage to give the applicant notices to be posted on the subject premises not less than fourteen days before the hearing date. After hearing representations, the Committee would decide whether or not the application should be proceeded with, and if its decision was to proceed, it would recommend to the Council of the defendant that the necessary amending by-law be passed.

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A district home owners' association had oppos­ed the extension of the Zoning Board orders to April 30, 1963, but without success. The consid­eration of the further application to rezone Dr. Ginsburg's land from R1 to R4A followed the prescribed procedures, including the giving of public notice, through newspaper advertisements, of the date of hearing of the application, but there was a failure to provide the applicant with notices to be posted on his premises. The association did not in fact see the newspaper notices because its secretary, who had the responsibility for such matters, was away on vacation at the time. No express notice was given to the association of the rezoning hearing (although such notice was given to Dr. Ginsburg's solicitors), nor were any of the officers of the association aware of the pendency of the hearing. In the result, no one appeared on its behalf to oppose the enactment of what became By-law No. 177. On November 28, 1963, more than eighteen months after that by-law was passed, the association instituted a declaratory action to impeach its validity and, as already noted, it succeeded finally in this Court.

The evidence shows that the association did not learn of the rezoning By-law No. 177 until about two weeks before action brought and that it came to the association's notice at a Board of Adjustment hearing on November 12, 1963, to consider an application for a variation of the zoning to permit a thirteen-storey building instead of the twelve-storey building that was authorized under the rezoning by-law.

The majority decision of this Court (Judson J. was alone in dissent from the four other members of the five who sat in the case) was to the effect that the defendant municipality was engaged in a quasi-judicial rather than in a legislative pro­ceeding in respect of the hearing on the rezoning application, and, consequently, in dealing with the matter, which involved a resolution of conflicting

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interests, it was bound to see that notice was given to the association as an interested party, and known to the defendant to be interested. The defendant had failed to give notice in disregard of its own procedures designed to that end, and hence the by-law was invalid. Hall J. (Martland J. concurring) was of the opinion that the by-law was, in the circumstances, void, but Cart­wright J., as he then was, (Spence J. concurring), although agreeing substantially with Hall J., did not find it necessary to come to a decision on that issue and dealt with the case on the assump­tion that the by-law was merely voidable. It is immaterial in the present proceedings whether the by-law was void or voidable only. The ques­tion of law that is raised is the same in either case and is sufficiently posed by the declaration of invalidity.

To complete the framework of facts within which that question must be resolved I note that soon after the agreement to lease the Ginsburg land was made with its assignor, the plaintiff engaged architects and a firm of solicitors and embarked on necessary preparations (including demolition of existing structures) to comply with building requirements. A building permit was not sought until shortly after the Wiswell action was instituted, and it was refused by the designat­ed officer because of, inter alia, the pending litigation on the validity of the rezoning by-law. An appeal was taken immediately to the Board of Adjustment which, in a decision on December 17, 1963, directed the officer to issue the requested permit for a twelve-storey building. Following the issue of the permit, a contract was executed by the plaintiff and a construction firm for the erection of the building. The trial judg­ment in the Wiswell case declaring By-law No. 177 to be invalid was handed down on. January 28, 1964, and the building permit was thereupon revoked. Save for some subsequent protective construction, all work on the apartment project was then stopped.

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The present proceedings, which were launched on January 19, 1967, are collateral to those in the Wiswell case, not in any sense of seeking any different result from that reached therein on the validity of the rezoning by-law, but in being posited on the very grounds on which that case was decided and on the circumstances which gave rise to those grounds. In seeking thus to establish a duty of care owed to it by the defendant and a breach thereof, the plaintiff has accepted the finding of the Manitoba Courts in the Wiswell case that the defendant acted in good faith (this Court did not pass on the question), and there is therefore no need to consider the defendant's liability on any ground other than negligence.

If the plaintiff has a cause of action as alleged, it is not destroyed or blocked by the fact that a building permit was necessary before the plaintiff could proceed with actual construction. The defendant's contentions in its factum that the Board of Adjustment which granted the permit was an independent statutory authority and that the plaintiff knew at the time that the rezoning by-law was under attack are not tenable defences to an action based on negligence in the procedures leading to the enactment of the by-law. These contentions seem to ignore the fact that extensive planning is necessary to qualify for a building permit and that, moreover, its issuance can be enforced by mandamus if the requirements for it are met. The exact position of the Board of Adjustment, whether agent of or statutory au­thority independent of the defendant, is, on this view, not central to liability; at the most, it might have a bearing on the range of damages.

The liability in negligence sought to be im­posed upon the defendant is not a vicarious one, resting upon the fault of a servant or agent of

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the defendant, but rather an original, independent liability. As I took the argument, it was said to proceed from a duty of the defendant, in enact­ing a rezoning by-law enlarging the development possibilities of designated land, to exercise rea­sonable care to see that the procedures upon which valid enactment depended were followed; and this duty was owed specially to those persons having or obtaining an interest in the affected land which enabled them to exploit those possi­bilities. There was, in the circumstances, more than merely a duty at large to the residents of the municipality or to the smaller number resid­ing in the affected area. If a duty such as is urged exists, I would not exclude the appellant from the class of those to whom it was owing, merely because the appellant did not come into existence until after the invalid by-law was passed and did not acquire any interest in the affected land until about sixteen months after its passage.

It is important to emphasize in this case that a duty of care of the defendant to the plaintiff cannot be based merely on the fact that economic loss would foreseeably result to the latter if By-law No. 177 should prove to be invalid. Indeed, it has long been recognized, as Lord Wright said in Liesbosch (Dredger) v. Edison (S.S.)[4], at p. 460, that "the law cannot take

account of everything that follows a wrongful act", a proposition that was recently applied in SCM (United Kingdom) Ltd. v. W. J. Whittall & Son Ltd.[5] However, the concern here is not with the consequences for which reparation should be made, but with whether there is liability for any consequences, however direct they be. On this issue, the Hedley Byrne case does not assist the plaintiff-appellant, even apart from the fact that it dealt with negligent words and not with negligent acts of omission as in the present case.

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Accepting that Hedley Byrne has expanded the concept of duty of care, whether in amplification or extension of Donoghue v. Stevenson[6], it does not, nor, in my view, would any underlying principle which animates it, reach the case of a legislative body, or other statutory tribunal with quasi-judicial functions, which in the good faith exercise of its powers promulgates an enactment or makes a decision which turns out to be invalid because of anterior procedural defects. McGillivray v. Kimber[7], so far as it has a majority rationale, rests either on a complete want of jurisdiction or on intentional wrongdoing which might, in any event, be said to be reflected in the want of jurisdiction. It was not concerned with negligence. I refer also to what Rand J. said about that case in Roncarelli v. Duplessis[8], at p. 141.

Under the considerations on which Hedley Byrne's enunciation of principle rests, it cannot be said in the present case either that a special relationship arose between the plaintiff and the defendant or that the defendant assumed any responsibility to the plaintiff with respect to procedural regularity. This would equally be my view if the plaintiff had been the applicant for the rezoning by-law. A rezoning application merely invokes the defendant's legislative au­thority and does 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. The applicant in such case can reasonably expect honesty from the defendant but not a wider duty. Beyond this, I would adapt to the present case what the late Mr. Justice Jackson said in dissent in Dalehite v. United States[9], at p. 59 (a case concerned with the Federal Tort Claims Act, 1946, of the United States), as follows:

When a [municipality] exerts governmental author­ity in a manner which legally binds one or many,

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[it] is acting in a way in which no private person could. Such activities do and are designed to affect, often deleteriously, the affairs of individuals, but courts have long recognized the public policy that such [municipality] shall be controlled solely by the statutory or administrative mandate and not by the added threat of private damage suits.

(The words in brackets are mine) .

The defendant is a municipal corporation with a variety of functions, some legislative, some with also a quasi-judicial component (as the Wiswell case determined) and some administrative or ministerial, or perhaps better categorized as busi­ness powers. In exercising the latter, the defen­dant may undoubtedly (subject to statutory qua­lification) incur liabilities in contract and in tort, including liability in negligence. There may, therefore, be an individualization of responsibility for negligence in the exercise of business powers which does not exist when the defendant acts in a legislative capacity or performs a quasi-judicial duty.

Its public character, involving its political and social responsibility to all those who live and work within its territorial limits, distinguishes it, even as respects its exercise of any quasi-judicial function, from the position of a voluntary or statutory body such as a trade union or trade association which may have quasi-judicial and contractual obligations in dealing with its mem­bers: cf. Abbott v. Sullivan[10]; Orchard v. Tun­ney[11]. A municipality at what may be called the operating level is different in kind from the same municipality at the legislative or quasi-judicial level where it is exercising discretionary statutory

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authority. In exercising such authority, a muni­cipality (no less than a provincial Legislature or the Parliament of Canada) may act beyond its powers in the ultimate view of a Court, albeit it acted on the advice of counsel. It would be incredible to say in such circumstances that it owed a duty of care giving rise to liability in damages for its breach. "Invalidity is not the test of fault and it should not be the test of liability": see Davis, 3 Administrative Law Trea­tise, 1958, at p. 487.

A narrower basis of liability is, however, proposed in the present case, one founded only on the failure to carry out the anterior procedural requirements for the enactment of By-law No. 177. Although those requirements were held in the Wiswell case to be expressions of a quasi-judicial function, this did not mean that the hearing to which they were relevant was a step unrelated to the legislative exercise in which the defendant was engaged. In approving what Freedman J.A. said in the Wiswell case in the Mani­toba Court of Appeal, Hall J. agreed that the enactment of the by-law was "[not] simply a legislative act": see [1965] S.C.R. 512, at p. 520. But that did not import that there was no legis­lative function involved in the enactment. There clearly was.

Moreover, even if the quasi-judicial function be taken in isolation, 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 to damages for negligence flows to any adversely affected person, albeit private property values are diminished or expense is incurred without recoverable benefit. If, instead of re-zoning the land involved herein to enhance its

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development value, the defendant had rezoned so as to reduce its value and the owners had sold it thereafter, could it be successfully contended, when the rezoning by-law was declared invalid on the same ground as By-law No. 177, that the owners were entitled to recoup their losses from the municipality? I think not, because the risk of loss from the exercise of legislative or adjudicative authority is a general public risk and not one for which compensation can be supported on the basis of a private duty of care. The situation is different where a claim for damages for negligence is based on acts done in pursuance or in implementation of legislation or of adjudi­cative decrees.

Windsor Motors Ltd. v. District of Powell River[12], a judgment of the British Columbia Court of Appeal, is a useful illustration in this connection. Hedley Byrne was applied against a municipality by reason of advice negligently given by its licence inspector to the plaintiff that he could lawfully open a used car business in a certain location. The inspector went further and issued a licence to the plaintiff who had gone into business in reliance on the advice and licence. In fact, the zoning regulations forbade a used car business at the particular location, and the plaintiff had to move at considerable loss. The municipality's liability, moreover, was vicarious, arising upon a conclusion that it had to answer for its employee who knew of the plaintiff's reliance on his special knowledge when the plaintiff sought the employee's advice.

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Finally, I refer to what appears to me to be the main ground upon which Freedman J.A., dissenting in the present case in the Manitoba Court of Appeal, would have imposed liability upon the defendant, relying on the Hedley Byrne doctrine. He said this (see (1970), 12 D.L.R. (3d) 124, at pp. 138-139):

...Metro's negligence was not spent with [the] omissions [as to notice]. It extended to its continuing representation that an apartment block could law-fully be erected on the site by reason of By-Law 177 rezoning the land. With respect to that continuing representation Metro most assuredly owed a duty to the plaintiff. Indeed, it is clear from the evidence that the plaintiff received specific assurances from Metro that the land in question had been rezoned and that a high-rise apartment block could be erected there. It was on the faith of that continuing represen­tation that the plaintiff proceeded with its plans, with resultant loss and damage.

I do not see how actionable negligence flows from the representation. Although I do not read the evidence as strongly against the defendant as did Freedman J.A., the fact was that the land had been rezoned. There was, therefore, nothing false or misleading or careless in the representa­tions or statements made to the plaintiff. I cannot accept what must be implicit in the learned judge's reasoning that the representations involved an assumption of responsibility to the plaintiff for the procedural regularity of the rezoning proceedings. If the passage quoted is intended to suggest a vicarious liability, as in the Windsor Motors Ltd. case, there is no factual basis on which it can be put. I have already noted that the argument before this Court charged the defendant itself with actionable negligence. What has gone before in these reasons covers this issue, and I need not repeat it.

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Since the action fails on the main substantive point it is unnecessary to deal with a number of preliminary issues raised in the case touching statutory and other bars to the plaintiff's action. Accordingly, the appeal is dismissed with costs.

Appeal dismissed with costs.

Solicitors for the plaintiff, appellant: Tallin, Kristjansson, Parker & Smith, Winnipeg.

Solicitors for the defendant, respondent: Thompson, Dilts & Co., Winnipeg.

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