Pacific National Investments Ltd. v. Victoria (City)

Pacific National Investments Ltd. v. Victoria (City)
Collection
Supreme Court Judgments
Date
2000-12-14
Neutral citation
2000 SCC 64
Report
[2000] 2 SCR 919
Case number
27006
Judges
Gonthier, Charles Doherty; Iacobucci, Frank; Major, John C.; Bastarache, Michel; Binnie, William Ian Corneil; Arbour, Louise; LeBel, Louis
On appeal from
British Columbia
Subjects
Municipal law
Property law
Notes
SCC Case Information: 27006
Decision Content
Pacific National Investments Ltd. v. Victoria (City), [2000] 2 S.C.R. 919
Pacific National Investments Ltd. Appellant
v.
The Corporation of the City of Victoria Respondent
and between
The Corporation of the City of Victoria Appellant
v.
Pacific National Investments Ltd. Respondent
Indexed as: Pacific National Investments Ltd. v. Victoria (City)
Neutral citation: 2000 SCC 64.
File No.: 27006.
2000: May 25; 2000: December 14.
Present: Gonthier, Iacobucci, Major, Bastarache, Binnie, Arbour and LeBel JJ.
on appeal from the court of appeal for british columbia
Municipal law ‑‑ Zoning ‑‑ Development of lands ‑‑ Developer suing municipality for breach of contract following “down‑zoning” of lots ‑‑ Whether municipality liable to pay damages under implied contractual term that municipality would not rezone before expiration of reasonable period of time ‑‑ Whether implied term ultra vires and contrary to public policy ‑‑ Whether implied term illegally fettering municipality’s discretionary legislative powers.
Land titles ‑‑ Subdivision of land ‑‑ Transfer of title to Crown ‑‑ Land title legislation providing in certain circumstances for a deemed transfer of title to Crown and extinguishment of fee simple ‑‑ Water lots part of subdivided area on subdivision plan ‑‑ Whether land title legislation applicable to any subdivided land or only to adjoining land ‑‑ Land Title Act, R.S.B.C. 1979, c. 219, s. 108(2).
In 1987, the respondent City and BCEC, a Crown corporation, signed an umbrella agreement (“Master Agreement”) to redevelop certain lands located around the City’s harbour. Under the Master Agreement, BCEC would develop “Phase I” and would sell the “Phase II” area. The Master Agreement was authorized by City Council and was registered as a restrictive covenant under s. 215 of the Land Title Act. The appellant developer (“PNI”) entered into an agreement to purchase the Phase II area from BCEC. The agreement was binding only if the City granted the subdivision of the lands and passed the requisite zoning, which it did. In 1988, PNI deposited the subdivision plan. It developed and sold three lots but when PNI’s plans for the development of the two water lots became known, objections were raised to the transformation of the harbourfront. These plans included three‑storey buildings, restaurants and other commercial establishments. City Council decided to rezone the water lots so as to prevent additional residential development and to restrict the height of the buildings. PNI sued for breach of contract and maintained that this “down‑zoning” was in breach of the City’s implied obligations under the Master Agreement and thus in breach of PNI’s rights as successor to BCEC under the Master Agreement. In the alternative, it claimed restitution for unjust enrichment for the parks and other amenities that it had constructed and which the City would benefit from. The trial judge found the City liable for breach of contract. The Court of Appeal set aside the judgment and remitted the matter for trial on the remaining issue of restitution for unjust enrichment.
Held (Major, Bastarache and Binnie JJ. dissenting on the appeal): The appeal and the cross‑appeal should be dismissed.
(1) Cross‑appeal
The City’s argument that PNI did not own the water lots must fail. Section 108(2) of the Land Title Act did not vest these lots in the Province when PNI deposited its subdivision plan at the land titles office. Given its clear confiscatory effect, s. 108(2) should be strictly construed. The section is not concerned with the lots created through subdivision but with other areas within the titled land that amount to remainders. On this interpretation, the water lots do not fall within the scope of s. 108(2) since they are part of the subdivided area on the subdivision plan and are in no way remainders.
(2) Appeal
Per Gonthier, Iacobucci, Arbour and LeBel JJ.: Under the provincial legislation, the City did not have the capacity to make and be bound by an implied term to keep the zoning in place for a number of years and to pay damages if it modified it. Section 963 of the Municipal Act provides for the power to zone by by-law. On its face, the statute provides for no power to constrain the future use of this legislative power and the legislature has generally considered that municipalities should not pay compensation for how they use this legislative power. These principles all militate against PNI’s case from the outset. Nor can PNI find the capacity it seeks through s. 215 of the Land Title Act or through s. 980(5) of the Municipal Act. Under s. 215(3), although the BCEC covenant in favour of the City was registered, the City is not bound to keep zoning that would allow BCEC or its successor PNI to fulfill its plans. Section 215(3) was clearly intended to provide that a covenant was still binding on the covenantor, even when the covenantee had not signed it. Section 980(5), which provided that a development permit was binding on the municipality once issued and might even prevent rezoning, has no application in this case since PNI did not have a development permit for the water lots. Lastly, a comparison with the prior and subsequent legislative schemes in B.C. makes it clear that under the legislation applicable at the time of the events in this case, implied terms such as the one alleged by PNI were without any statutory authorization. B.C. abolished the land use contracts system enabling municipalities to commit to particular zoning by contract in 1978, and it is only in 1993 that B.C. municipalities were permitted to request amenities in exchange for zoning. As well, prior to 1998, although municipalities could enter into long‑term commitments related to their business and proprietary powers under the Municipal Act, these commitments were subject to the statute’s close controls.
Moreover, while a municipality may engage in business and proprietary contracts, it cannot agree to terms that fetter its legislative power unless there is legislation expressing a public policy permitting it to do so. In this respect, s. 19 of the Municipal Act does not provide the statutory basis for a municipality to enter into long‑term agreements with a developer about the exercise of its zoning powers. The distinction between indirect and direct fettering cannot be accepted as it is likely without any legal basis. The supposed distinction is also unhelpful in rationalizing the case law and, more importantly, is inconsistent with the principles that undergird this area of the law. Here, the alleged implied term would have been an illegal fetter on the municipality’s discretionary legislative powers.
The wording of the legislation, its history, consistent case law, and established public policy against municipalities being bound in ways that constrain their legislative powers all support the conclusion that the City had no implied or express powers to agree to an implied term such as the one PNI has alleged. Whether such an implied term might or might not have made sense for business efficiency reasons, any such term was ultra vires and contrary to legislatively established public policy.
Per Major, Bastarache and Binnie JJ. (dissenting): Based on an analysis of the Master Agreement and the relevant external documentary evidence, and from all of the circumstances of this case, it can be concluded that the contract contained the implied term not to rezone for a reasonable time. Zoning was an essential pre‑condition of the Master Agreement. The implied term does not bind the City from rezoning for any length of time: it simply recognizes that in consideration of PNI’s initial investment, a change in zoning must be offset by compensation. It would be contrary to business sense and to all obligations of fairness to conclude that the condition precedent regarding zoning had to be met but was not protected in any way from unilateral retraction. While the parties did not agree to a bare term preventing the City from down‑zoning, since it is acknowledged that they were cognizant of the rule against binding future councils, they carefully arranged the contract as an innovative means of achieving the parties’ differing objectives by hinging binding obligations on each piece going into place. The implied term must be present to give the contract business efficacy. In view of the condition precedent in the contract, an officious bystander would necessarily hold the view that the City believed it would owe compensation in the event it down‑zoned without the passage of a reasonable time.
Although a municipality cannot be held liable for breaching a term that is ultra vires, in this case the implied term in the Master Agreement not to rezone for a reasonable time is intra vires the City. The general municipal power to contract in furtherance of municipal objectives is a solid basis for the City’s authority to agree to the zoning commitments in the Master Agreement. Sections 19(1) and 963 (read in conjunction with s. 287) of the Municipal Act establish that the subject matter of the implied term was within the City’s jurisdiction. The express power to contract for materials and services, coupled with the municipality’s power to zone, provided the City with the authority to agree to a contract that contained a term which temporarily maintains zoning. Even if the authorization did not flow directly from these provisions, this power would necessarily or fairly be implied under these express powers. Significantly, the City conceded that the Master Agreement was lawful despite being unable to identify a specific statutory basis which granted it the authority to enter into this type of contract. Finally, a review of the history of zoning power in British Columbia confirms that in 1987, the City had the power to agree to the term that the City would not rezone for a reasonable time. The repeal in 1978 of s. 702A of the Municipal Act did not signify that the City gained the power to exercise the discretion to rezone, in violation of a lawful contract, with no consequences. The repeal of s. 702A removed the right of municipalities to enter contracts where specific performance was guaranteed but did not prevent them from entering long‑term development contracts.
The implied term of the Master Agreement does not offend against public policy. The well‑established rule that a city council does not have the authority to fetter the ability of a future council to exercise its legislative power is not violated by the implied term of the Master Agreement since the agreement does not restrict the City’s authority to rezone. A distinction must be made between preventing council from exercising its legislative discretion and requiring it to consider its contractual obligations before exercising that discretion. To require a municipal council to consider its contractual obligations does not violate public policy but promotes the public interest. Councils are free to legislate as they like, but they cannot ignore the contractual obligations that they owe. Having such an indirect fetter does not subject the municipal legislative process to undue influence or embarrassment. It is sound policy to allow municipalities to enter complex, long‑term development contracts which provide developers with a promise that existing zoning will continue for a period sufficient to allow for development. In this case, there is no direct fettering of the municipality’s legislative power and there is no reason to fear that the duty to pay damages will affect in a detrimental way the public interest in preserving the legislative independence of all municipal governments.
In sum, where a municipality enters a contract with a legitimate purpose, that contract must be honoured. The City should not be able to terminate with impunity a contract that it uniquely crafted, thoughtfully entered into, received the full benefit of, and concedes is lawful. Here, PNI spent over $2.5 million on infrastructure upgrades in anticipation of the commercial development that would result from the land transfer and zoning provided for in the contract. The public interest would not be served by allowing the City to escape its commitments. PNI is entitled to damages for breach of contract. Awarding compensation does not amount to a fettering of the municipal power over zoning that adversely affects the public’s interest in local government.
Cases Cited
By LeBel J.
Distinguished: Wells v. Newfoundland, [1999] 3 S.C.R. 199; referred to: Vancouver v. Registrar Vancouver Land Registration District, [1955] 2 D.L.R. 709; Ingledew’s Ltd. v. City of Vancouver (1967), 61 D.L.R. (2d) 41; Leiriao v. Val‑Bélair (Town), [1991] 3 S.C.R. 349; Hongkong Bank of Canada v. Wheeler Holdings Ltd., [1993] 1 S.C.R. 167; M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619; Canadian Pacific Hotels Ltd. v. Bank of Montreal, [1987] 1 S.C.R. 711; Immeubles Port Louis Ltée v. Lafontaine (Village), [1991] 1 S.C.R. 326; Public School Boards’ Assn. of Alberta v. Alberta (Attorney General), [2000] 2 S.C.R. 409, 2000 SCC 45; Nanaimo (City) v. Rascal Trucking Ltd., [2000] 1 S.C.R. 342, 2000 SCC 13; R. v. Greenbaum, [1993] 1 S.C.R. 674; R. v. Sharma, [1993] 1 S.C.R. 650; City of Vancouver v. B.C. Telephone Co., [1951] S.C.R. 3; Martin Corp. v. West Vancouver (District) (1993), 85 B.C.L.R. (2d) 305; Re Walmar Investments Ltd. and City of North Bay, [1970] 1 O.R. 109; Lawrason v. Town of Dundas (1920), 18 O.W.N. 22; Birkdale District Electric Supply Co. v. Corporation of Southport, [1926] A.C. 355; Town of Eastview v. Roman Catholic Episcopal Corporation of Ottawa (1918), 44 O.L.R. 284; Capital Regional District v. District of Saanich (1980), 115 D.L.R. (3d) 596; Re Galt‑Canadian Woodworking Machinery Ltd. and City of Cambridge (1982), 135 D.L.R. (3d) 58, aff’d (1983), 146 D.L.R. (3d) 768; Kendrick v. Nelson (City) (1997), 31 B.C.L.R. (3d) 134; Attorney‑General for New Brunswick v. Saint John, [1948] 3 D.L.R. 693, leave to appeal granted, [1948] 3 D.L.R. 851; Walker v. Mayor of St. John (1872), 14 N.B.R. 143; Wall and Redekop Corp. v. City of Vancouver (1974), 16 N.R. 436, aff’d (1976), 16 N.R. 435; Dowty Boulton Paul Ltd. v. Wolverhampton Corp., [1971] 2 All E.R. 277; Shell Canada Products Ltd. v. Vancouver (City), [1994] 1 S.C.R. 231; William Cory & Son Ltd. v. London Corp., [1951] 2 K.B. 476.
By Bastarache J. (dissenting on appeal)
M.J.B. Enterprises Ltd. v. Defence Construction (1951) Ltd., [1999] 1 S.C.R. 619; Nanaimo (City) v. Rascal Trucking Ltd., [2000] 1 S.C.R. 342, 2000 SCC 13; R. v. Sharma, [1993] 1 S.C.R. 650; The King v. Dominion of Canada Postage Stamp Vending Co., [1930] S.C.R. 500; R. v. Greenbaum, [1993] 1 S.C.R. 674; Kendrick v. Nelson (City) (1997), 31 B.C.L.R. (3d) 134; Wells v. Newfoundland, [1999] 3 S.C.R. 199; Re Cressey Development Corp. and Township of Richmond (1982), 132 D.L.R. (3d) 166; Shell Canada Products Ltd. v. Vancouver (City), [1994] 1 S.C.R. 231; Vancouver v. Registrar Vancouver Land Registration District, [1955] 2 D.L.R. 709; Ingledew’s Ltd. v. City of Vancouver (1967), 61 D.L.R. (2d) 41; Town of Eastview v. Roman Catholic Episcopal Corporation of Ottawa (1918), 44 O.L.R. 284; Walker v. Mayor of St. John (1872), 14 N.B.R. 143; Attorney‑General for New Brunswick v. Saint John, [1948] 3 D.L.R. 693; First City Development Corp. v. Durham (Regional Municipality) (1989), 41 M.P.L.R. 241; Stourcliffe Estates Co. v. Bournemouth Corp., [1908‑10] All E.R. 785; Dowty Boulton Paul Ltd. v. Wolverhampton Corp., [1971] 2 All E.R. 277; Lawrason v. Town of Dundas (1920), 18 O.W.N. 22; Muskoka Mall Ltd. v. Town of Huntsville (1977), 3 M.P.L.R. 279; Re Galt‑Canadian Woodworking Machinery Ltd. and City of Cambridge (1982), 135 D.L.R. (3d) 58, aff’d (1983), 146 D.L.R. (3d) 768.
Statutes and Regulations Cited
Act to Amend the Municipal Act, S.B.C. 1971, c. 38, s. 52.
Land Title Act, R.S.B.C. 1979, c. 219, ss. 23(1) [am. 1982, c. 60, s. 3], 108(2) [idem, s. 25(a)], 215 [idem, s. 58; am. 1989, c. 69, s. 22].
Land Title Act, R.S.B.C. 1996, c. 250, s. 108(2).
Local Elections Reform Act, 1993, S.B.C. 1993, c. 54, s. 23.
Local Government Statutes Amendment Act, 1998, S.B.C. 1998, c. 34, preamble.
Municipal Act, R.S.B.C. 1960, c. 255, ss. 702A [ad. 1968, c. 33, s. 166; am. 1970, c. 29, s. 21; rep. & sub. 1971, c. 38, s. 52; am. 1972, c. 36, s. 28; am. 1972 (2nd Sess.), c. 9, s. 1; rep. 1977, c. 57, s. 13(1)], 702AA [ad. idem, s. 13(2)].
Municipal Act, R.S.B.C. 1979, c. 290, ss. 19, 287, 290 [am. 1993, c. 41, s. 32], 292, 313, 321 [rep. & sub. 1993, c. 54, s. 23], 322 [am. 1980, c. 50, s. 63; am. 1982, c. 76, s. 28; am. 1987, c. 38, s. 4], 344(1), 717 [rep. 1985, c. 79, s. 4], 963 [ad. idem, s. 8; am. 1987, c. 14, s. 27], 963.1(2) [ad. 1993, c. 58, s. 4; am. 1994, c. 43, s. 71], 972 [ad. 1985, c. 79, s. 8], 976 [idem], 980(5) [idem], (6) [idem], 982 [idem], 989(4) [ad. 1987, c. 14, s. 45(e)].
Municipal Act, R.S.B.C. 1996, c. 323, ss. 176, 903.
Municipal Affairs, Recreation and Housing Statutes Amendment Act, 1993, S.B.C. 1993, c. 58, s. 4.
Municipal Amendment Act, 1977, S.B.C. 1977, c. 57, s. 13.
Municipal Amendment Act, 1985, S.B.C. 1985, c. 79, ss. 4, 8.
Authors Cited
British Columbia. Debates of the Legislative Assembly, vol. 6, 2nd Sess. 31st Parl., August 8, 1977, pp. 4353‑54.
Côté, Pierre‑André. The Interpretation of Legislation in Canada, 3rd ed. Scarborough, Ont.: Carswell, 2000.
Hétu, Jean, Yvon Duplessis et Dennis Pakenham. Droit municipal: Principes généraux et contentieux. Montréal: Hébert Denault, 1998.
Hogg, Peter W. Liability of the Crown, 2nd ed. Toronto: Carswell, 1989.
Jones, David Phillip, and Anne S. de Villars. Principles of Administrative Law, 3rd ed. Scarborough, Ont.: Carswell, 1999.
Macaulay, Robert W., and Robert G. Doumani. Ontario Land Development: Legislation and Practice, vol. 1. Scarborough, Ont.: Carswell, 1995 (loose‑leaf updated 1999, release 3).
Rogers, Ian MacFee. Canadian Law of Planning and Zoning. Toronto: Carswell, 1973 (loose‑leaf updated 2000, release 3).
Rogers, Ian MacFee. The Law of Canadian Municipal Corporations, 2nd ed. Toronto: Carswell, 1971 (loose‑leaf updated 2000, release 3).
Waddams, S. M. The Law of Contracts, 3rd ed. Toronto: Canada Law Book, 1993.
APPEAL and CROSS‑APPEAL from a judgment of the British Columbia Court of Appeal (1998), 58 B.C.L.R. (3d) 390, 165 D.L.R. (4th) 577, [1999] 7 W.W.R. 265, 112 B.C.A.C. 161, 182 W.A.C. 161, 1 M.P.L.R. (3d) 58, [1998] B.C.J. No. 2302 (QL), allowing the city’s appeal from a decision of the British Columbia Supreme Court, [1996] B.C.J. No. 2523 (QL). Appeal dismissed, Major, Bastarache, and Binnie JJ. dissenting. Cross‑appeal dismissed.
L. John Alexander and Charles Edward Hanman, for the appellant/respondent on cross‑appeal.
Guy McDannold, for the respondent/appellant on cross‑appeal.
The judgment of Gonthier, Iacobucci, Arbour and LeBel JJ. was delivered by
LeBel J. –
I. Introduction
1 Land law may look like a dry, forbidding, and not very fashionable subject. Sometimes, however, it involves broad issues of policy and the principles of municipal governance, as will be found in the present appeal.
2 This case concerns land in and around Victoria’s Inner Harbour. The parties argued vigorously over a question that ultimately amounted to whether the City of Victoria could sell zoning for, or at least commit itself to a freeze in the zoning of, a particular piece of property. They also discussed the application of an obscure subsection of the Land Title Act, R.S.B.C. 1979, c. 219, s. 108(2), the effect of which could have deprived the respondent on the cross-appeal of any interest in the property. After tracing the factual background of the case and the judgments below, I turn to these questions and to why both the appeal and the cross-appeal must be dismissed. Indeed, I conclude that any decision otherwise would go against the wording, history, and object of British Columbia’s land titles and municipal government legislation and would potentially threaten longstanding principles of municipal law jurisprudence.
II. Factual Background
3 From 1911 until the 1970s, the “Songhees lands” located around Victoria’s Inner Harbour had been used for industrial purposes by various parties who leased them from the Province of British Columbia. In the 1980s, the Province became interested in redeveloping the area. The Province and the City of Victoria engaged in discussions, and the City published a concept plan in 1984. In 1986, the Province shifted control of the land to the Crown corporation that would become the British Columbia Enterprise Corporation (“BCEC”).
4 On August 28, 1987, the City and BCEC signed an umbrella agreement called the “Songhees Master Agreement” (“Master Agreement”). Under the Master Agreement, BCEC would itself develop some of the lands in a part of the development called “Phase I”, and it would sell other land consisting of some 22 acres to a private developer in a part of the development called “Phase II”. The City Council shortly thereafter gave its official authorization to the Master Agreement at a Council meeting. The Master Agreement was registered as a restrictive covenant under s. 215 of the Land Title Act, presumably, as explained in oral argument, in order that BCEC would subject itself to the City’s legislative powers over land use (from which, as part of the provincial government, it would ordinarily be exempt).
5 Contemporaneously with these events, after two years of planning, Pacific National Investments Ltd. (“PNI”) was negotiating with BCEC to buy the Phase II area in order that it could construct a commercial and residential development on this land. Under the purchase agreement, PNI would take over BCEC’s rights and obligations under the Master Agreement as successor to BCEC. This meant that PNI would fulfill BCEC’s commitments, among others, with respect to providing for roads, parkland, a seawall, and walking paths. PNI envisioned its development as eventually including three-storey structures on platforms on two proposed water lots within the Phase II area. As found by the trial judge ([1996] B.C.J. No. 2523 (QL), at para. 22), what PNI would pay for the land obviously depended on what kinds of developments it might have the opportunity to undertake. PNI’s agreement to purchase the land from BCEC was binding only if the City granted the subdivision of the Phase II land into five lots and passed the requisite zoning.
6 The City granted the subdivision and passed the zoning that would give PNI an opportunity to develop the land as it envisioned, this zoning permitting three-storey structures with mixed commercial and residential uses on the proposed water lots. In 1988, PNI deposited subdivision plan 47008, which would subdivide the Phase II land into five lots. These included Lots 3 and 4, the two water lots that have been the subject of so much litigation in this case. Most of the area of Lots 3 and 4 was covered by water when the subdivision plan was deposited and at other relevant times. Immediately to the north would be parkland and an area set aside for roads. Since the lands set aside for parks and roads were lands set aside for the Crown, Lots 3 and 4 thereby adjoined Crown lands. The City of Victoria would take the position in its reply to PNI’s claim that these specific details about the lots triggered a special section, s. 108(2), of the Land Title Act when PNI deposited the subdivision plan. Under s. 108(2), according to the City, title to the lots would have reverted to the Crown upon the filing of the subdivision plan.
7 In any case, the initial development by PNI did not take place on Lots 3 and 4. It began with landscaping of the parks and the other servicing work that it had to do to fulfill its obligations. It constructed condominiums on the south half of Lot 2 and began development on Lots 1 and 5, the other upland lots. No buildings were put up on the water lots. Through the sale of Lots 1 and 5 and the developed half of Lot 2, the trial judge found, at para. 41, that PNI recovered about $7 million compared to its costs for all the Phase II lands of $5 million; in other words, with land remaining to sell, PNI already had a 40 percent profit.
8 PNI’s development of residential property amid landscaped parks and near the newly constructed seawall resulted in the creation of a peaceful, tranquil setting. Residents and visitors would frolic in the parks and might stroll along the seawall to watch the sunset.
9 So, as the trial judge noted at para. 17, it was not surprising when those enjoying this oasis of tranquility objected to the plans that PNI brought forth for Lots 3 and 4. About five years after PNI purchased the land and began development on the other lots, PNI’s architect had designed for the water lots three-storey edifices that would sit atop concrete slabs. Such buildings were allowed under the City’s 1987 zoning by-law. The concrete slabs would rest on piles going down into the Harbour. With a combination of restaurants and other commercial establishments planned in conjunction with additional residential development, PNI aspired to the creation of a waterfront that would be full of people, energy, and noise.
10 As the public became aware of these plans that would transform the harbourfront as they now knew it, they began to express their discontent. They voiced their concerns to their elected representatives on the City Council, and all but one member of the Council voted on August 26, 1993 to rezone the water lots so as to prevent additional residential development on them and so as to limit buildings on these lots to one storey in height. In implementing new limits, the Council asserted that it was trying to strike a balance appropriate to the values and interests of the community in 1993 and that, in so doing, it was not bound by the zoning adopted by a previous council.
11 Because this rezoning would significantly impact on PNI’s intentions for these lots, PNI took the position that this “down-zoning” was in breach of the City’s implied obligations under the Master Agreement and thus infringed PNI’s rights as successor to BCEC under the Master Agreement. Accordingly, it sued for breach of contract. Alternatively, it claimed restitution for unjust enrichment for the parks and other amenities that it had constructed and from which the City would benefit. With major issues at stake, the matter has gradually made its way toward our Court.
III. Judicial History
A. British Columbia Supreme Court, [1996] B.C.J. No. 2523 (QL)
12 In the British Columbia Supreme Court trial before Mackenzie J., PNI claimed against the City for damages for breach of contract or, alternatively, restitution for unjust enrichment. After considering one preliminary issue, the trial judge held that the City was liable to pay damages and, thus, did not consider the alternative argument on restitution.
13 On a preliminary question at a voir dire, the City argued that s. 108(2) of the Land Title Act had operated to vest Lots 3 and 4 in the Province when PNI deposited its subdivision plan at the land titles office. This would mean that PNI did not even own the land that had given rise to its claim against the City. The trial judge rejected this argument, holding that s. 108(2) did not apply to areas within subdivided lots on the subdivision plan but only to remainders within the titled land. Thus, it did not apply to Lots 3 and 4.
14 On the contractual issue, the trial judge was prepared to find for PNI. Although there was no explicit term to this effect, he considered that there was a necessary implication in the Master Agreement that the City’s zoning would remain in place for a reasonable period of time. Such an implied term did not bind future councils to particular zoning but simply dictated that a future council would be liable for damages if it broke this contractual term. In arriving at his conclusion that it was appropriate to find this implied term, the trial judge took into consideration the policy reasons that “[t]o the extent that certainty reduces business risk, it reduces the cost of development . . .” (para. 39) and that “[t]he members of council . . . were in the best position to assess public attitudes and the risk that those attitudes might change during the course of a development intended to be built over a period of time” (para. 40). The trial judge found that PNI had proceeded within a reasonable time in the circumstances. He rejected any argument that the City was exempt from paying damages when it breached a contract. Therefore, in his written judgment, he held the City liable for breach of contract.
15 The trial judge did not reach any conclusion on the quantum of damages, which he considered was still very much a live issue, nor on the alternative claim of restitution for unjust enrichment.
B. British Columbia Court of Appeal (1998), 58 B.C.L.R. (3d) 390
16 Esson J.A. wrote for a unanimous Court of Appeal. He set aside the trial judgment and remitted the matter for trial on the remaining issue of restitution for unjust enrichment.
17 In the judgment, Esson J.A. had to consider first the City’s attempt to revive the s. 108(2) argument from the voir dire. Based on principles of indefeasibility of title, he came close to saying that the City had no standing to make the argument. In any event, the City lost on the merits of the point. Esson J.A. considered that the obscure language of s. 108(2) was directed toward the recovery of foreshore previously granted away and thus did not apply to the case at bar. Indeed, he considered that any application of s. 108(2) here would lead to an absurd and unconscionable result. Thus, the Court of Appeal’s judgment rejected the City’s argument on this point and even went on to make a special costs award to show its disdain for the argument.
18 On the contractual issue, Esson J.A referred first to the foundational principle that a municipal council cannot bind future councils. Previous legislation in British Columbia had made special provisions for a municipality to do just this in certain circumstances, but this legislation had been repealed. In the absence of that kind of legislation, the proper approach to municipal powers was to interpret them so that a present council could not bind future citizens. Based on Vancouver v. Registrar Vancouver Land Registration District, [1955] 2 D.L.R. 709 (B.C.C.A.), and Ingledew’s Ltd. v. City of Vancouver (1967), 61 D.L.R. (2d) 41 (B.C.S.C.), Esson J.A. held that even making the City liable for damages could effectively bind a future municipal government. In the context of an agreement like the alleged implied term, Esson J.A. concluded that the City lacked the power to fetter future councils.
19 Moreover, Esson J.A. considered that s. 972(1) of the Municipal Act, R.S.B.C. 1979, c. 290, created a statutory bar on claims against a municipality related to changes in value from changed zoning. The legislature had created one exception to this in s. 972(2). It could have created other exceptions, but it did not. This further supported Esson J.A.’s view that the scheme of the legislation was against a council being liable on implied terms like in the case at bar. Esson J.A. considered that these kinds of policy questions were appropriately questions for the legislature.
20 Esson J.A. concluded, then, that it was doubtful that contracting not to down-zone would be intra vires. However, he preferred to rule based on whether the allegedly implied term was actually implicit or not. On his reading of the record, there had been acknowledgments in the negotiation process that the City retained ultimate control over matters like zoning. After examining the business efficacy rule, he stated that the term could not be implied in fact because the City would not have agreed to it and could not be implied in law because it contradicted the legislature’s pronounced policy. Thus, the implication of the term had to be set aside.
21 In the circumstances, Esson J.A., writing for the unanimous Court of Appeal, held that the alleged term could not be implied and would likely be ultra vires. Thus, the City could not be liable in contract. However, because the matter had not been dealt with below, the case would be remitted for trial on the unjust enrichment issue.
IV. Relevant Statutory Provisions
22 Land Title Act, R.S.B.C. 1979, c. 219 (now R.S.B.C. 1996, c. 250)
23. (1) Every indefeasible title, as long as it remains in force and uncancelled, shall be conclusive evidence at law and in equity, as against the Crown and all other persons, that the person named in the title is indefeasibly entitled to an estate in fee simple to the land described in the indefeasible title, subject to. . . .
108. . . .
(2) Where the subdivided area shown in and included in a subdivision or reference plan deposited in the land title office before or after this section comes into force adjoins land covered by water, and the land is included in the subdivider’s indefeasible title and adjoins land the title to which is vested in Her Majesty the Queen in right of the Province, the deposit shall be deemed to be a transfer in fee simple of the first mentioned land to Her Majesty the Queen in right of the Province, and the title of the registered owner to the first mentioned land covered by water shall be deemed to be extinguished.
215. (1) A covenant, whether of a negative or positive nature,
(a) in respect of
(i) the use of land; or
(ii) the use of a building on or to be erected on land;
(b) that land is or is not to be built on;
(c) that land is not to be subdivided, or if subdivision is permitted by the covenant, is not to be subdivided except in accordance with the covenant;
or
(d) that several parcels of land designated in the covenant and registered under one or more indefeasible titles are not to be sold or transferred separately
in favour of the Crown or a Crown corporation or agency or of a municipality or a regional district, in this section referred to as the “covenantee”, may be registered as a charge against the title to that land and is enforceable against the covenantor and his successors in title, even if the covenant is not annexed to land owned by the covenantee.
. . .
(3) Where an instrument contains a covenant registrable under this section, the covenant is binding on the covenantee and his successors in title, notwithstanding that the instrument or other disposition has not been signed by the covenantee.
Municipal Act, R.S.B.C. 1979, c. 290 (now R.S.B.C. 1996, c. 323)
963. (1) A local government may, by bylaw,
(a) divide the whole or part of the municipality or regional district, as the case may be, into zones, name each zone and show by map or describe by legal description the boundaries of the zones,
(b) limit the vertical extent of a zone and provide other zones above or below it, and
(c) regulate within the zones
(i) the use of land, buildings and structures,
(ii) the density of the use of land, buildings and structures, and
(iii) the siting, size and dimensions of
(A) buildings and structures, and
(B) uses that are permitted on the land, and
(d) regulate the shape, dimensions and area, including the establishment of minimum and maximum sizes, of all parcels of land that may be created by subdivision, and
(i) the regulations may be different for different areas, and
(ii) the boundaries of those areas need not be the same as the boundaries of zones created under subsection 1(a).
(2) The regulations under subsection (1) may be different for different
(a) zones,
(b) uses within a zone,
(c) standards of works and services provided, and
(d) siting circumstances
as specified in the bylaw.
(3) The power to regulate under subsection (1) includes the power to prohibit any use or uses in any zone or zones.
972. (1) Compensation is not payable to any person for any reduction in the value of that person’s interest in land, or for any loss or damages that result from the adoption of an official community plan, a rural land use bylaw or a bylaw under this Division or the issue of a permit under Division (5).
980. . . .
(5) A local government may issue more than one permit for an area of land, and the land shall be developed strictly in accordance with the permit or permits issued, which shall also be binding on the local government.
V. Issues
23 There are two basic issues in this case. First, on the appeal, the question is whether the City was liable to pay damages under an implied contractual term that the municipality would not rezone before the expiration of a reasonable period of time. Second, on the cross-appeal, the question is whether the City can successfully argue that s. 108(2) of the Land Title Act means that PNI does not even have title to the land in question. I turn now to analyzing these questions.
VI. Analysis
24 If we were to allow the City’s cross-appeal, PNI would no longer have title to the land in question, and the appeal itself would thus become meaningless. Thus, I propose to deal with the cross-appeal first. After explaining why it must be dismissed, I will then turn to the appeal itself and why it too must not be allowed.
A. Does Section 108(2) of the Land Title Act Mean that PNI Does Not even Have Title to the Land in Question?
25 The cross-appeal presents a discrete, technical problem of statutory interpretation. It has ultimately consisted of much argument on the small, obscure, and even somewhat peculiar s. 108(2) of British Columbia’s Land Title Act. This subsection provides in certain circumstances for a deemed transfer of title to the Crown and extinguishment of fee simple. I can find no good reason to interfere with the British Columbia Court of Appeal’s interpretation of this subsection of their provincial statute. Indeed, on the contrary, there is solid reason to reject the City’s interpretation and to affirm the conclusion reached by both levels of courts in British Columbia.
26 In interpreting legislation, our Court and its members must be guided by long-standing and well-accepted principles of statutory interpretation. One such principle states that potentially confiscatory legislation ought to be construed cautiously so as not to strip individuals of their rights without the legislation being clear as to this intent. As described by P.-A. Côté, The Interpretation of Legislation in Canada (3rd ed. 2000), at p. 482, “encroachments on the enjoyment of property should be interpreted rigourously and strictly. . . . The courts require that the legislature express himself extremely clearly where there is an intention to expropriate or confiscate without compensation.” (See also Leiriao v. Val-Bélair (Town), [1991] 3 S.C.R. 349, at p. 357; Hongkong Bank of Canada v. Wheeler Holdings Ltd., [1993] 1 S.C.R. 167, at p. 197.)
27 Given s. 108(2)’s clear confiscatory effect, the lower courts have appropriately given it a strict interpretation and thus avoided what the Court of Appeal termed “a result that could fairly be called absurd and unconscionable” (para. 15). The trial judge held in the oral hearing on the voir dire that a necessary implication of the subsection’s wording was that the subsection did not apply to any subdivided area itself but simply to adjoining land. The Court of Appeal upheld the trial judge’s “reasonable interpretation [that] accords with the purpose of the enactment” (para. 15). I too consider thi