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In Victoria, a deal may not be a deal
December 17, 2000

A dispute between a developer and the City of Victoria was the subject of a decision of the Supreme Court of Canada released on December 14th.

The case, known as Pacific National Investments Ltd. v. Victoria (City) involves the Songhees lands which front on Victoria's Inner Harbour. The land was developed in the late 1980's and early 1990's pursuant to a 1987 master agreement between BCEC, an agency of the Provincial Government, and the City of Victoria. The agreement was approved by city council and registered as a covenant against title to the property. Pacific National stepped into BCEC's position when it purchased some of the land affected by the master agreement. The agreement required the City to rezone the property, which it did. Pacific National was required to and did provide numerous public amenities, including many offsite works, in return for the right to develop. Those amenities had a value in excess of $2.5 million.

After three of the five planned phases were completed the City received complaints about the plans for development of the remaining two phases. These complaints came from residents who had purchased residential units in the first three phases. These residents were opposed to any further development of the Pacific National property. In response to the protest, the City rezoned the remaining two parcels and imposed other development restrictions that made it impossible for Pacific National to proceed.

Pacific National sued the City for breach of contract. It alleged that the City had breached an implied obligation not to rezone the land. In the alternative, it asked for restitution for unjust enrichment in relation to the value of the public amenities that it had paid for.

At trial, Pacific National won on the breach of contract argument. On the first appeal, the B.C. Appeal Court set aside the judgment and directed that the matter go back to trial on the unjust enrichment issue. The Supreme Court of Canada dismissed the further appeal. The court concluded that a long established rule that a municipality cannot contract for zoning was applicable to this case. The city therefore did not have the power to make the agreement. This decision is noteworthy because it contains a strong dissenting opinion from three of the seven members of the court who heard the appeal.

The Supreme Court decision does not resolve all of the outstanding issues. The court considered only the breach of contract issue. The unjust enrichment issue remains outstanding.

Pacific National Investments Ltd. was represented by Ted Hanman and John Alexander of the Victoria firm of Cox, Taylor. Guy McDannold, of Staples McDannold Stewart, also of Victoria, appeared for the City.

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