An Ottawa developer purchased a property to develop as a condominium project. In the rezoning application process the developer was not informed that a municipal easement contained a four foot wide water main on the edge of the project’s lot line. The nature and location of the easement meant the developer could not excavate and construct an underground parking lot as planned. This required the developer to redesign the garage and reduce the parking available, resulting in significant delays and increased construction costs. The developer sued for negligent misrepresentation during the rezoning process and sought damages of $6 million. The trial judge held the CIty owed the developer a duty of care based on their relationship, and that the City had implicitly undertaken to take reasonable care to provide to the developer accurate information on the adjacent property that was materially relevant to the development. The City failed to do that and the developer reasonably relied on the information it received from the City. The trial judge awarded the developer damages of $4.5 million.
In its 2021 decision in Charlesfort Developments Limited .v Ottawa (City) the appeal court reversed the trial judgment. It held the City did not owe a duty of care to the developer. A critical element of the required proximity between the City and the developer was the intended effect of the City’s undertaking to the developer. There must be an intention to induce the developer to rely on the City’s representations during the rezoning process. The City’s representations merely described the positions and knowledge of the parties. The scope and purpose of the City’s undertaking was to fulfil its statutory duty. It was not to assess the viability of the condominium project or to protect the developer’s economic interests. If it was, this would effectively make municipalities insurers of developers’ profits.