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Articles & Publications - Alberta, NWT & Nunavut CLC Member

February 2017

When are municipalities granted immunity in a civil action?

Case Study: Keyland Development Corporation v Rocky View

John H.J. Gescher
John H.J. Gescher,
Associate Lawyer

Written by John H.J. Gescher, Brownlee LLP

Recently in Alberta, there have been a number of cases where a municipality has been sued in a civil action concerning a development while there is an ongoing subdivision application being considered by the municipality. One such case is Keyland Developments Corporation v. Rocky View County and the Town of Cochrane (Municipal District No 44), 2016 ABQB 735.

Keyland Development Corporation brought an action against Rocky View County and the Town of Cochrane and employees of the town. This action related to Keyland's attempt to develop a new residential subdivision called Cochrane Crossing on land that it owned in the town. Keyland also brought a related action against the Province of Alberta.

The actions commenced by Keyland related to problems with access to their lands and various applications to the municipalities and the province related to the same. The actions also related to problems the Plaintiff had in obtaining subdivision approval, as well as an annexation agreement entered into by the town and the county.

Keyland ultimately sold the lands claiming to be frustrated in the development process. They argued the actions of the Defendants deprived them of the opportunity to generate profits from developing the Cochrane Crossing subdivision, including the building and then the sale of homes.

The issue, in this case, was whether to dismiss Keyland's claims against the municipalities and the province by way of summary judgment.

The Court examined immunity for policy-based decisions. The Court stated that in cases where a municipal body or its actors were found negligent, "the tasks that the court found to be negligent are purely operational matters or negligence in the application of policy decisions" (paragraph 161).

The Court also stated that while it generally agrees with the statement that "the steps the municipality (or county) takes to reach its legislative decision would be immune", there are "situations in which those steps could be considered to be operational in nature" (paragraph 162).

...municipalities are immune from liability... provided they make those decisions... in good faith, or they are not patently unreasonable.

Finally, the Court confirmed the following in regards to immunity for policy-based decisions: "when a governmental authority, including a municipality, makes a policy decision, a court will question that decision only when ‘the policy decision is shown to have been made in bad faith or in circumstances where it is so patently unreasonable that it exceeds governmental discretion'" (paragraph 171).

Therefore, "municipalities are immune from liability when their decisions or functions are policy-based, legislative or quasi-judicial, provided they make those decisions and exercise those functions in good faith, or they are not patently unreasonable" (paragraph 171).

The Court considered Keyland's allegations regarding bad faith. The Court discussed what constitutes bad faith. In regards to this, the Court stated that claims for bad faith are not independently actionable. Therefore, "if a plaintiff's bad faith claim is a part of a tort that the defendants have committed, the court must consider whether the defendants are guilty of bad faith. If the plaintiff is not able to ground its bad faith claim onto a tort, the court need not consider it" (paragraph 178).

The Court found that the municipalities and the province were not guilty of civil conspiracy or misfeasance in public office as alleged by the Plaintiff. There was no bad faith on the part of the defendants.

As well, the plaintiff's claims for unjust enrichment and breach of the common law right of access did not succeed. As all of the Plaintiff's claims had no merit, summary judgment was granted.

It is important for municipalities to understand their potential exposure to liability. As outlined in this case, municipalities are generally immune from liability for policy-based decisions. The exception to this immunity is in cases where a municipality acts in bad faith when making policy based decisions or if the decision exceeds governmental discretion for being patently unreasonable.

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