1022049 Alberta Ltd. Plaintiff - v. -, 2013 ABQB 111

Court of Queen ’ s Bench of Alberta Citation: 1022049 Alberta Ltd. v. Medicine Hat (City), 2013 ABQB 111 Date: 20130219 Docket: 0501 16358 Registry: Calgary Between: 1022049 Alberta Ltd. Plaintiff - and - The City of Medicine Hat, Dale Arnold, Fred Meyer, John Doe and Jane Doe Defendants _______________________________________________________ Reasons for Judgment of J.T. Prowse, Q.C.

Master in Chambers _______________________________________________________ Damages arising from the shutting down of a nightclub [ 1 ] The plaintiff 1022049 Alberta Ltd. (the “Club”), owned and operated the Electric Roadhouse nightclub in Medicine Hat, Alberta . It went out of business when the City of Medicine Hat suspended, and then refused to renew, its business licence. [ 2 ] The Club commenced these proceedings for damages against the City and now seeks permission to amend its pleadings.

The City opposes the application to amend. [ 3 ] My conclusion is that the proposed amendments raise claims which are hopeless. Accordingly, I decline to permit the Club to make the amendments. The two reasons for my ruling, set out in detail below, are that:

- the amendments purport to raise a claim against the City in negligence for the manner in which the City carried out a legislative or quasi-judicial function, which is not a claim allowed at common law; and - the amendments are based on an inference that the City cancelled the Club’s business licence because they were unable to find a way to cancel the Club’s development permit. This argument is barred by the doctrine of res judicata . Background chronology [ 4 ] I will set out a brief history of the events and the prior litigation between the Club and the City.

The history of the litigation is relevant to the issue of res judicata with respect to whether the City cancelled the Club’s business licence because it failed in its attempts to cancel the Club’s development permit. - Aug 13, 2003 The Club applied for a development permit. - Aug. 20, 2003 A City development officer approved a development permit. - Aug. 23, 2003 The approval of the development permit was advertised in a local newspaper, giving members of the public 14 days to object.

No objections were received. - October 23, 2003 The Club opened. - Nov. 27, 2003 A business licence was issued. - Dec. 5, 2003 The first of 83 tickets for noise violation was issued. - April 19, 2004 The City passed a resolution asking the Municipal Planning Commission (“MPC”) to set aside the development permit. - June 29, 2004 The MPC considered a motion that “the [development permit] be cancelled as it was issued in error as [the nightclub] is neither a permitted nor a discretionary use”.

The motion was not carried. - August 3, 2004 The City suspended the Club’s licence, citing noise complaints. - Aug 9, 2004 The Development Appeal Board (“DAB”) refused to hear the City’s appeal of the MPC’s refusal to set aside the development permit as the City’s appeal was out of time. - Sept. 23, 2004 The City refused the Club’s appeal against its business licence suspension. - Sept. 24, 2004 An order was granted by the Court of Queen’s Bench staying the City’s decision to suspend the Club’s business licence until a judicial review of the City’s decision could be heard in the Court of Queen’s Bench.

The Club was allowed to operate in

the meantime provided it did not exceed certain noise levels in its operations. - Nov. 4, 2004 The City refused the Club’s application to renew its business licence. - March 3, 2005 Justice Erb refused the Club’s application to set aside the business licence suspension. - Nov. 17, 2005 The Club issued two separate Statements of Claim against the City.

The first Statement of Claim (the “Licence Revocation action”) alleged that the City had decided to put the Club out of business and, toaccomplish this goal, had in bad faith laid numerous charges against the Club for breaching the City’s noise bylaw, and then terminatedthe Club’s business licence. The second Statement of Claim (the “Occupancy Load action”) alleged damages because the occupancy permit issued by the City hadbeen reduced from 850 occupants to 425 occupants.

It is this second statement of claim which the Club now seeks to amend. - March 28, 2007 The Alberta Court of Appeal dismissed the Club’s appeal from Justice Erb’s decision upholding the businesslicence suspension. The Court of Appeal dealt with the allegation that the City’s refusal to renew the licence was an improper attempt tocontrol land use. It held that Justice Erb correctly concluded that there was nothing in the record to support that allegation. - Feb 18, 2009 Master Waller struck out the Licence Revocation Action based on res judicata.

He held that the question of whether the City had acted with improper motives in suspending the Club’s licence had beendecided in the City’s favour by Justice Erb, whose decision was upheld by the Court of Appeal. Accordingly that issue could not be re-litigated in the Licence Revocation Action. - Sept. 30, 2009 The Club’s appeal from Master Waller’s decision was dismissed.

The Club’s proposed amendment to the Occupancy Load action [5] The Club seeks permission to amend its claim by adding two alternative claims to the Occupancy Load action as follows: - the development officer was negligent in issuing a development permit when he ought to have realized that the proposed use(“Entertainment Establishment”) was neither a permitted nor discretionary use under the relevant zoning bylaw. - even if the proposed use was a permitted or discretionary use, the development officer was negligent in not realizing that allowing anEntertainment Establishment in that location would inevitable lead to a clash with nearby seniors’ residences necessitating the eventualshutting down of the nightclub.

Was the development officer’s decision legislative, quasi-judicial or administrative? [6] Both parties cite a line of cases which establish that one cannot sue a municipality in negligence for the manner in which themunicipality carries out legislative or quasi-judicial functions. Examples of such cases are: Welbridge Holdings Ltd. v. GreaterWinnipeg, (SCC), [1971] S.C.R. 957, [1972] 3 W.W.R. 433, 22 D.L.R. (3d) 470, 1970 CarswellMan 33; and Bowen v.Edmonton (No. 2), (AB KB), [1977] 6 W.W.R. 344, 3 M.P.L.R. 129, 4 C.C.L.T. 105, 8 A.R. 336, 80 D.L.R. (3d)501, 1977 CarswellAlta 242.

[7] The Club does not contest this proposition, but says that the development officer in question acted in an administrativecapacity rather than a legislative or quasi-judicial capacity. The Club points to Becze v. Edmonton, (AB KB), 42A.L.R. (3d) 192, 190 A.R. 93, 34 M.P.L.R. (2d) 94 (Alta.Q.B.), as an example of a City being successfully sued for an administrativeerror. [8] In Becze, the Development Appeal Board approved a development based on plans submitted by an architect namedWensley. The developer sent in a revised set of plans done by an architect named Sigurdson.

Unfortunately, the secretary for the DABmade an administrative error. She signed the Sigurdson plans thinking they were the Wensley plans. Construction occurred based on theSigurdson plans. One could not build according to the Sigurdson plans without trespassing on the plaintiff’s land, which is exactly whathappened. The plaintiff was unable to stop the work because everyone relied on the secretary’s signature as proof that the plans hadbeen approved by the DAB.

The court concluded that the negligence occurred in carrying out an administrative act as opposed to alegislative or quasi-judicial act. [9] Can you categorize the development officer’s approval of the Club’s development permit application as an administrative act? Ithink not. I refer to two indicia. [10] First, the development officer made his approval of the development permit conditional on certain ‘soft landscaping’ beinginstalled along the front of the property. Who benefited from this ‘soft landscaping’?

It was clearly for the benefit of the public - thepublic who lived in the area and the public who passed by. When you make a decision of a discretionary nature taking into considerationthe interest of the public, you are not exercising an administrative function. You are exercising either a legislative or quasi-judicialfunction. [11] Second, the granting of the development permit was advertised in a local newspaper, and then there was a 14 day wait period tosee if there were any appeals. Why was there a wait period? Obviously to see if members of the public wanted to make objection.

Aprocess where submissions from the public are contemplated is a legislative or quasi-judicial function, not an administrative function. [12] The Club does not challenge the proposition that deciding what types of land use should be allowed in which geographic areas ina municipality is generally a legislative or quasi-judicial function, in that these decisions are discretionary and primarily take intoaccount the public interest.

What the Club argues is that once the City has created a bylaw which does not allow a development officerthe discretion to approve an “Entertainment Establishment” in the subject geographic area, then the error of this development officer ingranting approval is by its nature an administrative error. [13] The problem with the Club’s argument is that it attempts to divide the City’s land use function into components, labelling someof them as ‘administrative’ and others as ‘legislative or judicial’, and then bring a suit for administrative errors, ignoring the fact that theerrors were made in the context of a legislative function.

Case law establishes that a composite function which involves both legislative,judicial and administrative duties is overall to be considered as quasi-judicial. Support for this proposition is found in Harvie v. Calgary(City) (Regional Planning Commission), 1978 ALTASCAD 361 , 1978 CarswellAlta 172, 8 Alta.L.R. (2d) 166, 12 A.R. 505,94 DLR (3d) 49 (Alta.S.C.A.D.) at paragraphs 28 to 30: This is not to say that the two functions must necessarily be compartmentalized in the analysis of function by a court, or that anadministrative function can in all cases be divorced from interplay with the judicial function.

As pointed out in Bowen, a tribunal may inthe course of its exercise of jurisdiction perform some combination of functions ... A composite function which involves both judicial and administrative duties is in my view properly designated as quasi-judicial ...

Insuch a case, the administrative element does not submerge the judicial element; the function being composite, it is the effect of thedecision of the tribunal on such rights or interests as are claimed by the complainant, as seem by the court, that is to be taken intoaccount in determining whether, in the final result, there is an effective judicial component within the accepted criteria. [14] In my view, the function being carried out by the City in this case was primarily legislative (land use planning) and thatcategorization, and the immunity from tort claims which comes with it, cannot be overcome by isolating and focussing on administrativesteps which form part of the overall process. [15] I find that the amendments proposed by the Club are hopeless, as they attempt to raise a claim for negligence for the manner in

which the City carried out a legislative or quasi-judicial function. In case I am in error in that conclusion, I will also consider the issue of causation and res judicata .

Whether the issuance of the development permit was the proximate cause of the loss incurred by the Club [ 16 ] The Club’s amendments assert that the City’s negligence resulted in the Club being issued a development permit when it should not have been issued a development permit. [ 17 ] If a municipality issues a development permit that it should not have issued, it is easy to see how this might lead to the permit eventually being revoked and the developer losing funds spent in reliance on the development permit. But that is not what happened here. The development permit was never cancelled.

The nightclub was shut down because its business licence was cancelled, not because the development permit was cancelled. [ 18 ] One of the requirements of a cause of action in negligence is that “the conduct of the defendant [City] must be a proximate cause of the loss or, stated in another way, the damage should not be too remote such as to bar or reduce recovery”: Allen M.

Linden & Bruce Feldhusen, Canadian Tort Law , 9 th ed. (Toronto: LexisNexis Butterworths, 2011) at p.115. [ 19 ] How does the Club show that the closure of its business, due to cancellation of its business licence, was caused by the improper issuance of a development permit? By asserting that the City made the land use error of issuing a development permit for an “Entertainment Establishment”and then improperly used its licencing authority to correct this land use error by cancelling the Club’s business licence.

This is the theory behind the Plaintiff’s proposed amendments. [ 20 ] Counsel for the Club confirmed this theory by acceding during argument to my

summary of the Club’s position as follows (words in square brackets added for context): And so to me, what your answer to that is ... I mean you’re edging a very close line, that in fact, the shutting down through the licensing function was as a result of not being - the City used that function because they couldn’t use - they couldn’t withdraw [the development permit].

They tried to and failed to withdraw the development permit and so therefore [they used the licensing function] [ 21 ] This allegation, that the City cancelled the Club’s licence as a means of land use control, was argued seven years ago before Justice Erb. Justice Erb rejected the Club’s argument. She found that the City had not used its authority to issue or cancel business licences for land use purposes.

Justice Erb’s decision was upheld by the Court of Appeal, which commented “none of the evidence relied upon to refuse the business licence can be said to relate to land use”. [ 22 ] A few months after Justice Erb made her decision, the Club commenced the Licence Revocation action.

It alleged that the City had cancelled the Club’s business licence for improper reasons, as follows: - the City approved a development permit in August of 2003; - in reliance on the development permit the Club expended considerable funds on the nightclub; - in November of 2003 the City issued a business licence to the Club; - in December of 2003 the Club received the first of 83 violation tickets under the City’s anti-noise bylaw;

- the City decided to put the Club out of business because of political pressure from certain citizens of Medicine Hat to shut down an ‘immoral’ business; - in April of 2004, the City asked the MPC to revoke the Club’s development permit; - in August of 2004 the City appealed the MPC’s refusal to cancel the development permit to the DAB, which declined to hear the City’s appeal as being out of time; and, - having failed to have the development permit cancelled, the City then redirected its efforts toward suspending or revoking the Club’s business licence. [ 23 ] Master Waller dismissed the Licence Revocation action on February 18, 2009.

He ruled that the issues raised were barred by the doctrine of res judicata , and his decision was upheld on appeal. [ 24 ] The Club argued unsuccessfully before Master Waller that Justice Erb’s decision dealt with a different theory as to why the City cancelled the Club’s licence.

Justice Erb’s decision dealt with the City allegedly using its authority to cancel licences to control land use, whereas the Licence Revocation action focussed on the allegation that the City had used its authority to cancel the Club’s business licence to curry favour with voters who wanted an allegedly ‘immoral’ business to be shut down.

However, as stated by Master Waller in his decision: The law of res judicata in this province has always been that not only are issues which have previously been determined caught by the principle but also issues which could have been raised at an earlier hearing. [ 25 ] The Club had argued before Justice Erb that the City had (what Master Waller categorized as) “bleak motives” for cancelling the Club’s business licence. The Club failed in that argument.

Master Waller struck out the Licence Revocation action as an attempt to re- litigate its assertion of bleak motives on a slightly different argument, which could have been attempted before Justice Erb. [ 26 ] Now, four years after Master Waller’s decision, the Club is attempting to amend its pleadings so that it can yet again argue that the City had bleak motives for cancelling the Club’s licence. The doctrine of res judicata prevents the Club from raising this issue again. Conclusion [ 27 ] I deny the Club’s application to amend its statement of claim.

In my view, it is plain and obvious that the proposed amendments are hopeless for two separate reasons, each of which is sufficient to deny the application. Firstly, the amendments purport to raise a claim against the City in negligence for the manner in which the City carried out a legislative or quasi-judicial function, a claim which is barred at common law. Secondly, the amendments attempt to establish that the City cancelled the Club’s business licence for land use planning reasons.

This claim has already conclusively decided in favour of the City and, under the doctrine of res judicata , cannot be revisited. [ 28 ] If the parties cannot agree on costs of the application they can approach me for a ruling in that regard. Heard on the 22 nd day of January, 2013. Dated at the City of Calgary, Alberta this 19 th day of February, 2013.

J.T. Prowse, Q.C. M.C.C.Q.B.A. Appearances: Bryce R. Farrell Niblock & Company LLP for the Applicant / Plaintiff Dennis K. Yasui, Q.C. Brownlee LLP for the Defendants / Respondents