541788 Alberta Ltd. v. Irv Williams, 2017 ABQB 363

Court of Queen’s Bench of Alberta Citation: 541788 Alberta Ltd v Bourgeois & Company Ltd, 2017 ABQB 363 Date: 20170605 Docket: 1303 09072 Registry: Edmonton Between: 541788 Alberta Ltd. and Irv Williams Plaintiffs - and - Bourgeois & Company Ltd. Defendant _______________________________________________________ Reasons for Judgment of the Honourable Mr. Justice K.P.

Feehan _______________________________________________________ [ 1 ] 541788 Alberta Ltd. (“541”) and Irv Williams (“Williams”) bring an action in breach of contract and negligence against Bourgeois & Company Ltd. (“Bourgeois & Co”) arising out of an appraisal of the market value of real estate consisting of 11.36 acres in the Elsinore subdivision in the expanding boundaries of north Edmonton. [ 2 ] The issue before this Court on

summary trial is determination of liability; damages, if necessary, deferred by agreement of counsel. I. Brief Outline of the Facts [ 3 ] The lands in question were part of lands originally owned by the Horricks family as part of a quarter

section of farm land. In 1977, the Horricks family sold this quarter section, excluding the 11.36 acre homestead area, to a developer. The zoning of the remaining

11.36 acres was AG (agricultural), but the Neighbourhood Structure Plan indicated the most probable zoning to be RFI (single-family lots). [ 4 ] A plan of subdivision of the quarter section, excluding the 11.36 acre lands in question, was registered on September 29, 1988 (Record, pp 124-125). This plan of subdivision left undeveloped remnant parcels immediately outside the north, west, and the north boundary of the southeast portion, of the 11.36 acre lands in question.

The two northerly remnant parcels are approximately triangular in shape immediately on the northern boundary and are owned by Canterra Castlebrook General Partner Inc (“Canterra”). The narrow “shovel-shaped” strip at the southeast of the 11.36 acre lands in question is also owned by Canterra.

Concept Realty Ltd (“Concept”) owned the two long narrow remnant parcels, divided by a proposed roadway, on the western boundary of the 11.36 acre lands in question (Record, pp 6-7 and 127). [ 5 ] More specifically, the first northern approximately triangular remnant land comprises Lots A, B and C in Block 69, Plan 8822276; the second northern approximately triangular remnant parcel is Lot D in Block 69, Plan 8822276; the southeast shovel-shaped remnant is Lot A of Block 67, Plan 8822276; and the westerly two remnant parcels are found in NE5-54-24-W4 (Record, pp 127-145). [ 6 ] The Concept remnant parcel to the north of the proposed roadway, described on the plan of subdivision as Elsinore Place, was later purchased by the Plaintiffs and became incorporated in the Stage 1 development of the 11.36 acres.

The three Canterra remnant parcels remain extant. [ 7 ] In September or October, 2011, Irv Williams contacted members of the Horricks family to determine whether they were willing to sell the remaining 11.36 acres that had been the family homestead.

The Horricks family members indicated they were agreeable to sell those lands and the purchase price would be based upon a fair market evaluation independently determined by a duly qualified real estate appraiser (Record, p 151). [ 8 ] In early November, 2011, there was a telephone conversation between Williams and Guy Bourgeois (“Bourgeois”) in which there was apparently a 10 minute discussion about a retainer to perform this independent appraisal of the 11.36 acres.

No notes were made of that telephone conversation by either party and recollections of the detail of that conversation are vague and unhelpful (Record, pp 156 and 273-274). [ 9 ] The contract into which the parties entered, such as it was, is constituted by an exchange of emails on November 9, 2011 (Record, pp 44-46). The first email is from Bourgeois, at a personal email address, guyb@bourgeois.ab.ca, although it is signed “Guy J. Bourgeois AACI, P.App, CRP”, to irvwill@shaw.ca, addressed to “Mr. Irv Williams”.

It was “intended to provide...a quotation of fees and timing to complete an appraisal estimating the market value of the lands above mentioned”: “11.36 acres potential development land Edmonton”. Analysis of the terms of the contract is set out in detail below. [ 10 ] The return email of November 9, 2011 is from Williams Chrysler, signed by Williams, at the email address irvwill@shaw.ca, addressed to Bourgeois, with respect to the appraisal of the 11.36 acres and merely confirms: “Great, that is what I want.

Go ahead, thanks” (Record, pp 44 and 174). [ 11 ] On November 21, 2011, Bourgeois attended at the 11.36 acres to conduct a visual inspection. [ 12 ] On November 29, 2011, Bourgeois & Co provided two documents to Williams: a Letter of Transmittal (Record, pp 49-51) and an Appraisal Report (Record, pp 52-111). Utilizing a land residual cost of development approach and assuming development of 58 single-family lots, the recommended market value for the land only was $3,557,000.

Analysis of the terms of the Letter of Transmittal and Appraisal Report are also set out below. [ 13 ] Based upon the Letter of Transmittal and Appraisal Report, on July 25, 2012 a fee simple real estate purchase contract was entered into by 541, a solely owned corporation of Williams (Record, pp 113-119). Williams signed on behalf of 541 (Record, pp 112- 119). [ 14 ] The purchase price was $3,800,000 plus GST with a deposit of $600,000, allocated as $1,575,000 for buildings and $2,225,000 for land (Record, pp 113-114).

This contract was not subject to conditions, including with respect to re-zoning or subdivision (Record, p 159). The completion day was set for January 15, 2014. [ 15 ] In November, 2012, both Plaintiffs retained Kit Leitch (“Leitch”), a professional engineer and development consultant, to make an application to the City of Edmonton for re-zoning and subdivision approval for the 11.36 acre parcel (Record, p 1).

They provided him with a copy of the Appraisal Report at the time. [ 16 ] In or about January, 2013, Leitch spoke with the president of Canterra who indicated that the purchase price for all remnant lots owned by Canterra would be between $1,000,000 and $1,500,000, despite the fact that the assessed value of the remnant lots was minimal (for example, the assessed value of Lot A in Block 67 was $500; Record, p 129). [ 17 ] In February, 2013, Leitch submitted an initial proposal on behalf of the Plaintiffs to re-zone the 11.36 acre parcel from agricultural to 53 single-family lots and 70-75 low to medium-density condominium units (Record, pp 1 and 162).

He was advised by City Planners that subdivision of the 11.36 acre parcel would have to account for the remnant lots outside the boundaries of this parcel. [ 18 ] In June or July, 2013, Leitch revised the application on behalf of the Plaintiffs to propose re-zoning to single-family lots and duplexes.

The City of Edmonton would not approve re-zoning without the Plaintiffs either acquiring the remnant parcels, or in the case of Lot D, providing roadway access within the 11.36 acre parcel (Record, p 2). [ 19 ] The transfer of land from the Horricks family to 541 was registered on January 14, 2014 subject only to a zoning regulation encumbrance placed by the Minister of National Defence (Record, pp 121-122). [ 20 ] On June 12, 2014, the City of Edmonton conditionally approved a Stage 1 subdivision of 12 lots in the southwest corner of

the 11.36 acres (Record, pp 3-6). The Plaintiffs have proposed future development of Stages 2 and 3 for 41 and 40 lots respectively, but the City refused to re-zone some portions of the 11.36 acre parcel until Lot D, Block 69 and Lot A, Block 67, Plan 8822276, comprising portions of the two northern triangular remnants, have been acquired from Canterra.

Counsel advised that more recently the City had agreed to allow a green space right-of-way to be provided to Lot D, Block 69, rather than requiring either purchase or roadway access. [ 21 ] There was no evidence in this matter as to whether the Plaintiffs sought a formal relaxation from the Planning Officer or Subdivision Authority of these obligations, and if such relaxations had not been granted, whether they had appealed those decisions to the Subdivision and Development Appeal Board.

Consideration as to whether those steps would have been a more practical solution, or would have constituted mitigation of any potential damages suffered by the Plaintiffs, is therefore not before the Court on this question of liability. II. The Contract [ 22 ] On the face of the exchange of emails of November 9, 2011, the contractual parties appear to be Bourgeois or Guy Bourgeois AACI, P.App, CRP, and Williams or Williams Chrysler.

At this time there is no mention of the Plaintiff 541 or the Defendant Bourgeois & Co. [ 23 ] The lands are agreed to contain 11.36 acres, legally described as “Lot 1, Blk 1, Plan 7821490...located in the vicinity of 174 avenue and 99 street in north Edmonton”. [ 24 ] There is no dispute as to the value of the contract: $4,200 plus GST. [ 25 ] The subject matter of the email exchange of November 9, 2011 was said to be to “assist...in estimating an appropriate purchase price” for the 11.36 acres to allow those acres to be subdivided for residential purposes, and to that end to require an investigation of the “issues and costs that may be incurred in the course of acquiring and developing these lands”.

The land residual cost of development approach to be used would include the costs to produce those lots and make them available to the public.

The issue as to whether the “costs, effort and risk are viable” were to be left to Williams or Williams Chrysler (Record, pp 44-46). [ 26 ] The email indicates that the lands in question had remained in their original state while the development had proceeded all around them and that it is “clear that the highest and best use of the subject lands is to be subdivided in a fashion that is consistent with surrounding properties”. [ 27 ] The email sets out how the appraisal would be conducted: Our appraisal will investigate the issues and costs that may be incurred in the course of acquiring and developing these lands.

We intend on using a cost of development technique that shows the potential revenue from the sale of lots on these 11.36 acres over time. This approach also estimates the costs to produce those lots and make them available to the public. The net present value of the revenue, less costs, will show the price that can be paid for this parcel based on the assumptions that we make on your behalf.

From that information you should be able to determine if the costs, effort and risk are viable from your perspective. [ 28 ] Additionally, the email indicates an estimated time to complete the appraisal of “about 4 weeks” upon receiving authorization and a fee of $4,200 plus GST (Record, pp 44-46; 174-176). [ 29 ] In

summary, while the subject lands of the contract and consideration are not in issue, the identification of the parties to the contract and whether the contractual services to be rendered included identification of and the cost implications associated with having to address the remnant parcels, are in dispute. III. The Letter of Transmittal [ 30 ] The Letter of Transmittal indicates that the attached Appraisal Report contains “all of the information and analysis leading to an opinion of ‘market value’ of a vacant parcel of development land located in the Elsinore neighbourhood of north Edmonton” (Record, p 49).

The property was said to contain 11.36 acres with a “highest and best use...for redevelopment to a residential subdivision”. The purpose of the appraisal was to provide an estimate of “market value” of the “fee simple interest” in the property. The report was “prepared for the exclusive use of Mr.

Irv Williams” and not intended for any others, specifically stating: “No other may use this report for any purpose without prior written approval from the authors” (Record, p 50). [ 31 ] Conversely, but confusingly, the Appraisal Report indicates that the opinions expressed are those of Bourgeois only, not those necessarily of Bourgeois & Co (Record, pp 56 and 90), but the Affidavit sworn by Leitch indicated that Bourgeois advised him he had not personally prepared the report (Record, p 2).

Although this statement is on its face hearsay, it is admissible as an admission against interest (see Hearsay in Civil Litigation , Renke W, JCQBA, Legal Education Society of Alberta, Civil Advocacy Series: Evidence , May 2 and 4, 2017, paras 51-53; R v SGT , 2010 SCC 20 at para 20 , R v Couture , 2007 SCC 28 at para 75 ). [ 32 ] The Letter of Transmittal reflects the inspection of the 11.36 acres on November 21, 2011, and consultation with developers and the City of Edmonton Planning and Development Team to discuss issues associated with the development of the property.

It indicated that the valuator used both a direct comparison approach (gathering sales of comparable development land) and a “land

residual (cost of development technique)” approach, assuming 58 lots could be developed and marketed at prices consistent with the market (forecasting sales of lots over a defined period, deducting costs of development and discounting net results). It indicated that the direct comparison approach supported a value of between $180,000 and $330,000 per acre and the land residual cost of development approach supported a total value of $3,557,000, equating to $313,116 per acre. [ 33 ] Important assumptions in the land residual cost of development approach were set out in the Letter of Transmittal: (

a) the 11.36 acres will be developed with 58 RF1 single-family lots; (

b) construction will start in March 2012 and be completed within eight months; (

c) an absorption period of 24 months is anticipated for the sale of these lots starting in June 2012; (

d) average price will be $180,000 for standard lots and $215,000 for pie-shaped lots; (

e) development costs will be consistent with the intended development; (

f) typical developer’s profit will be 25% of all costs; (

g) discounting of residual revenue stream will be 8.5%. [ 34 ] Taking all of the assumptions into account, the Letter of Transmittal anticipated total sales revenue for 58 single-family lots of $10,860,000, total cost to produce those lots of $5,284,789, and expected developer’s profit of $1,321,197 (Record, pp 49-51). IV. The Appraisal Report [ 35 ] The Appraisal Report is set out at pp 52-111 of the Record.

Like the Letter of Transmittal, it provides that it may not “be used for any other purpose other than that of the applicant, without the previous written consent of the appraiser” (Record, p 57). [ 36 ] It indicates that the date of valuation was to be as at November 21, 2011, the highest and best use of the land was subdivision and development into approximately 58 single-family lots, and the purpose of the appraisal was to provide an estimate of market value of the fee simple interest in these 11.36 acres “to assist in the purchase and financing of the property” (Record, p 57). [ 37 ] The scope of appraisal was to be in accordance with the Canadian Uniform Standards of Professional Appraisal Practice, utilizing both the direct comparison approach and land residual cost of development approach, deducting in the latter all costs from gross revenues in the appropriate time frame and then discounting results in valuation of the property (Record, p 58). [ 38 ] Based upon a competitive and open market, a fair sale, the buyer and seller each acting prudently and knowledgeably, and assuming price is not affected by any undue stimulus, estimated market value was $3,557,000 (Record, p 59). [ 39 ] The appraisal included examination of the Elsinore Area Structure Plan and Neighbourhood Structure Plan, and reflects conversations with City of Edmonton personnel (Record, pp 66-67), including advice as to offsite levies and downstream drainage infrastructure (Record, p 68).

The Appraisal Report indicates confidence “that the future use of the subject lands will be consistent with that approved in the NSP” (Record, p 75) and that “about 58 lots can be developed on the subject parcel” (Record, p 77). [ 40 ] There is no specific mention in either the Letter of Transmittal or the Appraisal of the remnant parcels, but a review of the area outline on the aerial photographs, included only to assist the reader in visualizing the property (Record, p 57), appears to include at least some of the remnant lands within the 11.36 acres (Record, pp 52 and 72).

The copy of the included registered plan for the 11.36 acres (Record, p 73) also does not indicate any of the remnant parcels, but the lot diagram includes some or all of the remnant parcels (Record, p 77). [ 41 ] Discussion of the direct comparison approach says that the 11.36 acres of land is “imminently developable” and that “all approvals to the NSP stage are complete” (Record, p 79).

The land residual cost of development analysis estimated all costs required to produce and sell the lots, based on current market cost information (Record, p 82). [ 42 ] The land residual cost of development analysis makes significant assumptions about the number and size of lots, the sale prices of those lots, absorption period of 2.5 lots per month for 24 months with paid up sales starting June, 2012 and total sellout by May, 2014, demolition costs of the existing farm buildings, offsite levies and downstream drainage costs, taxes during construction, servicing costs over an eight month construction period starting March, 2012 and ending October, 2012, interim financing charges ending December, 2013, marketing costs, developer’s profit, and discount rate over a 27 month development and sales period (Record, pp 84- 85). [ 43 ] The assumptions and final result as set out in the Letter of Transmittal are repeated in the Appraisal (Record, pp 88-89) signed by Guy J.

Bourgeois, AACI, P.App., C.R.P., but on stationary bearing the title “Bourgeois & Company”. V.

The Parties to the Contract [ 44 ] 541 and Williams plead breach of contract by Bourgeois & Co, alleging that the Defendant failed to take appropriate and reasonable steps when conducting the appraisal by failing to take into account the existence of the remnant parcels (Statement of Claim, paras 8, 9 and 13), that the Plaintiffs acquiring those parcels was essential to the most profitable development of the subject land, and accordingly the costs of acquiring those additional lands was material to a determination of the appraised market value of the lands

(Statement of Claim, para 14). On the other hand, Bourgeois & Co says there is no privity of contract between 541 and Bourgeois & Co;it was 541, not Williams, that entered into the contract with the Horricks family, and if any damages were suffered, it was 541 thatsuffered those damages (Statement of Defence, paras 9 and 15).

In the alternative, Bourgeois & Co say that the Appraisal Report met allof the terms, requirements and objectives of the contract (Statement of Defence, paras 11, 12 and 15). [45] What is clear from the documentation is that the contract of November 9, 2011 was between Williams personally and eitherBourgeois or Guy J. Bourgeois, AACI, P.App, CRP.

I find that in any event, Bourgeois was acting on behalf of and in his capacity as anemployee of Bourgeois & Co, particularly since the Appraisal Report was on Bourgeois & Co stationary, and Bourgeois reported that hedid not personally draft the Appraisal Report. [46] It is also clear on the face of the contract that Williams’ closely held corporation, 541, is not a party to the contract. 541 wasthe sole purchaser of the 11.36 acres in question (Record, pp 113-119).

However, the parties seeking development approval from theCity of Edmonton are both 541 and Williams (Affidavit of Kit Leitch, Record, pp 1-2, paras 1, 2, 3, 4, 7 and 8). There is no requirementthat because 541 purchased the 11.36 acres, only it could apply for a development permit, change in land use designation or subdivision(see Municipal Government Act, RSA 2000, c M-26, Division 5: Land Use, ss 639-642). [47] Edmonton Zoning Bylaw no. 12800, provides in s 13.2(1)(

c) that development applicants only require “confirmation of theowner’s authorization to apply for the Development Permit”, and in s 24.2 that an applicant for re-zoning need only set out an “interest inthe property”. Likewise, the Subdivision and Development Regulations, AR 43/2002, provide in s 4 that “the owner of a parcel of land, ora person authorized by the owner of a parcel of land, may apply for subdivision of that parcel of land...”. Williams could make thedevelopment applications referenced by Leitch, in his own right, and apparently did.

If the City of Edmonton has refused suchdevelopment applications, damages, if any, are suffered not only by 541 but by Williams in his own right. There is no privity of contractissue with respect to Williams. [48] If I am mistaken in that regard, I examine below the law with respect to privity of contract. VI.

Privity of Contract [49] The concept of privity of contract is well established: “only a person who is a party to a contract can sue on it”, and to be ableto enforce a contract, “consideration must have been given by [the person claiming the benefit of the contract] to the promisor” (DunlopPneumatic Tyre Co Ltd v Selfridge & Co Ltd [1915] AC 847 at 853 (HL). [50] The strict application of the doctrine of privity of contract has been severely criticized: “The justifications offered for theprivity doctrine...are quite unconvincing” (see McCamus, JD, The Law of Contracts (2d), 2012, at 307).

It is said that the doctrine is aproduct of “circular reasoning” and “inconsistent with consideration theory” (at 307). Third party beneficiaries of a contract can enforcetheir promises in American law (Eisenberg, MA, Third Party Beneficiaries (1992), Colum. L. Rev. 1358) and New Brunswick (LawReform Act, SNB 1993, c L-1.2, s 4).

It has also been recognized that elsewhere in common law Canada: “the general rule has survived,though...its force has been significantly undermined by a growing list of exceptions to the rule” (McCamus at 308). [51] There have generally been recognized four traditional exceptions to the doctrine of privity of contract: agency, trust, collateralcontract and equitable assignment of contract. [52] In the law of agency, where a principal authorizes an agent to enter into contracts on the principal’s behalf, the principal has adirect contractual relationship with the third party (Fridman, GHL, Canadian Agency Law (2d), 2012).

However, the application of anagency analysis rests on a “finding of a genuine intention to create a relationship of agency” (McCamus at 312). There was no evidencein this case that these parties had such a genuine intention as at November 9, 2011. [53] The same problem arises with respect to a trust analysis, whereby the right to enforce the contractual obligation, a chose inaction, as a matter of trust, will only apply where it is clear that the parties actually intended to create a trust relationship. See ReSchebsman [1944] Ch 83 (CA) and Fournier Van & Storage Ltd. v.

Fournier (ON SC), [1973] 3 OR 741 (HCJ).Again, there was no evidence in this case that a clear intention to create a trust existed on November 9, 2011. [54] Similar concerns exist with respect to the exceptions of collateral contract and equitable assignment of contract. The Plaintiffsdid not adduce evidence to support the assertion that the parties had agreed, expressly or impliedly, that Williams could enter into acollateral contract within the contemplation of the parties, or equitably assign the benefit of Williams’ contract with Bourgeois orBourgeois & Co to 541.

The inference of an intended collateral contract or equitable assignment of contract would be artificial, andfurthermore, any implied term must be founded on an objective basis having regard to “the specific parties and specific contractualcontext” (Energy Fundamentals Group Inc v Veresen Inc, 2015 ONCA 514 at paras 36-38). [55] In addition to these traditional exceptions to the doctrine of privity of contract, the Supreme Court of Canada fashioned a“principled exception” in London Drugs Ltd v Kuehne & Nagel International Ltd, (SCC), [1992] 3 SCR 299, [1992]SCJ 84, and Fraser River Pile & Dredge Ltd v Can-Dive Services Ltd, (SCC), [1999] 3 SCR 108. [56] In London Drugs, a contract was entered into between a corporation and a customer.

It contained a limitation of liabilitycause which restricted the liability of the corporation to forty dollars. An action was initiated by the customer against the employees ofthe corporation who relied upon the limiting contractual provision as a defence. It was argued by the customer that the employees couldnot take advantage of the limitation of liability clause in the contract, as they were not parties to the contract.

The Supreme Court ofCanada said with respect to the doctrine of privity at 246: The doctrine of privity fails to appreciate the special considerations which arise from the relationships of employer-employee andemployer-customer. There is clearly an identity of interest between the employer and his or her employees as far as the performance ofthe employer's contractual obligations is concerned. When a person contracts with an employer for certain services, there can be little

doubt in most cases that employees will have the prime responsibilities related to the performance of the obligations which arise underthe contract. This was the case in the present appeal, clearly to the knowledge of the appellant. While such a similarity or closeness mightnot be present when an employer performs his or her obligations through someone who is not an employee, it is virtually always presentwhen employees are involved.

Of course, I am in no way suggesting that employees are a party to their employer's contracts in thetraditional sense so that they can bring an action on the contract or be sued for breach of contract.

However, when an employer and acustomer enter into a contract for services and include a clause limiting the liability of the employer for damages arising from what willnormally be conduct contemplated by the contracting parties to be performed by the employer's employees, and in fact so performed,there is simply no valid reason for denying the benefit of the clause to employees who perform the contractual obligations.

The natureand scope of the limitation of liability clause in such a case coincides essentially with the nature and scope of the contractual obligationsperformed by the third party beneficiaries (employees). [57] The Supreme Court of Canada extended this logic in Fraser River, where an owner chartered vessels to a third party charterer,insured by the owner under a hull subscription policy. The policy, a contract between the owner and the insurer, contained a waiver ofsubrogation clause which stated that the insurers waived any right of subrogation.

The vessel being towed by the charterer sank, theowner recovered from the insurers and then pursued a subrogated action against the charterer in negligence.

The charterer relied upon thewaiver of subrogation clause in the policy between the owner and insurer, even though it was not a party to that contract. [58] The Court said that London Drugs had created “a principled exception to the common law doctrine of privity of contract”(para 24), and went on to “note that it was not [its] intention in London Drugs, supra, to limit application of the principled approach tosituations involving only an employer-employee relationship” (para 31).

It said at para 32: In terms of extending the principled approach to establishing a new exception to the doctrine of privity of contract relevant to thecircumstances of the appeal, regard must be had to the emphasis in London Drugs that a new exception first and foremost must bedependent upon the intention of the contracting parties. Accordingly, extrapolating from the specific requirements as set out in LondonDrugs, the determination in general terms is made on the basis of two critical and cumulative factors: (

a) Did the parties to the contractintend to extend the benefit in question to the third party seeking to rely on the contractual provision; and (

b) Are the activitiesperformed by the third party seeking to rely on the contractual provision the very activities contemplated as coming within the scope ofthe contract in general, or the provision in particular, again as determined by reference to the intentions of the parties? [59] More recently, the Ontario Court of Appeal addressed the relaxation of the doctrine of privity of contract as a “sword” ratherthan a “shield” as had been the situation in the London Drugs and Fraser River cases.

In Brown v Belleville (City), 2013 ONCA 148,the municipality had agreed with a local farmer to maintain and repair part of a storm sewer drainage system. The first farmer sold theland to a second farmer who later sold it to the Browns, the current plaintiffs.

The Browns requested that the municipality honour itscontractual obligation to the first farmer and the municipality defended on the basis that it had no privity of contract with the plaintiff.The Court of Appeal firstly found there was an enurement clause in the original contract which clearly demonstrated it was within thecontemplation of the parties that there would be subsequent owners of the property entitled to take advantage of the contractualprovisions.

However, in obiter, the Court addressed the privity of contract issue at para 79: It is important to note at the outset that the doctrine of privity of contract is of considerably diminished force in Canada as a continuingprinciple of contract law. It has been subject to a wealth of repeated academic and judicial criticism, leading to frequent calls for lawreform in Canada and elsewhere....Several of the leading cases cited by the parties on this appeal afford abundant evidence of therelaxation of the ambit of the doctrine in particular cases.

Thus, while the doctrine survives in Canada, it persists only in weakened form. [60] On the other hand, Alberta authorities have tended to apply the principled exception to privity only when the third partybeneficiary uses the contractual term to defend an action, not when advancing a claim (see 375069 Alberta Ltd v 400411 Alberta Ltd,2000 ABQB 29 at para 43; Parwinn Developments Ltd v 375069 Alberta Ltd, 2000 ABQB 31 at para 33). [61] The issues here, therefore, are whether under the circumstances Williams and Bourgeois or Bourgeois & Co intended toextend the benefit of their contract to 541, whether the activities performed by 541, purchase of the 11.36 acres in question and thedevelopment applications referenced above, were the very activities contemplated as coming within the scope of the contract, andwhether 541 should be entitled to rely upon the principled exception to privity of contract in the context of an action for breach ofcontract, as opposed to a defence to such an action. [62] Clearly, the activities performed by 541 were the very activities contemplated by the contract between Williams andBourgeois or Bourgeois & Co: the purchase of the 11.36 acres with a view to “be subdivided in a fashion that is consistent withsurrounding properties” so as to allow “acquiring and developing these lands” (Record, p 45). [63] I am invited by Williams to take judicial notice (Supplementary Brief of the Plaintiffs, paras 25-27; and Supplementary Briefof the Plaintiff on Judicial Notice) that virtually all land acquisitions for the purpose of application for commercial development permits,change in land use designation and subdivision in Edmonton occur through bodies corporate, rather than by individuals.

The SupremeCourt of Canada said in R v Find, 2001 SCC 32, at para 48: ...a court may properly take judicial notice of facts that are either: (1) so notorious or generally accepted as not to be the subject of debateamong reasonable persons; or (2) capable of immediate and accurate demonstration by resort to readily accessible sources of indisputableaccuracy: R v Potts (1982), (ONCA), 66 CCC (2d) 219 (Ont. C.A.); J. Sopinka, S. N. Lederman and A. W.

Bryant,The Law of Evidence in Canada (2nd ed. 1999), at p 1055. (See also CED Evidence XVII.1, Judicial Notice, s 1038; Judicial Notice: Dispensing with Proof, Graesser, R, JCQBA, Legal EducationSociety of Alberta, Civil Advocacy Series: Evidence, May 2 and 4, 2017; R v Meadowbrook Management Ltd, 2001 ABPC 245 at para 13, quoting from Canada Post Corp v Smith (1994), (ON SC), 118 DLR (4th) 454 (Ont Ct Gen Div); R v Spence,(2005) 2005 SCC 71 , 3 SCR 458 at paras 53-57 and 60-62; and Sopinka, Lederman & Bryant, The Law of Evidence in Canada, 4th, 2014, at 1322).

[ 64 ] The Supreme Court of Canada said in Southcott Estates Inc v Toronto Catholic District School Board , 2012 SCC 51 , at para 1 : “Real estate developers frequently create single-purpose corporations for the sole purpose of purchasing and developing properties for profit.” [ 65 ] A review of the matters before the City of Edmonton Planning Officer, Subdivision Authority, and the Subdivision and Development Appeal Board bears that out.

It would not have been a surprise to any of Williams, Bourgeois or Bourgeois & Co that Williams would use his closely held corporation for the purposes of purchase and development.

I therefore take judicial notice of that practice. [ 66 ] Finally, I conclude that the law has evolved with respect to the principled exception to the doctrine of privity of contract since the Alberta decisions noted above which would limit the use of that exception to matters of defence, rather than advancing a claim, and in that regard, I would adopt the position of the Ontario Court of Appeal in Brown . [ 67 ] As a result, had I determined it was necessary to determine the privity of contract issue to dispose of this matter, I would have found that 541, although not a party to the contract between Williams and Bourgeois or Bourgeois & Co, is entitled to rely upon that contract as a third party beneficiary in advancing its claim in this matter.

VII. The Breach of Contract [ 68 ] The email contract of November 9, 2011 was to estimate an appropriate purchase price for the 11.36 acres so that it could be developed to “[its] highest and best use”; that is, to be “subdivided in a fashion that is consistent with surrounding properties” (Record, pp 44-45). The contract indicated that Bourgeois or Bourgeois & Co would investigate the issues and costs that may be incurred “in the course of acquiring and developing these lands”.

To that end, Bourgeois or Bourgeois & Co utilized a “cost of development technique” that would show the “revenue from the sale of lots” on these lands. The contract also indicated that it would estimate the cost to “produce those lots and make them available to the public” (Record, p 45). [ 69 ] Those words in the email contract of November 9, 2011 make it clear that what Bourgeois or Bourgeois & Co were contracted to do was to provide an appraisal estimating the appropriate purchase price of these lands so that residential development could occur on the land.

This process would, without doubt, require the issuance of a development permit, re-zoning of the lands from AG to perhaps RF1, and subdivision. No one could have understood otherwise. [ 70 ] The Letter of Transmittal confirms this. It refers to the 11.36 acres as “development land” (Record, p 49) and contemplated “redevelopment to a residential subdivision” (Record, p 50), reports on consultation with developers and the City of Edmonton Planning and Development Team “associated with the development of this property” (Record, p 50), and assumes that 58 lots “could be developed and marketed” (Record, p 50).

It reports using a “cost of development technique”, deducts the costs of development, and assumes that the land will be “developed with 58 RFI single-family lots” (Record, p 50).

It provides that Bourgeois or Bourgeois & Co have “excellent information regarding development costs” and have applied that information “consistent with the intended development”, allows for a “developer’s profit” and provides an estimate clearly contemplating such development (Record, pp 50-51). [ 71 ] The Appraisal Report advises that the highest and best use of the land is subdivision and development into approximately 58 single-family lots and describes the property type as “Development Land” (Record, p 55).

It indicates that these lands are completely surrounded “in its entirety with single-family homes, medium density projects and retail typical of an established residential subdivision” (Record, p 64), and confirms that these lands are “intended for residential single-family lots” (Record, p 66). [ 72 ] Throughout, the Appraisal Report contemplates purchase of this property for the purpose of development application, re- zoning, subdivision and construction of single-family lots, condominiums or duplexes (Record, pp 66, 68, 70, 75, 77, 79, 82-85, and 87- 88).

Bourgeois or Bourgeois & Co clearly contemplated that their function was to “estimate all costs required to produce and sell the lots” (Record, p 82). [ 73 ] I find that the contract was clearly a contract to determine all costs that could reasonably be expected to be incurred in purchasing, developing, re-zoning, subdividing and selling single-family lots on the 11.36 acres.

In fulfilling this duty, Bourgeois or Bourgeois & Co clearly knew that they had to arrive at a cost that took into account and considered the lands and development surrounding this parcel (Record, pp 49, 50, 55, 64, 67, 68, 77 and 88), and to do so Bourgeois or Bourgeois & Co would be required to consult with developers and in particular, with the City of Edmonton Planning and Development Team to “discuss the issues associated with the development of this property” (Record, p 50, 67, 68 and 79).

The Appraisal Report also included Edmonton Zoning Bylaw extracts (Record, pp 92-93). [ 74 ] The only substantial contractual issue is whether Bourgeois or Bourgeois & Co was reasonably required to identify and “flag” the remnant parcels as being an issue that would need to be known and evaluated by Williams to determine whether the “costs, effort and risk are viable” (Record, pp 44-46). [ 75 ] Bourgeois & Co has argued that there are significant reasons why the Appraisal Report could not be relied upon by 541 or Williams, but none of those reasons are material as to whether or not the remnant parcels should have been identified as a potential impediment to development, re-zoning and subdivision.

Those non-material arguments were: i. The Appraisal Report was said to be only valid as at November 21, 2011, but the steps taken with regard to this property were significantly delayed after that date: (

a) The real estate purchase contract between 541 and the Horricks was not signed until July 25, 2012; (

b) Leitch was not retained until November, 2012;

(

c) The issue of the remnant lots was not determined until January, 2013; (

d) The development applications and re-zoning proposals were not made until February, 2013, and June or July, 2013; and (

e) the Transfer of Land from the Horricks to 541 was not registered until January 14, 2014; ii. Williams or 541 did not purchase the land from the Horricks at the amount set out in the Letter of Transmittal or Appraisal Report: $3,557,000 (Record, p 51). Instead, the purchase price was $3,800,000 plus GST, allocated as $1,575,000 for buildings and $2,225,000 for land (Record, pp 113-114); and iii.

The Letter of Transmittal and Appraisal Report contemplated the development of the lands for 58 single-family lots, whereas the applications to the City of Edmonton were firstly for 53 single-family lots and 70-75 low-medium density condominium units (Record, pp 1 and 162), and later for single-family lots and duplexes (Record, p 2). [ 76 ] I find it was essential to the completion of the contract between the parties that Bourgeois or Bourgeois & Co should have at least identified the existence of the remnant lots and flagged them for consideration by Williams.

Some or all of the remnant lots are wholly or partially identified either within or immediately outside the 11.36 acres in the subject site-aerial view (Record, p 72), and the development land sketch (Record, p 77) of the Appraisal Report, but on the other hand, are not identified nor acknowledged in the written text of the Letter of Transmittal or Appraisal Report, nor on the diagrams or plans of the property at pp 67, 68 or 73 of the Record. [ 77 ] The Plaintiffs have established a breach of contract. VIII.

The Tort of Negligence [ 78 ] In addition to the pleadings alleging breach of contract, 541 and Williams plead negligence on the part of Bourgeois & Co, as set out in paragraphs 15 and 16 of the Statement of Claim, which negligence was denied in the Statement of Defence at paragraphs 8, 13, 14 and 15. [ 79 ] McCamus, supra , says that the breach of a party’s contractual duty to another may also constitute a tort imposing compensable injuries upon a third party to the contract, and is thus another device for avoiding the third party beneficiary rule (p 315).

McCamus also indicates that in some cases the tort duty owed to the third party appears to arise directly from the breach of contract (p 315). I find, as I did with the consideration of breach of contract, that 541 was reasonably within the contemplation of the parties, so as to create a duty of care in Bourgeois and Bourgeois & Co. [ 80 ] There was no claim advanced, such as is standard with respect to land valuation and appraisals, in negligent misstatement pursuant to the principle in Hedley Byrne & Co v Heller & Partners Ltd , [1964] AC 465 (HL) .

In Hedley Byrne , the duty of care in making a representation was said to arise out of a relationship between the parties that was as close to contract as possible or “equivalent to contract”.

Because I have found a contract between Williams and Bourgeois or Bourgeois & Co, and, if necessary, the ability of 541 to rely upon that contract as a third party beneficiary, it is not necessary to engage in a detailed analysis of the duty of care in negligent misrepresentation aside from contract. [ 81 ] As a result, this Court is left to examine the issue of negligence on a traditional analysis: duty of care, standard of care, breach of the standard of care, causation and damages. [ 82 ] Each of the parties provided expert standard of care evidence from real estate appraisers licensed through the Real Estate Council of Alberta.

The Plaintiffs’ expert, Ivan Weleschuk (“Weleschuk”), is a Designated Appraiser – Commercial with the Canadian National Association of Real Estate Appraisers, which association requires members to follow the Uniform Standards of Professional Appraisal Practice, the American appraisal standards.

The Defendants’ expert was John Farmer (“Farmer”), an accredited appraiser with the Appraisal Institute of Canada, which created the Canadian Uniform Standards of Professional Appraisal Practice (“Standards”) (Record, pp 317-395). [ 83 ] The relevant provisions of the Standards include: 6.2 Rules In the report [see 7.1] the Appraiser must: ... 6.2.9 identify the location and characteristics of the property and the interest appraised; [see 7.10] 7.10 Characteristics of the Property [see 6.2.9, 12.21] 10.1 Relevant to the purpose and intended use of the report, strengths and weaknesses must be analyzed and included in the report: ... 7.10.1.vi.

Consideration of known detrimental conditions [see 12.22] .... 12.21 Characteristics of the Property [see 6.2.9] 12.21.1 ...Any unusual aspect and any contrasts between the subject property and adjoining uses should be highlighted.... ...

12.22 Detrimental Conditions [see 7.10.1.vi] 12.22.1 When qualified specialists have documented the existence of detrimental conditions and estimated the costs of remediation or compliance, an appraiser may be in a condition to develop an opinion of “as is” value and should be aware of, understand and correctly employ those recognized methods and techniques necessary to produce a credible appraisal. [ 84 ] Both experts provided opinions based upon the Standards (Record, pp 317-395). [ 85 ] The Plaintiffs’ expert, Weleschuk, criticized Bourgeois and Bourgeois & Co for relying on a dated Neighbourhood Structure Plan approved in September, 1985, well before any development had occurred within this area of Edmonton.

He said on cross- examination on affidavit, in explaining his concern that Bourgeois and Bourgeois & Co ignored the subsequent development of the area: ...there is no mention in the appraisal report of what the surrounding development is as far as lot sizes, land uses, and whether those – that surrounding development – would impact what he could do...how the surrounding area might impact his – subject property. (Record, pp 435-436) [ 86 ] Weleschuk indicated that Bourgeois and Bourgeois & Co undertook to investigate the issues and costs that might be incurred in the course of developing the lands in question.

He said that in doing so, it was important to identify the location and characteristics of the property (Standards, s 6.2.9), and in his opinion it was an: ...obvious characteristic of the Subject Lands...that the undeveloped parcel is surrounded by existing residential subdivisions and undeveloped or remnant lands or parcels [which] may impact the density and number of lots, the cost of development and the timing of development. (Record, p 311) [ 87 ] Weleschuk was of the opinion that Bourgeois and Bourgeois & Co was required: ...at a minimum, to clearly set out in his appraisal report as a Limiting Condition either that he ignored any issues that may arise as a result of such remnant parcels or that such remnant parcels may adversely impact the developmental area, the size and number of lots, the cost of development and the timing of development. (Record, p 311) [ 88 ] Weleschuk opined that a “more site specific analysis should have identified the potential impact the remnant parcels would have...” (Record, p 312). [ 89 ] The Defendants’ expert, Farmer, opined that Bourgeois “furnished his client with a report compliant with the professional standards required of him at that time”.

He said that it was “at all times outside the scope of work to consider the acquisition of additional lands, as these would be irrelevant to the specific vendor, and the purpose of the appraisal report” (Record, p 481). [ 90 ] Farmer’s analysis was based upon his

interpretation of the contract as limited to assisting Williams “in estimating an appropriate purchase price on these lands” (Record, pp 486 and 489).

I have found that the contract was broader than that and included consideration of the development and marketing of a subdivision including at least single-family lots consistent with the surrounding development, contemplating development application, re-zoning, subdivision and the development of the single-family lots. [ 91 ] Farmer admits that the Neighbourhood Structure Plan included in the Appraisal Report “does not match the outline of the actual parcel...[which] encircles approximately 62 Lots so it is not clear which Lots the appraiser believed were included in the stated 58 Lots used in the preparation of the analysis” (Record, p 493).

This difference may be explained by the inclusion or exclusion of the remnant parcels in the various diagrams or plans of the property, as indicated above (see Record, pp 67, 68, 72, 73 and 77). [ 92 ] Farmer said: If the scope of work had required the appraiser to consider additional analysis, information pertaining to preliminary subdivision plans, estimated costs for servicing or any other approvals would likely have been provided by the Plaintiffs. (Record, p 487) [ 93 ] Farmer points out that there was no such clear direction from the client so that the appraiser had to make “efforts to devise a valuation by making estimates and using assumptions” in Bourgeois’ land residual analysis cost of development technique, and said that the “weakness of this approach is that the final indication of value will change if any one of these assumptions is altered.

The more assumptions made, the weaker the value outcome...” (Record, p 499).

Additionally, he says: “There is, however, a general lack of support for the assumptions made in the report, with reliance based upon the appraisers’ experience of appraisal and market conditions” (Record, p 501). [ 94 ] In conclusion, Farmer indicated that it was his opinion “that the analyses, opinions and conclusions in the [Bourgeois] report under review are appropriate and reasonable” (Record, p 503), but again, that conclusion was based upon his limited view of the scope of the contract “to consider the value of a specific parcel of land, to assist in the acquisition of this parcel by their client from a specific vendor” (Record, p 503). [ 95 ] Subsequently, Farmer was asked to answer two specific questions: 1.

Considering the scope of his retainer and the evidence given in this action, did the cost of development [land residual] approach require Mr. Bourgeois to consider the remnant parcels in the course of his appraisal and either address them or specifically state that he ignored them in his Appraisal Report? 2. Considering the scope of Mr.

Bourgeois’ retainer and the evidence given in this action, were the remnant parcels “known detrimental conditions” as that phrase is used in the CUSPAP Standards? [ 96 ] In answer to the first question, Farmer was of the opinion that the cost of development land residual approach did not require

Bourgeois to consider the remnant parcels in the course of his appraisal nor to either address them or specifically state that he ignoredthem in the report. However, that conclusion was qualified by earlier statements that “this appraisal technique (based only in part on thecost of development [land residual] approach) is only used to arrive at a value estimate.

It is not a feasibility analysis for developmentpurposes” and “the only actual information that the appraiser had to rely on was a Neighbourhood Structure Plan (NSP), which is initself, only a concept design for the location of predicting the preferred future type of land uses envisioned by the Plan” (Record, p 866).This conclusion is therefore again limited by Farmer’s

interpretation of a more restricted contract than I have determined above. [97] In answer to the second question, Farmer was of the opinion that the remnant parcels could not be considered a “knowndetrimental condition” under the framework of the Standards which he said “appeared to relate to conditions on the land being appraised[as opposed to adjacent lands]” (Record, p 868). [98] Bourgeois and Bourgeois & Co submitted that the Standards differentiate between an appraisal report and a feasibilityanalysis; and their retainer was to do the former and not the latter.

They said that an appraisal report sets out a formal opinion of value ona specific parcel (Record, p 320) while a feasibility analysis encompasses “the cost-benefit relationship of an economic endeavour”(Record, p 322). [99] The relevant provisions are ss 11.10 and 12.47 of the Standards: 11.10 Feasibility Analysis [see 12.47] 11.10.1 In developing a feasibility analysis, a consultant must: 11.10.1.i. prepare a complete market analysis; 11.10.1.ii. apply the results of the market analysis to alternative courses of action to achieve theclient’s objective; 11.10.1.iii. consider and analyze the probable costs of each alternative; 11.10.1.iv. consider and analyze the probability of altering any constraints to each alternative; 11.10.1.v. consider and analyze the probable outcome of each alternative. ... 12.47 Feasibility Analysis [see 11.10] 12.47.1 The consultant should compare the following criteria from the client’s project to the results of the market analysis: - The project budget (all construction costs, fees, carrying costs, and ongoing property operating expenses); - The time sequence of activities (planning, construction and marketing); - The type and cost of financing obtainable; - Cash flow forecasts over the development and/or holding period; and - Yield expectations.

The consultant should have enough data to estimate whether the project will develop according to the expectations of theclient and is economically feasible in accordance with the client’s explicitly defined financial objectives. [100] It is clear that the report prepared by Bourgeois or Bourgeois & Co was entitled “Appraisal Report”. It is also clear that thecontract did not contemplate a full feasibility analysis as defined in the Standards.

However, I have found that the terms of the contractbetween the parties required more than a simple valuation of the lands in question for purchase, but contemplated purchase, developmentapplication, re-zoning, subdivision and sale of at least single-family units, and the identification of factors that would have a significanteffect on the cost to do so.

The contract, as I have determined it to be, falls somewhere between the narrow scope of an appraisal reportcontemplated by Farmer, but less than a full feasibility analysis as defined in the Standards. [101] Comparing the reports of Weleschuk and Farmer, I prefer and accept the Weleschuk opinion, given the scope of the contractbetween Williams and Bourgeois or Bourgeois & Co that I have determined above.

The opinion of Farmer is founded upon a narrowerscope of contract, which I do not accept and do not find. [102] Having accepted the report of Weleschuk, and based upon the conclusions I have reached with respect to the contract issuesabove, I find that Bourgeois or Bourgeois & Co had a duty of care in preparing their Appraisal Report to Williams and 541, that theestablished standard of care would have been to identify and flag the existence of the remnant parcels so that Williams and 541 coulddetermine whether the “costs, effort and risk [of the purchase and development of the 11.36 acres] are viable” (Record, pp 44-46) andthat in failing to do so, Bourgeois and Bourgeois & Co failed to live up to that standard of care expected of a reasonably competent,equally situated appraiser. [103] In the present case, any loss that may be suffered by Williams or 541 is a pure economic loss.

Discussion as to whether pureeconomic loss is recoverable in the current circumstances under the analysis in Anns v Merton London Borough Council, [1978] A.C.728, and Nielsen v Kamloops (City), (SCC), [1984] 10 DLR (4th) 641 (SCC), and the following cases, is best left forfuture discussion on damages, specifically reserved from the issue of liability before this Court.

IX. Conclusion [ 104 ] In conclusion, I find that Williams entered into a contract with Bourgeois or Bourgeois & Co to determine all of the costs that could reasonably be expected to be incurred in purchasing, developing, re-zoning, subdividing and selling single-family lots on the 11.36 acres in question in this litigation.

I find that 541 was not a party to this contract but there was nothing preventing 541 from purchasing the lands in question and having Williams, or each of them jointly, make the necessary applications for development approval, re-zoning and subdivision, such that if any damages were incurred, which is not the subject of the matter currently before me, they would have been incurred each of by Williams and 541, and are claimable through Williams as a party to the contract. [ 105 ] If I am wrong in this conclusion, I find that the “principled exception” to the doctrine of privity of contract exists such that 541, as a reasonably contemplated third party beneficiary, is able to take advantage of the contract between Williams and Bourgeois or Bourgeois & Co. [ 106 ] Additionally, I find that on a negligence analysis, Bourgeois and Bourgeois & Co had a duty to both Williams and 541 to identify and flag the existence of the remnant parcels for Williams and 541 in the Appraisal Report; that was the expected standard of care, and they failed to meet that expected standard of care. [ 107 ] I leave the issues of causation and damages to a further consideration.

Heard on the 31 st day of March, 2017. Dated at the City of Edmonton, Alberta this 5 th day of June, 2017. K.P. Feehan J.C.Q.B.A. Appearances: James K. McFadyen, Q.C. Parlee McLaws LLP for the Plaintiffs Donald J. McGarvey, Q.C. McLennan Ross LLP for the Defendant