Donald B. Holdings Ltd. et al. v. Date:, 2012 MBCA 70

Citation: Donald B. Holdings Ltd. et al. v. Date: 20120626 The City of Winnipeg, 2012 MBCA 70 Docket: AI 12-30-07749 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Barbara M. Hamilton Mr. Justice Martin H. Freedman Mr. Justice Marc M. Monnin B E T W E E N : DONALD B. HOLDINGS LTD. (formerly ) D. A. M. Pambrun known as DUTCH MAID ICE CREAM ) for the Appellant INC.) and 2858097 MANITOBA LTD. ) ) M. N. Trachtenberg (Plaintiffs) Respondents ) for the Respondents ) - and - ) Appeal heard: ) June 6, 2012 THE CITY OF WINNIPEG ) ) Judgment delivered: (Defendant) Appellant ) June 26, 2012 FREEDMAN J.A.

OVERVIEW 1 The respondents sued the City of Winnipeg, seeking, among other matters, a declaration that they hold valid rooming- house licences for certain properties. The City moved to dismiss the amended statement of claim for abuse of process (Queen’s Bench Rule 25.11(c)) or not disclosing a reasonable cause of action (Queen’s Bench Rule 25.11(d)). 2 The City argues that the action cannot be maintained because the respondents failed to adhere to the appeal process set out in The City of Winnipeg Charter , S.M. 2002, c. 39 (the Charter ).

Both the master and the Queen’s Bench judge on appeal disagreed with the City, which now appeals the judge’s decision. For the reasons that follow, I would dismiss the City’s appeal. BACKGROUND 3 Over the course of about 15 years (1979-1994), the respondents purchased ten residential properties in the City of Winnipeg. They operated the properties as rooming houses. In 1994, the City enacted provisions to license rooming houses. In early 1995 a new zoning by-law was enacted.

In 1995 and again in 1996 the City issued rooming-house licences for each of the properties. 4 In 1997, the City refused to renew the licences. It said the licences may have been issued in error and that none of the properties were properly zoned for a rooming house. In October 2001, it issued an order requiring the respondents to comply with the zoning requirements or face prosecution. Specifically, the respondents were ordered to apply for and obtain zoning variances or convert the premises to a permitted use. The parties met in December.

What was agreed at that meeting is disputed. 5 According to the respondents, at the meeting the City and the respondents entered into a “without prejudice” agreement pursuant to which the respondents would apply for a zoning variance for one property, on a “test case” basis. In fact, an application to the Board of Adjustment was made and was partially successful, but it was denied on appeal (by third parties) to the City of Winnipeg

Appeal Committee. The respondents did not appeal, as they could have done under s. 495 of the Charter, on a question of law, to theCourt of Queen’s Bench. They commenced the present action. 6 The respondents’ amended statement of claim seeks a declaration that they hold valid rooming-house licences, as well asdamages in negligence and for negligent misrepresentation, for costs incurred to upgrade the properties in accordance with Cityrequirements, costs to convert some of them back to single-family residences, and lost revenue.

They say that all the properties compliedwith City by-laws, or had a “grandfathered” right of continued operation as a non-conforming use. The respondents also say that, in lightof representations and agreements made, the City is now estopped from arguing that they did not follow the statutory appeal process. 7 The City’s position was that all it agreed to at the December 2001 meeting was that it would not argue that therespondents, by submitting to the appeal process, were conceding that their use of the one property as a rooming house was illegal.

Thewithout prejudice agreement did not permit the respondents to ignore the statutory appeal process; thus, failure to appeal the AppealCommittee’s decision ended the respondents’ rights to challenge the City’s demands. 8 The City’s zoning administrator had written to the respondents after the meeting to confirm that the City “will not use thevariance application to prejudice the position of [the respondents] as it relates to the rooming house use for the subject property.” DECISIONS OF THE MASTER AND THE JUDGE 9 The master and the judge each wrote decisions, with which I agree. They each applied the correct law.

As to whether astatement of claim discloses a reasonable cause of action, see e.g., the decision of Steel J.A. for this court in Fillion v. Degen, 2005MBCA 58, 195 Man.R. (2d) 2 (at paras. 8-9): Pleadings are not to be struck pursuant to Queen’s Bench Rule 25.11(

d) unless the case is “plain and obvious” or “beyond doubt” that noreasonable cause of action is disclosed. See Dumont et al. v. Canada (Attorney General) and Manitoba (Attorney General), (SCC), [1990] 1 S.C.R. 279; 105 N.R. 228; 65 Man.R. (2d) 182, at 280 [S.C.R.], which followed Inuit Tapirisat of Canadaand National Anti-Poverty Organization v. Canada (Attorney General), (SCC), [1980] 2 S.C.R. 735; 33 N.R. 304,and in a family law context, see Mabey v. Mabey, 2005 NSCA 35 , [2005] N.S.J. No. 71; 230 N.S.R. (2d) 272; 729 A.P.R. 272;2005 NSCA 35. In Hunt v.

T & N plc et al., (SCC), [1990] 2 S.C.R. 959; 117 N.R. 321, Wilson, J., observed (at p. 980[S.C.R.]): As in England, if there is a chance that the plaintiff might succeed, then the plaintiff should not be ‘driven from the judgment seat’.Neither the length and complexity of the issues, the novelty of the cause of action, nor the potential for the defendant to present a strongdefence should prevent the plaintiff from proceeding with his or her case. In determining whether a reasonable cause of action is disclosed, only the pleadings are looked to and all of the facts alleged must betaken as proven.

See Hunt and Mathias Colomb Indian Band et al. v. Saskatchewan Power Corp. et al. (1994), (MB CA), 92 Man.R. (2d) 105; 61 W.A.C. 105 (C.A.). 10 See also the following comments of Chartier J.A. in Chrysler Canada Inc. v. Eastwood Chrysler Dodge Ltd. et al., 2010MBCA 75, 262 Man.R. (2d) 1 (at para. 24): …. Although the question whether the pleading discloses a cause of action is one of law, the question whether it was plain and obviousthat the pleading disclosed no reasonable cause of action is essentially a matter of discretion.

As a result, the standard of review on themotions judge’s decision on whether to strike out the counterclaim for disclosing no reasonable cause of action can be expressed asfollows: absent an error in law or a palpable and overriding error on a question of fact, the decision of the motions judge is entitled todeference and this court will not intervene unless the decision is so clearly wrong as to amount to an injustice. …. 11 As to whether a case is an abuse of process, the pleadings, as well as other material such as affidavits, are relevant. InFillion, Steel J.A. said (at para. 21): ….

In considering whether a case should be struck as an abuse of process, a court gives consideration to principles of consistency,finality and integrity of the judicial process. See Toronto (City) et al. v. Canadian Union of Public Employees, Local 79 et al., 2003SCC 63 , [2003] 3 S.C.R. 77; 311 N.R. 201; 179 O.A.C. 291; 2003 SCC 63, at para. 37. This aspect of abuse of process wasdescribed by Lyon, J.A., in Solomon v.

Smith and Montreal Trust Co. (1987), (MB CA), 49 Man.R. (2d) 252(C.A.) (at para. 16): …. 12 In dismissing the City’s motion, the master said that the statutory procedures were required to be followed in normalcircumstances. He continued (at paras. 27-30):

In my view, however, this is not a normal circumstance. The plaintiffs’ pleadings, as supplemented by the filed evidence, disclose a situation in which certain representations were made by the defendant as to how the plaintiffs’ properties could be brought into conformance with the by-law, which representations were relied upon by the plaintiffs in performing the necessary work. Despite that work having been completed, the defendant refused to provide rooming house licenses to the plaintiffs (although it did so mistakenly for two years). The plaintiffs allege damages as a result.

Bearing in mind that the factual allegations in the amended statement of claim must be taken as true, those facts disclose a reasonable cause of action. Whether the cause of action will be successful remains to be seen, but the strength of the cause of action is not a matter to be considered on the motion. These facts do not relate in any way to the application for a zoning variance nor do they engage the statutory appeal procedure, as the essential character of the dispute is the earlier negligent misrepresentation allegedly committed by the defendant.

Even if the facts pleaded in the amended statement of claim are such that the plaintiffs should have followed the required statutory procedure, I find that the without prejudice agreement which all parties agree was reached allows the plaintiffs to pursue this action regardless of the statutory procedure. I do not accept the defendant’s argument that, although they agreed that the zoning variance application could be made on a without prejudice basis, it has no impact on the requirement for the plaintiffs to see through the statutory appeal process.

The agreement would have no value or legal impact whatsoever if the defendant’s position was accepted. At the time the without prejudice agreement was reached, the plaintiffs were of the view that they already had a pre-existing, non- conforming right to operate the properties as rooming houses. They had operated the properties as rooming houses for many years, both before and after the defendant refused to renew the rooming house licenses, and had completed upgrades to the properties at the defendant’s behest in order to ensure that they could continue to operate as rooming houses.

They held that belief even as they agreed to attempt a zoning variance application for one of the properties on what they believed to be a test-case basis. Clearly they wanted to reserve their rights to pursue whatever remedies were available to them as a result of what they felt were misrepresentations made by the defendant in relation to the rooming house licenses.

I am of the view that if the plaintiffs’ position on the facts is accepted by the court, they would not have been required to follow the statutory appeal procedure, as they reserved the right to proceed otherwise by way of the without prejudice agreement .

I find this to be the case whether I consider the pleadings alone, or when the pleadings are considered in conjunction with the evidence. [emphasis added] 13 The judge had a similar view of the unusual situation here (at paras. 7-11): It is true that the plaintiffs did not appeal the decision of the Appeal Committee to this court on a point of law pursuant to the statute. However, the plaintiffs say that they did not need a zoning variance and only sought one on a without prejudice basis in order to attempt to resolve the dispute between the parties.

They say that they did not need such a variance since they had a pre-existing non-conforming right which obviated the need for a zoning variance. They add that they are not seeking a zoning variance from the defendant in the relief they seek in their amended claim. They have also raised an estoppel argument in their reply to amended claim. At the hearing of this matter, counsel for the defendant said that the issue of whether the plaintiffs possessed a non-conforming right was raised before the Appeal Committee and that issue could, and should, have been the subject of the statutory appeal.

Counsel added that, in any case, there are other ways to determine whether a party has a pre-existing non-conforming right which would necessarily also have to have proceeded by way of the statutory appeal process. Counsel did not dispute, however, that if the plaintiffs possessed such a right, they would not require a zoning variance.

Given the allegations that have been raised by the plaintiffs in both the amended statement of claim and the reply, like the learned master, I, too, do not find that it is plain and obvious that the pleadings must fail or that they should be struck on the basis of an abuse of process. The pleadings implicitly raise a question of whether the plaintiffs possessed a pre-existing non-conforming right to operate the properties as rooming houses.

It is far from clear that the issue of whether the plaintiffs possessed such a right was before either the Board of Adjustment or the Appeal Committee, although it may have been raised obliquely by the plaintiffs’ representatives before the Appeal Committee. The Board of Adjustment and the Appeal Committee certainly make no reference to this point. It is therefore not certain whether that matter was before the Board of Adjustment or the Appeal Committee, and consequently whether an appeal to this court would have been the proper forum to adjudicate that issue.

It is also not plain and obvious on the facts before me that the issue of whether the plaintiffs possessed a non-conforming right had to similarly follow the defendant’s statutory appeal process.

The Mahon case [2011 MBQB 306 , 92 M.P.L.R. (4th) 273 ] while relevant and instructive, involving as it does an action arising from a failed application for a zoning variance, is nonetheless distinguishable as it does not involve an allegation of a non-conforming right and the related assertions made here, that no zoning variance is necessary, nor does that case contain any allegations involving a procedural agreement with the defendant, as we have here.

In my view, given the factual matrix present in this case, particularly as set out in both the reply to the amended defence as well as the affidavit material and cross-examinations on affidavits, it is not plain and obvious that the plaintiffs had to have exhausted their statutory appeal to this court from the Appeal Committee before bringing this action. Neither is it plain and obvious that the estoppel argument raised in the reply to the amended defence will fail. [emphasis added]

ARGUMENT, ANALYSIS AND DECISION 14 The City says that the respondents are sidestepping the statutory process. It points to the provisions in the Charter to theeffect that a decision on a zoning variance application at the Board of Adjustment is appealable to an Appeal Committee, and itemphasizes that at both those stages the public has a right to be heard. A further appeal may be taken on a question of law to the Courtof Queen’s Bench (see s. 495 of the Charter).

Since the respondents chose not to appeal the adverse decision of the Appeal Committee,they are bound by its decision. 15 The City argues that, as a matter of law and jurisdiction, the respondents are not entitled to proceed with their amendedstatement of claim. There is a statutory process and it must be followed. The City says that the without prejudice agreement, whateverits details, is not relevant. 16 The respondents argue that the judge did not err in principle or make any palpable and overriding error of fact, and thatconsiderable deference is owed to his view of the matter.

They say that the Charter has no relevance to the court’s jurisdiction over theclaim for damages for negligence and negligent misrepresentation. Moreover, they say that they are entitled to seek a declaration fromthe court that, in respect of the properties, there existed a valid, prior non-conforming use, and that they were not obliged to seek a zoningvariance and pursue appeals from the original zoning variance decision. 17 The position of the respondents on the “without prejudice” agreement was explained by their solicitor when he was cross-examined on his affidavit.

He said the respondents did not believe they needed zoning variances, but that it was agreed that they wouldnevertheless apply, and “[i]f we got what we asked for, end of story. If we didn’t, back to status quo. .… … [W]e’d go back to the waywe were. That’s what ‘without prejudice’ meant.” 18 We are determining an appeal from a discretionary decision of the judge. As was said in Towers Ltd. v.

Quinton’s CleanersLtd. et al., 2009 MBCA 81, 245 Man.R. (2d) 70 (at para. 25): A discretionary decision … is reviewed on appeal according to a highly deferential standard, often described in this way; see Elsom v.Elsom, (SCC), [1989] 1 S.C.R. 1367; 96 N.R. 165 (at p. 1375): … [A]n appellate court will be justified in intervening in a trial judge’s exercise of his discretion only if the trial judge misdirects himselfor if his decision is so clearly wrong as to amount to an injustice. … 19 The judge considered the pleadings and, to the extent permitted, other material, as well as the submissions of the parties.

He determined that the City had failed to persuade him that the amended statement of claim was an abuse of process or that it failed todisclose a reasonable cause of action. 20 The City argued that only the tribunals established under or contemplated by the Charter can deal with zoning variances ornon-conforming uses of property. Those tribunals are the Board of Adjustment, the Appeal Committee, and a judge of the Court ofQueen’s Bench sitting on an appeal under s. 495 of the Charter.

Like the master and the judge, I view that as too narrow a perspective inthe circumstances of this case. 21 The respondents’ position in the fall of 2001 was that there existed a valid non-conforming use of the properties that pre-dated any zoning restriction and that such valid use had been confirmed by the City. Their position was that nothing further had to bedone by them, and that they could continue to operate the rooming houses. The City disagreed and threatened prosecution for failure tocomply with the zoning by-law.

Had a charge been laid, the defence would undoubtedly have been based on s. 241(1) of the Charter: Previously conforming building and use continued 241(1) A building, or a use of real property, that complies with zoning by-laws before the adoption of a new zoning by-law maycontinue notwithstanding that the building or use does not conform with the provisions of the new zoning by-law. 22 Although there is disagreement about the precise nature of the “without prejudice” agreement, it provides the necessarycontext for what happened after the City issued its order in October 2001. There was no prosecution.

Rather, by agreement, therespondents applied for a zoning variance, thus initiating the process which the City now argues has to be followed to completion. Butthe respondents say they initiated the process only because they were assured that if they did not obtain the variance, their prior positionwould not be prejudiced. That is, they would still be able to argue that they did not need a variance because they had a valid, prior non-conforming use. It is clear from the evidence of their solicitor that without that assurance, no variance application would have beenfiled.

The City would have had to decide whether to prosecute. 23 The City agrees that on a prosecution, a provincial judge would have had the jurisdiction to decide if the respondents’defence on s. 241(1) was sufficient to answer the charge. Yet it argues that the respondents do not have the corollary right to seek adeclaration from a Queen’s Bench judge that they have a valid, prior non-conforming use, since seeking such a declaration would departfrom the statutory scheme. I do not agree. The zoning process governs when a variance is sought, but not otherwise.

If a party does notneed a variance, there is no need to initiate the process. According to the respondents, the process started here only because they were

assured that if the variance was denied, matters would revert to the status quo. If their position is accepted, it is as if no variance was ever sought. At the very least, the pleadings disclose a reasonable cause of action, and the action is not an abuse of process. 24 Nothing in the argument that the City has now advanced persuades me that the judge erred in his analysis of the facts or the law. There is no basis on which this court should overturn the judge’s decision. Accordingly, I would dismiss the appeal with costs. J.A. I agree: J.A. I agree: J.A.