Canadian Municipal Liability in a Risk Management Context

October 2, 1995
Author: Charles M.K. Loopstra, Q.C.
Municipal Attorney

(Article for Municipal Attorney issue with the theme:
"Protecting Local Government Interests In and Out of Court")

This article provides a brief overview of the recent developments in municipal liability in Canada. The Supreme Court of Canada has recently decided two important cases involving government tort liability.1 These cases, which I will refer to as the Brown and Swinamer decisions, follow a number of other pivotal decisions by Canada’s highest court, which I will refer to as the Kamloops,2 Tock3and Just4 decisions. It is rather remarkable that the Supreme Court has felt it necessary to deal with this area of the law so extensively, on what appear to be rather straight forward fact situations. Historically, governments were virtually immune from tort liability. A municipality performing a public duty authorized by statute would not be found liable in an action for negligence prior to 1866. This immunity was ended in England when the House of Lords held that the liability of a public body which was created by statute must be determined upon a true interpretation of the statute which created the body, and unless the statute specifically relieved the municipality from liability, then the legislature intended that the municipality be rendered subject to the same liabilities as would be imposed upon a private person doing the same thing.5

This line of reasoning made its way into the Ontario courts some 60 years later in the Nickell case,6 where Mr. Justice Middleton readily adopted the approach used by the House of Lords in the Mersey decision. The courts opened the floodgates ever so slightly, and a modest flow of tort litigation emerged on the basis of what became well-defined principles. It took another half a century for the floodgates to really open.

In the early days, after the Nickell decision, Canadian courts found against municipalities in only very limited and specific circumstances. Either a legal relationship had to exist, or some legal duty had to be expressly set out by statute. If a municipality failed to do something within its statutory powers, it was only considered nonfeasance, and therefore not actionable.7 However, if a municipality improperly carried out a statutory power, it would be regarded as misfeasance, and thus open to an action for liability and damages. Most Canadian provinces enacted uniform Crown liability legislation in the early 1950's to the effect that the government is subject to liability in tort, as if it were a person of full age and capacity:

(a) in respect of a tort committed by any of its officers or agents;

(b) in respect of any breach of duty owed to the servant and agent as an employer;

(d) under any statute, or under any regulation or by-law made or passed under the authority of any statute.

The Anns Principle

In 1977, the House of Lords in England delivered another seminal decision in municipal tortious liability.8 In this case the whole issue of "policy" versus "operational" decisions first arose, being the first step in a process of determining whether a public authority owed a private law duty of care. The Supreme Court of Canada wasted no time in adopting the principles of the Anns case in Kamloops which was decided in 1984. As a general rule, the law became that there is no private negligence duty owed by governments to take care in making their "policy" decisions, but such a duty may be owed in their "operational" activities. Mr. Justice Linden of the Federal Court of Appeal, noted:

This development might prompt one to observe, paradoxically, that the rule that ‘the King can do no wrong’ has been changed to ‘the King can do only little wrongs’, the big wrongs still being immune from ordinary tort liability. Mr. Justice Linden also makes the point that the scope of government liability in the United States is narrower than it is in Canada, as it is based on a formulation which expressly excludes discretionary decisions, something that is not found in Canadian statutes.9

It should be noted that there is no debate over liability for intentional torts and abuse of power. Similarly, immunity is conceded with respect to legislative, judicial and quasi-judicial decision making. The debate remains with respect to what set of rules should be applied to determine whether the government is liable for the negligence of government employees such as the inspector, the regulator, the fireman, the road maintenance crew or the policeman. It is in this area that the Supreme Court of Canada has dealt extensively.

As a side issue, the English courts have done some back-pedalling since Anns. In Murphy v. Brentwood District Council 10 the House of Lords specifically rejects the principles set out in Anns, thereby reversing a trend. This retreat has not been followed by the Supreme Court of Canada, which resolutely went forward to define the rules to be applied in distinguishing between policy and operational decisions, and hence government tortious liability.

What are the Rules?

The court started with Just in attempting to define the rules. The plaintiff Just and his daughter were travelling along a B.C. highway to the internationally famous Whistler ski resort when their car was struck by a falling rock, killing the daughter and seriously injuring the plaintiff. The government was sued for the negligent maintenance of the highway. The action had been dismissed in the lower courts on the basis that the highway inspection system was one of planning and policy, out of which no negligence duty could arise.

The Supreme Court of Canada attempted to simplify the process of making distinctions between true policy decisions and what is considered to be "implementation". Mr. Justice Cory wrote:

The duty of care should apply to a public authority unless there is a valid basis for its exclusion. A true policy decision undertaken by a government agency constitutes such a valid basis for exclusion. What constitutes a policy decision may vary infinitely and may be made at different levels, although usually at a high level...As a general rule, decisions concerning budgetary allotments for departments or government agencies will be classified as policy decisions.

If the court comes to the conclusion that a private law duty exists that is clearly not exempted either by a statutory provision or because it was a true policy decision, then the court must still define that duty in light of the surrounding circumstances. Where inspections are required the court stated:

In each case, the frequency and method must be reasonable in light of all the surrounding circumstances. The governmental agency should be entitled to demonstrate that balanced against the nature and quantity of the risk involved, its system of inspection was reasonable in light of all the circumstances, including budgetary limits, personnel and equipment available to it and it had met the standard duty of care imposed upon it.

The court sent the case back for re-trial. The plaintiff was ultimately successful. The Court concluded the government owed a tort duty, but it was still necessary to determine whether the proper standard of care had been met by the highway department employees, based on the policy decisions in effect with respect to the manpower resources available, the inspection program, and the method of carrying out such inspections.

To put it simply, if the government decides to hire 3 employees to manage 100 miles of road, that is a policy decision. Doing improper, incomplete or insufficient inspections, or failing to inspect in accordance with an approved schedule falls within the ambit of implementation.

Obviously Just didn’t do the job in making the rules sufficiently clear for interpretation in the lower courts. As a result the Supreme Court of Canada took another stab at it in Brown and in Swinamer. Interestingly, the court found no liability in both those cases, but refused to go back to the pre-Anns era. In Brown, theplaintiff sued the government for failing to properly maintain an icy road. While the Court agreed there was a duty to maintain the road, in this case the government was exempt from ordinary negligence principles because of its policy decision to adopt a summer schedule of reduced service. The Court held that such a policy decision could not be reviewed on the private law standard of reasonableness and that it did not need to consider whether the policy decision was made bona fide or was rational based upon the exercise of discretion, since the plaintiff had not attacked the policy on those grounds. There was no evidence of negligence in the operational aspect of the policy decision, and therefore no liability was found.

In Swinamer the plaintiff was injured by a falling tree on the highway. Although there was a tree inspection policy in effect, there was no proof of irrationality or bad faith, nor of negligence in relation to the operational aspects of the policy decision, and therefore no liability was found.

Statutory Duty

Although the ratio of Brown and Swinamer applies to all policy versus operational distinctions, in order to determine whether there is a private law duty of care, it should be noted that some provinces in Canada impose a positive statutory duty on the road authorities in any event.11 It remains to be seen whether innovative legal counsel will now argue on the basis of Just, Brown and Swinamer that the statutory duty to maintain can actually vary on the basis of a policy decision. It was always felt that a municipality could not escape liability on the basis of taking little or no action to maintain their roads, especially when they knew or ought to have known that actual hazards existed. I would suggest that if a local road authority adopts a policy which is tantamount to doing nothing, it will be held liable on the basis of breach of statutory duty.

Nuisance

Not to be overlooked is the fact that even in cases were the court finds no liability on the basis of a breach of a private law duty, there may still be liability in nuisance. In Schenck v. Ontario12 the road authority was held liable for road salt damage to adjoining orchards. It was held there was no negligence, because on the basis of the rule in Rylands v. Fletcher 13 it had not been proven that excessive quantities of salt had been used and the activity of salting was not in itself proven to be inherently dangerous. The court did find liability on the basis of nuisance. There was no statutory protection and the road authority could not establish that the nuisance was an inevitable result of doing what it was statutorily authorized to do. To find nuisance the court had to determine that the degree of interference with the plaintiff’s property rights was unreasonable. Mr. Justice Robins of the Ontario Court of Appeal held that the interference with use and enjoyment in the present circumstances is sufficiently peculiar, sufficiently direct and of sufficient magnitude to support an action for nuisance.

This decision led a lot of road authorities to revisit their winter maintenance policies. Of considerable concern was the known damage road salts inflicted on such structures as parking garages. This issue was again litigated in Bell Canada v. Olympia & York Developments Ltd.14 The plaintiff was suing the developer/vendor of its 10 storey parking garage as well as the local road authorities for damages caused by road salt. The trial judge found that the use of salt by the municipalities on their roads does not constitute an unreasonable interference with the owner’s use of its property as a parking garage, and the salting practices do not therefore constitute an actionable nuisance. He held that:

Schenck is direct authority that the legislation applicable in the present case does not protect a municipality from liability for a nuisance, and that the creation of a nuisance to a private landowner by the application of salt to highways in winter is not the inevitable consequence of fulfilling the statutory duty to "repair" or to "repair and maintain" the roads. The legislation applicable in this case gives no directions as to the specific manner or means by which the authorized undertaking or activity is to be performed.

Minimizing the Risk

There is no doubt that the law of municipal tort liability has expanded significantly in recent years and has become reasonably complex. The old regime of risk management still used by many municipalities is outdated and not responsive to the realities of current potential legal liability. Very little thought is being given to potential liability from the decision making process and how those decisions will ultimately be implemented. The majority of the risk management is still related to actual conduct and is to a large extent reactive rather than pro-active. Risk management should be seen as an integrated management function, with a strong legal presence. There may be instances where the legislation does not impose a statutory obligation to provide a certain service. The cost of providing that service should be evaluated by calculating the cost of the risks associated with it, including the cost of minimizing such risks, the insurance costs and the legal defence costs. If the municipality fully appreciates the legally required maintenance, inspection and record keeping obligations associated with the service, it can also better assess the costs.

In some cases municipalities make erroneous assumptions concerning risks. They are not fully aware of the statutory duties mandatorily imposed on them on the one hand, but may also be unaware of some statutory protection that is available in certain cases, such as immunity from liability for obstructions on the untravelled portion of the roadway.15

Conclusion

Although each municipality needs to formulate its own risk management program to suit its own needs, I would make the following general recommendations:

1. Identify the various areas of jurisdiction for which there is potential liability

2. Identify the statutory duties associated with each area and any statutory immunities and common law defences that may exist

3. Review the basis for the policy decisions made

4. Identify the appropriate standard of care required

5. Review the implementation of the policy decisions

6. Hire competent staff, fire incompetent staff, and constantly train your staff, including the preparation of proper procedural manuals, which include the requirement for the keeping of proper records of inspections, occurences, warnings and other important procedures

7. Conduct an independent legal audit on a periodic basis

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v. British Columbia (Minister of Transportation & Highways), [1994] 1 S.C.R. 420 and Swinamer v. NovaScotia (Attorney General), [1994] 1 S.C.R. 445.
The City of Kamploops v. Nielsen [1984] 2 S.C.R. 2
Tock v. St. John's Metropolitan Area Board [1989] 2 S.C.R. 1181
Just v. The Queen in the Right of British Columbia [1989] 2 S.C.R. 1228
Mersey Docks Trustees v. Gibbs, (1866) L.R. 1 H.L. 93
Nickell v. The City of Windsor (1926), 59 O.L.R. 618 (C.A.)
Sequein v. Hawke berry [1955] O.W.N. 966
Anns v. Merton London Borough Council [1978] A.C. 728
Linden, Mr. Justice Allen M., "Tort Liability of Governments", C.B.A. (Ontario), 1995
[1991] A.C. 398
Section 284, Municipal Act, R.S.O. 1990, c. M45
(1981) 34 O.R. (2d) 595 and (1982) 40 O.R. (2d) 410 (H.C); aff'd (1984) 49 O.R. (2d) 556 (C.A.); aff'd [1987] S.C.R. 289 (S.C.C.)
(1868), [1861-73] All E.R.Rep. 1 (H.L.)
(1992), 13 M.P.L.R. (2d) 161
Sub-section 284(3), Municipal Act, supra