Acquired rights: Unstable Ground!

The Supreme Court of Canada recently rendered a judgment¹ holding that unless the owner of a business that is operating in violation of a currently in force municipal zoning bylaw can clearly establish having an acquired right to do so, the business owner may be liable to a fine, despite the fact that the municipality, in this case the City of Québec (the “City”), knew of the offending use for decades, had provided assistance with the operation of the business and had even collected taxes on the non-compliant use.

Facts

Immeubles Jacques Robitaille Inc. (the “Owner”) acquired a piece of property in the City in 1998. The property had been used as a commercial parking lot, operated by a manager of such facilities, since at least 1995. However, the operation of a commercial parking lot at that location had been prohibited by municipal bylaw since 1979. Nevertheless, upon acquiring the property, the Owner continued to operate a parking lot there.

Since 1998 the City had on many occasions reached agreements with the Owner, including the following:

• because of the relocation of a major highway, the City had paid compensation to the Owner for having to relocate several parking spaces;
• the City had purchased a portion of the property;
• the City then built a stairway and a driveway to permit access to the parking lot;
• the City had even put up signs on a public road indicating the location of the parking lot, and
• the City had levied and collected municipal taxes on the property at a rate corresponding to such commercial use.

In July 2008 the Owner received a statement of offence for having allowed or tolerated a use of its property that did not comply with the zoning bylaw in effect. In Municipal Court the Owner pleaded not guilty, maintaining that it had an acquired right to the non-compliant use of the property. The Owner called a member of a religious order to testify that one of his fellow members had told him that starting in 1979 parking spaces had been leased on an informal basis to persons working in the building across the street. The Municipal Court rejected the witness’s testimony as hearsay, and concluded that because the Owner was unable to establish that the property had been operated primarily as a parking lot before the zoning bylaw was adopted in 1979, it could not rely on the doctrine of acquired rights as a defence. The Court found the Owner guilty and imposed a $200 fine.

On appeal before the Superior Court, the Owner again pleaded, unsuccessfully, the defence of acquired rights. The Owner also pleaded the doctrine of estoppel which, it maintained, would be an admissible argument in a civil proceeding brought by the City under section 227 of the Act respecting Land Use Planning and Development² (the “ALUPD”). The Superior Court first sought to determine whether the doctrine of estoppel could be relied upon as a defence in penal proceedings for infringement of a zoning bylaw.

The Supreme Court pointed out that in a public law context, promissory estoppel requires proof of a clear and unambiguous promise made to a citizen by a public authority in order to induce the citizen to perform certain acts.  In addition, the citizen must have relied on the promise and acted on it by changing his or her conduct. The Court went on to add however that the doctrine of estoppel must yield in the public law context to an overriding public interest and may not be invoked to prevent the application of an express legislative provision.

Zoning bylaws, the Court noted, are intended to ensure harmonious development of the urban area, and in the instant case the wording of the provision was very clear. Thus, giving precedence to the public interest, the Court refused to apply the doctrine of estoppel, giving no weight to the previous actions of the City such as paying compensation for the relocation of some parking spaces, installing a stairway at its own expense, collecting taxes on the non-compliant use of the property and posting signs on a public road indicating the parking lot’s location.

Moreover, even assuming that the City’s actions constituted a promise that was effectively permission to violate a zoning bylaw, the Owner’s argument would still fail, stated the Court, since a municipality cannot deviate from its own bylaws or authorize any deviation therefrom.

The second argument raised by the Owner was that by opting to proceed via a penal rather than a civil recourse, the City had prevented the Owner from pleading a potentially viable ground of defence to a civil proceeding. Like every municipality, the City had two recourses available to it: a penal proceeding aimed at imposing a fine for non-compliance with a zoning bylaw, or a civil proceeding under section 227 ALUPD seeking an order to enjoin the non-compliance. The Owner argued that since the Superior Court has discretionary power when applying s. 227, the Court might well have allowed its estoppel defence had the City elected to proceed under that section rather than via a penal proceeding. In the Court’s view however, the duality of recourses reflected a legislative choice and each of the recourses had a different purpose.

Conclusion

In sum, after having operated a commercial parking lot until 2008 in violation of a zoning bylaw adopted in 1979, i.e. for more than 30 years, the Owner was unable to establish the existence of an acquired right to do so. Thus, any owner of a business whose activities, whether exercised directly or through the intermediary of an operator, contravene a bylaw that is currently in force must be able to conclusively prove that it has an acquired right to do so. Otherwise, even if its activities have been accepted or tolerated by municipal authorities for many years and the municipality appears to have acknowledged such an acquired right, the courts will not recognize its existence.

Accordingly, owners and purchasers of properties that are being used in contravention of a zoning bylaw must ensure that they are in possession of clear proof of an acquired right to continue such use. Deeds of sale should reference that right, and any document or other evidence thereof should be carefully preserved, as such evidence tends to become lost over the years, with the result that rights that were thought to be solidly acquired prove to be ephemeral.