Court rules West Kelowna acted ‘unfairly’ doubling developer’s costs

A BC court has found the City of West Kelowna acted unfairly when it more than doubled the costs a developer had to pay after its housing project had been completed.

In a June 11 decision, BC Court of Appeal Justice Geoffrey Gomery said the unfairness in West Kelowna’s actions was “obvious” and the City failed to give the developer an opportunity to respond when it doubled the bill.

The Appeal Court’s decision overruled an earlier Supreme Court decision and sends the dispute back to the drawing board.

The case involves Ironclad Developments who in 2018 was in the midst of working on an unnamed development in West Kelowna.

A neighbouring project was also being built by WestUrban Developments which had been told by the City of West Kelowna it had to construct a road and infrastructure for the site.

As Ironclad Developments’ housing project would also benefit from the road and services, the City said it would also have to pay.

The City instructed Ironclad Developments to pay 54% of the actual construction costs incurred by WestUrban Developments, and the City would pay 20%. This would leave WestUrban Developments paying 26% of the actual cost.

“A dispute emerged as to whether the costs attributed to the work by WestUrban were reasonable,” the Justice said in the decision.

Initially, the road and service construction was supposed to cost $670,000, making Ironclad Developments share $362,000.

However, the City then said the cost had tripled to $1.9-million before a quantity surveyor SSA was brought in and confirmed the price at $1,388,260.

Ironclad Developments was now on the hook for $750,000 – twice what it had been told it had to pay.

As its building was ready and it had tenants ready to move in, it paid up “under protest.”

It then sued the City of West Kelowna in the BC Supreme Court but lost.

The Supreme Court found the City’s decision was unfair, but that it was following the legislation.

However, the three Justices at the Appeal Court ruled the decision wasn’t a matter of following legislation and was made by the City’s administration staff.

Justice Gomery ruled the City of West Kelowna had failed to fulfill its legal obligation to make the decision fairly.

“In the circumstances, fairness required that Ironclad be afforded an opportunity to be informed of the costs claimed by WestUrban and SSA’s analysis before the City made a decision that imposed on Ironclad an obligation to pay almost $750,000,” the Justice said.

“The Policy stated that it would have an opportunity to provide feedback. Ironclad had repeatedly requested supporting documentation and an opportunity to make submissions. It appears that the approving officer was willing to talk to WestUrban, for whose benefit the charge would be imposed, but not to Ironclad, who would have to pay it.”

The Justice also ordered the City of West Kelowna to pay Ironclad Developments legal costs for the Appeal Court process, and “in the circumstances” the earlier Supreme Court costs.