[1]         The issue on these appeals is whether a covenant on title to each of the individual respondents’ properties is effective to release claims advanced by them against the District of Sechelt (the “District”). In essence, the respondents claim against the District for the negligent approval of a subdivision in which their properties are located. Those properties were developed on land the respondents say the District knew or ought to have known was subject to the risk of subsidence and other problems. Those risks have materialized and the respondents have been ordered to evacuate their properties.

[2]         The judge concluded that the covenants registered pursuant to s. 219 of the Land Title Act, R.S.B.C. 1996, c. 250 [LTA], did not release the respondents’ claims because that section did not authorize the inclusion of release language in a covenant. He went on to interpret the specific release language in issue, concluding that, in any event, the release did not apply to the respondents’ claims.

[3]         The District contends that the judge erred both in respect of his statutory interpretation of the scope of s. 219 as well as in his interpretation of the specific language of the release.

[4]         The District is a municipal corporation under the Local Government Act, R.S.B.C. 2015, c. 1.

[5]         The respondents are registered owners in fee simple of properties located in a subdivision within the District (the “Development”).

[6]         In 2004, a developer (“Concordia”) applied to the District for a development permit and subdivision approval of the Development. In March 2005, the District issued a development permit in respect of lands, part of which would subsequently be subdivided. At or about the same time, the approving officer issued a “preliminary layout approval” (“PLA”) for the proposed subdivision.

[7]         By at least late 2005, consultants had identified seepage and slope stability as “issues of potential concern”. Both the District and Concordia knew that, during preparation of the property and initial construction, several soil instability events had occurred which included ‘land slip’, sinkholes, and the emergence of springs.

[8]         In February and March 2006, another consultant engaged by the District recommended that the District require the developer to obtain a comprehensive report outlining the current conditions, steps taken to stabilize the lands, and recommendations for proposed work on the Development.

[9]         On March 22, 2006, the approving officer amended the PLA (the “Amended PLA”) to require the following from Concordia:

[10]      The Amended PLA also notified Concordia that “[a]t the building permit stage, the Building Inspector may require from the owner/developer further Geotechnical Reports to ensure each lot may be safely built upon to support the intended use.”

[11]      In or around May 2006, the District received the geotechnical report that Concordia had been required to obtain under the Amended PLA. This report was prepared by GeoTacTics and dated April 28, 2006, with an addendum dated May 9, 2006 (collectively, the “GeoTacTics 2006 Report”).

[12]      The GeoTacTics 2006 Report provided recommendations for site drainage and site preparation, and noted that in September and October 2005, two sinkholes had developed as the result of a major spring on the Development. Unrelated to the two sinkholes above the spring, two other sinkholes were also observed on the Development. Although the GeoTacTics 2006 Report indicated the occurrence of sinkholes in the general area was found to be more common than previously believed, GeoTacTics concluded the property could be safely used for the intended purpose. Specifically, GeoTacTics stated that:

[13]      The addendum dated May 9, 2006 dealt primarily with the “surface expression of soil collapses”, commonly known as sinkholes, which the addendum noted had been observed in the Sechelt area generally and on the Development specifically. The addendum noted that “[u]ntil a soil collapse occurs, the presence of a (potential) sink hole is generally undetectable. The occurrence is random.” The addendum went on to outline certain remedial measures that had been used at the Development and that GeoTacTics opined were effective in making building sites safe for development.

[14]      Following receipt of the GeoTacTics 2006 Report, the approving officer wrote to Concordia on May 19, 2006 advising that the district engineer recommended site work not be recommenced until the District finished reviewing the GeoTacTics 2006 Report. The approving officer also advised Concordia that, before final subdivision approval, the District would “require a covenant that confirms the geotechnical stability of the subject lots; saving the District harmless (etc.)”, with wording to be worked out later.

[15]      On June 6, 2006, the approving officer further amended the PLA to require that:

[16]      On September 13, 2006, the approving officer approved the subdivision comprising the Development pursuant to the authority contained in Part 7 of the LTA.

[17]      On October 2, 2006, pursuant to s. 219 of the LTA and the agreement of Concordia, a covenant bearing Land Title Registration Number BA554998 was registered against title to each of the 28 subdivided lots of the Development, including each lot owned by the respondents (collectively, the “Section 219 Covenant” or the “Covenant”).

[18]      It is, I think, important to set out the specific language of the Covenant in some detail:

[19]      The Section 219 Covenant also sets out the following terms regarding mutual covenants and agreement:

[20]      As is apparent, the original covenantor was the developer, Concordia. The Section 219 Covenant had been registered against title to all of the lots when, subsequently, they were acquired by the respondents in this case. Once registered on title, the Section 219 Covenant is a charge on title to each of the lots in the subdivision, pursuant to s. 27 of the LTA. The registration on title provided notice to each of the respondents of the charge and its content. The Covenant, as a charge, burdens and runs with the land on each lot. As a result of clause 2 of the Covenant and s. 219(1) of the LTA, the terms of the Section 219 Covenant are binding on each respondent as a successor in title to Concordia.

[21]      In February 2019, the District declared a state of local emergency as a result of immediate danger arising from land subsidence and geotechnical instability at or in the area of the subdivision. Accordingly, the residents were evacuated, and the subdivision was closed and fenced off. This has continued to be the situation ever since.

[22]      The respondents started actions against a variety of defendants, arising out of their involvement in the development of the subdivision. The claim against the District and the approving officer sounds in negligence, for approving the Development and the subdivision, as well as issuing building and occupancy permits.

[23]      The District and the approving officer raised the Covenant as a defence in each case, contending that each respondent had released the District from any claims and, further, is obliged to indemnify the District for any loss arising from subsidence or settlement of dwellings or lots within the subdivision.

[24]      The parties then brought competing applications. The respondents brought an application by way of a summary trial for a declaration that the Covenant did not release the District from their claims. This application did not deal explicitly with whether the approving officer can take the benefit of the Covenant or release. Accordingly, I do not propose to address that question in these reasons. The approving officer, however, brought an application to strike portions of the pleadings naming him as a party, and for the dismissal of the claim against him. This second application forms the subject matter of the companion appeals.

[25]      After determining that the issue before him was suitable for summary trial, the judge turned to the interpretation of the Section 219 Covenant. He addressed the two principal arguments advanced by the respondents in support of their argument that the Section 219 Covenant does not apply to release the District.

[26]      The first argument is that s. 219 of the LTA does not authorize a release. The judge began by examining the statutory language. He noted that authority for the entering into a s. 219 covenant is found in s. 86(1)(d) of the LTA:

[27]      The judge then set out the pertinent parts of s. 219 of the LTA. They read:

[28]      The judge reasoned as follows:

[29]      The judge recognized that he needed to interpret the meaning of the word “may” in the section. He sought guidance as to the appropriate interpretive approach from a decision of this Court in Evans v. Jensen, 2011 BCCA 279. That case had to do with interpreting the word in the context of rules of court dealing with the scope of authority of a trial judge to make a costs award. In that context, this Court concluded that the use of the word “may” did not import a permissive approach which allowed the trial judge to depart from the options set out in the Rule.

[30]      The judge concluded:

[31]      Having concluded that the statutory section did not authorize the inclusion of a release in a s. 219 covenant, the judge then turned to the second principal argument: namely, whether the release in fact applied to the claims. That argument turned on the proper interpretation of clause 7 of the Covenant, which reads:

[32]      The judge emphasized the underlined passages above as the keywords engaged in the interpretation of the scope of the release. He concluded that the words which he had not underlined were merely modifiers of the keywords. Accordingly, he found that the release is only for damage, etc., “arising from or in connection with the construction of any structures on the Lands or use of the Lands.” As a result, to the extent the respondents’ claims are for things other than damage, etc., from construction or use of the land, the Covenant did not serve to release the District against the claims in the respondents’ pleadings. In short, he concluded that the release is “confined in its application to release for damage, etc., from construction on or use of the lands.”

[33]      The District submits that the judge erred:

[34]      The District, supported by the Province, contends, among other things, that the judge did not apply the correct framework for statutory interpretation, and consequently erred in reading s. 219 as restrictive and not as enabling. The root of the error, they contend, lies in the judge’s failure to consider the legislative objective, as well as the statutory and factual context of the Covenants. The District contends, further, that the judge erred in relying on this Court’s decision in Evans. It says that that case dealt with an entirely different statutory regime, and that the Court went to great lengths to explain its interpretation of the use of the word “may” in light of the legislative history of the provision in question. In any event, the appellants submit the release is authorized by the plain meaning of s. 219.

[35]      For their part, the respondents say that the judge got it right. They say that a s. 219 covenant is not intended to protect municipalities from liability, but is intended to be an exhaustive list identifying the type of conditions that may be attached to a development to control risks. It is not, however, a “get out of jail free card”. Moreover, a release does not align with the statutory purpose of s. 219 of the LTA, which is to impose conditions on development.

[36]      With respect for the range of arguments advanced by the parties and the reasons of the judge, I do not think it necessary to canvass all of those arguments to address the issue before us.

[37]      First, it is apparent that the statute contemplates that an approving officer may allocate risk in approving a subdivision, and provide for notice to purchasers through the use of a covenant running with title. Section 86(1)(d) provides:

[38]      Section 219 provides:

[39]      In my opinion, the critical wording in the section is that a covenant may include “provisions in respect of the use of land.” I agree with the Province that the legislature chose words of the widest scope in using the language of “in respect of.” Mr. Justice Dickson, writing for the Court in Nowegijick v. The Queen, 1983 CanLII 18 (SCC), [1983] 1 S.C.R. 29 at 39, explained:

[40]      In R. v. Barton, 2019 SCC 33, the Court considered s. 276 of the Criminal Code, which governs the evidence an accused can call about the prior sexual activity of a complainant “in respect of” listed offences. While the accused had not been charged with one of the listed offences, the Court nevertheless held that the regime applied to prosecutions that had some connection with those offences. As explained by Justice Moldaver at para. 73:

[41]      As I apprehend the matter, the same reasoning is applicable here. In broad terms, the statutory scheme contemplates management and allocation of risk, notice to the public, and the protection of the public purse. The legislature has chosen the widest possible language to capture what may be included in a covenant. The covenant is a creature of statute. To the extent necessary to achieve the statutory purpose, the statute modifies or supplements common law principles. By choosing such broad language, it appears to me that the legislature contemplated the inclusion of a release in a covenant as a provision “in respect of the use of land”. I do not think that the language of the section, when read in light of the statutory purposes and objectives, admits of any other possibility.

[42]      Indeed, the possibility that a covenant may include an indemnity is expressly contemplated by s. 219(6). I do not think that one can infer from the express authorization of the inclusion of an indemnity in a covenant that the legislature by implication should be taken to have excluded a release. To the contrary, I take it that the express reference to an indemnity, while probably not strictly necessary, removes any doubt that might otherwise exist. It is understandable that the legislature made express reference to an indemnity in s. 219(6) because it, like the other provisions in that subsection, imposes positive obligations on the landowner to expend money. As the Province points out, a release is not a positive obligation and does not require the expenditure of money. I agree with the District and the Province that authorizing an indemnity but not a release would result in an absurdity, effectively requiring a plaintiff to indemnify the covenantee for the financial consequences of its negligence.

[43]      It follows that it is not necessary to consider whether the use of the word “may” in the section should be interpreted restrictively, as the judge reasoned. This is so because a release is authorized by s. 219(2)(a)(i).

[44]      I turn now to the question of whether the release bars the respondents’ claims.

[45]      The judge’s error, contends the District, was to endorse an interpretive approach, based solely on the ordinary meaning of the words “in a restrictive covenant”. This, it says, is an extricable legal error because he ignored other necessary elements of contractual interpretation: namely, the objective circumstances known to both parties that formed the factual matrix in which the contract was made.

[46]      As the Supreme Court of Canada has recently confirmed, releases are contracts subject to the ordinary approach to contractual interpretation set out in Sattva Capital Corp. v. Creston Moly Corp., 2014 SCC 53 [Sattva]: see Corner Brook (City) v. Bailey, 2021 SCC 29 at paras. 3, 20–21 [Corner Brook]. The relevant principles are summarized in Corner Brook at para. 20, which I reproduce here:

[47]      As the Court noted at para. 23: “In Sattva, this Court directed judges to look to the surrounding circumstances known to the parties at the time of contract in interpreting the meaning of the words of a contract: para. 47.” This imperative has long been part of our law. I observe here the comments of Justice Lambert in Jacobsen v. Bergman, 2002 BCCA 102:

[48]      To similar effect is this statement from Canada Deposit Insurance Corp. v. Commonwealth Trust Co. (in Liquidation) (1998), 1997 CanLII 4028 (BC CA), 39 B.C.L.R. (3d) 1 at para. 10 (C.A.):

[49]      As the interpretation of a release is a matter of contractual interpretation, the standard of review to be applied on appeal is one of mixed fact and law, unless an extricable legal error is present. Again, to quote from Corner Brook, at para. 44:

[50]      Here, the District alleges that the judge erred in failing to apply proper legal principles of contractual interpretation. It says he erred by ignoring relevant evidence about the factual matrix that informs the proper interpretation of the release. These legal errors, if shown, are reviewable on a standard of correctness.

[51]      As I noted above, the judge focused his analysis exclusively on the following words from clause 7 of the Section 219 Covenant: “The Covenantor, … hereby releases, … the Municipality for any damage, loss claim, demand, cost … arising from or in connection with the construction of any structures on the Lands or use of the Lands.” He concluded that, to the extent the respondents’ claims are for things other than damage, etc. from construction or use of the land, the release does not shield the District against the claims in the respondents’ pleadings.

[52]      I agree that the judge fell into extricable legal error. The judge failed to consider properly the factual matrix and the objective circumstances known to the contracting parties at the time the contract was executed. As a result he ignored a substantial volume of admissible extrinsic evidence adduced by the District demonstrating that the common purpose of clause 7 of the Section 219 Covenant was to mitigate the risk of, or to absolve the District from, any liability arising from Concordia and its successors in title using the property for the construction of the Development as a whole, and not simply in relation to construction on the resulting subdivided lots.

[53]      Central to the scope of application of clause 7 is the interpretation of the phrase “use of land” in the passage, “arising from or in connection with the construction of any structures on the Lands or use of the Lands.” In Corner Brook, the Supreme Court clarified that a release may cover unknown claims, and does not need to particularize with exact precision the claims that fall within its scope. The question of a release’s scope ultimately depends upon its wording, and what the surrounding circumstances indicate the parties objectively intended: Corner Brook at paras. 27–30.

[54]      The District contends that the judge failed to have regard to a factual matrix leading up to the requirement of the Covenant, which involved awareness by all parties of geotechnical risks associated with the subdivision and the imposition of additional conditions in such documents as the Amended PLA. It says that the Amended PLA demonstrates that all contracting parties knew or reasonably ought to have known that the District intended to rely on a professional opinion about the suitability of the land for development and subdivision, as well as assuring that the report would be available publicly to alert potential purchasers of the geotechnical risks. The District argues that this critical factual matrix evidence establishes that the risks posed by geotechnical stability issues pertaining to the whole of the lands to be subdivided were known to the contracting parties when the Section 219 Covenant was entered into. In fact, the approving officer had specifically advised Concordia that the Section 219 Covenant would contain language “saving the District harmless” from issues created by geotechnical stability problems. These concerns were not, as suggested by the respondents, limited to problems that may arise from the construction of structures on individual lots. They were concerns that extended to the Development as a whole. The language “arising from or in connection with the construction of any structures on the Lands or use of the Lands” must therefore be interpreted to properly capture objective common intent of the parties at the time the Section 219 Covenant was entered into.

[55]      Once the factual matrix evidence adduced by the District is considered, it is clear that the parties objectively intended clause 7 to have a broad scope, namely one that would apply to (1) claims, damages and losses arising from or in connection to construction of the single family dwellings located on the individual lots of the Development, and (2) in relation to claims arising from the “use of the Lands” comprising the Development, including damages arising from subsidence, settlement of buildings or roads, or loss of slope stability upon the lots or the Development as a whole. In my view, this interpretation is compelled by the factual matrix, and is entirely in accord with the principles enunciated by the Supreme Court in Corner Brook.

[56]      The evidence demonstrated that the District had imposed the requirement for the Section 219 Covenant in or around 2005/2006, as part of the subdivision process, and before any building permits were applied for within the Development. The evidence also demonstrated that the requirement for the imposition of the Section 219 Covenant was aimed, in part, at addressing potential liability risk to the District that could arise from the Development generally. At the time the terms of the Section 219 Covenant were prepared, the property comprised all 28 lots, and was, as yet, unsubdivided. As such, the phrase “use of the Lands” must have contemplated the development work which was ongoing across the entire unsubdivided property at that time. This must have been objectively apparent to each contracting party.

[57]      The chambers judge did not address the fact that clause 7 is drafted to release the District from damage or claims arising “from or in connection with the construction of any structures on the Lands or use of the Lands.” The phrase “or use of lands” in clause 7 suggests a different scope of release for damages arising from the construction of single‑family dwellings on individual lots. The language broadens the scope of what is released. In particular, the judge did not address the reference in clause 7 to “any subsidence, settling of any structure including any utility or road infrastructure, loss of slope stability, or any similar matter.” The evidence before the chambers judge was that the development of “utility or road infrastructure” was part of the site‑wide works being undertaken to ready the subdivision for residential use. That work was not confined to individual lots or to construction upon them. A proper application of the canons of contractual interpretation would have led the chambers judge to apply a broader scope to the language of clause 7 than the extremely narrow scope sought by the respondents.

[58]      There exists no special dictate requiring releases to be interpreted more narrowly than other forms of contractual agreements, so long as the plain words of the agreement are in basic harmony with the parties’ intentions, as shown by the circumstances surrounding the contract’s execution: Corner Brook at paras. 3, 36–38. Broad wording in a release can conflict with the circumstances if the claims were not in contemplation at the time the release was executed: Corner Brook at para. 38. But that is not the case here. The requirement of the Section 219 Covenant arose out of the District’s approval of the subdivision of the property and was aimed, in part, at addressing the District’s potential liability arising from the Development generally. The evidence establishes that geotechnical risks associated with the Development, in particular, were known to the contracting parties at the time the release was drafted and, indeed, are expressly referred to in clause 7.

[59]      For the purpose of this application, the respondents advance the following claims against the District, all arising out of the subdivision and development process:

[60]      These claims all arise from or are in connection with the construction of structures in the Development or the use of development lands generally. The aforementioned evidence demonstrates that these were issues in the contemplation of the parties at the time the Section 219 Covenant was drafted and entered into, and, therefore, these are the precise types of damage, loss, claims and demands contemplated by clause 7 of the Section 219 Covenant.

[61]      In sum, a release of the kind included in the Section 219 Covenant is authorized by statute, and clause 7 of the Covenant applies to release the District against the claims advanced by the respondents.

[62]      I would allow the appeal, set aside the order of the chambers judge, and issue a declaration that the respondents have released the District from all claims alleged or damages sought in Rai v. District of Sechelt et al., SCBC Vancouver Registry No. S198921; Held et al. v. District of Sechelt et al., SCBC Vancouver Registry No. S198922; Pednaud et al. v. District of Sechelt et al., SCBC Vancouver Registry No. S198923; Pickell et al. v. District of Sechelt et al., SCBC Vancouver Registry No. S198924; Wang v. District of Sechelt et al., SCBC Vancouver Registry No. S198925; Goy et al. v. District of Sechelt et al., SCBC Vancouver Registry No. S198926; Moradian v. District of Sechelt et al., SCBC Vancouver Registry No. S198927; and, Pan v. District of Sechelt et al., SCBC Vancouver Registry No. S198928.