In Ville de Dollard-des-Ormeaux v. 4164717 Canada inc., 2025 QCCS 4117, the Superior Court of Quebec examines the liability of the City of Dollard-des-Ormeaux, accused of obstructing the completion of a major real estate project led by 4164717 Canada Inc. The dispute concerns compensation for financial consequences resulting from the City's wrongful intervention, as well as the terms of compensation for the loss of future profits. This decision sheds light on the scope of the principle of contractual good faith, compliance with municipal obligations, and compensation for economic harm in real estate development.
Applicable law: contractual liability and compensation for economic harm
The decision first recalls the fundamental principles of Quebec law regarding contractual liability. Under Article 1458 of the Civil Code of Quebec (C.C.Q.), each party to a contract must honor its commitments and is liable for harm caused by its breach. To be indemnified, the harm must result immediately and directly from the fault, and the victim must prove it on a balance of probabilities.
Regarding damages, Article 1611 C.C.Q. provides that compensation aims to cover both the loss suffered and the gain of which the victim was deprived. Future harm can be compensated if it is certain and can be evaluated. Quebec case law requires that the loss of future profits be demonstrated through reasonable projections and credible expert reports, and that the causal link between the fault and the damage be clearly established.
The Court also recalls the obligation to mitigate damages (Art. 1479 C.C.Q.), which requires the victim to take reasonable steps to limit its harm. It further notes that punitive damages may be awarded when there is an intentional and unlawful infringement of a fundamental right protected by the Charter of Human Rights and Freedoms, notably the right to peaceful enjoyment and free disposal of property (Arts. 6 and 49 of the Charter).
The facts: a project hindered by the City's arbitrary intervention
In 2008, 4164717 Canada Inc. (Canada Inc.) acquired an exceptional property in Dollard-des-Ormeaux, with the goal of developing a residential complex for seniors as well as condominiums, in accordance with specific timelines and conditions agreed upon with the City. From the outset, the developer surrounded itself with experienced partners, committed significant financial and technical resources, and prepared plans that complied with zoning and architectural integration requirements.
However, the City intervened arbitrarily and in bad faith. It required Canada Inc. to resolve a private dispute with an architect before reviewing the plans, imposed conditions not provided for in the contract, and refused to evaluate the project objectively. The Court certainly hinted at the existence of a personal vendetta by the mayor of Dollard-des-Ormeaux to ensure that a dispute between the developer and an architect previously involved in the project was settled before the City would consider any changes to the project. These behaviors, recognized as wrongful in a prior judgment confirmed on appeal, made the project's completion impossible.
Despite the developer's determination, expertise, and resources, the project was abandoned. The City repossessed the land and refunded the purchase price, but Canada Inc. then claimed compensation for the loss of future profits as well as for expenses incurred.
The Court's decision: a condemnation based on evidence and legal principles
The Superior Court first notes that the City's fault is established by res judicata, confirmed on appeal. This fault stems from imposing conditions not provided for in the contract and refusing to review the project objectively, which made its completion impossible for Canada Inc.
The Court then examines the substantial evidence presented by Canada Inc., which goes beyond merely demonstrating the intent to carry out the project and highlights the strength of the team and the rigor of the planning. The partners involved had recognized expertise in real estate, complex project management, and financing. Testimonies reveal significant resource mobilization: market studies conducted by reputable firms (RCGT, Altus), architectural plans compliant with municipal requirements, and a sophisticated corporate structure aimed at optimizing governance and reducing tax impact. The project was deemed realistic and viable, based on concrete market data, proven demand for senior residences in the area, and the developer's ability to secure necessary financing. Collaboration with Chartwell, a major player in the field, added further credibility and confirmed market interest in the project.
The Court then considers the conflicting expert reports regarding the quantification of lost future profits. It accepts the Altus report, produced for Canada Inc., as more credible and realistic. Altus applied the discounted cash flow method, recognized by case law, relying on relevant comparables and credible local market data. The valuation date chosen was the one closest to trial (May 31, 2025), allowing measurement of actual harm rather than relying on overly remote assumptions. The Court emphasizes that the Altus report stands out for its rigor, its consideration of the project's specific characteristics (exceptional location, high-end typology, realistic absorption rate), and its ability to justify each assumption with probative elements.
However, the Court reduced the amount awarded to account for uncertainties inherent in an unrealized project, applying a 25% reduction and noting that the assessment of future damages involves 'commercial contingencies.' It also found that Canada Inc. did not sufficiently mitigate its losses, as its efforts to invest elsewhere were deemed inadequate, leading to a second 25% reduction.
The Court concludes that the City acted knowingly, with intent to harm, which justifies the imposition of exemplary sanctions. The City's actions deprived Canada Inc. of the opportunity to carry out a major project, causing serious and direct harm to its assets.
Ultimately, the City is ordered to pay Canada Inc. substantial compensation covering lost future profits, incurred expenses ($16,513,000), and punitive damages ($75,000), all with interest and additional indemnity.
Conclusion
This judgment underscores the importance of honoring contractual obligations and good faith in relations between developers and municipalities. It reminds us that arbitrary interference can engage a city's liability and require it to compensate a developer for lost profits. The decision also stresses the rigor required to demonstrate economic harm and the obligation to mitigate damages. Finally, it warns municipalities against adding any conditions which are outside of the four corners of an agreement, as it could face major financial consequences for doing so.
The author would like to acknowledge the support and assistance of Samuel Cartier, articling student at law.
[View source.]
