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Seawatch: District Statement

Posted: 39 days ago



While the District generally avoids commenting on active litigation matters and has largely maintained that approach relating to the Seawatch litigation, a recent media report has prompted the District to clarify the current state of the legal proceedings.

When local governments approve subdivision applications, they rely on the expertise and professional opinions of independent engineers who are hired by the proponents of the subdivision. As part of the approval process for the Seawatch subdivision in the mid-2000s, the District relied upon assurances from a professional engineer that geotechnical issues which had been observed on the Seawatch property had been fully addressed by the developer, and that the land was safe for residential development.

When a local government allows development on land which it knows has historically been affected by geotechnical issues, the standard procedure is to require that a covenant is registered on the title of the relevant property. These covenants are registered for two main reasons: Firstly, to protect the local government (and its tax-paying residents and property owners) from any claims relating to the development in the event, for example, that the developer or any of its contracted professionals are negligent in carrying out their responsibilities. Secondly, covenants are registered to notify prospective buyers that the land has inherent geotechnical challenges and risks (property titles, including any covenants registered on title, are publicly available, and are reviewed in the usual course of real estate transactions).

The District followed its standard policy in the case of the Seawatch development, and required the registration of a covenant on the title of the properties in 2006, before the developer had sold the properties to individual buyers. The covenant contained terms commonly contained in covenants of this nature, including a release in favour of the District regarding any geotechnical event-related claims, an obligation for the property owner to indemnify the District in the event that it is sued for geotechnical event-related claims, and an obligation for owners to pay the costs of repairing any municipal roads or infrastructure in the subdivision that are damaged by geotechnical instability. The covenant included a full copy of the report prepared by the developer’s geotechnical engineer, which set out the geotechnical challenges on the property, and the steps that had been taken to make the property safe to build on.

In 2012, a large sinkhole opened up in the southeast corner of the subdivision, and a spring emerged on a private lot lower down on the property. The developer was still building houses in the subdivision at that time. In response, the District required the developer to seek new engineering advice. The developer obtained a report from a senior engineer at a large, multinational engineering firm, who concluded that the subdivision was still safe for residential development. The District required the developer to register further covenants on the potentially impacted properties, which specifically notified potential buyers of the sinkhole and the spring, and also attached the new geotechnical engineer’s report.

This second covenant was registered to the titles of properties which were subsequently purchased by private buyers in 2013 and 2014. As a result of the known geotechnical issues, some of these buyers were able to purchase their Seawatch properties at a substantial discount from the asking price. These are the same buyers who later brought lawsuits against the District.

In December 2018, a large new sinkhole appeared just south of the Seawatch subdivision, and in February 2019, the District declared a local state of emergency and evacuated the subdivision. In August that same year, the owners of eight Seawatch properties brought lawsuits against the District, the developer, a number of engineers, and others. As part of its defence, the District relied upon the 2006 covenant and, specifically, the release contained in that covenant.

In July 2020 the owners who had brought these lawsuits asked the court to rule upon whether the release was valid. In September 2021, the BC Court of Appeal found that, by virtue of the covenant, the Seawatch owners had “released the District from all claims alleged or damages sought in the lawsuits which had been brought against the District”. The owners who had sued the District attempted to appeal that decision to the Supreme Court of Canada. That court declined to hear their appeal.

Despite the decisions of the BC Court of Appeal and Supreme Court of Canada, the owners of seven parcels in the subdivision started a new lawsuit against the District. The new lawsuit includes claims which the courts have already declared the District to have been released from, including claims for damages relating to the ongoing hazardous condition of the subdivision roadways. In addition to this new lawsuit, the District remains a party to multiple other lawsuits brought by this same group of Seawatch owners.

The District is sympathetic to the plight of the Seawatch owners, and expects that the owners will continue to pursue their claims against the developer, engineers and others. However, addressing these lawsuits has consumed massive amounts of staff time and District resources. The owners’ legal claims against the District have been decided by the courts. If the owners intend to continue to sue the District, the District has reached the point where it will exercise its own rights under the covenant and require the owner to reimburse the District for the expense of such lawsuits. As a further attempt to recoup its costs, the District has brought a claim to enforce the covenant obligation upon the owners to repair the affected roadways. It is notable that the District could have pursued these claims at any point, but chose not to, until the plaintiffs tried to sue on the same issue once again.

Local governments require geotechnical covenants on properties, such as those in the Seawatch subdivision, specifically to warn prospective buyers that the land they are considering is potentially problematic, and to protect their tax-payers from the burden of claims relating to geotechnical events that may happen after the owners decide to assume that risk.

Although Court of Appeal effectively dismissed the lawsuit against the District, the same lawsuits are still ongoing against the developer, the engineers, and a number of other parties. If any party has been negligent in their professional duty with regard to the Seawatch properties, the District is confident that the courts will hold them responsible.