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| Sara Blake |
The City of Richmond undertook a water main and sewer upgrade project. It asked FortisBC Energy Inc. to relocate parts of its gas line. They were unable to agree on the contract for this gas line project because Fortis asked for a clause limiting its liability.
The city applied to the utilities commission for an order requiring Fortis to do the gas line project and to set the terms on which the work would be done. The statute provides that, if a public utility and municipality cannot come to an agreement on terms for a utility project, the commission “may, by order, … specify the manner and terms of use.” The commission ordered Fortis to do the gas line project and set the terms, including a limitation-of-liability clause. This clause was modified from the one requested by Fortis to clarify that it limited only Fortis’s liability to the city (not to the public) and excepted liability for claims caused directly by negligence or willful misconduct of Fortis.
The city was granted leave to appeal pursuant to a statutory provision that granted a right of appeal with leave of the court. The issue was whether the commission had statutory authority to impose the limitation-of-liability term. As this is a pure question of law requiring interpretation of the statute, the standard of review was correctness.
The court noted the statute’s broad expression of authority to “specify the manner and terms of use.” It is deliberately vague and open-ended. I note that it does not prescribe any parameters or criteria.
The court ruled that the scope of the commission’s power to set terms is constrained by statutory purposes. The commission identified statutory purposes that are served by the term limiting liability including:
- that gas utilities’ liabilities associated with their use of municipal lands for the provision of gas service are part of their cost, which is a factor in rate-setting;
- the allocation of liabilities between Fortis and the city is relevant to setting just and reasonable rates; and
- the limit on liability protects the gas supply system by protecting Fortis’s financial viability.
The city argued that the limitation-of-liability clause is contrary to the presumption of statutory interpretation that legislatures are presumed to respect the common law and do not intend to change existing law — in this case, a plaintiff’s common law right to sue in tort — except by explicit provisions.
The court rejected this argument because the statutory provision authorizes the commission to prescribe terms of a contract. Any order the commission makes necessarily interferes with and overrides the freedom to contract that the parties would normally enjoy.
The court concluded that the commission has the authority to impose the limitation-of-liability clause as a term of contract because it was done for proper statutory purposes.
Sara Blake is the author of Administrative Law in Canada, 7th edition, LexisNexis Canada. Her practice is restricted to clients who exercise statutory and regulatory powers.
The opinions expressed are those of the author(s) and do not necessarily reflect the views of the author’s firm, its clients, Law360 Canada, LexisNexis Canada or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.
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