Vancouver city staff intentionally dragged their feet for years on an application to demolish a century-old Shaughnessy mansion, waiting for council to approve a heritage protection bylaw, a B.C. Supreme Court judge has found.

The city acted in bad faith when it put off rejecting Zheqiang Wu and Binxia Cao's application to develop the property at 3990 Marguerite Street, Justice Catherine Murray wrote in a judgment Tuesday.

"Given the clear evidence indicating the City never intended to grant the plaintiffs a development permit due to the heritage merit of the property … the only action open to the City at the time was to designate the property as heritage and provide compensation," Murray wrote.

"Their failure to do so within a reasonable time deprived the plaintiffs of the compensation they were owed, according to the legislative framework, for the decreased market value of the property."

The home is known as the Walkem House, built in the Arts and Crafts style in 1913 for the shipbuilding magnate George Walkem.

Since September 2015, the house has been protected by the First Shaughnessy District Heritage Bylaw, which designated the neighbourhood as a heritage conservation area and prevented demolition of any home built before 1940.

But when Wu and Cao bought the property for $4.65 million in 2011, there was no such protection in place. Even before they signed on the dotted line, they asked their realtor to make sure the home wasn't protected by a heritage designation, according to court documents.

The old home was in rough shape and had been converted into five apartments years before, and from the very beginning, the couple planned to tear it down to build a new one where they could live with their three children.

Heritage rating recommended

Wu and Cao's architect, Loy Leyland, began the pre-application process for the development in March 2012. By May of the same year, a heritage planning analyst had evaluated the home, recommending a heritage "B" rating, according to court documents.

But staff didn't ask council to place the home on the city's heritage list, which would have prevented demolition and required the city to pay compensation for the lost property value.

Instead, they spent two years trying to convince Wu and Cao to keep the existing structure, even though the couple was adamant at every turn that they had no intention of keeping the house.

At one point, the city asked the couple to have a statement of significance completed for the property, requiring them to have heritage consultant Donald Luxton assist in the process.The idea was to give an independent and objective assessment of the structure.

But the couple wasn't told that Luxton had already written the city to complain about the proposed demolition in his capacity as president of the Heritage Vancouver Society.

'Complete silence'

In late 2013, then-director of planning Brian Jackson went so far as to ask council for a 120-day temporary heritage protection order for the property so that all options for retention could be considered.

"Why this was done, given that the plaintiffs had made it clear over and over again that they were not interested in retention options, is a mystery," Murray wrote.

Even after the temporary order had lapsed, the owners heard nothing about their application. Leyland, the architect, testified that he had "never before experienced complete silence of this kind from the City with respect to a legitimate application."

The couple finally gave up and filed suit in May 2014. The city would later acknowledge in court that this sort of application is usually processed within 10 to 14 weeks.

Order for damages

"The City had made a decision regarding heritage merit by May 31, 2012 … but they chose to not advise the plaintiffs of it in order to avoid dealing with the Application until the new bylaw was passed and the requirement to pay compensation was done away with," Murray wrote.

Her judgment requires the city to pay damages for Wu and Cao's economic losses, in an amount to be determined at a later date.

The city declined to offer up someone for an interview on the judge's decision, but issued a statement expressing disappointment. Vancouver is considering an appeal.