Expropriation Law: 2021 a year in review

Our national Expropriation Law Group summarizes several complex and compelling expropriation cases from across Canada in 2021. The team highlights a number of important issues and key takeaways for those parties involved in the expropriation process. The court decisions are not listed in rank order.

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Table of content

1. Halifax Regional Municipality v. Annapolis Group Inc.2021 NSCA 3, 2021 CarswellNS (NSCA)
2. Annapolis Group Inc. v. Halifax Regional Municipality, 2021 CarswellNS 455 (SCC)
3. Halifax County Condominium Corporation No. 277 (Re), 2021 NSUARB 130
4. Tri-C Management Limited v. Nova Scotia (Attorney General), 2021 NSCA 26
5. Her Majesty the Queen (Minister of Transportation) v. Soucy, 2021 NBCA 11
6. The Corporation of the City of Windsor v. Paciorka Leasehold Limited, 2021 ONSC 2189 (Div Ct)
7. Widmer-Adelaid Corp. v. Toronto (City), 2021 CarswellOnt 12266 (OLT)
8. Metrolinx v. 1450638 Ontario Inc., 2021 ONSC 8045
9. Southwind v. Canada, 2021 SCC 28
10. Madison Holdings Ltd. v. Winnipeg (City of), 2021 MBCA 94
11. Northern Cross (Yukon) Ltd. v. Yukon (Energy, Mines and Resources), 2021 YKSC 3 & 2021 YKCA 6

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1. Halifax Regional Municipality v. Annapolis Group Inc., 2021 NSCA 3, 2021 CarswellNS 4 (NSCA)

2. Annapolis Group Inc. v. Halifax Regional Municipality, 2021 CarswellNS 455 (SCC)

The Plaintiff, Annapolis Group Inc. (Annapolis) claimed that Halifax Regional Municipality (Region) had de facto expropriated its lands by refusing to proceed with a secondary planning process, a mechanism that is required to advance the lands toward serviced development. Annapolis argued the Region was exercising dominion over its lands by encouraging members of the public to utilize the lands as a park, and had an ulterior motive to refuse the secondary planning process. The Region's motion for summary judgment of Annapolis's claim was dismissed, and the Region appealed that decision.

The Court of Appeal found that Halifax's refusal did not amount to a de facto expropriation. The Court reiterated the two elements that constitute a de facto expropriation – the taking of lands and a corresponding deprivation of all reasonable uses, and further summarized what qualifies as a de facto expropriation and what does not, as follows:^[1]

1. The acquisition must be one that confers a beneficial interest on the authority alleged to have expropriated the land. Land must actually be taken from an owner and acquired by the authority;
2. All reasonable uses to which the property could be put must be removed. The burden of proving all reasonable uses have been removed is on the land owner;
3. The freezing of development and restrictive land use regulation, in and of itself, does not amount to de facto expropriation;
4. The decrease in the value of land does not amount to de facto expropriation; and
5. The passing of a development plan does not constitute a taking, it simply allows a municipality to set a vision and course for future development and ensures the land will be used or developed in accordance with its vision.

The Court of Appeal also concluded that the motive of an expropriating authority is not a factor in the analysis of a de facto expropriation. Improper motive does not create an alternative way of proving the claim and cannot compensate for the failure to establish the required elements of a de facto expropriation. Where an authority has acted in an inappropriate manner, the Court noted that parties could more appropriately proceed with a cause of action for abuse of, or misfeasance in, public office.

Annapolis was unable to demonstrate that there was a deprivation of all reasonable uses of the lands, and its allegations of improper motive were not material to the claim.

On June 24, 2021, leave to appeal was granted to the Supreme Court of Canada, and the appeal will be heard in February 2022.

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3. Halifax County Condominium Corporation No. 277 (Re), 2021 NSUARB 130

In 2017, the Halifax Regional Water Commission began upgrades on a drainage system that ran through an easement on the Claimant's lands. The upgrades required excavation and expansion, which caused parts of the drainage system to protrude above the ground. The Claimant maintained that the upgrades impaired the use of the easement lands and sought damages for injurious affection. Under the Act, a claim for "injurious affection" can be made when a "statutory authority acquires part of the land of an owner" causing a reduction in market value and personal or business damages. The Claimant argued that the degree of impairment caused by the upgrades constituted an "acquisition of land by a statutory authority". In the alternative, the Claimant argued that the original expropriation of the easement in 1972 formed the basis of expropriation and justified its claim for injurious affection.

The Board considered two key issues under the Expropriations Act: (1) whether upgrades to a drainage system constituted "acquisition of land", and (2) whether a claim for injurious affection can relate back to an expropriation of an easement in 1972. On the first point, the Board held that the Respondent's activities did not amount to expropriation under the Act. In its statutory interpretation, the Board held that "acquire" must refer to a legally transferable interest. The Respondent did not "acquire" any part of the Claimant's lands and had no right to occupy the Claimant's property beyond the extent of the easement. The Board could not find any wording to suggest that the Legislature intended "acquisition" to include unlawful use or interference of land.^[2] Finding that the "acquisition of lands" prerequisite was not met, a claim for injurious affection could not be upheld.

On the second issue, the Board held that neither the Respondent nor its predecessors in title had expropriated any lands from the Respondent. The wording of the Act implied the present-tense application to a current owner. In other words, only the owner at the time of expropriation is entitled to make a claim for damages arising from that expropriation. Given that the Claimant had other means of safeguarding its interests, the Board found that the Claimant voluntarily assumed the risks of land encumbered by an easement.

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4. Tri-C Management Limited v. Nova Scotia (Attorney General), 2021 NSCA 26

Five businesses (Appellants) sought damages against the Province of Nova Scotia for injurious affection arising from a highway construction project. Prior to 2009, the Trans-Canada Highway passed through the Town of Antigonish. In response to safety concerns, the Province undertook a two-phase project that effectively by-passed Antigonish and rendered the road as a "trunk highway".

The Nova Scotia Court of Appeal dismissed the appeal and cross-appeal, finding that the Nova Scotia Utility and Review Board (Board) correctly applied the law in finding that the Appellants did not establish a claim for injurious affection. Moreover, the Court of Appeal clarified that where a claim for injurious affection arises from a temporary continuous nuisance, a new cause of action will arise every day that the nuisance continuous, applying Gautum v. South Coast British Columbia Transportation Authority.

The Board correctly found that a claim for injurious affection can be founded on a temporary continuous nuisance. However, the Board incorrectly concluded that the limitation period began to run when the nuisance had ceased. The Court of Appeal clarified that in the case of continuing nuisance, "every day a civil wrong continues provides a new opportunity to bring a claim for injurious affection."

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5. Her Majesty the Queen (Minister of Transportation) v. Soucy, 2021 NBCA 11

In 2021, the New Brunswick Court of Appeal overturned a decision of the New Brunswick Court of Queen's Bench that we covered in our 2020 year in review article.

The Province of New Brunswick expropriated portions of the Claimant's land in 1992, and the Claimant provided written particulars of a claim for compensation for injurious affection within one year of the expropriation, as prescribed by s. 47(1) of the Expropriations Act, R.S.N.B. 1973, c. E-14. However, other than the filing of a Notice of Arbitration in 2013, the claim was left dormant and around 26 years after the expropriation, the New Brunswick Minister of Transportation brought a motion seeking to determine whether the claim was statute-barred under the Limitation of Actions Act, SNB 2009, c L-8.5.

We reported last year that the New Brunswick Court of Queen's Bench found that the Expropriations Act is meant and intended to encompass all of the time limits that are relevant to a claim for compensation, and concluded that the Limitation of Actions Act did not apply to the claim and that the claim was not statute-barred. In 2021, the New Brunswick Court of Appeal disagreed, and found that the general limitation period set out in the Limitation of Actions Act applies to expropriation proceedings, and that the claim was statute-barred. Section 47(1) of the Expropriations Act does not operate like the provisions of the Limitation of Actions Act; it does not set a time limit for filing an originating process to commence a claim before the court. Rather, it creates a time limit for completing a procedural prerequisite for making such a claim. Accordingly, there is no conflict between Expropriations Act s. 47(1) and the provisions of the Limitations of Actions Act.

Given the New Brunswick Court of Appeal's decision, it is clear that the limitation period provisions of the Limitations of Actions Act applies to all expropriation proceedings in New Brunswick.

Leave to appeal to the Supreme Court of Canada was dismissed in August 2021.

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6. The Corporation of the City of Windsor v. Paciorka Leasehold Limited, 2021 ONSC 2189 (Div Ct)

Long-standing litigation between the City of Windsor and Paciorka Leasehold Limited, resulting from the City's expropriation of 187 lots between 2004 and 2008, reached a conclusion this year when the Ontario Court of Appeal declined leave to appeal the Divisional Court of Ontario's 2021 decision upholding the compensation awarded by the Local Planning Appeal Tribunal in 2020 during a re-hearing of a Tribunal decision from 2009 that had been previously overturned..

From the late 1980s to the late 1990s, the claimants purchased land for residential development. In 1996 and 1997, the City received two reports recommending that the land's use be restricted to conservation, and the City designated the land as natural heritage in 2001. The 2005 Provincial Policy Statement prohibits development of lands so designated unless such development has no negative impact on the protected natural features. Before the Tribunal, the City argued that due to the Provincial Policy Statement, the environmental designation presented a significant barrier to development of the expropriated lands. The Tribunal did not agree, and found that the Provincial Policy Statement did not necessarily prevent residential development on the expropriated land. Accordingly, the expropriated land was valued as land for residential development, with a discount applied to take into account certain risks arising from the environmental designation.

In 2021, the Divisional Court dismissed the City' appeal, finding that the Tribunal gave appropriate consideration to the Provincial Policy Statement in reaching its decision on market value. Notably, the Divisional Court also upheld the Tribunal's award of interest on the market value compensation back to 1997, finding that productive use of the lands ceased when the City received the second report recommending that the lands be designated. From that time, the landowners could not reasonably have proceeded with a development application.

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7. Widmer-Adelaid Corp. v. Toronto (City), 2021 CarswellOnt 12266 (OLT)

Under ss. 42(10) and (12) of Ontario's Planning Act, R.S.O. 1990, c. P.13, landowners can seek a determination from the Ontario Land Tribunal of the value of their lands in order to calculate the correct amount of cash-in-lieu of parkland to be paid in respect of a redevelopment of those lands. Upon such an application, the Ontario Land Tribunal determines the value of the land in accordance with Ontario's Expropriations Act, R.S.O. 1990, c. E.26.

Such an application was made by the owners of a proposed condominium redevelopment in Toronto comprising 352 hotel suites and 640 residential units. The City of Toronto argued that the land should be valued at $163,800,000 while the landowner argued that the value should be $116,660,000, a difference of over $46 million.

Of note, the appraisers for the parties took significantly different approaches to the effect of the COVID-19 pandemic on the market value of the subject lands. The valuation date for the subject lands was September 3, 2020. The Ontario Land Tribunal found that it was appropriate to apply a "Covid Discount" to the valuation of the subject lands, as of September 3, 2020, for three reasons: at that time, there was a noticeable slowdown in condominium sales, there was uncertainty over construction costs introducing an elevated level of risk on new condominium projects, and there was a change in market trends with more buyers wanting to locate in the suburbs. All of these factors supported a lower market value of for the land on which the condominium development would be built.

Of secondary note, while maintaining its longstanding position that there is "no right to a view," the Ontario Land Tribunal also accepted a 7.5% negative adjustment to comparable sales given that the subject property had a less expansive view than the comparator properties considered by the appraisers.

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8. Metrolinx v. 1450638 Ontario Inc., 2021 ONSC 8045

Metrolinx expropriated a King City, Ontario property in King City, Ontario, owned by 1450638 Ontario Inc. in March 2019. One year later, Metrolinx served an offer of compensation of $1.00 accompanied by an appraisal report valuing the property at $2.1 million; Metrolinx provided no explanation of the discrepancy between its offer and the appraised value.

1450638 Ontario Inc. commenced a Court application seeking to delay possession of the expropriated lands by Metrolinx until Metrolinx complied with its obligations for an offer of compensation under s. 25 of the Expropriations Act, R.S.O. 1990, c. E.26. Metrolinx brought a counter application seeking to end 1450638 Ontario Inc.'s resistance to Metrolinx's possession of the property. As part of these applications, 1450638 Ontario Inc. sought production of Metrolinx's communications with its appraiser and the draft appraisal reports that were prepared. Metrolinx refused, arguing that the communications and draft reports were protected by litigation privilege.

Litigation privilege protects documents and communications made for the dominant purpose of actual or contemplated litigation. Third party communications, such as those with experts, are protected by litigation privilege when their dominant purpose is to prepare for litigation.

The Ontario Superior Court ordered the production of the requested documents; they were not protected by litigation privilege because the dominant purpose of the appraiser's retainer and work was not carried out in contemplation of litigation. Instead, the appraisal report was created for the purpose of meeting Metrolinx's statutory obligation under s. 25 of the Expropriations Act to provide an offer of compensation along with an appraisal report. The Court also determined that 1450638 Ontario Inc.'s questions about Metrolinx's general expropriation policies were relevant questions that should be answered.

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9. Southwind v. Canada, 2021 SCC 28

The Lac Seul First Nation's (LSFN) brought a claim against the Government of Canada for breach of fiduciary duty and statutory obligations. In 1929, LSFN's reserve land was flooded to power hydroelectricity generation for City of Winnipeg. The LSFN did not provide consent and did not receive any compensation. The project caused considerable damage to the reserve land and subsequently deprived its members of their livelihood, homes and access to natural resources. The Federal Court held that the Government of Canada failed to meet its fiduciary duty. In the trial judge's evaluation of equitable compensation for the flooded lands were valued based upon expropriation of the land in 1929. This evaluation did not entitle the LSFN to any compensation for the value of the land involved in the hydroelectric project. The LSFN challenged the evaluation for compensation; however, a majority Federal Court of Appeal dismissed the appeal.

The Supreme Court of Canada overturned the trial judge's evaluation of equitable compensation, finding that expropriation law failed to consider fiduciary obligations and the sui generis interests in reserve land. The Court held that Canada should have attempted to negotiate a surrender in consideration of the value of the land for its anticipated use. In this case, the LSFN was entitled to equitable compensation for the lost opportunity to negotiate.

The Supreme Court of Canada focussed on one central issue to determine equitable compensation: "what position the beneficiary would be in had the fiduciary fulfilled its obligations?" In writing for the majority, Karakatsanis J. ultimately disagreed with the trial judge's approach, finding that equitable compensation in these circumstances should give effect to the unique obligations imposed by fiduciary duty. In particular, Karakatsanis J. noted that the trial judge "improperly focused on what Canada would likely have done, as opposed to what Canada ought to have done as a fiduciary."

The Court held that the fiduciary duty imposes an obligation of loyalty, good faith, full disclosure, and the protection and preservation of First Nation's interests from exploitation. This fiduciary duty raises a higher bar than expropriation law because of the sui generous interest in reserve land. For this reason, expropriation law can serve as a reference point for compensation; it is not an appropriate legal framework to govern breaches of fiduciary duty.

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10. Madison Holdings Ltd. v. Winnipeg (City of), 2021 MBCA 94

The Land Value Appraisal Commission of Manitoba awarded approximately $2.6 million in disturbance damages arising from the expropriation of land containing a car wash and rust-proofing operation in Winnipeg. The bulk of this award related to the cost of acquiring and constructing a replacement facility. The City appealed this award, arguing that the market value of the replacement property must always be deducted from the disturbance damage award. The Manitoba Court of Appeal rejected the City's argument holding that: "there is no required formula for the assessment of disturbance damages where a replacement property is acquired for an operating business." Instead, the assessment of compensation due to relocation is "extremely fact-specific;" "there is no correct methodology;" instead, "methodology is a question of fact for the Commission to decide."

The City also argued that the replacement facility was newer, bigger, and better than the expropriated facility, and that the compensation awarded should be reduced to account for this betterment. In particular, the City argued that the replacement facility could have been constructed more cheaply by using alternative construction methods, such as a steel frame. The Court of Appeal determined that the City had failed to lead any evidence of betterment, and thus that the Land Value Appraisal Commission made no error in its treatment of betterment based on the evidentiary record before it.

Ultimately, the Court of Appeal reduced the compensation awarded by approximately $500,000 to prevent double recovery; compensation cannot be given both for the cost of acquiring a replacement property and for the fair market value of the expropriated land without accounting for any overlap of these awards.

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11. Northern Cross (Yukon) Ltd. v. Yukon (Energy, Mines and Resources), 2021 YKSC 3 & 2021 YKCA 6

The Plaintiff, Chance Oil and Gas Ltd. (formerly Northern Cross Yukon) brought numerous claims against the defendant, the Government of Yukon, after the Government announced a Moratorium on hydraulic fracturing in April 2015 in areas where the Plaintiff held oil and gas permits.

On a motion to strike pleadings, the Yukon Government submitted that the Plaintiff's claim in de facto expropriation had no reasonable chance of success because the Moratorium did not deprive the plaintiff of any property rights, nor remove all reasonable uses of property and/or constitute an acquisition by the government of any property rights or any economic value flowing from any property rights.^[3] The Plaintiff argued that the law recognizes that a governing authority can benefit from revoking or cancelling an interest in land it has granted, and that the removal of an encumbrance upon the land is the benefit acquired by the government as a result.^[4] The Plaintiff relied upon the decision of R v. Tener, [1985] 1 SCR 533, in which an entitlement to compensation for a de facto expropriation was found in respect of interests in the nature of a profit a prendre (the right to take resources from another's land).

The Court reiterated the two requirements for a de facto expropriation, citing Canadian Pacific Railway Co. v. Vancouver (City), 2006 SCC 5, setting out (1) an acquisition of a beneficial interest in the property or flowing from it, and (2) removal of all reasonable uses of the property.^[5] To determine whether an expropriation has taken place, it is the effect of the regulation or the government action rather than the form that needs to be considered. ^[6] The court further explained that the loss of economic value in land, is not a loss of interest in land and therefore not sufficient to constitute expropriation.

Pursuant to the rights granted by the permits and s. 37 of the Oil and Gas Act, the Plaintiff was entitled to obtain an oil and gas lease subject to the regulatory framework. The Plaintiff did not rely on the loss of economic value of its alleged interests. It relied instead on Tener to plead that by prohibiting the use of hydraulic fracturing, the Yukon government had essentially taken away all its rights to access and exploit the oil and gas located in the subject lands. In Tener, the respondents' complete inability to exercise their right of access to, or withdrawal of, the minerals that was found to constitute the interest in land taken from them.

The Court ultimately found that there were sufficient arguable similarities between the circumstances of this case and those in Tener to conclude it was not plain and obvious that the Plaintiff's claim in de facto expropriation had no reasonable chance of success.

This case was appealed to the Yukon Territory Court of Appeal. The portion of the decision relating to the Plaintiff's claim of de facto expropriation was upheld.

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Should you have any specific questions about this article or would like to discuss it further, you can contact the authors or a member of our Expropriation Law Group.