Expropriation Law: A Year in Review

28 January 2020

This article summarizes the most significant expropriation cases of 2019 from across the country, as selected by Gowling WLG's National Expropriation Law Group. The decisions are not listed in rank order.

Unregistered Lease Interests Protected

Edmonton (City) v. Business Care Corp, 2019 ABQB 724 (CanLII)

The City of Edmonton expropriated lands known as the Edmonton City Centre Airport, including land possessed and occupied by four subtenants of a leaseholder. The leaseholder's interest in the expropriated lands was registered on title, under the Land Titles Act, but the interests of the subtenants were not registered. The City applied to the Alberta Court of Queen's Bench for a declaration that no compensation was owed to the subtenants because their interests in the land had not been expropriated for the purposes of the Expropriation Act. While that Act does not define 'title,' 'land' is defined to include "any estate or interest in land." The City argued that "estate or interest in land" should be interpreted in the same manner as under the Land Titles Act, which would preclude a claim by the subtenants for their unregistered interests.

In rejecting the City's argument, the Court observed that legislation is to be interpreted purposively, and that the purposes of the Expropriation Act and the Land Titles Act are different. Further, the Expropriation Act is a remedial statute, which must be interpreted remedially: its purpose is to compensate landowners, as defined in the Act, "when their interests are taken without their consent." Since the Act's definition of 'owner' includes any "person who is in possession or occupation of the land," the Court found that it would have been inappropriate to adopt the City's proposed interpretation. This decision identifies that the Alberta legislation offers protection to citizens with unregistered interests affected by an expropriation, and reinforces the remedial nature of expropriation legislation.

Compensation for Delay

Tanchuk v. Ontario (Transportation), 2019 CanLII 86350 (ON LPAT)

The Minister of Transportation for Ontario expropriated land for a highway expansion in Kitchener, Ontario adjacent to which the claimants operated a furniture and mattress retail business. There was a substantial, 10 year delay between the initial public information sessions for the highway expansion project and the expropriation. During much of this period, the claimants' plan to expand its business was impeded by the looming expropriation. The claimants ultimately relocated and expanded their business at another site, and advanced substantial claims for business loss and disturbance damages, which the authority opposed vigorously.

The authority argued that the claimants' business losses were caused by their failure to select a suitable relocation site, and that compensation for these losses should not be awarded. The Local Planning Appeal Tribunal rejected this argument because the claimants selected their relocation property with professional assistance, including that of a professional land use planner. The authority also argued that compensation should not be awarded for further business losses relating to the delay between the announcement of the highway expansion and the expropriation. In making this argument, the expropriating authority relied on Ontario-wide market statistics. The claimants' expert focussed its analysis on the Kitchener-Waterloo trading area, which supported a higher level of compensation. The Tribunal accepted the claimants' argument that it was inappropriate to use the Ontario-wide statistics because they were heavily skewed by the Toronto market, which is a very different trading area from Kitchener-Waterloo.

The result was that the Tribunal awarded significant damages for business losses and disturbance that occurred during the delay period, emphasizing the importance of advancing claims for losses occurring in the 'shadow' of the expropriation. This case also demonstrates the value added by consulting a team of experts at every step in dealing with an expropriation: from addressing the initial impact of a planned expropriation on a landowner's business, to advancing a compensation claim that is finalized long after the expropriation has taken place.

Not to be Forgotten: Contribution in Market Value

1125814 Ontario Limited v. Hamilton (City), 2019 CanLII 16481 (ON LPAT)

The City of Hamilton expropriated a wedge shaped parcel of land that fronted a roadway. The wedge ran along the rear of two large lots in an established residential neighbourhood. Expert appraisers agreed that the highest and best use of the wedge was to merge it with the surplus lands at the rear of the existing residential lots, and to then subdivide and develop this larger parcel into five new residential lots. The appraisers also agreed that compensation owing under the Expropriations Act for the market value of the wedge should be a portion of the market value of the five new lots. They disagreed about how to apportion this value.

The City argued that the market value of the five lots should be apportioned on a pro rata basis according to land area. Since the wedge was much smaller than the surplus lands, this method would result in a small amount of compensation for the landowner. The landowner's appraiser argued that the market value should be apportioned equally between the wedge and the surplus lands, according to the principle of contribution. This principle states that "the value of any component of a property is measured by how much it adds to the market value by reason of its presence, or detracts from market value by its absence." Since the wedge fronted the roadway, this land was necessary to provide legal access to the future residential lots. Since the wedge was too small to develop on its own, the surplus lands were also required to develop the five new lots. In this situation, creating the new lots depended equally on both the wedge and the surplus lands, so the market value of the new lots should be apportioned equally between these two necessary components.

The Tribunal agreed with the landowner. Given the unique characteristics of this case, both parcels were equally necessary to carry out the development, and the principle of contribution required that the market value of the expropriated lands be set at half the value of the proposed development. This resulted in substantially higher compensation being paid to the landowner, and underscored the importance of cultivating a team of knowledgeable experts to advance a landowner's compensation claim.

No Taking - No Compensation for Use

Davoodian v. Dufferin Wind Power Inc., 2019 CanLII 75377 (ON LPAT)

The Local Planning Appeal Tribunal's decision in Davoodian v. Dufferin Wind Power Inc. reflects the need to properly assess a claimant's loss under the unique test for injurious affection where no land is taken.

The County of Dufferin constructed an electrical transmission line along a former railway corridor. The owners of a property adjacent to the power line made an injurious affection claim for the reduction in the market value of their property created by the power line. In particular, the property owner alleged that the power line created a buzzing noise, but that the buzzing would cease if the power was turned off. Since no land was taken in this case, the definition of 'Injurious Affection' under the legislation required that the property owner advance a claim for damages arising from the construction of the power line, not from its use. To determine whether the alleged damages actually arose from construction, rather than use, the Tribunal asked whether the constructed works would interfere with the enjoyment of the property if they were left unused. Given the property owner's assertion that the buzzing stopped when the power was turned off, the Tribunal determined that the claim was based on the power line's use, not its construction, and the claim was denied.

The High Bar for Summary Dismissal

Immeubles des Moulins inc. c. Ville de Terrebonne, 2019 QCCA 509 (CanLII)

In Immeubles des Moulins Inc. c. Ville de Terrebonne, the Quebec Court of Appeal reiterated the importance for decision-makers to exercise caution when faced with a motion to dismiss an appeal without holding a hearing. Even where the burden of proof on an appellant is onerous, as is the case for a claimant who seeks to challenge the validity of an expropriation or the imposition of a reserve pursuant to the Expropriation Act, the Court need not be convinced that the facts alleged lead to the conclusion sought by the appellant.

The appellant company, Immeubles des Moulins Inc., owned a golf course in the City of Terrebonne. Shortly after ceasing to operate the golf course, the City imposed a reserve on the land pursuant to section 79 and 80 of the Expropriation Act. While the City's stated purpose for the imposition was to reserve the land for green space, the Appellant alleged illegality, claiming that the City's imposition of the reserve was made in bad faith for ulterior motives. The Appellant relied on statements made by the Mayor, which in its opinion, signalled that the reserve was imposed pending a determination of whether private interests were interested in purchasing the golf club.

The Quebec Court of Appeal disagreed with the trial judge regarding the extent to which, at the stage of summary dismissal, the Court must be convinced that the facts alleged lead to a conclusion of an abuse of process and ulterior motive. It was sufficient for the factual allegations to be likely to give rise to the conclusions sought by the appellant. At the stage of a motion for dismissal, the Court confirmed any doubt that subsists should balance in favour of the matter proceeding to a full hearing.

No Compensation for Hurt Feelings

Atlantic Mining NS Corp. (D.D.V. Gold Limited) v. Oakley, 2019 NSCA 14 (CanLII)

In Atlantic Mining NS Corp. (D.D.V. Gold Limited) v. Oakley, the Nova Scotia Court of Appeal clarified the meaning of "losses" that give rise to disturbance damages. Drawing on the broader context of the Act, in particular section 2, the Court noted that the pecuniary purpose of compensation under the Expropriation Act is evident because the losses addressed by the legislation are proprietary in nature.

At first instance, the claimant was awarded the maximum amount of 15% of the market value of the land taken for non-pecuniary "losses" for disturbance. The Board took into account the claimant's personal and emotional experience with respect to the loss of his home and his property. For example, included among the losses were experiences such as being deprived of the calm, order and quiet of his life, as well as, being agitated, worried and unsettled.

The Nova Scotia Court of Appeal overturned the Board's finding, noting that the Board improperly treated the claimant as a victim of tort, exceeding the purposes of the legislation and the remedial goals therein. Under the common law, damages are not awarded for emotional upset except in cases of personal injury. The Court found no indication in the Expropriation Act to suggest a similar exception should apply to expropriated landowners. Ultimately, the Court was clear that the interests protected by the Expropriation Act are proprietary in nature, not personal.

An Expensive Shadow Period

Nova Scotia (Attorney General) v. S&D Smith Central Supplies Limited, 2019 NSCA 22 (CanLII)

The province of Nova Scotia sought to reconfigure a highway through land on which the applicant landowner operated a hardware business. In 1998, a provincial official told the applicant that a parcel of the applicant's land may be expropriated for the highway, and that given this awareness of a prospective expropriation, the applicant's future capital costs relating to that parcel would not be compensated. This disrupted the applicant's planned development of the parcel, and the applicant claimed disturbance damages for the losses created by this disruption even though they occurred before the expropriation document was filed with the land registry office in 2012. The Nova Scotia Utility and Review Board determined that "expropriation is a 'process', not an event" and that the applicant's loss "stemmed from an early step in the process." Accordingly, the Board awarded the applicant $6.7 million for disturbance damages. The Court of Appeal upheld this award, determining that the applicant suffered an economic loss caused by the expropriation, and that it was consistent with the remedial purpose of the Act to compensate the applicant for this loss even though it was incurred before the filing of the expropriation document.

The interest amount on this award was increased due to the delay in initiating the expropriation proceeding and the delivery of the appraisal and statutory offer. Interest is governed by s. 53 of the Expropriation Act, and runs from the date on which the owner ceases to "make productive use of the lands." In this case, the owner ceased to make productive use of the lands when the owner was told by the expropriating authority that any further development would not be compensable since the expropriation was forthcoming. Further, s. 53(4) permits the Board to raise the interest rate if "delay in determining compensation" was partly attributable to the province. The province argued that this only applies to delays in the compensation proceeding itself. The Board disagreed, and awarded increased interest for delays that occurred before the notice of expropriation was registered. The Board's position on interest was also upheld on appeal.

This case bolsters the remedial nature of the Nova Scotia legislation: reinforcing the position articulated by the Supreme Court of Canada in Dell Holdings Ltd. v. Toronto Area Transit Operating Authority, that disturbance damages can be compensable from the beginning of the shadow period, and the position that delays in determining compensation can also be considered during the shadow period provided that the owner has ceased to make productive use of the lands.

Board as Intervenor in Appeal

Lynch v. St. John's (City), 2019 NLCA 30 (CanLII)

The Newfoundland Board of Commissioners of Public Utilities made an order for interim payment pending the final determination of compensation for land taken. The landowner appealed the Board's order on the basis that it did not include an award for interest and litigation costs. The Board made an application to be allowed to intervene in the appeal, and proposed to make submissions based on statutory interpretation supporting the conclusion that the Expropriation Act does not authorize an appeal of an interim order with respect to an award for interest and litigation costs. In support of its application, the Board noted that the appeal would impact on the Board's performance of its statutory mandate.

The Newfoundland and Labrador Court of Appeal granted the Board's application. In doing so it made two key observations: that the Board had undertaken not to assert an interest in or take a position on the merits of the landowner's appeal, and that the Board would focus its argument regarding the interpretation of the legislation's application to interim orders, in general, and from a public interest perspective. The Court determined that granting the application was appropriate since "a determination as to the operation of the legislation in respect of interim orders" would not affect the merits of the landowner's claim for compensation. The Court of Appeal limited the scope of the Board's intervention to: the nature, scope and sources of the Board's jurisdiction in relation to expropriation proceedings based on the legislation, and to whether or not the legislation "authorizes an appeal from an interim decision or order of the Board."

Deemed Expropriation for First Nations

Southwind v. Canada, 2019 FCA 171 (CanLII)

In Southwind v. Canada, the Federal Court of Appeal considered principles in expropriation law when assessing a claim for equitable compensation. In particular, Canada had breached its fiduciary duty to the Lac Seul First Nation, where land within an established Treaty area was rendered unusable due to the construction and operation of a nearby dam. The court found that if Canada had not breached its fiduciary duty, it would have taken the formal steps to expropriate the land required to operate the dam.

In the 1920s, the federal government constructed a dam outside the Lac Seul First Nation reserve. The construction and subsequent operation of the dam resulted in significant flooding on the reserve, rendering approximately one-fifth of the land area unusable. This action of the federal government constituted a breach of its fiduciary duty to the Lac Seul First Nation necessitating equitable compensation.

The Court confirmed that compensation for the land taken must be determined based on the state of the law at the time of the taking. As such, the Court applied the common law as it stood in 1929. It was found to be correct to conclude that any value arising from the construction of the dam on the land should be excluded from the market value, since this principle was already in existence at the time (and is reflected in the Point Gourde principle now statutorily enshrined in expropriation legislation across the country).

Additionally, as a fiduciary, Canada was arguably required to pursue a negotiated surrender before proceeding to an expropriation. The court opined that a negotiated resolution would likely have been less detrimental to the Lac Seul First Nation. To account for this discrepancy, the Court determined that in the contingency where Canada sought a negotiated surrender, it might have agreed to a slightly higher surrender price per acre. This contingency had to be considered in determining compensation.

Shergar Development Inc. v. City of Windsor, 2019 ONSC 2623 (CanLII)

The Shergar Development cases have been of much recent interest to lawyers and experts working in the expropriation field. This includes the Ontario Divisional Court's decision from 2019. Given that we are counsel for the Appellant in the pending appeal of this decision before the Court of Appeal, we will not comment on this case, but note that much commentary is available online including the following:

Shergar: Redefining Expropriation Costs

Divisional court Confirms Expropriation Claimants Not Immune to Interest and Costs Consequences

Ontario Court Upholds Precedent-Stetting Decision Relating to Expropriation Hearing Costs

The editors gratefully acknowledge the contributions of our associates Carolina Campos and Tristan Neill for their research and analysis.

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