Expropriation Law 2023: A year in review

23 minute read
04 March 2024

This article summarizes a number of significant expropriation decisions released in 2023 from across Canada, as selected by Gowling WLG's National Expropriation Law Group. The team highlights a number of important issues and key takeaways for those parties involved in the expropriation process. The decisions are not listed in rank order.

Al Klippert Ltd. v Calgary (City), 2023 ABLPRT 132

A property's market value is appraised based on the land's highest and best use, which is defined as the legally permissible, physically possible, financially feasible and maximally productive use of the land.

This decision of the Alberta Land and Property Rights Tribunal illustrates how factors impacting the land's development potential may be considered when determining the land's highest and best use (and market value compensation) in cases where the proposed highest and best use differs from the existing use of the property.

Before it was expropriated by the City of Calgary in 2009, the property in question was used for the sale of landscaping products and the operation of a concrete business.

The landowner and the City presented the Tribunal with vastly different valuations based on divergent views about the property's highest and best use: the landowner advanced a $28 million valuation based on a low-density residential development, while the City advanced a $1.8 million valuation for a single estate-style home.

Taking into consideration significant physical, legal and financial constraints related to the development of the property (including issues with compliance with municipal road and emergency access standards, planning issues requiring relaxations or accommodations, challenges related to utility servicing, environmental contamination issues and related uncertainty), the Tribunal concluded that the landowner's proposed residential development use was not probable, and therefore not the highest and best use. The highest and best use was, instead, use as a single residential estate lot – resulting in a market value of $6 million.

This decision also illustrates the importance of obtaining appropriate compensation for impacts on the value of the remaining land in instances of partial expropriation. The City had previously expropriated a strip of land between the property and a river for use as a pathway. This previous expropriation had limited impact on the use of the property for a concrete business, but when it came time to value the remainder of the property in 2009, the fact that the property no longer had direct access lowered its value.

Selenium Creative Ltd. v Edmonton (City), 2023 ABKB 94

When land is expropriated, the landowner often incurs legal costs due to the expropriation. While the expropriating authority typically pays compensation for these costs, the decision of the Alberta Court of King's Bench in Selenium Creative Ltd. v Edmonton (City) demonstrates that not all legal proceedings related to an expropriation fall under the protective cost provisions of Alberta's Expropriation Act.

In this case, Selenium Creative Ltd. made an urgent application to extend the time by which it was required to vacate the expropriated property. Although it was unsuccessful on the application, Selenium sought full indemnity costs under the Expropriation Act's cost provisions.

Section 39(1) of Alberta's Expropriation Act provides that costs incurred by an expropriated landowner "for the purpose of determining the compensation payable shall be paid by the expropriating authority." The Court found that Selenium's application was not captured by the costs provisions because the application dealt with extending possession rather than compensation.

Ultimately, rather than being awarded costs, Selenium was ordered to pay costs to the City in accordance with Alberta's Rules of Court. Expropriated landowners should carefully consider the possibility of an adverse cost award when undertaking legal proceedings not directly tied to the determination of compensation.

This decision is under appeal before the Alberta Court of Appeal, and a future decision from the Court of Appeal may assist in clarifying the scope of the Expropriation Act's costs provisions.

A Maze in Corn Inc. v Manitoba Emergency Measures Organization et al, 2023 MBCA 92

In this decision, the Manitoba Court of Appeal expanded the application of expropriation principles to the compensation scheme under The Red River Floodway Act (the "RRFA") and the Floodway Compensation Regulation.

The Appellant (A Maze in Corn) operated a corn maze south of the gates of the Red River Floodway outside Winnipeg, and claimed compensation for the impacts of artificial flooding caused by the operation of the floodway, including future impacts to its business.

A Maze in Corn's application for compensation was governed by the RRFA, and raised the issue of whether compensation for economic loss under Part 2 of the RRFA included compensation for future economic losses. The Manitoba Disaster Assistance Appeal Board denied A Maze in Corn's application for compensation for future losses under the categories of brand damage, professional fees and lost opportunity to invest, but Manitoba's Court of Appeal set aside the Board's decision.

The Court of Appeal concluded that the artificial flooding caused by the operation of the floodway was a constructive taking, and that expropriation principles requiring full compensation (including as recently set out in the Supreme Court of Canada's decision in Annapolis Group Inc. v. Halifax Regional Municipality, 2022 SCC 36) apply to the interpretation of the RRFA. More specifically, the Court of Appeal found that compensation for economic loss under Part 2 of the RRFA includes compensation for future economic loss, including future loss of income, brand damage (goodwill), loss of opportunity to invest, and for professional costs, including legal costs.

This decision provides helpful guidance for landowners entitled to compensation through other legislation which interferes with their property rights, even if that interference is not explicitly framed as an expropriation.

12908 Highway 7 Inc. v HMK in right of Ontario (Minister of Transportation), 2023 CanLII 115093 (ON LT)

The Claimant initiated a claim against Ontario's Ministry of Transportation (the "MTO") for compensation arising from the closure of one of two access-ways to the Claimant's property. The claim was brought for injurious affection where no land was taken under sections 1(1)(a)(ii) and 21 of Ontario's Expropriations Act, or alternatively, under sections 6 and 14 of Ontario's Public Transportation and Highway Improvement Act.

The MTO argued that the Claimant was not entitled to damages for injurious affection because the closed access was illegal and required vehicles to trespass over other MTO lands that were situated between the Claimant's property and the highway. The MTO also argued that the closure did not result from the construction of the works, but from the application of the MTO's statutory authority under the Public Transportation and Highway Improvement Act.

The Tribunal rejected the MTO's arguments. First, the lands between the highway and the Claimant's land were not a one-foot reserve that could definitively prevent access to the highway. Second, while there was no entrance permit for the closed access-way, the MTO had lost its records for the subject property. A critical element of the Tribunal's decision was its determination that such gaps in the record must be resolved in favour of the Claimant. As the access-way had openly existed since at least 1985, having raised illegality as a defence, the MTO had the onus of establishing that the access-way was illegal. The Tribunal determined that the MTO failed to discharge this onus, that the MTO had granted the Claimant's predecessor in title the necessary permission and permit and that the access-way was therefore "grandfathered".

The Tribunal then considered whether the works as constructed, if left unused, would nevertheless interfere with the Claimant's use and enjoyment of the property. The Tribunal found that the closure of the access-way would interfere with the Claimant's use and enjoyment of the property even if the highway was unused, and thus that injurious affection arose from the construction, and not the use, of the works. Accordingly, the Tribunal awarded compensation to the Claimant.

Eric Levin Holdings Inc. v Ministry of Transportation, 2023 ONSC 3284

Ontario's Divisional Court recently dismissed an appeal relating to interest under Section 31 of Ontario's Expropriations Act, which provides that expropriated landowners are entitled to be paid interest on the market value of the land from the date that they cease to reside on or make productive use of the land.

Applying the test under Section 31 requires two factual findings: what was the productive use of the land, and when did that productive use cease? In this case, the Ontario Land Tribunal found that the productive use of the land was as a rental building, and that the owner continued to make productive use of the land until the date of expropriation.

The Owner appealed the Tribunal's decision, arguing that the land had a second productive use as a redevelopment site, and that this use ceased on the date that it first became clear that the land would be expropriated. The owner also argued that its productive use of the land as a rental building had ceased before the expropriation date because approximately 40 per cent of the tenants had already left due to the impending expropriation.

The Divisional Court disagreed with both arguments. First, while it is possible for a property to have more than one productive use, the owner had never initiated its redevelopment plans, such that the alleged redevelopment was not a productive use of the land. Second, the test for determining productive use does not inquire into whether the owner is making a profit, or the degree of profit being earned. The fact that a rental property is making a loss does not constitute a cessation of productive use. The Divisional Court upheld the Tribunal's interest award.

Edward and Dorothy Janisse v City of Windsor, 2023 CanLII 73687 (ON LT)

The owners of a three-acre, single family residential property expropriated by the City of Windsor argued that the highest and best use of the property was a future business park development. The City argued, instead, that the highest and best use was to hold the land for long-term development with a continuation of the existing residential use. The property was designated in the City's Official Plan as future employment land, and full municipal servicing was not available.

The Tribunal agreed with the City's highest and best use: the owner's proposed highest and best use was not sufficiently probable.

Under the City's Official Plan, future employment land was a different designation than a business park, and an amendment to the Official Plan would be required to allow for the owner's proposed highest and best use. In general, a property's highest and best use must be reasonably probable, meaning "something higher than a 50% probability." More specifically, a proposed highest and best use must be based on something more than a possibility of re-zoning – there must be a probability or reasonable expectation that such rezoning will take place.

The Tribunal found that any redevelopment of the land would have been on a twenty-year planning horizon or beyond, and would require detailed planning studies regarding permitted land uses and the construction of road systems and servicing infrastructure. Achieving these requirements was not sufficiently probable to meet the highest and best use test.

The Tribunal also provided direction on whether two types of sales can be valid comparable sales for a direct comparison appraisal analysis.

First, the Tribunal found that a pre-expropriation sale to an expropriating authority is admissible as a comparable sale, but is presumed to not have been free or voluntary unless this presumption is rebutted by the evidence. Second, the Tribunal found that a property sold under power of sale may be admissible as a comparable sale, but careful consideration must be given to whether:

  1. The sale requires an adjustment.
  2. The sale was a forced sale of a distressed property.
  3. The sale price meets the definition of market value.
  4. The sale meets the definition of a willing seller acting in an open market.

Nemeth v Toronto (City), 2023 CanLII 64038 (ON LT)

The City of Toronto expropriated a deep, irregularly shaped property, and presented appraisal evidence to the Ontario Land Tribunal based on an uncommon method of assessing highest and best use.

In conducting his highest and best use analysis, the City's appraiser considered multiple potential redevelopment options for the property, and testified that in any redevelopment of the property, a prudent owner would pursue whichever of these opportunities provided the maximum value. The appraiser testified that none of the potential options were clearly better than the others due to uncertainty as to how the market would perceive the irregular site. Accordingly, for the purpose of the highest and best use test, the City's appraiser opined that this open-ended "optionality" is maximally productive.

The Tribunal rejected this concept of "optionality" for three reasons.

First, the "optionality" approach was effectively a form of averaging, as opposed to the requirement that market value be based on the maximally productive use (i.e., the upper limit of productivity: averaging multiple options necessarily dilutes the outcome and does not identify the upper limit). Second, "optionality" is inconsistent with the principle of highest and best use, which seeks a single preeminent use of the property. Third, the Tribunal found that employing an "optionality" analysis would be contrary to the Tribunal's obligation to determine the expropriated property's value on the open market, sold by a willing seller to a willing buyer.

Ultimately, the Tribunal found that the highest and best use of the property was an eight-storey mixed-use mid-rise development, and awarded $4.3 million in market value compensation.

Sommet Prestige Canada Inc. v. Ville de Saint-Bruno-de-Montarville, 2023 QCCS 676

The law of "constructive" or "disguised" expropriation continues to develop in Québec following the Supreme Court of Canada's decision in Annapolis Group Inc. v. Halifax Regional Municipality (2022 SCC 36), and the Québec Court of Appeal's decision in Dupras c. Ville de Mascouche (2022 QCCA 350) (both of which were addressed in the 2022 edition of Gowling WLG's Expropriation Year in Review).

In this case, Sommet Prestige Canada Inc. purchased property for development, and filed a subdivision plan in 2011. In 2012, an endangered species was found on the property, and the municipality passed by-laws preventing the property's development.

Applying the test set out by the Supreme Court in Annapolis Group Inc. v. Halifax Regional Municipality, as applied by the Québec Court of Appeal in Dupras c. Ville de Mascouche, the Québec Superior Court determined that a constructive or disguised expropriation had occurred because the by-laws prevented any and all reasonable uses of the property, and especially noted the almost complete reduction in possible productive use of the land. As a result, Sommet Prestige Canada Inc. was entitled to compensation arising from the constructive expropriation.

The Province of New Brunswick v. Fundy Contractors Limited and Young, 2023 NBCA 57

The New Brunswick Court of Appeal dismissed an appeal by the Province of New Brunswick of a Court of King's Bench decision awarding $1.9 million in compensation for the expropriation of portions of three properties owned by Fundy Contractors Limited, a heavy civil contractor operating a concrete plant. The expropriation included the taking of the Dexter Pit, which supplied aggregate for Fundy's operations.

A key issue on appeal was whether Fundy was entitled to compensation over and above the market value of the land for the special value of the Dexter Pit to Fundy.

Section 38(1)(d) of New Brunswick's Expropriations Act provides, in addition to compensation for the market value of the land, compensation for "any special economic advantage arising out of his occupation of the land that is not reflected in the market value of the land."

While the legislation does not define "special economic advantage," or state how to determine its value, the New Brunswick Court of Appeal agreed that the Dexter Pit gave Fundy a special economic advantage that had to be compensated. Fundy clearly derived an advantage from the Dexter Pit, as it had the facilities nearby to profitably operate the property, and as the pit's location, adjacent to a highway, eliminated certain issues relating to the transportation of the aggregate. Similarly, the loss of the Dexter Pit left a significant hole in Fundy's aggregate inventory, which could not be replaced with aggregate from other local pits.

Accordingly, the New Brunswick Court of Appeal upheld the award for the loss of a special economic advantage.

Shute v. Paradise (Town), 2023 NLSC 24

In 2013, the Town of Paradise in Newfoundland expropriated a strip of land and an easement from a residential property for a road widening project. The Board of Assessors ordered the Town to pay the owner $65,000 for the land's market value, the easement and non-pecuniary damages for disturbance (i.e., for anxiety, distress and loss of peaceful enjoyment of the land while the road widening work was carried out).

Notably, the owners did not make a claim for injurious affection. Both the Town and the owners appealed the Board's decision to the Supreme Court of Newfoundland and Labrador.

As a procedural point, the Town argued that the owner's Notice of Appeal should be dismissed because it was not filed within 30 days after the date of the award, as is required by Section 75 of Newfoundland's Expropriation Act. Section 75 of the Expropriation Act requires that the Board immediately deliver a copy of its decision to the parties after making its award. The Board's decision was signed on February 20, 2019, and delivered to the parties on February 22, 2019.

The owners filed their Notice of Appeal on March 25, 2019, 32 days after the decision was signed and 30 days after the decision was delivered. The Town argued that the 30-day deadline commenced on the signing of the award, and the owners argued that it commenced on delivery of the decision.

The Court agreed with the owners, finding that the Town's interpretation could allow an appeal right to be lost before the affected party became aware of the decision through matters entirely beyond their control, such as a mail disturbance or an administrative error on the part of the Board.

The Town also argued that the Board erred in awarding non-pecuniary disturbance damages. The Court agreed with the Town, finding that disturbance damages are restricted to economic loss, which does not include anxiety, stress or other damages for non-pecuniary interference.

NOT LEGAL ADVICE. Information made available on this website in any form is for information purposes only. It is not, and should not be taken as, legal advice. You should not rely on, or take or fail to take any action based upon this information. Never disregard professional legal advice or delay in seeking legal advice because of something you have read on this website. Gowling WLG professionals will be pleased to discuss resolutions to specific legal concerns you may have.