All aboard: Expropriation and injurious affection in the age of the LRT

The development of Ottawa’s Light Rail Transportation (“LRT”) project has been a source of news and debate for decades. As the LRT comes to Ottawa, private owners are being displaced, as significant land is required to facilitate this project. The City has proceeded first through negotiation and where necessary, through expropriation, to acquire properties necessary to implement this project. In many circumstances, this has included the taking of whole properties. However, this and other projects including the City’s new affinity for segregated bike lanes, has and will impact property owners. This will include those who have had portions of their properties taken, or even those whose property has not been taken, but who have been impacted by the construction and implementation of these projects.

Expropriation is governed entirely by statute. Ontario’s Expropriations Act governs the vast majority of expropriations in Ontario. Expropriation is common in Ontario, and has become more common as legislative policy continues to focus on intensification of urban centres. This intensification of population requires an intensification of infrastructure.

There are four heads of damage under the Expropriations Act: market value, injurious affection, disturbance damages and special difficulties in relocation. This paper focuses on injurious affection in the context of the LRT project.

Injurious Affection

There are two forms of injurious affection under the Expropriations Act: (1) where land is taken; and (2) where no land has been taken.

Injurious affection under the Act is defined as

“injurious affection” means,

(a) where a statutory authority acquires part of the land of an owner,

(i) the reduction in market value thereby caused to the remaining land of the owner by the acquisition or by the construction of the works thereon or by the use of the works thereon or any combination of them, and

(ii) such personal and business damages, resulting from the construction or use, or both, of the works as the statutory authority would be liable for if the construction or use were not under the authority of a statute,

(b) where the statutory authority does not acquire part of the land of an owner,

(i) such reduction in the market value of the land of the owner, and

(ii) such personal and business damages, resulting from the construction and not the use of the works by the statutory authority, as the statutory authority would be liable for if the construction were not under the authority of a statute,

and for the purposes of this clause, part of the lands of an owner shall be deemed to have been acquired where the owner from whom lands are acquired retains lands contiguous to those acquired or retains lands of which the use is enhanced by unified ownership with those acquired;

Injurious Affection – Partial Takings

Where land is taken, injurious affection occurs when only a portion of the land is taken (as opposed to the whole of the property). This could include below grade rights for the LRT, road widening (other than in the context of development by the Owner) or even the taking of easements.  In addition to the market value of the land taken which falls under a separate head of damages, injurious affection occurs where land is taken and: (1) there is a decrease in the market value of the remaining land; and/or (2) there are personal and business damages resulting from the construction.

As a basic principle of expropriation law, market value is calculated on the basis of the highest and best use of the property. This may not be the current use of the property. This principle is considered when determining whether a parcel of land has been injuriously affected and in particular whether there is a decrease in market value of the remaining parcel.

An example is if one half of a property is taken, and a building is removed. In this circumstance, market value for one half of the property that was taken is captured as market value damages (not injurious affection). If pre-taking, the highest and best use of the property is a two unit building, and after the taking, the highest and best of the property is a one unit building, the market value of the remaining parcel may be less than one half of the market value of the whole parcel. This additional reduction in market value is injurious affection.

Another possibility is that the taking may decrease motor vehicle access to the property. For example, many LRT projects (such as the Region of Waterloo’s LRT) include a raised curb, which would prohibit left turns into properties. Often there are few curb cuts, and vehicles are expected to make turns at intersections. As you can imagine, this may impact a retail business or even undermine its viability. This may impact the highest and best use of a property.  This same principle would apply to the construction of a median to divide a roadway, or even to the new segregated bike lanes already built or being contemplated by the City of Ottawa.

As one can imagine the highest and best use of a property may change greatly by a reduction in the size of the land. To determine exactly how future development relating to the highest and best use of a property may be constrained, the use of an expert land use planner and real estate appraiser is essential.

For personal and business damages, in the example described above this may include the replacement of the former building with a smaller building, the business losses incurred during the construction (or during the time the building is being rebuilt if that period is longer than the construction) and other types of business damages.

Injurious Affection – No Land Taken

An area of law that has recently been revisited by Canada’s highest court is injurious affection where no land is taken. This has been a source of confusion at times; however, these claims remain in the exclusive jurisdiction of the Ontario Municipal Board.

The Ontario Superior Court in Curactive Organic Skin Care v. Ontario explained the nature of an injurious affection claim:

[Injurious affection] is a nuisance claim in tort that would otherwise be barred by the common law defence of statutory authority because the alleged injury is an inevitable consequence of construction of a work authorized by statute and done without negligence...

...

... injurious affection, is expressly governed by the statutory scheme of the Expropriations Act, and the jurisdiction to decide injurious affection claims is expressly conferred on the Ontario Municipal Board.1

Eastern Ontario has been at the forefront of this area of law, with the case of the Antrim Truck Centre v. Ontario (Ministry of Transportation), where our firm worked with the successful Claimant at the Supreme Court. The MTO reoriented highway 416 for the purpose of increasing public safety. As a result of this work, the highway was diverted away from the Antrim Truck Centre in Arnprior, a very successful truck stop accessible right off of the highway. The owners of the Antrim Truck Centre were successful in seeking compensation at the Ontario Municipal Board.

This matter was appealed. At the Court of Appeal, the decision of the Ontario Municipal Board was overturned. The Court of Appeal took an extremely narrow approach to injurious affection cases where no land has been taken. This decision was overturned at the Supreme Court of Canada in 2013.

The Supreme Court of Canada stated that the purpose of the statutory compensation scheme for injurious affection is “to ensure that individuals do not have to bear a disproportionate burden of damage flowing from interference with the use and enjoyment of land caused by the construction of a public work." 2

The claimant must meet three requirements: (i) the damage must result from action taken under statutory authority; (ii) the action would give rise to liability but for that statutory authority; and (iii) the damage must result from the construction and not the use of the works. It is the second element in which the Court of Appeal’s approach had result in a very narrow reading of injurious affection no taking claims.

In considering the second element, the Supreme Court reviewed the test for private nuisance, which underlies claims were there injurious affection with no taking. There is a two part test in the law of private nuisance, namely:

(a)        there must be “substantial interference”; and

(b)        that interference must be unreasonable. 3

In assessing the threshold for nuisance, the requirement of substantial harm “means that compensation will not be awarded for trivial annoyances.” 4 This first step is a relatively low threshold.

There are several factors that may be considered in determining whether the interference was unreasonable, namely:

(a)        The severity of interference;

(b)        The character of the neighbourhood;

(c)        The utility of the defendant’s conduct;

(d)       The sensitivity of the plaintiff; and

(e)        The duration of the interference. 5

These factors are not a checklist, rather an adjudicator should consider the substance of the claim during the balancing exercise of the factors. 6 Courts should not simply consider whether the public benefit outweighed the private interference, but whether that interference, in light of all of the circumstances, was more than the Claimant could reasonably be expected to bear without compensation. 7

The result was a clarification by the Supreme Court as to the breadth of claims for injurious affection where no land has been taken.

The first Ontario Municipal Board decision post Antrim is R. Jordan Greenhouses Ltd v Grimsby (Town). The Claimant was successful in obtaining damages of $115,000.

In the Jordan case the Board found that for a garden centre (and the only business in the construction area) whose business is dependent upon vehicular access and spring sales, it was substantial interference and unreasonable to commence construction of a sewer extension that was not time sensitive, in the spring, on timing set by the contractor rather than the Town, with a 40 day closure of one lane and all lanes for two weeks.

The Board followed Antrim in awarding damages for temporary interference where the Court said “while temporary interferences may certainly support a claim in nuisance in some circumstances, interferences that persist for a prolonged period of time will be more likely to attract a remedy.” 8

The case also is also noteworthy for the comments rendered on the sufficiency of public notices given for the project. The Board accepted the evidence from the Claimant’s expert engineering consultant that although the notices issued by the Town met the minimum standards under the Class Environmental Assessment, the pursuit of minimum standards led to further problems which the Board found the Town could not remedy:

In this case, the pursuit of minimum standards has led to a situation where the Town could not remedy a fundamental timing issue that was arbitrarily made at the outset without due care and attention to the area and the properties in that area. Moreover, the Board finds that this approach led to the careless implementation and supervision of the Project where the contractor provided not even a preliminary construction schedule until after the Project had commenced, provided no fixed construction start date, manipulated the signing of the contract to facilitate a start date to suit the contractor, provided no traffic plan, failed to comply with the Ontario Traffic Manual, and in essence managed the Project with the convenience, welfare, and best interests of the contractor only at heart. 9

With so many infrastructure projects underway, there is still uncertainty as to how far the test for injurious affection – no taking under Antrim extends.

The Ottawa LRT Project

The Confederation Line project is the first stage in Ottawa’s future light rail network. The 12.5 kilometre electric rail system will replace existing diesel powered buses, providing rapid transit between Blair Station in the east and Tunney’s Pasture Station in the west. The route includes 13 stations and a 2.5 kilometre tunnel that will alleviate congestion through the downtown core. 10 Phase one construction is anticipated to be complete in 2017.

Much of phase one will be underground, as the City has attempted to mitigate impacts on property owners, however, even underground works have given rise to assertions of rights under the Expropriation Act. Further, old railway corridors have been used at times to further limit the impact of the new LRT line.

Phase two of the LRT project includes the western LRT extension, a $2.5 billion plan to extend rail east, west and south to Algonquin College by 2023. Phase two will include more above ground portions than phase one.

Concerns relating to the LRT project include restriction of traffic during construction and noise and vibration. These types of issues have already captured media attention in Ottawa. 11

As the plans are in progress, there is an opportunity to property owners to mitigate their damages, which includes lessening the impact of the implementation and construction of the LRT project. Property owners, in particular businesses, located near the proposed LRT line should be:

1. Reviewing the City’s plans and asking questions to ensure they understand:

(a)  The impact of the construction; and

(b)  The impact of the LRT project as it is proposed.

2. Retain expert consulting services, which include:

(a)  Real estate appraisal (particularly if property is being taken);

(b)  Land use planners;

(c)  Traffic consultant engineers; and

(d)  Legal advice.

Early engagement of experts can assist in helping businesses thrive, through what can be a difficult and lengthy construction process. As well, this provides a structure to support a claim under the Expropriations Act, should one be necessary.

While the LRT has attracted much of the attention, we reiterate that medians and bike lanes can give rise to the very same issues, especially for small landowners.

The Supreme Court of Canada has stated that the underlying principle in expropriation law is the indemnity principle. This means that property owners should be put in the same position as if there was no expropriation. While there may be no way to avoid headaches and inconveniences, at the very least property owners can be protected finally by utilizing the extensive protections set out in the Act.