Supreme Court of Canada Confirms Constructive Taking Test
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Municipal governance naturally lends itself to incidental private property regulation. Therefore, land may be subject to various governance and regulations, including zoning by-laws and municipal designations. Expropriation is challenging to prevent; therefore, landowners often focus on obtaining fair compensation. While no property rights are conveyed in the Charter of Rights and Freedoms, Canadian property owners have common law property rights

In a recent decision, the Supreme Court of Canada affirmed that a landowner should be compensated if municipal regulations substantially deprive them of the use and enjoyment of their property in an unreasonable manner. In the decision, the Court also revisited the test used to determine constructive taking, focusing on the impacts on property owners, and provided guidance relating to a more expansive definition of de facto expropriations. 

What is Expropriation?

Expropriation is the exercise of a public authority taking land without the owner’s consent. Land may be expropriated by a public body, such as the provincial or municipal government, for a public purpose.  

De facto (or “constructive”) taking occurs when the government body exercises regulatory powers that significantly impair a landowner’s use and enjoyment of their property. In contrast, de jure taking refers to the process in which the government body formally acquires possession or title to the property through the appropriate legislation.  

Where constructive taking has been established, a landowner has a presumptive right at common law to be compensated. However, this presumption may be displaced by evidence of clear statutory language which provides that no compensation is required. The Supreme Court of Canada in Annapolis Group Inc. v. Halifax Regional Municipality has affirmed that a statute may limit a landowner’s right to compensation. While various statutes grant regulation powers to the government, the scope and effect of language that suggests no compensation should be paid will depend on the nature of the constructive taking and the types of claims which flow from it. 

Expropriation Law in Ontario

In Ontario, the Expropriations Act governs the rights of government bodies and landowners concerning the expropriation process and compensation. Legislation such as the Municipal Act and Planning Act may also become relevant in some issues. 

The Ontario Land Tribunal is an administrative tribunal with jurisdiction concerning expropriation compensation. 

Planning Strategy Contemplated Owner’s Development of Land

In Annapolis Group Inc. v. Halifax Regional Municipality, Annapolis Group Inc. (“the owner”) intended to develop 965 acres of land it owned that is situated in Halifax. In 2006, the Halifax Regional Municipality (“the municipality”) included the owner’s land in a proposed Regional Park plan despite the land being zoned for “future serviced residential development.” The planning strategy did not allow for the development of the land until after the municipality adopted a resolution that authorized a “secondary planning process” and amendment to the applicable by-law for land use. 

In 2016, without adopting a resolution to authorize a secondary planning process, the municipality placed signs on the land encouraging the public to use the land as a public park. As a result, the owner brought a claim for constructive taking. The owner claimed that the municipality’s regulatory measures deprived it of all economic or reasonable uses of the land, and the municipality had acquired a beneficial interest in the land by promoting its use to members of the public.

Nova Scotia Court of Appeal Found No Constructive Taking as Land Had Not Actually Been Taken

The municipality requested summary dismissal of the owner’s constructive taking claim. However, the motion judge found the claim raised genuine issues of material fact, including whether the municipality encouraged the public to use the land as a park. The Supreme Court of Nova Scotia dismissed the municipality’s motion. 

At the Nova Scotia Court of Appeal, the Court applied the constructive undertaking test from Canadian Pacific Railway Co. v. Vancouver (City). The Canadian Pacific Railway Co. case states that a claimant must establish there has been an acquisition by the government of a beneficial interest in, or flowing from, the property, and all reasonable uses of the property have therefore been removed. 

The Court of Appeal found no basis for a constructive taking claim and dismissed the owner’s action. The Court interpreted the first prong of the Canadian Pacific Railway Co. test as requiring the land to have “actually been taken”, which had not occurred. The Court went on to state the owner did not have a reasonable chance of establishing that the municipality had acquired a beneficial interest in, or flowing from, the owner’s land. The owner appealed the decision to the Supreme Court of Canada.

Supreme Court of Canada Clarified Test for Constructive Taking of Land in Expropriation Cases

The Supreme Court of Canada clarified the test for constructive taking. It held that to establish a public/government authority has obtained a proprietary interest in a piece of land, a court must decide whether:

  1. The public/government authority has acquired a beneficial interest (advantage) in, or flowing from, the property; and
  2. The regulatory measure taken has removed all reasonable uses of the land.

When determining whether a regulatory measure equates to a constructive taking, courts assess the context of the alleged taking, including:

  • The nature of the land and its historical or current uses;
  • The nature of the government action;
  • Notice to the owner of any restrictions at the time of the property acquisition;
  • Whether the restrictions are consistent with the owner’s reasonable expectations; and 
  • The substance of the alleged advantage gained by the government/public body.

Formal Transfer of Property Not Required to Establish Constructive Taking

The Court noted that some examples of constructive undertaking might include:

  • Confining the use of private land to a public purpose; 
  • Regulations which deprive a land of its economic value and leave a landowner with only notional use of the property; and
  • Indefinite or permanent denial of access to a landowner’s property or the government’s indefinite or permanent occupation of the land.  

The Court clarified that the law does not require a formal property interest transfer to occur to establish constructive taking. Instead, demonstrating that the government has obtained an advantage flowing from the property may be sufficient. Further, while the governing body’s intention is not a component of the test for constructive taking, it may be evidence that constructive taking has occurred. This decision also clarified that zoning “which effectively preserves private land as a public resource” may lend itself to a constructive taking claim if it eliminates all reasonable uses of the land by the property owner.

As the majority of the Supreme Court allowed the appeal, the owner’s claim will proceed to trial to determine whether the municipality is promoting the land as a public park and whether the municipality’s actions have impaired all reasonable uses of the land.

Baker & Company: Toronto Expropriation Lawyers Assisting Property Owners

The skilled expropriation lawyers at Baker & Company understand the immense stress that property owners, businesses, and tenants can experience when the land they own or occupy is being expropriated. We help clients navigate this complicated area of the law and take decisive action to preserve their rights and entitlement to the maximum compensation possible. Our firm has over 30 years of experience representing parties affected by expropriation – never the government or other expropriating bodies. Call us at 416-777-0100 or reach out online to schedule a consultation.

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