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Legal Notes: Supreme Court opens the door for more expropriation discussion

John Bleasby
Legal Notes: Supreme Court opens the door for more expropriation discussion

Land use disputes between property owners and municipalities can fester over time, giving rise to conflicts that can impact the beneficial use of the land by the owner. It’s a situation recently highlighted by the Supreme Court, pitting a property developer against the Halifax Regional Municipality.

Annapolis Group began acquiring several hundred acres of vacant land in the 1950s with the ultimate intention of future development. Brandon Kain, Jonathan Nehmetallah, Adriana Forest, Lauren Weaver of McCarthy Tetrault explain Halifax implemented a municipal planning strategy in 2006 that reserved part of the Annapolis land as a park while zoning another portion for future urban development. The public was encouraged by Halifax to use the lands for various outdoor activities in the meantime.

Annapolis could only proceed with development if approved through a secondary planning process, something Annapolis attempted to initiate several times between 2007 and 2016. However, in 2017, Halifax passed a resolution refusing to initiate those discussions.

There are two types of property expropriation. The more common form is called de jure, wherein title is acquired from a private party in exchange for compensation through a statutory expropriation framework. 

The other is called “constructive expropriation.”

As described by Micah Goldstein and Gavin Fior of WeirFoulds, this occurs when two common law requirements are met: the public authority has acquired a beneficial interest in the property or flowing from it; and the state action has removed all reasonable private uses of the property.

In response to Halifax’s refusal to initiate development discussions in 2017, Annapolis sued, claiming this constituted the constructive taking of its property.

Gowling WLG Partners John Doherty and Sahil Shoor, and associate Kevin Dias, summarize Annapolis’ position, writing that in effect, “Halifax 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 matter reaching the Supreme Court stemmed from a Court of Appeal ruling that held that Halifax’s refusal to engage in development discussions did not amount to a de facto expropriation. It decided there was no acquisition of a beneficial interest in the property or flowing from it, nor deprivation of all reasonable uses of the property, write Doherty, Shoor and Dias. That ruling, in turn, had reversed an earlier lower court decision that had allowed the matter to go to trial.

“The majority of the Supreme Court held that Annapolis’ appeal should be allowed and that the (original) motion judge was correct in concluding that, ‘a constructive taking need only have the effect of defeating the landowner’s reasonable use of land, and the state’s intent may be relevant in assessing whether all reasonable uses of land has been removed,’” write Doherty, Shoor and Dias.

“In other words, beneficial interest means ‘the effect of a regulatory measure on the landowner, and not with whether a proprietary interest was actually acquired by the government.’ In that sense, the Court of Appeal erred in requiring Annapolis to show that Halifax actually acquired its lands.”

The narrow 5-4 decision by the Supreme Court to allow the appeal leaves legal experts wondering if similar disputes might find their way to court.

“Parties bringing such claims should consider developing evidence that the public authority intended to effectively seize their land,” write Kain, Nehmetallah, Forest and Weaver.

“In the wake of this decision, it is clear that the test for a constructive taking is a contextual one that should consider the circumstances,” write Goldstein and Fior. “Although the authority’s intention may be material, the focus of the inquiry is now on the effects of the state action. The test does not require a transfer of proprietary interest to the public authority. On a broader scale, especially in light of the dissent, the decision creates uncertainty with respect to whether the failure of a municipality to up-zone lands may give rise to a supportable claim of constructive expropriation.”

John Bleasby is a Coldwater, Ont.-based freelance writer. Send comments and Legal Notes column ideas to editor@dailycommercialnews.com.

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