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Expropriation - Constructive. St. John’s (City) v. Lynch
In St. John’s (City) v. Lynch (SCC, 2024) the Supreme Court of Canada allowed an appeal from a Newfoundland case dealing with how "zoning regulations and other land use restrictions affect the compensation due to owners of expropriated property?", here in a 'constructive expropriation' context:[3] In this case, the City of St. John’s (“City”) constructively expropriated the respondents’ property when it refused to permit any development on it. The City deprived the respondents of all reasonable uses of the property and was found to have acquired a beneficial interest in the form of the right to a continuous flow of uncontaminated groundwater downstream to the City’s water facilities. At the time of the expropriation, a zoning regulation limited the property to discretionary agriculture, forestry, and public utility uses — a measure that no doubt diminishes the market value of the property compared to the respondents’ desired residential development use and, therefore, the compensation owed for the expropriation. The application judge concluded that the zoning regulation was an “independent enactment” and not part of the expropriation scheme. This meant that it could operate to influence the market value of the expropriated property and was not to be ignored for the purpose of fixing compensation. The Court of Appeal disagreed, concluding that compensation should be determined without reference to the zoning regulation.
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C. The Constructive Expropriation Claim
[13] Following the City’s refusal to permit development, the respondents commenced proceedings, seeking a declaration that the Lynch Property had been constructively expropriated. In a decision that is not the subject of this appeal, the Court of Appeal of Newfoundland and Labrador concluded that the property was constructively expropriated by the City. ....
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[27] A “taking” — defined as the “forcible acquisition by the Crown of privately owned property . . . for public purposes” — can occur in two ways (K. Horsman and G. Morley, Government Liability: Law and Practice (loose‑leaf), at § 5:1). Formal expropriation (a de jure taking) occurs where a public authority acquires legal title (typically through the authority’s invocation of a statutory expropriation framework) (Annapolis Group Inc. v. Halifax Regional Municipality, 2022 SCC 36, at paras. 18 and 104). Constructive expropriation (a de facto taking), on the other hand, involves the appropriation of private property by a public authority exercising its regulatory powers (Annapolis, at para. 18). In this case, the Lynch Property was constructively expropriated as the City had acquired a beneficial interest in it and all reasonable uses of the property had been removed. I note that the expropriation decision, which is not under appeal, applied the test from Canadian Pacific Railway Co. v. Vancouver (City), 2006 SCC 5, [2006] 1 S.C.R. 227, but the conclusion with respect to the Lynch Property is consistent with this Court’s more recent articulation of the test for constructive expropriation set out in Annapolis.
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[49] In the constructive expropriation context, it is not until all reasonable uses of the property have been removed that a de facto taking occurs (Annapolis, at para. 19). In assessing compensation once constructive expropriation is found to have occurred, distinguishing enactments on the basis of both their purposes and effects ensures the property owner receives “fair compensation but not more than fair compensation” (Waters, at para. 61). Ignoring enactments’ purposes and singularly considering effects would present two equally undesirable possibilities. If the Pointe Gourde principle only excluded the regulation that had the effect of removing all reasonable uses of the property (mirroring the requirement from Annapolis for a taking to occur), governments would be permitted to downzone properties or freeze development in anticipation of expropriation to reduce the compensation payable. This idea has been rejected (see, e.g., Tener, at p. 557; Gibson, at p. 536). If, instead, all prior enactments affecting the property’s value — regardless of whether they removed all reasonable uses of the property or were made with a view to expropriation — were excluded from the compensation assessment, compensation would amount to a windfall. This approach would be inconsistent with settled law: “. . . regulation alone will not satisfy the test for a constructive taking . . .” and “compensation does not follow zoning either up or down” (Annapolis, at para. 43; Tener, at p. 557). Neither of these possibilities would achieve proper economic reinstatement, and both would distort the property’s true market value.
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VI. Conclusion
[66] The respondents are entitled to “fair compensation but not more than fair compensation” for the City’s constructive expropriation of their property (Waters, at para. 61). Given the application judge’s finding that the Watershed zoning was an independent enactment and not made with a view to expropriation, the market value assessment for the Lynch Property must take into account the fact that it is limited to discretionary agriculture, forestry, and public utility uses. To ignore the Watershed zoning would be to award the respondents a significant windfall. It would compensate them for something they never would have had absent the expropriation: unencumbered land to develop residential housing. . Entes Industrial Plants Construction & Erection Contracting Co. Inc. v. Centerra Gold Inc.
In Entes Industrial Plants Construction & Erection Contracting Co. Inc. v. Centerra Gold Inc. (Ont CA, 2023) the Court of Appeal considered the rare issue of government constructive 'appropriation' [also 'expropriation'] when determining which entity was garnishable by a creditor:[13] The appellant argues that the application judge failed to address the following criteria to determine de facto governmental appropriation, as set out in Canadian Pacific Railway Co. v. Vancouver (City), 2006 SCC 5, [2006] 1 S.C.R. 227, and recently confirmed in Annapolis Group Inc. v. Halifax Regional Municipality, 2022 SCC 36, 33 M.P.L.R. (6th) 1, at para. 4:... [A] constructive taking occurs where: (1) a beneficial interest — understood as an advantage — in respect of private property accrues to the state, which may arise where the use of such property is regulated in a manner that permits its enjoyment as a public resource; and (2) the impugned regulatory measure removes all reasonable uses of the private property at issue. . Annapolis Group Inc. v. Halifax Regional Municipality
In Annapolis Group Inc. v. Halifax Regional Municipality (SCC, 2022) the Supreme Court of Canada - in the context of a developer's appeal of a summary judgment dismissal - reviews the law of 'constructive' or common law expropriation (aka 'takings'), that is expropriation outside of an express statutory scheme for that purpose (ie. no Expropriation Act) and without a formal taking of real estate title. In these quotes the court considers the test for when such constructive expropriation occurs, which - when satisfied - may give rise to a common law right of compensation [paras 17-57].
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