When does a municipality’s planning decisions amount to a de facto expropriation of land, and when is the owner entitled to compensation? These issues were considered by the Supreme Court of Canada in its October 21, 2022, decision in Annapolis Group Inc. v. Halifax Regional Municipality.
Beginning in the 1950s, Annapolis assembled 965 acres of land with the intent of development and resale. In 2006, Halifax approved a planning strategy intended to guide land development in the region over the next 25 years. Part of the Annapolis land was identified for possible inclusion in a future regional park. Some of the land was designated ‘urban settlement’ in which prescribed development would be permitted, and other parts were designated ‘urban reserve,’ intended to be held for future development beyond the 25-year life of the regional plan. Any serviced development of the land required Halifax’s council to adopt a resolution authorizing a secondary planning process and an amendment to the zoning bylaw.
Despite several attempts on the part of the Annapolis to develop the land, Halifax refused to initiate the secondary planning process. In 2016, Annapolis then sued, claiming that Halifax’s planning decisions deprived it of all reasonable or economic uses of its land, amounting to a constructive expropriation. Annapolis presented evidence that Halifax was treating the land as a public park, encouraging members of the public to hike, cycle, canoe, camp, and swim there.
Halifax applied to have the lawsuit bounced on the basis that its refusal to amend the planning strategy and zoning bylaws could not result in constructive taking. In a five–four split, the Supreme Court agreed with the motion judge, who found that there were sufficient facts and law to support a potential claim at trial.
Justices Côté and Brown, writing for the majority, set out the following ground rules:
Until the Annapolis decision, the courts applied the Canadian Pacific case as requiring proof that the expropriating authority had actually acquired a beneficial interest in the land in order for there to be a constructive taking. Further, the intent of the expropriating authority was considered irrelevant. In Annapolis, the majority said that some courts had applied Canadian Pacific incorrectly and that the term ‘beneficial interest’ should be viewed more broadly as being an ‘advantage’ flowing from the property. It is not necessary for the owner to show that government has effected an actual acquisition of an interest in the property to support a claim for compensation. It is enough for the aggrieved owner to show that the state has derived an advantage from the private property through regulation.
The majority held that if Annapolis could prove that Halifax was unlikely to ever grant secondary planning approval, it would be material to establishing its claim. It was wrong to say that the conduct of Halifax was a mere refusal to up-zone. When Annapolis acquired the land in 1950, it could have developed it. Halifax did not start to regulate its use until 1982. While Annapolis claimed that the land had been transformed into a public park, Halifax could defeat the claim by showing that there is at least a single reasonable use of the property as zoned. However, leasing the land as a public park should not be looked at as a possible use since the evidence was that it was already being used for that purpose.
The full effect of this decision remains to be seen. Annapolis is still bringing the case to trial. Arguably, the Court has broadened the circumstances in which a claim for constructive taking may be made out. Municipalities, planning authorities, and governments should proceed with caution when regulating in a way that can be characterized as sterilizing vested land use rights. The principles could be applied outside of the area of land use regulation and zoning. Take, for example, legislation that imposes a moratorium on the exercise of natural resource extraction or harvesting rights. It also remains open for the legislature to legislate away rights to compensation within the limits of its authority.
John Stefaniuk is a Manitoba-based lawyer who practises environmental and natural resource law.
This article was written for Municipal Leader magazine and is reproduced with permission.
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