Commercial Litigation and Dispute Resolution Blog

In a recent decision, the Supreme Court of Canada ("SCC") has expanded the scope for constructive taking (also called de facto expropriation) claims. They have removed the requirement to show that a government has acquired a beneficial interest in the relevant land whose development rights they impair. This requirement has been replaced with the much broader category of demonstrating that the government has obtained an ‘advantage’ short of a true beneficial interest. The requirement that the land be left without any reasonable use remains.

In Annapolis Group Inc. v Halifax Regional Municipality, 2022 SCC 36 (“Annapolis”), a developer had sought to develop its lands since 2007, making multiple attempts which were ultimately refused. The municipality had, since 2006, adopted a 25-year planning strategy which reserved a portion of the relevant lands for a future park. This prevented serviced development of the lands without a municipal resolution. Annapolis sued, alleging a constructive taking, on the basis that the municipality intended never to allow it to use its land other than as a park.

The municipality sought summary dismissal on the basis that there had been no “acquisition of a beneficial interest” by the municipality, required by the previous leading case, Canadian Pacific Railway Co. v. Vancouver (City), 2006 SCC 5, [2006] 1 S.C.R. 227 (“CPR”), and no removal of all reasonable uses for the lands, which could still be used as a park.

Annapolis won at the SCC in a decision that, while purporting only to clarify the CPR test, expands the scope of what constitutes a constructive expropriation, hopefully enhancing the ability of property owners affected by governmental regulatory takings to claim compensation.

At the heart of the court’s decision is the replacement of the traditional need to prove government has acquired an actual beneficial interest in the land whose use is regulated, with the need only to show government acquires an advantage or benefit.

This will presumably make it easier for property owners whose development rights were curtailed by down-zoning or other regulations for park, watershed or other governmental purpose, to claim compensation.

We expect there to be significant litigation in the next few years testing the limits of the new ‘advantage’ criterion. The SCC has sought to guide this interpretation, noting that to ensure substance over form, a court ought to consider the nature of the governmental action, the nature of the land and it’s historical and current uses, and the substance of the alleged advantage.

Separately, the Annapolis decision confirmed that while the intent of the municipality (here, to ultimately turn the land into a park) was not part of the test, it was a relevant consideration, useful in distinguishing typically broad down zonings from targeted constructive takings.

This too could strengthen the position of landowners, introducing a persuasive evidentiary tool to show excessive government action.

Should you have any questions about the decision, please contact Jim Fraser, Tom Boyd, or another member of our Real Estate Group.