Spike in infrastructure spending means more land expropriation, but businesses seek clarity on rules

Current wave of public infrastructure investment can be a concern for property owners: lawyers

Spike in infrastructure spending means more land expropriation, but businesses seek clarity on rules
John Doherty

Billions of dollars have been pouring into infrastructure projects across the country in recent years, thanks to a 12-year federal government plan. And more will likely follow as governments look to re-build their economies post COVID-19. In April, Alberta — anticipating unemployment to reach 25 per cent as a result of the double whammy of the health crisis and plunging oil prices — announced a doubling of its budget this year for infrastructure maintenance and renewal to $1.9 billion.  

Right across the country, highways have been expanded, new bridges erected and transportation systems developed. All that requires the acquisition of land, which has ushered in some legislative re-alignment, a re-examination of regulations and inevitable legal issues where inequities sometimes surface. 

“There’s lots of infrastructure projects being done at every level of government and that generates a lot of work,” says expropriation lawyer John Doherty, a partner with Gowling WLG (Canada) LLP in Kitchener, Ont.  

That, he says, can cause concern for property owners. He points to the Hamilton LRT project, which was put on hold after the province held back funding. Typically, property owners are not compensated for any improvements done after notice of expropriation. But when a project has already launched and negotiations for acquisition have begun, with some acquisitions already complete, and the project suddenly stalls, property owners are left in limbo, especially if there's anticipation that the project will be resurrected at some point. 

Doherty suspects there’s a possibility that authorities might, at some point, be held to a time limit to reduce that uncertainty. That’s an approach that is being broached in the United Kingdom to try to avoid a situation where a property owner is held in limbo for a decade or more, he says. 

In fact, the Ontario government is acknowledging the need to move quickly with expropriations to better accommodate the Toronto Transit Commission’s subway system’s expansion project. The province introduced Bill 171 earlier this year, to enact the Building Transit Faster Act, 2020, which sees the elimination of hearings of necessity. 

Out in Surrey, a particularly busy part of British Columbia attracting growth and infrastructure development, Peterson Stark Scott expropriation lawyer Bruce Melville observes that the expropriation process can be quite different from province to province. Jurisdictions with newer expropriation legislation, he says, are more generous toward property owners than those with older laws. Looking at the history of expropriation, he sees an evolution in which more deference is paid to property owners. 

“If we go back in time before any of the modern codes, most expropriation legislation didn’t have any advance notice requirement to property owners,” he says, pointing to Canada National Railway’s old policy of filing and serving the actual instrument that transferred title, before notifying the owner on the theory that if the owner had advance notice they might somehow change their affairs to improve their position when expropriation occurred. “But that approach I think is mostly just historical and may not happen anymore.” 

Now, advanced written notice of the intention to expropriate is a universal requirement. That typically allows for a hearing to address the justification for the proposed expropriation. “Advance notice is one of the hallmarks of the modern expropriation codes,” along with a requirement that the expropriation authority make an offer or advance payment before beginning the acquisition phase, he says. “The idea being that the property owner should not be out of pocket and also while deprived of title pending final settlement on the compensation claim.” 

In Melville’s opinion, the most significant issue in B.C. is the inability of an owner to be fully reimbursed for professional costs, such as legal assistance and appraisals to respond to the intent to expropriate, whereas in other jurisdictions, such as Alberta, the landowner is entitled to reimbursement for all costs reasonably incurred.  

“Some are much more generous to owners than others. If you go back to the provinces that don’t have modern codes, the owners’ right to obtain reimbursement for professional costs is very limited, perhaps non-existent except perhaps on the basis that would be applied in ordinary litigation. 

“In British Columbia, there’s a tariff of costs that’s applied, and that’s not particularly generous by comparison to, say, Alberta. Ontario has a cost-recovery regime that is much closer to Alberta than British Columbia.” 

Doherty observes that Nova Scotia has implemented changes in its legislation as well that the province describes in an October news release as providing “clarity to the Expropriation Act and support [for] continued infrastructure investments.” That falls on the heels of a couple of significant 2019 Nova Scotia Court of Appeal decisions.  

In Atlantic Mining NS Corp. (D.D.V. Gold Limited) v. Oakley, the appeal court determined that the provincial expropriation act protects interests that are propriety in nature, not personal. Its decision overturned an award made by the lower court for non-pecuniary losses related to disturbance, amounting to 15 per cent of the market value of the land. 

Another case, Nova Scotia (Attorney General) v S&D Smith Central Supplies Limited, resulted in an $11-million decision, plus costs, “which were not insignificant,” says litigator Bruce MacIntosh of MacIntosh MacDonnell & MacDonald in New Glasgow, N.S., who acted for Smith in what he describes as one of the largest and longest expropriation cases in the country. The case turned on the province’s desire to put a highway through part of the property owned by hardware retailer Smith Central Supplies dating back to 1998, although the expropriation document was filed with the land registry office in 2012. The appeal court upheld the Nova Scotia Utility and Review Board’s $6.7-million award for disturbance damages, plus increased interest as a result of the delay in the expropriation proceeding, along with costs. 

MacIntosh says the province was unflinching in its offer of $260,000 for the property and the desire to stick to its planned route, which would have resulted in a much larger impact on the property than if it was altered to just a portion of the property, as had been suggested by the property owner. 

“We tried time after time after time to sit down and talk reasonably,” he says. “Nova Scotia refused to take a non-adversarial approach.” He suspects other property owners with less appetite to fight have simply ceded to the province’s demands over the years. 

He believes the underlying message of the case is that type of opposition presented by the province in his case will not be received favourably by the courts. But, ultimately, it reinforces the Supreme Court of Canada’s decision in Dell Holdings Ltd. v. Toronto Area Transit Operating Authority, which allows the disturbance damages to date back to the beginning of the expropriation authority’s indication of intent to expropriate, and delays in the time it took to determine compensation can be considered when the property owner is no longer productively using that land.  

“It’s very useful for a property owner to know as early a stage as possible whether the province or some governmental authority is proposing to take their land. And it can be very difficult for a property owner, particularly businesses, to plan their future if they are uncertain when or if their property is going to be expropriated,” says Doherty. 

Ottawa investing in infrastructure 

Through its Investing in Canada plan, the federal government pledged an investment of more than $180 billion over 12 years in five main infrastructure priorities: 

  • Public transit; 
  • Green initiatives; 
  • Social projects; 
  • Trade and transportation;
  • Rural and northern communities’ infrastructure. 

Significant Canadian expropriation cases 

Nova Scotia (Attorney General) v. S&D Smith Central Supplies Limited: Award based on loss incurred through the expropriation process 

Edmonton (City) v. Business Care Corp: Leaseholder rights protected 

Southwind v. Canada: Federal Court of Appeal applies state of the law from the 1920s 

Atlantic Mining NS Corp. (D.D.V. Gold Limited) v. Oakley: Proprietary, not personal interests protected in Nova Scotia Court of Appeal decision 

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