Significant Expansion To The Law Of "Constructive Takings": Annapolis Group Inc V Halifax Regional Municipality

• Published date: 01 November 2022
• Subject Matter: Real Estate and Construction, Real Estate
• Law Firm: Borden Ladner Gervais LLP
• Author: Ms Emma Blanchard, Isaac Tang, Katie Butler, Stacy McFarlane, Brett Davis and Tim Haggstrom

On October 21, 2022, the Supreme Court of Canada (SCC) released a landmark decision with Annapolis Group Inc. v Halifax Regional Municipality, 2022 SCC 36 (Annapolis).

This decision provides further direction on the common law of de facto expropriation, or constructive taking, the latter being the preferred term from the SCC. This concept refers to situations where a private owner claims their land has been 'taken' by the state, but there is no formal (or de jure) expropriation - de jure expropriation being where the state compulsorily acquires a property interest through its statutory authority in accordance with legislation governing expropriations and the payment of compensation.¹

In 2006, the SCC in Canadian Pacific Railway Co. v Vancouver (City) (CPR) defined the common law test for when a de facto expropriation occurs, being when:

1. the government acquires a beneficial interest in private property or flowing from it; and
2. removes all reasonable uses of that property.²

In a split 5-4 decision, the SCC majority in Annapolis updated the test by stating that:

1. an 'acquisition' does not require an actual acquisition of the property; instead, the interest acquired can flow from the property as well as being an interest in property;³
2. the 'beneficial interest' acquired can be an advantage in respect of the lands;⁴ and
3. the intention of the government behind the exercise of its regulatory authority may be relevant to determining whether an owner has lost all reasonable uses of its property.⁵

The majority affirmed that in assessing whether a constructive taking has occurred, the courts ought to focus on the advantage that flows to the state from the acquisition and the effect of the taking on the property owner, emphasizing that substance, and not form is to prevail.⁶

In a strong dissent, the minority warned that instead of clarifying the test from CPR, the majority's reasons depart from it. In their view, the majority's decision dramatically expands the potential liability of municipalities engaged in land use regulation in the public interest and throws into question settled law that a refusal to 'up-zone' property does not constitute a constructive taking.

As Annapolis was an appeal from a summary judgment application, the SCC did not apply the majority's test to the facts to determine if a constructive taking had occurred in this instance. With this clarified legal test, the matter will return to the Nova Scotia courts to determine if a taking, or one of the other torts at issue, can be made out on the facts of this case.

Background and lower court decisions

Annapolis Group Inc. (Annapolis) is a land developer in the Halifax area. Starting in the 1950s, Annapolis began to gradually accumulate 965 acres of vacant, treed land, with the intention of eventually developing it (the Lands).⁷

In 2006, the Halifax Regional Municipality (HRM) adopted a planning strategy to guide for land development in the municipality. This strategy (1) identified a portion of the Lands for possible future inclusion in a regional park; (2) zoned the Lands 'Urban...