The Supreme Court Of Canada Clarifies The Law On Constructive Takings

• Published date: 08 November 2022
• Subject Matter: Government, Public Sector, Litigation, Mediation & Arbitration, Real Estate and Construction, Government Contracts, Procurement & PPP, Trials & Appeals & Compensation, Real Estate
• Law Firm: Stikeman Elliott LLP
• Author: Ms Gloria Moore, Joseph Wenig and Archer Bell

On October 21, 2022, the Supreme Court of Canada (the "SCC") released its decision in Annapolis Group Inc. v Halifax Regional Municipality, 2022 SCC 36 ("Annapolis"), affirming and clarifying the test for constructive taking, or de facto expropriation, set out in Canadian Pacific Railway Co. v Vancouver (City), 2006 SCC 5 ("CPR").

Introduction

Expropriation (or "taking") is referred to as constructive or de facto in contrast to de jure taking. The latter occurs when a government authority expressly takes legal title of land from a landowner. Compensation for de jure takings is codified across Canada in provincial and territorial legislation, such as Nova Scotia's Expropriation Act, RSNS 1989, c 156, which states that "where land is expropriated, the statutory authority shall pay the owner compensation as is determined in accordance with this Act".

Constructive taking covers situations where a government authority has not taken legal title from the landowner but has otherwise regulated the property to such an extent that the landowner has effectively lost the property. Notably, there is nothing to prevent the government authority from doing so; extensive land use regulation in the public interest is the norm in Canada, and there is no protection of property rights in the Canadian Charter of Rights and Freedoms. However, where a constructive taking occurs absent express statutory language permitting the government authority to take property without paying compensation, the government authority is required at common law to compensate the property owner.

In CPR, the SCC held that a constructive taking of private property occurs when two requirements are met (the "CPR test"):

1. the government authority must acquire a beneficial interest in the property or flowing from it; and
2. the property owner must lose all reasonable uses of the property.

Thus, where these requirements are met (and in the absence of express statutory language permitting uncompensated taking, as in CPR), the property owner is entitled to compensation from the government.

In Annapolis, the SCC majority held that the first prong of the CPR test should be interpreted broadly such that the acquisition of "a beneficial interest in the property or flowing from it" means the accrual of an "advantage" to the government actor. The majority also held that the public authority's motive, while not an element of the test, can be used as supporting evidence in making out a claim for constructive taking.

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