“Effects”: Annapolis Group and Nova Scotia Dispute 965 Acres of Land Near Blue Mountain-Birch Cove Lakes
In Annapolis Group Inc v Halifax Regional Municipality, 2022 SCC 36, the Supreme Court of Canada (“SCC”) divided 5-4 over the quagmire of whether state regulation of land may create a de facto or “constructive” taking of private property. The contested property constitutes a 390-hectare block of land in Blue Mountain-Birch Cove Lakes to the west of Halifax, Nova Scotia. The majority of the SCC sided with Annapolis Group Inc. (“Annapolis Group”) and underscored that the Nova Scotia Court of Appeal misapplied Canadian Pacific Railway Co v Vancouver (City), 2006 SCC 5 (“CPR”) and summary judgment principles.
McLachlin CJ noted in CPR that a constructive taking exists if (1) a beneficial interest or advantage accrues to the state and (2) the regulatory measure removes all reasonable uses of the private property at issue. The SCC clarified that the intention of the government is not irrelevant with respect to the second prong of the test.
Beginning in the 1950s, Annapolis Group, a real estate development company, acquired 965 acres of vacant treed land with development intentions. Fifty-six years later in 2006, Halifax Regional Municipality (“HRM”) commenced the Regional Municipal Planning Strategy (a land development guide). The guide zoned the disputed land as “Urban Settlement” (land that could be subject to urban development) and “Urban Reserve” (land that could be developed beyond the 25-year timeframe).
2007 marks the beginning of Annapolis Group making several attempts to develop the lands in question. HRM’s rejection of Annapolis Group’s attempts rendered land development efforts futile. Frustrated by blocked efforts, Annapolis Group brought a lawsuit against HRM in 2017, alleging constructive taking, misfeasance in public office, and unjust enrichment. Annapolis Group submits that HRM has repeatedly deployed regulatory powers to use the disputed land as a public park without compensating Annapolis Group.
HRM, in contrast, argues that Annapolis Group is trying to make taxpayers pay for the decades-long development suit. At the Nova Scotia Court of Appeal, HRM successfully opined that SCC’s judgment in CPR can be used to strike Annapolis Group’s claim of constructive usage. Now this case rests with the SCC.
The SCC considered two issues in this appeal. Firstly, did the Nova Scotia Court of Appeal err in holding that an acquisition of a beneficial interest requires land to be taken from an owner and acquired by the state? Secondly, did the Nova Scotia Court of Appeal err in holding that evidence of the state’s intention is irrelevant?
De facto or constructive taking of land is the process by which the HRM forcibly acquires privately owned property for public purposes and leaves Annapolis Group with no reasonable usage of its land. Constructive taking occurs when the “effect” of the Crown’s actions deprives Annapolis Group of the use and enjoyment of the disputed land in a substantial and unreasonable way–effectively confiscating property.
Common law notes that the plaintiff must suffer a “total loss” of any property interest to fall within this category of constructive taking. In CPR, the SCC outlined the common law test of constructive taking. The majority considered the meaning of “beneficial interest” in the first prong of the test. Writing for the majority, Côté and Brown JJ held that actual acquisition is not a necessary condition for beneficial interest. Considering Manitoba Fisheries Ltd v The Queen,  1 SCR 101, the majority noted that the effect of regulatory action is a relevant consideration in determining whether the Crown has deprived the plaintiff of goodwill (goodwill being the economic and legal value of the land). Beneficial interest is correlated with the effect of regulations. It is a distraction to look solely at actual acquisition. Eyeing the beneficial interest in the property or that flowing from the property also underscores that de facto taking does not require actual acquisition.
The majority held that the government’s intention to constructively acquire land, if proven by the claimant, may bolster the claimant’s submission regarding losing all reasonable usages. Still, intention is one material fact in the holistic assessment of constructive acquisition. The first issue is the predominant focus: effects.
The decision could potentially open a new can of worms. According to this holding, constructive taking does not demand the prerequisite of actual acquisition but merely beneficial interest. The majority’s emphasis on the “effect” of the taking may evince an expansion of the de facto criteria.
While it is logical to examine factors beyond actual acquisition, it is not exactly clear to examine beneficial interest. The majority posits that constructive taking does not constitute actual acquisition; however, what are the precise parameters of beneficial interest? Parsing the “effect” of constructive acquisition may run the danger of hindsight.
Expropriation claims aspire toward justice and fairness. Yet, the new test of “effect,” without clearer criteria than the “nature of government action,” “the nature of land and its uses,” and “the substance of the alleged advantage” proves too vague and amorphous. The majority’s analysis will likely lead to more expropriation claims knocking on judicial doors to clarify the exact scope and definition of looking to the “effect” of constructive acquisition.
Justice and fairness concerns also saturate the dissent’s analysis. Writing for the dissent, Kasirer and Jamal JJ warn that CPR is good and settled law in Canada. Indeed, transmogrifying the CPR test and focusing on effects may drastically broaden the liability of the state in regulating land usage. Randy Christensen, Ecojustice lawyer, states that the majority “inappropriately extends” CPR’s test “to encompass any ‘advantage’ occurring to the authority.” In other words, the expansion of the meaning of advantage potentially confers significant liability and risks upon governments engaged in the regulation of land. For instance, Christensen notes that the Alberta Court of Queen’s Bench’s decision in Altius Royalty Corporation v Her Majesty the Queen in Right of Alberta, 2021 ABQB 3 could face a completely different result if decided in light of the Annapolis reform. In that case, the court held that there is a difference between the complete prevention of land development (which may constitute expropriation) and the mere limiting of possible land usage (which does not constitute expropriation). The SCC’s holding in this case, however, seems to smudge this boundary.
CPR clarifies that de facto acquisition requires a beneficial interest and removal of all reasonable uses of the property. By focusing on the advantage and effects of regulatory decisions, the majority departs from precedent and stretches the liability net of government action.
Great power brings great responsibility. Now, great power also brings great liability.