De Facto Expropriation: SCC Grants Leave to Appeal in Annapolis Group Inc v Halifax Regional Municipality
In June 2021, the Supreme Court of Canada (“SCC” or “the Court”) granted leave to appeal in the case of Annapolis Group Inc v Halifax Regional Municipality, a ruling from the Nova Scotia Court of Appeal, 2021 NSCA 3 [Annapolis]. The SCC will rule on whether the refusal by Halifax Regional Municipality (“Halifax Municipality”) to approve Annapolis Group Inc’s (“Annapolis Group”) development applications constituted a de facto expropriation.
Facts of the Case
Annapolis Group, a Halifax developer, had plans of developing lands that they owned in Halifax. However, those plans have been unsuccessful. Annapolis Group argued that the Halifax Municipality have de facto expropriated their lands so that the lands can be used by the Halifax Municipality for public use as a park. Annapolis Group have brought forward significant claims, alleging that Halifax Municipality obstructed every attempt by Annapolis Group to develop their lands (including attempts between the years of 2007 to 2016). They argued that Halifax Municipality even sought to avoid zoning Annapolis Group’s lands as parkland in order to avoid compensating Annapolis Group.
The Halifax Municipality passed a Regional Municipal Planning Strategy in 2006, effectively reserving a portion of the Annapolis Group lands for a possible future use as a regional park. The Halifax Municipality passed its Regional Municipal Planning Strategy in 2014, which maintained the proposed possible use of a portion of the Annapolis Group lands as a regional park. In order for Annapolis Group to begin development on their lands, the Halifax Municipality must begin a secondary planning process, which serves as the method for getting the development process started. Annapolis Group requested that the Halifax Municipality start the aforementioned secondary planning process. Ultimately, this resulted in a long series of events, which occurred between the years of 2007 to 2016. On September 6, 2016, this series of events eventually resulted in Halifax Municipality refusing to start the secondary planning process. As a result, Annapolis Group filed this lawsuit in 2017.
At the Nova Scotia Court of Appeal (“NSCA”), Annapolis Group argued that the Halifax Municipality was essentially “exercising dominion over [Annapolis Group’s] lands” (Annapolis, para 21). By doing this, Annapolis Group says that “members of the public are hiking, cycling, canoeing, camping, and swimming on the Annapolis Lands and are encouraged to do so…” (Annapolis, para 21). To add fuel to the fire, Annapolis Group pointed to the fact that Halifax Municipality is a financial supporter of organizations which encourage the public to use the Annapolis Group’s land. As a result, along with taking into account the fact that the Halifax Municipality refused to start the secondary planning process, Annapolis Group argued that Halifax Municipality, through its actions, have effectively de facto expropriated the Annapolis Group’s lands.
Previous to the NSCA case, the Halifax Municipality had applied for a summary judgement at the Nova Scotia Supreme Court (“NSSC”), 2019 NSSC 341, for the dismissal of Annapolis Group’s action. The Motions Judge dismissed the motion, and awarded Annapolis Group $7,500.00 in costs. Consequently, Halifax Municipality sought leave to appeal to the Nova Scotia Court of Appeal which overturned the NSSC’s decision.
A Primer on De Facto Expropriation
Before delving any deeper into the Annapolis decision, it is imperative to explore the following question: what is de facto expropriation? The definition of de facto expropriation was reaffirmed in the 2018 SCC decision of Lorraine (Ville) v 2646‑8926 Québec inc, 2018 SCC 35 [Lorraine]. Chief Justice Wagner made the following statement in Lorraine:
“Where a municipal government limits the enjoyment of the attributes of the right of ownership of property to such a degree that the person entitled to enjoy those attributes is de facto expropriated from them, it therefore acts in a manner inconsistent with the purposes being pursued by the legislature in delegating to it the power” (Lorraine, para 27).
As a result, the onus is on Annapolis Group in this case to demonstrate that the Halifax Municipality deliberately prevented them from enjoyment of their property. In this case, enjoyment would be characterized as Annapolis Group being prevented from developing their land.
The Nova Scotia Court of Appeal’s Decision
The NSCA granted Halifax Municipality’s application for leave to appeal from the NSSC decision, and allowed the appeal. The NSCA affirmed that in order to establish de facto expropriation, the owner of the land “must conclusively prove that there has been, in effect, a confiscation of all reasonable private uses of the interest in the land in question and an acquisition of the same by the statutory authority” (Annapolis, para 65). This is a highly restrictive test, which requires the applicant to demonstrate that the municipal government (in this case, Halifax Municipality) has effectively acquired the applicant’s land, ultimately resulting in a “confiscation of all reasonable private uses” of the applicant’s land (Annapolis, para 65).
The NSCA applied the law of de facto expropriation, where the test requires establishing the following:
“For a de facto taking requiring compensation at common law, two requirements must be met: (1) an acquisition of a beneficial interest in the property or flowing from it, and (2) removal of all reasonable uses of the property.” (Annapolis, para 68).
In applying this test to the case at bar, the NSCA held that Annapolis Group did not satisfy the requirements needed to establish a successful de facto expropriation claim. Despite Annapolis Group’s argument that Halifax Municipality encouraged the public to use the Annapolis Group’s property, this did not constitute de facto expropriation because “[t]here has been no acquisition of any interest in the Annapolis Lands by HRM and, similarly, Annapolis’ reasonable uses of its lands have not changed” (Annapolis, para 91). There is nothing on the facts that constitutes a taking of Annapolis Group’s lands and a corresponding deprivation of all reasonable uses of the lands. The NSCA held that Annapolis Group merely cannot make use of the lands in the way that they wish to, which does not constitute a taking of the lands (Annapolis, paras 85-86). As Annapolis Group has the same rights to the land as they did in September 2016 (which is when Halifax Municipality passed a resolution refusing to allow Annapolis Group to proceed with development of its lands), Halifax Municipality’s actions do not constitute a de facto expropriation claim. Accordingly, the NSCA allowed Halifax Municipality’s appeal with a costs award of $3,500.00 to Halifax Municipality.
The SCC’s decision of Annapolis will have significant implications, as the SCC will consider whether Halifax Municipality’s refusal to approve Annapolis Group’s development applications constituted a de facto expropriation. Annapolis Group’s development applications on its 965 acres parcel were consistent with residential zoning, yet the NSCA held that Annapolis Group was not deprived of reasonable uses of the lands or acquired beneficial interest in the lands. The NSCA held that even if Halifax Municipality “placed signage on the property to encourage people to use it, and financially supported parties that are using the lands, that does not amount to a taking. At best, it may be a trespass by those using the land” (Annapolis, para 89). The Halifax Municipality promoted the Annapolis Group’s lands as a park and invited the public to utilize the land as such, but Annapolis Group was unable to meet the high bar for establishing a de facto expropriation claim.
The Annapolis case brings to light the issues associated with the current test for establishing de facto expropriation, more specifically, the second component of the test. In order to meet the second branch of the test for de facto expropriation, the plaintiff is required to prove a “removal of all reasonable uses of the property,” which has made it extremely difficult to successfully argue a claim for de facto expropriation (Annapolis, para 68). This component of the test conflicts with the longstanding principle of landowners having the right to use and enjoyment of their property and prevents innocent landowners, such as Annapolis Group, from having the right to use and enjoyment of their land. While it may be argued that Halifax Municipality was not obligated to permit Annapolis Group to develop their land by virtue of the powers delegated to them by having the inherent authority to decide on issues related to development in the region of Halifax, this fails to account for the motive of a municipality. It is clearly visible that through its actions that Halifax Municipality has taken a beneficial interest in Annapolis Group’s land by encouraging public use of the land and refusing to permit development on the land. Annapolis Group is a bona fide developer who sought development approval from Halifax Municipality. Through its actions, it is apparent that Halifax Municipality had no intention of approving development on the Annapolis Group lands, and instead, sought to use the lands as a public park without any intention of compensating Annapolis Group.
The case of Annapolis will give the SCC the opportunity to revisit the test for de facto expropriation. In doing so, it is imperative that the SCC considers the motive of a government authority in considering whether a taking of the lands occurs. While Annapolis Group’s rights in the land have not been affected by Halifax Municipality’s resolution refusing Annapolis Group’s development applications in September 2016, it is also evident that Halifax Municipality’s use of the park may constitute a de facto expropriation case when the case is viewed holistically (taking into account Halifax Municipality’s motive). The current test for de facto expropriation fails to take into account how in certain cases, such as the case of Annapolis, municipalities exploit innocent landowners from their right to use and enjoyment of their land. A reformulation of the test, which takes into account a municipality’s motive, will rectify any shortcomings associated with the current test.
As it stands, the NSCA’s interpretation of the test for de facto expropriation in the Annapolis decision requires meeting an exceptionally high bar. If the SCC rules on loosening the rules regarding de facto expropriation, it will have important implications for municipalities as they will need to be more cautious in placing restrictions on land use.
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