In November, the B.C. Supreme Court (Court) issued an important decision in the long-running litigation saga arising from the construction of the SkyTrain’s Canada Line between Vancouver’s downtown, the suburb of Richmond, and Vancouver’s international airport. The decision has significant implications for public infrastructure projects, in identifying those kinds of claims that may successfully be brought as a result of large-scale construction and the limits on such claims. This is particularly topical given the federal government’s announcement that it intends to fund a series of major public infrastructure projects across the country in the near term.

In Gautam v. Canada Line Rapid Transit Inc. (Gautam), the Court gave reasons after a common issues trial in a class action about the impact of the Canada Line’s construction on a group of merchants and property owners along Cambie Street in Vancouver. Built in part for Vancouver’s 2010 Winter Olympics, the Canada Line was a massive infrastructure project built through a public-private partnership. There have been a series of individual and group actions related to this construction dating back to about 2005.

Two construction methods were employed on the Canada Line. The first was “tunnel boring” to create a path underground without disturbing the surface. The other technique, known as “cut and cover”, was used for much of Cambie Street. This more intrusive method entailed excavating a large trench, constructing tunnels in the trench, and then rebuilding the street. Over 250 businesses and approximately 70 owners of property located on Cambie Street sued the members of the public-private construction partnership for losses alleged to have resulted from the decision to use cut and cover on that section instead of tunnel boring.

The class members claimed for both nuisance and injurious affection. The Court held that the claim of nuisance failed because the defendants were exercising a discretionary statutory authority and there was no practically feasible alternative to cut and cover. Giving deference to the defendants, and after a careful review of the evidence including the procurement process and available technical alternatives, the judge concluded that tunnel boring was impractical because of the associated risks. He found that technical problems endemic to tunnel boring could have had catastrophic consequences for the Canada Line project in regard to costs and the construction schedule. In the circumstances, the method of construction employed by the defendants was the only practically feasible course open to them.

The Court allowed the claim for injurious affection, however. This is a statutory cause of action under the Expropriation Act (a B.C. statute that has analogues in most Canadian jurisdictions). This encompasses injury to land, but not injury to a person or business. In a precedent-setting judgment, the Court determined that the cause of action was available to all members of the class, landowners and commercial lessees alike. The Court went on to find that injurious affection permitted claims for temporary injury to rental values. A negative impact on rental values constitutes injury to land sufficient to ground the cause of action, even if this impact is only temporary. Having found that the Canada Line’s construction negatively impacted rental values for some properties held by the class members, it was open for the plaintiffs to establish injurious affection and claim compensation on an individual basis. The amount of any such compensation will be dealt with at a further hearing.

This decision sets limits on the ability of plaintiffs to claim nuisance against major infrastructure projects being built for the public good, and shows that the courts will exhibit deference to practical project planning considerations beyond mere financial costs. This type of approach will likely result in the elimination of most business loss claims, which is the largest part of any construction related action.

At the same time, the Gautam decision identifies rental values as a new type of loss in Canada for which unsatisfied landowners and leaseholders may pursue builders. It is a circumscribed type of claim because it is not the loss of rent that is compensable, but the consequent loss of value to the land. It remains to be seen how expensive these types of claims will be, but those involved in these types of mega projects should be aware of this new risk class.