The Ontario Municipal Board awarded the former owners of expropriated property $3,700,000 for the market value of the expropriated property and $767,000 for the loss in value of properties not expropriated. This decision was upheld by the Divisional Court. The City of Windsor successfully appealed the decision of the Divisional Court which upheld the decision made by the Ontario Municipal Board.

[2012] O.J. No. 2822

2012 ONCA 431

Ontario Court of Appeal

D.H. Doherty and H.S. LaForme JJ.A., and J.R.H. Turnbull J. (ad hoc)

June 22, 2012

The respondents’ lands were subject to various governmental actions between 1982 and 2002. The lands, albeit not all parts of the lands, were ultimately expropriated by the City. Once the lands were expropriated, the respondents brought claims before the Board for the market value of the expropriated lands and for injurious affection damages in respect of the parts of the properties not expropriated pursuant to the Expropriations Act.

With respect to the proper calculation of the market value of the expropriated lands, the Board was faced with two starkly different positions. The respondents argued that the expropriation scheme began in 1983 and culminated in the actual taking of the lands beginning in 2004. Conversely, the City submitted that the expropriation scheme did not begin until 2002. The City argued that the studies and designations which took place in 1983 were not related to the expropriation scheme but rather they were part of an independent process by which various levels of government were seeking to identify and protect endangered species. In particular, the City argued that the provincial government’s 1996 Provincial Policy Statement (the “PPS”), which was issued as a part of a province-wide environmental policy, impacted negatively on the value of the land for development purposes and could not be regarded as part of the expropriation scheme. The PPS, inter alia, imposed restrictions on the development of the land.

The Board rejected the City’s position and agreed with the respondents that the expropriation scheme embraced certain government activities beginning in 1983 and culminating in the actual taking of the lands beginning in 2004. The Board ordered the respondents $3,700,000 for the market value of the expropriated property and $767,000 for the loss in value of properties not expropriated. The award took into account the impact of all government decisions from 1983 onwards on the market value of the owners’ property.

The City appealed the Board’s decision to the Divisional Court. A majority in that court, applying a reasonableness standard of review, upheld the Board’s decision in its entirety. In dissent Sachs J., applying the same reasonableness standard, concluded the Board’s order could not stand because it was unreasonable for the Board to fail to take into account the possible negative effects on the market value of the land flowing from the PPS. Sachs J further held that the Board erred in its calculation of injurious affection damages by failing to distinguish between diminution in value attributable to the actual taking of property and diminution in value attributable to other government actions in respect of the property. The Ontario Court of Appeal allowed the City’s appeal substantially on the grounds as articulated in the dissenting reasons of Sachs J. A new hearing before the Board was ordered.

One of the issues before the Ontario Court of Appeal was whether the majority of the Divisional Court erred in holding that the Board’s treatment of the potential effect of the PPS on the market value of the expropriated lands was not unreasonable. The majority in the Divisional Court deferred to the Board’s decision, indicating that the Board had fully appreciated the evidence about the PPS in its assessment of market value. The Appeal Court found that the Board’s treatment of the PPS was unreasonable as in its analysis there was no mention of the PPS and there was no consideration given to how its existence would have affected the probability of the lands being fully developed as a residential development. The Appeal Court outlined the three possible interpretations of the Board’s treatment of the PPS: (i) it may have regarded the PPS as part of the expropriation scheme, (ii) it may have regarded the PPS as not part of the expropriation scheme but as having no effect on the market value of the expropriated lands, or (iii) it may have failed entirely to consider the PPS in its analysis. The Appeal Court held that the Board’s treatment of the PPS, with respect to any of the three possible interpretations, was unreasonable. The first two possible interpretations were not supported in the evidence and the third possibility would also have rendered the Board’s decision unreasonable as the Board was obligated to consider all of the governmental activities in delineating the scope of the expropriation scheme.

Another issue was whether the Divisional Court erred in law in holding that the Board did not err into taking into account the entire expropriation scheme in assessing damages for injurious affection. Under the Expropriation Act, in calculating injurious affection damages, reference is to be made only to the loss caused by the actual acquisition of the respondents’ properties by the City and not by reference to the decrease in value caused by the entirety of the expropriation scheme. The majority of the Divisional Court found that in calculating injurious affection damages to the respondents’ remaining lands, the Board may have blurred the distinction between market value assessment and diminution in value for the purposes of assessing injurious affection damages but that despite that, the Court found as fact that the Board ultimately found a causal connection between the diminution in value and the act of expropriation. The Appeal Court held the Board unreasonably erred in interpreting the Expropriations Act as awarding injurious affection damages for any loss in value of the remaining properties attributable to the expropriation scheme. In assessing injurious affection damages, the Board should have focused exclusively on damages caused to the respondents’ remaining properties by the City’s acquisition of the related lands and not by the entire expropriation scheme as a whole.