The tension between private property rights and the need for public works and services has long been recognized in the Canadian law of property and expropriation. As access to land readily available for development becomes more limited, population increases, development expands outward, and the need for public spaces and services increases, this tension only continues to grow.
Two recent cases addressing the culmination of this tension made their way to the Supreme Court of Canada. First, the SCC dismissed an application for leave to appeal from a Quebec Court of Appeal (“QCCA”) decision, Dupras v Ville de Mascouche, leaving untouched the QCCA’s discussion of “disguised expropriation” and signalled that expropriation without compensation is a difficult judicial battle for municipalities to overcome. Shortly after Dupras, the SCC released Annapolis Group Inc v Halifax Regional Municipality, which highlights important considerations concerning the law of expropriation and constructive taking. This article explores the implications of these decisions.
For a more detailed discussion of Dupras and Annapolis, see our previous articles, “You Zone It, You Buy It: Lessons on “Disguised Expropriation” from Ville de Mascouche v Dupras” and “Tackling the Thorny Issue of Constructive Expropriation Claims: Annapolis Group Inc. v Halifax Regional Municipality”.
The Problem with Property Rights
It is important to understand that there is no constitutional protection of property rights in the Canadian Charter of Rights and Freedoms. Coupled with municipalities’ delegated power to implement by-laws and expropriate private land for public purposes, the absence of constitutionally enshrined property leaves landowners vulnerable.
In light of this, in Annapolis, the municipality argued that the protection against uncompensated taking should be interpreted narrowly so as not to create a “common law back door to constitutionalizing rights which were deliberately excluded from the Charter”. The Court recognized the underlying tensions but clarified that the Charter has never been the only source of Canadian rights against the state and that “the common law also affords protections of individual liberty.” Indeed, section 26 of the Charter states that it “shall not be construed as denying the existence of any other rights or freedoms that exist in Canada.” At common law and under the Civil Code of Québec, taking of property must be authorized by law, which “triggers a presumptive right to compensation which can be displaced only by clear statutory language showing contrary intention”.
Disguised Expropriation and Constructive Taking
Although embedded in distinct legal traditions, there are conceptual similarities between the civil law concept of “disguised expropriation” and the common law doctrine of constructive taking. In Annapolis, the Court explored the similarities between the two legal concepts confirming the persuasive value of Dupras’s disguised expropriation analysis in common law jurisdictions.
The concept of disguised expropriation is founded in art. 952 of the CCQ. Article 952 provides that “the owner, forced to transfer his property for a cause of public utility, must receive fair and prior compensation, that is to say, which must aim at full compensation for the loss of the expropriated.” In its 2018 decision, Lorraine (Ville) v. 2646-8926 Quebec Inc., the SCC explained the concept as follows:
It is settled law that a “disguised” expropriation, insofar as it occurs in the guise of a zoning by‑law, constitutes an abuse of the power of regulation conferred on the body in respect of such matters… 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 “to specify, for each zone, the structures and uses that are authorized and those that are prohibited”.
Building upon this statement, in Dupras, the QCCA held that in order to be considered disguised expropriation, the actions of a municipality must have the effect of removing any reasonable use of the property.
In Annapolis, the SCC explained that constructive taking only occurs when a two-part test from Canadian Pacific Railway Co v Vancouver City has been satisfied:
- An acquisition of a beneficial interest in the property, or flowing from it; and
While the “acquisition” branch of the constructive taking test may appear to distinguish it from the concept of disguised expropriation, in practice, similar criteria may be considered in a disguised expropriation analysis. In Montréal (Ville) v Benjamin, the QCCA stated that disguised expropriation occurred in two stages, the first was restrictive zoning, which removed reasonable use of the land, and the second was an “appropriation of premises.” Annapolis explained that the disguised expropriation criteria identified in Benjamin play a functionally similar role “to the ‘deprivation’ and ‘acquisition’ requirements of the CPR test.”
Moreover, the QCCA in Dupras made clear that physical appropriation is not a prerequisite for disguised expropriation and held that disguised expropriation may result exclusively from the effect of a restrictive by-law without the need for physical appropriation.
The SCC’s comparison of disguised expropriation and constructive taking in Annapolis emphasized the similarities between these two legal concepts. The SCC eroded the boundaries between these concepts, which were rooted in their respective legal traditions, and moved toward a consistent approach to compensation for substantial restrictions on property rights. Dupras and Annapolis make clear that compensation is not only owing when property is physically taken, but also where the regulatory action of government entity or municipal authority restricts all reasonable uses of property and creates beneficial interest flowing to the expropriating authority.