CASUAL LEGAL: De Facto Expropriation to be Considered by the Supreme Court
De Facto Expropriation to be Considered by the Supreme Court
By Greg Weber
Reynolds Mirth Richards Farmer LLP
AMSC Casual Legal Service Provider
On June 24, 2021, the Supreme Court of Canada granted leave to appeal in the case of Annapolis Group Inc. v Halifax Regional Municipality, a decision from the Court of Appeal in Nova Scotia (2021 NSCA 3) concerning “de facto” expropriation. De facto expropriation, also known as a “constructive” or “regulatory” taking, occurs when there is effectively a taking of land by a governmental authority without following the formal process set out in the Expropriation Act. The most common scenario where issues of a de facto expropriation might occur is when governments place restrictions on the use of land without actually formally acquiring the property. There are two branches to the test for de facto expropriation:
- Acquisition by the authority of a beneficial interest in the property; and
- Removal of all of the owner’s reasonable uses of the property.
This area of law has its roots in the 1920 British case of Attorney General v De Keyser’s Royal Hotel,  AC 508 which expressed the law as it came to be known in Canada:
The recognized rule for the construction of statutes is that unless the words of the statute clearly so demand, a statute is not to be construed so as to take away the property of a subject without compensation.
Interpreted liberally, this might suggest that any restriction placed on land would lead to compensation for owners. However, in Canada, this principle was quickly reigned in to allow for the normal sorts of restrictions regularly placed on land by authorities such as municipalities. This is most clearly seen by the establishment and narrowing of the second branch of the test: the removal of the owner’s reasonable uses of the property.
The last time de facto expropriation went to the Supreme Court was in the 2006 case of Canadian Pacific Railway v Vancouver, 2006 SCC 5. This case was criticized by many for narrowing the doctrine of de facto expropriation to the point where it was virtually impossible to establish. One such critic, Russell Brown, authored an article entitled “Legal Incoherence and the Extra-Constitutional Law of Regulatory Takings: The Canadian Experience”, arguing that the unnecessary narrowing of the second branch effectively eliminated de facto expropriations from Canadian law. Since writing this article, that author now sits as Justice Brown on the Supreme Court of Canada. The case of Annapolis Group Inc. v Halifax Regional Municipality has remarkably similar facts to the case of Canadian Pacific Railway v Vancouver. When it renders its decision, it is a distinct possibility that the Supreme Court might choose to loosen this area of law. If it does, municipalities will need to be much more careful and vigilant when placing restrictions on the use of land as the risks in doing so will increase.
To access AMSC’s Casual Legal Helpline, AUMA members can call toll-free to 1-800-661-7673 or email casuallegal [at] amsc.ca and reach the municipal legal experts at Reynolds Mirth Richards and Farmer LLP. For more information on the Casual Legal Service, please contact riskcontrol [at] auma.ca, or call 310-AUMA (2862) to speak to AUMA’s Risk Management staff. Any Regular or Associate member of the AUMA can access the Casual Legal Service.
DISCLAIMER: This article is meant to provide information only and is not intended to provide legal advice. You should seek the advice of legal counsel to address your specific set of circumstances. Although every effort has been made to provide current and accurate information, changes to the law may cause the information in this article to be outdated.