SCC zones in on compensation for constructive expropriation

By Ian Kelly, K.C. & Daniel Glover

June 12, 2024

Curtis Dawe successfully represented the City of St. John’s before the Supreme Court of Canada in the case of St. John’s v. Lynch, 2024 SCC 17. Based on the submissions of Ian Kelly, K.C. and Daniel Glover, the Supreme Court of Canada has developed the law in a manner that promotes the ability of municipalities and other public authorities to enact regulations in the public interest to facilitate matters such as watershed protection and environmental concerns without the risk of being required to pay excessive compensation awards.

After laying down the law of what will constitute constructive expropriation in the 2022 case of Annapolis Group Inc. v Halifax Regional Municipality, the Supreme Court of Canada has returned to the issue of constructive expropriation in Lynch. In what can be considered a sequel of a decision, the Court has addressed the question of compensation that arises from constructive expropriation.

While a “conventional” expropriation arises from an intentional process of government decision-making resulting in the actual acquisition of land by the government for public use, a constructive expropriation is the result of government of conduct that ultimately has the effect of taking away all reasonable uses of the land in question.

The facts of the Lynch case presented a helpful example in setting up a discussion on the scope of compensation for constructive expropriation. The land in question had previously been municipally zoned with a Watershed distinction. Under this zoning, there were no directly permitted uses, but there were available discretionary uses for agriculture, forestry and public utility.

When it was found that the land had been constructively expropriated by the City, a dispute arose on the valuation of the land in question.

The City argued that compensation was based on the permissible uses under the Watershed zoning, on the basis that this is what the landowners had prior to the constructive expropriation. In contrast, the landowners argued that they were entitled to higher compensation based on residential usage, on the basis that the Watershed zoning was simply part of the expropriation scheme.

Justice Martin, writing for a unanimous court, determined that the key question is whether an enactment was made with a view to expropriation, or conversely, whether it was an independent enactment. While this conclusion overturned the Court of Appeal of Newfoundland and Labrador and restored the finding of the Applications Judge, Justice Martin’s reasons did caution the approach that both Courts below had taken to the issue.

Under the framework established by the Supreme Court of Canada, focusing on the event that specifically caused the finding of constructive expropriation is too narrow an approach, while a broad concept of causation runs the risk of overcompensation. Instead, the Court has placed the focus on whether the enactment was made with a view to the expropriation.

The Court’s approach rejects a “bright-line” approach to what matters are to be considered and excluded in determining compensation. Rather, the Court endorsed a case-specific approach, with the matter ultimately being a factual determination shown deference on appeal.

With their successful representation on a national stage, the lawyers of Curtis Dawe have shown their expertise on this area of law that has implications for all levels of government.


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