Screening out the scheme in expropriation compensation

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE: 

According to the “Pointe Gourde” principle in expropriation law, “compensation for the compulsory acquisition of land cannot include an increase in value which is entirely due to the scheme underlying the acquisition.”  If the expropriating authority’s reason for taking the property (the “scheme”) actually enhances the market value of the property, the property owner does not get to rely on the enhanced value in the calculation of compensation payable: the property owner is not entitled to a windfall.  In determining the value of the property taken, the scheme must screened out – “screening out the scheme”.  This common law principle has been codified in Section 14(4)(b) of the Expropriations Act in Ontario, which provides that no account shall be taken of “any increase or decrease in the value of land resulting from the development or the imminence of the development in respect of which the expropriation is made or from any expropriation or imminent prospect of expropriation”.

The Pointe Gourde principle is taken from a 1945 case of the same name heard before the Judicial Committee of the Privy Council in the UK.  The case involved the expropriation of land in Trinidad for use as a quarry from which stone would be taken to construct a nearby naval base.  The compensation owing to the owners was to reflect the “value of the quarry as a going concern”.  The quarry owners argued that the value of their quarry should include consideration of the higher profits they would make because their stone was to be used for the naval base.  The Judicial Council, which was the highest court for cases from Trinidad (as it was at one time the highest court for Canadian cases), decided against the quarry owners.  The increase in the market value of the property was due entirely to the expropriating authority’s plan to build the naval base.  The expropriating authority benefitted from securing a nearby and accessible source of a large quantity of stone (the quarry), but without the plan for the naval base construction this did not increase the market value of the property taken.

The expropriation “scheme” to be screened out in determining value, or “development” as used in the Expropriations Act, refers not only to a specific project or initiative, such as the construction of the naval base in Pointe Gourde, but to the full set of government actions, plans and policies leading to a taking of property in connection with the project or initiative.  This was discussed in a 2025 decision of the Ontario Land Tribunal (“OLT”) arising from the expropriation of land for the new Ontario Line subway line in Toronto.  The OLT was tasked with determining the market value of the land expropriated for the subway line project: “what a reasonably informed person would pay for the property based upon the property’s highest and best use (“HBU”) at the time using the knowledge available to the person as at the valuation date”.  In accordance with Section 14(4)(b) of the Expropriations Act, the OLT was barred from considering any change in value resulting from the planned subway line development itself.  Indeed, the OLT found that it could not consider any change in value resulting even from the provincial government’s announcement of the Ontario Line project several years earlier in 2019.  That announcement was effectively the “scheme” to be screened out of the compensation analysis.

The OLT also clarified that both sides – the expropriating authority and the property owner – share the responsibility of assisting the tribunal in determining how the scheme affected the market value of the property taken.  The owner must show that its proposed valuation is not based on a highest and best use for the property that relies on factors related to the scheme.  If the expropriating authority challenges the proposed valuation because it is influenced by the scheme, the authority bears a “positive obligation” to put forward evidence of how the scheme has affected the proposed valuation.

In the Ontario Line case, the property owner claimed compensation based on highest and best use of its property being a high-density mixed-use high-rise tower including residential and commercial uses.  The expropriating authority argued that the development potential of the property that would allow for the owner’s proposed highest and best use actually depended on the Ontario Line scheme.  In other words, without the proposed transit project (the expropriating authority argued unsuccessfully that the transit project pre-dated the 2019 announcement and that the Ontario Line was part of a scheme stretching back over 20 years), the level of density of development on the property suggested by the owner could not be achieved.  The OLT disagreed, concluding that the owner’s proposed site density (highest and best use) was consistent with approvals for other developments in the area and did not depend on the Ontario Line transit project.  As noted by the OLT, the expropriating authority failed to show what specific increase or decrease in value resulted from the Ontario Line project:

The Tribunal recognizes that the requirements of section 14(4)(b) of the Act are often not easy to apply in expropriation proceedings.   As already noted, the reality is that there may be simply no way for either Party to empirically demonstrate whether there was “increase or decrease in value” resulting from the Expropriation.  The situation might have been quite different if, for example, the Claimant had relied on a particular development approval by the City where the City’s staff had made it clear in writing that their approval was predicated on the impacts of the Scheme – or conversely, where City’s planners had written that the Scheme was not considered at all. However, no such specific evidence exists in this case.

Read the decision at: 2025canlii50810 OLT.

Drainage Referee rules CPR not exempt from Drainage Act assessment

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE: 

The history of Ontario's Drainage Act stretches back to 1834 with the enactment by the Upper Canada Legislature of “An Act to regulate Line Fences and Watercourses”.  The legislation is provincial and predates Canada’s Confederation in 1867 by over three decades.  Under the British North America Act, 1867, the foundational law passed by British Parliament to create the Dominion of Canada, the federal Parliament was given jurisdiction over interprovincial undertakings (connecting provinces or going beyond the limits of the province) including railways.  And so arose what should have been an age-old constitutional question: are interprovincial railways like CP and CN subject to the provincial Drainage Act?  Are they obligated to pay assessments for municipal drains?

Despite history having long ago set up the showdown between provincial interests in managing surface water and federal interests in moving freight and passengers across the country, the question of a federal railway’s responsibility to pay an assessment on a municipal drain was the subject of a hearing held before the Acting Drainage Referee in October, 2025.  The dispute centred on whether CP is constitutionally exempt from paying assessments levied under the Drainage Act for drainage works crossing its railway right-of-way.  CP was made aware by the Municipality of the proposed drainage works (involving lowering and increasing the capacity of an existing drain crossing the right-of-way lands), but CP elected not to participate in any of the Drainage Act proceedings and did not exercise any of its appeal rights (including with respect to the assessment of costs of the drain).  After the Municipality applied to the Referee for an order permitting the crossing of the CP right-of-way, CP served a Notice of Constitutional Question.

The evidence before the Referee was that until sometime in 2020, railways like CP and CN paid assessments under the Drainage Act and had for a century.  From 2020 forward, however, the railways have refused to pay assessments and have declined to accommodate municipal drainage projects under the Drainage Act unless the municipality accedes to the demands of the railways that they bear none of the costs.  The Referee noted that, as a result, many Drainage Act projects have not proceeded or have been deferred.  At least six municipalities have sued CP or CN for unpaid assessments.  Besides CP and the Municipality, the hearing involved several intervenors: the Attorney General of Ontario, CN, the Ontario Federation of Agriculture, and the Rural Ontario Municipal Association.

As noted by the Referee, the question of whether railways must pay Drainage Act assessments is an important one for rural municipalities:

Many of the affected municipalities are smaller, often rural communities with a limited municipal tax base. It is not just a matter of the railways targeting small municipalities that lack the resources to resist. Stormwater management in larger urbanized communities is typically handled through storm sewers in road allowances, which are financed by the municipality through general municipal taxation and/or development charges. Smaller rural municipalities depend upon the Drainage Act for their stormwater management and rural farm drainage to support their agribusinesses; these municipalities are otherwise hard-pressed to afford to provide the drainage works, much less absorb the cost of maintaining the Drainage Act infrastructure, if railway assessments were to evaporate.

The Referee’s conclusion on the constitutional question was that federally regulated railways are required to pay costs assessed to them for municipal drains in Ontario.  The Referee found that the Drainage Act’s assessment provisions do not “trench” on the protected core of federal railway jurisdiction. The Act is a law of general application, designed to allocate costs for local drainage works among all benefiting landowners, including railways. The assessment is akin to a local improvement levy or property tax, not a regulatory interference with railway operations. The Referee emphasized that federal undertakings are not “enclaves immune from provincial laws of general application,” and there is no precedent for immunity from such assessments.  Further, the Referee concluded that Drainage Act assessments do not impair the core of federal railway jurisdiction. The financial impact on CP is negligible compared to its revenues, and there is no evidence of operational impairment. The doctrine of interjurisdictional immunity (where federal undertakings are immune from provincial regulation) is to be applied with restraint and only in exceptional circumstances, which were not present in this situation.

The Referee also analyzed whether there is an operational conflict or frustration of federal purpose between the Drainage Act and federal statutes authorizing and governing interprovincial railways – the Transportation Act and the Railway Safety Act.  The Referee found that the provincial and federal legislative schemes can operate concurrently and complementarily.  The federal Transportation Agency’s authority is limited to apportioning costs for the physical crossing of the railway right-of-way, while the Drainage Act governs the broader watershed and cost allocation among all affected properties.  The Referee rejected CP’s argument that the federal scheme precludes provincial assessments, noting that the Drainage Act’s assessment of costs is a zero-sum exercise.  All landowners involved in the municipal drain are assessed their proportionate share of the costs.  If one owner doesn’t pay, the cost is thrust upon everyone else.

According to a news release published on December 5, 2025 by the Rural Ontario Municipal Association, CP plans to appeal the Referee’s decision.  More to follow.

Read the decision at: 2025 ONDR 12 (CanLII).

A new standard in fines for illegal woodlot clearing?

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

Recent decisions made by the Ontario Court of Justice in a Huron County case serve as a cautionary tale for farmers and landowners about the steep penalties that can follow illegal woodland clearing.  A farm corporation and its sole director were each convicted of two offences under the County’s Forest Conservation By-law: unlawfully destroying a woodland and failing to obey a stop work order. The case involved the clearing of approximately 6 to 7 acres of forest (about 2.75 hectares) on a farm property, estimated to involve the destruction of roughly 10,000 trees. The penalties imposed by the Court for the violations may be unprecedented for tree clearing by a rural landowner in Ontario. 

The farm corporation involved had filed a Notice of Intent under the Forest Conservation By-law for a selective harvest plan to remove dead ash trees. The plan was prepared by a professional forester and approved by the County’s forestry staff in accordance with the By-law.  During a site visit in early 2021, the County’s Forest Conservation Officer explicitly warned that the woodlot qualified as a protected “woodland” and could not be clear-cut for agriculture. Despite this warning, it was later discovered that between March and July 2023, the woodland was largely bulldozed and piled for removal. Upon spotting large piles of pushed-out trees on the site in June 2023, the County issued a Stop Work Order. However, when officials returned with a search warrant in August, they found the piles gone and evidence of recent burning – meaning the order had been ignored and the felled trees had been burned in the interim.

Estimates derived from GPS mapping and sample plots showed about 6.8 acres of woodland destroyed, representing an extrapolated 10,450 trees removed (the average between the high estimate of 15,200 and low estimate of 5,700 trees adopted by the Court). This comfortably met the Forest Conservation By-law’s definition of a protected “woodland” (land 1 ha or more with at least 1,000 trees per hectare). The Court found that the corporation and its director had “caused or permitted” the destruction of a woodland, and further had failed to comply with the stop work order by continuing clearing activities after it was issued. Convictions were registered against both the corporation and its director for both offences.

It is the sentencing decision of the Court that is the most noteworthy aspect of the case.  The Huron County Forest Conservation By-law includes remarkably strong penalty provisions. For a first offence, an individual is liable to a fine of up to $10,000 or $1,000 per tree, whichever is greater, and a corporation can be fined up to $50,000 or $5,000 per tree. With well over ten thousand trees removed in this case, the theoretical maximum fine ran into the millions of dollars. The prosecutor sought a total of $500,000 in fines, split between the two defendants. The defence requested a far lower penalty of around $70,000–$80,000 arguing mitigating factors such as the director’s advanced age, lack of prior record, and the fact that the same individual would ultimately pay both the corporate and personal fines.

After weighing the factors relevant to sentencing, the Court emphasized that deterrence and denunciation had to be the primary considerations for this kind of environmental offence. The Justice of the Peace noted there was little in the way of mitigating factors beyond the fact that these were first-time offenders. On the other hand, aggravating factors were plenty: the Defendants knew in advance the land couldn’t be cleared (from the 2021 forester’s plan and site meeting) yet went ahead anyway; a vast number of trees were destroyed; and the stop work order was flouted, effectively destroying evidence by burning the debris. In the words of the Justice of the Peace, the clearing and burning occurred “in full defiance” – conduct which “cannot be condoned by modest penalties.”

In the end, the Court fined the director $175,000 for the woodland destruction and $25,000 for the stop work order violation. The corporation was separately fined an additional $175,000 for the destruction and $25,000 for the stop work count. The fines combined total $400,000 – an enormous sanction in the context of farm tree-cutting cases. The Court also placed both defendants on probation for 2 years to ensure future compliance, including a condition not to commit the same offence again. The By-law also allows the court to order the offender to rehabilitate the land or replant trees, but in this case no replanting order was made.  The Defendants had sought an adjournment to explore a replanting plan (presumably to mitigate the fine amount), but no plan was put forward.  

The fines levied in this case appear dramatically higher than what has been seen in many past cases under tree protection by-laws, at least in rural areas. The clear message from the Court is that violating woodland protection rules cannot “be seen as a cost of doing business.” In other words, the fines are meant to hurt, not to be simply written off as a business expense. The Justice of the Peace explicitly stated that “other farmers and landowners must understand that if…a woodland is destroyed or…stop work orders are ignored, then there will be serious financial consequences.” 

If fines of the magnitude imposed in the Huron County case reflect a shift in thinking about penalties, then the days of “ask forgiveness, not permission” are gone when it comes to clearing woodlands. Violating a tree conservation by-law is not worth the risk. The Huron County prosecution, although it did involve a very large number of trees (estimated) is a stark example of how Ontario courts are prepared to hand down record-setting fines to protect the environment and drive the point home. Landowners are best advised to work within the law – consult with forestry officials, consider sustainable harvesting, or seek proper exemptions if available – rather than face the possible hefty consequences of illegal clearing.

Read the decision at: 2025 ONCJ 514 (CanLII).

Don’t mistake a warranty for a condition

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

Contracts for the sale of land often include both conditions and warranties, which serve distinct legal purposes and aren’t always easy to distinguish.  Conditions are essential terms that must be fulfilled for the contract to proceed. If a condition is not met – such as a buyer being satisfied with a home inspection – the non-breaching party may terminate the agreement and walk away.  Conditions are often referred to as “dealbreakers” because they directly affect the enforceability of the contract. In contrast, warranties are non-essential promises or factual assurances made by one party, typically the seller, such as confirming the property has not been used for illegal activities. Breach of a warranty does not void the contract but may entitle the injured party to compensatory damages. Warranties are often made “to the best of the seller’s knowledge and belief” as at the time of closing but are intended to continue to be effective after closing.

Correctly identifying what is a condition and what is a warranty in a contract is a vital step for any buyer looking to back out of a deal.  Where some deficiency is discovered by the buyer before closing that engages a contractual term, the question will be whether there has been a breach of a condition or a breach of a warranty.  For example, a contract for the purchase of a house may contain a clause in which the seller has represented that there are and have been no problems with water penetration into the basement.  With the right wording, that clause may constitute a condition that the house has no water penetration problems.  If the basement floods prior to the closing date, the buyer might be entitled to walk away from the deal (with the purchase deposit to be refunded).  However, if the clause is only a warranty, and the basement flood did not cause “substantial damage”, the buyer probably has to go through with the purchase and can only claim damages for breach of warranty from the seller.

Sometimes buyers make the wrong choice.  Confronted with a property deficiency just before the closing date, buyers may take the position that a condition has been breached and that they are no longer bound by the contract.  The seller may try to keep the deal alive and fix whatever problem has arisen (e.g. fix the leaking basement) or offer an abatement of the purchase price.  The buyer must understand that once he or she walks away from the deal, the seller’s offer to fix the problem or reduce the purchase price is likely off the table.  If it turns out that a warranty and not a condition was breached, the seller will likely re-sell the property to a new buyer, keep the original buyer’s deposit, and then sue the original buyer for any shortfall in the new sale price along with any additional costs and damages sustained.  By then it is too late for the original buyer to accept the seller’s offer of repairs or an abatement.

The distinction between a condition and a warranty was one of the issues addressed in a recent Superior Court decision arising out of a failed farm purchase transaction.  The intended buyer agreed to pay $1.8 million for a 120-acre property that contained two natural gas wells.  The buyer paid a $250,000 deposit.  The sale did not close and the buyer said that he refused to complete the transaction because the seller had breached an environmental warranty in the contract.  The buyer alleged that the warranty covered the status of the gas wells, which the buyer said were not licenced and could not be legally operated.  Of course, if the clause on which the buyer relied was only a warranty, it didn’t entitle him to walk away from the deal.  The seller sued for the deposit and additional damages.  The judge hearing the case found that the clause was a warranty and was not actually breached by the seller.  The buyer forfeited his $250,000 deposit and was also ordered to pay the seller’s damages arising from the breach, which consisted of additional costs incurred to carry and re-sell the property.

The case decision explains that after the buyer failed to complete the purchase transaction as required by the contract, the seller still offered to repair any deficiencies identified with the two gas wells to keep the deal alive.  However, the buyer refused the seller’s offer.  The buyer did not seem to appreciate that the breach of a warranty would only entitle the buyer to damages, not to rescind the contract.  This ended up costing the buyer his $250,000 deposit and more on top of that.

The buyer also tried to pin responsibility for the seller’s claim on the buyer’s own real estate agent.  The buyer alleged that the realtor had breached his duties to the buyer by failing to follow the buyer’s instructions in drafting the wording of the purchase agreement and in failing to disclose that the realtor was also acting as agent for the seller.  The buyer alleged that the realtor preferred the interests of the seller over the interests of the buyer.  The judge dismissed this counterclaim by the buyer without much explanation, stating that, “the evidence does not substantiate the claims”.

Read the decision at: 2025 ONSC 5258 (CanLII).