No Free Ride on Expropriation Costs

AS PREVIOUSLY PUBLISHED IN THE RURAL VOICE:

In the oft-cited case of Toronto Area Transit Operating Authority v. Dell Holdings Ltd. from 1997, Justice Cory of the Supreme Court of Canada wrote of expropriation:

The expropriation of property is one of the ultimate exercises of governmental authority.  To take all or part of a person’s property constitutes a severe loss and a very significant interference with a citizen’s private property rights.  It follows that the power of an expropriating authority should be strictly construed in favour of those whose rights have been affected.  This principle has been stressed by eminent writers and emphasized in decisions of this Court.

The presumption is that there will be no expropriation without compensation, and expropriation statues such as Ontario’s Expropriations Act are to be read, as noted by Justice Cory, “in a broad and purposive manner in order to comply with the aim of the Act to fully compensate a land owner whose property has been taken.”

Full compensation is normally understood to include reimbursement of the reasonable costs incurred by a landowner incurred in the determination of the amount owing for the expropriation.  The landowner will not be “made whole” if he or she is left out of pocket for legal, appraisal and other costs expended in disputing the amount of compensation offered by an expropriating authority.  Section 32 of the Expropriations Act requires the Local Planning Appeal Tribunal (the statutory tribunal that arbitrates expropriation compensation, formerly the Ontario Municipal Board or “OMB”) to order payment of a landowner’s reasonable legal, appraisal and costs “actually incurred by the owner for the purposes of determining the compensation payable” where the compensation amount recovered by the landowner is “85 per cent, or more, of the amount offered by the statutory authority”.  If the amount recovered is less than 85 percent of what was offered in compensation by the authority, the Tribunal has discretion to award costs as it sees fit.

The 85 percent rule, which is a common one across Canadian jurisdictions, means that the landowner does not need to accept the compensation offered by the authority solely out of fear of the costs of arbitrating the compensation.  The landowner will still be entitled to recover his or her reasonable costs even if the Tribunal determines that the compensation payable is up to 15 percent less than what was offered by the expropriating authority.  Only where a landowner turns down an offer by the expropriating authority that ends up to be more than 15 percent higher than the actual compensation payable (as found by the Tribunal) does the landowner risk not recovering his or her own costs and perhaps having to pay costs to the expropriating authority.

Where land is taken by an expropriating authority, Section 25 the Expropriations Act requires that the expropriating authority serve on the registered owner of the land “an offer of an amount in full compensation for the registered owner’s interest”.  In a recent decision, the Court of Appeal for Ontario confirmed that this mandatory offer is not the only offer that may be relevant to the determination of costs under Section 32 of the Act.  It is open to the expropriating authority to make subsequent offers to settle the issue of compensation, and a landowner will have to consider those offers reasonably on an ongoing basis.   The landowner cannot sit back and reject an updated offer that ends up being more than 15 percent higher than the actual compensation awarded on the assumption that his or her entitlement to costs is safe because the initial offer was too low.  At least not without putting that entitlement to costs at risk.

Writing for the Court of Appeal, Justice Hourigan explained that, “the objective of full and fair compensation cannot be divorced from the objective of the efficient resolution of claims.”  He rejected the landowner’s position in the case on appeal that only the Section 25 offer counted.  In Justice Hourigan’s view, the landowner’s proposed interpretation:

… would permit the prospect of an unreasonable claimant delaying proceedings, running up legal costs, and wasting the [former] OMB’s resources, all the while safe in the knowledge that unreasonable refusals of subsequent offers cannot adversely affect its entitlement to legal costs.

Put another way, “the statutory protection provided by the Act is not a blank cheque that permits a claimant to act unreasonably.”

And it must be remembered that unreasonable conduct by a landowner does not only put the landowner’s entitlement to costs at risk, but also exposes the landowner to possible liability to the expropriating authority for its costs.  In the case before the Court of Appeal, the landowner was appealing a decision by the OMB (upheld on appeal by the Divisional Court) that awarded the expropriating authority its partial indemnity costs incurred after the date of its offer to the landowner that ended up being far more than 15 percent higher than the expropriation compensation awarded.

Landowners facing expropriation can take comfort in knowing that the costs recovery rules are designed to afford them a fair chance to dispute the compensation amount offered by the expropriating authority.  However, the trade-off is that landowners must conduct themselves reasonably throughout the full course of the dispute.

Read the Court of Appeal's decision at:  2020 ONCA 490.

Interest on expropriation damages awarded for time before land actually expropriated

The Ontario Divisional Court has dismissed an appeal from an Ontario Municipal Board ("OMB") decision that awarded interest to a landowner under the Expropriations Act for a period prior to the actual expropriation.  In this case, a local school board expropriated land for a school site.  The landowner had registered a subdivision plan on the lands in question and, in February, 2005, wrote to the school board to advise that, failing an agreement to sell the property to the school board, the landowner would be proceeding with the development of residential lots on the land.

Rather than attempting to negotiate an agreement (reportedly because of a change of control over the landowner company and uncertainty as to the identity of the controlling interest), the school board registered an expropriation plan on June 1, 2006.

The market value of the land taken was determined by the OMB to be a little over $2 million.  On the issue of interest payable on that amount under the Act, the OMB ruled that interest could accrue from a date preceding the date of expropriation.  The OMB determined that the productive use of the land actually ceased in December, 1999 when a "district plan" that governed land use in the area received draft approval.  That plan stated that the land in question was to be used as a school site.  The interest payable by the school board for the period between 1999 and 2006 amounted to between $600,000 and $700,000.

The Divisional Court upheld the OMB's ruling that interest was payable from the date of loss of the use of the expropriated asset and that, in this case, that date was December, 1999.  As the Divisional Court notes:

In my view, the board member applied the correct test by seeking to determine the earliest date at which the potential for expropriation prevented the use of the lands, either because the Municipality would not permit further development or because it would not have been prudent for Erbsville to spend money for that purpose.  In the present case, the distinction between these two potential triggering events is inconsequential.  The board member found that both events occurred on the date that Plan 30T-97017 received draft approval.  As I will explain, I believe that finding was reasonable.

Read the decision at: Erbsville Road Development Inc. v. Waterloo Region District School Board.

OMB awards costs to Municipality where landowner's claim for expropriation compensation denied

The Ontario Municipal Board ("OMB") has awarded costs to the County of Simcoe in a case where a landowner unsuccessfully claimed compensation for injurious affection.  The OMB's decision is recounted in my blog post from June, 2015 - OMB dismisses claim for injurious affection where no taking - on merits and on basis of limitation period.

The OMB has discretion under Section 32(2) of the Expropriations Act to award costs in favour of the expropriating authority.  In this case, the County of Simcoe had incurred a discounted amount of $165,176.55 consisting of legal and appraisal costs.  The County's claim for costs was made on the grounds that, "if the Claimant had conducted itself in a reasonable and prudent manner, it would never have brought this claim and that the way in which the Claimant governed itself throughout this claim unjustifiably increased costs which otherwise could have been avoided."  The OMB's reasons also disclose that the County had actually made an offer to the landowner of $15,000 to settle after the landowner retained counsel for the matter.

The County claimed "party and party" or "partial indemnity" costs in the amount of $113,922.48.  The OMB decided that the landowner's conduct in refusing the settlement offer was unreasonable and, therefore, that it should be responsible for some of the costs of the County incurred in defending the claim.  The OMB awarded $86,943.20 to the County.

Read the decision at: Willies Car & Van Wash Limited v. Simcoe (County).

OMB dismisses claim for injurious affection where no taking - on merits and on basis of limitation period

The Ontario Municipal Board ("OMB") recently dismissed an injurious claim by a car wash business that saw a significant drop in business after a local road was realigned.  The claimant alleged that the realignment of County Road 10 led to a significant drop in traffic passing by the car wash, resulting in a reduction in the number of vehicles using the wash.  The claim was for injurious affection in a situation where the statutory authority, the County of Simcoe, did not actually expropriate any of the car wash lands.

In a case of injurious affection where there is no taking, the claim must meet the following requirements:

1)   The damage must result from the action taken under statutory authority (the statutory rule);

2)   The action would give rise to liability but for that statutory authority (the actionable rule); and

3)   The damage must result from the construction and not the use of the work (the construction and not the use rule).

Here, the car wash business was unable to establish that the losses it alleged it had incurred were the result of the construction of the realigned road.  As the OMB explained:

"The Claimant has not been able to prove on the balance of probabilities that the losses it alleges it incurred were the result of the re-routing of County Road 10 and the Board finds that the decline in the number of car washes was on the balance of probability, more likely caused by other factors such as general economic decline resulting in reduced consumer spending.  Furthermore, regular users of HW 89 who had been customers of the car wash prior to the re-routing of County Road 10 would have been required to travel only a short additional distance on HW 89 to continue to use the car wash according to the evidence."

and,

"The Claimant must establish on the balance of probabilities that the re-routing of County Road 10 was the cause of its alleged losses and it has not done so in this case.  Revenues were up in the year following the re-routing and the evidence suggested that the later downturn may have been caused by weather related factors as well as the downturn in the automobile industry including the elimination of the third shift at the Honda plant in the period 2007- 2008. The Claimant has failed to establish any causal connection between the Respondent’s works and any loss it has alleged."

In the end, the OMB ruled that the claim related to the use of the realigned road and not the construction of the realigned road.  On that basis, the injurious affection claim would fail.

However, the actual basis for the dismissal of the claim was the expiry of the applicable limitation period.  Injurious affection claims are subject to a one-year limitation period under Section 22(1) of the Expropriations Act:

Subject to subsection (2), a claim for compensation for injurious affection shall be made by the person suffering the damage or loss in writing with particulars of the claim within one year after the damage was sustained or after it became known to the person, and, if not so made, the right to compensation is forever barred.

The evidence before the OMB showed that the actual construction of the realigned road was completed on or about December 27, 2006 and made official on January 23, 2007.  The OMB agreed with the County that if the Claimant had suffered business losses from the construction, it knew or ought to have known of those losses occurring on a monthly basis from January, 2007 to February, 2008 (its fiscal year end).  The OMB concluded:

"The claim for compensation ought to have been initiated not later than January, 2009, to comply with the Act as it is required to serve its claim within one year of when the loss is sustained.  It is not reasonable to delay a claim until after the full amount of the loss is calculated as is being advanced by the Claimant.  The Claimant is also required to act diligently to inform itself of any loss giving rise to a claim.  In this case while the losses ought to have been known at the latest by February 28, 2008, the claim was not served until July 31, 2009, some 30 months after the road was stopped up and closed and the claim was not filed with the Board until September 30, 2009.  Furthermore, no previous notice of the claim was given to the Respondent."

Read the decision at: Willies Car & Van Wash Limited v County of Simcoe.

Divisional Court upholds OMB on question of reduction in market value for contamination

The City of Toronto appealed an OMB decision awarding more than $3.3 million for market value on the expropriation of a contaminated property.  The property in question was the former site of a soft drink manufacturing plant; the expropriation was required in order to install an underpass at Dufferin Street in Toronto beneath a rail corridor.  Through testing, a City consultant had identified various contaminants on the property, including vinyl chloride (VC) and tetracholorethylene (TCE).

Although there was no requirement to remediate the property, the City's expert witness at the OMB hearing suggested that remediation might be warranted based on a risk assessment and that the cost of remediation of the TCE would be $355,000.  To deal with the VC, a $40,000 upgrade to basement ventilation would be required.  As a consequence of these findings, the City's appraiser estimated that market value of the property should be subject to a reduction of $580,000.

The OMB accepted the evidence of the landowners that there was no risk to human health or to the environment from the presence of the contaminants and that no remediation was needed.  However, the OMB did deduct $20,000 from the market value for air sampling and $10,000 for the drilling of additional bore holes. 

The City appealed the market value award (as well as an award of business losses) arguing that the OMB should have deducted something for the contamination because the land was not "pristine" and that the OMB erred in relying on 2009 environmental standards when the valuation date for the expropriation was in 2005.  The Divisional Court ruled that it was reasonable for the OMB to reject the City's expert's evidence about a "potential 'ball park' worst case scenario" concerning the contamination.  There was no basis on which to find that the market value should be reduced on account of the contamination present.  Also, the Divisional Court found that the landowners' expert witness testified on the basis of standards that were available in 2005, even if he made reference to the 2009 standards as well.

The Divisional Court dismissed the City's appeal and awarded the landowners' costs of $25,000.

Read the decision at: City of Toronto v. Simone Group Properties Limited.

Court says injurious affection claim to be decided by OMB, not in a class action

In 2003, the City of Toronto began a major expansion of its public transit system, and the City and the Toronto Transit Commission (“TTC”) planned a project to replace the existing streetcar line on St. Clair Ave. West with a light rail transit system.  The St. Clair Project involved reconstructing the existing streetcar tracks on St. Clair West from Yonge Street to the Gunns Road loop in the form of a dedicated streetcar right-of-way that separates the centre two lanes from the roadway.   Construction of an enhanced streetscape, the upgrading of water and natural gas mains, and the burial of hydro wires along St. Clair West were undertaken concurrently with the TTC’s work on the St. Clair Project.

Curactive is a corporation that for 30 years has carried on business as a hair salon in the City of Toronto at 1063 St. Clair Avenue West.   Curactive is a putative representative plaintiff for a wide range of commercial enterprises including restaurants and retail and service business that carry on business on St. Clair Avenue West from Bathurst St. to Old Weston Rd. 

 

In a proposed class action claim, Curactive pleaded that:

• the project was not properly supervised, and it was mismanaged and uncoordinated. The contracting and subcontracting process was badly mishandled. There was confusion and there were costs overruns and substantial delays and ongoing disruptions of access to and from the affected community. 
• the concerns of the local business community were ignored with hostility, deflection, dismissive arrogance, misrepresentation, and callous indifference at both the City and the TTC.
• the TTC negligently or gross negligently constructed the St. Clair Ave. West project.
• the City is liable for damages in public abuse of authority and gross negligence, or alternatively negligence.
• the City deliberately seized upon the delays in the St. Clair project as a means to harm the existing businesses on St. Clair and as a means to have them replaced by new upper scale businesses that would attract more tax revenues for the City, which was desperate for revenues. This means was also allegedly used as a part of the City’s “war on cars,” where factions on City Council sought to discourage vehicle use in the City.
• the City covertly and unlawfully adopted an internal policy of “blockbusting” to intentionally cause harm to affected business along St. Clair Ave. West.

Justice Paul Perell of the Ontario Superior Court of Justice dismissed Curactive's action, finding that it was a claim for injurious affection falling within the exclusive jurisdiction of the Ontario Municipal Board (OMB).  The Expropriations Act provides for compensation for injurious affection and the sole venue for determining that compensation is the OMB.  Curactive argued that its proposed class action should be permitted to proceed because the Expropriations Act and the OMB do not ordinarily provide for class claims to be made.  Justice Perell ruled that the Class Proceedings Act, which governs class actions in Ontario, could not confer substantive jurisdiction to the Court over an issue within the exclusive jurisdiction of another tribunal - the Act is procedural only.

 

Read the decision at: Curactive Organic Skin Care Ltd. v. Ontario.

OMB declines to discount pipeline easement payment from highway expansion expropriation compensation

On April 11, 1996, the Ontario government (the "Respondent") expropriated 8.391 acres (3.396 ha) out of lands owned by the Estate of Alexander Shypka and Julia Shypka (the "Claimants") to be incorporated into the right-of-way for the 407 highway near Milton. The effect of the expropriation was to divide the Claimants’ lands leaving a 23.392 acre (9.473 ha) parcel on the east side of the highway fronting onto the Ninth Line and a 7.532 acre (3.05 ha) landlocked parcel on the west side of the highway, which is also subject to Consumer Gas and Trans Canada Pipeline easements.  Both before and after the partial taking, the land had been used for agricultural purposes.

In its decision on compensation, the Ontario Municipal Board ("OMB") set out the following general principles of compensation:

The Expropriations Act is a remedial statute enacted for the specific purpose of adequately and fully compensating a land owner whose lands are taken to serve the public interest.
To take all or part of a person’s property constitutes a severe loss, and a significant interference with a citizen’s private property rights, and as such, the power of an expropriating authority should be strictly construed in favour of those whose rights have been affected.

The Expropriations Act, being a remedial statute, must be given a broad and liberal interpretation, and should not be interpreted to deprive one of common law rights unless there is a specific provision in the Act stating so.

This is a presumption that whenever land is expropriated, compensation will be paid, and the Expropriations Act should be read in a broad and purposive way.

Section 13 (2) of the Expropriations Act sets out that the compensation payable shall be based upon one or more of the four heads of damages, three of which for this matter are relevant ; the market value of the land (13(2)(a)), damages for disturbance (13(2)(b)), and damages for injurious affection (13(2)(d)).

The first step in any expropriation is to determine the highest and best use of the expropriated property and the second step is to fix the compensation to be awarded to a Claimant based on such use.

The OMB also discussed the relevance of the TransCanada pipeline easement to the compensation. The Claimants and Transcanada Pipeline Limited had entered into an agreement dated May 29, 1998 in which a total of $53,000.00 was paid to them in 1998. The OMB could find no reason why an adjustment should be made to the amount of the compensation it ordered to be paid to reflect this amount. The pipeline in question is located in the westerly landlocked portion of the Claimants’ lands that the Respondent chose not to take in 1996. The amount paid had no reference to a market value calculation being made then. The Claimants reserved their rights to be paid for the value of that pipeline easement before the National Energy Board. The OMB saw no issue that the Claimants have been doubly compensated by the OMB’s award in this matter. There is a right to arbitration in the agreement, should a party to it wish to pursue the matter.

Read the decision at: Shypka v. Ontario.

Ontario Court of Appeal overturns Antrim Truck Stop expropriation compensation decision

In February, 2010, I wrote about a much anticipated decision of the Ontario Divisional Court on appeal from the Ontario Municipal Board: Antrim Truck Centre Ltd. v. Ontario (Ministry of Transportation).  The facts of the original OMB case were as follows:

• Antrim owned a truck stop in the Hamlet of Antrim on Highway 17, formerly part of the Trans-Canada Highway;
• In September, 2004, a new section of Highway 417 was finished and re-routed the former Trans-Canada Highway (away from the truck stop);
• The Antrim property comprised 13.66 acres and included 947 feet fronting on Highway 17;
• Antrim alleged that the closure of Highway 17 substantially interfered with its use and enjoyment of its property and made a claim for injurious affection - the change in the Highway basically put Antrim out of business (Antrim took steps to mitigate its loss and relocated);
• The business had been generating gross annual revenues of more than $15 million and had employed about 100 people;
• The claim for injurious affection was for over $8.2 million, including the cost of relocation and construction of new business premises;
• The OMB awarded Antrim $393,000 - the MTO appealed the decision - Antrim cross-appealed seeking the additional $7.6 million or so it had originally claimed.

No lands were taken from Antrim.  The Divisional Court agreed with the decision of the OMB and upheld the award of compensation on the basis that the diversion of the highway constituted an actionable nuisance in the form of interference with access. 

 

The Ontario Court of Appeal disagreed with both the OMB and the Divisional Court.  In its June, 2011 decision, the Court found errors in the Divisional Court's analysis of the tort of nuisance.  The Court of Appeal said that the OMB was required to consider two elements of the test for nuisance: was the interference with Antrim's property (access) substantial and, if so, was the interference unreasonable?  The Court of Appeal agreed with the OMB's finding (upheld by the Divisional Court) that the interference was substantial.  However, it found that the interference was also reasonable.  In its view, the Divisional Court had failed to analyze this issue.  The Court of Appeal concluded:

When the board’s factual findings are properly applied to the various elements of the reasonableness analysis, I would conclude, based on the observations made above, that the interference caused by the MTO’s conduct was not unreasonable. As the board reasonably concluded, the interference amounted to a “serious impairment in nuisance”. However, the interference was such that it fell within the boundaries of what the reasonable property owner in the area should be expected to tolerate and was the result of a project that served the public interest – more, was actually essential to public safety. Simply put, the highway was built to save lives. In the light of the substantial weight to be given to this factor in the circumstances, it is difficult to see how this change in the access to the Antrim property, particularly given the fact that it actually brought the Antrim truck stop in line with the access typical of Ontario truck stops, can be viewed as unreasonable.

In failing to properly carry out the reasonableness analysis, the board failed to give effect to the fundamental purpose of the law of nuisance: balancing the competing rights of property owners to use their land as they wish.

On this basis, the Court of Appeal found there was no nuisance and, therefore, no basis for an award of compensation.  Based on agreement between the parties, the Court awarded the MTO its costs of the appeal in the amount of $20,000 and its costs of the unsuccessful cross-appeal by Antrim (seeking higher compensation) in the amount of $20,000.

Read the decision at: Antrim Truck Centre Ltd. v. Ontario (Transportation).

York Region Article: Land dispute holds up 404 expansion

York Region Article: Land dispute holds up 404 expansion

Click on the link above to read about an ongoing fight over expropriation in York Region.  A Hearing of Necessity was held on September 21 of this year to determine whether the expropriation proposed for the expansion of Highway 404 was "fair, sound and reasonably necessary" as required by the Expropriations Act.  Five landowners involved have rejected the compensation offers made by the Ministry of Transportation (MTO) and there is also opposition to the Environmental Assessment proposed for the expansion project.  The MTO had originally projected 2012 for the start of operations of the expansion, but has now pushed the date back to 2013.