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).

Surplus Farm Residence Severances - Differing decisions from the OMB

Two recent decisions from the Ontario Municipal Board (OMB) have addressed the limits on severing surplus farm residences from larger farm parcels.  In one decision, the OMB declined to allow the severance of a parcel larger than about 1.5 acres on the basis that the proposed severance was not of "a minimum size" as required by the 2014 Provincial Policy Statement (PPS).  The farm landowner had requested a severance of approximately 5 acres from the existing 98-acre farm, including a residence and three accessory buildings.

In the other decision, the OMB approved the severance of approximately 86 acres out of a 102-acre farm.  The parcel to be retained by the owners, who were retiring from farming, contained a surplus residence, barn, and drive shed.  The balance of the farm (the severed 86-acre parcel) was apparently going to be conveyed to another area farmer to be used in conjunction with a larger operation.

These two decisions would appear to be at odds with each other.  In both cases, the applicant landowner was attempting to sever more than the minimum residence plus 1 acre because the severance of a larger parcel made more sense given the actual configuration and development of the property.  However, it is clear that in the case where the OMB declined to permit the larger severance, the OMB held that it did not have the evidence it needed from the landowner to go beyond the "minimum" severance.

Read the OMB decisions at: Simcoe (County) v Essa (Township) and McClary v. Middlesex Centre (Township).

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.

Empty barn not enough to trigger MDS to prevent neighbours' severance

Landowners had applied to their municipality to sever a 0.84 acre parcel from their existing 30-acre lot.  County planning staff determined that the proposed severance complied with MDS requirements and that the County had no objection to the proposal.  However, a neighbour did object to the severance, suggesting that the new lot would breach MDS provisions because it would come too close to his 1860-era barn.  Although the barn was vacant, the neighbour was considering returning the barn to livestock use.  He asked that the proposed severed parcel be moved to a different location on the applicants' property.

The municipality went ahead and approved the severance, so the neighbour appealed to the Ontario Municipal Board ("OMB").  The only issue on the appeal was the application of MDS to the severance, and the OMB ruled that MDS did not apply.  Although the OMB took issue with some aspects of the municipality's methodology for considering required setbacks, the OMB concluded that the neighbour's barn did not correspond to the definition of a "livestock facility" within the governing Provincial documents.  MDS had no application in this case.

As the OMB noted:

The fundamental problem with this appeal, however, pertains to the barn itself, and whether it even constitutes a "livestock facility", as understood in the Provincial documents. The Board was not persuaded for the following reasons.

The Provincial documents are unequivocal: to qualify as a "livestock facility", it is not enough for a building to be "structurally sound"; it must also be "reasonably capable of housing livestock." The two criteria are not synonymous. Although the neighbour insisted that the structure would not actually fall over, he offered essentially no evidence it could meet any other expectations.

Indeed, the Board was not shown how the existing structure could be much more than a "shade shelter" (which is specifically excluded from consideration as a "livestock facility"). Although there was no "comprehensive building analysis", it did not take a comprehensive analysis to discern that the structure had no insulation, electricity, ventilation, stalls, hay storage, manure storage, or livestock equipment. It also had planks visibly missing from its siding in various places. None of the observations by the CBO were contradicted. The structure is a shell, and not even one that is impervious to the elements.

Whether or not the structure was considered appropriate for livestock by 1860 standards, the Province would not have published its detailed instructions for "determining when a barn is a livestock facility", if such a primitive structure could qualify. The Board is satisfied that if this structure were subjected to even the most elementary agricultural standards today, substantial remodeling would be essential.

That is where the neighbour encounters a second problem. The Guidelines specify that MDS II also applies to "remodeled livestock facilities.”

The CBO apparently concluded that no remodeling under MDS II would be feasible – not because the barn was too close to the proposed severed parcel, but rather because it was too close to Ms. [S]'s existing dwelling across the road. The Board heard no evidence to contradict that position.

Therefore, notwithstanding the eloquence of the [O] brothers and their expert, the Board was not shown how the barn could now trigger the MDS process – or that it ever could.

Read the decision at: O’Brien v Laronde.

OMB declines to award landowner pre-expropriation costs where expropriation did not proceed

The City of Hamilton moved successfully for the dismissal of expropriation-related Notices of Arbitration and Statements of Claim on the basis that the Ontario Municipal Board (OMB) had no jurisdiction to hear the matters; no expropriations had taken place.

The proposed expropriations related to construction in Hamilton for the 2015 Pan American Games, and the landowner claimants had retained counsel to advise them with respect to the land acquisition process.  The City and the landowners then entered into negotiations, and when offers were refused by the landowners, a notice of application for approval to expropriate was served.  However, not longer after that notice was sent the City decided that it did not require the properties in question, though it was still open to purchasing the properties for the amounts previously offered.

By that time, the landowners had incurred legal costs and forwarded to the City a Bill of Costs.  They then served Notices of Arbitration and Statements of Claim to commence a claim to the OMB for consequential damages arising from the City's abandonment of the expropriation.

The City asked the OMB to throw the claims out, which the OMB did.  The OMB confirmed that pre-expropriation costs are compensable when there is an expropriation, but found that costs are not generally compensable under the Expropriations Act where there is no expropriation.  The OMB decided that this was not a circumstance in which it could exercise its discretionary powers to find that the term "expropriation" applies to the overall process for the taking of land (as had been argued by the landowners) and not just to an expropriation commenced by way of a formal Notice of Expropriation.

The OMB concluded:

In the absence of a formal registered expropriation, an expropriating authority should not be bound to compensate for damages or costs in a case where there is a potential for an expropriation. Furthermore, in the absence of a taking of land, negotiations for the purchase of the lands does not, and should not, attract a claim for costs, merely because the potential buyer has the power, if fully exercised, to expropriate.

Landowners in Ontario should question whether to engage in any negotiations whatsoever with an expropriating authority prior to receiving a Notice of Expropriation without an agreement in place requiring the authority to pay the landowner's legal costs of the negotiations.

Read the decision at: Marsdin v. Hamilton (City).

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.

Municipal Board upholds County decision to refuse surplus farm dwelling severances

Better Farming has a report on an Ontario Municipal Board (OMB) decision backing Perth County's policy against severances of surplus farm dwellings (click here).  Two Perth municipalities - the Municipality of West Perth and the Township of Perth South - had appealed County council's refusal to amend the Perth Official Plan to allow severances under certain conditions.  The OMB dismissed the appeal, finding that the County's policy was not unreasonable:

The Board finds that the SSFDs [severance of surplus farm dwellings] are permitted in many of the surrounding agricultural focused municipalities through their official plans. However, in the case of the County of Perth, the upper tier municipality with a single county-wide official plan covering all the lower tier municipalities, the Board finds that the refusal to approve an OPA to permit the SSFDs is not unreasonable. The PPS [Provincial Policy Statement] makes the SSFDs permissive, it also allows the municipality to go beyond the minimum requirements in the PPS. Therefore, it is the County’s prerogative to implement a strict prohibition on the SSFDs. The Board finds this acceptable because it is permitted to do so and their position does not conflict with other PPS policies. In fact, the PPS recognizes the importance of agriculture and strongly discourages lot creation on agricultural lands and directs settlement activities to designated settlement areas. The Board finds that the COP [County of Perth Official Plan] does just that, when looking at the County as a whole, there are sufficiently designated settlement areas and the policies of the PPS are being maintained. The Board notes that it is Mr. Hanly’s evidence that an individual can still apply for a site specific OPA [official plan amendment] for a SSFD.

Read the OMB decision at: County of Perth.

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.