Grab a Tim Hortons double double and get ready to read an interesting opinion.
What we call "eminent domain" Canada calls "expropriation." But that's not the only thing different about the takings law of the U.S. and that our neighbors in the Great White North.
Generally, under the law of most U.S. states, lost business goodwill is not recoverable as just compensation even when the losses are incurred by the owner whose land is taken. Some jurisdictions such as California allow compensation when the affected business is conducted on the property taken, or on the remainder if the property is part of a larger parcel. But even those jurisdictions do not allow a property owner whose business is impacted by a taking, but whose property is not actually taken, to recover.
It looks like Canada takes a different approach. In Antrim Truck Centre Ltd. v. Ontario (Transportation), No 34413 (Supreme Court of Canada, Mar. 7, 2013), the unanimous Supreme Court held that the losses incurred by a truck stop due to improvements on the Trans-Canada Highway were compensable pursuant to a statute allowing for recovery even when business owner's property has not been taken:
Motorists heading east from the truck stop have to take a circuitous route including a dirt road and two other side roads before they reach Highway 417. Moreover, motorists travelling on the new stretch of Highway 417 do not have direct access to the appellant’s truck stop; they have to turn onto a regional road west of the property and drive about two kilometres to reach it.
Slip op. at 14. And because this is the Cour suprême du Canada, here's the traduction française officielle. Even though its land was not expropriated directly for the project, the truck stop suffered an "injurious affection" because it shut down and moved to a new location further from the highway. Sounds a lot like what we would call inverse condemnation, or a regulatory taking.
The owner brought an action under Ontario's Expropriation Act, arguing that the expropriation for the highway -- a public purpose -- resulted in an unreasonable interference with its use and enjoyment of its land. The Ontario Municipal Board awarded the owner $58,000 for business loss and $445,000 for the decline in market value of the land resulting from the highway construction. The Court of Appeal, however, set the award aside holding that the interference with the owner's land "had not been unreasonable given the important public purposes served by the highway's construction." As the Supreme Court characterized the holding, "[i]n effect, the Court of Appeal found that it was reasonable for the appellant to suffer permanent interference with the use of its land that caused significant diminution of its market value in order to serve the greater public good." Slip op. at 10.
The Supreme Court granted review (here's the briefing (factums) of the parties), and reinstated the award by analyzing it as a private nuisance and "balancing the competing interests" --
The balance is appropriately struck by answering the question whether, in all of the circumstances, the individual claimant has shouldered a greater share of the burden of construction than it would be reasonable to expect individuals to bear without compensation. Here, the interference with the appellant’s land caused by the construction of the new highway inflicted significant and permanent loss on the appellant; in the circumstances of this case, it was not unreasonable for the Board to conclude that an individual should not be expected to bear such a loss for the greater public good without compensation.
Slip op. at 10. The Expropriation Act has three prerequisites to compensation: the damage must result from official action, the damage would otherwise give rise to liablity, and the damage must result from construction and not use. The Court noted that the owner satisfied the first and the third elements, and the only question was "whether, if the highway construction had not been done under statutory authority, the appellant could have successfully sued for damages caused by the construction." Slip op. at 12. Thus if Ontario would be liable for a private nuisance (unreasonable and substantial interference with the use and enjoyment of land), it would be liable under the Expropriation Act. That analysis turned on the reasonableness of the interference with the owner's use.
The most interesting part of the opinion begins on page 20, which analyzes the harm caused in relation to the public purpose for the highway improvements. "The main question here is how reasonabless should be assessed when the activity causing the interference is carried out by a public authority for the greater public good," and whether, on the whole, it would be unfair to deny compensation. The Court rejected the argument that this is a simple comparison of the public benefits with the damage, since if "the two factors were simply compared, one against the other, a high degree of public utility would always trump even very extensive intereference." Slip op. at 24.
Applying the same reasoning as the U.S. Supreme Court in cases under the Fifth Amendment, the Court concluded that the highway improvements and the attendant damage to the truck stop business should be viewed "as a cost of 'running the system' and therefore borne by the public generally." Slip op. at 28. Cf. Armstrong v. United States, 364 U.S. 40 (1960) ("The Fifth Amendment's guarantee that private property shall not be taken for a public use without just compensation was designed to bar Government from forcing some people alone to bear public burdens which, in all fairness and justice, should be borne by the public as a whole."). The Court considered the duration of the interference, the character of the neighborhood, and the manner in which the work was carried out, and concluded that the truck stop owner was entitled to compensation because the Municipal Board appropriately weighed the considerations.
The opinion concluded with another analysis that should resonate with U.S. takings mavens, because the Court rejected the property owner's call for a per se rule of compensation when the interference is "material" or results in "physical" damage. Slip op. at 31. Certain categories of interference should not be allowed to "short circuit" the reasonableness inquiry.
All in all, a worthy read.
If that Shatner video isn't your cup of tea, here's the video of the oral arguments (Nov. 14, 2012). The property owner was represented by Toronto lawyer Shane Rayman.