Here's one we've been waiting to drop, in a case we've been following.
Today, in Annapolis Group Inc. v. Halifax Regional Municipality, No. 39594 (Oct. 21, 2022), the Supreme Court of Canada held (and we're translating into United States here), that to state a claim for a regulatory taking based on the government's refusal to approve a development application consistent with the residential zoning, requires only that the plaintiff allege a taking of a beneficial interest, and does not require that the government have seized land.
Our northern friends do not label this claim a "taking" or "regulatory taking," but use different terms: de facto expropriation or constructive appropriation, or constructive taking, or even "disguised expropriation." You get the drift. (For the record, we really like "disguised expropriation.")
One major difference between Canadian takings law and the U.S. approach is that Canada does not consider property rights to be constitutional rights. Property rights are either common law or statutory. But that being said, in some ways Canada does it better, so you should not presume that simply because Canada law doesn't constitutionalize property that owners' rights are somehow lesser.
Here, instead of approving the plaintiff's development application, Halifax "promoted the Annapolis Lands as a park by inviting the public to use them as such and permitting its logo to be placed on trail signs directing the public onto them." Not very polite, Halifax! The landowner brought a de facto expropriation claim, asserting that the government's exercise of zoning power deprived the owner of the reasonable uses of land and instead created a public park, and seeking compensation under the common law test established in Canadian Pacific Railway v. Vancouver (City), 1 S.C.R. 227, 2006 SCC 5 (2006).
The trial court denied Halifax summary judgment. On appeal, the Nova Scotia court of appeal concluded that a claim for constructive appropriation must be based on an actual seizure of land, and Annapolis had not made that allegation. Thus, property owner had no chance for success. Reversed.
The owner sought further review. A divided Supreme Court rejected the court of appeal's analysis and affirmed the existing CPR two-part test for a regulatory taking: "the common law rule in the form of a two-part test for showing a constructive taking: '. . . (1) an acquisition of a beneficial interest in the property or flowing from it, and (2) removal of all reasonable uses of the property . . .'" Slip op. at ¶ 25. The Court also considered whether the government's motive played any part in the analysis.
There's no need for physical taking, the Court held, just deprivation of uses of a beneficial interest. "A “beneficial interest” is to be broadly understood as an “advantage”; as such, the interest acquired by the state can fall short of an actual acquisition by the state."
The issues present in this appeal require us to consider the meaning of a “beneficial interest in the property or flowing from it” under the first part of that test. In bringing greater clarity to this aspect of the CPR test, we do not change the doctrine of constructive takings, but simply apply it to the facts of the present dispute. As we will explain, the Court in CPR did not use “beneficial interest” in the technical sense that it carries in the domain of equity. Rather, a “beneficial interest” is to be more broadly understood as an “advantage” — hence the Court’s coupling of “beneficial interest” with the phrase “or flowing from [the property]”. Clearly, if the interest acquired by the state can be one which flows from the property, what must be shown by the property owner can fall short of an actual acquisition by the state.
Slip op. ¶ 25.
The majority held that beneficial interest referred to was some economic or other advantage -- even one conferred by the government -- some "benefit" that has an advantage behind it (shades of Kaiser Aetna: " But not all economic interests are 'property rights;' only those economic advantages are 'rights' which have the law back of them, and only when they are so recognized may courts compel others to forbear from interfering with them or to compensate for their invasion.").
The majority walked through each of the Court's prior constructive appropriations decisions to show that when it referred to "beneficial interest" it wasn't limited to a physical interest in land. In short, we're reading this opinion to affirm a very expansive view of property rights.
The Court also considered the government's motives, and rejected the different rationales advanced by both of the lower courts. The disguised expropriation claim is not absolutely dependent on the motive of government, good or bad -- but rather on the effect the regulation has on the owner's property rights. But evidence of motive might be evidence of the government's intent to deprive the owner of reasonable uses:
[52] Respectfully said, neither position is correct. The public authority’s intention is not an element of the test for constructive takings at common law. Again, the mischief addressed by the doctrine is one of advantage and effects, not that a public authority acted in bad faith or with an otherwise ulterior motive. Indeed, this Court held in CPR that, even if the City’s purpose were to “enable the inhabitants to use the corridor for walking and cycling,” its bylaw, in effect, neither encouraged trespassing nor prevented the historical and current use of the land (para. 33) and therefore could not be said to have deprived the landowner of all reasonable uses.[53] This does not mean, however, that intention is irrelevant to the inquiry. Indeed, the case law we discuss below suggests that the objectives pursued by the state may be some evidence of constructive taking. Stated differently, the intention to take constructively, if proven by the claimant, may support a finding that the landowner has lost all reasonable uses of their land (inasmuch as a finding of this effect can be supported by evidence that such an effect was intended). But the absence of evidence of the state’s intention does not preclude a property holder’s claim. It follows that intent may constitute a “material fact” in the context of a constructive taking claim. We stress, however, that the focus of the inquiry must remain on the effects of state action.
Slip op. ¶ 52-53.
The Supreme Court publishes "plain language" summaries of their opinions so the public can understand the Court's rulings (how polite!). Here's how the Court described this decision:
Writing for a majority of the judges of the Supreme Court, Justices Suzanne Côté and Russell Brown found that Annapolis’ claim of constructive taking raises disputed issues of fact that must be decided at trial, based on the constructive taking test set out in the Canadian Pacific Railway Co. case.There are two parts to the test for establishing a constructive taking. First, the test must show the government has acquired a beneficial interest in the property or flowing from the property. A beneficial interest is an advantage, such as when private property is enjoyed as a public resource. Second, the test requires showing the proposed regulatory measures would remove all reasonable uses of the private property.
The Nova Scotia Court of Appeal had interpreted the first part of the test as requiring Annapolis to show that Halifax had actually taken possession of the lands. However, Justices Côté and Brown wrote, “what must be shown by the property owner can fall short of an actual acquisition by the state.” The majority said the Court of Appeal was also wrong in holding that Halifax’s intention is irrelevant to applying the second part of the test.
The majority of the Supreme Court noted, “Annapolis is entitled to adduce evidence at trial to show that, by holding Annapolis’ land out as a public park, Halifax has acquired a beneficial interest therein; and that, because Halifax is unlikely to ever lift zoning restrictions constraining the development of Annapolis’ land, Annapolis has lost all reasonable uses of its property”. Annapolis may also adduce evidence of Halifax’s intention in not doing so, the majority said.
Read the entire summary here.
As noted above, we've been following this one for a while, even watching live as the Court heard arguments back in February.
Annapolis Group Inc. v. Halifax Regional Municipality, No. 39594 (Can. Oct. 21, 2022)
