Annapolis Group Inc. v Halifax Regional Municipality

2022 SCC 36

Côté, Brown JJ. – #

I. Overview #

This appeal calls upon the Court to clarify the circumstances in which state regulation of land use may effect a de facto or (as we will refer to it) “constructive” taking of private property.

The appellant, Annapolis Group Inc., contends that the respondent, Halifax Regional Municipality, improperly used its regulatory powers to effectively seize Annapolis’ land for use as a public park without compensation. Halifax says that Annapolis’ claim is a veiled attempt to make taxpayers foot the bill for a decades-long development gamble. It sought summary dismissal of this part of Annapolis’ claim, while permitting other claims (for misfeasance in public office and unjust enrichment) to proceed to trial.

Although unsuccessful at first instance, Halifax persuaded the Nova Scotia Court of Appeal that it should apply this Court’s judgment in Canadian Pacific Railway Co. v. Vancouver (City) 2006 SCC 5, [2006] 1 S.C.R. 227 (“CPR”), to strike that claim. Annapolis asks this Court to restore its claim in respect of the alleged constructive taking and allow it to proceed to trial.

We would allow Annapolis’ appeal.

[…]

II. Factual Background #

Over time from the 1950s, Annapolis acquired the subject property, comprising 965 acres of land (“Annapolis Lands” or “Lands”), with the intention of eventually securing enhanced development rights and reselling it.

In 2006, Halifax adopted the Regional Municipal Planning Strategy, a guide for land development in the municipality, including the Annapolis Lands, over a 25-year period. While the Planning Strategy reserved a portion of the Annapolis Lands for possible future inclusion in a regional park, it also zoned the Lands as “Urban Settlement” and “Urban Reserve”. Urban Settlement denotes an area where urban forms of development may occur. Urban Reserve identifies land that could be developed beyond the 25-year horizon. These designations thus contemplate — but do not permit — future residential serviced development. For serviced development to occur on the Annapolis Lands, Halifax must adopt a resolution authorizing a “secondary planning process” and an amendment to the applicable land use by-law. The applicable by-law is the Halifax Mainland Land Use By-Law, also adopted in 2006.

In 2014, Halifax adopted a revised version of the Planning Strategy. The Urban Settlement and Urban Reserve designations were maintained, and thus the zoning of the Annapolis Lands did not change, and has not changed since 2006. Nor were the conceptual boundaries for the potential park altered.

Beginning in 2007, Annapolis made several attempts to develop the Lands. Ultimately, by resolution dated September 6, 2016, Halifax refused to initiate the secondary planning process, and Annapolis sued, alleging a constructive taking, misfeasance in public office, and unjust enrichment.

At issue in this appeal is Annapolis’ allegation of a constructive taking. Specifically, Annapolis says that Halifax’s regulatory measures have deprived it of all reasonable or economic uses of its land, resulting in a constructive taking without compensation, contrary to ss. 65 and 237 of the Halifax Regional Municipality Charter, S.N.S. 2008, c. 39, and ss. 6 and 24 of the Expropriation Act, R.S.N.S. 1989, c. 156. It alleges in particular that Halifax has acquired a beneficial interest in the Lands by exercising dominion over them so as to effectively create a public park at Annapolis’ expense. According to Annapolis, members of the public hike, cycle, canoe, camp, and swim on the Lands, are encouraged to do so by Halifax, and Halifax financially supports organizations that also encourage people to use the Lands as a park. Further, signs posted on the Lands allegedly depict the municipality’s logo and phone number, and a media article quotes a municipal employee referred to as “the city staffer overseeing the park’s creation”.

On March 11, 2019, Halifax moved for partial summary judgment of Annapolis’ claim, pursuant to r. 13 of the Nova Scotia Civil Procedure Rules. In its motion, Halifax sought the dismissal of Annapolis’ constructive taking claim and urged the motion judge to find that, as a matter of law, a constructive taking cannot result from Halifax refusing to amend the Planning Strategy and associated land use by-laws. Annapolis resisted the motion, arguing that its claim raises genuine issues of material fact requiring a trial.

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V. Analysis #

A. Overview of the Law of Takings #

It is useful to begin with a brief overview of the law of takings. Given the facts of this appeal, our focus is on expropriation through regulation — which, again, we refer to as a “constructive taking” in preference to other commonly applied terms such as “de facto” or “regulatory taking”, as in our view it more accurately captures the nature of the state action at issue and the effect on the landowner (see e.g., M. Lavoie, “Canadian Common Law and Civil Law Approaches to Constructive Takings: A Comparative Economic Perspective” (2010), 42 Ottawa L. Rev. 229).

A “taking” is a “forcible acquisition by the Crown of privately owned property … for public purposes” (K. Horsman and G. Morley, eds., Government Liability: Law and Practice (loose-leaf), at § 5:1). It may take the form of a constructive taking (effective appropriation of private property by a public authority exercising its regulatory powers), or a de jure taking (formal expropriation), by (in the case of land) taking title.

To be clear, not every instance of regulating the use of property amounts to a constructive taking. Governments and municipalities holding delegated provincial regulatory authority (Toronto (City) v. Ontario (Attorney General), 2021 SCC 34, at para. 2) validly regulate land in the public interest without effecting “takings”, properly understood (see Compliance Coal Corporation v. British Columbia (Environmental Assessment Office), 2020 BCSC 621, 13 L.C.R. (2d) 215, at para. 91). The line between a valid regulation and a constructive taking is crossed where the effect of the regulatory activity deprives a claimant of the use and enjoyment of its property in a substantial and unreasonable way, or effectively confiscates the property (Horsman and Morley, at § 5:2). Put simply, “in order for a Crown measure to effect a constructive taking of property, private rights in the property must be virtually abolished, leaving the plaintiff with ‘no reasonable use’ of the property” (Horsman and Morley, at § 5:13 (emphasis added)).

A series of lower court judgments affirm that, in general, Canadian courts require a “total loss of the plaintiff’s interest in property for the Crown’s action to constitute a taking” (Horsman and Morley, at § 5:13; see also Lynch v. St. John’s (City), 2016 NLCA 35, 400 D.L.R. (4th) 62; Sun Construction Company Limited v. Conception Bay South (Town)2019 NLSC 102, 87 M.P.L.R. (5th) 256(N.L. S.C.) ). Courts have, therefore, dismissed claims for compensation where the regulation left the owner some reasonable use for the property (Genevieve Holdings Ltd. v. Kamloops (City)198842 M.P.L.R. 171 (B.C. Co. Ct.); Steer Holdings Ltd. v. Manitoba, [1992] 2 W.W.R. 558 (Man. Q.B.), aff’d (1992), 99 D.L.R. (4th) 61 (Man. C.A.); Purchase v. Terrace (City)199526 M.P.L.R. (2d) 126 (B.C.S.C.); Harvard Investments Ltd. v. Winnipeg (City), (1995), 129 D.L.R. (4th) 557 (Man. C.A.)).

At common law, taking of property by the state must be authorized by law, and triggers a presumptive right to compensation which can be displaced only by clear statutory language showing a contrary intention — that is, an intention not to compensate (see P. A. Warchuk, “Rethinking Compensation for Expropriation” (2015), 48 U.B.C. L. Rev. 655, at pp. 656 and 678-81). This was recognized in Attorney-General v. De Keyser’s Royal Hotel, [1920] A.C. 508 (H.L.), wherein Lord Atkinson stated: “The recognized rule for the construction of statutes is that, unless the words of the statute clearly so demand, a statute is not to be construed so as to take away the property of a subject without compensation” (p. 542).

[…]

This legal backdrop brings us to CPR, and its elaboration of 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 …” (para. 30 (emphasis added), citing Mariner, at p. 716; Manitoba Fisheries ; Tener ). 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.

Further, we must also decide the relevance, if any, under the second part of the test of the public authority’s intended use of the land.

B. “Beneficial Interest" #

The Court of Appeal, it will be recalled, held that the first part of the test stated in CPR — the “acquisition of a beneficial interest in the property or flowing from it” — requires Annapolis to show that Halifax actually acquired the Lands. Deciding whether this is so requires that we give meaning to the expression “beneficial interest”, as it was used in CPR. In our view, that meaning is best appreciated by considering the authorities upon which CPR relied in stating that condition, and especially this Court’s decisions in Manitoba Fisheries and Tener . As we will explain, doing so reveals that actual acquisition is not necessary; rather, the obtaining by Halifax of an advantage in respect of the Lands suffices.

[…]

In our view, the foregoing jurisprudence — upon which the CPR test was expressly stated as resting — supports an understanding of “beneficial interest” as concerned with the effect of a regulatory measure on the landowner, and not with whether a proprietary interest was actually acquired by the government. Conversely, that same jurisprudence supports the view that “beneficial interest”, as that term appears in the first part of the test stated in CPR, refers not to actual acquisition of the equity that rests with the beneficial owner of property connoting rights of use and enjoyment, but to an “advantage” flowing to the state. We say this for two reasons.

First, to require actual acquisition would collapse the distinction between constructive (de facto) and de jure takings — a distinction which CPR explicitly preserves (paras. 30-37). Simply put, if a constructive taking requires an actual taking, then it is no longer constructive. It follows that the Court of Appeal’s requirement of an actual acquisition of the Annapolis Lands cannot be necessary to satisfy the CPR test for a constructive taking.

Secondly, interpreting “beneficial interest” broadly (as meaning a benefit or advantage accruing to the state) ensures CPR’s coherence to Manitoba Fisheries and Tener , neither of which understood “benefits” in the strict equitable sense of that term. Again, the references to those authorities in CPR demonstrate that CPR merely sought to affirm, and not to alter, our law of constructive takings. This interpretation is supported by the explicit wording under the first part of the CPR test: “… a beneficial interest in the property or flowing from it …” (para. 30 (emphasis added)). An interest flowing from the property affirms that a “beneficial interest” can be more broadly understood as an advantage, and need not be an actual acquisition.

To be clear, we are not “depart[ing] from precedent” (para. 111), as our colleagues contend. We aim to illuminate CPR, not overrule it. Our colleagues say that courts “have applied the CPR test without difficulty” (para. 112). With respect, this misses the point. The key question is whether the lower courts have applied the CPR test correctly. In our respectful view, many of them have not. Indeed, the Court of Appeal itself misapprehended the law in this case, by asserting that CPR requires an actual expropriation to establish a constructive taking. As we have explained, and as the authorities confirm, CPR — properly understood — trains the court’s eye on whether a public authority has derived an advantage, in effect, from private property, not on whether it has formally acquired a proprietary interest in the land. To hold otherwise would be to erase the long-standing distinction between de jure and de facto expropriation from Canadian law.

As a final observation, we acknowledge that, in addition to Manitoba Fisheries and Tener , the Court in CPR also cited to Mariner . But this does not affect our analysis. Mariner concerned the Province of Nova Scotia’s designation of privately owned land as a beach under a provincial statute that subjected it to stringent conservation regulations. When the Minister refused the respondents’ applications to build homes on the land, they sought a declaration that the Crown had expropriated their lands, entitling them to compensation. Cromwell J.A. (as he then was), writing for the Nova Scotia Court of Appeal, held that the respondents’ loss of economic value did not amount to an advantage acquired by the provincial authority (see generally Mariner, at pp. 713-16).

Mariner illustrates that regulation alone will not satisfy the test for a constructive taking; there must be something more “beyond drastically limiting use or reducing the value of the owner’s property” (p. 716). When this threshold is crossed — that is, where all reasonable uses have been removed — a regulation may be, “in effect, confiscation” (p. 727 (emphasis added)). To be clear, Mariner does not stray from focussing on both the effect of the taking and the advantage acquired by the government, as required by this Court’s jurisprudence and affirmed in the test set out in CPR. Rather, and consistent with both Manitoba Fisheries and Tener , Mariner asked whether the effect of the regulation was to remove an interest in land (Mariner, at p. 722, referring to Tener ).

[…]

In sum, we affirm that the test to show a constructive taking is that stated by CPR, properly understood. The reviewing court must decide: (1) whether the public authority has acquired a beneficial interest in the property or flowing from it (i.e. an advantage); and (2) whether the state action has removed all reasonable uses of the property. This gives effect to this Court’s acknowledgement of a common law right to compensation where the two-part CPR test is satisfied. It accords with imperatives of justice and fairness, which underpin the court’s assessment of expropriation claims, and remedies situations where cases do not neatly fit within the expropriation legislative framework and would otherwise “fall between the cracks” (Warchuk, at pp. 686 and 690).

To this, we would add that, because the test focusses on effects and advantages, substance and not form is to prevail. A court deciding whether a regulatory measure effects a constructive taking must undertake a realistic appraisal of matters in the context of the specific case, including but not limited to:

a. The nature of the government action (i.e., whether it targets a specific owner or more generally advances an important public policy objective), notice to the owner of the restrictions at the time the property was acquired, and whether the government measures restrict the uses of the property in a manner consistent with the owner’s reasonable expectations;

b. The nature of the land and its historical or current uses. Where, for example, the land is undeveloped, the prohibition of all potential reasonable uses may amount to a constructive taking. That said, a mere reduction in land value due to land use regulation, on its own, would not suffice; and

c. The substance of the alleged advantage. The case law reveals that an advantage may take various forms. For example, permanent or indefinite denial of access to the property or the government’s permanent or indefinite occupation of the property would constitute a taking (Sun Construction , at para. 15). Likewise, regulations that leave a rights holder with only notional use of the land, deprived of all economic value, would satisfy the test. It could also include confining the uses of private land to public purposes, such as conservation, recreation, or institutional uses such as parks, schools, or municipal buildings.

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E. Application #

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(1) Halifax’s Alleged Acquisition of a Beneficial Interest in the Annapolis Lands #

First, it is disputed whether Halifax is promoting the Annapolis Lands as a public park, for instance by encouraging public use and holding them out as a park, as Annapolis alleges. This disputed fact is material because, if proven, it would tend to support Annapolis’ claim that Halifax acquired a “beneficial interest” in the Lands, as we have explained it. Preserving a park in its natural state may constitute an advantage accruing to the state, thus satisfying the “acquisition” element of CPR.

To be clear, we reject the Court of Appeal’s formalistic position that a public authority’s alleged encouragement and financial support of trespass can never amount to an acquisition of a beneficial interest. Several cases support the proposition that whether a public authority treats private lands as an extension of a public park is a key factor in assessing the acquisition requirement. For instance, in Benjamin, the Quebec Court of Appeal found that the City of Montréal’s knowing use of private land as a public park — entailing the installation of lampposts, a fence, and signage indicating the location of the “park” that included the subject lands — in conjunction with restrictive zoning, effectively constituted a “disguised expropriation” (paras. 65 and 82).

Similarly, in Dupras v. Ville de Mascouche, 2020 QCCS 2538, the Quebec Superior Court held that the City had effectively expropriated the claimant’s lands by subjecting them to “conservation” zoning and treating them as if they were part of a public park. Notably, the City had (1) marked off trails, (2) added signage with park maps covering the subject land, (3) encouraged the public to use the lands on the park, and (4) taken out insurance to cover public recreational activities on the land (see paras. 137-40). The Quebec Court of Appeal affirmed the Superior Court’s reasoning and dismissed the respondent city’s cross-appeal on the finding of disguised expropriation (2022 QCCA 350, at paras. 27-40).

A similar claim in Steer Holdings failed, but for reasons which distinguish it from the allegations here. In Steer Holdings , the Manitoba Court of Appeal held that no benefit was acquired where there was “no suggestion that people will be encouraged in any way to move from the nature park to the subject property” (p. 67). Moreover, the land was not adjacent to the provincial park. The Court of Appeal thus rejected the argument that the Province of Manitoba had effectively enlarged its park system.

As we have explained, and as the cases confirm, the doctrine of constructive takings looks to the effects of state action; it does not require a formal acquisition of a proprietary interest by the state. The absence of such a proprietary interest does not preclude the argument that, in effect, Halifax has functionally treated the Annapolis Lands as if they were a park for the benefit of the public. If proven, this fact would support Annapolis’ claim that Halifax acquired a beneficial interest in its property. It is, therefore, plainly material.

(2) Halifax’s Alleged Removal of All Reasonable Uses of the Annapolis Lands #

Second, it is disputed whether Halifax, by allegedly treating the Annapolis Lands as a public park, has eliminated all uses of the Lands except serviced development, which is conditional upon the approval of Annapolis’ secondary planning applications.

This disputed fact is material because, if proven, it may arguably support Annapolis’ claim that it has lost all reasonable uses of its property. This would leave Annapolis to shoulder the burden of holding the Lands as a public park indefinitely, while Halifax enjoys the advantage of having the Lands reserved for its own purposes without having to pay compensation. It is notable that the Court of Appeal, after observing that “Annapolis’ reasonable uses of its lands have not changed”, failed to identify a single reasonable possible use of the property (para. 92; see Lynch, at para. 63).

Further, the Court of Appeal’s reasoning — to which our colleagues subscribe — cuts against one of the core lessons from Mariner , being to look to “the actual application of the regulatory scheme as opposed simply to its potential for interference with the owner’s activities” (p. 718 (emphasis added)). In concluding that there had been no taking in the present case, the Court of Appeal leaned heavily on the fact that the zoning rules had not changed, such that Annapolis’ land use rights remained the same after the release of the 2006 Planning Strategy. But the Court of Appeal neglected to consider Halifax’s application of the regulatory scheme as alleged by Annapolis. Indeed, Manitoba Fisheries , Tener , and Mariner all stand for the proposition that a regulation does not per se eliminate all reasonable uses of property where it provides a mechanism for permits, exemptions, or licenses to allow activities that are otherwise prohibited. In such cases, it is not the regulation alone that effects a constructive taking, but the application of that regulation to the land, including the manner in which the public authority refuses to grant the permit, exemption, or license (see Manitoba Fisheries , at p. 103 (taking of the goodwill resulting from the refusal by the Crown corporation to grant a license or exemption for the export of fish); Tener, at pp. 564-65 (Crown’s notice denying a permit to conduct development work found to be an “expropriation” of the mineral rights)). In sum, “[w]hen … the claim is that the impact of a regulatory scheme has, in effect, taken away all rights of ownership, it is not the existence of the regulatory authority that is significant, but its actual application to the lands” (Mariner, at p. 729 (emphasis in original)). Therefore, the Court of Appeal erred in focussing solely on the “longstanding zoning status quo for the Lands” (R.F., at para. 18) since the passing of the Halifax Mainland Land Use By-Law in 2006.

According to Annapolis, Halifax has repeatedly refused to initiate the secondary planning process which could lead to the re-zoning of the Annapolis Lands. If Annapolis can prove at trial that Halifax is unlikely to ever grant secondary planning approval, this is clearly material to its constructive taking claim. In our view, all reasonable uses of land may be shown to have been eliminated where a permit needed to make reasonable use of the land is refused, such that the state has effectively taken away all rights of ownership.

We note our colleagues’ characterization of Halifax’s alleged conduct as a mere “refusal to up-zone” which did not affect the reasonable uses of the Annapolis Lands. Our colleagues say that Halifax’s alleged conduct “simply disappointed” Annapolis’ hopes of cashing in on a speculative investment (para. 145). For several reasons, we respectfully reject this view.

First, Annapolis did not acquire the Lands as a “speculative bet” (para. 145). Annapolis acquired most of the Lands in 1956, slowly adding to its holdings over time. Crucially, Halifax did not regulate land use in the relevant area prior to 1982. In other words, nothing prevented Annapolis from developing the Lands when they were first acquired. The conduct alleged is therefore not a mere “refusal to up-zone”, as our colleagues say (para. 115). Annapolis originally had the right to use the Lands at its discretion. It now alleges that Halifax eliminated this right and thereby secured a public advantage without compensation.

Secondly, and again with respect, our colleagues incorrectly characterize our position as an assertion that a “refusal to up-zone vacant land” is tantamount to a constructive taking (para. 151). A refusal to up-zone, standing alone, will not generally remove all reasonable uses of vacant land. As we have explained, Halifax’s alleged conduct in this case is more than a mere refusal to up-zone. Annapolis claims that Halifax has effectively transformed its Lands into a public park. We emphasize, however, that Halifax may defeat Annapolis’ constructive taking claim by showing a single reasonable use of the property.

In this regard, it is telling that our colleagues do not identify any reasonable use of the Annapolis Lands. The mere (theoretical) possibility for Annapolis to lease the lands is not indicative of any reasonable use of the property — as our colleagues implicitly recognize in discussing Benjamin. As they acknowledge, the City in Benjamin “render[ed] any use of the land practically impossible” (para. 139), despite the absence of any restrictions on leasing. In any event, it is not realistic to assert that Annapolis may lease lands which, according to its allegations, are already used as a public park by Halifax.

Moreover, in most cases, a public authority will not benefit from a refusal to up-zone vacant land. As such, even if all reasonable uses of land are eliminated by a zoning refusal, the first element of the CPR test for a constructive taking would not ordinarily be met. Accordingly, we cannot agree with our colleagues that our approach “dramatically expands the potential liability of municipalities engaged in land use regulation” (para. 115). To the contrary, our approach is firmly rooted in the common law and does not encroach on the general rule that a refusal to up-zone does not itself effect a constructive taking.

Lastly, we reiterate that provincial legislatures remain free, as they always have been, to “alter the common law” in respect of constructive takings (CPR, at para. 37, referring to the immunity conferred by s. 569 of the Vancouver Charter) — by, in this case, immunizing Halifax by statute from the obligation to pay compensation for taking private property in the public interest.

In light of the foregoing, the Court of Appeal erred in striking Annapolis’ claim related to the alleged constructive taking. There are genuine issues of material fact to be tried.

VI. Disposition #

We would allow the appeal, set aside the Court of Appeal’s partial summary judgment order, and restore the motion judge’s order dismissing Halifax’s motion for partial summary judgment, with costs throughout. Annapolis’ claim against Halifax, in its entirety, may proceed to trial.

Kasirer, Jamal JJ. (dissenting) – #

I. Overview #

We have had the advantage of reading the reasons of our colleagues Côté and Brown JJ. With respect for their views, we conclude that the appeal should be dismissed.

This Court summarized the test for a de facto (or constructive) taking at common law in its unanimous decision in Canadian Pacific Railway Co. v. Vancouver (City) 2006 SCC 5, [2006] 1 S.C.R. 227 (“CPR”), at para. 30, per McLachlin C.J.:

For a de facto taking requiring compensation at common law, two requirements must be met: (1) an acquisition of a beneficial interest in the property or flowing from it, and (2) removal of all reasonable uses of the property (see Mariner Real Estate Ltd. v. Nova Scotia (Attorney General) (1999), 177 D.L.R. (4th) 696(N.S.C.A.), at p. 716; Manitoba Fisheries Ltd. v. The Queen, [1979] 1 S.C.R. 101; and The Queen in Right of British Columbia v. Tener, [1985] 1 S.C.R. 533).

Annapolis Group Inc. has asked this Court to depart from this precedent. It urges the Court to allow its appeal from the order of the Nova Scotia Court of Appeal granting partial summary judgment dismissing its claim against Halifax Regional Municipality for a de facto taking of its lands. Annapolis invited — and needs — this Court to depart from CPR for its claim to proceed to trial.

Our colleagues Côté and Brown JJ. have accepted Annapolis’ invitation and propose to change the CPR precedent in two respects. We respectfully disagree with the changes they propose and how they apply the law in this case.

First, we disagree with our colleagues’ view that the first element of the CPR test — which requires “an acquisition of a beneficial interest in the property or flowing from it” — should be replaced with the much broader notion of an “advantage”, whether or not “a proprietary interest was actually acquired by the government” (see paras. 4, 25, 27, 38, 40 and 44-45). Our colleagues’ reformulation involves an unwarranted departure from CPR and significantly expands the potential liability of public authorities when regulating land use in the public interest. In our view, this Court should retain the CPR test for a de facto taking, which insists that a proprietary interest be acquired. Courts across common law Canada have applied this test without difficulty.

Second, we disagree with our colleagues’ view that a public authority’s “intention” is a material fact in a claim for a de facto taking (para. 53). This is also an unwarranted departure from CPR and this Court’s prior jurisprudence. The material facts for a de facto taking claim concern the effects of the public authority’s regulatory activity, not its intention.

Here, Annapolis’ de facto taking claim arises from Halifax’s refusal to “up-zone” (in French: “procéder à un rezonage pour usage plus intensif”) land — to re-zone to enlarge the permissible uses of land, in this case so that Annapolis may commercially develop the land for housing — in connection with about 1,000 acres of vacant and treed land owned by Annapolis (”Annapolis Lands”). Annapolis’ proposed use for commercial development is impermissible and has been impermissible for many years. Annapolis now alleges that a Halifax municipal council resolution in 2016 refusing to up-zone the land to permit development — a regular occurrence in municipalities across Canada — and Halifax’s alleged acts of trespass in encouraging the public to hike, canoe, and swim on the lands, give rise to claims for de facto taking, abuse of public office, and unjust enrichment.

[…]

Annapolis’ core claim is that Halifax’s refusal to up-zone its land to permit residential development, along with the fact that Halifax acted deliberately to secure the advantage of using the Annapolis Lands as a public park, constitutes a de facto taking. However, a refusal to up-zone, in the circumstances of this case, cannot establish a de facto taking unless this Court departs from the common law requirements that Halifax has acquired a beneficial interest involving the property and that Halifax has removed all reasonable uses of the property. We decline to alter the settled law to allow Annapolis to proceed with its claim. We are respectfully of the view that by acceding to Annapolis’ plea to set aside this Court’s decision in CPR as a governing precedent, our colleagues’ opinion risks radically changing the complexion of municipal planning law by providing, in like up-zoning contexts, a windfall to developers who speculate at municipal taxpayers’ expense.

II. Background #

We take no issue with our colleagues’ summary of the factual background and the decisions below, but we wish to highlight the precise conduct of Halifax that Annapolis alleges constitutes a de facto taking: (1) refusing to up-zone the Annapolis Lands and to zone the lands as a park, and (2) encouraging the public to trespass.

Between the 1950s and 2014, Annapolis, a real estate development company, acquired the Annapolis Lands, consisting of about 1,000 acres of vacant and treed land. Annapolis hoped to develop the lands into residential communities and to sell the development for a profit. The Annapolis Lands — which are still vacant and treed — are next to the Blue Mountain-Birch Cove Lakes Wilderness Area, a large wilderness area protected under the Wilderness Areas Protection Act, S.N.S. 1998, c. 27.

In 2006, Halifax adopted a “Regional Municipal Planning Strategy” as a policy statement to guide land development in the municipality. This policy, essentially a vision statement of long-term property development in the municipality, was adopted under the Municipal Government Act, S.N.S. 1998, c. 18, and the Halifax Regional Municipality Charter, S.N.S. 2008, c. 39 (”Halifax Charter”). Both statutes require Halifax to put in place a municipal planning strategy containing “statements of policy” to “guide the development and management of the municipality”, including “the future use, management and development of lands within the municipality” (Municipal Government Act, ss. 212 to 214; Halifax Charter, ss. 227 to 229). Both statutes also expressly provide that “[t]he adoption of a municipal planning strategy does not commit the council to undertake any of the projects suggested in it” (Municipal Government Act, s. 217(2); Halifax Charter, s. 232(2) (emphasis added to both statutes)).

Under Halifax’s 2006 Regional Municipal Planning Strategy, about a third of the Annapolis Lands are designated “Urban Settlement”, which means they could be developed for serviced residential communities within 25 years. The remaining two-thirds of the Annapolis Lands are designated “Urban Reserve”, which means they could be developed after 25 years. Serviced development on the Annapolis Lands cannot occur, however, unless Halifax adopts a municipal resolution authorizing a “secondary planning process” and amends its zoning by-law to allow residential development.

Starting in 2007, Annapolis urged Halifax to take these legislative measures to permit Annapolis to build residential communities on the lands. Halifax has consistently refused to do so, preferring to maintain the status quo. In 2016, Halifax adopted a municipal resolution stating that it would not authorize a secondary planning process on the Annapolis Lands “at this time”.

The 2016 municipal resolution refusing to up-zone the lands to permit development led to this litigation. In 2017, Annapolis sued Halifax for over $120 million for the alleged de facto taking of its lands and for abuse of public office and unjust enrichment.

Only the de facto taking claim is in issue on this appeal. Annapolis alleges that Halifax refused to up-zone the lands because it intends to use them for a park and that Halifax has encouraged the public to trespass on the lands to hike, canoe, and swim. Annapolis also claims that Halifax has refused to zone the lands as a park because it would otherwise have a statutory obligation to buy the lands within a year (see Municipal Government Act, s. 222; Halifax Charter, s. 237). Annapolis’ key allegations of de facto taking are set out in its amended statement of claim, dated March 22, 2017, at paras. 111-12:

[Halifax] has de facto expropriated the Annapolis Lands for public use as a park. [Halifax] has delayed and obstructed all of Annapolis’ attempts to develop the Annapolis Lands, and likewise, has deliberately avoided expressly zoning the Annapolis Lands to avoid its compensation obligation. In doing so, it has obtained the use of the Annapolis Lands as a public park, and has deprived Annapolis of any use of the Annapolis Lands.

Indeed, [Halifax] encourages members of the public to use the Annapolis Lands as a park. In addition to a variety of other outdoor activities, members of the public hike, cycle, canoe, camp, and swim on the Annapolis Lands as if [Halifax] held the Annapolis Lands as a park.

(A.R., vol. I, at p. 146)

As we will explain, none of these pleaded acts, alone or in combination, amount to a de facto taking.

[…]

III. Analysis #

[…]

Our colleagues’ reformulation of the acquisition requirement and departure from CPR as precedent has significant ramifications. It dramatically expands the potential liability of municipalities engaged in land use regulation in the public interest and throws into question the settled law that a refusal to up-zone is not a de facto taking.

For example, in Tener, at pp. 557 and 564, Estey J. affirmed that “[o]rdinarily, in this country, … compensation does not follow zoning either up or down…. The imposition of zoning regulation and the regulation of activities on lands … add nothing to the value of public property.”

Similarly, in Mariner, at pp. 713 and 734, Cromwell J.A. stated that “[i]t is settled law … that the regulation of land use which has the effect of decreasing the value of the land is not an expropriation…. [O]rdinarily compensation does not follow zoning either up or down…. Development freezes have consistently been held not to give rise to rights of compensation”.

This settled law, which our colleagues propose now to set aside, was helpfully summarized by E. C. E. Todd in The Law of Expropriation and Compensation in Canada (2nd ed. 1992), at pp. 22-23:

By the imposition, removal or alteration of land use controls a public authority may dramatically increase, or decrease, the value of land by changing the permitted uses which may be made of it. In such a case, in the absence of express statutory provision to the contrary an owner is not entitled to compensation or any other remedy notwithstanding that subdivision approval or rezoning is refused or development is blocked or frozen pursuant to statutory planning powers in order, for example, to facilitate the future acquisition of the land for public purposes. [Footnotes omitted.]

See also S. E. Hamill, “Common Law Property Theory and Jurisprudence in Canada” (2015), 40 Queen’s L.J. 679, at p. 703 (”So long as the owner can continue to use their property as they always have, they cannot be considered to have suffered a legally recognizable loss”); S. M. Makuch, N. Craik and S. B. Leisk, Canadian Municipal and Planning Law (2nd ed. 2004), at p. 212 (”the courts would be well advised to remain true to their traditional approach, which is in keeping with the general assumptions of no compensation for planning decisions and of allowing municipalities to allocate the benefits and burdens of planning”).

[…]

IV. Application #

[…]

Neither Halifax’s 2016 municipal resolution refusing to up-zone the Annapolis Lands nor Halifax’s alleged acts of encouraging the public to trespass raises any genuine issue of material fact that Halifax has acquired a beneficial interest in the lands or flowing from them.

The municipal resolution merely preserved the status quo by refusing to allow lands which have always been vacant and treed and situated next to a protected wilderness area to be developed into serviced residential communities. It is of no moment that the 2006 Regional Municipal Planning Strategy, as a statement of policy, stated that a possible future use of the Annapolis Lands included serviced residential development. Both the Municipal Government Act and the Halifax Charter confirm that “[t]he adoption of a municipal planning strategy does not commit the council to undertake any of the projects suggested in it” (Municipal Government Act, s. 217(2); Halifax Charter, s. 232(2)).

Halifax’s adoption of a municipal resolution refusing to up-zone the lands also cannot be a basis for a de facto taking claim because the resolution did not result in Halifax acquiring any proprietary interest in the lands. As this Court held in CPR, at para. 33, a mere assurance that land will be used or developed in accordance with a municipality’s vision, without precluding historical or current uses of the land, is “not the sort of benefit” that can meet the acquisition requirement. This is why the common law has consistently held that a refusal to up-zone is not actionable as a de facto taking. Our colleagues claim, at para. 64, that “[p]reserving a park in its natural state may constitute an advantage accruing to the state”, but this flouts CPR’s insistence that the public authority must have acquired a proprietary interest. A mere “advantage” does not suffice. Respectfully, our colleagues’ expansive approach to what constitutes a de facto taking departs from precedent and would result in CPR being decided differently.

We also respectfully disagree with our colleagues’ suggestion, at para. 65, that Halifax’s alleged encouragement of trespass changes this conclusion. For example, at the hearing of the appeal, Annapolis insisted that Halifax has distributed promotional material encouraging people to hike at Fox Lake, which is within the Annapolis Lands. Annapolis claimed that this was an example of Halifax’s “use [of] the Annapolis Lands as a Regional Park” (outline of argument, at para. 5, in condensed book, at p. 2). We disagree. A public authority does not and cannot acquire a proprietary interest by encouraging others to trespass. If these allegations were made out at trial, Halifax might well expose itself to liability on some other basis. But this allegation cannot ground a claim for a de facto taking.

[…]

Even if Annapolis could establish that Halifax has acquired a beneficial interest in the Annapolis Lands or flowing from them, it cannot meet the second requirement of the test for a de facto taking: there is no genuine issue of material fact that Halifax has deprived Annapolis of all reasonable uses of its lands. This in itself is fatal to Annapolis’ appeal given that the two requirements in CPR are cumulative.

This second element of the CPR test must be assessed “not only in relation to the land’s potential highest and best use, but having regard to the nature of the land and the range of reasonable uses to which it has actually been put” (CPR, at para. 34, quoting Mariner, at p. 717). When “a regulatory regime is imposed on land, its actual application in the specific case must be examined, not the potential, but as yet unexploited, range of possible regulation” (Mariner, at p. 718 (underlining added)). Confinement to uneconomic uses is insufficient (CPR, at paras. 8 and 27-31). Loss of virtually all economic value is also insufficient (Mariner, at pp. 714 and 719-27).

In CPR, for example, this Court held that the City of Vancouver’s by-law did not remove all reasonable uses of the property because it did not prevent the landowner from using its land to operate a railway, the only use to which the land had ever been put during the history of the City (para. 34).

The situation here is indistinguishable. As the Nova Scotia Court of Appeal noted, at para. 14, “[t]he zoning of the Annapolis Lands has not changed since the adoption of the Land Use By-law in 2006.” The court added: “Annapolis has the same rights with respect to its lands that it had prior to Council’s resolution on September 6, 2016. Nothing has changed” (para. 91). The lands were vacant and treed when Annapolis acquired them, and they remain vacant and treed. Halifax’s refusal to up-zone the lands in 2016 did not deprive Annapolis of any reasonable uses of its lands. It simply disappointed Annapolis’ hope of developing them. Annapolis speculated that, one day, it would have that right. The company made a bet and lost. There is no principled basis for saying that Halifax and its taxpayers now have to guarantee that speculative bet. We therefore agree with the submission of Halifax’s counsel, that “[Annapolis] bought barren land with no rights to do anything more than that. The municipality is not the guarantor of their land speculation” (transcript, at p. 79).

Contrary to our colleagues’ suggestion at para. 72, Halifax has not taken Annapolis’ “right” to develop the lands. Annapolis claims that it had an unfettered right to develop the lands before they were first zoned in 1982. Yet Annapolis grounds its de facto taking claim in the proceedings before us in Halifax’s refusal to up-zone in 2016 — which, as already noted, did not affect the zoning of the lands or Annapolis’ rights. Indeed, our colleagues acknowledge that the zoning has not changed since 2006 (para. 7). The potential permissible uses of the lands before 1982 are thus irrelevant to Annapolis’ claim.

We therefore agree with the Nova Scotia Court of Appeal, at para. 92: “… the lands and the reasonable uses to which Annapolis can put them remain exactly as they have been for many years”. This responds to our colleagues’ criticism that the Court of Appeal “failed to identify a single reasonable possible use of the property” (para. 70; see also para. 74). The lands remain vacant and treed and are zoned exactly as before. Further, as counsel for Halifax conceded during oral argument, subject to the current zoning Annapolis can lease the lands (transcript, at p. 72), just as CPR could in CPR (CPR, at para. 34). We note, too, that confinement of the land to uneconomic uses does not in itself establish a de facto taking (see CPR, at paras. 8 and 34; Horsman and Morley, at § 5:13).

In our respectful view, there is no basis in the record for our colleagues to assert that “it is disputed whether Halifax, by allegedly treating the Annapolis Lands as a public park, has eliminated all uses of the Lands except serviced development, which is conditional upon the approval of Annapolis’ secondary planning applications” (para. 69 (emphasis added)). Halifax did not eliminate or remove any reasonable use of the property. It simply refused to up-zone the lands to allow for residential development.

Our colleagues nevertheless claim, at para. 76, that “it is telling that [Kasirer and Jamal JJ.] do not identify any reasonable use of the Annapolis Lands” (emphasis in original). Respectfully, this illustrates how our colleagues have changed the law. First, our colleagues evaluate the reasonable uses of the lands from the perspective of a commercial property developer, even though our law has never required that the “use” be confined to those of one class of landowner. Second, the removal requirement insists not merely that there be no reasonable uses, but also that they have been removed by the public authority. The issue is whether there has been a de facto taking by the public authority. Annapolis cannot show that Halifax removed any reasonable uses. Nor, in any event, is there any legal impediment to Annapolis leasing the lands.

Our colleagues respond to the zoning and uses of the Annapolis Lands having not changed with the suggestion that this ignores “Halifax’s application of the regulatory scheme as alleged by Annapolis” (para. 71 (emphasis in original)). Our colleagues assert that “[i]f Annapolis can prove at trial that Halifax is unlikely to ever grant secondary planning approval, this is clearly material to its constructive taking claim” (para. 72 (emphasis in original)). We respectfully disagree. As a matter of proof, we do not see how Annapolis can prove a negative, particularly one involving a future fact.

More importantly, even if Annapolis could somehow show that Halifax will never up-zone the lands, that could not establish that Annapolis has lost all reasonable uses of those lands. The lands have never been used for serviced development — they have always been vacant and treed. Our colleagues’ assertion amounts to saying that a refusal to up-zone vacant land can give rise to a de facto taking merely if all “potential reasonable uses” are prohibited (para. 45 (emphasis in original)). That would upset the settled law reflected in Manitoba Fisheries , Tener , Mariner , and CPR, and it would eliminate Halifax’s statutory and common law protection from liability for refusing to up-zone. In CPR, this Court specifically noted that removal of all reasonable uses of the land must be assessed in relation to both its potential uses as well as the “nature of the land and the range of reasonable uses to which it has actually been put” (para. 34, quoting Mariner, at p. 717). That statement applies equally in this case.

C. Conclusion #

We conclude that there is no genuine issue of material fact that Halifax has acquired a beneficial interest in the Annapolis Lands or flowing from them or that Halifax has deprived Annapolis of all reasonable uses of its lands. In view of the settled law, the pleading of a de facto taking has no real chance of success. Like the Nova Scotia Court of Appeal, we would grant partial summary judgment dismissing the claim for de facto taking.

V. Disposition #

We would dismiss the appeal with costs throughout.

Appeal allowed.