Annapolis Group Inc. v. Halifax Regional Municipality, 2022 SCC 36

The Supreme Court of Canada has issued a decision coming out of the province of Nova Scotia which broadens the basis upon which a local government may be held liable for “constructive taking” of private lands.

1.0 Facts

Since the 1950s, Annapolis Group Inc. (“Annapolis”) acquired a large amount of land with the intention of eventually securing enhanced development rights and reselling it. In 2006, Halifax Regional Municipality (“Halifax”) adopted a planning strategy to guide land development over a 25-year period which affected Annapolis’ lands. The strategy reserved a portion of the land for possible future inclusion in a regional park and zoned the lands as “Urban Settlement” and “Urban Reserve”. These designations contemplate future service development but required Halifax to adopt a resolution to authorize it. Beginning in 2007, Annapolis made several attempts to develop the lands. In 2016, Halifax passed a resolution refusing to allow development of the lands. Annapolis commenced a lawsuit alleging that Halifax’s regulatory measures had deprived it of all reasonable or economic uses of the lands, resulting in a constructive taking without compensation.

2.0 Decision

Before the Nova Scotia Supreme Court, Halifax brought a motion for summary dismissal of Annapolis’ claim. The motion judge dismissed Halifax’s motion, finding that Annapolis’ claim raised issues of material fact requiring a trial.

On appeal by Halifax, the Nova Scotia Court of Appeal struck the claim, stating that Annapolis’ constructive taking claim did not have a reasonable chance of successfully establishing an acquisition by Halifax of a beneficial interest in the lands or flowing from the lands, as required by Canadian Pacific Railway Co. v. Vancouver (City), 2006 SCC 5 (“CPR”). The Court of Appeal held that the CPR test for constructive taking required that the lands actually be taken from Annapolis by Halifax.

On appeal by Annapolis to the Supreme Court of Canada, the majority held that the appeal should be allowed, and restored the order of the motion judge. The Court of Appeal erred in holding that an “acquisition of a beneficial interest” under the CPR test requires land to actually be taken from an owner and acquired by the state. The Court held a “beneficial interest” is to be broadly understood as an “advantage” and does not require an actual acquisition.

3.0 Constructive Taking

Constructive taking is the acquisition of privately owned property for public purposes through regulation. The line between a valid regulation and a constructive taking is crossed where the effect of the regulatory activity deprives the owner of the use and enjoyment of its property in a substantial and unreasonable way, or effectively confiscates the property.

The CPR test for constructive taking provides that the court must decide: (1) whether the public authority has acquired a beneficial interest in the property or flowing from it; and (2) whether the state action has removed all reasonable uses of the property.  Where the two-part CPR test is satisfied, an owner has a common law right to compensation.

4.0 Summary

  • Constructive taking occurs where a public authority acquires a beneficial interest in a property and has removed all reasonable uses of the property.
  • In this context, a “beneficial interest” may arise from a public authority obtaining an advantage and does go so far as to require an actual acquisition.
  • The public authority’s intention is not an element of the test for constructive taking.
  • Such taking may support a common law right to compensation by the public authority to the land owner.

5.0 Primary Local Government Takeaway

  • An exercise of land-use regulation authority (e.g. zoning power, development approval) which “sterilizes” a property from all reasonable uses may give rise to a right of compensation to the private landowner.

This article was co-authored by our articled student, Thomas Haughian.