How Canada’s Expropriation Laws Function to Preclude Compensation for Private Property Owners
Flipping through my property law textbook, I was struck by the realization that, in certain situations, the Crown has the power to expropriate the land of private citizens without compensating its owners. After navigating through the legal topography of expropriation, several of my cursory concerns ripened into serious disagreements with how the courts have designed legal tests with respect to a regulatory taking. In what follows, I will lay out how the common law on de facto expropriation provides an insatiable test for determination that diminishes the possibility of compensation for private property owners.
Legal Topography of Expropriation
The Crown is provided two avenues by which they may expropriate land in Canada. First, they may take the de jure or legal path, following Federal and Provincial statutes. Among other things, the federal Expropriation Act requires that owners of expropriated land are fully and justly compensated by the Federal Government. Second, they may take the de facto or constructive route, following the rules set out in the common law. In the latter pathway, the Crown may expropriate land without engaging its statutory obligations, including the responsibility to give notice, consult, and provide compensation. As Bruce Ziff explains, this occurs when “state action has the effect of gutting the incidents of ownership,” without in purpose being a craft of expropriation. One of the authorities for de facto expropriation in Canada is the Nova Scotia Court of Appeal’s decision in Mariner Real Estate Ltd v Nova Scotia. Here, Justice Cromwell explained that the only questions the Court must ask itself in the case of a constructive expropriation are whether the regulatory action was lawful, and whether the Expropriation Act entitles the owner to compensation for the resulting restrictions. The entitlement to compensation thus becomes a conditional, opposed to categorical, feature of expropriation law, and this generates scenarios where a private citizen can have their land effectively expropriated without a reimbursement. The test for determining de facto expropriation, and the basis on which compensation may be ordered is twofold: first, the regulation must remove all reasonable uses of the land, and second, there must be a corresponding gain by the expropriating authority. When examined closely, this test features a significant shortcoming: the high threshold to meet its constituent elements functionally precludes a common law remedy for private property owners subject to de facto expropriation.
Sticks and Stones
The first element of the Mariner test requires that the land in question be stripped of all reasonable uses. Regulations that have been found not to strip a piece of land of all its incidents include “a decrease in land value,” a “development freeze,” and “withholding a license to do a particular act on or with the use of the land.” The latter of these stipulations is particularly alarming. Consider the case of Rock Resources Inc v British Columbia, where the B.C. government prohibited mineral extraction on a piece of land owned by the appellant. The Crown argued that this company could find other reasonable uses for the land other than mining, and this contention found strong support in the lower courts, who were applying the Mariner test. The Supreme Court eventually applied some common sense when concluding that, to a mining extraction company, mining is the only reasonable use a land could be put to. As James Beaton put it, although the Supreme Court ruled in favour of the appellant, the current test nevertheless allows the courts the interpretive leeway to “call a stick a bundle.” In other words, the requirement that all reasonable uses be removed provides the space for a single use, no matter how immaterial to the interests of the owner, to be constituted as reasonable and thus sufficient to end the Mariner scrutiny. More importantly, this dynamic is in direct tension with the basic property precept that an interest in land is a bundle of rights, and not a singular proprietary use to be leveraged by the Crown to deny compensation.
Pain without Gain
The second element of the Mariner test requires that the Crown have a corresponding gain to the loss suffered by the private property owner during expropriation. As Justice Brown pointed out in a thoughtful critique of the expropriation laws of Canada, the concept of ‘constructive’ “contemplates that no gain, or at least no gain of an equitable or otherwise rem quality, needs to be conferred upon the Crown in order for a taking to have occurred.” Finding that a taking has occurred is not drawn from the facts per se, but is “judicially imposed upon the facts,” based upon a threshold “denoting the stripping away from the property owner of all reasonable uses of the land.” In other words, the Crown’s requirement for a corresponding gain does not square with its own designation of a regulatory taking as ‘constructive’. If constructive hinges on the effect on the property interest, the analysis deployed to determine a corresponding gain appears to be a separate issue. Beyond this, the requirement for a corresponding gain is overinclusive of what exactly a gain is. In the Court’s decision in The Queen (BC) v Tener, Justice Etsey held that a Crown’s gain can come in non-monetary, intangible, and abstract form. Moreover, within the same decision, the Court found that such a gain can be “displaced into the future.” The amorphous nature of the gain provides the Crown with a broad set of arguments to deploy in denying the recognition of de facto expropriation.
A Steep Hill to Climb
When combining the Court’s interpretive freedom to determine what is ‘reasonable,’ with the indefinite character of the ‘corresponding gain’ requirement, and the erosion of the constructive property of de facto expropriation, the likelihood that a private property owner would receive compensation at common law for a regulatory taking is thin and, for all intents and purposes, futile. Parliament must either statutorily intervene to provide a fairer and more just legal framework for regulatory takings, or the courts must revisit and reimagine the law of de facto expropriation to better respond to the concerns of private property owners. Until then, there may be a Crown without compensation.