In a 5-4 decision, the Supreme Court of Canada has clarified the test for claimants to establish de facto expropriation of private property through a public authority’s exercise of regulatory powers. Such expropriation is known as a “constructive taking”, as distinct from the “de jure taking” that arises where a public authority formally acquires property (e.g., by taking title in the case of land). Arising out of an appeal of a summary judgment motion decision, the Supreme Court of Canada’s decision in Annapolis Group Inc. v. Halifax Regional Municipality, 2022 SCC 36 (“Annapolis”) holds that when assessing whether a public authority has acquired a “beneficial interest” in a property for the purposes of establishing a constructive taking, there is no requirement for the public authority to actually acquire a proprietary interest in the land. Rather, the fact that an “advantage” has flowed to the state from its regulation of the property will suffice to meet this element of the constructive taking test. Further, the public authority’s intention will play a role in the broader constructive taking analysis.
Background
Annapolis is the latest in a series of Supreme Court cases on expropriation and clarifies the test for establishing a constructive taking originally set out in Canadian Pacific Railway Co. v. Vancouver (City), 2006 SCC 5 (“CPR”). The CPR test requires a claimant to establish both: (1) an acquisition of a beneficial interest in the property or flowing from it; and (2) removal of all reasonable uses of the property. Where this test is established, a claimant will be entitled to recover compensation from the public authority unless legislation clearly provides to the contrary. The Court in Annapolis relied on its previous decisions in Manitoba Fisheries Ltd. v. The Queen, [1979] 1 S.C.R. 101 (“Manitoba Fisheries”) and R. v. Tener, [1985] 1 S.C.R. 533 (“Tener”) to broaden the traditional understanding of what constitutes a constructive taking under the CPR test.
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