Beyond the Date: The Admissibility of Post-Effective Planning Evidence in Expropriation Cases

Background

In determining valuation of an expropriated interest, arbitral tribunals must consider existing planning and zoning regulations. However, the admissibility of evidence concerning post-expropriation planning and zoning changes can often become a pivotal issue in determining the probable highest and best use, as well as the market value of the subject property.

Consider a scenario, for example, where following the effective date of an expropriation, a city council enacts a new zoning ordinance reclassifying an area previously zoned for agricultural use into a mixed-use residential and commercial zone. Here, the admissibility of evidence pertaining to the post-expropriation zoning change emerges as an important issue in determining the fair compensation owed to the landowner. On one hand, admitting such evidence may risk being unduly influenced by circumstances that arose after the expropriation, perhaps neither predictable nor anticipated. On the other hand, refusing to admit such evidence may lead to overlooking crucial factors relevant to a landowner’s claim. Accordingly, the issue presents arbitrators with a delicate balancing act.

While the law concerning the admissibility of post-effective date planning evidence is mixed, two overarching principles emerge from the series of cases discussed below:

1. Post-effective date planning evidence is generally admissible when it pertains to an ongoing process affecting the use of the subject lands that existed prior to the date of expropriation.
2. Admissibility hinges on demonstrating the relevance and logical probative value of the evidence regarding the issue at hand.
   

Selected Cases

Examining leading cases provides valuable insight into how courts have approached the admissibility of post-effective date evidence. For instance, in Metropolitan Toronto and Region Conservation Authority v. Valley Improvement Co. Ltd., [1963] SCR 15, 1962 CarswellOnt 77,  and Valley Improvement Co. v. Metropolitan Toronto & Region Conservation Authority, [1965] 2 O.R. 587, 965 CarswellOnt 150 (Ont. C.A.) (collectively, “Valley Improvement”), the Supreme Court of Canada and the Court of Appeal of Ontario addressed the admissibility of post-expropriation zoning changes, establishing a foundation for how courts and arbitral tribunals have approached the admissibility of post-effective date evidence in determining compensation.

In the first appeal of Valley Improvement before the Supreme Court of Canada, a key issue concerned whether the Ontario Municipal Board should consider evidence of a by-law enacted nine months after the expropriation. Years prior to the expropriation, the municipality had passed a zoning by-law prohibiting residential and commercial development on the land in question, but the zoning by-law was only approved for a limited period and had expired at the time of expropriation. Subsequently, another similar zoning by-law was passed after the expropriation, both of which were considered by the Ontario Municipal Board in determining compensation. The Supreme Court of Canada held that the Board did not err in considering the subsequent zoning by-law as this was done only to show that the Board's conclusions of the “the circumstances existing at the date of the expropriation” had received subsequent confirmation but referred the assessment of compensation back to the Board on a separate issue.[1]

During the subsequent hearing before the Ontario Municipal Board, the landowner sought to introduce additional evidence of a new zoning by-law showing that the remaining lands had been rezoned to allow for commercial and residential use. However, the evidence was refused, leading to an appeal before the Ontario Court of Appeal. The court found that the Board erred in not admitting the evidence of the by-law, emphasizing that it provided the best evidence of the probability or possibility of a zoning amendment after expropriation, despite occurring years later.[2] The municipality again sought to appeal to the Supreme Court of Canada but leave to appeal was denied.

The approach adopted by the courts in Valley Improvement has since been applied in subsequent cases such as in Markpal Holdings Ltd. v. Metropolitan Toronto, 10 LCR 193, 1976 CarswellOnt 1009 (“Markpal”). In this case, the Ontario Land Compensation Board initially refused to admit evidence of planning and zoning matters affecting a landowner’s remaining lands which arose after the date of expropriation, claiming that evidence should be restricted to the situation as it stood on the date of expropriation. However, on appeal, the Divisional Court followed the Valley Improvement decisions and allowed the appeal, finding that “the evidence was relevant and logically and rationally probative and was admissible.”[3]

Tribunal decisions subsequent to Valley Improvement and Markpal also provide further guidance on the admissibility of post-effective date evidence. In Dempsey v. Metropolitan Toronto (No. 2), [1977] 12 LCR 269, 1977 CarswellOnt 1445 (“Dempsey”), the Ontario Land Compensation Board declined to admit post-effective date planning and development evidence concerning events and developments affecting nearby lands being expropriated. The Board reviewed the Valley Improvement and Markpal decisions and concluded that the evidence tendered was not relevant to proof of the highest and best use or market value as of the date of expropriation.  In arriving at its conclusion, the Board wrote:

…[W]e find it difficult to see how the highest and best use in the minds of knowledgeable and willing purchasers and sellers, as of the date of expropriation, can be presumed to be influenced by zoning and planning developments and other events not contemplated or foreseen at the date of expropriation, but which occurred some years later.[4]

The Board also adopted the respondent’s argument which interpreted Valley Improvement as requiring that post-effective date evidence be admissible only if it pertains to an ongoing process affecting the use of the subject lands that existed prior to the date of expropriation. The Board concluded that the proposed evidence was not part of an ongoing process of development concerning which "the probability or possibility" of its occurrence with reference to the lands in question could best be evidenced by the fact that such a development took place.[5]

Finally, in Shypka Estate v. Ontario (Management Board of Cabinet), [2005] OMBD No. 440, 2005 CarswellOnt 5569, the Ontario Municipal Board held that a policy direction “may be followed to its result after expropriation, to see what the future development prospects of the property really are, rather than just conjecture as at the date of expropriation.”[6]

The Board admitted the evidence upon finding that a purchaser would have anticipated that the planning direction would “be followed to a determination subsequent.” Moreover, the Board stated that “to exclude the evidence would, in the Board's view, be a failure to explore all of the relevant evidence that might be probative of the Claimant's claim.”[7] In the end, however, the Board found that the evidence “did nothing more than” confirm its view of the circumstances that existed at the time of the taking, i.e., that a purchaser would anticipate a change in the applicable planning policies.

Key Takeaways

While legal practitioners should always evaluate the merits of admitting of post-effective date evidence on a case-by-case basis, the cases discussed above generally show that post-effective date planning evidence is generally admissible when it pertains to what has been ongoing and continuous from a point in time prior to the expropriation. However, in order for post-effective date evidence to be admissible, the relevance and logical probative value of the evidence regarding the issue at hand must also be demonstrated. As a result, parties considering bringing forward post-effective date evidence at the determination of compensation should not only consider whether the evidence is part of an ongoing process, but also carefully evaluate its relevance and potential to contribute meaningfully to the determination of compensation.

Any article or other information or content expressed or made available in this Section is that of the respective author(s) and not of the OBA.