Most people are familiar with the term “expropriation” since they have heard it used in the media in connection with major projects. However, very few people understand the real scope of this procedure and are unaware of the considerable consequences it can have on those who are deprived of their property for the public good. The purpose of this article is to present the basic concepts of expropriation as well as the key elements that need to be known concerning expropriation procedures.
A Few Historical Concepts Related to Expropriation Law
A. Ancient origins
The right to expropriation is an ancient right intimately linked to the creation of the State and its development. The Honourable Justice Yergeau, in 8811571 Canada Inc. c. Procureure générale du Québec[1], provides an important historical overview that contextualizes the right to expropriation by recalling its three fundamental components, namely the presence of a public power, a public utility and compensation for full value:
There are many examples. The Bible, for instance, gives a very ancient illustration in the First Book of Chronicles. In ancient Greece, engraved inscriptions inform us that the right to expropriation for public utility purposes already existed. And it is hard to imagine that the major works of the Romans could have been carried out without expropriation. Later, an edict issued by Philip the Fair in 1303 established the right of the State to expropriate private property pro justo pretio compelli debent.Over the next centuries, several French royal edicts followed suit, even adding a premium to the full market value as a guarantee of fair compensation.[2]
As Justice Yergeau reminds us, these three components also exist in old French law and are found in article 17 of the Declaration of the Rights of Man of 1789, in the Napoleonic Code of 1804, the Civil Code of Lower Canada of 1866, the German Civil Code and Italian constitutional law. Similarly, in common law, where there is no constitutional principle declaring the inviolability of private property, a presumption has developed against the appropriation of property without compensation. The rules of expropriation were codified, so to speak, only as of the 19th century in England through the Railway Clauses Consolidation Act.[3]
B. A Brief History of Canadian Expropriation Law
The right to expropriation was also an essential component in the growth of the Canadian State from its inception. Author George S. Challies paints an interesting picture of the history of expropriation in Canada and Quebec.[4] One of the first pieces of legislation dealing with the power of expropriation was the Public Works Act of the Province of Canada of 1841, which was passed during the period of United Canada. This act gave the Board of Works the power to take any land necessary or useful for public works. Compensation was determined by three arbitrators.
This legislation was improved in 1859 and became the Public Works Act in 1867, with the advent of the Canadian Federation. The compensation process was modified from the 1841 method, with the Minister offering monetary compensation and, if this was refused, the decision was then referred to a panel of three arbitrators.[5]
The right to expropriation was also an essential component of Canadian railway development. In 1850, the United Canada legislature passed the Railways Act which authorized the compulsory taking of land for the construction and operation of railways. This law was also amended in 1867, and compensation was again determined by a panel of three arbitrators. In 1919, the Railways Act was further amended to confer jurisdiction over compensation on a single arbitrator in the person of a judge of country courts. In Quebec, it was entrusted to the judge of the Superior Court.[6]
Canada’s first expropriation act was passed in 1886, based largely on the Public Works Act of 1867. The Expropriation Act also conferred jurisdiction over compensation on three arbitrators. This law was amended several times to increase the degree of precision in the various stages of expropriation, and the jurisdiction of compensation was gradually entrusted to a single judge rather than to three arbitrators.[7]
C. A Brief History of Quebec Expropriation Law
One of the first expropriation laws in Quebec was passed by the Lower Canada legislature in 1796, giving the State the power to compulsorily acquire land for road construction with compensation determined by seven appraisers. Quebec municipalities had very early in their statutes the right to expropriate land for public purposes.[8]
In 1856, Quebec City was given the right to take any land necessary for aqueduct work subject to the payment of compensation and, failing agreement, compensation was determined by two experts with the possible support of an arbitrator. As early as 1851, the City of Montreal was authorized to expropriate, with compensation determined by a special jury of 12 persons convened by the city’s Justice of the Peace[9].
The practices and principles were codified in article 407 of the Civil Code of Lower Canada of 1866, which states:
No one can be compelled to give up his property, except for public utility and in consideration of a just indemnity previously paid.[10]
Quebec’s first Expropriation Act was passed in 1890, governing compensation disputes that were not subject to other provincial or federal legislation. The award was determined by a panel of three arbitrators. If a party failed to appoint an arbitrator, the Attorney General became the sole arbitrator.[11] After 1937, it was determined that a Superior Court judge would act as the sole arbitrator.
The Superior Court’s jurisdiction over expropriation was short-lived. In 1939, jurisdiction for compensation in matters of expropriation not covered by the Municipal Code was entrusted to the Provincial Transportation and Communications Board, which was replaced in 1940 by the Public Utilities Board.[12] This Board retained jurisdiction over expropriation matters until 1973, a very important year in the evolution of expropriation law.
In 1973, a new law was adopted and led to the creation of the Expropriation Tribunal, on which provincial court judges, the forerunner of the Court of Quebec, sat. The 1973 Act marked a major change in that, from that point on, all municipal and provincial expropriations came under the jurisdiction of a single court, putting an end to the operations of the Montreal Expropriation Office and unifying expropriation disputes – with the exception of those under federal jurisdiction – before a single court.[13]
The Expropriation Tribunal was abolished in 1998 with the creation of the Administrative Tribunal of Quebec where expropriation disputes are now heard in the Real Estate Division by a panel composed of a judge, a lawyer and a certified appraiser, as stipulated in section 33 of the Act respecting administrative justice.
Some Basic Concepts of Expropriation Law
Expropriation remains today a power attributed to public bodies, allowing them to appropriate an immovable (building, land) or the dismemberment thereof for public purposes, in return for the payment of fair compensation to the expropriated.
A. Expropriation: An Infringement of the Right to Property
In Quebec, there can be no question about the exorbitant nature of the power of expropriation since it constitutes the ultimate infringement of the right to property, a fundamental right enshrined in the Quebec Charter of Human Rights and Freedoms:
6. Every person has a right to the peaceful enjoyment and free disposition of his property, except to the extent provided by law.
This limit is enshrined in article 952 of the Civil Code of Québec, which restrictively sets out the only cases in which the owner of an immovable may be deprived of his property:
952. No owner may be compelled to transfer his ownership except by expropriation according to law for public utility and in return for a just and prior indemnity.
Litigation in expropriation law is therefore part of a context in which private property rights give way to considerations of public interest that are expressly provided for in the law.
B. De jure Expropriation and de facto Expropriation
Expropriation is an exceptional and exorbitant power under civil law to deprive the owner of his or her property. The right to expropriate must therefore be authorized and specifically provided for by law.[14] It must always be interpreted strictly and restrictively in favour of the expropriated party[15], since the expropriating party is never compelled to expropriate while the expropriated party is dispossessed against its will.[16]
In Quebec, the expropriation procedure is governed by the Expropriation Act (CQLR, c. E-24) (the “EA”). The EA provides for various rules and procedures that apply in an expropriation situation but does not provide for the power to expropriate as such. The power to expropriate is enshrined in various statutes, depending on which authority has the power to expropriate, if any.[17]
An expropriation exists when a notice of expropriation is issued against an expropriated party. The notice of expropriation is the starting point for the expropriation process, which will proceed according to the rules and procedures set out in the EA.
Civil law also recognizes that, in certain circumstances, an expropriation situation may exist even though the competent authority has not issued a notice of expropriation. This is a disguised expropriation, i.e., a de facto expropriation, a concept distinct from de jure expropriation, which has its own criteria and sanctions.
The Supreme Court of Canada recently defined[18] the scope of a disguised expropriation in Quebec law where a municipality, under the guise of a zoning by-law, limits the enjoyment of the attributes of the right of ownership of property to such a degree that the person entitled to enjoy those attributes is de facto expropriated from them.[19] This type of situation requires a more detailed analysis and will not be discussed further in this text. It should be noted, however, that cases of disguised expropriation must be handled separately and that, in such cases, recourse must be brought before the Superior Court of Quebec, and not before the specialized administrative tribunals as is the case in situations of formal expropriation following the service of a notice of expropriation.[20]
Expropriation Procedure: Introduction to Possible Remedies
A. Some Basic Concepts of the Expropriation Procedure
The compensation paid to an expropriated party falls under the jurisdiction of the real estate division of the Tribunal administratif du Québec (“TAQ”).[21] In such situations, it is the Act respecting administrative justice[22] that applies, and administrative judges may also be guided, where appropriate, by the rules set out in the Code of Civil Procedure, which supplements the Act respecting administrative justice.[23]
The notice of expropriation must be served on the owner of the immovable or the holder of the real property right.[24] The expropriated party then has 15 days following the date of service of the notice to appear before the TAQ.[25] At the time of the appearance, the owner must provide the expropriating party with information concerning the tenants and occupants of the expropriated property so that the expropriating party can advise them of the notice of expropriation.[26] Tenants and occupants of the expropriated building must appear separately. They will have their own expropriation procedure before the TAQ to determine the compensation due to them.
Subsequently, the service of a notice of expropriation leads to the expropriating party’s taking possession of the expropriated property. A transfer of ownership is registered according to certain procedures that must be followed, i.e., the expropriating party must have made a detailed offer and paid interim compensation to the expropriated party before serving a notice of the transfer of ownership, all in accordance with the requirements of the EA.[27]
It should be noted that the EA also provides for a pre-notification regime, i.e., the possibility of issuing a notice of reserve prior to the expropriation of a building. The notice of reserve is not a prerequisite to expropriation but an alternative that essentially allows the expropriating party to “reserve” an immovable which it intends to expropriate later for purposes that are not yet well defined.[28] The duration of a notice of reserve is two years, and the expropriating party may renew it for an additional two-year period.[29] The main consequence of the imposition of a notice of reserve notice is the prohibition of any construction, improvement or addition to the immovable covered by the notice, except for repairs. The reserve notice regime contains its own rules and compensation mechanism.[30]
B. Legality of a Notice of Expropriation
In a situation of expropriation by right, it is first possible to contest the validity of the notice of expropriation by filing a motion with the Superior Court of Quebec.[31] The expropriated party has 30 days following the date of service of the notice of expropriation to file a motion to object.[32]
Attacking the legality of a notice of expropriation is subject to specific conditions. Challenging the right to expropriation is a means of controlling the legality and compliance of the expropriation notice, not its appropriateness. Such a control focuses on the following elements:
- The notice of expropriation must result from a statutory power of expropriation. If a notice of expropriation has not been issued in accordance with the law, the notice may be cancelled by the Superior Court;
- Expropriation must be for a real and legitimate public purpose. It cannot be a mere pretext for acquiring a building for other purposes;
- The expropriation procedure must not be an abusive or bad faith exercise by the expropriating party; and
- The expropriation must not be procedurally flawed in any of its significant aspects.
Challenging the right to expropriation leads to the outright annulment of the expropriation notice, which completely releases the title to the property originally expropriated.
That said, the courts confirm the principle that the legality of an expropriation cannot be affected by the prejudice caused to the expropriated party, since that is the very essence of such a procedure. Since expropriation necessarily affects the right of ownership of the expropriated party, the latter must therefore be compensated by the expropriating party. The existence of a prejudice, however serious, does not make expropriation illegal. Instead, fair compensation should be sought under the EA.[34]
C. Obtaining Fair and Equitable Compensation under the Act
Section 58 of the EA enshrines the right to fair compensation and specifies the two essential components, which are (1) the value of the expropriated property and (2) the damage directly caused by the expropriation:
58. The indemnity shall be fixed according to the value of the property expropriated and the damage directly caused by the expropriation.
Article 58 of the EA is based on civil law and provides for full compensation of the expropriated party. An expropriating party may expropriate property, but it may do so only for fair compensation. Expropriation law does not exist on the fringe of civil law; it constitutes a continuum with civil law in terms of injury and full compensation.
1. Value of the Expropriated Property
Expropriation law requires introduction of the concept of “value to the expropriated party,” which can be defined as follows [translation]:
[...] the Chamber believes that all of these efforts can be properly summarized by defining the legal concept of OWNER VALUE as the market value of a property for the owner, valued at any actual or potential benefit and, where applicable, at any attribute specific to the owner, subject only to legislative or regulatory requirements.[35]
In a context of forced dispossession, the value of the expropriated property must be assessed according to the personal and subjective characteristics of the expropriated party. The compensation awarded to the expropriated person must therefore always be assessed from the angle that is most advantageous to him or her.[36]
In order to establish the value of the expropriated property, it is first necessary to determine its best and most profitable use, i.e., [translation] “the use which, at the time of the appraisal, confers on the immovable the highest value either in money or in the pleasure and/or convenience of a place.”[37] The best and most beneficial use must meet various conditions and is sometimes subject to debate between the parties.
In the event that the expropriated person wishes to have his or her property assessed for a potential use that corresponds to a real estate development, as might be the case for a project proponent, developer or builder, the latter will have to demonstrate that the proposed development was physically, legally and financially feasible; this requires the submission of extensive evidence covering all aspects of the proposed development.
Subsequently, the value of the expropriated property may be established according to various valuation methods recognized in expropriation law; this often leads to complex and multiple debates, as evidenced by the case law delivered by the TAQ in expropriation matters.
2. Prejudice Directly Caused by the Expropriation
As for the second component of compensation, i.e., the damage directly caused by expropriation, the Supreme Court of Canada has made it clear that “no legitimate item of claim [should be] overlooked.”[38] This includes any damage caused to the residual part of the expropriated property. It also includes any business loss resulting from the expropriation process, whether before or after the notice of expropriation is issued, as long as causation is established.
The onus is on the expropriated party to demonstrate that it is entitled to compensation for any harm directly caused by the expropriation. The expropriated party must establish the nature of the prejudice for which it is claiming compensation, demonstrate the existence of a causal link between the prejudice and the expropriation and, lastly, communicate to the TAQ the elements that make it possible to determine the required amount. The evidence is administered on the balance of probabilities.
A Few Hypothetical Expropriation Law Cases
This introductory text does not, of course, allow for a detailed discussion of all the issues that may be raised in expropriation law. However, a few hypothetical cases will provide an idea of the level of complexity sometimes reached in expropriation cases.
A. Legality of Current Uses of the Expropriated Property
The question of the legality of uses is a recurring problem in expropriation cases. Indeed, the issue of whether the activities carried out on the expropriated property were lawful or tolerated at the time of the expropriation is often raised by the expropriating party in an attempt to question the causal link between the expropriation and the compensation claimed; this sometimes give rise to heated debate. The expropriated party must explain the history of the property’s use to demonstrate a probable continuity of operations at the time of expropriation.
Expropriation law first takes into account the actual reality that existed at the time of expropriation. The existence of a situation of illegality does not necessarily exclude the right to compensation. Evidence of a certain tolerance of the activities may establish a probable continuity of operations on the premises despite the alleged illegality. In other words, the expropriating party cannot take advantage of a situation of illegality that was tolerated at the time of the expropriation, since equity requires that the expropriated party be compensated according to what prevailed for its benefit before the expropriation.[39]
Similarly, a change of zoning to permit the planned use of the expropriated property after the expropriation cannot be set against the expropriated party for the purpose of calculating compensation. The use that was possible before such a zoning change may be considered for the purpose of establishing the best and most beneficial use of the expropriated property.[40] This rule of interpretation thus prevents an expropriating party from taking undue advantage of the adoption of a restrictive zoning that would have the effect of reducing the value of the expropriated immovable.
B. Soil Condition of the Expropriated Property
The soil condition of the expropriated property is an issue that must be raised in expropriation law. Certain specific rules apply in this case since it involves a forced dispossession that is imposed on the expropriated party in the context of expropriation.
In the presence of soil contamination, the question of costs and related liability for decontamination will depend on which use of the building is chosen as the best and most beneficial.
In the case of current use, insofar as there was no obligation to decontaminate the soil at the time of expropriation, decontamination is the responsibility of the expropriating party. The cost is not deducted from the compensation to be paid to the expropriated party, even if the expropriated party is the perpetrator of the contamination.[41] Everything depends on whether there is an obligation to decontaminate the soil at the time of expropriation.[42] On the other hand, when the best and most profitable use consists of developing or redeveloping the property, insofar as decontamination is a necessary step to allow such a project, the decontamination costs will normally be deducted from the value of the expropriated property.[43]
C. Prejudice Leading to the Relocation of a Business Affected by Expropriation
In some cases, the impact of the expropriation is such that the business affected by the expropriation is required to relocate to allow for fair and just compensation. This applies to both the owner and the tenant of the building. Serious evidence must be presented to demonstrate the need to relocate the business. Relocation to an already constructed building is first considered. A complete relocation of the business, involving the construction of new buildings on land to be acquired, is ultimately considered if no building can be found that can adequately accommodate the business targeted by the expropriation. Certain specific conditions must then be respected to allow the relocation of the business.[44] A coordinated effort between the parties is necessary to complete such an operation.
Conclusion
Far from constituting an exhaustive overview of expropriation law, this text aims rather to provide a general picture of what expropriation entails and to present some of the issues raised in these cases.
Future articles will expand on the issues that have been briefly discussed in this introduction.
[1] 8811571 Canada Inc. c. Procureure générale du Québec, 2018 QCCS 4554.
[2] 8811571 Canada Inc. c. Procureure générale du Québec, 2018 QCCS 4554, para. 57.
[3] 8811571 Canada Inc. c. Procureure générale du Québec, 2018 QCCS 4554, para. 58-63.
[4] Georges S. Challies, The Law of expropriation, Wilson Lafleur, 1963.
[5] Georges S. Challies, The Law of expropriation, Wilson Lafleur, 1963, p. 5.
[6] Georges S. Challies, The Law of expropriation, Wilson Lafleur, 1963
[7] Georges S. Challies, The Law of expropriation, Wilson Lafleur, 1963, p. 6.
[8] Georges S. Challies, The Law of expropriation, Wilson Lafleur, 1963.
[9] Georges S. Challies, The Law of expropriation, Wilson Lafleur, 1963.
[10] C.C.L.C. s. 407.
[11] C.C.L.C. s. 407.
[12] Régie des services publics, Bibliothèque et archives nationales du Québec, consulted online (http://pistard.banq.qc.ca/unite_chercheurs/description_fonds?p_anqsid=20140826080226285&p_centre=06M&p_classe=E&p_fonds=35&p_numunide=895699).
[13] Dorion, Guy and Savard, Roger, Loi commentée de l’expropriation, 1979, Presse de l’Université Laval, Québec, p. 1.
[14] For example, sections 11 and following of the Act respecting the Ministère des Transports (CQLR, c. M-28) allow the Minister of Transport to expropriate, on behalf of the government, its departments or agencies, any property that he or she deems necessary for the construction, improvement, enlargement, maintenance and use of public works or buildings, or to make them more accessible. Municipalities and cities can also expropriate in various ways and for various purposes. For example, they have a general power of expropriation for municipal purposes under section 570 of the Cities and Towns Act (CQLR, c. C-19) and 1097 of the Municipal Code (CQLR, c. C-27.1). In addition to this general power, municipalities and cities are empowered to expropriate in specific situations. For example, they can expropriate in connection with the application of a special planning program (SPP) under sections 85 and following of the Act respecting land use planning and development (CQLR, c. A-19.1). Sections 2 and 6 of the Act respecting industrial immovables e industrial properties by way of expropriation, which they may subsequently resell to third parties for industrial development purposes without being required to participate in such development.
[15] Francis GERVAIS, “La contestation du droit à l’expropriation et le contrôle judiciaire,” in Développements récents en droit municipal, vol. 294, Montreal, Éditions Yvon Blais, 2008, para. 28, 29, 71 and 221; Leiriao v. Val-Bélair (Town), [1991] 3 S.C.R. 349, 357; Hydro-Québec c. Radmore, [1991] R.J.Q. 1852 (C.A.), p. 1855-1856; Adams c. Québec (Procureur général), J.E. 94-1235 (S.C.), p. 3.
[16] Régie intermunicipale de gestion des déchets de la Mauricie v. Service spécial de vidanges Inc, J.E. 2002-2163 (C.A.) (motion for leave to appeal to the Supreme Court dismissed (S.C. Can., 2003-10-02), para. 47.
[17] For examples of enabling legislation, see note 5 above.
[18] Ville de Lorraine v. 2646-8926 Québec inc., 2018 SCC 35.
[19] Ville de Lorraine v. 2646-8926 Québec inc., 2018 SCC 35, para. 27.
[20] See Martin SHEEHAN, Nikolas BLANCHETTE and Nicolas-Karl PERRAULT, “Commentaire sur la décision Lorraine (Ville) c. 2646 8926 Québec inc. – Premier arrêt de principe de la Cour suprême du Canada sur le concept d’expropriation déguisée en droit québécois,” in Repères, August 2018, La référence, EYB2018REP2535.
[21] Sect. 32 of the Act respecting administrative justice, CQLR, c. J-3.
[22] CQLR, c. J-3.
[23] CQLR, c. J-3.
[24] In accordance with sections 39 et seq., EA.
[26] Sect. 40-41, EA.
[27] Sect. 41, EA.
[28] Sect. 46 and 53-53.17, EA.
[29] Sect. 69-89, EA.
[30] Sect. 73, EA.
[31] Sect.. 85-89, EA.
[32] Sect. 44-44.2, EA.
[33] Sect. 44, EA.
[34] See Nikolas BLANCHETTE and Marie-Ève BRASSARD, “Commentaire sur la décision Développement immobilier Grilli inc. c. Ville de Sainte-Anne-de-Bellevue – Les difficultés inhérentes au recours en contestation du droit à l’expropriation,” in Repères, October 2018, La référence, EYB2018REP2580.
[35] Rouyn-Noranda (Ville de) c. Motel Colibri (Rouyn) inc, 2010 QCTAQ 0451, para. 76. See also Québec (Régie de l’assurance maladie) c. Pierre Carignan, 2012 QCTAQ 06539, para. 66; Saint-Anselme (Municipalité) c. Bédard, 2006 CanLII 71978, para. 105 and 106 (QC T.A.Q.).
[36] Montreal (Ville de) c. Benjamin, J.E. 2005-31 (C.A.), para. 79.
[37] Standards of Professional Practice of the Ordre des évaluateurs agréés du Québec, p. 11.
[38] Toronto Area Transit Operating Authority v. Dell Holdings Ltd. [1997] 1 S.C.R. 32, para. 26.
[39] Québec (Procureur général) c. 2153-5364 Québec inc. 2008 QCCQ 2436, para. 88, citing with permission Corporation municipale de St-Henri de Lévis c. Provincial Hardwoods Inc. J.E. 85-937, p. 7-9 (C.A.).
[40] Charlesbourg (Ville) c. Desrochers, 1996 CanLII 6485 (QC C.A.); Laval (Ville) c. 3402045 Canada Inc. 2016 CanLII 54177 (QC T.A.Q.).
[41] See in particular Chambly (Ville de) c. Pierre Vollering, 2018 QCTAQ 01255; Ville de Terrebonne c. 9056-6084 Québec inc. 2014 QCTAQ 0580; Ville de Saint-Jean-sur-Richelieu c. 9092-9340 Québec inc. 2014 QCTAQ 08306, aff’d (2015) QCTAQ 03434; Boucherville (Ville de) c. 9221-8247 Québec inc. 2014 QCCQ 12604.
[42] See sections 31.51, 31.53 and 31.54 of the Environment Quality Act, CQLR, c. Q-2 and Schedules I, II and III of the Land Protection and Rehabilitation Regulation, CQLR, c. Q-2, r. 37.
[43] See in particular 9092-9340 Québec inc. c. St-Jean-sur-Richelieu (Ville de), 2016 QCCQ 10040, aff’d (2017) QCCS 4832;Québec (Procureur général) c. Pièces d’autos de Montréal-Nord inc. 2015 QCCQ 319; Ville de Châteauguay c. Les Investissements Fard Ltée, [2005] T.A.Q. 524; Blainville (Ville) c. Chouinard, [2003] No. AZ- 50199720 (T.A.Q.) Ville de Gatineau (Hull) c. Douvilar inc. [2003] Q.T. 1253; Ville de Sainte-Thérèse c. Miller, [2001] T.A.Q. 594.
[44] Spencer ltée c. Laval (Ville), 1987 CanLII 845 (QC C.A.) and Val-Bélair (Ville) c. Leiriao, 1995 CanLII 4714 (QC C.A.).
