On June 18, 2024, in its decision in 2024 QCCA 804 | Ville de Saint-Bruno-de-Montarville c. Sommet Prestige Canada inc. (available in French), the Court of Appeal (the “Court”) ruled for the first time on the impact of the new legislative framework applicable to the infringement of property rights under the Act respecting land use planning and development[1](the “Act”), and ordered the Superior Court to review the merits of a claim for an indemnity for disguised expropriation in light of the Act’s new section 245.
By changing the circumstances under which owners are entitled to an indemnity, these recent legislative amendments to the Act are expected to modify existing legal principles surrounding the infringement of property rights and disguised expropriation by municipal authorities.
Background
The respondent developers own a large wooded property near Mont-Saint-Bruno National Park in the territory of the appellant municipality,and wanted to build a large number of homes there. To bring the project to fruition, the parties engaged in negotiations and made a number of undertakings. An agreement to develop infrastructure was reached, and the municipal administration endorsed the project.
However, the arrival of a newly elected municipal council in 2013 resulted in many amendments being made to municipal regulations. These changes led the respondents to consider any residential development on their property as impossible to achieve. They then filed a claim for damages to claim an indemnity for disguised expropriation and an application for judicial review to challenge the legality of the new binding and prohibitive regulatory provisions.
Trial Decision
The Superior Court dismissed the application for judicial review, as it considered the time it took for the respondents to institute their proceedings was unreasonable. However, it recognized that the constraints imposed by the municipal regulations were such that they prevented any reasonable use of the respondents’ property, which amounted to disguised expropriation, as defined in the case law. As such, the judge found that the respondents were entitled to an indemnity under general law.[2]
The Court’s Analysis
After the appeal was filed and the Court granted leave to appeal, the Québec government amended the legislation by adding sections 245 to 245.6 to the Act. The purpose of these new provisions is to govern a municipal administration’s obligation to indemnify owners who are expropriated as a result of a measure adopted under the Act. The Court therefore decided to review the application of section 245 of the Act rather than addressing the grounds of appeal.
Section 245 provides that the performance of an act provided for in the Act creates no obligation to indemnify under the Civil Code of Québec even where a right of ownership is infringed, as long as a reasonable use of the immovable is still possible. The law provides that for the infringement of property rights to be warranted, it must be deemed that reasonable use of the immovable is still possible. Such infringement will be deemed to be warranted in situations such as where it is intended to protect an environment of “high ecological value.” The legislator specifies that the provision is declaratory, which means that the Court must analyze the effect of this addition to the law in the case at hand.
Declaratory Nature of Section 245 of the Act
The Court began by setting out the scope of declaratory provisions, under which lawmakers can essentially impose how the law is to be interpreted. The Court further pointed out that declaratory provisions are retroactive and intended to apply immediately. Under the new provision, the legislator was setting aside case law principles that previously applied with regard to indemnification following the performance of an act provided for in the Act, which principles had been applied by the trial judge.
The parties acknowledged that the provision was retroactive in scope, but interpreted its effects differently. Notwithstanding the views of the parties, the Court emphasized that declaratory provisions have an immediate effect on pending cases, including appeals. Such provisions have a retroactive effect and apply to ongoing proceedings as if they had always been part of the existing legislation. This case was therefore subject to the new regime under section 245 of the Act.
Retroactive Effect of Section 245 of the Act
Given that the new section 245 of the Act is retroactive, the Court considered the trial court’s findings to have been nullified, as they had been based on the previous law and on a now incorrect analytical framework.
The trial judge had found that the regulatory measures left the respondents’ property with [translation] “no reasonable use” and warranted indemnification. However, he had reached that conclusion without considering the key concepts of the new legislative framework. Under the newly applicable concept of “high ecological value,” the appellant may not have to indemnify the respondents. If the property was considered to be of high ecological value, the infringement of the right of ownership could be warranted. In such a case, the property would be considered “susceptible of reasonable use” within the meaning of the Act, which would deprive the respondents of any indemnification available under general law.
Because the concept of high ecological value is not defined in the Act, the Court considered that it could not rule on the indemnification aspect of the case. It therefore chose to set aside the findings of the trial court’s judgment, which had found that the situation was one of disguised expropriation, so that the Superior Court may reassess its decision under the new legal framework of section 245 of the Act.
Significance of This Decision
Without clearly setting out how section 245 of the Act will apply, this decision remains a concern for real estate developers and landowners alike. It shows how the retroactive application of the provision seemingly creates substantial limits to the awarding of any indemnification following an expropriation under the Act.
As of now, only owners whose land is confiscated by public authorities under those circumstances covered by section 245 of the Act will be entitled to an indemnity. This also applies retroactively to pending cases. It will be very interesting to see how this case is decided by the Superior Court, as it will have to address the application of the new provision and clarify the concept of “high ecological value.” This entire situation is certain to have repercussions on real estate and municipal law, and there is a very good chance that this case could once again be brought before the Court of Appeal.
Don’t hesitate to contact the authors if you have any questions about how this decision or section 245 of the Act can affect you or your business.
