The concept of disguised expropriation in Québec law is not new; the first decisions of interest on this subject date back to the 1960s. Many texts and legal writing have also been written on this subject in recent years. It is, therefore, not our intention to prepare an exhaustive overview of the case law relating to disguised expropriation. Instead, the authors chose to focus their analysis on the Supreme Court of Canada’s (the “SCC”) decision in the case of Lorraine (Ville) v. 2646-8926 Québec inc. and subsequent case law.
As shown by abundant case law on the subject, disguised expropriation is still fascinating today and the guidelines for defining it do not appear concrete. The SCC’s decision in Lorraine (Ville) v. 2646-8926 Québec inc. is a perfect example of this, since in our opinion, it eases the criteria for making a determination of disguised expropriation.
The most recent decisions rendered on this subject after the Lorraine decision, for the most part, question the zoning regulations adopted by municipalities, which must be adjusted in accordance with the government’s guidelines on urban planning. The principles of sustainable development are now advanced, and particular importance is given to the conservation of certain environments, particularly in order to curb and better control real estate development. The implementation of these new guidelines is not without consequence for landowners who see their property rights being annihilated for the benefit of the collective interest, which is said to be greater than their own.
The exercise proposed in this text is divided in three sections. First, the authors provide context by conducting a summary review of the leading decisions rendered prior to Lorraine (Ville) v. 2646-8926 Québec inc. Secondly, the authors will present the lessons learned from the Lorraine decision, and analyze later important decisions rendered in order to validate the extent to which these lessons have been followed by the lower courts. The last section will be devoted to the authors’ comments with regard to post-Lorraine case law analysis.
Disguised expropriation: a review of this concept in case law
The legal basis for this remedy (article 952)
The concept of disguised expropriation stems from the right of ownership and article 952 of the Civil Code of Québec (“CCQ”). This article provides the following:
“952. No owner may be compelled to transfer his ownership, except by expropriation according to the law for public utility and in return for a just and prior indemnity.”[1]
This protection of the right to property echoes the protection that is also conferred on this right by section 6 of the Charter of Human Rights and Freedoms, namely:
“6. Every person has the right to the peaceful enjoyment and free disposal of his property, except to the extent provided by law.”[2]
Obviously, the right to property is not absolute and is subject to certain constraints.
Expropriation is an exceptional and excessive power under civil law depriving the owner of their property. The right to expropriate must therefore be authorized and specifically provided for by law. It must always be interpreted strictly and restrictively in favour of the expropriated party.
In Québec, the expropriation procedure is governed by the Expropriation Act (CQLR, c. E‑ 24) (the “EA.”) The EA provides for various regulations and procedures that apply in a situation of expropriation, but does not provide for the power to expropriate as such. The power to expropriate is embedded in various statutes, depending on which authority has the power to expropriate, if any.
An expropriation commences when a notice of expropriation is issued against an expropriated party. The notice of expropriation is the starting point for an expropriation process, which will proceed according to the regulations and procedures set out in the EA.
Generally speaking, expropriation is defined as “the power of a public authority to deprive a property owner of the enjoyment of the attributes of his or her right of ownership.” Since the exercise of this power has serious consequences for owners, it is strictly regulated and can only be exercised for public purposes and in return for fair compensation.
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 considered a disguised expropriation, e.g., a de facto expropriation.
The concept of disguised expropriation has existed for a long time in Québec law and has been refined in each particular case that comes before the court. This concept, which has already inspired many authors, refers to an undue and excessive restriction of the right of ownership by the public authority, without any compensation being paid to the person subjected to it, while providing a correlative beneficial interest for the public authority in question.
The SCC noted in Lorraine that “[b]ecause of the importance attached to private property in liberal democracies, the exercise of the power to expropriate is strictly regulated to ensure that property is expropriated for a legitimate public purpose and in return for a just indemnity.”
Disguised expropriation is therefore a unique concept, with equally unique cases of application. It aims to balance the power between owners and public bodies (often municipal) in situations of gross injustice that amount to an abuse of power, and that do not necessarily stem from bad faith or malicious intent.
Let us now review a few leading decisions rendered by the Court of Appeal of Québec that have left a mark on case law in matters of disguised expropriation over the last fifty years.
Landmark Decisions prior to Lorraine
Sula c. Duvernay (Cité de), [1970] C.A. 234
In 1970, in the frequently cited case of Sula c. Duvernay (Cité de), the Court of Appeal of Québec examined the issue of municipal zoning authority. The effect of the by-law was to change the buildings in question from a “residential zone” to a “park” only zone. The Court wrote [translation]:
“The board thus has the power to ‘prescribe [...] the use of any building’ that is within the zones it has created. What did the board do in this case? By zoning Sula’s building as a park, it claimed to be allowing public use of the land. It did not prescribe the use that Sula could make of the property. It forbade its use. They have no more right to their land than any other person. It is unthinkable that the legislature intended to allow a municipality, under the guise of a zoning by-law, to expropriate Sula’s land without compensation. [...] A by-law that does not allow an owner any use of their land is not a zoning by-law, but an expropriation.”
[Our emphasis]
Consequently, the Court of Appeal overturned the trial decision and annulled the municipality’s by-law. The Court of Appeal emphasized the absence of permitted use of the land, thus stripping the owner of the attributes of the right of ownership. It also held that the result was that the owner [translation]: “has no more right to their land than any other person.”
This decision has subsequently been cited several times by the courts.[3]
Montréal (Ville) c. Benjamin, J.E. 2005-151(C.A.)
In this 2005 case, the Court of Appeal of Québec had to consider a decision made on November 5, 2003, by the Québec Superior Court, which had ruled that the appellant had disguisedly expropriated the respondent’s land, and ordered it to pay the respondent compensation for the value of the land, in addition to reimbursing the taxes paid since the expropriation.
The Facts
On November 5, 1965, Benjamin acquired a 55,000-square-foot lot. The land is situated in a zone where industries are allowed. In 1970, Côte St-Luc adopted a new zoning by-law restricting uses and, since 1979, the by-law only allows for parks, public squares, municipal buildings, libraries and museums in the area where the land is located. On May 16, 1988, Côte St-Luc adopted the borrowing by-law number 1970 in order to obtain the necessary funds for the development of Collins Park.
As part of the park’s development, Côte St. Luc built a fence around the park that was part of Benjamin’s property, installed a streetlight and built a pathway that encroached a few feet onto the property. The city also installed posts with signs indicating the location of the park without excluding Benjamin’s land.
In 1990, Benjamin, who visited his property approximately every seven or eight years, noticed the presence of the fence.
Analysis
In this case, the Court of Appeal found that, in theory, the City’s arguments were well founded in that an action to rescind a by-law is the appropriate remedy for unduly restrictive zoning. The Court was of the opinion that Benjamin had not exercised his remedy in a timely manner and that, therefore, in principle, he should not win his case and the City’s appeal should be allowed.
However, the Court specified that the facts of this case were so specific that the intervention of the Superior Court was justified due to the City’s abusive behaviour, and the fact that the dismissal of Benjamin’s appeal would have led to an absurd result and would have created a serious injustice against him.
For the past 14 years, the City had been using Benjamin’s land with full knowledge of the facts. The latter was of the opinion that it was the citizen’s responsibility to take steps in having his property rights respected. The Court concluded that such conduct on the part of the public administration was unacceptable.
In fact, due to the regulations in force, the City was the only entity that could use the land. The Court therefore completed its analysis by explaining that a city cannot take over a citizen’s property without compensating them. Nor can it place the citizen in a position where they’re obliged to surrender their property to the city without fair consideration. In the particular circumstances of this case, the Court concluded that the first judge was correct in determining it as a disguised expropriation.
This 2005 ruling by the Court of Appeal has been cited several times by the courts.[4] It remains a landmark case that was adopted and explained by the SCC in Lorraine. In paragraphs 37 and 46 of Lorraine, the SCC explains and quotes with approval from the Court of Appeal in Benjamin, which had sanctioned the public body on the basis of payment of compensation for disguised expropriation. The SCC reminds us of the distinction that must be made between this action for payment and an appeal for judicial review, which seeks instead the annulment or unenforceability of the contested regulation:
“[37] In my opinion, these errors likely resulted from a misreading of Benjamin, a case, in which the Quebec Court of Appeal had held that, even though the plaintiff had not brought a direct action in nullity to remedy the alleged disguised expropriation which he considered himself to be a victim of, it was open to him to bring an action to claim an indemnity (para. 47-62). An action to annul the zoning by-law, the usual remedy in such circumstances, would probably have been dismissed for being out of time. Unlike the instant case, therefore, Benjamin did not involve an action to have a by-law declared null or inoperable, nor did it involve the exercise of the Superior Court’s power of review as a court of original general jurisdiction. The duty to act within a reasonable time in filing an action to claim an indemnity was thus unrelated to the availability of the action, as the trial judge had in fact properly noted (Benjamin v. Montréal (Ville), 2003 CanLII 33374 (Que. Sup. Ct.) at para. 40).
[…]
[46] That being said, the outcome of this appeal has no bearing on the conclusions being sought by the Company that were not dealt with by Emery J., including the one relating to the claim for an indemnity for disguised expropriation. Even where a plaintiff no longer meets the conditions for applying for judicial review, he or she still has the right, in appropriate cases and if the claim is supported by the evidence, to seek payment of an indemnity for disguised expropriation (Benjamin (C.A.), at paras. 47-62; J. Hétu and Y. Duplessis, L. Vézina, Droit municipal : Principes généraux et contentieux (2nd ed. (loose-leaf)), vol. 1, at p. 8577).”
Wallot c. Québec (Ville de), 2011 QCCA 1165
In 2011, the Court of Appeal had the opportunity to revisit the concept of disguised expropriation in Wallot c. Québec (Ville de).[5] It proposed a definition that has since been repeatedly adopted by the courts.[6] This will be discussed later in this article.
The Facts
The Saint-Charles River and the lake of the same name are the main sources of drinking water for the residents of the greater Québec City area. Having been informed in October 2006 of the proliferation of cyanobacteria in certain parts of the lake, the respondent was required to take the necessary action to counter this scourge. The City had, therefore, adopted a by-law requiring shoreline property owners to create a permanent shoreline buffer strip of 10 to 15 metres of vegetation on their property.
The appellants, shoreline property owners who objected to the program, filed a motion to have the by-law declared null and void and unenforceable, arguing that the implementation of the vegetation strip had caused them to lose the useful use of their property, and that the by-law amounted to a confiscation of their property or a disguised expropriation without compensation.
Analysis
After setting out the applicable principles, the Court of Appeal specified that for a by-law to be considered as having the effect of a disguised expropriation, it must be considered to amount to an absolute denial of entitlement to the right of ownership, e.g., making its use impossible, or result in an absolute confiscation of the land. In such a case, a by-law that does not allow an owner to use part or any of their land is not a zoning by-law, but an expropriation. According to the Court of Appeal, the question of the municipality’s good or bad faith, or its “fault,” then becomes entirely secondary, if not irrelevant.
According to the Court, the judge was correct in concluding that the City had the authority to pass a by-law for protecting the source of drinking water and that it was within the limits of the enabling authority conferred by the Act. The constraints imposed by the by-law are not so prohibitive as to constitute a disguised expropriation, since there is no reasonable removal of use of their property in this case.
Although this case has since been cited by the courts, it was not adopted by the SCC in Lorraine, unlike Benjamin. This fact must be considered in the analysis of the concept of disguised expropriation in Québec law. More on this later in this article.
Lessons Learned from Lorraine
In Lorraine (Ville) v. 2646-8926 Québec inc. [7], the SCC ruled for the first time on the concept of disguised expropriation in Québec law. The debate centred on the obligation to act within a reasonable time frame in the context of a challenge to a municipal by-law on the grounds of disguised expropriation.
The SCC ruled that an application to invalidate a by-law must be made within a reasonable time frame in the context where a disguised expropriation arose from a zoning by-law which constitutes an abuse of regulatory power entrusted to the public bodies in question. This obligation to act within a reasonable time frame also applied to an application of unenforceability, since this type of application is also a form of recourse that falls within the discretionary powers of the Superior Court, which allows a solution to remedy the abusive nature of the regulation in question, if necessary.
In this case, the 16-year period that had elapsed from the date of entry into force of the contested regulation, where the plaintiff was also presumed to have knowledge of the impugned regulation, was not considered to be a reasonable amount of time.
On the other hand, although the Court decided that an action for annulment or unenforceability was no longer possible, it specified that compensation for expropriation could still be claimed in such circumstances.
The Facts
In 1989, the plaintiff 2646-8926 Québec inc. (the “Owner”) had acquired lot 2 322 934 of the land registry of Québec, registration division of Terrebonne (the “Land”), in the City of Lorraine (the “City”). At that time, the lot was located in a wooded area, and the regulations in effect allowed for the construction of residential units.
In 1991, the City passed a by-law under which more than half of the plaintiff’s land was included in a conservation zone where the only permitted uses were for public recreation and leisure activities (the “By-law”). The adoption of the new By-law had the effect of removing the uses for which the Land was acquired in 1989, namely residential development.
It was only 10 years later, in 2001 at the earliest, that the plaintiff became aware of the existence of the by-law, which essentially annihilated the uses from which the lot benefited at the time of its acquisition. In addition, at that time, the Owner had noticed that the City had built infrastructure on the Land, including culverts, stairs, fences and public benches, to allow for hiking.
In 2003, the Owner mandated an urban planning firm to try to convince the City to modify the By-law to allow residential development again. One year later, the City informed the Owner that it did not intend to amend the By-law.
Despite receiving the City’s response with respect to its position on amending the By-law, it was not until 2007 that the Owner finally initiated legal proceedings by instituting an action to nullify the by-law. The Owner’s action also sought the removal of the infrastructures installed by the City on the Land but did not include a request for indemnity.
In 2010, the Regional County Municipality of Thérèse-de-Blainville (the “RCM”) adopted a by-law protecting the conservation zone created by the City.
In 2012, the Owner amended its proceedings to add a conclusion claiming compensation for disguised expropriation under article 952 of the CCQ.
Previous Decisions
The SCC allowed the appeal brought by the City and the RCM with respect to the decision rendered by the Québec Court of Appeal on November 7, 2016.
The Court of Appeal had ruled that the zoning amendment by-laws adopted by the City could not be annulled as the time that had elapsed between their coming into force and the court action was too long. However, the Court of Appeal was of the opinion that the zoning amendment by-laws should be declared unenforceable against the Owner, since they constituted a disguised expropriation. Therefore, the Court of Appeal had allowed the Owner’s appeal of the Superior Court’s judgment rendered on July 7, 2015, by the Honourable Justice Benoît Emery.
In the first instance, the Superior Court had rejected the Owner’s application for nullity of the by-laws, ruling that it had not been brought within a reasonable time frame, whether by retaining the date of entry into force of the by-law according to the presumption of legal knowledge (16 years) or the date of the Owner’s actual knowledge of the existence of the by-law (5 years).
The City’s appeal raised the following question: can a by-law that is challenged by a party as abusive be declared unenforceable against it if the party had not filed its application within a reasonable time frame? The SCC was called upon to answer this question in a context involving the concept of disguised expropriation developed by the case law in recent years.
In its action, the Owner claimed a series of remedies to compensate for the City’s abusive conduct, namely (i) the nullity or unenforceability of the challenged by-law, (ii) the payment of compensation and (iii) the reimbursement of taxes paid.
The parties agreed to bring a motion to sever the proceedings, which was accepted by Judge Emery. The latter decided to first determine the validity of the municipal regulation. Therefore, the decision under appeal concerned only this first aspect.
The Trial Decision
In his decision, Judge Emery noted that an action to nullify a by-law must be brought within a reasonable time frame, and that all parties are presumed to be aware of the existence of a by-law from the moment it is adopted.
It considered that both the 16-year period that elapsed between the adoption of the Regulation and the institution of the action; and the 5-year period that elapsed from the owner’s actual knowledge of the existence of the Regulation could not be considered reasonable within the meaning of the case law. The judge also pointed out that the owner had never visited the premises at the time of the purchase of the land, had never looked into the City’s intentions with respect to urban development, and had never inquired about past or future changes to the zoning regulations.
Based on the evidence, Judge Emery concluded that the owner had not instituted his action in nullity within a reasonable time frame and therefore dismissed the application.
Judgment of the Court of Appeal
In a unanimous decision rendered by Justices Julie Dutil, Mark Schrager and Étienne Parent, the Court of Appeal allowed the landlord’s appeal, which raised the following issues:
- Did the trial judge err in deciding that the application for nullity was not brought within a reasonable time frame?
- Were the challenged by-laws so unreasonable that they must be considered ultra vires of the City’s jurisdiction, in which case, according to the Owner, their invalidity could be invoked at any time?
On the first issue, the Court of Appeal held that the trial judge had not erred in finding that an application for nullity must be brought within a reasonable time frame after the adoption of a by-law and that the owner was presumed to have knowledge of the by-law as soon as it was adopted.
With regard the second issue, the Court of Appeal, citing Benjamin, concluded that the City had exercised its power to adopt zoning by-laws in an abusive manner that had the effect of removing all commercial value from the owner’s Land and that such an injustice could not be tolerated.
Considering [translation] “the passage of time and the interest in preserving stability of the laws for the benefit of citizens who could have acted in consequence of these regulations”[8], the Court of Appeal decided that it was not appropriate to annul the by-laws and that it was therefore more appropriate to declare them unenforceable against the owner.
The Supreme Court of Canada decision
The remedy in nullity or inoperability of a zoning by-law, the claim for damages and the limitation period of the remedy
First, the SCC recalls that “[b]ecause of the importance attached to private property in liberal democracies, the exercise of the power to expropriate is strictly regulated to ensure that property is expropriated for a legitimate public purpose and in return for a just indemnity.”[9]
It then discusses the two remedies available to an owner who is the victim of a disguised expropriation, namely an application for nullity or inoperability of the by-law and an application for payment of compensation corresponding to the value of the expropriated property under article 952 of the CCQ. Whereas an application for nullity on the ground of abuse of authority is based on the general power of control or on supervision of the Superior Court with respect to the acts of the administration provided for in article 34 of the Code of Civil Procedure,[10] such an application must be instituted within a reasonable time frame.[11]
However, this is not an absolute rule. Thus, it should be remembered that the obligation to act within a reasonable time frame does not apply in cases where nullity is sought on the basis of lack or excess of jurisdiction, in accordance with the SCC’s teachings in Immeubles Port Louis ltée v. Lafontaine (Village).[12]
On the other hand, the SCC teaches us that a disguised expropriation, “insofar as it occurs in the guise of a zoning by‑law,” constitutes an abuse of regulatory power, as opposed to an absence or excess of jurisdiction. Therefore, an owner who intends to contest a by-law that places him in a situation of disguised expropriation must bring his action within a reasonable time frame. Following this reasoning, the Court of Appeal erred in relying on Benjamin to conclude that the City’s abuse of power exempted the owner from the obligation to act within a reasonable time frame.[13]
In this case, the SCC was of the opinion that the Superior Court was right to reject the owner’s application for nullity on the grounds of lateness by taking into account the presumed date of legal knowledge, namely June 23, 1991, the date upon which the Regulation was adopted. Nevertheless, the five-year delay between the date of the owner’s actual knowledge of the Regulations existence and the institution of his action could also have justified the rejection of the application.
The SCC held that the Court of Appeal had erred in distinguishing between the invalidity of a regulation and its unenforceability, considering that these are both forms of remedies within the discretionary exercise of the Superior Court’s inherent power to address the abuse of a regulation. Thus, the obligation to act within a reasonable time frame applies equally to an application for nullity and to an application for inoperability.[14]
In the SCC’s view, the Court of Appeal’s error resulted from a misreading of Benjamin, where the Court of Appeal had held that it was possible for the plaintiff to claim compensation for expropriation despite the fact that he had not filed an application for nullity, which would likely have been dismissed for lateness.[15] Considering that the claim for compensation does not call into question the Superior Court’s power of review, the obligation to act within a reasonable time frame does not apply to such a claim.
In conclusion, the SCC noted that the owner’s claim for nullity was, in any event, pursuant of the limitation period of general law as set out in the Civil Code of Québec. Under the Civil Code of Lower Canada, an application for nullity was subject to a limitation period of 30 years. In 1994, following the coming into force of the Civil Code of Québec, such a claim is subject to the 10-limitation period provided for in article 2922 of the CCQ. Considering that the owner is deemed to have had knowledge of the by-law as of its adoption on June 23, 1991, the owner’s request for nullity was therefore out of time at the time it was filed in 2007.
Consequently, the owner’s request for nullity had to be rejected, without consequence as to the conclusions of the action on which the judge of first instance had not yet ruled. Indeed, the SCC reiterated that even if the plaintiff no longer met the conditions for judicial review, “he or she still has the right, in appropriate cases and if the claim is supported by the evidence, to seek payment of an indemnity for disguised expropriation.”[16]
The SCC therefore indicates that two remedies are available to the aggrieved owner. The Court stated that the severance of proceedings granted by the trial judge “attests to the fact that the […] request for a declaration of nullity was made in the alternative to” the application for payment of expropriation compensation.[17]
Accordingly, we are of the opinion that the SCC confirms that the aggrieved owner may pursue either remedy, which is consistent with the general civil law principle that the choice of remedy rests with the creditor, in this case the owner who is the subject of a disguised expropriation.
The concept of disguised expropriation: a review of the criteria for analysis?
With respect to the concept of disguised expropriation, we believe that the SCC proposes a new and simpler definition than the one it proposed at common lawin Canadian Pacific Railway v. Vancouver (City).[18]
In that case, the SCC stated that in order to successfully invoke the concept of disguised expropriation, the expropriated party had to prove (i) that the public organization had acquired a beneficial interest in the property that was subject to the disguised expropriation and (ii) the removal of all reasonable uses of the property.
The SCC has defined the concept of disguised expropriation in Québec law as a fact that a municipal administration restricts the enjoyment of the attributes of the right of ownership of a property to such an extent that the owner of the property is de facto expropriated:
“[27] It is settled law that a ‘disguised’ expropriation, insofar as it occurs in the guise of a zoning by‑law, constitutes an abuse of the power of regulation conferred on the body in respect of such matters [...]. Where a municipal government 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, it therefore acts in a manner inconsistent with the purposes being pursued by the legislature in delegating to it the power ‘to specify, for each zone, the structures and uses that are authorized and those that are prohibited’ (Act respecting land use planning and development, s. 113 para. 2(3)).”
The SCC’s use of the word “limits” suggests, in our view, that the SCC favours a definition of disguised expropriation whereby a so-called disguised expropriation may arise from an act that has the effect of limiting, reducing or diminishing the enjoyment of the attributes of the right of ownership over property, without requiring that the act prevent or prohibit any possible enjoyment of the attributes of the right of ownership. In our view, the SCC’s use of the word “limits” allows us to set aside the stricter approach of the lower courts, which required a demonstration that the effect of the act was to render any use of the immovable impossible to the point of destroying the right of ownership.
Second, the SCC’s reference to the “enjoyment of the attributes of the right of ownership” confirms that the effect of the act must be analyzed with respect to all the attributes of the right of ownership, namely usus (use), fructus (right to enjoy the fruits of the property) and abusus (right to dispose of the property). Therefore, it is not possible to consider disguised expropriation solely from the point of view of the possible uses or non-uses of the property. For the sake of clarity, the ability to enjoy the fruits of ownership and the ability to dispose of it are components that must be analyzed, in addition to the right to use it. In fact, more often than not, the determining factor for owners remains that of being able to collect the fruits (fructus) of the property, and the SCC states that this factor must be analyzed by the courts in situations of disguised expropriation.
Finally, the third criterion that emerges, in our opinion, from the examination proposed by the SCC, informs us that it is from the point of view of the holder of the attributes of the right of ownership that we must determine whether or not we are in a situation of de facto expropriation. This way of establishing the examination is consistent with the general principle in expropriation of “value to the owner” according to which one must put oneself in the shoes of the expropriated party to establish the compensation to which it is entitled.
Case Law After Lorraine [19]
As mentioned in the previous section, the Lorraine decision was the first occasion on which the SCC ruled on the concept of disguised expropriation in Québec law. Although this decision may have left some people wanting more, given its conclusions, which are essentially limited to the notion of a reasonable time frame, it is nonetheless important because it opens the door, in our opinion, to a certain easing of the notion of disguised expropriation previously defined by the Court of Appeal in Wallot.
The following lessons can be drawn from this landmark judgment:
- Expropriation is a restriction on the enjoyment of the attributes of the right of ownership, the exercise of which is strictly regulated by law to ensure that such a process is carried out “for a legitimate public purpose;”
- When expropriation is carried out for ulterior motives (in particular to avoid paying compensation to the owner of a property), outside the framework provided for by law, and the restrictions on the enjoyment of the attributes of the right of ownership are such that the holder is de facto expropriated, the expropriation is said to be disguised;
- In our view, this clarification by the SCC is a modification of the definition of disguised expropriation provided by the Court of Appeal in Wallot, which requires, in a municipal regulatory context, that the [translation] “regulatory restriction be equivalent to an absolute denial of the exercise of the right of ownership or to a true confiscation of the immovable,” while specifying that [translation] “limitations that tend to neutralize only part of that right without depriving the holder of reasonable use of his property will not be deemed abusive[20];”
- In a situation of alleged disguised expropriation, two remedies are available to the plaintiff: (1) the nullity/inoperability remedy (2) or the claim for compensation for disguised expropriation;
- An action for invalidity/inoperability of a regulatory act for abuse of authority within the meaning of Port Louis Buildings[21]must be brought within a reasonable time frame (and not for lack or excess of jurisdiction). This remedy is subject to the supervisory and control powers of the Superior Court, the exercise of which remains discretionary;
- An action for nullity of a regulatory act is also subject to a 10-year limitation period provided for in article 2922 of the Civil Code of Québec;
- An action for nullity that fails due to delay does not constitute a rejection of an action for recovery of compensation for disguised expropriation to the extent that the evidence supports such a claim.
In light of the lessons learned from Lorraine, we will attempt to validate the extent to which these lessons have been followed and applied by lower courts.
Judgments
Habitation Germat inc. c. Ville de Lorraine, 2018 QCCS 5781[22] and 2019 QCCA 542
It should be noted at the outset that Habitation Germat is one of the few cases since Lorraine where the Court has found a disguised expropriation in favour of the plaintiff. Note, however, that this decision has been appealed. The outcome of this case is pending.
The Facts
In this case, the plaintiffs claimed compensation of $10,015,000 from the City of Lorraine for the disguised expropriation of their land acquired in the early 1990s. Located in the Grand Coteau forest, these lands had been zoned conservation land for only a few months prior to their acquisition by the plaintiffs. Considering the type of zoning in effect, almost all uses are strictly prohibited. The severity of the zoning regulations is not disputed by the city, as the only uses that can be carried out on the property are hiking, cross-country skiing and nature observation (almost in its entirety, as only a portion to the north had retained its residential zoning).
In this case, the plaintiffs learned of the new regulations only a few weeks after acquiring the land (the zoning change was made on June 23, 1991, whereas the land was acquired in September of the same year). Moreover, the plaintiffs had not only verified the regulations before signing the option to purchase, but also prior to signing the agreement to acquire the land, the latter verification having been done in the spring of 1991. Following this observation, several exchanges between the plaintiffs and the representatives of the city took place in order to find a solution to the zoning change and allow the real estate development intended by the plaintiffs. These exchanges also concern the implementation of the development project.
These various exchanges continued up until 2007 due to the publication of two public notices of reservation on the plaintiffs’ lands, which will expire four years later. Following a referendum, the city finally decided, in the fall of 2011, to expropriate only the northern portion of the land for which residential use was still permitted.
Over the years, the plaintiffs had participated in several meetings with the city during which the latter was reassuring about the zoning that would have been modified with the sole purpose of better controlling the residential development that will be put back in place later on. Talks therefore followed their course: submission of a formal request for a zoning change, submission of various plans, etc. In April 2002, a meeting was held at City Hall with the new mayor, the councillor responsible for urban planning, Mr. Dale-Vedove, the technical director and the representatives of an organization wishing that the city acquire the land comprising the Boisé du Grand Coteau, which includes the plaintiffs’ land. In spite ongoing exchanges with the city concerning the plaintiff’s development project of the plaintiffs, they were never informed of this meeting nor of all the others that took place with this organization. While the project was still in progress, the plaintiffs were informed by the city on August 30, 2004, that a new development plan could have an impact on the time required to amend the zoning by-law in order to reinstate it for residential use.
After years of exchanges and meetings, the plaintiff’s project did not go through. Councillor Dale-Vedove, who was responsible for urban planning in 2002 and whose election campaign was based on promises to protect the Boisé du Grand Coteau, was elected as the new mayor in November 2005.
The judge highlighted certain passages in the testimony of the city’s former director general, Mr. Leclerc, who summarized the situation as follows:
- When he took office in 2004, the city intended to reinstate residential use on the plaintiffs’ land, but that intention changed when Councillor Dale-Vedove took office in November 2005;
- Discussions with the plaintiffs were still ongoing in 2006, although the City never informed the plaintiffs of its intention to acquire their land;
- Mr. Leclerc had no choice but to delay the plaintiffs’ project, as he had not received instructions from the mayor who had specifically asked him, “not to prioritize this file” and to wait for his directives.
Although surprised when they received the reserve notice, the plaintiffs understood that the city would proceed with the expropriation of their property. Finally, no offer would be made to the plaintiffs to acquire their land. In the meantime, the new development plan was adopted by the RCM, which provided that the plaintiffs’ land would always be used for residential purposes. As a result, the city made three requests to the Ministry of Municipal Affairs for an extension of time to adopt its compliance by-laws. At the trial, Mayor Dale-Vedove admitted that the requests for extension of time were related to the steps taken by the city with the RCM in order to convince the latter to include an orientation in the plan for the protection of the Grand Coteau Forest. In early 2012, the plaintiffs filed their appeal following the commencement of the expropriation procedure.
The Parties’ Claim
In this case, the plaintiffs are not seeking to have the regulations declared void or unenforceable against them. Rather, the action requests that, considering the city’s failure to reinstate the residential zoning, which would allow them to use their land or to expropriate them in due form, the plaintiffs asked that the Court recognize that they were expropriated without compensation and that such compensation be paid to them accordingly. For its part, the city claimed that the plaintiffs were not entitled to compensation, since their remedy was not commenced within a reasonable time frame and proposes that the remedy be time-barred. The only issue raised in this case is therefore the statute of limitation.
Analysis of the Legal Issues
Before undertaking the analysis of the issue of prescription, the judge ruled on the type of action taken by the plaintiffs. In the judge’s opinion, the facts of the case are unequivocal: the situation corresponds to a situation of disguised expropriation. In fact, the zoning by-law, which was highly prohibitive, constituted a disguised expropriation, a characterization which, according to the judgment, was not debated by the parties.
In support of his motives, the judge referred to the definition given by the Court of Appeal in Wallot. Despite the strictness of the criteria qualifying a situation as disguised expropriation, the judge was of the opinion that the facts put in evidence amply supported such a qualification [translation]:
“[15] In Wallot c. Québec (Ville de), the Québec Court of Appeal specified that in order for a regulation to be considered a disguised expropriation, a regulatory restriction must amount to an absolute denial of the exercise of the right of ownership, i.e., one that makes its use impossible, or of a true confiscation of the immovable. In such a case, the by-law that does not allow owners to exercise any use on their land. It is not a zoning by-law, but an expropriation. The Court’s earlier decisions in Sula c. Duvernay (Cité de) and Montréal (Ville) c. Benjamin are to the same effect.
[16] This is the case here. This point was not argued at the hearings as the City Solicitor admitted that this characterization of the regulation was not up for debate.”
[References omitted]
The judge then pointed out that in such a case (disguised expropriation), the aggrieved owner had two remedies, either the cancellation of the by-law or the request for compensation based on the full value of their property. In this case, the plaintiffs having chosen the second option, the judge must therefore verify whether 1) the evidence supports such a claim and 2) whether the recourse was indeed initiated within the applicable limitation period. As the proceedings were severed at trial, the quantum of compensation would be determined at a later date.
Considering the fact that the judge characterized the prohibitive settlement as a disguised expropriation, the only question that remains is that of the limitation period. Once the short six-month limitation period is set aside (s. 586 of the Cities and Towns Act), the judge concludes that the limitation period applicable to a claim for compensation for disguised expropriation is the one provided for in article 2925 of the CCQ, i.e. three years.
In his analysis, the judge reiterated the importance of not confusing the notion of reasonable time with that of the limitation period applicable to the action for compensation. Following the lessons learned from Benjamin[23] and Lorraine[24]the judge was of the opinion that the higher courts recognized that, to the extent that there is evidence to that effect, the limitation period may not begin to run if [translation]:
- “The citizen had not acquired the interest to pursue;”
- “The complainant had not yet really realized that the municipality would not correct the situation by acquiring the expropriated building.”
The judge also went back to the notion of presumption of knowledge regarding the applicable regulations in administrative matters, for example in an action seeking the nullity or unenforceability of a regulation. On the other hand, while recalling that in order to support a claim for compensation for disguised expropriation, the plaintiff must be aware of the fault and its damage, the judge concluded that it would be wrong to apply the presumption of knowledge regarding the regulations in such a context [translation]:
“[46] Since in a claim for compensation for expropriation, as in terms of a claim for damages, the plaintiff must be aware not only of the fault but also of the damage, the Court is of the opinion that it would be wrong to set the starting point of any extinctive prescription period (here, it is three years) automatically at the day the prohibitive by-law comes into force by applying to it the presumption of knowledge of the by-laws set out in Wendover-et-Simpson (Corporation municipale) c. Filion. While it is true that this presumption of knowledge applies in administrative matters (application for nullity or unenforceability of a regulation), it cannot apply to a claim for compensation for expropriation when the citizen does not know that they have, in practice, lost one or more of the attributes of the right of ownership as a result of the regulation. They are then not able to know that they have suffered a prejudice. This also responds to the argument raised by Lorraine that the plaintiffs were precluded from taking their recourse because they acquired their land when they were presumed to have known the content of the regulations in force at the time of the purchase, in September 1991.
[47] Thus, the starting point of the extinctive limitation period shall be established by taking into account the particular circumstances of the case, including whether or not the plaintiff had an interest in filing their or her claim and whether or not they had an objectively analyzed belief that the potentially detrimental situation would be corrected. The commencement of the limitation period is the day on which the plaintiff becomes objectively aware of the reality of such damage.”
[References omitted]
After careful analysis of the factual framework, the judge was of the opinion that, despite the years that had passed, the plaintiffs were only interested to sue in the late fall of 2011, the day the referendum was announced, where it was stated that only a portion of the plaintiffs’ land would be expropriated. Although they recognized that the city had never committed to amending the zoning by-law, the judge found that the plaintiffs did not have sufficient interest to pursue the matter, considering the numerous exchanges with the city that [translation] “allowed them to have a reasonable hope” that the zoning would eventually be amended and would allow them to go ahead with their project. He therefore concludes that the action is not time-barred, as the quantum of compensation has yet to be determined.
Authors’ comments
This case is currently under appeal. That being said, we would like to note that the judge referred to the definition of disguised expropriation set out in Wallot, which predates the definition proposed by the SCC in Lorraine. We are of the opinion that the determination of a disguised expropriation must be made considering the SCC’s teaching in paragraph 27 of the Lorraine decision.
However, the judge did apply the Lorraine decision regarding the concept of limitation periods. It also sheds some light on the distinction that must be made between the reasonable time limit applicable to an action in nullity and the limitation period applicable in the case of a claim for compensation for disguised expropriation.
Dupras c. Ville de Mascouche, 2020 QCCS 2538
The Facts
The plaintiff, Ginette Dupras (“Dupras”), owned a wooded lot located in the City of Mascouche (the “Land”) since 1976. It is a wooded lot in the middle of a forest, which is neither fenced nor staked and is difficult to locate.
In fact, it is an investment that Dupras intended to sell when she retired and she did not visit the Land for several years, as she lived at a good distance from it.
However, some residents of the Town of Mascouche (the “Town”) used the Land for outdoor activities since there was no fence limiting passage on the Land. Over the years, cross-country skiing and snowshoeing trails as well as a bicycle path were created.
In 2006, the Town changed 70% of the zoning of the Land from residential land to conservation land, which resulted in the restriction of possible uses on the Land.
Dupras learned of this change two years later, in 2008. In these circumstances, she attempted to negotiate with the City with respect to the possibility of rezoning the Land or of the City acquiring the Land. Exchanges between the parties on this subject lasted several years.
In 2014, Dupras noted that a bike path and trails ran through her Lot.
In 2015, as part of the discussions between the parties, Dupras had the Land appraised and requested that the City acquire it for the appraised amount of just over $4.5 million.
In March 2015, the City passed by-law 834-3 allowing dog walking on one of the trails going through the Lot, which opened to the public on April 15, 2015.
On February 8, 2016, the City informed Dupras that it did not intend to purchase the Land. Also, the City acknowledged the denunciation of the encroachment of the bike and the dog paths and responded to Dupras by specifying that the City intended to remedy the encroachment by closing and prohibiting their access. The City informed Dupras that it also intended to relocate the bike path and rehabilitate the Land but offered to acquire the parcel of Land over which the bike path ran, without any admission, to avoid costs.
In late March 2016, Dupras sued the City for disguised expropriation and claimed compensation for the value of the appraisal obtained from the Land as well as damages. She was also seeking reimbursement of her out-of-court expenses, as she considered the City’s actions to be abusive.
The City contested this, arguing that Dupras’ action is time-barred. It also stated that it acted in good faith and in the public interest in protecting the forest cover. Furthermore, it added that the zoning did not prevent all reasonable uses on the Land and that, therefore, there is no disguised expropriation.
Analysis of Legal Issues:
The limitation period
The Court concluded that the remedy is not time-barred since Dupras objectively and reasonably believed that a remedy was unnecessary due to the negotiations with the City, until the City informed her that it did not intend to acquire the Land in February 2016.
This implies that prior to the City’s February 8, 2016, letter, Dupras had reasonable grounds to believe that she would not suffer damages. Furthermore, the Court stated that in this case, prior to February 8, 2016, there was no basis to pursue a remedy against the City because City officials made representations to Dupras that the zoning would be changed or that there was reasonable possibilities that the City would purchase the Land.
Thus, the Court determined that the commencement of the limitation period was February 8, 2016, the date on which the City clearly indicated to Dupras that it did not intend to purchase the Land.
Disguised Expropriation
The Court concluded that the Land had been the object of a disguised expropriation by the combined effect of the restrictions resulting from the adoption of the zoning by-law limiting its use, as well as the appropriation of the Land by the City as a public space for the population.
First, the Court reminded us that in order not to constitute a disguised expropriation, the zoning by-law must not deprive the owner of any [translation] “reasonable use” of her land.
Next, the Court cited Benjamin to demonstrate that the adoption of a restrictive zoning by-law with an appropriation of land can lead to the conclusion of a disguised expropriation.
In this case, Justice Harvie explained that the conservation zoning seriously limited Dupras’ property rights. In addition, the zoning limits apply to the entire lot and do not allow for any construction. Also, in the present case, the Court emphasized the fact that the zoning by-law does not allow for a wide range of recreational and tourism businesses, contrary to the decision in Municipalité de Saint-Colomban c. Boutique de golf Gilles Gareau inc.
Moreover, similar to the Benjamin decision, the City had appropriated the Land as if it were part of its surrounding park and had done so for many years. The City maintained the trails that ran through the grounds, marking and signalling them. The City mapped the surrounding park, including the trails running through the grounds and named the trails. It encouraged the public to use the grounds as a public park, and it carried insurance to cover activities on the trails, including those that cross the grounds. For these reasons, the Tribunal concluded that the City’s behaviour constituted an abuse of rights and that the Land was subject to a disguised expropriation.
The Court also concluded that the expropriation of the Land took place at the time of the zoning by-law’s adoption in 2006 and that, consequently, the compensation must be assessed from that time.
In this regard, Judge Harvie stated that in matters of disguised expropriation, the case law established that the compensation is calculated from the time it was realized. In Benjamin, the Court of Appeal specified [translation]:
“[65] The disguised expropriation, according to the reasoning of the first judge, and with which I agree, arises both from the restrictive zoning and from the execution of the work done on Benjamin’s land. It is at this last moment that the disguised expropriation became a reality.”
In this case, the Tribunal is of the opinion that the elements leading to the conclusion of the disguised expropriation coalesced when the zoning of the Land was changed in 2006.
Authors’ Comments
At the time of writing, it should be noted that the time limit for appeal had not yet expired. However, it is interesting to note that this recent decision of the Superior Court adopted the conclusions reached in Habitation Germat c. Ville de Lorraine on the issue of limitation periods and reiterates the importance of taking into account the particular circumstances of each case. Here again, the Court concluded that “the starting point of the statute of limitations will be the day on which the plaintiff becomes objectively aware of the reality of such damages.”[25]
Municipalité de Saint-Colomban c. Boutique de golf Gilles Gareau inc., 2019 QCCA 1402 (application for leave to appeal to the Supreme Court of Canada dismissed, 2020 CanLII 26457 QC S.C.C.)[26]
This case also involves a zoning by-law, the application of which would cause the disguised expropriation of the plaintiff’s land. At first instance, the judge found that the city had acted in bad faith and that the plaintiff’s land had been de facto expropriated as a result of the application of the zoning by-law. An award of $3,998,900 was therefore granted.
On appeal, the Municipality of Saint-Colomban challenged not only the findings that the city had acted in bad faith, but also the remedy chosen by the trial judge, namely the payment of nearly $4 million in expropriation compensation rather than the nullity of the by-law.
The Facts
The plaintiff, Boutique de golf Gilles Gareau inc., acquired several lots in 1987 on which, some of these lots, a golf club was located. The golf course was expanded in 1988 and a proposal to build a residential complex around the golf course was presented to the city in 1994. A parkland assignment agreement and memoranda of understanding for municipal works were signed and allowed the applicant to obtain its subdivision permits for 8 of the 10 development phases of the project. The different phases of the project were planned and approved in consideration of the presence of the golf course.
In 2013, the golf industry lost its appeal. The plaintiff therefore submitted a subdivision plan for the land on which the golf course was located, which provided for the development of approximately 100 lots. In July of the same year, the council members met to discuss the new subdivision project. While everyone thought that residential use was not permitted, they found out that this use was indeed permitted and that it was the use of the golf course that was not. Following this finding, the Town undertook the necessary steps to prohibit residential use on the land in question and allowed it for golf course use. As part of the process of amending the zoning by-law, the Town received a notice of non-conformity with the orientations and objectives of the RCM’s urban development plan. A second regulation was therefore adopted, which was declared at this time, to be in conformity with the plan. The second project foresaw a [translation] “park for general recreation” use. The regulation comes into force on November 27, 2013. For its part, the applicant filed an updated project plan as well as permit applications to carry out phases 1 and 2 of its project. They received an unfavourable recommendation from the Planning Advisory Committee on December 4 and the Municipal Council refused the project on December 10.
The plaintiff brought an action in mandamus, declaratory judgment, nullity and damages. The proceeding was last amended in May 2017 to include alternative findings that asked the court to declare that the regulation caused them prejudice and that they pay $1,428,900 in compensation accordingly.
Trial Decision
The judge concluded that the zoning by-law prohibiting residential use on the plaintiff’s land was the result of political manoeuvring. Then, relying on Boyd Builders Ltd., he was of the opinion that the plaintiff had a prima facie right to the subdivision permits at the time of their application and that the onus was on the city to prove its good faith. Considering that no such evidence had been presented, the judge concluded that the city had acted improperly.
The Appeal
The appeal raised three issues, but only the issue of disguised expropriation will be addressed in this text.
In this regard, the Court of Appeal noted two fundamental errors which, in its view, required its intervention. First, the judge was of the opinion that the by-law resulted in a disguised expropriation of the plaintiff’s land since the restrictions it contained resulted in the loss of its potential value. Therefore, this would constitute a [translation] “denial of property rights without compensation.”[27] In this regard, the Court of Appeal recalled that the decrease in value of an immovable caused by restrictions on its use cannot affect the validity of a zoning by-law and reiterated the criteria applicable in such a situation:
“[47] The courts have thus recognized that, in order to be considered illegal, a regulatory restriction must amount to an ‘absolute denial’ of the exercise of the right of ownership or to a ‘true confiscation’ of the property. Limitations which tend to prevent only a part of this right without depriving the owner of reasonable use of his property would not be considered abusive.”[28]
In the Court’s opinion, since [translation] “true confiscation” must be assessed in light of, among other things, the previous uses of the property, the loss of potential value is not sufficient to find disguised expropriation.
The second error noted by the Court of Appeal was that the trial judge did not appear to have considered which uses were permitted in the area in which the land was located. In fact, before concluding that the exercise of the right of ownership was denied, the judge should have verified whether the restrictions imposed by the zoning by-law prevented any reasonable use of the land by the plaintiff. Following a detailed analysis of the grid of uses and standards contained in the zoning by-law, the Court of Appeal concluded that the by-law did not deprive the plaintiff of any reasonable use of their land since the use for golfing, which had been in use on the land for some fifty years, was still possible, as were some thirty other uses in the Recreational and Tourism Trade class.
These two errors were sufficient for the Court of Appeal to conclude that there was no disguised expropriation and to overturn the trial judgment.
Meadowbrook Groupe Pacific inc. c. Ville de Montréal, 2019 QCCA 2037 (application for leave to appeal to the Supreme Court of Canada dismissed, 2020 CanLII 34907 QC S.C.C.)
This judgment raised several issues, including that of disguised expropriation, but only the latter will be discussed below. In this case, the plaintiff Meadowbrook Groupe Pacific inc. appealed a judgment refusing to acknowledge its offer to transfer land to the City of Montreal in exchange for payment of an indemnity in the amount of $44 million. The main criticisms of the city were as follows:
- A breach of its duty to act fairly;
- An institutional fault on its part;
- Its actions in processing its permit application constituted a disguised expropriation.
The Facts
The plaintiff had been planning a real estate development project on the land since 2006. Several exchanges took place between the applicant and the city concerning this project. In 2010, the city informed the plaintiff that the realization of this development project was not a priority for it, especially since the costs associated with it were very high due to the fact, among other things, that the land was practically landlocked. Despite this, the applicant filed a second version of their project in February 2012 and a third one in December 2012 in addition to a permit application. As no agreement on the municipal work had been reached, the city suspended the applicant’s permit application.
Analysis of the Legal Issues: Disguised Expropriation
The plaintiff argued before the Superior Court that their property was the object of a disguised expropriation by the city because of various breaches it had allegedly committed, namely the obligation to act diligently and in good faith in its dealings with the plaintiff’s proposed development project. The plaintiff also alleged a breach of procedural fairness. The bad faith and breach of procedural fairness were allegedly demonstrated by the city’s refusal to sign a municipal works agreement and its failure to disclose a cost study prepared at the city’s request and relied upon by the city in making its decision.
In the judge’s opinion, the issue of disguised expropriation was simply non-existent, as the city had not appropriated the plaintiff’s land. It is important to note that at the time of the commencement of the proceedings in 2013, the development scheme had not yet been adopted, and it was still possible to carry out a development on a smaller scale than that proposed by the applicant. However, such a project was never presented to the city by the plaintiff.
Moreover, the judge specified that although this possibility no longer existed following the adoption of the RCM plan and the interim control by-law, the land could continue to be used as a golf course, as it had been since its acquisition in 1970. Other recreational uses were also permitted.
On appeal, the plaintiff claimed that the disguised expropriation resulted instead from [translation] “the City’s actions in processing their permit application which constituted a serious limitation on their property rights.”
The Court of Appeal’s response to this argument is clear [translation]:
“[29] As stated earlier by this Court, ‘[…]to be considered illegal, a regulatory restriction must amount to an “absolute denial” of the exercise of the right of ownership or to a “true confiscation” of the property. Limitations that tend to prevent only part of that right without depriving the holder of reasonable use of his property will not be deemed abusive’ (Wallot c. Québec (Ville de), 2011 QCCA 1165, para. 47).”
In fact, the uses permitted at the time of the dispute were residential, certain commercial uses and indoor sports facilities. A golf course had been located there since 1930. Accordingly, the Court of Appeal concluded as follows [translation]:
“[31] Here, the zoning by-law in effect at the time of the permit application allowed for several uses. It is neither this by-law nor the City’s actions that prevented the development of this land, but a combination of the particular characteristics of the property and the two projects submitted to the City. Indeed, Meadowbrook was aware of these difficulties, having become the owner of the land following the failure of the previous owner’s attempt to develop the land. The Petite Rivière and Projet Deux projects were rejected, and no to all construction. Meadowbrook had not submitted any other project.”
As the plaintiff has not shown any error in the trial judge’s assessment of the facts, the appeal was dismissed on this point as well.
Authors’ Comments
In this case, the plaintiff’s grounds for a disguised expropriation argument were outside the framework established by the case law in this area, making the claims perhaps a little more difficult to defend.
The plaintiff had to face a number of challenges, and the issue of the city’s discretion in signing agreements for municipal works remained a difficult one to dismiss.
Ville de Québec c. Rivard, 2020 QCCA
In this case, the appellant appealed a judgment of the Superior Court which partially granted the respondent’s claim and awarding it compensation of $1,240,000 for disguised expropriation.
The Facts
On August 8, 2002, the respondent acquired the property in litigation. He then obtained permission from the city to demolish the residence presently there and rebuild one on the same site. This project required a minor variance because the residence was set back from the street. In 2011, the city passed a by-law prohibiting the construction of houses on the back lot of the existing one in the area where the property is located. The application for a minor variance to permit moving the driveway was filed in March 2012, the ultimate goal being to subdivide the lot in order to build two residences. In June 2012, the Planning Advisory Committee recommended that the minor variance be allowed, but the Town Council disagreed with this recommendation. It was therefore agreed to prepare a notice of intention to amend the zoning by-law with a freeze effect in order to [translation] “prevent any new construction on the properties,” including that of the respondent, to “create a new zone within the existing zone corresponding to the two properties concerned” and “to provide for a minimum setback of approximately 4,500 m2 for a lot in this zone.” Consequently, the examination of the request for minor exemption was suspended.
The respondent was not informed of the change in the regulations until November 2012 and understood at that time that his project could not proceed. The zoning by-law came into effect on December 20, 2012.
Analysis of Legal Issues
In the Superior Court, the respondent asked that the zoning by-law be annulled or declared unenforceable against it and that the resolution adopting it be annulled. An alternative claim was for compensation for disguised expropriation. It should be noted that the respondent was asking for an award for damages rather than a declaration that the settlement is void or unenforceable. The Court of Appeal also noted that the respondent had never offered to transfer the land to the city in consideration of compensation claimed and specified that it no longer owned the land in question.
The trial judge recognized the city’s discretion to grant a request for a minor variance as well as a notice of intent of up to 150 days. It could not interfere with the exercise of such power. Then, based on their analysis of the evidence, they concluded that the adoption of the by-law and its impact [translation] “do not constitute reasonable outcomes of the decision-making process of the members of the municipal council.” In this regard, the Tribunal noted that the respondent was not kept informed of the effects of the Notice of Proposal and was prevented from meeting with the actual decision makers to make its case. As for Councillor Lortie, she allegedly showed bad faith by making falsely reassuring statements that the judge considered to be inconsistent with reality. For these reasons, the judge allowed the claim for compensation.
The Court of Appeal identified several errors in the judge’s reasoning. First, the city had the right to legislate as it did, and the fact that the value of a property is revised downward is not grounds to seek invalidation. Also, the fact that a zoning by-law applied to only one of the lots does not make it discriminatory insofar as [translation] “the municipality is acting in good faith and in the public interest, or with a view of generalizing the conditions in place in a given area.” The Court reiterated the application of the presumption that the municipality must act in good faith and in the public interest.
With respect to the councillor’s bad faith, the Court stated that it was important to distinguish it from the city’s bad faith, which was not apparent from the adoption of the notice of intention or its regulations.
The Court then returned to the principle of procedural fairness, which does not apply to the adoption of a zoning by-law initiated by the municipality itself. In fact, municipalities are not required to give reasons for their decision to pass a by-law.
Finally, the Court of Appeal was of the opinion that since the criteria for disguised expropriation had not been met, the judge should not have awarded compensation in this case. In this regard, the Court, referring to Lorraine, returned to the alternative nature of the remedies available to anyone claiming to be the victim of a disguised expropriation, namely, an application to set aside the regulation in question or the payment of compensation corresponding to the value of the confiscated property. Thereon, the Court referred to the need for the regulatory restriction to constitute a [translation] “suppression of any reasonable use of the land, a denial of the exercise of the right of ownership or even a true confiscation or appropriation of the immovable.”
The Court of Appeal noted in this regard that the trial judge did not consider what constitutes a reasonable use of the land following the adoption of the by-law. In fact, the respondent’s land retained the same uses as it had before the regulation came into force. Since the city had never attempted to appropriate or use the land and there was not a complete prohibition or confiscation of the land in question, the Court of Appeal concluded that the judge could not order the city to pay compensation for disguised expropriation.
9193-4463 Québec inc. c. Ville de Mont-Saint-Hilaire, 2020 QCCS 1585[29]
This last case that we wish to address in this text does not deal with the concept of disguised expropriation. However, it is still of some importance, since it is because the regulation is declared unenforceable that the subsidiary issue of expropriation is not addressed.
The Facts
In the early 1990s, the city decreed a 10-year moratorium such that the A-16 zone, which includes the land in dispute, would remain agricultural. Once this period expired, no further action was taken, and as such, nothing happened on the land in question.
In 2012, the Communauté métropolitaine de Montréal (“CMM”) adopted the Plan métropolitain d’aménagement et de développement (“PMAD”), which provided for urban development planning based on the principles of sustainable development. The densification of certain sectors is therefore part of the PMAD. Following the adoption of this urban planning tool by the CMM, an exercise to ensure compliance with the major orientations set out in it was undertaken. During this exercise, the RCM must ensure that the RCM’s urban planning and development plan is consistent with the PMAD. Subsequently, said local municipalities were to carry out the same exercise and ensure that their by-laws comply with the plan.
The PMAD adopted in 2012 imposed minimum density thresholds that are applicable outside of TOD (transit-oriented development) areas, thus applicable to the A-16 zone in question.
The judge noted that these new constraints imposed by the CMM were not in keeping with the will of the citizens of Mont-Saint-Hilaire and that the town understood this. Based on this observation, the city adopted its urban plan (by-law 1230), its zoning by-law (1235) and its by-law on conditional uses. The city also planned to adopt a Special Planning Program (SPP) for the A-16 zone, thereby suspending all development in this area until the SPP was adopted.
Certain uses are indeed authorized in the A-16 zone, but does not allow for the application of minimum residential density thresholds adopted in the RCM’s “Urban Development Plan.”[30] It also appeared from the evidence that the city intended to approach the RCM to obtain a waiver of the minimum density threshold for the A-16 zone because of certain [translation] “physical or natural constraints, or exceptional environmental or heritage characteristics (clear reference to section 1.8.3 of the Complementary Document).”
A committee was then formed (CAZA-16 committee) whose role was to work on the future of the A-16 zone. As of April 2018, the city was still awaiting recommendations from its Committee. The Committee was criticized, in particular, for its lack of transparency in relation to the work it was carrying out. In this regard, the judge noted the lack of transparency and opacity of the Committee, which was content to provide selective information at a late stage.
As of August 2018, the RCM provided the applicable timeline for a request to waive the minimum density thresholds for the A-16 zone. As of December 15, 2019, the PPU had still not been adopted and none of the steps required to apply for the aforementioned exemption had been initiated.
Analysis of Legal Issues
In the judge’s opinion, by-laws 1230 (urban plan) and 1235 (zoning by-law) were unenforceable against the plaintiffs, essentially for the following reasons [translation]:
“[237] As for the uses permitted in the A-16 zone, the rules thus established by the City are unreasonable, unjustifiable, unjust and in bad faith, to use the terminology of Kruse v. Johnson cited by the Supreme Court in the Catalyst decision.
[238] To paraphrase Catalyst itself, the treatment of the A-16 zone in by-laws 1230 and 1235 would not have been adopted if the municipal council had acted reasonably. In fact, these regulations stray from the purpose of the legislative framework now governing the densification of construction within the urbanization perimeters.
[239] Moreover, an analysis of the process leading to the adoption of by-laws 1230 and 1235, as well as the content of the by-laws with respect to residential construction, indicates an unreasonable approach by the City.
[241] First, the prolonged freeze on all residential development in the A-16 zone thwarts the intention of the legislator, the CMM and the RCM to concentrate new construction within the urbanization perimeters.
[…]
[256] Second, if the City intends to lower the minimum density threshold of 21 dwellings per hectare in the A-16 zone, it is aware of the Roadmap to achieve this: complying with section 1.8.3 of the Supplementary Document.
[257] The evidence indicated that it was in response to the City’s lobbying that the RCM inserted section 1.8.3 into its Complementary Document in 2014, specifically in response to the A-16 controversy.
[258] The City thought it would be easy for it to avail itself of the exception in Article 1.8.3. The RCM countered with an attitude more in keeping with the intent of the legislator.
[259] The City believed that it would easily prove that the A-16 Zone had special environmental or heritage features. But Article 1.8.3 required that these characteristics be both special and exceptional.
[260] To date, the City is, unable to identify anything exceptional in the A-16 zone.
[261] This is, therefore, how the procrastination of the CAZA-16 committee must be interpreted, after 53 meetings spread over 36 months, when its initial mandate was supposed to be limited to one year.
[262] The City had not yet begun the RCM’s six step Roadmap, as it knew it would be in vain.
[263] Instead, the City fell back on another option: inertia. It falsely claimed that it was actively working on a solution, when in fact it was fully satisfied with the status quo, which continued until its PPU was designed, discussed, adopted and implemented.
[264] Third, the City was behaving in an abusive, arbitrary and discriminatory manner towards the plaintiffs, who were treated as pariahs while paying municipal taxes on properties whose development was capriciously stopped.
[265] The municipal council has, since January 2017, put the fate of the A-16 zone in the hands of a municipal committee infiltrated by citizens opposed to the development, who filter the information disclosed to other taxpayers.”
[References omitted]
Finally, as for the subsidiary claims relating to disguised expropriation, the judge determined that he could not rule on them since the main claims had been granted in part.
Principles Retained from Post-Lorraine Jurisprudence and Findings
Since the Lorraine decision of July 2017, it must be noted that very few judgments dealing with disguised expropriation have been handed down to date (we will ignore here the decisions in which such an argument, although raised by the plaintiff, was dismissed outright by the Court). In some of the cases not reported in this text, the trial on the merits has not yet taken place. We will therefore have to keep an eye on the fate of these matters.[31]
As mentioned above, our analysis of Lorraine leads us to an understanding of the definition of the concept of disguised expropriation that is much more nuanced and flexible than proposed by the Court of Appeal in Wallot, which has been cited frequently by the courts since Lorraine.[32]
In the vast majority of the cases examined, the few references to Lorraine relate more to the question of a reasonable time frame and the application of the statute of limitations. Thus, the tempering of the definition of disguised expropriation by the SCC had never been repeated to date. In light of recent decisions rendered by the Superior Court and the Court of Appeal, we have not observed any changes that would indicate a certain flexibility of the concept of disguised expropriation, or of the notions used to define its contours, whereas the SCC was careful in proposing a more flexible definition of this concept in Lorraine.
The trend in case law, which requires almost absolute forfeiture of the property in order to obtain a finding of disguised expropriation, is obviously very serious for landowners caught in such situations. Despite all the emphasis on public interest, this position is all the more surprising, given that our country’s highest court recalls in the first paragraph of its decision “the importance attached to private property in liberal democracies.”[33] The position taken by the courts seems to lead to a result where the rights of owners are likely to be overlooked in favour of the protection of the public interest and the principle of deference to public administrations, which would then enjoy a very broad discretionary power preventing any more critical examination of potential situations of disguised expropriation.
It will be important to see whether the debate over the very definition of the concept of disguised expropriation will be revived in the courts by highlighting the definition proposed by the SCC at paragraph 27 of the Lorraine decision.
This is not, of course, a criticism of the power of municipalities to legislate on urban planning, nor of the appropriateness of exercising such a power. Rather, it is a question of balancing that power with the importance that must be attached to private property in a liberal democracy like ours based on the rule of law. This balance can only be ensured by a judicial review that is sufficiently critical in allowing the sanctioning of cases where there is in substance a situation of disguised expropriation. The definition proposed by the SCC provides, in our view, the necessary flexibility to achieve this objective. The requirement of an absolute denial of the right of ownership as suggested by the Court of Appeal in Wallot seems to us, on the other hand, too radical to achieve such an objective.
It is important to note that the SCC, while careful to cite Benjamin with approval, did not cite Wallot in Lorraine.
It is also important to note that the SCC in Lorraine did not cite or incorporate Canadian Pacific Railway v. Vancouver (City)[34] a leading Canadian case at common law. In that case, the SCC stated that there were two tests to demonstrate a situation of disguised expropriation in cases of common law:
“[30] For a de facto taking requiring compensation at common law, two requirements must be met: (1) an acquisition of a beneficial interest in the property or flowing from it, and (2) removal of all reasonable uses of the property.” [citations omitted]
The stakeholder, the CMM, argued and requested that the Vancouver decision be recognized in Québec law as the reference for defining the concept of disguised expropriation.[35] This position was not accepted by the SCC. The definition proposed in paragraph 27 of Lorraine simply does not incorporate the two conditions set out in Vancouver. No reference is made to it at any point.
It should be noted that, despite the flexibility in the definition of the concepts in regards to disguised expropriation proposed in Lorraine, the lower courts still adhere to the lessons learned in Wallot, which refers to the Vancouver decision[36]although this common law case was not incorporated by the Supreme Court in Lorraine. Therefore, in our opinion, the appropriateness of referring to the Wallot judgment should be seriously reviewed.
Thus, an imbalance in policing of the kind we have observed in our analysis of the post-Lorraine case law is certainly of concern. When an owner’s property is formally expropriated, the rules governing such a process are very strict and ensure a certain protection for the citizen who does not choose the time of expropriation. The analysis that is then undertaken to determine the compensation to be paid puts the expropriated person at the heart of this process. The value sought is one of “to the owner” that takes into account their specific situation. When municipalities decide to use their power to zone or develop their territory rather than formally expropriate, we must ensure that even the most complex situations of disguised expropriation are denounced and sanctioned without reservation. The application of the concept of disguised expropriation by the courts must be able to adapt, in our opinion, to the increasingly varied cases that arise and that call into question the application of municipal regulations, which are themselves becoming more and more abundant and complex to apply.
Conclusion
As mentioned at the beginning of the text, the authors’ objective was to review the lessons learned from Lorraine (Ville) v. 2646-8926 Québec inc. and to validate the extent to which they were applied by the courts.
Several important elements emerged from the Lorraine decision, but the most important of these is the flexibility of the definition of disguised expropriation in Québec law found at paragraph 27 of the decision.
This flexibility represents a definite willingness to ensure that the rights of owners who are forced to live in such a situation are respected. Despite this, the trend in case law seems to be towards the strictest definition of the concept of disguised expropriation, which was not adopted by the Supreme Court in Lorraine. Let us hope that the courts will adopt a flexible approach adapted to the various cases in order to ensure a better balance between the public interest, on the one hand, and on the other, respect for the right to property, which remains at the heart of our Québec’s and Canada’s legal systems.
[1] Civil Code of Québec, R.S.Q., c. CCQ-1991, art. 952.
[2] Charter of Human Rights and Freedoms, CQLR, c. C-12, s. 6.
[3] See in particular: Dupras c. Ville de Mascouche, 2020 QCCS 2538, para. 107-110; Construction M.J.M. inc. c. Senneville (Village), 1990 CanLII 3062, para. 23; Boutique de golf Gilles Gareau inc. v. Municipalité of Saint-Colomban, 2017 QCCS 2689, para. 122; Habitations Germat inc. c. Ville de Lorraine, 2018 QCCS 5781, para. 15; 2646-8926 Québec inc. c. Lorraine (Ville de), 2016 QCCA 1803, para. 9; Montréal (Ville) c. Benjamin, 2004 CanLII 44591, para. 61; Shahmoon c. Kirkland (Ville de), 2013 QCCS 2386, para. 125; 9034-8822 Québec inc. c. Sutton (Ville de), 2010 QCCA 858, para. 49; Wallot c. Québec (Ville de), 2011 QCCA 1165, para. 47.
[4] See in particular: Dupras c. Ville de Mascouche, 2020 QCCS 2538, para. 111-113; Shahmoon c. Kirkland (Ville de), 2013 QCCS 2386, para. 66; Pillenière, Simoneau c. Ville de Saint-Bruno-de-Montarville, 2018 QCCS 488, para. 15; Fattal c. Montréal (Ville de), 2006 QCCS 3353, para. 90; 2646-8926 Québec inc. c. Lorraine (Ville de), 2016 QCCA 1803, para. 9; Habitations Germat inc. c. Ville de Lorraine, 2018 QCCS 5781, para. 40; Développements Vaillancourt inc. c. Rimouski (Ville de), 2008 QCCS, para. 83; Taylor c. Île-Cadieux (Ville de l’), 2012 QCCS 2126, para. 28; Boutique de golf Gilles Gareau inc. c. Municipalité de Saint-Colomban, 2017 QCCS 2689, para. 122; Wallot c. Québec (Ville de), 2011 QCCA 1165, para. 47.
[5] Wallot c. Québec (Ville de), 2011 QCCA 1165.
[6] See in particular: Alarie c. Ste-Anne-des-Plaines (Ville de), 2011 QCCS 7083, para. 35; 9016-4310 Québec inc. c. Shefford (Municipalité du canton de), 2012 QCCS 196, para. 156; Gaz propane Rainville inc. c. Granby (Ville de), 2013 QCCS 4104, para. 65; Astral Media Affichage c. Montréal (Ville de), 2016 QCCS 4541, para. 89; Yale Properties Ltd. c. Ville of Beaconsfield, 2017 QCCS 3692, para. 167; Habitations Germat inc. c. Ville de Lorraine, 2018 QCCS 5781, para. 15; Municipalité de Saint-Colomban c. Boutique de golf Gilles Gareau inc.,2019 QCCA 1402, para. 64; Meadowbrook Groupe Pacific inc. c. Ville de Montréal, 2019 QCCA 2037, para. 29; Ville de Québec c. Rivard, 2020 QCCA 146, para. 64; Ville de La Prairie c. 9255-2504 Québec inc, 2020 QCCS 307, para. 29; Ressources Strateco inc. c. Procureure générale du Québec, 2020 QCCA 18, para. 114; Ville de Montréal c. Astral Media Affichage, 2019 QCCA 1609, para. 99; Ville de Léry c. Procureure générale du Québec, 2019 QCCA 1375, para. 17; Lapara c. Montréal (Ville de) (Ahuntsic-Cartierville Borough), 2016 QCCS 680, paras. 65-66; Dupras c. Ville de Mascouche, 2020 QCCS 2538, para. 108.
[7] 2018 SCC 35.
[8] 2016 QCCA 1803, para. 16.
[9] 2018 CSC 35, para. 1.
[10] Code of Civil Procedure, CQLR, c. C-25.01, s. 34.
[11] 2018 CSC 35, para. 25.
[12] [1991] 1 S.C.R. 326, EYB 1991-67741, p. 342.
[13] 2018 CSC 35, para. 34.
[14] 2018 SCC 35, paras 35 and 36.
[15] 2018 CSC 35, para. 37.
[16] 2018 CSC 35, para. 46.
[17] 2018 CSC 35, para. 24.
[18] [2006] 1 S.C.R. 227.
[19] The authors focused their analysis on decisions involving disguised expropriation in a municipal context. For examples where the public authority is not a municipality and the plaintiff claimed to be a victim of disguised expropriation, see: Ressources Strateco inc. c. Procureure générale du Québec, 2020 QCCA 18, 2017 QCCS 2679 and Ville de La Prairie c. 9255-2504 Québec inc., 2020 QCCS 307.
[20] Wallot c. Québec (Ville de), 2011 QCCA 1165, para. 47.
[21] Immeubles Port Louis ltée v. Lafontaine (Village), [1991] 1 S.C.R. 326, 349: “A municipality must exercise its powers in pursuit of the purposes intended by the legislature. It taints its actions and decisions if it abuses its discretion. A municipal act done for an unreasonable or condemnable purpose or for a purpose not provided for by law is null. This illegality does not result from the violation of specific texts but derives from the limits imposed by the courts on the discretionary power of the administration and affects the substance of the contested decision since it is the reasons for the act that must be evaluated. This is how the courts will determine whether the act is fraudulent, discriminatory, unfair or in bad faith. In which case it will be qualified as an abuse of power and cannot be covered by the expiry of the three months required for specific remedies.”
[22] Note that this judgment was appealed by the city of Lorraine. Permission to appeal filed out of time frame was granted on March 25, 2019 (2019 QCCA 542).
[23] Montreal (Ville) c. Benjamin, J.E. 2005-151(C.A.).
[24] Lorraine (City of) v. 2646-8926 Québec inc, [2018] 2 S.C.R. 577.
[25] Habitations Germat inc. c. Ville de Lorraine, 2018 QCCS 5781, para. 47.
[26] For the trial judgment, see 2017 QCCS 2689.
[27] Boutique de golf Gilles Gareau inc. c. Municipalité de Saint-Colomban, 2017 QCCS 2689, para. 126.
[28] Wallot c. Québec (Ville de), 2011 QCCA 1165, para. 47.
[29] Note that this decision is under appeal: Motion for leave to appeal and Notice of Appeal, 2020-07-22 (C.A.) 500-09-028996-205. Motion to dismiss Appeal, 2020-07-27 (C.A.) 500-09-028996-205.
[30] For a full description of permitted uses, see paras. 35-41 of the judgment.
[31] Développements Pierrefonds inc. c. Ville de Montréal, 2020 QCCA 428 (motion for leave to appeal a judgment rendered in the course of proceedings). No decision on the merits of the case has been rendered. See also Développements Bedros inc. c. Ville de Longueuil, 2020 QCCS 893 (judgment on the application to split the proceedings). Again, the judgment on the merits has not yet been rendered.
[32] See in particular: Dupras c. Ville de Mascouche, 2020 QCCS 2538, para. 108; Ville de Québec c. Rivard, 2020 QCCA 146, para. 64; 170304 Canada inc. (Weed Man) c. Municipalité de la Paroisse de Sainte-Anne des-Lacs, 2020 QCCS 150, para. 140; Ville de La Prairie c. 9255-2504 Québec inc.2020 QCCS 307, para. 29; Ressources Strateco inc. c. Procureure générale du Québec, 2020 QCCA 18, para. 114; Desmarais c. Arrondissement de LaSalle, 2019 QCCS 5064, para. 19. Meadowbrook Groupe Pacific inc. c. Ville de Montréal, 2019 QCCA 2037, para. 29; Ville de Montréal c. Astral Media Affichage, 2019 QCCA 1609, para. 99; Municipalité de Saint Colomban c. Boutique de golf Gilles Gareau inc.2019 QCCA 1402, para. 64; Ville de Léry c. Procureure générale du Québec, 2019 QCCA 1375, para. 17; Yale Properties Ltd. c. Ville de Beaconsfield, 2019 QCCA 344, para. 25; Habitations Germat Inc. c. Ville de Lorraine, 2018 QCCS 5781, para. 15.
[33] Lorraine (City of) v. 2646-8926 Québec inc, [2018] 2 S.C.R. 577.
[34] [2006] 1 S.C.R. 227.
[35] See the brief submitted to the SCC by the CMM.
[36] See para. 53 of the Wallot decision.
