Constructive Expropriation - Lynch v. St. John's (City), 2016 NLCA 35

In Lynch v St. John's (City), 2016 NLCA 35, the Newfoundland and Labrador Court of Appeal heard an appeal of a decision denying permission to proceed with a ten-lot residential development. The refusal by the city had been upheld by the Trial Division of the court. The plaintiffs appealed the court's decision, arguing that the denial effectively amounted to expropriation without compensation.

The property of the Lynches was located on a watershed which had no “permitted uses” and only three discretionary uses, relating to agriculture, forestry and public utilities. After several meetings between the Lynches and City officials, the Lynches were verbally informed by the officials that the Lynches would not be allowed to develop the Property in any manner.

The City’s position was that the land must be kept “unused in its natural state”. The Lynches decided to force the issue by applying to develop a subdivision. This application sought permission to develop and requested a re-zoning of the property. The City wrote and advised that the Lynches’ application had been rejected The Lynches then commenced the action for a declaration that the property had been constructively expropriated.

The NL Court of Appeal cited the Supreme Court’s test in Canadian Pacific Railway v Vancouver for a de facto expropriation: 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.

The Court of Appeal found that the City had acquired the tangible benefit of a continuous flow of groundwater by taking away the Lynches’ beneficial interest in the groundwater. The Legislature and the City thereby ensured that the City acquired a continuing water-filtration-type benefit. The Legislature and the City purported to take away the Lynches’ right to appropriate the groundwater on their land and to give the City a beneficial interest in the Lynch property, consisting of the right to a continuous flow of uncontaminated groundwater downstream to the City’s water facilities.

The court went on to consider the second requirement of the test for a de facto or constructive expropriation, namely, whether all reasonable uses of the property had been removed. The court held that having the property rights flowing from a Crown grant, with virtually unrestricted rights to build and to appropriate and use groundwater, transformed to merely a right to keep the land “unused in its natural state,” resulted in virtually all of the aggregated incidents of ownership being taken away. All of the reasonable uses of the property were taken away and a compulsory taking, a de facto or constructive expropriation, resulted.

In the result, the court found that the Lynches’ property had been constructively expropriated, and that the Lynches have a right to file a claim for compensation with the city as though a notice of expropriation had been served under the Expropriation Act.

Article Source: Patterson Law Expropriation Blog

Full Case File: Lynch v. St. John's (City), 2016 NLCA 35

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