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Court Considers Authority's Obligation to Offer-Back Expropriated Lands to Owner

In a recent decision, 1739061 Ontario Inc. v. Hamilton-Wentworth District School Board, 2016 ONCA 210, the Ontario Court of Appeal considered the “offer-back obligations” of expropriating authorities  and an expropriated owner’s right of first refusal under the Expropriations Act (the “Act”), where lands are found to no longer be required for the purposes for which the property is expropriated. The decision also provides useful guidance on the interpretation of the “purposes” and “objectives” of an expropriating authority.

The appeal was brought by a landowner seeking to compel the expropriating authority to offer back a property on the grounds that the lands were no longer needed for the originally stated purpose of constructing and operating a secondary school and related amenities.  In 2011, the owner purchased the property from the School Board with the intention of redeveloping the former school site into a seniors centre. The School Board later decided to build a new centrally located school on the recently sold site and expropriated the property back from the owner in 2013. 

The design of the new school project evolved over time and in 2014 the School Board authorized its staff to implement a land swap with the City of Hamilton whereby a majority of the expropriated property would be exchanged for nearby City lands. The plan was that the City would use at least a part of the expropriated site for the development of a recreation facility similar to that previously proposed by the owner.  

Upon learning of this plan, the owner brought an application before the Ontario Superior Court of Justice.[1] The owner sought a declaration that all or part of the property was unnecessary for the purposes articulated by the School Board in its Notice of Application for Approval to Expropriate Land; an order requiring the School Board to serve a notice under section 41 of the Act advising of the owners option to elect to take the expropriated lands back and seek consequential damages; and an interlocutory injunction order preventing the School Board from conveying the property to the City and from demolishing the existing school building on the property until the application was decided.  

The Superior Court ultimately determined that at least a portion of the expropriated site would be used for the originally stated purpose of amenities related to the school as defined in the Education Act, RSO 1990, c E.2, and that the expropriating authority was not obligated to offer the property back to the owner. The application judge found that the owner failed to make its case and dismissed the application, awarding costs and disbursements to the School Board in the amount of $58,815.46.

The owner appealed to the Court of Appeal. The issues on appeal were whether: (i) the appellant’s rights under section 41 of the Act were engaged on the facts, and if so, what were the consequences; (ii) the School Board was required to offer the property back to the appellant under s. 41 despite its resolution not to do so under s. 42 of the Act; and (iii) the application judge had erred in his award of costs to the School Board.

(i) Issue one: whether the appellant’s rights were engaged under s. 41 of the Act

On the first issue, the Court of Appeal found that the School Board’s actions had not triggered the offer-back obligation in the legislation. As part of its analysis, the Court considered at length principles of statutory interpretation and how the “purposes” and “objectives” of expropriating authorities are to be determined. It stressed that the purposes and objectives are to be considered in interpreting and applying the legislation that authorizes the expropriation under scrutiny. In this case the School Board’s decision to expropriate the property for a use as a “school site” had to take into account the meaning of that term in s. 1(1) of the Education Act.

Based on the purpose and facts, Justice Lauwers summarized his findings on the issue stating that,

[80] To sum up, in my view, the School Board did not abandon the property when it authorized the land swap with the City in September and again in November 2014. The motions do not operate as an admission binding on the Board that most of the property was “found to be unnecessary for the purposes of the expropriating authority” by the Board. The swap was not executed by staff, and it appears unlikely that it will be, although the Board has not yet rescinded the approvals. The School Board is set to use the property “for the purposes of the construction and operation of a secondary school and related amenities” consistent with the original notice of application. In short, the School Board did not change its purposes for expropriating the property, and s. 41 of the Expropriations Act was not triggered.

(ii) Issue two: whether the School Board was required to offer the property back under to the owner

On the second issue, the Court of Appeal addressed the issue of whether the School Board was required to offer the property back to the owner under section 41 despite its resolution not to do so under section 42 of the Act. The Court noted that under the latter provision, where the expropriating authority determines that the expropriated land is “no longer required for its purposes” and decides to dispose of it, the authority is obliged to give the former owner a right of first refusal to buy the land unless the approving authority dispenses with this right.

The Court reviewed the legislative history of section 42 of the Act, namely that its purpose is to discourage the expropriation of more land than is required in order that a speculative profit may be made. But declined to rule definitely on the relationship between section 41 and 42 of the Act stating that, “[t]he issue should be explicated in a situation in which it is directly engaged on the facts.”

(iii) Issue three: award of costs by the application judge

On the third issue, the Court of Appeal saw no reason to extend the principle of full compensation for the costs of collateral civil litigation expropriated owners may bring to challenge the legality of an expropriation. However, in considering whether the application judge erred in awarding the School Board costs in the amount of partial indemnity costs sought by the appellant ($58,815.46) instead of the amount of substantial indemnity costs sought by the School Board ($29,574.17), the Court sided with the owner. It stated that,

[97] There is no basis in principle for an award of costs exceeding the amount sought by the successful party, and in this case there was no basis for an award of substantial indemnity costs against the unsuccessful appellant…

On this basis the Court of Appeal set aside the application judge’s costs award and substituted the amount of $14,000 all-inclusive for the application to be paid by the owner to the School Board. The Court similarly awarded costs to the School Board for the appeal in the amount of $16,000 all-inclusive. For the full decision see:

[1] 1739061 Ontario Inc v Hamilton-Wentworth District School Board, 2015 ONSC 1442, 114 LCR 207.

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