DISGUISED EXPROPRIATION_2

In an earlier blog post (February 8, 2016), I wrote about a court of appeal decision that dismissed a claim against Quebec City based upon a disguised expropriation argument.

The principles that the Court of Appeal reviewed in its analysis included the following:

• Disguised expropriation requires the absolute negation of the owner’s right to access his property.

• Disguised expropriation requires interference with the exercise of the right of ownership to such extent that it renders the use of the property impossible.

• It is not because a law or zoning by-law tends to sterilize the right of ownership in whole or in part, or interferes with its exercise, even in a draconian fashion, for it to be considered to be abusive or unenforceable.

• Unless the by-law amounts to a veritable confiscation of private property, economic prejudice resulting from the imposition of restrictions on use and enjoyment cannot affect the validity of the by-law.

Obviously, it is a very difficult case to win, which is exemplified by the saying: “You can’t fight city hall”.

In a recent decision, the Court of Appeal granted such a claim in the case of 2646-8926 Quebec Inc. -vs- Ville de Lorraine 2016 QCCA 1803 and it is interesting to understand why the plaintiff in this case successfully prevailed over city hall.

In 1989, the Owner purchased some vacant land which was zoned residential at the time. It planned to eventually to build residences on the land in approximately 15 years when it expected that such a development would be profitable. However, Lorraine modified the zoning in 1991 as a result of which, 60% of the land became a conservation zone.

Ten years later, the Owner’s CEO visited the land for the first time and noticed hiking and cross-country ski trails, benches and stairs apparently set up by Lorraine. The CEO learned of the existence of the city by-law that changed the zoning and hired a firm to lobby Lorraine to restore the residential character of the land, which Lorraine refused to do.

The Owner then filed suit in Superior Court to have the zoning by-law declared null and void for all legal purposes. However the Owner’s suit was dismissed as being tardy, since it was not brought before the expiry of the legal delays. The trial judge concluded that the suit had been brought 16 years after the adoption of the by-law; 4 years after the Owner became aware of it; and 3 years after being informed of Lorraine’s refusal to modify it. The Court of Appeal agreed with the trial judge’s reasoning.

However, the Owner raised two additional arguments at the Court of Appeal that were not submitted to the trial judge:

• The conduct of Lorraine constituted an abuse of right.

• The dismissal of the Owner’s recourse to nullify the zoning by-law results in an absurdity and causes the Owner to suffer a serious injustice.

The Court of Appeal agreed that the zoning modification and the trespassing by installation of trails, stairs and benches constituted a disguised expropriation since the Owner lost the use and enjoyment of a substantial part of its land which, as a result of the change in zoning, could be used only for public utility.

Since Lorraine had the legal competence to adopt zoning by-laws, the argument that the by-law was null and void could not succeed. However, according to the evidence, Lorraine exercised its competence abusively, thereby exposing itself to legal liability.

The Court of Appeal referred to Article 952 of the Quebec Civil Code which states as follows:

952. No owner may be compelled to transfer his ownership except by expropriation according to law for public utility and in return for a just and prior indemnity.
1991, c. 64, a. 952; I.N. 2014-05-01.

In the circumstances, the zoning by-law was not declared null, considering the passage of time and the public interest of preserving the stability of laws. However, the zoning by-law was declared to be unopposable to the Owner i.e. it would not apply to the Owner’s land.

The Court of Appeal also ordered the file returned to the Superior Court for a hearing to adjudicate upon additional conclusions of the suit namely, to order Lorraine to purchase the land from the Owner for the price of $7,290,529.64; reimbursement of property taxes that the Owner paid in the aggregate amount of $293,966.93, and reimbursement of legal fees.