1. History and intent of the "ignore the scheme" provisions of the Act

Expropriation legislation in Ontario has undergone fundamental changes since the mid-1960s. At that time there was no statute of general application to expropriations in Ontario. Instead, a variety of different statutory powers, procedures and compensation entitlements with respect to expropriation were spread unevenly across over thirty statutes. Private citizens complained of arbitrariness and unfairness, and expropriating authorities were experiencing uncertainty and inconsistency.1 The Expropriation Procedures Act, S.O. 1962-63, c. 43, which came into effect in January 1964, consolidated Ontario's expropriation law.

While the Expropriation Procedures Act was successful in formalizing procedure, it did not deal with entitlements to compensation. These defects were not remedied until 1968 following completion of the Ontario Law Reform Commission, which issued its report called Report of the Ontario Law Reform Commission on the Basis for Compensation on Expropriation,2 issued in September 1967, and the Royal Commission — Inquiry into Civil Rights of the Honourable J.C. McRuer, whose report was issued in February 1968 and dealt with procedural rights on expropriation.3 From this was born the Expropriations Act, SO 1968-69, c. 36, which was the first piece of genuine reform legislation in the field of expropriation enacted anywhere in Canada. It was followed by similar reforms enacted by the Parliament of Canada, namely the Expropriation Act, 1970, c. 41. These two reform statutes were adopted, copied, or followed by the legislatures of Alberta, Manitoba, New Brunswick and British Columbia in the 1970s and 1980s.

In its Report, the Ontario Law Reform Commission took the position that a simple statutory directive under the Expropriation Procedures Act to pay "due compensation" on expropriation was not satisfactory. Instead, the Commission recommended that the relevant factors to be considered in the assessment of compensation be stipulated in the statute. This would provide meaningful guidelines to assist in the negotiation of fair compensation.

The Commission also recommended that compensation be determined by reference to the "market value" of the land,4 defined as "the amount which the land might be expected to realize if sold in the open market by a willing seller to a willing buyer".5 Importantly, the special use to which the expropriating authority intends to put the land (“the scheme”) should be disregarded in determining the market value of the land.

The landowner should be compensated on the basis of what the market value would have been if it had not been affected by the scheme. This ensures that the landowner is indemnified for their loss and put in a position where they can acquire comparable premises elsewhere.6 The landowner should not have to bear the loss associated with a decrease in the market value of the land as a result of the planned development.7 However, neither should the expropriation unjustly benefit the landowner at the expense of the expropriating authority. If the scheme creates an increase in the value of the land, the landowner should not be allowed to enjoy an undeserved windfall.8 For those reasons, the Commission recommended that any increase or decrease in the value of the land resulting from the expropriating authority's proposed scheme, or from any prospect of expropriation, should be ignored as irrelevant to establishing market value.9

The Legislature largely adopted the recommendations of the Law Reform Commission in enacting the Expropriations Act, R.S.O. SO 1968-69, c. 36. The Act’s provisions regarding market value remain the same under its current version, the Expropriations Act, R.S.O. 1990, c. E. 26, as amended. The Act provides that an expropriated person shall be compensated based on the "market value" of the land in question (s. 13(2)(a)). Market value is defined under the Act, as "the amount that the land might be expected to realize if sold in the open market by a willing seller to a willing buyer," (s. 14(1)). And, in determining market value, "no account can be taken of any increase or decrease in the value of the land attributable to the government actions that culminated in expropriation," (s. 14(4)(b)). Together, these provisions form the basis for the modern principle of "ignoring the scheme" in the determination of market value. Over the decades that followed, this principle would be applied to increasingly diverse and complex fact situations and the positive and negative impact on landowners would repeatedly ebb and flow.

2. The liberal use of the provision to date

The Board has taken a liberal view of what constitutes part of the "scheme" or "development" to be ignored in applying the "ignore the scheme" provision under subsection 14(4)(b) of the Expropriations Act, R.S.O. 1990, c. E. 26, has been applied liberally by the Ontario Municipal Board in the past. By liberal, I mean an approach which reaches far back in time, connects complex planning and environmental processes and reaches across regulatory authorities. In our highly regulated world, it seems that every government action is connected necessarily to many others. Thus, public authorities apprehend that an overly liberal approach risks public projects becoming unaffordable.

Frequently, when reviewing the history of Section 14(4)(b), the Courts have identified that provision as the statutory enactment of the " Pointe Gourde rule".10 It is perhaps sobering, when advocating a case for landowners, to realize that the Pointe Gourde case is actually an example of referencing the scheme for the purpose of reducing compensation. In that case, part of the award that had previously been made was reversed by the Privy Council of the House of Lords on the basis that that portion of the award represented the additional value enhancement caused by the scheme. Thus, it was not a factor for which additional compensation could be awarded. In that case, the scheme was the war time construction of a US Naval Base in Trinidad and Tobago. There, the Owner’s lands included a limestone deposit which was quarried to develop the base.

In fact, the use of Section 14(4)(b) has been rebalanced several times prior to the Spring Garden case. The question of what constitutes the scheme assumed great importance in Ontario when, pursuant to legislation assented to in 1973, the province of Ontario established a multi-purpose transportation corridor designated as "the Parkway Belt West Plan" (the Plan). The stated objectives of the Plan were to provide land reserves to accommodate future linear facilities such as hydro transmission lines, highways and public transit lines, as well as to provide public and private open-space and recreational uses. While some, but not all, of the land placed within the Parkway Belt was slated for acquisition, the uses of the land within the Plan were strictly controlled and, in effect, down-zoned to open space or agricultural uses. The litigation over this Plan would be to three different lines of cases; the first, which ignored the Plan as the scheme to the benefit of landowners, the second which did not, to the benefit of the authority, and the third, which again connected it to the scheme, all based on fact specific findings.

In dealing with the Parkway Belt West scheme, the Ontario Municipal Board initially found in Pfundt v. Ontario,11 that the Parkway Belt West was the development or the scheme to be ignored under Section 14(4)(b). While this case was followed by the Land Compensation Board and later at the Ontario Municipal Board in a line of cases,12 this determination of the scope of the scheme was reversed in Salvation Army.13 There a majority of the Court found that the Parkway Belt West Plan was not the development to be ignored. The swinging of the pendulum continued on the Parkway Belt West Planning scheme with the conclusion in the Mikalda Farms Ltd. v. Ontario 14 case, followed by Base Ninety Developments Ltd. v. Ontario (Management Board of Cabinet)15 and Spencer v. Ontario (Management Board of Cabinet),16 where the dual purpose of the Parkway Belt West as recorded by Mr. Justice Southey in his Salvation Army analysis of the Parkway Belt legislation as a Greenbelt and urban separator as well as a corridor for highway and utilities, did not prove out in its application. Reviewing the 20 year period the Board had before it in the Mikalda Farms case, the Parkway Belt was in effect found to be part of the 407 Highway scheme.

Another dramatic use of the ignoring the scheme principle in favour of the landowner, at least from the practitioner’s point of view is demonstrated in the West Hill case, West Hill Redevelopment Co. v. Ontario (Management Board of Cabinet).17 The case is significant in that the planning restrictions imposed by one level of government were ignored, even though they pre-dated the announcement of the intention to establish the scheme by another level of government, which actually undertook the expropriation. In West Hill, it was the Province who expropriated for a provincial park in 1995 after having announced its intention to establish a park in 1990. Notwithstanding that the municipal Official Plan which envisioned the land as open space was enacted 3 years earlier, it was found to be causally connected to the development of the park or expropriation scheme and ignored. Interestingly, the case received only limited review in the reasons issued by the Divisional Court in West Hill Redevelopment Co. v. Ontario.18 There the Court noted that

"The unique feature of this case is the province’s influence, as the Major landowner, on the planning process. The province’s decision to abandon its own development plans and to accept OPA 721 puts it in a very different position from an ordinary expropriating authority. When the province changed its intention qua landowner it went beyond a coincidence of interest with Scarborough and effectively fostered and abetted the park development in respect of which the expropriation was made."

In Spring Garden then, it was not surprising in itself that the Ontario Municipal Board found that provincial and municipal regulations were connected to the scheme to acquire land for passive, open space purposes by the City of Windsor. However, a rebalancing or proper calibration of the ignore the scheme principle followed the Ontario Municipal Board decision.

The Spring Garden Complex

As the aerial photograph attached as Schedule A shows, the Spring Garden area exists in the middle of the Windsor Urban Area as an open space feature, largely undeveloped to this day. The core area of this open space feature has been identified by naturalists as part of the Ojibway Prairie Remnant, the largest protected tallgrass prairie still existing in Ontario. It is but a vestige of a once vast landscape of tallgrass prairie and oak savanna that once dominated mid-western North America. As a result, it provides habitat for rare plant species and animal communities, which are adapted to that landscape. This is a unique biological community, the diversity of which is almost without equal. There are 509 recorded plant species, 36 of which are considered rare in Ontario. There are also rare and endangered animal species, particularly reptiles. The slides attached as Schedule B provide photographic images of some of these rare and endangered species.

From the landowners’ point of view, the native species are unwelcome in an area that has long been intended to be redeveloped. Attached as Schedule C is a lotting pattern for the area. Just having viewed the photographs of the rare and endangered species, the uninitiated will be startled to learn that all of the land area is subject to registered plans of subdivision and virtually all of the lots shown were created legally and exist as separate parcels in the Registry Office. What is even more remarkable is that these parcels were created in the 1920’s and have been in existence since then. This subdivision anticipated an economic boom expected to follow the establishment of a new steel mill in Windsor. While the great Depression intervened, in the meantime, the lots had been sold widely as speculative investments. Over time, many of the lots were recovered by the City pursuant to tax sales, others were assembled by investors or speculators, depending on one’s point of view.

What Triggered the Expropriation

Science-based interest in the Spring Garden Complex goes back as far as 1979. By 1984, both the local Conservation Authority and the Ministry of Natural Resources began identifying areas of natural and scientific interest.The City of Windsor took that forward into its planning process, which culminated in 2001 with the adoption of an Official Plan Amendment approving development in the Spring Garden area, but preserving a core natural feature. The owners of lots within the core appealed OPA No. 5 to the Ontario Municipal Board and obtained an Order from the Board requiring that as a condition of the Board approving the setting aside of a natural heritage area, the City purchase lots still held by private owners in that area.19 The owners were clearly concerned that there would be no buyer for their lands other than the City and used the planning process as a means of compelling the City acquisition to take place.

However, once the expropriation process was engaged, the owners sought to bring Section 14(4)(b) of the Act to bear to claim that their lands had certainty of imminent development, if the scheme was ignored. Notwithstanding the fact that they had recently bought a small portion of their holdings at values which reflected a market perspective that development was speculative, their scheme based claim reflected the value the lands would have if no natural heritage features at all were in place. Compensation for land that had been purchased for less than $60.00 a front foot was being claimed in the range of $350 to $475 a front foot. Once again, the rule of ignoring the scheme was proving to be a powerful tool to advance the economic interest of owners. However, from the public authority perspective, it seemed to be moving away from providing owners with fair treatment to a situation where owners were being rewarded to the extent that, the land acquisition project, while both in the private and public interest, was no longer affordable.

Litigation History

Starting with the contested Ontario Municipal Board hearing which led to the requirement that the City proceed by way of expropriation in 2002, the City filed three sets of expropriation plans. As outlined in Schedule D, this led to a lengthy Ontario Municipal Board hearing in March and April of 2009. The Claimants were entirely successful before the Board and defended their position with a majority decision of the Divisional Court on May 16, 2011. It was not until the release of the Court of Appeal decision on June 22, 2012, that that situation was rectified. That decision itself was subject to an Application for Leave to Appeal to the Supreme Court of Canada, which was denied as indicated in Schedule D on August 17, 2012. The matter now appears destined to return to the Ontario Municipal Board for a re-hearing based on the new direction provided concerning ignoring the scheme. However that decision turns out, the legal principles established in the Court of Appeal now represent the latest direction from the Courts as to the scope of Section 14(4)(b) of the Act.

What is the Provincial Policy Statement

A key issue that emerged on appeal was the role of the Provincial Policy Statement in directing and, in certain cases, constraining development. The Provincial Policy Statement is a statement of the provincial government containing what to most lay readers would be read as only a general direction concerning provincial interests. However, the Provincial Policy Statement is a powerful instrument.

First, it has statutory authority by virtue of the Planning Act.20 The Planning Act authorizes the issuance of Provincial Statements and Provincial Plans. It also contains the requirement in the case of Provincial Statements that decisions made by any planning authority at the municipal or provincial level, including the Ontario Municipal Board, must be consistent with the Provincial Policy Statement. The rule of being consistent with, is admittedly not as powerful as the requirement to conform to Provincial plans, but is significantly more rigorous than the previous standard of "have regard to".

The Province began issuing statements of its provincial interest under Section 2 of the Planning Act prior to 1996. In 1997, these various statements were drawn together into a comprehensive Provincial Policy Statement. Since 1997, the Provincial Policy Statement has been updated and to some extent expanded and developed with a new Provincial Policy Statement in 2005, and most recently, the 2014 Provincial Policy Statement to take effect on April 30th of this year.

An essential characteristic of the Provincial Policy Statement is that it applies to all development anywhere in the province of Ontario. It is not a responding document that is triggered or initiated by any particular development issue in any particular part of the province. Rather, it speaks to broad provincial interests which apply to virtually every land use, social, economic and environmental interest.

With respect to natural heritage features, the Provincial Policy Statement is a development constraint because it requires the protection of those features wherever they exist in the province with some distinction being made between northern and southern Ontario, but not otherwise as to location.

It is important for the application of the principles in this case for practitioners to understand that the Provincial Policy Statement is not static with respect to natural heritage protection, but has evolved from a features based approach to a systems based approach. The key element of the systems based approach is that it seeks to develop and sustain the whole natural heritage system and avoid the risk that by protecting features only, the features will eventually degrade and lose their natural function. To avoid this, a natural heritage system is built with buffers, linkages and enhancement areas to create a larger, more robust and self-sustaining system.

Other provincial-wide legislation post-evaluation date in the Spring Garden case provides protection to rare and endangered species. The scheme of the Endangered Species Act, S.O. 2007, c. 6 is to protect and enhance threatened and endangered species and the habitat on which they depend. Introduced into Ontario with the 2007 Act it has long been a feature of environmental protection as exemplified by the 1973 Act,21 passed by the United States Congress.

The Themes of the Appeal

In arguing the appeal, at first unsuccessfully in Divisional Court and laterally, successfully in the Court of Appeal and in resisting the Application for Leave, our approach was to develop three key themes related to the Section 14(4)(b) issue.

The first theme was that the owners in this case were not oppressed by a down-zoning, but rather sought to profit, in the sense of taking undue advantage of the legal rule of ignoring the scheme.

In other words, the case was presented as not being a case where fairness required that the scheme be ignored.

The second theme was to emphasize the physicality of what created the major impediment to development, mainly, the rare habitat and the rare and endangered species that the habitat nurtured. When dealing with down-zoning or down-designation, which are ephemeral policy principles, the scope of what can be struck down seems to be simply a matter of a strict reading of the principle. To make that more of a practical challenge, we emphasized the physicality of what was in place. Our point was that the City’s expropriation scheme didn’t put the Massasauga Rattler on the ground, nor did it cause the tobacco tree and rare plant species to appear on the landscape.

By way of analogy, we said that these natural physical facts were equivalent to a protected forest or a valley area. One cannot use the concept of a scheme to hypothetically fill in a valley, nor could the scheme be used to notionally remove plants or animals and perhaps, more importantly, their habitat, which was physically in place.

Our third theme was to emphasize the clear distinction between the local endeavour to protect the natural features and the province-wide scheme of the Provincial Policy Statement which was clearly not issued because of the desire to acquire the Spring Garden area by expropriation more cheaply.

Translating the Themes into Legal Principles

The first theme is a matter of advocacy related to highlighting that the City’s interpretation and not the Claimant’s best met the purpose and intent of the legal rule set out in Section 14(4)(b).

The second theme feeds into causation because what was worth protecting did not arise out of the public intention to protect it, rather, it was the other way around. The natural heritage features were of a nature and character that were worth protecting and recognized as being worth protecting on a province-wide basis, whether or not the local authorities were ever motivated or required to do land acquisition.

The third theme fed directly into already established legal principles concerning causation. This principle was established in 1983 in the Jewish Community Centre of Edmonton Trust v. R.22 case and reaffirmed in 1998 in a dramatic fashion in the West Hill case. As discussed above, the West Hill case established that a land use instrument enacted by one authority could be ignored in fixing the market value in an expropriation effected by a different authority, even where that land use instrument pre-dated the announcement of the scheme. While there were key facts in the West Hill case that allowed the causal link to be made, the legal principal is the same. From a legal point of view, a factual finding of the causal connection must be made. Only that way, it can be said that the land use instrument of one authority was made for the purpose and "with a view to the development under which the land is expropriated" by another.

In reasons written by the dissenting judge, Madam Justice Sachs in the Divisional Court and adopted on appeal by the Court of Appeal if on the other hand the evidence establishes that the "land use by-law, land use classification or analogous enactment" was opposed independently and unconnected with the "development under which the land is expropriated", then such land use or classification must be considered in the valuation process. Accordingly, Madam Justice Sachs found

The PPS was issued under the authority of the Planning Act to provide "policy direction on matters of provincial interest related to land use planning and development": PPS at Preamble. The PPS applies across the province and was not directed at the Expropriated Lands. It was passed independently of, and without any connection to, the specific development for which the land was expropriated. The fact that the Expropriated Lands are covered by the PPS is due to a recognition by the Province that province wide protection is necessary for its natural heritage resources. As put in the Preamble:

The Province’s resources – its agricultural land base, mineral resources, natural heritage resources, water supply and cultural heritage resources – provide economic, environmental and social benefits. The wise use and protection of these resources over the long term is a key provincial interest. [Emphasis added by Sachs J.]

Given the fact that the PPS was not passed with a view to the development for which the land was expropriated, it cannot be considered to be part of the “scheme” that should be disregarded for the purpose of the market value assessment. Thus, even without the scheme, the Expropriated Lands, which do not contain natural heritage features, would have been subject to the PPS. The Board was required to deal with what effect this would have had on the development potential of the lands in question. However, it did not do so. It ignored both the natural features of the Expropriated Lands and that land with those features was protected under the PPS, regardless of the “scheme”. In taking this approach, the Board arrived at a conclusion as to market value that cannot be justified on the basis of the facts and the law. [Emphasis added.]

The But For Test

Another way of addressing the causation question is to ask “but for” the expropriation scheme, would the development constraints in question still apply?

As it turned out in the Spring Garden litigation, there was no issue about the Provincial Policy Statement being a development constraint regardless of the decision to acquire land for public passive open space.

Rebalancing

The West Hill decision had taken the principle of ignoring the expropriation scheme significantly into the landowner’s favour. The Spring Garden decision from the speaker’s perspective represents a rebalancing of the application of that principle.

The decision also demonstrates the power of the Provincial Policy Statement. It is part of the new era of Provincial planning where Provincial Policy instruments have direct impact at a local level. The fact that the Provincial Policy Statement has had a direct impact in the expropriation realm is no accident. The only surprise is that it has taken so long for its pre-eminence to be recognized in compensation cases.

As well as being an expert in expropriation law now, those responsible for public land acquisition are challenged to understand more than the basic principles of planning law, including Provincial planning policy.

Schedule A

Schedule B

Schedule C

Schedule D​


1 R.B. Robinson, Q.C. "Report on the Expropriations Act," 1974, at p. vi

2 (Toronto: Ontario Law Reform Commission, 1967).

3 Hon. J.C. McRuer, Royal Commission - Inquiry into Civil Rights (Toronto: Queen’s Printer, 1968).

4 (Toronto: Ontario Law Reform Commission, 1967) at p. 17.

5 Ibid., at p. 19.

6 Ibid., at p. 25.

7 Ibid.

8 Ibid., at p. 24.

9 Ibid.

10 In reference to Pointe Gourde Quarrying & Transport Co. v. Subintendent of Crown Lands; [1947] A. C. 565.

11 (1979) 20 L.C.R. 183 [Pfundt v. Ontario].

12 John A. Coates and Stephen Waqué, The New Law of Expropriation vol. 1, loose-leaf (consulted on March 24, 2014), (Toronto: Thomson Reuters, 1986), 10-114.

13 (1984) 31 L.C.R.193 [Salvation Army].

14 (2001) 75 L.C.R. 274 [Mikalda Farms].

15 (2004), 83 L.C.R. 144 (O.M.B.), affirmed (2005), 89 L.C.R. 11 (Ont. Div. Ct.), leave to appeal to Court of Appeal refused (2006), R.P.R. (4th) 169 [Base Ninety].

16 (2004), 84 L.C.R. 73, affirmed (2005), 89 L.C.R.11, leave to appeal to Court of Appeal refused (2006), 60 R.P.R. (4th) 169 [Spencer].

17 [1998] O.M.B.D. No. 779, 64 L.C.R. 81 [West Hill].

18 [1999] 67 L.C.R. 252 (Ont. Div. Ct.).

19Windsor (City) Official Plan Amendment No. 5 (Re), [2002] O.M.B.D. No. 1010.

20 The Planning Act s.o. 1990, c. P13, as amended, Section 3(5)

21 Endangered Species Act, 16 U.S.C. § 1531 (1973).

22 (1984), 30 L.C.R. 97, affirming (1983), 27 L.C.R. 333.

Author

Stephen F. Waqué 
SWaque@blg.com
416.367.6275

Other Author

Meghan Lindo

Expertise

Expropriation