Canada: The Expropriations Act: The Indemnity Principle And Costs

There has been little in terms of legislative reform in the expropriation context for several decades. The common law has assisted in providing guidance on how interest and cost provisions in expropriation statutes should be interpreted. The cost and interest provisions in the Expropriations Act are unique and much different from standard civil litigation as no one chooses to be expropriated. An understanding of these provisions is critical in appreciating their role in settlement discussions, mediation and hearings in the expropriation context.

The entitlement of expropriated property owners to recover their reasonable legal, appraisal and other costs is an essential part of the compensatory scheme pursuant to the Expropriations Act.

In Toronto Area Transit Operating Authority v. Dell Holdings Ltd.¹, the Supreme Court of Canada observed that expropriation has a significant impact on the expropriated owner. The Court further noted that the Expropriations Act is a remedial statute, which must be given a broad and liberal interpretation consistent with its purpose. The Supreme Court found indemnity to be the guiding principle. Furthermore, in the event of an ambiguity, it should not be interpreted to deprive common law rights unless that is the plain provision of the statute.² These principles, when applied, create a presumption that whenever land is expropriated, compensation will be paid.³

Pursuant to subsection 32(1) of the Expropriations Act, an owner, who is awarded 85% or more of the amount offered by the expropriating authority, is entitled to an order directing the expropriation authority to pay for her reasonable legal, appraisal and other costs "actually incurred" for the purposes of determining compensation.⁴ In those circumstances, the Board has no discretion and it "shall" make an order directing the statutory authority to pay the reasonable costs. However, under subsection 32(2) of the Expropriations Act the Board has the discretion to award or refuse costs where the claimant is awarded less than 85% of the amount offered by the statutory authority.⁵

The "amount offered" refers to the section 25 offer, which must be made within three months after the registration of the expropriation plan.⁶ The OMB has held that it would exclude evidence of any other offer from an expropriating authority, which the authority had served for the purpose of improving its position with regards to costs.⁷ Furthermore, where the expropriating authority makes no section 25 offer, the OMB will presume that the amount awarded is above the 85% threshold and will order the authority to pay all reasonable costs.⁸ However, where no offer is made and the claimant is unsuccessful in obtaining compensation, courts have held that there is no jurisdiction to award costs.⁹

Reasonable appraisal costs

In DDS Investments Ltd. v Toronto¹⁰, Assessment Officer Argyropoulos found that many of the same principles that apply to the question of reasonable legal costs also apply to the issue of reasonable appraisal costs:

The function of the assessment officer is not to assess the appropriate fee to be charged by the appraiser to the owner, but rather to determine the quantum to be paid by the expropriating authority.

The basis for assessing experts' fees has been stated in these words: It is not enough that the claimant may have acted reasonably in hiring an expert, but further, the fees of the expert must have been reasonable....having regard to the qualifications and experience of the appraiser, the hours spent and the hourly rate charged by him and quality of the services rendered. All of the foregoing factors must be considered in light of the complexity of the issues and the amount involved in the expropriation.¹¹

Injurious affection — no taking

There is limited jurisprudence when dealing with costs where no land has been taken. In cases where there is injurious affection with no taking, it has been argued that the Board should not read the 85% reference as a precondition to the award of costs. That could create the anomalous and potentially absurd result that the authority could, arguably, by its failure to make any offer of compensation oust the jurisdiction of the OMB to award reasonable costs even to a successful claimant. Such an interpretation is inconsistent with the intent of the indemnity principle underlying the Act as articulated by the Supreme Court of Canada.

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