KMK Properties Inc. First Plaintiff And: Central Holdings Inc. Second Plaintiff And: New Cove Road Holdings Inc. Third Plaintiff And: 77345 Newfoundland & Labrador Inc. Fourth Plaintiff And: City of St. John's First Defendant And: Her Majesty in Right of Newfoundland v. Labrador, 2021 NLSC 122

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : KMK Properties Inc. v. St. John's (City) , 2021 NLSC 122 Date : September 29, 2021 Docket : 201601G4970 Between: KMK Properties Inc. First Plaintiff And: Central Holdings Inc. Second Plaintiff And: New Cove Road Holdings Inc. Third Plaintiff And: 77345 Newfoundland & Labrador Inc. Fourth Plaintiff And: City of St. John's First Defendant And: Her Majesty in Right of Newfoundland and Labrador Second Defendant (dISCONTINUED) - AND – Docket : 201601G4971 BETWEEN: MILDRED STEINHAUER Plaintiff And:

City of St. John's First Defendant And: Her Majesty in Right of Newfoundland and Labrador Second Defendant (dISCONTINUED) Before: Justice Sandra R. Chaytor Place of Hearing: St. John’s, Newfoundland and Labrador Dates of Hearing: November 4, 5, 6, 9, 10, 12, 13, 16 & 17; December 14 & 17, 2020

Summary: The Plaintiffs sought a declaration that their property had been constructively expropriated by the City of St. John’s as a result of ithaving been designated a heritage building and that the surrounding property had been injuriously affected due to the expropriation. TheCourt found that the Plaintiffs had failed to meet the requisite test of establishing that as a result of the heritage designation, the City had acquired a beneficial interest in the property, or flowing from it; or that there had been a removal of all reasonable uses of the property.

Held: The actions were dismissed with costs in each action awarded to the City against the respective Plaintiffs on a Column 3 basis. Appearances: David Goodland, Q.C. and Jeremy Loeb Appearing on behalf of the Plaintiffs Irene Muzychka, Q.C. and Travis D. Payne Appearing on behalf of the First Defendant Authorities Cited: CASES CONSIDERED: Canadian Pacific Railway v. Vancouver (City), 2006 SCC 5; Mariner Real Estate Ltd. v. Nova Scotia(Attorney General), 1999 NSCA 98; Lynch v. St. John’s (City), 2016 NLCA 35; Harvard Investments Ltd. v. Winnipeg (City), (MB CA), [1996] 2 W.W.R. 267, 107 Man.

R. (2d) 114 (C.A.); British Columbia v. Tener, (SCC), [1985]1 S.C.R. 533; Gosse v Conception Bay South (Town), 2019 NLSC 126, aff’d. 2021 NLCA 23 STATUTES CONSIDERED: City of St. John’s Act, R.S.N.L. 1990, c. C-17; Urban and Rural Planning Act, 2000, S.N.L. 2000, c. U-8;The Expropriation Act, R.S.M. 1987, c. E190; Expropriation Act, R.S.N.L. 1990, c. E-19

RULES CONSIDERED: Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D REGULATIONS CONSIDERED: St. John’s Development Regulations, created under the authority of the Urban and Rural Planning Act, 2000 ; St. John’s Municipal Plan 2003 created under the authority of the Urban and Rural Planning Act, 2000 REASONS FOR JUDGMENT Chaytor, J. : INTRODUCTION AND BACKGROUND [ 1 ] There is a Queen Anne style house that in May 2016 sat on over three acres of land in the centre of the City of St. John’s (“the City”). The house is known locally by the Welsh name “Bryn Mawr”.

It was built in 1907 by businessman, James C. Baird and acquired by James Steinhauer in 1973 as his family’s residence. After Mr. Steinhauer’s death, his widow, Mildred Steinhauer, one of the Plaintiffs in these actions, continued to reside at Bryn Mawr. [ 2 ] Over the years, Bryn Mawr became noticed for its historical significance. In 1993, it was recognized as a registered heritage structure by the Heritage Foundation of Newfoundland and Labrador. This designation does not prevent its demolition.

Although Bryn Mawr is not located in a designated heritage area pursuant to the City's Development Regulations, created under the authority of the Urban and Rural Planning Act, 2000 , for decades it has been on a list of properties that the City is interested in protecting as being architecturally valued. In 2004, the City inquired of Mildred Steinhauer whether she would be interested in designating Bryn Mawr as a heritage building. Such a designation would prevent exterior renovations or its demolition without the approval of City council.

She declined. [ 3 ] In 2014, Mildred Steinhauer decided to sell Bryn Mawr along with the entire surrounding land as it no longer met her needs and was expensive to maintain. The Altus Group Limited (“Altus”) was retained to provide a preliminary market value range for the entire property. At that time, Altus determined that the highest and best use of the entire parcel of land was a multi-residential development with a resulting value between $3.2 million to $3.6 million.

This would involve rezoning and demolition of Bryn Mawr. [ 4 ] On December 1, 2014, Mildred Steinhauer and KMK Properties Inc. (“KMK”) entered into an Agreement of Purchase and Sale (“APS”) for the entire property, including Bryn Mawr [1] . Pursuant to the APS, the purchase price was two-tiered depending upon whether Bryn Mawr could be demolished. The negotiated price was $3.020 million if the house could be removed and $2.72 million if it could not.

The APS was amended in March 2015 by extending the dates for due diligence including KMK’s determination as to whether its intended use of the property was economically feasible. [ 5 ] In June 2015, KMK decided upon a concept plan for development of the property. The plan was not for the multi-residential use found by Altus to be the highest and best use. Rather, it envisioned the development of high-end single family homes with a private central park area. The concept plan required the demolition of Bryn Mawr.

Kevin King, Executive Chairman of KMK, testified that he believed the concept plan would be more profitable than multi-residential use. [ 6 ] On December 12, 2015 the APS was further amended. KMK assigned its interest under the APS to Central Holdings Inc. The purchase price while lowered now included a profit sharing clause between the parties. The purchase price remained two-tiered being $2.3 million if the City approved the application for demolition of Bryn Mawr and $2 million if not approved. At this point, the parties considered the agreement to be binding.

Funding was advanced to Mildred Steinhauer from Central Holdings Inc. to allow her to purchase a new residence and secured by a mortgage on the property. She moved out of Bryn Mawr in January 2016. [ 7 ] On March 17, 2016, Kevin King was advised by a City official that because Bryn Mawr had a provincial heritage designation, an application to demolish it would be referred to the City’s Built Heritage Experts Panel. The following day a demolition application was submitted to the City on behalf of Mildred Steinhauer.

The application was referred to the City’s Built Heritage Experts Panel which recommended a City heritage designation for Bryn Mawr. The City’s Planning and Development Committee subsequently voted to recommend heritage status and, despite representations on behalf of the Plaintiffs objecting to the designation, on May 24, 2016, City council voted to designate Bryn Mawr as a heritage building. [ 8 ] The heritage designation became official by way of by-law enacted May 30, 2016 pursuant to

Section 355 of the City of St. John’s Act, R.S.N.L. 1990, c. C-17 (“ City Act ”) and all other powers enabling it. Sub-sections 355(1) and (2) of the City Act provide that: 355.

(1) The council may, by by-law, designate buildings, structures, lands or areas in whole or in part, as heritage buildings, structures, lands or areas for the purpose of preserving evidences of the city's history, culture and heritage for the education and enjoyment of present and future generations.

(2) A building, structure, land or area designated by the council shall not be demolished or built upon nor shall the exteriors of

the building or structure be altered, except with the approval of the council. [ 9 ] On June 15, 2016, following the heritage designation, the Plaintiffs closed the transaction. 77344 Newfoundland & Labrador Inc., a wholly owned subsidiary of Central Holdings Inc., purchased the property for the lower tiered price of $2 million as Bryn Mawr could not be demolished due to the heritage designation. [ 10 ] On June 20, 2016, 77344 Newfoundland & Labrador Inc. changed its name to New Cove Road Holdings Inc., the Third Plaintiff.

The following day, New Cove Road Holdings Inc. sold the portion of the property on which Bryn Mawr is situated to 77345 Newfoundland & Labrador Inc., the Fourth Plaintiff. Justin Ladha, the Chief Executive Officer of KMK, testified that the portion on which Bryn Mawr is located was carved out in an effort to mitigate their financial losses as the heritage designation only pertained to the house and the footprint on which it sits. This smaller piece of property then became known as 154 New Cove Road and the remaining large portion of vacant land became known as 11 Tiffany Lane.

Hence forth in this decision I will use these street addresses to reference each piece of property. [ 11 ] Since the heritage designation, the corporate Plaintiffs have taken steps towards developing 11 Tiffany Lane (including an application that was pending at the time of trial for a rezoning to construct assisted living facilities). However, there has been no development of 154 New Cove Road and Bryn Mawr has remained vacant. the actions [ 12 ] Two actions were commenced on August 25, 2016 against the City as the First Defendant and Her Majesty in Right of Newfoundland and Labrador as the Second Defendant [2] .

Mildred Steinhauer is the Plaintiff in one action. The Plaintiffs in the second action are corporate entities that are identified in the Statement of Claim as affiliated companies involved in the property purchase. [ 13 ] By way of each Statement of Claim, the respective Plaintiffs sought a declaration of constructive expropriation by the City as a result of the heritage designation and, alternatively, a declaration of injurious affection.

At the commencement of trial, counsel for the Plaintiffs amended the relief sought to clarify that injurious affection was not an alternate remedy but in addition to the declaration of expropriation. [ 14 ] At the time of oral submissions, the relief sought by specific Plaintiffs was further clarified as follows:

(1) Mildred Steinhauer and 77345 Newfoundland & Labrador Inc. seek a declaration that 154 New Cove Road had been constructively expropriated due to the heritage designation; and

(2) Mildred Steinhauer, and New Cove Road Holdings Inc. seek a declaration that 11 Tiffany Lane has been injuriously affected by the expropriation of 154 New Cove Road. [ 15 ] It is perhaps helpful to clarify at the outset what these cases are, and are not, about. These cases are not about whether the City can designate a property as heritage without the owner’s consent. Nor are they about the reasonableness of the City’s decision as that decision was not appealed.

Rather, the Plaintiffs claim that because of the heritage designation, the City has constructively expropriated 154 New Cove Road and that 11 Tiffany Lane has been injuriously affected as a consequence of the expropriation. This, simply put, is what these cases are about. This raises an interesting and novel issue for the Court as to whether a heritage designation can, in these circumstances, be tantamount to a compulsory taking by the City. ISSUES: [ 16 ] The issues that arise are as follows: 1. Was 154 New Cove Road constructively expropriated by the City as a result of the heritage designation?

If constructive expropriation is found, the following issues arise: 2. Are there any statutory impediments to the Plaintiffs’ claims for compensation? 3. Is it appropriate for the Court to decide whether 11 Tiffany Lane was injuriously affected by the expropriation and if so, have the Plaintiffs established injurious affection? 4.

Given Mildred Steinhauer’s ownership of the property at the time of the heritage designation and the subsequent transfers of ownership amongst the corporate Plaintiffs, which of the corporate Plaintiffs, if any, have a cause of action? [3] [ 17 ] For the reasons that follow, I find that the Plaintiffs have failed to establish that 154 New Cove Road was constructively expropriated as a result of the heritage designation. Therefore there is no need to address the remaining issues. analysis Was 154 New Cove Road constructively expropriated by the City as a result of the heritage designation? The Law

[18] The Plaintiffs must meet the two-prong test articulated by the Supreme Court of Canada in Canadian Pacific Railway v.Vancouver (City), 2006 SCC 5 to establish that there has been a constructive expropriation. They must show that:

i) the City acquired a beneficial interest in the property, or flowing from it; and ii) there was a removal of all reasonable uses of the property. [19] Canadian courts have been reluctant to find constructive expropriation results from restrictions placed by governmentauthorities on property usage and development. This is because in Canada land use regulation is to be expected. In Mariner Real EstateLtd. v. Nova Scotia (Attorney General), 1999 NSCA 98, Cromwell J.A. stated at paragraph 42: In this country, extensive and restrictive land use regulation is the norm.

Such regulation has, almost without exception, been found notto constitute compensable expropriation. It is settled law, for example, that the regulation of land use which has the effect of decreasingthe value of the land is not an expropriation, [20] In Lynch v. St.

John’s (City), 2016 NLCA 35, the Newfoundland and Labrador Court of Appeal, citing Mariner, stated atparagraph 45, that land use regulation has rarely been found to constitute compensable expropriation in Canada and that the regulation ofland use, even when it has the effect of decreasing the value of land, is not usually found to be a compulsory taking. [21] As articulated by the court in Mariner, at paragraph 80, constructive expropriation will occur when the restrictions placed onproperty are so stringent and all-encompassing that they have the effect of depriving the owner of his or her interest in the land, whileleaving the paper title undisturbed.

At paragraph 83, the court continued by noting the rarity of constructive expropriations in Canadaand the requirement of proof of the virtual extinction of an identifiable interest in the property. [22] Bearing these principles in mind, I will now apply the Canadian Pacific Railway test to the facts of these cases.

i) Did the City acquire a beneficial interest in 154 New Cove Road, or flowing from it? [23] To meet the first prong of the test, the Plaintiffs must prove on the balance of probabilities that the City acquired a beneficialinterest in 154 New Cove Road or flowing from it. [24] The Plaintiffs submit that by designating Bryn Mawr as a heritage building they have lost the proprietary right to deal with 154New Cove Road as they see fit including the ability to demolish the house or renovate its exterior without City council’s permission.Correspondingly, the Plaintiffs submit that the heritage designation has provided a benefit to the City in that it gives the City the right topreserve Bryn Mawr, including its exterior, in perpetuity, for the City’s benefit in terms of tourism and cultural enhancement. [25] The evidence supports that, generally, a benefit accrues to the City through heritage designations.

Part 7 of the City of St.John’s Municipal Plan 2003 created under the authority of the Urban and Rural Planning Act, 2000 (“the Municipal Plan”), entitled“Heritage”, references that preserving and building on the legacy of the City’s lengthy history is one of the key tenets guiding theMunicipal Plan. It states that, “The built heritage of fine old buildings and streetscapes in St.

John’s contributes to the enjoyment of itsresidents and visitors.” The objective of this portion of the Municipal Plan is described as, “To protect heritage areas and buildings thathave historic value for the benefit and enjoyment of residents and visitors.” [26] Ken O’Brien, the City’s chief municipal planner and former heritage officer, testified as to the benefits derived by the City indesignating properties as heritage.

He noted the economic value to the City in terms of tourism revenues generated through protectingheritage buildings as well as the educational benefit of knowing the City’s history through heritage structures. [27] The parties identified one other case in Canadian jurisprudence which considered the issue of whether constructiveexpropriation could result from a heritage type designation. In Harvard Investments Ltd. v. Winnipeg (City), (MBCA), [1996] 2 W.W.R. 267, 107 Man.

R. (2d) 114 (C.A.), the court concluded that constructive expropriation had not occurred incircumstances where a hotel had been added to Winnipeg’s Buildings Conservation List. It is noted that Harvard pre-dates CanadianPacific Railway. However, in addressing the issue of when a beneficial interest in property is acquired by a government authority, thecourt in Harvard as well as the Supreme Court of Canada in Canadian Pacific Railway, both rely upon British Columbia v.

Tener, (SCC), [1985] 1 S.C.R. 533. [28] In dealing with whether the listing of the property in Harvard could result in a constructive expropriation, at paragraphs 21-22,Philp, J.A., for the majority of the court, wrote as follows: 21 The circumstances are akin to the limitations that zoning and planning regulations may impose upon a property. The regulatorypower of a local authority over land use was considered in some detail in the trial judgment in the Steer Holdings case (reportedat (1992), (MB KB), 79 Man. R. (2d) 169 [[1992] 2 W.W.R. 558]) by my colleague, Justice Kroft, who was the trialjudge.

He quoted with approval the statement of I.M. Rogers, Q.C. in Canadian Law of Planning and Zoning (Carswell, 1973), at p. 124: The law permits the appropriation of prospective development rights for the good of the community but allows the propertyowner nothing in return. Although the courts have inveighed against this seeming injustice they have seldom invalidated municipalregulations having this effect. It is well settled that owners may be compelled to surrender some value or future value of theirland to the local authority and no price has to be paid.

Kroft J., as he then was, observed that the statement is well supported by decisions of the Supreme Court of Canada. Referring to the reasons of Estey J., writing for the majority in Tener , he wrote (at p. 179), "that ordinarily in this country compensation does not follow zoning, provided it is not used as a device to depress the value of property as a prelude to compulsory taking." He noted the distinction between a compulsory taking, where there must be "an actual taking over or transferring of benefit ..."; and executive actions which are akin to zoning.

He concluded with the statement of Estey J. in Tener (at p. 564): The imposition of zoning regulation and the regulation of activities on lands ... add nothing to the value of public property. 22 In my view, those comments are particularly apposite to the circumstances of this case. [ 29 ] In Tener , the Crown denied a park use permit to registered owners of mineral rights within the park and advised them that no new exploration development would be permitted. The Supreme Court of Canada determined that this constituted a constructive expropriation.

In so doing, the court was clear to distinguish between zoning regulations and those actions taken by government authorities that result in the authority enhancing its own property at the expense of individual property owners. [ 30 ] At paragraph 21, of Tener , Estey, J. wrote: Here, the action taken by the government was to enhance the value of the public park. The imposition of zoning regulation and the regulation of activities on lands, fire regulation limits and so on add nothing to the value of public property.

Here the government wished, for obvious reasons, to preserve the qualities perceived as being desirable for public parks, and saw the mineral operations of the respondents under their 1937 grant as a threat to the park. The notice of 1978 took value from the respondents and added value to the park. The taker, the government of the province, clearly did so in exercise of its valid authority to govern.

It clearly enhanced the value of its asset, the park. [ 31 ] In Harvard , the court concluded its discussion on the issue of constructive expropriation by quoting a portion of this passage in Tener that, “The imposition of zoning regulation and the regulation of activities on lands… add nothing to the value of public property.” It then concluded its analysis of this issue by adding that these comments were “particularly apposite to the circumstances of the case.” [ 32 ] Therefore, in Harvard , the majority of the court found that while there may have been a taking away of some of the property owner’s rights by the placement of the property on the heritage listing, there had not been a transferring of a benefit to the City which is required to establish that an expropriation has occurred.

Rather, the heritage listing of the building was akin to the limitations that planning regulations may impose upon a property. [ 33 ] The Plaintiffs further point, however, to the comments of the majority decision at paragraph 26 of Harvard as support for their argument that a heritage designation could result in an expropriation if, in the circumstances, the designation results in the property being deprived of all economic value. I do not agree that the majority decision in Harvard stands for this.

Rather, I interpret this part of the decision as pertaining to a potential claim for injurious affection, without expropriation, not whether an expropriation could occur in such circumstances. [ 34 ] At paragraph 26, of Harvard , Philp J.A., wrote as follows: I do not mean to say that the listing of a building by the City on its Buildings’ Conservation List will never give rise to a claim for damages.

There may be circumstances where a listed building becomes commercially impracticable, either as a consequence of its being placed on the City’s Buildings Conservation List or because of its age, the impact of market and economic forces, or other causes. Such circumstances, far beyond the facts of this case, may amount to a taking and entitle an owner to compensation. [ 35 ] These comments were not made in the context of the court’s consideration of the expropriation issue.

Rather, they were made after the court after had already determined that constructive expropriation had not been made out because a heritage-type designation did not result in an actual taking over or transferring of a benefit to the City of Winnipeg.

After so finding, the court then stated, at paragraph 23, that it must go on to determine whether the circumstances could constitute injurious affection: If the City's listing of the hotel on its Buildings' Conservation List and its refusal to remove it from the list did not constitute a compulsory taking, has Harvard established that the circumstances can be characterized as injurious affection so as to trigger the payment of compensation under The Expropriation Act ?

I have concluded that it has not. [ 36 ] After having found that constructive expropriation had not been established, the court nonetheless continued to deal with the issue of whether the circumstances could be characterized as injurious affection so as to trigger compensation. It did so because, unlike the applicable legislation in this jurisdiction, pursuant to subsection 2(1) of Manitoba’s Expropriation Act , R.S.M. 1987, c.

E190 , there is potential for compensation not only where the City has expropriated property but also where it has, in the exercise of its lawful powers, caused injurious affection of the land. [ 37 ] Section 2(1) of Expropriation Act , R.S.M. 1987, c.

E190 states: Notwithstanding any Act of the Legislature heretofore enacted whether special or general, this Act applies wherever an authority expropriates land or in the exercise of its lawful powers causes the injurious affection of land, and due compensation shall be determined in accordance with the provisions hereof. [Emphasis added] [ 38 ] On the other hand, in the cases before me, the Plaintiffs’ claim for compensation is pursuant to sections 18 or 19 of

Expropriation Act R.S.N.L. 1990, c. E-19 or

Section 61 of the Urban and Rural Planning Act 2000, S.N.L. 2000, c. U-8 (the “ URPA ”).

Unlike the Manitoba legislation, in order for a claim for compensation for injurious affection to arise pursuant to these statutory provisions, there must be an expropriation. [ 39 ] Sections 18 and 19 of the Expropriation Act refer to claims for compensation arising in respect of expropriation or as a result of being “detrimentally affected by the expropriation.” Sub- section 61(1) of the URPA states : The minister, a council or a regional authority shall pay compensation to the owner of land expropriated and to the owner of land injuriously affected by the expropriation. [Emphasis added] [ 40 ] It was in the context of considering the issue of injurious affection, without expropriation, that the Manitoba Court of Appeal in Harvard , made the comments that the circumstances as described in paragraph 26 might give rise to a claim for compensation.

I take this as meaning a claim for compensation resulting from injurious affection, not from constructive expropriation as the court had already determined there could not be an expropriation as the requisite transferring of a beneficial interest had not occurred in circumstances of the heritage listing. In any event, if I am wrong in this

interpretation, these comments are obiter dicta without factual foundation in the case and I do not share the view that a heritage designation could result in the City acquiring a beneficial interest in the property or flowing from it in the circumstances of the cases before me so as to establish the first prong of the Canadian Pacific Railway test. [ 41 ] I will briefly address the Plaintiffs’ reliance upon comments made at paragraph 47 of Harvard , where Twaddle, J.A. wrote: Conceptually then, I see the historical designation of a building as having the potential of being an expropriation, but only in the most limited of circumstances.

It certainly does not occur where the building retains a real economic value. [ 42 ] Although Twaddle J.A. concurred in the result of the decision in Harvard it was for different reasons. Therefore the comments at paragraph 47 in addition to being obiter dicta , are also not part of the reasons of the majority.

In any event, I respectfully I do not agree with these comments and do not believe that they are consistent with the rationale of other cases that have analyzed what is required for a beneficial interest to be acquired by a government authority so as to constitute an expropriation. [ 43 ] Other cases, while not dealing with heritage designations, are instructive on the issue of what is required to constitute an acquisition of a beneficial interest in the context of constructive expropriation.

In Mariner , at paragraphs 105-106, the court found that freezing development in a beach zone for environmental protection did not constitute a “taking” sufficient to establish constructive expropriation.

In so concluding, the court stated that the restriction of development generally does not result in the acquisition of an interest in land by the regulating authority and that there was no evidence that the economic value of the Crown’s land had been enhanced. [ 44 ] In Canadian Pacific Railway , the Plaintiff railway company sought to develop a railway corridor for residential or commercial purposes as it was no longer being used for transportation.

The City of Vancouver wanted to preserve the corridor for transportation purposes and ultimately adopted a by-law that designated the corridor as a public thoroughfare for transportation and “greenways” like heritage walks, nature trails, and cyclist paths. The Supreme Court of Canada determined that this was not the sort of benefit to the City that could be construed as a “taking” so as to meet the first prong of the test.

At paragraph 33, the court stated that the City had, “gained nothing more than some assurance that the land will be used or developed in accordance to its vision, without even precluding the historical or current use of the land.” [ 45 ] Lynch , on the other hand is a case where a beneficial interest was found to have been acquired so as to establish the first prong of the test. In that case, the City had denied the landowners all forms of development of their property.

They were required to maintain the property “unused in its natural state” with its groundwater uncontaminated so that the City could have a continuous flow of pristine groundwater for its water supply. The court found that the City thereby acquired the tangible benefit of the continuous flow of groundwater by taking away the property owners’ beneficial interest in the groundwater.

This is the type of beneficial interest contemplated to be acquired in order to meet the first prong of the test. [ 46 ] In Lynch at paragraph 60 , Barry J.A. wrote: It is sufficient to conclude, as I do, that 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 or uncontaminated groundwater downstream to the City’s water facilities. [ 47 ] The factual circumstances of the cases before me are more analogous to that of Mariner and Canadian Pacific Railway than that of Lynch .

By prohibiting the demolishment of Bryn Mawr, or carrying out exterior renovations to the exterior without City council’s approval, the City has curtailed certain types of development of 154 New Cove Road including what the Plaintiffs envisioned through their concept plan.

The City has not, however, precluded the historical or current use of the property. [ 48 ] Furthermore, while the City considers designating properties as heritage to be both important and beneficial and I find such designations are, in general, of benefit to the City, this does not mean that a beneficial interest was gained by the City in 154 New Cove Road, or flowing from it, due to the heritage designation.

In making the heritage designation, to paraphrase the wording of the Supreme Court of Canada in Canadian Pacific Railway , the City gained nothing more than some assurance that 154 New Cove Road would not be used or developed except in accordance with its vision unless it permits otherwise. [ 49 ] This situation is comparable to the benefits generally gained by the City in controlling development through zoning and regulation including the City’s ability to invoke changes to zoning that can prevent, for example, commercial properties being built in residential neighbourhoods.

I agree with the majority decision in Harvard that the circumstances of a heritage designation are “akin to the limitations that zoning and planning regulations may impose upon a property.” [ 50 ] Although, I have concluded that the Plaintiffs have not succeeded in establishing that the City acquired a beneficial interest related to 154 New Cove Road, I will nonetheless address the second prong of the constructive expropriation test.

ii) Did the heritage designation remove all reasonable uses of 154 New Cove Road? [ 51 ] The threshold to be met by the Plaintiffs in establishing the second branch of the test is high.

In the words of the Supreme Court of Canada in Canadian Pacific Railway , “all reasonable uses of the property must have been removed.” In Lynch , the Court of Appeal confirmed, at paragraph 63, that this will be met where the Plaintiffs have demonstrated that “virtually all of the aggregated incidents of ownership have been taken away.” [ 52 ] If there were an expropriation due to the heritage designation, I find the expropriation would have occurred on May 30, 2016, the date the City passed the by-law that officially designated Bryn Mawr as a heritage building.

At that time, Mildred Steinhauer was the property owner. 154 New Cove Road is situate in a Residential Medium Density (R2) Zone. Historically, Bryn Mawr had been used as a residence and it was being used for residential purposes by Ms. Steinhauer up until January 2016, a few months prior to the heritage designation. [ 53 ] Pursuant to its current zoning, the house may still be used as a residence. Ken O’Brien testified that 154 New Cove Road can be developed within its zoning which includes many permitted and discretionary uses.

Permitted uses include: accessory building, bed and breakfast, boarding or lodging house, duplex dwelling, home office, semi and single detached dwelling, subsidiary apartment, townhouses, recreational park and family home child care services. Discretionary uses include adult day care facilities, heritage uses, parking lot, or a private park. [ 54 ] Furthermore, Ken O’Brien testified that there are more relaxed regulations and rules for heritage designated properties and that additional uses for 154 New Cove Road are permitted beyond the current residential zoning.

As of May 2020, heritage designated structures are permitted to be utilized for any purpose which in City council’s opinion is compatible with adjoining uses. According to Mr. O’Brien, some property owners seek the designation to expand their potential uses without needing to re-zone. [ 55 ] The Plaintiffs do not dispute that there are uses for 154 New Cove Road but they contend that these are not reasonable uses because they are not economically viable.

They submit that at the time of designating the house as a heritage structure, it was a liability and would require significant unrecoverable funds to renovate it to a reasonable use. [ 56 ] Fred Steinhauer, Mildred Steinhauer’s son, testified that he negotiated the deal with KMK on his mother’s behalf.

He referred to himself and his mother as being partners with KMK in terms of the proposed development of the overall property and stated that the heritage designation caused his mother to lose money (beyond the lower purchase price received), because the development would not be as profitable if the house had to remain and be restored. [ 57 ] Justin Ladha, testified that to turn Bryn Mawr back into residential use would be too big a project and too costly. He stated, “Any money put into that house is a loss.

That doesn’t make sense.” Kevin King acknowledged that there were development opportunities for 154 New Cove Road but these would cause the Plaintiffs to lose money. [ 58 ] A couple of months after the heritage designation, the Plaintiffs retained Kevin Fancy and Joanne Slaney of Altus to prepare a Preliminary Market Value Range Estimate for both 154 New Cove Road and 11 Tiffany Lane.

The report generated was entered into evidence and Kevin Fancy and Joanne Slaney were both qualified to give opinion evidence as accredited appraisers regarding their analysis and conclusions. [ 59 ] Kevin Fancy performed the part of the analysis dealing with 154 New Cove Road. He determined that the highest and best use of the property was continuation as a residence. Mr. Fancy acknowledged that 154 New Cove Road could also be utilized for other uses including professional offices.

He did not however, conduct any analysis with respect to any other uses (including potential revenue generating options) as he concluded that the cost to renovate 154 New Cove Road for alternate uses would be higher than continuing to use it as a residence. [ 60 ] The Altus report, at page 6, states: This building could be converted to several uses including residential uses, medical and professional or spa offices as permitted by the development regulations. The building appears to be in poor condition and would require extensive upgrades before occupancy.

Renovation of the dwelling would require interior and exterior work and this would likely outweigh any value that may be in the shell of the building. [ 61 ] Further, at page 10, of the Altus report it is stated that: The dwelling on the property is in poor condition and requires extensive upgrades. Under normal circumstances, the dwelling would likely be demolished or could be renovated to an alternate use.

While there may be value in the frame of the building for an alternate use, the cost to bring the building to a family home may outweigh the depreciated cost of the frame. [ 62 ] Kevin Fancy explained that this meant if an alternate use were to be considered, it would likely involve more extensive renovations than keeping it as a residence and the cost to convert to such a use would likely be significantly higher. [ 63 ] Overall, having conducted an analysis of the value of comparable properties that had recently sold, Kevin Fancy concluded that a renovated residential value of 154 New Cove Road would be between $870,000 to $980,000.

When the cost of renovation was factored in, the resulting value ranged from a loss of $80,000 to a gain of $30,000.

As of July 19, 2016, it was his opinion that a prudent buyer would purchase 154 New Cove Road for a price between $1 and $30,000. [ 64 ] In Canadian Pacific Railway , at paragraph 34 , the Supreme Court of Canada adopted the reasoning of Cromwell J.A. in Mariner that the requirement of the second prong of the test is to be assessed “not only in relation to the land’s potential highest and best use, but having regard to the nature of the land and the range of reasonable uses to which it has actually been put.” [ 65 ] In Mariner , at paragraph 81, Cromwell J.A. wrote that, “While the decline in economic value of land is not the loss of an

interest in land, it may be evidence of the loss of interest in land.” He continued, at paragraph 82, writing: It follows that, where the effect of land use regulation is to eliminate virtually all the normal incidents of ownership, this will be reflected in the market value of the land.

It is not, however, the decline in market value that constitutes the loss of interest in land, but the taking away of the incidents of ownership reflected in that decline. [ 66 ] The Plaintiffs have not established that the heritage designation took away the incidents of ownership and that this is the cause of the low market value of 154 New Cove Road. The evidence adduced by the Plaintiffs was that Bryn Mawr had little value at the time of the designation in that it was in need of significant renovations. They sought to demolish it to realize on the value of the land on which it is situate.

Although the heritage designation restricts certain development of 154 New Cove Road insofar as it prevents Bryn Mawr from being demolished or the exterior altered without the approval of City council, it does not prohibit the use of 154 New Cove Road as a residential property or other development.

After the heritage designation, Mildred Steinhauer was still able to sell and the corporate Plaintiffs were able to acquire the entire property at the lower price negotiated because Bryn Mawr could not be demolished. [ 67 ] The fact that the cost of restoration of Bryn Mawr would not be worth it to the corporate Plaintiffs in terms of the investment they made in the overall property does not mean 154 New Cove Road has been deprived of all reasonable uses. Reasonable use in the context of constructive expropriation does not equate to economic feasibility.

In Canadian Pacific Railway , the Supreme Court of Canada acknowledged that the effect of the by-law in that case was to freeze the redevelopment potential of a railway corridor and to confine the property owner, the Canadian Pacific Railway company, to uneconomic uses of the land. The company submitted that this was unfair and unreasonable.

The Supreme Court of Canada nevertheless found that constructive expropriation had not been made out in those circumstances. [ 68 ] The fallacy of this aspect of the Plaintiffs’ argument is apparent upon scrutiny of the corporate Plaintiffs’ reasoning in deciding upon the concept plan. Justin Ladha testified that after having executed the APS, KMK then turned its mind to consideration of various ideas for the development of the overall property based on the price they had agreed to pay.

He testified that they considered proposals that would include Bryn Mawr remaining and ultimately determined they “couldn’t achieve a feasible development with the house there”. In the Plaintiffs’ analysis, according to Mr. Ladha, they could not produce the “required yield” to meet an acceptable return within their “risk tolerance” with the house remaining.

Following this thought process to its logical conclusion means that if the agreement negotiated had been for a lower purchase price, the house would not have to be demolished. [ 69 ] Reasonable use of property in the context of meeting the test for constructive expropriation cannot be determined by the amount a purchaser paid for the property or the amount of return that the purchaser hoped to achieve from the transaction. The profitability of the deal does not equate with reasonable use.

It is not that 154 New Cove Road does not have a reasonable use but rather it would not make financial sense based on the purchase price paid to devote such funds to the renovation of the house. This is not sufficient to meet the stringent test of the second prong of the test so as to establish constructive expropriation. [ 70 ] The circumstances are analogous to that of a party who enters into an agreement to purchase a parcel of land zoned for commercial purposes only to have the property subsequently re-zoned so as to prohibit a commercial development.

Although such circumstances may cause a depreciation in the value of the land and the purchaser may sustain financial losses as a result of not being able to proceed with the proposed development, it does not mean the property has been deprived of all reasonable uses so as to constitute constructive expropriation. [ 71 ] In Canadian Pacific Railway , the Plaintiffs were not permitted to develop the corridor used for the railway in the manner they wished to pursue. The Supreme Court of Canada noted that the by-law did not prevent the land from being operated, however, as a railway.

This was its traditional use. [ 72 ] Similarly in this case, 154 New Cove Road can still be used as a residence, as it was historically and continued to be so used until shortly before it was sold by Mildred Steinhauer. The heritage designation did not change that. Kevin Fancy’s opinion was that such usage remains its highest and best use. The zoning remains the same as it was prior to the heritage designation and that zoning in fact allows for several permitted and discretionary uses.

Furthermore, I accept that the evidence of Ken O’Brien that the heritage designation allows for more flexibility in uses that may be permitted beyond the current zoning. [ 73 ] In Lynch , the property owners were required to keep their property “unused in its natural state” with its groundwater uncontaminated. The Newfoundland and Labrador Court of Appeal determined that this extreme restriction on the use of the property resulted in deprivation of the reality of proprietorship and virtually all the aggregated incidents of ownership had been taken away.

Hence, the second branch of the test had been made out in that case and a constructive expropriation had occurred. [ 74 ] The restrictions placed on the property owners in Lynch were much more extreme than the limitations resulting from the heritage designation in this case. Bryn Mawr remains available to continue to be used as a residence or to be converted into another purpose within the permitted uses of heritage properties and its current zoning.

The many permitted and discretionary uses of 154 New Cove Road are, to borrow the words of Orsborn J. in Gosse v Conception Bay South (Town) , 2019 NLSC 126 , aff’d. 2021 NLCA 23 , “a far cry” from being simply a “right to keep the land unused in its natural state.” [ 75 ] Although I have not accepted the Plaintiffs’ argument that reasonable use is equated with economic feasibility, I will add that, if this were the test, the Plaintiffs did not adduce sufficient evidence to establish that 154 New Cove Road has no economic value. [ 76 ] Firstly, based on the expert evidence adduced by the Plaintiffs, the house may be renovated and continued to be used as a residence or it may be sold as is.

To upgrade it to the point of sale may result in a financial loss for the Plaintiffs or it might result in a slight profit. When Kevin Fancy conducted his analysis in 2016, a similar stately home was being renovated on Circular Road in St. John’s for a renovation cost of $150 per square foot. Mr. Fancy was advised by representatives of the corporate Plaintiffs that they felt a reasonable renovation cost for Bryn Mawr would be between $185-$220 per square foot. Mr.

Fancy testified that he decided to “temper” the figures and utilized $175 per square foot as opposed to the $150 figure that was being utilized for the Circular Road project. Mr. Fancy acknowledged that if he had used the $150 per square foot for the renovation cost, the renovated value of 154 New Cove Road would have been higher than $30,000. It remained his opinion nonetheless that its value was between $1 and $30,000.

[ 77 ] Secondly, while Justin Ladha testified that one prospective developer had been approached in an effort to sell 154 New Cove Road and that this did not progress, there was no evidence adduced by the Plaintiffs that the property had been listed for sale on the open market or any concerted effort had been made to sell it in the range of value calculated by Kevin Fancy, or otherwise. [ 78 ] Thirdly, the Plaintiffs did not present any expert evidence as to the feasibility of alternate revenue generating uses permitted of 154 New Cove Road such as professional office space.

Although Kevin Fancy opined that it would be more expensive in terms of renovation to convert to such uses, the long-term profitability of such uses was not analyzed. This is the type of evidence that would be expected to be adduced in order for the Plaintiffs to succeed in establishing that 154 New Cove Road retained no economic value. [ 79 ] The Plaintiffs have failed to prove that the heritage designation resulted in virtually all of the aggregated incidents of ownership having been taken away and therefore, have not met the second prong of the test.

Costs [ 80 ] The City seeks costs on the basis of Column 5 of the Rules of the Supreme Court, 1986, S.N.L. 1986, c. 42, Sch. D . It contends that such an award is warranted given the protracted manner in which the Plaintiffs proceeded with the litigation. [ 81 ] Time was spent during the trial trying to narrow the issues including the necessity of an application within the trial due to the Plaintiffs seeking to lead evidence for causes of action that were not pled or being pursued.

Furthermore, the Statements of Claim did not clearly articulate the declaratory relief sought and this was clarified by Plaintiffs’ counsel at trial and further amended at the time of final oral submissions. Given those issues, the City contends that this trial was unnecessarily elongated and points to Lynch which dealt with similar issues but was able to proceed by way of Originating Application and affidavit evidence. [ 82 ] The nature of the relief sought by the respective Plaintiffs should have been clearly articulated in the pleadings or amended before the trial.

The issues that gave rise to the application within the trial concerned relevance of evidence of witnesses that the Plaintiffs sought to call. This arguably is also an issue that could have been determined by way of a pre-trial application. [ 83 ] Notwithstanding these issues, the trial was able to conclude within the allotted time as agreed to by the parties at the pre-trial conference.

In this regard, I am not satisfied that dealing with these issues at the time of trial as opposed to by way of pre-trial applications translated into additional costs for the City so as to warrant an award of costs beyond Column 3. Therefore, the City shall have its costs in each action against the respective Plaintiffs on a Column 3 basis for two counsel.

summary and disposition [ 84 ] The Plaintiffs have not established that 154 New Cove Road was constructively expropriated as a result of the heritage designation. Therefore the actions are dismissed with costs in each action awarded to the First Defendant against the respective Plaintiffs on a Column 3 basis for two counsel. _____________________________ Sandra R. Chaytor Justice [2] The action against the Second Defendant was discontinued on December 6, 2016. Upon Application by the Plaintiffs in both actions, on April 30, 2019 the actions were ordered to be tried at the same time with evidence in one being considered evidence in the other.