HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF ALBERTA AS REPRESENTED BY THE MINISTER OF PUBLIC WORKS, SUPPLY v. SERVICES, 1999 ABQB 440

Alberta (Public Works, Supply and Services) v. Nilsson, 1999 ABQB 440 Date: 19990604 Action No. 9503-25991 IN THE COURT OF QUEEN’S BENCH OF ALBERTA JUDICIAL DISTRICT OF EDMONTON IN THE MATTER OF AN ARBITRATION PURSUANT TO THE ARBITRATION ACT, BEING

CHAPTER A-43.1 OF S.A. 1991 AND AN AGREEMENT DATED AUGUST 20, 1993 BETWEEN: HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF ALBERTA AS REPRESENTED BY THE MINISTER OF PUBLIC WORKS, SUPPLY AND SERVICES Applicant (Respondent) - and - THOR WILLIAM NILSSON Respondent (Applicant) [Note: An Erratum was filed on June 4, 1999; the correction has been made to the text and the Erratum is appended to this Judgment.] ____________________________________________ REASONS FOR JUDGMENT of the HONOURABLE MR. JUSTICE R. P. MARCEAU ____________________________________________

Table of Contents I. INTRODUCTION [1] II. GROUNDS OF APPEAL [11] III.

SUMMARY OF POSITIONS [12] A. Nilsson ’ s View of the Facts B. Crown ’ s View of the Facts [13] [17] IV. STANDARD OF REVIEWS [26] V. De Facto Expropriation [33] A . The Test for De Facto Expropriation [35] i. What is a “ taking ” ? ii What is a “ benefit ” ? [37] [53] B. Were Nilsson ’ s Lands Expropriated? [56] i. The Trelenberg decision and the Imposition of the R.D.A. ii. Expropriation by Illegal Acts? iii. 1976: The Rejection of Nilsson ’ s Development Proposal iv. Conclusion: The Problem of the Indefinite Freeze [56] [65] [74] [75] VI. Abuse of Public Office [80] A. The Law of Abuse of Public Office [80] i. Targeted Malice ii. The Second Ground for Abuse of Public Office [84] [89]

a) Commonwealth

b) Canada [93] [107]

B. Did the Crown Commit an Abuse of Public Office? [118] i. Cabinet ’ s 1974 Implementation of the R.D.A. [120]

a) The Intentional Illegal Act i. Illegal Act ii. Intentional Act

b) Knowledge that Damage would Occur

c) Damage [120] [120] [140] [157] [160] ii. Administration of the Purchasing Program under R.F.D. K4- 76 [164]

a) Implementation of the R.D.A. to May 6, 1978

b) May 6, 1978 to Approval of R.F.D. P4-79 [164] [181] iii. R.F.D. P4-79 and Purchase Moratorium of 1981 [192] VII. Damages [215] A. Market Value Interest [215] [218] B. VIII. Conclusion [224] I. INTRODUCTION [ 1 ] Her Majesty the Queen in Right of the Province of Alberta as represented by the Minister of Public Works (“the Crown”), appealed the decision of the arbitrator, Mr. Alan Bryan, Q.C. (the “Arbitrator”) finding the Crown liable for the tort of abuse of public office, and the award of damages and interest consequent on that finding.

The Crown also questioned the Arbitrator’s finding as to the market value of the lands as at November 1, 1976. [ 2 ] Thor William Nilsson (“Nilsson”) cross-appealed the Arbitrator’s decision on the basis that the Arbitrator erred in failing to find that a de facto expropriation occurred on November 1, 1976, May 25, 1978 or November 27, 1979.

Additionally, Nilsson argued that the Arbitrator erred in failing to award disturbance damages, consequential damages for loss of interest in an auction market, damages at large, and punitive damages. [ 3 ] Prior to 1970, the provincial government planned to acquire land for the purpose of building ring roads around Calgary and Edmonton. In 1974, pursuant to The Department of the Environment Act , S.A. 1971, c. 24 (the “ Act ”), the Crown created a Restricted Development Area (“R.D.A.”) around each city to reserve the lands needed for this plan.

Nilsson’s land (an 80 acre parcel) was included in the North Edmonton R.D.A. The Crown, which initially had no immediate plans to purchase the reserved lands save in exceptional circumstances, chose to restrict development on such lands to preserve them for their intended future use. [ 4 ] Nilsson’s land was part of this development freeze in 1976, when his application to develop a mobile home park on his property

was refused. However, landowners unable to develop their property as a result of the restrictions were allowed to negotiate to sell the land to the Crown pursuant to Crown policy under the R.D.A. Negotiations to purchase Nilsson’s land broke off almost as soon as they started. [ 5 ] In 1977, the Alberta Court of Appeal struck down one of the R.D.A.s, holding that the intended use of the land as a highway did not fall within the purposes for which the lands could be used under the Act .

The Legislature quickly rectified this problem by amending the Act through the Department of Environment Amendment Act , 1977 (No. 2), S.A. 1977, c. 61 (the “ Amending Legislation ”) to cover purposes such as the ring road, and by declaring valid the R.D.A.s that had previously been ultra vires . Since that time, the validity of the R.D.A.s under the Amending Legislation has not been challenged. [ 6 ] A second attempt at negotiations between the parties began in 1978, but again they were too far apart to reach an agreement. Land prices in the reserved areas began to rise.

The Crown responded by changing its policy in 1979 to actively purchasing R.D.A. lands. The rush ended in 1981, when but for a few exceptions, Cabinet placed a year long moratorium on purchases in the context of skyrocketing land values. Nilsson was left out of the 1979 purchase rush and was not listed as an exception to the moratorium in 1981, although he claims to have been trying to contact the Crown and to negotiate between1979 and 1981. [ 7 ] In 1982, Nilsson again initiated contact with the Crown through a letter written by his M.L.A.

Negotiations began but were not concluded until 1987 when an agreement to purchase under s.30 of the Expropriation Act , R.S.A. 1980, c.E-16 (“s.30 Agreement”) was reached (the s.30 Agreement contemplates that the issue of the amount of compensation will be decided by the Land Compensation Board (the “Board”)).

However, prior to the hearing before the Board, Nilsson sued the Crown claiming de facto expropriation of his land, and the tort of abuse of public office. [ 8 ] On August 20, 1993, the parties agreed (“Arbitration Agreement”) to submit the contentious issues and the question of compensation (i.e. the value of the land in 1987) to the Arbitrator. The Arbitrator found that the de facto expropriation action was barred by the Limitation of Actions Act , R.S.A. 1980, c.L-15 .

He also found that the tort of abuse of public office had occurred around 1976, fixed damages flowing from that tort, and fixed compensation for the land in 1987. As previously stated, both parties appealed the Arbitrator’s Decision. [ 9 ] In the s.30 Agreement portion of the Arbitration, Nilsson limited himself to claiming an award for the market value of the lands as at March 15, 1987. I am mindful that the Arbitration Agreement allowed for other claims arising from the amended Statement of Claim but not for disturbance damages.

Therefore, no claim for disturbance damages will be allowed in this case. [ 10 ] The Arbitrator found Nilsson was not entitled to damages for loss of interest in an auction market as the damages were too remote to meet the foreseeability test. The Arbitrator rejected Nilsson’s claim for damages at large as well as for his claim for exemplary damages which would flow not from the expropriation proceedings, but rather from the finding of an abuse of public office. I agree with the Arbitrator’s reasons for not awarding damages under these three heads. II.

GROUNDS OF APPEAL [ 11 ] The Appeal raises the following questions: 1. Was there a de facto expropriation of Nilsson’s land by the Crown and if so, when? 2. Did the Crown commit the tort of abuse of public office, and if so, when? 3. Did the Arbitrator err in assessing market value? Did the Arbitrator err in ordering the Crown to pay interest to Nilsson? III.

SUMMARY OF POSITIONS

[ 12 ] In order to attain a balanced view of the facts, which occurred principally between October 30, 1974 and March 15, 1987, it is helpful to adopt a phase by phase approach. A. Nilsson ’ s View of the Facts [ 13 ] According to Nilsson, the Crown had been planning to build ring roads around Edmonton and Calgary prior to 1974, and sought a mechanism to acquire the necessary land. In Nilsson’s view, the Crown’s intention and acts were part and parcel of this land acquisition program.

Nilsson argues that the proclamation to the public that the purpose of the R.D.A. was to create an environmental preserve or green belt constituted a colourable device deviously planned to camouflage what was from 1974 to this date a thinly- disguised acquisition of lands for a public highway. In Nilsson’s view, references to the green belt, and later to concentrating an environmentally harmful transportation and utility corridor in this R.D.A., were in essence window dressing and an attempt to characterize the R.D.A. as general planning legislation. The R.D.A. was not in fact authorized by the Act .

The freezing of Nilsson’s land in all of the circumstances constituted the tort of abuse of public office. [ 14 ] Nilsson also submits that de facto expropriation and the tort of abuse of public office relative to his land occurred as early as 1974 for the following reasons: 1. the Crown had clearly decided Nilsson’s land was required for a major highway intersection in the proposed ring road; 2. the Crown refused Nilsson’s application to develop a mobile home park on his land in the summer of 1976; and 3. by November 1976, the Crown had failed to negotiate in good faith; In 1978, Nilsson received a bona fide offer to purchase his land for $40,000.00 per acre, subject to removal of the R.D.A. notice against the land.

According to Nilsson, the Minister of the Environment refused to lift the R.D.A., which frustrated the sale. In Nilsson’s view, since 1976, the Crown by its own internal policies (Request For Decision K4-76, hereinafter “R.F.D. K4-76") recognized its obligation to negotiate in good faith to purchase his land, or failing negotiations, to at least offer to have the purchase price settled by an independent third party.

Nilsson argues that the Crown did not negotiate in good faith, expropriate, or offer any mechanism to independently fix the fair market value, which serves as further evidence of de facto expropriation and abuse of public office. [ 15 ] In 1979, the policy changed so that while R.D.A. lands previously were to be acquired only if urgently needed, or if a sale had been frustrated or other hardship had occurred, now all R.D.A. lands were to be acquired within a general time line of five years (“R.F.D. P4-79").

Between the policy change and the implementation of an acquisition freeze in June, 1981, the Crown contacted certain major developers to explain that funds for acquisition were now available, and commenced negotiations with these major developers as well as many other owners. Nilsson argues that despite knowing Nilsson’s precarious situation, and his repeated telephone calls to Crown officials, the Crown did not advise him of the “secret” policy change and did not negotiate with him.

In Nilsson’s view, this arbitrary and capricious behaviour was discriminatory, and further evidenced the Crown’s real intention to use the R.D.A. freeze to depress land values and acquire lands at less than market value from owners. Nilsson submits that the Crown was thereby dishonest and abused its public authority in administering the land acquisition program. [ 16 ] Nilsson submits that from 1974 onward, both Edmonton and Calgary experienced a boom in real estate markets. By June, 1981, lands which were worth about $4,000.00 per acre in 1976 were selling for around $60,000.00 per acre.

The civil servants proposed land purchases to Cabinet totalling approximately $139,000,000.00. The Cabinet, whose policy it was to time the purchases when prices were low, abruptly changed course because of the high prices and implemented a purchasing freeze for one year. Eventually, the Cabinet partially reversed its decision and allowed negotiations on $125,000,000.00 of proposed land to proceed, approving $100,000,000.00 in land acquisitions in late 1981.

Nilsson argues that there was no rational approach to selecting those who would have their lands purchased, although the $100,000,000.00 purchase was made almost exclusively from major developers, and almost no small owners saw their land purchased. Nilsson was not even considered or put on any priority list, although his desire to sell and his hardship case was known to the Crown. Nilsson submits that he was treated dishonestly, capriciously and arbitrarily in 1981 as a result of the Crown’s tort of abuse of public office.

Nilsson further submits that after 1981, the Crown provided further evidence of its use of the R.D.A. freeze to depress land values by restricting land purchases until prices fell, and finally dealing only somewhat fairly with Nilsson when his debt burden threatened him with bankruptcy and prices had fallen to approximately $13,000.00 per acre. B. Crown ’ s View of the Facts

[ 17 ] According to the Crown, the Alberta Court of Appeal struck down the R.D.A.s because freezing land for later acquisition for a transportation and utility corridor was not a use permitted by the Act . By its Amending Legislation , the Legislature approved the R.D.A. retroactively by enlarging the purposes for which it could be brought into existence, allowing either the confinement or separation of land uses, such as transportation and utility lines, into corridors.

On the basis of the Amending Legislation , the Crown argues the use of the R.D.A. was not colourable, but rather was a legitimate device to protect a transportation and utility corridor, and thus, in pith and substance, a valid regulatory planning exercise no different than those approved by the Supreme Court of Canada in analogous situations. [ 18 ] The Crown agrees that if it had proceeded under the Public Highways Development Act , R.S.A. 1970, c. 295 , it would have had to survey the roadway and upon filing the plan of survey, expropriation would have occurred, with the result that an independent third party would have fixed compensation if fair market value could not be agreed upon.

The Crown also agrees that had it chosen to designate the ring road pursuant to the Public Works Act , R.S.A. 1970, c. 303 , owners affected by the designation would have had the right to trigger an expropriation, resulting in compensation being fixed, if necessary, by an independent third party. [ 19 ] The Crown argues that nothing nefarious is to be read into its decision to use one piece of legislation over another, as each one provides for the implementation of a planning scheme with a view to eventual acquisition; it is not for the Courts to question legitimate Crown decisions.

The Crown emphasizes that the Legislator is responsible to the electorate for its decisions and so long as the method chosen by the Crown is intra vires , it is not reviewable by the Court and does not constitute an abuse of public office. [ 20 ] The Crown argues that in order for Nilsson to succeed on a claim of de facto expropriation, the Crown must have taken all or substantially all of the rights associated with the ownership of his land.

According to the Crown, Nilsson was permitted to use his agricultural land as previously, and because Nilsson was free to sell the land, he could take advantage of any speculative increase in value. The fact that the only real eventual purchaser was the Crown did not result in a diminution of the value of the land, because at all relevant times the Crown policy was to pay fair market value disregarding the effect of the R.D.A. when it purchased land.

While it was true that all development inconsistent with the eventual use of Nilsson’s land as a highway would not be permitted, the Crown argues that falls short of taking away all, or virtually all, of Nilsson’s property rights. [ 21 ] The Crown recognizes that it had a duty to negotiate in good faith with Nilsson in 1976 and 1978. It claims it did so. According to the Crown, Nilsson unilaterally abandoned the negotiations on each occasion.

The Crown argues that the 1976 policy should not be read as obliging it to acquire Nilsson’s land by expropriation if negotiations fail, nor as obliging it, as part of good faith negotiations or fairness because of its unequal bargaining power , to offer Nilsson the right to have an independent third party fix the price. [ 22 ] The Crown emphasizes that its policy after the 1979 R.F.D. was to negotiate with anyone who approached them to sell. Nilsson did not approach them, or if he did, he did not do so in a meaningful way until the spring of 1982.

When he did, negotiations began which finally resulted in the 1987 agreement. During that time, the Crown was in the process of trying to acquire more land than it had the staff to negotiate or funds to pay for, which obliged the Crown to prioritize dealings. The result was that those who pressed their case received more immediate attention.

Although that may have been an unequal result, the Crown argues it did not derive from any dishonest intentional preference of one party over another. [ 23 ] The Crown conceded that it may have been more fair to tell all landowners of the Crown’s policies and its wish to acquire all of the lands after 1979, or to allow landowners to trigger expropriation if negotiations failed.

However, even if the policy were wrong, the Crown submits that the failure to conclude negotiations with Nilsson prior to 1987 was not for lack of honest attempts to negotiate with Nilsson; the negotiations in 1976 and 1978 ended with Nilsson unilaterally breaking off the talks each time, and the Crown’s perception that Nilsson failed to contact them from 1978 to 1982 and therefore did not wish to sell his land at that time, if wrong, was a simple misapprehension. [ 24 ] Finally, the Crown argues that the decision to prioritize the purchase of $100,000,000.00 worth of land from the major developers, from whom large blocks of land could be acquired rapidly and more easily than from many small landowners, was an honest decision made for the legitimate purpose of saving the Calgary R.D.A. which was in serious jeopardy because only 15% of those lands had been purchased at that time. [ 25 ] The Crown submits that it did not use the R.D.A. to depress land prices, and its decision in 1981 to adopt a freeze was not motivated by a desire to depress land prices or wait for depressed prices.

Rather, it was motivated by concern that the speculation was

out of control, that prices being paid no longer represented anywhere near real market value, and that its own purchases under the R.D.A. were fuelling the speculation. The Crown submits that its duty was to spend citizens’ money wisely, and that did not include paying exorbitant sums for the acquisition of land. None of the Crown’s decisions can be characterized as arbitrary or capricious, and certainly none of these decisions were made dishonestly as that term is used in the context of the tort of abuse of public office. IV. STANDARD OF REVIEW [ 26 ] Pursuant to

Part 9 of the Arbitration Agreement, and subject to s.44(1) of the Arbitration Act , S.A. 1991 c. A-43.1 , the parties agreed that the Arbitrator’s Decision shall be final and binding on them. The relevant portion of s.44 of the Arbitration Act reads: Remedies 44

(1) If the arbitration agreement so provides, a party may appeal an award to the court on a question of law, on a question of fact or on a question of mixed law and fact. [...]

(4) The court may require the arbitral tribunal to explain any matter.

(5) The court may confirm, vary or set aside the award or may remit the award to the arbitral tribunal and give directions about the conduct of the arbitration.

(6) Where the court remits the award to the arbitral tribunal in the case of an appeal on a question of law, it may also remit to the tribunal the court’s opinion on the question of law. [ 27 ] The standard of review on appeals from awards under s.44(1) of the Arbitration Act has been judicially considered in Willick v. Willick (1994), 1994 CanLII 9182 (AB KB) , 118 D.L.R. (4 th ) 51 (Alta. Q.B.) and Seneviratne v. Seneviratne (1998), 1998 ABQB 289 (CanLII) , 159 D.L.R. (4 th ) 733 (Alta. Q.B.).

In Willick , Deyell J. noted that there are three standards of judicial review in the review of a decision of an administrative or arbitral tribunal: correctness, patent unreasonableness and utmost deference. In the absence of a privative clause or evidence that an arbitrator has greater expertise than the Court on the issue in question, the “correctness” or “judicial” standard should apply to an appeal brought pursuant to s.44(1) . Hutchinson J. in Seneviratne , supra (p.750), quotes from William H. Hurlburt, Q.C.’s article, “Appeals from awards under the Arbitration Act: (Case comm.) Willick v.

Willick (1994), 118 D.L.R. (4 th ) 51" (1994), 33 Alta. L. Rev. 178 at p.183: It is true that the language of s.44(1) does not differentiate between appeals on law and appeals on fact: it says that “a party may appeal ... on a question of law, on a question of fact ...,” suggesting that the same standard of review should apply to appeals on both law and fact. But traditionally, the courts have respected the fact findings of private consensual arbitrators, setting them aside only in extreme cases, for example, if there is no supporting evidence.

That is, the courts have recognized that, insofar as the facts are concerned, the parties have chosen their tribunal and a court should not substitute its view of the facts for that of the chosen tribunal. I think that the courts will be reluctant to decide that an arbitrator believed the wrong person or gave the wrong weight to a piece of evidence and that they will develop a formula that does not involve the substitution of the court’s view of the facts for the arbitrator’s view.

That is, they will not apply the “correctness” standard to arbitrators’ findings of fact. [ 28 ] Hutchinson J. reiterated these concerns and reviewed comments of R.P. Kerans in Standards of Review Employed by Appellate Courts (Edmonton: Juriliber, 1994), including the observation that reviewing tribunals will not disturb findings of fact made by a trial judge if there were credible evidence before him upon which he could reasonably base his conclusion, and that appeal courts have, for some years now, applied the test of “unreasonableness”, not “correctness”, to all fact findings. Hutchinson J. concluded (p. 752):

The Arbitrator’s decision in assessing and balancing the facts [...] is to be reviewed on the unreasonableness (“clearly wrong”) standard. [ 29 ] In Canadian Crude Separators Ltd. v. Jacobson, 1998 ABQB 590 (CanLII) , [1998] A.J. No. 787 (Q.B.), online: QL (AJ) the issue of the standard of review in the context of a s.44(1) Abritration Act appeal was considered by Lee J. (para. 31): By agreement between the parties, the Arbitrator was accorded the full power and authority of a Justice of the Court of Queen’s Bench.

This appeal from his Award should be considered on the same basis as would an appeal from a judgment of the Court of Queen’s Bench to the Court of Appeal.

This is not a trial de novo . [ 30 ] While the Arbitration Agreement in this case does not provide that the Arbitrator has the power and authority of a Justice of the Court of Queen’s Bench, by agreeing that the jurisdiction of the Arbitrator shall be to award compensation should the Arbitrator find compensation is payable based on Nilsson’s claims of expropriation de facto or abuse of public office, the parties implicitly agreed to grant the Arbitrator that power. [ 31 ] McLachlin J. in Toneguzzo-Norvell v.

Burnaby Hospital, 1994 CanLII 106 (SCC) , [1994] 1 S.C.R. 114 at p. 121, set out the standard of review for a Court of Appeal from the ruling of a trial judge: It is by now well established that a Court of Appeal must not interfere with a trial judge’s conclusions on matters of fact unless there is a palpable or overriding error. In principle, a Court of Appeal will only intervene if the judge has made a manifest error, has ignored conclusive or relevant evidence, has misunderstood the evidence, or has drawn erroneous conclusions from it: see P. (D.) v.

S. (C.), 1993 CanLII 35 (SCC) , [1993] 4 S.C.R. 141, at pp. 188-89 ( per L’Heureux-Dubé J.), and all cases cited therein, as well as Geffen v. Godman Estate, 1991 CanLII 69 (SCC) , [1991] 2 S.C.R. 353, at pp. 388-89 ( per Wilson J.), and Stein v. The Ship “ Kathy K ” , 1975 CanLII 146 (SCC) , [1976] 2 S.C.R. 802, at pp. 806-8 ( per Ritchie J.). A Court of Appeal is clearly not entitled to interfere merely because it takes a different view of the evidence. The finding of facts and the drawing of evidentiary conclusions from facts is the province of the trial judge, not the Court of Appeal. In R. v.

Triple Five Corp. (1993), 1993 ABCA 366 (CanLII) , 14 Alta. L.R. (3d) 305, the Alberta Court of Appeal coincidentally reviewed a decision of the Board which dealt with an expropriation of R.D.A. land in the City of Edmonton. McClung J.A. wrote (p. 308): For this appeal to succeed what must be shown is the employment of a wrong principle or the neglect of material evidence by the valuing authority which translated to a wholly erroneous award of compensation. It is not enough that this Court is left with its impression that too much or too little was awarded.

Côté, J.A. noted further (p.313): We agree with him [McClung J.A.] that the Court should approach this sort of appeal with some caution. Just as it must be slow to overturn the fact findings or damage assessments of a Queen’s Bench judge, so it should be with a decision of this tribunal. [ 32 ] In my review of the Arbitrator’s decision I will apply the “correctness” test to the Arbitrator’s statements of the law. With respect to the Arbitrator’s findings of fact or mixed fact and law, I will apply the “palpable” or “manifest error” test.

Further, even if I find that the law has been misstated or there is a palpable error in coming to the conclusion with respect to certain facts, if in applying the correct law and making obvious inferences as to the facts from the evidence I come to the same conclusion as the Arbitrator, his decision must stand. An appeal court may affirm on any valid ground and may do so for its own reasons, ignoring the reasons of the lower Court which are not persuasive: Re Thatcher and Merchant v. The Queen (1983), 1983 CanLII 2597 (SK CA) , 1 D.L.R. (4 th ) 763 (Sask. C.A.); R.

P. Kerans, Standards of Review Employed by Appellate Courts , supra , pp. 55 and 175 to 181. V. DE FACTO EXPROPRIATION [ 33 ] Nilsson does not dispute the test for de facto expropriation applied by the Arbitrator, but rather its application. In particular, he argues that Trelenberg v. Alberta (Minister of the Environment ) (1980), 1980 CanLII 1087 (AB KB) , 31 Alta.

L.R. (3d) 353 (Q.B.) per Sinclair J., a case which also dealt with the actions of the Crown under the R.D.A. program and which the Arbitrator held was binding, is distinguishable on the facts, since previously undisclosed Crown policies and internal memoranda were presented as evidence in the present case which were not available in Trelenberg , supra . Nilsson also takes issue with the factors relied upon by the Arbitrator to reach his conclusion and argues that the Arbitrator failed to consider his claim of de facto expropriation other than in relation to the 1976 development permit refusal.

On the other hand, the Crown submits that the Arbitrator’s conclusion on this issue was correct and was well founded on the facts. [ 34 ] De facto expropriations are rare. The more common form of expropriation occurs within the well-defined terms of expropriation legislation, or other statutory planning instruments. Under these statutes, the extent and form of compensation is clearly set out and landowners are often well compensated.

These legislative remedies underline the profound encroachment on private property rights represented by expropriation as well as the seriousness with which the Legislature approaches such encroachments. Where “takings” fall outside of the statutory authority, there remains a common law right to compensation. This proposition originates from Attorney General v.

De Keyser ’ s Royal Hotel Ltd. , [1920] A.C. 508 (H.L.) , where Lord Atkinson stated (p. 542): The recognized rule for the construction of statutes is that, unless the words of the statute clearly so demand, a statute is not to be construed so as to take away the property of a subject without compensation.

In the case before me, the R.D.A. regulation expressly provided for compensation in the form of purchasing the land; or if the Minister chose to exercise his authority to expropriate, compensation would be determined pursuant to the Expropriation Act , including compensation for the loss of profits while land was frozen prior to expropriation. However, I note that in the nether-regions of failed negotiations and development freezes with no apparent end, the R.D.A. regulation does not provide a clear indication as to what, if any, remedy should be available to landowners.

This brings me back to the issue of whether the Crown actions with respect to Nilsson’s property amounted to a “taking”; if so, the De Keyser principle indicates that Nilsson should be compensated. A. The Test for De Facto Expropriation [ 35 ] In addressing the issue whether the Crown’s actions constitute a de facto expropriation, the Arbitrator stated (p. 25): The requisite elements which are required to support an allegation of expropriation have been enunciated by the Supreme Court of Canada in Manitoba Fisheries Ltd. v.

The Queen (1978) 1978 CanLII 22 (SCC) , 88 D.L.R. (3d) 462 and R. in Right of British Columbia v. Tener and Tener (1985) 1985 CanLII 76 (SCC) , 3 W.W.R. 673, and are as follows: (

a) A complete “taking” or total extinguishment of rights; 1. No compensation paid; and 2. A corresponding benefit in favour of the expropriating authority. [ 36 ] I accept this statement of the law as correct, and indeed neither of the parties takes issue with this test. There is, however, considerable disagreement between the parties as to the meaning of a “taking” as well as some disagreement over whether the Crown received a benefit from the alleged “taking”. In my view this disagreement necessitates further examination.

i. What is a “ taking ” ? [ 37 ] Even though a determination of this nature is a factual question to be answered by the trier of fact, the case law does provide some guidance as to the type of circumstances which amount to a “taking”, distinguishing between mere “negative prohibitions” on the use of land, and restrictions that effectively strip the landowner of all, or virtually all, of his rights in the land, and thereby entitle him or her to compensation. [ 38 ] An illustration of the negative prohibition approach is found in the House of Lords decision of France Fenwick and Co. Ltd. v.

The King , [1927] 1 K.B. 458 (p. 467) (Wright J.) : A mere negative prohibition, though it involves interference with an owner’s enjoyment of property, does not, I think, merely because it is obeyed, carry with it at common law any right to compensation. A subject cannot at common law claim compensation merely because he obeys a lawful order of the State. [ 39 ] A line of authorities follows France Fenwick and Co. Ltd. to the effect that zoning changes and development freezes do not constitute a “taking” and do not give rise to a common law right of compensation. The leading case in Canada is Vancouver v.

Simpson , [1976] 1 S.C.R. 71 which involved a landowner whose waterfront lot was part of an area that the city planned to incorporate into a public park. The city could not purchase all of the necessary lands at once, but made limited funding available to buy lands, such as the landowner’s, which were identified as high priority. The landowner refused the city’s offer and then applied to subdivide the lot for the purpose of residential development. His application was refused on the basis that the proposed development conflicted with the City’s plans to build a park in the area.

The Supreme Court (Martland J. writing for the majority) held that the decision was valid and did not amount to an expropriation, as the officer who refused the application acted within his powers. The Supreme Court also recognized that if the development restrictions were employed for the express purpose of depressing the value of the lands the City intended to acquire, the landowner would be entitled to a remedy. [ 40 ] The problem of using planning powers to depress land prices was played out in Hauff v. City of Vancouver (1980), 1981 CanLII 437 (BC CA) , 15 M.P.L.R. 8 (B.C.C.A.).

As was the case in Simpson , the City of Vancouver wanted to acquire waterfront properties for future parks. A bylaw was passed that restricted the amount of land available for development on these properties, effectively down-zoning the lands. The trial judge found that one of the intended purposes, if not the only purpose, of the by-law was the restriction or limitation of property values. [ 41 ] The Court of Appeal agreed with the trial judge that this objective was not a bona fide planning purpose under the municipality’s enabling legislation.

The Court of Appeal rejected the argument that there was nothing improper about a bylaw which reduces property values where there is no immediate intent to acquire the property. In the end result, the bylaw was quashed.

Although Hauff did not involve a claim for de facto expropriation, in my view it stands for the proposition that where public powers are improperly exercised to affect private property rights, the appropriate remedy may be found in challenging the validity of the enactment rather than claiming an expropriation under what is essentially an illegal use of authority. [ 42 ] Returning now to the distinction between “negative prohibitions” and expropriation, Hartel Holdings Co. Ltd. v.

Council of City of Calgary (1984), 1984 CanLII 137 (SCC) , 8 D.L.R. (4 th ) 321 (S.C.C.) provides the policy behind the proposition that a development freeze does not give rise to a common law right of compensation as an expropriation de facto . In this case the plaintiff’s lands were located in the area of a proposed park. The City of Calgary rejected the plaintiff’s application to subdivide and develop the land for residential purposes.

The plaintiff then approached the City to negotiate its purchase of the land but, unhappy with the offered price and believing he could get a better price under the Expropriation Act , he rejected the offer. The City did not expropriate as the plaintiff expected, but instead played a “waiting game”.

The plaintiff eventually applied to the courts to force the City to comply with the newly enacted Planning Act , S.A., 1977, c. 89 , which triggered expropriation when land was “designated” for specific public purposes such as a park. [ 43 ] The Supreme Court of Canada rejected the application, holding that the restrictions on land use imposed by the city did not amount to a “designation” under the Planning Act , and therefore did not trigger the expropriation process.

Wilson, J., writing for the Court, found that even though development was frozen thereby preventing any commercial use, the statute contemplated the infringement of property owners’ rights in this manner and tolerated it in order to accommodate the public interest (pp. 333, 334):

The legislation has gradually moved away from the situation in which the rights of the property owner were given paramount consideration towards the situation in which planning flexibility and the public interest are given paramountcy. [... T]he Alberta Legislature has decided that if the rights of individuals and the public conflict, then to the extent necessary the “greater public interest” must prevail and that the compensation scheme envisaged under the Act is an exclusive one.

This seems to be the balance which the Legislature has struck and I see no basis upon which the court can interfere with that balance. In obiter , Wilson J. suggested that as long as a statutory enactment is made for a legitimate and valid planning purpose, development freezes are permissible (p. 335): The city has not changed the zoning of the appellant’s land. It has simply refused to rezone it in his favour or buy him out at a fair price. There is nothing inherently wrong with a development freeze. [ 44 ] In Steer Holdings Ltd. v. Manitoba , 1992 CanLII 2773 (MB CA) , [1993] 2 W.W.R. 146 (Man.

C.A.), the plaintiff landowner sued the Province of Manitoba for a statutory “taking” following an amendment to the City of Winnipeg Act that blocked his ability to obtain a permit to develop his land.

The amendment had also ended negotiations towards the sale of his land to the City of Winnipeg, which intended to turn the lands into a park. [ 45 ] Huband J.A. for the Manitoba Court of Appeal dismissed the claim and distinguished between compulsory “takings” and zoning- type restrictions (pp. 149,150): A clear distinction has been made [...] between those cases where there is a compulsory taking, as opposed to those cases where some right or interest in the property has been restricted or affected [...] Thus, zoning by-laws passed by municipalities do not give rise to claims for compensation, and this is so even where there is a “down zoning” by which the owner’s use of the property is more restricted.

The Manitoba Court of Appeal also reiterated the rule that no right to compensation can be inferred from a mere limitation on property rights, unless it is specifically provided for in a statute. [ 46 ] Unlike Hartel Holdings , Steer Holdings was decided on common law principles rather than on a statutory basis.

In my view, Hartel Holdings gives further weight to the proposition that restrictions imposed by zoning regulations, even when down-zoning is involved, are not a “taking” of property. [ 47 ] Finally, Trelenberg , supra , deals with the same land acquisition program that Nilsson claims resulted in the expropriation of his lands.

Therein, Sinclair J. considered the effect of the R.D.A. restrictions on the plaintiff, and held (p. 370): As I see the Edmonton RDA, the restrictions on the use of property are essentially of a zoning character and while they do deprive the plaintiff of the use or the enjoyment of his property, the result is not the specific dedication of private land to public use. In the final analysis, I do not consider that a de facto expropriation of the plaintiff’s land has occurred. At first blush, Sinclair J.’s conclusion appears to be persuasive authority mitigating against Nilsson’s claim of de facto expropriation.

However, the case before me is distinguishable from Trelenberg , as there is evidence before me regarding the Crown’s land acquisition plans and policies which was not before Sinclair J. I must not therefore hastily dismiss Nilsson’s claim on this basis. I mention Trelenberg at this point only to emphasize the strength of the authorities which state that in spite of the infringement on private property rights, zoning-type restrictions do not support a finding of expropriation de facto .

[ 48 ] Thus, the “taking” of property must be more than a mere restriction on use, except if the restriction is of sufficient severity to remove virtually all of the rights associated with the property holder’s interest. In such a case, a claim of de facto expropriation may be supported: Manitoba Fisheries Ltd. v. The Queen (1978), 1978 CanLII 22 (SCC) , 88 D.L.R. (3d) 462 (S.C.C.); R. in Right of British Columbia v.

Tener and Tener , 1985 CanLII 76 (SCC) , [1985] 3 W.W.R. 673 (S.C.C.). [ 49 ] In Manitoba Fisheries , the federal government set up a statutory monopoly over the business of exporting fish, which put the plaintiffs out of business. Although the government had the statutory authority to compensate businesses affected by the monopoly, the plaintiffs received none, and brought an action claiming compensation for the loss of their business, including the loss of goodwill.

The Supreme Court held that the loss of goodwill was a “taking” of property compensable in the absence of clear wording (p. 473): [I]n my opinion the Freshwater Fish Marketing Act and the Corporation created thereunder had the effect of depriving the appellant of its goodwill as a going concern and consequently rendering its physical assets virtually useless and that the goodwill so taken away constitutes property of the appellant for the loss of which no compensation whatever has been paid.

There is nothing in the Act providing for the taking of such property by the Government without compensation and as I find that there was such a taking, it follows, in my view, that it was unauthorized having regard to the recognized rule that “unless the words of the statute clearly so demand, a statute is not to be construed so as to take away the property of a subject without compensation”: per Lord Atkinson in Attorney-General v. De Keyser ’ s Royal Hotel, supra . [ 50 ] A similar conclusion was reached in Tener , supra , where no land was actually taken by the government.

The plaintiffs owned mineral claims, however they were not able to obtain a permit to explore or work the claims. The claims were located in a provincial park, and the requirements for exploiting natural resources within the park were becoming increasingly onerous in the years leading up to the plaintiffs’ action. Eventually, the plaintiffs received a letter from the provincial government informing them that current park policy prohibited development within the park, and asking them to itemize a quit claim price.

Estey J., writing for the majority of the Supreme Court, found that although title had not transferred, the government had in effect expropriated the plaintiffs’ mineral interests (p. 685): The denial of access to these lands occurred under the Park Act and amounts to a recovery by the Crown of a part of the right granted to the respondents in 1937. This acquisition by the Crown constitutes a taking from which compensation must flow.

In a separate judgment that concurred in the result, Wilson J. explained how the denial of access to the minerals was in effect a denial of virtually all of the plaintiffs’ interest (p. 699): While the grant or refusal of a licence or permit may constitute mere regulation in some instances, it cannot be viewed as mere regulation when it has the effect of defeating the respondents’ entire interest in the land.

Without access the respondents cannot enjoy the mineral claims granted to them in the only way they can be enjoyed, namely by the exploitation of the minerals. [...] The reality is that the respondents now have no access to their claims, no ability to develop and realize on them and no ability to sell them to anyone else. They are effectively beyond their reach. They are worthless. As described by Estey J., the restrictions placed on the respondents’ interest were so severe that they were “left with only the hope of some future reversal of park policy and the burden of paying taxes on their minerals”.

I am mindful that this situation contrasts with the zoning cases in which the landowners are, at a minimum, able to continue to enjoy the use of their property, either in the same manner as at the time the restrictions were imposed, or in any other manner that does not violate the new conditions of use.

Furthermore, although zoning-type restrictions may inflict a cap on land values, and even reduce property values in some cases, the land is not rendered worthless, and landowners retain the right to sell the land to any interested buyer. [ 51 ] One further case that exemplifies the expropriation restrictions is Mariner Real Estate Ltd. v. Nova Scotia (Attorney-General) (1998), 1998 CanLII 1757 (NS SC) , 165 D.L.R. (4 th ) 727 (N.S.S.C.). The plaintiffs owned land that fell entirely within an area designated by the Minister of Natural Resources as “beach” land.

The Beaches Act , R.S.N.S. 1989, c. 32 , amended 1993, c. 9, s.9, was aimed at protecting fragile beach ecosystems and set out numerous restrictions on the use of beach lands, including a prohibition against development without the approval of the Minister. Compensation to landowners for the restrictions imposed by the Act was expressly precluded. The plaintiff landowners applied to the Minister for approval to build single family dwellings on their beach lands. Their

applications were rejected, prompting them to bring an action against the government for compensation. In examining the issue of whether an expropriation de facto had occurred, Tidman J. applied the test set out by Estey J. in Tener , supra (paras.26 and 27): Expropriation or compulsory taking occurs if the Crown or a public authority acquires from the owner an interest in property. [...] Two questions at once arise: What right did the respondents lose and what interest did the government acquire [...] In applying that test here, I accept the evidence of Mr.

Hardy and find first of all that the plaintiffs have lost virtually all economic value in the designated lands and thus have lost an interest in their property. When Tidman J. considered whether compensation was owed in spite of the express provision of the Act precluding compensation, he reiterated that the plaintiffs had lost virtually all of their interest in the lands, stating that “[t]he fee simple in the lands has been stripped of its whole bundle of rights” (at para. 17).

In the end result, Tidman, J. concluded that although the plaintiffs retained legal title to the beach lands, there had been a “taking” with a corresponding benefit to the Crown, and therefore an expropriation had in fact taken place. [ 52 ] Thus, a distinction may be made between mere limitations on the use of property and restrictions that are severe enough to amount to a taking on the scale of an expropriation.

Although the analyses are fact driven, the case law is clear that virtually all of the rights held by the owner must be taken away or rendered worthless before one can succeed on a claim of de facto expropriation. ii) What is a “ benefit ” ? [ 53 ] In addition to establishing a “taking”, the plaintiff must show that the Crown received a corresponding “benefit”.

In Manitoba Fisheries , supra , the Supreme Court found that there was a “taking” of the plaintiff’s goodwill, and because the government was using what it had taken away, it had acquired a corresponding benefit from the taking. [ 54 ] This reasoning was followed in Mariner Real Estate , supra , where the Court found that there had been a taking as well as a corresponding benefit to the Crown. Similarly in Tener , supra , Estey J. found that even without acquiring title to the minerals, the Crown benefitted by denying the plaintiffs access to their minerals and enhancing the value of the park.

Estey J. also drew important distinctions between planning-type or zoning regulations, necessary to achieve planning objectives and not aimed at adding value to a particular project or public asset, and limitations on property use that are imposed to promote a specific public value or government project. [ 55 ] This distinction is noted in Steer Holdings , supra , where the Manitoba Court of Appeal found that while there had been a restriction on use, there was no corresponding benefit to the Crown from these restrictions and consequently no expropriation in fact (p. 152): I am inclined to agree that there was a “taking away” in the sense that the legislation limited the plaintiff in what it could do with the property.

But in my opinion there was no corresponding benefit or acquisition by the province of Manitoba. Title to the land remains with the plaintiff. The creek and the ravine are an amenity to the restaurant. That amenity remains just as it was before the plaintiff was struck with the idea that a development proposal would persuade one government level or the other to pay a healthy price for the property. Unlike Manitoba Fisheries , the government in Steer Holdings did not acquire a piece of property that was immediately put to use.

Instead, the Crown prevented further development on a property that it intended to acquire and turn into a park, and according to the Court, this form of taking was not something from which the Crown benefitted. In my view, this reasoning is difficult to reconcile with Tener , supra , and Marina , supra , which stand for the proposition that the benefit does not have to be in the form of the Crown making direct use of the owner’s property in the same manner as the owner would have, but can be a general benefit to the public.

B. Were Nilsson ’ s Lands Expropriated? i. The Trelenberg Decision and the Imposition of the R.D.A. [ 56 ] The Arbitrator found that the Crown’s actions in relation to Nilsson did not constitute de facto expropriation. In the Arbitrator’s view, he was bound by Trelenberg , supra , which resolved the issue.

Nilsson argues correctly that Trelenberg , supra , is not binding on me, and that Sinclair J. did not have the benefit in that case of all the internal government memoranda and policy directives as well as further evidence of the Crown’s actions in relation to Nilsson. [ 57 ] At the outset, I recognize that there is often a fine line between the use of a development freeze as legitimate planning legislation, and as a de facto expropriation.

I am also mindful that it is not objectionable for a government (be it municipal or provincial) to freeze development of land, if the object of the legislation is motivated by an intention to acquire the land for public purposes: Hartel Holdings Ltd. v. City of Calgary , supra ; Simpson v. City of Vancouver , supra . However, the freeze must not have as its object the acquisition of the land at a lower price than its value before the freeze: Hauff v. City of Vancouver , supra .

Further, a development freeze cannot be used to affect the price paid by the authority which later acquired the land for public purposes: Kramer et al. v. Wascana Centre Authority , 1967 CanLII 115 (SCC) , [1967] S.C.R. 237.

As noted earlier, de facto expropriation occurs when a government confiscates all, or virtually all, of the incidents of ownership: Tener, supra, Manitoba Fisheries , supra , and Mariner Real Estate , supra . [ 58 ] Given the above principles, I agree with the position which Sinclair J. appears to have adopted in Trelenberg , supra , that although the original R.D.A.s affecting the ring roads around Calgary and Edmonton were ultra vires the Act , the Amending Legislation created enabling legislation to legitimize the R.D.A.s, including the one affecting Nilsson. In Heppner v.

Minister of Environment, etc. (1977), 1977 ALTASCAD 206 (CanLII) , 4 Alta. L.R. (2d) 139 (A.D.), Lieberman J.A. held (pp. 150,151): Counsel for the respondent forcefully argues that the Act is concerned with the whole of the environment and that its intent is to make “everything which can be of a detrimental effect to the environment capable of control for the general benefit of all Albertans”.

It follows, therefore, he contends, that the impugned order in council and regulation fall within the wide “purpose, intent, object, ambit or scope of the Act .” While it is true that the intent of the Act is to protect the environment as a whole, the powers given to the Lieutenant-Governor in Council are clearly set out in ss.15 and 17 of the Act , and in order to be valid orders in council and regulations must fall within those sections.

The rapid growth of urban areas, combined with the substantial industrial development including pipelines and electrical transmission lines in this province, obviously requires regulations to, among other objectives, protect the environment. However, the placing of a transportation and utility corridor – the expressed and, as I have found, motivating purpose behind the impugned subordinate legislation – within the R.D.A. can have nothing but a detrimental effect to the R.D.A. or indeed to the area “adjacent” to it. In my view, this purpose does not fall within s.15 , even as amended, or within s.17 .

It appears that Lieberman J.A.’s comments were seized upon and a decision was made to legitimize as an environmental purpose the concentration of utilities and highways in particular corridors, thereby preserving the balance of the environment from these environmentally damaging activities.

Consequently as a result of the Amending Legislation , s.15 provided for the validation of the R.D.A. notices filed against land for the purpose of building a transportation and utility corridor. [ 59 ] The effect of the Amending Legislation was that the Edmonton R.D.A. falls within the purposes set out in the Act : Trelenberg , supra , at p. 359. [ 60 ] It also appears that either Sinclair J. accepted the legislation as valid, or the validity of the retroactive legislation was not in issue.

[ 61 ] The amended legislation clearly provides that an R.D.A. may be designated for the purpose of concentrating activities such as highways and utilities in a certain area and that is an environmental purpose.

Therefore, while I agree with counsel for Nilsson that the way in which the Crown sought to camouflage the real purpose of the R.D.A. is relevant to the tort of abuse of public office, I must and I do accept the fact that the Amending Legislation did legitimize the R.D.A. affecting Nilsson’s land from the date of promulgation forward. [ 62 ] Counsel for Nilsson argues that Trelenberg is distinguishable from the facts before me as there was no evidence in that case that the Crown had decided to eventually purchase the Trelenberg land, by expropriation if necessary. This in my view, is a valid distinction.

Trelenberg , supra , does not deal with the confidential R.F.D.s and the Department of Highways’ plans which disclosed that the Nilsson land was to be the site of a major highway interchange. While all lands in the R.D.A. could be said to be indefinitely frozen, only certain lands (including Nilsson’

s) could be said to have been frozen until purchased. In fact, in 1979 some land in the Edmonton R.D.A. was removed from that designation because the highway plans were much more definite and did not require all of the lands originally designated. [ 63 ] Does the fact that Nilsson’s land was, in practice, never going to be freed for any other development, and that the government was firmly committed to acquiring it, add to the Trelenberg situation an element that would allow a finding of de facto expropriation? I think not.

I cannot distinguish the situation in Simpson , supra , from the case at bar. [ 64 ] I therefore agree with the Arbitrator’s decision that the imposition of the R.D.A. designation per se did not amount to expropriation de facto . In so doing, I am mindful that the Act and the R.D.A. regulation never authorized the Crown to acquire the land except by voluntary purchase or the statutory expropriation process, which has built into it a method of ensuring that fair market value is paid.

The Supreme Court of Canada has interpreted expropriation legislation similar to that in Alberta as obliging the expropriating authority to pay fair market value without regard to the effect, positive or negative, on land values of the fact that the land is being expropriated or has been zoned for a public purpose: Wascana , supra . ii) Expropriation by Illegal Acts? [ 65 ] The Arbitrator’s conclusion that the imposition of the R.D.A. did not result in an expropriation does not meet the total argument advanced by counsel for Nilsson, in particular the issue as to the context in which the Crown imposed a freeze on Nilsson’s land.

The Crown does not dispute that in practice, Nilsson could only use his land for bare agricultural purposes, without development by way of buildings, or sale to another, knowing that there was but one eventual buyer for the land: the Crown. [ 66 ] The Crown knew this to be the situation and knew the following principles of law applied: 1. The Crown could not use the R.D.A. to effect a purchase below fair market value: Wascana, supra , Hauff , supra and Simpson , supra .

In addition, by adopting R.F.D.s which specifically directed that appraisers should ignore the imposition of the R.D.A. as a factor (as per Wascana ) and by providing for arrival at fair market value through the intervention of an independent third party, the Cabinet had set these principles as policy. 2. The Crown had a duty to bargain in good faith. 3. The Crown had a duty not to discriminate against Nilsson. The authority for this is found in the common law and by interpreting the Alberta Statutes in light of s.1(

b) of the Alberta Bill of Rights .

Section 1(

b) reads: 1. It is hereby recognized and declared that in Alberta there exist without discrimination by reason of race, national origin, colour, religion or sex, the following human rights and fundamental freedoms, namely: (a) [...]

(

b) the right of the individual to equality before the law and the protection of the law; 4. The Crown had a duty to exercise its discretion under the R.D.A. reasonably. [ 67 ] The Arbitrator referred to the following passage from the decision of Lord Macnaghten in Westminster Corporation v. London & North Western Railway, [1905] A.C. 426 at p. 430 : It is well settled that a public body invested with statutory powers such as those conferred upon the corporation must take care not to exceed or abuse its powers. It must keep within the limits of the authority committed to it. It must act in good faith.

And it must act reasonably. In my view, Westminster Corporation is authority for the requirement that in performing administrative functions, the Crown must act in good faith and reasonably. [ 68 ] Nilsson argues that each of the four duties of the Crown set out above were breached: 1. The Crown used the R.D.A. through its ministers and employees to deflate prices for subsequent acquisition at bargain prices. Evidence of the Crown’s intention to acquire the land at less than fair market value can be found in the negotiations themselves and from the least cost policy directive. 2.

The Crown failed in its duty to act in good faith when it abandoned the negotiation process on two occasions (1976 and 1978), thereby denying Nilsson those rights which the expropriation process would have afforded. 3. The Crown acted improperly by inviting others, particularly large corporate developers, to the bargaining table from 1979 through 1982, while not dealing with Nilsson during that time, thereby discriminating against him. As found by the Arbitrator, the Crown’s handling of the negotiations, far from being absent of discrimination, was in fact arbitrary and capricious.

This offended the Alberta Bill of Rights (the third duty), and the obligation to act reasonably (the fourth duty). [ 69 ] Assuming the above allegations to be true, would the Crown’s attempt to confiscate Nilsson’s land at less than market value change a process which on its face was not an expropriation into de facto expropriation?

I think the short answer is no. [ 70 ] Any such attempts, whether it be buying at low prices and refusing to buy at high prices, making unrealistically low offers and then walking away from the negotiations, or acting arbitrarily, would necessarily amount to acting illegally but not to de facto expropriation. The remedy to correct an illegal act not amounting to the tort of abuse of public office, is to quash the illegal act.

On the other hand, if it is illegal and amounts to abuse of public office, then the remedy should be to quash the illegal act and grant compensatory and/or punitive damages. [ 71 ] In my view, illegal acts of the Crown cannot be the foundation for de facto expropriation. Worthy of note is that none of the de facto expropriation cases to which I was referred cite illegal acts of a confiscatory nature as a foundation for this remedy.

To illustrate, in Manitoba Fisheries , supra , the federal legislation which created the monopoly over fresh water fish marketing in Manitoba was not challenged and was presumably valid federal legislation. In Tene r , supra , the authority of the British Columbia government to create public parks and to proscribe activities in those parks was also presumably a valid exercise of legislative authority.

In Mariner Real Estate , supra , the authority of the Nova Scotia Government to regulate the beach environment as it did was similarly not in issue. [ 72 ] In contrast, there are several cases featuring potential “takings” of property by an invalid exercise of government power, none of

which result in a finding of de facto expropriation. In Hauff , supra , the bylaw which was in fact an illegal taking of some rights was simply quashed. In Simpson, supra , an attempt was made to quash the bylaw which also effected a taking of some rights.

Similarly, in Heppner , supra , the remedy sought and obtained was the striking down of the illegal regulation, and not expropriation. [ 73 ] Therefore, if the legislation by virtue of which the Crown employees acted is valid, failure to act in accordance with that legislation does not give rise to a declaration that those illegal acts amount to expropriation de facto .

Instead, failing to act in accordance with legislative directives may constitute one of the elements required for the tort of abuse of public office. iii. 1976: The Rejection of Nilsson ’ s Development Proposal [ 74 ] All the cases lead me to the conclusion arrived at by Sinclair J. in Trelenberg , supra , that the law of Canada allows a Legislature to enact legislation providing for “takings” without compensation.

However, I conclude that it is also the law of Canada that if valid legislation provides for “taking” of all or virtually all property rights, then unless the contrary intention appears, the legislation is to be read as providing compensation. Nilsson argued that even if the Crown’s actions with respect to Nilsson’s lands were valid, a claim of de facto expropriation is still supportable on the basis of the 1976 development permit refusal. The restrictions placed on Nilsson’s lands by the R.D.A. and by this refusal, however, do not amount to a “taking” on the scale of an expropriation.

Although Nilsson was restricted from using his property as he had intended, or to its “highest and best use” as in Hartel Holdings , supra , Simpson, supra , and Steer Holdings, supra , the lands nonetheless retained some value and participated in speculative increases in value as evidenced by Triple Five Corporation’s offer of $45,000 per acre in 1980. Furthermore, Nilsson was able to stay on his land and use it in the same manner as he had before the R.D.A. and before the development refusal.

The retention of these rights and incidents of property ownership differentiates Nilsson’s situation from the cases such as Mariner Real Estate , supra , where virtually all of the bundle of rights in fee simple ownership were stripped. As a result, the restrictions on Nilsson’s land after the 1976 decision puts Nilsson in the category of frustrated landowners who have no remedy against validly made zoning-type restrictions and development freezes affecting their lands. iv. Conclusion: The Problem of the Indefinite Freeze [ 75 ] The zoning and development freeze decisions raise an issue of fundamental fairness.

The problem of the indefinite freeze was reviewed by R. J. Bauman in his

article “ Exotic Expropriations: Government Action and Compensation ” (1994) 52(4) The Advocate 561 (at p. 561): A final source [for this article] arises from the growing frustration of many owners of lands otherwise suitable for development. This frustration has increased dramatically in latter years with citizens’ groups successfully encouraging local governments to virtually sterilize undeveloped tracts of land - in effect, appropriating to the neighbourhood, as an amenity, open space owned by private citizens. At what point do such actions at law give rise to a right in the frustrated owner to compensation?

After reviewing the Canadian authorities and Re Rodenbush et al. and District of North Cowichan (1977), 1977 CanLII 1864 (BC SC) , 76 D.L.R. (3d) 731 (B.C.S.C.), Professor Bauman concluded that the law provides only a very narrow opportunity to claim compensation in such circumstances (at p. 574): One must draw on the authorities like Manitoba Fisheries Ltd. and Tener and demonstrate that the legislation effectively, if not prima facie , confiscates all reasonable private uses of the land in question.

As has been noted, there is a very “slender” line of authority available to found such an argument. [ 76 ] Frederick A. Laux in Planning Law and Practice in Alberta , 2d ed. (Calgary: Carswell, 1996), discusses Trelenberg , supra , Soo Mill & Lumber Co. Ltd. v. Sault Ste. Marie v. (City), 1974 CanLII 17 (SCC) , [1975] 2 S.C.R. 78 , and Hartel Holdings, supra . He

concludes that while the Court in Hartel professes to leave intact a line of cases that have held that it is an abuse of the planning process to impose a freeze on development for the purpose of public acquisition, the significance of those cases is diminished in light of Hartel .

He also makes the point with respect to Soo Mill that there was no discussion about the length of time that a development freeze could be applied to a given property. [ 77 ] Professor Laux concludes (p.245): To sum up, as the law presently stands in Alberta, provided that municipalities act discreetly and pursuant to comprehensive long-range planning objectives, they have little to fear by way of judicial intervention, even though their actions may have a dramatic impact on the development expectations of landowners. Municipalities can decide when land is ripe for development.

Private land can be prohibited from development forever in the name of protecting consumers from hazards inherent in the land. Similarly, there is ample scope to downzone land for the protection of the natural environment. Further, so long as municipalities follow the model used by the City of Calgary described in Hartel , intensive land development can be halted indefinitely pending possible future acquisition.

In the end, it would seem that Alberta municipalities can go a considerable distance before they have crossed over the line of legitimate land use regulation and into the realm of an illegal or compensable taking. Nevertheless, in light of the revived concern over civil liberties and individual rights brought on in large part by the Charter , one can expect a continual reassessment of the situation, and perhaps some swing of the pendulum in favour of private landowners.

Were it not that the facts in Simpson , supra , Soo Mills, supra , and Hartel Holdings, supra, are indistinguishable from the facts in this case, I would have been inclined to follow the reasoning in Rodenbush, supra , and conclude that the pendulum will swing in favour of the landowner.

The point should be made that the courts have not dealt head-on with the question whether a legitimate freeze for planning purposes might become an expropriation, or might be struck down by the Court as illegal were it to continue, or be intended to continue, indefinitely. [ 78 ] In this case, the R.D.A. was initially imposed with a view to acquisition within initially an indefinite time. The time frame for acquisition, however, was loosely defined in the sense that it was intended to be only as long as it would take for implementation of the plan to build a ring road around each city.

In 1979, internal Department of the Environment memoranda referred to a 5-year acquisition plan. On the face of it, this is not a plan to freeze land forever. In fact, by its own internal policies the Crown directed itself to negotiate a purchase with Nilsson in 1976, and again in 1978. These negotiations did not succeed mainly because Nilsson left the negotiating table.

In 1982, negotiations did recommence (very slowly on the Crown’s part), culminating eventually in the 1987 agreement of sale. [ 79 ] In light of the particular facts regarding the Nilsson land, there is no evidence by virtue of which the Arbitrator could conclude that Nilsson’s land was, by the wording of the legislation and the internal policy directives, land frozen forever without the possibility of compensation. Although in an appropriate case it might be open to the Court to conclude that such a freeze had become a total “taking”, the Nilsson case cannot be so characterized. VI. ABUSE OF PUBLIC OFFICE A.

The Law on Abuse of Public Office [ 80 ] With respect to the tort of abuse of public office, the Arbitrator concluded (Phase 1, p.34): the test to be applied is one of reasonableness and the case law supports the position that acts based on negligence or a misunderstanding of legal obligations may, nevertheless, constitute abuse of public office. [ 81 ] The Crown argues that this conclusion is erroneous, pointing out that there is no authority for the Arbitrator’s proposition that an allegation of abuse of public office is supported by merely negligent or unreasonable acts.

Instead, the Crown urges that abuse of public office is an intentional tort, requiring both deliberate abuse or misuse of public authority and an intention to injure, or knowledge that injury will result. The Crown submits that under the proper test, the facts of this case do not support a finding of liability for abuse of public office. [ 82 ] Nilsson argues that the Arbitrator’s finding was correct, if not in law, then in the result. While not disputing the Crown’s description of the test for abuse of public office, Nilsson argues that this test can absorb the reasonableness standard applied by the

Arbitrator. Nilsson submits that on a careful reading of the Arbitrator’s decision, the word “reasonableness” should be interpreted in an administrative context, referring to an improper exercise of statutory discretion, which may or may not involve elements of malice, bad faith or dishonesty. In any event, argues Nilsson, the Arbitrator was correct in finding that the tort occurred in 1976, and would have made the same finding under the test suggested by the Crown.

Nilsson also submits that further instances of the tort can be established after that date. [ 83 ] The case law indicates that the tort may be established as follows: 1) by proving “targeted malice”, whereby a public officer uses his or her authority for the specific purpose of harming the plaintiff; or 2) by proving a mental element less than actual intention to harm the plaintiff, which leads to the conclusion that the official was aware of the impropriety of his or her conduct and knew or could foresee that harm would result.

While the law of targeted malice is firmly rooted in Canadian law, the second ground, of more recent vintage, has broadened the tort of abuse of public office. It has been considered in greater depth in England and other Commonwealth jurisdictions. i. Targeted Malice [ 84 ] The leading authority on abuse of public office in Canada is Roncarelli v. Duplessis (1959), 1959 CanLII 50 (SCC) , 16 D.L.R. (2d) 689 (S.C.C.). Roncarelli was a case of blatant misuse of public authority wherein Duplessis, Premier and Attorney-General of Quebec, caused the cancellation of a restauranteur’s liquor licence.

The restauranteur was a Jehovah’s Witness who often posted bail for fellow Jehovah’s Witnesses arrested for violating municipal bylaws governing the distribution of pamphlets. Cancellation of the licence was not for a legitimate purpose of the Quebec Alcoholic Liquor Act , R.S.Q. 1941, c. 255. Duplessis’ act was discriminatory as it was intended to punish Roncarelli for his involvement with the Jehovah’s Witnesses. [ 85 ] The Supreme Court held that by using his statutory authority to punish Roncarelli, Duplessis had acted illegally.

In separate reasons, Rand J. wrote (p.706): The act of [Duplessis] through the instrumentality of the Commission brought about a breach of an implied public statutory duty toward the appellant; it was a gross abuse of legal power expressly intended to punish [Roncarelli] for

an act wholly irrelevant to the statute, a punishment which inflicted on him, as it was intended to do, the destruction of his economic life as a restaurant keeper within the Province.

The implied public statutory duty referred to by Rand J. is that of good faith (p.707): “Good faith” in this context, applicable both to the respondent and the General Manager, means carrying out the statute according to its intent and for its purpose; it means good faith in acting with a rational appreciation of that intent and purpose and not with an improper intent and for an alien purpose; it does not mean for the purposes of punishing a person for exercising an unchallengeable right; it does not mean arbitrarily and illegally attempting to divest a citizen of an incident of his civil status.

Rand J. qualified this type of illegal conduct as “malice” (p.706): Malice in the proper sense is simply acting for a reason and purpose knowingly foreign to the administration, to which was added here the element of intentional punishment by what was virtually vocation outlawry.

The standard for abuse of public office set out in Roncarelli is referred to as “targeted malice”, the test being: malicious conduct on the part of a public officer, whereby the officer (

a) knowingly acted for an improper purpose, and (

b) acted with the intent of harming the plaintiff (targeted malice). Thus, the exercise of statutory authority for the purpose of harming an individual or a class of individuals renders an otherwise lawful exercise of authority illegal. A fortiori , the test also applies in situations where the official acted beyond his or her authority in order to inflict harm on the plaintiff. In either context, the objective of harming the plaintiff establishes the requisite mental element of deliberateness by establishing both an intentional illegal act and the knowledge that harm will result. [ 86 ] In Gershman v.

Manitoba Vegetable Producer ’ s Marketing Board (1976), 1976 CanLII 1093 (MB CA) , 69 D.L.R. (3d) 114 (Man. C.A.), where a government produce marketing board was found to have interfered with the commercial affairs of the plaintiff in retaliation for the plaintiff’s unsuccessful challenge to the validity of the board’s enabling legislation, the Manitoba Court of Appeal held (p.123): The principle that public bodies must not use their powers for purposes incompatible with the purposes envisaged by the statutes under which they derive such powers cannot be in doubt in Canada since the landmark case of Roncarelli v.

Duplessis (1959), 1959 CanLII 50 (SCC) , 16 D.L.R. (2d) 689, [1959] S.C.R. 121. Since that case, it is clear that a citizen who suffers damages as a result of flagrant abuse of public power aimed at him has the right to an award of damages in a civil action in tort. [ 87 ] In White Hatter Limousine Service Ltd. v. City of Calgary (1993), 1993 CanLII 7182 (AB KB) , 13 Alta. L.R. (3d) 362 (Q.B.), the plaintiff, a limousine operator, was denied a licence to operate a limousine business after the City of Calgary froze the number of licences available.

The limousine operator conducted his business in spite of this decision. The City’s by-law enforcement inspector then harassed the operator by issuing excessive numbers of tickets to the drivers and questioning and threatening passengers and other potential clients with legal action if the operator’s service was used.

The Court held that while the City had acted within its authority in placing a freeze on licences, the enforcement inspector’s conduct was beyond its authority, and warranted an award of both general and punitive damages. [ 88 ] It is clear that although Roncarelli was decided under Quebec civil law, an action for damages for abuse of power is available throughout Canada. ii.

The Second Ground for Abuse of Public Office [ 89 ] Several recent Canadian cases have considered the second ground for the tort of abuse of public office, but it appears that there have not yet been any findings of liability under this second branch. For example, in Francoeur v. Canada (1994), 78 F.T.R. 109 (T.D.) a customs officer seized videotapes imported by the plaintiff, thereby destroying the plaintiff’s business. The plaintiff alleged an abuse the officer’s discretionary powers.

The Court applied the U.K. law of misfeasance in public office to arrive at the following test (p.126): There are two possible grounds upon which to found liability. First, if one can show that the public officer acted with malice or an intent to injure, then the act of the public officer which is purported to be undertaken pursuant to a power conferred by statute becomes unlawful and the plaintiff who suffers damages as a direct result of that act will be entitled to damages.

Secondly, if one can show that the statutory actor or public officer knowingly undertook an action for which he or she had no authority in law, and he or she could foresee that their action would cause harm to the plaintiff, then the tort will establish; see Bourgoin S.A. and others v. Ministry of Agriculture, Fisheries and Food , [1985] 3 All E.R. 585 (C.A.) . The Court emphasized that regardless of whether the first or second ground was used, the mental element of intention remained crucial to

the tort (p.126): Underlying both categories of cases giving rise to the tort of abuse of power or misfeasance of public office is the element of intent. The term malice can be applied to a variety of conduct, however, the notion of malice necessarily implies some form of intention. Likewise, knowingly acting outside the scope of one’s statutory authority also involves an intentional element. Therefore, the tort of abuse of authority must be described as intentional and it is incumbent upon the plaintiff to establish this element either in the form of malice or action knowingly taken without authority.

Even with the application of the broader standard, the Court did not find that there had been an abuse of public office in Francoeur. The Court held that the officer did not knowingly act outside of his authority, which is enough to prevent liability under this tort. However, the Court went further and

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