Expropriation – Standard of Review – Costs
– National Energy Board Act
In this case the Supreme Court of Canada held that it was
reasonable for an arbitration panel formed pursuant to the
National Energy Board Act to award substantial indemnity
costs to an individual whose land has been expropriated.
Pursuant to an expropriation agreement between the two parties,
Alliance Pipeline Ltd. ("Alliance") obtained a
right-of-way over Smith's land. Alliance then failed to reclaim
the land in a timely manner, as required by the agreement, and
refused to compensate Smith fully for Smith having done so in
Alliance's place. Smith brought arbitration proceedings
pursuant to the National Energy Board Act
("NEBA") to recover his costs related to the
Before the arbitration panel delivered its decision, Alliance
brought proceedings in the Alberta Court of Queen's Bench for
unhindered access to Smith's land, a declaration that the
parties' releases in the expropriation agreement precluded
Smith's compensation claim, and an order that the panel not
render its decision pending resolution of the Queen's Bench
action. Alliance discontinued its action after 18 months, and the
Queen's Bench awarded Smith costs on a party-and-party (partial
indemnity) basis in regard to that action.
A newly appointed arbitration panel awarded Smith compensation
for his costs before the first panel and the balance of the costs
he had incurred defending Alliance's Queen's Bench action
on a solicitor-client (substantial indemnity) basis.
The Supreme Court (per Fish J., with Deschamps J. concurring in
separate reasons) held that the standard of review of the
panel's costs decision was reasonableness. This standard was
appropriate because the arbitration panel was interpreting its
"home statute" and awards for costs are fact-sensitive
and generally discretionary.
With respect to the reasonableness of the costs decision, Fish
J. noted that NEBA, like various provincial expropriation statutes,
is remedial and so should be given a broad and liberal
interpretation. The decision to award costs on a solicitor-client
basis was reasonable for several reasons. First, in the context of
modern expropriation law, where a statute authorizes awards of
"all legal, appraisal and other costs", costs should
generally be given on a solicitor-client basis. Second, awarding
costs on a solicitor-client basis accords well with the remedial
purpose of NEBA. Third, Fish J. noted the inordinate amount of
money and time that Smith had had to invest in what should have
been an expeditious process. Fish J. held that Smith should not be
made to bear the costs of what was clearly a test case for
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