Canada: The Latest on Compensation When A New Highway Puts You Out Of Business

Last Updated: September 23 2013
Article by A. Irvin Schein

Originally published at  www.irvinschein.com.

Aside from the nuisance caused during the construction process, the construction of new highways to replace routes through small towns is usually welcomed by motorists simply because it tends to expedite travel. Unfortunately, the rerouting of a highway will damage a business built along a well traveled road if it depends on passing motorists for business, and if the road is no longer used.

The recent Supreme Court of Canada decision in Antrim Truck Centre v. Ontario (Minister of Transportation) provides an interesting insight into the law governing the circumstances under which such a property owner can obtain compensation.

In this case, the Plaintiff operated a truck stop on Highway 17 near the hamlet of Antrim from 1978 until 2004 when construction was completed on a new section of Highway 417 running parallel to Highway 17. Motorists travelling on the new highway did not have direct access to the truck stop and as a result, in effect, it was put out of business. 

The Plaintiff brought a claim for damages against the Province before the Ontario Municipal Board under the Expropriations Act on the basis that the highway project substantially interfered with its use and enjoyment of its property. The OMB awarded damages of $393,000.00 for loss of business and the decrease to the value of the property. On appeal, the Divisional Court affirmed the OMB's decision. On further appeal to the Ontario Court of Appeal, the Board's decision was reversed. At the final appeal stage, before the Supreme Court of Canada, the Supreme Court restored the Board's decision.

The legal doctrine governing the issue is the law of nuisance. The issue in the case was quite simply whether or not the rerouting of a highway constituted a nuisance as a matter of law, and if so, what right the Plaintiff might have to compensation.

The Court defined the main question in the case as how to decide whether an interference with the private use and enjoyment of land is unreasonable, and therefore a nuisance, when it results from construction that serves an important public purpose. The Court decided that one determines the reasonableness of such interference by balancing the competing interests of the public and the land owner. This involves answering the question of whether, in all of the circumstances, the private party has shouldered a greater share of the burden of construction then it would be reasonable to expect individuals to bear without compensation.  

Given the public interest served in the construction of a new highway, if the penalty suffered by an individual land owner is no more than his or her fair share of the costs associated with providing a public benefit, there will be no recovery. In this case, the Court found that the interference with the truck stop caused by the construction of the new highway inflicted significant and permanent loss, and as a result, the Plaintiff was entitled to compensation.    

There are a number of instances in common-law jurisprudence generally in which such a balancing of competing interests is required. This circumstance probably arises most frequently in the context of applications for injunctions. In such cases, the Court must consider a test known as the "balance of convenience" i.e. the Court must balance the apparent harm to the party seeking the injunction if the injunction is not granted against the apparent harm to the other party if the injunction is granted. This is often a particularly difficult exercise because in most injunction cases, the facts are heavily disputed and the Judge must make the decision without being able to determine exactly what did or did not happen. In many cases, this makes it very difficult for parties and their lawyers to be able to predict with any reasonable certainty what the outcome of an application for injunction is likely to be.

The outcome of this case would have been similarly difficult to predict. The Ontario Municipal Board and the Divisional Court balanced the competing interests of the truck stop owner and the Province in a particular way.  The Ontario Court of Appeal had the opposite opinion of the same facts. The Supreme Court of Canada disagreed with the Ontario Court of Appeal. All of this serves to demonstrate quite clearly the difficulty faced by land owners having to decide whether or not to seek compensation from the Province in such circumstances.

Adding to the difficulty, of course, is the fact that if the construction of a new highway has effectively put the land owner out of business, the land owner might have difficulty being able to afford to fund an application for compensation – especially if the Province is intent on taking the dispute all the way up to the Supreme Court of Canada for a final resolution. Conversely, if the impact of the new highway is not so severe as to out the land owner out of business, so that the land owner can be expected to be able to fund an application for compensation, its case might not be as compelling simply because it has not been put out of business. Based on this case, however, it would appear that any time a land owner is victimized this way, some consideration should be given to an application for compensation.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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