Has Annapolis Expanded the Law of Constructive Expropriation in BC?

May 1, 2025 | By Douglas J. Conolly & Robert Goddard

Introduction

Where the government forcibly takes an individual’s property for public use or in the public interest through formal expropriation procedures, this is referred to as de jure taking. In these situations, the strict procedural requirements set out in the Expropriation Act^[1] must be followed, and the respective property owner must be compensated. However, situations may arise where the actions of a government body interfere with the property rights of an individual or entity to such an extent that the property is effectively taken, despite no formal process of expropriation or transfer of title. These situations are referred to as de facto or constructive expropriation.

Constructive expropriation is an important concept for both property owners and government entities, though for different reasons. For property owners, the obvious concern is ensuring compensation when property is taken absent the formal expropriation process. For government entities, the concern is understanding the boundaries within which government may act without risking exposure to liability for constructive expropriation claims.

For many years property owners have endured (and governments have enjoyed) a restrictive legal test for constructive expropriation. In 2022 however, the Supreme Court of Canada addressed the test for constructive expropriation in Annapolis Group Inc. v. Halifax Regional Municipality,^[2] and extensive debate ensued regarding Annapolis’ effect on the law of constructive expropriation. Some viewed Annapolis as simply a re-statement of the law, whereas others viewed it as a departure that opened the door for constructive expropriation claims.

This blog weighs in on the above debate by looking at how Annapolis has been applied in the three years since its release.

The Evolution of Constructive Expropriation

At common law, a government act that deprives a property owner of all reasonable use of its property constitutes a constructive taking and imposes an obligation on the government to compensate the property owner.^[3] The legal test for establishing constructiveexpropriation was initially set by the Supreme Court of Canada in Canadian Pacific Railway Co. v. Vancouver (City), which requires the government act to result in:

1. the government’s acquisition of a beneficial interest in the property or flowing from it; and
2. removal of all reasonable uses of the property.^[4]

The test set out in Canadian Pacific proved very challenging to satisfy, making successful claims for constructive expropriation quite rare. However, in 2022 the SCC re-visited the test in Annapolis leading some to speculate that constructive expropriation claims might now have a better chance of success.

In a 5-4 decision, the majority in Annapolis purported to clarify the first branch of the Canadian Pacific test but arguably expanded it by broadening what constitutes a beneficial interest in property. Pursuant to the majority’s decision, a beneficial interest is to be understood as an “advantage” with respect to private property that accrues to the state, and which may arise where private property is regulated in a manner that permits its enjoyment as a public resource.^[5] Furthermore, the majority directed that the beneficial interest inquiry is concerned with the effect of a regulatory measure on the landowner, and the government’s intention is a material fact to be considered in constructive expropriation claims.^[6]

The majority’s decision was met with a strong dissent.  The dissenting justices felt that by replacing beneficial interest with the broader notion of “advantage”, the majority departed from the Canadian Pacific test and significantly expanded the potential liability of public authorities when regulating land use in the public interest.^[7]

Constructive Expropriation Post-Annapolis

Annapolis was recently applied in Teal Cedar Products Ltd. v. British Columbia,^[8] a case concerning the effect of British Columbia’s Haida Gwaii Land Use Objectives Order [the “Land Use Order”]. Teal Cedar Products Ltd. [“Teal”] held licenses to harvest timber on Crown lands in Haia Gwaii, carried out harvesting operations on said lands and owned several mills for processing timber. Starting in 2005, the Haida Nation and the Province embarked on a land use planning process which culminated in the Land Use Order being enacted in 2010. The effect of the Land Use Order was to reduce the available lands upon which licensees could harvest timber.

Teal brought a challenge to the Land Use Order alleging, among other things, that the Land Use Order constituted a constructive taking of its licenses to harvest timber.^[9] Teal argued that the licenses conferred a form of property interest that is susceptible to a constructive taking and that by prohibiting harvesting in certain areas, the Land Use Order constructively took Teal’s licenses as harvesting was no longer viable.^[10]

The Court set out the law from Canadian Pacific and Annapolis and stated that the Land Use Order did not amount to a constructive taking of Teal’s harvesting licenses. With respect to the first branch of the test, the Court stated that the Province did not appropriate any benefit. Instead, the Land Use Order “simply put different or modified parameters in place” which “does not give a benefit or advantage to the Province any more than any legislation or regulation provides a benefit to the Province.”^[11] In essence, the Court found that the Land Use Order conferred only a generalized public benefit which is not the type of benefit or advantage that was contemplated in Annapolis.^[12]

Annapolis was also recently applied by the Alberta Court of Appeal in Altius Royalty Corporation v. Alberta,^[13] a case involving the effect of federal and provincial government action on Altius Royalty Corporation’s [“Altius”] royalty interests in a coal mine in Genessee, Alberta.  The coal from the mine fueled a neighbouring power plant which produced electricity in Alberta. However, arising out of the 2015 United Nations Framework Convention on Climate Change, the government of Canada created regulations which established a performance standard for coal-fired power plants to be met by 2030. In turn, the government of Alberta entered into an “Off-Coal Agreement” with the owners of the Genessee power plant whereby the owners agreed to end emissions by 2030.

In 2018, Altius filed a statement of claim against the respondents, Canada and Alberta, alleging that they had constructively expropriated Altius’ royalty interests in the Genessee coal mine. Canada and Alberta applied for summary dismissal of the action in 2021, which came before an applications judge pre-Annapolis. The applications judge dismissed Altius’ statement of claim on the basis that neither Canada nor Alberta “acquired a beneficial interest in property or flowing from it” as required by the Canadian Pacific test^[14] and this was affirmed on appeal by a chambers judge.^[15]

Altius then appealed to the Alberta Court of Appeal, and by this time the Supreme Court of Canada had released its decision in Annapolis. Altius argued that the judges below erred because constructive expropriation does not require the acquisition of a beneficial interest – the acquisition of an advantage in respect of property was sufficient.^[16] Furthermore, Altius argued that the advantage flowing to the governments was avoided healthcare and environmental expenses.^[17] In making these arguments, Altius was putting to the test the notion that Annapolis expanded the law of constructive expropriation.

However, the Alberta Court of Appeal’s decision seems to effectively foreclose this concern. The Court found that the government’s “prediction of health and environmental benefits resulting from the reduction of greenhouse gas emissions described benefits to the public, not… an advantage flowing to the state.”^[18] The Court also emphasized that Annapolis did not change the numerous precedents in which courts have found that a generalized public benefit does not constitute an advantage flowing to the state for the purposes of constructive expropriation.^[19]

Conclusion

In considering Teal Cedar and Altius, it appears that Annapolis has not amounted to a marked departure from and expansion to the law of constructive expropriation. In the three years since Annapolis was released, it is evident that the bar for succeeding on constructive taking claims remains high and difficult to meet.

While the bar remains high, a lesson can be gleaned from Annapolis, Teal Cedar and Altius which people should be aware of when considering constructive expropriation claims. It appears fair to say that success at the first stage of the test depends at least in part on the degree of specificity of the benefit or advantage said to be acquired by the state. In this sense benefits or advantages may be understood as falling along a continuum between general and specific. The more specific a benefit or advantage the easier it will be to establish that the benefit or advantage was specifically acquired by the state. Conversely, the more general a benefit or advantage the more likely a court will find it belonging to the general public and thus be insufficient for the purposes of constructive expropriation.

[1] Expropriation Act, RSBC 1996, c. 337.
[2] Annapolis Group Inc. v. Halifax Regional Municipality, 2022 SCC 36 [“Annapolis”].
[3] Canadian Pacific Railway v. Vancouver (City), 2006 SCC 5 [“Canadian Pacific”].
[4] Canadian Pacific, at para. 30.
[5] Annapolis, at para. 4.
[6] Annapolis, at para. 38.
[7] Annapolis, at para. 85.
[8] Teal Cedar Products Ltd. v. British Columbia, 2025 BCSC 595 [“Teal Cedar”].
[9] Teal Cedar, at para. 66.
[10] Teal Cedar, at para. 66.
[11] Teal Cedar, at para. 98.
[12] Teal Cedar, at paras. 99-100.
[13] Altius Royalty Corporation v. Alberta, 2024 ABCA 105 [“Altius”].
[14] Altius Royalty Corporation v. Alberta, 2021 ABQB 3, para. 77.
[15] Altius Royalty Corporation v. Alberta, 2022 ABQB 255.
[16] Altius, at para. 13.
[17] Altius, at para. 29.
[18] Altius, at para. 32.
[19] Altius, at para. 32.

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