Sweeping Changes to Expropriation Compensation

In 2019 the Province of Nova Scotia made significant changes to the way expropriation compensation is determined.

According to the Province, the changes were made to ensure that claimants are reasonably compensated and not overcompensated or compensated for hypothetical or potential future losses that may or may not occur.

The first change was the introduction of the Tariffs of Costs Regulations (the “Regulations”), which came into force on June 4, 2019.

Prior to the introduction of the Regulations, an expropriating authority was required to pay a claimant’s reasonable legal, expert and other costs on a on a solicitor-client (i.e. dollar-for-dollar) basis if the Board awarded more compensation than the expropriating authority offered.  In almost every case, the Board awarded more than the expropriating authority offered.

While the Regulations still require the expropriating authority to pay a claimant’s costs in these circumstances, costs are now determined using a tariff system. In the majority of cases, an expropriating authority will have to pay significantly less under the tariff than if they had to pay solicitor-client costs.

The tariff for legal costs under the Regulations is the same tariff that applies to civil matters under the Nova Scotia Civil Procedure Rules.  The tariff amount is established by determining the “amount involved” – typically this is the total compensation awarded. The next step is to select the applicable scale based on the complexity of the matter and other factors. The Civil Procedure Rules give judges the discretion to increase or decrease tariff amounts or depart from the tariff entirely and award lump sum costs.  The Regulations do not provide this discretion.

Absent a fee arrangement where the claimant’s lawyer agrees to limit legal fees to those awarded under the Regulations, a successful claimant will likely be out of pocket several thousand dollars in legal fees.

The second change was Bill No. 169, An Act to Amend Chapter 156 of The Revised Statutes, 1989, the Expropriation Act. This bill received royal assent on October 30, 2019.  The Bill amends the Expropriation Act, retroactive to June 1, 2019.  The amendments significantly limit the compensation that can be awarded during expropriations.  In particular, three types of compensation have been limited:

  1. Disturbance damages. In order to be entitled to “disturbance” damages, which are costs incidental to an owner’s disturbance resulting from an expropriation, such as moving to new premises, two requirements must be met:
    1. the claimant must have been in actual physical occupation of the land; and
    2. the costs must have actually been incurred.

Prior to the amendments, the Expropriation Act allowed for disturbance damages where claimants were not in actual physical occupation of the property and for hypothetical or potential future losses, including business losses. In one case, S. & D. Smith Central Supplies Limited, 2017 NSUARB 124, these losses amounted to $6,700,000.

  1. Claims for compensation where no land is taken. These claims will now be heard exclusively by the Supreme Court of Nova Scotia and not the Nova Scotia Utility and Review Board (the “Board”).  This change has raised concerns around access to justice given that the formalities of the court process can be much more intimidating, costly and complicated than the process followed by the Board.
  1. Interest. Interest will no longer be awarded for any period prior to the date the expropriation documents were deposited at the Land Registry office.  Previously, the Expropriation Act authorized awards of interest before the documents were deposited, sometimes years before the actual expropriation. This typically occurred where the owner was under the threat or “shadow” of expropriation at an earlier time.

These changes will have significant implications.  Losses that were previously compensated are now prohibited, with the affect of lowering overall compensation and cost awards.  On the other hand, determining compensation will become more predictable and should result in earlier settlements and fewer long, drawn-out proceedings before the Board or the courts.

There are typically only a small number of expropriation decisions each year.  It will take some time before there is an established body of case law interpreting these changes. It remains to be seen if these changes actually accomplish their intended purpose of providing reasonable compensation to people who have their land expropriated.