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Arbutus Corridor decision clarifies constructive expropriation remedy
February 24, 2006

The Arbutus Corridor decision, released yesterday by the Supreme Court of Canada, could turn out to be the most significant decision in the last 20 years so far as the law of constructive expropriation is concerned. The decision is reported as Canadian Pacific Railway Company v. Vancouver (City), [2006] EXLAW 301.

The case involves a strip of land in the City of Vancouver which has been owned by the Canadian Pacific Railway for more than 100 years. For most of that period, the land was used as a railway. However, rail operations ceased in 2002.

When it became apparent that rail operations would eventually come to an end, the C.P.R. began to make plans for re-development of the land to permit commercial and residential uses. However, at the same time, there was strong public support for preservation of the rail corridor for future commuter rail use and/or recreational uses. The City of Vancouver responded to this public interest by adopting an Official Development Plan bylaw to designate the corridor as a public thoroughfare for transportation. The effect of the bylaw was to freeze the redevelopment potential and to confine the C.P.R. to uneconomic uses of the land. The C.P.R. commenced legal action in 1999 in an attempt to set aside the bylaw, or alternatively, to obtain compensation.

At trial ([2002] EXLAW 327), the bylaw was found to be void and was set aside. However, the bylaw was restored on the first appeal ([2004] EXLAW 304). The C.P.R. then appealed to the Supreme Court of Canada.

The Court held firstly, that the bylaw was valid and fell within the City's jurisdiction under the Vancouver Charter. It then considered whether the C.P.R. land had been constructively expropriated. The court confirmed that a two-step test is applicable in such cases. Compensation will be payable where (1) all reasonable uses for the land have been removed by the government action, and (2) the authority has obtained a beneficial interest related to the property. In setting out this test, the court relied upon its earlier 1979 decision in Manitoba Fisheries Ltd. v. Canada and its 1985 decision in Tener v. British Columbia ([1985] EXLAW 2). In the present case, it was held that neither condition had been satisfied. The appeal was dismissed.

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