December 2005

Disclaimer: Agrilaw is a syndicated column produced by the full service London law firm of Cohen Highley LLP.  Paul G. Vogel, a partner in the firm, practises in the area of commercial litigation and environmental law.   Agrilaw is intended to provide information to farmers on subjects of interest and importance. The opinions expressed are not intended as legal advice.  Before acting on any information contained in AgriLaw, readers should obtain legal advice with respect to their own particular circumstances.

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The construction of a major highway through a rural community can result in the severance of agricultural properties and significant disturbance for community residents. What is fair compensation?

The Nova Scotia Court of Appeal recently considered this issue of fair compensation for a farm couple whose agricultural lands were severed as a result of the realignment of a portion of the TransCanada Highway through their property. Prior to the expropriation of their lands for this highway construction, they had been in the business of growing and harvesting blueberries for many years. The severed lands contained both existing and prospective blueberry fields. The landowners had claimed and been awarded compensation for not only the potential blueberry development of the expropriated lands, but also a 100 metre buffer strip along both sides of the newly constructed highway to protect against the effects of road de-icing salt. In addition, they had been awarded compensation for property devaluation attributable to traffic noise and remediation costs to reduce this disturbance.

In considering the Province’s appeal from this compensation award, the Court of Appeal concluded that a landowner is entitled to compensation based on prospective land use only to the extent that such a prospective development is reflected in current market value being “the amount that would have been paid for the land, if, at the time of its taking, it had been sold in the open market by willing seller to a willing buyer.” In coming to this conclusion, the Court stated:

“The critical question was not that identified by the Board, namely whether the (landowners) were likely to develop their present woodlands into blueberry producing lands. The task before the Board concerned the determination of market value in accordance with the criteria set out in (the Expropriation Act). Consequently the question the Board should have asked itself was what amount would have been paid for the land if, at the time of its taking, it had been sold in the open market by a willing seller to a willing buyer. The focus should have been placed upon the fictional willing seller and willing buyer and the evidence as to land value to those persons. The relevant time was the time of expropriation and not sometime in the future.”

Similarly, the Court agreed that the landowners should be compensated for a buffer strip adjacent to the highway to protect against the effect of de-icing salt but that such compensation must also be based on current market value. The Court stated:

“The Board was satisfied that an allowance should be made for a 100 metre buffer, measured from the centre line of each carriageway of the (highway), to protect against the effect of de-icing salt. Having decided that had it not been for the expropriation, the lands within the buffer zone would have been developed for their blueberry potential, the Board adopted a methodology similar to that applied to the expropriated parcels themselves for valuation. “In my view, the Board was not patently unreasonable in establishing the width of the buffer zone and thereby the lands for which the (landowners) were entitled to compensation. However, as determined earlier, the Board erred in the methodology it used to establish market value.”

Finally, with respect to landowner compensation, the Court agreed that the landowners should be compensated for remediation costs incurred to reduce noise disturbance net of the award for property devaluation resulting from this interference. This compensation award was based upon the Board’s finding that noise originating from the highway did materially interfere with the lives of the landowners. The remediation costs for which they were reimbursed included an air conditioning unit, a privacy fence, door replacement and triple glazed windows. The Court rejected the Province’s argument that the landowners should have made greater efforts to mitigate this disturbance. In this regard, the Court stated:

“The (landowners) testified that because of the traffic noise, they closed their windows and attempted, when the bedroom got very hot in the summer, to sleep in the basement. The Province argued that had they made greater and different attempts to mitigate the effects of the noise, what remediation efforts were necessary and effective would have been clearer. In my view, whether or not that may be the case has no legal ramifications here. It was for the Board to determine what remediation was appropriate and the cost of such remediation. These are factual matters within the jurisdiction of the Board and I cannot discern grounds for interference with its decision.”

Landowners who face expropriation of their lands for highway development are entitled to fair compensation for the expropriation of their lands. Such compensation may include consideration of prospective future use to the extent that such use is reflected in current market value. In addition, landowners may be entitled to compensation for a buffer strip adjacent to the highway to protect against the effects of road de-icing salt and for land devaluation and remedial costs related to noise disturbance.