In a decision released on December 8, 2014, the Court of Appeal has confirmed that the expropriation of property from one private landowner and subsequent transfer of those lands to another private landowner does not constitute an illegal bonus under s. 106 of the Municipal Act, 2001, S.O. 2001, c. 25. Section 106 prohibits a municipality from, inter alia, providing assistance to a manufacturing business by selling municipal property to it below fair market value.
For those who may be unfamiliar with the history of this particular case, in 2005, the County of Oxford (“County”) expropriated an old commercial mall for the purpose of facilitating the development of a new Toyota automobile plant in the City of Woodstock. The County, in turn, then transferred the lands to Toyota for the price it paid for the expropriation of the mall lands. The mall owners subsequently sued the County, arguing that they were entitled to damages because the expropriation of their lands and subsequent transfer to Toyota was an illegal bonus conferred by the County under s. 106. The mall owners asserted that the damages they had suffered was the difference between the expropriation price of the lands and the fair market value of the lands, taking into account the Toyota plant development. The trial judge found that there was no bonus under s. 106 because the expropriation and subsequent transfer to Toyota were two separate transactions which did not constitute any bonus under s. 106.
In the Court of Appeal, the appellants contended the trial judge had erred in concluding that two separate transactions took place and argued instead that it was really one single transaction which was void from the start because it violated s. 106. The Court of Appeal found the mall owners’ argument was flawed because of their premise that any damages suffered by the mall owners would have to take into account the Toyota development (“the scheme” in expropriation parlance). Taking into account any increase (or decrease) in value of expropriated lands owing to the influence of the scheme is expressly prohibited by s. 14(4) of the Expropriations Act, R.S.O. 1990, c. E. 26. Consequently, even if the appellants’ contention was accepted that there was one single transaction, there could be no bonus under s. 106 as the price of the lands conveyed by the County was in fact the price paid to acquire the lands in the first instance and constituted no undue advantage to Toyota.
There are few cases which address the restrictions set out in s. 106 but it is clear that the view of the Court of Appeal is that any restriction on a municipality’s general powers, as s. 106 was intended to be, is to be construed narrowly. Municipalities should take comfort in the future knowing that the general powers given to them under the Municipal Act, 2001 continue to be interpreted broadly in order to respond in an appropriate fashion to important and new opportunities in the 21st century. In particular, absent any bad faith or any other procedural irregularity, municipalities have the tools to act on significant economic development opportunities without undue risk of violating s. 106.