Perhaps I wasn’t the only Canadian property law enthusiast who eagerly clicked on this Globe and Mail story about the ongoing saga of Vancouver’s Arbutus rail corridor. The 10-km corridor that cuts through the west side of Vancouver from Richmond to False Creek was the subject of the Supreme Court of Canada’s leading decision on constructive or de facto expropriation, also known as regulatory takings. That case been the subject of extensive commentary, by obscure academics and esteemed jurists alike.
The Arbutus corridor, which runs through some of the most expensive residential real estate in Canada, is owned by Canadian Pacific Railway Ltd. (CP). It was operated by CP as a rail corridor from the start of the 20th century until 2001, when CP discontinued service. CP then put forward proposals to develop the land in the corridor for commercial and residential purposes. It also indicated that it would be willing to sell the land to the City of Vancouver at a price determined by agreement or under the formal process for expropriation. Instead, the City preferred to keep the corridor intact for future transportation purposes without formally acquiring it. It zoned the corridor as a public thoroughfare for rail, transit, and cycling and pedestrian paths. As the Supreme Court acknowledged, the effect of this designation was to confine CP to uneconomic uses of the land in question, since use of the corridor for rail was no longer profitable.
CP brought a claim for constructive expropriation, arguing that a development plan confining it to uneconomic uses and providing Vancouverites with a de facto public park amounted to a taking of the land in question, which should require compensation. The doctrine of constructive expropriation is ultimately based on an interpretive principle – that the legislature will not be understood to authorize a taking of property without compensation unless it says so explicitly. Since municipalities are creatures of statute, they are only able to formally expropriate property based on powers explicitly set out in provincial legislation, which uniformly requires that compensation be paid to expropriated landowners. A public body should not be able to do indirectly what it cannot do directly, and so Canadian courts have long held that regulations that are so burdensome as to amount to a de facto expropriation of the property in question should also require compensation unless an uncompensated taking is explicitly authorized by the legislature. (See, e.g., R. v. Tener,  1 SCR 533, in which a refusal to grant access to a provincial park for the purposes of exploiting a mineral lease was held to amount to a constructive expropriation of the mineral interest.)
The Supreme Court of Canada ultimately rejected CP’s constructive expropriation argument, establishing a highly restrictive test for constructive expropriation in the process. The Supreme Court held that in order to make out a claim for constructive expropriation, a plaintiff has to establish that a public body has acquired a “beneficial interest” in the property in question, and that it has deprived the owner of all reasonable uses of the property. The Court held that CP had not satisfied either branch of the test, despite the fact that none of the uses left to CP was profitable and the City obtained the benefit of what was essentially a park and intact transportation corridor. The Court denied compensation, in a decision that was strongly criticized by then-Professor Russell Brown. 
This is where the Globe story picks up. As a result of the Supreme Court decision, CP and the City of Vancouver were effectively locked in a standoff. The City was not prepared to formally expropriate the land in order to designate it as a public park or use it as a transit corridor, despite the fact that many Vancouverites had taken to using the corridor as a walking path and community garden. Formal expropriation would have required the City to compensate CP. CP, for its part, technically still held title to a large swath of urban land with enormous development potential, but was unable to do anything with it – at least not anything profitable, which is a pretty significant restriction for a publicly traded company with duties to shareholders.
This state of affairs persisted for a few years following the Supreme Court decision, until last year, when CP finally made a move. In what was widely viewed as a negotiating tactic aimed at bringing the City back to the bargaining table, CP announced that it planned to resume freight rail service along the corridor. This is, of course, exactly the type of service that CP had previously argued before the Supreme Court would not be profitable. Last year, as part of its efforts to prepare the corridor for the resumption of freight rail service, CP cleared community gardens that had been established in the corridor. It now claims to be on the cusp of resuming rail service.
In response to CP’s actions, the City has initiated an application under the Canada Transportation Act. The City argues that when CP discontinued rail service in 2001, it was under an obligation to offer to sell the land to the government at its “net salvage value”, which is a term of art in transportation law that effectively provides a discount on the market value of the land. In separate litigation in the B.C. Supreme Court, the City also raises some interesting constitutional questions, arguing that when CP abandoned rail service, the Arbutus corridor ceased to fall under federal jurisdiction, and that s. 88 of the Canada Transportation Act, which declares railways under federal jurisdiction to be works for the general advantage of Canada, is not a valid invocation of s. 92(10) of the Constitution Act, 1867. The City sought an interlocutory injunction to stop the resumption of rail service, which was rejected in January.
I have always found the Canadian Pacific constructive expropriation decision fascinating, featuring as it does the lingering effects of Canada’s 19th century railway history, the shifting economics of transportation, and the incentives of public officials to obtain something for nothing. It’s hard to feel sorry for a railway conglomerate, especially one that was initially given the land in question for basically nothing (other than an undertaking to establish a rail line). But at the same time, there is something disturbing about a local government’s using its zoning powers to effectively force a single landowner to absorb the entire cost of a benefit enjoyed by the citizenry as a whole. Even if you think, as many do, that large corporations like CP should pay more in taxes, it does not follow that a single corporation should be made to pay the full cost of a public amenity just because it happens to own land in the wrong place. That is just arbitrary. One cannot help but think that the ongoing standoff over the Arbutus corridor could have been averted by a more robust doctrine of constructive expropriation that would preclude governments from using their regulatory powers to create stranded assets, that is to say, assets that have no profitable uses.
As the Globe article indicates, the Arbutus corridor story is far from over. The legal terrain has simply shifted from the common law of property to the legislative framework governing railways in Canada. We’ll see if this round of litigation ultimately brings resolution.
 Sunny Dhillon, “Vancouver wants Arbutus rail corridor sold at a discounted price”, Globe and Mail (12 August 2015) <http://www.theglobeandmail.com/news/british-columbia/vancouver-wants-arbutus-rail-corridor-sold-at-a-discounted-price/article25948375/>.
 Canadian Pacific Railway Co. v. Vancouver (City), 2006 SCC 5,  1 SCR 227.
 Malcolm Lavoie, “Canadian Common Law and Civil Law Approaches to Constructive Takings: A Comparative Economic Perspective” (2011) 42(2) Ottawa L Rev 229.
 Russell Brown, “The Constructive Taking at the Supreme Court of Canada: Once More, without Feeling” (2007) 40(1) UBC L Rev 315.
 AG v De Keyser’s Royal Hotel, Limited,  AC 508 at 542,  122 LT 691 at 698 (HL), Atkinson LJ (“unless the words of the statute clearly so demand, the statute is not to be construed so as to take away the property of a subject without compensation”), applied in Manitoba Fisheries Ltd v Canada,  1 SCR 101, 88 DLR (3d) 462
 Canadian Pacific, supra note 1 at para 30.
 Brown, supra note 4.
 “Arbutus Corridor: Vancouver tries new tactic in battle with CP”, CBC News (13 August 2015) http://www.cbc.ca/news/canada/british-columbia/arbutus-corridor-vancouver-tries-new-tactic-in-battle-with-cp-1.3189834.
 SC 1996, c 10.
 Dhillon, supra note 1.
 See Vancouver (City) v. Canadian Pacific Railway Company, 2015 BCSC 76 at paras 32-33.
 Vancouver (City) v. Canadian Pacific Railway Company, 2015 BCSC 76.
 C.P.R. v. Vancouver (City), 2004 BCCA 192 at para 4.