P.E.I. – legislation imposes arbitration before a judge in order to resolve disputes over compensation owing from expropriation – #016

Unlike most other court decisions in which litigants apply to a judge to send the parties to arbitration or to review an arbitral award, the judge in Haras Management et al. v. Gov. of P.E.I., 2017 PESC 14 was appointed by provincial legislation to sit as an arbitrator to resolve the parties’ dispute and her award was subject to the province’s Arbitration Act, RSPEI 1988, c A-16

Haras Management Inc. (“Haras”) owns 79 acres of land on Prince Edward Island, which the Government of Prince Edward Island expropriated for a highway by-pass pursuant to section 3 of P.EI..’s Expropriation Act, RSPEI 1988, c E-13.  R. Ellen Jones (“Jones”), lessee of the land, also applied.

Section 11 of the Expropriation Act provides that the Government shall provide compensation for the expropriation and that “any claim for the compensation not mutually agreed upon shall be determined as hereinafter provided.” Sections 16 and 17 provide that solution:

16.     Agreement on compensation, arbitration – The Minister and the owner may agree upon the amount of compensation, or either party may give notice in writing to the other that he requires the amount of such compensation to be determined by arbitration under this Act.

 Determination of compensation by judge – Subject to section 14, a judge, upon application of the Minister or of the owner, may appoint in writing a time and place at which he will determine the amount of the compensation and may give such directions for the service of the appointment and as to the persons to be served as he shall consider proper.

In an unusual solution, the legislature obliged the parties to an expropriation to submit to arbitration but that arbitration would be before a judge of the P.E.I. Supreme Court.   Section 18 of the Expropriation Act clarified the application of the Arbitration Act insofar as there could be an appeal:

18.  Except as otherwise provided by this Act, the Arbitration Act R.S.P.E.I. 1988, Cap. A-16 applies to the proceedings taken under this Act before the judge.

 (1) Where the amount of the claim exceeds $500, the Minister or the claimant may appeal to the Court of Appeal from any determination or order of a judge under this Act as to compensation.

(2) The practice and procedure on such appeal and incidental thereto shall be according to the rules of the Supreme Court respecting appeals.     

(3) The decision of the Court of Appeal shall be final.

Haras and Jones had been paid $536,800.00, comprised of $488,000.00 for the real property, a further 10% to cover expenses and inconveniences associated with the expropriation and a thirteen-month lease to the property valued at $13,000.  Haras and Jones as applicants considered the compensation insufficient and sought further compensation.

Haras and Jones therefore applied to a judge for the legislated arbitration and sought the following relief:

[1]     This is an application for:

(a)    An award that the applicants receive due compensation for the expropriation of their interests in their property in accordance with the equivalent reinstatement principle pursuant to s. 16 of the Expropriation Act, R.S.P.E.I. 1988, c. E-13;

 (b)     An award granting costs of this arbitration pursuant to s.27 of the Expropriation Act, R.S.P.E.I. 1988, c. E-13 and s. 20 of the Prince Edward Island Arbitration Act, R.S.P.E.I. 1988, c. A-16; and,  

(c)     Such further and other relief as the arbitrator deems just and expedient.”

Madam Justice Jacqueline R. Matheson undertook the task as arbitrator. Following a thorough and balanced review of the facts surrounding the use of the land and the applicable legislation and caselaw, she awarded Haras and Jones an additional $295,389.00 as compensation.  Much like a court decision, Matheson J. invited the parties to discuss costs and to contact the court for an assessment in the event they cannot agree.

The detail and care reflected in the reasons for judgment are similar to many commercial awards but unusual to see drafted by a sitting judge obliged to sit as an arbitrator.   Indeed, the case was the first, and only, time that parties applied for the arbitration further to an expropriation since the Expropriation Act was enacted in 1974.  The rarely-used, legislated undertaking to arbitrate before a judge did occasion closing remarks by Matheson J. in a single section which she styled as “Obiter”:

[126]  This is the first time an application for arbitration has been made under the Expropriation Act which was last amended in 1974.  The law on compensation upon expropriation has been codified in detailed legislation in other provinces since then.  The respondent may wish to consider revisiting the P.E.I. Statute to bring it into line with federal and other provincial legislation regarding appropriate compensation upon expropriation.

urbitral note – Readers may be interested in considering another recent case from Newfoundland and Labrador which also contained an arbitration clause for the determination of compensation from expropriation : Lynch v St. John’s (City), 2016 NLCA 35.

The legislation applicable in that decision, City of St. John’s Act, RSNL 1990, c C-17, at section 105 provides specifically for arbitration.

105.     The council shall have power, where necessary, for preventing the pollution of the waters of the lakes and ponds, to expropriate private property to the extent from the margin of the lakes and ponds that may be considered necessary; the compensation to be paid to the proprietors of the land shall be determined by arbitration.”

In that case, the issue was whether or not the land owner had been constructively expropriated or not.  The Court of Appeal reversed the judge in first instance and determined that a constructive expropriation had occurred.  In doing so, the decision triggered the land owner’s entitlement to compensation.  The matter was therefore referred back to the city council for determination of a price and there was no current dispute for an arbitration to determine.