As road repair and construction season ramps up in municipalities across Ontario, many business owners will be facing the news that the street and sidewalk outside their business will be temporarily closed due to municipal roadwork. Depending on the extent of the project, this can range from a trivial interruption to a significant interference with normal business operations.
If you are a business owner facing this scenario, you may be entitled to compensation for business losses under the Expropriations Act for "injurious affection".
Injurious Affection
The Expropriations Act, section 21, reads: "A statutory authority shall compensate the owner of land for loss or damage caused by injurious affection."
The Act's definition of Injurious Affection includes "business damages, resulting from the construction and not the use of the works by the statutory authority, as the statutory authority would be liable for if the construction were not under the authority of a statute".
The leading case on Injurious Affection is Antrim Truck Centre v. Ontario (Transportation), 2013 SCC 13 ("Antrim"). In this decision, the Supreme Court set out the three-part test that a business owner would need to meet in order to be compensated for their business losses. This test can be summarized as:
- The construction must be authorized by the municipality.
- The action must amount to a "private nuisance".
- The business losses must be caused by the construction and not the use of the works.
The first part of the test is met if the construction is authorized by the municipality. This is rarely difficult to establish. The third part of the test is met where it can be shown on the balance of probabilities that the business losses were caused by the construction work and not some other unrelated factor.
The complex part of the test is part two that depends on the factual circumstances: Municipal road construction would amount to a private nuisance if the interference with your business is both: (a) "substantial" and (b) "unreasonable".
A. Substantial: A substantial interference is one that is non-trivial, amounting to more than a slight annoyance or trifling interference. It requires that the construction work interfere to a significant extent with the actual use being made of the property (Antrim, paras. 22 and 24).
B. Unreasonable: The reasonableness of the interference requires a balancing of the severity of harm to your business with the public utility of the construction to determine "whether the interference is such that it would be unreasonable, in all of the circumstances, to require the claimant to suffer it without compensation" (Antrim para. 22).
The Supreme Court in Antrim provided a list of factors to be considered in the reasonableness analysis, which includes:
- the severity of the harm
- the duration of the harm
- the nature of the neighbourhood
- the particular sensitivity of the claimant to the harm
- whether the conduct is malicious or careless
The Court held that the reasonableness analysis should favour the municipality where the harm to the business, considered in light of the above factors, is such that it "cannot reasonably be viewed as more than the claimant’s fair share of the costs associated with providing a public benefit" (Antrim, para. 40).
Case Law
The decision in R. Jordan Greenhouse Ltd. V. Grimsby (Town), 2015 CarswellOnt 2187 (OMB), provides an example of a successful Injurious Affection claim for business losses. In this case,a municipality was required to pay a garden centre for the business losses it sustained when the municipality installed sewer mains in front of the property. The ruling found that the road work caused "substantial" and "unreasonable" interference with the business because there was significant impairment of the street; the road was closed for longer than necessary, and there was no effort on the part of the municipality to mitigate impacts to the business, even though it was known that the construction was taking place during the height of the garden centre's business season.
Injurious Affection claims are very fact specific. It should be noted that section 22 of the Expropriations Act requires a claim for compensation for injurious affection to be made within one year after the business losses were sustained or discovered.
If you think you have business losses due to municipal road (or other) work impacting your business, we would encourage you to speak with a lawyer with respect to seeking compensation for any business losses. Note, however, it is important that records be kept in the form of photographs and documentation relating to any loss in business during the construction period in order to proceed with a claim.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
