July 28, 2000, E.C.B. No's. 30/93/187 (70 L.C.R. 126), 32/93/187

REASONS FOR DECISION ON RECONSIDERATION

1. INTRODUCTION

This case involved a street widening in Creston, British Columbia, resulting in the expropriation of a 16½ foot strip of land along one side of Hillside Street. The owners of three properties affected by the expropriation brought compensation claims which were heard together. The board issued a decision on June 25, 1996 (59 L.C.R. 113) in which it made findings on each property on claims for the market value of land taken, disturbance damages, personal losses, and (since these were partial takings only) loss of market value to the remainders of each parcel.

The owners of two of the properties, the Inghams and Mr. Kowalski, brought an appeal of this decision to the Court of Appeal for B. C. The grounds of appeal were as follows:

1.	The Board erred in construing s. 43 (now s. 44) of the Expropriation Act, R.S.B.C. 1996, c.125, in finding that general benefits should be deducted from the compensation awarded.
2.	The Board erred in construing s. 971 (now s. 912) of the Municipal Act, R.S.B.C. 1996, c. 323, as having the effect of ensuring that no loss to the remaining lands can occur where a partial taking results in the remaining lands failing to conform with a zoning bylaw.
3.	The Board erred in its method of calculating the reduction in the market value of the remaining lands.

The Court of Appeal issued its decision on March 22, 1999 (66 L.C.R. 161). The Court held that the board had erred when it used a post-taking sale of the Kowalski property that was directly affected by the road widening as the basis for an "after value", which was then used in a "before and after" method for determining the value of the taking and the loss in value to the remaining lands.

In this decision the Court of Appeal agreed with the appellants (claimants) that by the board's use of the sale of one of the affected properties to support the "after" value, it incorporated into the conclusion of compensation general benefits which may have accrued to all the property owners on Hillside Street from the project. The appellants argued that, while special benefits to a property may be deducted from an award, under then s. 43 of the Act (now s. 44 amended), general benefits may not. At that time, sections 40(1) and 44(1) of the Expropriation Act provided:

40 (1)	Subject to section 44, if part of the land of an owner is expropriated, he or she is entitled to compensation for
	(a) the reduction in market value to the remaining land, and
	(b) reasonable personal and business losses
	that are directly attributable to the taking or that result from the construction or use of the works for which the land is acquired.
44 (1)	If part of the land of an owner is expropriated, and the construction or use of works by the expropriating authority are of special benefit to that owner or to his or her remaining land beyond any general benefit to any other owner benefited by the construction or use, there must be deducted from the amount of compensation payable to that owner the estimated value of the benefit.

The Court accepted the appellants' submission that the approach used by this board necessarily resulted in general benefits, available to any property owner on the street, being deducted from the award. The parties were generally agreed that there were no "special benefits" to the Ingham and Kowalski properties. Thus the first and third ground of appeal succeeded. The Court did not consider it necessary to rule on the second ground of appeal.

In its June 1996 decision, the board had awarded compensation under the heading of "reduction in market value to the remaining land" of $5,075 for Ingham and $4,400 for the Kowalski property, in addition to the value of the land taken. The Court of Appeal ordered that "the parties ought to be given an opportunity to consider, in view of the relatively small amounts involved and the considerable expense entailed in further proceedings before the Board, to agree on the awards to be substituted by this Court for those made by the Board." The parties were not able to agree and subsequently the Court of Appeal made a supplementary order (1999 BCCA 316) remitting the matter back to the Expropriation Compensation Board "to be determined in accordance with [this Court's] reasons ...". This board held a one day hearing into the reconsideration on November 3, 1999.

Between the date of the Court of Appeal decision and this reconsideration, the provisions of the Act regarding general and special benefits were amended by the Miscellaneous Statutes Amendment Act (No. 3), S.B.C. 1999, c. 39, as follows:

13)	Section 44 is amended
	(a)	in subsection (1) by adding "the expropriation or" before "the construction or use" in both places, and
	(b)	by adding the following subsection:
		(1.1) If part of the land of an owner is expropriated, and the expropriation or the construction or use of the works for which the expropriated land was acquired are of any benefit to that owner, the estimated value of the benefit must be deducted from the amount of compensation otherwise payable to that owner, under section 40 (1) (b) (i), for the reduction in the market value of the remaining land, whether or not any other owner is benefited by the expropriation of the expropriated land or by the construction or use of the works. (emphasis added)

We are not, however, bound to follow the revised section for this determination because the Miscellaneous Statutes Amendment Act (No. 3) includes a transitional provision for cases currently under adjudication:

79)	Sections 40 and 44 of the Expropriation Act, as amended by this Act, apply to any compensation claimed or payable in respect of any expropriation, whether or not that expropriation occurred before the coming into force of this section, unless, before the coming into force of this section,
	(a)	a court order had been made respecting compensation payable under the Expropriation Act in respect of the expropriation, or
	(b)	a determination had been made of the compensation payable under that Act in respect of the expropriation.

Of the three parties to the original compensation claim, only the Inghams and Mr Kowalski brought the appeal and these are therefore the only properties subject to this reconsideration.

2. SCOPE OF RECONSIDERATION

2.1 No new evidence

A preliminary issue was the proper scope of the reconsideration. The respondent had filed new appraisal reports that, by their titles, purported to value the reduction in value to the remaining portions of each of the Kowalski and Ingham properties. Mr. Burke, counsel for the claimants, objected to the admission of these reports. He took the position that the board was not engaged in a full rehearing, but rather that it was confined by the Court of Appeal's order to a reconsideration of the existing evidence. The board decided not to receive the reports, although not quite for the reasons urged on it by Mr. Burke. It held that the Court of Appeal's order did not bind it to proceed without new evidence; the board had a discretion. However it
would in any event exercise its discretion not to receive new evidence. In the board's view, it was in much the same position as it would have been if the hearing had closed, but that a decision (on these particular issues) had yet to be issued. It was not appropriate to take further evidence on an issue that had at all times been squarely before the board, and on which the respondent had taken a firm position both in its pleadings and in argument.

2.2 Loss in value to the remaining lands

The reconsideration was also limited in its subject matter. The Court of Appeal had only vacated those aspects of the decision which dealt with the claims for reduction in value to the remaining lands. All other decisions remained in place. The board was therefore only to reconsider its awards for loss in value to the remainder properties.

2.3 Loss of conformity

Another argument made to the Court of Appeal was that the board had erred in its treatment of a certain section of the Municipal Act. That section (formerly s. 971, now s. 912) provides that if a partial taking results in nonconformance with a zoning bylaw the remainder is nevertheless "deemed to conform", unless compensation is paid to the owner for the loss of conformity. The board had decided not to award compensation for such a loss, on the ground that this deeming clause would then take effect, and that the properties would still be in (deemed) conformity. On appeal, it was argued that the board should have made an award for non-conformity in the case of Kowalski. However the Court of Appeal, while declining to rule whether the board was correctly interpreting the section, nevertheless agreed with the board's ruling that the section "does not determine whether the Board should or should not award compensation for non-conformity". The Court therefore made no ruling on this ground of appeal. 

On this reconsideration, Mr. Burke argued that the board ought to revisit its decision on non-conformity on the ground that the "deemed conformity" status of the Kowalski property may nevertheless have some impact on its remainder value. This therefore was a factual question which he urged the board to reconsider.

The board does not see any reason to depart from its original reasoning on this issue. We have essentially no useful evidence on what the loss of value expressly related to nonconformity, if any, would be in the Kowalski case, yet if we award even $1.00 in that respect, the Kowalski property would lose its deemed conformity status. If Mr. Burke is asking us to make an award for "deemed conformity" as opposed to true conformity, we have absolutely no evidence on which to do so. We prefer not to make any award.

3. REDUCTION IN MARKET VALUE TO THE REMAINING LAND

3.1 Method of Measurement

The Court of Appeal has criticized the board's use of the "before and after" method as a measurement of the reduction in value created by the project, because the board failed to screen out general benefits, if any, accruing to properties on Hillside Street from the road improvement. The problem is not with the method itself, but with the fact that the only direct market evidence of "after" value was the sale of the Kowalski property, 17 months after the expropriation.

Both parties took the position that to avoid the problem identified by the Court, the board should not use the before and after method, and should look for an alternate way of measuring the reduction in value to the remaining lands, under s. 40(1)(a). We are left with two possible methods:

a.

Adopting the Cost Approach to measure depreciation caused by the taking, as it was used by the claimants' appraiser, Danny Grant. For the Kowalski property, Mr. Grant estimated the cost of certain remedial measures, such as the use of additional insulation and triple glazing in windows and proposed a further 5% reduction of the total property value for non-curable loss. For the Ingham property, he was of the opinion that a new bedroom addition on the rear of the house would be necessary to restore the property value.

b.

Estimating an overall loss from all causes, reflected as a percentage of the building value, based on the best available evidence.

Claimants' counsel, Mr. Burke, urged us to use Mr. Grant's approach citing several cases using this type of measure of reduction in value to remaining land caused by a partial taking.

There are some intrinsic difficulties with the first approach. We expressed in our previous decision our doubt that the mitigation costs, as Mr. Burke has called them, would in the general case be good evidence of the loss of market value. Some items of proposed mitigation, such as Mr. Grant's rather extreme suggestion that a 300 square foot addition be added to the Ingham house, would increase the value of the overall property, raising the issue of betterment.

Mr. Melville, counsel for Creston, argued that the board should be measuring the market value impact and that this was not necessarily the cost of reinstatement. The board does note, however, that at the original hearing Creston did not put in any independent evidence of a reduction in market value, preferring simply to criticize the claimants' expert reports.

An additional technical difficulty is that mitigative expenses, to the extent that they exceed any actual loss of value to the remainder, would have to be recoverable under a different head of compensation – presumably as disturbance damages. Yet the Court of Appeal has clearly not opened those other aspects of our decision. We will therefore attempt to restrict ourselves to the loss of value to the remainders of the properties, no matter how difficult that may be.

The board does not wish to be taken, by these comments, as agreeing that the claimants have actually suffered disturbance damages in the amounts claimed through the calculations of "mitigative expenses" presented by Mr. Grant. In large part they had not in fact incurred such expenses, and had they incurred them, there would always remain a question of their reasonableness. In this decision, we simply observe that we are neither required nor permitted to reconsider such heads of damage.

3.2 Analysis

We are not at all satisfied with the quality of the alternative evidence offered. Nevertheless, as has been said in other cases, we must do the best with what we have. The only other evidence is Mr. Grant's opinion that reduction of value to the remainder, at least as to the "incurable" component, might be measured by a percentage of value before the scheme.

Mr. Grant's opinion of the percentages we should use for the incurable component of loss ranged quite widely. He referred to studies conducted by his firm from other situations of various types; relying particularly on studies related to the widening of high-traffic roads in the Lower Mainland. These led him to propose initially that impacts could lie in a range of 0% to 30% of total value (of the remainder value "before" the scheme). On Hillside Street in Creston, he recognized that the impact should be lower, and proposed a range between 0% and 10%.

In the end, Mr. Grant proposed for the Kowalski property $7,750 for curable items and 5% of the overall residual value for incurable loss. This resulted in a total loss, in his opinion, of $11,733. For the Ingham property he argued that the loss should be measured by the cost of constructing an additional bedroom, less an estimate of betterment. This produced a net cost of $15,745. Grant's conclusions amounted to 23% and 31% of the building values, respectively.

The board feels that these percentages are too high. Grant has overstated the effect of the road widening. While the houses are now closer to the street and faced with the potential of increased traffic volume, the impact on value should not be compared with the impact of a freeway. The board also is reminded that the Inghams and Mr. Kowalski received compensation for landscaping to replace trees and shrubbery taken. Such replacement landscaping would reduce any impact of greater exposure to traffic, including the particular impact on the Ingham property of headlights shining into the bedroom window.

For the question of betterment to be properly applied, it would be necessary to go beyond Mr. Grant's somewhat rudimentary approach of merely depreciating the new component at the same rate as the old dwelling. On his figures, the claimant would be faced with a cost new of $23,248, an added value (by depreciated cost) of $7,503, and hence a claimed sum – which he calls a net cost – of $15,745. Whether such an addition would enhance value, and if so by how much, was not tested; whether it might extend the life of the dwelling was not broached; whether the claimant was being reasonable in pursuing claims for remediation costs was not addressed. In this case, the supposed betterment of $7,503 is neither supported by reference to the market nor can it be said to be reasonable as a consequence of increasing the depreciated cost from $50,753 to $58,256 from an outlay of $23,248.

The evidence of the Town Administrator, which the board accepts, was that the taking had resulted in certain reduced setbacks – the distances from the new front property line to the houses. In the case of the Ingham house which is configured in an L-shape, the bedroom is now 15 feet from the property line, whereas the family room is setback by 33 feet. In the case of the Kowalski house, the front of the house containing two bedrooms and the living room is 20½ feet from the property line. These measured distances are quite different from Mr. Grant's estimates. Mr. Grant reported the Ingham house as being about 28 feet from the sidewalk to the living room and the bedroom as being 17 feet back from the road. Yet the living room, according to his plan, is set back 18 feet from the bedroom. He shows the Kowalski house as being about 10 to 12 feet from the sidewalk. This is consistent with his report. He testified that the setback was six feet from the porch to the edge of the sidewalk. In neither case did Mr. Grant provide measured distances from the new property line to the dwelling.

The board has more confidence in the dimensions as measured by the Town officials, that were not challenged at the hearing, rather than the estimates reported by Mr. Grant. The Town's evidence shows the Ingham bedroom as being 5½ feet closer to the new property line than are the two Kowalski bedrooms. The Ingham living room is 12½ feet further back from the street than the Kowalski house. While both properties are likely worth less on these accounts, in the view of the board both have suffered to about the same extent.

The board prefers to measure the impact as a percentage of building value, rather than as a percentage of the total remainder value, since the complaint is that the useability of the buildings as residences have been impaired. The unimpaired values of the two buildings are the depreciated cost estimates provided by Grant.

4. CONCLUSION

Having had the benefit of photographs before and after the project, a site visit that was helpful to the board in placing some of the issues in context, and all the evidence before us we find a reduction in value to the Kowalski property to be 15% of the building value, estimated by Grant to be $50,276, for a reduction of $7,541. Recognizing a similar effect for the Ingham property, we find a reduction in the remainder value of that property to be 15% of the building value of $50,753, or $7,613.

5. INTEREST AND COSTS

In considering the issue of costs, the board is mindful of the observations of the Court of Appeal regarding the expense of bringing this matter before another sitting of the board given the small amounts involved, granting the claimants each just over $2,500 further compensation. We do, however appreciate the position of the claimants and their success before the Court of Appeal. We also recognize that counsel expedited the time for re-hearing the matter, keeping the submissions to a one day sitting. We therefore find no reason to change the earlier decision that interest should run from the date of expropriation, with additional interest as permitted by the statute and that the claimants are entitled to their reasonable costs in the meaning of the Act, including the additional costs of and related to one additional day of hearing and reconsideration.

To the extent that costs are incurred after the date of introduction of the new Tariff, the board grants costs on Scale 2.

THEREFORE IT IS ORDERED THAT

The Town of Creston shall pay to the claimants: