December 22, 2000,  E.C.B. Control No. 03/98/193 (72 LCR 45)


Between: N.Y. Automotive Ltd.
And: The City of Richmond
Before: Suzanne K. Wiltshire, Presiding Member
Martin A. Linsley, F.C.A., Board Member
Firoz R. Dossa, Board Member
Appearances: J. Bruce Melville, Counsel for the Claimants
Eric Rice, Q.C., Counsel for the Respondent




[1]  The claimant, N.Y. Automotive Ltd., operated a franchise automotive repair business, specializing in brake and suspension repairs, known as "Vancouver Brake & Wheel (Richmond)". The business was located in leased premises at 5711 No. 3 Road, Richmond, on lands legally described as:

PID 003-419-304

Lot 20
Section 5
Block 4
North Range 6 West 
New Westminster District 
Plan 29857 
(the "Land").

[2]  The respondent, City of Richmond, required part of the Land, including the entire area of the claimant's leasehold interest, for its Lansdowne Road Extension project.

[3]    The claimant and the respondent entered into an agreement under section 3 of the Expropriation Act, R.S.B.C. 1996, c. 125 (the "Act") providing for the transfer of the claimant's interest in the Land to the respondent.

[4]  The parties could not agree on the compensation to be paid for the transfer of the claimant's interest in the Land to the respondent. Our task, therefore, is to determine the compensation to be paid to the claimant, N.Y. Automotive Ltd., as if the land had been expropriated under the Act.



[5]  The parties are in agreement with respect to certain facts, including:

  • Nizar Jiwani and Yasmin Jiwani, who are husband and wife, own all of the shares of the claimant, N.Y. Automotive Ltd., a company incorporated in 1993 under the Company Act, R.S.B.C. 1996, c. 62.
  • The claimant was the owner of a leasehold interest in part of the Land pursuant to lease agreement dated February 11, 1993 between George Hoegler, Mary Hoegler, Helmut Hoegler and the claimant (the "Lease"). The term of the lease was for five years, commencing March 1, 1993, with an option to renew for a further five years. The claimant is an owner for the purposes of the Act. The respondent acquired all of the claimant's interest in the Land.
  • A fully executed copy of the section 3 agreement was delivered to the claimant on April 25, 1997.
  • The leasehold interest was assigned to the respondent on May 20, 1997, and the respondent took possession of the property on May 30, 1997.
  • Pursuant to section 3 of the Act and the terms of the section 3 agreement, the effective date for determination of compensation is May 31, 1997.
  • The claimant makes no claim pursuant to section 31 of the Act for the market value of its interest in the part of the Land taken.
  • The claimant's business shut down and it was not feasible for the claimant to relocate its business.
  • The respondent made an advance payment of $102,000 on May 20, 1997 in respect of disturbance damages. The respondent made a further payment on or about May 31, 1997 in the amount of $3,387 by way of rent paid to the landlord for May 1997 pursuant to the Lease.
  • The claimant is entitled to be compensated for out of pocket expenses totaling $6,340 which it incurred in winding up the business between April 25, 1997 and May 31, 1997. This amount does not include, and the parties do not agree on, the value of management services provided in this period.
  • The claimant incurred a cost of $5,600 in severance pay for employees Randy Pope and Harry Baldeo. The parties do not agree on entitlement to compensation in respect of this cost.
  • The value of the claimant's inventory immediately prior to its disposition at auction was $3,390.32.
  • The net proceeds of the auction of capital assets and inventory were $8,380.80.



3.1  Claimant's Position

[6]  The claimant claims compensation for disturbance damages pursuant to section 34 of the Act.

[7]  At the outset of the hearing, the claimant sought to file an Amended Form A Application for Determination of Compensation deleting some items previously claimed and providing revised amounts for other items claimed. The Amended Form A was accepted for filing. The claimant also requested the Board defer consideration of its claim (paragraph 12.9 of the Amended Form A) concerning potential liability to the franchisor for possible breach of the franchise agreement as a result of the closure of the claimant's business. The panel agreed to the deferral so requested.

[8]  The claims for compensation remaining to be considered by the Board at this time, taking into account the above and the agreed facts, are as follows:

  • Loss in value of capital assets and inventory on liquidation at auction
  • Expenses incurred in winding up business
  • Severance paid to employees, Pope and Baldeo
  • Amount pursuant to section 34(4) of the Act (termination allowance)
78,000.00 *
  • Liability for severance to Mr. Jiwani

*In the Form A, the amount claimed was $93,500 but in the course of the hearing the claim was reduced to $78,000.

[9]  The claimant also seeks costs pursuant to section 45 of the Act and, if applicable, interest pursuant to section 46 of the Act.

3.2 Respondent's Position

[10]  The respondent considers its advance payment of $102,000.00 to be generous. Specifically, it disputes:

  • The claimant's value of the tangible assets of the business as a going concern.
  • The amount of $7,220.00 claimed as expenses incurred in winding up the business for the services of the Jiwanis in that regard in the period from April 25 to May 31, 1997.
  • The need for the claimant to pay severance to employees, Pope and Baldeo.
  • The goodwill of the business and, therefore, the amount claimed under section 34(4).
  • The liability of the claimant to pay severance to Mr. Jiwani.



[11]  The positions advanced by the parties raise issues that we have addressed under two main headings: Business Loss and Severance Liability. Under Business Loss, we address:

  • Entitlement to disturbance damages under section 34(1)(a) of the Act in respect of the claims for loss in value of capital assets and inventory, severance paid to Pope and Baldeo, and the value of the Jiwanis' services in connection with the winding-up of the business.
  • Entitlement to what is characterized by the claimant as a termination allowance pursuant to section 34(4) of the Act assessed in relation to the goodwill of the business where (as agreed here) the claimant cannot relocate its business.

Under Severance Liability, we separately address entitlement to disturbance damages under section 34(1)(a) of the Act with respect to the claim for compensation relative to the claimant's liability for severance to Mr. Jiwani.

[12]  Sections 34(1)(a) and (4) of the Act read:

34 (1)  An owner whose land is expropriated is entitled to disturbance damages consisting of the following:

(a) reasonable costs, expenses and financial losses that are directly attributable to the disturbance caused to the owner by the expropriation;

 . . .

(4)  If the board determines that it is not feasible for an owner to relocate his or her business, there may be included in the compensation that is otherwise payable, an additional amount not exceeding the value of the goodwill of the business.



5.1  Expert Witnesses

[13]  Evidence with respect to the value of the business and the business loss sustained by N.Y. Automotive Ltd. was presented by Toby Symes of Symes Valuation Services and by Ron Hooge of BlairCrossonVoyer, Chartered Accountants. Both Mr. Symes and Mr. Hooge are Chartered Accountants and Chartered Business Valuators. Mr. Symes was retained by N.Y. Automotive Ltd. and Mr. Hooge was retained by the City of Richmond.

5.2  Valuation Methodology

[14]  The valuation methodology employed by Messrs. Symes and Hooge was identical. However, there were five issues, each of which impacted on their calculation of the value of the business, on which they did not agree:

  • The appropriate level of salary and benefits for Mr. and Mrs. Jiwani.
  • The amount of the annual provision which should be made for sustaining capital reinvestment.
  • The need to adjust the reported earnings for the four months ended April 30, 1997 in order to predict what the results would have been for the whole year.
  • Whether the company could have borrowed an additional $16,065 on the security of its assets.
  • The amount of the automobile expenses properly attributable to the business.

[15]  The differences in opinion with respect to these issues led to a material difference in the two experts' opinions on the value of the business as a going concern. Mr. Symes estimated the business to have goodwill in the range of $71,500 to $84,500. Mr. Hooge calculated the goodwill to be a negative amount in the range of $18,300 to $23,100 and concluded that the value of the tangible assets of the business was diminished by the amount of the negative goodwill.

[16]  Mr. Symes' calculations of the business loss included goodwill in his determination of the total value of the business. Mr. Hooge deducted his estimated negative goodwill in determining the total value of the business. Mr. Hooge also made an alternative calculation of the business loss assuming no goodwill but with no abatement of business value for negative goodwill.

5.3 Salaries and Benefits of Mr. & Mrs. Jiwani

[17]  Mr. Jiwani testified that he had taken courses in automotive repairs. Prior to starting N.Y. Automotive Ltd. he was employed by Vancouver Brake & Wheel. He held a number of positions with that company from 1979 to 1993 including repairing cars, running the brake calliper department and manager of parts. Mr. Jiwani said that his salary at Vancouver Brake & Wheel was between $35,000 and $40,000. However he made more in 1991 because there was a bonus of about $2,000 in that year. He worked a 40-hour, 5-day week.

[18]  Mr. Jiwani provided the following testimony with respect to his employment with N.Y. Automotive Ltd.:

  • He was employed full-time in the business from its inception in May 1993 until its closure and he had no other source of employment income during that period.
  • He managed the business and his responsibilities included dealing with customers, assigning work, ordering parts, billing customers and sometimes working as a mechanic.
  • Business hours were 8 a.m. to 5 p.m., Monday to Saturday inclusive.
  • The business would sometimes close early on Saturday depending on the volume of business. An early Saturday closing would be 3 p.m. but on those days staff would not take a lunch break.
  • He normally got in around 7:30 a.m. to 7:45 a.m. and left around 5:15 p.m. to 5:30 p.m. each day.
  • He worked 50 hours a week in the early days of the business.
  • He closed the books at the end of each day and did the banking at Canada Trust which was open until 8 p.m.
  • The business employed two full-time mechanics who were paid $16 and $16.25 an hour.

[19]  It is clear that Mr. Jiwani worked long hours. His testimony on his starting and finishing times shows an 81/2 to 9 hour day after deducting an hour for lunch. This would give a 50 to 54 hour week after allowing for an early closing on some Saturdays. This is generally in line with the 50 hour week which Mr. Jiwani estimated when testifying as to his working day, although much less than the 60 to 65 hour week which Mr. Hooge testified was the estimate given to him by Mr. Jiwani. After considering the conflicting evidence, which included reference to Mr. Jiwani's occasional absences for personal reasons, we believe it is reasonable to conclude that Mr. Jiwani worked an average of 50 hours a week in the business.

[20]  The reports of Mr. Symes and Mr. Hooge show that Mr. Jiwani's salary from N.Y. Automotive Ltd. was at the rate of $36,000 a year for the years 1995 and 1996 and the four months ended April 30, 1997. The Jiwanis' two sons, Zaheer and Talib are shown as receiving salaries totalling $9,296 in 1995, $8,175 in 1996 and $1,900 in the four months ended April 30, 1997. Mr. Jiwani testified that his sons did very little work for the business. He said Zaheer might spend two hours on a Saturday on clean up and Talib helped install the accounting system in the computer. Mrs. Jiwani said that no actual payment was made to their sons.

[21]  Zaheer Jiwani testified that he was at school during the whole of the period that the business operated and that his only work for the company was one Saturday a month on clean up. Zaheer Jiwani did not work on cars and has no training as an automotive mechanic. He had no recollection of receiving a pay cheque from the company.

[22]  We have concluded that any services rendered by Zaheer and Talib Jiwani were inconsequential, and should be ignored for the purposes of determining the earnings and the value of the company's business.

[23]  The determination of an appropriate salary level for Mr. Jiwani requires consideration beyond the amount paid to him, directly or indirectly, by the company. Mr. Symes and Mr. Hooge differed in their views on the appropriate salary for Mr. Jiwani. They both explained their reasons for reaching their separate conclusions.

[24]  Mr. Symes utilized a salary level of $40,000 a year including benefits. He based this on statistical data published by the Government of Canada relating to British Columbia and the Yukon, a publication "Financial Review of Collision Repair Industry" prepared by Ference Weiker & Company and statistical data published by the Automotive Retailers Association. Mr. Symes quoted average earnings of $40,600 for a retail trade manager taken from the Government publication. The other publications showed average earnings of $39,201 for a non-owner manager in the job category which Mr. Symes considered closest to N.Y. Automotive Ltd., and average earnings of $40,284 for the owner manager of a mechanical repair shop with sales of $468,000. Mr. Symes did not know if the quoted earnings included fringe benefits.

[25]  Mr. Hooge made his calculations using a salary of $45,000 for Mr. Jiwani exclusive of fringe benefits. He based this on Mr. Jiwani's salary at Vancouver Brake & Wheel and on information provided to him by the owner of an independent brake and wheel shop and a muffler shop. Mr. Jiwani told Mr. Hooge that his salary from Vancouver Brake & Wheel was $40,000 to $45,000 plus benefits. He also told him that this was for a five day week working from 8 a.m. to 5 p.m. for a total of 40 to 45 hours a week. The owner of the independent brake and wheel shop told Mr. Hooge that the manager of his brake and wheel shop, who also does mechanical work, earns $45,000 to $50,000 a year.

[26]  Mr. Jiwani's salary as an employee at Vancouver Brake & Wheel prior to starting his own business can be considered to be an independent assessment by an unrelated party of the value of his services at that time. There is some inconsistency in the information provided by Mr. Jiwani with respect to the amount of his salary with Vancouver Brake & Wheel, however, it seems to have been at least $40,000 a year plus benefits.

[27]  Mr. Symes did not know the hours worked for the earnings shown in the statistical data that he used in arriving at his figure of $40,000 a year. We believe it is reasonable to assume that the statistics would reflect an average work week of approximately 40 hours. This is 20% less than the 50 hours worked by Mr. Jiwani. Ignoring overtime premium, this suggests that a salary level of $50,000 would be appropriate to reflect Mr. Jiwani's longer hours. Another approach suggested by Mr. Hooge would be to calculate Mr. Jiwani's salary based on the $16.25 an hour paid to his mechanic. This would yield a salary of $42,250 based on a 50-hour week.

[28]  There are shortcomings in all of the above calculations. We observe that statistics are based on averages and the average will not reflect differences occasioned by a myriad of factors such as longevity of employment, the quality of the services provided by an individual employee and geographical disparities. Also, the evidence suggests significant variations in average salary between different categories of employment and it can be difficult to decide which category is the appropriate yardstick. Considering all of the evidence, we conclude that $45,000 a year is an appropriate salary for Mr. Jiwani plus 10% for employee benefits.

[29]  Mrs. Jiwani is a Certified General Accountant. She was employed for 10 years by a shipping company until March 1995 when she resigned for health reasons. Her position with the shipping company carried significant responsibility. She was the controller of the company and also provided accounting services to client shipping lines. She reported directly to the President and supervised a staff of up to six people. Her salary was $65,000 a year plus significant bonuses.

[30]  Mrs. Jiwani looked after the accounting at N.Y. Automotive Ltd. from its inception. This was done outside her working hours during the period that she was employed by the shipping company. Mrs. Jiwani spent more time at N.Y. Automotive Ltd. after she resigned from the shipping company in March 1995. She testified that on an average day, she would arrive at about 10 a.m. and leave at between 2 p.m. and 3 p.m. However, only a small portion of her average day was actually occupied with business activities. The business activities included preparation of payroll, preparation of some cheques, making some bank deposits, monthly and annual reporting to the franchisor, sometimes checking receipt of parts against the order, preparing bank reconciliations and preparing VISA and MasterCard reconciliations. She estimated that these activities, together with the preparation of financial statements, tax returns, reports to governments and the maintenance and supervision of the accounting records would take her about 20 hours a month.

[31]  Mrs. Jiwani explained that she had no technical knowledge of the brake and wheel business. Other than accounting, her work at the business was limited to occasionally picking up parts, occasionally driving customers to their desired destinations, greeting customers and making coffee.

[32]  N.Y. Automotive Ltd. used Pace accounting software. Mrs. Jiwani explained that this is an integrated point of sale system which provides all of the accounting records, including inventories and financial statements, from the entry of the basic data. She said the system is simple and minimizes the time required to maintain the accounting records.

[33]  Mrs. Jiwani valued her accounting services at $300 a month based on 20 hours a month at $15 an hour. This figure was used by Mr. Symes in calculating the value of the business.

[34]  Mr. Hooge assumed Mrs. Jiwani's services were worth $12,000 a year in making his calculation of the value of the business. He used this in combination with a $45,000 salary for Mr. Jiwani. He also prepared, but did not use, an alternative estimate using a $3,600 salary for Mrs. Jiwani and a $56,000 salary for Mr. Jiwani. Mr. Hooge's $12,000 estimate was based on 20 hours a week at $12 an hour. The $12 an hour was derived from an earlier estimate given to him by Mrs. Jiwani of the hours she worked and her estimate of the value of her services to the business. It differs from the $15 an hour estimate she later gave to Mr. Symes and in her testimony during the proceedings. Mr. Hooge testified that $15 an hour was reasonable for the general accounting work done by Mrs. Jiwani but that the preparation of financial statements and tax returns would warrant a charge of at least $50 an hour.

[35]  Based on the testimony of Mr. and Mrs. Jiwani and Mr. Hooge, we believe it is reasonable to conclude that after March 1995, Mrs. Jiwani was present at the business premises an average of 20 hours a week. However, the Jiwanis' testimony leads us to conclude that much of Mrs. Jiwani's time spent at the business premises was non-productive.

[36]  We accept Mrs. Jiwani's estimate that only 20 hours a month was spent on accounting matters and that $15 an hour is reasonable compensation for routine day-to-day accounting. However, we believe that a higher rate of $50 an hour should be applied to the more senior levels of work, such as the overall supervision of the accounting records and the preparation of financial statements and income tax returns. There is no doubt that Mrs. Jiwani has the skills required to do this work and command this level of pay since this is amply evidenced by her professional qualifications and her salary level at the shipping company.

[37]  Based on the foregoing, and assuming 10% of her time to be spent on senior accounting work, we calculate the value of Mrs. Jiwani's accounting services to be:

[38]  We also considered the value of the balance of the time spent by Mrs. Jiwani at the business. The only specific tasks identified for this time were occasionally driving customers, checking receipt of parts, picking up parts, greeting customers and making coffee. Mrs. Jiwani said that after leaving her previous job in March 1995, she attended the business premises to "kill time" because she had nothing else to do. The business operated successfully without her day to day presence prior to March 1995 and we have concluded that it is not appropriate to ascribe any value to her services other than for accounting. Based on the evidence we conclude that $4,440 a year would be appropriate compensation for the accounting services provided by Mrs. Jiwani plus 10% to cover employee benefits.

5.4 Sustaining Capital Reinvestment

[39]  Mr. Hooge estimated that an annual amount of $4,500 was required to provide for the replacement or major overhaul of fixed assets. He based this on the assumption that the assets had a useful life of 15 years.

[40]  Mr. Symes made no provision for sustaining capital reinvestment because he believed the fixed assets had a life of more than 15 years, and that such provision as might be required net of tax shield (being the reduction in income taxes flowing from the deduction of the costs of replacing or overhauling fixed assets) would not make a material difference to his conclusions. Mr. Symes acknowledged that Mr. Hooge's calculation was correct if the fixed assets had a life of 15 years.

[41]  There was no technical evidence submitted concerning the probable life of fixed assets. Schedules prepared by Mr. Hooge show that the income tax depreciation rates applicable to the fixed assets are 10% straight line for leasehold improvements, 20% on the diminishing balance for equipment and 30% on the diminishing balance for computer hardware. Mr. Hooge acknowledged that his choice of 15 years was arbitrary but said that it was longer than the 10 year period that he would normally use. He also said that he had calculated that Mr. Symes' assumptions required an annual provision for capital replacement in the range of $1,700 to $2,500. This would imply a useful life in the range of approximately 30 to 40 years. Mr. Symes offered no opinion on the life of the fixed assets other than to say he thought it was longer than 15 years.

[42]  The fixed assets comprise shop equipment, an awning, computer hardware, furniture, and leasehold improvements. It is probable that some assets have a longer life than others. The actual life of some assets will depend on the ability of the company to renew the lease of its premises, which had an initial term of five years with a right of renewal for a further five years. Mr. Hooge, while acknowledging that his selection of a 15 year life was arbitrary, had clearly given considerable thought to the issue. After weighing all of the evidence, we have concluded that Mr. Hooge's estimate of a 15 year life is reasonable, and we have accepted his calculations.

5.5 Earnings for the Four Months Ended April 30, 1997

[43]  Mr. Hooge adjusted the earnings for the four months ended April 30, 1997 because he believed that the four month period did not accurately reflect the results that would have been achieved for the whole year. Mr. Symes did not think any adjustments were required.

[44]  The adjustments made by Mr. Hooge were:

  • Reduction to gross profit of $1,247
  • This adjustment was triggered by the fact that the gross profit percentage for the four months ended April 30, 1997 was higher than the previous year and higher than the average achieved by the company since its inception. Mr. Hooge commented that internally generated interim financial statements are often not accurate because period end inventories are not calculated and valued. We accept the general accuracy of this statement but note that the cost of materials and supplies, expressed as a percentage of sales, was higher in the four months ended April 30, 1997 than in the two preceding years. Accordingly, we do not think that the gross profit of this four month period was inflated by artificially low material and supplies costs.

    The increase in gross profit percentage in the four months ended April 30, 1997 is principally attributable to a reduction in direct labour. This remains the case after eliminating the wages of the Jiwanis' sons, which are included in direct labour. We do not think that the cost of direct labour is subject to distortion because of the short four month period.

    We consider Mr. Hooge's adjustment to gross profit to be inappropriate.

  • Increase in accounting and legal of $500, increase in office and miscellaneous of $1,875, and increase in repairs and maintenance of $300

    These expenses, expressed as a percentage of sales, were generally consistent in the 1994, 1995 and 1996 years. However, in each case the expenses were significantly lower in the four months ended April 30, 1997. Mr. Hooge's adjustments represent the increases required to bring these expenses to the level experienced in 1996.

    We consider these adjustments to expenses to be appropriate and we also note that none of the other expenses in the four month period appeared to be out of line with the historical experience after allowance is made for known differences such as family salaries and increase in rent.

[45]  We conclude that the reported earnings for the four months ended April 30, 1997 should be reduced by $2,675 to provide for the aforementioned cost understatement.

5.6 Company Borrowings

[46]  Mr. Symes estimated that the company could borrow $16,065 based on a normal debt equity ratio of 2:1 shown in annual statement studies published by Robert Morris Associates. He said this money could then be paid to the shareholders as a dividend which would provide them with $14,137 after payment of $1,928 income tax. Mr. Symes categorized this as a redundant asset which should be reflected in the overall value of the business.

[47]  Mr. Symes' calculation of debt equity ratio included adjustments increasing asset values by a net amount of $32,707 and liabilities by $2,502. The principal adjustments were to increase the $31,710 book value of fixed assets by $43,290 to bring them to an estimated value of $75,000 and to write off $11,997 unamortized franchise costs. The debt equity ratio of N.Y. Automotive Ltd. prior to these accounting adjustments was 2.4:1. The debt equity ratio after the adjustments and after the payment of a dividend of $16,065 from the notional refinancing would be 2:1.

[48]  Mr. Symes said that he believed a bank would lend N.Y. Automotive Ltd. $16,065 on the security of its assets. Based on his personal experience he thought a bank would lend a total of 75% of accounts receivable and 50% of inventory and fixed assets. He also thought a bank would require shareholders to subordinate their loans to the claims of the bank.

[49]  Mr. Hooge also made calculations of the debt equity ratios before and after adjustments. He considered it inappropriate to write up the value of fixed assets when comparing the debt equity ratio with the Robert Morris studies because the Robert Morris studies were based on book values, not estimated values. Mr. Hooge did, however, calculate that the debt equity ratio was 4.5:1 after writing off the unamortized franchise fee. He made this calculation because he noted that intangible assets were not a material factor in the Robert Morris data.

[50]  Mr. Hooge testified on his discussions with a banker concerning the amount, which N.Y. Automotive Ltd. might borrow against the security of its assets. He was told that the bank would not lend against the company awning and leasehold improvements. The bank would probably lend up to 65% of the value of the company's equipment. The bank would require an appraisal in order to determine value, but for loan purposes, would not accept values which were in excess of cost. In the absence of an appraisal, the bank would probably use the net book values to determine the maximum amount of their loan. Mr. Hooge pointed out that the cost and net book value of the equipment, computer and furniture totalled $35,000 and $14,000 respectively. Thus it might be possible for N.Y. Automotive Ltd. to borrow a maximum of $23,000 against its fixed assets if it obtained an appraisal showing that the assets were worth no less than their cost. In the absence of an appraisal, a loan of $9,000 might be obtained based on their net book value of $14,000.

[51]  Mr. Hooge explained that the company was largely financed by shareholder loans, which totalled $37,060 at April 24, 1997. He estimated that the cash and term deposits, which totalled $23,567, were sufficient to allow repayment of $12,000 against shareholder loans and still leave sufficient working capital to permit the company to meet its third party liabilities in the normal course of business. This would reduce shareholder loans to $25,060. Mr. Hooge likened the shareholder loans to bank debt and said that a buyer of the business would require repayment of these loans from any bank borrowings. He pointed out that bank loans totalling $41,000 would be required to repay shareholder loans and pay the $16,035 dividend postulated by Mr. Symes. He said this was clearly beyond the company's maximum borrowing capacity. [52] Two issues must be considered in reaching a decision on whether N.Y. Automotive Ltd. has a redundant asset through unused borrowing capacity. Firstly, do the balance sheet ratios suggest that there is unused borrowing capacity? Secondly, could the company borrow an amount sufficient to permit the payment of a dividend, on the strength of its assets without outside assistance?

[53]  The Robert Morris studies reflect the book values of the assets and liabilities of the reporting companies. Accordingly, we believe the unadjusted book values of N.Y. Automotive Ltd. should be used for comparative purposes. These show a debt equity ratio of 2.4:1 as compared with 2:1 reported by Robert Morris. This leads us to conclude that N.Y. Automotive Ltd. had no obvious unused borrowing capacity since it carries more debt than the industry average.

[54]  Mr. Hooge's testimony suggests that the company might be able to borrow a maximum of $23,000 against its fixed assets. There seems to be little or no borrowing capacity against accounts receivable and inventory because of the low levels, which the company in fact maintained. We were not provided with details of the normal level of accounts receivable but noted that accounts receivable and prepaid expenses together totalled between $2,281 and $5,247 at the end of the company's fiscal years. This suggests that most customers pay their bills when they pick up their cars. Inventories showed a year over year decline to a level of $3,013 at December 31, 1996. We believe it is reasonable to conclude that the company's borrowing capacity would be no greater than $23,000 being the maximum amount that might be secured against its fixed assets.

[55]  We accept Mr. Hooge's testimony that a bank loan of $41,000 would be required to repay shareholder loans and pay a dividend of $16,065 and that this is beyond the company's borrowing capacity. We also accept Mr. Hooge's testimony that a purchaser of the company would require the shareholder loans to be repaid before taking a dividend. In this connection we note that the repayment of shareholder loans would be an impediment to obtaining a bank loan because, as testified by Mr. Symes, the bank would request a subordination of shareholder loans to the claims of the bank.

[56]  It seems unlikely that the shareholders of N.Y. Automotive Ltd. would seek a loan on these terms since it would be irrational and imprudent to take a taxable dividend without first repaying shareholder loans, particularly when the credit risk associated with those shareholder loans would be increased as a result of the subordination to the bank.

[57]  After weighing all of the evidence and the testimony of the two experts, we have concluded that the company could not reasonably have borrowed from the bank to pay a dividend.

5.7 Automobile Expenses

[58]  The expenses paid by the company include the day to day operating expenses of cars owned by the Jiwani family. There was originally only one car, a 1983 Chevrolet Caprice. A second car, an Oldsmobile, was purchased in 1994 for the use of the Jiwanis' two sons. The operating expenses paid by the company comprise insurance, gas, and repairs and maintenance. The capital cost of the cars was paid by the Jiwanis personally and the company did not reimburse them for the depreciation and cost of capital associated with the ownership of the cars.

[59]  Mr. Jiwani testified that the 1983 Caprice was used in the business for picking up parts, delivering financial statements to the franchiser and giving lifts to customers. He said that the car was at the business six days a week but said 90% of the use was personal and 10% for business.

[60]  Mr. Symes excluded 90% of the automobile expenses when calculating the company's earnings based on Mr. Jiwani's assertion that only 10% of the car use was for business.

[61]  Mr. Hooge intended to exclude 50% of the automobile expenses when calculating company earnings. His actual exclusion was 45% due to a misinterpretation of Mr. Symes report. Mr. Hooge testified that Mr. Jiwani had told him that the car was used 90% on business. His 50% estimate of business use was made by taking the mid-point of the two conflicting percentages provided by Mr. Jiwani.

[62]  The testimony suggests that the 1983 Chevrolet Caprice was the principal, or perhaps the only, car used in the business. There was no evidence with respect to the depreciation and financing costs associated with the ownership of this vehicle. They may be small since the car was 10 years old at the time that N.Y. Automotive Ltd. commenced business. However, it is clear that the car expenses recorded by the company do not include these costs. It is also clear that the car expenses paid by the company include a second car commencing sometime in 1994. Thus, assuming only one car was used in the business for 10% of its total use, the application of that percentage to post 1994 recorded costs will overstate the business expense because the recorded costs include expenses relating to a second car. Conversely the recorded costs are understated because they do not include depreciation or cost of capital.

[63]  We received no information on depreciation and cost of capital invested in the car. We do not know how much of the expenses paid by the company relate to the second car used by the Jiwanis' sons. While Mr. Jiwani's testimony of 10% business use appears to be an estimate and not based on mileage calculations, it appears to be in keeping with the evidence as to the requirements of the business. Based on the available evidence and the testimony at the hearing, we accept Mr. Symes' calculations as being the best available allocation of automobile expenses between business use and personal use.

5.8 Calculations of Loss on Disposal of Business Assets

[64]  Our calculations follow the methodology used by both Mr. Symes and Mr. Hooge. The adjustments to earnings are identical to those made by Mr. Symes and Mr. Hooge except where they held differing opinions when the adjustments reflect our conclusions based on the testimony presented at the hearing.

[65]  Mr. Symes and Mr. Hooge made similar estimates of the going concern value of the fixed assets. Mr. Symes estimated a value range of $65,000 to $75,000. Mr. Hooge estimated $72,400 in his February 12, 1996 report but used Mr. Symes' range of $65,000 to $75,000 in his April 1, 1999 rebuttal report. Mr. Hooge also used Mr. Symes' 3.5 and 4.5 capitalization multipliers to value the business in his rebuttal report. These jointly used capitalization multipliers and estimates of going concern value of fixed assets are incorporated in the calculations below:

Estimated Maintainable Cash Flow:

*The expense adjustments include 90% of the car expenses paid by the company.

[66]  Our calculation of the loss on disposition of assets sustained by N.Y. Automotive Ltd. as a result of the expropriation is as follows:

*Fixed assets have been valued at the midpoint of the value range since this amount is reflected in the goodwill/franchise midpoint value.

5.9  Winding Up Expenses

[67]  The parties have agreed that out of pocket expenses totalling $6,340 were properly incurred in winding up the business.

[68]  N.Y. Automotive Ltd. also claims the following expenses which are disputed by the City of Richmond:

$ $
Services of Mr. and Mrs. Jiwani for the period April 25 to May 31, 1997:
      Mr. Jiwani 
      Mrs. Jiwani 
Severance pay for employees R. Pope and H. Baldeo   5,600

[69]  Mr. Jiwani testified that he received the executed agreement made pursuant to section 3 of the Expropriation Act on April 25, 1997. The agreement required N.Y. Automotive Ltd. to give vacant possession on May 31, 1997. Mr. Jiwani explained that he terminated the employment of Randy Pope and Harry Baldeo as soon as he received the executed agreement and paid them the required severance pay. Mr. Jiwani did not think it was reasonable to require the employees to work out their severance period because:

  • he was concerned that the stress associated with losing their job might lead to faulty work;
  • he thought it would be difficult to sell new work when the customers knew that the business was closing down and would not be available to attend to warranty claims; and
  • the time period to May 31, 1997 would be required to wind up the business.

[70]  We believe N.Y. Automotive Ltd. acted reasonably in closing the business and terminating the employment of Randy Pope and Henry Baldeo on receipt of the executed section 3 agreement on April 25, 1997, particularly in view of the narrow time frame for winding up the business. We also see warranty and work quality considerations as valid in view of the imminent closure. We note that Maynards Industries Ltd., who conducted the auction of the company's assets, stipulated in their letter of April 22, 1997 that a period of three weeks was required for the preparation, sale and removal of these assets. We consider the $5,600 severance payment to employees Pope and Baldeo to be a proper cost of winding up the business.

[71]  Mr. & Mrs. Jiwani spent the period April 25 to May 31, 1997 winding up the business. This included returning parts where return was possible, making arrangement for the sale of the company's tangible assets by auction, terminating utility contracts, reconciling supplier accounts and preparing financial statements and reports to governments and franchisor. There was no evidence on the time spent on these activities and whether it was more or less than the time spent when the business was operating normally. Based on the available evidence we cannot conclude that Mr. & Mrs. Jiwani's work during the five week wind up period would have been more onerous or time consuming than when the business was operating. Compensation at the rates which we have previously determined to be reasonable would be a proper cost of winding up the business. Our calculation is as follows:

5.10 Summary of Business Loss

[72]  Our summary of the business loss, excluding severance liability for Mr. Jiwani, is as follows:



6.1  Background

[73]  Mr. Jiwani stated he was 51 years of age at the time of the hearing in the fall of 1999. He described his education as being equivalent to a Grade 12 education in British Columbia. He had been employed by Vancouver Brake & Wheel in Vancouver from 1979 to 1993. He had taken various automotive repair courses and had worked his way up to the position of manager of the parts department for all Vancouver Brake & Wheel shops.

[74]  With the closure in late 1992 or early 1993 of the then existing Vancouver Brake & Wheel shop in Richmond, Mr. Jiwani was offered an opportunity to open a new Vancouver Brake & Wheel operation in Richmond as a franchisee. He saw this as an opportunity to advance and entered into a franchise agreement in May 1993 with Vancouver Brake & Wheel (Richmond) Ltd. (the "Franchise Agreement"). Mr. Jiwani was identified in that agreement as the Franchisee. The Franchise Agreement contains a non-competition covenant that provides:

13.01  Non-Competition of Franchisee. During the Term and for one year after Termination, in the event of termination of this agreement prior to the expiry of the Term by either the Franchisor or the Franchisee, or in the event of expiry of the Term, the Franchisee shall not individually or in partnership or in conjunction with any person or persons, firm, association, syndicate or company, as partner, principal, agent, shareholder, employee or in any other manner or capacity whatsoever, directly or indirectly, carry on or be engaged in or concerned with or interested in, or lend money to, lease or sublet premises to, supply to, consult with, advise, manage, guarantee the debts or obligations of, or permit his name or any part thereof to be used or employed by any person or persons, firm, association, syndicate or company engaged in or concerned with or interested in, the operation of any business similar to or competitive with the Business or the Franchisor's Business within a 25-kilometre radius of the Licensed Location, or within a 25-kilometre radius of either of the Vancouver Brake & Wheel locations currently operated by the Franchisor or its affiliates at 1239 Kingsway and 1841 East Hastings Street, Vancouver, B.C. or any successor locations thereto opened and operated during the Term, or within a 25-kilometre radius of the Guildford Town Centre shopping centre in Surrey, B.C., or such smaller area as determined by the Franchisor and notified to the Franchisee in writing.

[75]  Mr. Jiwani subsequently assigned the franchise agreement to the corporate claimant, N.Y. Automotive Ltd. effective May 27, 1993, pursuant to an assignment agreement dated June 24, 1993 (the "Assignment"). Section 6 of the Assignment reads:

6.  This consent shall not waive or modify in any manner the rights of the Franchisor under the Franchise Agreement and the Assignor acknowledges and understands that this Assignment shall not relieve and release the Assignor from any and all obligations under the terms of the Franchise Agreement.

[76]  The business commenced operations May 27, 1993. Mr. Jiwani described his role as that of an owner/manager. He derived his income solely from the business after operations commenced, working full time in the business until operations ceased and the business was wound up in May 1997.

[77]  Mr. Jiwani testified that from May 1997 until January 15, 1999 he had no employment and no source of income. He said he did not seek employment after the business closed because of his age, because of the restrictive covenant in the Franchise Agreement, and because he was not interested in employment but in finding another business. Initially, he took a vacation period of some 2 months. After that he indicated he spent most of his time researching and investigating various businesses outside the automotive area, eventually making a few purchase proposals, and in mid-January 1999 investing in a dry cleaning business. He confirmed that in the period from May 1997 to mid January 1999 he did not approach his previous employer, Vancouver Brake & Wheel, for employment because he had no intention of returning to work for that employer or, indeed, for any other employer. He preferred, as he put it, to be his own boss. With respect to his search for another business, Mr. Jiwani agreed that he had assumed he could not open another automotive repair business because of the restrictive covenant. However, he neither discussed this with the franchisor, nor did he seek legal advice on this point in May 1997 or after. He testified that he saw the restrictive covenant as clear cut and that at the time he signed the Franchise Agreement in 1993 he had been advised by a lawyer that he would not be able to own an auto repair business within the restricted areas.

6.2 Claimant's Argument

[78]  The claimed amount of $120,000 was stated by counsel for the claimant to be based upon the projected annual cash flow that would have been generated by the business between the closing of the claimant's business at the end of May 1997 and the commencement of the new business in January 1999, i.e. approximately $75,000 per annum for a period of 19 months.

[79]  Counsel conceded that Mr. Jiwani could not claim compensation in his personal capacity since he was not an "owner" under the Act. However, he argued that the corporate claimant, N.Y. Automotive Ltd., had an obligation to make a severance payment to Mr. Jiwani and should be compensated in respect of that liability. In support of that argument he cited the cases of Roadmaster Auto Centre Ltd. v. Burnaby (City) (1997), 62 L.C.R. 124 (B.C.E.C.B.) and Meyer v. British Columbia (Minister of Transportation & Highways) (1995), 55 L.C.R. 94 (B.C.E.C.B.).

6.3 Respondent's Argument

[80]  Counsel for the respondent submits the corporate claimant has no liability to Mr. Jiwani. He points to a lack of evidence that Mr. Jiwani had advanced a claim against N.Y. Automotive Ltd. He argues that there is no basis upon which to allow compensation in the circumstances considered here and says that the Meyer and Roadmaster cases are not applicable.

[81]  Respondent's counsel describes Mr. Jiwani's choice to seek out a new business as a "lifestyle choice". Even if the corporate claimant was potentially liable for severance, counsel argues there was a total abdication by Mr. Jiwani of his duty to mitigate his losses, disentitling him to any severance. Counsel argues that because of the breadth of the restrictive covenant contained in the Franchise Agreement, that covenant would be unenforceable. He notes Mr. Jiwani failed to seek any release from his obligations under the restrictive covenant and submits this was not because Mr. Jiwani's ability to get a job was destroyed, but because of his lifestyle choice. He also argues the Assignment operated to release Mr. Jiwani from his obligations under the Franchise Agreement.

6.4 Analysis and Conclusion

[82]  The following issues must be resolved in reaching a conclusion on the severance claim:

  • Whether Mr. Jiwani has a sustainable claim for damages for loss of employment against N.Y. Automotive Ltd., and if so
  • The rate of remuneration to be used in calculating the severance liability, and
  • The period of time for which he should be compensated.

[83]  The financial circumstances of N.Y. Automotive Ltd. are similar to the financial circumstances of the business considered in Meyer. In both cases, the businesses had goodwill and were profitable after paying a reasonable salary to the principal or principals.

[84]  The principal distinction is the Jiwanis operated their business through N.Y. Automotive Ltd., an incorporated company, whereas in the Meyer case, the claimant was the sole proprietor of an unincorporated business. In Meyer, the Board found the claim by Mrs. Meyer for "loss of employment as owner/manager" fell within section 34(1)(a) of the Act, as a financial loss directly attributable to the disturbance caused by the expropriation. Unlike Mrs. Meyer, Mr. Jiwani is himself not a claimant and therefore the claimant here, N.Y. Automotive Ltd., can only be entitled to disturbance damages if it has a liability to Mr. Jiwani in respect of his loss of employment.

[85]  The first question then is whether or not Mr. Jiwani was an employee of N.Y. Automotive Ltd. entitled to reasonable notice on termination of his employment.

[86]  The board in an earlier decision, Surrey Animal Hospital Ltd. v. British Columbia (Minister of Transportation and Highways) (1993), 51 L.C.R. 37, briefly considered a claim for severance pay in a similar situation. The Board dismissed that claim on the basis that Dr. Ross, one of the principals of the corporate claimant, was not an employee of the corporate claimant entitled to the benefit of the provisions of the Employment Standards Act.

[87]  We have more fully considered the question of whether or not Mr. Jiwani may be considered an employee of the corporate claimant, N.Y. Automotive Ltd., not in the restrictive sense of whether or not Mr. Jiwani would be entitled to the benefit of the provisions of the Employment Standards Act, but rather in the broader context of his position at common law.

[88]  We note the references in Surrey Animal Hospital Ltd. to the cases of Re Bolt & Iron Co.; Livingstone's Case (1888), 14 O.R. 211 (Ch.D.), aff'd 16 O.A.R. 397 (C.A.) and Allish v. Allied Engineering of B.C. Limited (1957), 9 D.L.R. (2d) 688, 22 W.W.R. 641. We consider those cases to be distinguishable from the situation before us, in that both address the question of entitlement to severance on termination of a "managing director" in their capacity as a director. For us, the question is, rather, whether there was an employment relationship between Mr. Jiwani and N.Y. Automotive Ltd.

[89]  On the evidence before us, Mr. Jiwani in his day to day activities at the rented premises of N.Y. Automotive Ltd. fulfilled a role similar to that of a senior service advisor/manager in an automotive repair facility. He discussed necessary repairs with customers, provided repair estimates, completed work orders, ordered necessary parts and received payments from customers upon completion of the work. In addition, he completed bank deposits, assigned work to and supervised the two automotive technicians employed by N.Y. Automotive Ltd. and, when it was busy, worked on customers' vehicles himself. These are not the duties of a managing director. Had he not performed these duties, N.Y. Automotive Ltd. would have had to hire an additional employee to perform such duties. This is, of course, consistent with the deduction by both business valuation experts of a salary amount for Mr. Jiwani's services in order to arrive at the earnings and hence goodwill of the business carried on by N.Y. Automotive Ltd. The services performed by Mr. Jiwani for N.Y. Automotive Ltd. were, we conclude, of a nature and character equivalent to that of a full time automotive service advisor/manager and are one element supporting an employment relationship.

[90]  Mr. Jiwani testified that his only sources of income during the periods N.Y. Automotive Ltd. operated its business were the amounts he received from N.Y. Automotive Ltd., either as salary or as profits from the business. The financial records of N.Y. Automotive Ltd. indicate a salary was paid to Mr. Jiwani. The receipt of remuneration from N.Y. Automotive Ltd. is another element confirming the existence of an employment relationship between Mr. Jiwani and N.Y. Automotive Ltd.

[91]  The other usual element of an employment relationship, the employer's control over the manner of doing the work might on first glance be considered to be absent here, where the controlling shareholder and the purported employee are one and the same.

[92]  In a case analogous to the case before us, where the same individual, Lee, was both the controlling shareholder and governing director of a company, as well as employed at a salary as its chief pilot, it was held that the relationship of Lee in his role of chief pilot was that of an employee. That case, Lee v. Lee's Air Farming Ltd., [1961] A.C. 12 (P.C.) confirmed that the individual and the company are separate legal entities and that one and the same person may function in dual capacities, acting in one capacity to give orders to himself in another capacity.

[93]  Similarly, in McGuire v. Wardair Canada Ltd. (1969), 70 C.L.L.C. 14,026, 71 W.W.R. 705 (Alta.S.C.) the court held that McGuire, who was both a director, vice president and general manager of Wardair was, in his capacity of general manager, an employee of the company entitled to damages in lieu of reasonable notice upon the termination of that employment. Both Livingstone's Case and Allish, amongst others, were considered in the context of the circumstances leading up to McGuire's initial employment to determine whether there was ground for implying a term of reasonable notice. It was concluded that in the cases reviewed the basis for disallowing damages for wrongful dismissal of a managing director was that as a director of the company the remuneration was in the nature of a gratuity in the absence of special circumstances to the contrary and that a director is not a servant and therefore the relationship of master and servant does not apply. The court found McGuire's position to be clearly distinguishable from that considered in the cases reviewed and held his employment as general manager was distinct and apart from his appointment as a director and vice-president.

[94]  In the case before us, Mr. Jiwani and N.Y. Automotive Ltd. are clearly separate legal entities and there is no reason in law which precludes Mr. Jiwani from being both an employee and the controlling shareholder of N.Y. Automotive Ltd. We consider Mr. Jiwani's day to day activities in the roles of service advisor/manager and sometimes automotive technician to be distinct and apart from his roles as a director, officer and shareholder of N.Y. Automotive Ltd. In his performance of his day to day services, we conclude Mr. Jiwani was an employee of the corporate claimant, N.Y. Automotive Ltd., entitled to reasonable notice of termination of his employment or damages in lieu of such notice.

[95]  There was no evidence that Mr. Jiwani had made a claim against N.Y. Automotive Ltd. although, in the circumstances of this case, we believe that this technical requirement could be met quite easily. Thus, we consider the liability exists even if a claim has not been formally advanced. On our analysis, Mr. Jiwani has a cause of action against N.Y. Automotive Ltd. and the proper amount of the claim then falls, as do the severance claims of Pope and Baldeo earlier considered, within section 34(1)(a) of the Act as a reasonable expense directly attributable to the disturbance.

[96]  Having regard to the amount of that expense, the claimant cited Roadmaster in support of its claim that the severance liability is equivalent to the cash flow of the business of N.Y. Automotive Ltd. Roadmaster differs on its facts since the business in that case was found to have no goodwill and the cash flow was generally insufficient to pay a fair market salary to the principal. To the extent that there can be said to be any award made in that case analogous to the severance liability claim made here, it is the award made for financial losses from the date of expropriation to the end of the lease term, a period of approximately 18 months. That award is based on the Board's analysis of the expert evidence estimating the likely cash flows of the business during that period but for the expropriation. Claims for a termination allowance under section 34(4) of the Act and for executive time were dismissed as having been included in the award for financial losses in the post expropriation period. We note the Board's comment that in awarding financial losses to the end of the lease term by including management wages and benefits it was accepting in the circumstances of the Roadmaster case the applicability of the exception in Plouffe v. Ottawa (City) (1973), 4 L.C.R. 37 (Ont. L.C.B.). The Board went on to note that therefore any award in the nature of a termination allowance would be double recovery.

[97]  In the case before us, the opposite is true. The business of N.Y. Automotive Ltd. does have goodwill and this is reflected in the award we have made under business loss pursuant to section 34 (4) of the Act, making the Plouffe exception inapplicable here. To award an amount under the severance claim equivalent to the whole of the maintainable cash flow of N.Y. Automotive Ltd., as the claimant suggests, would result in double compensation because it is the cash flow which produces the goodwill that is the basis for the award under section 34(4). We therefore reject the claimant's suggestion that the amount of severance should be based on the cash flow of the business of N.Y. Automotive Ltd.

[98]  Since the claim is for liability as a result of the termination of Mr. Jiwani's employment arising from the winding-up of the business of N.Y. Automotive Ltd., we find the principles applicable to the determination of damages in a wrongful dismissal action are those to be applied.

[99]  It is therefore necessary to determine the appropriate rate of remuneration. The use of fair market salary is consistent with Meyer. Since goodwill has been calculated after deduction of a market salary plus benefits for Mr. Jiwani's services, the use of the same remuneration rate will ensure there is no element of double recovery nor any deficiency of recovery. Accordingly, the Board considers the annual salary of $45,000 plus 10% for benefits, as previously determined in connection with the section 34 (4) award, to be the appropriate salary and benefit amounts to be used to calculate the severance liability.

[100]  In the Meyer case while the claim for "loss of employment as owner/manager" was characterized by the Board as a financial loss under section 33 (1)(a), now section 34(1)(a), the position of the claimant was seen to be akin to "[a] person wrongfully dismissed from employment where age, length of service, nature of the position, and availability of similar positions all factor into determining the amount of reasonable notice a dismissed employee would be entitled to: see Ansari v. British Columbia Hydro and Power Authority, [1986] 4 W.W.R. 124 (B.C.S.C.)."

[101]  The nature of the claim before us rests on liability for wrongful dismissal and thus the factors to be considered in determining the appropriate time period are clearly those applicable in determining the period of reasonable notice in a wrongful dismissal action. The courts have generally applied the principles set out by McRuer C.J.H.C. in Bardal v. Globe & Mail Ltd. (1960), 24 D.L.R. (2d) 140 (Ont. H.C.) at p. 145:

There can be no catalogue laid down as to what is reasonable notice in particular classes of cases. The reasonableness of the notice must be decided with reference to each particular case, having regard to the character of the employment, the length of service of the servant, the age of the servant and the availability of similar employment, having regard to the experience, training and qualifications of the servant.

[102]  Bardal was applied in Ansari and has subsequently been adopted by the Supreme Court of Canada in Machtinger v. HOJ Industries Ltd., [1992] 1 S.C.R. 986.

[103]  Mr. Jiwani was employed by Vancouver Brake & Wheel from 1979 to 1993, a period of 14 years. He then managed the business of N.Y. Automotive Ltd. as a franchisee of Vancouver Brake & Wheel for the four years from its inception in May 1993 to its closure in May 1997. Length of employment is germane to the determination of severance entitlement. We considered whether Mr. Jiwani's employment as the manager of a franchisee of Vancouver Brake & Wheel should be construed to be a continuation of his employment with Vancouver Brake & Wheel but concluded that this would be inappropriate. Mr. Jiwani terminated his employment with Vancouver Brake & Wheel in 1993 in favour of self-employment through the family ownership of N.Y. Automotive Ltd. Mr. Jiwani's employment, as the manager of a family owned franchisee company, cannot be construed to be a continuation of his employment as a parts manager of the franchisor company in which he had no ownership interest, particularly when he himself voluntarily terminated that employment. We have concluded that four years is Mr. Jiwani's period of employment for the purpose of determining the amount of the severance liability.

[104]  The extent to which Mr. Jiwani's activities were restricted by the Franchise Agreement has been the subject of argument by counsel for the parties. It is our view; however, that it had no bearing on Mr. Jiwani's failure to find employment with a third party because he did not and never intended to seek such employment. It might have prevented Mr. Jiwani from purchasing a business similar to that conducted by Vancouver Brake & Wheel within one year from the termination of the franchise, if that business was in the geographic area set out in the Franchise Agreement. However, Mr. Jiwani sought no legal advice on the enforceability of the non-competition clause after receipt of the section 3 agreement although, as noted earlier, he stated that he had been given legal advice at the time he entered into the franchise agreement. Nor did he discuss with the franchisor the possibility of obtaining a release or modification of the restrictive covenant. This, notwithstanding Mr. Jiwani's evidence that on closing the business of N.Y. Automotive Ltd., he spoke to the franchisor regarding the release of Mr. Baldeo to return to work for the franchisor. We can only conclude Mr. Jiwani was content to exclude the automobile repair business from his field of future endeavours.

[105]  The claimant argues for a severance period of 19 months, being the time it took for Mr. Jiwani to purchase a new business. We believe this is unreasonably long. It is also the wrong basis upon which to calculate damages for wrongful dismissal. Mr. Jiwani admitted he made no attempt to mitigate his loss of earnings by seeking alternate employment while he searched for another business in which to invest. He decided to take two months' holiday after winding up the business of N.Y. Automotive Ltd. He did not attempt to clarify the extent to which the Franchise Agreement limited his future activities, either as an employee or investor.

[106]  The respondent argues that Mr. Jiwani is disentitled to any amount for severance because of his failure to seek alternate employment. In order to succeed on this mitigation argument, the respondent must prove not only that Mr. Jiwani failed to diligently seek alternate employment, but also that, on the balance of probabilities, he would have obtained appropriate work had he made reasonable efforts. See Maguire v. Sutton (1998), 34 C.C.E.L. (2d) 67 (B.C.S.C).

[107]  No evidence was adduced to show that suitable employment positions were available to Mr. Jiwani. Thus, while the evidence is clear that Mr. Jiwani did not actively seek re-employment choosing instead to pursue other possible business investment opportunities, there is no evidence to show that if he had done so he would have obtained a suitable job earlier than would otherwise be anticipated in his case taking into account all other relevant factors.

[108]  Conversely, there was no evidence adduced on behalf of the claimant to indicate that the period of reasonable notice should be longer in Mr. Jiwani's case because suitable employment positions were not available despite reasonable efforts to obtain appropriate work.

[109]  We, therefore, have no basis upon which to conclude the period of reasonable notice should be either longer or shorter than it would otherwise be because of either a failure to mitigate or considerations as to availability of similar employment.

[110]  We consider a notice period of six months to be reasonable having regard to all of the circumstances and the evidence before us, including Mr. Jiwani's age, his position and the length of his service with N.Y. Automotive Ltd. We find that the notice period commenced on April 25, 1997, the date the fully executed section 3 agreement was delivered to N.Y. Automotive Ltd. and N.Y. Automotive Ltd. commenced winding-up the business.

6.5 Summary of Severance Liability

[111]  We have already determined the appropriate salary and benefits for Mr. Jiwani's services to be $45,000 annually plus 10% for employee benefits. Mr. Jiwani's remuneration from April 25, 1997 to May 31,1997 has already been included in the calculation of compensation as an expense incurred in the winding-up of the business and must be deducted here to avoid duplication. Our calculation of N.Y. Automotive Ltd.'s remaining severance liability to Mr. Jiwani is as follows:


[112]  N.Y. Automotive Ltd. has been awarded $118,400 as disturbance damages pursuant to sections 34(1)(a) and (4) of the Act. $98,410 of the amount awarded has been generically referred to as a business loss and the remaining amount awarded in respect of severance liability might also be characterized as a business loss. Following the reasoning in Sequoia Springs West Development Corporation v. Her Majesty the Queen in Right of the Province of British Columbia as represented by the Minister of Transportation and Highways, unreported, E.C.B. No. 93/95/188, September 1, 2000, we conclude that no deduction is to be made in the present case in respect of compensation for business loss(es) when carrying out the calculations under sections 45(4) and 46(4) of the Act relating to costs and interest since no amount was claimed or awarded under section 34(3) of the Act.

[113]  An advance payment of $102,000 was made to the claimant on May 20, 1997. The additional payment of $3,387 made on May 31, 1997 was, as we understand it, paid directly to the landlord pursuant to the Lease to cover the rent for May 1997. Thus, the claimant did not incur disturbance damages in respect of the May rent and the payment, having been made to the landlord, is not in our view to be treated as a payment to the claimant for the purposes of interest and costs.



[114]  Section 46(1)(a) of the Act provides that the expropriating authority must pay interest on any amount awarded in excess of any amount paid by the expropriating authority under section 20(1) or (12) or otherwise, to be calculated annually, in the case of disturbance damages, from the date the damages were incurred, or any other date that the board considers reasonable. Therefore, the claimant is entitled to interest under section 46(1)(a) on the amount awarded of $118,400, with adjustments to take into account the advance payment of $102,000 on May 20, 1997. Under section 46(2), interest is payable at an annual rate that is equal to the prime lending rate of the banker to the government.

[115]  We have concluded that interest should run from April 25, 1997, which is the date a fully executed copy of the section 3 agreement was delivered to the claimant and the claimant commenced the winding-up of its business. While the possession date was not until May 31, 1997, the winding-up of the business which gave rise to the disturbance damages in our view necessarily commenced earlier and it was reasonable for the claimant to discontinue its business on April 25, 1997, as soon as the taking became certain with the delivery of the section 3 agreement.

[116]  The advance payment made by the respondent to the claimant under section 20 constitutes approximately 86% of the total compensation awarded. Therefore, the provision under section 46(4) for additional interest applies. Additional interest is payable at an annual rate of 5%, on the difference of $16,400 from May 20, 1997, the date of the advance payment, to the date of this decision.



[117]  As a result of the hearing, the claimant has been awarded $118,400 in compensation. This award amounts to approximately 116% of the advance payments already received. Pursuant to section 45(4) of the Act, the claimant is entitled to costs.

[118]  Those costs are the actual legal, appraisal and other costs incurred by the claimant for the purpose of asserting its claim for compensation or damages, pursuant to sections 45(3) and 45(7)(a) of the Act, up to and including June 27, 1999. Thereafter, while other costs may continue to fall under section 45(7)(a), legal and appraisal costs are governed by the Tariff of Costs Regulation, B.C. Reg. 189/99 (the "Tariff"), as provided under section 45(7)(b) of the Act. Under section 3(3) of the Tariff, we fix the scale under which costs will be assessed at Scale 2, considering the matters addressed to be of ordinary difficulty or importance.




1. Compensation in the amount of $118,400 for disturbance damages pursuant to sections 34(1)(a) and (4) of the Act;

2. Interest on the amount in item (1) pursuant to section 46(1) of the Act from and including April 25, 1997 until paid, with adjustments to take into account the sum of $102,000 paid on May 20, 1997, by the respondent to the claimant.

Pursuant to section 46(2) of the Act, interest shall be calculated annually at the following rates:

a) Four and three-quarters per cent (4.75%) from January 1, 1997 to June 30, 1997

b) Four and three-quarters per cent (4.75%) from July 1, 1997 to December 31, 1997

c) Six per cent (6.00%) from January 1, 1998 to June 30, 1998

d) Six and one-half per cent (6.5%) from July 1, 1998 to December 31, 1998.

e) Six and three-quarters per cent (6.75%) from January 1, 1999 to June 30, 1999.

f) Six and one-quarter per cent (6.25%) from July 1, 1999 to December 31, 1999.

g) Six and one-half per cent (6.5%) from January 1, 2000 to June 30, 2000.

h) Seven and one-half per cent (7.5%) from July 1, 2000 to December 31, 2000.

3. Additional interest on the amount of $16,400 pursuant to section 46(4) of the Act, from and including May 20, 1997, the date of the relevant advance payment, at a rate of five percent (5.00%) per annum to the date of this decision.

4. The claimant's actual reasonable legal, appraisal and other costs of, and incidental to, the application and hearing before the board pursuant to sections 45(3), (4) and (7)(a) of the Act; provided, however, that the costs payable in respect of legal and appraisal costs incurred on and after June 28, 1999 shall be those costs prescribed pursuant to section 45(7)(b) of the Act and the Tariff on Scale 2.



Government of British Columbia