July 26, 1995, E.C.B. No.: 18/89/92 (57 L.C.R. 57)

 

Between: McPhail's Equipment Co. Ltd.
Claimant
And: City of Surrey
Respondent
Before: Jeanne Harvey, Chair*
Robert W. Shorthouse, Chair**
Michael R. Grover, AACI, Board Member
Appearances: Ralph A. May, for the Claimant
Robert W. Jacobs, for the Respondent

 * Jeanne Harvey did not participate in the reasons for decision.
** Robert W. Shorthouse heard this application in his capacity as Vice-Chair and prior to his appointment as Chair.

 

1. INTRODUCTION

The claimant seeks an order of the board fixing the compensation payable to it by the respondent City of Surrey (formerly The Corporation of the District of Surrey) as a result of the respondent's expropriation of a small portion of the claimant's lands for road access purposes. The expropriation in question occurred in 1980, and the board has previously decided that it has jurisdiction to hear and determine this claim and that the claim is not statute-barred (reported as McPhails Equipment Co. v. Surrey (District) (1990), 44 L.C.R. 173). Although the expropriating bylaw and the pleadings suggest that the partial taking was of a statutory right of way, the parties now agree that what was in fact expropriated was the claimant's unregistered fee simple interest.

The land expropriated comprised only .058 of one acre and the parties are agreed that its value at the time of taking on September 4, 1980 was $1,740. The primary issue which the board must determine is whether the expropriation reduced the value of any interest the claimant may have had in other land pursuant to s. 39 of the Expropriation Act, S.B.C. 1987, c. 23 (the "Act"). The claimant asserts that it had a compensable interest in other land and that there was a reduction in the value of that interest amounting to some $314,300. The respondent says that the claimant had no such compensable interest and that the claim is frivolous and vexatious in that it is based upon unverifiable assumptions, mere speculation and conjecture.

The focal point of the dispute between the parties is a garbage dump or landfill site located near the Port Mann Bridge (the "Surrey landfill") which has been operated by the respondent and the Greater Vancouver Regional District since at least the early 1970s. The Surrey landfill operation requires a continuous supply of cover material in the form of sand, gravel, clay and other fill (the "materials"). The claimant's land lies in close proximity to the Surrey landfill and the claimant says that, in the period from 1979 to 1983, it also had the legal right to extract such materials from neighbouring land and to sell them. But for the expropriation of a road access through the claimant's land, the claimant contends that the respondent would have found it necessary to purchase those materials to meet its requirements at the Surrey landfill. The respondent dismisses that contention and points to its ownership of a gravel pit commonly known as "Woodens Pit" adjacent to the claimant's land which it says was sufficient to meet its needs at all relevant times.

At the hearing of this claim, three witnesses were called. Mr. Terry J. McPhail, vice-president of the claimant, testified as to his personal knowledge of the claimant's dealings with and operations on the lands in question since the late 1970s. Mr. Danny R. Grant, a qualified land appraiser retained by the claimant, testified concerning his report filed with the board on June 10, 1994, estimating the value of the part taken and the loss in value to the claimant's remaining interests in the lands. Mr. Robert L. Dolphin, district engineer for Surrey from 1973 to 1984, testified on behalf of the respondent.

 

2. BACKGROUND

The relevant facts forming the background to this claim are somewhat complex and include matters predating the expropriation by several years. In setting them out below, the board has incorporated portions of a statement of agreed facts which the parties provided at the outset of the hearing.

2.1 The Subject Properties

Prior to 1974 and during all relevant times since then, the claimant owned lands in the Municipality of Surrey, British Columbia, described as:

Parcel 13 (Explanatory Plan 17277) of Section 10 Block 5 North Range 1 West EXCEPT part subdivided by Plan 30947 New Westminster District

(the "McPhail Lands")

From 1974 to 1978, the claimant also owned two other parcels of land in the Municipality of Surrey described as follows:

All that portion of Section 10 Block 5 North Range 1 West lying between Parcel "B" (Reference Plan 2131) and the West Boundary and its southerly production of Block "D", Plan 7564, EXCEPT Firstly: the South 33 feet; Secondly: Part subdivided by Plan 30947, New Westminster District

Block "D" of Section 10 Block 5 North Range 1 West Plan 7564 EXCEPT Part subdivided by Plan 30947 New Westminster District

In 1978 a company known as Farrell Estates Ltd. acquired these two parcels from the claimant and, more than a decade later, developed them into a residential subdivision (the "Farrell Lands").

Prior to 1974 and during all relevant times since then, the respondent owned lands in the Municipality of Surrey described as:

Section 9 Block 5 North Range 1 West save and except part subdivided by Plans 1718 and 1816 and except part shown on Plan 3379 NWD

(the "Surrey Lands", also known as "Woodens Pit").

The McPhail Lands, the Farrell Lands and the Surrey Lands or Woodens Pit are located within an area of Surrey known as Fraserview Heights. Viewed collectively, they are bounded by the Fraser River and Canadian National Railway Company ("CNR") yards to the north, the Municipality of Langley to the east, the Trans Canada Highway to the south and 152nd Street to the west. Until 1974, the McPhail Lands adjoined Woodens Pit on the east, north and west, and the only access which Woodens Pit had to any other properties not owned by the claimant or through any public road was to the south. Legal and practical access to the McPhail Lands, the Farrell Lands and Woodens Pit was off 112th Avenue in Surrey. From 112th Avenue vehicular traffic accessing any of these lands had to proceed along other municipal roads. The lands bordering these roads comprised residential properties.

2.2 The 1974 CNR Expropriation and Its Aftermath

In 1974 CNR, acting under federal legislation, expropriated northerly portions of each of the McPhail Lands, the Farrell Lands and Woodens Pit. One of the effects of this expropriation was that both Woodens Pit and the Surrey landfill then formed a common boundary with the CNR lands so that the respondent potentially had direct access from its own source of cover material to the Surrey landfill without having to travel upon any public roads. Whereas previously the circuitous route from Woodens Pit to the Surrey landfill by public road was in excess of seven kilometres, the 1974 expropriation opened up the possibility of a direct route across the CNR lands of some two kilometres in distance. The respondent entered into negotiations with CNR to obtain access for that purpose in late 1978, but the parties did not conclude an agreement until April of 1979.

Another consequence of the 1974 expropriation was protracted litigation between the claimant and CNR in the Federal Court of Canada involving the compensation which was to be paid to the claimant. On January 24, 1979, the parties entered into an agreement which settled all outstanding issues between them arising out of the expropriation (the "McPhail's settlement agreement").

Two provisions of the McPhail's settlement agreement are highly relevant to these proceedings. The first is a clause (paragraph 4 of that agreement) which gave the claimant certain limited rights on the lands expropriated from it by CNR. The terms are sufficiently important to warrant setting them out in some detail. Paragraph 4 states in part:

"4. CNR agrees that McPhails is entitled to take and remove all natural material in situ on the lands expropriated from McPhails, on the following terms and conditions:

(a) The material is to be removed according to reasonable lines and grades to be set out in plans to be prepared by CNR and delivered to McPhails within seven days of the date of execution of this agreement;

(b) McPhails will have four years from the date of the execution of this agreement to remove the materials and can remove such portions of the materials from time to time and in such amounts as it sees fit;

(c) McPhail's right to remove material in situ shall expire four years from the date of the execution of this agreement;

(d) CNR agrees to allow McPhail access from the public road systems immediately west of the Port Mann Bridge to the west-end of the expropriated land. The location of the roadway over the expropriated land will be staked on the ground and has been delineated on a plan which has been supplied to McPhail by the CNR. …

(e) McPhails will be responsible for obtaining any necessary approvals from governmental authorities and paying any applicable royalties;

(f) McPhails will pay all costs of removal of the materials except that all costs of preparing any necessary plans, specifications, directions or otherwise incurred by the CNR will be paid by the CNR."

Notwithstanding subparagraph 4 (a), it was only in October of 1979 that CNR actually provided to the claimant the detailed written specifications for removal of the materials. These written specifications indicate that the claimant was entitled to remove a total of 449,037 cubic yards of the materials from the CNR lands.

Under the second relevant provision (paragraph 5 of that agreement), CNR agreed to convey to the claimant a 66 foot wide strip of land (the "66 foot parcel") along the northern boundary of Woodens Pit in order to connect and provide reasonable access between the McPhail Lands to the west and the McPhail Lands and the Farrell Lands to the east of Woodens Pit. From the date of execution of the McPhail's settlement agreement, the claimant was permitted to make full use of the 66 foot parcel and to remove materials from it. The claimant agreed to consolidate the 66 foot parcel with title to its existing land but, as of the date of expropriation in 1980, had not registered its interest in the land title office. One notable effect of this agreed arrangement between CNR and the claimant was to remove the common boundary previously existing between Woodens Pit and the CNR lands.

Unaware of the existence of the McPhail's settlement agreement, the respondent entered into a lease with CNR on April 1, 1979. The term of the lease was for one year ending March 31, 1980 but it automatically renewed from year to year thereafter until terminated by one of the parties. The lease continued in effect until September 14, 1988 when its terms were varied by and incorporated into a settlement agreement in respect of a subsequent expropriation by CNR in 1983. The lease gave the respondent the right on specified terms to use a roadway on the CNR lands for hauling gravel. The respondent constructed its own haul road to connect with the CNR roadway and, shortly after executing the lease, began hauling materials along it from Woodens Pit for deposit at the Surrey landfill.

2.3 The Respondent's 1980 Expropriation and Its Aftermath

The respondent's determination to use Woodens Pit as a source of cover material for the Surrey landfill led directly to the expropriation which is the subject of this claim. The haul route utilized by the respondent after April of 1979 necessarily traversed the 66 foot parcel which the claimant had acquired some months earlier. On June 2, 1980, the claimant gave written notice to the respondent that its trucks were trespassing on the McPhail Lands and demanded that it cease doing so. A few weeks later the claimant physically blocked the haul road. The respondent, having been apprised of the terms of the McPhail's settlement agreement, ceased its hauling operations. It also recognized that the terms of that agreement posed a serious problem in preventing access from Woodens Pit to the Surrey landfill through the CNR lands. An internal memorandum from the respondent's land agent dated July 4, 1980 reveals that expropriation of a right of way through the claimant's lands to accommodate the haul route was already in contemplation.

In August, 1980, the respondent initiated expropriation proceedings pursuant to s. 578 of the Municipal Act, R.S.B.C. 1979, c. 290, which authorizes a municipality, by by-law, to expropriate land for road access purposes. The "McPhail Right-of-Way Expropriation By-law, 1980, No. 6340" was finally adopted on August 11, 1980, published in the prescribed manner, and deposited in the New Westminster Land Title Office on August 25, 1980. A notice of expropriation dated August 26, 1980 was served on the claimant. On September 4, 1980 the respondent took possession of the expropriated portions comprising in total some 236.1 sq. metres of the McPhail Lands.

A dispute over compensation has continued since that time. Approximately one year after the expropriation, the claimant commenced an action for trespass and damages for injurious affection in the Supreme Court of British Columbia. On May 31, 1989, it filed an application for determination of compensation with the board under the Act. The application claimed the market value of the expropriated land as well as damages for injurious affection, costs and interest. An amended application was filed on June 17, 1994 in which the claimant recast its claim by seeking compensation for the reduction in market value to the remaining land as well as reasonable business losses. At the outset of the hearing on July 4, 1994, the claimant further amended its application by specifying that it held a particular interest in those lands owned by CNR which previously had been owned by the claimant. At the same time the claimant abandoned its claim for business loss.

 

3. ISSUES

The parties having already resolved the question of the market value of the land taken, the board is left to determine the following principal issues in this matter:

1. or the purposes of the Act, does the claimant have an interest in the CNR lands pursuant to the McPhail's settlement agreement?

2. If the answer to the first question is "yes", is the claimant entitled to compensation for any reduction in market value to that interest pursuant to the Act?

3. If the answer to the second question is "yes", what was the market value of the claimant's interest and in what amount, if any, was it reduced as a result of the respondent's expropriation?

 

4. DISCUSSION AND ANALYSIS

4.1 Nature of the Claimant's Interest

In order to maintain a claim for compensation before the board, a claimant must first be able to establish itself as an "owner" under the Act. Section 1 of the Act defines those persons who qualify as owners. Germane to this matter is that portion of the definition which states in part:

"owner", in relation to land, means

(a) a person having an estate, interest, right or title in or to the land …

Under the McPhail's settlement agreement, the claimant was "entitled to take and remove all natural material in situ on the lands" expropriated by CNR from the claimant for a specified period of time. The claimant submits that this entitlement conferred upon it an interest in the CNR lands in the nature of a profit a prendre. The respondent is less categorical. It acknowledges that the claimant's extraction rights under that agreement may have amounted to a profit a prendre but suggests that, equally, they may have conferred no more than a non-exclusive licence.

The characteristics of a profit a prendre have been described in Cherry v. Petch et al., [1948] O.W.N. 378 (Ont. H.C.J.). In that case the plaintiff had been granted the right to remove gas, petroleum and other "petroliferous" products from certain lands but was subsequently obstructed from doing so by the defendant fee simple owner of those lands. The court found that the plaintiff enjoyed a real interest in the lands which it described as a profit a prendre in gross. At p. 380 of the judgment, Wells J. said this:

It has been said that a profit a prendre is a right to take something off the land of another person. It may be more fully defined as a right to enter on the land of another person and take some of the profit of the soil such as minerals, oil, stones, trees, turf, fish or game, for the use of the owner of the right. It is an incorporeal hereditament, and unlike an easement it is not necessarily appurtenant to a dominant tenement but may be held as a right in gross, and as such may be assigned and dealt with as a valuable interest according to the ordinary rules of property. It is in effect a grant of the ownership of such portions of the land as are conveyed.

The claimant also referred the board to the judgment of the Appeal Division of the Nova Scotia Supreme Court in Atlantic Concrete Ltd. v. LeVatte Construction Co. Ltd. (1975), 62 D.L.R. (3d) 663, which discusses at length the rights existing under a profit a prendre. In that case the plaintiff enjoyed the right to extract stone from a quarry under an agreement. The plaintiff extracted some stone but left most of it lying in place on the floor of the quarry. When the fee simple owner later purported to give the defendant the right to remove the stone in situ, the plaintiff asserted ownership in it. The central issues before the court were whether the stone still lying in place had become the property of the plaintiff and whether the agreement permitting its extraction was a sale of goods or a profit a prendre. The majority of the court held that stone extracted from the ground under the agreement became the property of the plaintiff at the moment of its severance from the soil, not at the time of its removal from the land. Cooper J.A. also said as follows at p. 689:

I do not find here any contract for the sale of goods, but rather an agreement conferring an interest in land, namely a profit a prendre. … The subject-matter of the agreement is an interest in land not goods.

As to the fact that the claimant's right to remove natural materials from the CNR lands was for a specified period of time only, namely four years, the claimant cites the following passage from the British Columbia Real Estate Law Guide (North York: CCH Canadian Limited, 1989), vol. 1, at p. 1052:

Being an interest in land, a profit may be created by statute, grant or reservation. It may be in perpetuity or for any lesser period.

The respondent's suggestion that the board can construe the relevant terms of the McPhail's settlement agreement as granting a licence rather than a profit a prendre, if accepted, might have serious consequences for the claimant since the board has already determined that a licence does not confer an interest or estate in land: see Read Marketing Inc. v. British Columbia (Minister of Transportation and Highways), E.C.B. No. 19/92/87, an unreported decision dated April 5, 1995. However, the respondent offered no evidence or case authority to support such a finding in this instance.

There is also, in the board's view, little or no force to the respondent's argument, even if accepted, that the claimant's right to remove materials from the CNR lands under the McPhail's settlement agreement was non-exclusive and that CNR was also in a position to extract those materials if it chose to do so. The respondent appeared to accept the claimant's contention that a profit a prendre need not confer an exclusive right. That contention is well supported in law as evidenced by the judgment in the Cherry case where the court recited as follows at pp. 381-2:

In the decision of the Court of Appeal in Duke of Sutherland v. Heathcote, [1892] 1 c. 475, Lindley L.J., delivering the judgment of the Court, said at pp. 484-5: "A profit a prendre is a right to take something off another person's land; such a right does not prevent the owner from taking the same sort of thing from off his own land; the first right may limit, but does not exclude, the second. An exclusive right to all the profit of a particular kind can, no doubt, be granted; but such a right cannot be inferred from language which is not clear and explicit."

Accordingly, upon its review of the McPhail's settlement agreement in light of the applicable law, the board concludes that the claimant did have a legal interest in the CNR lands known as a profit a prendre and, as such, is an owner pursuant to subsection (a) of the definition of "owner" under the Act.

4.2 The Claimant's Entitlement to Compensation

As an owner, a claimant's right to compensation flows from particular provisions of the Act. Section 29 (1) provides:

29. (1) Where land is expropriated, every owner of the land is entitled to compensation, to be determined in accordance with this Act.

The basic formula for compensation relevant to this matter is set out in s. 30 (1) which reads in part as follows:

30. (1) The board shall award compensation to an owner for his estate or interest in the expropriated land for the market value of that estate or interest plus reasonable damages for disturbance. …

The subject expropriation was a partial taking of the 66 foot parcel conveyed to the claimant by CNR under the McPhail's settlement agreement and, accordingly, s. 39 of the Act which governs partial takings applies. The following subsections have particular relevance:

39. (1) Subject to section 43, where part of the land of an owner is expropriated, he is entitled to compensation for

(a) the reduction in market value to the remaining land, and

(b) reasonable personal and business losses

that are attributable to the taking or that result from the construction or use of the works for which the land is acquired.

. . .

(6) For the purposes of this section, expropriation of part of the land of an owner occurs only where

(a) he retains land contiguous to the expropriated land, or

(b) he owns land close to the land that was expropriated, the value of which was enhanced by unified ownership with the land expropriated.

The respondent submits that the board ought to interpret the words "the remaining land" in s. 39 (1) to mean the remaining portion of the legal parcel of land actually expropriated. In this instance the claimant's claim is in relation to its interest in the CNR lands which the respondent says is not a compensable interest under s. 39 (1). The board has difficulty in accepting so restrictive an interpretation as that proposed by the respondent but, even if it were to do so, the claimant's entitlement nevertheless depends upon the further considerations raised in s. 39 (6).

With respect to s. 39 (6), the respondent says that insufficient evidence, in the form of maps or legal descriptions, was adduced to show that the CNR lands in which the claimant had an interest were either contiguous to the expropriated land or that they were close to and enhanced in value by them.

The evidence of Mr. Grant, the claimant's appraiser, was contrary to the respondent's contentions. He referred to explanatory plans entered as exhibits during the hearing as well as to a site plan within his own report showing that the lands in question were contiguous, ie. physically touching one another. Although the board was not provided with a plan outlining the precise boundaries within which the claimant was entitled to extract materials in situ from the CNR lands, Mr. Grant expressed the belief that such plans had been prepared and that they would have shown sufficient proximity to bring this case within s. 39 (6). He referred to an exhibited letter dated October 9, 1979 in which the solicitors for CNR purported to provide to the claimants cross-sections and plans and set out specifications for the removal of the materials by reference to those cross-sections. Mr. Grant also opined that the value of the claimant's interest in the CNR lands had been enhanced by unified ownership with the land expropriated. It was, in his view, the claimant's ownership of the 66 foot parcel, obstructing direct access from Woodens Pit to the Surrey landfill, which gave market value in the form of a competitive advantage to the claimant's profit a prendre over the materials on the CNR lands.

The claimant also entered in evidence a report dated June 3, 1994, prepared by Mr. A.E. Dahlman, P.Eng., of HBT AGRA Limited, an engineering and environmental services firm (the "Dahlman Report"). The Dahlman Report contains a topographic map coloured in such a way as to show the respective areas of the McPhail Lands including the 66 foot parcel, the Farrell Lands and the CNR lands. The map clearly depicts the CNR lands as being contiguous to the land expropriated from the claimant by the respondent.

The respondent did not offer evidence to demonstrate that the lands in question were not contiguous and the board, upon its review of the matter, is satisfied that they were. If the board is mistaken in its conclusion that the remaining land was contiguous to the expropriated land, it nevertheless is of the view that the claimant's interest in the CNR lands was enhanced in value by unified ownership with the land expropriated. Accordingly, in either case, the claimant is entitled to compensation pursuant to s. 39 for any reduction in market value to the remaining land that was directly attributable to the taking or that resulted from the construction or use of the works for which the land was acquired.

To say that the claimant is so entitled is, of course, to beg the questions of whether the claimant's profit a prendre actually had a market value and, if so, whether that value was reduced as a direct result of the respondent's actions. These are issues better addressed within the context of the board's valuation of the claim. However, it is useful at this point to note the claimant's position that the materials which it was entitled to extract under the McPhail's settlement agreement had value only to the extent that they could be sold to the respondent and that, as a result of the respondent's use of the expropriated lands to access its own materials at Woodens Pit, the claimant's profit a prendre became worthless. It is an agreed fact that the sole purpose and effect of the subject expropriation was to give the respondent just such access. Therefore, to the extent that the claimant is able to prove that the alleged reduction in market value was directly attributable to the respondent's use of the expropriated lands, the claimant will have met all of the requirements entitling it to compensation under s. 39 of the Act.

4.3 Valuation of the Claim

The board must determine the market value of the claimant's profit a prendre by reference to s. 31 of the Act, which states:

31. The market value of an estate or interest in land is the amount that would have been paid for it if it had been sold at the date of expropriation in the open market by a willing seller to a willing buyer.

In this instance the board considers that several factors enter into the determination of market value: the suitability of the materials for use as fill or otherwise, the accessibility to alternative markets for the materials, and the respondent's availability as a potential purchaser of those materials.

4.3.1 Positions of the Parties

The claimant acknowledges that, with insignificant exceptions, it never succeeded either before or after the respondent's expropriation in marketing any of the materials which it was entitled to extract from the CNR lands. The claimant says that it was frustrated in its efforts to find purchasers other than the respondent by the respondent's imposition of soil removal restrictions and charges, the cost of constructing a haul road, the distance to alternative markets, and the limited suitability of the materials themselves. Nevertheless, the claimant maintains that the materials had a potential value which was lost through expropriation. It says the materials were particularly suitable for landfill purposes, that the respondent needed such materials for those purposes and that, until expropriation, the claimant enjoyed a competitive advantage in respect of those materials which would have compelled the respondent, acting prudently, to acquire them. On a pre-paid bulk purchase basis, the claimant says the respondent would have acquired all 449,037 cubic yards of the materials at $0.70 per cubic yard for a total cost rounded to $314,300.

The respondent questions whether there ever was a market for the materials on the CNR lands. Respondent's counsel analogized the situation to that of a gold mine in a remote location where, absent a substantial increase in the market price for gold, the cost of extraction would make uneconomic the development of distant markets. The respondent brands as pure speculation and conjecture the claimant's contention that, but for the expropriation, the respondent itself would have entered into a contract to purchase the claimant's materials. The fact is that neither before nor after the expropriation did the respondent ever purchase materials from the claimant. The respondent points out that it had been hauling materials to the Surrey landfill from other sources of supply for many years prior to 1980 and that, with access to Woodens Pit, it simply had no need for the claimant's materials. According to the respondent, it was precisely in order to be able to act in the public interest, in this instance by more directly accessing its own source of supply, that the respondent enjoyed the power of expropriation. The exercise of that power in this instance through a partial taking, says the respondent, did not interfere with rights enjoyed by the claimant under the McPhail's settlement agreement to deal with the materials as it saw fit. In the respondent's submission it is highly significant that the claimant, during roughly the year and a half intervening between the date of the McPhail's settlement agreement and the date of expropriation, did not remove any of the materials and did not attempt to negotiate with the respondent for their purchase and sale.

4.3.2 Suitability of the Materials

The board received evidence concerning the soil composition of the materials in and around both Woodens Pit and on the CNR lands. The thrust of that evidence was to the effect that the materials at both locations were suitable as landfill cover but had limited other use.

Mr. Terry McPhail, who for many years had been involved in the claimant's sand and gravel operations and was knowledgeable about soil conditions, described the materials on the McPhail Lands and the Farrell Lands as comprising a heavy component of "silty sand". He testified that those materials would not meet the specifications for many construction jobs. It was partly for that reason, he said, that the claimant had been unable to conclude a supply agreement with outside contractors.

Mr. Robert Dolphin, the respondent's engineer responsible for Woodens Pit during the relevant years, further testified that the materials there were generally unsatisfactory for construction purposes but were ideal as cover for the Surrey landfill. He went on to describe how portions of Woodens Pit contained clay deposits which were useful in providing a final cap on the landfill.

The foregoing evidence raises the question of the degree to which the materials on the neighbouring CNR lands possessed similar soil characteristics to those at Woodens Pit giving them an equivalent potential value as fill. Mr. McPhail testified that in his view the characteristics were the same. The claimant also referred to the Dahlman Report, the purpose of which was to offer an opinion as to soil conditions on the CNR lands in question. Mr. Dahlman's firm had carried out geotechnical studies and reviewed maps, reports and borehole and test pit logs on adjacent sites from which the Dahlman Report concluded as follows:

… it is our opinion that the stratigraphic sequence in this study area is reasonably consistent. Soil conditions prevalent in the lower elevation portions of the Woodens Pit would be expected to be similar to those in the area coloured yellow adjacent [the CNR lands], and to the east of, Woodens Pit. The quality and nature of the soil deposits with regard to extraction and use off site would be expected to be similar within similar elevation ranges in the Woodens Pit and the adjacent property in question.

The claimant did not call Mr. Dahlman to give oral evidence in connection with his report and the respondent did not seek to cross-examine him. Except in respect of clay deposits at Woodens Pit, which may or may not have been present in any quantity on the CNR lands, the respondent offered no evidence which cast in doubt the reliability of the conclusions drawn in the Dahlman Report. In any case, the Dahlman Report does refer to "clayey silt" in the higher elevations of the Farrell Lands and suggests that "silt and clay lenses and layers" would become more prominent in the lower elevations of the CNR lands.

From its review of the evidence, the board concludes that the materials which were the subject of the profit a prendre under the McPhail's settlement agreement were reasonably consistent with and best suited for the same purpose as the materials at Woodens Pit, that is, as cover at the Surrey landfill. As such, in the board's view, they had a similar potential value.

4.3.3 Accessibility to Alternative Markets

The claimant gave evidence that, in the period between 1979 and 1983 when it held the profit a prendre, it made some efforts to market the materials on the CNR lands to potential customers other than the respondent but was never able to conclude a deal. Those efforts were frustrated, says the claimant, not only by the limited suitability of the materials for particular purposes as discussed above as well as the distance to market, but also by the restrictions on hauling imposed by the respondent during that time.

The evidence shows that, since the 1950s, the claimant had from time to time carried on a sand and gravel business from a pit located on the McPhail Lands pursuant to soil removal permits issued by the respondent. The claimant moved its materials out along 112th Avenue. However, under mounting complaints about truck traffic from residents of the rapidly growing neighbourhood, the respondent in 1976 amended its bylaws to require all future soil removal operations to be placed under land use contracts. When the claimant's soil removal permits expired in November 1976 and April 1977, the respondent declined to renew them. The claimant closed its gravel pit. Terry McPhail, who was charged with the responsibility of trying to find a market for its materials from 1977 through 1984, testified that the claimant was dissuaded by the complexities involved from pursuing an application for a land use contract. Further efforts by the claimant to obtain soil removal permits also met with no success.

In the spring of 1980, the claimant sought approval by way of an extraordinary use permit to remove the materials on the CNR lands. In a report to council dated June 2, 1980, the respondent's municipal engineer noted the high volume of truck traffic along municipal roads through residential neighbourhoods that such material hauling would require. The engineering department, he said, was not prepared to entertain any such hauling without a policy decision from council but, subject to council's direction, was prepared to work with the claimant in developing the details of an extraordinary use permit for haul routes, the timing of the hauling, and bonding conditions. Terry McPhail's evidence before the board was that, even if an extraordinary use permit could have been negotiated, the respondent would have required the claimant to post a bond on the order of $150,000 against possible injury to the municipal roads, a cost which he considered uneconomic in the circumstances.

Also uneconomic, according to the claimant, was the necessary cost of constructing its own haul road on the CNR lands to highway truck standard in order to move the materials out to more distant markets by linking up with the respondent's perimeter road system. Although the claimant evidently spent some monies on culverting, it never did actually construct a haul road. Terry McPhail testified that he had made some inquiries of contractors about the probable cost to build the road but had not obtained any firm prices. It was his understanding from those inquiries, however, that the cost would have been in the range of $50,000 to $75,000.

The board is persuaded that the claimant was serious about wishing to sell the materials on the CNR lands but that formidable obstacles lay in the path of overcoming the municipal restrictions and meeting the infrastructure costs in order to access alternative markets. In all of the circumstances, the board concludes that the respondent was the claimant's best and probably its only viable potential customer for the materials.

4.3.4 The Respondent as Potential Purchaser

The board must next consider how to treat a situation in which essentially the only value to the claimant of the materials on the CNR lands lay in their possible purchase by the expropriating authority and in which the authority's expropriation had the direct effect of eliminating that potential value. To place these questions in the proper context, it is necessary first to say something further about the respondent's landfill and soil removal operations.

The Surrey landfill commenced operation some time prior to 1974. It has operated continuously ever since. In 1979, at about the time the claimant entered into the McPhail's settlement agreement, the respondent estimated that the Surrey landfill would continue to be used for about six or seven more years. The landfill required cover material virtually on a daily basis. During the years from 1981 to 1983, for example, the volume of material used was approximately 2,500 cubic yards per week.

The respondent met the landfill cover requirements from various sources. Although it owned Woodens Pit from as early as 1965, the respondent until the mid-seventies relied upon another site, known as Stokes Pit, as its primary source of materials. According to Mr. Dolphin, Stokes Pit contained high quality materials but had the disadvantage of being located 20 miles distant from the Surrey landfill so that hauling costs were high. After about 1975 the respondent began to use Woodens Pit as a more regular source of cover material for the Surrey landfill. It seems clear that Woodens Pit had the potential to supply all of the respondent's requirements for cover material during the whole of the period during which the claimant held its profit a prendre and beyond. It was not until a later period that the respondent made inquiries of the claimant and others about alternative sources of supply in case the materials at Woodens Pit ran out. Even then, the respondent ultimately calculated that its own supply at Woodens Pit would be sufficient for the life of the Surrey landfill and made no outside purchases.

While Woodens Pit was a nearby and seemingly ample source of cover material, its difficulty lay in the lack of direct legal access to the Surrey landfill across the CNR lands. The respondent was forced to haul its materials from Woodens Pit out along 112th Avenue and other municipal roads and soon faced the protests of local residents. Mr. Grant, at p. 40 of his report, has carefully estimated the hauling distance each way by this route at 4.38 miles (7.05 km.). For a time after entering into the lease with CNR, the respondent thought it had resolved the difficulty. Once the claimant blocked access to the respondent across the 66 foot parcel, however, the respondent was potentially placed at a competitive disadvantage. Mr. Grant has summarized at p. 34 of his report the situation as it existed in the summer of 1980 as follows:

Just prior to expropriation, McPhail's Equipment could deliver materials to the landfill and beyond via the haul road; Surrey could not. Surrey could haul materials to the landfill via 112th, but had precluded itself and McPhail's Equipment from doing so economically and politically. This former 112th Street route was more costly because of the hills, cost of clean up, public opposition and by reason of hauling distance.

Although the respondent remedied its access dilemma through expropriation and was therefore not faced with having to consider purchasing the claimant's materials, the question which now arises is whether, for the purposes of the Act, the respondent is nonetheless to be treated as though it were a willing buyer of those materials in the open market.

The claimant cites several cases in support of its position that the value of an interest in land created solely through the possibility of a sale to an expropriating authority is compensable. In Sri Raja Vyricherla Narayana Gajapatiraju Bahadur Garu v. Revenue Divisional Officer, Vizagapatam, [1939] 2 All E.L.R. 317 (P.C.) (commonly referred to as the Indian Case), the authority, in the course of securing a safe supply of fresh water for its harbour development, expropriated a fresh water lake and spring located above the harbour. The expropriated owner claimed the value of the spring and lake. It was established that the taking authority was their only possible purchaser. Lord Romer stated at p. 328:

… their Lordships have come to the conclusion that, even where the only possible purchaser of the land's potentiality is the authority which has obtained the compulsory powers, the arbitrator, in awarding compensation, must ascertain to the best of his ability, the price which would be paid by a willing purchaser to a willing vendor of the land with its potentiality in the same way that he would ascertain it in a case where there are several possible purchasers …

Lord Romer went on to point out that the valuation was to be performed on the assumption that neither of the parties acted under undue compulsion. At p. 332 of the decision, he continued:

In the present case, the land must be valued, not at the sum which it would be worth after it had been acquired by the harbour authority and used for anti-malarial purposes, but at the sum which the authority "in a friendly negotiation" (to use the words of Lord Johnston) would be willing to pay on [the date of expropriation] in order to acquire it for those purposes.

The case of Fraser v. The Queen (1963), 40 D.L.R. (2d) 707 (S.C.C.) arose out of the construction of the causeway linking Cape Breton Island to the mainland of Nova Scotia. The facts bear repeating. The respondent Government of Canada expropriated barren land owned by the appellant located close to the site of the proposed causeway and offered to compensate the owner only for the bare value of the land at some $50 per acre. At the date of expropriation it was already known that the causeway was to be built, that approximately 9 million tons of rock would be required as material to be used in its construction, that rock admirably suited to this purpose and in excess of the amount required was contained in the appellant's land, that its location was such that the costs of quarrying and transportation would be less than in the case of any rock in other locations, and that although other possible sources of supply existed, because of their location none would be equally economical. The respondent acquired the lands solely for the purpose of obtaining a suitable supply of rock. The appellant sought to be compensated for the market value of that rock in situ which he valued at $450,000. The facts established that, apart from the requirements for the causeway, there was no probability of the appellant selling any substantial quantity of his rock in the foreseeable future. The respondent maintained that the value of the material accordingly had only been created by its causeway project and therefore, on case authority, the appellant was not entitled to be paid for it.

The Supreme Court of Canada rejected the respondent's contention and distinguished its authorities. In delivering the majority opinion, Ritchie J. adopted the reasoning of Lord Romer in the Indian Case and said at p 722:

None of these cases is, in my opinion, authority for the proposition that a hitherto undeveloped potentiality of expropriated property is to be entirely disregarded in fixing the value of that property for compensation purposes on the ground that the expropriating authority is the only present market for such potentiality and that it has developed a scheme which involves its use.

Cartwright J., concurring with the majority judgment, also commented as follows at p. 711:

In relation to a case such as the one before us where what is expropriated is really building material rather than land, the principle underlying the decisions relied on by the respondent (other than that in the Vezina case) appears to me to be that the owner of property taken for the public use shall not receive a price inflated beyond its market value because of the necessities of the scheme for the carrying out of which it is required, not that the owner shall be compelled to take less than the market price which would be paid by any willing purchaser who wanted the material and to whom competitive sources of supply were available.

The claimant also refers the board to the case of Agnew v. Minister of Highways for the Province of Ontario, [1961] O.R. 234 (C.A.), which was cited with approval in the Fraser case. There the owner's lands, situated close to an anticipated extension of a public highway, contained gravel deposits of a type and quality generally required in the construction of highways. The highway authority expropriated the lands before the route of the highway extension had been set. The owner claimed compensation for the value of the gravel in situ which he said became enhanced because construction of the highway would provide a new nearby and ready market for the material. The expropriating authority argued that the material would have had no value had it not been taken for the highway project. The Court of Appeal concluded that the owner was entitled to be compensated for the lands taken from him on the basis of all its potentialities and that its valuation must be made as though the power of taking had not yet been exercised. In commenting upon the impact of the power of expropriation, Roach J.A. at p. 239 quoted the following passage from p. 326 of the Indian Case:

The valuation must always be made as though no such powers had been acquired, and the only use that can be made of the scheme is as evidence that the acquiring authority can properly be regarded as possible purchasers.

The foregoing cases stand for the proposition that compensation is to be awarded to an owner for the value of the land taken with all of its potentialities even where such value would not have existed but for the particular project for which the land was acquired. The fact that the expropriating authority is the only potential purchaser does not alter the basis of the valuation to be performed.

However, those cases must also be viewed in the light of statutory provisions enacted in British Columbia and elsewhere which arguably limit their effect. In particular, s. 32 (a) of the Act states:

32. In determining the market value of land, no account shall be taken of

(a) the anticipated or actual purpose for which the expropriating authority intends to use the land,

As claimant's counsel, Mr. May, points out, it is difficult to see how this provision was intended to be applicable to a partial taking where the board is expressly directed to consider the expropriating authority's use of the works for which it acquired the land in determining compensation for reduction in market value to the remainder.

Furthermore, the present case varies from those discussed above in that, in those other cases, it was to acquire the particular attributes of the lands (fresh water, rock, gravel) that the authorities expropriated them, whereas in this instance it was to gain access to competitive cover material that the respondent took a portion of the claimant's lands. Whereas the authorities' intended use of those other lands gave value to them which they would not otherwise have possessed, in this case the respondent's use of the expropriated portion to access Woodens Pit had the effect of rendering essentially worthless the materials on the CNR lands which, prior to expropriation, already had a potential value by way of sale to the respondent.

A second proposition which can be drawn from the above-cited cases is that the valuation at the date of taking is to be the value determined in the open market between a willing buyer and a willing seller who have entered into "friendly negotiations" and where the willing buyer is deemed not to have the power of expropriation.

Respondent's counsel submits that his client, having been vested with the power of expropriation in the public interest, used it in good faith and, as a result, had no need to purchase any materials from the claimant. The board accepts that the respondent's actions were a legitimate and prudent use of its powers in the circumstances. There is some internal evidence to suggest that, by its own estimate at a later date, the respondent could benefit to the extent of $1.8 million by continuing to excavate materials from Woodens Pit and delivering them to the Surrey landfill. What the board cannot accept is the respondent's position that the good faith use of those expropriation powers ought somehow to act as a bar to compensation where that use has resulted in a reduction in value to the claimant's remaining interest in land. The three cases cited by the claimant are contrary to any such contention. Furthermore, s. 32 (e) of the Act enshrines the principle that the power of expropriation is to be ignored when valuing a claim. It provides:

32. In determining the market value of land, no account shall be taken of

. . .

(e) an increase or decrease in the value of the land resulting from any expropriation or prospect of expropriation,

In other words, the valuation is to be based upon what the parties, constituted as willing buyer and willing seller, would have prudently done had there been no power of expropriation.

Respondent's counsel argues that, even ignoring his client's power of expropriation, the claimant's claim remains too remote and speculative. At best, he says, the notion of the respondent entering into a contract with the claimant for the purchase of materials can be regarded as no greater than a mere possibility. Mr. Jacobs notes that the respondent could have exercised other options, as in the past, to obtain the cover material it required, whether by hauling from alternative more distant sites or by using once again the more circuitous route along municipal roads. He points out that the claimant had established no active soil removal business or laid the groundwork for doing so from the CNR lands. He cites several case authorities for the proposition that, where no active business has been created prior to expropriation, claims for business loss have been dismissed, namely, in Neulieb et al. v. Minister of Highways for the Province of Nova Scotia (1978), 14 L.C.R. 373 (N.S.E.C.B.), Calvary Temple First Pentecostal Church of Kamloops v. Kamloops (City) (1988), 41 L.C.R. 55 (B.C. Arbit.), and St. Pierre et al. v. East Parry Sound Board of Education (1977), 13 L.C.R. 184 (Ont. L.C.B.). The respondent contends that a claim based in this instance on the reduction in market value to the remaining land is on the same footing.

In the board's view, the facts of this matter support a finding that the claimant's claim for the loss of potential value of its interest in the profit a prendre is not too remote or speculative. On the contrary, the board concludes that, but for the respondent's exercise of its power of expropriation, the respondent would likely have been forced to reach some financial accommodation with the claimant to obtain either the desired access to Woodens Pit or the claimant's own materials. The possibility that the respondent would not have entered into a contract with the claimant but would have pursued other options instead constitutes, in the board's opinion, an element of risk that figures in the final valuation of the claim. However, the board is persuaded that, considering both the political and economic costs to the respondent of pursuing those alternatives, that risk was not high. The decisions in the Indian Case, Fraser, and Agnew are persuasive against any view that an owner, to found a claim for reduction in value to the remaining land, must have been in the business of actively exploiting its potential for financial gain prior to expropriation.

4.3.5 Calculation of the Reduction in Market Value

Having determined, pursuant to s. 39 (1), that there was a reduction in market value of the claimant's interest in the remaining land, namely in the materials in situ on the CNR lands, resulting from the respondent's use of the works for which the expropriated land was acquired, it remains for the board to place a value on the materials the potential sale of which was lost.

The evidence as to market value placed before the board is at once diverse and fragmentary. It spans the period from the mid-1970s to the mid-eighties. Little of it is contemporaneous with the agreed date of taking on September 4, 1980 from which date the valuation is to be determined. The available evidence has to do with actual or proposed prices for or costs of the materials existing on either the McPhail Lands, the Farrell Lands, or Woodens Pit.

Chronologically, the evidence may be usefully summarized as follows:

(1) During the mid-1970s, the claimant maintained a price list for sand offered for sale from its gravel pit on the McPhail Lands. Prices ranged from $1.50 downward to $1.30 per cubic yard with volume discounts.

(2) In 1977, the respondent, internally assessing the economics of using fill material from Woodens Pit for municipal purposes including the Surrey landfill operation, indicated that its loading cost was $0.30 per cubic yard and its hauling cost some $1.30 per cubic yard. This made material from Woodens Pit less than half as expensive as the next available source.

(3) On August 25, 1979, as part of a settlement of outstanding debts arising from the sale of the Farrell Lands by the claimant to Farrell Estates Ltd. during the previous year, the claimant agreed to purchase 600,000 cubic yards of sand located on the Farrell Lands at the price of $0.70 per cubic yard. The agreement was contingent upon Farrell Estates Ltd. providing a soil removal permit within a year, which ultimately it proved unable to do.

(4) In May of 1983, the respondent indicated that it was prepared to sell clay fill from Woodens Pit to certain contractors performing work in the vicinity of the Port Mann Bridge at the price of $2.00 per cubic yard delivered. Other evidence before the board indicates that hauling costs at the time were in the range of $1.25 to $1.50 per cubic yard, yielding a net price for the materials of between $0.50 and $0.75 per cubic yard.

(5) In January of 1984, a construction company offered to purchase from Farrell Estates Ltd. some 400,000 cubic metres of sand and gravel at the price of $2.00 per cubic metre ($1.53 per cubic yard). This was evidently also a delivered price since Mr. Terry McPhail, one of the principals of Farrell Estates Ltd., testified that the overhead costs of constructing a haul road and of obtaining permits and bonding contributed to defeating the deal.

(6) An appraisal report prepared in 1984 by Mr. Grant in connection with a further CNR expropriation and referred to in his report currently before the board considered estimates and offers for materials located on the McPhail Lands and the Farrell Lands which ranged from $0.76 per cubic yard to $1.53 per cubic yard.

(7) In June of 1986, the respondent considered, but rejected, the recommendation of its municipal engineer to purchase from Farrell Estates Ltd. some 150,000 cubic yards of cover material for the Surrey landfill at $1.00 per cubic yard. At the time the respondent was notionally selling the materials at Woodens Pit to the Surrey landfill and recording the sale of materials as a book entry at $0.50 per cubic yard according to the municipal manager and $0.65 per cubic yard according to the municipal engineer.

(8) The respondent's municipal engineer, in a report dated January 21, 1987, posited an assumption that the materials coming from Woodens Pit had a fair market value of $3.00 per cubic yard. However, this observation must be set against other evidence within the report which indicates that the cover material cost at Woodens Pit was some $0.80 per cubic yard, with the cost of haulage bringing the total cost to $2.00 per cubic yard.

The indicators of market value range widely. At p. 52 of his report, Mr. Grant, who reviewed much of the above-recited evidence, states:

The prices range from .70¢ per cubic yard up to $2.50 for better sand and pit run gravel. The predominant range is in the $1.35 to $1.55 per cubic yard, representing on-call availability of loading equipment.

From its review of the data, the board observes that the preponderance of evidence points to a value for the materials in situ at the date of expropriation of substantially less than $1.00 per cubic yard.

Nearest in time to the expropriation was the proposed purchase by the claimant of materials from Farrell Estates Ltd. at the price of $0.70 per cubic yard. Both Mr. McPhail and Mr. Grant were at some pains in their testimony to establish that this transaction, even though it occurred between companies in both of which the McPhail family held a substantial interest, was an arms length settlement of outstanding issues. The agreed price, they maintained, was considered by both parties to be at market value. There is no evidence that the price was discounted and there is some indication that it might even have been set at the high end. Certainly, according to one contemporary document, the proposed deal was seen, from the claimant's perspective, as being "highly advantageous" to the vendor, Farrell Estates Ltd.

Mr. Grant, at p. 53 of his report, says this:

On the basis of a prepaid bulk sale in the 500,000 to 1,000,000 cubic yard range with the Purchaser [ie. the respondent] able to remove over a five to ten year schedule, it is concluded that a fair price would be .70¢ per cubic yard.

From its analysis of the available data, the board is prepared to accept that $0.70 per cubic yard represents a reasonable estimate of the market value of the materials situated on the CNR lands at the date of expropriation. The board is not, however, convinced that this price represents value on a bulk basis only for the entire 449,037 cubic yards of material which the claimant was entitled to extract and sell. The board considers that the price of $0.70 per cubic yard would have applied to the situation where the respondent was simply extracting what was needed until the McPhail's settlement agreement expired.

The foregoing observation impacts significantly upon the claimant's claim because, although the profit a prendre took effect from January 24, 1979, it was not until June of 1980 that the claimant asserted its rights as against the respondent. At that time, the claimant had disposed of none of the materials on the CNR lands to which it was entitled and had evidently not even approached the respondent, who was supplying its needs from Woodens Pit, to negotiate a sale. As of September 4, 1980, the date of expropriation from which the claim is to be valued, only roughly 29 months of the 48-month period remained during which the claimant was in a position to sell the materials to the respondent. Records of usage from Woodens Pit between 1979 and 1989 indicate that the respondent required about 11,200 cubic yards of fill material per month on average for the Surrey landfill. If this average usage is applied to the 29-month period then remaining under the McPhail's settlement agreement, the claimant was thus in a position to sell to the respondent in all some 324,800 cubic yards of cover material.

The claimant has argued that it either would have negotiated a bulk sale of the entire quantity of materials available to it and stockpiled that for which the respondent had no immediate need by the end of the four-year period under the agreement, or alternatively, it would have negotiated with CNR for an extension of the term of the agreement. The respondent, on the other hand, holds to the view that it might never have entered into an agreement with the claimant at all, preferring to pursue other options.

The board is of the view that it should not accord any weight to the mere possibility of an extension by CNR of the four-year time period specified in the McPhail's settlement agreement. The board has also weighed the possibility that the respondent might have been induced to enter into a bulk purchase of the whole 449,037 cubic yards of the materials as of September, 1980. This would have necessitated stockpiling some 28 per cent of the total volume of materials either on the McPhail Lands, at Woodens Pit, or at the Surrey landfill. There was no evidence to indicate the practical possibility of stockpiling at the landfill site and considerable evidence to highlight the topographical difficulties involved in hauling the materials up the steep slope from the CNR lands in the opposite direction from the Surrey landfill to either of the McPhail Lands or Woodens Pit, only to transport them back again at a later time to the landfill site.

Moreover, in the board's view, there was no practical reason for the respondent to purchase from the claimant more of the materials than it actually needed for the duration of the term of the McPhail's settlement agreement ending January 24, 1983. At that point the respondent, having the power of expropriation, could directly access its own supply of cover material from Woodens Pit without regard to further compensation of the claimant whose rights under the profit a prendre had expired.

Neither is the board fully persuaded by the claimant's contention that, absent bad faith on the respondent's part, a contract between the parties for purchase and sale of the materials was a certainty. There is, in the board's opinion, at least the risk to the claimant that the respondent might have explored its other options and that the claimant might, in the end, have succeeded in marketing considerably less of the materials to the respondent than it had available within the specified timeframe. As claimant's counsel conceded in final argument, the question of such a contingency was not considered in the cases cited but would reasonably figure in the test of market price or value. The board concludes that there should be an overall reduction in value in this case to reflect the risk involved and considers that a 25 per cent reduction would be reasonable in the circumstances.

Accordingly, the board determines the market value of the materials in situ for which the claimant is entitled to be compensated by the respondent to be the sum of $170,520. This amount has been reached by multiplying the sale of 324,800 cubic yards of the materials on a bulk pre-paid basis at the price of $0.70 per cubic yard, and adjusting the resulting product downward by 25 per cent to take into account the element of risk.

 

5. INTEREST

In addition to being compensated for the reduction in market value of the materials, the claimant is entitled under the Act to interest on the award. Because of the passage of time and the fact that the respondent has never made an advance payment, this is potentially a very material component. The questions to be decided are the date from which the award ought to attract interest and the rate or rates to be calculated. The claimant says, on case authority, that interest is payable from the date of expropriation in 1980 at the rates prescribed in the Act. The respondent argues that, if the board makes an award of compensation such that interest is payable at all, then in all of the circumstances interest should run only from the date at which the claimant filed its claim with the board in 1989.

Section 45 of the Act provides:

45. (1) The expropriating authority shall pay interest on any amount awarded in excess of any amount paid by the expropriating authority under section 19 (1) or (11) or otherwise, to be calculated annually,

(a) on the market value portion of compensation, from the date that the owner gave up possession, and

(b) on any other amount, from

(i) the date the loss or damages were incurred, or

(ii) any other date that the board considers reasonable.

(2) Interest shall be payable at an annual rate that is equal to the prime lending rate of the banker to the Crown in right of the Province.

(3) During the first 6 months of a year, interest shall be calculated at the interest rate under subsection (2) as at January 1, and, during the last 6 months, interest shall be calculated at the interest rate under subsection (2) as at July 1.

(4) Where the amount of the payment under section 19 (1) or (11) or otherwise is less than 90% of the compensation awarded, excluding interest and business loss, the board shall order the expropriating authority to pay additional interest, at an annual rate of 5%, on the amount of the difference, calculated from the date that the payment is made to the date of the determination of compensation.

It was clearly established by the Supreme Court of Canada in Minister of Highways for British Columbia v. British Pacific Properties Ltd., Vancouver Mortgage Corp. Ltd. and Westmount Estates Ltd. (1960), 23 D.L.R. (2d) 305, [1960] S.C.R. 561, 81 C.R.T.C. 107, that interest is payable on any compensation awarded for land taken and for damage by severance. The court said that the interest rate to be applied is governed by the law in force during the time interest is payable.

In the present instance the subject expropriation occurred long before the present Act was proclaimed in force on December 23, 1987. The board has previously dealt with interest in the context of pre-Act expropriations. In Richland Farms Ltd. v. British Columbia (Ministry of Transportation and Highways) (1991), 46 L.C.R. 66 (B.C.E.C.B.), involving a 1986 expropriation, then Chairman Heinrich concluded at p. 74 that the rates of interest and method of calculation both before and after December 23, 1987 were to be governed by s. 45 of the Act. However, in that instance, the parties had agreed as part of the general settlement of compensation payable that all interest would be paid pursuant to s. 45.

More akin to the present case are the board's decisions in Armstrong v. British Columbia (Minister of Transportation & Highways) (1989), 42 L.C.R. 32, and May Estate v. British Columbia (Ministry of Transportation and Highways) (1991), 44 L.C.R. 288, where there was no agreement as to the basis upon which pre-Act interest would be calculated. In those decisions the board awarded interest for the period commencing December 24, 1987 to the date of payment pursuant to s. 45 of the Act, and looked to the principles for the awarding of interest set out in British Pacific Properties Ltd. v. Minister of Highways and Public Works (1978), 14 L.C.R. 299 (B.C. Arbit.), for the period prior to December 24, 1987. In British Pacific Properties Ltd. the arbitrators, after hearing evidence and argument from counsel, concluded that interest should be equivalent to the rate of return on a safe, short-term investment and selected the prevailing 90-day rate on finance company paper, compounded every 90 days from the date of expropriation. The arbitrators' award as to interest was varied by the British Columbia Court of Appeal, 19 L.C.R. 99, [1980] 2 W.W.R. 525, Nemetz C.J.B.C. dissenting, and restored by the Supreme Court of Canada, 20 L.C.R. 1, 112 D.L.R. (3d) 1, [1980] 2 S.C.R. 283.

The board concludes that, no advance payment having been made, interest on the market value portion of compensation, comprising both the land taken and the reduction in value to the claimant's interest in the remaining land, will run from September 4, 1980, the date that the claimant gave up possession. For the period from September 4, 1980 to December 23, 1987, the board will on any subsequent application select an appropriate rate based on all of the circumstances of the case and the evidence and argument presented. From December 24, 1987 to the date of payment, the rate of interest payable and the calculation of interest will be governed by s. 45 of the Act.

Since no advance payment has been made, the full rigour of s. 45 (4), which is in the nature of penalty interest, is also to be applied. Accordingly, the respondent will pay additional interest at an annual rate of 5 per cent on the amount of $172,260 from December 24, 1987 when this provision of the Act became effective, up to and including the date of this award.

 

6. COSTS

Pursuant to s. 44 (3), the claimant is entitled to be paid costs necessarily incurred by it for the purpose of asserting its claim for compensation, and the costs payable pursuant to ss. (7) will be its actual reasonable legal, appraisal and other costs.

 

THEREFORE IT IS ORDERED THAT the respondent shall pay to the claimant:

(1) $1,740 for the agreed market value of the claimant's fee simple interest in the expropriated land pursuant to s. 30 (1) of the Act.

(2) $170,520 for the reduction in market value to the claimant's interest in the remaining land pursuant to s. 39 (1) (a) of the Act.

(3) Interest on the amounts in items (1) and (2) from and including September 4, 1980 to and including December 23, 1987 in such amount as may be agreed upon, and failing such agreement in such amount as may, upon application, subsequently be determined by the board.

(4) Interest on the amounts in items (1) and (2) from and including December 24, 1987, until paid, such interest to be calculated pursuant to s. 45 (2) of the Act at the following rates:

(a) Nine and one-half per centum (9.50%) from December 24, 1987 to December 31, 1987;

(b) Nine and three-quarters per centum (9.75%) from January 1, 1988 to June 30, 1988;

(c) Ten and three-quarters per centum (10.75%) from July 1, 1988 to December 31, 1988;

(d) Twelve and one-quarter per centum (12.25%) from January 1, 1989 to June 30, 1989;

(e) Thirteen and one-quarter per centum (13.25%) from July 1, 1989 to December 31, 1989;

(f) Thirteen and one-quarter per centum (13.25%) from January 1, 1990 to June 30, 1990;

(g) Fourteeen and three-quarters per centum (14.75%) from July 1, 1990 to December 31, 1990;

(h) Twelve and three-quarters per centum (12.75%) from January 1, 1991 to June 30, 1991;

(i) Nine and three-quarters per centum (9.75%) from July 1, 1991 to December 31, 1991;

(j) Eight per centum (8.00%) from January 1, 1992 to June 30, 1992;

(k) Seven per centum (7.00%) from July 1, 1992 to December 31, 1992;

(l) Seven and one-quarter per centum (7.25%) from January 1, 1993 to June 30, 1993;

(m) Six per centum (6.00%) from July 1, 1993 to December 31, 1993;

(n) Five and one-half per centum (5.50%) from January 1, 1994 to June 30, 1994;

(o) Eight per centum (8.00%) from July 1, 1994 to December 31, 1994;

(p) Eight per centum (8.00%) from January 1, 1995 to June 30, 1995;

(q) Eight and three-quarters per centum (8.75%) from July 1, 1995 to December 31, 1995.

(5) Additional interest on the amounts in items (1) and (2) from and including December 24, 1987 to the date of determination of compensation at the annual rate of five per centum (5%) pursuant to s. 45 (4) of the Act.

(6) The actual reasonable legal, appraisal and other costs of, and incidental to, the application and hearing before the board in such amount as may be agreed upon, and failing such agreement in such amount as may, upon application to the board, subsequently be determined and allowed by the chair.

 

 

Government of British Columbia