November 8, 1995, E.C.B. No. 77/94/95 (57 L.C.R. 301)

Between: Anthony Dyakowski
Shannon Dyakowska
Scott Primrose
Heath Realty Ltd.
Royal Bank of Canada
Malden Holdings Ltd. and
Langley Mortgage Corp.
Claimants
And: Her Majesty The Queen in Right of the Province of
British Columbia as represented by the Minister of
Transportation and Highways
Respondent
Before: Fiona St. Clair, Vice-Chair
Appearances: Peter W. Klassen, for the Claimants, Dyakowski and Dyakowska
John Adams, for the Claimant, Royal Bank of Canada
Neena Sharma, for the Respondent

This is an application brought by the expropriating authority, Her Majesty the Queen in Right of the Province of British Columbia ("the province"), pursuant to ss. 19 (3) and (5) of the Expropriation Act, S.B.C. 1987, c. 23 ("the Act"). The notice of motion seeks

... an order that the proposed Advance Payment be made to the Royal Bank of Canada on account of the balance owing under its loan secured by a first mortgage against the Lands, or alternatively, that the proposed Advance Payment be paid into Court to be paid out as the Court may subsequently direct ...

I heard the application on August 22, 1995 in Victoria.

No compensation action has yet been commenced under the Act, since the taking has only progressed to the point of the province serving its expropriation notice on all "owners" as defined by the Act. Section 1 of the Act defines "owner" as including "a person having an estate, interest, right or title in or to the land including a person who holds a subsisting judgment or builder's lien." Thus, both registered owners and mortgagees qualify as owners under the compensation scheme set out in the Act.

The property in question consists of 2 lots north of Nanaimo, just outside the city boundary. The lots comprise 26 acres in total, and the province intends to expropriate about 14 acres of the eastern portions of both lots. The end result will be to leave approximately 12 acres of total area in both lots combined. The land to be taken is required for the Nanaimo Bypass Project.

The registered owners and registered encumbrances are the same for both lots. Anthony Dyakowski and Shannon Dyakowska own an undivided one-half interest in both lots as joint tenants. Scott Primrose owns an undivided one-quarter interest and Heath Realty Ltd. owns the remaining undivided one-quarter interest. The first mortgagee on both properties is the Royal Bank of Canada. Its mortgage was registered in December of 1994 in the amount of $910,000. That mortgage secures a running account, and accrues interest at the rate of prime plus two per cent, calculated and paid on a monthly basis. The affidavit evidence filed by the province indicates that the amount outstanding under that mortgage was $813,029.18 on July 4, 1995. The second mortgage is registered only against Mr. Dyakowski's and Ms. Dyakowska's half interests in the lots. It is in favour of Malden Holdings Ltd. and Langley Mortgage Corp., and is for the amount of $250,000. This mortgage was registered in April of 1995 and is due on September 1, 1995. It is an interest only mortgage, with a rate of the greater of prime plus four per cent or twelve per cent. It is also secured against a Vancouver property, which I understand may be the residence of Mr. Dyakowski and Ms. Dyakowska.

Victoria Appraisal Services valued the property for the province in April of 1995. Their appraisal estimates the market value of the entire two lots to be $967,000, and values the portion to be expropriated, including an allowance for injurious affection, at $635,000. Based on this appraisal, the province intends to make an advance payment pursuant to section 19 of $635,000, and seeks the direction of the Expropriation Compensation Board ("the board") as to the appropriate party to whom to make the payment.

Section 19 of the Act provides as follows:

Advance payment

19. (1) Within 30 days after

(a) filing an order of the Lieutenant Governor in Council under section 5 (4) (b),

(b) the approving authority complying with section 17 (2) or (3), or

(c) the making of an agreement under section 3 (1),

the expropriating authority shall

(d) pay to the owner the amount the expropriating authority estimates is or will be payable to that owner as compensation, other than for business loss referred to in section 33 (3), and

(e) serve on the owner a copy of all appraisal and other reports on which the payment is based.

(2) The appraisal report shall be prepared by a person who has been accredited by an institute or body prescribed by the Lieutenant Governor in Council, shall be reasonably detailed and shall include

(a) a description of the land,

(b) the date of the valuation, which must be within 6 months of the date of the endorsement by the registrar under section 7 (1),

(c) factual data necessary for the value estimate and the reasoning on which the estimate is based,

(d) the zoning, the highest and best use of the land and any provisions of an official community plan or rural land use bylaw under Part 29 of the Municipal Act that are relevant to a determination of the highest and best use, and

(e) the final estimate of the value of the land.

(3) Where, before taking action under subsection (1), the expropriating authority is in doubt as to whether a person is an owner or, if an owner, as to the nature and extent of his interest, it may apply to the board for

(a) a determination respecting the state of title to the land, and

(b) an order respecting the nature and extent of the interest of any owner of the land for the purpose of determining to whom and in what amounts the payment proposed to be made by the authority under subsection (1) shall be distributed.

(4) The expropriating authority shall serve a copy of the application on all persons who it considers would be affected by it.

(5) After hearing an application under subsection (3), the board may, in respect of the payment that the expropriating authority proposes to pay to an owner to comply with this section, order

(a) to whom and in what amounts payment shall be made, or

(b) that money be paid into court to be paid out as the court may subsequently direct.

(6) On compliance with an order made under subsection (5), the expropriating authority shall be deemed to have complied with subsection (1).

(7) To assist the expropriating authority in making payment under this section, an owner shall, on the authority's request, provide the authority with any information relevant to estimate the compensation to which the owner is or will be entitled.

(8) An owner who withholds relevant information may be penalized by the board in costs and interest to which he would otherwise be entitled.

(9) Payment and receipt of compensation under this section is without prejudice to the right of the owner who receives the compensation to have the amount determined in the manner provided for in this Act.

(10) The board may, on application by the expropriating authority and on being satisfied that the authority cannot practicably comply with subsection (1), extend, subject to conditions the board considers appropriate, the period within which the payment is required to be made under that subsection.

(11) The expropriating authority may, at any time before 10 days prior to the commencement of a hearing to determine compensation, increase the amount of its advance payment made under subsection (1).

The province took the position that its appraisal of the fee simple interest in the property was all that was required of it at this point in the expropriation, and that it was not yet required to appraise each of the owners' interests separately and to make separate advance payments to each owner under s. 19.

The province alluded to certain problems it had encountered in instructing its valuators regarding the appraisal of the security interests. It outlined these as being:

1. The appraisers wanted to know what the priorities were as between the two mortgages.

2. The appraisers sought guidance about the meaning and potential applicability of s. 4 (4) of the General Regulation, B.C. Reg. 458/87.

3. The appraisers required to be told "whether the market value of the mortgage would be estimated on a stand-alone basis relative to the real estate's valuation as being 100% of the fee simple, to the exclusion of any other properties or covenants, or without attempting to allocate the advance payment among various parties."

The province indicated that it was because of the difficulty in answering these questions that the appraisals had not yet been undertaken.

The reason the province gave for not simply making the payment as proposed, was that it desired the board's confirmation that its intended course of action does not run afoul of the Act. In particular, the province is troubled by the fact that its overall appraisal of the two lots indicates a value far below the combined face values of the two mortgages registered against those lots. Its counsel stated her concern that the province might be exposed to some liability if it made the payment it proposes to the Royal Bank without the consent of the other owners, including the second mortgagee.

It was the province's position that the wording of s. 19 does not permit the board to examine the adequacy of the amount of the proposed payment, but that it does permit the board to "sanction" the payment that the province wants to make without regard to the amount.

The registered owners maintained that I do not have any jurisdiction to make the order sought, because s. 19 (5) can only be triggered by an application under s. 19 (3), and despite the fact that the notice of motion maintains otherwise, no such application is in fact being made here. A s. 19 (3) application can result in either "a determination respecting the state of title to the land" or "an order respecting the nature and extent of the interest of any owner of the land". The registered owners argued that the state of title to the land is clear here, and that the nature and extent of the interest of each owner can be determined through a careful examination of the documents registered on title. They maintained that the only matters about which the province is unclear at this point are the relative values of the interests of the various owners, but that value is not a concept subsumed within the term "extent". Since, they argued, I am not being asked to make any order about the state of the title or the nature and extent of any owner's interest under s. 19 (3) (this being readily determinable through an examination of the various documents registered against title), I lack the jurisdiction to make an order under s. 19 (5) directing to whom and in what amounts advance payments should be made, because that power is only granted to me "after hearing an application under subsection (3)."

As to the alternative relief sought (that is, that the amount be paid into court), the registered owners resisted it on the same basis as outlined above, and in addition argued that this form of relief should only be available in circumstances where there is a legal problem that is properly only determinable by the Supreme Court of this province as a necessary prerequisite to the board hearing a compensation matter. They argued that where the only issue relates to value, the board would improperly be passing on to the Supreme Court a matter under the board's own jurisdiction if it made an order that moneys be paid into court.

The registered owners also maintained that the province, in order to comply with s. 19 of the Act, must also pay to each mortgagee the amount stipulated by s. 5 of the General Regulation. Section 5 provides for the payment of disturbance damages to security holders in the amount of 3 months' interest at the rate prescribed in the security document. The registered owners argued that since s. 19 (1) requires an expropriating authority to "pay to the owner the amount the expropriating authority estimates is or will be payable to that owner as compensation, other than for business loss referred to in s. 33 (3)", this required payment under s. 5 of the General Regulation must form part of the advance payment under s. 19. They submitted that if I decide that I have jurisdiction to make an order for payment in this matter, I should include in the order a requirement that the s. 5 payment be made in addition to any other amount payable.

Finally, the registered owners submitted that if I find that I have the jurisdiction to make the order sought, then they would be content that the whole amount of the advance payment be paid to the Royal Bank of Canada. They made it clear, however, that they were not consenting to such an order.

The Royal Bank supported the legal arguments made by the registered owners, and concurred particularly in the position that the s. 5 payment must be included as part of the s. 19 advance payment.

I accept the primary argument put forward by the registered owners regarding my lack of jurisdiction to make the order sought by the province. The province used the phrase "nature and extent of the interest" of the owners throughout its argument, and its notice of motion purports to be brought under both ss. 19 (3) and 19 (5). I find, however, that no actual s. 19 (3) application was made by the province. I clearly was not asked to make any "determination respecting the state of title to the land", and in my view neither was I asked to make "an order respecting the nature and extent of the interest of any owner of the land." I agree with the registered owners' contention that the term "extent" relates to the legal extent of an interest, and should not be read so broadly as to include the concept of value, which properly forms the subject of a compensation hearing before the board.

On June 20, 1995, the board rendered an as yet unreported decision in the matter of El and El Investments Ltd. and Stephanie Perla Chuchman and George Chuchman v. The Board of School Trustees of School District No. 36 (Surrey), E.C.B. #17/94/88. That decision arose from an application brought pursuant to ss. 19 (3) and 19 (5) of the Act, seeking a determination as to whether the Chuchmans were "owners" as defined in s. 1 of the Act, and if so, as to the nature and extent of their interest in the subject lands. The board determined in that case that Mr. Chuchman was an owner under the Act, and defined the nature and extent of his interest as "that of a tenant under an annual lease with subsequent renewals." It is this type of legal determination regarding an interest in land, as opposed to any consideration of its value, to which I consider s. 19 (3) to refer.

Because I have found that no application was brought under s. 19 (3), it follows that I have no jurisdiction to make an order under s. 19 (5), because the s. 19 (3) determination is a necessary prerequisite to any exercise of jurisdiction under s. 19 (5).

In short, I see no legal issues here to be determined regarding title or ownership under the Act, which require the involvement of the board. It is up to the province to determine what advance payments need to be made in order for it to comply with s. 19.

I understand that the valuation of the security interests in this case may well prove to be a difficult process, but I find that none of the problems encountered in instructing the valuators that were outlined by the province's counsel, requires any determination by the board at this juncture. They are all matters upon which decisions and assumptions will have to be provided by the province to the experts it will retain. To paraphrase a submission made by counsel for the registered owners, the province should not be at the board's door. Rather, it should be at the appraisers' door saying "Get the job done."

Since I am declining to make the order sought on the basis of my lack of jurisdiction to do so, it is not necessary for me to decide here the other issues raised, such as whether s. 19 requires separate appraisals of all owners' interests and separate advance payments to each owner, whether the General Regulation s. 5 payment to security holders must be included as part of a s. 19 advance payment, and in what circumstances an order of the board for payment into court under s. 19 is appropriate.

 

 

Government of British Columbia