November 8, 1995, E.C.B. No. 77/94/95
(57 L.C.R. 301)
Heath Realty Ltd.
Bank of Canada
Malden Holdings Ltd. and
Langley Mortgage Corp.
Majesty The Queen in Right of the Province of
British Columbia as represented
by the Minister of
Transportation and Highways
St. Clair, Vice-Chair
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
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
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 description of the land,
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
(a) to whom and in what amounts
payment shall be made, or
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.
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.
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.
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.
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
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
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.