March 7, 1995, E.C.B. No. 87/91/85
(55 L.C.R. 157)
Style Holdings Inc.
||Her Majesty The Queen in Right
of the Province of British Columbia
M. St. Clair, Vice-Chair
Lesley Eames, AACI, Board Member
Art Guthrie, Board
Hook, Director, acting on the Claimant's behalf
Sarah I. Macdonald, Counsel
for the Respondent
The claimant, Country Style Holdings
Inc. ("Country Style") has obtained an appraisal report ("the report") from Mr.
John T. Crowe, AACI, of the firm Flynn Mirtle Moran. Country Style, on February
3, 1995, applied to the Expropriation Compensation Board ("the board") for an
order determining the admissibility of the report. The board had previously agreed
to hear that application prior to the date set for the compensation hearing.
Country Style did not call Mr. Crowe as a witness at the application hearing,
nor did it file any affidavit material in support of its position that the report
should be ruled admissible. We therefore only had the report itself to consider
as evidence of Mr. Crowe's qualifications as an expert to give this particular
piece of opinion evidence.
THE PROVINCE'S POSITION
The respondent, Her Majesty
the Queen in Right of the Province of British Columbia as represented by the Minister
of Transportation and Highways ("the province"), argued that the report was inadmissible
for two main reasons:
1. Mr. Crowe is not
qualified to perform the type of business valuation set out in the portion of
the report headed "Income approach -- Based on Restaurant as a Going Concern"
2. The other two analytical portions of the report,
headed "Cost Approach" and "Income Approach -- Based on Rental of Restaurant
Premises" are irrelevant, because they value property for which the claimant has
already been compensated through a section 3 agreement dated March 27, 1991.
The province also argued in more general terms that because the sale price under
a section 3 agreement between the parties and dated March 27, 1991, was specifically
stated to include the real property and "any buildings, improvements, fixtures,
appurtenances and attachments to the property, as set out in the Interwest appraisal,
and as listed in Schedule I to this agreement", the opinion report was inadmissible
on the basis of irrelevance to the extent to which it addresses the market value
of the property in any part of its analysis or conclusions.
3. QUALIFICATIONS AS EXPERT WITNESS
The province did not take issue with Mr. Crowe's qualifications as an expert in
the area of real property appraisal, but it did argue that the part of his report
headed "Income approach -- Based on Restaurant as a Going Concern" could
only be offered in testimony if he were either a Chartered Business Valuator,
or if he had similar experience or training to that required to qualify as a Chartered
Country Style maintained, in very general
terms, that Mr. Crowe was well qualified to provide all of the opinions contained
in his report.
Experienced property appraisers regularly
qualify as experts before the board and submit reports about the market value
of real property, both residential and commercial. In order to qualify an individual
as an expert in the area of business loss, the board must be satisfied that the
individual has the qualifications, experience and requisite skills to assist the
board in its determination of the issue of business loss.
It may be that some real estate appraisers possess this kind of expertise in valuing
business properties. However, in this instance, the only evidence offered about
Mr. Crowe's expertise in this area was a single page summary headed "Qualifications
of the Appraiser", attached as an addendum to his report. This summary makes no
reference to training or practical experience in the valuation of business properties.
Since Mr. Crowe did not attend the application hearing, we were not able to determine
whether he might have some special qualifications or experience that would especially
qualify him to give the opinion set out in the 'business as a going concern' section
of his report.
We are therefore unable to provide Country
Style with an order that the report is admissible, based on the evidence available
to us at the application hearing. It may be that such evidence would be available
at the compensation hearing, but it is not open to us to make any assumptions
about that now.
It was clear to us that there is an unresolved issue between the parties as to
how the quantum of Country Style's compensation should be calculated, based on
the stated exception in paragraph 11 of the section 3 agreement, which is worded
"The Sale Price constitutes full
and final payment for any and all claims arising out of the transfer or dedication
of the property to the purchaser which, but for this agreement would give rise
to a claim under the Expropriation Act, S.B.C., 1987 and amendments thereto,
save and except the business losses relating to the operations of the subject
property and specifically excluded from the Interwest appraisal dated Jan. 28/91.
The parties do not agree
as to what was included in the Interwest appraisal and what was not. The province
argued that because of the exception clause in the section 3 agreement, the report
was inadmissible on the basis of irrelevance to the extent to which it addresses
the market value of the property. Country Style, on the other hand, argued that
the Interwest appraisal only valued the real estate, and excluded the value that
the business had to that property. It reasoned that the board therefore needed
to have before it a real property appraisal that took into consideration the value
of the business as a going concern. It was on this basis that Country Style put
forward Mr. Crowe's appraisal report, and it is the final opinion in the report
about the value of the business as a going concern that forms the basis of Country
Style's business loss claim.
We did not hear argument
about the proper construction of paragraph 11 of the section 3 agreement, and
the province quite properly pointed out that it would not be appropriate for us
to draw any conclusions now about the effect of any of the clauses of that agreement.
We do not find it necessary to make a ruling on the issue of relevance now, because
we have already declined to accept Mr. Crowe's opinion report into evidence at
this point in the proceedings, due to an insufficiency of evidence about his qualifications
and experience. We believe, however, that it might be useful to the parties to
know that we do (at least initially, and without the benefit of further argument
on this point) find some merit in the province's argument about the report effectively
revisiting the property value issue. The province maintained that since the real
property value has already been settled, any valuation that takes any different
value into account than the one it has already paid under the section 3 agreement,
would be inadmissible because of irrelevance.
Approach" and "Income Approach -- Based on Rental of Restaurant Premises" portions
of the report do appear to value an aspect of the property that is not in issue
before the board. In addition, it appears to us that Mr. Crowe's valuation of
the business as a going concern may indirectly factor in a different real property
value than the one set out in the section 3 agreement. With the valuation method
he uses, we do not see how it would be possible to identify an amount referable
specifically to the real property and buildings which have already been purchased
by the province under the section 3 agreement. While he does subtract the actual
purchase price from his final arrived at value to reach an amount claimed, our
concern is that a greater sum than the agreed property price may have been factored
indirectly into the total from which the purchase price was subtracted.
While we are not ruling on the relevance issue here, we are concerned that the
approach taken by Mr. Crowe in this part of the report might well prove quite
unhelpful to us in coming to a determination about compensation for business loss
in this case. It may be that Mr. Crowe could demonstrate to the board that his
methodology in the "going concern" section of the report is not flawed in this
respect, but again, in the absence of hearing from him, we are not able to make
a determination about that.
On the basis of the evidence that was before
us at this application, we must deny Country Style's pre-hearing request for a
ruling that the opinion report of Mr. Crowe is admissible for the purpose of the
compensation hearing. It is still open to Country Style, however, to argue the
admissibility of the report at the compensation hearing, as this decision does
not constitute a ruling that the report is inadmissible.