January 4, 2000, E.C.B. No. 15/96/179 (68 L.C.R. 245)

 

Between: Lorry Lawrence Raymond Morse
Claimant
And: Her Majesty the Queen in Right of the Province of British Columbia as represented by the Minister of Transportation and Highways
Respondent
Before: Robert W. Shorthouse, Chair
Michael R. Grover, AACI, Board Member
Suzanne K. Wiltshire Board, Member
Appearances: Eugene H. Fraser, Counsel for the Claimant
Nerys Poole, Counsel for the Respondent

 

REASONS FOR DECISION

1.  INTRODUCTION

The claimant, Lorry Lawrence Raymond Morse, was the registered owner in fee simple of a one acre parcel of property located at 3002 – 3002A Murray Street in Port Moody, British Columbia, legally described as: Parcel Identifier 011-179-643, Parcel "A" (Explanatory Plan 8735), Lot 2, District Lot 190, Group 1, New Westminster District, Plan 6245 (the "subject property").

On August 2, 1995, the respondent, Her Majesty the Queen in Right of the Province of British Columbia as represented by the Minister of Transportation and Highways, expropriated the subject property in connection with what was called "the Barnet/Hastings People Moving Project".

At the time of expropriation, the subject property was zoned M-1 (light industrial) and was identified in the City of Port Moody's Official Community Plan (the "OCP") for future "major public open space". It was improved with two older detached, single family residential dwellings which were non-conforming to the M-1 zoning and which the claimant was renting out.

On July 24, 1995, the respondent made an advance payment of $662,000 to the claimant under what is now section 20 of the Expropriation Act, R.S.B.C. 1996, c. 125 (the "Act") for what it estimated was or would be payable as compensation, comprising $650,000 for the market value of the subject property, $1,000 as a conveyancing allowance, and $11,000 as a property purchase tax allowance.

On March 13, 1996, the claimant filed with the board an application for determination of compensation in which he asserted claims for compensation totalling $1,073,671.34 plus interest and costs. These included a claim in the amount of $870,000 for the market value of the subject property based on the contention that its highest and best use was for future multi-family residential development. The other claims were for special value to the claimant in the amount of $153,000, costs expended by the claimant to pursue rezoning in the amount of $23,500, appraisal costs of $4,751.34 and property purchase tax to purchase similar property in the amount of $22,420.

In its reply to the application for determination of compensation filed with the board on June 10, 1996, the respondent asserted that the claimant had been properly and adequately compensated by the advance payment already made. However, on May 27, 1998, the respondent made a further advance payment of $5,888.87, comprising an additional $5,000 on account of market value plus $888.87 in interest.

The compensation hearing in this matter took place in New Westminster, B.C. The claimant gave evidence in his own behalf. The other witness for the claimant was Reid S. Umlah, an accredited real estate appraiser with Hooker Carmichael Property Consultants Ltd., who testified concerning the appraisal report he had prepared dated May 12, 1998 and his rebuttal report dated June 2, 1998. The witnesses appearing on behalf of the respondent were Stan E. Mason, an accredited real estate appraiser with Macintosh Appraisals Ltd., who testified concerning his appraisal report dated May 15, 1998, and Tom Tasaka, a professional engineer who at the relevant time was a partner with the consulting firm, Reid Crowther & Associates, and project director for the Barnet/Hastings People Moving Project.

 

2.  BACKGROUND

Based upon its assessment of the oral and documentary evidence adduced, the board makes the following background findings and observations in this matter.

2.1  The Claimant

The claimant, who lives in Coquitlam, B.C., is an experienced land developer and part owner with his brothers of a company known as Morse Construction Ltd. The claimant and his company have been involved in development projects since 1979, including the creation of strip malls, warehouses and rental properties. He testified that, prior to his involvement with the subject property, he had purchased and successfully developed through the rezoning process a total of four properties in Port Moody, which included a commercial strip mall on St. John's Street not far from the subject property as well as some warehousing nearby. He said he encountered no special problems in obtaining rezoning in those cases and that in the process he made useful contacts with officials of the City of Port Moody.

The circumstances surrounding the claimant's ownership of the subject property warrant some attention. The claimant said he became interested in acquiring the subject property for future development around 1980, but it appears that the actual purchase by his company took place early in 1983. At that time the title to the subject property was also transferred by the company into the name of Janik David Vahanian, a businessman residing in the Middle East. The claimant explained that Mr. Vahanian was a good friend who had consented to hold title to the subject property under a trust agreement in order to keep it out of the claimant's marital separation dispute. Although the transfer document dated January 27, 1983 stipulated a price paid of $100,000, the claimant said no actual money changed hands on the transfer. Mr. Vahanian retained title to the subject property until 1995, in turn granting the claimant a power of attorney to deal with it and directing relevant correspondence to an address in Port Moody accessible to the claimant. By transfer document filed in the New Westminster Land Title Office on March 31, 1995, Mr. Vahanian transferred title to the subject property to the claimant personally. At that time its market value was stated to be $650,000; however, the consideration specified was nominal, and the claimant again said no actual payment was made.

The trust agreement was evidently lost and could not be produced at the hearing. However, in so far as anything turns on it, the board accepts that such an arrangement was in place during the indicated years and that the claimant is properly constituted as an "owner" for the purposes of the Act, beneficially entitled to make the claims which he has asserted. By the date of expropriation he was, of course, the registered owner in fee simple.

2.2  The Subject Property

The subject property is a slightly irregularly shaped parcel of land which has a frontage of 129.50 feet along the north side of Murray Street. Its depth measures 302.06 feet along the west boundary and 370.80 feet along the east boundary. The rear boundary measuring 147.18 feet is adjacent to waterfront parklands known as Rocky Point Park which lies along the south shore of Burrard Inlet. In all, the gross site area of the subject property calculates to 43,568 sq. ft. or approximately one acre.

Topographically, the subject property is situated at street grade along Murray Street and is generally level although, according to the respondent's appraiser, the northerly half drops off in a rolling fashion to the rear boundary. That boundary is adjacent to a paved public walkway constructed through Rocky Point Park.

The subject property was improved with two older detached single family residences sited toward Murray Street. The evidence suggests they were built around 1960. The claimant testified that, from the time of purchase in 1983 to the time of the expropriation, these residences were continuously occupied by tenants. At the time of the taking they were being rented out for $750 and $450 per month respectively.

2.3  The Neighbourhood

The subject property lies within or borders an area of the City of Port Moody known as "Moody Centre". Moody Centre is one of the older neighbourhoods within the City and one of the most diverse in terms of land uses, comprising residential, commercial and industrial properties. St. John's Street extends through Moody Centre, providing main access into the neighbourhood as well as a main link to other municipalities east and west of the City. At the time of the taking, St. John's Street itself was lined with commercial development and institutional uses along either side. The land south of St. John's Street comprised mainly single family dwellings while the land to the north was largely given over to industrial uses.

Murray Street, situated to the north of St. John's Street, is a main collector arterial road extending east/west through the north part of Moody Centre. The majority of properties on both sides of the street in the vicinity of the subject property, as well as in the immediate surrounding area including Clarke Street and Spring Street, were improved with what the appraisal witnesses variously described as "older, light industrial structures" or "multi-unit service industrial and warehouse buildings". At both the west and east ends of the neighbourhood, light industry gave way to heavy industrial uses. The Canadian Pacific Railway main line runs parallel to Murray Street, along the rear boundary of properties on the south side of the street.

Notwithstanding its historic industrial orientation, a portion of Port Moody since the early 1960s had developed as a "bedroom residential community" and an attractive location for commuters to Vancouver, approximately 14 miles to the west, and to other urban centres in the Lower Mainland. Indeed, the Barnet/Hasting People Moving Project, which occasioned the present expropriation, appears to have been conceived with a view to improving the desired transportation links. By the 1980s, the City of Port Moody through its OCP was projecting the development of a "New Town Centre", a mile or so to the east of the subject property, comprised of a mixture of high density residential, commercial and institutional uses. The plan also envisioned the redevelopment for high density multi-family residential use of at least one heavy industrial site known as the "IPSCO" property.

2.4  Land Use Regulations and Development Efforts

From the time of purchase by the claimant in 1983 to the time of expropriation by the respondent in 1995, the subject property was zoned M1 (light industrial) by the City of Port Moody. Permitted uses under that zoning included a wide variety of light manufacturing, automotive repair, laboratories, laundries, film studios, and warehousing and storage. Retail sales ancillary to such uses were also permitted. Residential use was prohibited. The two detached dwellings on the subject property evidently predated this zoning designation and enjoyed the status of legal non-conforming uses.

In 1984 the City of Port Moody created its first OCP to guide the future development of the community. The OCP designated the immediate neighbourhood of the subject property for light industrial and public park uses. The subject property itself, together with several other properties to the north of Murray Street, was designated as "major public open space" to be considered for future acquisition and integration within Rocky Point Park.

The claimant testified that during this period, consistent with the zoning already in place, he approached the City of Port Moody for a building permit to construct a warehouse on the subject property but the permit was refused. He suggested that one reason for the refusal was that the City was actually disinterested in seeing further light industrial buildings created in the vicinity of the waterfront and had therefore recently introduced an additional requirement for development permits. Another reason, he said, was that the City wished to purchase the subject property for park use but lacked the immediate funding to do so. The claimant said he was told to come up instead with a plan for commercial or high density residential development for the subject property. The claimant was asked by the respondent during the hearing to provide documentation evidencing the application and its refusal but no such documents were produced.

By the late 1980s Port Moody was considering making changes to the 1984 OCP and its zoning bylaw which would affect the designation and permitted uses of the subject property and three other parcels on the north side of the 3000 block of Murray Street. On December 20, 1988, the City's municipal council passed a resolution instructing the director of city planning, Daniel Janczewski, to prepare studies and bylaws for further consideration to effect a possible change in their zoning from industrial to multiple-residential use. Mr. Vahanian as registered owner of the subject property was notified of the resolution by letter dated January 13, 1989.

Responding to this possible change in planning direction within the City of Port Moody, the claimant in early 1989 put forward a development proposal for the subject property together with the site adjoining to the west which contemplated construction of two eleven-storey multiple residential buildings. The plans submitted were evidently quite general in nature, and they produced a general response from the director of city planning. In a letter of May 23, 1989 to the claimant, Mr. Janczewski outlined the application process required and commented on general elements of the site concept. With respect to the application generally, he wrote:

Again, it is emphasized that you should contact the City's Administrator in order to determine whether or not the City is willing to pursue the purchase of the property for public open space purposes. So that you are aware – my preference is that the property be acquired for open space use.

With respect to the proposed structures, he noted:

[T]he building height of eleven storeys is considered excessive. At this particular location, a general height of approximately 7 storeys should be proposed as it is human in scale and "fits" with the setting.

The claimant testified that, based upon the initial response, he foresaw no unusual obstacles to obtaining rezoning. He therefore continued to pursue the development proposal and, together with the owner of the adjacent property to the west, retained a prime consultant, David Nairne & Associates Ltd., to co-ordinate the necessary planning, design, engineering, budgeting and management. At the compensation hearing the claimant entered into evidence two invoices dated in July, 1989 which totalled $1,611 for drilling work, an invoice from a firm of consulting geotechnical engineers dated in August, 1989 in the amount of $5,494.70 for a report on soil conditions, and an account from the prime consultant dated in May, 1990 but relating to invoices issued on the project between June, 1989 and January, 1990, which totalled $14,424.77. Additionally, on October 31, 1990, the claimant's company invoiced Mr. Vahanian in the amount of $1,469.53 for services rendered in overseeing the proposed development. These invoices together totalled exactly $23,000.

On January 15, 1990, Port Moody's municipal council passed a further resolution rescinding that of December 20, 1988. The city clerk wrote to Mr. Vahanian on January 22, 1990, in part as follows:

Following extensive review of the area in question, City Council has determined that all the privately owned properties located on the north side of the 3000 block Murray Street should remain at the current zoning of Light Industrial (M1).

At the compensation hearing the claimant maintained that he was not deterred by council's decision from pursuing his rezoning and development efforts. However, there was no evidence of further significant expenditures by the claimant in that regard after January, 1990.

In February, 1993, Port Moody's municipal council adopted bylaw no. 2136, which was a 1992 update to the 1984 OCP. With respect to housing policy, it indicated that high density, high-rise residential development would be restricted to the New Town Centre and the development permit area at the east end of St. John's Street. With respect to industrial development, the 1992 OCP spoke of the industrial character of Port Moody, the importance of maintaining an industrial job base, and the need to focus on more service and light industrial activities in the land use plan. It also suggested maintaining a policy of protecting some waterfront industrial lands for future industrial use, a policy which, it said, would require careful assessment of any neighbouring land use to ensure the ability of such industry to continue operating successfully.

In October, 1994, certain policies within the 1992 OCP were amended through the adoption of bylaw no. 2203. One amendment to the housing policies concerned the density of residential development in the community. It stated:

Outside of the high density areas of New Town Centre and the east end of St. John's Street, the density of multifamily residential developments shall be determined on a site or project basis, but shall generally not exceed a maximum of 40 units per acre **unless otherwise specified by neighbourhood or area plans. (1992 OCP, p. 6-8)

Another amendment in the area of industrial policies emphasized the importance the City placed on light industrial uses. It read:

The City will encourage clean, light industrial uses, with special emphasis in the area of high technology industry. The existing light industrial areas will generally be maintained, and retail and office uses shall generally be prohibited from this area, *unless otherwise specified by neighbourhood or area plans. (1992 OCP, p. 8-6).

The Moody Centre Neighbourhood Land Use Plan incorporated in the 1992 OCP appears to indicate that the properties on the north side of Murray Street, which included the subject property, were designated "open space" while the properties on the south side of Murray Street adjacent to the Canadian Pacific Railway line were all designated "light industry".

These policies and designations remained in effect at the time the subject property was expropriated.

2.5  The Respondent's Project and the Expropriation

The evidence before the board concerning the scope of the respondent's Barnet/Hastings People Moving Project was somewhat sketchy. Hastings Street is a main thoroughfare connecting the City of Vancouver with the City of Burnaby to the east. From the City of Burnaby in an easterly direction it ultimately connects with what comes to be known as the Barnet Highway. The Barnet Highway runs through a western heavy industrial section of the City of Port Moody adjacent Burrard Inlet and intersects the western end of St. John's Street. Continuing in an easterly direction through Port Moody, the thoroughfare continues to be known as St. John's Street until it reaches the eastern boundary of the City where it again becomes known as the Barnet Highway and, beyond that to the east, the Lougheed Highway through the municipalities of Coquitlam and Port Coquitlam. The entire route is designated as provincial highway 7A.

Mr. Tasaka, the project director, testified that the main thrust of the project was to widen the Barnet Highway from two to four lanes and to convert a parking lane along Hastings Street into a high occupancy vehicle lane. It also contemplated a bypass route through Port Moody into which both Murray Street and Clarke Street to the south would feed through what was called the "Murray/Clarke Connector". The subject property was ultimately wholly expropriated, partly to make way for the construction of this proposed connector and partly, it appears, for the creation of a proposed "park and ride" facility.

The entire project was publicly announced in April, 1990. Mr. Tasaka was retained in June and, according to him, design work began in September of that year. With respect to the Port Moody section of the project, Mr. Tasaka reviewed at the hearing a large number of successive concept plans for the Murray/Clarke Connector. The earliest had been prepared in August, 1991, and the first plan which he identified as actually affecting the subject property was dated August 24, 1992. Based on that plan, Mr. Tasaka wrote to Mr. Vahanian on November 24, 1992 in part as follows:

The latest concept has been developed through consultation with the City of Port Moody and B.C. Transit and is felt by all parties to best serve the transportation needs of the area while recognizing that it has certain impacts on the neighbourhood. The conceptual plans show that your property is directly affected and a portion or all of it will be required before construction can begin. At this time it is anticipated that the earliest construction on Barnet Highway would be about one year from now. Construction of the Port Moody Bypass will probably begin a year later than the Barnet Highway portion.

Together with other affected owners to whom the same letter was sent, Mr. Vahanian was invited to a meeting on December 1, 1992, at which time, he was told, a representative of the respondent would "answer questions about how purchase of your property will be handled."

The claimant acknowledged during the hearing that Mr. Tasaka's letter and the information meeting which he attended were the first formal indications he received of the respondent's interest in acquiring the subject property. However, he also testified that as early as 1988 or 1989 he had heard rumours of such interest. When Port Moody in January, 1990 rescinded the resolution to consider rezoning the subject property for multiple residential use, the claimant said he learned that the reason behind council's decision was its knowledge of the respondent's proposed project. The claimant identified an official of the City of Port Moody, Mr. H. McCoy-Mogensen, the director of permits and licences, as the source of his information during these years.

The alleged causal connection between the respondent's project plans and the decision of the City of Port Moody not to rezone the subject property in January, 1990 bears scrutiny later in these reasons because it forms the basis of the claimant's assertions that the board should ignore that decision when considering the question of highest and best use and should also hold the respondent liable for reimbursement of the costs expended in pursuing rezoning.

The respondent's project did not proceed according to the timeframe suggested in the letter of November 24, 1992. In particular, according to Mr. Tasaka's evidence, the right of way for the Murray/Clarke Connector portion was simply "reserved" due to budgetary constraints in 1994 for construction at some future date. Nevertheless, on March 30, 1995, the respondent issued an expropriation notice with respect to the subject property. The certificate of approval of expropriation was issued on July 20, 1995, and title to the subject property was vested in the respondent on August 2, 1995, the agreed date of expropriation. Although the rest of the project was evidently completed in September, 1996, the Murray/Clarke Connector has yet to be built.

 

3.  THE ISSUES

At the outset of the compensation hearing the claimant abandoned his claim in the amount of $153,000 for special value pursuant to section 31(2) of the Act. He also acknowledged that the claim for appraisal costs in the amount of $4,751.34 should properly be pursued, if necessary, at a cost hearing before the board pursuant to section 45. The issues which the board must therefore determine related to the remaining claims are as follows:

(1) What was the highest and best use of the subject property on August  2, 1995, the date of expropriation, and was that use different from the then existing use?
(2) What was the market value of the subject property on August  2, 1995?
(3) Is the claimant entitled to disturbance damages in addition to an award for market value and, if so, does he have compensable claims under section  34(1) of the Act for the costs expended in pursuing rezoning of the subject property and for property purchase tax to purchase similar property?
(4) Is the claimant entitled to interest under section 46 as set out in the statement of claim?
(5) Is the claimant entitled to his actual reasonable legal, appraisal and other costs under section 45 of the Act?

 

4.  HIGHEST AND BEST USE

The question of highest and best use of the subject property at the date of expropriation is the threshold issue before the board. The claimant maintains that, but for the OCP designation of "major public open space", the highest and best use of the subject property would have been as a holding property for future multi-family residential development. No planning evidence was called to support this contention. The respondent submits that the highest and best use would have been as a development site for light industrial use, conforming to the existing zoning.

Herein lies the essential issue in this case. The distinction between these two purported uses is significant in terms of land value, and results in a difference in value opinions by the appraisers of $870,000 for the claimant and $655,000 for the respondent.

4.1  The Claimant's Case

The claimant's appraiser, Mr. Umlah, at page 20 of his report defined "highest and best use" as:

the reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supportable, financially feasible, and that results in the highest value.

The definition, he pointed out, is that currently used by the Appraisal Institute.

In performing his analysis of highest and best use, Mr. Umlah first had to confront the fact that the subject property had been designated for "major public open space" in both the 1984 and 1992 OCP. He accepted instructions to disregard the park designation because, as he stated at page 21 of his report:

Based upon our experience with municipal park acquisitions, the price paid by government agencies is typically based upon the value of the property under its alternative highest and best use.

He then went on to consider what, in his opinion, would have been the most reasonable and probable alternative use to which the subject property could otherwise have been put.

Although recognizing that the size, configuration and neighbourhood of the subject property made it conducive to light industrial redevelopment under the existing M-1 zoning, Mr. Umlah nevertheless identified factors which he said favoured its use for multi-family rather than industrial development. These included its attractive location within Moody Centre, adjacent to existing park land and overlooking Burrard Inlet. He noted that waterfront industrial lands in other municipalities were being redeveloped with multi-family residential uses, particularly high-rise development. He also referred to the fact that the old industrial IPSCO site, located a short distance to the east, offered similar locational features and was identified for future high density mixed residential, commercial and institutional uses as part of the New Town Centre.

Mr. Umlah also pointed to the evidence of previous support for multi-family development on the subject property by the City of Port Moody in 1988 and 1989. These included the municipal council's resolution in December, 1988 to consider amendments to the OCP and zoning bylaw as well as the correspondence from the director of city planning in May, 1989, which suggested to the claimant that a seven storey multi-family residential development "should be proposed as it is human in scale and fits with the setting". Finally, he made reference to one of the respondent's documents prepared in 1994 containing, he said, a "recommended offer" for purchase of the adjacent parcel to the west of the subject property based on a highest and best use for the site which was shown as "multi-family". This document was produced at the hearing and, in fact, appears to be in regard to the subject property itself.

The claimant's appraiser was, however, candid in his evidence that several factors militated against any notion that multi-family residential development could be readily achieved. One factor to be weighed was the rescinding by Port Moody's city council in January, 1990 of its earlier resolution indicating possible support for such development on the subject property and adjacent parcels. Another was the probable lengthy duration of the development approval process. Rezoning would be required and a public hearing would be necessary. A third factor was the state of the market for development. As Mr. Umlah noted at page 23 of his report:

. . . given softer demand and the increased supply of existing multi-family residential inventory in the Greater Vancouver Region, we envision an extended holding period before economic conditions warrant redevelopment to high density residential uses.

In the result, Mr. Umlah concluded that, if not for the existing "major public open space" designation and but for the expropriation, the highest and best use of the subject property would have been as a holding property for future multi-family residential development in keeping with the City of Port Moody's anticipated zoning changes in 1989. While he saw no reason why a development application under the existing light industrial zoning would not be approved forthwith, he anticipated a holding period of between three and ten years for multi-family development. In his view, however, the holding potential for the subject property was strengthened by the fact that it was improved with two residential dwellings capable of generating holding income during the interim.

As noted earlier, the claimant gave evidence that the respondent, in connection with its own transportation planning scheme, became involved with the City of Port Moody in the period prior to council's decision to rescind its 1988 resolution and was the effective cause of that decision. At one point in his testimony the claimant went so far as to suggest that the real purpose behind the respondent's later acquisition of the subject property was not to further its own Barnet/Hastings People Moving Project, but rather to act as a "tool" to allow Port Moody ultimately to acquire the subject property for its long planned park expansion.

In any event, the alleged collaboration between the respondent and Port Moody is the basis for the claimant's further submission that the board, when determining highest and best use, should ignore the municipal council's decision in January, 1990 not to rezone the subject property for multi-family residential use. The claimant relies on section 33(g) of the Act which provides:

33. In determining the market value of land, account must not be taken of (…)
(g) any increase or decrease in value of the land that results from the enactment or amendment of a zoning bylaw, community plan or analogous enactment made with a view to the development in respect of which the expropriation is made.

The claimant further relies on the authority of decisions by the Supreme Court of Canada in Kramer v. Wascana Centre Authority, [1967] S.C.R. 240, and by the English Court of Appeal in Wilson v. Liverpool City Council, [1971] 1 All E.R. 628.

4.2  The Respondent's Case

The respondent's appraiser, Mr. Mason, proceeded from a different definition of "highest and best use" than that of Mr. Umlah. At page 22 of his report, he defined it as:

that (legal) use which, at the time of the appraisal, is most likely to produce the greatest net return, in money or amenities, over a given period of time.

He went on to say that the predominant factors determining the use of real estate are the legal aspects, namely zoning regulations in effect, the trend of surrounding uses, government control, and economic transition from a lesser to a more profitable use.

In reaching his conclusion on highest and best use, Mr. Mason testified that he first inspected the subject property and formed an early opinion that some type of residential rather than industrial development was more likely. Indeed, under cross-examination, he agreed with claimant's counsel that the waterfront location was ideal for residential development.

However, after holding discussions with officials of the City of Port Moody and reviewing the OCP as successively amended, Mr. Mason said he had to alter his opinion. Quoting from the OCP in his report, he found that one of its aims was to maintain industrially zoned land to provide "solid support for the City's tax base" and to "provide employment opportunities close to home for residents" of Port Moody and that the continued park designation was to maintain waterfront access for recreation. He referred in his analysis to one amendment made to the 1992 OCP by bylaw no. 2203, which provides:

The existing designation of lands for light industry uses shall generally be maintained except where redevelopment to an alternative use would result in substantial job creation and/or other economic activity considered beneficial to the City. (1992 OCP, p. 13-7)

Therefore, although he thought the subject property could be ideal for other uses such as residential development, Mr. Mason concluded that the probability of effecting such a change in use was "extremely remote". Like Mr. Umlah, the respondent's appraiser in forming his final opinion appears to have disregarded the OCP designation for "major public open space". However, Mr. Mason concluded in his report that the highest and best use for the subject property was "as a redevelopment site for industrial use buildings which conform to the zoning bylaw and local building codes and which add value to the land." (p. 23)

The respondent submits that there is no reliable evidence of a causal connection between its project plans and Port Moody's decision not to rezone the subject property to multi-family residential in January, 1990. The resolution which Port Moody adopted, the respondent says, was an independent zoning decision which was part of an overall municipal plan and not part of the expropriation proceedings. While the claimant identified Mr. McCoy-Mogenson as the source of his information concerning the reason behind council's decision, the respondent through Mr. Mason adduced evidence that Mr. McCoy-Mogenson actually left his position with the City in February, 1989 and worked thereafter as a consultant until officially terminated in late April, 1989, some eight and a half months before council rescinded its earlier resolution.

The respondent adds that it is too speculative and remote to say that the decision by Port Moody in 1990 was somehow linked to a project for which, according to Mr. Tasaka, the earliest possible time that a concept plan affecting the subject property was even considered by the respondent was in August, 1992. The respondent suggests that the attempt by the claimant to link this particular planning decision by the City of Port Moody with the respondent's highway project is an attempt by a disappointed land owner who had speculated on the possibility of being able to redevelop his lands to a higher use than what Port Moody was prepared to permit.

The respondent cites the decisions in Salvation Army, Canada East v. Ontario (Minister of Government Services) (1986), 34 L.C.R. 193 (Ont. C.A.), and Levine v. City of Ottawa (1990), 44 L.C.R. 1 (Ont. Div. Ct.), in support of its submission that, absent bad faith, compensation does not flow for any decrease in value to an owner's land which may result from the imposition of land use regulations pursuant to legitimate and valid planning purposes.

Furthermore, the respondent contends, section 33(g) of the Act does not apply to the facts of this case, and the designation of "major public open space" in the OCP and the retention of the M-1 (light industrial) zoning for the subject property should be determining factors for the board in arriving at its conclusion as to highest and best use. The respondent seeks to distinguish those decisions by the British Columbia Court of Appeal in Vision Homes Ltd. v. Nanaimo (City) (1996), 59 L.C.R. 106, and Devick v. British Columbia (Minister of Transportation and Highways) (1998), 63 L.C.R. 193, where section 33(g) was found to be applicable.

4.3  Analysis and Conclusion

It is well established in expropriation law that compensation for land taken cannot be based on an improbable use. In Farlinger Developments Ltd. v. Borough of East York (1975), 8 L.C.R. 112, the Ontario Court of Appeal in the context of rezoning stated as follows at pp. 123-124:

. . . highest and best use must be based on something more than a possibility of rezoning. There must be a probability or reasonable expectation that such rezoning will take place. It is not enough that the lands have the capability of rezoning. . . . [P]robability connotes something higher than a 50% possibility.

The question before the board therefore becomes: what was the most probable use of the subject property, that is, what would have been its highest and best use but for the taking?

Leaving aside for a moment any consideration of the possible influence on the City of Port Moody of the respondent's proposed "development", it seems clear that the overall thrust of the City's planning intentions, as reflected in its OCP from 1984 through to the time of expropriation in 1995, was to retain the immediate neighbourhood of the subject property for light industrial uses. There was no evidence before the board to support the claimant's assertion that he was refused a building permit to construct a warehouse on the subject property in conformity with the M-1 zoning in part because the City did not wish to see such further development near the waterfront.

Through those years the City also maintained its desire to incorporate the subject property and other parcels of land on the north side of the 3000 block of Murray Street into its parkland development along the south shore of Burrard Inlet. The evidence suggests that lack of funding lay at the root of Port Moody's failure to attempt to acquire the properties for that purpose.

To those ends, the City at all relevant times continued to designate the subject property in its OCP for future "major public open space" and, at the same time, to zone it for light industrial uses.

The board accepts that Port Moody, acting in good faith, was entitled to follow this course of action without regard to any possible adverse consequences to the value of the subject property or the claimant's development intentions with respect to it. The trend of decisions before the British Columbia Court of Appeal in support of that view is set out in Yuen v. Oak Bay (District), [1992] B.C.J. No. 202, 8 M.P.L.R. (2d) 263 (BC.S.C.), a case cited by the claimant. In the Salvation Army case cited by the respondent, the Ontario Court of Appeal reviewed a series of case decisions to the same effect, culminating in the judgment of the Supreme Court of Canada in Hartel Holdings Co. Ltd. v. Council of City of Calgary, [1984] 1 S.C.R. 337, 8 D.L.R. (4th) 321, [1984] 4 W.W.R. 193. In that case the Court said at pp. 354-5 S.C.R., pp. 334-5 D.L.R.:

The appellant's case in a nutshell is that by freezing its land with a view to its subsequent acquisition for a park the respondent has deprived the appellant of the potential value of its land for residential development. No doubt, this is true. The difficulty the appellant faces, however, is that in the absence of bad faith on the part of the respondent this seems to be exactly what the statute contemplates. The crucial rider is that the City's actions must have been taken pursuant to a legitimate and valid planning purpose. If they were, then the resulting detriment to the appellant is one that must be endured in the public interest.

At the compensation hearing the respondent's appraiser was taken to task by claimant's counsel for using, as the appraiser acknowledged, an outdated definition of highest and best use which focused predominantly on the legal factors involved. While the modern definition used by the claimant's appraiser is clearly more expansive, the board considers that, in this instance, it was the zoning and planning regulations which the City of Port Moody decided to keep in effect which primarily determined the probable use to which the subject property could be put.

Even so, the board concludes that the "major public open space" designation should be disregarded in determining highest and best use. This conclusion does not involve an application of section 33(g) of the Act but is, instead, an acceptance of Mr. Umlah's argument that municipal park acquisitions are typically based upon the value of the property under its alternative highest and best use. The respondent in argument also appeared to recognize this practice. As respondent's counsel stated in her written submissions:

A City is not entitled to down zone a property in order to depress the value for possible acquisition; however, a City is entitled to refuse to rezone an area that has been designated for future public use with the intention of acquiring properties at the market value for the established zoning. [Emphasis added]

In any case, neither appraiser performed a market valuation of the subject property based on its potential to become parkland.

This leaves for consideration the question of why in early 1990 the City of Port Moody declined to proceed, as earlier contemplated, with redesignating and rezoning the subject property and others nearby for multiple family residential use. The lack of any solid documentary evidence led the appraisers to speculate as to the possible reasons. Mr. Umlah, while acknowledging that he did not know, suggested at page 22 of his report: "it may have been that the City rescinded on the multi-family residential proposal due to their interest in acquiring the site for Park." Mr. Mason was rather more definitive. Based on discussions he said he had with the city administrator, he concluded that council's original resolution to consider possible changes to the OCP and the zoning in December, 1988 was prompted by an application from an adjacent owner to construct an industrial building on his property. At page 21 of his report, Mr. Mason wrote:

The motive for this resolution was to gain Council time to consider whether they wanted to proceed with the OCP amendment and rezoning, by deferring consideration of the industrial development for the subject [sic] for up to 90 days.

As it turned out, Mr. Mason's observations were drawn from an appraisal report on the adjacent property prepared by a different appraiser in 1993.

While Port Moody's short-lived consideration of a change to its OCP and zoning bylaw created a possible window of opportunity for the claimant to attempt to develop the subject property for multiple family residential use, it did not, in the board's view, establish a change of direction in the City's long range planning objectives for the area.

Conspicuously absent from either Mr. Umlah's or Mr. Mason's reports was any suggestion that the respondent's proposed development may have played a role in Port Moody's decision not to rezone. Indeed, the only evidence to that effect was the claimant's testimony about his discussions with one city official. That evidence was cast in serious doubt by Mr. Mason's testimony that he had checked with the current director of personnel for the City and learned that the official in question had left its employ long before the decision was made. In these circumstances, the board concludes that the claimant's evidence in this regard was mistaken.

This case is clearly distinguishable from those, such as Wascana, Vision Homes and Devick, in which a causal connection was found between the enactment of municipal bylaws, or the refusal by a municipality to rezone, and an expropriating authority's scheme. Here, on the preponderance of evidence, such a nexus simply has not been established. Nor can it be said, in the board's view, that the respondent's Barnet/Hastings People Moving Project was on the same footing as the "scheme" referred to in Wilson, wherein Lord Denning made his often quoted observation about the progressive effect on values of an expropriating authority's scheme as it becomes better known and more precise. There was no cogent evidence before the board in this instance from which it could reasonably infer that Port Moody's decision in January, 1990 not to rezone the subject property was influenced by the respondent's highway project, the general scheme of which was first publicly announced some months later. Accordingly, section 33(g) of the Act has no application in this matter so as to exclude Port Moody's decision from consideration in determining market value.

After considering all of the foregoing evidence bearing on the question, the board concludes that rezoning of the subject property for multiple family residential development as at the date of expropriation was not only improbable but was most unlikely. In the board's view, its highest and best use was for light industrial development in conformity with the existing M-1 zoning.

The board defers to the later discussion of the claims for disturbance damages its consideration of the further question as to whether highest and best use was the same as, or different than, existing use.

 

5.  MARKET VALUATION

Having found that the highest and best use of the subject property was for light industrial as zoned, the board must next determine the relevance of the expert appraisal evidence in coming to its determination of market value as of August 2, 1995, the date of expropriation. Both appraisers relied on the direct comparison approach in order to arrive at their own estimations of value.

5.1  The Claimant's Case

Mr. Umlah for the claimant used 14 land sales where the prices paid ranged from $12.77 per square foot to $36.11 per square foot. The first six sales were of parcels all zoned for either light or heavy industrial development. They included, as his comparable no. 2, a parcel at 2300 Clarke Street, west of the subject property, which sold in April, 1995, at a price equating to $15.07 per square foot. The parcel was improved with an old, steel frame industrial building which Mr. Umlah considered of nominal value. Although zoned light industrial, it was designated in the OCP for future "low-medium density residential/adaptable commercial" use and therefore, in Mr. Umlah's opinion, possessed some future redevelopment potential, although at a lower density than what the subject property could have achieved for multi-family residential use. For this reason, and because of what he considered the subject property's superior general location, Mr. Umlah concluded that the subject property would have attracted a higher rate per square foot than that suggested by the sale of this comparable no. 2.

A primary focus for Mr. Umlah was his comparable no. 4, a parcel adjacent to the subject property to the west, at 3000 Murray Street, which was acquired by the respondent in May, 1994 at a price which Mr. Umlah equated to $16.80 per square foot. In the course of the hearing this comparable came to be known as the "Evon property" after the name of the vendor. Mr. Umlah found that upward adjustments would be necessary when comparing this site to the subject property, even though they were similar in size, location and use potential and were both acquired for the same purpose. The distinction requiring adjustment, in Mr. Umlah's view, was for the adverse topography of this comparable in that Slaughterhouse Creek along its western boundary would have necessitated fill and piles to support high density development. Useable site area would likely have been reduced, he thought, as a result of additional set back requirements from the creek. With some offset, unquantified, for what he described as slightly superior market conditions when this comparable was acquired, the rate paid provided Mr. Umlah with a lower limit of value for the subject property.

Next, Mr. Umlah turned his attention to his comparable no. 6, a parcel situated at 3140 St. John's Street, at the northeast intersection of St. John's Street and Electronic Avenue, approximately two blocks southeast of the subject property. This parcel was zoned M-3 (heavy industrial) but was designated in the OCP for future "high density mixed residential, commercial and institutional" uses. Registration of the sale in December, 1995 was prefaced by a rezoning application from the purchaser in 1994 to allow 254 residential units and 12,600 square feet of commercial space. The application was approved in 1996, and Mr. Umlah's report contains a photograph of the now completed project. Dedications reducing the site area from 4.8 acres to 4.05 acres resulted in a price paid for the net development area of $19.26 per square foot.

Adjustments required with respect to comparable no. 6 included size, location and risk. The parcel was larger and in an inferior location, but embodied less risk in achieving multi-family use. Mr. Umlah applied an upward adjustment of 30% for size and location and a downward adjustment of 15% to reflect his view of the greater risk associated with achieving multi-family use on the subject property. The net upward adjustment of 15% produced a rate of $22.15 per square foot of site area for the subject property.

Mr. Umlah then reviewed his comparable nos. 7 through 14, all of which he considered offered potential for medium or high density multi-family residential apartment use. Considering the size and location of the subject property relative to these eight indicators, he concluded that a rate of $30.00 per square foot could have been obtained once it was rezoned and approved for high density multi-family residential development. As Mr. Umlah stated in his report, the subject property was valued as a holding site for future multi-family residential development within three to ten years. Consequently, he applied a discount of one third from the above rate to allow for costs of rezoning, holding, marketing, profit and risk, resulting in a final estimated rate of $20.00 per square foot. Mr. Umlah applied the discounted rate to the 43,568 square foot site in order to arrive at his final estimation rounded to $870,000 as being the market value of the land and buildings. No conclusion as to market value was arrived at by Mr. Umlah for the subject property as zoned for light industrial use.

5.2  The Respondent's Case

Mr. Mason for the respondent, in performing his direct comparison analysis, used five land sales, four of which were common to Mr. Umlah's industrial comparables and one of which was zoned for commercial use only. Additionally, he referred to the sales of four small lots on Murray Street and its vicinity which occurred between May, 1993 and August, 1996. Mr. Mason did not consider these four small lot sales as comparables due to size but included them in order to demonstrate, he said, that there appeared to be little or no fluctuation in the value of industrial sites during that period. One of them, a parcel at 84 Moody Street, was used by Mr. Umlah as one of his industrial comparables.

Of the four industrial land sales that he used to derive a conclusion of value, Mr. Mason maintained that the best comparable was the adjoining Evon property, his comparable no. 2, which Mr. Umlah also relied upon as his comparable no. 4. Mr. Umlah treated the two properties as having the exact same site area, some 43,568 square feet, while Mr. Mason indicated that the Evon property was slightly larger, at 43,690 square feet. This accounts for their difference in price per square foot for the Evon property sale which Mr. Umlah states at $16.80 and Mr. Mason at $16.75. After reviewing all of the appraisal information before it on this small point, the board prefers Mr. Mason's number.

In May, 1993, both the Evon property and the subject property had been appraised at the same value of $640,000 by a firm of appraisers not called to give evidence at this hearing. This value was predicated on multiple residential development and assumed that no unusual soil conditions were present for either site.

Another appraisal of the Evon property valued as of February, 1993 was entered into evidence at the hearing. This appraisal was based on its highest and best use as an industrial development site, and concluded a value of $321,000 – almost precisely one half of the value found under the multi-family option. While this appraisal specifically excluded consideration of the environmental status of the property, it did take into account the presence of the adjoining Slaughterhouse Creek and its impact on value. That portion of the property indicated as setback was valued at $8,000. An unsupported downward adjustment of $42,400 was allowed for fill and bank stabilization. As with the report at $640,000, this appraiser was not called to testify at the hearing.

Mr. Mason had made no particular reference to the impact of the creek on value other than to say that the Evon property was low lying below road grade. Under questioning, he asserted that a two level building which had been designed by the owner to take advantage of the topography was more efficient. He produced a copy of an old plan depicting the relationship between road, creek, and a proposed building of 26,076 square feet. This plan also showed a 180 foot long concrete retaining wall, seven to eight feet in height, between the existing creek and a planned driveway to be situated over a filled-in, eroded creek bed. Mr. Mason made no upward allowance in his report for the costs associated with this work. In fact, his analysis considered a minus adjustment appropriate because, he suggested, until the adoption of bylaw no. 2203 in October, 1994, amending the 1992 OCP, there continued to be speculation that the Evon property and other large parcels nearby could be rezoned for multiple family residential development, thus creating higher land values.

Mr. Mason's other industrial sales comparables were 2300 Clarke Street at $15.07, 2419 Columbia Avenue at $15.34, and 50 Electronic Avenue at $12.59 per square foot respectively. Each required some form of adjustment, whether for a building on the site, or for size, zoning or location. Without disclosing the mechanics of the adjustment process, he concluded that $15.00 per square foot was the market value of the subject property comprising 43,568 square feet. This resulted in his final estimation of market value rounded to $655,000.

5.3  Analysis and Conclusion

Leaving aside those sales of parcels which Mr. Umlah identified as having potential for multi-family residential development, there remain for primary consideration five industrial sales of properties used by the two appraisers who gave evidence at the hearing. These are: the property at 84 Moody Street, a much smaller site of 8,712 square feet that sold for $22.61 per square foot in November, 1994; 50 Electronic Avenue comprising 138,956 square feet that sold for $12.59 per square foot in December, 1989, and reportedly resold for the same price in February, 1998; 2300 Clarke Street, a 24,879 square foot parcel that sold for $15.07 per square foot in April, 1995; the property at 2419 Columbia Street, a site of 35,784 square feet that sold for $15.34 per square foot in February, 1995; and the adjacent Evon property of 43,690 square feet that sold for $16.75 per square foot in May, 1994.

According to both appraisers, the sale of 84 Moody Street set an upper limit whereas the sale of 50 Electronic Avenue set a lower limit, both on account of size. Within this range, the indicators are: first, $15.07 per square foot for 2300 Clarke Street; second, $15.34 per square foot for 2419 Columbia Street; and third, $16.75 per square foot for the Evon property at 3000 Murray Street.

The first indicator, the property at 2300 Clarke Street (Umlah's comparable 2; Mason's comparable 3) is somewhat smaller than the subject property and, although zoned light industrial, was designated in the OCP for what would appear to be a more intensive and diversified use. While Mr. Umlah considered that an upward adjustment to this sale comparable was required for location and density potential when valuing the subject property for multi-family residential development, Mr. Mason was of the view that a downward adjustment needed to be made to account for the value of the steel frame industrial use building on site when valuing the subject property for light industrial development. Notwithstanding the differing treatments accorded this comparable by the appraisers, the board views it as a good industrial site not far west of the subject property which offers a useful comparison.

The second indicator, the property at 2419 Columbia Street (Umlah's comparable 3; Mason's comparable 4), zoned M-3 and destined for heavy industrial use in the OCP, is reasonably close in size to the subject property and its date of sale is nearest of any of the comparables to the date of expropriation. Mr. Mason was of the opinion that there was little significant difference in value between sites zoned M-1 and M-3. Like the subject property, this parcel is close to Port Moody Bay along Burrard Inlet. The price paid was based on appraised values. Fencing and gravel surfacing of the vacant site allowed for vehicle parking, presumably capable of generating some holding income prior to development if necessary. The subject property also derived some holding income in the form of rental revenue from the two residential dwellings on site.

Mr. Mason applied to this comparable what he termed off-setting adjustments for size, zoning and location, presumably leaving the rate paid of $15.34 per square foot intact. Mr. Umlah had no particular comment in his narrative regarding this sale. The board views it as another useful comparable, given its similarities to the subject property.

The third indicator was the adjoining Evon property at 3000 Murray Street (Umlah's comparable 4; Mason's comparable 2). Several considerations could militate against direct comparison of this sale with the subject property. The first is Mr. Mason's suggestion that there had been speculation that this parcel and other properties nearby may have been candidates for rezoning to allow multiple family residential development, thereby creating higher land values at the date of sale. The second is the fact of its acquisition by the respondent for $16.75 per square foot against an appraisal commissioned by the respondent which Mr. Mason testified was at $14.80 per square foot. The third is the fact that the site was impacted by Slaughterhouse Creek and was low lying.

With respect to the first consideration, it is true that in the roughly one year period prior to January, 1990, some potential for multifamily use might have existed for both the Evon property and the adjoining subject property. Like the subject property, the Evon property was one of those identified in Port Moody council's resolution of December 20, 1988 for possible redesignation and rezoning. It was the council resolution of January 15, 1990 that effectively put paid to any such speculation. Whether the adoption of bylaw no. 2203 in October, 1994 confirmed the extinguishment of that potential, as Mr. Mason maintained, is slightly unclear, because the boundaries for Moody Centre shown in the amended OCP plan at that time actually excluded the subject property. What is clear, however, is that bylaw no. 2203 affirmed that existing light industrial areas would generally be maintained. On the totality of the evidence before it, the board rejects the respondent's suggestion that a downward adjustment to the sale of the Evon property is necessary because of rezoning speculation as late as 1994.

As to the second consideration -- the inference that the sale of the Evon property is clouded -- the board is privy to no evidence that the rate paid of $16.75 per square foot represented anything other than the market value of the property. An appraisal at $14.80 per square foot does not in itself indicate that the price paid was too high, for there may have been other appraisals. While an issue can be raised as to the freedom of negotiations where the acquisition is by an authority with the power to expropriate, such a sale is acceptable as evidence of value when its admissibility is not effectively questioned. Both appraisers used this sale and both asserted that it offered the best indication of value. The only question in this respect is whether too high a price was paid. The respondent simply left it to the appraiser to make such an observation without actually calling evidence from the parties to the transaction. The board draws from this an inference that the price paid did in fact reasonably represent market value. A submission in argument that the price paid for the Evon property exceeded market value because of the respondent's desire to acquire it without lengthy and costly expropriation proceedings is no substitute for direct evidence and is rejected by the board.

With respect to the third consideration, Mr. Umlah testified that the Evon property had inferior topography and soil conditions and that it was partly encumbered by a ravine containing Slaughterhouse Creek extending along the west boundary, requiring fill to render it suitable for multifamily residential development. On the other hand, Mr. Mason claimed that the topography permitted a more efficient two-level industrial building.

The board notes, in considering these two conflicting positions, that a consultant's geotechnical report entered in evidence noted the presence of loose surface fill and very soft clayey silt at depth on both the Evon property and the subject property. An appraisal report on the Evon property by International Property Consultants ("IPC") in March, 1993 reduced the value of that portion of the land likely to be affected by creek setback and allowed some $42,400 for fill and bank stabilization to permit industrial use. However, a further report for the respondent by Johnston, Ross & Co. Ltd. in June, 1993 placed the same value of $640,000 on each of these two properties.

Any upward pressure on the Evon sale as a comparable due to the presence of the creek and other topographical features is, in the board's view, offset by several factors. These include Mr. Mason's persuasive evidence regarding efficiencies likely to be achieved on site by the creation of a two level development. This evidence helps to overcome the concern raised as a result of the IPC report which focused on the trend toward creation of only single storey buildings, consequently allowing for no potential value in density transfer. Other factors include the fact that both the Evon property and the subject property had been valued in another appraisal report at the same amount, and the market evidence of the prices paid for other comparables, in particular, for 2419 Columbia Street at $15.34 per square foot and for 2300 Clarke Street at $15.07 per square foot. Accordingly, the board will draw no adverse conclusion on account of the topography and creek that would require an upward adjustment to the rate paid for the Evon comparable.

In the result, the sale of the Evon property is given most weight by the board, subject to any possible adjustment for time.

As to the need for a timing adjustment, both appraisers commented on fluctuations in market prices for land in the area. Mr. Umlah said that there had been a general increase from 1989 through 1993 and early 1994, with a softening of prices in late 1994 into the spring of 1995 and, in fact, continuing into 1996. He testified that at the date of taking, August 2, 1995, values were softer than in the previous year. Mr. Mason referred to the table in his report reviewing the sales of smaller lots on Murray Street and its vicinity, portraying little movement in price levels for small parcels of land from May, 1993 through August, 1996, the one anomaly being a corner site acquired for a possible rapid transit station. He pointed out that the same price was paid in February, 1998 for 50 Electronic Avenue (Umlah's comparable 5; Mason's comparable 5) as was paid in December, 1989, suggesting that, if prices had increased or decreased in the interim, they had returned to earlier levels some two and a half years after the taking.

Provided with hard evidence only from Mr. Mason, the board is not persuaded that a time adjustment should be applied to the Evon property sale. This transaction, at $16.75 per square foot in May, 1994, while at a higher rate than the sale of 2419 Columbia Street at $15.34 per square foot and 2300 Clarke Street at $15.07, represents the most compelling evidence of value for the subject property. In the board's view, the rate derived from the Evon property sale requires no adjustment for location, topography, size, zoning or improvements.

For the subject property's area of 43,568 square feet, application of this rate results in the rounded amount of $730,000, which the board concludes is the appropriate measure of compensation for market value of the subject property as of the date of expropriation.

 

6.  DISTURBANCE DAMAGES

6.1  Existing Use and the Application of Section 31(1)

Before turning to the claimant's claims for disturbance damages pursuant to section 34, the board must consider whether the existing use of the subject property at the date of expropriation was the same as, or different from, its highest and best use. The question arises in light of section 31(1) of the Act, which provides:

31. (1) The board must award as compensation to an owner the market value of the owner's estate or interest in the expropriated land plus reasonable damages for disturbance but, if the market value is based on a use of the land other than its use at the date of expropriation, the compensation payable is the greater of
(a) the market value of the land based on its use at the date of expropriation plus reasonable damages under section 34, and
(b) the market value of the land based on its highest and best use at the date of expropriation.

The claimant was in the development business and the board is satisfied that he acquired the subject property in 1983 as a holding site for future development. He testified that he initially attempted unsuccessfully to gain municipal approval to construct a warehouse on it in conformity with the existing M-1 (light industrial) zoning. Some years later, in 1989 and 1990, he unsuccessfully pursued efforts to have the subject property rezoned for multi-family residential use. Between that time and the date of taking, there is no real evidence of ongoing development efforts. At the date of expropriation, the subject property remained unimproved except for the two residential dwellings which continued throughout the period to provide the claimant with a modest amount of holding income, some $1,200 per month gross. At that date, the board has determined the highest and best use of the subject property, but for the taking, to have been for light industrial development in conformity with the existing zoning.

In Peter Panagiotis Daflos et al. v. The Board of School Trustees of School District No. 42 (Maple Ridge-Pitt Meadows), unreported, E.C.B. No. 39/94/176, November 25, 1999, the board reviewed at some length the factors to be considered when deciding, in a particular case, the existing use of a parcel of land and whether that use is the same as its highest and best use. At page 41 of the decision, it stated:

. . . the board considers that existing use cannot be determined merely by reference to the subjective intentions of the particular owner either at the time of purchase or at the date of expropriation. It is also necessary to take into account what practical use the owner was making of the property at the date of taking. The case for equating highest and best use with existing use seems strongest where the property in question is vacant and non-producing land in the process of being developed or simply being held for its future development potential. It is perhaps weakest where, despite having recognized future development potential, the property is already substantially improved for, say, residential use and is owner-occupied.

Notwithstanding the subsidiary rental use which the claimant was able to make of the subject property pending redevelopment, the board is satisfied that the overall facts of the present case support equating highest and best use with existing use. Accordingly, under section 31(1), the claimant is entitled to reasonable damages for disturbance in addition to an award for compensation for market value of the subject property based on its highest and best use.

6.2  The Claim for Costs Expended to Pursue Rezoning

Under section 34(1)(a) of the Act, an owner whose land is expropriated is entitled to disturbance damages consisting of the "reasonable costs, expenses and financial losses that are directly attributable to the disturbance caused to the owner by the expropriation." The claimant has asserted a claim for reimbursement from the respondent of the sums which he says he expended in attempting to have the subject property rezoned by the City of Port Moody for multi-family residential use in 1989 and early 1990, amounting to $23,500.

The central difficulty with the claimant's claim is, of course, that his failed development effort has been found by the board to have had nothing to do with the respondent's project or the subsequent expropriation. Port Moody's rejection of the claimant's proposal was an independent planning and zoning decision. It follows that this claim for disturbance damages must be dismissed.

6.3  The Claim for Property Purchase Tax

Under section 34(1)(b), an expropriated owner is entitled to disturbance damages for the "reasonable costs of relocating on other land, including reasonable moving, legal and survey costs that are necessarily incurred in acquiring a similar interest or estate in other land." The claimant has asserted a claim in the amount of $22,420 for reimbursement of property purchase tax payable in acquiring replacement land similar to the subject property.

When making its initial advance payment to the claimant on July 24, 1995, the respondent included a property purchase tax allowance of $11,000. Property purchase tax in British Columbia is assessed on the basis of 1% of the first $200,000 of the purchase price and 2% of the remainder. The respondent's payment was calculated, using these prescribed percentages, on its original estimate of $650,000 as being the market value of the subject property. The respondent also paid to the claimant at that time a $1,000 conveyancing allowance.

The board in other cases has awarded both property purchase tax and reasonable conveyancing costs with respect to an owner's acquisition of replacement property where it has been satisfied that such costs have actually been "incurred" at the date of the compensation hearing: see, for example, Okanagan Dairy Transport Ltd. v. Vernon (City) (1995), 57 L.C.R. 211 at pp. 246-247; Ferancik v. Langley (City) (1996), 60 L.C.R. 123 at p. 138; Hawk Investors Ltd. v. British Columbia (Minister of Transportation and Highways) (1999), 66 L.C.R. 94 at pp. 106-108.

However, the board has also held that the onus is upon the expropriated owner to establish that these costs or expenses have actually been incurred before it can consider awarding compensation for such alleged damages: see McKinnon v. School District No. 36 (Surrey) (1994), 54 L.C.R. 23 at pp. 40-41.

In the present instance, the claimant led no evidence of his having acquired a replacement property or of even having made any efforts to do so. Since the onus to prove actual expenses incurred has not been met, this claim for disturbance damages is also disallowed.

 

7.  INTEREST

Section 46(1)(a) of the Act provides that the expropriating authority must pay interest on any amount awarded in excess of any amount paid by the expropriating authority under section 20(1) or (12) or otherwise, to be calculated annually, on the market value portion of compensation, from the date that the owner gave up possession.

The respondent made two advance payments under section 20 totalling $667,000 plus an amount in respect of interest on the second advance payment . The board has determined compensation for the market value of the subject property at $730,000. Therefore, the claimant is entitled to interest under section 46(1)(a) on the excess amount awarded of $63,000. Under section 46(2), interest is payable at an annual rate that is equal to the prime lending rate of the banker to the government. Account must be taken of the interest payment already made by the respondent on May 27, 1998 in the amount of $888.87.

In his statement of claim, the claimant calculates that interest should run from March 30, 1995, which is the date at which the expropriation notice was issued. However, there was no evidence or argument to suggest that the claimant gave up possession of the subject property at this date rather than on August 2, 1995, the date of expropriation. Accordingly, the board finds that interest pursuant to section 46(1) on the excess amount awarded is to run from August 2, 1995.

The advance payments made by the respondent to the claimant under section 20 constitute approximately 91.4% of the compensation awarded. Therefore, the provision under section 46(4) for additional interest does not apply.

 

8.  COSTS

As a result of the hearing, the claimant has been awarded $730,000 in compensation. This award amounts to approximately 109.4% of the advance payments already received. The board therefore has a discretion in this matter with respect to costs pursuant to section 45(5) of the Act, which provides:

45. (5) If the compensation awarded to an owner is 115% or less of the amount paid by the expropriating authority under section 20(1) or (12) or otherwise, the board may award the owner all or part of his or her costs.

In the board's view, it was reasonable for the claimant, in the face of the advance payments already received, to pursue his claim to a compensation hearing in order to obtain a determination of whether the subject property could be valued for future multi-family residential development at the date of expropriation, albeit the evidence in support of such a valuation was rather narrowly confined to a period some six years prior to the date of taking. The board ultimately rejected that valuation but was nevertheless persuaded that the subject property, even when valued for light industrial development at its existing zoning, was worth more than what the respondent paid on that account. On the other hand, the board considers that the claimant's theory of "project influence" involving the respondent, which the board rejected, was founded on the most tenuous of evidence and should not have been pursued in the absence of better evidence. So, too, was the assertion that the respondent should be held liable for costs thrown away in pursuing rezoning. A review of the decided case law would also have revealed that the claimant's claim for property purchase tax where no replacement property had been acquired could not succeed.

Taking into account the foregoing considerations, the board is of the view that the claimant should be entitled to reimbursement from the respondent of 90% of his actual reasonable legal, appraisal and other costs incurred for the purpose of asserting his claim for compensation and damages.

 

THEREFORE IT IS ORDERED THAT

(1) The respondent shall pay compensation to the claimant in the amount of $730,000 for the market value of his fee simple interest in the expropriated subject property pursuant to section 31(1) of the Act.
(2) The respondent shall pay interest to the claimant pursuant to section 46(1) of the Act on the amount in item (1) from and including August 2, 1995, until paid, with adjustments to take into account moneys paid by the respondent to the claimant as compensation pursuant to section 20(1) and (12) of the Act and as interest. Pursuant to section 46(2) of the Act, interest shall be calculated annually at the following rates:
(a) Eight and three-quarters per cent (8.75%) from August 2, 1995 to December 31, 1995;
(b) Seven and one-half per cent (7.5%) from January 1, 1996 to June 30, 1996;
(c) Six and one-half per cent (6.5%) from July 1, 1996 to December 31, 1996;
(d) Four and three-quarters per cent (4.75%) from January 1, 1997 to June 30, 1997;
(e) Four and three-quarters per cent (4.75%) from July 1, 1997 to December 31, 1997;
(f) Six per cent (6.0%) from January 1, 1998 to June 30, 1998;
(g) Six and one-half per cent (6.5%) from July 1, 1998 to December 31, 1998;
(h) Six and three-quarters per cent (6.75%) from January 1, 1999 to June 30, 1999;
(i) Six and one-quarter per cent (6.25%) from July 1, 1999 to December 31, 1999.
(3) The claimant's claims pursuant to section 34(1) of the Act for compensation for costs expended to pursue rezoning and for property purchase tax to purchase similar property are hereby dismissed.
(4) The respondent shall pay to the claimant 90% of his 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