January 13, 1997, ECB Control No.
2/94/133 (60 L.C.R. 218)
Marie Warlow and Fritz Foste
Majesty The Queen in Right of the Province of British
Columbia as Represented by the Minister of Transportation
W. Shorthouse, Chair
Lesley Eames, AACI, Board Member
Julian K. Greenwood, Board Member
S. Cosburn, for the Claimants
Alan V.W. Hincks, for the Respondent
The "Pat Bay Highway" leads from
downtown Victoria out the Saanich peninsula to the town
of Sidney, the airport and ferry terminals. In 1993
this highway was being upgraded to carry more traffic
and limit the number of access points. The anticipated
Commonwealth Games in August 1994 was one reason for
the timing. In the area of concern a major new intersection
was built, and the highway was widened and moved. An
eight foot wall was put up to separate a local residential
area from the highway, and houses that had previously
fronted onto the highway now found themselves on a side
road behind this wall.
This case concerns a property (the
"subject property") in that residential area. It was
unique for the area in that it was the only commercial
property. It had been adapted for mixed retail and residential
use some years ago, when the road was less busy. It
had faced onto, and been directly accessible from, the
After the construction, the subject
property was barely visible from the highway, and was
no longer directly accessible. Its usefulness as a retail
site appealing to users of the highway was much reduced,
if not eliminated altogether. The owners came to the
Expropriation Compensation Board (the "board") to say
that although the subject property had not been "expropriated"
in any physical sense, nevertheless it had lost value
because of the highway development. The question is
whether they have a right to be compensated, and if
so, for how much.
Douglas Street is a major north-south
thoroughfare in Victoria which merges into the Pat Bay
Highway as one drives out of town. This highway serves
the growing populations of Sidney and the Saanich Peninsula.
It is also the principal route to the airport and the
B.C. Ferries terminal at Swartz Bay.
The subject property, located at
3891 Douglas Street, in the Municipality of Saanich,
is zoned C-1 Local Commercial and was used for over
50 years as a mixed use residential/commercial property.
It lies in a neighbourhood which is otherwise completely
residential, and which backs onto the Swan Lake Nature
Reserve. In this decision this area is referred to as
The configuration of the subject
property is a standard lot which slopes downward away
from Douglas Street. The principal building comprised
retail space on the main floor with separate living
quarters in the rear. The basement, which was finished
and rented out as storage space, was accessed at grade
from the rear. There was also a secondary building leased
in three modules for storage.
Until 1993, the location of the subject
property allowed it to serve northbound highway traffic,
which could turn right directly into its parking area.
Southbound traffic could not easily make a left turn
to access the subject property because of the double
yellow centre line at that location.
The respondent Ministry of Transportation
and Highways ("MoTH") reconstructed the highway in such
a way as to separate the subject property and its neighbours
entirely from the highway. The highway was relocated
some distance to the west, and that portion of Douglas
Street became a separate road, serving only the houses
in the immediate block. A major new intersection was
constructed at McKenzie Avenue, just to the north of
the neighbourhood. Direct access between the highway
and the neighbourhood was cut off. To get to the neighbourhood
from the highway, motorists now have to exit by way
of a ramp onto McKenzie Avenue.
When this highway project was being
planned, there was considerable public input. Plans
were drawn up and lodged in the Saanich Municipal Hall,
where the public could study them. A ratepayer's group
expressed concern over traffic noise and safety issues.
It agitated for a sound barrier beside the highway,
and made submissions on the design of access points
to McKenzie Avenue, including the location of traffic
lights and the provision of a pedestrian overpass. As
a result of these discussions, MoTH altered its original
plans in various respects.
Two particular changes in the plans
became the focus of attention during the compensation
hearing. One was the installation of an eight-foot high
concrete wall separating the highway from the now orphaned
stretch of Douglas Street and the subject property.
The original plan had called for a low wall, some three
to four feet in height, sufficient to protect the properties
from the glare of headlights. The higher wall was MoTH's
response to the residents' request for a better sound
barrier. It also had the effect of making the neighbourhood
buildings largely invisible from the road. Only the
roofs and upper floors are now visible to highway drivers.
The second change drawn to the board's
attention involved access to the neighbourhood from
McKenzie Avenue. Two side roads were available. The
one nearest the highway was Rainbow Street. The next
one, some distance further east along McKenzie, was
Nelthorpe Street. In the original design, a car would
be able to enter Rainbow from either direction off McKenzie,
and could likewise exit Rainbow turning either left
or right onto McKenzie. However, this Rainbow/McKenzie
intersection would have required a traffic light, and
such a light would have been uncomfortably close to
the main highway intersection. MoTH felt, or was persuaded
by the public comments, that it would be unsafe. The
decision was therefore made to take out the traffic
light, and instead limit Rainbow to what was described
as "right-in, right-out" traffic movement. Pedestrians
were provided with a bridge over McKenzie Avenue at
Rainbow. The traffic light planned for Rainbow was instead
used at Nelthorpe.
These changes to the intersection
plans on McKenzie Avenue had no effect on eastbound
traffic seeking to enter the neighbourhood from the
highway. Such traffic would still exit the highway at
McKenzie and turn right at Rainbow into the neighbourhood.
However, to get out of the neighbourhood and back onto
the highway now required a more circuitous route. It
became necessary to drive some distance along residential
municipal streets east to Nelthorpe in order to turn
left onto McKenzie and return in a westerly direction
to the highway.
The claimants, Mr. Foste and Ms.
Warlow, decided to purchase the subject property in
late 1992. The date is significant because the plans
to rebuild the highway and the McKenzie intersection
were already well known, and the public discussion process
described above was going on at the time. The final
decisions on the sound barrier and the McKenzie Avenue
intersections had not yet been made, however. Those
changes happened about a year later, at the end of 1993.
The purchase was made in the name
of Ms. Warlow only, although she and Mr. Foste were
living common law. Mr. Foste testified that in fact
the purchase was a joint affair. He had contributed
money to the purchase, and thereafter he continued to
handle the administration of the subject property. He
was presumably included as a claimant because he has
a right to live there by virtue of his relationship
and agreement with the legal owner, and arguably has
an equitable interest sufficient to fit him within the
definition of "owner" in the Expropriation Act,
S.B.C. 1987, c. 23 (the "Act"). In its reply to the
claimants' application for determination of compensation,
MoTH alleged that Mr. Foste had no interest, estate,
right or title in or to the subject property and denied
that he was entitled to any compensation. However, the
issue of who were properly the claimants in this matter
was not pursued at the hearing, and the board considers
it unnecessary in the overall result to make a finding
on that point.
Mr. Foste gave evidence about his
investigations prior to purchasing the subject property.
He said that he was looking for a small commercial/residential
property which would develop revenue. The visibility
and accessibility of the subject property from the highway
were important to him and to the tenants he expected
to have in its retail premises. He was advised that
33,000 cars per day passed the site. His inquiries,
which were based in part on the plans he viewed at MoTH's
offices, and on the plans lodged at the municipality,
led him to believe there would be a one-metre high "glare
shield" separating the property from the new highway,
and that the Rainbow/McKenzie intersection would have
traffic lights allowing movement onto McKenzie from
Rainbow in either direction. On these assumptions, Mr.
Foste felt that the subject property would continue
to be viable for both residential and commercial use,
situated so as still to be able to attract business
from the highway. Signage would be easily seen from
the highway, and access, though no longer direct, would
not be too difficult. The fact that that stretch of
Douglas Street would no longer be part of the highway
did not bother him. He saw it as enabling parking on
the street in front of the store. He and Ms. Warlow
decided to buy the subject property with the intention
of living in the residential quarters, while renting
out the commercial areas. They completed the purchase
in early 1993.
The claimants found the premises
on the subject property in a vacant and somewhat rundown
condition. The vendors were residents of Italy whose
local property manager, Mario Moccia, was interested
in becoming the claimants' first tenant and running
a delicatessen operation in the retail portion. The
interim purchase agreement was signed December 6, 1992,
and the store area was leased to Mr. Moccia that same
month. Soon after, Mr. Foste began a major renovation.
He estimated its cost at $90,000, although this number
included a value for his own time. Title to the subject
property was actually registered to Ms. Warlow on February
9, 1993, and the claimants finished their renovations
and moved in about this date.
Subsequently, the highway project
plans were altered from those Mr. Foste had seen in
late 1992. The one metre fence referred to by Mr. Foste
became an eight foot fence, and the Rainbow/McKenzie
intersection was redesigned. The new fence went up around
the end of 1993. These changes, Mr. Foste suggested,
made it essentially impossible to attract highway business
to any kind of retail operation. The deli tenants were
very unhappy and refused to pay their rent. They eventually
moved out in May 1994, and attempts to re-rent the area
for a similar use were unsuccessful. The commercial
rental value therefore declined, and the building had
to be renovated again (at a cost, according to Mr. Foste,
of $16,500) to convert the retail area to office use.
These extra costs and the loss of rental value, he maintained,
were directly related to the changes in highway design.
The claim is for compensation for
injurious affection where no land has been taken within
the meaning of s. 40 of the Act. This kind of claim
has occasionally been referred to as one for "pure injurious
affection" in past decisions of the board, but in light
of the discussion of that term in E.C.E. Todd, The Law
of Expropriation and Compensation in Canada, 2nd ed.
(Toronto: Carswell, 1992), at p. 332, where its use
has been linked with partial takings, it would be preferable
to avoid using it here. In this decision, unless otherwise
indicated, all references to "injurious affection" should
be understood to mean injurious affection where no land
is taken, in the meaning of s. 40 (2).
Claimants' counsel, Mr. Cosburn,
in his opening statement, summarized the monetary claims
a. Reduction in value of the land
as a result of the changed configuration of the highway
b. Costs pursuant to s. 44 (6)
of the Act. (Section 44 (6) gives the Board discretion
to award costs to either party where the claim is
for injurious affection with no land taken.)
c. Interest on the amount awarded
from January 1, 1994. (This is the approximate date
when the new high fence and intersection changes were
The threshold issue in this case
is whether the claimants have any right to compensation
in the absence of an expropriation merely because a
public work has been constructed in the vicinity of
the subject property, negatively affecting its value.
However, even if there is no right
of compensation arising simply from the construction
of the highway, can there nevertheless be a claim based
on the publication of plans which are later changed?
This is the real basis of the claimants' argument in
this case. Mr. Cosburn acknowledged that his clients
could not claim for the loss of access and visibility
which was inherent in the original highway design, since
they knew about those plans when they bought the subject
property. But the highway designs changed after the
claimants had committed themselves to buy, and those
changes, he submitted, further reduced its value.
If there is a right of compensation
in these circumstances, is it a claim that is within
the jurisdiction of the board? The board only has jurisdiction
assigned to it by statute. It is not empowered, for
example, to assess claims for common law nuisance, nor
can it rule on whether MoTH is liable in negligence.
Finally, if there is a compensable
claim within the jurisdiction of the board, what is
the proper amount of compensation? This question need
only be faced in detail if the earlier questions are
decided in the claimants' favour.
5. ENTITLEMENT TO COMPENSATION
5.1 Is there statutory authority
for the claim?
A claim for injurious affection is
statutory in nature. The statutes authorizing the construction
of highways and other public works have the effect of
taking away common law rights of action such as claims
in nuisance; thus, any right to compensation must be
a replacement right found in the statutes. It is also
established law that there is no "presumption" in favour
of compensation for injurious affection, although there
is often said to be such a presumption in the case of
an expropriation: Tener v. R. (1985),
32 L.C.R. 340 (S.C.C.), per Wilson J. at pp. 360-1,
citing Sisters of Charity of Rockingham v. R.
 2 A.C. 315 (J.C.P.C.). Where there is no taking,
therefore, the claimants must show that a statute expressly
or by necessary implication grants a right to compensation.
In this province the statutory entitlement
to compensation for injurious affection, and the board's
jurisdiction to determine it, depends first on s. 40
of the Act which reads as follows:
Injurious affection where no
40. (1) In this section,
"injurious affection" means injurious affection caused
by an expropriating authority in respect of a work
or project for which the expropriating authority had
the power to expropriate land.
(2) The repeal of the Expropriation
Act, R.S.B.C. 1979, c. 117, and the amendments
and repeals in sections 56 to 128 shall be deemed
not to change the law respecting injurious affection
where no land of an owner is expropriated, and an
owner whose land is not taken or acquired is, notwithstanding
those amendments or repeals, entitled to compensation
to the same extent, if any, had those enactments not
been amended or repealed.
(3) An owner referred to in subsection
(2) who wishes to make a claim for compensation for
injurious affection shall make his claim by applying
to the board, and the board shall hear the claim and
(a) whether the claimant is entitled
to compensation, and
(b) if so entitled, the amount
of the compensation.
Because this provision merely deems
the law on injurious affection to be as it was when
the section was enacted, it becomes necessary to examine
the state of the law in December 1987, just before the
new Act came into effect. The relevant statutory law
of the time included the predecessor Expropriation
Act, R.S.B.C. 1979, c. 117 (the "former Expropriation
Act"), and a statute authorizing construction of
highways: the Ministry of Transportation and Highways
Act, R.S.B.C. 1979, c. 280 (the "former MoTH Act")
Section 67 (1) of the former Expropriation
Act would have allowed a claim for injurious affection
caused by an expropriating authority. However, that
statute was expressly excluded from use in the case
of highway projects by s. 29 (3) of the former MoTH
Act. Instead, the former MoTH Act provided its own compensation
scheme and procedures. The short question, therefore,
is whether the former MoTH Act provided the necessary
statutory authority for an injurious affection claim
so as to vest the board now with jurisdiction to hear
and determine such a claim.
That question has already been considered
by the board in Tancredi v. British Columbia
(Minister of Transportation and Highways) (1995),
57 L.C.R. 154. There, the board concluded that ss. 25
and 26 of the former MoTH Act, just before the 1987
repeal of those sections, had provided a statutory basis
for a claim for injurious affection in connection with
diversion of a stream for a highway project. It followed,
by application of s. 40 of the Act, that such a claim
could still be asserted today, and it could be decided
by the board.
Those sections of the former MoTH
Act read as follows:
25. Compensation to be agreed
on between the parties, or awarded in the manner set
out in this Act for the land, stream, water, watercourse,
timber, stones, gravel, sand, clay or other materials,
or for any damage to them, shall be made to the owner
or occupier, or owner and occupier as the case may
be, of the land or property, or to the persons suffering
the damage, and shall be paid within 6 months after
the amount has been agreed on or appraised and awarded.
Notice of claim and tender for
26. If a person has any
claim for property taken, or for alleged direct or
consequent damage to property arising from the construction
or connected with the execution of a government building,
highway or public work undertaken at the expense of
the Province, or a claim arising out of or connected
with the execution or fulfilment of, or on account
of deductions made for failure to execute or fulfil,
a contract for a government building, highway or public
work made and entered with the minister, in the name
of Her Majesty or in another manner, the person may
give written notice of the claim to the minister with
particulars of it and how the claim arose. The minister
may, within 30 days after the notice, offer what he
considers a just satisfaction for the claim by tendering
a Provincial government cheque with notice that unless
the offer is accepted in 30 days after the offer the
claim shall be submitted to arbitration.
Mr. Cosburn for the claimants sought
to rely on the Tancredi precedent, which he urged as
binding on the board. However, MoTH's counsel, Mr. Hincks,
requested the right to re-argue the issue and, after
hearing argument on the point, the board ruled that
it would reconsider.
Tancredi involved a different type
of damage to the current case. The claim was over the
loss of a stream which had flowed through the Tancredis'
property. In the process of highway works nearby, the
stream was diverted. There was therefore a physical
impact on the Tancredis' property, rather than an economic
one as alleged in the present case. In the end, the
Tancredis lost because the board held they had no right
to the flow of water, any common law rights of earlier
times having been long since replaced by Water Act
procedures. Not having taken the necessary steps to
bring themselves within those procedures, they therefore
had no claim for loss of the stream.
While its decision ultimately rested
on a different basis, the board in Tancredi also considered
whether there could ever be a claim in respect of a
highway project for injurious affection arising from
MoTH's diversion of a stream. In reviewing ss. 25 and
26 of the former MoTH Act, the board observed that s.
25 authorized compensation for "any damage" to land,
water or various natural materials and s. 26 authorized
compensation for "direct or consequent damage to property".
It concluded that, although the actual words "injurious
affection" were not used in the statute, these phrases
were broad enough to encompass a claim for injurious
The board in Tancredi found support
for that view in the majority judgment of Lambert J.A.
of the British Columbia Court of Appeal in Tener
v. The Queen in right of British Columbia (1982),
24 L.C.R. 266, 133 D.L.R. (3d) 168,  3 W.W.R.
214. In Tener, the provincial government had so changed
the rules regarding access to park land that it had
effectively denied an owner access to its mineral claims
situated in a park. The Court had to consider several
potentially relevant statutes to determine whether compensation
would be given. In the course of his analysis, Lambert
J.A. looked to the wording of the predecessor to s.
26 of the former MoTH Act ("alleged direct or consequent
damage to . . . property") and concluded that, if it
applied in the circumstances of the case before him,
compensation would be payable. Notably, he said (at
p. 274 L.C.R.) that in such a case compensation would
be given "to the owner of land not taken when no land
was taken from any one but the land suffered direct
or consequent damage from the work." In the circumstances
of this case, however, Lambert J.A. found that the predecessor
to the former MoTH Act did not apply. Its use was excluded
by provisions of the Park Act. The majority of
the Court of Appeal in Tener did award compensation
for what it found to be injurious affection but on a
different statutory basis. When the case proceeded on
appeal to the Supreme Court of Canada, the majority
there held that what had actually occurred was an expropriation
rather than injurious affection and awarded compensation
on that basis instead: see 32 L.C.R. 340, 17 D.L.R.
(4th) 1,  1 S.C.R. 533.
Mr. Hincks for MoTH offered several
reasons why, in his submission, the board's decision
in Tancredi with respect to this issue need not and
should not be followed. First, it was clear that the
board's observations on the issue were, strictly speaking,
obiter dicta, that is, unnecessary to the decision which
the board ultimately reached. Second, they were observations
offered without the benefit of argument from counsel
concerning ss. 18 through 26 of the former MoTH Act
or the majority judgment of the Court of Appeal in Tener.
Third, the board's observations were also offered without
the benefit of a subsequent binding decision of the
Supreme Court of British Columbia in which the obiter
dictum of Lambert J.A. in Tener was considered and not
That decision was Re Ministry
of Transportation and Highways Act; Re New Westminster
Plan 6446, Lot 2, Block 8-12, Dist. Lot 2497 (1982),
38 B.C.L.R. 370 (S.C.), a judgment of McKenzie J. There
a property owner wanted damages for the flooding of
her land during a road construction. She tried to use
the former MoTH Act arbitration procedures in reliance
upon s. 26. The provincial Crown responded by saying
that a claim for "direct or consequent damage to property"
in s. 26 did not authorize claims for injurious affection.
There had to be a taking pursuant to the antecedent
ss. 18 to 24. This was because, according to the Crown,
s. 25 provided the substantive right to compensation
— a limited one involving takings — while s. 26 was
procedural only, telling those who fell within the limited
group entitled to seek compensation under the statute
how to go about making a claim.
McKenzie J. agreed with the Crown's
argument. In reaching his decision, he considered, but
declined to follow, the reasoning of Lambert J.A. in
the Tener case on this issue. He said at p. 375:
I agree that if s. 26 stood alone,
without s. 25, then the words in s. 26 "for direct
or consequent damages to property" would, on a plain
interpretation, indicate that there would be nothing
to limit the claim in the manner suggested by Lambert
J.A. However, s. 25 does exist and it does grant the
substantive right to compensation to members of a
limited group, while s. 26 only sets forth the procedure
which must be followed to advance such a claim. The
statutory right to compensation is dispensed, in my
view, not by s. 26 but by s. 25.
Because he found the facts in Tener
to be so very different from those before him, and since
he considered the comments of Lambert J.A. to be obiter,
McKenzie J. did not accept them as binding upon him.
It is my conclusion that the Crown's
objections are both valid in that the Crown took nothing
from the respondent which would provide a qualification
for compensation under s. 25, or provide the right
to proceed to arbitration under s. 26, and I agree
that the activity which caused the injurious affection
was not done pursuant to statutory powers, or was
done in excess of or in abuse of statutory powers,
and therefore the appropriate remedy is an ordinary
action for damages or injunction.
The claimants were unable to provide
any authority which has since departed from the views
expressed by McKenzie J. in Re MoTH or in which compensation
has been awarded for injurious affection in connection
with a highway project in reliance on the provisions
of the former MoTH Act. We accept MoTH's submissions
that the board's conclusions on this issue in Tancredi
were made without the benefit of the Re MoTH case and
were, in any event, obiter. More particularly, we are
persuaded by the analysis of McKenzie J. in Re MoTH
for the purposes of this case. That being so, we conclude
that the claimants in this matter, whatever other remedies
might be available to them, do not have a statutory
right to compensation for injurious affection which
the board has jurisdiction to hear and determine under
s. 40 of the Act.
5.2 Have the common law rules
Even if we are mistaken in the first
instance, and the former MoTH Act does allow a claim
for injurious affection in these circumstances, the
board considers that it is able to decide this case
on the further ground that the claimants have not satisfied
all of the common law rules which apply to injurious
R. v. Loiselle, 
S.C.R. 624, is one of many authorities which set out
four rules for deciding when an injurious affection
claim can be made. Both parties before us agreed these
rules applied; they merely differed on whether they
were satisfied. These rules are:
1. the damage must result from
an act rendered lawful by the statutory powers of
the person performing such act [the "statutory authority
2. the damage must be such as would
have been actionable at common law, but for the statutory
powers [the "actionable rule"];
3. the damage must be an injury
to the land itself, and not a personal injury or an
injury to business or trade [the "nature of the damage
4. the damage must be occasioned
by the construction of the public work, not by its
user [the "construction and not the use rule"].
MoTH contends that it is principally
the second of these rules — the "actionable rule" —
which has not been satisfied in the present instance.
The claimants argue that the kind of damage allegedly
caused to them by highway construction would have been
actionable at common law as either a public or private
Public nuisance refers to conduct
or omission causing injury to the community at large
rather than to property of the plaintiff. It commonly
involves matters such as the creation of blockages or
dangerous conditions on public highways. It is a crime
at common law, and there is still an offence of "common
nuisance" in s. 180 of the Criminal Code, the
essence of which is conduct endangering the lives, safety
or health of the public. It is normally not actionable
except by the Attorney General. The only exception is
when a particular individual suffers a harm significantly
different, in both kind and degree, from the general
public — then that individual can bring suit
(usually for injunction, but also damages) against the
Mr. Cosburn for the claimants argued
that his clients suffered a harm different from their
neighbours because theirs was the only commercial property
in the affected area. Therefore, he said, they could
ground a claim in public nuisance. The board disagrees.
There is no public nuisance in this case because it
is not shown that MoTH has done anything which is causing
damage to people in the neighbourhood generally. In
the board's view, claimants' counsel has ingeniously
tried to convert what is really just a "standing" issue
(particular damage) into an element of the common law
cause of action for public nuisance. If this situation
gave any rights of action at common law, they would
be in private nuisance.
Private nuisance is a disturbance
of one's possession of private property. It is a broad
category of tort, including potentially anything which
interferes with the enjoyment of that property. Its
scope, or application to particular facts, has been
limited by the courts, which have found that it necessarily
involves a conflict of rights which have to be balanced.
On the one hand, people should be able to use their
own property more or less as they wish; on the other
hand, their neighbours have a right not to be bothered
unduly. The courts weigh the balance by the use of two
concepts: "substantial interference" and "reasonableness".
The plaintiff must show that the damage was "substantial"
and also that the conduct of the defendant was "unreasonable".
These concepts are dealt with in the authorities cited
by the claimants, in particular H. Street, The Law of
Torts, 6th ed. (London: Butterworths, 1976) at pp. 222
et seq., and J.G. Fleming, The Law of Torts, 6th ed.
(Sydney: The Law Book Company Limited, 1983) at pp.
383 et seq. There is also a highly germane discussion
of reasonableness and the balancing process in a case
cited by MoTH, St. Pierre v. Ontario (Minister
of Transportation and Communications),  1
S.C.R. 906 at pp. 912 and 916. Because these concepts
are not precise, every case stands somewhat on its own
facts, and judges must simply try to judge them by objective
standards — "what would the ordinary sensible bystander
Mr. Hincks for MoTH argued that any
damage caused to the claimants by the highway project
was not substantial and also that his client's actions
were reasonable. Accordingly, he contended, there would
have been no private nuisance action at common law and
it follows that the "actionable rule" is not satisfied.
On the question of substantial interference,
the board has considered the evidence underpinning the
two components of the claim: interference with access
to the subject property, and interference with visibility
of the subject property. No claim is advanced for loss
of direct access to and from the highway. The claimants
bought on the understanding that they would not enjoy
direct access. Therefore, their only claim in that respect
is that indirect access was made more difficult by the
redesign of the Rainbow Street intersection about a
year after the purchase. However, the evidence showed
that redesign did not affect access to the property.
All it did was make entry back onto the highway from
the property somewhat more circuitous. There was no
convincing evidence to suggest that the new circuitousness
of re-entry would act as a significant disincentive
to potential customers of the retail premises. The board
agrees with MoTH that this change was not substantial
enough to raise a claim in nuisance at common law.
The claim for loss of visibility
rests on the notion that the eight foot wall which was
ultimately constructed, separating the subject property
from the highway, would have had a more severe economic
impact on the retail premises than the three or four
foot wall provided for in the highway construction plans
at the time the claimants purchased. The board is satisfied
from the evidence adduced that the higher wall affected
the likelihood that motorists on the highway would notice
the subject property. With only a low wall, large signs
on the front of the retail premises could have been
easily seen, and brief instructions could perhaps have
been given as to how to access it. However, the board
is not convinced that this would have been translated
into a substantial flow of retail customers. It seems
to the board that this business location — as a retail
business appealing to highway traffic — was effectively
doomed once the highway was moved and direct access
was lost. The real damage was already done when the
claimants bought the subject property and thus is outside
With respect to loss of visibility,
there is perhaps an even more fundamental obstacle lying
in the claimants' path. Mr. Hincks argued that damage
to visibility, however substantial, would never have
formed the basis for a claim in common law at all. There
are numerous authorities which tend to support his position.
The main one cited was the St. Pierre case before the
Supreme Court of Canada. It found that there was no
property right in a view out, but that appears to the
board to be just one side of the general proposition
that there is no right of sight in either direction
inherent in property ownership. Both Street, The Law
of Torts, at p. 222, and Fleming, The Law of Torts,
at p. 385, cite other cases which have held that the
tort of nuisance does not protect a "monopoly of view"
or provide a legally enforceable right of visibility.
An authority from the Alberta Land
Compensation Board bears a close resemblance to the
present case. In Beierbach v. City of Medicine
Hat (1980), 21 L.C.R. 133, a pedestrian overpass
was built directly in front of a motel and gas station.
The motel owners claimed that the view of their premises
was obstructed, but the Alberta Board found, on the
authorities, that restriction of a view would not have
been actionable at common law.
The other issue in assessing the
actionability of a common law claim for private nuisance
is reasonableness. Mr. Cosburn argued that MoTH acted
unreasonably by changing the Rainbow intersection and
raising the height of the wall. These actions were unreasonable,
he said, because neither of these changes was necessary
to the safety of use of the highway. They were directed
to the comfort of non-users of the highway — the neighbourhood
residents — and perhaps were motivated, he suggested,
by other political considerations. With respect, the
board finds this argument very hard to accept. The fact
that MoTH went to some lengths to consult local opinion
and to adapt its plans to meet what appear to have been
legitimate local concerns was, in the board's opinion,
evidence of MoTH's reasonableness rather than the opposite.
MoTH was doing its best to accommodate the neighbourhood.
The fact that it could not please everyone hardly makes
those efforts at accommodation unreasonable. In addition,
the board is satisfied from the evidence that the amendment
to the Rainbow intersection did involve highway safety.
One reason for changing the lights at Rainbow was that
they were too close to the McKenzie interchange for
safe and comfortable highway use.
In light of its consideration of
the evidence in this matter and the applicable law,
the board concludes that there would not have been a
common law cause of action in private nuisance in the
circumstances of this case. It follows that the "actionable
rule" has not been met, and therefore the claimants
cannot recover compensation for injurious affection
pursuant to s. 40 of the Act, even if (as the board
has declined to find) there is a statutory claim under
the former MoTH Act.
6. QUANTUM OF COMPENSATION
The board has reached its determination
concerning the claimants' right to compensation pursuant
to s. 40 of the Act following a full hearing in which
much appraisal evidence was also adduced on the issue
of quantum of compensation. In case it is wrong on the
question of entitlement, the board considers that it
would be useful at this point to analyze the evidence
on quantum and to state its conclusions.
6.1 Before and After Scenarios
The board heard appraisal evidence
from Rita C. Thibault, AACI, of Thibault & Company
Appraisals Inc. on behalf of the claimants, and from
Alasdair K. Gordon, Dip. Surv., FRICS, AACI, of Nilsen
Realty Research Ltd. for MoTH. Each of the appraisers
used a before and after valuation technique to estimate
the loss in value from the increased fence height. It
is agreed between the parties that the value loss, if
any, to be determined is under the following scenarios:
Before Scenario: Douglas Street
as a frontage road separated from the main highway
by a three or four foot fence; access to the neighbourhood
by way of a traffic light at Rainbow and McKenzie.
After Scenario: A similar situation
but with the fence height increased to eight feet;
access to the neighbourhood at Rainbow and McKenzie
changed to "right-in, right-out" and the traffic light
moved to Nelthorpe.
6.2 Highest and Best Use
Ms. Thibault's narrative report addressed
the situation of the subject property in its original
state, prior to any highway works, and then under the
after scenario. It was only in oral testimony at the
compensation hearing that she gave some opinions as
to the effect on the subject property of the lower,
three to four foot, fence. She did not, however, include
an opinion on the highest and best use in the before
scenario. In her report she gave the opinion that, in
the after scenario, the subject property was no longer
capable of its historical use as a retail store, and
that the subsequent conversion to office use of that
front portion (which she calculated to be 875 sq. ft.)
was its highest and best use, with a continuation of
the residential and storage use of the remainder of
the subject property.
Mr. Gordon was of the opinion that,
in the before scenario, the front portion was most suited
for retail or service-oriented use relying on destination
customers who would know or seek out the location. He
considered that the reduced visibility and changes in
routing in the after scenario rendered that front portion
more suitable to office or service-oriented business
use, also relying on destination patrons. He did not
consider that there would be any change to the highest
and best use of the remainder of the property.
The board agrees with Mr. Gordon's
opinion on the highest and best use as it relates to
the valuation of the overall property.
6.3 Claimants' Appraisal Evidence
Ms. Thibault prepared a narrative
report valuing the property as of January 3, 1996. She
based her principal analysis on the income approach,
using actual rents and expense schedules provided by
Mr. Foste. While her first valuation was of little help
to the board in that it addressed the property in its
original state, prior to the realignment of the highway,
reference is made to it since she used the same data
in oral testimony as to the before value.
In the before scenario, Ms. Thibault
summarized the gross income to the property using the
actual rent obtained from the delicatessen of $12,000
per annum, or $13.71 per sq. ft. She attributed a market
rent to the owner-occupied apartment of $11,700 and
rent to the remaining six leasable units of $22,230.
She applied an overall rate for vacancy and collection
loss of 4% and actual expenses of $10,372 derived from
the 1994 financial statements, resulting in projected
net income of $33,808. At the hearing she gave the opinion
that the appropriate capitalization rate was 9.33%,
derived from a single sale of an older industrial property
in the neighbouring municipality of Esquimalt.
In the after scenario, Ms. Thibault
reduced the market rent for the front portion of the
building to $7,800 or $8.91 per sq. ft., the actual
rent obtained in 1995 following its conversion to office
space. She kept the same 4% vacancy rate for the residential
area but chose a higher rate of 10% for all of the commercial
space. She used slightly reduced operating expenses
of $10,058, and this time applied a capitalization rate
of 10.75%. It was her opinion that the rate should be
higher than was found in any of the comparable sales
due to a perceived reduced stability of income stream.
The results are summarized as follows:
Income: Front portion
Vacancy and Collection
The difference in the before and after
values was $120,000. To this Ms. Thibault added the
cost of converting the delicatessen to office space
at $16,500, for a claimed loss in value due to the increased
wall height and different access routing of $136,500.
Ms. Thibault also applied the direct
comparison approach to her analysis. She briefly reviewed
sales of comparable properties in the area and simply
concluded that the market supported the values derived
from the income approach, but without enough analysis
to assist the board in its conclusions.
There was evidence from Mr. Foste
that the claimants were in the habit of purchasing commercial
property which was in need of rehabilitation and undertaking
renovations to achieve higher rents. At the time they
purchased the subject property, the claimants knew they
would lose direct access to the highway and that a fence
of about four feet would be erected. Under these circumstances,
they paid $270,000 in December 1992. Ms. Thibault used
this sale to arrive at her before scenario, adding Mr.
Foste's declared costs of renovation of $90,000 and
making an adjustment for time to November 1995, for
an adjusted sale price of $405,000.
6.4 MoTH's Appraisal Evidence
Mr. Gordon prepared two reports for
MoTH. The second, entered as Exhibit 3, followed the
two scenarios outlined above. He used a valuation date
of January 1, 1994, the approximate date the eight foot
wall was built. He relied entirely on the cost approach
and, unlike Ms. Thibault, reasoned that neither the
income nor the direct comparison approaches could be
used. He stated that the income data for the subject
property were unreliable and there were insufficient
data on market rents and capitalization rates.
In his analysis, Mr. Gordon concluded
a before value of $317,800 and an after value of $299,700.
He agreed with Ms. Thibault that there would be a reduction
in rental value after the fence was increased in height
from the earlier design. He disagreed with her opinion
as to how much of the subject property was actually
affected. Whereas Ms. Thibault attributed a drop in
value to the whole of the subject property, Mr. Gordon
applied a rental loss only to the delicatessen portion,
which he used in his rather unconventional method of
measuring locational depreciation. He reviewed rent
levels in ten comparable properties in the area and
concluded that the front portion of the subject property,
the area of which he calculated at 923 sq. ft., had
a market rent of $8.50 per sq. ft. as a deli or store.
It was his opinion that the rent potential dropped by
$2.00 per sq. ft. to $6.50 on conversion to office use
as a result of the increase in fence height and change
of access. This translated to a loss of $1,846 per annum
in gross income. Deducting 2% for operating expenses,
he capitalized the resulting loss in income of $1,810
per annum by 10%, giving an estimated loss in value
of $18,100. While his report detailed lease rates in
the area, Mr. Gordon did not provide any substantiation
for his choice of capitalization rate.
6.5 The Board's Analysis and
Of the two issues raised (the wall
height and access), it seems apparent that the loss
of direct access to the subject property from the highway
had the greatest impact on its future use. The claimants
bought the subject property in the knowledge that it
would shortly be cut off from the highway. This had
been disclosed in the Quadra Local Area Plan as far
back as 1989, and had been detailed in highway construction
plans examined by Mr. Foste before the purchase. It
follows that the claimants acquired the subject property
at a time, and indeed at a price, which reflected its
limited future as a retail site.
Of the more minor factors affecting
value thereafter, the board agrees with Mr. Gordon that
the loss of visibility caused by the higher than anticipated
wall had a greater effect on the commercial use of the
subject property than the subsequent rearrangement of
side access roads.
Ms. Thibault, however, expressed
the rather surprising opinion that the loss of direct
access was the least important factor. To her, it only
affected the subject property value by $15,000, whereas
the other two subsequent changes were said to cause
more than $135,000 of value loss. The board finds no
convincing evidence for her opinion that the loss of
direct access would be measured merely by a change in
the capitalization rate from 9.0% to 9.33%, and rejects
this particular conclusion.
In reaching its determination on
quantum, the board has been hampered by what it views
as deficiencies in the analyses of both appraisers.
Ms. Thibault for the claimants did not identify an appropriate
valuation date or adequately address the before and
after scenarios. Mr. Gordon for MoTH chose the correct
scenarios and valuation date but the usefulness of his
data is limited because of his exclusive reliance upon
the cost approach. Expropriation tribunals have generally
been reluctant to rely on the cost approach where other
evidence was available.
In this instance the availability
of data to support an income or direct comparison analysis
appears to have been somewhat limited. However, the
board is not convinced that such data could not be found
in the Greater Victoria market and applied in this case.
In any event it is not uncommon for appraisers in limited
markets to make use of the income or direct comparison
approaches through the careful exercise of their professional
judgment. Both the Thibault Report and the Gordon Report
actually contain a considerable quantity of data which
the board considers useful in measuring the impact on
value to the subject property of the increased fence
height and changed access routing.
By looking at market rent levels
provided in Mr. Gordon's report and those actually charged
after conversion of the front of the building to office
use, the board can reconstruct the potential revenue
to the subject property. It accepts MoTH's position
that the rent would have been higher by $2.00 per sq.
ft. had the changes not been made to the original design
of fence height and access. The after scenario is that
which was actually in effect following conversion of
the deli to office space. At that time the rent for
the front portion was $650 per month or $7,800 per year.
Applying an added $2.00 per sq. ft. which would have
been achieved if the original design plan had proceeded,
and using Mr. Gordon's calculation of this space of
973 sq. ft., gives an annual before rent of $9,546.
The board has concluded that the highest and best use
of the remainder of the subject property would not be
affected by the changes, and therefore the rents to
the residential and other commercial areas would stay
the same. A blended vacancy rate of 6% is applied to
the gross income. Operating expenses, as presented by
Ms. Thibault, are accepted and rounded to $10,000. The
following reconstructs the income potential of the subject
property under the two scenarios:
& Collection Loss:
The board considers that the reduction
in rental value to the subject property adequately addresses
the overall diminution in value between the before and
after scenarios without varying the capitalization rate.
As to the appropriate rate, the board observes that
Mr. Gordon used 10% in both scenarios with no supporting
evidence. Ms. Thibault's report offered a detailed review
of capitalization rates. She used 9% with the subject
property in its original state, 9.33% in the before
scenario, and 10.75% in the after scenario. Using the
mid-range of 10% to capitalize the before net income
of $30,952 gives a before value of $309,520. Capitalizing
$29,311 at the same rate produces an after value of
$293,110, for a loss to the subject property of $16,410.
Ms. Thibault made an upward adjustment
in value in the before scenario for the fact that the
claimants occupied part of the subject property as a
residence. The board cannot see how this is a significant
factor. There is reason to believe that the residential
apartment could just as easily have been rented out
and was not necessary to the commercial operation of
the subject property.
Common sense suggests that the price
agreed to by the claimants in late 1993 would in fact
reflect most of the before value. They paid $270,000
for the subject property including equipment. The board
does not ignore the fact that the claimants commenced
a major renovation immediately after the purchase. This
was done to upgrade the existing front space for the
delicatessen. Mr. Foste estimated this renovation at
$90,000, and Ms. Thibault therefore treated the claimants
as having "paid" $360,000 to purchase the subject property.
In a sense they did, but it is a fallacy to equate this
with the value of the renovated property. The renovation
was misdirected to the extent that it improved an existing
retail area, and in hindsight it can be seen that that
part of the renovation was wasted and added little to
the value of the premises. Mr. Foste was subsequently
forced to the same conclusion, and engaged in a second
renovation (for $16,500, he said) to reconvert the space
to office use.
The board considers that only those
renovations which contributed to the final condition
of the building would have added value to the amount
paid, and even then it is not likely that the full amount
of those renovations would automatically be reflected
in the value of the subject property. Indeed, this was
the very criticism advanced by claimants' counsel to
Mr. Gordon's use of the cost approach.
The other question raised by the
renovations was whether the amounts claimed by Mr. Foste,
and referred to by the appraisers, was accurate or reasonable.
Of the $90,000 claimed on the first renovation, $67,800
was listed as "Labour at $20 per hour", which equates
to 3,390 hours, or about 85 weeks of labour. This appears
to be excessive, and would need to be measured against
the time an outside contractor would reasonably have
required to perform the work. Unfortunately, the board
was not presented with any professional opinion of the
reasonable cost of this work, nor any analysis of how
much it would have contributed to value or would have
been wasted in the sense that it was solely or primarily
related to improving the retail area.
There are some other pieces of evidence
to consider. Among the exhibits was a note by Mr. Foste
to his realtor, Noel Hache, dated November 25, 1992,
in which Mr. Foste set out a long list of things that
he considered ought to be done to the building. It may
be that the purpose of providing such a list was to
support grounds for a lower price. In any case, it is
apparent from this list, which seems to be based on
a fairly thorough examination of the building, that
a number of the items of work to be done relate expressly
to the store. The board also notes that Mr. Foste expressed
to Mr. Hache his view that the total renovation would
cost at least $50,000.
Likewise, Mr. Foste reported to Ms.
Thibault a figure of $16,500 for the second renovation
of the retail area to office use, and Ms. Thibault simply
adopted this figure without verification in coming to
her conclusion. But MoTH called Mr. John Dilworth, who
was accepted as an expert on construction costs. He
estimated the reasonable cost of converting the retail
area to office use at $10,650, or about $13 per sq.
ft. Whatever figure is chosen for the second renovation,
it would only contribute to the value of the subject
property to the extent that it is deducted from the
original renovation, since it represents work that should
have been done originally.
Since it is not clear how much was
needed to bring the subject property to a condition
suitable for realizing the stated rents, the use of
the subject sale is quite subjective. It does, however,
give credibility to the value estimate of about $310,000
in the before scenario.
The board has determined that the
loss of value to the subject property, caused by the
changes occurring between the before and after scenarios,
is measured primarily by a decline in attainable net
income from the front portion of the main building,
when the highest and best use of that portion changed
from a retail to an office or service use. The board
estimates this drop in net income to be $1,641 per year.
When capitalized at 10% (Mr. Gordon's rate), this produces
a loss of value of $16,410. If capitalized instead at
9.33% (Ms. Thibault's rate), the indicated value loss
would then become $17,588. These numbers are close enough
to the value loss opinion expressed by Mr. Gordon that
the board accepts his opinion of $18,100.
7. SUMMARY OF CONCLUSIONS
The board has found that the claimants
do not have a statutory right of compensation arising
from the actions of MoTH in redesigning certain details
of its highway project in the neighbourhood of the subject
property after the claimants had purchased. The board
finds that the kinds of changes complained of would
not have supported a claim in private or public nuisance
at common law. The board also finds that a property
owner does not have an inherent right to visibility
or lines of sight over adjacent property, and hence
that damage to visibility does not represent damage
to a recognized property right.
In case it is wrong in the above
conclusions, the board has nevertheless determined the
loss in value to the subject property occasioned by
the changes complained of. It accepts the evidence of
MoTH's appraiser, Mr. Gordon, that the changes reduced
that value by $18,100.
Since no compensation is awarded,
there is no right to interest.
Section 44 (6) of the Act provides:
44. (6) On a claim under
section 40 (3), the board may award, in its discretion,
costs to the claimant or the expropriating authority.
It is clear from the foregoing that
claimants who advance a claim for injurious affection
where no land has been taken incur a substantial risk
in respect of costs. In the board's view, the legislature,
which accorded entitlement to costs for expropriated
owners, must have intended the cost provision under
section 44 (6) to act as a positive disincentive to
aggrieved owners, whose property has not actually been
expropriated, from advancing a case for compensation
for injurious affection unless the particular facts
and the law to be applied are such as to offer a real
chance of success. The question is whether, on the state
of the law and the facts in this matter, the board should
exercise its discretion to award costs for or against
The factual basis of this claim was
itself problematical. The claimants evidently began
from the position that their compensable loss arose
from the initial realignment of the Pat Bay Highway
which had the effect of denying direct access off the
highway to the subject property. Ms Thibault's appraisal
report, estimating the loss, proceeded from that initial
premise. Late in the day, the claimants came to accept
that, having purchased the subject property with knowledge
that it would lose direct access, such a claim could
not be sustained. They were then left with the much
more difficult task of proving a compensable loss for
later changes in highway design that negatively affected
the already impaired visibility of the subject property
and made indirect access to it slightly more circuitous.
The claimants' expert had to alter her opinion in oral
testimony to accommodate the new scenario and the conclusions
which she drew simply did not withstand scrutiny. On
the evidence adduced, the board has concluded that the
loss was marginal. Even if the claimants had been able
to prove their entitlement, the quantum of compensation
which the board considers would have been payable is
only a small fraction of the amount which they claimed.
The law of injurious affection as
applied to the circumstances of this case proved to
be an even more formidable obstacle. The claimants failed
to convince the board that there was a statutory basis
for a claim for injurious affection in connection with
a highway project, pursuant to the provisions of the
former MoTH Act. Mr. Cosburn for the claimants candidly
stated that, but for obiter dicta in the board's earlier
decision in Tancredi, his clients likely would not have
incurred the risk of proceeding with their claim. The
board acknowledges that the Tancredi decision created
a measure of uncertainty as to the state of the law
which gave the claimants more hope of success than would
otherwise have been warranted. Even so, they must have
been aware that they also had to satisfy the four common
law rules in order to sustain a claim for injurious
affection without a taking. On the state of the law,
their case was highly tenuous and ultimately failed,
although it could be said that the claimants raised
at least an arguable issue as to whether the later changes
in highway design were sufficiently substantial and
unreasonable as to found an action in private nuisance
and so meet the "actionable rule".
Taking into account all of the foregoing
considerations, the board concludes that this is not
an appropriate case for the exercise of its discretion
to award costs against the claimants. Rather, it considers
that each party should bear its own costs in this matter.