January 13, 1997, ECB Control No. 2/94/133 (60 L.C.R. 218)

 

Between: Sally Marie Warlow and Fritz Foste
Claimants
And: Her Majesty The Queen in Right of the Province of British Columbia as Represented by the Minister of Transportation and Highways
Respondent
Before: Robert W. Shorthouse, Chair
Lesley Eames, AACI, Board Member
Julian K. Greenwood, Board Member
Appearances: Robert S. Cosburn, for the Claimants
Alan V.W. Hincks, for the Respondent

 

1. INTRODUCTION

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 highway.

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.

 

2. BACKGROUND

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 "neighbourhood".

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.

 

3. CLAIMS

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 as follows:

a. Reduction in value of the land as a result of the changed configuration of the highway project.

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 in place.)

 

4. ISSUES

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. [1922] 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 land taken

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 determine

(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:

Compensation

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 it

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 affection.

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, [1982] 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, [1985] 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 followed.

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. He continued:

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 been met?

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 affection claims.

R. v. Loiselle, [1962] 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 rule"];

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 rule"];

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 nuisance.

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 wrongdoer.

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), [1987] 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 think?"

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 this claim.

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:

  Original Before After

Gross Income: Front portion $ 12,000 $ 12,000 $ 7,800
Apartment 11,700 11,700 11,700
Remainder 22,320

22,320

20,400

  46,020 46,020 39,900
Less: Vacancy and Collection      
Loss: 1,840

1,840

3,288

Effective Gross Income: 44,180 44,180 36,612
Less: Operating Expenses: 10,372

10,372

10,058

Net Income: $ 33,808 $ 33,808 $ 26,554
Capitalization Rate: 9.00% 9.33% 10.75%
Value Estimate (rounded): $375,000 $370,000 $250,000

 

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 Conclusion

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:

  Before After

Rent for front: $ 9,546 $ 7,800
Rent for residence: 11,700 11,700
Rent for remainder: 22,320

22,320

Gross Income: 43,566 41,820
Vacancy & Collection Loss: 2,614

2,509

Effective Gross Income: 40,952 39,311
Operating Expenses: 10,000

10,000

Net Income: $30,952 $29,311

 

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.

 

8. INTEREST

Since no compensation is awarded, there is no right to interest.

 

9. COSTS

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 claimants.

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.

 

 

Government of British Columbia