Supreme Court of Canada
Nova Scotia (The Queen in right of the Province of) v. Pow Investments Ltd., [1975] 2 S.C.R. 86
Date: 1974-04-29
Her Majesty the Queen in right of the Province of Nova Scotia Appellant;
and
Pow Investments Limited Respondent.
1973: November 26; 1974: April 29.
Present: Abbott, Ritchie, Spence, Laskin and Dickson JJ.
ON APPEAL FROM THE SUPREME COURT OF NOVA SCOTIA, APPEAL DIVISION
Expropriation—Compensation—Development value for probable development—Highest and best use—Present value for future development.
On November 20, 1969, appellant expropriated for a housing development a 900 acre area at Spryfield in the County of Halifax of which respondent was owner of 428 acres. The 428 acres were entirely within the Halifax metropolitan area and 60 of the 428 acres were within City limits. The land was reasonably level medium density wood and bush land with some outcrops in the easterly part and had been acquired by the respondent for housing development by six stages over a 20 year period. The highest and best use for the 428 acres was for present and future residential development. The arbitrator fixed the market value of this land at $210,000 and awarded respondent $8,224.17 as special damages. The Appeal Division rejecting, as did the arbitrator, the cost development method of valuation fixed the market value of the land at $345,400 and affirmed the special damages.
Held: The appeal and the cross-appeal should be dismissed with costs.
It is not appropriate to characterize even “rear land” of which the highest and best use is residential development for an expanding City as “wilderness land”. Where the entire land is capable of development it should be valued not as wilderness land but with regard to its present value for future development; its present value and potential for building purposes in the future must be ascertained.
Winnipeg Supply & Fuel Co. Ltd. v. Metropolitan Corporation of Greater Winnipeg, [1966] S.C.R. 336;
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University of Toronto v. Zeta Psi Elders Association of Toronto, [1969] S.C.R. 443; R. v. Eastern Trust Co., [1945] Ex. C.R. 115, referred to.
APPEAL and CROSS-APPEAL from a judgment of the Supreme Court of Nova Scotia, Appeal Division[1], varying an award of compensation of Dubinsky J.[2] sitting as an arbitrator under The Expropriation Act, R.S.N.S. 1967, c. 96. Appeal and cross-appeal dismissed with costs.
I. Palmeter, Q.C., and W. Strug, for the appellant.
H.F. Jackson, Q.C., and D.H. Reardon, for the respondent.
The judgment of the Court was delivered by
RITCHIE J.—This is an appeal from a judgment of the Appeal Division of the Supreme Court of Nova Scotia varying an award of compensation made by Dubinsky J., sitting as an Arbitrator under the provisions of The Expropriation Act, R.S.N.S. 1967, c. 96, in respect of 428 acres belonging to the respondent which was situate at Spryfield in the County of Halifax and which had been expropriated by the Province on November 20, 1969 for a housing development. Mr. Justice Dubinsky fixed the market value of this land at $210,000 and awarded the respondent $8,224.17 in addition as special damages. The Appeal Division would have valued the lands at $345,400 and affirmed the Arbitrator’s award for special damages.
The lands which are the subject of this appeal form part of a 900-acre area in Spryfield, all of which was expropriated by the Province on the same day. It is of primary importance in valuing these lands to note that the respondent’s 428 acres is entirely situate within the boundaries of the metropolitan area of Halifax while 60 acres thereof is actually within the City limits. The
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following findings by the learned Arbitrator are accepted by both parties:
(a) The land is reasonably level with a medium density covering of mixed hardwood, softwood, and bush land, and with granite bedrock outcroppings occurring in the extreme easterly section.
(b) The respondent had acquired the property for the purpose of developing it for housing, and planned a six stage development program over a 20-year period which would provide 1324 single dwellings and 1056 multiple dwellings, together with schools, parks, roads, a shopping centre, service station and the other amenities of suburban living.
(c) The highest and best use for the lands is for present and future residential development.
The learned Arbitrator and the Appeal Division have found that the main approach to the subject land is via a road maintained by the City of Halifax, that access would not be an obstacle to its development and that there are other housing subdivisions adjoining or near the eastern and northern boundaries of the property.
Much of the evidence adduced before the Arbitrator was related to the manner in which the respondent acquired the property, the amount paid for it, and offers which were alleged to have been made to sell it prior to the expropriation.
The circumstances surrounding the respondent’s acquisition of the subject lands are described by Mr. Justice Cooper on behalf of the Appeal Division as follows:
In February, 1969, title to the property was held in four undivided interests. By agreement dated February 12, 1969, the owners of two of the interests agreed to sell to Mr. John Risley for the sum of $64,800. The other two undivided interests had become vested in Hilden Developments Limited subject to a first and a second mortgage. The second
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mortgagee brought foreclosure proceedings. The Sheriff’s sale pursuant to those proceedings was held on February 25, 1969. Mr. Gary Hurst attended the sale as Mr. Risley’s solicitor. His bid of $42,500 was the highest and a deposit was paid to the Sheriff thus putting Mr. Risley in the position where he could acquire the Hilden interests so that in due course he would have full title to the property.
The appellant was incorporated on April 2, 1969, for the purpose of developing the property. Mr. Hurst became its president and Mr. Risley one of its shareholders. The appellant acquired the property in May, 1969, by, as I understood it, stepping into Risley’s shoes. It paid the $64,800 under the February 12, 1969 agreement and paid the $42,500 and obtained a Sheriff’s Deed. Mr. Hurst gave the total purchase price to the appellant as $116,168 made up of the two amounts I have mentioned and ‘the first mortgage amounting to $8,686,’ although it may be noted that the sum of the three figures is $115,986.
The efforts made by Mr. Hurst and his associates to sell the property in the spring of 1969 and the offers made by them at that time were rightly disregarded by the learned Arbitrator, and the further offer made on behalf of the respondent in October 1969 to sell these lands to the Nova Scotia Housing Commission for $800 per acre, was also, in my view, properly left out of account by the Arbitrator as it was made at a time when Mr. Hurst was in a financial dilemma and was in the nature of a preliminary to what would have amounted to a forced sale if it had been accepted.
The issues arising in this appeal centre almost entirely around the evidence of the expert appraisers. Dubinsky J. heard evidence from four appraisers and in his reasons for judgment thoroughly and carefully assessed the weight which should be given the evidence of each.
The appellant’s three appraisers, Speed, Stiebritz and Stailing, and the respondent’s witness,
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King, placed the following value on the expropriated property:
| Speed: |
$205,400 |
| Stiebritz: |
$234,000 to $256,000 |
| Stailing: |
$214,000 |
| King: |
$727,099, assuming favourable zoning could be achieved, |
|
|
|
|
|
$643,021 on the basis of existing zoning and $313,130 on the basis that only single family dwellings could be erected on the land. |
Neither the Arbitrator nor the Appeal Division accepted the figures of Mr. King or the method which he employed in arriving at them. He had considered the cost development approach to be more appropriate than the market data valuation approach and would accordingly have valued the lands as if they had been already developed, which was far from the case.
Mr. Justice Dubinsky based his decision largely on the evidence of Speed, the appellant’s first appraiser. Speed divided the subject land into two parcels—the “front lands” with access from Rockingstone Road, approximately 55.5 acres, which he valued at $1,000 per acre for $55,000, and the “rear lands”, consisting of some 358 acres which he valued at $400 per acre for $143,200. This made a total value by Speed of $198,700, based on an area of 413.5 acres, but when asked for a valuation of the agreed area of 428 acres, he gave the figure of $205,400 to which I have already referred. Mr. Justice Dubinsky and the Appeal Division accepted Mr. Speed’s approach in dividing the land for valuation purposes as he had done into two parcels and they also accepted his conclusion that the highest and best use of the land was for present and future residential development.
In reaching his estimates as to the value to be placed on the “front land” Mr. Speed con-
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sidered transactions involving comparable lands in the Spryfield area, but notwithstanding the fact that the “rear lands” were directly in the path of residential development for the expanding City, he appears to have characterized this area as “wilderness land” the development of which was “quite a ways in the future” and Mr. Justice Dubinsky’s acceptance of this assessment was one of the main areas of difference between himself and the Appeal Division.
In dealing with the 55.5 acres of “front lands” Mr. Speed and Mr. Justice Dubinsky applied two discounting factors which were not adopted by the Appeal Division. In his direct evidence, Mr. Speed expressed the view that there was one strip of the lands in the frontal area which was only 260 feet in width and that it would therefore not be possible to build an access road 66 feet in width on this part of the property leaving 100-foot lots on each side of the road. It at first appeared from what Mr. Speed said that a road of this width was required in a development of the kind envisaged, but on cross-examination he admitted that a 60-foot road would be permissible, and he was further asked:
Q. But I suggest to you there is nothing wrong with a lot being 95 feet and having a little extra width?
A. Well, that’s true. I know of subdivisions with shorter lots.
It thus appears that the narrow strip in question could be developed and the considerations attributed to this “discount factor” are accordingly minimized.
The other “discount factor” advanced by Speed was that 21 of the 55 acres were either swampy or below the level of the bordering Rockingstone Road and would require fill prior to development. In the final stages of his cross-examination, however, Mr. Speed gave the following answers with respect to all of the “front lands”:
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Eventually, I would envisage development (sic) it all. I would envisage that the first section to be developed would be the 19.5 acres on the east side of the Rockingstone Road, and with the earth moving and so forth that would take place on that development, the lands on the other side would be built up and drainage could take place, and so forth, and create land on the other side of the road.
When this evidence is taken in conjunction with the fact that the parties have agreed that “the land is reasonably level” and having regard to the evidence that drainages facilities are available, this second “discount factor” does not appear to be such a serious one. The effect given by Mr. Speed to the factors I have mentioned is reflected in the method he employed in valuing the front 55.5 acres at $55,000. In this regard he said:
These discounting factors would tend to reduce the area of useable land, in my opinion, by approximately 40 to 50 per cent, which means that in allowing $1,000 per acre for that land, in my mind anyway, at that time, I was saying maybe $2,000 or $2,500 for the useable portion.
In the course of the reasons for judgment which he delivered on behalf of the Appeal Division, Mr. Justice Cooper had occasion to review this approach and while making allowances for the difficulties of development of the lower lying land, he reached an overall conclusion which appears to me to reflect the true situation. In this regard he said:
I would take approximately the median in each case resulting in 30 acres at $2,250.00 per acre or $67,500.00. I would ascribe a lesser value to the remaining acreage having regard to difficulties of development of the swampy and lower lying land of $1,500.00 per acre amounting to $38,250.00 and making a total for the 55.5 acres of $105,750.00.
The Appeal Division had jurisdiction to review the finding of the Arbitrator in this regard based as it was on the fact that Speed had misapprehended the evidence in attaching undue weight to the “discounting factors” to which I have referred. See Winnipeg Supply & Fuel Co. Ltd. v. Metropolitan Corporation of
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Greater Winnipeg,[3] at p. 338 and University of Toronto v. Zeta Psi Elders Association of Toronto[4].
The learned Arbitrator accepted Mr. Speed’s opinion that the “rear lands” should be valued at $400 an acre on the ground that the chances of their development lay in the far distant future and he did not dissent from Mr. Speed’s characterization of these lands as “wilderness”. In reviewing this finding, Mr. Justice Cooper, speaking on behalf of the Appeal Division, said:
Mr. Speed in his appraisal report from which I have already quoted said that the subject lands were directly in the path of residential development “and when adequate services are available form a logical area for a large comprehensive residential development scheme.” In view of this statement I find it difficult to accept Mr. Speed’s characterization of all the remainder of the lands, his parcel two, as wilderness lands. I do not think that the evidence supports such a rigid line being drawn between the 55.5 acre area and the whole of parcel two. The entire land is capable of development. The question is not on the evidence whether it will be developed, but when. Parcel two should not be valued on the basis of wilderness land but with regard to the present value of its potentialities for development in the future.
In conformity with this reasoning, Mr. Justice Cooper fixed a value of $239,700 on the “rear lands”, and having regard to the proximity of these lands to the City and to the fact that they are reasonably level, I can see no reason for disturbing his conclusion which accords with the test stated by Thorson J. in R. v. Eastern Trust[5], at p. 119 where he was dealing with an earlier Halifax subdivision and said:
While, therefore, a considerable portion of the expropriated land was in fact pasture land at the time of the expropriation, it is not fair to value it solely as such,
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but its present value for building purposes in the future must also be ascertained.
The present value to which the learned judge referred is, in my view, accurately reflected in the amount fixed by Mr. Justice Cooper as a value for the “rear lands”.
Pow Investments Limited cross-appealed in this Court alleging that the cost development method of valuation should have been applied in relation to the early stages of the subdivision, but having regard to the conclusion which I have reached in respect to the main appeal, it appears to me to follow that the cross-appeal must be dismissed with costs.
In the result I would dismiss the appeal and the cross-appeal with costs.
Appeal and cross-appeal dismissed with costs.
Solicitor for the appellant: Ian H.M. Palmeter, Halifax.
Solicitor for the respondent: Harold F. Jackson, Halifax.