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Supreme Court of Canada

Expropriation—Compensation—Valuation—Suitability of site for proposed apartment building project—Whether apartment development highest and best use of land to owners.

The City of Halifax expropriated certain lands which the respondents had acquired for the purpose of building thereon a highrise luxury apartment. On an application for determination of the compensation payable to the respondents, the trial judge awarded $57,000 in respect of the lands in question ($52,000 for land and $5,000 for expenses). The Appeal Division, on appeal by the respondents, increased the award to $143,105.45 ($117,000 for land and $26,105.45 for expenses). An appeal by the city was then brought to this Court.

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Held: The total of the various costs incurred by the respondents should be corrected to read $25,705.59, and, accordingly, the award to the respondents should be reduced to $142,705.59. In all other respects the appeal should be dismissed.

In arriving at a valuation considerably in excess of that fixed by the trial judge, the Appeal Division relied on s. 414 of the Halifax City Charter, 1963 (N.S.), c. 52, which provides in part that “the Court may review any findings of fact or estimate of value and make such order as it deems just.” Unlike the trial judge, who did not make an actual finding as to the highest and best use of the land, the Appeal Division found that such highest and best use was for an apartment development.

Having regard to the care with which the Appeal Division reviewed all the evidence as to value and the whole question as to the suitability of the site for the apartment building project, this Court considered that the amount fixed by the Appeal Division, fully supported as it was by the evidence, should not be disturbed.

Woods Manufacturing Co. Ltd. v. The King, [1951] S.C.R. 504; Cedars Rapids Manufacturing and Power Co. v. Lacoste, [1914] A.C. 569; Gagetown Lumber Co. Ltd. v. The Queen et al., [1957] S.C.R. 44; Federal District Commission v. Dagenais, [1935] Ex.C.R. 25; Scottish Halls Ltd. v. The Minister (1915), 15 N.S.W. St. R. 81, referred to.

APPEAL from a judgment of the Appeal Division of the Supreme Court of Nova Scotia[1], increasing the amount of compensation awarded at trial to the respondents for certain lands expropriated by the appellant. Appeal dismissed.

Ian M. MacKeigan, Q.C., and David S. Fraser, for the defendant, appellant.

Harold Jackson, Q.C., and George Cooper, for the plaintiffs, respondents.

The judgment of the Court was delivered by

HALL J.—This is an appeal from a judgment of the Appeal Division of the Nova Scotia Supreme Court involving the compensation payable to the respondents for lands expropriated by the City of Halifax at Jollimore in the County

[Page 172]

of Halifax, being an area adjacent to Sir Sanford Fleming Park and fronting on the western side of the Northwest Arm. The Northwest Arm is a long, narrow body of water which separates the peninsula of Halifax from the mainland. Access to Halifax from Jollimore is by a roadway along the western side of the Northwest Arm to the head of the Arm to a point known as the “Armdale Rotary” a distance of approximately 2.8 miles. Streets radiate from the Armdale Rotary to centre town Halifax and to the Angus L. Macdonald Bridge and Dartmouth. According to the evidence it would take about one-half hour at peak traffic periods to drive from centre town Halifax to Jollimore.

The history of the property in question and its acquisition by the respondents (referred to in the judgment under appeal and in these reasons as “Lot A”) and of their plans in regard thereto as well as the on-and-off procedures by the appellant to expropriate the site and the litigation which ensued between the parties is a long one, the details of which are fully set out in the Appeal Division’s judgment reported 1 N.S.R. (2d) 38 at pp. 40-50 inclusive. I will not repeat those details but in summary, early in 1965 the respondents who had built and subsequently sold two apartment buildings in Halifax conceived the plan of assembling the property now called Lot A and of building thereon a 72-unit highrise luxury apartment (later changed to 78 units). The City of Halifax which owned and operated the Sir Sanford Fleming Park opposed the plans and offered to buy out the respondents. The respondents were unwilling to sell and were determined to proceed with their projected building. They notified the city accordingly, particularly in April and May 1966. Meanwhile, on October 28, 1965, the City Council passed a resolution as follows:

That, as recommended by the Committee on Works, the City acquire all the land in the Fleming Park area zoned “commercial” for City purposes; a public park, saving and excepting that land owned by the Municipality of the County of Halifax, and that the owners be advised of this resolution.

[Page 173]

The city did not, however, take expropriation proceedings and matters became more or less deadlocked. In this situation the respondents, having obtained a permit to do so from the County of Halifax, proceeded with the excavation for the foundation of their building and expended the sum of $14,747.63 for this work and other substantial amounts in furtherance of their plans. The city retaliated by passing a resolution on September 15, 1966, which was not an expropriating resolution but one instructing its engineering staff to prepare a plan and description of the land to be expropriated. The respondents contested the city’s right to expropriate and took action to prevent the city from expropriating and for an injunction. The action was tried by Cowan C.J.T.D. who, on February 15, 1967, upheld the city’s right to expropriate. Having succeeded in this litigation, the city did not act to take the lands until, on November 16, 1967, a resolution expropriating the property was passed by council, but this was done only after repeated requests from the respondents that the city either take the lands or abandon its declared intention of doing so.

It cannot be questioned that the respondents were bona fide in their plans to erect a highrise luxury apartment building on Lot A. Their actions throughout 1965, 1966 and 1967 admit of no other conclusion. On the other hand, the city did everything it could to delay and block those plans prior to the actual expropriation resolution of November 16, 1967.

The substantial issue here is whether the proposed use of Lot A as a site for a highrise luxury apartment building was a practical undertaking at the relevant times in question here and constituted making the highest and best use of the land by the respondents if not taken from them.

The basis of compensation set out in the Halifax City Charter, 1963 (N.S.), c. 52, is as follows:

408. (1) The City shall make due compensation to the owners or occupiers of, or other persons in-

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terested in, any land taken by the City in the exercise of any of the powers conferred by this Act, and shall pay damages for any land or interest therein injuriously affected by the exercise of such powers, and the amount of such damages shall be such as necessarily result from the exercise of such powers beyond any advantage that the claimant may derive from the contemplated work.

The principles which govern the fixing of compensation following expropriation have been considered in many cases and are well known. Rinfret C.J.C. in Woods Manufacturing Company Limited v. The King[2], said at p. 506:

While the principles to be applied in assessing compensation to the owner for property expropriated by the Crown under the provisions of the Expropriation Act, c. 64, R.S.C. 1927, and under various other Canadian statutes in which powers of expropriation are given have been long since settled by decisions of the Judicial Committee and this Court in a manner which appears to us to be clear, it is perhaps well to restate them. The decision of the Judicial Committee in Cedars Rapids Manufacturing & Power Company v. LaCoste, [1914] A.C. 569, where expropriation proceedings were taken under the provisions of the Railway Act, 1903, determine that the law of Canada as regards the principles upon which compensation for land taken was to be awarded was the same as the law of England at that time and the judgment delivered by Lord Dunedin expressly approved the statement of these principles contained in the judgments of Vaughan‑Williams and Fletcher-Moulton, LL. JJ. in Re Lucas and Chesterfield Gas and Water Board [1909] 1 K.B. 16.

In the Cedars Rapids case, Lord Dunedin said:

The value to be paid for is the value to the owner as it existed at the date of the taking, not the value to the taker The value to the owner consists in all advantages which the land possesses, present or future, but it is the present value alone of such advantages that falls to be determined.

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and in Gagetown Lumber Co. Ltd. v. The Queen et al.[3], Rand J., referring to the principle that “the value of the property to the owner is the measure of compensation” said:

It has two aspects, one that it is the present value of all the land’s possibilities to the owner in contradistinction to the value to the taker, for with the latter the owner is not concerned; and the second, the value to the owner as a prudent man in a situation affected by conditions or relations from which buyers generally on the market would be free, as, for example, the special features involved in the ejection of an established business from possession of land. They represent the sum total of detriment suffered by reason of the disruption, over and above what the market price would take into account.

What, then, was the highest and best use of Lot A? The Court must find this fact before it can properly determine the proper compensation payable to the owner. Cowan C.J.T.D. did not, in my view, make an actual finding as to the highest and best use. He dealt with the issue as follows:

The appraisals of R.H. Craig and C.F. Whynacht being based on the highest and best use of the lands in question, namely as a site for multiple housing development, I do not accept their valuations as being a proper basis for determination of due compensation to the claimants. Mr. Speed having found that “an apartment project on this site would constitute a marginal operation and does not represent an economically viable proposition at this time”, gave as his opinion that “the best potential use of the site is for a light commercial extension of Fleming Park, offering a licensed restaurant, docking and general marina facilities to the general public.”

but having said that, he continued:

I am of the opinion that Mr. Speed was endeavouring to find, as a highest and best use of the property, a commercial use which would give a value higher than that which would accrue if the property were used for single family residential purposes. It must be remembered that the commercial use which determined zoning was a commercial use which had become outdated and of no commercial value, just

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prior to the date of acquisition by the claimants. The use of the property in question as a ferry terminus and as a marine railway and a place for hauling out and repairing yachts and launches had ceased to be of any real commercial value. These commercial undertakings were feasible only when operated by families who were content to make a day’s pay during the short summer season and to provide storage facilities and a certain amount of repair work during the late autumn, winter and early spring. The sign painting business associated with the Jollimore properties was of minor significance.

which clearly shows that he rejected Mr. Speed’s “best potential use of the site” as being for a light commercial extension of Fleming Park. It is to be noted that Speed in his evidence said:

Well, I have heard major emphasis this week on the use of this site as an apartment site and everything is now slanted towards it as an apartment building site. It was never my feeling that this was the best use of the land, so, therefore, my entire report was drafted to give effect to that commercial defect (?) in the valuation, which is the commercial value of the land, although I was asked by the City to look into the potential of the site as an apartment building site, but it was not given any major emphasis.

which is at variance with his appraisal report wherein he said that he had “given considerable attention to the suitability of the site for highrise apartment construction”.

The Appeal Division on the other hand dealt with the question of the highest and best use of the site as follows:

After considering all of the evidence, presented at the hearing, in the light of the legal principles upon which compensation in cases such as this must be made, I have reached a conclusion which differs substantially from that reached by the trial Judge. In my opinion a prudent man would at the date of expropriation, in the words of the test set forth in the Diggon-Hibben Limited v. The King case, [1949] S.C.R. 712, have paid the price which the property would have commanded as an apartment development rather than be ejected from it. This was the conclusion reached by Mr. Craig when he appraised the property in 1965, and the evidence indicates

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clearly that between 1965 and the date of expropriation the shortage of suitable sites for apartment developments was becoming more acute in the Halifax-Dartmouth area and the demand for housing was increasing.

Mr. Craig in his appraisal was not considering the ability of the particular owner to proceed with an apartment project on the site in question, but was attempting to determine what the assembled package of land would bring on the market when offered to developers generally. His conclusions were reached at a time when he had a great deal of actual experience not only in the buying and selling of real estate for development purposes but also in the arranging of finances for such undertakings through his connection with various mortgage concerns. At p. 8 of his report, he sets forth the approach which he took to this appraisal:

“It is known that the site under appraisal was acquired comparatively recently by the acquisition and assembly of five parcels of land. It is also known that there were many problems in bringing this project to its present position as a realistic probability. In the circumstances it is considered that the actual cost of the acquisition of the overall site would not in itself be an indication of the value of the site and of the project as it stands at the present time.

“Considerable research has been done into the history of the proposed development over the past number of months. It is known that there was an attempt by the City of Halifax to have the land rezoned from ‘Commercial’ to ‘First Class Residential’ and that this attempt was unsuccessful. It is known that there has been opposition to allowing the proposal to proceed. As a result of numerous inquiries made, it is the considered opinion of the appraiser that, as of this date, the developer is in a position to proceed with the development as soon as he has received his building permit. Application has already been made for the building permit but it is not possible for this application to receive final approval until the detailed plans of the development are provided. As can be expected with a development of this magnitude, it takes considerable time to complete detailed plans, but from discussions with the developer and from a review of the work done to date, it is apparent that these plans will be available in the very near future. As far as can be determined, there is every likelihood that the building permit will be granted upon the submission of the plans as required by the by-laws of the County of Halifax.

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“Consideration has also been given to the question of vehicular access to and egress from the site to public roads in the area. As a result of considerable investigation into this matter, supported by legal opinion, it is believed and accepted that ingress and egress to the site does not present a material problem.

“Taking all factors into account therefore, this proposed development is accepted, for the purpose of this appraisal, as a development project which is in a position to proceed as routine formalities are overcome. In these circumstances, it is proposed to arrive at the value of the project as it now stands by estimating the value of the site, as a site economically and physically suitable for the construction and development of a 60-unit apartment building, on the basis of the rents and construction costs estimated on pages 6 and 7 of this report, and taking into account the present day market for apartment sites in the Halifax area.”

In giving his evidence at the hearing, after stating that the highest and best use of this property was for an apartment development, Mr. Craig went on to explain how he reached his opinion:

“A. I feel that the greatest amenity that this site had to offer was the fact that it was zoned Commercial, which covered a wide range of possible developments, and that it was located on the shores of the North West Arm, with water frontage and this really overshadowed everything else in connection with the favourable conditions.

Q. Now, why do you stress that so much?

A. Well, for eleven years I worked in the Halifax area and for nine of those years I was in real estate and, in the real estate capacity, initiative and enterprise are extremely important. I was sometimes in selling and I was sometimes in option property and I was, at different times, responsible for trying to find property suitable for apartment buildings. I had requests from many Halifax developers—from Montreal and Toronto, and if I located a site suitable for apartment projects, I merely had to pick up the phone and they would come running. I did succeed in promoting and assisting in the promoting of several apartment sites, but during all this, the North West Arm was a remote possibility because, to the best of my ability, there was no land during this time on the North West Arm suitably zoned for anything other than residential development. I was most surprised when it came to my attention that

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there was a parcel of land that was zoned Commercial, or a number of parcels of land which were zoned Commercial. Had I personally been aware of this, then I would have been after this site long before Mr. Bauditz was established.

Cowan C.J.T.D. fixed the compensation for Lot A at $52,000, saying:

Having regard to all the evidence and to all relevant factors, I am of the opinion that the value of Lot “A” to the owner at the effective date of expropriation, November 22, 1967, was $52,000.

The respondents also included in their claims for compensation amounts to cover damages which they alleged they suffered due to the appellant’s failure to proceed with its expropriation proceedings in due time and the additional costs which they incurred in keeping alive the various agreements into which they had entered until such time as the expropriation did in fact take place, and they also claimed an amount of $15,000 for loss of time flowing directly from the expropriation commencing with the resolution to acquire on October 28, 1965, and there was a claim for compensation for the fact that the appellant’s resolution of October 28, 1965, interfered with their financing arrangements for their proposed project and converted them from a position of solvency to one of insolvency. The respondents also claimed the costs awarded against them in the action they took against the appellant to restrain the appellant from proceeding with the expropriation and there were claims for services rendered by various firms to prevent the rezoning of the lands in question as well as claims for architect and engineering fees, soil tests and for expenditures made in preparation for the erection of the proposed building. The sum of $15,147.53 being the amount of a judgment recovered against the respondents by the firm which did the excavation for the foundation of the proposed building was also claimed.

The learned trial judge disallowed all of these claims but allowed a general item of $5,000 for miscellaneous expenses so that his total award came to $57,000.

The Appeal Division increased the amount of compensation for Lot A from $52,000 to $117,-

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000 and, in addition, citing with approval the statement of MacLean J. in Federal District Commission v. Dagenais[4], at p. 33, and Scottish Halls Ltd. v. The Minister[5], allowed items totalling $26=105.45 made un as follows:

The amount payable for excavation........................................................................

$14,747.63

Architect’s fees (Ledaire)........................................................................................

6,554.62

Engineering fees (Brandys).....................................................................................

1,760.00

Engineering fees (Wendt)........................................................................................

251.20

Soil tests....................................................................................................................

350.00

Demolition.................................................................................................................

600.00

Surveyor’s fees.........................................................................................................

75.00

Photographs..............................................................................................................

50.00

Typing services.........................................................................................................

7.00

Vancouver travel expenses.....................................................................................

403.80

K.W. Robb & Associates, Surveyors.....................................................................

573.00

 

Drafting and printing services.................................................................................

241.34

Insurance...................................................................................................................

42.00

Survey (Steven & Fiske Ltd.)...................................................................................

50.00

These items, according to my calculation, total $25,705.59. The Appeal Division called this total $26,105.45. I am unahle to reconcile the two totals, and it is evident that the correct figure is $25,705.59 as set out in the factum of the appellant. I am in agreement with the Appeal Division in the allowance of these several items totalling $25,705.59. This aspect of the judgment of the Appeal Division should not be disturbed but the figure should be changed to $25,705.59. The Appeal Division correctly disallowed the other items claimed by the respondents.

In arriving at a valuation of $117,000 as the fair market value of Lot A, the Appeal Division rejected Mr. Speed’s opinion that the site in question was not a suitable site for the apartment project being undertaken by the respondents and also rejected his testimony that the highest and best use of the lands would be “for a light commercial extension of Fleming Park, offering a licensed restaurant, docking and general marina facilities to the general public.” Mr. Speed conceded that the site could physically support an apartment building of the size projected to meet

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the requirements of the County of Halifax by-law, but considering the many factors involved, he said in his report:

With respect to an apartment project it is our opinion that due to irregularity of shape; poor accessibility; difficulty of financing; restricted rentals obtainable in relation to cost of construction, and other facts discussed above, an apartment project on this site would constitute a marginal operation, and does not represent an economically viable proposition at this time.

In dealing with this the Appeal Division said:

Some of the factors which Mr. Speed took into consideration in reaching his conclusion, however, do not appear to be based upon an accurate factual situation. He seems to be labouring under the impression that no part of the subject property abuts the provincially owned highway known as Parkhill Drive, and it is therefore not considered to have access to a public highway. The correct situation appears to be that a small triangular lot of land which was eventually found to have been acquired by Bauditz and to be part of the lands expropriated does in fact join the site to a public highway.

Similarly, Mr. Speed was under the impression that the Dingle Road should not be considered as a public highway since access by this route could be curtailed at any time by Council approval. The same argument might be made of any public street but should not, in my opinion, have been treated as a factor limiting the accessibility of the site to the main access road to the area.

Mr. Speed’s conclusion that the highest and best use of the site was for commercial purposes was based on a presumed difficulty of arranging finances for an apartment project in the area. The evidence, however, indicates that there were people prepared to assist in the financing of the project if it proceeded under its present ownership, and the evidence of Mr. Craig was to the effect that financing for an apartment project on this site would have been available from regular finance institutions had not the threat of expropriation been placed over the lands by the City. The affirmative proof of the ability to finance such an apartment project was not, however, as important as the fact that Mr. Speed had made no efforts to determine whether financing would be available or not for this particular project and admitted on p. 462 of the evidence that he had had no experience in trying to obtain mortgage money for apartment construction in this location. His conclusion that financing would be difficult was

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based merely on his observation of the mortgage market and not on any experience in actually granting mortgage financing to apartment projects as was the case with Mr. Craig.

Mr. Speed’s next premise for rejecting this site as a suitable site for an apartment project was that it was located in an area of an untried rental market. He did not, however, take any great exception to the proposed rentals contained in the rental schedule prepared by Mr. Whynacht in the course of his appraisal, and further indicated that at the time of making his appraisal he did not anticipate the abnormal increase in the rents which took place immediately afterwards over the whole of the metropolitan area.

The Appeal Division accepted the evidence of the appraisal of Mr. Whynacht, and in regard thereto said:

The appraisal of Mr. C.F. Whynacht was, like that of Mr. Craig, based upon the assumption that the highest and best use of the land was for an apartment development. He used three approaches to determine his opinion as to value, mainly the per square foot basis, the land residual basis and the per unit basis. Most emphasis was put on the per unit basis because, in his opinion, most land developers were using this rule of thumb technique as a method of determining what they were prepared to pay for land for use in their apartment projects.

The Appeal Division also accepted the opinion of Mr. Craig, a part of whose evidence was referred to earlier in these reasons, that the highest and best use of the land was for an apartment development. Mr. Craig valued the land at $124,800; Mr. Whynacht at $155,000. Mr. Speed had placed the valuation of Lot A on an individual lot basis at $33,750 and collectively and as a commercial site at $43,500 and as an apartment site at $58,500, but subject to his opinion that as an apartment building site it was a marginal proposition. The learned trial judge, relying almost wholly on Mr. Speed’s report and evaluation, fixed the value at $52,000. The Appeal Division, after a review of all the evidence, said that the fair market value of Lot A on the day of expropriation was $117,000.

[Page 183]

In arriving at a valuation considerably in excess of that fixed by Cowan C.J.T.D., the Appeal Division relied on s. 414 of the Halifax City Charter, which provides in part that “the Court may review any findings of fact or estimate of value and make such order as it deems just” and in regard thereto said:

Were it not for this direction in the legislation the right of review in this appeal would be very limited. Under the statutory right of review given, however, it will be necessary to consider all of the evidence presented before the Court below, and to determine whether or not the opinion of this Court as to value of the lands expropriated differs from that of the trial Judge and should be substituted therefor.

Since the finding of the Court below has been based upon a consideration of testimony which to a great extent is in the nature of expert testimony and the conclusions of the Court must necessarily be drawn from evidence of this sort, no question of credibility is involved but merely that of the persuasive quality of the evidence being reviewed. Nor is there any question as to the principles of law upon which the valuation of the compensation should be determined.

Having regard to the care with which the Appeal Division reviewed all the evidence as to value and the whole question as to the suitability of the site for the apartment building project which the respondents were actually in the act of putting into effect when stopped by the expropriation, I consider that the amount fixed by the Appeal Division, fully supported as it is by the evidence, should not be disturbed. The judgment of the Appeal Division should be sustained with the correction previously referred to to make a total of $142,705.59; otherwise the appeal should be dismissed with costs.

Appeal dismissed with costs except that correction made in award.

Solicitor for the defendant, appellant: I.M. MacKeigan, Halifax.

Solicitor for the plaintiffs, respondents: Harold F. Jackson, Halifax.

 



[1] (1910), 1 N.S.R. (2d) 38.

[2] [1951] S.C.R. 504.

[3] [1957] S.C.R. 44.

[4] [1935] Ex.C.R. 25.

[5] (1915), 15 N.S.W. St. R. 81.

 

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