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Expropriation—Lands taken for provincial park—Compensation payable—Special adaptability of land for purpose of new use.

The appellant was engaged in the business of real estate and for some years had been on the lookout for a piece of property which she could purchase and hold for future development. In 1963 she purchased 140 acres of undeveloped land in an area some 20 miles from the centre of Winnipeg. She was attracted to this parcel by its location, the terrain, the fact that it was well treed and particularly because it was high ground. The property was acquired for $6,000.

Within a year the Province of Manitoba expropriated 80 acres of the land to form part of a provincial park. An arbitrator valued the 80 acres so taken at $17,320 and allowed $3,250 by way of

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depreciation for the 60 acres not taken. The Court of Appeal reduced the amount of the award to $12,320, the amount that was first offered in settlement. An appeal was then brought to this Court.

Held (Martland and Pigeon JJ. dissenting): The appeal should be allowed and the arbitrator’s award restored.

Per Cartwright C.J. and Hall and Spence JJ.: While the mathematical averaging of sales, such as was done by the arbitrator, is not a proper method of arriving at the value to the owner, evidence of such sales is relevant and it was proper for the arbitrator to take such evidence into consideration. The arbitrator was required to determine the value of the land being taken as the value of the property to the appellant calculated on the basis of its highest and best use. This value may be the market value but it may be more in cases where, for some reason, the land has a special adaptability for the purpose of the new use. It was clear from the evidence that this land had such a special adaptability.

Even though the arbitrator adopted a wrong method in arriving at his figure of $17,320 for the 80 acres, his conclusion was nevertheless reasonably correct and should stand.

Fraser v. The Queen, [1963] S.C.R. 455, Murphy Oil Co. v. Dau (1969), 70 W.W.R. 339, referred to.

Per Martland and Pigeon JJ., dissenting: The averaging done by the arbitrator was not an averaging of properly comparable items and the Court of Appeal was right in refusing to accept the arbitration award. The appellant had not succeeded in establishing that the Court of Appeal failed properly to apply the appropriate legal principles, or made a manifest error in fact.

APPEAL from a judgment of the Court of Appeal for Manitoba[1], allowing an appeal from an award in expropriation proceedings. Appeal allowed, Martland and Pigeon JJ. dissenting.

Mrs. Mollie-Irene Ives, in person.

W.E. Norton, Q.C., and W.M. Holburn, for the respondent.

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The judgment of Cartwright C.J. and Hall and Spence JJ. was delivered by

HALL J.—The appellant, Mollie-Irene Ives, is a person who, in 1963 and for some years prior thereto, was engaged in the real estate business in Winnipeg in the Province of Manitoba. She had been on the lookout for a piece of property more or less contiguous to the Metropolitan Winnipeg area which she could purchase and hold for future development. She searched for several years without finding a piece of land that would fit into her long term plan. However, in her search she became aware of a parcel, 140 acres in area, which appealed to her and which she determined to acquire.

This land which is contained in two titles and includes full mineral rights, including gravel, is described as follows:

C.T. A13235—legal subdivisions 3 and 4 and the South halves of legal subdivisions 5 and 6 of Section 28 in the twelfth township and fifth range East of the principal meridian in Manitoba;

C.T. A13236—The South half of the North half of legal subdivisions 5 and 6 of Section 28 in the twelfth township and fifth range East of the principal meridian in Manitoba.

This property was situate on the east side of the Red River some 20 miles from the centre of the City of Winnipeg. The appellant was attracted to this property, but on inquiring learned that it was owned by a man who was in Selkirk Hospital and his property was being administered by the Administrator of the Estates of the Mentally Incompetent for the Province of Manitoba. She was informed that it was not for sale at that time. She returned to the area from year to year and became more convinced that the property in question was what she wanted. Finally, in 1963, she learned that the land was for sale. She contacted the administrator, Mr. Vermeulen. He confirmed that the land was to be sold and arranged to advertise for tenders. The appellant first offered $3,000, but on being told that one of the relatives of the owner had put in a higher bid she doubled her bid to $6,000. She got the land for this price. The appellant

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testified that she was particularly attracted to this piece of property by its location; the terrain; by the fact that it was well treed, and above all, it was high ground with a gravel base, one of the higher ridges in the province of Manitoba where high ground is always at a premium.

The appellant’s appreciation of the special character of this land and of the area in which it is situate is confirmed by admissions made by Elmer Karlief Farstad, the appraiser called by the respondent. This evidence is as follows and refers to quotations from a statement made by the Honourable Sterling Lyon in April 1965 when this land and other lands were being expropriated to form the Bird’s Hill Provincial Park under the jurisdiction of the Province of Manitoba. The statements made by the Honourable Sterling Lyon were put to Farstad as follows:

Q. The Minister was addressing the House, and he said:

In most urban centres where we have seen the loss of neighborhood vacant spaces, the expansion of the City pushing outwards, the lack of development of new park areas in step with population growth, and what I was calling the new era of leisure with its increased demands for recreational outlets—all of these things motivated the department to move as it did on its Centennial park expansion program.

He goes on and says:

The Birds Hill Provincial Park area has an excellent natural resource space for a large multipurpose park. In fact it can be described as an unique area in the topography surrounding greater Winnipeg. It consists of an elevated glacial plain broken only by a shallow swale, a swale trough running through the south central section. This trough is the core residential, agricultural area and contains almost all of these uses. Well over three quarters of the north section of this plain is unoccupied and except for several gravel quarries, and some grazing, the character of the landscape closely approximates the natural wilderness condition.

This wilderness plain and its slope lands with their variety of tree cover are as I have said a unique feature within the whole Red River Valley and provides a natural park setting which is in complete contrast with the prairie landscape which surrounds us otherwise.

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He goes on to extol the beauties of the park area. He says:

There are no natural unexploited areas within or adjacent to the metropolitan boundaries that offer the contrast in landscape contained within the Birds Hill Provincial Park, and remember I am talking about an area 14 miles from the corner of Portage and Main.

Would you agree pretty well with the Minister’s comments about the area as a whole?

A. Well, this is a description of the area.

Q. The Minister went on to say:

Birds Hill Provincial Park, 14 miles from downtown Winnipeg, is ideally situated to serve this recreational need. Connected to the perimeter system by trunk highway number 59 the Park can serve all sections of the Metro area and is within comfortable travel distance by bus or bicycle.

Do you agree?

A. It is reasonably close.

It will be seen that Farstad was in agreement with the description and suitability of the land in question as described by the Honourable Sterling Lyon. It is also obvious that the appellant had exercised good judgment and forethought in acquiring 140 acres of land, 80 acres of which were to be expropriated from her within a year after she got title to form part of this Birds Hill Provincial Park. The learned arbitrator valued the 80 acres so taken at $17,320 and allowed $3,250 by way of depreciation for the 60 acres not taken, making $20,570 in all. The Court of Appeal reduced the amount of the award to $12,320, the amount first offered in settlement, although in his reasons Monnin J.A. appears to have concluded that the value should have been fixed at $9,000. He awarded the larger amount because the respondent’s counsel informed the Court that the Province’s original offer of $12,320 still stood.

In his judgment the learned arbitrator found on the evidence that the three appraisers who gave evidence, two for the appellant and one, Farstad, for the respondent, agreed on certain points, namely:

1. The highest and best use of this land was in building lots of 5 to 10 acres each.

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2. The price of land in the area had risen in the few years preceding this expropriation.

3. The area had changed from a purely agricultural one to a suburban residential type.

He arrived at his valuation by averaging a number of sales in 1964 and 1965 testified to by Farstad and by Simpson and Clark, the appellant’s appraisers. While a mathematical averaging of sales is not a proper method of arriving at the value to the owner, evidence of such sales is relevant and it was proper for the arbitrator to take such evidence into consideration and, as an example, it was proper for him to take into consideration that one Bethrends sold 110 acres immediately across the road from the appellant’s land in August 1963 for $200 an acre. The arbitrator was required to determine the value of the land being taken as the value of the property to the appellant calculated on the basis of its highest and best use. This value may be the market value but it may be more in cases where, for some reason, the land has a special adaptability for the purpose of the new use. That this land had such a special adaptability is quite clear from the Honourable Sterling Lyon’s description previously quoted of the area in which it was situated.

In this connection the remarks of Ritchie J. in Fraser v. The Queen[2] are pertinent. Speaking for the majority, he said at p. 472:

The respondent’s counsel contends that the only potential value of the expropriated lands over and above their “bare ground” value was “solely and exclusively related to the scheme of constructing the causeway” and should accordingly have been excluded in fixing the value for the purposes of compensation. The leading authorities cited in support of this contention are: Cedars Rapids Mfg. & Power Co. v. Lacoste (1914) 6 W.W.R. 62, [1914] A.C. 569, 83 L.J.P.C. 162, reversing 43 Que. S.C. 410; Fraser v. Fraserville (City) [1917] A.C. 187, 86 L.J.P.C. 91, 34 D.L.R. 211, affirming 25 Que. K.B. 106, and Pointe Gourde Quarrying & Transport Co.

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v. Sub-lntendent of Crown Lands [1947] A.C. 565, 63 T.L.R. 486. None of these cases is, in my opinion, authority for the proposition that a hitherto undeveloped potentiality of expropriated property is to be entirely disregarded in fixing the value of that property for compensation purposes on the ground that the expropriating authority is the only present market for such potentiality and that it has developed a scheme which involves its use. These cases do, however, make it plain that the amount fixed by way of compensation must not reflect in any way the value which the property will have to the acquiring authority after expropriation and as an integral part of the scheme devised by that authority.

In Murphy Oil Company Ltd. v Dau[3], Porter J.A., after quoting this passage from Fraser, said at pp. 346 and 347:

It will thus be seen that the rough statement that it is the value to the owner and not to the taker that must be awarded does not exclude from consideration, as part of the value to the owner, the hitherto undeveloped potentiality of the expropriated property flowing from its characteristics as, in this case, being the only area on which by reason of The Oil and Gas Conservation Act the operator can drill. This principle is applicable even though there is but one purchaser for the lands.

It follows, from the principle running through the cases, that the value in the new use to which the land is being put is not to be taken into consideration but the adaptability of the land for the purpose of the new use must be paid for. (Emphasis added.)

Monnin J.A. appears to have given undue weight to the fact that the appellant acquired the land for $6,000. That fact was relevant but not necessarily decisive. Even Farstad, whose opinion Monnin J.A. appears fully to accept, valued the 140 acres at $14,250 and the 60 acres not taken at $4,500 which indicates that the appellant bought the land for much less than it was actually worth, and consequently the fact that she got the land for $6,000 is of little assistance in determining the actual value at the time of the expropriation.

The learned arbitrator was the proper person to weigh the evidence which he heard and it is

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clear from his award that he did not accept Farstad’s valuation of $9,000. Even though he adopted a wrong method in arriving at his figure of $17,320 for the 80 acres, I am of opinion that his conclusion was nevertheless reasonably correct and should stand.

As to the value of the remaining 60 acres and compensation for severance, I think that the learned arbitrator was low rather than high in the award of $3,250. There is no question on the evidence but that this 60 acres is of little value compared to the south 80 acres and as part of it. It is virtually isolated and inaccessible, situated in a cul-de-sac. The narrow strip on the west fronts on a road allowance which terminates in a dead end at the north boundary of the area taken. Access to the south or east could only be attained by acquiring a road allowance from the owner of the remaining part of the north-east quarter of section 28. I would, accordingly, have been inclined to give more under this heading than the arbitrator did but he had all the relevant evidence before him, and I do not think that I should substitute my opinion for his at this point.

In the result, I would restore the arbitrator’s award of $20,570 with costs here and in the Court of Appeal. The order as to costs made by the arbitrator must stand. The award will carry interest at 5 per cent from April 10, 1964, with credit being given for any payments made to the appellant on account.

The judgment of Martland and Pigeon JJ. was delivered by

MARTLAND J. (dissenting)—This appeal is from the unanimous judgment of the Court of Appeal for Manitoba[4], which allowed an appeal by the present respondent from an award made by an arbitrator in expropriation proceedings, reducing the amount payable from $20,570 to $12,320, which latter sum had been offered by the respondent to the appellant before the arbitration proceedings commenced.

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The appellant purchased 140 acres of undeveloped property on November 1, 1963, in what is now Birds Hill Provincial Park in Manitoba. Less than six months later, on April 10, 1964, the Province of Manitoba expropriated 80 acres of this property to form a part of the above‑mentioned park. The appellant had acquired the property from the Administrator of the Estates of the Mentally Incompetent who had sold it by public tender. The appellant had initially submitted an offer of $3,000, before the property was advertised, but when she was told that this was insufficient she submitted a bid of $6,000 and obtained the property.

The appellant said, in evidence, that she would have been prepared to double the amount of the purchase price if she had had to do so.

At the arbitration proceedings evidence was given by three real estate valuators, two called by the appellant, Messrs. Simpson and Clark, and one called by the respondent, Mr. Farstad. Their respective total estimates as to the value of the land taken and the damage caused to the remaining land as a result of severance were $51,000, $48,500 and $9,000.

The learned arbitrator did not adopt any of these estimates. Mr. Farstad had used, for purposes of comparison, 38 sales of land in the general area. Of these, the arbitrator ruled out all those occurring prior to 1964, leaving five sales at an average price of $190 an acre. The other two witnesses had relied upon six sales, none of which had been used by Farstad, which gave an average value of $284 per acre, approximately.

He then added the total price obtained on Farstad’s five sales and the other two witnesses’ six sales, divided it by the total acreage involved in all 11 sales, and derived an average value of $216.50 per acre. He allowed $17,320 as the value of the land expropriated; i.e., 80 acres at $216.50 per acre. He also allowed, as damages for severance, 25 per cent of the total value of the remaining 60 acres at $216.50 per acre.

On appeal, counsel for both parties contended that the averaging of sale prices of other lands

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sold in the area was not a proper method of estimating the value of the lands expropriated. The method was disapproved by the Court of Appeal, relying upon the statement in The Grand Trunk Railway Company of Canada v. Coupal[5]:

His second method of computation would seem to approximate nearer to legal principles, but even that method was clearly vicious, because it was attended by a process of averages, giving to the evidence of each witness on each side the same value, adding up the amounts respectively sworn to by them all and arriving at the amount by dividing the total by the number of the witnesses. I cannot conceive how any award come to by any such process can be supported.

This principle had been applied again by this Court in Fairman v. The City of Montreal[6].

The view expressed in those two cases is not directly applicable to the circumstances of this case. In those two cases the estimates made by various witnesses were averaged. In the present case none of the witnesses’ estimates of value was used in arriving at an average figure. Instead, examples of sales used by the valuators in arriving at their own estimates were taken into account by the arbitrator in reaching an average price per acre. I do not think that this method is wrong merely for that reason. But, if a proper average is to be determined, it must be obtained by using properly comparable items. That was not done by the arbitrator in this case.

It has already been noted that, in respect of the sales relied upon by Farstad in preparing his estimate, the arbitrator ruled out all sales occurring before 1964. He appears to have adopted this course under the erroneous impression that the expropriation occurred in April 1965. This was an error. The expropriation actually occurred on April 10, 1964. That was the date at which the value of the land was to be determined. However, all of the five sales mentioned by

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Farstad, which the arbitrator did take into account, are subsequent to that date. That which involved the largest acreage, i.e., Sale No. 29, occurred almost a year after the expropriation.

Of the six sales mentioned by Simpson and Clark, which were taken into account in arriving at an average, four occurred prior to 1964, and one occurred more than a year after the expropriation. Furthermore, as the Court of Appeal pointed out, both of these witnesses conceded, in evidence, that examples which they had used in making their estimates were not comparable to the expropriated property.

It thus appears that the averaging which was done by the arbitrator was not an averaging of properly comparable items and, in my opinion, the Court of Appeal was right in refusing to accept the arbitration award.

The Court of Appeal then went on to determine the amount of the award, and Monnin J.A., delivering the judgment of the Court, said:

On the whole I find Farstad’s report more realistic than the other two and I accept his reasoning in arriving at a figure of $9,000.

The Court then went on to say that, as the respondent had offered to the appellant $12,320, and as its counsel had indicated to the Court that that offer still stood, the award should be for that amount.

It is true that the learned arbitrator did not accept Farstad’s estimate, just as he also refused to accept the other two estimates which had been made. However, this decision on his part does not appear to have been based upon any finding as to credibility. What he did, instead, was to adopt his own method of estimation. Apart from any question as to credibility, the Court of Appeal was in as good a position as the arbitrator to appraise the weight which should be given to the evidence which was before him.

In this respect the case is similar to that of Duthoit v. Province of Manitoba[7], in which, also, the arbitrator accepted none of the estimates submitted by the three valuators, but set a figure of

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his own. Cartwright J. (as he then was), delivering the unanimous judgment of this Court, said, at p. 132:

This is not a case in which the learned arbitrator enjoyed any particular advantage over the Court of Appeal by reason of having seen and heard the witnesses. At the commencement of his reasons, he says:

Three appraisals of the subject land were submitted to me. The Applicants called Mr. M.R. Rhone and the Crown called Mr. E.K. Farstad. A third appraisal was made by Mr. Andrew Turpie, upon my suggestion, in view of the wide divergence in the opinions of the other appraisers. I find no reason to prefer any of these gentlemen over the others by reason of qualifications, experience or conduct as witnesses.

In the present case, the arbitrator expressed no preference for the evidence of any of the three witnesses, although he did adopt Farstad’s views on another aspect of the case.

Monnin J.A. did lay some stress upon the price paid by the appellant for the 140 acres, i.e., $6,000, less than six months before the expropriation, when $12,320 was offered in respect of 80 acres, but he does not adopt this as being decisive. This evidence was cogent, because the appellant did say that when she doubled her original offer of $3,000 she stated that: “I would like the opportunity of doing so again if I had to.” In determining the value of the land to her, i.e., what she, as a prudent businesswoman, would pay for the land at the date of the expropriation rather than be ejected from it, this evidence as to what she would have paid to acquire the whole 140 acres, less than six months before, has substantial weight.

As stated by Cartwright J., in the Duthoit case, supra, at p. 132:

The task of the appellants in this Court is to satisfy us that the judgment of the Court of Appeal is wrong;

To succeed in that task it is necessary for the appellant to establish that the Court of Appeal failed properly to apply the appropriate legal prin-

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ciples, or made a manifest error in fact. The appellant has not succeeded in establishing such an error in law, or in fact.

For these reasons, I would dismiss this appeal with costs.

Appeal allowed with costs; MARTLAND and PIGEON JJ. dissenting.

Mollie-lrene Ives, Winnipeg.

Solicitors for the respondent: Fillmore, Riley & Co., Winnipeg.

 



[1] (1968), 65 W.W.R. 436.

[2] [1963] S.C.R. 455.

[3] (1969), 70 W.W.R. 339.

[4] (1968), 65 W.W.R. 436.

[5] (1898), 28 S.C.R. 531 at 537.

[6] (1901), 31 S.C.R. 210 at 218.

[7] [1967] S.C.R. 128.

 

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