Gagetown Lumber Co. Ltd. v. The Queen

Gagetown Lumber Co. Ltd. v. The Queen
Collection
Supreme Court Judgments
Date
1956-12-21
Report
[1957] SCR 44
Judges
Rand, Ivan Cleveland; Locke, Charles Holland; Fauteux, Joseph Honoré Gérald; Abbott, Douglas Charles; Nolan, Henry Grattan
On appeal from
Canada
Subjects
Expropriation
Decision Content
Supreme Court of Canada
Gagetown Lumber Co. Ltd. v. The Queen, [1957] S.C.R. 44
Date: 1956-12-21
Gagetown Lumber Co. Ltd. (Defendant) Appellant;
and
Her Majesty The Queen, on the Information of The Deputy Attorney General of Canada (Plaintiff) Respondent;
and
The Attorney General For New Brunswick (Defendant) Respondent.
1956: May 31, June 1, 4, 5; 1956: December 21.
Present: Rand, Locke, Fauteux, Abbott and Nolan JJ.
ON APPEAL FROM THE EXCHEQUER COURT OF CANADA
Compensation—Timber lands—Valuation of lands and unexpired licences on Crown lands—Licence as “interest” in land—The Expropriation Act, R.S.C. 1952, c. 106—Allowance for compulsory taking.
The Crown in right of Canada expropriated for military purposes a large tract of land in New Brunswick, including some 28,000 acres on which the appellant company had carried on lumbering operations. About half of this land was owned by the company and the other half consisted of Crown lands in respect of which the company held two different licences, one of which would expire in the ordinary course in 11 years, while the other had only 1 year to run. The Exchequer Court determined the value of the company’s freehold lands at $330,000 (to which was added 10 per cent. for compulsory taking), the value of the licences at $42,000, and the value of the freehold in the Crown lands at $344,000. Adding other allowances, and deducting the value of the timber that the company had been permitted to cut after the expropriation, the Court fixed the total compensation at $394,177 for the company and $344,000 for the Province. Both the company and the Province sought increases in the amounts awarded. Held, the company’s appeal should foe allowed with costs and the Province’s cross-appeal should be dismissed with costs.
Per curiam: The company’s rights under its licences constituted an “interest” in land for which it was entitled to compensation under the Expropriation Act, but only to the extent of the unexpired terms; the mere possibility of renewal in the future was not in itself an interest in land.
Per curiam: The additional allowance of 10 per cent. for forcible taking, having been rightly given in respect of the freehold lands, should also have been given in respect of the licences.
Per Locke, Fauteux and Nolan JJ.: The witness M, whose valuation of the land was accepted in the Court below, considered the matter solely from the standpoint of what a prospective purchaser might be willing to pay for the lands, and did not at all consider the value to the company or whether an informed owner would have agreed to sell at any such figure. He simply expressed his opinion as to the amount the lands would realize if the owner was under compulsion to sell for what they would bring on the open market. In determining the value to the owner all advantages, present or future, that the land possessed in his hands were to be taken into consideration, and he was entitled to have the price assessed in reference to those advantages that would give the land the greatest value. These lands, in the circumstances, clearly had a value to the appellant company that they would not have had to someone who did not have like facilities for converting the logs into lumber, and a long-established business designed and effective for disposing of the lumber at a profit. Applying these principles, the award to the company in respect of the freehold properties should be increased by $55,000. There was nothing in the record that would support a higher valuation than had been made of the Crown lands as freehold in the hands of the Province. The award in respect of the licences should be increased by $35,000, and there should be a reduction of $10,426.50 in the credit to be given for timber cut after the expropriation.
Per Rand J.: The value of the property to the owner, as a measure of compensation, had two aspects: (1) the present value of all the land’s possibilities to the owner, as opposed to the value to the taker, with which the owner was not concerned; and (2) 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, representing the sum total of detriment suffered by reason of the disruption, over and above what the market price would take into account. Market value, i.e., the price on which a prudent and willing vendor and a similar purchaser would agree, might or might not be the sole determinant of compensation. Where the position of the owner vis-à-vis the land was not different from that of any purchaser, that value would be the measure; where the owner was in special relations to the land, as in the case of an established business, the measure was the value to him as a prudent man—what he would pay rather than be dispossessed, that value thereafter representing the capital cost of the business to which the profits would be related. But the value of these special relations must be established by the claimant. Considered on this basis, and on the evidence adduced, the final valuations of the lands arrived at by the Court below were liberal and should not be disturbed. Evidence of settlements for lands taken from other owners in the area in the same expropriation proceedings was rightly rejected by the Court below. Evidence of sales to the Crown might be admissible if the Court found that they were the result of genuinely free negotiations, influenced only by the desire of the parties to reach agreement on a figure deemed to be the fair value of the property, and not by extraneous considerations, but here the act of expropriation covered all the land required for the project and what remained was settlement of the claims for compensation, which involved elements different in degree, if not in nature, from those in sales to the Crown, and of such a character as to exclude the necessary freedom. Amory et al. v. Commonwealth (1947), 321 Mass. 240 at 255, quoted with approval.
On all the evidence, the company was entitled to an increase of $15,750 in the amount awarded for the licences, a reduction of $10,587 in the amount deducted in respect of the timber cut after the expropriation, and half the cost of marking boundary-lines shortly before, making a total increase of $30,039.
Per Abbott J.: The valuations for both the freehold lands and the Crown lands in the hands of the Province were liberal, and should not be disturbed. The economic value of the licences could not exceed their profit potential after taxes, during the terms that they still had to run. Applying the evidence as to the prices at which licences for timber lands in New Brunswick were bought and sold, and the other matters considered in the judgment appealed from, the valuation of the licences should not be disturbed. There should, however, be an allowance of $4,200 for compulsory taking in respect of the licences, $3,702 in respect of the survey costs, and a reduction of $10,567 in the credit for wood cut after the expropriation.
APPEAL from the judgment of Thorson P., of the Exchequer Court of Canada, fixing the compensation to be paid on lands expropriated by the Crown in right of Canada. Appeal allowed in part.
A. B. Gilbert, Q.C., and D. M. Gillis, for the appellant.
A. McF. Limerick, Q.C., C. J. A. Hughes, Q.C., and K. E. Eaton, for Her Majesty the Queen in right of Canada, respondent.
J. F. H. Teed, Q.C., for the Attorney General for New Brunswick, respondent and cross-appellant.
Rand J.:—This appeal arises out of an expropriation of approximately 28,000 acres of land in New Brunswick. Part was freehold, 13,413 acres, and part Crown lands under licences to cut, 14,424. The latter were embraced within two types of licence to the company by the Crown, one called a sawmill licence covering 9,027 acres and the other a timber licence for 5,397 acres. Of these 1935 and 1950, 2,586 acres of the freehold and 1,818 acres of the licensed, lands had been burnt over. The freehold had 151 acres of non-productive and 76 acres cleared; the licensed lands, 579 acres of non-productive and 2 cleared. The sawmill licence was sustained by legislation which , was to expire in 1963 and the timber licence in 1953, and at the time of the expropriation, August 6, 1952, their terms were accordingly limited to 11 years and 1 year respectively. In each, where the conditions of the licences had been complied with, an annual renewal was stipulated. It was shown that, although they were so limited in time, the policy of the legislature by periodic authorizing enactments for the last 40 years had been to permit continued renewal.
The main claim made by both the company and the Province was on a basis of some simplicity of conception though of complexity in computation. The total quantities of wood, as at the moment of expropriation, from sapling to mature tree, classified by species and in categories of sawlogs, pulpwood, firewood and other uses, were estimated ; from the market prices for products received in 1952 by the company and in other cases, estimated, operating costs of the company for the same year, operations extending over lands in another section of the Province, in corresponding units, were deducted; and the balances, the net returns, with minor adjustments, multiplied by the quantities produced the total value of the growth. To this was added that of the land related to its capacity to yield growth. The price, for example, of white pine in sawn lumber at shipping point (Saint John) was $94.16 per M (f.b.m.), and for spruce and fir, $75.15; the production costs, to that point, exclusive of stumpage fees payable to the Province, deducted from the selling-prices, left balances of $41.08 and $22.07 respectively. These amounts, embracing an unspecified element of profit, were said to represent the unit-value of the standing trees, although the actual figures used in the calculation of the claim were, for spruce and fir $20, and for white pine $25.
The total value was reduced to an acreage figure for the several categories. For sawlogs on the forested area of the Crown lands, $14.02; for growth of 5 inches and over available for sale in cords for pulpwood, firewood, spoolwood, etc., $53.18; for undersized trees, less than 5 inches in diameter, dealt with on a maturity basis and the 1952 market price discounted at 4 per cent. compounded for the appropriate number of years for each species to obtain the present value, $12.02; the land’s capacity for producing a crop of trees over a period of 64 years, $6.15: a total of $85.37. A similar calculation for the freehold lands yielded a total of $84.66 an acre. In each case $5 was allowed for reproducing burned and cleared land, and 5 per cent. deducted for inoperable growth. The grand total claimed before us was, for Crown lands, to the Province $451,551.54, to the company $555,011.92 (less an amount for cutting after the expropriation which is dealt with hereafter); and for the freehold, $877,911.50 (also less an amount for subsequent cutting).
This theoretical computation was argued to represent the value to an owner whose utilization of his property was by way of treating the annual growth of the trees as a crop in an indefinite continuity, as the most profitable mode of the exploitation on a large scale of woodlands; but as can be seen, it virtually ignores present market or exchange value and the element of profit which that involves.
It may be assumed that the general range of market values for freehold and for licensed lands in a Province where lumbering has played and now plays so large a part in the economy as in New Brunswick must long since have been established; and that in the case of licences the probability of indefinite renewal would, in some degree, have been a factor. But the expropriation, here, of the estate of the Province excludes that possibility, and the interest of the company as licensee must be taken as confined to the strict rights under the licences, including the limits of size for cutting, but not excluding the value, if any, placed by the market on the chance of being able to obtain leave under the regulations to cut undersized growth. The compensation for this interest must accordingly be referred to the periods in 1952 remaining unexpired of the licences.
It is, I think, beyond question that no sales and purchases of timber lands or licences have ever been carried out on the basis outlined. It was in fact rejected by Mr. Reid, an officer of the company; in speaking of the price at which licences would be bought or sold, the President, examining the figure of $20 per M (f.b.m.) claimed for the standing spruce on the licensed lands, put this question:
Is there any way of finding out how much would you pay to licence holders—will you pay them $12 and then pay the province $8 [the stumpage rate] ? Is that how it would work out?
His answer was:
I would not buy it on that basis; he would expect as much as he could from his lease … He might [expect to get $12] just according to how hard a bargain he could drive … He has the lease and wants to sell his licence to you, that is part of a dicker between the two parties.
The unexpressed element here which is concealed by the answer is the profit over the stumpage value which the purchaser would have in view, largely the determinant of the market price, the failure to face which is the serious defect in the argument presented.
Mr. Gilbert’s exclusive concern with this basis results from an underlying misconception of the meaning of the form in which the principle of compensation is put, that the value of the property to the owner is the measure of compensation. Properly understood, that language is accurate but the meaning is not precisely what the appellant has in mind. 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. The claim confuses the present exchange value of the land with the present value of the total return of its present growth ; in substance it attributes to the land a value equal to the present value of what the owner would be able to realize from the existing growth over a growth cycle of say 64 years plus the residual or capacity value of the land. The mere recognition of some undetermined element of profit does not alter the basic structure of the claim. The defect of this formulation was long ago pointed out by the Exchequer Court in The King v. Thompson 1 and The King v. Griffin 2.
The conception so advanced conceals other vital items involved in exchange value: the multiple risks of the future, risks of fire—of which there is significant evidence here, the infestation of pests, fungi, etc., market variations, changes in operating-costs, seasonal conditions, the effect of competitive substitutes and other factors and uncertainties. In the broader sense, it disregards the price for re-establishing the owner in business, the price at which he could purchase comparable lands and continue his business.
Those variables and uncertainties, some in more or less vague appreciation, are the unexpressed factors operating on the minds of persons habituated to lumber dealings. Opinions, varying, of course, with the individual, are given weight roughly according to the experience and standing in the business of those who give them; and they may require modification in the application to the facts on which they are based of the principles governing compensation. From this point of view, we have little or no help from what was adduced on behalf of the company; what, instead, is given us is the ideal realization of an equally ideal body of values, reduced by 5 per cent. and an unestimated profit.
The confusion of the appellant’s case may arise from the manner in which the rule in a number of cases has been examined and treated, and, distasteful as it is, a brief restatement appears to be called for. The task of the tribunal is primarily to determine compensation, not market or other values: these are items or elements that enter into or make up compensation. And it is compensation for the taking of land. By definition 3, “land” includes damages and these are not to be confined to the exercise of powers other than that of taking land. In developing the scope of compensation, such as, for example, the effects on remaining lands of the operation as distinguished from the construction of works placed upon the lands taken, and in injurious affection, we have followed the interpretation given to the early English statutes granting, in more or less similar language, like powers. But, both by the express language of the statute and that interpretation, the compensation here is wrapped up in and is in respect of that act of appropriation, the taking.
Market value, that is, the price on which a prudent and willing vendor and a similar purchaser would agree, may be the sole determinant, exhausting compensation, but it may not be. Where the position of the owner vis-à-vis the land is not different from that of any purchaser, that value is the measure; where the owner is in special relations to the land, as in the case of an established business, the measure is the value to him as a prudent man, what he would pay, as the price of the land, rather than be dispossessed, that price thereafter, in effect, representing the capital cost of the business to which the profits would be related. But evidence of those relations issuing in special injury upon extrusion and their value in terms of money must be adduced. It is in this comprehensive view that in Woods Manufacturing Company Limited v. The King 4, by a unanimous judgment, the rule for compensation under the existing law was laid down definitively by this Court.
The President relied largely on the opinions of two experienced lumbermen, Mr. R. G. MacFarlane and Mr. Ashley Colter. The former is associated, in an executive position, with the largest pulp and paper organization in the Province, and the latter is engaged in large scale lumbering and contracting. Both show long and successful careers and their opinions, as the President held, are entitled to high respect.
Mr. MacFarlane, on the footing of an operation stripping the land in 3 years, and taking certain market prices of white pine, red pine, spruce, fir and hemlock in f.b.m. and cords, computed the net return from sawn lumber of 9 inches and over and from trees down to 5 inches available for pulpwood. From this he deducted 15 per cent. as representing inoperable growth. On that total net return he then considered a price which a prudent purchaser from a willing seller would risk in an operating venture. With interest of 10 per cent. on the price for the 3 years, and allowances for annual charges, taxes, warden service, etc., he sought a figure that would permit also an inducing profit. On this, his valuation of the freehold was $230,000 and the Crown lands, as freehold, $274,000. Mr. Colter used a somewhat different method. He estimated, in the light of his experience, the stumpage value of each class of product and using the same quantities but deducting 20 per cent. for inoperable growth he reached a price for the freehold of $251,978 and for the Crown lands, $284,276, including in each case $3 an acre for the land with its undersized growth.
The selling prices based on information received from what Mr. MacFarlane considered a reliable shipping source, were, in his judgment, warranted for a 3-year period from 1952. They were less than the highest prices obtained in that year by the company, peak prices in a period of abnormal demand, and it is objected that they were, as presented, hearsay. By Mr. MacFarlane’s use of them, they carried the support of his own general opinion; it is obvious that the appellant’s prices could not themselves be taken; lower figures must have been used and in the circumstances, including other evidence, and what was omitted from as well as adduced in that submitted on behalf of the claimants, I cannot say that the President was unwarranted in accepting generally Mr. MacFarlane’s estimate and the unit figures on which it was based.
The values for stumpage used by the company were arbitrary. For example, that for spruce and fir sawn lumber was $20 per M (f.b.m.); the officers of the company, with no actual experience in New Brunswick, had “thought” that amount to be the going rate, but they could furnish no evidence in support of it. Drawn out of the void, it was observed to be 2½ times the Government stumpage of $8: that factor was then applied to white pine which carried a Government stumpage of $9, making $22.50, but because of a greater return from pine it was increased to $25. Similarly the other figures were reached. But between the $8 and the $20 for spruce, as is seen by Mr. Reid’s “dickering” view of purchases, an element of profit is hidden. The final estimates of the freehold forested land at $84.66 an acre and the licensed land at $85.37 an acre, as well as those of $92.69 and $98.29 urged at the trial, fully justify their description by the President as unrealistic. They are to be contrasted with the estimates of $17.15 and $19 by Mr. MacFarlane and $20 and $20.54 respectively by Mr. Colter.
To Mr. MacFarlane’s totals, the President made certain increased allowances. For the freehold lands they were, for pulpwood $31,939, residual value $40,239, and reductions in operating expense $27,829: for the licensed lands, pulp-wood, $37,728, residual value $43,272, and expense reduction $31,003. The additions to the net operating returns would have affected the purchase-prices at which Mr. MacFarlane arrived but they would not wholly have been added to them. The final valuations so reached were, in my opinion, liberal and should not be disturbed.
The valuation of the interest of the company as licensee of the Crown lands remains. Mr. MacFarlane proceeded on the same general basis as for the freehold using as the individual net unit returns from each class of product those of the latter less the Government stumpage. Considerable evidence was given of prices paid for licences, the highest figure being $2,000 a square mile. Using that as the standard appplicable, the President awarded $42,000 on the basis of 21 square miles, or at the rate of $2.91 an acre for the actual acreage of 14,424. The balance of the total valuation enured to the Province. This resulted in an award to the latter of $344,000 or $23.85 an acre.
It would have been of some benefit to have had a theoretical estimate of the market value of the Provincial Government’s interest on the footing of a continuing operation by licensees. The amount allowed to the Province considered in the light of its stumpage revenue from this area appears to be in sharp contrast to what those returns could justify and what the market would be prepared to pay. For the years 1934-1952 inclusive the total cut under the sawmill licence was 1018M: and from 1942-1952 under the timber licence 52M. At the prescribed stumpage rates this represents a negligible return.
In a table prepared by the forestry experts it is shown that the time required to bring the undersized trees, that is, trees 5 inches D.B.H. (diameter at breast height), to an increase of 4 inches D.B.H., ranged from 26 to 46 years. By 1963 on the sawmill-licensed land there would be 3722M spruce and fir sawlogs: 1212M red pine sawlogs: 1097M white pine sawlogs and 742M hemlock sawlogs. On the timber-licensed lands the quantities available for cutting in 1953 were : spruce and fir sawlogs 364M, red pine 45M, white pine 140M, and hemlock 28M. These quantities are of sizes within the regulations for cutting. The stumpage on spruce, fir and red pine in 1952 was $8 per M : on white pine $9 per M ; and on hemlock $7 per M. At those rates the return would be less than $60,000. The difference between the acreage allowance to the Crown of $23.85 and to the company, $2.91, lies in the value attributed to the growth between 5 inches and the 12 inches for spruce and 16 inches for white pine at the stump to which the regulations limit cutting by the licensee, the value for the undersized growth and the land, and that stumpage.
Although the interests of ownership and licence in a settled relation are complementary in indefinite time, that of a specific licensee is of right limited strictly to the terms of his licence and the regulations: he enjoys it for only the fixed period of time and the prescribed modes and sizes for cutting. The Government may allow additional cutting but is not bound to; new legislation authorizing renewal licences to past licensees may or may not be passed; on neither consideration can a direct claim be rested. The market value of the licence, to be reached by ordinary bargaining, may, to some extent, take both into account; but only in that form can they be contemplated as factors.
For the price of $2,000 a square mile we know nothing of the growth which it purchased. Mr. MacFarlane reached a value of $2,800 a square mile, but this involved the cutting of smaller sizes than allowed by the regulations. Having in mind the total value reached and the other considerations mentioned, general prices over the years can properly be related to each situation. For these reasons I should think $2,500 a square mile would be more proportionate to the total value than the sum allowed. To this I would add 10 per cent. for the forcible taking. The President conceded that allowance on the freehold and I am unable to see how it can be withheld from the value of the licences. Mr. Colter did not essay an estimate on the latter and I cannot think the abstention to have been wholly divorced from the difficulty of making it; but that circumstance is a reason for such an allowance.
The amount for 21 square miles at $2,500 plus 10 per cent. is $57,750, an increase over the amount allowed of $15,750. As the Dominion has not appealed, the award to the Province stands notwithstanding it was based on a total compensation as for a freehold minus the value attributed to the licences. As that total has been found to have been adequate, there is no ground for a supplementary percentage allowance to the Province.
Evidence of settlements for lands taken in the Gagetown area under the same expropriation proceedings was offered and rejected. Mr. Gilbert contended that the rejection was wrong and prejudicial to the proof of his claim. The respondents support the ruling; and as the question is involved with that of sales to the Crown or other expropriating authority for the purposes of a public or semi-public work before expropriation, an examination of both seems desirable.
Sales of land to the Crown prior to expropriation have, in a number of cases, been admitted in the Exchequer Court: The King v. Condon 5; The King v. Hayes 6 ; The King v. Murphy 7; The King v. La Compagnie des Carrières de Beauport Limitée 8; The King v. King 9; The King v. Bowles 10. Of these both The King v. King and The King v. Bowles were affirmed in this Court on December 11, 1916, but it should be said that in them no objection to the evidence seems to have been taken. The matter has been considered in innumerable instances by Courts in the United States, and as shown in Orgel on Valuation under Eminent Domain, 2nd ed. 1953, pp. 581 et seq., much diversity of opinion is exhibited. The objection to admission is that the power on the one side to take and the necessity on the other ultimately to yield introduce factors that destroy freedom of action between the parties. But the ideal conception of a free vendor and a free purchaser is in many transactions infringed by factors personal or peculiar to the parties or their purposes and irrelevant to pure economic or market value. This is elaborated in a decision of the New Jersey Court of Appeals in Curley et al v. Mayor and Aldermen of Jersey City 11. The rule of admissibility is well stated in Amory et al. v. Commonwealth 12:
If it is made to appear that the water rights taken from the petitioners are substantially similar to those taken from the other riparian owners, save only in the extent of the rights taken, and that the taking from them was not too far distant in space and time from the taking in question, then it is to be reasonably expected that the judge in the exercise of a sound discretion will find that the value of those rights will furnish a fair standard of the value of the petitioners’ rights, provided it is shown by those having knowledge of the details involved, including the basis upon which the payments were in fact computed, that the transactions between the Commonwealth and these other riparian owners amounted in reality to a purchase and sale of water rights and nothing more, irrespective of the form in which these transactions were clothed and, finally, provided it is shown that these sales were voluntarily and freely made between these riparian owners and the Commonwealth.
As Holmes C.J. of the same Court, in the case of O’Malley v. Commonwealth 13, said:
We cannot say merely because of the name of the purchaser that the sale was not a fair transaction in the market rather than a compulsory settlement.
The primary question is of freedom in the negotiation as a fact, and it is for the tribunal, in the light of the circumstances, to say whether the price was influenced by extraneous elements, or whether the parties were concerned only to reach agreement on a figure deemed to be the fair value of the property. This rule is in effect what appears to have been followed in the cases in this and the Exchequer Court cited.
But, as Mr. Teed pointed out, that is not the question here. The act of expropriation in this case covered all the land required for the project and what remained was settlement of the claims for compensation. This has been deemed generally to involve elements different if not wholly in nature at least in degree from those in sales to the Crown, and of such a character as likely to exclude the requisite freedom: O’Malley v. Commonwealth, supra. It was on this view that the President acted in this case, and in my opinion his ruling should not be disturbed. Some minor items remain. A sum of $25,000 was awarded for disturbance. No evidence was given sufficient ‘ to enable an estimate to be made with any degree of accuracy and the amount allowed cannot be said to be inadequate.
Following the expropriation, the company was permitted through the season 1952-1953 to carry on lumber operations on both tracts. In deducting the value of the stumpage to be charged for this, the President took the figures on which the claim had been presented but which he rejected. Mr. MacFarlane did not deal directly with stumpage value; Mr. Colter did, taking, for example, spruce logs for sawn lumber at $10 per M (f.b.m.), and white pine at $15. He allowed also $3 an acre for the land and residual growth for which there was no corresponding item on the MacFarlane calculation. The Colter total for the freehold was $251,978, including $37,728 for residue; the MacFarlane valuation, $230,000. For the Crown lands, the former found $284,276 with $41,520 for the land, and the latter $274,000. Mr. Colter deducted 20 per cent. for inoperable growth against Mr. MacFarlane’s 15 per cent. Applying the latter to the Colter figures after deducting the allowances for land, the estimates are: freehold, Colter $227,641 against $230,000; Crown lands, $257,929 against $274,000. Assuming a similar element of profit, the stumpage rates thus appear to be, roughly, the same, and those used by Mr. Colter, with one-half of the additional amounts allowed by the President, i.e., $1 a cord in addition to the return on spruce and fir pulpwood, and $1 per M (f.b.m.) for sawn lumber and 50c. a cord for pulpwood, from revised operating costs, can be used for the purpose here.
There was cut on the freehold 180,518 f.b.m. of spruce, 23,000 of fir, 10,000 of red pine, 47,379 of white pine and 24,000 of hemlock; on the Crown lands, the corresponding production was 1,501,918, 39,981, 621,909, 585,106 and 11,892. The pulpwood removed from the freehold was, spruce and fir 193 cords, red pine 66 and white pine 6. These quantities at the rates mentioned yield stumpage for the freehold, $4,531.65 and the Crown lands, $32,204.35, a total of $36,736 against $47,323 found by the President. A small item related to the cost of marking boundary-lines which had been done shortly before the expropriation, $7,404. This was disallowed on the ground that it had been taken into account in the estimates. I see nothing in the case to show that; and since its value to the lands is unquestioned some allowance should be made. Although not all the lands of the company so bounded were taken, new boundaries have been created. We do not know the cost represented by what was taken but at least 50 per cent. of the outlay should be allowed.
A final item concerned the value of a siding and appurtenant property owned by the company and used in connection with a sawmill at which the logs were sawn. The item was considered in detail by the President and the amounts awarded appear to be reasonable.
The question, whether the company has an “interest” in the land, within the’ meaning of the Expropriation Act, R.S.C. 1952, c. 106, was raised. On this I have no doubt: the licensee is in substantial possession; he may bring trespass or replevin in respect of standing trees or cut logs; he is vitally affected by any loss or damage to the growth in respect of not only the future operations but past payments to the Province both at the time of purchasing the licence and annually thereafter as bonus, mileage, fire fees, minimum stumpage, etc. A profit à prendre is admittedly an interest within the statute and the distinction in substance between the two, if any, is extremely fine. In this I am in agreement with the President.
The appeal of the company will therefore be allowed with costs and the judgment modified by adding to the amount awarded the company the sum of $30,039 ; in other respects it is affirmed. The cross-appeal of the Province will be dismissed with costs.
The judgment of Locke, Fauteux and Nolan JJ. was delivered by
Locke J.:—This is an appeal from a judgment of the Exchequer Court settling the compensation to be paid to the appellant as the owner of certain timber lands and as the licensee of other such lands held under licences from the Province of New Brunswick issued under the provisions of The Crown Lands Act, R.S.N.B. 1927, c. 30, title to which was taken under the provisions of the Expropriation Act, R.S.C. 1952, c. 106, on August 7, 1952. The lands so taken were part of a much larger area taken by the Crown in right of Canada for military purposes. By the judgment from which the appeal is taken, the compensation payable to Her Majesty in right of the Province of New Brunswick, in respect of the lands subject to the licences granted to the appellant, was determined and the Province has cross-appealed against the amount of that award.
Different considerations apply in arriving at the value to the owner of the lands of the appellant, 13,413 acres in extent, of which it was the owner in fee simple, and the lands of the Province subject to the licences, 14,267 acres in extent, and to the interest of the appellant in those lands under the licences referred to.
The freehold lands of the appellant had been acquired by it and its predecessors in title over a period of some 50 years prior to the expropriation. They had been purchased mainly by a partnership carrying on business under the name of Reid Brothers, of which firm Richard R. Reid, who gave evidence at the trial, was a member. The appellant company was incorporated in the year 1948 to take over the lumber business theretofore carried on by this firm, and the freehold lands and the existing licences were thereafter transferred to it. Reid Brothers had built a lumber mill on the Saint John River at Gagetown in 1917 and, adjoining the mill, had established a lumber yard supplied with railway facilities by a spur line connecting with the Canadian National Railways Valley Line. The business was mainly the manufacture and export of lumber to the United States and Great Britain and was a successful and profitable undertaking.
The timber limits in question, including both the freehold and licensed lands, lay generally to the west of Gage-town. The nearest of these was distant about 1½ miles from the mill and none was more than 15 miles away. According to Reid and to the witness Allingham, a brother-in-law of his who had been a member of the firm of Reid Brothers for many years and is the vice-president of the appellant, these limits had been obtained as a source of log supply for the mill at Gagetown. The mill itself, as distinct from the lumber yard and its facilities, had not been acquired by the appellant company but remained the property of the partnership and manufactured lumber for the appellant on a custom basis. As the evidence showed, comparatively little cutting was done upon either the freehold or the licensed lands up to the time of the expropriation. These witnesses said, and there is no contradiction of their evidence or doubt expressed as to their veracity, that the appellant’s intention in respect of these limits was to utilize them as a yearly and permanent source of supply of logs. Neither Reid Brothers nor the appellant had ever engaged in the production of pulpwood and there was no intention on the part of the appellant to cut any of the trees which were not sufficiently large to be logged for use as lumber for that purpose, but rather to allow them to mature.
The learned President arrived at his conclusion as to the quantum of the compensation in reliance mainly upon the evidence of the witness R. G. MacFarlane, an experienced lumberman employed by Fraser Companies, Limited, in New Brunswick in an executive capacity. MacFarlane was, I think, well qualified to express an opinion as to the value of these properties to a company such as the appellant having a well-established export lumber business at Gage-town, closely adjacent to these limits, with the information as to the timber standing on the properties afforded by the cruises which had been made. He, however, refrained from doing so.
Though this witness had said at the outset of his evidence that his instructions from the Department of National Defence had been to compile data as to what, in his opinion, a prudent and informed buyer would pay to an informed and willing seller, he apparently interpreted this as requiring him to express an opinion only as to what a prospective purchaser might be agreeable to pay for the lands. In a written report prepared several months prior to the trial and which was put in evidence, MacFarlane submitted an opinion to the Department which, he said, reflected “the value that in my opinion a prospective purchaser might place on the freehold lands and the Crown lands treated as freehold lands as of August 7, 1952”. That ‘ his opinion was based entirely upon what he thought his “prudent