Saskatoon (City of) v. Smith-Roles Ltd.

Saskatoon (City of) v. Smith-Roles Ltd.
Collection
Supreme Court Judgments
Date
1978-06-29
Report
[1978] 2 SCR 1121
Judges
Laskin, Bora; Spence, Wishart Flett; Pigeon, Louis-Philippe; Dickson, Robert George Brian; Estey, Willard Zebedee
On appeal from
Saskatchewan
Subjects
Expropriation
Decision Content
Supreme Court of Canada
Saskatoon (City of) v. Smith-Roles Ltd., [1978] 2 S.C.R. 1121
Date: 1978-06-29
City of Saskatoon Appellant;
and
Smith-Roles Ltd. Respondent.
1978: March 9; 1978: June 29.
Present: Laskin C.J. and Spence, Pigeon, Dickson and Estey JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR SASKATCHEWAN
Expropriation—Compensation—Quantum—Factors involved—Property not being utilized for highest and best use at time of taking—Value to owner—Relocation costs—Market value for highest and best use—The Municipal Expropriation Act, R.S.S. 1965, c. 166.
An arbitrator allowed to the respondent compensation in the amount of $203,775 upon the expropriation by the City of Saskatoon of 19,500 square feet of land situated on a corner of an intersection, close to the city’s commercial centre, and used for a foundry business. The arbitrator noted that this use was at far less than the economic potential of the lands and held, citing authority, that an owner in the position of the claimant who claims payment for the land based on its highest and best use has no separate claim for the value of the buildings thereon or for an allowance for disturbance unless the value of such land based on its present use, together with the value of the buildings and the loss caused by disturbance exceed the value of the land for its highest and best use.
The Court of Appeal for Saskatchewan, by a majority judgment, increased the compensation allowed to $362,000 and from that decision the City appealed to this Court.
Held (Estey J. dissenting): The appeal should be allowed and the order of the Court of Appeal varied to provide compensation at $230,000.
Per Laskin C.J. and Spence, Pigeon and Dickson JJ.: In this case all were agreed that the use of the premises was for a much less economic purpose than its highest and best use. Therefore, to determine whether the owner would have accepted its market value based on such highest and best use and vacated the property, one must consider his complete costs of relocation. As Brownridge J.A., who gave the majority judgment of the Court of Appeal, pointed out, even accepting the cost of replace-
[Page 1122]
ment lands and the cost of a like depreciated building, and also electrical connections and foundations, there remained a claim for business disturbance which the claimant valued at $440,365.50. Brownridge J.A. shared the view of the arbitrator that this portion of the claim was greatly exaggerated. The arbitrator found his task in ascertaining this amount an impossible one and chose to assign 10 per cent of the amount of what he thought was the true market value of the lands. By adding such sum, namely $18,525, to the market value of the lands, which he found to be $185,250, he arrived at a total award of $203,775.
Brownridge J.A. considered $100,000 to be a fair and reasonable amount for business disturbance. He therefore added this amount, plus $32,000 for the foundations and electrical connections, to the market value of the land as he found it at $230,000, to reach a total compensation of $362,000.
Hall J.A., dissenting, attacked the problem in the fashion in which it should have been attacked and that is by putting to one side the market value of $230,000 and then in an attempt to determine whether the willing vendor would accept that sum and leave the property attempted an addition of the relocation factors. Hall J.A. took as the value to the owner the figure which the arbitrator had arrived at of $203,100. He did so by reanalyzing the result reached by the arbitrator as follows: market value of bare land as used for a foundry $10,000; depreciated value of buildings $51,000; foundation and electrical installations $32,100; relocation costs $110,000; total $203,100.
Neither the arbitrator nor any member of the Court of Appeal suggested that the amount of the disturbance allowance would be more than $110,000 and, therefore, Hall J.A. was correct when he took that sum, added it to the other costs of the owner in relocation and found that they totalled $203,100, compared that amount with the market value for highest and best use of $230,000 and, therefore, found that the compensation should be fixed at the latter amount.
Diggon-Hibben Ltd. v. The King, [1949] S.C.R. 712, applied; Metropolitan Toronto v. Samuel, Son & Co., [1963] S.C.R. 175, distinguished; The King v. Edwards, [1946] Ex. C.R. 311; National Capital Commn. v. Budd et al., [1968] 1 Ex. C.R. 402; Drew v. The Queen, [1961] S.C.R. 614, referred to.
Per Estey J., dissenting: The average of the market value analysis of the land by the expert witness called for the claimant, rounded to $205,000, was accepted as
[Page 1123]
being a fair market value of the taken lands without buildings appraised according to their highest and best use at the time of taking. The lands, to attract such value, must be considered as free of buildings not associated with or useful to the highest and best use of such lands. Accordingly, no value in such an approach can be attributed to the buildings.
Market value is the least the owner will receive in compensation where the test is value to the owner. The global value payable to an owner in these circumstances according to the properly applicable law includes compensation for disturbance expense actually incurred by the owner. There should be no distinction (in the sense of the availability of an award for disturbance costs) between the situation where the expropriatee is utilizing the lands for their highest and best purpose and the case where the expropriatee is using the lands for a lesser economic purpose. Such a distinction was not made in the case of Saint John Harbour Bridge Authority v. J.M. Driscoll Ltd., [1968] S.C.R. 633.
The formula produced from the majority in Horn v. Sunderland Corporation, [1941] 1 All E.R. 480, and applied in National Capital Commission v. Budd et al., [1968] 1 Ex. C.R. 402, results in unfairness and arbitrary illogicalities. Under the Horn principle, disturbance loss is compensated only if, when added to the market value of land when not being put to its highest and best use, the total is less than the fair market value of that land at its highest and best use; and where excess occurs compensation for disturbance is limited to such excess only. The result of the application of such a valuation technique is that an owner utilizing the taken lands at less than their highest and best use will receive full compensation for disturbance only when the value of land and buildings based on the actual use by the owner fortuitously equals the value of the land when valued at the highest and best use. In contrast, the owner utilizing the taken lands at their highest and best use at the time of expropriation will invariably receive full compensation for disturbance costs. Thus there is no constant, rational test in the foregoing technique to determine entitlement to disturbance costs because the technique does not recognize the basic entitlement of an owner to be compensated for disturbance costs whatever his actual use of the lands may have been at the time of the taking.
[Page 1124]
In this case there was considerable evidence in the record before the arbitrator who stated that the disturbance expenses “could well equal or exceed $92,150”. In the end, however, the award was based upon an allowance for disturbance costs equal to 10 per cent of the arbitrator’s finding of the fair market value of these lands, namely $18,525.50, but this conclusion was drawn with reference to residual value calculations which started with the value of lands and buildings. Hall J.A. in the Court of Appeal added this 10 per cent calculation to the sum of $92,150 arriving at a total disturbance allowance of $110,000. Brownridge J.A. on the other hand found that the disturbance costs approximated $100,000 and on the basis of the record before this Court there was no better approximation. Accordingly, the total compensation payable on the compulsory taking of the respondent’s land should be $205,000 plus $100,000 for a total of $305,000.
APPEAL from a judgment of the Court of Appeal for Saskatchewan[1], allowing an appeal from an award by Maher D.C.J. for certain lands expropriated by the City of Saskatoon, pursuant to the provisions of The Municipal Expropriation Act, R.S.S. 1965, c. 166. Appeal allowed, Estey J. dissenting.
J.B. J. Nutting, Q.C., and R.J. Kucey, for the appellant.
D.E. Gauley, Q.C., and P. Foley, for the respondent.
The judgment of Laskin C.J. and Spence, Pigeon and Dickson JJ. was delivered by
SPENCE J.—This is an appeal from the judgment of the Court of Appeal for Saskatchewan pronounced on January 13, 1977. His Honour Judge Maher had, by an award made on January 7, 1975, allowed to the respondent Smith-Roles Ltd. compensation in the amount of $203,775 upon the expropriation of 19,500 square feet of land situated at the corner of Idylwyld Drive and 22nd Street in the City of Saskatoon.
The Court of Appeal for Saskatchewan, by a majority judgment, increased the compensation
[Page 1125]
allowed to $362,000. The significance of these amounts will be discussed hereafter.
The area in which the expropriated property was situated within the City of Saskatoon was described by the learned arbitrator in these words:
Before going into the details of the various appraisals a word should perhaps be said about the property, the subject of the expropriation. As previously mentioned, the six lots are located on the north-west corner of the intersection of Idylwyld Drive and 22nd Street in the City of Saskatoon. Idylwyld Drive is a main traffic route running in a north and south direction through the centre of the City of Saskatoon. Three main highways to the north all fan out from Idylwyld Drive, No. 5 being the Yellowhead route to the cities of North Battleford, Saskatchewan and Edmonton, Alberta, No. 12 to the rural area to the north-west of the Province and No. 11 to the City of Prince Albert and points north. To the south, Idylwyld Drive becomes a freeway, one branch of which is the main highway linking the cities of Regina and Saskatoon and the other leads to the City of Winnipeg, Manitoba, through Yorkton, Saskatchewan and to the south-east portion of the Province.
In addition, 22nd Street to the west leads to Provincial Highway No. 14 to the Town of Biggar, Saskatchewan and points west towards Edmonton, Alberta and No. 7 travels in a south-west direction through that portion of the Province and leading to the City of Calgary, Alberta. To the east on 22nd Street the subject property is within two blocks on the Centennial Auditorium, the only large concert and entertainment centre in the City, and Mid-Town Plaza, the City’s largest shopping mall. The business centre of the City is within a few short blocks and 22nd Street acts as a main thoroughfare for vehicular traffic to and from the west half of the City to the downtown business section.
The claimant’s use of the premises was also described by the learned arbitrator in these words:
I consider it relevant to these proceedings to briefly review the history and the operations of Smith-Roles Ltd. The business was founded in 1947 by Clement Roles, the present President and General Manager of the Company, who holds degrees in both electrical and mechanical engineering from the Universities of Saskatchewan and Manitoba respectively.
Originally the business sold only welding equipment but the Company grew and prospered over the years under the personal direction of Mr. Roles and at the time of the expropriation was operating the foundry division, Blanchard Foundry, and a manufacturing divi-
[Page 1126]
sion, Milro-Lyn Co. The corporation manufactures some fifty items and operates a sales and mail order business of manufactured and other products throughout western Canada and in the northern United States and also maintains a sales office and warehouse in London, Ontario to supply customers in that Province.
The Company has approximately 137 employees and its sales in the year ending August 31st, 1973, were in excess of three million dollars.
The Company acquired the Blanchard Foundry as a going concern in the year 1965 at a price of $110,000. Since the acquisition all but two of the original items of the foundry equipment purchased have been replaced, numerous new and modern machines have been added and, although the business has continued to operate in the original buildings that were a part of the premises at the time of purchase, an extension to the buildings was made in the year 1972 at a cost of $22,500. This is the cost as reflected in the records of the Company but it is to be noted that approximately $5,000 of that amount was the estimated costs of supervision and labour provided by employees and the supervisory staff of Smith-Roles Ltd.
The foundry is an integral part of the operations of the Smith-Roles Corporation, including its Milro-Lyn division. Casting for numerous items that are manufactured and sold by Smith-Roles Ltd. and Milro-Lyn are made at the foundry. The products manufactured are mainly directed toward the rural areas and in addition to a large mail order business, they have built a sales force of almost two thousand farm agents who work on a part-time basis.
The major items of manufacture include electric welding machines and tractor wheel weights, bin cleaners that are sold in the United States as well as in Canada, and bird scare cannons that are sold throughout the world. Casting for these items are all manufactured at Blanchard Foundry and approximately 50% of the entire production of the foundry is sold either by the foundry itself or marketed by the Milro-Lyn division of Smith-Roles Ltd.
The move required to be made by reason of the expropriation involves not only the disruption of marketing by the Company, its divisions and agents, but also means the relocation and start-up operations of complicated electrically operated furnaces and other machines.
The learned arbitrator made the following finding as to such use of the said lands by the claimant:
[Page 1127]
It is obvious from the evidence adduced on behalf of both parties to the proceedings that the foundry business is not the highest and best use of the property of the claimant. All three of the appraisers were of this opinion and the claimant’s witness, Mr. Fraser, a specialist in foundry manufacturing, conceded that the centre of a city is not a desirable place for an industrial operation and that the present foundry would be better off if it were located elsewhere.
The amount of compensation is governed by the provisions of s. 9 of The Municipal Expropriation Act, R.S.S. 1965, c. 166. Section 9 provides:
9. In estimating the amount to which the claimant is entitled, the judge or the arbitrators shall consider and find:
(a) the value of the land and all improvements thereon as of the date of the deposit of the plan under section 4; and
(b) the damage, if any, to the remaining land of the claimant;
and from the amount so found the judge or the arbitrators shall deduct any increased value to the remaining land of the claimant by virtue of work done or to be done on the land taken.
The learned arbitrator heard evidence from expert appraisers called on behalf of both the appellant and the respondent and expressed the view that he should accept the evidence of an expert witness called for the claimant, a Magnar Kvatum. The learned arbitrator understood Mr. Kvatum’s evidence to be that the market value of the lands expropriated for their highest and best use was $182,250 and, therefore, so found. I shall refer to this finding hereafter. The learned arbitrator, applying that provision, came to the conclusion, in my view, rightly, that he was required to fix the value to the owner and he adopted statements to that effect made in many cases in this Court, quoting particularly Rand J. in Irving Oil Co. Ltd. v. The King[2], at p. 561, and Rand J. in Diggon-Hibben Ltd. v. The King[3], at p. 715, which I quote hereafter:
that the owner at the moment of expropriation is to be deemed as without title, but all else remaining the same, and the question is what would he, as a prudent man, at
[Page 1128]
that moment, pay for the property rather than be ejected from it.
Such statement has been approved often in this Court and it may be taken as the prime principle in the fixing of the quantum of compensation upon expropriation. As I have said, the learned arbitrator noted that the use of the lands by the present claimant was at far less than the economic potential for the said lands. Having so noted, the learned arbitrator then stated:
It follows that an owner in the position of the claimant who claims payment for the land based on its highest and best use has no separate claim for the value of the buildings thereon or for an allowance for disturbance unless the value of such land based on its present use, together with the value of the buildings and the loss caused by disturbance exceed the value of the land for its highest and best use.
As the authority for this proposition, the learned arbitrator referred to two cases: The King v. Edwards[4], particularly per Thorson P. at p. 333, and National Capital Commission v. Budd et al.[5], quoting Jackett P. at p. 407, as follows:
Where, however, use of land by the owner for his business does not constitute the highest and best use of the land, a further problem arises. It seems obvious, and I think that it is common ground in this case, that value to the owner in such a case is the larger of
(a) market value of the bare land for the highest and best use, or
(b) market value of the bare land for the use for which it is being used, plus the amount that that value is improved by the business buildings and fixtures plus the “business disturbance” amounts to which I have referred.
It is my view that both of these authorities simply demonstrate attempts to find the value to the owner in accordance with the formula outlined by Rand J. in Diggon-Hibben Ltd. v. The King, which I have quoted above.
[Page 1129]
The learned arbitrator, therefore, turned himself to an investigation of whether the value to the owner exceeded the market value of the land which, as I have said, he found to be $182,250. The value to the owner, in short, what the owner would pay rather than be evicted from the property, must be assessed by a consideration of his costs of relocation in another place for, in the present case, as in most cases of the expropriation of industrial property, the expropriated owner intends to carry on business elsewhere and must, therefore, seek other premises. The learned arbitrator first ascertained what he termed to be the value of the lands expropriated for the use to which the expropriated owner was putting them at the time the lands were taken. The same terminology has been used in many other cases. I am of the opinion that the concept is unrealistic. The lands have the same market value whether they are used for a business or whether they are standing vacant. Sometimes an owner does not use his property for its full economic potential but the economic potential is in the lands and the value of that economic potential is the market value of the lands. What the learned arbitrator did, in fact, was to find the cost of the acquisition of other lands equally valuable for the purpose of carrying on the business which the owner was carrying on in the lands expropriated, to wit, a general foundry business. He accepted the evidence of Mr. Grant, an appraiser called by the city, who testified that like lands, that is, lands equally valuable for the foundry use, could be obtained for the amount of $5,600 but felt, however, that such a price could not get lands with some of the advantages of the lands expropriated and, therefore, was ready to say that, as he termed it, the value of these lands for foundry purposes was $10,000. That finding was criticized in the majority judgment of the Court of Appeal for Saskatchewan, chiefly on the basis that the lands had been valued at $72,500 in a sale some years before when the claimant had acquired the lands and the foundry building thereon.
I am not ready to accept such a criticism. As Hall J.A. noted in his dissenting reasons, to which I shall refer hereafter, it is impossible to fix the value of lands in a contract between two parties, particularly when that contract is for the sale of a
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whole business including the lands. It is impossible to equate valuations in 1953, even if there had been a true representation of the value of the lands, with values in 1973.
The learned arbitrator then proceeded to find other costs which would be entailed in the relocation of the claimant’s industry. All parties were in agreement with two figures given for certain costs, a cost of replacement of concrete foundations at $10,600, and the cost of certain electrical installations at $21,500. The learned arbitrator added these two figures to the $10,000. The learned arbitrator accepted the valuation of the building on the land expropriated after allowing depreciation of $51,000. He also added that amount to the relocation costs on the basis that the claimant was entitled to have a like building in the replacement premises. Those amounts total $93,100. They do not, however, represent all of the costs which the expropriated owner would have to consider when he was determining whether he would accept the market value of the lands and relocate elsewhere. Those other costs may be generally characterized as business disturbance. Locke J. expressed them very accurately in Drew v. The Queen[6], at p. 625:
expense and inconvenience of moving elsewhere, the loss of benefits enjoyed by the owner due to the location of the property taken and, where a business is carried on which the owner proposes to continue elsewhere, the loss due to the dislocation of the business, the loss of profit in the interval before it can be established elsewhere, moving costs and other unavoidable expenses.
The arbitrator found the attempt to evaluate such costs was an impossible task. Although, under the expropriation, the claimant had been allowed a full year after registration of the plan to relocate, the claimant did nothing until very shortly before the date on which it was required to move and then the claimant, as the learned trial judge found and the members of the Court of Appeal for Saskatchewan agreed, adduced a mass of rather unintelligible evidence so that he found it quite impossible to make any accurate assessment. Under such circumstances, the learned trial judge then noted that in Drew v. The Queen, supra, all the members
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of the Court agreed that although 10 per cent of the market value of the property could not be automatically allowed for any such thing as compulsory taking, there were cases where the device of a percentage award could be used to cover disturbance costs of relocation. The learned arbitrator then added to the market value of the lands, which he found to be $185,250, 10 per cent thereof, i.e., $18,525, awarding the total of $203,775.
As Hall J.A. points out in his dissenting reasons in the Court of Appeal, what the learned arbitrator was doing was allowing disturbance costs at about $110,000 and, therefore, finding that the value to the owner was more than the market value.
The majority judgment of the Court of Appeal for Saskatchewan was given by Brownridge J.A. Brownridge J.A. correctly stated the principle upon which the learned arbitrator had proceeded in the following words:
However, he found that the foundry business was not the highest and best use of the property and held that an owner in the position of the claimant who claims payment for the land based on its highest and best use has no separate claim for the value of the buildings thereon or for an allowance for disturbance unless the value of such land based on its present use, together with the value of the buildings and the loss caused by disturbance exceed the value of the land for its highest and best use.
He then turned to a consideration of the learned arbitrator’s findings that the market value of the lands expropriated were $182,250. Brownridge J.A. carefully examined the evidence given by all of the expert witnesses and came to the conclusion that the learned arbitrator had been in error and that on their evidence the market value of the lands expropriated was $230,000. Hall J.A., giving dissenting reasons, reached the same conclusion. The latter learned justice quoted the evidence given by Kvatum, the expert witness called by the claimant, who outlined how he had arrived at a market value of the lands bare of any buildings at $224,250 and a market value of the lands bearing the buildings which the lands bore at the time of
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the expropriation of $236,234 and then he was asked these questions and made these answers:
Q. What amount would you, yourself, assign; what value, in your professional opinion, would you appraise this building to be at, given those two figures that you have just reviewed?
A. The building or the property?
Q. I’m sorry, the property. I’m sorry.
A. The property, I’m of the opinion that both approaches are valid, in my opinion. They’re not unusual in transitional lands of this type. I think they reflect, probably, the thinking of both vendors and purchasers. Approach number one probably would come closer to reflecting the thinking of a vendor, because he always hates to admit that he’s selling his building for nothing. Approach number two probably comes closer to representing the purchaser, because he, in most cases of this nature, feels that he is paying X dollars for the land only, because in most cases the buildings are tore down. So I’m of the opinion, I feel that the fair market value of the property is, say, $230,000.
I need only repeat Kvatum’s last sentence, “So I’m of the opinion, I feel that the fair market value of the property is, say, $230,000.00”. Since Kvatum’s evidence was accepted by not only the learned arbitrator but by both of the learned justices on appeal giving reasons, I see no justification for departure from the decision that the market value of the lands expropriated was that sum of $230,000.
Brownridge J.A. continued to consider the question of value to the owner and he relied upon the decision of this Court in Municipality of Metropolitan Toronto v. Samuel, Son & Co., Limited[7], and said:
Thus, while the market value of the land and buildings if sold to a purchaser for the purpose of carrying on the same type of business was only $650,000, the value to the owner of the land and buildings was allowed at $1,003,555, being $423,555 for the land and $580,000 for the building. So it is not correct, as argued by counsel for the respondent in this case, that the land in the Samuel case was being used for its highest and best use when used for a sheet metal business and is, therefore, distinguishable from the facts of the case at Bar. The case is another illustration of the fact that value to the owner may exceed market value.
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With deference, I am of the opinion that the learned justice on appeal misinterpreted the decision of this Court and of the Court of Appeal and the arbitrator in Metropolitan Toronto v. Samuel, supra. As Hall J.A. noted in his reasons for judgment, it is not disclosed in the report in either the Supreme Court of Canada or of the Court of Appeal on what basis the arbitrator in that case assigned the value of $423,555 to the lands. However, I have had the advantage of reading the arbitrator’s report as the same was printed in the Appeal Case submitted to this Court. Almost at the beginning of his report, the learned arbitrator there, His Honour Judge Forsyth of the County Court of the County of York, said, “The highest and best use for these premises is its present use”. Later in his report, the learned arbitrator stated his conclusions as follows,
I consider the subject land is situate in a very favourable location, and I have arrived at the conclusion it has a market value of $6.70 per square foot for 63,217 square feet amounting to $423,555.
These figures and this conclusion were accepted without argument in both the Court of Appeal and in this Court and, therefore, there is no doubt that Metropolitan Toronto v. Samuel is a case where the lands were being used at the time of the expropriation for their highest and best use. Under such circumstances, the value to the owner would be as Jackett P. pointed out in National Capital Commission v. Budd, supra, at p. 406, a value equal to (a) the market value of the land for the highest and best use, plus (b) an amount equal to the various amounts that he would be out of pocket if he had to move his business (moving costs, depreciation in fixtures, loss of profits during the move, etc.) sometimes referred to as “business disturbance”.
The learned arbitrator in Metropolitan Toronto v. Samuel allowed as compensation the total of the value of the buildings when depreciated, the market value of the land as he found it, and the value of certain crane equipment which became useless upon the expropriation. The amounts totalled $1,117,555. The learned arbitrator concluded his report as follows:
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Considering all the evidence before me, I think the subject property had a special value to the owner in excess of the sum of $1,117,555 above referred to, and the 10% for compulsory taking. I am convinced that the location for the purpose of their business was excellent and it provided exceptionally good advertising facilities. The turn-over last year despite the small amount expended in advertising certainly owes something to location. While it is not known how the business might prosper at the new location, the move is unlikely to redound to their benefit. While the risk involved is difficult to reduce to a dollar value, I think that an extra $200,000 should be added as value to the owner, making a total of $1,317,555.
Roach J.A., giving judgment for the Court of Appeal, only varied the award of the arbitrator by cutting out the 10 per cent allowed for compulsory taking in view of the judgment of this Court in Drew v. The Queen, supra, and the judgment of the Court of Appeal was confirmed without variation in this Court.
I am, therefore, of the opinion that the decision in Metropolitan Toronto v. Samuel is an exact application of the principle on which compensation will be awarded to the expropriated owner of a commercial or industrial property when that owner is utilizing the said property at the time of the expropriation for its highest and best use and when the owner must relocate in other premises. I do not think that the decision in any way casts doubt on the proposition based on Diggon-Hibben v. The King, supra, or on the analysis on the same principle made by Jackett P. in National Capital Commission v. Budd.
As I have said, in the present case, all are agreed that the use of the premises was for a much less economic purpose than its highest and best use. Therefore, to determine whether the owner would have accepted its market value based on such highest and best use and vacated the property, one must consider his complete costs of relocation. The claim for such costs was, one might almost say, enormous. As Brownridge J.A. pointed out in his reasons, even accepting the cost of replacement lands and the cost of a like depreciated building, and also electrical connections and
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foundations, there remained a claim for business disturbance which the claimant valued at $440,365.50. Brownridge J.A. pointed out that “I must say at once that I share the view of the learned arbitrator that this portion of the claim is greatly exaggerated and that is no reflection upon those who gave evidence in support of this item”. As I have said, the learned arbitrator found his task in ascertaining this amount an impossible one and chose to assign 10 per cent of the amount of what he thought was the true market value of the lands.
After referring to some of the evidence, Brownridge J.A. concluded:
These reasons, together with the evidence of the loss due to business disturbance, persuade me that a fair and reasonable allowance for this item is the sum of $100,000.
and he therefore added the market value of the land as he found it at $230,000, the $32,000 for the foundations and electrical connections and the sum of $100,000 to reach a total compensation of $362,000.
Hall J.A., I think, attacked the problem in the fashion in which it should have been attacked and that is by putting to one side the market value of $230,000 and then in an attempt to determine whether the willing vendor would accept that sum and leave the property attempted an addition of the relocation factors, to use most general terms. Hall J.A. took as the value to the owner the figure which the learned arbitrator had arrived at of $203,100. He did so by, if I may use the term, reanalyzing the result reached by the learned arbitrator as follows:
Market value of bare land as used for a foundry
$ 10,000.00
Depreciated value of buildings
51,000.00
Foundation and electrical installations
32,100.00
Relocation costs, business disturbance and other items comprising special value to the owner
110,000.00
TOTAL
$ 203,100.00
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Hall J.A. therefore, came to the conclusion which he expressed in the following words:
The market value of the bare land at $230,000 exceeds the other valuation of $203,100 by so great a margin that no prudent man in the position of the owner would pay $230,000 for the property rather than be ejected from it. Under all of the circumstances therefore, the amount of compensation payable to the claimant should be set as $230,000.
It will be observed, therefore, that both Hall J.A. and, as reanalyzed by the latter, the learned arbitrator, estimated the relocation cost at $110,000. As I have pointed out above, Brownridge J.A. estimated those costs at the sum of $100,000.
The Courts below have agreed it was impossible to make a mathematical ascertainment of those disturbance costs for two reasons, firstly, the very nature of such costs defy an attempt to make an exact assessment. Such matters as loss of profits, possible loss of equipment in the move, such as torn patterns and other elements, simply do not yield to exact mathematics. Secondly, the conduct of the claimant in needlessly delaying its move and then submitting grossly exaggerated evidence of the costs of such move, again, make mathematical calculation impossible.
The expropriation took place in February 1973. It is now April 1978. It would seem that any attempt to rehear that portion of the expropriation would be most inappropriate. Neither the learned arbitrator nor any member of the Court of Appeal has suggested that the amount of the disturbance allowance would be more than $110,000 and, therefore, I am of the opinion, with respect, that Hall J.A. was correct when he took that sum, added it to the other costs of the owner in relocation and found that they totalled $203,100, compared that amount with the market value for highest and best use of $230,000 and, therefore, found that the compensation should be fixed at the latter amount.
I would, therefore, allow the appeal, vary the order of the Court of Appeal for Saskatchewan to provide for compensation at $230,000 with interest at 5 per cent from May 22, 1973, until paid. The
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appellant is entitled to costs in this Court. The respondent, of course, was awarded costs of the arbitration. I would make no award of costs in the Court of Appeal.
ESTEY J. (dissenting)—I have had the opportunity of reading the judgment of my brother, Spence J., in these proceedings and must for the reasons set out below, with the greatest respect, come to a different conclusion. The essential difference between the judgment of Spence J. and my respectful position lies in the proposition that in my view there is no distinction (in the sense of the availability of an award for disturbance costs) between the situation where the expropriatee is utilizing the lands for their highest and best purpose and the case where the expropriatee is using the lands for a lesser economic purpose.
The standard of compensation applicable in this proceeding is that prescribed in the Saskatchewan Municipal Expropriation Act being R.S.S. 1965, c. 166. The relevant provisions have been for many years interpreted by the Courts of that province as establishing compensation on the basis of value of the taken lands to the owner on the date of expropriation. Vide Serviss and Stevenson v. Rural Municipality of Flett’s Springs No. 429[8], a decision of the Saskatchewan Court of Appeal applying Woods Manufacturing Co. Ltd. v. The King[9]. The Courts of this country have long ago determined that the value to the owner shall mean at least the market value of the taken lands and in some circumstances may mean more. Lake Erie & Northern Ry. Co. v. Brantford Golf and Country Club[10] per Duff J. (as he then was) at p. 229; Woods Manufacturing, supra. The legislature in adopting value to the owner as the standard of compensation rather than market value must be taken to have deliberately issued a legislative mandate that must constantly be borne in mind when formulating practices and procedures for the determination of compensation payable to the owner on compulsory taking.
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To examine the applicable authorities in this area one must go back to the decision of the Court of Appeal in England in Horn v. Sunderland Corporation[11]. While this is a convenient starting point, for completeness it should be noted that the first reported instance where disturbance allowances were denied because fair market value was awarded as compensation, was in a case originating in Ontario (Re Boulton and The Standard Fuel Co. and The Toronto Terminals Railway Co.[12]). The judgment of the Court of Appeal was confirmed by the Privy Council in a very brief judgment reported in [1935] 3 D.L.R. 657. The headnote in the latter report states that:
Where the value of the land has been established at an increased figure by valuing on a footing which presupposes that both the buildings and business have disappeared, the value of the buildings and compensation for business disturbance can no longer properly enter into the matter.
The issue as to whether an owner loses the right to compensation for existing buildings and for disturbance expenses arose squarely in the Horn case, supra, the facts of which in principle are the same as those now before this Court and which are set out in detail in the reasons of my brother Spence J.; in the learned arbitrator’s award, Smith-Rotes Ltd. v. The City of Saskatoon[13], and in the judgment of the Court of Appeal[14]. The expropriatee in the Horn case was a horse breeder who carried on these operations on lands the highest and best use for which was found to be as building lots, the lands being then ripe for development. The arbitrator valued the property as though it were being used for the higher commercial purpose and for that reason denied any allowance for the disturbance of the expropriatee’s horse breeding business on the theory that the market value for the highest use could only be realised by the owner if he voluntarily gave up his use of the property and left at the time of the taking.
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The majority of the Court of Appeal in the Horn case concluded that disturbance damage was merely an element in the make-up of the purchase price to which the own