Smith v. The Queen, 83 DTC 5085, [1983] CTC 69 (FCTD)

Collier, J:—These reasons are given in this action (T-2445/80: Campbell v The Queen). They will apply in action T-2444/80: Smith v The Queen. The two actions were tried on, where applicable, common evidence.

For the taxation year 1975; the Minister of National Revenue, by assessment, substantially increased the income tax said to be payable by the two plaintiff taxpayers, Campbell and Smith. The increase arose because of the Minister’s calculation of a taxable capital gain arising out of a disposition of real property by each taxpayer. Campbell and Smith had owned unrelated properties in the Township of South Cayuga, in southern Ontario. In 1975, in separate transactions, they sold their property in the Province of Ontario.

The essential dispute between the taxpayers and the Minister was, and Is, as to the fair market value of their properties as of December 31, 1971 (Valuation Day).

The Minister, in his assessments, put those values as follows:

I have taken those figures from the reasons for judgment of the Chairman of the Tax Review Board. The Minister’s assessments were based on appraisals made by one H E Longstaff in 1977 and 1978. Longstaff’s estimate of the Campbell property was $120,000; of the Smith property, $51,700.

The amounts received by the taxpayers on the 1975 dispositions were as follows:

The difference between the Minister’s December 31, 1971 valuation and those of the taxpayers resulted in the Minister increasing, in respect of taxable capital gain, Campbell’s 1975 taxable income by $235,230, and Smith’s by $85,030.

The taxpayers appealed to the Tax Review Board. They were technically successful. In each case, the Chairman of the Board allowed the appeal and referred the matters back for reassessments. According to Exhibit 7, filed at this trial, the Board determined the Valuation Day fair market values as follows:

Before the Tax Review Board, Campbell had asserted a value of $559,000. Smith had put forward a value of $221,760.

The taxpayers have appealed to this court.

The defendant, in the pleadings, asserts the original position taken, based on the Longstaff appraisals: Campbell, $120,000 maximum value; Smith $51,700. But, as will appear later, the appraiser called by the defendant, put somewhat higher values on the properties.

I turn now to the facts in these appeals.

The Campbell and Smith properties were, as of December 31, 1971, located in the Township of South Cayuga in the County of Haldimand, Southern Ontario. South Cayuga had an area of approximately 13,673 acres. Its southern boundary was the north shore of Lake Erie. Running generally west to east across the northern part of the Township was the Grand River. lt was, according to the witness Strung, the southern boundary of the Township of North Cayuga. The general area in which the properties were located was about 30 miles south of Hamilton, 36 miles south-east of Brantford, and 30 miles east of Simcoe.

To the north of the Township of South Cayuga was the Township of North Cayuga. To the west of the Cayuga Townships was the Township of Rainbow. To the west of Rainbow was the Township of Walpole. Its western boundary was, as well, the western boundary of Haldimand County. The adjoining county was the County of Norfolk. The Township of Woodhouse, abutting Walpole, lay immediately west of the county line. To the north of Woodhouse was the Township of Townsend. Its eastern boundary also formed part of the Haldimand-Norfolk County line.

At the material times, Haldimand County comprised approximately 296,000 acres; Norfolk approximately 417,400 acres. The total population of the two counties in 1971 was approaching 84,000. The population of the Township of South Cayuga was approximately 700. The population growth in the two counties, and in South Cayuga, had, since 1954, been modest.

As a matter of history, and partly because of certain developments before 1971, the counties of Haldimand and Norfolk were, in 1974, combined to become the Regional Municipality of Haldimand-Norfolk.

As of 1971, with the exception of what was referred to at trial as the Nanticoke development, the two counties were basically rural in character. Agriculture was the general use of the land, with mixed farming carried out on farms, and the area serviced by small towns and villages. (See Strung, Exhibit 14, p 19.)

The Campbell property, as of December 31, 1971, was operated as a farm. lt was approximately 240 acres in size, about 8 miles west of Dunnville. The property was divided by River Road. The northern limit, running approximately 2150 feet in an east-west direction, fronted on the Grand River. The area from Grand River to River Road comprised approximately 28 acres. The farm buildings were in this acreage, about 100 yards north of River Road. They were the residence, an implement shed, a corn crib, and part of an old barn in poor condition. The parcel, if I may call it that, south of River Road, was about 212 acres in size. Mr Campbell purchased the whole property in 1968. He operated it as a cash-crop farm, growing corn, wheat, and soybeans. He did not raise livestock. There were approximately 200 acres under Cultivation.

The Smith property was also farm property. It was operated as a mixed farm, including livestock. About 125 acres was cleared and used. It was approximately 4 miles south, and slightly to the west, of the Campbell property. As of December 31, 1971, the property fronted on Lakeshore Road which ran along the north shore of Lake Erie. A small piece of the property fronted to the south on the lake, and to the north on Lakeshore Road (see plan fronting page 13, Hughes Exhibit 24). The farm buildings, including the Smith residence, were in an area north of Lakeshore Road. In the 1975 property disposition, Smith retained a strip of land north of Lakeshore Road, and a projection between the road and the lake. The farm buildings were in the northerly retained strip, with the exception of an implement shed. It was further north in the area sold in 1975. Smith had inherited the whole property from his father in 1955. Originally, and probably before 1955, the south limits were on the lake. Over a period of time, and extending into the 1950s and 1960s, 42 small parcels, fronting the lake, were sold off. They were purchased by buyers who intended to build cottages on them. The evidence indicates there were as of 1971, a number of cottages in this area, as well as in other areas along the north shore of the lake.

There is a disagreement between the parties as to the exact acreage sold, by Smith, to the Province of Ontario, in 1975. The plaintiff Smith says, based on Mr Strung’s calculations, the disposition was 162 acres. Mr Hughes, in his appraisal for the defendant, used 173 acres. He said he did so to give the benefit of any doubt to Smith.

On the state of the evidence before me, I am unable to find, on a balance of probabilities, which is the correct figure. The difference, for the purposes of deciding the overall fair market value, is not of great significance.

I have earlier said the Norfolk and Haldimand Counties were generally rural and agricultural in character. But in 1966 there was a change.

I have gone to the evidence of Grove, Strung, Hughes and Campbell, including the exhibits referred to by them, to describe the developments. They were in what was described as the Nanticoke area.

Ontario Hydro announced it proposed to build a thermal generating station. Some of the publicity predicted it would be the largest such coal-fired operation in the world. The location was in the Township of Walpole, east of the county line, fronting on Lake Erie, and running approximately 11/2 miles north. Some 600 to 700 acres of land were acquired through expropriation.

Subsequently, in 1968, Stelco assembled and acquired approximately 6600 acres of what had essentially been farmland. This land was in Woodhouse and Walpole Townships. The approximate midline of the area acquired roughtly straddled the townships and county line. The asembly ran north, about 2 miles, from the Lake Erie shoreline. Its width was approximately 3 miles. Stelco proposed to build a huge steel-making plant, larger than its Hamilton operation. The company subsequently assembled and acquired further farm acreage for an approximate distance of V/2 miles north of the first area. This was for use as an industrial park.

There was considerable publicity given to these developments. Information was disseminated throughout the two counties, including South Cayuga and surrounding townships.

As a result of these announcements and developments, the Province of Ontario set up, in March 1969, a study group to investigate, review and make recommendations in respect of the impact these developments would have, or might have, in the two counties. The proposed industrial developments, and the organization and purpose of the study were set out in an address by the Minister of Municipal Affairs on March 17, 1969 (Exhibit 10). These studies were generally referred to as the Haldimand-Norfolk Study. A Mr Eric Grove, a planner, was appointed Assistant director of the study group. The Director was a Nigel Richardson. Grove gave evidence before the Tax Review Board. Portions of that testimony were put in at trial as Exhibit 9. Various newsletters were issued by the Study Group (Exhibit 2.1). Two reports, and a background paper, by the Study Group were put in evidence (Exhibit 2.2 dated March 1970, Exhibit 2.4 dated March 1971, and Exhibit 2.3 dated January 18, 1972). The contents of these newsletters and reports were widely known throughout the counties. Grove, from 1969 through to 1971, attended many local council and committee meetings advising on the study activities. He also made television appearances.

In 1969 Stelco began clearing operations on the property it had acquired. For various reasons, including labour and financial problems, and the gen eral economic climate, development slowed or stopped in 1970. It did not resume, to any large extent, until 1975. The plant was completed in 1979.

In late 1969 and early 1970, Texaco Canada assembled and acquired approximately 1300 acres of farmland in the Township of Walpole. The parcel abutted the Hydro land for approximately two miles to the north. A finger projected southward to the Lake Erie shore. Texaco proposed to construct a very large oil refining plant.

I return for a moment to the report entitled “Towards a Land Use Plan for Haldimand-Norfolk”, issued in March 1970, by the Haldimand-Norfolk Study Group (Exhibit 2.2). It was estimated the population of the counties would be by 1981 approximately 118,000; by 2001 approximately 283,000. It envisaged the increasing urban type population could be handled by existing communities in the initial expansion period to 1975. The creation of a major new urban centre in Haldimand-Norfolk was recommended. Three areas came under consideration, but the Study Group did not disclose the locations, nor its own preference. The Study Group may in fact have concluded, shortly after April 1971, its choice for the site of the so-called new town. It did not, however, publicly disclose its view (see Grove at 309). The new urban centre was contemplated to come into existence in the 1976-1980 time sphere, with development extending into later years.

The Study, and its reports and recommendations, received, as I have earlier recorded, wide publicity. The Dunnville Chronicle, on March 31, 1971, reported Nigel Richardson, the Director of the Study, as predicting a new town of 100,000 people in the two county area. The same paper, on October 27, 1971, again quoting Richardson, referred to a secret plan before the Provincial Cabinet, setting out the proposed location of the new town of 100,000 people. The site was reportedly one selected from the original three earlier recommended by the Study Group.

As one might expect, these industrial announcements, acquisitions, and developments prompted speculation in land in the counties. A company called Nanticoke Development Limited, in 1969, assembled and acquired approximately 2,000 acres in Woodhouse Township. This was to the west of the Stelco development, and running to the north from New Lake Shore Road. The acreage was purchased for urban residential deveopment. Another developer, First Jarvis Realty, assembled and acquired in 1969, approximately 736 acres in the west portion of Concession VII in Walpole Township. This acreage was roughly 6 miles north of the south (Lake Erie) boundary of the Stelco purchase. The purpose was, again, for urban residential development.

Assistant Director Grove, in the relevant years, spent most of his time in Haldimand-Norfolk. He became aware of land speculation in 1969, 1970 and 1971. He said most of it occurred to the west, north, and to a smaller extent to the immediate east of the industrial area. This was in Woodhouse and Walpole Townships. He said there was no great land speculation elsewhere in the counties (see Exhibit 9, pages 214-216). The speculation occurred most closely around the fringes of the industrial development (page 236). He described (pages 237-238) speculation in the Jarvis area by a company he referred to as “Greater York”. The location seemed to be the same, or very close to, what I have already described as the First Jarvis Realty acquisition. He also referred to land acquisitions by a group called “Fiddinham”. He placed that assembly as west of the Stelco site. By the relevant date here, December 31, 1971, governmental permission had been denied, because of potential pollution factors, for development of the Fiddinham tract as a town (see Exhibit 2.36, p 29).

Of South Cayuga, Grove said, referring to 1969, and to at least March, 1970:

South Cayuga was a very stable community and a very stable township or County and, as far as I can recollect, there was no raw land, farmland, purchased for residential development at that time. (216)

239: (referring to South Cayuga)

Nothing at all, the land simply was at that time — South Cayuga and Dunn generally — and this portion of Rainham were not favored by speculators because they are cut off from the rest of Ontario. Sorry, that sounds bad; cut off from the Niagara Peninsula and there is a bridge crossing at Dunnville. The only access is through Dunnville or to go in through here (indicates) and this was the centre of speculation. It was just too far away and too difficult to get at.

At 344-364, in cross-examination by Mr Giffen before the Tax Review Board, Grove reviewed the areas of land speculation throughout the two counties. He said, at 355:

I recollect no land speculation, no unusual land acquisitions in Rainham.

At 358:

South Cayuga I can’t recollect anything.

With all this background in mind, I turn now to the expert evidence given by Dr Pearson and Strung on behalf of the plaintiffs, and Hughes on behalf of the defendant.

I say at the outset I find these three gentlemen to be well-qualified and knowledgeable. I have no criticism of the credibility of any one of them. Strung and Hughes differed in approaches, analysis, and opinion. But each held his opinion honestly. I do not consider one to be more qualified than the other.

Dr Pearson is a planner. His time has been spent about equally between the academic and private consultant field. In 1973 he was retained by a private consortium. It wished to purchase a large site in the Haldimand-Norfolk area for urban development or speculation. The consortium had in mind the Nanticoke industrial site and the recommendation (then public) that a new town, within half hour commuting distance, was needed. The site would have to be approximately 10,000 acres, supporting a population of 150,000. The proposed town was to be in addition to the present growth at Simcoe, Port Dover, and Cayuga.

Dr Pearson used a site sieve analysis technique to select the best site for recommendation to the consortium. The data he used was essentially that in existence as of December 31, 1971.

He selected a site north-west of the town of Jarvis, about 6 miles north of the Stelco development. The site was referred to at trial as “Townsend New Town” (“Townsend”). He said (Exhibit 11, 4):

In practice, the very stringent criteria revealed only one such site, Townsend, and automatically excluded all other areas.

Based on his preliminary recommendations, the consortium had acquired, by April 1973, the main block of land in the new Townsend area. Subsequently, commencing in 1974, and into 1975, the Province of Ontario acquired the Townsend site for the new town for the Nanticoke industrial complex.

For the purposes of this trial, Dr Pearson applied the same methodology, using the same material, to the Township of South Cayuga. He concluded it also was suitable for urbanization, “subject to certain constraints which could he handled”. He described it as:

A viable and attractive town site with some disadvantages, to a large degree offset by superior scenic and recreational quality.

He added:

. it has urban potential — which could be quite substantial, depending on a phased improvement of infrastructure . . .

I digress, at this stage, to record that the Province of Ontario, in 1974 and 1975, purchased practically the whole of the Township of South Cayuga, on an assembly basis, for ultimate urban development. The Campbell and Smith properties were part of that acquisition.

The main expert witness for the plaintiffs was Mr Strung. It was suggested by Mr Giffen, counsel for the plaintiffs, that Strung’s opinions and conclusions were to be preferred because of acceptance, or adoption, in other valuation or expropriation proceedings before boards, courts or other tribunals, of the particular testimony given there by him. A number of such decisions were cited to me. I add, in fairness, that some reports were also included where parts of Strung’s testimony were not accepted. One, or more, illustrations were also given where valuations by Hughes had not been accepted by a particular tribunal in a particular case.

I give little weight to that type of scoreboard or track record analysis. It does not take into consideration all matters, proceedings, inquiries, or assignments where Strung, or for that matter any other appraiser, has prepared reports, made recommendations, or given testimony. There may well be as many instances where those reports, recommendations, or opinions given by Strung (or again, any other appraiser) were not used, referred to, or adopted, as where they were.

Before dealing in detail with the evidence of Strung, and Hughes, I shall make some further observations.

Both appraisers were in substantial agreement as to the meaning of “market value”. Both were, as well, in substantial agreement as to their understanding of “highest and best use”. It is not necessary to set out their definitions of those very familiar real estate appraisal terms.

But Strung and Hughes differed as to the highest and best use, as of December 1971, of the Campbell and Smith properties. Even before that divergence, they differed as to the actual use to which the lands could, at the relevant times, be put. The evidence is that throughout Haldimand and Norfolk County, with some exceptions including the Nanticoke Industrial development, land was basically used for agricultural purposes. But the actual legally designated use varied from place to place and township to township. In some townships there were official plans, amended from time to time. This was the case in respect of Walpole and Woodhouse. Some areas or townships had zoning by-laws. Others did not. Some had subdivision by-laws. Others did not.

South Cayuga Township, as of December 31, 1971 did not have an official plan. Nor did it have a zoning by-law. It had a subdivision control by-law (No 245 — Exhibit 15.2). It had a building by-law. The two by-laws had, for practical purposes, little or no effect on the use of land. As of December 31, 1971, the land in South Cayuga was not designated as agricultural, by Ministerial order, or otherwise. That was not done until May 14, 1973. It was said that if one wished to sever a portion of one’s land, for whatever use, a consent was practically a matter of course.

Mr Hughes, in his evidence, concluded South Cayuga lands, at the relevant times, had been designated, by Ministerial order under the Planning Act, for agricultural use only. He had obtained that information from, I find, knowledgeable and reputable people. The information was incorrect.

Mr Giffen contended that Hughes’ assumption was a fundamental error; his assumption colored his whole appraisal approach to these properties; his use of comparables was consequently subjectively wrong; his appraisal, opinion and values should be largely put aside.

I do not agree.

Hughes’ assumption, as to agricultural use, did not, in my view, come close to approaching even significant error. The sales in the counties from 1968 on, including the Stelco, Texaco, and other purchases, used as indicators of value by Strung, were of agricultural land. There were, nevertheless, vague restraints on land use. Strung, himself, said (28):

. . . there were few legal constraints to urban development.

However, intensive urban development would have required Ministerial approval, or upon referral, approval by the Ontario Municipal Board. That is, to subdivide, approval would have been required and the approval would quite likely have required the installation of municipal services, which at that time were not available.

Hughes did not, in his consideration of highest and best uses, restrict himself to agricultural use only. He considered potential economic use of the lands for future urban development. (See Exhibit 23, pp 34-38 and Exhibit 24, pp 23-26). The difference between Hughes and Strung is that Hughes considered that possible use, and ruled it out. He excepted the 28 acre Campbell property to the north of River Road. Strung, on the other hand, considered that potential use, and adopted it. I shall later on deal further with that issue.

I see no reason to disregard or put aside, and I do not, Hughes’ evidence, his comparables, or his conclusions.

I return to Strung’s evidence.

He estimated the value of the Campbell property, excluding the residence, as $300,000. He valued the 212 acre parcel south of River Road at $1,000 per acre. He valued the northerly 28 acre segment at an average rate of $3,083 per acre, a sum of approximately $87,000. In respect of the Smith property, he used 162 acres, and the value of $1,000 per acre, for a total of $162,000.

In Strung’s opinion, the highest and best use of the Smith property and the south 212 acres of the Campbell property was

to hold them for some form of future development and to continue the existing agricultural use during the transitional period.

He selected and analyzed 19 sales of large farm properties in South Cayuga Township — from July 1968 to January 1973. Most of the sales took place from mid-1969 to the latter part of 1972. The acreages ran from a low of approximately 20 acres to a high of 177. The prices ranged from a low of $141 to a high of $448 per acre. He used what he described as a trend line technique, for the time factor, to relate the values as of December 31, 1971. The adjusted figures were $141 to a high of $426 per acre.

He rejected these transactions as indicative of fair market value at the key date. The province, and the country, were in a recession period from mid- 1969 to at least the end of 1972. It was Strung’s view, these South Cayuga sales were generally in the nature of sales under distress conditions, or sales that might not otherwise have been made if the vendors had been able to wait out the recession for, what he felt to be, the ultimate market.

He then went to prices paid for the lands assembled and acquired by Stelco, Nanticoke Development Limited, First Jarvis Realty, and Texaco in the years 1968 through 1970.

The average prices of those acquisitions referred to, after adjustment for time, ranged from $1,096 per acre to $2,519 per acre. He relied on those assembly transactions as indicative of value of the Campbell and Smith land parcels. He also investigated five purchases of land, for park purposes, in Haldimand County. Those parcels ranged from 40 to 1,300 acres. The prices, after time adjustment, were from $747 per acre to $1,327 per acre.

Strung concluded the properties in this lawsuit had somewhat lower value than the Stelco and other land assembly values. He discounted, to some extent, the park land comparables because of their water frontage. He struck a final value figure of $1,000 per acre.

I cannot accept Strung’s opinion that the plaintiffs’ pure farm land, if I can describe it that way, had a value of $1,000 per acre.

The use of the Stelco, Texaco, Nanticoke and First Jarvis values, as indicative of value in the South Cayuga location of the plaintiffs’ properties is, in my opinion, not warranted. Those assemblies were much closer to the industrial complex. They reflect prices paid by acquisitors interested in assembling large areas. According to Strung, premiums may have to be paid, at least in the latter stages, for such assemblies. It is noteworthy these land activities took place in Woodhouse and Walpole Counties, very close to the projected industrial projects: The announcements by industry and the Haldimand-Norfolk Study reports spread across both counties, including Rainham, North and South Cayuga, Canborough, Moulton and Dunn Townships. But in my view, the “permeating optimism” (Strung, p 29) did not substantially affect, nor did it penetrate, the land market in and about the Campbell and Smith lands.

The distance in a straight line, from the approximate centre of the Stelco purchase to the Smith property is roughly 18 miles; to the Campbell property, roughly 21 miles. From the centre of South Cayuga Township to the approximate centre of Stelco, again in a direct line, is roughly 20 miles. The Township itself it a little over 6 miles in width in an east-west direction. It is noteworthy that no other transactions of the Stelco, Texaco, Nanticoke, and First Jarvis type were found, in 1968, 1969 and 1970 in any other areas of Haldimand or Norfolk Counties, and in particular in South Cayuga and its immediately surrounding townships. I have already referred to the evidence of Grove, the knowledgeable man on the scene. I shall not repeat it. I find that evidence credible and convincing. The industrial plans, the Haldimand- Norfolk studies, the publicity and public meetings did not arouse land purchase interests in South Cayuga and adjoining townships. The optimism and any possibilities created did not, I find, affect the key area under review, in so far as land values are concerned.

I find no convincing or real basis for the plaintiff’s view that the Stelco, Texaco, Nanticoke and First Jarvis values indicated similar values for the South Cayuga area, and in particular the plaintiffs’ pure farm lands. Nor do I find any satisfactory basis for the highest and best use potential advocated by Strung. At the same time, I do not subscribe to Strung’s view, his 19 sales in South Cayuga, should be disregarded. There may have been a general recession in 1969 through 1972. But in my view, and for the reasons given earlier, the highest and best use for the plaintiffs’ land was, at the key date, still agricultural. The prices for farmland in that area, recorded by Strung and Hughes, are the best indicators, to my mind, of the fair market value of the plaintiffs’ pure farm land.

I am also unable to accept, as persuasive of market value, Strung’s park land purchases. The circumstances, those of which are known, were different; the sites, in some of the comparables, quite removed from the plaintiffs’ properties; the geography, including water frontage, different.

I have not disregarded the Pearson evidence. The plaintiffs rely on it to support their contention the highest and best use was to hold for future urban development, while continuing agricultural use during the transitional period. Pearson’s evidence is to the effect South Cayuga, with some reservations, could be adapted for a new urban centre. He did not, however, give any opinion as to what he thought would be the highest and best use of the general area. The fact that South Cayuga had suitability as a new urban centre, does not mean that knowledgeable vendors and purchasers, there on the ground as of December 31, 1971, would have valued individual properties higher than current sales indicated.

I go now, in respect of the valuation of what I have termed the plaintiffs’ pure farm land, to the evidence of Hughes.

I accept his view as to highest and best use. As I have earlier said, Hughes’ assumption the properties were, by Ministerial order, restricted to agricultural use is not, in my view, fatal. Nor did that assumption colour or taint his opinion as to highest and best use, or his selection of comparables to estimate value. I have earlier referred to his consideration of possible uses, other than agricultural.

In respect of the Smith property, he testified the highest and best use was as a farm unit, with no speculative potential for long range, future development.

I agree.

I apply that highest and best use characterization, as well, to the south 212 acre Campbell parcel.

Hughes, and his researcher, investigated a number of transactions in the Townships of North Cayuga, South Cayuga, Canborough, Rainham and Dunn. He narrowed the number finally to 19. Eight came from North Cayuga, four from South Cayuga, three each from Dunn and Canborough, and one from Rainham. Strung, in his selection of 19 sales earlier referred to, confined them to South Cayuga Township.

Mr Giffen had several criticisms of the Hughes’ comparables.

It was pointed out only four were in South Cayuga; of his four “best” Smith comparables only one was in South Cayuga: of his two “best” Campbell comparables only one again was in South Cayuga. Those facts do not, in my view, denigrate the 19 comparables selected. The townships surrounding South Cayuga were of its same character, and its same potential, if any. Hughes’ 19 comparables ranged in values from $197 to $415 per acre. Adjusted for time and other factors, Hughes put the range, as of December 31, 1971, at $317 to $438 per acre. There is a remarkable similarity to Strung’s figures for his 19 South Cayuga sales; $141 to $448 per acre unadjusted, $141 to $426 adjusted.

Another criticism by Mr Giffen was that Hughes’ appraisal, and his selection of comparables, was highly subjective, and therefore suspect. I do not find that to be a valid attack. Undoubtedly Hughes’ selections, after investigation and judgment based on experience, were subjective. That is common in any appraisal. Strung’s selection of 19 Cayuga transactions was equally subjective. He rejected them solely because they occurred during a recession period. Strung’s choice of the Stelco, Texaco, Nanticoke and First Jar- vis indicators was, to a large extent, subjective, based on his experience and judgment.

The final serious attack was that the surrounding circumstances of the Hughes’ comparable sales had not been properly investigated or determined. But that criticism applies equally to Strung’s evidence. Hughes made much more effort than Strung, in my opinion, in respect of inquiries as to surrounding circumstances. There was no evidence given by Strung of surrounding circumstances into each of the Stelco, Texaco, Nanticoke and First Jarvis farm purchases. Some attempt was made in respect of some of the purchases for park purposes. Hughes was able to establish, to a large extent, at least the authenticity of his selected sales and the prices paid.

I have sympathy for both appraisers. These transactions occurred over ten years ago. It was a difficult, if not impossible task, to locate vendors or purchasers at this late date in order to establish all the cogent surrounding circumstances one might wish. I do not fault, nor do I reject, on that single ground alone, the evidence and opinions of either Hughes or Strung.

In summary, then, I accept the approach of Hughes in respect of the smith land and the Campbell pure farm land, and his valuation. For Campbell he concluded a value of $430 per acre, for Smith, $410 per acre. I understand how the slight difference between the two was arrived at. Hughes ultimately went to what he felt were the “best” comparables for each individual property. From a practical point of view, I see no reason why there should be that subtle difference.

I fix the value at $430 per acre for the Smith land, and for the Campbell 212 acres.

The Campbell north 28 acres is a difficult problem.

Strung said, as to highest and best use of this parcel, at 30:

. .. their development prospects for small residential holdings, by way of land separation, was more imminent and it is this utilization which, in my view, represents the highest and best use of the land.

He put it more succinctly at page 63:

. . . the highest and best use of these lands was to market them as home sites, by land severances.

Hughes said the 28 acre parcel had “some utility as a separate rural residential holding”. Dealing with the Campbell property as a whole he said (37-38):

. . . the subject’s highest, best and most probable use for the foreseeable future was as a farm unit with some potential for severing off the 28.069 acre . . . parcel . . . to be used as a separate rural residential holding.

If there is, in reality, a difference between Strung and Hughes, as to the highest and best use, I prefer Strung’s view. As to comparables, the properties immediately west of the Campbell property, fronting on the river, were small properties used for residential purposes, or potentially so. It seems logical to me that would have been the best use of the 28 acre parcel. The fact that Campbell chose not to do it, while he owned the property, is, as I see it, irrelevant.

Hughes did endeavour to assign additional value to the northerly acreage. He selected 4 comparables of what he described as smaller river front property sales with residential potential. Sales A, C and D were some distance away. Sale B was immediately west of the Campbell property. It had a 66 foot towpath easement. The Campbell frontage on Grand River was not subject to any similar easement. A good deal of the land in Sale C was in flood plain. A percentage of Sale D was also in flood plain.

The comparables used by Hughes are, therefore, somewhat questionable. He was endeavouring to find acreages akin in size, with a water location, to the 28 acre Campbell parcel; acreages which also could be used for residential holdings. It was, for that reason, he did not use the already, for practical purposes subdivided, smallholdings immediately west of the Campbell land.

Strung went to five sales in that particular area. All of the properties were vacant except for one. They were small parcels with frontages of approximately 100 feet, and depths varying from slightly under 200 feet to over 300 feet. They ranged from roughly 2/3 of an acre to 1% acres. The prices, adjusted to Valuation Day, were, chronologically as follows. I am quoting from Strung.

$2,486

$4,156

$8,106

$3,933

$3,589

The $8,106 sales was referred to as sale five. It, and the last two sales, were all in 1972. Their values were adjusted down. There was no evidence given as to the surrounding circumstances of any of these sales. There was no explanation given for the strikingly high price of $8,106.

Strung then envisaged the 28 acres, for valuing purposes, as two parcels. The most northerly part comprised the Grand River frontage, running back a distance of 386 feet. The acreage was approximately 15.3. Based on the 5 comparables, he assigned a value of $4,000 per acre, roughly $61,000. To the remaining parcel of approximately 13 acres, because it had no water frontage, he assigned 50% value, or $2,000 per acre, for an amount of roughly $26,000. The average, for the whole 28 acres, was, as I have earlier recounted, $3,083 per acre, for a total assigned value of $87,000.

Hughes felt, from his analysis, the indicated land value of the Campbell 28 acre parcel was about $1,000 per acre (p 62). He then calculated a dollar premium for the north parcel, and related it to the Campbell farm as a whole. This worked out to a premium of $82.00 per acre.

The Hughes method, while ingenious, suffers from the basic choice of comparables. Some consideration ought to have been given to the sales utilized by Strung. That is not to say those sales should be accepted without reservation. But I am unable to accept the Hughes method or valuation in respect of the north 28 acres.

At the same time, I am not prepared to accept, in toto, the Strung value. Undoubtedly, smaller parcels of land, fronting the river, would have commanded a good price. But the estimate of $4,000 per acre for the prime area is, in my view, too high. Sale five is, for lack of information, suspect. Strung made no discount for development costs. He did not elaborate on that bald statement. I am not convinced that his conclusion is necessarily so. It seems to me the success of severance sales, particularly those with no water frontage, would depend on the provision of the usual services and perhaps other compensating amenities.

Doing the best I can in the circumstances here, I find the value of the 28 acres at an average of $2,250 per acre, a total of $63,000.

The Campbell matter is further complicated by the presence, at all relevant times, of the buildings on the property, including the residence. Hughes put a “contributory value” of $31,000 as of December 31, 1971, in respect of those buildings. That estimate was not seriously attacked by the plaintiffs, except as to the valuation of the implement shed and the corn crib. The complaint there was in respect of the depreciation rates used. There was some limited cross-examination of Hughes on this point. No evidence, suggesting different rates, was adduced. In the circumstances, I see no reason to depart from the Hughes figures, or his total estimate of $31,000 for the buildings.

I propose to add that figure to the valuations I have already reached. One might contend that step is technically incorrect. One could argue, for example, that a developer would tear down all the buildings, and then subdivide. That may, or may not, be the case. It is speculation. But from a practical point of view I add in that contributory value to the pure land values I have found.

I give similar treatment to the Smith implement shed. I accept Hughes’ calculation, including the depreciation rate he used.

To summarize:

1. The Campbell property, as of December 31, 1971, had a fair market value of $185,000; broken down

2. The Smith property, as of December 31, 1971, had a fair market value of $75,000 (rounded); broken down:

Up to this point, I have not dealt with the matter of onus of proof in this case. There was a lengthy and thorough submission by Mr Giffen on this matter. I do not find it necessary to explore the subject. Assuming the initial onus to be on the taxpayers to “demolish” the Minister’s assessment and his assumptions, that has been done. The defendant did not rely on the Long- Staff appraisals, earlier referred to, on which the Minister predicated his assessment. Assuming an onus then shifting to the defendant, it is my view that onus has been satisfied.

There remains the matter of the allocation of the 1975 sale proceeds.

In respect of the Campbell property, the parties have agreed a value of $142,700 be allocated to the principal residence and its one acre site. The Hughes allocations in respect of the implement shed and corn crib will, in view of my findings as to the 1971 valuations for those structures, be adopted.

For the same reasons the Hughes allocation in respect of the Smith implement shed is adopted.

The tax assessments are referred back to the Minister for reassessment according to the findings set out in these reasons.

Finally, I want to thank counsel for their assistance and their able presentations in this case. There remains the question of costs.