Date: 20030307
Docket: T-1402-01
Neutral Citation Number: 2003 FCT 277
BETWEEN:
LYDIA HWITSUM, Chief of the Cowichan Tribes, as
trustee of the members of the Cowichan Tribes
Plaintiff
- and -
HER MAJESTY THE QUEEN IN RIGHT OF CANADA,
THE MINISTER OF INDIAN AFFAIRS AND NORTHERN
DEVELOPMENT, THE ATTORNEY GENERAL OF CANADA,
and VENTURE LEASING LTD.
Defendants
REASONS AND DETERMINATION
HUGESSEN J.
Introduction
[1] In this action, the Court is required to determine the "market rent" as of January 1, 2001 for a parcel of land forming part of the Cowichan Reserve, containing about 567,000 square feet (13 acres). The rent so determined will then become the rent for the land for the five year period commencing April 1, 2001. The Band surrendered the parcel to the Crown, who then leased it back to the Band. The Band and the defendant Venture entered into a sublease, whereby the Band leased 83,200 square feet (about 1.9 acres) of the land to Venture. The rental terms in effect required Venture to pay the whole of any increased rent which might become due under the rent review terms of the head lease for the larger area. Since the Crown is in a fiduciary position towards the Band, the latter is in the anomalous position of wishing to see its obligation to pay rent under the head lease increased as much as possible as it is able to recover the whole of such payment from Venture and is the ultimate beneficiary thereof. Thus, the rent being sought by the Crown, as lessor, is less than that which the Band, as lessee, argues it should be obliged to pay but is very substantially more than the amount which Venture, as the ultimate payer, suggests is proper.
Background
[2] The following summary of the background facts is drawn largely from the plaintiff's pre-trial memorandum which, in this respect, was not the subject of controversy.
[3] The named plaintiff is a former Chief of the Cowichan Tribe which is a "band" within the meaning of the Indian Act, R.S.C. 1985, c. I-5.
[4] Canada holds legal title to Cowichan Indian Reserve No. 1 (the "Reserve"), which is a tract of land that has been set apart by the Crown for the use and benefit of the Band. Canada is the landlord under a head lease entered into between the Band and the Crown. Venture is a company incorporated under the laws of British Columbia.
[5] By the head lease, effective April 1, 1987, Canada leased to Dennis Alphonse, as trustee for Cowichan, certain lands on the Reserve being about 13 acres and more fully described below. By a series of declarations of trusts, assignments of lease and consents to those assignments by the Minister, Dennis Alphonse, the lessee, under the head lease and the bare trustee for the benefit of Cowichan, transferred his trusteeship to Lydia Hwitsum, who, in turn, has recently transferred her trusteeship to Harvey Alphonse. Accordingly, the present day bare trustee holding the head lease on behalf of Cowichan is Harvey Alphonse.
[6] Venture is a subtenant of Cowichan by way of a sublease of part of the head lease lands, made on or about May 26, 1987 (the "sublease"), which demised and leased to Venture a certain portion of the head lease lands, being about 1.9 acres .
[7] On June 22, 1987, the Minister consented to the sublease.
Head lease
[8] The term of the head lease is for twenty four years, from April 1, 1987 to March 31, 2011. The annual rent is established on the basis of dividing the term of the head lease into one, initial nine year rental period, and then three consecutive five year rental periods to the end of the term.
[9] The rent for the initial nine year rental period (from April 1, 1987 to March 31, 1996) was set at $20,000. The rent for each of the ensuing five year rental periods was to be set as follows:
[...]
(c) The yearly rent during each five year period after the nine-year period shall be set in the way hereinafter provided, but in the absence of or pending such setting the Lessee shall continue to pay the same rent as during the previous year on or before April 1 of the year for which the said rent is payable.
(d) The annual rent for each five year period after the first shall be either:
(i) the amount which is on the day ninety days before the five year period being in the opinion of the Minister market rent for the land leased on the terms and conditions contained in this lease, and enjoying all the services and amenities then existing but ignoring the value of any permanent improvements made on the land by the Lessee, which improvement shall include the value of the land fill and rip-rap; or
(ii) the same rent in each year as for the last year of the previous five year period, which ever is the more.
[10] The rent for the first five year term of the head lease (from April 1, 1996 to March 31, 2001) was set by the Minister at $85,000.
[11] The head lease also made provision for the use of the head lease lands, as follows:
5. The Lessee will use the land only as a Heritage and Cultural Centre, designed for commercial tourism and for other institutional uses related to education and the arts, or such other purpose or purposes as the Minister may from time to time, in his sole discretion consent to in writing.
[12] The head lease further provides, inter alia, that if the lessee disagrees with the rent set by the Minister for a five year period, the matter may be referred, within sixty days of receiving the rent notice for that five year period, to the Federal Court of Canada under section 17 of the Federal Court Act R.S.C. 1985, c. F-7 as amended, for a determination of the rent, so long as the lessee had paid all rents currently due and as set by the Minister.
Sublease
[13] The term of the sublease is also for twenty-four years, from April 1, 1987 to March 31, 2011.
[14] The sublease provides that, for the purpose of ascertaining the rent, the term is divided into consecutive five year periods. For the first rental period, from April 1, 1987 to March 31, 1992, the rent was fixed at $19,100. For the next consecutive five year periods thereafter, Venture agreed to pay rent under the terms of the sublease, with the determination of that rent being dependent upon the determination of the rent payable by Cowichan as set by the Minister under the head lease.
[15] Pursuant to an implied term of the sublease, Cowichan must forward to Venture any rent notice received from the Minister within 15 days of such receipt. However, if the Minister fails to raise the head lease rent within the prescribed time limits under the head lease, or Cowichan fails to provide notice of any increases in rent under the head lease to Venture, then the annual rent would be the same as the annual rent in the previous five year rental period.
[16] The sublease further provides, inter alia, that if Venture disagrees with the rent set by the Minister under the head lease, Venture may demand in writing within 45 days of receiving the Minister's rent decision that Cowichan refer the matter to the Federal Court of Canada under section 17 of the Federal Court Act for a determination of the rent, so long as Venture has paid all rents currently due as set by the sublease and is not in default of any other provision of the sublease.
[17] Because the Minister failed to raise the head lease rent within the prescribed time limits under the head lease in 1996 and Cowichan failed to provide the requisite notice of the eventual increase in rent under the head lease in 1998 to Venture, the annual rent under the sublease remained at $19,100 for the five year rental period from April 1, 1997 to March 31, 2002.
[18] Prior to April 1, 2001, the Minister did not set a new annual rent under the head lease for the next five year rental period, that being April 1, 2001 to March 31, 2006. Accordingly, on April 1, 2001 Cowichan paid Canada $85,000 in rent and Venture paid Cowichan $19,100 in rent.
[19] However, the head lease provides that the Minister may, within a 90 day time-frame after April 1, 2001 set a new rent. On June 11, 2001, the Minister provided Cowichan with a Notice of Rent that the annual market rent payable under the head lease for the five year period commencing April 1, 2001 was set at $145,000 per annum.
[20] On June 20, 2001, Cowichan forwarded the Minister's Notice of Rent to Venture. On July 9, 2001, Venture acknowledged in writing that Cowichan had forwarded the Minister's Notice of Rent and advised that it disagreed with the rent set by the Minister. Venture further demanded in writing that Cowichan refer the matter to the Federal Court.
[21] On July 25, 2001, Cowichan paid Canada $60,000, being the balance owing on the rent due and payable April 1, 2001 under the head lease for the first year of the five year rental period commencing April 1, 2001 to March 31, 2006.
[22] This action was commenced on August 2, 2001. On August 9, 2001, Cowichan gave Venture formal notice that Cowichan expected Venture to pay $145,000 per annum beginning April 1, 2002, being the rent demanded by Cowichan as due and payable under the sublease for the first year of the five year rental period commencing April 1, 2002 to March 31, 2007.
[23] As of April 1, 2002, Venture paid Cowichan under protest the sum of $145,000 for the first year of the five year rental period commencing April 1, 2002.
The issues
[24] In general terms, the issue before the Court is to determine the market rent for the head lease lands as if unimproved as of January 1, 2001 (being 90 days before the commencement of the current five year term). That determination in turn requires an assessment of the market value of the land and the application thereto of a reasonable rate of return. However, there are a number of sub-issues involved in that determination of which the most important are : i) whether account must be taken of any requirement of a set back from the banks of the Cowichan River ; ii) whether the highest and best use of the land would require the addition of fill and other works to protect the land from flooding ; iii) whether account must be taken of the fact that only ten years remain in the term of the leases and whether and to what extent this affects the market rent.
The property
[25] The property which is the subject of the head lease is located southeast of the downtown core of the City of Duncan and north of the Cowichan River.
[26] The neighbourhood is commercial ; most of the adjoining lands that lie west of the Trans Canada Highway and north of the Cowichan River have been developed with a wide range of commercial/retail outlets, including : the enclosed Duncan Mall, anchored by Wal-Mart, the open Duncan Plaza and Village Green Mall and the free-standing Saan store, Safeway, Real Canadian Superstore, Shell and Tempo gas bars, White Spot Restaurant and the Village Green Motor Hotel complex.
[27] Access to the First Nations' portion of this commercial neighbourhood is available south from Trunk Road and west from the Trans Canada Highway with through traffic using Cowichan Way, which angles through the neighbourhood, south from Trunk Road and then east to the Trans Canada Highway. The area south of Cowichan Way to the Cowichan River and the Trans Canada Highway forms the subject property which is partially improved first, by the Band's own Quw'utsun' Cultural and Conference Centre, in the central quadrant, and second, by the Cowichan Campus of Malaspina College in the Northwest quadrant built on the parcel of land which is the subject of the sublease to Venture.
[28] The head lease property consists of a slightly irregular shaped parcel of land with a frontage of 423.788 metres (1,390.38 feet) on the south side of Cowichan Way, a depth of 140.077 metres (459.57 feet) along the west parcel boundary abutting the E & N Railway right-of-way, a depth of 144.81 metres (475.10 feet) along the east parcel boundary abutting the Trans Canada Highway right-of-way, a rear parcel boundary of ±300 metres (±985 feet) along the north side of the Cowichan River and a further easterly extension of 104.211 metres (341.90 feet) above the north bank of the River. Total site area from the survey plan is 5.272 hectares (13.027 acres or approximately 567,000 square feet.).
[29] Originally, the site sloped gently away from the road frontage to the frontage along the Cowichan River. Over time and with the construction of the various improvements on the site, the frontage along the River has been rip-rapped to prevent erosion and the grade has been sloped up to the grade of Cowichan Way. It remains, however, that the greater part of the site is below, and sometimes very substantially below, the level of the 200 year flood plain. At the time of the trial, in January 2003, the lower parts of the land were wet and there were obvious signs of flooding in the form of water marks, sandbags and posted warnings.
The experts
[30] Three expert witnesses were called by the parties to give their appraisals of the value of the leased lands and of their market rent as of January 1, 2001.
[31] On behalf of the Band, Mr. Burnett opined that the market land value as if vacant and unimproved is $2,385,500. This market land value is based on the unimproved market unit value of the head lease lands of amounts varying from $4.25 to $6.50 per square foot, depending on location, for a total of $3,195,000, less an estimated value of the existing fill and rip-rap as well as of required future fill of $810,000. Using a 7% market rate of return, the Burnett Appraisal concludes that the market rate of rent for the head lease lands is $167,000. This is the rent for which the Band argues in this litigation.
[32] In a report prepared for the Crown on May 28, 2001, the witness Mr. McConnell, estimated the market land value of the head lease lands to be $1,450,000 or $3.75 per square foot. This figure takes into account an assumption that a 30 metre set back requirement would apply to the reserve lands thereby reducing the market value of the head lease lands by 25 %. It also reflects an estimate of the cost of the value of the existing fill and rip-rap, valued at $362,500 but no amount for any required future flood proofing. Using an 8% market rate of return, the May 28, 2001 McConnell Report concluded that the market rate of rent for the head lease lands is $120,000 per annum. This report was not acceptable to the Band.
[33] In a further report dated June 6, 2001 McConnell eliminated the 30 metre set back factor from the calculation of the market land value of the head lease lands on the grounds that the provincial legislation imposing such set back did not apply to reserve lands. The market rate of rent was then estimated to be $145,000 per annum, using the same 8% market rate of return. This is the rent for which the Crown now contends.
[34] On behalf of Venture, a report prepared by the witness Clark indicates that the market land value of the head lease lands as of January 1, 2001 was $2.40 per square foot, yielding a site value of $1,360,000. This value is calculated before making any further adjustments relating to set backs or site improvements. Once the estimated cost of such improvements, necessary in Clark's view to bring the site to the 200 year flood plain level, are factored in the value of the site is actually less than $0.00. The Clark Report arrives at this conclusion by assuming first, that there was a requirement that the existing grade of the head lease lands be filled above the 200 year flood plain level; second, that a 30 metre set back from the Cowichan River would be required for any future development; and third, that these future development considerations are relevant to the determination of the rent under the head lease.
[35] The Clark Report acknowledges its counter-intuitive conclusion, by offering an alternative valuation of the market land value and market rate of rent for the head lease lands based on comparisons to other unimproved sites. Although one of such sites is quite close in both size and location to the subject land, the sale in question took place thirteen years previously and the development was residential, not commercial. The Report concludes that the unimproved market value of the lands is $260,000. Using an 8% market rate of return as in the McConnell Reports, the Clark Report concludes that, on this basis, the rent for the head lease lands is only $20,800.00.
Appreciation of expert evidence
[36] None of the expert reports is entirely satisfactory. While all three appraisers agreed that the "return on site value" approach was the most appropriate in the circumstances (McConnell also tested but ultimately rejected two other methods) and two of the three (McConnell and Clark) felt that a rate of return of 8% was the correct factor to apply, they all reached dramatically different conclusions. All filed more than one report and demonstrated a regrettable willingness to alter their opinions at the suggestion of the parties who had retained them or their solicitors.
[37] I find Mr. Burnett's report to be the least reliable. He did not respond well to cross- examination. His value per square foot is seriously out of line with the other two appraisers. All of his comparables were of properties very much smaller in size than the leased lands which makes them inappropriate for comparison purposes. Even his largest comparables were only about 20% the size of the leased lands and one of them was not even a sale but rather a listing which he admitted subsequently sold at a discount of about 40% off the listed price. Burnett also notionally divided the leased lands into three smaller parcels and valued them separately, a stratagem which not only resulted in higher values but which is directly contrary to the instructions of the head lease which asks us to assume a hypothetical lease of the whole of the leased property, not a series of leases of parts of it. Burnett's estimate of the cost of necessary improvements to the site is unsupported by any evidence. Rather less significant, in my view, is the fact that Mr. Burnett simply assumed, contrary to the express terms of the head lease, that any commercial tourism use would be permissible on the leased lands whereas there are clear restrictions on use and any other use is subject to the approval of the Minister, an approval which, although it is unlikely that it would be withheld, had not been given as of the operative date of January 1, 2001 (or, apparently, to date). I place little or no reliance upon Burnett's appraisals.
[38] As between McConnell and Clark, I find it virtually impossible to choose. Both witnesses were persuasive and carried impressive qualifications. In a task such as that which they undertook, there are a large number of variables, each of which calls for an exercise of judgement and a certain degree of subjectivity on the part of the appraiser. The difference between their per square foot values of $2.40 and $3.75 respectively, is due largely to their assigning different weights to various adjustment factors such as for time, size, possible permitted variations in use, choice of comparables and the like. To the extent that it is relevant, I note that the evaluations made by the B.C. Assessment Authority for neighbouring and adjacent properties generally are for values in a similar range which indicates to me that the suggested values are not wildly out of line. I accordingly would assign a per square foot value to the leased lands prior to any adjustments for set back, improvements etc. at the approximate mid-point between the two appraisers of $3.10 per square foot or a total rounded out to $1,758,000.
Thirty metre set back
[39] A major part of the discrepancy between Clark and McConnell, (and between McConnell's first and second reports) was due to disagreement over the question of whether or not the leased lands should be valued as being subject to a 30 metre set back requirement from the banks of the Cowichan River. It is clear that there is no binding legal requirement to this effect in either provincial or municipal legislation which is inapplicable to reserve lands. However, the evidence is that the Department of Fisheries and Oceans, which does have jurisdiction, would follow the Guidelines which it has issued and would almost certainly require such a set back for the protection of the fishery. It is also clear that the Band itself considered that it had imposed such a requirement and a Band Council resolution of September 2002 talks of the Band's "environmental standards" imposing the set back. But, in a move which I view as highly suspect, given the timing and the issues herein, the Band Council purported to rescind that resolution in November 2002, only two months before the scheduled trial date in the present litigation.
[40] In the circumstances, I conclude that no prudent developer would purchase or lease this property without making allowance for a "leave strip" of at least 30 metres along the river bank and that this would materially decrease the amount of the purchase price or rent which such developer would pay on the open market. To disregard the virtual certainty that such set back would be required, as the Minister has done in commissioning and relying on McConnell's second report, would be unreasonable in the extreme.
[41] I accept Mr. McConnell's method, used in his first report, of calculating the impact of such set back on the total value of the lands, namely that the leave strip represents approximately 20% of the total area and that it should be discounted to 25% of the value of the remaining land. Rounding out the figures would produce the following result:
80% of the land, or approximately 453,600 square feet would have a value of $3.10 = approximately $1,406,000;
the balance or 113,400 square feet would have a value of $0.75 = approximately $85,000
Total (rounded) : $1,490,000.
Flood proofing
[42] The greatest discrepancy, by far, between Clark and McConnell, is in the former's allowance of a sum in excess of his estimated land value to account for the projected cost of raising the land to the level of the 200 year flood plain. There is no binding legal requirement that the land or any part of it be filled to such level before being developed. But, that does not mean that any such requirement can be ignored. It is clear from the evidence, especially that of Mr. Clark himself, who had been on the land only a few days before the trial, that the land is extremely susceptible to flooding and that all the existing buildings have been raised to approximately the level of the 200 year flood plain. One building, the Riverside Café, being a unit of the Heritage Centre, has even been built on stilts. Obviously, if the land is to be developed, the developer will include in his acquisition costs the cost of making the site useable and will reduce the price of the land proportionately. Evaluations of the market value of the leased lands, which fail to make any allowance for this factor, are unreasonable and cannot be supported.
[43] Establishing just what that factor ought to be is not a simple task on the evidence that I have before me. There is some indication that in 1987, the Band considered that it would cost $300,000 to install necessary fill and rip-rap, but not only is that a layman's estimate made by the then Chief, but it seems likely that what was being estimated was the cost of raising that part of the land which is now occupied by the Heritage and Cultural Centre, which represents only a portion of the leased lands.
[44] The only evidence is that of Mr. Hradowytch, a qualified engineer, who comes to a figure of just over $2 million to raise the whole site to the 200 year flood plain and install rip-rap along the river bank. This is the sum deducted by Clark to arrive at a negative land value. Hradowytch also estimates a further $1 million as being the cost of the flood proofing works which have already been carried out on the land and which, by the previously quoted terms of the head lease, must be excluded from the calculation of market rent. If that sum were also deducted, of course, the resultant negative land value would be even more striking and counterintuitive.
[45] I find Mr. Hradowytch's estimate to be decidedly exaggerated. The fact that, if accepted, it would result in a huge negative land value, an obviously nonsensical outcome, is a strong indication of the report being radically wrong. Among its several important deficiencies, the report's author does not make a proper allowance for a "leave strip" of wetlands along the river where fill would be neither required nor, in all likelihood, permitted; he calls for a retaining wall at points where he admits that a simple slope of 1:1 would do the same job; he proposes bringing in expensive "structural" fill throughout 75% of the site although it is virtually certain that no developer would envisage anything like that extensive a coverage even if it were permitted; he proposes rip-rap of a size (1.5 metres) and quantity far in excess of what is already in place and which appears to have served satisfactorily to date; his proposed method would involve an extraordinary duplication of work since he envisages stripping and removing to landfill all the existing soil cover and trucking in new fill, some of which, at least, would be of the same quality as what had just been taken away and expensively disposed of; finally, even the requirement of filling right up to the 200 year flood plain level is suspect since the evidence is that Cowichan Way itself, as well as some of the developed properties across the street from the subject lands are also, albeit marginally, below that level, perhaps, due to better means of flood control in the river itself.
[46] It remains, however, that Mr. Hradowych's evidence is all that I have on the question and I must do my best by discounting it by what I consider to be a reasonable figure. This is no simple task and I undertake it with great hesitation. The best indication which I can find in the evidence is Mr. McConnell's estimate in current dollars of the sum of $362,000 as the cost of the presently existing fill and rip-rap. While the supporting evidence for this figure is not as solid as one might wish, it is all we have and it has the advantage of coming from a witness whom I find to be generally credible (even though I disagree with him on the need for flood proofing). Accepting McConnell's figure would indicate that Hradowych's estimate of $ 1 million for the value of existing fill and rip-rap is exaggerated by a factor of about 3. If that factor is in turn projected onto the engineer's estimate for the total cost of both existing and required works, it would indicate that a deduction of $ 1 million would be justified to cover both the value of the existing works and the probable cost of what would be necessary to flood proof the rest of the property to a sufficient degree to permit future development. Although I have attached little weight to Mr. Burnett's evidence, I note that he allowed a little over $800,000 for this work and, even though he gives no support for that figure, it provides some confirmation that the sum I have selected is not wholly out of line. At the risk of repeating myself, I am convinced that a substantial degree of flood proofing is required and although the evidence is both scant and unsatisfactory, I must do the best I can with what I have. This is not a case where I can simply say that one or other party has failed to discharge its burden of proof since, in effect, they have all done so and to ignore the probable cost of necessary flood proofing would have the effect of hugely inflating the value of the land to the detriment of the only party who has even attempted to lead any evidence on the question.
[47] Applying the $1 million figure and deducting it from the revised value, after allowing for the 30 metre set back, gives a net land value of $490,000 which at a rate of return of 8% would yield an annual rent of $39,000.
[48] This rent, when compared to the rent negotiated at arm's length between the parties for the original nine year rent period in the head lease, accords well with the general evidence of market conditions in the Duncan area, where land values have been flat for the past five or six years after having risen substantially over the preceding ten years. While I do not base my conclusion on this reasoning, it provides some comfort that the result arrived at by the process I have followed is not out of line with reality.
[49] I attach no significance to the fact that my estimate of market rent is far below what the Band apparently accepted in 1996 and what both it and the Minister proposed for 2001. The Band's posture on the present litigation demonstrates that when it has the assurance that the bill will be picked up by someone else, one cannot rely on it to negotiate rent with the Minister at arm's length. I have already found as a fact that the basis upon which the Minister purported to set the current rent, by ignoring both the 30 metre set back and the need for flood proofing, was unreasonable.
Impact of remainder of term of head lease
[50] In its submissions and in a report commissioned from Mr. Clark, expressly for this purpose, Venture argues that the market rent should be further reduced by a factor which would lower it to some 58% of the figure otherwise arrived at to take account of the fact that only ten years remain in the term of the head lease. As I understand the argument, the hypothetical lessee of a lease under "the same terms and conditions" as the head lease would only obtain a lease which would require him to give up the property in 2011, that is to say, in ten years. It would, therefore, be wrong to calculate market rent as though the hypothetical lease was to have a term of twenty-four years starting in 2001. A number of English cases are cited in support of this proposition which seems to me to be unassailable. What seems far more dubious, and indeed unacceptable, is Venture's further proposition that the hypothetical lease should be viewed as having a term of ten years starting in 2001. Such a lease would obviously not be on the same terms and conditions as the head lease which is for a term of twenty-four years starting in 1987. In calculating the market rent in 2001 for a hypothetical lease which had already run fourteen years on the terms and conditions of the head lease, it seems to me that one should not properly make any discount for the "shortened" term because the lessee would already have had the benefit of fourteen years' occupancy, including, of course, the recovery of any costs incurred in developing the property. While I have some doubt as to the applicability of English jurisprudence because of the very heavy statutory overlay on their law of landlord and tenant, it appears to me as though the English Courts too, after some hesitation, are tending toward a conclusion similar to the one I have set out. See: Lynnthorpe Enterprises Ltd. v. Sidney Smith (Chelsea) Ltd., [1990] E.W.J. 672 (C.A.).
[51] In my view, disregarding authority of dubious relevance and simply interpreting the lease I have before me, it is an error to focus on the unexpired portion of the term to conclude that there should be any discount based on the fact that such portion will obviously be less than the full term. The hypothetical lease is for twenty-four years from 1987, and when we are reviewing it after fourteen years in 2001, the lessee has been occupying the property for that period at a rent which we now determine to be less than what today's market would justify. The rent review periods, every five years starting at year nine of the term, are periods in which the rent may go up but never down. They do not represent "new" terms of the lease which the Minister must take into account when setting the rent. It seems to me to be perverse to construe a lease, in which the express terms state that the rent can only be increased but never lowered, as if the parties had agreed to an implied term defeating those express terms by allowing for a diminishing rate of rent as the expiry date of the lease draws closer. Not only does that seem to me to make no commercial sense, I can think of no practical reason for the parties to include a "ratcheting up" provision if there was to be a discount (which by its nature would become larger and more important at each rent review date) applied upon every rent review. That surely would defeat the whole purpose behind the rent review provision in the first place, namely that the lessor is to benefit from any increase in the underlying land values occurring during the term.
[52] Accordingly, I reject Venture's submissions on this point.
Conclusion
[53] I accordingly determine that the annual market rent for the leased property as of January 1, 2001 is $39,000. If anything more than my formal declaration to that effect is required, and in particular, if an order is needed to set out the adjustments which will have to be made as between the parties, I will entertain one or more motions for judgment pursuant to Rule 394. Such motions should be brought pursuant to Rule 369.
Costs
[54] While the result is a very substantial increase in Venture's rent, it nonetheless represents considerable success for it since the new rent is even more substantially less than the figures sought by the Band and by the Minister. I would award Venture its costs as against the Band to be assessed under Column III. I would award no costs to or against the Crown.
Judge
Ottawa, Ontario
March 7, 2003
FEDERAL COURT OF CANADA
TRIAL DIVISION
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: T-1402-01
STYLE OF CAUSE: Lydia Hwitsum and others v.
Her Majesty the Queen in Right of Canada and others
PLACE OF HEARING: Vancouver, BC
DATE OF HEARING: January 22nd, 23rd, 24th, 2003
REASONS AND DETERMINATION OF THE HONOURABLE MR. JUSTICE HUGESSEN
DATED: March 7, 2003
APPEARANCES:
Christopher Devlin/John Gailus FOR PLAINTIFFS
Paul Miller/Narvinder Gill FOR DEFENDANT(Her Majesty the Queen)
Gerald Ghikas, Q.C./Robert Deane FOR DEFENDANT(Venture Leasing Ltd.)
SOLICITORS OF RECORD:
Woodward & Company
Barristers & Solicitors
Victoria British Columbia FOR PLAINTIFFS
Boughton Peterson Yang FOR DEFENDANT (Her Majesty the
Anderson Law Corporation Queen)
Barristers & Solicitors
Vancouver, British Columbia
Borden Ladner Gervais LLP FOR DEFENDANT (Venture Leasing Ltd.)
Lawyers-Patend & Trade Mark Agents
Vancouver, British Columbia
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