Supreme Court
of Canada
Lake Erie and
Northern Rway. Co. v. Schooley, (1916) 53 S.C.R. 416
Date: 1916-06-13
The Lake Erie and
Northern Railway Company (Plaintiffs) Appellants;
and
Ignatius Franklin
Schooley and The Brantford Ice Company (Defendants) Respondents.
1916: May 30; 1916: June 13.
Present: Sir Charles Fitzpatrick C.J.
and Davies, Idington, Anglin and Brodeur JJ.
ON APPEAL FROM THE APPELLATE DIVISION
OF THE SUPREME COURT OF ONTARIO.
Expropriation—Business premises—Special value—Mode of estimating compensation.
Where property
expropriated is, owing to its location and adaptability for business, worth
more to the owner than its intrinsic value, he is not entitled to have the
capital amount representing the excess added to the market value of the
property. His proper compensation is the amount which a prudent man in the
position of the owner would be willing to pay. Brodeur J. dissenting. Judgment
appealed against (34 Ont. L.R. 328) varied.
APPEAL from a
decision of the Appellate Division of the Supreme Court of Ontario
affirming with a slight variation of the award of the arbitrators appointed to
determine the compensation to respondents for their property expropriated.
The respondents
carried on an ice business in Brantford and the business premises were
expropriated for purposes of appellants’ railway. The evidence produced before
the arbitrators appointed to determine their compensation showed that the
premises were specially adapted for their business and the arbitrators awarded
for such special adaptability the sum of
[Page 417]
$20,000
representing the annual saving of expense over the cost of doing business in
another place capitalized for ten years. This was added to the $29,000 allowed
as the market value of the property. The Appellate Division upheld the award
save as to $800 allowed for sawdust which was struck off.
Tilley K.C. and Brewster K.C., for the
appellants.
Cowan K.C. for the respondents.
THE CHIEF JUSTICE.—Any question of principle involved in this case is, I
think, covered by the authority of the decision of the Judicial Committee in Pastoral
Finance Association v. The Minister.
The arbitrators
here have found the market value of the property and then added to the amount
the special value of the land to the respondents. To this special value the
respondents were undoubtedly entitled whatever exception may be taken to the
way in which it was arrived at. In the case above referred to the Judicial
Committee say:—.
The
substantial ground on which the majority of the court based their decision was
that the appellants were not entitled to anything beyond the market value of
the land * * * * Their Lordships have no hesitation in deciding that, the
principle underlying this decision is erroneous. The appellants were clearly
entitled to receive compensation based on the value of the land to them.
The Appellate Division, following this
ruling, has held that the respondents were entitled to the special value which
the arbitrators have allowed. The court indeed takes exception to the method
adopted for arriving at the proper compensation by first taking the market
value of the property and then ascertaining and adding the special value to the
respondents.
[Page 418]
The court
considers, and I think rightly, that the preferable method would have been to
ascertain simply the value of the property to the respondents and base upon
this the compensation to which they were entitled. The court, however, finds
and again, I think, rightly, that there has been no error in principle which
can affect the amount of the compensation awarded. With the amount allowed the
court professes itself satisfied and declines to vary it.
The only question,
therefore, for this court to determine is, in my opinion, the adequacy of the
amount of the compensation awarded.
Although I think
the sum of $29,000 at which the jury have estimated the market value of the
property is a very liberal allowance, I am not disposed to interfere with this,
holding as I do, that unless the award of arbitrators is clearly excessive, it
should not be disturbed on an appeal to the courts. Notwithstanding, however,
this disposition to interfere as little as possible with the award of arbitrators
on a simple question of amount, I cannot accept the finding, with regard to the
special value of the property to the respondents. The sum of $20,000 cannot, I
think, be justified by anything in the evidence pointing to such loss by the
respondents as would entitle them to compensation on this scale.
Under the
circumstances, it is necessary to adhere to the method of valuation which the
arbitrators have adopted and to deal separately with the loss which the
respondents have sustained by reason of the special value of the property to
them.
Upon reading the
evidence and giving the matter the most careful consideration, the conclusion
that I have arrived at is, that if to the market value found by the arbitrators
at $29,000 there is added $4,000
[Page 419]
for the so-called
special value, the respondents will have received full and ample compensation
for the loss which they have sustained by the taking from them of their
property.
The appeal must be
allowed to the extent of reducing the total award to the sum of $33,000. The
appeal of the respondents is dismissed.
DAVIES J.—This appeal is from the judgment of the First Appellate
Division of Ontario confirming an award made by arbitrators appointed to value
the compensation payable to the respondents for two pieces of property
expropriated by the railway company in the City of Brantford on which the
respondents carried on an ice business, less the sum of $800 for sawdust which
was disallowed.
There was a
cross-appeal by the respondents to restore this $800; but I may as well dispose
of this cross-appeal by saying that I am quite in accord with the Appellate
Division in disallowing this item.
As to the award,
the business premises consisted of two distinct parcels of land with buildings
upon them, one called the Water Street lands and the other the Greenwich Street
lands. As to the former, the arbitrators valued the compensation payable for
the lands at $4,620 and the buildings at $3,500, and as to the latter, the
lands at $10,560 and the buildings at $8,400. The values placed upon the
machinery and the sawdust between the walls are not in dispute:
The total value
awarded for the lands, buildings, sawdust and machinery amounted to $29,000 and
in their written reasons the arbitrators explained that
the values
put upon these lands and buildings is their intrinsic value or real value as
taken for any purpose, not necessarily the ice business, but we found also that
these lands were especially adapted for the ice
[Page 420]
business,
reducing the handling and storing of ice to a minimum of expense and making it
much less expensive than it can be done for at the premises to which the
claimants propose removing or indeed in any other premises in the City of that
were mentioned or pointed out to us.
The arbitrators
then proceed to add to the “intrinsic or real value” of the lands and buildings as determined by them the sum
of $20,000 for the reason, as explained by them, of “special adaptability” of the lands for the business of the
ice company, thus increasing their award to $49,000. Their language in the
award is:—
Then in
addition also for the extra cost of harvesting ice in any other place in the
City of Brantford or what may be termed “Special Adaptability” interest in the lands expropriated by the Railway
Company. * * *
With respect to
this item, the main one is dispute, the Appellate Division says:—
The amount of
$20,000 seems large, having regard to the figures awarded for the land and
buildings in this case. But there seems to be no basis on which it can fairly
be reduced, if, as I think was intended, it represents the special value of the
land expropriated and damages for disturbance to business.
I am extremely reluctant
to set aside or alter the award of arbitrators who have had the advantages of
seeing and hearing the witnesses and visiting the property, and with respect to
the $29,000 awarded, though I agree it is very large and, specially with
respect to the amount awarded for the Water Street buildings, which had
been condemned by the city inspector as dilapidated and dangerous, indefensibly
large, yet I am not, in view of the judgment of the Appellate Division,
disposed to interfere with it holding that it includes all damages for
compulsory purchase.
With respect to
the additional amount of $20,000 added under the head of “special adaptability,”
I am of opinion that the arbitrators proceeded upon a wrong principle.
[Page 421]
They first found
on conflicting evidence that the extra expense of harvesting and selling the
ice at the proposed new location would be $2,000 yearly and they proceed to
allow this amount for ten years in addition to the intrinsic value of the
property taken. There is no justification in my judgment for such an arbitrary
assessment.
The true principle
on which they should have proceeded is that laid down by the Judicial Committee
in the Pastoral Finance Association v. The Minister,
namely, that this special suitability of the lands expropriated for the
carrying on of an ice business and the additional profits which the owners will
derive from so carrying it on, are proper elements in assessing the compensation,
but the owner is not entitled to have the capitalized value of those savings
and profits added to the market value of the lands.
Their Lordships
say at page 1088 of the report of the above case:—
That which
the appellants were entitled to receive was compensation not for the business
profits or savings which they expected to make from the use of the land, but
for the value of the land to them. No doubt the suitability of the land for the
purpose of their special business affected the value of the land to them, and
the prospective savings and. additional profits which it could be shewn would
probably attend the use of the land in their business furnished material for
estimating what was the real value of the land to them. But that is a very
different thing from saying that they were entitled to have the capitalized
value of these savings and additional profits added to the market value of the
land in estimating their compensation. They were only entitled to have them
taken into consideration so far as they might fairly be said to increase the
value of the land. Probably the most practical form in which the matter can be
put is that they were entitled to that which a prudent man in their position
would have been willing to give for the land sooner than fail to obtain it.
Now it is evident that no man would pay for land in addition to its market
value the capitalized value of the savings and additional profits which he
would hope to make by
[Page 422]
the use of
it. He would, no doubt, reckon out those savings and additional profits as
indicating the elements of value of the land to him, and they would guide him
in arriving at the price which he would be willing to pay for the land, but
certainly if he were a business man that price would not be calculated by
adding the capitalized savings and additional profits to the market value.
This statement of
the law shews clearly that in arbitrarily adding ten times the amount of their
estimate of the extra yearly cost of harvesting and selling their ice product,
the arbitrators proceeded upon a wrong principle and one which, if indorsed by
the courts, would, in many cases (I think in this case), be productive of great
wrong.
After giving the
facts of the case and the arguments at bar and in the respective factums every
consideration and giving the judgment which, in my opinion, the Appellate Court
should have given, I have reached the conclusion that a prudent man in their
position might have been willing to give for the lands taken a sum certainly not
greater than $5,000 for these special advantages and adaptability to the ice
business in addition to their intrinsic value as found by the arbitrators. In
this view my brother Anglin concurs but we agree to reduce that $5,000 down to
$4,000 in order that there may be a majority judgment reached. The judgment
appealed from accordingly will be reduced to $33,000.
IDINGTON J.—This appeal arises out of the expropriation by appellant
under the Railway Act of lands in Brantford used by the respondents for
carrying on an ice business.
The arbitrators’ award of compensation amounted to a total of $49,000
made up as follows:—
[Page 423]
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Machinery
(valued by consent)
|
$675.00
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|
|
|
|
|
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Greenwich Street buildings
|
|
|
|
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Sawdust in ice house for covering ice
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Then in addition also for the extra cost of harvesting
ice in any other place in the City of Brantford or what may be termed “Special Adaptability”
interest in the lands expropriated by the Railway Company
|
|
The
Appellate Division of the Supreme Court of Ontario struck out the $800 item for
sawdust used for covering in the ice house, thus leaving $28,200.00 for lands
and buildings.
How
such an item of purely personal property crept into such an award puzzles me,
yet respondents ask its restoration. The remaining items of the original
$29,000 are claimed to be high but admittedly cannot be contested here with
much hope of success in face of the evidence and no legal principle violated in
acting thereon.
The
additional item of $20,000 does not seem to be justifiable on any legal
principle put forward to support it when dependent only upon such evidence as
relied upon.
The
expression of the arbitrators of what the item stands for is rather confusing
and, I most respectfully submit, seems the result of the confusion of thought
which lies at the root of the error into which the arbitrators fell. And their
later deliveries of divergent reasons supporting their respective views,
apparently after an appeal was in sight, is an unsatisfactory method of doing
so, for the reasons under such circumstances
[Page 424]
do
not carry the same weight as if they had been delivered with the award.
The
lands are to be estimated in such cases as in question herein upon the basis of
their market value. And it is what they are worth to the owner that is to be
considered.
In
fixing the market value at the figure they did I have to assume the arbitrators
proceeded on their appreciation of the evidence before them. We are not
seriously asked to change that. But in that evidence so far as counsel in
argument or in factum has directed our consideration, there was nothing
presented to shew that there was any market price for ice house sites as
distinguished from their values for anything else. Yet it is that market price
of any land possessing special adaptability for anything that has to be
determined if we are in principle to follow the latest authority reiterating
the rule in the case of Cedars Rapids Manufacturing and Power Co. v. Lacoste,
at p. 579.
The
direct evidence which ought to be required to fix the market value in that
regard has not been produced. In the indirect way, of entering into a long and
elaborate investigation of the comparative cost of operating with this plant
where it is, as compared with a plant assumed to be placed some place else,
there is alleged to exist the basis of a calculation of value to be added to
the market price.
Not
a title of evidence is referred to shewing that any sane man of business would
think of investing $48,200 for land and buildings of the kind in question
devoted to an ice business selling four thousand tons of ice per season.
[Page 425]
The
proposition seems to me to sound rather hollow. And without going so far as to
hold, as matter of law, that you cannot prove value and even market value by an
involved process like unto that tried but uncompleted here, I may say the
process has (if it ever can be made operative and serviceable), failed in this
case because of that reasonable approach to completion which would make it
worth anything being entirely wanting.
Would
any one looking ahead to the enlightenment of the public on the subject of
health and the gradual enforcement of the results thereof, through boards of
health and otherwise, think of purifying the Grand River sewage for the express
purpose of an ice business? Would he shew his faith in the business sense of
doing so by paying $20,000 for the privilege when and where pure water is to be
found and ice produced therefrom at perhaps less expense in any convenient
spot? And all for the sake of a few incidental and temporary advantages of
handling the product at a trifling less expense. And in Brantford, we are asked
to believe these incidental advantages will extend over a period of ten or
twenty years. The economic and social forces are against the realization of
such imaginary contingencies.
There
is only one other ice business in the city and that is supplied by pure water
and involves a haulage of a mile and a half more than respondents either had to
or has now to face in way of competition.
The
proof that this plant had been made profitable and had been placed on a
permanently profitable basis that would justify an investment of $48,200, has
fallen short. Indeed so far as I can see the evidence is the other way.
The
appellant’s factum presents a statement of
[Page 426]
counsel’s estimate of the results so far as known which I do not
adopt in its entirety. But in the main it ought to have been met and displaced
if untrustworthy.
The
only reason I imagine for respondents’ able counsel failing therein is that
the main facts were against him attempting it.
Moreover,
though respondents’ counsel properly enough put forward
the interest on $29,000 as an item of expense in order to test whether or not
there was such a profit in the business as to render it likely an owner getting
that sum for his business stand could rightly complain, yet it is to be
observed that the problem facing us is whether or not any one would think of
paying $48,200 for such a business stand and to test that we must take interest
on the latter sum as a test of what strain the proposition to be maintained by
respondents will stand.
Unless
there was either a highly profitable or at least a clearly substantial,
profitable and permanently established business existent on the premises, this
mode of proof of market value thereof is worthless.
All
the elaborate calculations of a possible difference in cost of handling are of
no consequence if the thing itself has failed to produce to the owner such a
productive investment that reasonable men must say he would not and should not
be asked to part with such a property for its ordinary market value.
If
he expects others, even a railway company, to pay him for depriving him of a
business stand something beyond ordinary market value, he must be ready and
willing to demonstrate the fact just as fully as possible and allow the fullest
possible investigation of the basis of such a proposition.
There
was neither cash book nor ledger kept in the business and the only possible
available and sub-
[Page 427]
stantial
means of testing the matter was an inspection and thorough investigation of the
bank book and that was refused.
There
was, therefore, in short no proof upon which the arbitrators should have
allowed any such sum as the item in question, and that part of the award should
be stricken out.
The
ordinary ten per centum allowance for compulsory taking in absence of such
proper proof should be allowed instead, amounting to $2,820.
This
is not a case for referring back, for the respondents had deliberately refused
that proper investigation of the lines of proof upon which they rested their
claim.
The
appeal should be allowed with costs here but without costs to either party in
the court below, and the award amended in the way I have indicated.
ANGLIN
J.—I concur with Mr. Justice Davies.
BRODEUR
J.—This is an appeal concerning the
compensation which should be awarded to the respondents for the expropriation
of lands in the City of Brantford. Those properties were used by the
respondents for harvesting and storing ice. They were situated on the Grand
River and they were specially adaptable for that business. The current of the
river afforded facilities for storing ice which reduced to a minimum the cost of
the work.
There
is not much difficulty with regard to the value put upon the lands and the
buildings. The three arbitrators have come to a unanimous conclusion in that
respect.
There
is, however, a difference between them. One of the arbitrators is of opinion
that the price
[Page 428]
which
has been awarded for the lands and the buildings would have included also the
special adaptability of this property for the ice business.
The
other two arbitrators, on the other hand, state that $29,000, which is the
amount awarded for the lands and buildings, would simply give the intrinsic
value of the property for any purpose, not necessarily the ice business; but
they find that the lands were specially adapted for the ice business and that
it has cost less to the owners for handling and storing their ice than it will
cost at the place where they will have to remove their place of business.
It
appears that the reason for this low degree of expense is that the ice field is
some distance above the buildings and that the respondents used to cut the ice
in squares on that field. They would cut then a canal through the ice to the
storehouse and float the ice down this canal each block being ready for
storage.
The
other arbitrator does not dispute the advantage of the convenience of
harvesting ice at that point; but he claims that the railway company had the
option either of compensating them for such advantage or of compensating them
for the establishment of the business so far as such business was incidental to
the land expropriated. He does not dispute the fact that, if the method adopted
by the majority of the arbitrators is correct, the value put as to damages
incurred would be correct.
The
railway companies in exercising their right of eminent domain are bound not
only to pay the market value of the lands expropriated but also the damages
incurred by the owner in connection with the expropriation.
Here
is a man who had, on account of the con-
[Page 429]
venient
site of his business, particular advantages for handling it. Those advantages
could not be secured elsewhere and in order to carry out the same business as
he was doing before he will have to pay extra costs and incur additional
expenditure. He will suffer damages then as a result of that expropriation and
it seems to me that the principles of law enunciated above render the railway
company liable for those additional costs.
The
Privy Council in the case of Pastoral Finance Association v. The Minister,
decided that the special suitability of the land for a business which the owner
carries on elsewhere but intends to transfer to that land and the savings and
additional profits which he will derive from so doing are elements in assessing
the compensation.
It
seems to me that, applying the principles enunciated in the above decision of
the Privy Council, the owners, respondents, are in this case entitled to be
compensated for special adaptability of the lands expropriated or for extra
cost of harvesting ice in any other place in the locality.
The
arbitrators have awarded a sum of $20,000 for such compensation and they are
all unanimous as to the amount of that compensation if the above principle is
right. The amount seems to be very high; but I would not feel disposed to
substitute my own judgment as to the value for the judgment of the arbitrators.
There
has been a cross-appeal by the respondents concerning a sum of $800 which was
awarded by the arbitrators for the sawdust which was in the ice house for
covering ice. That amount was refused by the
[Page 430]
Appellate
Division and I concur in the views expressed by that court that the owners are
not entitled to the same.
For
these reasons the appeal and the cross-appeal should both be dismissed with
costs.
Appeal allowed with costs.
Solicitors for the appellants:
Brewster & Heyd.
Solicitors for the respondents:
Beatty, Blackstock, Fasken, Cowan & Chadwick.
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