Sarchuk,
T.C.J.:—This
is
an
appeal
by
Mr.
George
Choquette
(Choquette)
from
a
reassessment
of
income
tax
for
the
1980
taxation
year.
At
issue
is
the
treatment
to
be
given
to
his
disposition
of
approximately
158.1
acres
of
land
located
near
Crawford
Bay,
British
Columbia,
which
property
had
been
acquired
in
1962.
Since
the
disposition
was
subject
to
the
Income
Tax
Application
Rules,
1971
in
assessing
the
appellant
the
respondent
was
required
to
determine
the
fair
market
value
of
the
subject
property
as
at
December
31,
1971
which
he
did
and
found
it
to
be
$105,900.
This
was
allocated
in
the
amount
of
$58,500
to
the
value
of
the
land
and
$47,400
for
the
buildings.
In
his
income
tax
return
for
the
1981
taxation
year
the
appellant
asserted
that
the
adjusted
cost
base
of
the
subject
land
was
$281,077.
At
trial
his
position
was
that
the
appraised
value
of
the
property
as
at
December
31,1971
was
$391,000,
allocated
$318,564
to
the
land
and
$72,500
to
the
buildings.
Counsel
for
the
respondent
conceded
that
one
house,
valued
at
$16,500
should
not
have
been
included
in
the
appraiser's
calculations
since
it
did
not
exist
on
December
31,
1971,
and
that
accordingly
the
value
of
the
existing
improvements
at
that
time
was
$56,000.
The
appellant
appeals
on
the
basis
that
the
respondent
erred
both
in
determining
the
adjusted
cost
base
and
in
his
calculation
of
the
proceeds
of
disposition
and
the
net
capital
gain
subject
to
tax.
At
trial
counsel
for
the
respondent
advised
the
Court
that
certain
selling
expenses
and
other
items
had
now
been
established
to
the
satisfaction
of
the
respondent
which
reduced
the
net
gain
subject
to
tax
from
$186,265
to
$170,270.
By
agreement
an
amended
schedule
of
capital
gains
was
filed
to
replace
Schedule
I
to
the
respondent's
reply
to
the
notice
of
appeal.
To
that
extent
the
respondent's
assessment
is
conceded
to
have
been
incorrect.
What
remains
in
issue
is
whether
the
respondent
was
correct
in
his
determination
of
the
fair
market
value
of
the
subject
property
as
at
December
31,
1971.
The
subject
property
is
situated
near
Crawford
Bay
on
Highway
3A
approximately
two
kilometres
east
of
Kootenay
Bay
which
is
on
the
west
side
of
Kootenay
Lake.
It
is
located
in
the
Regional
District
of
Central
Kootenay
approximately
50
miles
north
of
Creston,
British
Columbia.
It
is
also
25
miles
east
of
Nelson,
British
Columbia,
which
is
on
the
west
side
of
Kootenay
Lake
and
can
be
reached
only
by
a
ferry
which
docks
at
Balfour,
a
small
community
approximately
21
miles
east
of
Nelson.
Nelson
is
the
major
town
in
Central
Kootenay
with
a
population
of
approximately
9,000
people
in
1971.
Forestry
constituted
the
largest
primary
industry
in
its
area
although
Nelson
also
provided
other
employment
in
its
role
as
the
regional,
commercial
and
administrative
centre.
The
Creston
area
enjoys
a
reasonably
well
balanced
economy
based
on
a
wide
variety
of
agricultural
enterprises,
forestry
and
tourism.
In
so
far
as
Crawford
Bay
is
concerned
forestry
was
the
primary
industry,
followed
by
some
tourism
and
a
limited
amount
of
agriculture,
The
tourism
industry
was
mainly
seasonal
and
confined
to
the
summer
months.
Agriculture
is
limited
to
small
pockets
of
land
which
are
capable
of
providing
some
agricultural
use.
At
the
relevant
time
the
population
of
Kootenay
Bay
was
88
and
that
of
Crawford
Bay
was
244.
The
subject
property
consists
of
a
total
area
of
184.1
acres
of
which
approximately
26
acres
are
a
fresh
water
lake
(Fraser
Lake).
The
parties
disagree
as
to
whether
the
lake
is
publicly
or
privately
owned.
The
land
area
is
made
up
of
three
contiguous
parcels.
The
first,
a
36-acre
parcel,
rectangular
in
shape,
is
located
west
of
Fraser
Lake.
Its
physical
characteristics
range
from
wooded,
rocky,
steep
slopes
on
the
north
side
of
Highway
PR127
to
more
moderate
rolling
topography
south
of
that
road.
The
south
portion
has
a
small
frontage
on
Fraser
Lake.
The
second
parcel,
the
largest
of
the
three,
is
located
immediately
to
the
east
and
encompasses
an
upland
area
of
approximately
98.92
acres.
The
largest
part
of
this
parcel
lies
south
of
the
highway
and
southwest
of
a
power
transmission
line.
Fraser
Lake
is
located
on
the
west
side
and
is
completely
surrounded
by
these
two
parcels.
The
physical
characteristics
of
parcel
two
range
from
rolling
to
moderately
level
hay
land
to
moderate
to
steep
wooded
slopes
above
the
lake.
Four
residential
houses
plus
several
outbuildings
were
on
site
and
in
existence
as
at
December
31,
1971.
The
third
parcel,
approximately
23
acres
in
size,
abuts
parcel
two
on
the
east.
It
is
wooded
with
moderate
to
steep
topography.
In
simple
terms
the
primary
disagreement
between
the
parties
relates
to
the
highest
and
best
use
of
the
property.
Highest
and
best
use
is
that
use
which
at
the
valuation
date
likely
would
produce
to
a
property
the
greatest
return
in
terms
of
money
or
money's
worth.
It
is
generally
considered
in
light
of
three
criteria
(a)
economic
practicability,
(b)
physical
possibility,
and
(c)
legal
feasibility.
It
is
not
an
absolute
fact,
but
rather
reflects
an
appraiser's
opinion
of
the
best
use
of
a
property
based,
in
this
case,
on
his
analysis
on
the
prevailing
market
conditions
which
existed
as
at
December
31,
1971.
To
that
extent
the
opinion
of
the
value
is
notional
and
understandably
is
difficult
to
reduce
to
exact
reasoning.
The
appellant
takes
the
position
that
the
highest
and
best
use
of
the
land
in
question
“is
as
a
holding
property
for
future
recreational
development"
and
contends
that
the
respondent
based
his
assessment
on
the
erroneous
assumption
that
"the
existing
use
of
the
property
as
a
small
ranch
is
compatible
with
the
physical
characteristics
of
the
subject
and
considered
to
be
the
highest
and
best
use".
The
appellant
contends
that
the
respondent
fell
into
error
in
his
approach
to
highest
and
best
use
by
misjudging
the
effect
of
a
recreational
development
project
undertaken
by
Kokanee
Springs
Development
Ltd.
(Kokanee
Springs)
on
the
potential
use
of
the
subject
property.
Two
particular
errors
are
alleged.
First,
the
respondent
misunderstood
the
actual
stage
of
development
of
the
project
as
of
December
31,
1971.
Second,
the
respondent
erred
in
assuming
that
the
Kokanee
Springs
project
had
not
been
a
success,
in
particular
by
taking
into
account
matters
which
occurred
after
that
date
but
which
could
not
have
been
anticipated.
The
appellant
therefore
approaches
the
issue
of
highest
and
best
use
from
two
directions.
First,
he
challenges
the
validity
of
the
conclusions
reached
by
Mr.
R.W.
Richardson,
A.A.C.I.
in
an
appraisal
report
prepared
for
the
respondent
(Exhibit
R-5).
Secondly,
he
asserts
that
the
evidence
of
George
E.
Commander,
Edward
E.
Moore,
George
D.
Logan
and
that
of
the
appellant,
supports
the
main
underlying
assumptions
made
by
his
appraiser,
Mr.
W.L.
Behr,
A.A.C.I.
which
are:
that
the
Kokanee
Springs
recreational
project
was
well
underway
as
at
December
31,
1971,
with
a
golf
course,
camp
grounds
and
two
subdivisions
in
place;
an
access
road
to
the
east
in
contemplation;
further
subdivisions
in
the
planning
stage;
and
a
marina
and
ski
facilities
planned
for
the
future.
In
Mr.
Behr's
view
these
facts,
if
they
existed,
meant
that
by
any
reasonable
standard
significant
progress
had
been
made
by
the
developer
by
the
end
of
1971.
In
his
opinion
it
logically
followed
that
since
the
subject
property
was
surrounded
by
property
owned
or
controlled
by
Kokanee
springs
the
suitability
of
the
subject
property
itself
for
recreational
development
was
not
in
doubt.
Because
the
Kokanee
Springs
project
plays
such
a
major
role
in
the
conclusions
reached
by
both
appraisers
a
summary
of
its
status
as
at
December
31,1971
is
in
order.
Planning
for
the
development
of
a
resort
area
at
Crawford
Bay
on
Kootenay
Lake
began
in
1962
when
Kokanee
Springs
and
its
principal
shareholder
Kendall
Jennings
began
an
assembly
of
land.
By
1964
it
had
acquired
approximately
6,600
acres,
a
substantial
portion
of
which
was
dedicated
to
recreational
development.
At
some
point
of
time
Jennings
arranged
with
Samadan
Oil
Corporation
of
Canada
to
purchase
a
half-interest
in
the
project.
For
approximately
the
next
one
and
one-half
years
Jennings
retained
sole
responsibility
for
the
management
of
Kokanee
Springs
but
eventually,
as
Mr.
Moore
recalled:
.
.
.
because
of
a
lumber
mill
operation,
which
Mr.
Jennings
had
purchased
in
the
interim
of
'65/'66,
turned
out
to
be
bad
judgment
and
the
Samadan
people
decided
to
buy
out
Mr.
Jennings,
which
they
did
early
in
‘61
or,
excuse
me,
early
in
'67.
As
part
of
the
1967
sale
by
Jennings
to
Samadan
approximately
1,600
acres
of
the
land
which
had
been
assembled
were
given
over
to
him.
As
at
1967
Kokanee
Springs
also
had
an
arrangement
with
the
provincial
government
for
a
"land
reserve"
of
some
16,000
acres.
This
meant
that
certain
land
was
held
in
reserve
by
the
Crown
to
be
used
by
Kokanee
Springs
if
and
when
it
presented
a
proposition
that
made
sense
(to
the
Crown)
for
the
use
of
that
land.
If
the
Crown
approved
the
proposed
use
and
agreed
to
sell
the
land
to
Kokanee
Springs
it
would
be
at
the
1964
raw
land
price.
In
June
1966
Kokanee
Springs
prepared
a
submission
to
the
Government
of
British
Columbia
(the
submission).
The
project
described
therein
was
the
development
of
a
year-round
lakeside
resort
to
encompass
a
hotel,
vacation
chalets
and
a
trailer
park
to
be
built
by
1970;
four
marinas;
an
18-hole
golf
course;
unlimited
downhill
skiing;
the
development
of
hot
springs
and
the
construction
of
a
health
spa;
a
vacation
and
perhaps
permanent
home
site
development,
and
an
area
for
trailers
and
campers.
The
Government's
reaction
was
not
referred
to
by
the
witnesses,
however,
it
is
fair
to
assume
that
it
was
not
entirely
negative
since
some
construction
began
on
the
golf
course
in
or
about
1966.
Mr.
Edward
Moore
was
involved
in
the
Kokanee
Springs
project
from
September
1968.
His
background
was
in
the
oil
well
drilling
business
in
an
executive
capacity.
In
1968
he
was
retired
and
was
operating
his
own
real
estate
venture
in
Calgary
when
he
was
approached
by
Kokanee
Springs
to
be
its
Vice-President
and
General
Manager.
When
Mr.
Moore
went
to
Crawford
Bay
a
major
part
of
his
responsibility
was
to
conduct
an
analysis
of
the
proposals
contained
in
the
submission
and
to
make
recommendations
as
to
their
implementation.
He
described
the
proposals
as
follows:
This
is
an
artist's
conception
of
what
could
be
built
in
this
resort
area.
It
was
used
for
the
purpose
of
bringing
in
a
big
investor
to
put
money
into
this
operation,
and
it
was
also
used
as
part
of
the
sales
efforts
to
get
the
interest,
Premier
W.A.C.
Bennett's
help,
to
give
assistance
to
this
project.
I
can
say
that
it
was
part
of
my
job
to
analyse
the
suggestions
of
the
ski
hill,
hot
springs,
spa,
marina,
and
get
down
to
the
basic
proposition:
are
these
operations
economically
viable.
I
found
some
things
suggested
here
that
did
not
make
economic
sense
at
this
time.
With
respect
to
the
specific
proposals
contained
in
the
submission
Mr.
Moore
made
the
following
observations:
Golf
Course:
Construction
of
an
18-hole
golf
course
was
commenced
in
1966
and
although
it
needed
considerably
more
work
nine
holes
were
open
to
the
public
for
limited
play
in
1968.
In
1969
the
whole
course
was
opened,
however,
in
July
of
that
year
the
grass
on
all
of
the
greens
died.
The
course
was
closed,
remedial
steps
were
taken
and
the
course
was
reopened
in
1970.
Once
again
the
greens
died
in
early
July
and
the
course
had
to
be
closed.
In
February
1971
a
decision
was
taken
not
to
open
the
course
again
to
permit
the
grass
to
recover
and
develop
a
good
root
system.
In
the
fall
of
1971
preparations
were
being
made
to
open
the
golf
course
in
1972
to
the
extent
of
nine
holes,
which
was
deemed
to
be
sufficient
to
take
care
of
the
traffic.
Marinas:
Four
marinas
were
proposed
along
the
shore
of
Crawford
Bay.
In
1968
when
Mr.
Moore
took
over
little
had
been
constructed
other
than,
in
his
words:
.
.
a
small
marinai
marina,
if
you
call
it
a
marina.
.
.
.
This
was
a
very
small
operation,
a
boat
launch
and
operating
house.
It
required
considerable
dredging
of
the
water
out
into
the
Bay.
It
was
not
very
well
used
and
finally
abandoned
as
inappropriate.
That
was
done
before
I
arrived
in
September
of
‘68.
The
marina
as
it
existed
in
1968
was,
according
to
Mr.
Moore:
In
plain
words
a
no-nothing
marina
.
.
.
it
was
valueless
for
the
operation,
for
several
reasons.
With
respect
to
the
upgrading
of
the
marina
and/or
constructing
other
marinas
in
the
area
Mr.
Moore
said:
We
didn't
have
any
further
plans
and
we
found
that
this
was
the
wrong
location
for
our
marina
because
of
shallow
water,
because
we
just
put
on
hold
any
serious
ideas
of
a
marina.
That
is
the
situation
which
existed
as
at
December
31,
1971.
It
was
known
then
that
the
original
site
was
inappropriate
and
that
any
future
marina
would
have
to
be
in
a
different
location.
No
plans
to
do
so
were
being
considered.
Ski
Facilities:
Prior
to
Mr.
Moore's
involvement
Kokanee
Springs
had
retained
experts
to
conduct
surveys
on
various
mountains
in
the
area.
Bluebell
Mountain,
which
was
referred
to
as
the
location
for
the
ski
hill
in
the
submission,
had
been
abandoned
by
1968.
When
Moore
began
his
review
he
found
that:
.
.
.
there
was
an
expert
that
was
looking
at
a
different
area
in
the
head
waters
of
Crawford
Creek
.
.
.
We
found
that
it
was
an
ideal
place
for
a
ski
hill,
but
part
of
my
job
was
to
assess
the
economic
viability
of
a
ski
hill
in
that
remote
area.
And
in
going
to
other
ski
hills
and
talking
to
other
ski
hill
owners,
it
became
quite
evident
that
that
was
a
very
large
investment
and
did
not
make
economic
sense
at
that
time.
We
thought
that
to
make
a
destination
ski
area
available
we
would
have
to
have
facilities
for
possibly
3,000
people
on
the
weekend,
and
there
was
no
way
that
we
could
get
that
number
of
people
in
there
to
use
a
ski
hill.
And
we
put
the
ski
proposition
on
hold,
on
the
shelf,
for
consideration
way
down
the
road,
in
the
future.
We
thought
we
were
talking
about
an
investment
in
the
order
of
about
$50,000,000.00.
According
to
Moore
the
principal
stumbling
blocks
were
that
the
Crawford
Bay
area
was
quite
inaccessible
and
because
it
would
be
extremely
expensive
to
build
the
facilities
required
to
accommodate
3,000
people.
By
the
end
of
1968
nothing
had
been
done
beyond
the
surveys
made
by
experts
for
the
purpose
of
selecting
a
ski
site.
There
was
no
plan
in
1968
to
bring
a
ski
area
into
operation
in
the
foreseeable
future.
That
situation
remains
unchanged.
Spa:
The
submissions
relating
to
the
development
of
the
springs
and
construction
of
a
health
spa
were
reviewed
by
Mr.
Moore.
His
evidence
was:
It
was
found
—
let
me
start
over
please.
The
hot
springs
were,
supposedly,
discovered
by
the
Indians
a
long
time
ago.
It
was
basically
a
seep
of
warm
water
down
close
to
the
creek
level
of
Crawford
Creek.
The
year
before
I
arrived,
the
company
had
gone
in
with
a
bulldozer
and
tried
to
open
up
this
seep
to
find
out
if
there
was
more
water
and
this
caused
an
earth
slide
and
covered
the
whole
seep
over.
My
conclusion,
after
trying
to
find
some
hot
water
for
a
period
of
time,
that
it
was
just
a
seep
of
surface
water
that
came
down
from
higher
up
in
the
mountain,
down
deep
enough
to
get
some
heat
and,
was
not
mineral
water.
The
heat
was
not
from
below
which
you
normally
think
is
hot
water.
.
.
.
So,
the
conclusion
was
that
the
hot
water
was
of
no
commercial
value.
At
another
point
Moore
said:
From
what
I
found
out
about
hot
springs,
it
is
not
a
viable
commercial
operation
by
any
stretch
of
the
imagination.
The
decision
that
that
was
not
a
viable
project
had
been
made
before
I
arrived.
Neither
Mr.
Moore
nor
his
predecessors
were
able
to
locate
any
other
springs
in
the
area
and
that
aspect
of
the
project
was
effectively
terminated
by
1967.
Property
Development:
Two
subdivisions
had
been
surveyed
in
1968.
A
47-
lot
subdivision
adjoined
the
boundary
of
the
golf
course
on
the
east.
Following
Moore's
arrival
services,
being
electricity
and
a
water
system,
were
provided
to
each
lot.
The
second
subdivision
ran
along
Crawford
Creek
and
the
highway
on
the
west
side
of
the
golf
course.
It
had
road
access
from
the
highway
with
a
small
road
going
through
the
interior
of
the
subdivision.
All
of
the
lots
but
two
backed
onto
Crawford
Creek
which
provided
an
acceptable
supply
of
water.
Power
was
available
along
the
highway.
The
lots
were
not
otherwise
serviced.
These
lots
were
not
put
up
for
sale
until
1972
when
Kokanee
Springs
reopened
the
golf
course.
The
overall
plan
was
that
if
and
when
demand
increased
further
subdivision
would
be
considered
around
the
golf
course
as
it
was
to
be
the
central
attraction.
In
all
68
lots
were
sold.
Kokanee
Springs
also
owned
approximately
two
miles
of
lake
front
land.
One
site,
located
on
Kootenay
Lake
near
the
ferry
landing
was
described
by
Mr.
Moore
as
being
very
steep
with
the
result
that
it
was
difficult
to
find
any
application
for
it
in
the
way
of
residential
development.
The
other
parcel
consisted
of
approximately
one
mile
of
lake
front
across
the
north
end
of
Crawford
Bay,
which
is
a
delta
built-up
by
Crawford
Creek.
It
is
generally
a
flat,
sandy
area
and
Kokanee
Springs
initially
considered
it
to
be
prime
property
for
recreational
development.
It
was
aware
of
one
principal
hazard,
which
was
that
the
area
was
classed
as
"flood
plain”.
Nonetheless
cabins
and
a
campground
were
constructed
in
1968,
on
the
basis
that
the
flood
hazard
could
be
handled
by
good
engineering.
In
1971
Moore
held
discussions
with
personnel
from
the
Ministry
of
Environment
with
respect
to
the
engineering
and
the
process
of
beginning
the
control
of
flooding
by
Crawford
Creek.
In
Mr.
Moore's
words:
It
was
all
in
the
discussion
stage
and
to
the
present
time
it
is
still
in
the
discussion
stage.
In
1967,
in
this
same
area,
a
sandy
beach
front
was
cleared
and
a
bath
house
with
change
facilities
and
toilets
was
erected.
The
facility
was
rarely
used
and
ultimately
was
vandalised.
The
cleared
out
space
on
the
lake
front
was
used
by
local
residents
for
parties.
According
to
Moore
the
mistake
made
by
Kokanee
Springs
was
that
it
failed
to
ask
the
local
people
if
Kootenay
Lake
was
a
good
swimming
lake,
which
it
was
not.
No
further
development
was
being
considered
in
this
area.
In
1972
a
provincial
election
took
place
and
a
new
government
resulted.
Shortly
thereafter
Mr.
Moore
received
a
letter
from
the
Deputy
Minister
of
Lands
and
Forests
cancelling
the
reserve
arrangement
with
Kokanee
Springs.
This
step
was
taken
as
part
of
an
announced
provincial
agricultural
land
reserve
which
was
in
effect
a
freeze
on
the
development
of
any
land
considered
as
agricultural
by
Canada
Lands.
No
investment
of
moneys
and
no
further
development
was
undertaken
after
1972
until
1980
when
Kokanee
Springs
was
sold
to
three
Alberta
residents.
Mr.
Moore's
overall
assessment
of
the
Kokanee
Springs
project
was
that
better
access
into
the
Crawford
Bay
area
was
essential
if
it
was
to
be
commercially
viable.
Market
studies
prepared
for
Kokanee
Springs
indicated
that
a
five-hour
drive
for
a
weekend
guest
was
the
maximum
that
people
were
prepared
to
travel.
Calgary
was
considered
to
be
a
prime
market,
however,
by
existing
roads
it
was
an
eight-hour
drive
to
Crawford
Bay
through
Creston.
As
a
result
the
future
of
the
development
was
premised
on
the
construction
of
a
shorter
route.
At
the
time
the
submission
was
being
made
Kokanee
Springs’
planning
depended
upon
the
construction
of
an
all-
weather
road
without
which
it
.
.
.
became
somewhat
hesitant
to
invest
more
money
until,
in
some
manner,
there
were
more
people
coming
to
the
area
and
that
meant
they
were
holding
in
abeyance
further
capital
investment
until
the
road
was
actually
built.
According
to
Mr.
Moore
consideration
was
being
given
to
better
access
to
the
area
and:
Verbal
assurances
from
the
Highways
Minister
and
Lands
and
Forests
Minister.
.
.
were
made
to
me
personally
and
to
other
officials
involved
in
this
development.
Similar
assurances
apparently
had
been
given
to
Mr.
Jennings
in
or
about
the
time
the
submission
was
made
in
1966.
Since
an
access
road
was
central
to
the
Kokanee
Springs
project
(as
well
as
to
Mr.
Behr’s
conclusions)
it
is
appropriate
to
deal
with
the
evidence
relating
to
it
at
this
point.
Apparently
an
east-west
road
connection
had
been
the
subject
of
lobbying
for
some
30
years
by
diverse
interest
groups
such
as
the
Kimberley
Bavarian
Society,
various
Chambers
of
Commerce,
logging
interests
and
in
more
recent
years,
Kokanee
Springs.
Evidence
as
to
what
occurred
in
1971
and
1972
was
given
primarily
by
George
E.
Commander,
Acting
Regional
Engineering
Officer,
Ministry
of
Forests,
Nelson
Region.
In
that
capacity
he
administers
the
road
program
including
the
construction
and
maintenance
of
all
forest
service
roads.
Although
initially
stationed
in
the
Nelson
area
in
1972,
from
the
records
available
he
was
able
to
state
that
discussions
had
taken
place
over
some
period
of
time
between
officials
of
the
Ministry
of
Transportation
and
Highways
and
the
Ministry
of
Forests.
Ultimately
an
agreement
was
reached
between
the
respective
Ministers
to
jointly
fund
a
road
project.
In
August
of
1972
Treasury
Board
approved
the
expenditure
of
$100,000
to
permit
the
Ministry
of
Forests
to
upgrade
a
forest
service
logging
road
which
ran
through
Grey
Pass
and
along
the
west
Kootenay
power
line
to
connect
with
St.
Mary's
Public
Road
and
thence
on
to
Marysville,
some
49
miles
to
the
east.
Upon
his
arrival
in
October
1972,
Mr.
Commander
was
directly
involved
with
this
project,
the
purpose
of
which
was
to
provide
a
public
road,
gravelled,
not
paved,
without
shoulders
and
with
restricted
summer
access
only.
Once
completed
that
was
to
be
the
end
of
the
project
with
no
further
upgrading
contemplated
or
intended,
He
recalled
that
clearing
operations
were
begun
but
after
two
or
three
days
snow
conditions
made
it
unsafe
to
continue.
Mr.
George
Choquette
also
testified.
He
is
a
petroleum
geologist
consultant.
First
employed
by
Imperial
Oil
in
1945,
he
worked
for
it
and
various
other
petroleum
companies
until
1958
when
he
began
to
practise
as
a
consultant
in
the
petroleum
business.
His
principal
expertise
is
in
the
area
of
appraising
potential
and
producing
properties
for
oil,
gas
and
minerals.
He
is
certified
with
the
American
Association
of
Petroleum
Geologists.
The
appellant
acquired
the
property
in
issue
in
1962
and
for
the
first
few
years
rented
it
to
tenants
who
kept
cattle
thereon.
In
1966
the
Choquette
family
moved
there
and
at
least
until
1975
he
continued
to
carry
on
a
cattle
operation
which
he
described
as
.
.
.
a
feeder
operation.
We
used
to
purchase
cattle
either
in
Creston
or
Fort
McCloud,
Alberta
and
keep
them
over
the
spring
and
summer
and
fall
and
sometimes
over
the
winter.
Mr.
Choquette
asserted
that
since
1966
he
considered
developing
this
property
and
over
a
period
of
time
from
1966
to
1970
prepared
various
diagrams
showing
his
concept
for
the
development
of
the
land.
The
lake,
which
he
considered
to
be
owned
by
him,
was
used
by
the
Choquette
family,
guests
and
visitors,
for
fishing,
canoeing
and
swimming.
It
was
also
the
main
source
of
water
supply.
He
felt
that
his
property
was
most
particularly
suited
for
shoreline
development.
The
diagrams
he
introduced
in
evidence
proposed
a
shoreline
subdivision
of
approximately
94
lots.
This,
he
said,
was
reasonable
and
would
still
leave
most
of
the
ranch
upon
which
he
could
continue
carrying
on
the
cattle
operation.
He
perceived
the
development
as
proceeding
on
the
basis
that
the
purchasers
would
acquire
an
"interest"
in
the
lake,
describing
the
concept
as:
Well,
it
wasn't
only
the
shore
of
my
lake,
it
was
to
possibly
have
a
lot
for
what
—
many
lots,
but
with
a
house
or
cottage
who
would
have,
on
a
share
basis
as
a
company
probably
who
would
buy
shares
and
with
those
shares
would
go
an
allotment
of
land.
Of
course,
that
would
have
to
be
surveyed.
But
it
was
on
that
type
of
an
operation.
And
the
people
would
have
access
to
the
lake
but
in
a,
like
a
commune
in
a
way.
I
mean,
it
wasn't
commune,
but
that
type
of
—
or
condominium,
if
you
wish.
And
they
would
have
the
use
of
the
lake
to
some
extent.
They'd
have
to
make
their
own
rules
and
regulations,
which
we
would
also
have
to
concur.
Counsel
for
the
appellant
sought
to
elicit
from
Mr.
Choquette
an
expert
opinion
on
the
issue
of
highest
and
best
use.
His
submission
was
that
Mr.
Choquette's
25
years
of
experience
in
petroleum
appraisal
compared
to
which,
as
Mr.
Choquette
stated,
"real
estate
appraisal
is
simple";
and
his
knowledge
of
the
subject
property,
of
the
general
area
and
of
topographic
and
other
requirements
for
such
development
qualified
him
to
express
an
opinion.
Notwithstanding
Mr.
Choquette's
confident
assertion
that
real
estate
appraisal
was
child’s
play
compared
to
his
work
with
petroleum
properties,
I
am
satisfied
that
he
cannot
be
qualified
as
an
expert
and
that
his
opinion
as
to
the
highest
and
best
use
and
as
to
the
value
of
the
land
could
not
be
admitted
in
evidence.
Mr.
Choquette
is
not
an
accredited
appraiser.
He
has
never
taken
any
training
or
courses;
he
has
never
performed
a
real
estate
appraisal
nor
is
he
familiar
with
the
generally
accepted
appraisal
techniques
which
are
in
the
usual
course
utilized.
Furthermore
he
has
no
experience
in
any
form
of
real
estate
business
and
has
not
acquired
the
practical
knowledge
upon
which
an
expression
of
opinion
might
have
been
formulated.
The
Court
did,
however,
hear
Mr.
Choquette
as
to
his
personal
views
as
to
the
use
asserted
for
his
property.
His
evidence
suggesting
that
Crawford
Bay
and
the
surrounding
area
was
potentially
a
tourist
mecca
was
extremely
subjective
and
was
not
supported
by
hard
facts.
He
relied
on
the
existence
of
hot
springs
across
Kootenay
Lake,
north
of
Nelson;
on
glacier-skiing,
again
on
the
Nelson
side
of
Kootenay
Lake;
on
skiing
in
Idaho
some
120
miles
south
and
upon
the
availability
of
heli-skiing.
His
comment
on
the
latter
activity
as
it
impacted
on
Crawford
Bay
(and
the
subject
property)
is
most
illustrative:
There
is
also
Heli-Skiing.
From
the
Cranbrook
side
helicopters
bring
in
skiers
roughly
into
our
area
to
ski.
So
that
is
very
close
skiing,
although
it’s
not
that
used
where
we
are.
With
respect
to
Mr.
Choquette's
assertions
as
to
the
development
potential
of
the
property
the
following
observations
are
warranted.
His
interest
in
development
was
triggered
almost
exclusively
by
the
Kokanee
Springs
proposals
and
in
particular
by
the
initial
flurry
of
activity.
Mr.
Choquette
took
no
independent
action
to
conduct
any
form
of
market
analysis;
no
studies
were
conducted
as
to
the
impact
of
such
a
development
on
the
lake
itself,
which
was
the
sole
source
of
water;
nor
was
any
approval
sought
from
the
municipality
or
any
other
authority
for
requisite
subdivision
permits
and
so
forth.
Since
the
first
step
in
ascertaining
the
value
to
be
placed
on
the
property
is
to
determine
its
highest
and
best
use
I
turn
to
that
issue
at
this
stage.
It
is
my
conclusion
that
the
appellant’s
position
that
the
highest
and
best
use
of
the
subject
land
was
as
a
holding
property
for
future
recreational
development
cannot
be
maintained.
Due
to
the
location
of
the
property
and
its
topography
the
practical
or
physical
uses
to
which
the
property
could
be
put
were
limited.
Although
many
lakes
have
some
"cottage
potential”
there
was
no
strong
evidence
that
any
subdivision
of
the
property
for
recreational
purposes
would
be
either
practical
or
economical
or
likely
in
the
foreseeable
future.
For
reasons
which
I
will
outline
in
a
moment
I
do
not
accept
Mr.
Behr's
rationale
on
this
issue.
On
the
other
hand
Mr.
Richardson's
conclusion
that
the
existing
use
of
the
property
as
a
small
ranch
was
both
compatible
with
its
physical
characteristics
and
logically
was
its
highest
and
best
use
is
reasonable
and
has
not
been
rebutted.
In
so
concluding
I
note
that
Mr.
Richardson's
appraisal
is
not
without
its
faults.
In
his
report
and
in
his
testimony
he
fell
into
an
all
too
common
error
by
taking
into
account
some
matters
which
occurred
after
December
31,
1971.
This,
however,
was
not
fatal
because
the
facts
known
as
at
December
31,
1971
inevitably
lead
to
the
same
conclusion.
I
am
satisfied
that
Mr.
Richardson
did
not
misunderstand
the
actual
stage
of
development
of
the
Kokanee
project
as
of
that
date
and
its
effect
on
other
property
in
the
area.
Many
of
the
Kokanee
Springs
proposals
had
been
put
on
hold,
if
not
abandoned
completely.
The
plans
which
were
in
place
in
the
fall
of
1971
were
not
positive
as
suggested
by
counsel
for
the
appellant
and
were
reasonably
predictable
only
in
the
sense
that
they
would
have
thrown
up
a
cautionary
flag
to
any
hypothetical
objective
purchaser.
The
evidence
before
me
clearly
establishes
that
not
only
had
Kokanee
Springs
fallen
far
short
of
developing
the
recreational
facilities
it
had
proposed
in
its
1966
submission
but
also
that
it
had
failed
to
achieve
any
measure
of
success
which
could
have
encouraged
such
a
hypothetical
objective
purchaser.
Mr.
Behr's
conclusion
as
to
highest
and
best
use
must
be
assessed
in
light
of
the
fact
that
for
all
practical
purposes
his
sole
source
of
information
was
the
1966
submission.
In
his
examination-in-chief
he
said:
Having
read
this,
which
was
issued
and
published
prior
to
December
31st,
1971,
having
talked
with
the
people
there,
having
seen
the
uniqueness
of
this
property,
with
its
lake,
with
the
gently
rolling
land
towards
the
lake,
part
of
it
already
cleared,
in
proximity
to
whatever
amenities
were
there
in
1971,
I
came
to
the
conclusion
that
this
is
ideal
for
future
recreational
development.
When,
only
time
will
tell.
And
this
is
what
—
His
Honour:
I’m
sorry
sir,
you
came
to
the
conclusion
it
was
suitable?
A.
As
recreational
land
somewhere
down
the
line.
And
that
—
His
Honour:
And
you
said,
when?
A.
I
said,
I
cannot
say
when
because
that,
again
is,
it
becomes
most
viable
with
the
success
of
the
Kokanee
Spring
Developments.
If
they
are
able
to
put
in
—
let's
go
back
to
1971.
It
looked,
at
that
time,
or
I
said
to
myself
what
it
looked
like,
that
there
was
going
to
be
ski
slopes,
there
was
going
to
be
a
marina,
there
was
going
to
be
an
airstrip,
there
is
the
lake
itself
for
sailing.
There
was
talk
about
hot
springs
in
the
area,
in
fact,
there
is
a
hot
spring
on
the
other
side
of
the
lake.
Everything
indicates
—
(emphasis
added)
His
Honour:
What
other
side
of
the
lake?
Which
lake
are
you
speaking
of?
A.
On
the
west
side
of
Crawford
Lake
..
.
.
A.
Okay,
Kootenay
Lake.
I
understand
that
on
this
side,
over
here
on
this
or
somewhere
here
in
this
area
is
a
hot
spring,
on
the
west
side
of
Kootenay
Lake.
His
Honour:
That
is
pretty
far
removed.
A.
Yes,
but
it
is
still,
if
somebody
has
a
residence
there,
it
is
still
an
amenity
that
is
in
the
general
area.
So,
all
around
the
subject
property
are
recreational,
or
at
least,
proposed
recreational
facilities,
not
immediately
available.
And
this
was
why
I
said
then,
it
is
a
holding
property
for
recreational
purposes.
I
am
not
suggesting
that
it
was
a
recreational
property
as
at
the
date
of
evaluation,
which
is
December
31st,
1971.
Mr.
Arbour:
Q.
Sorry,
I
don’t
understand.
What
is
the
distinction
between
a
recreational
property
and
land
being
held
for
recreational
development?
A.
Well,
this
one
had
recreational
potential
somewhere
down
the
line.
.
.
.
It
is
like
having
recreational
land
in
inventory
and
bring
it
on
stream
when
the
market
has
ripened
for
it.
When
asked
later
when
that
might
be
Mr.
Behr
stated:
I
do
not,
cannot
then,
or
now,
speculate
for
the
future,
I
don't
know
.
.
.
Q.
You're
saying
a
year?
A.
No.
Q.
Twenty
years?
A.
Within
20
years.
Q.
Forty
years?
A.
That
would
be
unreasonable.
His
Honour:
I'm
sorry.
What's
unreasonable,
within
.
.
.
A.
40
year
projection
is
an
unreasonable
projection
.
.
.
It
would
happen
sooner
or
be
abandoned,
one
or
the
other.
Mr.
Behr's
reliance
on
the
submission
was
so
complete
that
he
chose
not
to
verify
the
progress
and
status
of
the
project
in
any
way
other
than:
I
did
see
with
my
own
eye
some
implementation
of
what
was
proposed
there.
The
example
of
it
was
the
golf
course,
which
naturally
was
in
operation
in
1984.
Of
greatest
import,
however,
is
the
fact
that
Mr.
Behr
did
not
speak
with
Mr.
Moore,
that
he
never
contacted
him
in
1984
when
he
visited
Mr.
Choquette
to
examine
the
property
and
the
area.
He
chose
to
rely
instead
on
the
submission
and
on
information
given
to
him
by
Mr.
Choquette
and
some
general
conversations
he
had
with
unidentified
residents
of
Crawford
Bay.
The
effect
of
such
failure
is
evident.
At
the
time
he
wrote
his
report
he
was
not
aware
that
further
planning
with
respect
to
the
creation
of
a
ski
area
had
been
abandoned;
that
none
of
the
proposed
marinas
had
been
built
and
that
in
fact
only
a
makeshift
(and
virtually
useless)
marina
was
in
existence;
that
no
further
plan
for
construction
of
summer
residences
was
being
contemplated
within
the
foreseeable
future;
that
of
the
lots
which
had
been
subdivided
none
had
been
offered
for
sale
as
at
December
31,
1971;
that
the
golf
course
had
been
closed
for
two
years
due
to
problems
with
the
grass
on
the
greens;
that
plans
were
being
made
to
only
open
nine
holes
for
play
in
1972
because
of
insufficient
traffic;
that
the
developer
was
holding
back
on
selling
lots
until
such
time
as
the
viability
of
the
golf
course
could
be
determined,
and
that
the
plans
for
hot
springs
and
a
spa
had
been
completely
abandoned.
Mr.
Behr
also
failed
to
consider
the
fact
that
the
original
owners
of
Kokanee
Springs
had
purchased
land
which
was
unrelated
to
the
project
(some
of
which
was
in
1967
transferred
to
Jennings)
but
which
had
been
included
in
the
submission.
With
respect
to
the
ski
area
Mr.
Behr's
attention
was
directed
to
the
evidence
of
Mr.
Moore
and
to
the
fact
that
the
entire
ski
development
had
been
put
on
hold
indefinitely
because
of
the
estimated
$50,000,000
cost
that
Kokanee
Springs
had
apparently
not
anticipated.
When
asked
whether
he
took
that
fact
into
account
in
his
appraisal
report
he
responded:
"I
took
into
account
that
we
have
a
ski
area,
not
the
economics
of
it.”
Again
with
respect
to
the
ski
area
proposal
Mr.
Behr
on
several
occasions
compared
it
to
a
ski
resort
in
British
Columbia
known
as
Whistler
Mountain.
He
stated
at
one
point:
I
know
with
hindsight
and
from
what
I've
seen
that
these
things
did
not
come
true
but,
what
was
the
perspective
in
1971?
Not
what
I
know
in
1984.
And
I
said
to
myself,
well,
this
situation
is
not
that
much
different
to
what
Whistler,
for
instance,
must
have
been
when
they
started
out
.
.
.
When
pressed
to
provide
points
of
comparison
between
the
subject
property
and
the
Crawford
Bay
area
with
the
Whistler
development
Mr.
Behr's
responses
can
only
be
described
as
woefully
inadequate.
One
final
matter.
Access
was
crucial
if
Kokanee
Springs
was
to
succeed.
Mr.
Behr's
testimony
on
this
issue
was
unsatisfactory
—
and
appeared
to
flow
from
the
submission
in
which
accessibility
was
on
the
face
of
it,
assumed
as
a
fact.
It
was,
however,
public
knowledge
that
for
some
30
years
intensive
lobbying
had
failed
to
move
the
government
very
far
in
the
direction
of
providing
the
type
of
access
which
was
absolutely
required
before
consideration
could
be
given
to
development
in
the
area.
The
amount
ultimately
authorized
by
the
Government
of
British
Columbia
was
sufficient
to
produce
no
more
than
a
minimally
upgraded
forest
logging
road,
gravelled,
not
paved,
without
shoulders
and
with
restricted
summer
access.
If
this
decision
was
made
in
1971
and
implemented
in
1972
as
has
been
suggested
by
the
appellant,
then
it
had
to
be
clear
to
all
persons
concerned
that
the
limited
access
which
was
to
be
provided
would
only
be
available
from
the
middle
of
June
through
to
the
end
of
October
and
was
virtually
of
no
use
for
the
development
of
a
ski
resort.
On
balance
Mr.
Behr's
opinion
as
to
highest
and
best
use
is
supremely
optimistic
and
unrealistic.
Since
the
subject
land,
was,
in
his
words,
not
“ripe
for
development"
on
the
valuation
date,
it
became
important
in
determining
its
highest
and
best
use
(and
its
market
value)
to
produce
cogent
evidence
as
to
the
time
frame
required
to
make
the
lands
ready
for
such
recreational
development.
In
this
context
Mr.
Behr's
evidence,
some
of
which
I
have
already
referred
to,
was
also
unsatisfactory.
Initially
he
stated
that
20
years
was
a
reasonable
holding
period.
Subsequently
he
stated
that
five
years
was
more
appropriate,
while
at
other
times
he
simply
said
the
property
was
ripe
for
future
development
but
that
he
did
not
know
when.
The
most
favourable
conclusion
which
might
be
reached
on
the
evidence
is
that
the
subject
property
had
some
latent
potential
for
recreational
use,
at
some
unforeseeable
point
of
time
in
the
future.
In
a
determination
of
highest
and
best
use
I
am
of
the
view
that
the
use
urged
upon
the
Court
must
be
established
to
be
probable
within
a
reasonable
period
of
time
and
not
simply
possible.
It
has
been
stated
that
for
a
higher
and
better
use
to
be
taken
into
account
it
must
be
more
than
a
mere
"chance".
(Cocomile
v.
Municipality
of
Metro
Toronto,
[1968]
S.C.R.
366;
67
D.L.R.
(2d)
261
at
263
(S.C.C.).)
In
Turner
v.
City
of
Winnipeg
(1972),
4
L.C.R.
319
at
page
323
(Man.
Co.Ct.)
Judge
Hewak
(as
he
then
was)
suggested
that
highest
and
best
use
must
be
based
on
a
reasonable
expectation
and
that:
The
term
"reasonable"
is
emphasized
to
eliminate
speculative
ventures
and
over-
optimistic
expectation.
In
the
present
appeal
the
evidence
is
uncertain
and
fails
to
demonstrate
a
probability
or
reasonable
expectation
that
the
subject
property
will
be
used
for
such
development
in
the
foreseeable
future.
Counsel
for
the
appellant
argued
that
an
opinion,
based
on
second-hand
source
material,
although
admissible,
must
be
weighed
in
light
of
the
extent
to
which
the
opinion
relied
on
such
material,
particularly
where
such
information
appears
to
be
unreliable
and
on
that
basis
asked
the
Court
to
disregard
certain
evidence
adduced
on
behalf
of
the
respondent.
Unfortunately
for
the
appellant
those
comments
are
much
more
directly
applicable
to
the
opinions
expressed
by
Mr.
Behr.
In
my
view
the
primary
assumptions
he
made
regarding
Kokanee
Springs
and
its
impact
on
the
subject
property
were
flawed
by
his
failure
to
substantiate
the
facts.
In
many
instances
his
assumptions
are
contradicted
by
the
evidence
of
Mr.
Moore.
The
result
is
that
the
credibility
of
his
opinion
was
seriously
undermined,
and
as
I
have
noted,
cannot
be
accepted.
Since
the
appellant
has
been
unsuccessful
in
persuading
me
that
the
highest
and
best
use
of
the
subject
property
was
as
contended
by
him
it
is
unnecessary
for
me
to
decide
two
of
the
remaining
issues,
being
fair
market
value
and
ownership
of
the
lake.
I
will,
however,
make
these
comments.
In
attempting
to
put
a
value
on
the
subject
property
Mr.
Behr
used
what
might
best
be
described
as
a
novel
approach.
It
involved
determining
a
general
ratio
between
the
value
of
vacant
water-front
and
non-waterfront
properties
(assumed
to
be
recreational
in
nature)
through
an
analysis
of
some
data
available
with
respect
to
the
sale
of
properties
in
the
Gulf
Islands,
B.C.
in
1971
and
1972.
If
I
understood
Mr.
Behr's
approach
correctly
the
ratio
he
so
developed
was
based
on
12
sales
in
the
Gulf
Islands
(six
waterfront
and
six
non-waterfront)
and
could
be
used
in
any
valuations
involving
waterfront
(lake
or
ocean)
properties,
subject
perhaps
only
to
minor
adjustments
for
location,
time
and
so
forth.
This
ratio
was
ultimately
applied
by
Mr.
Behr
to
the
land
fronting
Fraser
Lake
on
a
per
front
foot
basis
and
formed
an
integral
part
of
his
valuaton
of
the
subject
property.
I
am
not
satisfied
that
the
ratio
so
developed
by
Mr.
Behr
is
reliable.
He
made
no
inspection
of
the
properties;
he
did
not
verify
the
sales
and
there
is
some
substantial
question
as
to
whether
the
statistical
base
that
he
used
is
broad
enough.
His
suggestion
that
the
ratio,
being
2.58:1,
was
essentially
universal
and
could
be
applied
virtually
anywhere
is
also
questionable.
As
counsel
for
the
respondent
noted,
a
review
of
similarly
located
properties
on
Point
Grey
Road
in
Vancouver,
B.C.
performed
by
Mr.
Behr
(at
another
point
of
time)
produced
a
ratio
of
2.15:1
—
a
difference
which
would
clearly
produce
substantial
variations
if
applied
to
other
properties.
Even
if
the
analysis
and
ratios
so
derived
by
Mr.
Behr
were
accurate
his
application
thereof
to
the
property
in
question
with
minimal
adjustment
seems
to
be
inappropriate.
His
ratio
was
determined
on
the
basis
of
sales
of
existing
use
small
parcel
recreational
properties
and
was
applied
to
a
large
unsubdivided
piece
of
land
which,
by
his
own
admission,
was
not
ripe
for
development.
I
am
concerned
that
Mr.
Behr’s
valuation
method
is
not
based
on
any
acceptable
or
recognizable
method
of
land
valuation
and
since
the
foundations
of
his
calculations
are
not
based
on
sufficiently
thorough
research,
the
validity
of
his
findings
is
in
doubt.
The
subsidiary
issue
as
to
whether
Fraser
Lake
was
privately
owned
by
the
appellant
is
of
limited
relevance
in
this
appeal.
I
agree
with
the
submission
of
counsel
for
the
appellant
that
even
if
it
were
to
be
found
to
be
a
public
lake,
any
loss
in
value
would
be
marginal
and
not
significant
enough
to
affect
the
disposition
of
this
appeal.
I
note
in
passing
that
in
deciding
the
issue
of
highest
and
best
use
I
proceeded
as
though
Fraser
Lake
was
a
private
lake
owned
by
the
appellant.
One
minor
issue
remains.
In
his
valuation
Mr.
Richardson
allocated
the
V-Day
value
in
the
amount
of
$58,500
to
the
land
and
$47,400
to
the
appellant's
principal
residence,
two
other
houses
and
outbuildings.
Mr.
Behr
on
the
other
hand
allocated
a
value
of
$56,000
to
the
houses
and
outbuildings.
I
am
satisfied
that
the
value
of
the
improvements
set
out
in
Mr.
Richardson's
appraisal
should
be
accepted.
There
were,
in
my
view,
several
inaccuracies
in
Mr.
Behr's
calculations.
He
did
not
establish
the
size
of
the
buildings
personally
but
relied
on
another
person's
research
in
order
to
gather
his
material.
This
source
material
was
inaccurate
and
even
led
Mr.
Behr
to
include
in
his
appraisal
a
building
which
did
not
exist
as
at
December
31,
1971.
Mr.
Richardson’s
calculations
were,
in
my
view,
not
successfully
challenged
and
accordingly
on
this
issue
the
Minister’s
reassessment
must
stand.
The
appeal
is
allowed
only
to
the
extent
of
the
admissions
made
on
behalf
of
the
respondent
at
the
commencement
of
the
hearing.
The
matter
is
referred
back
to
the
Minister
for
reconsideration
and
reassessment
on
the
basis
that
the
net
gain
subject
to
tax
be
reduced
from
$186,265
to
$170,270.
Appeal
allowed
in
part.
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