Sarchuk,
T.C.J.:—The
appellant
Gregory
J.
Power
(Power)
resides
in
St.
John's,
Newfoundland.
He
was
the
owner
of
approximately
136
acres
of
land
situated
near
St.
John’s
which
land
was
under
option
in
January,
1980,
and
was
sold
under
the
option
in
July
1980.
In
his
income
tax
return
for
the
1980
taxation
year
the
appellant
calculated
the
capital
gain
with
respect
to
the
disposition
of
the
said
property
as
being
$305,258.45.
By
way
of
a
notice
of
reassessment
dated
October
22,
1984
the
respondent
reassessed
the
appellant's
income
tax
liability
for
the
1980
taxation
year.
In
so
doing
the
respondent
calculated
the
capital
gain
to
be
$559,199
on
the
basis
that
the
fair
market
value
as
of
December
31,
1971
used
to
calculate
the
capital
gain
was
in
the
amount
of
$115,600
or
$850
per
acre.
The
portion
of
the
proceeds
of
the
sale
received
in
1980
was
$150,000.
The
balance
at
closing
was
secured
by
a
mortgage.
There
is
no
dispute
as
to
the
calculation
of
the
capital
gain
reserve.
The
subject
property
is
located
within
the
northeast
sector
of
the
St.
John’s
Metropolitan
Area
approximately
one
and
one-half
to
two
miles
beyond
the
boundary
of
the
City
of
St.
John's.
It
is
irregular
in
shape
and
is
calculated
to
contain
135.983
acres.
The
property
is
located
1000
feet
from
Logy
Bay
Road
approximately
one
mile
north
of
the
Marine
Lab
Road.
Access
to
the
site
is
off
Stick
Pond
Road
from
Logy
Bay
Road.
The
site
consists
of
generally
rolling
terrain
with
no
sudden
or
dramatic
changes
in
the
elevation.
It
is
a
combination
of
cleared
meadow
land
and
areas
of
thick
tree
growth.
The
site
is
transversed
by
two
small
brooks;
however,
these
brooks
do
not
present
a
physical
barrier
that
might
significantly
restrict
normal
development
of
the
site.
Known
as
Clovelly
Farm,
the
property
was
formerly
owned
by
the
Cook
family.
In
or
about
1960
it
was
divided
into
two
parcels
and
in
1962
the
appellant
purchased
the
eastern
half
at
a
price
of
$20,000.
On
July
31,
1980,
the
property
was
sold
by
Power
to
the
Cabot
Development
Corporation
Limited.
A
municipal
plan
known
as
the
St.
John's
Metropolitan
Area
Plan
of
July
1966
(approved
in
1969
by
the
Minister
of
Municipal
Affairs)
governed
the
subject
property
as
well
as
most
of
the
other
properties
utilized
by
the
two
respective
appraisers
to
establish
their
respective
opinions
as
to
value.
The
apparent
purpose
of
this
plan
was
to
provide
for
the
general
development
of
the
area.
There
were
no
specific
uses
identified
in
the
plan,
rather
general
concepts
were
outlined
with
respect
to
the
utilization
of
land
in
the
various
sections
of
the
metropolitan
area.
The
principal
factor
to
be
considered
in
achieving
this
goal
was
to
ensure
that
each
parcel
of
land
was
utilized
to
its
highest
and
best
use.
It
is
not
disputed
that
other
properties,
particularly
those
located
to
the
west
of
the
municipal
limits
of
St.John’s
and
which
were
zoned
for
agricul-
tural
use
(as
was
the
subject
property)
were
sold
with
that
zoning
restriction
in
place
and
were
ultimately
developed
for
residential
purposes.
No
difficulties
appear
to
have
been
encountered
in
obtaining
the
necessary
zoning
variations.
Mr.
J.
Gordon
Nagle
A.A.C.I.
(Nagle),
an
accredited
appraiser,
was
called
to
testify
on
behalf
of
the
appellant.
It
was
his
conclusion
that
the
highest
and
best
use
of
the
subject
property
was
that
of
holding
the
site
for
future
urban
development.
In
the
course
of
cross-examination
Nagle
conceded
that
the
highest
and
best
use
which
he
had
ascribed
to
the
property
did
not
envision
immediate
development,
and
that
the
concept
of
holding
land
for
future
urban
development
involves
an
assumption
of
risk
which
must
necessarily
be
reflected
in
the
purchase
price.
There
is
some
question
as
to
whether
this
factor
was
adequately
taken
into
account.
In
attempting
to
estimate
the
market
value
of
the
subject
property
Nagle
relied
upon
nine
comparable
sales
and
two
other
transactions.
Based
on
his
assessment
of
the
comparables
it
was
his
opinion
that
the
value
of
the
subject
property
was
$2,500
per
acre
or
$340,000
as
at
December
31,
1971.
With
respect
to
Nagle's
comparable
sales
1-7
it
became
apparent
that
the
properties
described
therein
were
all
available
for
immediate
development.
Residential
development
had
actually
occurred
in
the
immediate
vicinity
of
comparables
2-7
prior
to
their
sale
and
commercial
development
had
occurred
adjacent
to
comparable
sale
one.
Several
other
factors
tend
to
put
in
question
Nagle's
choice
of
comparable
sales
as
indicators
of
the
subject
property's
value.
Sales
1-7
were
all
located
within
or
on
the
border
of
the
limits
of
the
City
of
St.
John's
as
they
existed
at
December
31,
1971.
Municipal
services
were
available
to
the
purchasers
of
those
properties
or
were
within
a
reasonable
distance
thereof.
The
lands
referred
to
in
those
sales
were
completely
cleared;
and
they
were
zoned
for
industrial
and
residential
development.
Mr.
Francis
O’Leary,
(O'Leary)
a
former
chairman
of
the
St.
John's
Housing
Authority
(the
Authority)
testified
that
in
1971
most
if
not
all
of
the
development
in
the
City
of
St.
John's
was
occurring
in
the
west
end
of
the
city
including
a
residential
development
by
the
Authority
itself.
It
must
be
noted
that
Nagle's
comparables
number
1-7
were
all
located
in
that
sector
of
the
city
while
the
subject
property
was
east
of
the
city.
Mr.
O’Leary
confirmed
that
no
development
was
being
considered
in
the
eastern
sector
at
that
time.
Sale
8
referred
to
in
Nagle’s
narrative
report
is,
in
the
Court's
view,
not
an
appropriate
comparable.
Unlike
the
subject
property
it
had
commercial
frontage
on
a
major
highway,
was
zoned
for
urban
and
rural
development,
and
was
located
approximately
one
mile
west
of
the
city
limits
in
the
path
of
ongoing
development.
Furthermore,
this
sale
took
place
in
June
1974,
two
and
one-half
years
after
the
relevant
valuation
date.
Sale
9
relates
to
the
acquisition
of
the
western
half
of
the
Clovelly
Farm
in
July
1974.
This
half
of
which
was
retained
by
the
Cook
family
was
located
closer
to
the
City
of
St.
John’s
and
had
frontage
on
a
main
access
road
known
as
Torbay
Road.
In
1972,
the
Cook
family
granted
an
option
to
purchase
to
one
Andrew
C.
Crosbie
at
a
price
of
approximately
$2,750
per
acre.
It
is
unclear
as
to
whether
or
not
this
option
was
exercised
and
indeed
from
the
document
tendered
it
appears
to
have
expired
on
September
1,
1972.
However,
the
optionee
did
purchase
this
property
at
a
later
point
of
time
in
1974
at
the
same
price
as
that
stipulated
in
the
option
agreement.
This
sale
occurred
two
and
a
half
years
after
Valuation
Day.
Ignoring
for
the
moment
the
use
of
“hindsight”
in
the
valuation
process,
I
note
that
Nagle
made
no
adjustment
for
this
time
difference.
Furthermore
this
sale
must
be
scrutinized
carefully
because
the
financing
arrangements
were
extremely
favourable
to
the
purchaser.
Although
Nagle
attempted
to
apply
a
discount
rate
to
compensate
for
this
fact
several
erroneous
assumptions
were
made
by
him
in
so
doing,
including
the
fact
that
the
option
provided
for
the
purchase
price
to
be
paid
over
a
period
of
16
years
and
not
six
years
as
suggested
in
his
evidence.
With
respect
to
sale
10
its
reliability
as
a
comparable
must
be
considered
in
light
of
the
fact
that
it
had
frontage
on
a
major
roadway,
Torbay
Road,
as
well
as
the
fact
(unknown
to
Nagle)
that
house,
barn
and
garage
were
on
the
site
at
the
time
of
sale,
the
value
of
which
had
not
been
taken
into
account
in
his
valuation.
In
addition
to
the
foregoing
comparables
Nagle
relied
on
a
letter
written
to
Power
by
the
St.
John’s
Housing
Corporation
(the
Corporation)
in
December
1974
to
support
his
conclusions
as
to
value.
This
letter
asked
the
appellant
to
make
an
offer
to
sell
his
land
to
the
Corporation
at
a
price
of
$3,500
per
acre.
The
Corporation,
at
the
time
the
letter
was
written,
was
banking
land
for
future
development.
They
had
purchased
other
land
with
zoning
restrictions
similar
to
those
applying
to
the
subject
property,
and
they
had
considered
the
possible
purchase
of
the
subject
property
for
some
period
of
time.
In
the
Corporation's
view
the
price
of
$3,500
per
acre
was
a
fair
price
at
which
the
Corporation
was
prepared
to
purchase
the
land
in
1974.
According
to
O'Leary
the
Corporation
was
conscious
of
its
position
as
a
major
developer
and
was
careful
not
to
go
above
current
market
prices.
The
letter
was
not
an
offer
to
purchase
since
the
Corporation
preferred
that
in
its
acquisitions
the
suggested
price
come
as
an
offer
from
the
landowner.
Mr.
O’Leary
expressed
absolute
confidence
that
if
such
an
offer
had
been
received
from
the
appellant
his
recommendation
for
acceptance
would
have
been
approved
at
the
stated
price.
The
appellant
chose
not
to
offer
his
property
for
sale
at
that
time.
This
letter,
the
evidence
of
O'Leary
and
the
refusal
all
formed
the
principal
basis
upon
which
the
appellant’s
V-Day
value
of
$2,500
per
acre
was
founded.
Even
if
the
Court
were
to
accept
this
document
as
having
the
same
evidentiary
value
as
an
offer
to
purchase
it
cannot
in
the
Court's
view
properly
be
considered
as
indicative
of
the
value
of
the
subject
property
as
at
December
31,
1971.
To
do
so
would
be
to
decide
the
issue
of
valuation
not
on
the
basis
of
facts
actually
existing
at
the
valuation
date
but
on
the
basis
of
subsequently
ascertained
facts.
The
courts
have
on
a
number
of
occasions
considered
the
use
of
hindsight
for
valuation
purposes.
The
Supreme
Court
of
Canada
in
Roberts
and
Bagwell
v.
The
Queen,
[1957]
S.C.R.
28
stated:
...
In
other
words
the
mere
circumstance
of
the
sale
being
before
or
after
a
particular
date
cannot
nullify
the
reference
of
subsequent
sales
while
general
market
conditions
have
remained
the
same.
The
rule
should
allow
the
Court
to
admit
evidence
of
such
sales
as
it
finds,
in
place,
time
and
circumstances,
to
be
logically
probative
of
the
fact
to
be
found.
[Emphasis
added.]
All
evidence
that
is
relevant
is
admissible
unless
subject
to
some
specific
exclusionary
rule
and
accordingly
a
sale
of
nearby
and
comparable
lands
made
the
day
following
a
"valuation
day”
and
without
any
knowledge
by
either
the
vendor
or
purchaser
may
in
certain
instances
be
cogent
and
relevant
evidence
as
to
the
value
of
the
subject
lands
the
day
before.
The
fact
that
such
a
sale
was
made
on
the
day
after
rather
than
the
day
before
should
not
render
evidence
of
the
sale
inadmissible.
However,
the
remoteness
of
the
dates
of
sale,
will
of
course
affect
the
weight
of
such
evidence.
Pawson
v.
The
City
of
Sudbury,
[1953]
O.R.
988.
While
it
is
clear
that
in
certain
circumstances
the
Court
may
rely
on
hindsight,
such
use
must
be
limited
to
situations
occurring
within
a
reasonably
short
period
of
time
following
the
valuation
date
and
where
evidence
exists
that
no
material
changes
in
market
conditions
have
occurred
in
the
intervening
period.
No
acceptable
evidence
was
adduced
to
qualify
the
use
of
this
offer
in
this
manner.
What
this
Court
is
being
asked
to
consider
is
an
offer
to
sell,
(if
it
was
that),
the
date
of
which
is
so
remote
that
it
is
well
nigh
impossible
to
accept
it
as
being
logically
probative
of
the
fact
to
be
found.
Accordingly,
I
attach
little
or
no
weight
to
that
evidence.
On
balance,
I
am
not
satisfied
that
Nagle
made
an
appropriate
choice
of
comparable
sales
as
indicators
of
land
value
particularly
in
terms
of
the
proximity
and
the
extent
of
ongoing
and
pending
developments
which
existed
in
the
vicinity
of
the
comparables
and
did
not
exist
in
the
area
of
the
subject
property.
Furthermore,
every
sale
utilized
by
Nagle
with
the
exception
of
the
first
took
place
after
Valuation
Day,
many
of
them
well
after
that
date.
In
view
of
these
factors
I
am
unable
to
accept
Nagle's
opinion
of
value.
I
say
that
with
no
reflection
on
his
credibility.
The
respondent
called
Mr.
Roy
W.
Noel
A.A.C.I.
(Noel).
He
appraised
the
property
on
the
basis
that
its
highest
and
best
use
was
as
designated
by
its
zoning
i.e.
agricultural,
subject
to
the
fact
that
the
size
of
the
site
would
“offer
utility
as
a
comprehensive
land
development
at
some
future
date
and
time
when
the
municipal
services
and
economic
conditions
dictated
a
more
optimum
use
of
the
site.”
the
principal
difference
between
the
two
experts
is
that
the
appellant’s
appraiser
Nagle
viewed
the
transition
of
the
subject
property
from
agricultural
use
to
urban
development
as
somewhat
more
immediate
than
did
Noel.
Noel
also
utilized
the
comparative
sales
method,
and
referred
the
Court
to
nine
land
sales
and
to
one
offer
to
purchase.
His
choice
of
comparable
sales
was
restricted
to
sales
which
took
place
prior
to
Valuation
Day.
All
properties
were
situated
within
the
metropolitan
area
of
the
City
of
St.
John’s.
The
sales
ranged
in
price
from
$103
per
acre
to
$1,569
per
acre
before
adjustments.
His
analysis
of
the
comparable
sales
led
Noel
to
conclude
that
the
appropriate
value
for
the
subject
property
was
$750
per
acre
or
$102,000
(rounded).
This
value
reflected
his
perception
of
the
long
range
potential
for
the
land
and
the
possibility
of
a
more
optimum
use
of
the
site
at
some
future
time.
Noel's
evidence
was
properly
challenged
on
the
basis
that
the
comparable
sales
utilized
by
him
were
for
the
most
part
quite
different
from
the
subject
property
in
that
they
were
situated
much
further
away
from
the
boundary
of
the
City
of
St.
John’s.
Sales
7,
8
and
9
were
of
properties
located
on
Bay
Bulls
Road
and
were,
according
to
Noel,
at
least
9
miles
if
not
more
from
the
City
boundary.
Sale
10
was
seven
miles
by
road
from
the
boundary
and
was
located
in
a
water
shed
area
from
which
the
City
of
St.
John’s
obtains
its
water
supply
and
within
which
building
and
development
was
strictly
controlled
if
not
prohibited.
On
the
other
hand
comparable
sales
1,
2
and
5
referred
to
in
his
narrative
report
generally
support
his
conclusion.
Sale
1
was
of
a
property
located
on
Logy
Bay
Road
slightly
to
the
south
of
the
Power
property.
It
was
a
smaller
site
with
direct
frontage
on
Logy
Bay
Road
and
as
a
result
offered
superior
marketability
and
potential.
In
June
of
1971
this
property
sold
for
approximately
$938
per
acre.
There
were
no
special
financing
terms,
no
need
to
employ
discount
rates
and
according
to
Noel
required
only
minor
adjustments
to
account
for
the
superior
frontage
and
physical
characteristics.
It
should
be
noted
that
as
at
Valuation
Day
it
had
approximately
the
same
development
prospects
as
the
subject
property.
In
an
effort
to
discount
this
comparable
the
appellant's
appraiser
testified
that
he
had
spoken
to
the
purchaser
and
present
occupier
of
that
property.
It
was
Nagle’s
evidence
that
the
land
had
been
acquired
in
a
private
sale
(from
a
widow)
and
that
it
was
regarded
by
the
buyer
“as
a
bargain."
Although
an
expert
witness
derives
his
market
data
from
many
sources
and
thus
may
on
occasion
utilize
hearsay
in
the
course
of
preparing
a
valuation
report
such
evidence
must
be
scrutinized
with
care.
An
expert
opinion
is
not
rendered
inadmissible
because
it
is
based
on
information
gained
from
others.
However
the
presentation
of
the
statement
of
a
third
person
as
unimpeachable
evidence
of
the
state
of
mind
or
belief
of
that
person
is
clearly
inappropriate.
I
have
great
difficulty
in
attaching
any
weight
to
hearsay
comments
such
as
those
relied
upon
by
the
appellant
in
this
particular
context.
There
was
no
evidence
before
the
Court
to
indicate
that
the
acquisition
of
this
property
was
anything
but
an
arm's
length
transaction
and
that
the
price
reflected
fair
market
value
at
that
time.
Sale
2
referred
to
by
Nagle
was
of
23.76
acres
of
land
on
Torbay
Road
in
September
1971.
It
is
a
property
located
in
the
vicinity
of
the
Power
property
albeit
slightly
closer
to
St.
John’s.
It
has
superior
road
frontage
and
is
a
smaller
site.
The
price
per
acre
was
$1,305.
In
cross-examination
Noel
conceded
that
he
had
failed
to
take
into
account
the
fact
that
a
small
bungalow
was
located
on
this
property.
He
had
subsequently
reconsidered
this
sale
as
a
comparable
and
had
reduced
the
sales
price
by
the
sum
of
$8,000
being
the
value
he
placed
on
the
building.
The
effect
of
that
was
to
reduce
the
sales
price
for
comparison
purposes
to
approximately
$1,000
per
acre.
Sale
5
related
to
a
property
on
Thorburn
Road
offering
superior
road
frontage
and
zoning
and
which
was
sited
slightly
closer
to
the
City
boundary
than
the
Power
property.
It
was
located
north
of
St.
John’s
in
an
area
which
in
1971
faced
the
same
uncertain
development
future
as
the
area
in
which
the
Power
property
was
located
if
not
more
so.
this
latter
fact
appears
to
be
reflected
in
the
price
of
$588
per
acre
at
which
the
property
was
sold
for
in
June
1971.
It
is
a
matter
of
some
concern
of
the
Court
that
two
accredited
appraisers
generally
agreeing
on
the
highest
and
best
use
for
the
subject
property
failed
to
use
even
one
common
comparable
sale.
I
note
also
that
of
the
18
or
19
sales
referred
to
by
the
appraisers
only
the
three,
that
is
sales
1,
2
and
5
utilized
by
Noel
commend
themselves
to
the
Court
as
being
appropriate
in
determining
value
by
this
method.
The
failure
of
Nagle
to
select
appropriate
comparables
was
a
factor
taken
into
account
by
the
Court
in
rejecting
his
evidence
of
value.
On
the
other
hand
while
I
did
not
find
the
evidence
presented
by
the
respondent
to
be
entirely
satisfactory
I
cannot
disregard
his
final
opinion
of
value.
The
evidence
considered
in
its
entirety
leads
me
to
the
conclusion
that
the
appellant
has
not
met
the
onus
of
establishing
that
the
respondent's
assessment
Is
wrong.
The
appeal
is
dismissed.
Appeal
dismissed.
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