Tremblay,
TCJ:—This
case
was
heard
on
February
17,
18
and
19,
1982.
The
last
documents
filed
before
the
Court
was
on
August
15,
1983.
The
case
was
then
taken
under
advisement.
l.
The
Point
at
Issue
The
point
at
issue
is
whether
the
appellant
is
correct
in
considering
that
the
7,916
acres
of
bare
land
located
in
the
rural
municipalities
of
Victory
and
Lacad-
ena
in
Saskatchewan
had
a
fair
market
sale
value
in
December
1971
of
$1,068,000.
It
was
sold
in
1974
to
The
Saskatchewan
Land
Bank
Commission
for
the
said
amount
of
$1,068,000.
The
respondent
in
his
notice
of
reassessment
placed
the
V-Day
value
at
$675,000.
2.
The
Burden
of
Proof
2.01
The
burden
is
on
the
appellant
to
show
that
the
respondent’s
assessment
is
incorrect.
This
burden
of
proof
results
particularly
from
several
judicial
decisions,
including
the
judgment
delivered
by
the
Supreme
Court
of
Canada
in
Johnston
v
MNR,
[1948]
CTC
195;
3
DTC
1182.
2.02
In
the
same
judgment,
the
Court
decided
that
the
assumed
facts
on
which
the
respondent
based
his
assessment
or
reassessment
are
also
deemed
to
be
correct.
In
the
present
case,
the
assumed
facts
are
described
in
the
reply
to
notice
of
appeal
as
follows:
6.
In
so
assessing
the
Appellant,
the
Respondent,
assumed
inter
alia,
that
the
fair
market
value
of
the
land
at
Valuation
Day
was
$675,000.
3.
The
Facts
3.01
The
first
appellant’s
witness
was
Mr
Zazelenchuk,
secretary-treasurer
to
the
appellant.
From
his
testimony,
it
appears
that
the
co-operative
was
founded
by
a
group
of
seventeen
veterans
of
World
War
II
who
amalgamated
and
developed
their
Veterans
Land
Act
land
grants
into
what
was,
in
1971,
a
very
valuable
and
substantial
mixed
farming
operation.
It
seemed
like
an
ideal
situation.
The
houses
and
farm
buildings
were
grouped
on
a
central
location
on
the
land.
The
land
was
surrounded
on
three
sides
by
community
pasture,
which
was
publicly-
owned
land
upon
which
local
residents
could
graze
livestock
at
reduced
rates.
The
farm
was
served
by
an
on-site
spring
fed
water
system
which
delivered
substantial
quantities
of
fresh,
clean
water
to
the
residences
and
farm
buildings
without
treatment
or
purification.
3.02
The
testimony
of
Mr
Zazelenchuk
also
confirmed,
in
substance,
the
facts
described
in
paragraphs
1,
2,
3
and
4
of
the
notice
of
appeal
giving
the
appellant’s
position:
1.
A
shareholder
of
the
company,
Mr
Alvin
Francis
Tone,
died
December
29,
1971.
In
accordance
with
a
buy-sell
arrangement
among
the
shareholders
of
the
company,
the
value
of
the
deceased’s
interest
in
the
company
was
determined
giving
consideration
to
the
current
estimated
fair
market
values
of
the
net
corporate
assets
at
the
time.
The
company’s
fiscal
year
ends
November
30.
The
settlement
of
his
interest
in
the
company
was
consummated
utilizing
the
company’s
financial
statements
at
November
30,
1971
which
approximated
the
date
of
death.
The
figures
contained
in
those
financial
statements
were
adjusted
to
reflect
the
current
fair
market
values
of
the
corporate
net
assets
as
at
that
date.
And,
the
value
of
the
deceased’s
shareholdings
in
the
company
was
determined
accordingly.
(Exhibit
A-13)
2.
The
principal
assets
for
which
estimated
current
fair
market
values
were
determined
at
the
time
included
farm
land,
buildings,
machinery
and
equipment
and
inventories
of
grain,
cattle,
hogs
and
feed.
In
all
cases,
the
established
current
fair
market
values
of
the
identified
assets
were
greater
than
their
values
recorded
in
the
books
of
account.
The
respective
figures
in
the
books
of
account
were
increased
accordingly
in
order
to
reflect
their
estimated
current
fair
market
values
in
the
financial
statement
used
to
determine
the
deceased’s
interest
in
the
company.
At
November
30,
1971,
the
fair
market
value
of
the
farm
land
was
$1,065,360.
Its
book
value
was
$180,375.
The
value
contained
in
the
financial
statement
used
to
determine
the
value
of
the
deceased’s
shareholdings
was
$1,065,360.
3.
The
deceased’s
widow
was
the
executrix
of
his
estate.
She
became
a
very
hostile
party
during
the
negotiations
for
the
settlement
of
the
deceased’s
interest
in
the
company.
Solicitors
were
engaged
by
both
parties
—
the
executrix
and
the
company.
Lengthy
negotiations
ensued.
And,
all
of
the
values
contained
in
the
financial
statement
used
to
determine
the
value
of
the
deceased’s
interest
in
the
company
were
thoroughly
reviewed
during
those
negotiations.
4.
An
out-of-court
settlement
was
effected
on
October
9,
1974.
The
value
of
the
deceased’s
interest
in
the
company
at
his
date
of
death
was
established
utilizing
the
company’s
financial
statements
at
November
30,
1971
adjusted
to
reflect
the
estimated
fair
market
value
of
the
net
corporate
assets
as
described
above.
The
estimated
fair
market
value
of
the
farm
land
was
confirmed
at
$1,065,030
as
at
the
date
of
death.
3.03
Mr
Zazelenchuk
testified
that
the
appellant
received
several
offers
(Exhibits
A-6,
A-7
and
A-8)
in
the
years
between
1971
and
1974
but
they
were
rejected
in
large
part
because
of
the
desire
of
the
members
to
make
the
land
available
to
their
children.
Finally
in
1974
they
concluded
a
sale
to
The
Saskatchewan
Land
Bank
which
enabled
them
to
realize
their
lifetime
investment
while
making
the
land
available
to
their
sons
who
could
lease
it
back
from
the
Commission
at
reasonable
rates.
3.04
Of
the
several
offers
received
by
the
appellant,
the
most
important
was
that
contained
in
Exhibit
A-8.
Exhibit
A-8
is
a
letter
dated
April
18,
1974
from
Mr
Warren
J
Holland,
a
solicitor
from
Swift
Current,
Saskatchewan
a
town
in
the
vicinity
of
the
subject
land.
Mr
Holland
testified
that
he
wrote
the
letter
on
behalf
of
Mr
John
Rhind
of
Aberdeen,
Scotland
who
has
instructed
Mr
Holland
to
offer
1.5
million
dollars
for
the
entire
operation
of
the
appellant,
the
major
component
of
which
would
be
the
land.
In
fact,
the
offer
was
$1,350,000
for
the
land
(7,916
acres)
and
$150,000
for
the
360
head
of
Hereford
cattle
and
calves.
Another
amount
was
supposed
to
be
offered
for
all
the
machinery
and
equipment.
3.05
Mr
Zazelenchuk
filed
a
letter
dated
March
1,
1967
(Exhibit
A-6)
from
a
legal
firm
of
Saskatoon
concerning
a
possible
offer
to
buy
the
subject
property.
No
specific
offer,
however,
seems
to
have
followed
that
letter.
From
Exhibit
A-7,
a
piece
of
paper
dated
“April/69”,
one
can
read
that
an
offer
to
purchase
5,000
acres
of
land
and
buildings
for
$1,200,000,
$600,000
cash
and
the
balance
in
10
years
with
a
five
per
cent
interest.
It
is
signed
by
a
Mr
Tearl
of
Calgary.
There
is
nothing
referring
to
the
name
of
the
appellant.
No
witness
gave
any
explanation
about
this
document,
or
confirmed
its
contents,
or
to
whom
it
was
addressed.
3.06
On
August
5,
1974,
The
Saskatchewan
Land
Bank
Commission
(SLBC)
made
a
written
offer
to
the
appellant
to
purchase
the
subject
property
(lands
and
improvements)
for
the
$1,240,510
(Exhibit
A-9).
It
was
accepted.
3.07
Mr
Zazelenchuk
admitted
that
in
1973
the
SLBC
had
offered
a
price
of
$500,000
to
$600,000,
but
the
appellant
rejected
it
(SN
Vol
I,
p
72).
3.08
Concerning
the
settlement
of
the
estate
of
Alvin
Francis
Tone
in
October
1974
(Exhibit
A-13),
Mr
Zazelenchuk
in
cross-examination
admitted
(SN
Vol
I,
pp
73
and
74),
they
simply
took
the
value
received
from
the
SLBC
in
August
1974
and
they
gave
Mrs
Tone
a
percentage
(%)
of
it;
therefore
they
accepted
the
value
of
the
land
given
by
the
SLBC.
The
membership
(Valuation
Committee
provided
in
article
VI
of
Supplemental
Bylaws
—
Exhibit
A-5)
agreed
that
it
was
a
fair
price
in
1971.
Concerning
the
value
of
the
land
at
the
death
of
Mr
Tone
on
December
29,
1971,
a
letter
written
to
Mr
Zazelenchuk
on
January
10,
1973,
by
the
firm
of
accountants
Touche
Ross
&
Co
was
filed
as
Exhibit
R-1.
The
subject
of
this
letter
was
“Settlement
with
Mrs
Tone”.
A
financial
statement
was
filed
with
that
letter.
It
is
entitled
“Summary
of
Revaluation
of
Assets
in
relationship
to
audited
financial
statements
as
at
November
30,
1971”.
The
latter
date
is
the
end
of
the
appellant’s
fiscal
year.
Under
the
item
Fixed
Assets,
one
can
read:
Land,
Buildings
&
Improvements:
Book
Value
$237,628
and
revaluation
$577,915.
Mr
Zazelenchuk
also
explained
that
Mrs
Tone
had
put
“.
.
.
a
caveat
against
the
land
so
that
we
couldn’t
sell
it
without
her
getting
a
settlement”
(SN
Vol
I,
p
61,
1.
16
to
19).
3.09
Mr
Chyz,
the
appellant’s
appraiser,
estimated
in
his
appraisal
report
(Exhibit
A-15,
page
58)
the
bare
land
value
at
$871,500.
It
was
computed
on
the
basis
of
the
municipal
assessment
data
of
the
pieces
of
the
subject
property
multiplied
by
factor
of
around
6.
This
factor
was
a
result
of
the
study
of
12
comparables
(from
April
1969
to
February
1973)
summarized
on
page
53
of
Exhibit
A-15
and
of
Exhibit
A-19,
but
it
was
especially
on
the
comparables
which
had
the
same
quality
of
land
as
the
subject
property
(p
57).
However,
in
cross-examination,
Mr
Chyz
admitted
that
the
factor
is
chosen
“more
on
an
overview
basis
as
opposed
to
a
plus
and
minus
situation”
(SN
Vol
III,
p
46).
Mr
Chyz
also
testified
that
in
the
light
of
the
Rhind
offer
(Exhibit
A-8)
of
which
he
was
unaware
at
the
time
of
compiling
his
report,
he
would
reassess
the
value
at
$1,132,950
(SN
Vol
III,
pp
12
to
15).
3.10
Mr
Chyz
contended
that
the
buildings
and
improvements
increased
the
value
of
the
land,
more
specifically,
the
sewers
and
water
installations.
Mr
Chyz
also
said
in
his
report
that
the
memorandum
of
April
1969
(Exhibit
A-7)
is
not
a
conclusive
indicator
of
value
(p
57
of
Exhibit
A-15).
3.11
Mr
Murray
J
Cooney,
one
of
the
two
appraisers
of
the
respondent,
estimated
on
page
107
of
his
appraisal
report
(Exhibit
R-3)
the
bare
land
value
at
$601,000.
That
was
based
on
the
cost
approach
of
15
comparables
(from
February
1971
to
May
1972)
divided
in
three
groups
depending
on
the
different
quality
of
the
soil.
On
page
84
the
computation
is
summarized
as
follows:
|
Summary:
|
|
|
GROUP
ONE:
|
6,560
acres
@
$82.00
|
$537,920.00
|
|
GROUP
TWO:
|
912
acres
@
$55.00
|
$
50,160.00
|
|
GROUP
THREE:
|
444
acres
@
$30.00
|
$
13,320.00
|
|
TOTAL
|
$601,400.00
|
|
TOTAL
LAND
VALUE
(ROUNDED)
|
$601,000.00
|
3.12
Mr
Cooney
used
a
soil
quality
index
as
the
basis
of
his
comparables,
but
it
appeared
under
cross-examination
that
the
soil
indices
of
his
comparables
were
calculated
on
the
basis
of
net
assessed
value,
whereas
for
the
subject
land
a
gross
asset
value
was
used.
This
error,
admitted
by
Mr
Cooney
(SN
Vol
IV,
p
140)
has
the
net
effect
of
putting
down
the
adjusted
price
of
the
comparables
and
thereby
reducing
the
appraised
value
of
the
subject
land
(SN
Vol
IV,
p
156).
The
Cooney
report
was
also
in
error
for
using
the
wrong
total
assessed
value
of
the
subject
land
(SN
Vol
IV,
pp
84
and
85).
There
was
an
inconsistent
application
of
the
soil
index
calculation
both
in
the
treatment
of
non-cultivated
acreage
(SN
Vol
IV,
pp
126
and
132)
and
in
the
actual
calculation
of
the
comparable
index
fracttions
(SN
Vol
IV,
p
145).
3.13
Mr
Howard
Mattila,
the
second
appraiser
of
the
respondent,
estimated
at
page
6
of
his
appraisal
report
(Exhibit
R-5)
the
bare
land
value
at
$622,300.
This
value
was
based
on
the
municipal
assessment
of
22
pieces
of
the
subject
property
multiplied
by
the
factor
4.3
except
for
two
pieces.
The
factor
was
then
5.
These
factors
were
computed
from
a
study
of
16
comparables
(from
April
1971
to
January
1973),
the
range
factor
was
from
2.8
to
6.3.
3.14
In
cross-examination,
both
Mr
Mattila
and
Mr
Cooney
admitted
that
they
did
not
check
whether
any
of
the
comparable
sales
were
between
relatives.
In
many
instances,
counsel
for
the
appellant
suggested
that
these
comparables
involved
sales
of
a
non-arm’s
length
or
of
a
forced
nature.
3.15
In
general,
all
of
the
three
experts
agreed
with
the
economic
conditions
as
they
existed
before,
at,
and
subsequently
to
Valuation
Day.
It
was
agreed
that
they
were
depressed
land
values
at
V-Day,
values
having
been
much
greater
approximately
in
1969.
Land
values
inflated
from
Valuation
Day
to
1974
according
to
Mr
Chyz
by
approximately
30
per
cent
(SN
Vol
III,
p
50,
1.
5-11).
4.
Cases
at
Law
—
Analysis
4.01
Cases
at
Law
Counsel
for
both
parties
referred
the
Court
to
the
following
cases
at
law:
1.
Dr
L
Miller
v
MNR,
[1978]
CTC
2924;
78
DTC
1666;
2.
E
Schlenker
v
MNR,
[1978]
CTC
2848;
78
DTC
1614;
3.
Crown
Trust
Co
v
The
Queen,
[1977]
CTC
320;
77
DTC
5173;
4.
D
and
H
Friedman
v
MNR,
[1978]
CTC
2809;
78
DTC
1599;
5.
John
J
Neder
v
MNR,
[1980]
CTC
2031;
80
DTC
1040;
6.
R
Price
v
MNR,
[1978]
CTC
2498;
78
DTC
1375;
7.
Willows
Golf
Ltd
v
The
Queen,
12
LCR
305.
4.02
Analysis
4.02.1
In
valuation
the
best
criterion
is
an
offer
to
purchase
the
subject
property
from
independent
and
interested
persons.
This
criterion
has
priority
on
a
direct
sales
comparison
approach
when
the
sales
concern
properties
other
than
the
subject
property.
In
the
instant
case,
the
appellant
adduced
evidence
concerning
3
offers
and
1
settlement,
all
related
to
the
subject
property.
4.02.2.
First,
the
Court
cannot
accept
the
offers
(Exhibits
A-6
and
A7)
on
the
basis
that
both
of
them
are
too
vague
(para
3.05),
and
therefore
not
conclusive.
This
is
also
the
conclusion
of
the
appellant’s
appraiser
Mr
Chyz
(para
3.10).
4.02.3
Concerning
the
settlement
of
the
Tone
Estate,
this
cannot
be
accepted
as
the
value
on
Valuation
Day,
despite
the
fact
that
the
Valuation
Committee
agreed
that
the
price
was
a
fair
price
in
1971.
All
the
circumstances
surrounding
the
decision:
legal
proceedings,
caveat,
impossibility
to
sell
before
settlement,
influence
of
the
offer
of
SLBC
and
also
the
revaluation
to
$577,915
of
the
land
made
by
the
firm
of
accountants,
in
view
of
a
settlement
with
Mrs
Tone,
are
to
the
effect
that
the
real
settlement
cannot
be
taken
as
the
value
on
V-Day
(para
3.08).
4.02.4
The
Rhind
offer
(para
3.04,
Exhibit
A-8)
cannot
be
accepted
either
as
a
fair
market
value
on
V-Day.
Done
in
April
1974,
this
offer
is
too
remote
from
December
1971.
This
offer
would
be
a
good
criterion
to
determine
the
value
of
a
part
of
the
subject
property
in
1974,
but
not
in
1971.
4.02.5
This
offer
(Exhibit
A-8)
being
set
aside,
the
Court
cannot
accept
the
conclusion
of
Mr
Chyz
about
the
V-Day
value
which
was
$1,132,950
(end
of
para
3.09).
Moreover,
in
putting
aside
as
criterion
the
settlement
of
the
Ton
Estate,
this
affects
Mr
Chyz’
factor
6.
Indeed
the
amount
of
the
settlement
$1,065,360
and
the
assessed
value
of
$143,350
gives
a
factor
of
7.43
(Exhibit
A-15,
p
53,
sale
13).
4.02.6
However,
on
another
point
of
view
because
of
the
evidence
that,
from
1971,
the
land
values
inflated
approximately
30
per
cent
(para
3.15),
the
Court
wonders
whether
the
said
offer
in
1974
of
$1,350,000
for
the
land
(para
3.04,
Exhibit
A-8)
(because
it
concerns
the
subject
property)
could
not
be
used
in
applying
retroactively
the
said
30
per
cent
rather
than
using
the
comparables?
When
one
indeed
looks
at
the
comparables
used
by
the
three
appraisers,
they
stated
that
the
acreage
of
50
per
cent
of
them
was
160;
35
per
cent
of
them
was
320
and
15
per
cent
of
them
was
480.
Are
they
really
good
comparables
to
determine
the
value
of
the
subject
property
with
an
acreage
of
7,916?
It
seems
it
was
not
possible
to
find
a
comparable
of
this
size.
Moreover,
each
of
the
three
appraisers,
in
cross-examination,
met
difficulties
in
explaining
or
substantiating
some
of
their
positions
or
opinions.
The
appellant,
however,
never
adduced
evidence
to
substantiate
the
assumptions
that
the
comparables
involved
sales
of
a
non-arm’s
length
or
of
a
forced
nature
(para
3.14).
He
had
the
burden
of
proof.
However,
it
seems
that
those
who
did
the
research
to
build
the
valuation
data
bank
of
the
respondent
did
not
take
special
care
to
establish
if
there
was
or
was
not
an
arm’s
length
relation
between
the
parties.
4.02.7
However,
one
must
recall
that
the
said
offer
(Exhibit
A-8)
was,
in
fact,
rejected
by
the
appellant
because
of
the
desire
of
the
members
to
make
the
land
available
to
their
children
(para
3.03).
This,
in
fact,
restrained
the
possibility
of
selling
and
that
must
be
considered.
In
fact,
as
the
increase
of
30
per
cent
is
admitted,
and
is
a
proven
fact,
the
Court
is
bound
by
it.
The
Court
thinks
that
the
best
figure
to
take
is
the
price
of
sale
of
the
subject
land,
$1,068,000.
In
applying
retroactively
the
30
per
cent,
the
V-Day
value
would
be
$821,538
($1,068,000
x
100)
130
If
the
Court
would
accept
Mr
Cooney’s
figure
$601,000
and
Mr
Mattila’s
$622,300,
or
even
the
assessor’s
$675,000,
the
increase
would
be
far
in
excess
of
30
per
cent,
it
would
be
over
55
per
cent.
4.02.8
With
the
adduced
evidence
concerning
the
subject
land
(acreage,
localization
and
the
quality
of
soil),
the
Court
thinks
it
is
difficult
to
find
a
net
preponderance
of
evidence
coming
from
the
three
appraisal
reports,
and
concludes
it
must
consider
that
the
increase
of
30
per
cent
must
apply
to
the
subject
land
and
that
the
figure
of
$821,538
is
more
appropriate
in
expressing
the
fair
market
value
in
December
1971.
5.
Conclusion
The
appeal
is
allowed
in
part
and
the
matter
referred
back
to
the
respondent
for
reassessment
in
accordance
with
the
above
reasons
for
judgment.
Appeal
allowed
in
part.
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