Marceau,
J:—This
action
is
brought
against
notices
of
reassessment
issued
by
the
Minister
of
National
Revenue
in
respect
of
the
plaintiff’s
1975,
1976
and
1977
taxation
years.
The
question
raised
is
that
of
the
market
value,
on
December
31,
1971
(Valuation
Day
for
the
purpose
of
determining
capital
gains
on
dispositions
of
property
under
section
40
of
the
Income
Tax
Act),
of
a
piece
of
land
sold
by
the
plaintiff
in
1975
for
the
price
of
$510,265.
In
his
1975,
1976
and
1977
income
tax
returns,
the
plaintiff
reported
a
capital
gain
of
$53,505
on
the
sale
of
his
land
and
claimed
appropriate
reserves
in
respect
of
the
proceeds
not
receivable
in
each
of
the
three
years
respectively:
he
had
assessed
the
value
of
the
land
on
Valuation
Day
at
$456,760.
The
Minister
completely
disagreed.
By
the
notices
of
reassessment
here
under
appeal,
the
Minister
increased
the
plaintiff's
capital
gain
on
the
sale
of
his
property
to
$485,765,
thereby
assuming
the
fair
market
value
of
the
land
at
Valuation
Day
to
have
been
$24,500.
As
can
readily
be
seen
by
the
magnitude
of
the
disagreement
it
has
given
rise
to,
the
question
of
valuation
the
Court
is
called
upon
to
determine
is
highly
consequential
and
certainly
not
without
particular
difficulties.
Fortunately,
the
parties,
through
their
counsel,
have
agreed
on
most
of
the
facts
that
could
have
some
relevance
to
a
proper
consideration
of
the
issue,
and
the
expert
witnesses
called
upon
to
express
their
opinions,
however
complete
may
have
been
their
disagreement,
were
always
honest,
direct
and
to
the
point.
The
inherent
intricacies
of
the
issues
raised
by
a
controversy
of
this
type
will
still
be
present
of
course
but
the
analysis
of
the
case
should
thereby
be
greatly
simplified.
I
will
briefly
go
through
the
most
salient
facts
and
then
review
the
expert
evidence
in
which
are
to
be
sought
the
elements
needed
to
sustain
valid
conclusions.
The
property
we
are
concerned
with
(hereinafter
the
subject
property
or
the
subject
land)
is
a
narrow
strip
of
vacant
and
unused
land,
encompassing
some
146.77
acres.
It
is
now,
although
only
since
December
1976,
located
within
the
boundaries
of
the
town
of
Vegreville,
on
the
west
side
of
60
Street
and
south
of
55
Avenue.
In
1971,
the
land
was
part
of
a
larger
parcel
adjoining
the
southwest
boundary
of
the
town,
its
legal
description
being
portions
of
the
northeast
quarter
of
section
13
and
the
southeast
quarter
of
section
13,
all
in
township
52,
range
15,
west
of
the
fourth
meridian
in
the
county
of
Minburn,
province
of
Alberta.
The
town
of
Vegreville
lies
approximately
80
kilometers
east
of
Edmonton,
from
which
it
is
accessed
by
Highway
#16.
Situated
in
the
middle
of
an
area
which
has
a
well
established
mixed
farming
industry,
and
serviced
by
good
transportation
facilities,
including
both
CPR
and
CNR
rail
lines
as
well
as
an
airport
capable
of
handling
all
types
of
small
commercial
aircraft,
the
town’s
importance
within
the
northeastern
part
of
Alberta
is
due
to
the
fact
that
for
many
years
it
has
been
the
centre
for
service
operations
for
the
whole
surrounding
countryside.
Vegreville
is
still
a
small
town
with
a
population
estimated
at
some
5,000
people
(3,863
in
1971)
but
it
has
experienced
for
some
years
a
regular
and
relatively
strong
growth.
Local
construction
for
residential
as
well
as
commercial
purposes
(including
a
$500,000
shopping
cnetre)
has
been
quite
active
and
the
provincial
government
has
just
opened,
in
a
building
recently
completed
and
incorporated
within
the
town’s
boundary,
its
new
Alberta
environment
research
centre.
In
fact,
this
growth
took
place
after
1972,
and
apparently
was
provoked
to
a
great
extent
by
a
progressive
council
and
dynamic
town
administration,
but
obviously
an
eventual
expansion
of
the
town
boundaries
could
be
foreseen
and
was
in
fact
expected
before
it
actually
happened.
It
is
clear
from
the
evidence
that
the
most
natural
direction
an
expansion
of
the
town
boundaries
could
take
in
1971
was
towards
the
southwest
where
the
subject
property
was
located.
On
one
hand,
development
in
other
directions
was
somewhat
constrained
by
both
physical
and
man
made
features:
towards
the
northeast
were
the
sewage
lagoon
and,
farther,
the
airport;
towards
the
south
and
the
land
was
low
and
the
water
storage
and
water
treatment
plant
were
located
there;
towards
the
west
were
the
railway
lines.
On
the
other
hand,
the
subject
property
was
easily
accessible,
being
bordered
on
both
its
north
and
west
sides
by
public
roads,
it
could
be
serviced
immediately,
being
surrounded
by
the
water
and
sewage
systems
of
the
town,
and
its
topography
was
perfectly
suited
for
any
type
of
urban
development.
In
fact,
for
many
years
the
property
had
been
seen
as
a
natural
extension
of
the
town.
As
far
back
as
1964,
the
Vegreville
School
District
No
19
had
nego
tiated
with
the
owner
an
option
to
purchase,
at
a
price
of
$1,000
an
acre,
forty
acres
of
land
to
be
taken
out
of
the
northeast
quarter
of
the
property,
which
option
was
not
exercised
only
because
the
school
division
finally
decided
to
buy
land
on
the
north
side
of
Highway
#16
at
a
more
advantageous
price.
Mr
Burnstad,
who'was
the
town
manager
in
Vegreville
from
1973
until
his
recent
retirement
in
1982,
testified
at
the
hearing
that
one
of
his
first
recommendations
upon
taking
office
was
that
the
property
of
the
plaintiff
be
annexed
to
the
town
and
indeed,
shortly
thereafter,
in
June
1974,
having
in
view
the
creation
of
a
lands
bank,
the
town
negotiated
an
option
to
purchase
the
site.
It
is
precisely
the
exercise
of
that
option
and
its
assignment
to
a
private
developer
that
resulted
in
the
1975
sale
which
gave
rise
to
the
assessments
in
question
in
these
proceedings.
Those
are
the
important
facts
on
the
basis
of
which
the
market
value
of
the
subject
property,
on
Valuation
Day,
has
to
be
estimated.
Now,
the
expert
evidence.
Three
land
appraisers
were
called
upon
to
give
their
expert
opinions
as
to
the
market
value
of
the
subject
property
on
December
31,
1971.
The
plaintiff
called
Mr
Stiebritz
and
Mr
Hagan,
both
members
of
real
estate
appraisers
and
consultants
firms.
The
defendant
called
Mr
Bamber,
a
professional
appraiser,
now
an
officer
of
the
Department
of
National
Revenue,
Taxation.
The
three
have
impressive
credentials
and
long
experience.
Their
respective
reports,
which
were
read
into
the
record,
were
validly
documented
and
well
presented;
the
explanations
added
orally
in
Court
were
clear.
The
three
had
an
equally
correct
veiw
of
what
had
to
be
estimated,
namely
the
“market
value”,
and
I
am
satisfied
that,
in
spite
of
the
vague
definitions
reproduced
in
their
reports,
their
understanding
of
the
notion
was
in
conformity
with
that
adopted
by
the
Courts
since
the
decision
of
the
Supreme
Court
in
Woods
Manufacturing
Co
v
The
King,
[1951]
SCR
504.
Finally,
the
three
were
agreed
that,
in
spite
of
a
relative
calm
in
sales
activity
in
the
region,
the
best,
if
not
the
only,
method
of
valuation
available
was
the
comparable
sales
method,
guided
by
the
principle
that
the
market
value
of
a
property
will
necessarily
tend
to
reach
the
value
indicated
by
transactions
completed
in
the
open
market
with
respect
to
properties
having
comparable
physical
and
economic
characteristics.
And
yet
their
conclusions
were
far
apart:
the
experts
for
the
plaintiff
assessed
the
value
of
the
property,
on
December
31,
1971,
at
$1,100
or
$1,250
per
acre,
while
the
expert
for
the
defendant
refused
to
acknowledge
a
value
in
excess
of
$167
per
acre.
Such
a
divergence
of
opinion,
of
course,
could
not
be
without
a
clear
and
straightforward
explanation.
While
the
two
experts
for
the
plaintiff
did
not
hesitate
to
consider
that
the
subject
property,
in
December
1971,
was
already
a
land
definitely
destined
to
a
near
urban
development,
either
residential
or
commercial,
the
expert
for
the
defendant
contended
that
if,
in
1972,
the
property
presented
some
possibility
of
development
for
residential
purposes,
“this
higher
use
could
only
be
a
considerable
distance
into
the
future”
(see
page
6
of
his
report).
So,
while
the
two
experts
for
the
plaintiff
discarded,
as
valid
comparable
sales,
transactions
pertaining
to
basic
farm
lands,
the
expert
for
the
defendant
would
not
pay
any
attention
to
a
transaction
concerning
land
immediately
suitable
for
development.
I
have
no
hesitation
in
accepting
the
assumption
of
the
experts
for
the
plaintiff
as
to
the
highest
and
best
use
to
be
assigned
to
the
property
on
Valuation
Day.
It
is
true
that
the
land
is
still
undeveloped
today,
but
I
am
satisfied
that
there
have
been
special
and
unforeseeable
reasons
for
the
delay
and
the
fact
in
itself
can
hardly
have
any
bearing
since
we
are
concerned
strictly
with
the
situation
a
prospective
buyer
could
reasonably
have
appreciated
in
December
1971.
In
my
view,
because
of
its
location
adjacent
to
town,
its
perfect
topography
and
its
immediate
accessibility,
the
subject
property,
which
was
then
free
from
any
limitation
as
to
possible
use,
has
been
for
many
years
ideally
suited
for
development,
and
a
developer
would
have
been
the
most
likely
candidate
to
a
transaction,
in
December
1971,
if
the
land
had
then
been
for
sale.
The
leading
assumption
made
by
the
expert
for
the
defendant
was
to
me
unwarranted.
I
have
other
reasons
for
not
taking
much
account
of
the
report
submitted
by
the
expert
for
the
defendant.
I
do
not
question
the
obvious
qualifications
of
the
appraiser,
nor,
of
course,
do
I
entertain
any
doubt
as
to
his
good
faith
and
honesty,
but
I
think
that,
in
this
particular
instance,
he
acted
with
some
haste
and
without
sufficient
care.
Counsel
for
the
plaintiff
was
able
to
bring
to
light,
in
the
course
of
his
cross-examination,
many
weakneses
that
impair
the
reliability
of
his
analysis.
Here
are
some
of
these
weaknesses.
Of
the
three
sales
he
first
selected
for
comparison,
he
acknowledged
finally
that
two
were
without
any
significance
having
to
do
with
lands
much
further
away
from
town
and
offering
no
development
potentiality;
and
he
was
forced
to
admit
that
he
had
not
seen
fit
to
inquire
as
to
the
special
circumstances
in
which
the
third
one
had
taken
place”.
He
completely
and
systematically
disregarded
all
sales
of
lands
of
less
than
forty
acres
or
so,
on
the
unjustified
assumption
that
the
importance
of
the
size
factor
was
such
that
no
adjustment
could
adequately
compensate
for
the
difference.
He
likewise
apparently
decided
to
discard
all
sales
that
had
not
taken
place
within
one
or
two
years
of
Valuation
Day,
although
he
readily
admitted
during
his
testimony
that
for
many
years
prior
to
1972
the
general
market
conditions
had
remained
very
stable.
Finally,
in
order
to
obtain
more
sales
for
comparison
purposes,
he
selected
5
sales
of
properties
located
in
proximity
to
other
towns
in
central
Alberta,
without
giving
the
information
that
would
be
needed
to
appreciate
the
value
of
the
approach,
such
as
the
relative
significance
of
the
five
selected
transactions,
the
development
potential
of
the
lands
there
sold
as
compared
to
that
of
the
subject
property,
and
the
characteristics
of
the
five
towns
in
question
in
1971
in
relation
to
those
of
Vegre-
ville.
In
my
view,
the
plaintiff
has
succeeded
in
showing
that
the
valuation
on
which
the
Minister’s
reassessments
were
based
was
unreliable.
The
Court
is
therefore
left
with
the
evidence
given
by
the
two
expert
witnesses
called
by
the
plaintiff.
The
valuation
reports
submitted
by
the
experts
for
the
plaintiff
were
certainly
not
quite
satisfactory.
Both
appraisers
adopted
the
comparable
sales
technique
but
they
failed
to
explain
clearly
the
treatment
they
applied
to
the
data
collected,
especially
when
making
upward
or
downward
adjustments
to
account
for
differences.
The
correlation
between
their
conclusions
and
the
information
gathered
was
often
vague.
The
two
reports,
however,
were
thoroughly
discussed,
and
as
a
result
greatly
clarified,
in
the
course
of
the
trial
and,
in
my
view,
despite
their
weaknesses,
they
provide
the
elements
needed
to
draw
acceptable
conclusions.
As
could
be
expected,
the
market
data
approach
led
the
two
experts
to
similar
conclusions:
$1,000
and
$1,100
an
acre
respectively.
I
should
point
out
here,
before
going
further,
that
one
of
the
two
appraisers,
Mr
Hagan,
expressed
the
view
that
the
conclusion
suggested
by
the
market
data
tech-
nique
could
hardly
be
conclusive
in
view
of
a
scarcity
of
comparable
sales,
and
he
suggested
using
as
well
another
method
of
valuation,
the
so-called
price
index
method
according
to
which
the
value
of
the
land
on
Valuation
Day
should
be
shown
by
applying
to
its
known
1975
selling
price
the
same
rate
of
increase
in
value
lands
of
the
same
category
had
benefited,
between
1972
and
1975,
according
to
an
appropriate
analysis
of
the
market.
Mr
Hagan’s
suggestion
was
not
acceptable:
the
price
index
method
appears
to
me,
as
it
appears
to
the
other
expert,
Mr
Stiebritz,
so
contingent
and
uncertain
that
it
cannot
be
relied
on.
Mr
Hagan’s
conclusion
of
$1,000
per
acre
is
drawn
from
two
sales
that
transpired
in
mid-1971.
These
sales
were
of
lands
not
immediately
adjacent
to
the
town
but
much
smaller
than
the
subject
property:
in
one,
a
site
of
9.46
acres
was
purchased
for
$1,100
an
acre,
and
in
the
other
the
site
was
16.39
acres
and
the
price,
$1,159
an
acre.
It
is
my
opinion
that
the
minimal
adjustment
considered
by
the
appraiser
to
account
for
the
smaller
size,
and
the
fact
that,
in
the
second
case
at
least,
the
purchase
was
made
for
an
immediate
purpose,
ie
the
installation
of
a
drive-in
theatre,
was
greatly
insufficient.
Mr
Stiebritz,
for
his
part,
suggests
$1,100,
on
the
basis
of
three
sales:
one
was
that
of
the
site
purchased
for
the
drive-in
theatre,
with
a
price
of
$1,159;
another
was
a
sale
completed
in
July
1970
in
which
12.68
acres
were
sold
for
a
price
of
$1,300
an
acre;
and
the
third
was
the
sale
transacted
by
the
school
division
in
1965
(when,
as
mentioned
above,
a
site
other
than
that
of
the
plaintiff
was
chosen
for
a
new
school)
which,
when
subjected
to
a
time
adjustment
of
12%
per
annum,
indicates
a
value
of
$872
per
acre.
In
my
opinion,
the
first
of
these
three
sales
considered
by
Mr
Stiebritz
could
be
acceptable
only
subject
to
the
remarks
I
already
made
with
respect
to
the
important
adjustment
required,
and
the
second
is
extremely
suspect
as
it
is
recognized
by
the
appraiser
himself
as
having
not
been
an
arm’s
length
transaction.
Only
the
third
is
immediately
striking,
a
sale
for
35.5
acres
of
land
located
in
front
of
the
subject
property
transacted
in
1965
at
a
price
of
$500
an
acre.
In
the
course
of
his
testimony,
Mr
Stiebritz
half
discarded
this
sale
for
reasons
which
remained
to
me
quite
unclear,
and
at
the
same
time
he
tried
to
support
the
clearly
exaggerated
12%
per
annum
time
adjustment
adopted
in
his
report
on
the
apparent
necessity
to
bring
up
the
price
so
as
to
place
it
more
in
line
with
the
other
transactions.
I
completely
disagree
with
such
an
attitude.
It
appears
to
me
that
this
sale
—
having
concerned
a
property
whose
size
and
location
were
more
in
line
with
those
of
the
subject
property
—
is
a
far
better
indicator
of
value
than
any
other
I
was
referred
to,
and
the
time
adjustment
it
requires,
in
view
of
the
evidence
that
for
many
years
before
Valuation
Day
the
prices
of
real
estate
had
been
stable,
can
certainly
not
be
estimated
at
more
than
half
the
amount
suggested
in
the
report.
For
those
reasons,
on
the
basis
of
the
expert
evidence
adduced
on
behalf
of
the
plaintiff,
I
set
the
market
value
of
the
land,
on
Valuation
Day,
at
$750
an
acre.
This
amount
is
the
one
to
be
used
as
the
adjusted
cost
base
for
the
purpose
of
determining
the
capital
gain
realized
by
the
plaintiff
on
the
sale
of
his
property
in
1975.
The
reassessments
will
therefore
be
vacated
and
the
matter
will
be
referred
back
to
the
Minister
of
National
Revenue
for
reassessments
on
the
basis
of
my
conclusions.
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