National Capital Commission v. McFarland Contruction Co. Ltd., [1974] SCR 1088

Supreme Court of Canada

National Capital Commission v. McFarland Contruction Co. Ltd., [1974] S.C.R. 1088

Date: 1972-06-29

National Capital Commission Appellant;

and

H.J. McFarland Construction Company Limited Respondent.

1972: May 4; 1972: June 29.

Present: Abbott, Judson, Hall, Spence and Pigeon JJ.

ON APPEAL FROM THE EXCHEQUER COURT OF CANADA

Expropriation—Compensation—Market value—Special value to owner—Notice of expropriation—Expenditures before expropriation—Delay in filing notice—Carrying charges during delay—Damage resulting from expropriation—Interest as damages.

Respondent took an option on a piece of land which it subsequently purchased for use as a quarry after drilling operations and analyses showing stone suitable for crushing. To secure adequate access it purchased one acre from the owner of an adjacent lot over which there was a railway siding. It proposed to obtain crushed stone from this property to build a length of Riverside Drive in Ottawa. However, it was informed by letter that appellant had decided to acquire all the lands in the Green Belt, and this would involve acquisition of the property in question. However, the notice of expropriation was not registered until one year later. Respondent obtained another site where it was unable to have a railway siding. Appellant appealed from the judgment of the Exchequer Court fixing the compensation at $90,000, and respondent entered a cross-appeal.

Held: The appeal should be allowed; the cross-appeal should be dismissed.

Respondent expected that operating a quarry on the expropriated site it would realize greater profits than if operating from another site. There is nothing to prove that due to those facts the property had a special value to the owner beyond its market value which took into account its potential use for quarrying.

The principle in this class of case is that the owner should be left as nearly as possible in the same position financially as he was prior to the taking,

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provided that the damage, loss or expense for which compensation is claimed was directly attributable to the taking of the lands. The market value reflects only the price for which the property could be expected to be sold, without taking into account the drilling and analysis expenses necessarily made for ascertaining whether it was fit for quarrying. By the expropriation respondent was deprived of the benefit of this expenditure, the amount of which must be added to the market value. Further, after receiving appellant’s letter respondent was obliged to bear carrying charges on the property for just about a full year while being prevented from deriving any benefit therefrom, because appellant delayed filing the notice of expropriation until June 14, 1961. Interest on the compensation runs from that date.

On the basis that every damage caused by the expropriation should be compensated, it seems proper to allow respondent, on account of the delay, six per cent on the compensation, which is the interest stipulated in the deed for the alternative site.

[Jalbert v. The King, [1937] S.C.R. 51; Irving Oil Company Ltd. v. The King, [1946] S.C.R. 551, relied on.]

APPEAL from a judgment of the Exchequer Court of Canada fixing the amount of compensation for an expropriated property. Appeal allowed and judgment varied as to the amount. Cross-appeal dismissed.

E.M. Thomas, Q.C., and G.W. Ainslie, Q.C., for the appellant.

W.B. Williston, Q.C., and J. Laskin, for the respondent.

The judgment of the Court was delivered by

PIGEON J.—This appeal is from a judgment of the Exchequer Court fixing at $90,000 the compensation for a property expropriated by the National Capital Commission (the Commission). There is also a cross-appeal by the expropriated owner (the Company).

The subject property was farm land in the Township of Nepean, some two miles west of the village of Bells Corners. It was acquired by the Company with the intention of using it for a

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quarry site. The Company had been operating as a contractor in the Ottawa region since 1951. It had been engaged mainly in building runways at the Uplands Airport and also in some road building. It was operating an asphalt plant and a quarry but this was on airport land and it was not authorized to do any quarrying there for other purposes. On April 15, 1958, it took a three-month option on the subject property at $250 an acre. Diamond drilling was then done and a quantity of stone was obtained by a large blast for testing. The result of the tests being judged satisfactory, the 50 acres were purchased. This area was in the form of a triangle bounded on one side by the C.P.R. right-of-way. It had only nine feet of frontage on a road allowance which was its only access to a highway. In order to have an adequate access and also, it was said, to facilitate the laying of a railway siding, another acre was obtained from the owner of an adjacent lot at a cost of $5,000. This additional area was expropriated with the main plot, the total area taken being 51.112 acres.

In 1959, the Company contracted with the Federal Public Works department for building a substantial length of Riverside Drive and it proposed to use for that purpose crushed stone to be obtained from the subject property during the coming winter. Before the end of the year, it was informed that it would not be allowed to open up a quarry in that location because this was in the Green Belt. On April 6, 1960, a letter was sent by the Commission to the Company’s real estate agent advising him that the Commission has “decided to reiterate its policy that it would be acquiring all the lands in the Green Belt” and that this would “involve the acquisition” of the property in question. Shortly after that, namely on May 25, 1960, the Company acquired rights to another site outside the Green Belt on Moodie Drive, the price being $126,750 for 174.75 acres.

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The notice of expropriation was registered June 14, 1961, and the Commission offered $31,000 as total compensation. The Company claimed $430,000. At the trial, an agreed statement of facts was filed in which it was stated “that the market value of the subject property on the date of expropriation, namely June 14, 1961, was $31,000”. It was also admitted that the Company “had at the date of expropriation, spent a sum of approximately $15,000 for administration costs and exploration expenses”. Evidence was given on behalf of the Company, not only of the much higher cost of the other quarry site, but also of the additional haulage costs actually incurred from the new location. Evidence was also given of all the savings that could have been effected by using a railway siding at the expropriated site, something which was not possible on Moodie Drive. On the other hand, the Commission submitted expert evidence as to the additional cost which would have been incurred for drilling and crushing at the expropriated site because the rock was sandstone instead of limestone. The Company’s experts did not deny that there would be some increase in cost on that account but considered it insignificant compared to the other items.

The trial judge concluded as follows:

The rock required by defendant for its business is relatively plentiful and not difficult to find in the area so it would be wrong to attribute an exaggerated value to the property merely because it contains rock suitable for road building and similar operations, but the important fact which differentiates the value of one property containing such a rock deposit from another such property in the eyes of a person in the gravel, asphalt and road contracting business, is the location of such rock deposit, its accessibility to main highways along which it can be transported to job sites, and its accessibility to a railroad siding, to the extent that such siding can be useful in connection with the business. I believe that with the exception of the single negative factor that the sandstone rock on

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subject property was not as desirable as the limestone rock found in other properties, the subject property possessed considerable advantages to the owner over other properties in the area available at the time, and in fact defendant has established that the best alternative property which it could acquire possessed several disadvantages for its purposes compared with subject property. Under the circumstances it appears that defendant has established that it would have been willing to pay a price substantially in excess of the market value of subject property rather than be dispossessed of it and prevented from using it as it intended in its business operations. While it is difficult to determine this value by any mathematical computation, I would, on the basis of the evidence presented before me, fix the figure it would pay at $90,000.

It will be noted that nothing shows on what basis the amount of $90,000 was arrived at and it does not appear that there is in the evidence any basis on which this amount could be reached by mathematical calculation from figures submitted. In Jalbert v. The King[1], Davis J. speaking for the Court, after stating (at p. 68).

The authorities therefore clearly justify us in proceeding with the ascertainment of damages on the basis of the land having been expropriated.

said (at p. 72):

Counsel for both parties admit that there was no evidence given at the trial by any one as to the value of the suppliant’s estate in the lands before or of the value after the construction of the public work complained of. Counsel for the suppliant admitted that the evidence in support of the claim for damages was directed solely to showing an increased cost in operating the suppliant’s lumber business on the property under the changed conditions and establishing some capitalized value of the loss. Now that is plainly the wrong principle to apply in the ascertaining of the damages.

In the present case the situation of the expropriated owner is clearly less favourable than that of the claimant in the Jalbert case. It is not a going business that was expropriated but land

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acquired in view of the establishment of a business. While the evidence shows that the Company was unable to obtain another site having access to a railway line, it is clear that there was no scarcity of sites suitable for quarrying in the same general area. Therefore, the market value necessarily reflected the potentiality of use for such purpose. On the evidence in this case, it does not appear that there was any special economic value established as existing at the date of the expropriation in addition to the market value. All that is shown is that the Company expected that operating a quarry on the expropriated site it would realize greater profits than if operating from another site. There is nothing to prove that due to those facts the property had a definite special value to the owner beyond its market value which took into account its potential use for quarrying.

There is, however, another element which should be taken into consideration, namely the amount of $15,000 that was spent in drilling and testing. It is clear that this was not taken into account in the market value as established in this case. The report of the expert who found this value was filed as an exhibit. It includes a list of the sales used in the estimating. The subject property is included in this list and the price mentioned in the amount paid to the vendors only. Similarly, the Moodie Drive property is included at the price paid without any addition for the drilling and testing expenses that were incurred. It is, therefore, apparent that the market value as established and admitted reflects only the price for which the property could be expected to be sold, without in any way taking into account the expenses that were necessarily made by the Company for ascertaining whether it was fit for quarrying. It is equally obvious that by the expropriation the Company was deprived of the benefit of this expenditure. It should therefore be compensated. In Irving Oil Company Ltd. v. The King[2], Kerwin J. said:

It was argued in the Exchequer Court of Canada, before the late President Maclean, in Federal District

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Commission v. Dagenais (1935) Ex. C.R. 25, that no compensation could be allowed for certain items there claimed because they did not represent an estate or interest in the lands taken. While saying nothing of the correctness of the list of things for which compensation has been allowed and enumerated by the late President, I agree with him that the principle in this class of case is that the displaced owner should be left as nearly as possible in the same position financially as he was prior to the taking, provided that the damage, loss or expense for which compensation was claimed was directly attributable to the taking of the lands.

In my view, the sum of $15,000 should be added to the market value of $31,000 in order to arrive at the compensation properly payable for the lands expropriated in this case.

Consideration should also be given to the fact that the Company was in fact obliged by the Commission to bear carrying charges on the subject property for just about a full year while being prevented from deriving any benefit therefrom. As a rule an owner left in undisturbed possession is not prejudiced by delay in the filing of the notice of expropriation, because he keeps enjoying the fruits of the land. Here, it was otherwise. The Company, after receiving the April 6, 1960 letter, had to obtain promptly another quarry site while its money invested in the subject property was remaining unproductive. Because the notice of expropriation was filed only on June 14, 1961, interest on the compensation runs from that date only.

On the basis that every damage caused by the expropriation should be compensated, it appears to me that in fairness to the owner an allowance should be made on that account. No data was submitted with respect to municipal taxes which cannot be substantial due to the very low assessment of $1,500. However, the deed for the alternative site stipulates six per cent interest on the purchase price. Under the circumstances, it seems proper to allow on account of the delay six per cent on the compensation, that is $2,760 making a grand total of $48,760.

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I would therefore allow the appeal and vary the judgment of the Exchequer Court by substituting the amount of $48,760 for that of $90,000 as the amount of compensation payable and the amount of $25,760 for that of $67,000 as the balance due on which interest is payable at five per cent per annum from September 15, 1961. The cross-appeal should be dismissed and in view of the divided success and the nature of the case, there should be no order as to costs in this Court.

Appeal allowed and cross-appeal dismissed without costs.

Solicitor for the appellant: D.S. Maxwell, Ottawa.

Solicitors for the respondent: Clark, Mac-Donald, Connolly, Affleck, Brocklesby, Gorman & McLaughlin, Ottawa.