National Capital Commission v. Sheahan, [1971] SCR 406

Supreme Court of Canada

National Capital Commission v. Sheahan, [1971] S.C.R. 406

Date: 1971-02-01

National Capital Commission Appellant;

and

Clarence M. Sheahan and Margaret B. Sheahan Respondents.

1970: May 13, 14, 15, 28; 1971: February 1.

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

ON APPEAL FROM THE EXCHEQUER COURT OF CANADA

Expropriation—Operation of sand pit on parcel expropriated—Market value—Best and most advantageous use—Business disturbance.

In October 1960, the appellant expropriated 17.5 acres of land out of 68 acres which the respondent had acquired in the latter part of 1958 for a price of $80,000. A sand pit on the 68‑acre parcel had been opened by the respondent’s predecessors in title. The expropriated portion was at the rear of the parcel, was landlocked and the whole 68 acres was required for the sand pit operation of the respondent. He reconstructed an existing road, built an additional road and culvert and renovated certain buildings, all of which were located on the unexpropriated parcel. Extraction of the sand at the rear of the property could only be effected by using these facilities. So long as that business was carried on, the property could not be developed for residential purposes. On the date of the expropriation, the respondent entered into a contract to supply approximately 131,000 tons of sand to be taken from the expropriated property. This contract was carried out after the expropriation, in part by sand taken from the expropriated property, and in part from sand obtained elsewhere.

The trial judge awarded $225,000 as the market value of the 17.5 acres, $100,000 in connection with the contract and for business disturbance and $10,000 for injurious affection. (This last claim was abandoned at the hearing before this Court). The Commission appealed to this Court and the respondent cross-appealed.

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

In arriving at market value, as distinct from value to the owner, the trial judge erred in principle in failing to ascertain the market value of the whole parcel of land before expropriation and deducting

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therefrom the value of the unexpropriated portion. At the date of expropriation, no prudent purchaser, contemplating the operation of a sand pit on the property, would have paid more than $3,000 per acre, the value put on the remainder of the property for residential purposes. The amount of $80,000 awarded as damages arising out of the contract to supply sand was based upon evidence accepted by the trial judge, and should not be interfered with. The amount of $20,000 for business disturbance was on the low side. The evidence establishes that considerable sums were spent for the improvements and only a portion of them would be of continuing value to the unexpropriated parcel. An additional $25,000 should be allowed under this head.

APPEAL and CROSS-APPEAL from a judgment of Walsh J. of the Exchequer Court of Canada, in an expropriation matter. Appeal allowed and cross-appeal dismissed.

Eileen Mitchell Thomas, Q.C., G.W. Ainslie, Q.C., and J.E. Smith, for the appellant.

J.T. Thorson, Q.C., and W.G. Burke-Robertson, Q.C., for the respondents.

The judgment of the Court was delivered by

ABBOTT J.—This is an appeal and cross-appeal from a judgment of the Exchequer Court of Canada rendered July 23, 1969, fixing the sum of $335,000 as the compensation to be paid to respondents for the expropriation of 17.5 acres of land out of 68 acres in the Township of Nepean, owned by the respondent Clarence M. Sheahan, in which his wife the co‑respondent, Margaret B. Sheahan, possessed an inchoate right of dower. Notice of expropriation was given on October 4, 1960.

The facts are fully reviewed in the judgment below and can be briefly summarized for the purposes of this appeal.

The respondent Clarence M. Sheahan appears to have acquired the said lands in the latter part of 1958 (a deed was executed early in January 1959) for a price of $80,000 (approximately $1,200 per acre) payable $25,000 cash and the balance secured by mortgage in favour of the vendor.

[Page 408]

The respondents remained in possession of the 17.5 acres expropriated until March 1, 1961, and the parties agreed that interest on any compensation would run from March 1, 1961.

At the date of expropriation, the expropriated parcel contained 1,354,000 cubic yards of sand material equal to the sand cushion specification of the Department of Highways of Ontario and, of this amount, 450,000 cubic yards were below the water line and would require dredging for their removal.

The 68-acre parcel of land had a frontage of 300 feet on the Greenbank Road, and the only access to the property was from that road. A sand pit on the 68-acre parcel had been opened by the respondents’ predecessors in title in 1955.

In June 1958, C.M. Sheahan and Son Construction Limited (a company which was wholly owned by Clarence M. Sheahan) had leased from one Majeau, the then owner, the 68-acre parcel on which certain buildings were located, for a term of two years, at a rental of $250.00 per month. At the same time, Clarence M. Sheahan Equipment Rentals (Ottawa) Limited (which was also wholly owned by Sheahan) went into possession of the lands. The lease specifically provided that the tenant was not to remove sand or gravel without permission from the landlord. As I have stated, in January 1959, respondents acquired title to the said parcel. The 68-acre parcel was leased by Sheahan to the two companies which he controlled. The rent payable was “whatever suited our book-keeping for the year”.

Sheahan testified that, in the fall of 1958 and in the spring of 1959, he reconstructed the road which ran from Greenbank Road to the sand deposit which was located at the rear of the parcel and that, in the course of reconstruction, a culvert was installed in the gully which traverses the property. In the spring of 1960, an additional road and culvert were constructed.

At the westerly end of the 68-acre parcel of land, where the pit was located, there was a very high water table. The water level was 10 to 12 feet from the surface and, in the spring, it was even higher. In order to extract all of the sand in the deposit, it was necessary to construct a ditch. Sheahan constructed a new ditch which ran

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from the deposit through the unexpropriated parcel and was thereby able to extract the sand to a depth of 30 to 35 feet.

At trial, Sheahan gave an estimate of $125,000 as the probable cost of installing the ditch, culverts and roads. No records were produced to substantiate these expenditures and the improvements are not shown as assets in the financial statements of the two Sheahan companies. Mr. Paterson, a witness called by the respondents, stated on examination‑in‑chief, with respect to the figure of $125,000 that “It seems a little high to me and I would be inclined to estimate perhaps $75,000.” He also testified that he had never seen the work said to have been done to cross the gully.

Mr. Wall, an engineer for Dibblee Construction Company, who was called on behalf of the appellant, stated that the practice of all companies was to install only temporary inlets or outlets and that this can be done “very, very cheaply”. It was rare for Dibblee to spend more than $500 for the construction of a culvert, and it had cost Dibblee $1,500 to construct a bridge and approach roads on the Nelms-Moffatt property, which lay south of the expropriated lands and through which the same gully ran.

On October 4, 1960, the date of the expropriation, C.M. Sheahan & Son Construction Limited entered into a contract with Rayner Construction Limited to supply approximately 131,000 tons of sand cushion material to be taken from the expropriated property. This contract was carried out after the expropriation, in part by sand taken from the expropriated property, and in part from sand obtained elsewhere.

In fixing compensation at the sum of $335,000, the learned trial judge did so on the following basis:

Market value of the 17.5 acres, calculated with reference to the potential anticipated profits which respondent would have realized from the operation of a sand pit thereon...................................................................................................................................	$225,000
Damages in connection with the Rayner contract and for business disturbance..........	100,000
Damages for injurious affection..........................................................................................	10,000
	$335,000

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The appellant asks that this amount be reduced to $90,000 and by their cross-appeal respondents ask that it be increased to $798,000.

At trial, Sheahan’s position was that the best and most advantageous use, present and prospective of the expropriated parcel was use as a sand pit and that he was entitled to have market value estimated on that basis.

The appellant’s position was and is that the best and most advantageous use of the whole parcel of 68 acres and the remainder of the parcel after expropriation was for use as a future residential subdivision, and that the lands before and after expropriation had a market value of $3,000 per acre.

Both parties were in agreement that, after the expropriation, the best and most advantageous use, present and prospective, of the unexpropriated portion was use as a future residential subdivision and that, on this basis, it had a fair market value of $3,000 per acre.

In arriving at market value (as distinct from value to the owner), the learned trial judge, in my opinion, erred in principle in failing to ascertain the market value of the whole parcel of land before expropriation and deducting therefrom the value of the unexpropriated portion. The expropriated portion was at the rear of the parcel, was landlocked and the evidence is clear that the whole 68 acres was required for the operation of the respondent Sheahan’s business. For that purpose, he appears to have reconstructed an existing road, built an additional road and culvert and renovated certain buildings, all of which were located on the unexpropriated parcel. Extraction of the sand at the rear of the property could only be effected by using the facilities to which I have referred. So long as that business was carried on, the property could not be developed for residential purposes.

At the time of the purchase by Sheahan in January 1959, the property was being used for the extracting of sand. Unquestionably that fact was reflected in the purchase price of approxi-

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mately $1,200 per acre for the whole 68 acres. Confirmation of this is to be found in the sale in July 1958 of the Terrace property, immediately to the south of the Sheahan property, for approximately $885 per acre. That property had a sand deposit of approximately 2,300,000 cubic yards.

Both properties are near the Queensway which was then in the course of construction. The increase in value from $1,200 per acre in January 1959, to the agreed figure of $3,000 per acre in October 1960 for the unexpropriated portion of the parcel of land, clearly reflected the sharp increase in the value of land for residential purposes in this part of the Ottawa Metropolitan Area. In my view at the date of expropriation, no prudent purchaser, contemplating the operation of a sand pit on the property, would have paid more than $3,000 per acre, the value put on the remainder of the property for residential purposes. It follows that the market value of the whole parcel should have been fixed at $204,000 and of the 17.5 acres expropriated, at $52,500.

There remains for consideration the additional amount of $110,000 awarded by the learned trial judge as damages arising out of the Rayner contract, for business disturbance and for injurious affection to the remainder of the property. At the hearing before us, counsel for respondents stated that the award of $10,000 for injurious affection could not be supported on the evidence and it was abandoned. Of the remaining amount of $100,000, the trial judge found that Sheahan had suffered direct damage in connection with Rayner contract resulting in a financial loss to him of $80,000 as a consequence of the expropriation, and to this amount he added a sum of $20,000 for business disturbance.

The amount awarded with respect to the Rayner contract appears to me to be generous. However, it was based upon evidence, accepted by the trial judge, and should not be interfered with. On the other hand, the amount of $20,000 for business disturbance seems to be on the low side.

[Page 412]

In discussing this item, the learned trial judge said this:

Defendant furthermore suffered considerable business dislocation. His quarrying business was not one which could be merely moved to another address, with no loss save for moving costs, as no similarly located quarries were available. The substantial quantities of equipment which he had accumulated to operate it were left temporarily idle unless and until he could find other work in which they could be used. His source of income from profits from his sales of sand was abruptly cut off while his expenses for interest on loans, and commitments to repay liabilities which he had incurred in connection with the rapid expansion and development of his business continued. While these latter damages are too indirect to permit compensation they would all, no doubt, enter into his thinking in deciding what he would have been willing to give for the land if he did not own it, sooner than fail to obtain it, which is the criterion of value to the owner. In his evidence he himself fixed this figure at $350,000. I believe that considering the loss of the Rayner contract alone, and the other factors mentioned it would be very conservative to allow an additional $100,000 over the $225,000 which I have fixed as the market value, making a total of $325,000 as the value to the defendant as owner.

As I have indicated, the evidence as to the improvements made to the property for roads, ditches and the like is not too satisfactory. However, it does establish that considerable sums were spent for these improvements and only a portion of them would be of continuing value to the unexpropriated parcel. In all the circumstances, I would allow an additional $25,000 to the sum fixed by the trial judge as damages for business disturbance, making a total under this head of $45,000.

I would therefore allow the appeal with costs in this Court and vary the judgment of the Exchequer Court by awarding to respondents as compensation for the lands taken the sum of $177,500 with interest at the rate of 5 per cent per annum thereon from March 1, 1961, to Feb-

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ruary 2, 1968, and on the balance of the compensation monies after deducting the advance payment of $50,000, from February 2, 1968, to the date of judgment.

The cross-appeal should be dismissed with costs.

Appeal allowed with costs; cross-appeal dismissed with costs.

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

Solicitor for the respondents: J.T. Thorson, Ottawa.