Supreme Court of Canada
Canadian Pacific Ltd. v. City of Montreal, [1978] 2 S.C.R. 719
Date: 1978-03-21
Canadian Pacific Limited Appellant;
and
City of Montreal Respondent.
1977: November 4; 1978: March 21.
Present: Ritchie, Spence, Pigeon, Dickson and Pratte JJ.
ON APPEAL FROM THE COURT OF APPEAL FOR QUEBEC
Municipal law—Valuation—Land used for railway purposes—Actual value—Special methods of valuation—Most appropriate method in the circumstances—Charter of the City of Montreal, S.Q. 1959-60, c. 102.
Appellant is the owner of certain lands used for railway purposes only. Appellant succeeded in its appeal to the Provincial Court against the valuation of this land adopted by the Board of revision of the City of Montreal for the years 1964-65 to 1968-69. The Provincial Court held “that an increase of nearly two hundred per cent in the valuation of appellant’s land between 1962 and 1968 inclusive, compared to forty per cent in the same period for the land on which respondent’s incinerator stood, is arbitrary and causes manifest injustice to appellant”, and adopted the value fixed by the witnesses for appellant rather than that set by the Board of revision. The Court of Appeal reversed this judgment on the ground that the valuation method adopted by the Provincial Court, namely “the developer’s approach”, did not comply with the principles established by the cases, and that consequently the trial judge was not justified in substituting this method for the one adopted by the Board of revision. Hence the appeal to this Court.
Held: The appeal should be allowed.
No mathematical criteria were used in the valuation method adopted by the Board of revision. Each of the factors referred to is a matter of opinion. The decision of the Board of revision not only fails to indicate how it arrived at the value adopted, but mentions, in justification of its conclusions, a valuation by respondent of its own property. The method used by the Provincial Court, on the other hand, is the only precise method submitted to the Court and the only one based on figures arrived at mathematically on proven bases. The Court of Appeal was not justified in concluding that “the developer’s approach” is legally inadmissible in the circumstances. Although this Court and the Privy Council have already approved other valuation methods, it would be wrong to
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hold that only the methods they approved were valid. Where special circumstances make it impossible to fix the realizable value of property by the usual methods, whatever method is appropriate in the circumstances may be used to estimate the property at its actual value. In the case at bar, since no one suggested using a method other than the one adopted by the Provincial Court, the judgment of that Court was justified.
Sun Life Assurance Co. of Canada v. The City of Montreal, [1950] S.C.R. 220, aff’d [1952] 2 D.L.R. 81 (P.C.); Canadian Pacific v. City of Sudbury, [1961] S.C.R. 39; Montreal Island Power Co. v. City of Laval des Rapides, [1935] S.C.R. 304; Canadair Limited v. City of St-Laurent, [1974] C.A. 613, aff’d [1978] 2 S.C.R. 79; Guy Towers Inc. v. City of Montreal, [1968] Que. Q.B. 277, aff’d [1969] S.C.R. 738; City of Ste-Foy v. Société Immobilière Enic Inc., [1967] S.C.R. 121; City of Toronto v. Ontario Jockey Club, [1934] S.C.R. 223, referred to.
APPEAL from a decision of the Court of Appeal reversing a judgment of the Provincial Court setting aside a decision of the Board of revision of valuations of the City of Montreal. Appeal allowed.
Pierre Durand, for the appellant.
Marcel Gerbeau, for the respondent.
The judgment of the Court was delivered by
PIGEON J.—This appeal as of right is against a judgment of the Court of Appeal of Quebec dated November 12, 1974, reversing the judgment of the Provincial Court and restoring a decision of the Board of revision of valuations of the City of Montreal with respect to the municipal valuation of some of appellant’s lands for the years 1964-1965 to 1968-1969.
It should be noted that the evidence on which this case was decided was all submitted to the Board of revision. On appeal from the Board the Provincial Court ruled on the record thus constituted and adopted the value fixed by the witnesses for appellant rather than that set by the Board, considering, it says, [TRANSLATION] “that
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an increase of nearly two hundred per cent in the valuation of appellant’s land between 1962 and 1968 inclusive, compared to forty per cent in the same period for the land on which respondent’s incinerator stood, is arbitrary and causes manifest injustice to appellant”.
The land in question is in a very special situation. In the Court of Appeal, Bélanger J.A. said:
[TRANSLATION] The Board of revision visited the site and provided the following description of the subject land (J.R., p. 10):
During the years in question, the subject land was used for railway purposes only. It was used as a receiving yard for freight cars.
In 1964, only part of the land was actually occupied by railway tracks and access roads, but other tracks and buildings were gradually added in subsequent years.
When we visited the site on June 25, 1969 after the hearing, in the presence of complainant’s representatives and one of its counsel, tracks and railway utility buildings occupied most of the land.
The Board of revision also stated that the land enjoyed no municipal services and had limited access, and that for these reasons its value was less than that of many of the parcels of land sold in that sector which enjoyed municipal services and bordered on public roadways.
In its submission, respondent pointed out that there was no access to the south side of the land and that, although Ferrier and Paré Streets ended at the north side of the land, there was no access to these two streets.
With respect to the decision of the trial judge, Bélanger J.A. began by saying:
[TRANSLATION] First, it may be noted that the trial judge correctly summarized the cases on the scope of such appeal when he posed the question as follows (J.R., p. 239):
Can we conclude that the decision of the Board of revision of the City of Montreal is based on wrong principles, or has disregarded important evidence, or has caused manifest injustice to appellant, in light of the only principle which should guide the assessors, the Board of revision and this Court, namely
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“All property must be estimated at its actual value for municipal purposes”?
The comment made a little farther on also complies with the principles established by the cases later referred to (J.R., p. 240):
The Board of revision did not err in holding that appellant’s lots should be valued in accordance with their condition and use for railway purposes in each of the valuation years from 1964 to 1968 inclusive, and that they had a lower value than many of the lots sold which bordered on public roadways and enjoyed municipal services.
However, the same is not true of the trial judge’s decision to adopt the method of valuation used by the representative of one of respondent’s subsidiaries and to substitute the latter’s valuation for that made by the Board of revision. The method suggested by this expert witness, called the “developer’s approach”, whereby the property is considered “bulk land” or “raw land”, seemed to him to be justified by the fact that it appeared to be impossible to establish the actual value of the property by comparison with other sales in the sector. After discussing the methods used by the assessor and the Board of revision, the trial judge approved the method outlined by respondent in the following terms, and then fixed the value of the lots at the amounts suggested in the report (J.R., p. 246).
It is therefore clear that the sales reported cannot be of assistance in resolving the dispute, and that in the circumstances the method used by appelant’s expert witness is more realistic and comes closer to the notion of actual value. Since these figures were not contradicted, they must be accepted as presented.
In other words, the valuations mentioned in the conclusions of the judgment a quo were arrived at by a method which presupposed that a buyer was planning a subdivision, that is, by determining the price that a buyer would reasonably be justified in paying for a land when he planned on reselling it in several lots to be used for industrial purposes by various purchasers. The calculations of respondents’s expert witness were based on a subdivision project, and on the amounts which could be obtained from the sale for industrial purposes of lots available after allowance was made for streets and parks, minus the subdivision and legal costs, the agents’ commissions, a ten per cent profit for the promoter, and a deferred disposal rate on the subdivided land based on three years; arriving by this reverse calculation at an
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average unit amount or price per square foot, which was submitted as a valuation.
This method of valuation, accepted by the trial judge, was submitted in evidence to the Board of revision by respondent’s expert witness, but was rejected by the Board. This is no doubt what caused the trial judge to remark that important evidence had been disregarded.
After reviewing prior cases in the Court of Appeal of Quebec, Bélanger J.A. gave the following reason for rejecting, with the concurrence of his brother judges, the method of valuation approved by the Provincial Court:
[TRANSLATION] It should be noted that the method of valuation adopted by the Provincial Court to replace that of the Board of revision does not comply with the principles established by the cases. It does not fix the realizable value of the property in accordance with its condition and use at the time of the valuation. It in no way takes into account the amount which the owner would be prepared to pay for like property for similar needs. In other words, since no sale of the property is foreseeable and there is no comparable sale in the sector, it is not the actual value as defined above which was sought. With all due respect for the opinion of the trial judge, even assuming he was right in not being satisfied with the valuation method of the Board of revision, this Court must hold that the method substituted for it is ill-founded.
With respect, I cannot agree that the “developer’s approach” is legally inadmissible in the circumstances. The effect of the decisions of this Court and of the Privy Council in Sun Life Assurance Co. of Canada v. The City of Montreal, is that, where special circumstances make it impossible to fix the realizable value of property by the usual methods, special methods must be used: “There must always be a number of exceptional cases, to which the ordinary rules cannot be applied…” (per Lord Porter, at p. 101).
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It is clearly impossible to fix the value of the subject land in its present condition and use at the time of the valuation, since it is a part of a large railway system. In Canadian Pacific v. City of Sudbury, a case decided under the law of Ontario, Judson J., expressing the unanimous opinion of the Court, said (at pp. 42-43):
…The Assessor is not required to value these assets as part and parcel of the whole Canadian Pacific Railway system and base his valuation upon the earnings of the system. The subsection does not require this and the sheer impossibility of such task is sufficient to condemn this interpretation.
It is equally impossible to try to determine how much the owner would be prepared to pay for like property for similar needs—the requirements of the system would force it, if it had to move, to pay a price determined by factors other than those used in making municipal valuations. In Montreal Island Power Co. v. City of Laval des Rapides, where the subject land was purchased for the purpose of flooding it for a hydro-electric development, the following was stated (at p. 318):
…the acquisition price paid once for all to avoid the payment of damages to the riparian owners is not the actual value to the company after the property has been flooded. It represents the value to the vendor plus the value of the special adaptability and immediate prospects and, besides, the damages resulting from the expropriation.
Recently (on November 16, 1977) this Court affirmed the judgment of the Court of Appeal in Canadair Limited v. City of St-Laurent. The “land residual technique” had been taken into account in the valuation under attack. This was a huge tract of land used for an airplane building plant, which could not be valued as an ordinary lot. We did agree that consideration should be given to its ecomomic value, determined on the basis of the value of the whole less the valuation of the buildings, which was not contested. In Guy
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Towers Inc. v. City of Montreal, this Court affirmed a judgment of the Court of Appeal, the headnote of which stated:
[TRANSLATION] Where it is impossible to make a comparative analysis of recent sales of property similar or comparable to that of the subject property (in the case at bar, property one‑half of which is occupied by an office building with two basements and fifteen storeys, the other half by a parking lot), the Board of revision must consider two other factors, namely the replacement value and the economic value.
In my view it would be wrong to hold that these cases indicated approval only of the specific methods used. The principle on which they are based is that whatever method is appropriate in the circumstances may be used when the more usual methods cannot be applied. In the case at bar, no one suggested the possibility of using a method other than that approved by the Provincial Court.
One last question must therefore be examined: was the Court of Appeal justified in approving the valuation method adopted in the decision of the Board of revision? Bélanger J.A. quoted the following passages in this regard:
[TRANSLATION] Our analysis, especially the analysis of the sales which, among those submitted, might help us to ascertain the value of the subject land, and an analysis of the sector in which complainant’s land is located, have led to the following conclusions:
(1) the land must be valued in accordance with its condition and use at the time of each valuation;
(2) the same conditions apply to the land as a whole;
(3) the said land enjoys no municipal services and has limited access: for these reasons, its value is lower than that of other lots which are serviced and border on public roadways;
(4) the value of the lots in the said sector has progressively increased from year to year in the period under study.
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Bearing in mind the location of the subject land and the conditions which affect its value, the following valuations are made:
No mathematical criteria were used in this valuation—each of the factors mentioned is just a matter of opinion. At the hearing, counsel for the respondent stated that the valuations had been based, first, on the basic rate per square foot for the ward, but the evidence did not show how this rate was established. It was, in any case, clearly the valuation of lots which are in no way comparable, since they are ordinary lots served by public roadways. In view of this important difference, the assessors, the Court was told, reduced the basic rate by 50 per cent for part of the land and by 75 per cent for the balance. The decision of the Board of revision does not indicate how it then arrived at the lower value adopted. The only information provided after the above-cited passages of the decision is the value set per square foot, the area, and the total valuation for each year. Then, the following is added:
[TRANSLATION] In addition, we find that the unit rates, which we consider reasonable, are very close to those set by the assessor for a large tract of land adjacent to that of complainant, which belonged to the City of Montreal and was given Account No 471074. It is 2,605,963 square feet in area, and its conditions are basically the same as those of complainant’s land.
Counsel for the appellant was justified in questioning this part of the decision. How could the Board reasonably take into account in respondent’s favour the valuation of its own property?
It is therefore clear that the valuation made by the Board of revision rested solely on the assessment by its members of the various relevant factors, without any mathematical basis of calculation. It is true that the Charter of the City of Montreal does not expressly oblige the Board of revision to give such information, but ss. 873 and 874 of the Charter provide for a right of appeal to the Provincial Court, which must decide on the record compiled before the Board of revision without further evidence. These enactments do not
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materially differ in these respects, from those which were in force at the time of the Sun Life case.
In that case, the Board had given the bases for its calculations. It had decided to take into account the replacement cost to the extent of 82.3 per cent and the market value to the extent of only 17.7 per cent. It was on this point that the trial judge, whose decision was restored by this Court, held there was an error. He ruled that equal weight should be given to both factors.
Here the decision of the Board of revision does not indicate how the value set was arrived at from the information provided in the evidence. Its valuation cannot therefore stand up against figures arrived at mathematically on proven bases, and by the only precise method submitted to the Court. It may be noted that this was the method used for expropriation purposes in City of Ste-Foy v. Société Immobilière Enic Inc. It was also applied in an Ontario case to assess the value of race tracks (City of Toronto v. Ontario Jockey Club).
In my opinion, the judgment of the Provincial Court was well-founded and should therefore be restored.
For these reasons I would allow the appeal, set aside the judgment of the Court of Appeal and restore the judgment of the Provincial Court with costs throughout against the respondent.
Appeal allowed with costs.
Solicitors for the appellant: Gadbois, Joannette & Durand, Montreal.
Solicitors for the respondent: Péloquin, Badeaux, Allard & Lacroix, Montreal.
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