Date: 20031215
Docket: A-169-03
Citation: 2003 FCA 476
CORAM: LÉTOURNEAU J.A.
NADON J.A.
PELLETIER J.A.
BETWEEN:
LYDIA HWITSUM, Chief of the Cowichan Tribes,
as trustee of the members of the Cowichan Tribes
Appellant
and
HER MAJESTY THE QUEEN IN RIGHT OF CANADA,
THE MINISTER OF INDIAN AFFAIRS AND NORTHERN
DEVELOPMENT, THE ATTORNEY GENERAL OF CANADA,
and VENTURE LEASING LTD.
Respondents
Heard at Vancouver, British Columbia on December 15, 2003.
Judgment delivered from the Bench at Vancouver, British Columbia on December 15, 2003.
REASONS FOR JUDGMENT OF THE COURT BY: LÉTOURNEAU J.A.
Date: 20031215
Docket: A-169-03
Citation: 2003 FCA 476
CORAM: LÉTOURNEAU J.A.
NADON J.A.
PELLETIER J.A.
BETWEEN:
LYDIA HWITSUM, Chief of the Cowichan Tribes,
as trustee of the members of the Cowichan Tribes
Appellant
and
HER MAJESTY THE QUEEN IN RIGHT OF CANADA,
THE MINISTER OF INDIAN AFFAIRS AND NORTHERN
DEVELOPMENT, THE ATTORNEY GENERAL OF CANADA,
and VENTURE LEASING LTD.
Respondents
REASONS FOR JUDGMENT OF THE COURT
(Delivered from the Bench at Vancouver British Columbia on December 15, 2003)
LÉTOURNEAU J.A.
[1] This is an appeal against a decision of Hugessen J. of the Federal Court which determined as of January 1, 2001, the rent for a parcel of land forming part of the Cowichan Reserve.
[2] The appellant as trustee of the members of the Cowichan Tribes raises three issues on this appeal:
a) whether the trial judge erred in making a negative adjustment to the hypothetical fee simple value of the Head Lease lands and the corresponding Head Lease rent: the adjustment was made for flood-proofing the site level to the 200 year flood plain;
b) whether, in the alternative, the trial judge erred when he based the determination of the market rent for the Head Lease on hypothetical fee simple comparables rather than comparable rents of leases on Indian reserve lands,
c) and whether the trial judge properly exercised his discretion in imposing costs to the appellant.
[3] The appellant's position on appeal is supported by the Crown, i.e. Her Majesty the Queen, the Minister of Indian Affairs and Northern Development and the Attorney General of Canada, on the first two grounds, but opposed on the third one. The trial judge understood the incongruous nature of the proceedings before him whereby the lessee on the Head Lease asked the Court to oblige her to pay a much higher rent than what the landlord was asking for.
[4] At issue before the trial judge was the interpretation of Clause (d) of the Head Lease which states:
The annual rent for each five-year period ... shall be either:
(i) the amount which is on the day ninety days before the five-year period being in the opinion of the Minister market rent for the land leased on the terms and conditions contained in this lease, and enjoying all the services and amenities then existing but ignoring the value of any permanent improvements made on the land by the Lessee, which improvement shall include the value of land fill and rip rap; or
(ii) the same rent in each year for the last year of the previous five-year period, whichever is more.
The rent review provision of the Sublease is basically to the same effect, except that it refers to the "fair market rental value" instead of the "market rent". Nothing turns on the addition of the word "fair" to the rent.
[5] We are satisfied that there is no merit to this appeal and that it ought to be dismissed.
[6] With respect to the first issue, the appellant and the Crown are attempting to dress up as an error of law reviewable on a standard of correctness what is in fact purely and simply a finding of fact made by the trial judge.
[7] There was evidence before the trial judge that the greater part of the terrain is below the level of the 200 year flood plain and extremely susceptible to flooding: see paragraph 2 of his decision. At the time of the trial in January 2003, the lower parts of the land were wet and, as the judge noticed, there were obvious signs of flooding in the form of water marks, sandbags and posted warnings.
[8] The trial judge acknowledged that there was no binding legal requirement that the land be filled to such level before being developed. However, he found that all the existing buildings have been raised to approximately the level of the 200 year flood plain. He concluded that, as a matter of fact, a developer would "include in his acquisition costs the costs of making the site useable and reduce the price of the land proportionately". He went on to add "evaluations of the market value of the leased lands, which fail to make any allowance for this factor, are unreasonable and cannot be supported.".
[9] We agree. It defies common sense to think that a prudent and reasonable developer or tenant would allocate the same value to a land that is partly flooded annually as it would to a land that is not so flooded and that is ready for development or occupation. This is not a question of law: this is a fact of life, a practical reality which, as the respondent Venture Leasing Ltd. rightly pointed out, the mortgage lenders and the insurers will soon remind you of when they assess the risk they have to assume.
[10] It is significant that the expert appraiser for the appellant himself had deducted a sum of $810,000 for the aggregate market value of the land to reflect the estimated value of the existing fill and rip rap as well as of required future fill to ameliorate flooding problems.
[11] In coming to the conclusion that a negative adjustment ought to be made to reflect the limitations to the land resulting from flooding, the trial judge was not engaged in an erroneous interpretation of the terms of the lease or in a rewriting of those terms as the appellant contends, he was simply determining the market value of the Head Lease lands taking into account an actual fact which adversely affects such value. He made no error in so doing.
[12] As for the second ground of appeal, the trial judge made no error in using and applying the Return on Site Value Approach to determine the market rent of the land instead of the Direct Comparison Approach.
[13] First, this was not only the appraisal method relied upon by the appellant at trial, it was also the method retained by the expert for the Crown as well as the expert for the respondent Venture Leasing Ltd. It is true that the expert for the Crown also considered the Direct Comparison Approach, but he gave it less weight as it yielded a value judged to be in excess of the current market rent because of the limitations and restrictions affecting the use of the land and the lease.
[14] In addition, the Crown expert did not simply compare leases on Indian reserve lands as the appellant argues should be done. The expert also used as comparables leases of the fee simple lands as well as municipally and federally owned lands. Most of these lands were commercially developed while the subject land is currently to be used only as a Heritage and Cultural Centre and for other institutional uses related to education and the arts. The Direct Comparison Approach was not the appraisal method advocated and argued by the appellant at trial. At most, it was suggested merely as an alternative. The blame therefore cannot be laid at the feet of the trial judge for having determined the rent according to the Return on Site Value method that the appellant proposed and assessed the evidence that she filed accordingly and wanted him to assess.
[15] We agree with the respondent, Venture Leasing Ltd., that the rent review provision of the Head Lease, contrary to the contention of the appellant, does not require that the rent be "set only with reference to the comparable market rents obtained for leased lands on the Cowichan reserve and other Indian reserves": see that contention in paragraph 48 of the appellant's Memorandum of Fact and Law. No such terms can be found in the lease. Had the trial judge accepted this contention, he would have been rewriting that provision of the lease and disregarding the bulk of the evidence on the issue, something that he could not do. What clause (d) of the Head Lease requires is the Minister or the Court, in fixing the rent, to have regard to the particular terms and conditions of the lease, such as the restrictions regarding the commercial development and use of the land which necessarily affect the market rent. This is what the trial judge did.
[16] Finally, we see no error in the trial judge's exercise of his discretion regarding the allocation of costs.
[17] For these reasons, the appeal will be dismissed with costs. The Crown on this appeal could have taken a neutral position. Instead, it supported the appeal against the respondent Venture Leasing Ltd. on the key issues. It should therefore bear the costs with the appellant.
(Sgd.) "Gilles Létourneau"
J.A.
FEDERAL COURT OF APPEAL
NAMES OF COUNSEL AND SOLICITORS OF RECORD
DOCKET: A-169-03
APPEAL FROM A JUDGMENT OF THE TRIAL DIVISION DATED
MARCH 7, 2003, NO. T-1402-01
STYLE OF CAUSE: Lydia Hwitsum Chief of the Cowichan Tribes, as trustee of the members of the Cowichan Tribes v. HMQ et al.
PLACE OF HEARING: Vancouver, British Columbia
DATE OF HEARING: December 15, 2003
REASONS FOR JUDGMENT OF THE COURT: Létourneau, Nadon, Pelletier J.J.A.
DELIVERED FROM THE BENCH BY: Létourneau J.A.
APPEARANCES:
Christpoher Devlin
John Gailus FOR THE APPELLANT/
Gerald Ghikus Q.C.
Robert Deane FOR THE RESPONDENT
Venture Leasing Ltd.
Jane Luke FOR THE RESPONDENTS
Dennis Hill Her Majesty the Queen et al.
SOLICITORS OF RECORD:
Woodward and Company
Victoria, British Columbia FOR THE APPELLANT
Borden Ladner Gervais LLP FOR THE RESPONDENT
Vancouver, British Columbia Venture Leasing Ltd.
Morris Rosenberg FOR THE RESPONDENTS
Deputy Attorney General of Canada Her Majesty the Queen et al.
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