Brulé,
T.C.J.:—This
is
an
appeal
with
respect
to
a
reassessment
of
income
tax
for
the
1976
taxation
year
of
the
appellant.
In
that
year
she
sold
property
for
$627,204.25
and
claimed
a
Valuation
Day
(V-Day)
value
of
$605,465
with
an
adjusted
cost
base
of
$618,125.
The
gain
was
reassessed
by
the
Minister
on
the
basis
that
the
property
had
a
V-Day
value
of
$399,000
and
an
adjusted
cost
base
of
$411,660
leaving
a
capital
gain
of
$215,544.25
as
a
taxable
capital
gain
of
$107,772.12
which
was
reassessed
at
$107,772.
Issue
The
sole
issue
in
this
case
is
the
claimed
value
of
gravel
deposits
on
the
property
as
of
V-Day
which
were
allegedly
ignored
by
the
Minister
in
arriving
at
his
V-Day
figure.
Facts
The
subject
property
was
a
parcel
of
farm
land
purchased
by
the
appellant
in
1967
for
$120,000.
It
was
located
in
the
township
of
Vaughan,
northwest
of
Toronto,
and
contained
approximately
114
acres.
In
1968
soil
and
gravel
tests
were
conducted
on
the
property
and,
as
a
result,
the
appellant
entered
into
agreements
with
a
construction
company
providing
for
the
excavation
of
two
small
lakes
and
the
sale
by
the
appellant
to
the
company
of
the
excavated
gravel.
This
continued
to
some
extent
in
1969
and
1970.
The
excavation
of
the
gravel
and
other
material
as
incidental
to
the
excavation
of
the
lakes
was
a
permitted
use
of
the
land
under
the
existing
provincial
legislation
and
local
municipal
by-laws.
The
property
was
sold
in
1976
as
indicated
above
to
a
developer
who
wished
to
turn
the
property
into
a
rural
estate
subdivision.
Appellant's
Position
Counsel
for
the
appellant
indicated
to
the
Court
that
there
was
no
dispute
over
the
Minister's
valuation
of
the
property
as
of
December
31,
1971
at
$399,000
but
that
a
serious
error
had
occurred
in
that
the
Minister
did
not,
in
arriving
at
his
conclusion,
take
into
consideration
the
value
of
the
gravel
deposits
which
were
said
to
be
in
the
neighbourhood
of
$400,000.
In
support
of
this
claim
there
was
presented
the
evidence
of
an
expert
consultant
in
the
environmental
and
applied
earth
sciences,
Dr.
Bruce
A.
Brown,
who
set
out
in
detail
how
he
arrived
at
his
conclusion.
The
overall
result
was
that
the
appellant
used
a
figure
of
$605,465
in
calculating
the
V-Day
value
of
the
property.
Minister's
Position
An
expert
report
produced
by
the
Minister
showed
a
value
of
$350,000
for
the
property
as
of
V-Day
and
that
this
was
based
on
conditions
as
they
existed
at
the
time
and
also
on
the
fact
that
comparable
sales
in
the
area
would
seem
to
justify
this
figure.
The
Minister
had
already
indicated
a
V-
Day
value
of
$399,000.
In
submitting
his
report
the
expert
appraiser
for
the
Minister,
Mr.
Michael
E.
Brock,
acknowledged
that
the
highest
and
best
use
of
the
property
was
not
primarily
for
agricultural
purposes
but
as
a
speculative
holding
with
potential
for
a
country
residential
estate
development.
No
mention
was
made
in
the
appraisal
of
any
added
value
for
gravel
deposits.
Analysis
The
determination
to
be
made
is
whether
or
not
the
alleged
gravel
deposits
should
have
been
considered
in
putting
a
December
31,
1971
value
on
the
property.
These
are
several
factors
to
be
considered,
many
of
which
raise
questions
that
have
been
left
unanswered.
The
appellant’s
husband
gave
testimony
as
to
the
existence
of
gravel
deposits,
setting
out
that
soil
testing
was
carried
out
in
1968.
Who
did
this
survey,
and
if
there
was
a
copy
of
the
report
in
existence
could
not
be
answered.
The
price
paid
for
the
gravel
was
recalled
but
not
the
name
of
the
person
carrying
out
the
soil
testing,
nor
the
contents
of
the
report.
Some
gravel
was
removed
until
1970,
but
how
much
could
not
be
remembered
nor
were
any
records
produced
such
as
might
show
on
income
tax
returns.
The
excavation
was
carried
on
by
agreement
with
Rockmaple
Construction
Limited
(“Rockmaple’’)
but
again
no
copy
of
the
agreement
was
produced.
Rockmaple
went
bankrupt
and
the
gravel
excavation
ceased.
What
was
not
explained
was
why
another
company
was
not
sought
to
continue
the
work
if
the
deposits
were
so
valuable,
or
was
it
because
the
property
was
only
zoned
agricultural
at
the
time,
or
perhaps
the
excavation
for
two
lakes,
desired
by
the
appellant
were
completed.
The
opinion
of
Mr.
Brown,
on
behalf
of
the
appellant,
while
undoubtedly
based
on
his
years
of
experience
and
expertise
nevertheless
often
speaks
in
vague
terms.
He
mentions
"possible
gross
quantities
of
sand
and
gravel"
and
puts
in
the
report
a
caveat
as
follows:
The
above
opinion
is
not
based
on
any
field
investigation
program
save
and
except
the
inspection
of
opened
faces
and
stockpiled
materials
which
were
present
in
1982,
but
are
no
longer
accessible,
as
a
consequence
of
regrading.
No
program
of
test
drilling
and
quality
assessment
was
performed
by
the
writer,
nor
was
any
report
carried
out
by
any
recognized
engineer
or
geologist
available
to
assist
in
forming
an
opinion.
The
opinion
is
therefore
based
on
extrapolation
of
visible
evidence
on
those
faces,
in
combination
with
inferred
data
from
subsequently
constructed
waterwells.
The
writer
did
not
witness
the
actual
development
of
these
wells,
however
for
purposes
of
this
assessment
the
original
logs
are
assumed
to
be
an
accurate
reporting
of
subsurface
conditions
in
their
immediate
areas.
In
addition
to
this,
the
appellant
did
not
have
a
permit
to
remove
the
gravel
from
all
of
the
property.
A
statute
had
been
passed
as
to
the
regulation
of
gravel
pits
but
areas
included
in
The
Pits
and
Quarries
Control
Act,
1971
had
not
been
designated.
There
was
no
evidence
that
the
purchaser
of
the
property
from
the
appellant
removed
any
gravel
nor
that
this
was
a
consideration
in
the
purchase
price.
The
report
of
Mr.
Brock
on
behalf
of
the
Minister,
as
set
out
above,
suggested
that
the
best
use
of
the
property
was
not
primarily
for
agricultural
purposes
but
as
a
speculative
land
holding
with
some
potential
for
country
residential
estate
development.
This
is
what
happened.
Mr.
Brock
used
the
market
data
or
comparison
approach
to
make
his
determination
of
value.
Eight
properties
were
considered.
These
included
two
which
had
the
same
stream
running
through
their
properties
as
the
subject
property.
In
neither
case
was
gravel
presence
indicated
nor
a
factor
in
a
sales
price.
The
appellant's
husband
indicated
that
no
amount
over
and
above
land
values.
for
agriculture
was
paid
at
the
time
the
subject
property
was
purchased.
No
evidence
was
offered
as
to
how
the
appellant
arrived
at
a
V-Day
value
of
the
property
being
over
$618,000
as
shown
in
her
tax
return.
Mr.
Brock
indicated
in
his
report
that
in
the
period
1968
to
1972
land
prices
in
the
area
were
not
escalating
to
any
great
extent.
The
subject
property
was
purchased
at
the
end
of
1967
for
$120,000
and
it
would
be
somewhat
surprising
to
have
risen
in
value
over
500
per
cent
in
this
period
unless
a
true
assessment
of
the
gravel
potential
was
in
existence
to
substantiate
this.
Mr.
Levinter
said
the
original
report
was
not
available
and
Mr.
Brown's
report
was
not
prepared
when
the
property
was
sold
in
1976.
It
is
always
difficult
to
rely
on
evidence
such
as
that
expressed
by
an
expert
some
15
years
after
the
fact.
I
believe
Mr.
Brown
did
the
best
he
could
under
the
circumstances.
He
himself
admitted
that
a
thorough
research
had
not
been
carried
out
and
the
report
therefore
must
be
accepted
with
some
questions
unanswered.
In
The
Modern
Law
of
Evidence
by
Adrian
Keane,
1985
edition,
he
said
of
opinion
evidence
at
page
377:
The
danger
is
particularly
acute
in
the
case
of
opinions
expressed
by
expert
witnesses,
of
whom
it
has
been
said,
not
without
some
sarcasm,
“‘it
is
often
quite
surprising
to
see
with
what
facility
and
to
what
extent,
their
views
can
be
made
to
correspond
with
the
wishes
or
the
interests
of
the
parties
who
call
them”.
In
the
case
of
Whitehouse
v.
Jordan,
[1981]
1
W.L.R.
246
(H.L.)
at
256,
Lord
Wilberforce
said:
.
.
.
expert
evidence
presented
to
the
court
should
be,
and
should
be
seen
to
be,
the
independent
product
of
the
expert,
uninfluenced
as
to
form
or
content
by
the
exigencies
of
litigation.
In
The
Queen
v.
National
System
of
Baking
of
Alberta
Limited,
[1978]
C.T.C.
30;
78
D.T.C.
6018,
Mahoney,
J.
said
at
38
(D.T.C.
6024):
I
expressly
rejected
the
validity
of
hindsight
as
probative
of
fair
market
value
at
a
given
date
.
.
.
This
is
the
situation
here.
Mr.
Levinter
could
not
produce
records
of
the
first
opinion
evidence
given
to
him
and
Dr.
Brown
did
not
make
a
proper
and
thorough
evaluation.
Both
witnesses
expressed
their
understanding
but
these
were
hindsight
observations.
There
are
too
many
uncertainties
from
the
evidence
presented
to
allow
the
appellant
the
V-Day
value
she
seeks.
The
assumptions
made
by
the
Minister
in
the
reply
to
notice
of
appeal
are
sufficiently
set
out
to
place
the
onus
on
the
appellant
to
disprove
them.
This
had
not
been
done.
The
appeal
is
therefore
dismissed.
Appeal
dismissed.
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