Reginald A. Palmer v. Minister of National Revenue, [1986] 2 CTC 2187, 86 DTC 1645

Kempo, T.C.J.:—The issue in this appeal as to the appellant's 1980 taxation year is the fair market value as at December 31, 1971 ("Valuation Day”) of a 72-acre parcel of land (Pt. S /2 Lot 32 and 31, Concession 5, Township of London (Melrose)) located approximately two and one-half miles west of the City of London, Ontario. It was good agricultural land, triangular shaped and was bounded by three roads. It had Highway 22 frontage (then being the main highway to Sarnia) which, together with gravel roads intersecting at the south west corner, provided the actual boundaries. A house (constructed in 1895) and an old barn were the only structures on the subject property. The value issue here is basically with respect to the real estate.

The subject property was located just south of the small Hamlet of Melrose whose dozen-odd inhabitants, largely retired farmers, enjoyed a quiet rural-residential existence.

The appellant disputes the Minister's determination of the fair market value of $68,000 as at Valuation Day of the subject property that was sold in 1980. He was of the view that the correct value was $137,000. This was premised on the allegation that the highest and best use of the property was for residential development. Neither the pleadings nor the evidence disclosed what the assessor's premise was for his assessed value of $68,000. The appraiser called by the Minister's counsel was of the view that the highest and best use of the subject property was agricultural and that its value was in the amount of $50,400.

In 1959 or 1960, on acquisition by the appellant and one Al Sinnott (now deceased), the property was designated as agricultural. In 1961 the City of London annexed approximately 13,000 acres of land and consequently an Official Plan was put into place with respect to the remaining lands in the London Township in order to provide a long-term general development plan. This Official Plan designated approximately 35 per cent of the subject property as residential and the balance as agricultural. The actual land use, however, was controlled by zoning bylaw. The applicable zoning for the whole parcel was agricultural. An extract from a letter of Mr. Albert Bannister, Administrator and Clerk of the Township of London found at page 18 of Exhibit R-6 (Appraisal Report of Mr. Stub) is pertinent:

Re: Part S /2 Lot 32 and 31, Concession 5,

Township of London. (Melrose)

The information contained in this letter is an attempt to bring together a history of facts concerning the area above-noted and the surrounding area in the Township of London and more particularly the Hamlet of Melrose.

Having started work with the Township of London in June of 1960, my personal knowledge of the Township of London and the growth of same is well founded. Melrose has, since 1960, been basically a dormant hamlet which has experienced very little population change with the exception of three or four new houses which have been built over the course of the last 10 or 12 years. In fact, the population of London Township has dropped from 5979 in 1974 to 5652 in the year 1982.

During the period 1961 through 1971, the above-noted lands were designated (approximately 65% Agricultural and 35% Residential Use) and all of the lands were zoned as Agricultural Use. There was, in 1963, two amendments to the Official Plan to expand on the designation for residential use not only on all of these lands but a considerable area surrounding these lands. The amendments also included mobile home parks as part of the residential use, however, the amendments were never approved by the Ministry of Municipal Affairs and Housing and were subsequently repealed in November of 1976 in order to close the files and retain the original designation of Agricultural and Residential.

The Official Plan for the Township of London did in 1961 designate a considerable area around Hyde Park for Industrial and Residential Use which had it have taken place may have provided the need for development of the Melrose area. However, this demand did not materialize and limited infilling or severances over the years on an individual basis has provided the supply of building lots needed.

Mr. Bannister conceded in his viva voce evidence that if the aforesaid two amendments had been carried through, the remaining 65 per cent of the subject property would have been designated residential. He also acknowledged that the Township of London had agreed to these amendments subject to certain conditions which the appellant and Mr. Sinnott had agreed to fulfill and that all that was then needed was the approval of the Minister of Municipal Affairs of Ontario which, if refused, could be subject to an appeal to the Ontario Municipal Board under the Planning Act of Ontario.

It was the appellant's evidence that the mobile home park that Mr. Sinnott had proposed to the planning authorities sometime in 1963 or 1964 had been abandoned on economic grounds. However a letter from the Department of Municipal Affairs to Mr. Sinnott's planning and engineering consultants (Exhibit R-2) stated that its approval would not be forthcoming until a Village Development Plan had been approved and that the draft plan had not conformed thereto.

The other development proposal, which was also at the instance of Mr. Sinnott, had been submitted by the same planning firm and had gained conditional Township approval in 1963. It involved a comprehensive draft plan of subdivision (Exhibit A-5) of some 109 single-family housing units together with 6.35 acres on Highway 22 allocated for commercial development. Mr. Palmer testified that although he had very little to do with the project, it was his recollection that he and Mr. Sinnott had verbally agreed to comply with all the conditions recommended by the Township counsel but that Mr. Sinnott's ill-health and the ensuing lack of funding precipitated their abandonment of the project. He said he had not been informed by Mr. Sinnott or anyone else that by early 1965 the Department of Municipal Affairs had advised the London Township Clerk by letter (Exhibit R-3) that they would not approve the subdivision plan for the many and diverse reasons stated therein. Mr. Bannister could not find anything in the Township file indicating that the Township had passed on this information to anyone. Mr. Palmer did not know if Municipal Affairs had communicated this information to Mr. Sinnott or to his planning and engineering firm which had prepared and submitted the draft plan.

In any event the two amendments to the Official Plan had not had Ministerial approval and they remained completely dormant for approximately seven years prior to Valuation Day. The subject's designation under the Official Plan remained 35 per cent residential and the balance of 65 per cent as agricultural. The proposed amendments that would have changed this to wholly residential were ultimately repealed in November of 1976.

In March of 1972 Mr. Sinnott had asked his long-standing friend, Mr. Bryce Grahame, to do a Valuation Day value appraisal of the subject property for him. At this point it should be noted that at the time of the hearing Bryce Grahame was 87 years of age and had suddenly taken very ill and could not attend. The appellant is 77 years of age. Counsel for the Minister said he would consent to an adjournment so that the appellant would have the opportunity of getting another appraiser. This offer was declined by the appellant following consultation with his counsel and the Court was informed that the hearing would proceed on the appraisals and evidence at hand.

Bryce Grahame is a qualified appraiser (Exhibit A-10). He did prepare the requested appraisal but it had been made without knowledge of the partial residential designation or of the Official Plan amendments (Exhibit R-1). This appraisal is expressed as having been done for Mr. Al Sinnott and is dated March 30, 1972 (Exhibit A-3). It bears his signature, is very cursory, does not mention any governing land-use or zoning parameters as to the subject property nor with respect to the land sales used by him as a guide to value. His son, John Grahame, who is also a qualified appraiser (Exhibit A-10), gave evidence with the view to supporting his father's appraisals. I use the plural because there were more than one as shall be shown. He said his father's land-sale guides were farm lands but that he, John Grahame, knew nothing about them. He was not able to enlighten the Court as to his father's hand-printed, unsigned and undated comment on page 4 therein wherein it was alleged that “zoning” would have made the land worth more. The written opinion of Valuation Day value was $850 per acre and was expressed as a total of 80 Cl 850 or $68,000. Because the property is in fact 72 acres, mathematically this should be $61,200.

At some time, which is not certain, Bryce Grahame made another written appraisal for Al Sinnott dated March 30, 1972 (Exhibit A-11) which was unsigned, repeated the 80 acreage error, employed the same land-sale guides, made more emphasis on the residential appeal of the property and valued the property again at $850 per acre or $68,000.

Because the two 1972 appraisal reports had been modified by Mr. Grahame to emphasize the property's residential appeal, I would agree with counsel for the Minister’s observation that there is a logical possibility the modifications had been made after the appellant had told him of the landuse history. However, as he could not testify, negative inferences will not be drawn under the circumstances.

After having been approached and provided with the additional information by the appellant, Bryce Grahame prepared a written appraisal expressed as being for Mr. A. Palmer and is dated April 14, 1981 (Exhibit A-4). The land is stated to be 72 acres which he erroneously expressed as having been Hamlet zoned. A review of the report indicates that his appraised value of $137,000 was obviously premised on Hamlet zoning and what he described as advanced subdivision work. The Court was told by John Grahame that his father intended to justify a boosting of the subject's agricultural value from two to four times by what he had been told by local builders or developers. In my view this report is of limited value and should be given minimal weight. That is because the first premise was not correct, the second was without stated independent research or detail and the third was not supported either in the report or by the testimony of his son who had not done any independent research in this respect.

It was the opinion of John Grahame that the Valuation Day value was $440,000. He had not garnered any corroborative material of an objective nature to support this admittedly “educated guess” that the value of residential service lots would be $4,000 each (or $3,600 per acre) at Valuation Day. To say that “this is my opinion” which is supported only by long experience in the field, and that it is an art, is simply not acceptable in the case before me. This is not a situation whereby such an approach may be professionally justifiable due to the absence of any other alternatives. I would adopt the comments of Mr. Justice Mahoney in Willows Golf Ltd. v. The Queen, 12 L.C.R. 305 at 312 to the situation at bar:

The Court is not justified in jumping with an expert witness to a conclusion that is sustained only by evidence of his expertise; it simply must have evidence as to facts so that it can both understand and evaluate the process leading to the conclusion and the validity of the conclusion itself.

For these same reasons it would be inappropriate to allocate a value of $3,600 per acre to the 36 per cent of the parcel with the residential designation as counsel for the appellant invited the Court to do.

Both the appellant and John Grahame were of the opinion that a 46-acre parcel of land in the nearby Township of Delaware which had been purchased by the appellant’s company in late 1972 or early 1973 for $1,700 per acre was a good indicator of value for the subject. At first blush this attracts appreciable, but only superficial, validity. While there may be many basic similarities, there may also be many basic differences. All of this would have to be particularized, measured, weighed and adjusted before any meaningful value could be thereby transposed to the subject. This had not been done in this case.

The evidence and appraisal report of Mr. Stub for the Minister (Exhibit R-6) gives a lengthy and detailed analysis in support of his opinion of value of $700 per acre for 72 acres or $50,400. His underlying premise was that the subject property, notwithstanding its designation under the Official Plan and the interim amendments, was agricultural in nature and potential, and that no other use was reasonably anticipated in the foreseeable future. Accordingly his land-sale indices, derived from Revenue Canada’s data banks, were zoned agricultural and admittedly were lacking the equivalency of residential designation under the Official Plan.

The Court allowed Mr. Palmer to introduce into evidence a Revenue Canada appraisal report which had been prepared for internal use, which was incomplete and which had been given to him by someone other than its author. Its author, Jim Best, was in Court and was available. As neither party chose to call him to testify, his final opinion of value carries little weight. However through very adept cross-examination Mr. Stub agreed with the statement therein that “lands very close to the City were being purchased by developers for speculation as possible future residential subdivisions [and that] marginal farm land preferable with picturesque bush and creek areas was being purchased for residential estate type uses”. He would not and did not agree that the correct approach would be the utilization of speculative residential use as was noted in this report. It was for this reason that a particular sale of 50 acres therein identified as Sale “D” dated June 1972 for $1,000 per acre had been considered by him as inapplicable. Mr. Palmer said that he had physically examined this property after receiving the report and found that it was topographically inferior to the subject's for residential development. Apparently this property was nearer to the city limits. It had a residential designation.

The evidence to this point is that the Minister had assessed the fair market value of the land at $68,000 and has called expert opinion that it was worth $50,400. The appellant says it was worth $137,000 (via Bryce Grahame) or $122,400 (via Appellant's Delaware property) or in excess of $72,000 (via Sale D Din the “Best” report) or $132,000 (via John Grahame's $4,000 per lot).

Counsel for the appellant has demonstrated a substantive shortfall in the restrictive approach used by Mr. Stub in choosing not to draw on land-sales having residential designation. However this flaw is not necessarily fatal for the reason that the appellant has not convinced me that he was totally incorrect in doing so, given all of the circumstances. Further the appellant has not provided the Court with any workable or reliable evidence to take its place.

In my view the appellant and John Grahame approached the development potential of the subject property as at Valuation Day with undue optimism. The evidence was that the owners had decided some seven years prior to Valuation Day not to pursue development, and this decision remained operative for at least 11 years. Further, there was no evidence of any noticeable demand for residential lots in the subject’s location. As Mr. Stub testified, the nearby community of llderton had a plan of subdivision on stream of up to 125 dwelling units incorporating a Village Development Plan which would have had a significant competitive impact on any perceived need or demand for similar development on the subject. Apparently the property remained unchanged when it was sold in 1980 and is still being used for agricultural purposes.

An overview of all of the evidence leads me to conclude that notwithstanding the shortcomings of Mr. Stub's analysis, they are not sufficient in weight or scope to compel a finding that the subject had a value on Valuation Day in excess of $68,000. In coming to the above conclusion I have kept in mind the following remarks of Walsh, J. in E.R. Bibby Estate v. The Queen, [1983] C.T.C. 121 at 131; 83 D.T.C. 5148 at 5157 (F.C.T.D.):

While it has frequently been held that a Court should not, after considering all the expert and other evidence merely adopt a figure somewhere between the figure sought by the contending parties, it has also been held that the Court may, when it does not find the evidence of any expert completely satisfying or conclusive, nor any comparable especially apt, form its own opinion of valuation, provided this is always based on the careful consideration of all the conflicting evidence. The figure so arrived at need not be that suggested by any expert or contended for by the parties.

This is what the appellant has urged the Court to do. However, for the reasons aforementioned, the appellant’s evidence is amost entirely unsatisfactory or inconclusive. And to say that the evidence was conflicting in the sense that it was equivalent would be illusive.

I would adopt the comments of Bonner (now T.C.J.) in Dubbel Wear Holdings Ltd. v. M.N.R., [1981] C.T.C. 2348 at 2350; 81 D.T.C. 351 at 353 (T.R.B.):

The onus in an appeal such as this is on the appellant. It is not enough for the appellant simply to attempt to cast doubt on the value used on assessment. In order to succeed the appellant must affirmatively establish, on the balance of probabilities, that the value used by the Minister is too low and he must show, with some degree of accuracy, by how much.

For all of the reasons given, the appeal must fail and is dismissed.

Appeal dismissed.