Walter E Hopkins v. Minister of National Revenue, [1982] CTC 2069, 82 DTC 1084

John B Goetz:—This is an appeal by the appellant with respect to his 1977 and 1978 taxation years arising from the expropriation of property owned by the appellant in 1977 by the Province of Nova Scotia. The appellant was paid $52,500 by the Province of Nova Scotia for the expropriation and acknowledges receipt of the funds set forth in the Minister’s reply to notice of appeal. The appellant disagrees with the respondent’s evaluation of the fair market value of the property as of December 31, 1971 as being $23,000. He claims that it was worth $110,000. In reassessing the appellant, the respondent relied, inter alia, upon sections 3, paragraph 12(1 )(c), sections 16, 38, 39, 40, 54 and 248 of the Income Tax Act, SC 1970-71-72, c 63, as amended, and upon subsection 26(3) of the Income Tax Application Rules.

Issue

The issue to be determined in this case is the value of the appellant’s land as of December 31, 1971.

Facts

The appellant acquired the three lots in question in 1958 for the sum of $1,558 with the view to eventually converting the property to an apart- ment/hotel. Meanwhile he established a trailer court in which he set up three trailers which he rented out. The balance of the land was used to store trailers. He says he put in water and sewer services.

In 1967 a piece at one end (2' X 4') and 20' on the other side of the property were expropriated for No 1 Highway for $2,000. I shall deal no further with the evidence of the appellant in that each side called qualified accredited appraisers. It is their evidence with which I will deal.

A Mr Philson J Kempton was called by the appellant and in many respects his evidence agrees with that of the Government appraiser. Both appraisers agree that the land was not zoned for anything but commercial use and in the view of Mr Kempton, the highest and best use of the property was commercial use which requires good highway exposure as offered by the subject property on December 31, 1971. The property was located on the easterly side of Memory Lane in the town of Lower Sackville, Halifax County, Nova Scotia and as at December 31, 1971, was being used as a trailer park. It was the plan of the Province that Sackville would be developed as a commercial area as opposed to merely recreational.

The appellant’s appraiser had knowledge of the subject property from having done appraisals along Memory Lane including the subject property and No 1 Highway over the past ten years. The subject site was basically level land, mostly cleared of trees except at the rear and was rectangular in shape. It was considered to be in a general building zone although, because it was being used as a trailer court, it was designated “T” as to conform with the use to which it was presently being used.

Mr Kempton used two approaches in ascertaining the value of the property and stated that Lower Sackville was becoming one of the fastest growing communities in Nova Scotia, coupled with the fact that all the traffic leading to this fast growing community and traffic passing on No 1 and No 2 Highways had exposure to the subject site, hence increasing its development potential. Demand for land on location such as the subject property is always strong for commercial use. The site had 80 m of road frontage and offered good potential for development without restriction due to size or shape. Access to the site in 1971 was by way of Memory Lane off No 1 Highway just south of Cobequid Road, No 1 intersection. In 1971 a right or left turn could be made from Memory Lane onto No 1 Highway and similarly a left or right turn could be made onto Memory Lane from Highway No 1 South or North respectively.

Memory Lane as it existed in 1971 was parallel and adjacent to Highway No. 1 with the only development or potential for development being on the easterly side of Memory Lane. These properties along the easterly side of Memory Lane, particularly the subject property, were exposed to the passing traffic on No 1 Highway and also from Bicentennial Drive and the interchange with No 1 Highway. In 1971 the trend was that the commercial potential was very good. On the basis of highest and best use evaluation, the appraiser’s opinion was that as of December 31, 1971, the highest and best use of the subject land was for development as a retailer service commercial property, taking advantage of its location and exposure to the high volume of traffic which passed by the property each day.

Mr Kempton also used the evaluation procedure by direct sales comparison and listed eight sales, one of which included a parcel of land by the Nova Scotia Liquor Commission for the erection of a liquor store not too distant from the appellant’s land. Although the purchase price was low, there was a cost of approximately $400,000 for clearing away rock and stone. He particularly referred to three sales which took place in 1969 and 1971 and came to the conclusion that “it became obvious how commercial land prices took a real jump between 1969 and 1971 as evidenced by these three sales”. The other four sales were for purchase of commercial land along No 1 highway, with the last two sales being on No 1 Highway and Cobequid Road, just north of the subject site. On this basis he evaluated the site property at $1.50 per square foot and rounded it to $70,500. Mr Kempton concludes by saying that the subject site and adjacent lands had perfect exposure and good accessibility, making them prime targets for commercial development, which he considers to be their highest and best use at that time (namely December 31, 1971).

Since Valuation Day, Highway No 101 construction and widening, twice rerouting Memory Lane and construction of the Bedford by-pass, have destroyed the marketability of the subject and adjacent lands because access has been totally altered to the point that its commercial potential, as its taking in 1977, was substantially less than it was at Valuation Day when the property was at or near its prime value.

In the late 1960’s there was commercial nucleus starting nearby involving the liquor store, restaurant, and Blackburn shopping centre. In 1971 Memory Lane was a service road for these businesses which were from 1,000 to 2,000 feet from the appellant’s property. Bicentennial Road was known as Highway No 102. In Mr Kempton’s view, the highest volume of traffic in Nova Scotia passed by the site. The appellant’s property was on a quadrant giving direct access to his land by way of Memory Lane and the remaining three quadrants were undeveloped and are still undeveloped to this day because of their condition. In Mr Kempton’s opinion the ramp elevation from Highway 102 would give a good view of the property which was, in his mind, a benefit to the appellant. Mr Kempton further states since closing Memory Lane, the province has closed the liquor store which had been very busy but this came about because of the changes in the roadways and the bypasses, causing a shift of the business area development to the north and away from the appellant’s property. Moreover, Kempton said that all his comparables were commercial sites along No 1 Highway. He says values went up and development took place because of the merging of No 1 and No 101 Highways at the subject property, as well as Highways No 2 and 102. In cross- examination Kempton stated that the other quadrants were not suitable for development because they were known as flood plains. In his view, it was in the 1970’s that development “started to boom”.

The respondent called J E Mulcahy, also a qualified appraiser. He states: “During 1971 interest in the area became quite evident with the acquisition of lands for commercial purposes along the main highway”. At that time it was in the early stages of transition and the area was not fully serviced by sewer and water but contracts for these facilities had been awarded in 1971. He describes the subject property as being relatively level in relation to the grade or the roadway and no drainage problem was evident at the time. He says that on Valuation Day the subject property was serviced with water and electrical power. Sewerage was available on Memory Lane to buildings located in the vicinity of the Nova Scotia Liquor Commission property referred to earlier. However, this service did not extend to the subject property but that, in my view, could easily be rectified by a potential purchaser. The ramp from Highway No 102 to No 1 Highway ran by the subject property, giving anyone passing a good view of it. Access was available two-tenths of a mile west of the site.

Mr Mulcahy indicated comparable sales and did not refer to highest and best use. There are six what he calls “comparable sales” but they are quite a distance from the subject piece of property, although sale #1 was known as the shopping centre where the liquor store was located. He placed great emphasis on sale #4 which was on the turn-off from Highway No 1 to Memory Lane but this was zoned as residential and as yet has not been built upon. All his other comparables were along No 1 Highway. His comparables ranged from 14¢ to $1.02 per square foot, although Mulcahy, in cross-examination, indicated that one of the pieces of property did not reflect the cost of the liquor commission property, namely $531,000. From his direct sales comparison approach Mulcahy felt that sale #4 indicated a value of 26¢ per square foot and that property was most comparable to the subject property with respect to the location and time of the sale. He ultimately concluded that the land, as at December 31, 1971, was worth 50¢ a square foot and thereby reached his rounded evaluation at $23,000.

I am faced with evidence of two highly qualified appraisers, each asking me to accept their evaluation. From the maps, aerial photographs and other photographs, I have been able, I think, to get a reasonably good perspective of the situation as it existed as of December 31, 1971. I find that the appellant’s appraiser was too optimistic in his appraisal and likewise the respondent’s appraiser was much too low in his appraisal as to the land value on December 31, 1971.

From all of the evidence before me, I would consider the sum of $48,000 as being a proper amount for Valuation Day as at December 31, 1971. I therefore allow the appeal to that extent and refer the matter back to the respondent for reconsideration and reassessment.

Appeal allowed.