January 24, 1991,  E.C.B. 16/89/019 (44 L.C.R. 288)

ORDER

1. INTRODUCTION

This is an application for determination of compensation (the "application" ) payable to the Claimants in respect of 7.9116 acres (the "expropriated land") expropriated from them by the Respondent on August 29, 1985. The expropriation was pursuant to section 6 of the Highway Act, R.S.B.C. 1979, c.167. No arbitrator or arbitrators having been appointed under s.27 of the Ministry of Transportation and Highways Act, R.S.B.C. 1979, c.280 compensation falls to be determined by this Board pursuant to s.55 of the Expropriation Act, S.B.C. 1987, c.23 (the "Expropriation Act"), and not in the manner provided for in the Ministry of Transportation and Highways Act, supra.

The expropriation is a partial taking. Prior to expropriation, the Claimants were the owners of a 78 acre parcel (the "subject property") situate on the east side of No. 6 Highway between Cambie Road and the new Richmond East/West Freeway (the "freeway") in the Municipality of Richmond ("Richmond"), and more particularly described as

Municipality of Richmond
West One-Half (W1/2) of Section 33
Block 5 North, Range 6 West,
New Westminster District

(the "subject property").

The expropriated land, which was taken to establish a right-of-way for the new freeway, had the effect of bisecting the subject property. The hearing of evidence and argument took place in Richmond, B.C. on November 6, 7 and 8, 1990 and in Victoria, B.C. on December 11, 1990.

2. BACKGROUND

The subject property, which is located within the Agricultural Land Reserve ("A.L.R."), has been owned by the Claimants' family for three generations. Its westerly boundary borders No. 6 Highway, a transportation corridor adopted by Richmond in its Official Community Plan ("O.C.P.") as the dividing line between lands zoned and reserved for agricultural purposes and those designated as urban and commercial. The lands to the west of and bordering No. 6 Highway are zoned commercial industrial and for the most part are in an advanced stage of development.

The southerly 20.75 acres of the subject property on the north side of the new freeway was at the time of taking under lease. This acreage was then and is now used as a golf driving range, a use permitted within the A.L.R. The northerly 45.71 acres was, until recently, part of an operating dairy farm. It is now under lease by the Claimants as pasture land. The remaining portion of the subject property, a small severed parcel containing 3.628 acres, is located south of the new freeway and is under lease to the neighbouring golf course.

3. AGREEMENTS

1)	Before the taking the subject property comprised 78 acres all sited in the A.L.R.
2)	The total area of the expropriated land is 7.9116 acres.
3)	After the taking the subject property was severed into two parcels and reduced in size to 70.0887 acres consisting of 66.4607 acres on the north side and 3.628 acres on the south side of the freeway. After the taking both parcels retained one legal description. The 3.628 acre parcel is without access and therefore could not be raised under separate title. It was agreed that the highest and best use of this parcel was its existing use as a golf fairway and that it should be consolidated with the neighbouring golf course.
4)	The 66.4607 acre parcel north of the freeway is divided into two zoning categories. The northerly 45.71 acres is zoned Agricultural One (Ag-1) and the southerly 20.75 acres is zoned Agricultural Two (Ag-2). The latter zoning category permits the land to be used as a golf driving range.
5)	The 3.628 acre parcel was under lease by the Claimants to Greenacres Golf Club at the time of taking. In 1989 the Claimants sold this parcel to the golf club for the sum of $160,000 ($44,101/acre).
6)	Any claims for disturbance damages and injurious affection arising from the severance were abandoned by the Claimants at the beginning of these proceedings as the severed parcel south of the freeway has now been sold.
7)	The date of taking was agreed to be August 29, 1985.

4. ISSUES

The issues to be determined by the Board are:

(a)	the highest and best use of the subject property before and after the taking;
(b)	the market value of the expropriated land;
(c)	interest; and
(d)	costs.

5. THE HIGHEST AND BEST USE

(a) The Claimants' case

The evidence to be considered in determining the highest and best use was that of Mr, Danny Grant, P.Ag., SR/WA, an appraiser with Interwest Property Services Ltd. of New Westminster, B.C., who expressed his opinion on page 23 of his report.

The highest and best use after the taking is for the sale of the land south of the new highway for consolidation with the golf course. The highest and best use of the land north of the highway is to maximize the interim income with uses permitted in the A.L.R. and to ultimately develop with approved agricultural processing or sales uses or for the removal from the A.L.R. for commercial and industrial purposes.

(b) The Respondent's case

The evidence on behalf of the Respondent was given by Mr. Carl Nilsen, B.Sc., A.R.I.C.S., A.A.C.I., a qualified appraiser with Nilsen Realty Research Ltd. of Vancouver, B.C., who expressed his opinion of highest and best use on page 12 of his report.

Before the taking it is concluded that the highest and best use of the greater part of the property is for agricultural purposes, in accordance with the zoning and A.L.R. status.

After the taking the highest and best use of the land north of the new freeway system does not change, and it is still most suited for agricultural usage.

Mr. Nilsen agreed with Mr. Grant that the highest and best use of the severed parcel of land south of the freeway would be a consolidation with the golf course since its "agricultural utility has been impaired". Mr. Nilsen further gave evidence  that the severed parcel "does not have a separate legal access and we have been advised that a separate legal title cannot be issued for the severance".

(c) Conclusion of the Board

The essence of this issue is whether at the date of expropriation the highest and best use of the subject property was its existing agricultural use or as a holding property within the A.L.R. having speculative potential attributable to location. The evidence reflects real pressures on lands within the A.L.R. which are sited on the "hard edge", that is, bordering urban land which is, or is designated to be, commercially developed. The highest and best use of the subject property is not necessarily limited in perpetuity to agricultural or those uses permitted by the Agricultural Land Reserve Procedure Regulation (B.C. Regs 313/78 and 301/88).

The subject property fronts No. 6 Highway, a definitive boundary between those lands classified as urban and those reserved for agricultural purposes as prescribed by Richmond's O.C.P. In addition, ss.15(l) and (2) of the Agricultural Land Commission Act R.S.B.C. 1979, c.9, which imposes a further restriction, states as follows:

15.	(1)	This section and sections 16 to 22 apply to agricultural land designated as an agricultural land reserve.
	(2)	No person shall use agricultural land for any purpose other than farm use, except as permitted by this Act, the regulations or an order of the commission, on terms the commission may impose.

Notwithstanding the fact that exclusions from the A.L.R. have occurred within Richmond, the evidence shows that none have occurred east of No. 6 Highway, generally referred to as the East Richmond planning area. The policy statements which form an integral part of the O.C.P. recognize that "the best way to preserve farmland is to rationalize the disjointed pattern of A.L.R. lands" the object of which is to develop a permanent and distinct boundary between rural and urban Richmond and to further designate a consolidated land reserve "the boundaries of which provide an unequivocal limit to urban expansion." One area upon which the O.C.P. focused was East Richmond. To protect the consolidated A.L.R. lands a major transportation corridor is often selected and used as a permanent boundary. In this case, No. 6 Highway has been adopted as the dividing line.

The Board finds that the highest and best use of the subject property is agricultural. However, this finding is based upon those uses restricted by virtue of municipal and provincial policy.

The following statement contained in Richmond's policy paper on implementation of its O.C.P. states:

Inevitably, conditions will change and O.C.P.  Amendments will be required from time to time.

As with all official community plans each is monitored on an annual basis and often formally reviewed and amended every five years to reflect the fact that these plans are by necessity flexible instruments which attempt to realistically balance a community's objectives and goals.

To the extent that policies often change with time, one factor must therefore be added to the finding of highest and best use; that is, the subject property has the features of a holding property with a long term potential for urban use.

6. THE MARKET VALUE OF THE EXPROPRIATED LANDS

(a) The Claimants' case

Mr. Grant's report valued the expropriated land at $254,000 which is equivalent to $32,105 per acre. He adopted as the best evidence his comparable No. 7, a 46.76 acre parcel which sold in 1982 for $33,147 per acre. It is located immediately north of the subject property and similarly fronts No. 6 Highway. Though not as large, it is a sizeable acreage which can be fairly compared provided certain adjustments are made. This comparable included a 1.46 acre improved homesite. Mr. Grant did not make any adjustments for time or size nor did he make an allowance for the small homesite acreage.

During the hearing the Claimants introduced as evidence three transactions, not included within Mr. Grant's report, which were settlement agreements made by the Respondent with property owners whose land was within the A.L.R. and which was required for the freeway. Two of these properties are located on the west side of No. 6 Highway and surrounded by urban development. The third property is east of No. 6 Highway and within the East Richmond Agricultural Land Reserve consolidation.

The two properties west of No. 6 Highway were both six acre parcels and were purchased by the Respondent for $45,660 and $48,563 per acre respectively. Both appraisers stated that Richmond had successfully applied to the Agricultural Land Commission to have these parcels excluded from the A.L.R. The policy statements forming part of the O.C.P. stated that these parcels were isolated from Richmond's agricultural community and "will be further isolated with the construction of the new EAST/WEST freeway along its southern border." Their exclusion complies with the stated O.C.P. policy objectives to "use major section roads or rights-of-way as a buffer between urban and rural land uses where feasible."

The third property was part of a larger parcel comprising in total 58.43 acres. The portion purchased was 5.98 acres and the price paid was $29,587 per acre. This parcel adjoined lands which were for the most part industrially zoned.But of greater significance, there was no identifiable boundary such as a transportation corridor between this parcel and the industrially zoned land on its eastern border. It was also located east of the North/South extension of a CNR spur line which pursuant to the O.C.P. would act as a natural buffer between A.L.R. lands and lands that would probably be used for future industrial development though at present within the A.L.R. While this settlement cannot be used as a reliable indicator of value for the subject property, it does illustrate that land values bordering urban designations do command a premium.

Although the Respondent did not object to the admissibility of these settlements, the Claimants failed to provide evidence of the circumstances surrounding each transaction to rebut the presumption that they were not freely negotiated. The Board admitted these transactions with the caveat that any weight given would not be significant because of the absence of such evidence. This will be further canvassed below.

(b) The Respondent's case

Mr. Nilsen at page 18 of his report concluded that

the market evidence indicates a price for agricultural land in the order of $15,000 to $22,000 per acre with somewhat higher rates being paid for those parcels with additional positive influences. In the case of the subject taking, the land is zoned agricultural, is in the A.L.R. and has little or no potential to change to another use.

Accordingly, he assigned a value of $18,000 per acre for the subject property which placed a value on the expropriated land of $142,410. As indicators of value he referred to a number of listings of agricultural land "with little or no speculative elements" where the asking prices tended to be in the range of $15,000 to $22,000 per acre. In addition, Mr. Nilsen gave evidence of smaller parcels selling in a range between $23,000 and $25,000 per acre and which he stated "typically sell for higher unit rates, all other factors being equal". His comparables No. 2 and 5 (Mr. Grant's comparables No. 3 and 7 respectively) are evidence of sales of larger parcels both of which border the subject. Comparable No. 2 sold for $19,937 per acre in 1981 and Comparable No. 5 sold for $33,147 per acre in 1982. The caveat which he placed on both sales is that they occurred near or at the peak of a real estate market that entered into a decline and remained relatively soft until 1986.

The Respondent introduced evidence of settlements relating to lands it acquired for the freeway right-of-way immediately east of the subject property. Mr. Ronald Hanson, the Respondent's Regional Property Agent (Southcoast Region) gave evidence that the Respondent had paid $22,000 per acre for nine contiguous parcels, each under separate ownership. The physical  features of these parcels were similar to the subject property and all were located in the A.L.R. There is however, in the Board's opinion, an important distinction. The subject property borders the A.L.R.; the lands referred to in the settlements are not so favourably positioned.

Mr. Nilsen, who gave evidence on behalf of the Respondent, had conducted appraisals of some of the parcels referred to in these transactions. In most instances the amounts paid were at variance with his appraised values. Counsel for the Claimants did not object to the admissibility of these settlements but did question their relevance as reliable indicators of value. The Respondent did not introduce evidence of the circumstances surrounding the settlements to rebut the presumption that they were not freely negotiated. If the Respondent intends to rely upon such evidence, it is obliged to satisfactorily discharge that onus. The mere statement of the Respondent's Regional Property Agent that the Crown pays "market value" is not sufficient.

While evidence of these transactions is admissible, there must also be evidence that each transaction was freely negotiated and that market value was paid. This point was considered by the former Ontario Land Compensation Board in Smegal v. Oshawa (1972), 2 L.C.R. 109 at p. 122:

the ... principle enunciated by Rand J. in the Gagetown case, comes into play after evidence, if any, has been adduced as to circumstances surrounding sales to or transfers following settlement with, the expropriating authority with reference to lands in the area of and at or about the date of the expropriation, In the opinion of the Board the onus of adducing such evidence is on the ... party introducing the registry office records and relying on them as comparable sales.

This point was also canvassed in Nowell et al v. Minister of Environment (1984), 30 L.C.R. 255, 259 where the Ontario Municipal Board stated:

Although admissible, such sales are presumed to be not free and voluntary and the person introducing and relying upon them must rebut that presumption through evidence of surrounding circumstances.

(c) Selection of appropriate comparables

Twenty-seven properties in total were included in the appraisal reports of which three (3) were common to both appraisers. Most were situated within the A.L.R. and many were located some considerable distance from the subject property. Due to the absence of sales near the date of taking, that is, August, 1985, many of the so-called comparables were listings. Both experts agreed that the real estate market peaked in 1981 and was followed by a decline during the years 1982 to 1986. However no evidence was given as to how the comparables would be adjusted for time in the process of estimating market value of the expropriated land at the date of taking.

While listings may indicate trends, the Board "is inclined to give little, if any, weight to" them. (Henderson v. Minister of Tourism (1981), 23 L.C.R. 30, 52.) The use of listings was the subject of some comment in Feldman v. Township of Langley (1988), 40 L.C.R. 213, 223, a decision of this Board.

This situation exemplifies the wisdom found in reported comments made with respect to testimony advanced on the basis of listings used as guidance to estimate market value. In those decisions which have been reported, two views can be found as to whether the evidence of listings should be admissible. In Kossar v. Ministry of Government Services (1978), 16 L.C.R. 93 at 95 the former Ontario Land Compensation Board stated:

"While it was not ruled inadmissible the Board does not normally attribute any degree of weight to listings in the absence of supporting evidence relating the listing price to market value ..."

In Jakubowski et al. v. Minister of Transportation & Communications (1973), 6 L.C.R. 29 at 34 the Ontario Land Compensation Board refused to admit evidence of listings.

"This Board ... has never favoured listings as having any real evidentiary value. At best such testimony is indirect evidence of the opinion of the party making the listing. It is hearsay with no opportunity for cross-examination unless the listor is produced.

... this Board cannot find that listings which generally reflect the maximum price of a hopeful vendor can be of any assistance to it in determining market value ..."

The best evidence is represented by those transactions which are common to both appraisers. They are as follows:

(d) The Board's conclusion

The Board has concluded that the greatest weight should be given to three sales which are common to both appraisers. All sales are of essentially unimproved parcels, two of which border the subject. While each comparable requires some degree of adjustment for size, location and/or time, they are the most appropriate sales to use in the determination of compensation by the direct comparison approach.

The first sale is referred to in 6(c)(i) above. The 1981 sale price of $19,937 per acre must be adjusted upward as the subject property is in a superior location having corner exposure and fronting No. 6 Highway. In the absence of any evidence of sales near the time of taking any adjustment made is arbitrary. There is evidence that land bordering an arterial highway and on the "hard edge" of the A.L.R. commands a higher price. The Board finds that an upward adjustment for both factors should be in the order of 20% which would place a value on the subject property at the date of taking of $23,900 per acre.

The second sale is referred to in 6(c)(ii) above. The 1983 sale price of $27,717 per acre must be adjusted downward as it is a smaller parcel and subdivided. In the absence of any evidence of adjustments for time, size and location the board is compelled to draw its own conclusion. A downward adjustment is required for time and because this comparable is a subdivided smaller parcel, say 20%; however, an upward adjustment is required because it is located in an inferior location to that of the subject although this comparable does front Westminster Highway, say 10%. These adjustments indicate a value of $24,950 per acre for the subject property.

The third sale is referred to in 6(c)(iii) above. The 1982 sale price of $33,147 per acre must be adjusted downward for size, time, a homesite, the unrealized expectations of the purchasers who at the time of purchase were not fully informed as to the prospects of re-zoning, and the change in a zoning by-law by Richmond prior to the taking. This comparable does have a positive feature, though difficult to quantify, in that it, like the subject property, is located on the boundary which divides urban from agricultural. The value of land located on the "hard edge" reflects to a degree the speculative value which a prudent purchaser would attach to lands so sited. Evidence was submitted that acreage on the west side of No. 6 Highway sold between $225,000 and $325,000 per acre. Mr. Grant was emphatic in his evidence that lands within but on the border of the A.L.R. command a higher price and should be categorized as holding properties. Mr. Nilsen's evidence was that it would be reasonable to pay more for land on the border and stated that speculative potential tends to be greater at the hard edge rather than the middle.

The Board was again left without any evidence on which to make adjustments and accordingly has adjusted this sale downward by 5% for time and then a total of 15% for other factors. Using this comparable would indicate a value of $26,750 (rounded) per acre for the subject.

When evidence is scarce and the subjective use of adjustments is necessary, estimating compensation is not without some difficulty. As concluded by the Judicial Committee of the Privy Council in Lacoste et al v. Cedar Rapids Mfg. & Power Co. [1928] 2 D.L.R. 1, 12:

But the proper amount to be awarded in such a case cannot be fixed with mathematical certainty but must be largely a matter of conjecture.

Based upon an analysis of the three best comparables and making adjustments for all factors including size, time and location, the Board concludes that the market value of the subject property was in the order of $26,000 per acre at the time of taking. The Board therefore finds that the compensation to be paid to the Claimants for the expropriated land (7.9166 acres) shall be $205,700 (rounded).

7. INTEREST ON COMPENSATION PAYABLE

In accordance with the decision of the Supreme Court of Canada in Minister of Highways for British Columbia v. British Pacific Properties Ltd. [1960] S.C.R. 561 at 568 and 570, interest is payable on any compensation awarded for land taken. [See also Minister of Highways for British Columbia v. Richland Estates Ltd. (1973), 4 L.C.R. 85 (B.C.C.A.)]. The interest rate to be applied is governed by the law in force during the time interest is payable.

From August 29, 1985 to December 23, 1987 the rate is to be fixed in accordance with the principles in British Pacific Properties Ltd. v. Minister of Highways and Public Works (1984), 14 L.C.R. 299, 314 and following. The award as to interest in that case was varied by the British Columbia Court of Appeal [(1979), 19 L.C.R, 99, Nemetz C.J.B.C. dissenting] and restored by the Supreme Court of Canada [(1980), 20 L.C.R. 1]. The arbitrators concluded that the interest rate should be the prevailing 90-day rate on finance company paper, compounded every 90 days from the date of expropriation to the date of the award.

In the instant case on any subsequent application the Board would select an appropriate rate based on all the circumstances of the case and the evidence and argument presented.

The interest and rate of interest payable from December 24, 1987 to the date of payment is governed by s.45 of the Expropriation Act, S.B.C. 1987, c. 23 which reads as follows:

45.	(1)	The expropriating authority shall pay interest on any amount awarded in excess of any amount paid by the expropriating authority under section 19(l) or (11) or otherwise, to be calculated annually,
		(a)	on the market value portion of compensation, from the date that the owner gave up possession, and
		(b)	on any other amount, from
			(i)	the date the loss or damages were incurred, or
			(ii)	any other date that the board considers reasonable.
	(2)	Interest shall be payable at an annual rate that is equal to the prime lending rate of the banker to the Crown in right of the Province.
	(3)	During the first 6 months of a year, interest shall be calculated at the interest rate under subsection (2) as at January 1, and, during the last 6 months, interest shall be calculated at the interest rate under subsection (2) as at July 1.
	(4)	* * * * *

The prime lending rate of the banker to the Crown in the right of the Province as at July 1, 1987 was 9.50%; as at January 1, 1988 was 9.75%; as at July 1, 1988 was 10.75%; as at  January 1, 1989 was 12.25%; as at July 1, 1989 was 13.25%; as at January 1, 1990 was 13.25%; as at July 1, 1990 was 14.75%; and as at January 1, 1991 was 12.75%.

8. PENALTY INTEREST

Section 45(4) of the Expropriation Act states as follows:

(4)

Where the amount of the payment under section 19(l) or (11) or otherwise is less than 90% of the compensation awarded, excluding interest and business loss, the board shall order the expropriating authority to pay additional interest, at an annual rate of 5%, on the amount of the difference, calculated from the date that the payment is made to the date of the determination of compensation. (Emphasis added)

The amount of compensation advanced by the Respondent excluding interest and business loss totalled $169,425 (rounded) based on a taking of 7.7011 acres at $22,000 per acre. During the hearing the Board was advised that the area of the expropriated land had been revised to 7.9116 acres. The compensation awarded excluding interest totals $205,700 (rounded). Since the advance payment was less than 90% of the compensation awarded, excluding interest, the Respondent shall pay additional interest at an annual rate of 5% on the amount of the difference of $36,275 from the 24th day of December, 1987 up to and including the date of this award as provided for in s.45(4) of the Expropriation Act.

9. COSTS

The Claimants shall have their actual reasonable legal, appraisal and other costs.

THEREFORE IT IS ORDERED THAT

The Respondent shall pay to the Claimants

(1)	For the market value of the expropriated land the sum of $205,700;
(2)	Interest on the aforesaid amount in (1) from August 29, 1985 to December 23, 1987 at the prevailing 90-day rate on finance company paper compounded every 90 days with adjustments to take into account any monies paid by the Respondent either to or on behalf of the Claimants. In the event the parties are unable to agree on the rates of interest to be applied in (2), the Board would select an appropriate rate based on the evidence and argument presented on a subsequent application to the Board requesting that a determination be made;
(3)	Interest on the aforesaid amount in (1) from December 24, 1987 until paid as set out below with adjustments to take into account any moneys paid by the Respondent either to or on behalf of the Claimants. Interest shall be calculated annually at the following rates:
	(a)	Nine and one-half per centum (9.5%) from December 24, 1987 to December 31, 1987;
	(b)	Nine and three-quarters per centum (9.75%) from January 1, 1988 to June 30, 1988;
	(c)	Ten and three-quarters per centum (10.75) from July 1, 1988 to December 31, 1988;
	(d)	Twelve and one-quarter per centum (12.25%) from January 1, 1989 to June 30, 1989;
	(e)	Thirteen and one-quarter per centum (13.25%) from July 1, 1989 to December 31, 1989;
	(f)	Thirteen and one-quarter per centum (13.25%) from January 1, 1990 to June 30, 1990;
	(g)	Fourteen and three-quarters per centum (14.75%) from July 1, 1990 to December 31, 1990; and
	(h)	Twelve and three-quarters per centum (12.75%) from January 1, 1991 until the total amounts due and owing are paid.
(4)	Interest on the amount of $36,275 at the rate of 5% per annum from December 24, 1987 up to and including the date of the award; and
(5)	Their actual reasonable legal, appraisal and other costs of and incidental to the application and hearing before the Board in such amount as may be agreed upon and failing such agreement in such amount as may, upon application to the Board, subsequently be taxed and allowed by the Board;

EXPROPRIATION COMPENSATION BOARD

John H. Heinrich, Q.C.,
Chairman