September 21, 2005, E.C.B. No. 62/96/261

REASONS FOR DECISION

[1]  Associated Building Credits Ltd. (the "claimant") was the registered owner in fee simple of a parcel of land located at 1925 Erskine Lane (the "Subject") in the town of View Royal. The property was 3.68 hectares (9.093 acres) in size with P2, Private Institutional zoning applicable to the front 1.602 hectares (3.95 acres) of the site and C1, Village Commercial zoning on the rear 2.078 hectares (5.14 acres). The claimant acquired its interest in the Subject through an amalgamation with a related company, Winchester Holdings Ltd. ("Winchester"), on December 31, 1995. Winchester had been the fee simple owner of the Subject since March 14, 1986 when it purchased the property. For ease of reference, we will utilize the term "claimant" to refer to the owner of the Subject throughout the relevant time period although the corporate entity changed upon the amalgamation of the two companies, some three months prior to the date of expropriation.

[2]  In March 1996 the respondent expropriated a portion of the Subject under the provisions of the Expropriation Act, R.S.B.C. 1996, c. 125 (the "Act"). The area taken comprised 0.6394 hectares (1.58 acres) from the front P2 zoned area and 0.3562 hectares (0.88 acres) from the rear portion of the site for a total area of 0.9956 hectares (2.46 acres). The partial taking was to facilitate improvements at the Helmcken interchange with the Island Highway.

[3]  On August 15, 1996, the claimant filed with the board, an application for determination of compensation (the "Form A"). The claim was amended twice prior to the conclusion of the hearing.

[4]  The claimant is seeking compensation for the loss of return on the value of the Subject during the period October 31, 1989 to March 22, 1996, the "delay period", when it says the property was "frozen" or "sterilized" due to the uncertainty associated with the highway project. Other losses are alleged relating to the original purchase of the Subject and the subsequent development activities undertaken by the claimant with respect to the property.

[5]  The compensation sought under the final amendment of the Form A was particularized under six categories:

[6]  The value of the land taken and any loss in value to the remainder had been agreed upon by the parties prior to the commencement of the hearing. An advance payment of $2,608,320 had been paid to the claimant on March 22, 1996 along with service of a copy of an appraisal report upon which this amount was based. The respondent asserts that the advance payment made is equal to or greater than the compensation to which the claimant is entitled.

[7]  The hearing commenced December 8, 2003 in Victoria and occupied six days over a two-week period prior to adjourning to allow for preparation and exchange of experts' reports on quantification of losses. The hearing reconvened for the quantification phase on December 6, 2004 and occupied another eight days over a two-week period.

[8]  Roy Stewart and Reg Stewart, testified on behalf of the claimant at the hearing. Mr. Roy Stewart was a director of Associated Building Credits Ltd. and Winchester during the relevant time period and his brother, Mr. Reg Stewart, has been a director of the claimant since 2001.

[9]  The claimant also called Peter Gericke, a professional engineer who had been involved with the proposed development on the Subject; Jack Miller, an independent property agent retained by the respondent to acquire the partial taking from the Subject; Wayne Strandlund, who had an option to purchase the Subject from the owner, Mrs. McGrath, and sold the Subject to the claimants; and Jean Giffon and Lyle Kahl, Realtors who had listed the Subject for sale during the relevant period. In support of its claim for financial losses, the claimant relied upon the expert report and testimony of Robert Orr, a chartered accountant and chartered business valuator with Deloitte & Touche, who specializes in the areas of business valuations and corporate finance.

[10]  The respondent called two employees who had been involved with the Island Highway project. These witnesses were Joe Camilleri, a project manager, and Greg Mertton, an assistant regional property agent. The respondent also called two experts: Richard Crosson, a chartered accountant and business valuator with the firm of Ernst & Young; and David Osland, a professional real estate appraiser with the firm Baker & Osland Appraisals Ltd.

2.  BACKGROUND

[11]  The Subject was a vacant 3.68 hectare (9.093 acre) property located northwest of the Helmcken Interchange with the Island Highway and adjacent to the Victoria General Hospital. Access to the property was off of Erskine Lane which connected with the hospital's access road. Erskine Lane divided the property with a 0.2102 hectare (0.519 acre) portion closest to Helmcken Road and the main, 3.4698 hectare (8.574 acre), section on the northwest side of Erskine Lane. The hospital road connected with Helmcken Road.

[12]  At the time the claimant purchased the Subject, the property was zoned P3 Institutional on the front one third and C5 Medical Commercial on the rear portion.

[13]  Shortly after the purchase, in 1986, the claimant retained J.E. Anderson & Associates to deal with the Ministry of Transportation and Highways ("MoTH") and the Greater Victoria Hospital Society to improve the access from Helmcken Road to the Subject and the hospital. This access route was intended to serve the development planned for the Subject. The proposed development included a care facility and medical commercial offices.

[14]  In late 1989, the claimant listed the Subject for sale with Jean Giffon of Colliers International ("Colliers") for $5,250,000. Mr. Giffon became aware of the possibility of the Subject being impacted as a result of planned changes to the Helmcken Interchange. He was able to obtain a preliminary concept plan for the interchange in February 1990.

[15]  The Colliers listing expired and the claimant relisted the Subject in March 1990 with Lyle Kahl of Re/Max of Victoria, again for $5,250,000. Mr. Kahl received one full price offer on the property in May 1990. The conditional offer required the vendor to provide an interest free $2,000,000 second mortgage on the property for one year. The claimant did not respond to the offer.

[16]  In July 1990, the Town of View Royal adopted a new zoning bylaw and official community plan ("OCP"). The zoning of the Subject was changed to P-2 Private Institutional on the front 1.602 hectares (3.95 acres) and the rear 2.078 hectares (5.14 acres) was C-1 Village Commercial. This was essentially consistent with the earlier zoning which had been implemented by the Capital Regional District prior to the incorporation of the Town in 1988.

[17]  Under the new OCP, the future land use designations for the Subject were changed to VC Village Commercial for the front two thirds and R-C Medium Density Residential for the rear third. These designations were not consistent with the zoning of the Subject.

[18]  In March 1991 the Subject was again listed for sale with Mr. Kahl for $6,800,000. No offers were received.

[19]  In 1991 the design and construction of the Helmcken interchange and part of the Island Highway Project was put on hold in order to allow the Capital Regional District to complete a comprehensive regional transportation study. This study took approximately two years to complete.

[20]  In August 1993 the claimant became aware of the possibility that access to the property would be from the north rather than the previously enjoyed southern access to Helmcken Road. In July 1994 they wrote to MoTH regarding the delay of the interchange project and the impact on the Subject. The claimant expressed the concern that the proposed connector road would adversely affect their ability to develop the Subject for future Village Commercial use as proposed in the OCP. They suggested two alternative routes for the respondent to consider.

[21]  In early 1995, Mr. Miller of D.R. Coell & Associates was retained by the respondent to oversee the appraisals on the properties affected by the interchange. In September 1995 Mr. Miller commenced negotiations with the claimant to acquire part of the Subject property.

[22]  The final configuration involved a taking from the front section of the Subject property including Erskine Lane and the former access to Helmcken Road. A portion at the rear of the property was also taken to provide access to both the Subject and the hospital via a new road, Watkiss Way.

[23]  On February 26, 1996 the respondent issued an expropriation notice for a partial taking from the claimant's property. On March 22, 1996 an advance payment of $2,608,320 was paid to the claimant as compensation for the expropriated interest. This amount was identified on the Notice of Advance Payment as $1,739,700 for market value and $868,620 for injurious affection.

[24]  Prior to the commencement of the hearing, the claimant accepted the advance payment in full satisfaction of its claim for the market value of the land taken and the reduction in the market value of the remaining land directly attributable to the takings or resulting from the construction of use of the works for which the land was taken.

[25]  The claim before the board is based upon the claimant's allegation that the Subject property was "frozen" or "sterilized" due to the uncertainty associated with the highway project. The claimant is seeking compensation for the loss of use of the Subject during the period October 31, 1989 to March 22, 1996, the alleged "delay period". The amount claimed is based on the assumptions that the property was worth $5.25 million at October 31, 1989 and that, but for the highway project, the claimant would have earned a return of 14.66%, compounded annually, on that property value.

3.  ISSUES

[26]  The claimant has framed its claims under Sections 34 and 40 of the Act:

a. Reasonable costs, expenses and losses that are directly attributable to the disturbance to the owner by the expropriation (Section 34(1)(a) of the Act) or

b. Reasonable personal and business losses incurred by the claimant that are directly attributable to the taking or result from the construction or use of the works for which the land is acquired (Section 40(1)(b)(ii) of the Act)

[27]  The board will consider the issues in the following order:

i) Is the respondent liable for any losses incurred by the claimant as a result of the alleged loss of use in the pre-expropriation period? Put another way, did the process of expropriation cause the claimant to incur such losses?

ii) If the answer to i) in the affirmative, what is the quantification of compensation for such losses?

iii) Is the claimant entitled to the other losses, costs and expenses claimed?

4.  CLAIM FOR LOSS OF USE IN PRE-EXPROPRIATION PERIOD

4.1  Liability

[28]  It is now settled law that causation leading to compensation cannot be ruled out merely because the damages pre-date the expropriation. The leading case is the Supreme Court of Canada decision Dell Holdings Limited v. Toronto Area Transit Authority, [1997] 1 S.C.R. 32. At paragraph 38 Cory J, writing for the majority, states:

The approach to damages flowing from the expropriation should not be a temporal one; rather it should be based upon causation. It is not uncommon that damages which occur before the expropriation can, in fact, be caused by that very expropriation.

[29]  At paragraph 41, Cory J, states:

The company had purchased the lands for development. It was in the process of seeking the necessary approval for development when the Authority expressed its interest in a portion of Dell's lands. The result was that its lands were frozen for more than two years while the Authority considered how much and what portion of the lands should be taken. There was nothing Dell could do but wait for the Authority's decision before it could get on with the business of land development.

[30]  At paragraph 44, Cory J. quotes with approval the decision of the Privy Council in Director of Buildings and Lands v. Shun Fung Ironworks Ltd., [1995] 2 A.C. 111 (P.C.)

Losses incurred in anticipation of [expropriation] and because of the threat which [expropriation] presented are to be regarded as losses caused by the [expropriation] as much as losses arising after [expropriation]. This involves giving the concept of causal connection an extended meaning, wide enough to embrace all such losses. To qualify for compensation a loss suffered post [expropriation] must satisfy the three conditions of being causally connected, not too remote and not a loss which a reasonable person would have avoided. A loss sustained post scheme and pre-[expropriation] will not fail for lack of causal connection by reason only that the loss arose before [expropriation], provided it arose in anticipation of [expropriation] and because of a threat which [expropriation] presented.

[31]  Dell Holdings has been quoted with approval by the British Columbia Court of Appeal in Bayview Builders Supply (1972) Ltd. v. Ministry of Transportation and Highways (1999), 66 L.C.R. 176 (B.C.C.A.) and by the board in Sequoia Spring West Development Corporation v. British Columbia (Minister of Transportation and Highways) (2000), 69 L.C.R. 1 (B.C.E.C.B.) and Whitechapel Estates Ltd. v. The Ministry of Transportation and Highways (1998), 63 L.C.R. 121 (B.C.E.C.B.).

4.1.1  Commencement of the "process of expropriation"

[32]  In the case presently before the board, the claimant seeks compensation for alleged pre-expropriation losses commencing October 31, 1989. The expropriation took place in March 1996. It is necessary to determine when the "process of expropriation" commenced. Only disturbance damages arising after this time can be said to have been caused by the expropriation, and therefore be recoverable.

[33]  The respondent seeks to draw an analogy between construing the scheme for the purpose of pre-expropriation losses and the manner in which the scheme is construed for the purpose of application of the Point Gourde principle, which stands for the proposition that compensation for expropriation of land must not take into account an increase or decrease in value that is entirely due to the scheme underlying the acquisition. This principle is incorporated in Section 33 of the Act. In Waters v. Welsh Development Agency, [2004] U.K.H.L. 19, the House of Lords at paragraph 55 notes practical difficulties if a broad construction of the scheme is applied for the purposes of the Pointe Gourde principle. The respondent submits that similar reasoning should apply in defining the scheme for the purposes of assessing recovery of pre-expropriation damages.

[34]  The commencement of the "expropriation process" in the authorities cited to the board is as follows:

• In Shun Fung the parties agreed that the scheme began in 1981, and therefore pre-expropriation losses from that date to the date of the expropriation in 1986 were payable. The Privy Council referred to a letter sent to Shun Fung by a government official in November 1981. That letter is set out in the decision of the Hong Kong Court of Appeal at Shun Fung Ironworks Ltd. v. Director of Buildings and Lands, [1994] 1 H.K.C. 35 (C.A.) at p. 43:
   
  I am sorry to have to tell you that the retention of your factory would completely compromise the development of the new town. The government has, reluctantly, come to the conclusion that it will be necessary to clear your site.
   
  There will be many things to discuss and I have been asked, on behalf of the government, to convene an early meeting with your company where the issues can be aired. New Territories Administration and Trade, Industry and Customs Department, will be at the meeting.
   
  It would clearly be helpful if you could give some thought to the range of options which may be open so that government can, quickly, gain a realistic understanding of your company's interest.
  
• In Dell Holdings, the parties also agreed that the scheme began when the authority identified two alternative sites on owner's land as the probable sites of a future transit station. The factual situation is summarized by the Ontario Court of Appeal in Dell Holdings Ltd. v. Toronto Area Transit Operating Authority (1995), 123 D.L.R. (4 th ) 157 at 158-9:
   
  It is sufficient to observe that by March, 1977, the authority had identified at least two alternative locations on the appellant's lands as the probable site of a future GO transit station. From then until March, 1980, the authority continued to study the project for the purpose of determining, among other things, the location of the station and the precise acreage required to meet its needs. During this period, pending the authority's finalization of its requirements, the municipality withheld such approvals as were required to subdivide and develop the appellant's land. In March 1980, the authority expropriated about nine acres of the appellant's lands.
   
  It is undisputed that the time taken by the authority … in determining the actual site and exact acreage required for the GO station did in fact delay the development of the appellant's remaining lands, and that the appellant, as a result, sustained damage.
  
• In Bersenas v. Minister of Transportation and Communication (1982), 25 L.C.R. 137 (Ont L.C.B.), it was determined that the process commenced when the Ministry wrote the Claimant stating it would require vacant possession.
• In Mount Lawn Industries Ltd. v. City of Edmonton (1999), 69 L.C.R. 50 (Alta L.C.R.), the Alberta Land Compensation Board, at pages 53-54 and 56-59, summarized the facts it relied on in reaching its conclusion that negotiations between 1981 and 1983 were part of the expropriation process that ended in expropriation in 1990. The facts considered included, inter alia, the respondent's land negotiator writing to the claimant in 1981 indicating the respondent's intention to purchase all of the property; the respondent advising the claimant, in writing not to proceed with sub-trades for its building project on the property, and the respondent offering to purchase the property in 1981.
• In Ryde International PLC v. London Regional Transport (Lands Tribunal, U.K., May 28, 2003), an English case involving the principle from Shun Fung, it was conceded that the process commenced with the introduction in Parliament of the Bill authorizing the tramway project.

[35]  The claimant asserts that the "delay period", and hence the expropriation process, commenced in October 1989 when it first became aware of the general plans for reconfiguration of the Helmcken intersection and a possible impact on the Subject, particularly on access from Helmcken, through discussions with Mr. Giffon.

[36]  The respondent submits that in all the cases referred to above, the project was well defined and the expropriation was a virtual certainty at the time the expropriation was found, or agreed, to have commenced.

[37]  The respondent states that in 1989 its plans for the interchange were vague in all respects including what would be built, when it would be built, and what the land requirements were. Treasury Board had not approved the project budget. The preliminary concept plan provided to Mr. Giffon was described as a "very sketchy sketch" by Mr. Camilleri. The claimant was not told that its land would be expropriated – only that land requirements would be discussed. There was no further announcement by the respondent that acquisitions were imminent until January 1994, when newspaper advertisements were placed stating that acquisitions for the interchange would get underway that year. The respondent submits that at no time before January 1994 could it be said that the process was underway such that the principle for Dell Holding or Shun Fung could be applied. Any losses prior to this date are too remote.

[38]  The board does see some merit in the respondent's position that the expropriation process did not commence in 1989. A review of the chronology of events and the evidence does not support the claimant's contentions that the property was "frozen" or "sterilized" commencing in October 1989 as a result of the scheme. The board notes that the claimant continued to list the Subject in 1990 and in May 1990 received a conditional offer to purchase at its listing price of $5.25 million which it neither accepted nor countered.

[39]  In March 1991, Mr. Kahl advised the claimant that the property could be sold with the "Highways problem". The Subject was listed at $6.8 million between March and July 1991, well above Mr. Kahl's suggested list price of $6.3 million. As late as April 12, 1993, Kahl reported to the claimants that there was an enquiry about purchasing the Subject from an "international scale developer".

[40]  The evidence also does not indicate that development possibilities were frozen after October 1989. There was an expression of interest by McDonald's Restaurant of Canada Ltd. ("McDonald's") in late 1992 in the development opportunity. McDonald's suggested that more could have been done by the claimant to further a development on the Subject.

[41]  Another factor in the present case is the two year moratorium imposed in May 1991 on the Vancouver Island Highways Project as a result of the Capital Regional District (CRD) undertaking an overall transportation strategy for the Region. The claimant submits that this moratorium should not be a consideration in determining the liability of the respondent, and points to the situation in Dell Holdings where the municipality's refusal to issue a development permit to the claimant was discounted by the Court. The board notes however, that the situation in Dell Holdings was somewhat different in that the municipality refused to issue the building permit until the authority had decided the area of the taking. In the present case, the CRD's action was not based on facilitating the taking by the authority, but to undertake a transportation strategy.

[42]  Some of these issues are further elaborated later in the discussion. The determination of the commencement of the expropriation process is dependent on the facts of each case. It is sometimes difficult, as in the present case, to draw a particular line at which the expropriation process commenced such that losses prior to that can be said to be too remote. In Shun Fung, Lord Nicholls, writing for the majority, notes that the certainty that an expropriation will occur will gradually increase until it finally takes place and states at page 138:

Their Lordships can see no sound reason for attempting to draw a spurious line somewhere along this penumbra of ever darkening shadow. One of the conditions of compensation is that the loss must have been incurred reasonably …..The less certain the prospect of [expropriation], the greater will be the burden of showing that he acted reasonably….and that the losses were caused by the process of [expropriation].

[43]  After reviewing the chronology of events and evidence presented, the board accepts this formulation of Lord Nicholls as being the appropriate approach to employ in the circumstances of the present case. Rather than draw a somewhat "spurious line" between October 31, 1989 and the date of expropriation, the board will consider the actions of the claimant from October 1989 and will assess the reasonableness of the claimant's actions in accordance with this formulation.

4.1.2  Did the process of expropriation cause the Claimant to suffer damages for loss of use during the pre-expropriation period?

[44]  While the claimant pleads that it suffered losses through its inability to "develop, rent, sell, finance or otherwise deal with the Subject lands at market values or rates", it did not adduce any evidence to indicate any intention of renting the Subject or using it for financing purposes. The board's analysis on causation therefore focuses on the premise that the alleged loss arose from the inability of the claimant to use the Subject property by either selling or developing it.

[45]  The claimant points to the efforts made to sell the Subject through realtors Mr. Giffon and Mr. Kahl. The subject was listed by Mr. Giffon in late 1989 for $5.25 million dollars. This was the value estimated by Mr. Giffon, based upon $12 per square foot. Discussion with the respondent in the early stages of the listing made Mr. Giffon aware of major changes to the Helmcken interchange. It was Mr. Giffon's opinion that uncertainty about the interchange, particularly access and any taking from the Subject, made it difficult for him to market the property.

[46]  The Subject was listed for sale again in March 1990 for $5.25 million by the realtor Mr. Kahl. Mr. Kahl also expressed concerns about the difficulties in marketing the Subject as a result of the uncertainty in the respondent's plans. The Subject was relisted by Mr. Kahl in March of 1991 for $6.8 million based upon a change in the OCP and higher density involving residential properties. The claimant maintains that the inability of Mr. Kahl to market the Subject resulted from the continuing uncertainty about the respondent's plans.

[47]  The respondent submits that the claimant did not take active steps to market the property. It notes that the listing period was less than one year in total over a loss period alleged to span over six years. It also points out that the last listing agreement expired almost five years before the expropriation and says the listing price was significantly in excess of market value because, even accepting Mr. Giffon's estimate of $12 per square foot, the value of the Subject was $4.75 million.

[48]  Other evidence also suggests that the market value was significantly less than the listing price. In a handwritten note in May 1989 entitled "Re: price on Helmcken", Roy Stewart suggested pricing the Subject at $4.5 million. One offer that was received through Mr. Kahl during the period of his first listing was for $5.25 million. However, this offer required the vendor to take back an interest free second mortgage for a period of one year. The offer price would accordingly have to be discounted heavily to account for the interest free factor, as well as the risk associated with that mortgage. Further, the respondent's appraiser, Osland, whose report is discussed later in these reasons, estimated the market value as at May 12, 1990 to be $4.56 million, a figure that the board accepts as correct.

[49]  The claimant did not seek listing proposals from realtors nor did it initiate the listing with Mr. Giffon that was granted on October 12, 1989. Mr. Giffon testified that he approached the claimants and obtained a listing to December 15, 1989 which was later extended to February 15, 1990. Mr. Kahl's March 12, 1990 listing expired on June 12, 1990. On March 25, 1991 Mr. Kahl wrote to the claimant suggesting that the Subject was worth $6.3 million under the new OCP, and said that the marketability of the Subject was good at that time. Mr. Kahl obtained a second listing at a price of $6.8 million on March 30, 1991 which expired on June 30, 1991. The Subject was not listed again during the claimed delay period. There was, however, evidence of unsolicited buyer interest which the claimant either rejected or did not pursue. This included a January 1993 approach by a developer, a May 1993 approach by Royal Lepage on behalf of a client, and the previously mentioned expressions of interest by McDonald's in 1992 and by Mr. Kahl on behalf of an international scale land developer in April 1993.

[50]  The listing price of $6.8 million for the second Kahl listing in 1991 was $500,000 greater than the valuation of the Subject carried out by the respondent's appraiser, Ray Baker of Baker Osland Appraisals Ltd., as the basis of the advance payment, and accepted by the claimant in 1996. There was no evidence that the market between 1991 and 1996 had declined. Roy Stewart's testimony that the listing served as a test of the market at that time also suggests that the claimant had no strong desire to sell at the time that it granted the second listing to Mr. Kahl.

[51]  The respondent also contends that the claimant did not take reasonable steps when it did receive expressions of interest in the Subject. The respondent notes that the $5.25 million offer that was received through Mr. Kahl was rejected because of vendor financing, but there is no evidence of any negotiations or counter offer.

[52]  In further support of its contention that the claimant was not motivated to sell, the respondent notes that the issue of the claimant's inability to sell the Subject was not raised by the claimant with the respondent's agent, Mr. Miller, despite frequent dealings beginning in December 1994.

[53]  The board also notes that rather than demonstrating a serious intention to sell, the claimant made unsuccessful attempts to add to its land bank by purchasing additional land adjacent to the Subject from a Mrs. Adams in 1990, and other adjacent land from a Mr. Creed during the time period 1992 to 1994.

[54]  The claimant's realtor in 1991, Mr. Kahl, also appears to indicate in a memo to his client of March 25, 1991 that the highway issue would not preclude a sale:

The highways problem must be resolved before development, not necessarily before sale, it is probably better to let a party negotiate with them who will develop it.

[55]  The board now turns to the issue of the effect of the process of expropriation on the claimant's development plans. There is no question that the claimant initially purchased the property to develop it and actively pursued this objective until 1989. The evidence of its desire to pursue development after 1989 is, however, put at issue by the respondent.

[56]  The claimant asserts that it did not apply for a development permit as it felt that there was no point in doing so given the uncertainty relating to the respondent's project. The claimant says that if it had applied for a development permit, obtained the permit and undertaken the work, the cost to the respondent for the taking would have been greater.

[57]  The respondent submits that there is no evidence that any actions by the respondent or any other authority in connection with the respondent's project prevented the claimant from developing the Subject. The Subject was zoned as required by the claimant for the development that it envisaged. All that was required was a development permit from the Town of View Royal. No legal provision would have permitted either the respondent or the Town of View Royal to hold up development and there is a presumption that statutory authorities will act within their lawful authority (Adams v. British Columbia Workers Compensation Board (1989), 42 B.C.L.R. (2d) 228 at paragraphs 9, 12-13). Had the claimant applied for a development permit, the respondent would either have had to move up its planning and acquisition for the interchange or allow the development to proceed and either acquire it or design the interchange in a manner that avoided the Subject. The respondent submits that any losses resulting from the claimant's failure to take what the respondent characterizes as a reasonable course of action are not the responsibility of the respondent. It should be noted that the respondent's property manager, Mr. Mertton, gave evidence of two situations involving properties on the same portion of the Vancouver Island Highway Project where ongoing development forced the respondent to act earlier than it might have otherwise.

[58]  As referred to earlier, McDonald's had expressed an interest in the development opportunity in late 1992. At that time, the claimant's response to the enquiry was a request that a proposed meeting be held in abeyance due to the matters of sewer and highways which the claimant referenced as two major hurdles to overcome. McDonald's written response in January 1993 is noteworthy:

We are aware of the complexities associated with the Helmcken Village development and would like to make the following comments. From our experience dealing with the likes of municipalities and the Department of Highways, an applicant/developer has a better command of a project if they take a leadership role in the process. By being proactive, the various departments involved are provided with the opportunity to react to a situation. In terms of the Department of Highways, we are aware that their previous plans were somewhat shelved as a result of a referendum opposing same. It is my understanding that an application to develop the Helmcken Village would give the Department of Highways the ammunition needed to make a decision on the intersection of Helmcken Road and the Trans Canada Highway.

[59]  The note of Mr. Geoffrey Stewart, the father of Mr. Reg Stewart and Mr. Roy Stewart, on this letter states, "It seems for the moment we can only leave this matter on hold."

[60]  Mr. Geoffrey Stewart, who is elderly, did not testify at the hearing. It was clear from the evidence that Mr. Geoffrey Stewart was a key decision maker with respect to the Subject. Mr. Roy Stewart testified that his father was the principal of the claimant and "called the shots".

[61]  Another factor which appears to have played a part in the lack of motivation to sell or develop the Subject in the pre-expropriation period is a change of focus of the Stewart group of companies to investments in Australia, and Mr. Roy Stewart's move to Australia in 1993.

[62]  Importantly, the evidence shows that the Stewart companies are primarily purchasers and owners of revenue producing real estate rather than developers. This was confirmed by Roy Stewart who testified that the claimant was not a developer and would typically seek an experienced developer partner for development projects. There is no evidence that a developer partner was involved with the Subject. Roy Stewart testified that the claimant has owned land on King George Highway in Surrey, British Columbia since 1971 which remains undeveloped, although an unsuccessful attempt was made to develop it in concert with a Mr. Hartshorne, an experienced developer, from about 1994 to 1996. Roy Stewart stated that a developer optioned the King George Highway property in 1980, but the option was not exercised. Winchester owned land on Sooke Road in Victoria, British Columbia which it did not develop and finally sold in 1989 after holding it for a number of years. The claimant is part of a large and well financed corporate group. It has demonstrated a willingness to retain properties for many years even if there is no income or development, as in the case of the King George Highway and Sooke Road properties.

[63]  As noted above, the claimant listed the property for only a limited period of time and at prices that were clearly higher than market value. The Subject was not listed again after June 1991. Expressions of interest were rejected or not pursued. The claimant failed to make any meaningful attempts to develop the property.

4.1.3  Board's Conclusion on Liability

[64]  Weighing all the evidence, the board concludes that the claimant would have continued to retain the Subject for future development or sale, even in the absence of the respondent's Highway project. The evidence shows that the claimant was not motivated to sell or develop the property in the period prior to expropriation and did not make reasonable efforts to do so. The board notes that the property remained undeveloped and unsold at the time of the hearing of this matter, some eight years after the expropriation was finalized.

[65]  It follows from the board's conclusion that the respondent did not cause, and is therefore not liable to the claimant for any losses that may have been incurred by the claimant for any loss of development or sale in the pre-expropriation period.

4.2  Quantification of Compensation for the Alleged Loss of Use

[66]  Given the board's conclusion on the question of liability, it is not necessary for the board to embark upon an assessment of the losses alleged to have flowed from the claimant's inability to sell or develop the Subject. The board will however address the quantum of such losses in case it is found to be wrong in its conclusion on liability.

[67]  A review of the authorities reveals different approaches to the assessment of damages. For example, in Shun Fung, the claimants were awarded lost profits during the "shadow period"; in Dell Holdings, the quantum, determined by the Ontario Municipal Board, appears to have been based on carrying costs bearing interest at 10%, deferral of development profit and additional servicing costs; in Whitechapel, the approach taken was the difference between the return to the developer had there been no delay and the actual return.

[68]  The claimant points to a line of cases where the approach, stated very simply, appears to have been to take the value of the land or other property, and apply an annual percentage rate to such value in order to quantify damages. These cases include Devine v. Ministry of Transportation and Highway (2002), 76 L.C.R. 89 (Ont.C.A,); and Lofranco v. Municipality of Metropolitan Toronto (1982), 25 L.C.R. 11 (Ont. L.C.B.)

[69]  A variety of approaches to quantification of damages for pre-expropriation delay are apparent from an analysis of the authorities. The principles underlying these different approaches are not readily apparent in all instances. This may be a reflection, in some instances, of limitations arising from the quality of the evidence presented.

4.2.1  Claimant's Approach to Quantification

[70]  In the present case, the claimant is seeking compensation for the loss of use of the Subject which it has quantified as the loss of return on the value of the Subject during the period October 31, 1989 to March 22, 1996, the alleged "delay period". The amount claimed is based on the assumptions that the property was worth $5.25 million at October 31, 1989 and that, but for the highway project, the claimant would have earned a return of 14.66%, compounded annually, on that property value.

[71]  The 14.66% rate of return was determined by Mr. Robert Orr. It represents his calculation of the annual rate of return on equity earned by the combination of ABC and Winchester during the calendar years 1990 to 1995. He also calculated that $5.25 million invested at 14.66%, compounded annually, during the period October 31, 1989 to March 22, 1996 would produce a return of $7,376,255.

[72]  The respondent says that the activities of the claimant during the delay period suggest that if the money invested in the Subject had been available, it would have been invested in the stock market at a modest return, or used to pay down debt, or make loans to related companies at bank prime rate or prime plus one-quarter of one percent.

[73]  The respondent takes issue with the claimant's use of a combination of the financial performance of ABC and Winchester as a measure of loss and points out that those two companies were not amalgamated until December 31, 1995. It says that Mr. Orr should have based his calculation on the performance of Winchester which owned the Subject throughout almost all of the delay period or, alternatively, have calculated and used the rate of return achieved by all of the companies in the Stewart family corporate group. The board has addressed this issue later in its reasons under the heading "corporate veil".

[74]  A number of technical issues affecting Mr. Orr's calculation of the return on equity were identified during the proceedings. These included:

[75]  Mr. Orr's calculation of the annual return on equity was de rived by dividing the total equity at the beginning of each year into the total return for the year. The board believes that it would be preferable to make this calculation using the average of the total equity at the beginning and end of each year because the return for the year is attributable to the equity employed during that year. Equity will increase during the year because of operating income. Also the assessed values of real estate which are an integral part of equity and return are based on values at July 1.

[76]  The board has recalculated the return on equity using the methodology employed by Mr. Orr but with the following changes to some of the individual component figures:

Our calculations following on the above changes show a return on equity of 10.31% for the period 1990 to 1995.

[77]  The board is concerned that the large and irregular swings in property assessed values and return on investments can significantly affect the annual return on equity. Mr. Orr's analysis shows an overall annual return during the 1990 to 1995 calendar years of 14.66% with returns of individual years varying from a low of -8.18% in 1990 to a high of 77.09% in 1991. The board's calculations of the return during this six year period, which reflect the adjustments listed above, show a much narrower range of 2.42% in 1994 to 20.34% in 1993 for an overall average of 10.31%. However we noted that a one year change in the starting point of the six year period makes a significant difference to the overall average rate of return. For example, using Mr. Orr's methodology, the board calculates an overall average rate of return of 12.66% for the six years from 1989 to 1994 and 8.41% for the years 1991 to 1996. In the board's opinion, the lack of consistency in assessed values and investment return, which are a significant factor in creating these swings in rates of return, make it inappropriate to use the equity return calculated using this methodology as a basis for determining any loss sustained by the claimant.

[78]  The Subject is a development property which produces no income. It forms part of a mixture of different classes of real estate and investments owned by the claimant. The financing and return from different segments of this portfolio of properties and investments varies. Income producing real estate and marketable investments may be financed in part by mortgage loans or bank and broker loans and this will have an impact on the rate of return on the equity portion of those investments. However the Subject is a clear title property funded by equity or bank loans secured by other property. Accordingly, even if it had been possible to calculate an accurate equity return, we do not believe the claimant's overall rate of return on equity would be an appropriate measure for calculating the loss sustained as a result of the freezing or sterilization of the Subject.

[79]  The foregoing conclusion is supported by a review of the claimant's returns from its King George Highway and Sooke Road lands, both of which were development properties and, as such, similar in character to the Subject. The King George Highway assessed value increased from $868,350 at July 1, 1984 to $2,964,000 at July 1, 2001 which is a return of 7.49% a year compounded annually. However this return would be reduced by development costs of approximately $350,000 which Roy Stewart testified were paid out between 1994 and 1996, and the annual property taxes and any other holding costs. The board does not know the amount of the annual holding costs nor the precise amount of the development costs however it is probable that the compounded annual return on the King George Highway property, net of these costs, would be less than 6.5% during the period 1984 to 2001. Mr. Orr's report shows that the assessed values of the Sooke Road properties increased only $550 during the period of his review, going from $415,500 in 1984 to $416,050 in 1988. The absence of return on the Sooke Road properties, based on assessed values, does not affect the calculated returns on equity because they were sold prior to 1990 which is the beginning of the claimed loss period. However our examination of the assessed values of both the King George Highway and Sooke Road properties does suggest that the returns from development properties during the period reviewed by Mr. Orr were less than the overall return on equity.

[80]  The large difference between the $1,005,000 sale price of the Sooke Road properties and their $416,050 assessed values in the year of sale further undermines the use of assessed values to calculate returns on equity. In this connection the board also notes that the Subject's 1989 assessed value of $1,785,250 is only 34% of the claimant's $5.25 million estimate of its market value at October 31, 1989, and 39% of its $4,560,000 value at May 12, 1990 as determined by an appraisal obtained by the respondent from David Osland.

[81]  It is impossible to determine whether the rate of return on equity calculated using assessed values would increase or decrease if appraised values were used. The annual gain or loss in property value determined by appraisal would almost certainly differ from the change in assessed value; however it would not necessarily follow that an appraised value which was higher or lower than assessed value would produce a correspondingly higher or lower gain since it is the difference between opening and closing value which creates the annual gain, not the difference between the assessed and appraised values. A further factor which would influence equity return is the increase or decrease in equity flowing from the substitution of appraised values for assessed values. This is because total equity is used as the denominator in calculating return on equity and any change in equity will change the annual rate of return.

[82]  The board noted that the claimant acknowledged during its final argument that there might be errors in the calculation of the 14.66% interest rate used in the calculation of the amount of its claim, and said the amount claimed was a guide, and that the board should apply a premium rate and make an assessment, rather than a calculation, of the amount of the damage.

[83]  For the reasons set out above, and those set out under "corporate veil" below, the board has concluded that the board cannot accept a calculation of loss based on equity return.

4.2.2  Corporate Veil

[84]  The Subject was purchased by Winchester in 1986. Winchester was amalgamated with ABC effective December 31, 1995 and the amalgamated entity has continued in business under the name of ABC. The Subject has been owned continuously by Winchester and the amalgamated company since the time of its original purchase.

[85]  The 14.66% return on equity used by the claimant in calculating its claim was determined by combining the operating results and assets of Winchester and ABC for the whole of the period under review. Mr. Orr's report states that the return of Quadra, another company or companies within the Stewart family group of companies, was 17.31% during that same period, however no financial information was provided showing how that amount was calculated.

[86]  The respondent referred to the fact that the Subject was owned by Winchester for almost all of the claimed delay period and said the decision to combine the results of Winchester and ABC prior to their amalgamation was arbitrary. In this connection the board notes that the respondent offered to purchase the necessary land from the claimant on September 5, 1995 with a completion date of October 15, 1995. The claimant considered the offer and advised on September 8, 1995 that they would not respond to it. Accordingly, the respondent was forced to acquire the Subject by expropriation, which, for various reasons, did not occur until March 1996. In the intervening period, the amalgamation of the two corporate entities occurred.

[87]  The respondent takes the position that any equity rate of return used to calculate loss should be either that of Winchester or all of the companies in the Stewart group. The board believes the only basis for combining the results of Winchester and ABC is their amalgamation at December 31, 1995. However the amalgamation did not retroactively combine their operations and assets prior to December 31, 1995. Clearly it would be inappropriate to permit the selective combination of the results of individual companies since that could lead to the manipulation of rates of return.

[88]  The board notes that in some cases that fit within the ambit of the "group enterprise theory", it may be appropriate to lift the corporate veil and treat related companies as one enterprise, as discussed by the board in Actton Petroleum Sales Ltd. and Actton Super-Save Gas Stations Ltd. v. British Columbia (Minister of Transportation and Highways) (1994), 58 L.C.R. 47. In the circumstances of the present case, however, the board is fully in agreement with the respondent's submission that if an equity rate of return were to be used to calculate loss, it should either be that of Winchester or the Stewart group of companies as a whole.

[89]  The board notes further that when questioned about the basis for considering the combined result of Winchester and ABC for the entire alleged delay period, the claimant's counsel did not rely on the "group enterprise" theory or similar concepts to justify the claimant's approach. Rather, he pointed to the Supreme Court of Canada's reference in Dell Holdings to the Expropriation Act being a remedial statute that must be given a broad and liberal interpretation consistent with its purpose to compensate those whose lands are taken to serve the public interest. The board believes the dictum of the Ontario Superior Court of Justice in Bernard Homes Ltd. v. York Catholic District School Board [2004] O.J. No. 2650 serves as a useful reminder of the ambit of a broad and liberal interpretation. The Court observes, at paragraph 50 that:

Dell Holdings make[s] it clear that disturbance damages must be damages actually incurred and caused by the process of expropriation

[90]  Further, at paragraph 68, in discussing the claim for executive time, the Court observes:

Dell Holdings confirms that the Act must be construed broadly and in a purposive manner in favour of the persons or entity having land expropriated. However Dell Holdings cannot be construed as an invitation to embellish disturbance damage claims. Actual losses caused by the expropriation process are compensable. A broad, purposive reading should not embark into the subjective and speculative.

[91]  The board was provided with copies of the financial statements of Winchester and ABC for the years 1984 to 2002. The board does not have the requisite information for the other Stewart companies to reach a conclusion with respect to the financial returns of the Stewart companies as a group. The financial statements of Winchester show that its principal assets during the period 1989 to 1995 were marketable investments, loans to associated companies and others, and the Subject. The board has calculated Winchester's annual return on equity using the methodology employed by Mr. Orr and determined that it was less than 5% in the period 1990 to 1995. The board has already concluded that it cannot accept these calculations of return on equity as a basis for calculating any loss sustained by the claimant; however, even if this was not the case, the board believes a return of under 5% to be inappropriately low for the purpose of calculating any loss due to delay during that period of time. The board thinks it preferable and fair to measure any loss by using the interest rate obtained by Winchester on its loans to associated companies, which was customarily bank prime lending rate plus one quarter of one percent. The board prefers this rate to the investment return on Winchester's portfolio of marketable securities or the interest that would have been saved by paying down debt, which were other alternatives suggested by the respondent, because Winchester sold its portfolio of marketable securities in 1994 and its only outside debt during that period was to its bank, which was repaid in 1990, and to its broker which was repaid in 1994.

4.2.3  Respondent's Approach to Quantification

[92]  The respondent says that any loss should be calculated based on what the claimant would have done with the Subject but for the highways project. It says there are three alternatives:

[93]  The board's assessment and conclusions on the issues of the effect of the process of expropriation on the claimant's efforts to sell the Subject or pursue plans for its development has been discussed previously. In addition the board notes that the claimant presented no evidence with respect to the loss of profit arising from the frustration or delay of development plans. Mr. Orr testified that a calculation of damages based on development of the Subject would be complicated and was not done. Mr. Crosson, whose role in these proceedings is described below, testified that such a calculation would require the determination of the nature of the development, the estimated costs, and the source and cost of financing. Mr. Crosson was unable to say what such an exercise would show. The board will not address the quantification of a claim for financial loss based on delay of development plans given the complete lack of information in this regard.

[94]  Mr. Richard Crosson, who is experienced in the quantification of commercial damages, was retained by the respondent to prepare an assessment of damages sustained by the claimant assuming that:

[95]  Mr. Crosson calculated that interest, before income taxes, on the net proceeds of sale would amount to $2,102,266. The companies would also save property taxes of $106,316 for a total of $2,208,582. Mr. Crosson compared this with the $2,015,000 increase in value of the Subject from $4,300,000 to $6,315,000, which was the value of the Subject at the date of expropriation, and concluded that the difference in investment return was $194,000 [$2,208,582 less $2,015,000 rounded].

[96]  Mr. Crosson prepared analyses showing the amount of the difference in investment return with different gross sale proceeds and different sale closing dates. There was no challenge to the mathematical accuracy of any of Mr. Crosson's calculations and the board accepts them as being correct.

[97]  Mr. Crosson's sensitivity analysis shows that the difference in investment return is driven by three factors: the sale price of the Subject, the timing of the receipt of the proceeds of sale, and the rate of interest earned. His report shows that the bank prime rate fell from 14.75% in April 1990 to 6.75% in March 1996. Thus a later sale date not only reduces the length of the period during which interest is earned, but also reduces the overall average rate of return because of the falling interest rate. This is reflected in Mr. Crosson's sensitivity analysis which shows that at each sale price level the difference in investment return is reduced with later dates of sale because a later sale produces less interest.

[98]  The claimant cited City Parking Ltd v. City of Toronto (1980), 20 L.C.R. 159 (Ont. Div. Ct.) where it was held that income tax should not be deducted from an award for a loss of income, and questioned the appropriateness of deducting income tax on the capital gain flowing from the sale of the Subject when calculating the amount that would be available for investment. It suggests that this would result in double taxation because any award received by the claimant from these proceedings would be subject to income tax. The board disagrees. The interest calculated by Mr. Crosson is the pre-tax amount that would have been earned from the investment of the net proceeds generated by a sale of the Subject which is consistent with the City Parking decision. The board believes this is the proper way to measure the loss because the only amount available for investment by the claimant, had it sold the Subject but for the expropriation, would be the after tax proceeds of sale.

[99]  The board noted that Mr. Crosson added interest earned to the capital sum available for investment, and also reduced the capital sum by the income tax that would be payable on that interest. The board has carefully considered the deduction of tax on interest from the capital sum available for investment because it reduces the amount of interest earned during the investment period. The board has concluded that the deduction is appropriate because the net result has been to calculate the amount of pre-tax income that would have been earned by the claimant if it had sold the Subject and invested the net proceeds.

[100]  The board agrees for the reasons set out under "corporate veil" that bank prime rate plus one quarter of one percent is an appropriate rate to use in the measurement of loss. There are two other assumptions given to Mr. Crosson that influence the amount of the loss. These are the value of the Subject at the beginning of the loss period, and the timing of the receipt of the proceeds from the sale.

[101]  The claimant says the Subject was worth $5.25 million at October 31, 1989. It bases this on the opinions of the realtors Mr. Giffon and Mr. Kahl, who obtained listings at that price on October 12, 1989 and March 12 1990 respectively, and testified that they considered the listing price to be reasonable.

[102]  The respondent commissioned an appraisal of the Subject as at May 12, 1990 from David Osland of Baker & Osland Appraisals Ltd. Mr. Osland determined that the highest and best use of the Subject was development in accordance with the OCP designations of Village Commercial and Medium Density Residential, designations which were pending but proposed at the effective date of the appraisal.

[103]  Mr. Osland utilized 17 sales in the valuation of the commercial portion of the Subject and analyzed the sales on the basis of square foot rates. His comparable sales ranged from $2.57 to $23.97 per square foot prior to adjustment. He adjusted ten of the sales for comparison with the Subject and these sales indicated adjusted rates of $8.07 to $13.13 per square foot. He concluded that the market value of the main commercial portion of the property was $13.00 per square foot but utilized a rate 50% lower for the smaller section of the Subject which was located on the southeast side of Erskine Lane. He concluded a value of $3,300,000 for the commercial portion of the Subject.

[104]  For the residential section of the Subject, Mr. Osland analyzed five sales of multi family sites on the basis of developable units. The comparables indicated values ranging from $16,250 per unit for a proposed 144 unit condominium development to $31,944 for an 18 unit townhouse site. After adjustment, the range of unit values narrowed to $20,663 to $22,329. Mr. Osland estimated that a rate of $21,000 was appropriate for the residential portion of the Subject. On the basis of the maximum density allowable under the OCP designation, Mr. Osland concluded a value of $1,260,000 for the possible 60 townhouse units developable on the residential portion of the Subject. His final conclusion of the market value of the Subject was the combined results of his analysis or $4,560,000.

[105]  In testimony at the hearing, Mr. Osland commented that his appraised value was similar to the $5.25 million offer received for the Subject when allowance is made for the interest free second mortgage. He estimated that the market rate of interest for this second mortgage would have been 25% at that time, so that the interest free feature would reduce the effective offering price by $500,000 to $4.75 million. Mr. Osland chose to use the lower $4.56 million value determined with reference to other land sales and noted that he was unable to assess the seriousness of the $5.25 million offer.

[106]  Mr. Osland was also asked to provide his opinion on the exposure time required to achieve an acceptable contract of purchase and sale and the time to complete the sale.

[107]  Mr. Osland included five sales in his report in support of his estimated exposure time. The five sales indicated market exposure periods ranging from 3 months to 13 months. He concluded the exposure time for the Subject would be 7 months from the date of listing in October 1989. He then reviewed eight sales to determine an estimate of completion time for the Subject. The completion dates of the sales ranged from 3 months to 10 months and Mr. Osland concluded that if the Subject property had sold 7 months after the October 1989 listing, the sale would be completed 6 months later for a for a total of 13 months from the time of listing to the receipt of the proceeds of sale.

[108]  The board considers Mr. Osland's appraisal to be more reliable evidence of the value of the Subject than the $5.25 million listing prices accepted by Mr. Giffon and Mr. Kahl. It is only slightly less than the $4.75 million value which flows from both Mr. Giffon's estimate of $12 a square foot, and the value attributable to the one offer that was received after allowance is made for the interest free second mortgage component of that offer. The board accepts Mr. Osland's $4.56 million appraised value and his estimate of the probable time frame from listing to receipt of the proceeds of sale.

4.2.4  Board's Conclusion on Quantification

[109]  The board concludes that it would have adopted the methodology used by Mr. Crosson to measure loss if it had found that the expropriation process had delayed the sale or development of the Subject.

[110]  Interpolating from Mr. Crosson's tables indicates that the difference in investment return with a gross sale price of $4.56 million, the receipt of the net proceeds of sale on November 12, 1990 being 13 months after the October 12, 1989 listing with Mr. Giffon, and the investment of the sale proceeds at bank prime lending rate plus one quarter of one percent, would be approximately $310,000. The board notes however, that if liability had been found, it would not necessarily have awarded this amount as damages for delay. The board would have considered whether factors other than the process of expropriation contributed to the delay and reduced the award accordingly. These factors, including those that led the board to conclude that the claimant lacked the motivation to sell or develop the Subject during the pre-expropriation period, have been explored in the discussion on liability for loss of use. In Sequoia Springs, the board concluded that factors other than the highway would have delayed the development in any event and reduced the amount awarded by over 40%.

[111]  The claimant submits that the increase in value of the Subject should be ignored in the calculation of the loss. In support of its contention, the claimant cites Leeder v. Minister of Highways and Public Works (1980), 24 B.C.L.R. 264 (B.C.S.C.); (1982), 37 B.C.L.R. 266 (B.C.C.A.); and Hougen et al. v. Minister of Highways (1984), 58 B.C.L.R.306 (B.C.S.C.). In the board's view, however, these cases are distinguishable from the present case. The damages assessed in those were in the nature of an occupation rent for temporary taking where the properties were transferred back to the owner, a situation quite different from that in the present case. The board also notes that takings operated under a different statutory scheme at the time those two cases were decided. The board notes further that in both Whitechapel and Ryde International, increases in value were taken into account in the assessment of damages for delay, and the losses caused by the delay were eliminated as a consequence of taking these increases in value into account. The board is of the view that any increase in value in the Subject over the alleged delay period should be taken into account to reduce damages.

[112]  Another issue that the board wishes to address is the claimant's submission that it is entitled to an additional rate of return on its claimed losses even beyond the date of expropriation. On the basis that the claimant was not made whole at the date of expropriation, the claimant states that they should receive the rate of return calculated by Mr. Orr for the period between March 22, 1996 to December 6, 2004, the date of commencement of the second phase of the hearing. The claimant has not cited any authority in support of this submission. The board agrees with the respondent that there is no justification for this. Any claim for losses for pre-expropriation delay ceased with the expropriation. No evidence was presented to indicate any effort, or even intention, on the part of the claimant to sell or develop the property in the eight years since the expropriation. Had the board awarded damages for delay, the claimant would only be entitled to interest under Section 46 of the Act after the date of expropriation.

5.  CLAIM FOR OTHER LOSSES

5.1  Property taxes

[113]  The claimant alleged a number of other losses resulting from the partial taking from the Subject and the alleged delay. These costs included property taxes from 1990 to 1997. As the board has found that the claimant would have held the land for future development, there can be no claim for property taxes as this would be a normal holding cost of the land. The board disallows this claim.

5.2  Development costs thrown away

[114]  The claimant also claimed a number of development costs thrown away due to the changes in access and the property configuration. The amount claimed totalled $46,442.67. Generally, the amounts can be segregated as follows:

[115]  The claimants have clearly lost any benefit that would have accrued to the site by virtue of the work done towards arranging access from Helmcken Road as this route will not be available to the site due to the reconfiguration of the roads. Accordingly, the board is prepared to allow the costs incurred in this regard. The board awards the claimants the costs for the engineering, electrical and consulting work incurred in relation to access as well as the legal fees for the access easement. These costs total $15,378.71.

[116]  Of the other expenses claimed, the board has limited information on the costs claimed for the period May 1986 to December 1986 as the claimant's invoices for this period were not available. The figure claimed relates to amounts recorded in the claimant's books. These amounts, as well as the amount claimed for dealing with zoning changes, appear to be typical development expenses that would enhance the value of the property if the proposed or similar development ultimately proceeded. The board finds that these amounts are not costs "thrown away" as the claimant has received compensation for the partial taking on the basis of the market value of the property. If the highest and best use of the property was for the proposed development, these expenditures would have increased the value of the property. Alternately, if the value of the property was higher under the revised OCP designations, the costs would have been thrown away by the claimant in order to obtain the value of the property under the revised development potential. The evidence shows that the claimant did support the proposed change of use under the new OCP.

[117]  The claimant also included costs for excavation of test holes, building removal and fencing in its claim. The board has no evidence which would indicate that these expenditures will not ultimately benefit the claimant. The Subject is a development property and test holes and the removal of the building would be necessary for any development on the property. The cost of the fencing is considered to be a normal cost of holding the property. The board declines to award these amounts as losses.

5.3  Executive time

[118]  The claimant advanced a claim for executive and staff time devoted to development 1986 through 1996. The board finds that, generally, the time spent on the development of the property would have either enhanced the market value of the property, which would have been included in the amount already awarded to the claimants, or as above, if the property was more valuable for a different use, this time spent would, in any event, have been of no use to the claimant. The board is of the view that the only aspect of the claim for executive and staff time attributable to development that can be considered to be thrown away is that which relates to access to the Subject from Helmcken Road. The respondent, in oral closing submissions, conceded the claimant's entitlement to this portion of the claim for executive and staff time. The claimant has not allocated executive and staff time spent on access issues as opposed to development as a whole. In reviewing the available evidence, the board considers $5,000 to be reasonable compensation for time spent with respect to access to Helmcken Road. The board accordingly awards this amount as disturbance damages for executive and staff time thrown away as a result of the expropriation.

[119]  The claimant also advances a claim of $2,500 for executive and staff time devoted to expropriation proceedings. This claim relates to time spent in assembling financial information in preparation for the compensation hearing. Claims for the time spent in preparing a compensation claim or in attending a hearing to give evidence are not compensable disturbance damages. This includes time spent meeting counsel, meeting with expert witnesses, attending discoveries and reviewing documents from the claimant's own files or the authority's files in preparation for the claim or the hearing.

[120]  In L'Abri B.C. Ltd. v. School District 34 (Abbotsford) (1994), 52 L.C.R. 161 (B.C.E.C.B.), a claim was made for $20,000 of executive time spent on the expropriation proceedings, based on 300 hours of an individual at $65 per hour. The board considered the authorities and decided that there is no claim simply because a claimant's executive spends time on the expropriation; there must be a corresponding loss or expense, or one must be able to reasonably infer a consequential loss as a result of the time expended. There was no evidence that the claimant company had suffered any loss arising out of principal's time being diverted by the expropriation, nor was there any evidence on the basis of which the board could infer a loss. With respect to time that the principal spent on the expropriation hearing itself, the board stated that generally an owner's "time spent in preparing a compensation claim ... or in attending the hearings to give evidence is not a compensable disturbance damage". See E.C.E. Todd in The Law of Expropriation and Compensation in Canada, 2nd ed., (Carswell Co. Ltd., Toronto, 1992) at pp. 289 and 290.

[121]  In the present case, while the board accepts that some time was spent by the executive officers and/or staff on the expropriation proceedings, the Board cannot conclude from the evidence that the claimant has suffered a financial loss, nor can it infer such a loss. This claim is disallowed.

5.4  Development costs and land given up by former owner

[122]  The claimant claims $400,000 as being the estimated value of that portion of the purchase price of the property, paid to the former owner, Mrs. McGrath, which represented development costs and costs of land given up by Mrs. McGrath, to the respondent. This claim relates to the development work done by Mr. Strandlund towards the rezoning of the property prior to the purchase by the claimants, as well as the road dedication that was a condition of the rezoning approval.

[123]  As a condition of the rezoning, in February 1986 Mrs. McGrath dedicated 0.2580 hectares of land for the extension of Erskine Lane through the Subject. This road dedication lay within the area ultimately expropriated for the highway interchange. This dedication occurred prior to the purchase by the claimant.

[124]  The board notes that road dedications are a normal requirement for rezoning approvals. Although Mrs. McGrath was not paid any monetary compensation for the dedication, she did receive the benefit of the rezoning, a change which increased the value of the property. The claimant continues to enjoy the benefit of the rezoning.

[125]  The claimant cites the recent decision of the Supreme Court of Canada in Pacific National Investments Ltd. v. Victoria (City), 2004 SCC 75 in support of its claim for unjust enrichment. Pacific National Investments is clearly distinguishable on the facts. The (respondent) City made a zoning commitment in return for the (appellant) developer carrying out certain improvements. This zoning commitment was ultra vires, and ultimately the developer, having carried out the improvements, at considerable expense, did not receive the anticipated zoning. The Court observed that it would not be good public policy to allow municipalities to make development commitments, and then not only to attack these commitments as illegal and beyond their own powers, but to also scoop the financial windfall at the expense of those who contracted with them in good faith.

[126]  Given its very different factual situation, Pacific National Investments does not offer any assistance to the Claimant in the present case. As noted, the previous owner of the Subject received the benefit of the rezoning, and the claimant continues to enjoy that benefit. The board sees no basis for the claimant's submission that the respondent has been unjustly enriched as a result of the dedication, and finds that the claimant has not proven a loss in this regard.

6.  COMPENSATION AWARDED

[127]  The following summarizes the board's determination of the claims for compensation:

7.  INTEREST

[128]  Section 46(1) provides:

[129]  The respondent made an advance payment of $2,608,320 to the claimant on March 22, 1996. We have awarded a further $20,378.71 which represents an increase of less than 1%. The board has discretion as to the date from which interest on the amount awarded is payable. As most expenses relating to access were incurred in 1987 and 1988, the board believes that it would be reasonable to award interest on the compensation payable from January 1, 1988.

8.  COSTS

[130]  Section 45(3), (5) and (7) of the Act are relevant for the purposes of this decision:

Pursuant to section 45(7) of the Act, the government brought into force the Tariff of Costs Regulation, B.C. Reg. 189/99 (the "Tariff") on June 28, 1999. The Tariff governs legal and real estate appraisal costs incurred since that date. As this claim pre-dates the Tariff, legal and real estate appraisal costs incurred prior to June 28, 1999 will fall under section 45(7)(a). All costs other than legal and real estate appraisal costs will also fall under section 45(7)(a).

[131]  The award of compensation totalling $20,378.71 when considered in the context of the advance payment of $2,608,320 made for the previously settled issues is less than a 1% increase in compensation. Accordingly, the board has discretion in awarding costs.

[132]  The claim of the alleged delay or freezing of a development property is one which has been considered previously by this board and others. This case was presented on a notional basis rather than on actual losses experienced or potentially incurred by the claimant. A significant amount of time and expense has been expended to advance a claim that given the authorities and the evidence that was adduced, had very little chance of success. Accordingly, the board reduces the claimant's costs of the hearing and awards the claimant 90% for the costs incurred after December 5, 2003, exclusive of the costs for Mr. Orr which are dealt with separately below.

[133]  With respect to the claimant's business valuer, Mr. Orr, the board finds that loss calculations and conclusions in his report were not reasonable given the facts in this case. Additionally, the scope of Mr. Orr's report was excessive. There was no basis for the claimant to retain Mr. Orr to provide financial loss calculations far past the date of expropriation. He also made financial calculations for other companies related to the claimant which were unnecessary for this claim. Accordingly, we would allow only 50% of the cost of Mr. Orr's account.

[134]  Section 3 of the Tariff provides that if costs are payable under section 45, the board may, when it makes an adjudication of compensation following a hearing, fix the scale, from Scale 1 to 3, under which legal and appraisal costs will be assessed. All other costs are assessed on the basis of reasonableness.

[135]  Under section 4(1) of the Tariff when fixing the scale of costs the board must have regard to the principles that Scale 1 is for matters of less than ordinary difficulty or importance, Scale 2 is for matters of ordinary difficulty or importance, and Scale 3 is for matters of more than ordinary difficulty or importance. Under section 4(2), when fixing the appropriate scale, the board may take into account, among other things, whether difficult issues of law, fact or construction are involved.

[136]  The issues in this case were of ordinary difficulty or importance. Insofar as the costs fall to be determined under the Tariff, we conclude that they should be fixed at Scale 2.

THEREFORE IT IS ORDERED THAT

Appendix "A"

Interest shall be calculated and compounded annually at the following rates: