June 20, 2002, E.C.B. No. 8/91/223

REASONS FOR DECISION

 
1.  INTRODUCTION

[1] On September 21, 2001, the hearing panel of the board rendered its compensation decision in this matter: see Pay Less Gas Co. (1972) Ltd. v. British Columbia (Minister of Transportation and Highways) (2001), 74 L.C.R. 81. The decision left open the question of entitlement to costs under section 45 of the Expropriation Act, R.S.B.C. 1996, c. 125 (the "Act").

[2] Section 45(3), (4) and (5) of the Act provides:

[3] After citing the foregoing provisions, we stated as follows at paras. 479 and 480 of our decision:

[479] The board has awarded total compensation to Pay Less in the amount of $844,105.37, whereas the Ministry's advance payments total $729,098.13. The award is 115.8% of the advance payments. Assuming that "business losses" referred to in s. 45(4) encompass the loss in earnings at Stations 48 and 88, which the board has determined in the amount of $281,124, their exclusion from the overall calculation results in Pay Less not having met the "greater than 115%" threshold which would have automatically entitled the claimant company to its costs. On this assumption, it would appear that the board has a discretion in the awarding of costs to Pay Less.

[480] In final submissions the Ministry requested the board, if it had a discretion, to adjourn the matter of entitlement to costs in order to permit the Ministry to adduce evidence of a settlement offer which it says it made prior to commencement of the compensation hearing. Pay Less did not make any submissions in reply to this request. Under these circumstances, the board has decided to adjourn the matter of the Pay Less costs of these proceedings, pending a further application by either party as to the question of entitlement.

[4] The hearing panel reconvened in Vancouver on February 8, 2002, for the purpose of receiving submissions on costs entitlement. The hearing lasted approximately two hours. It soon became apparent that the parties placed differing interpretations upon what we had said regarding costs. The Ministry's counsel advised that he would not be pursuing the matter of the settlement offer but went on to argue that the panel, which he said clearly had a discretion under section 45(5) in awarding costs in this case, should exercise that discretion so as to deny Pay Less some portion of its costs on various grounds. Counsel for Pay Less, while specifically opposing the Ministry's suggested grounds for a reduction, submitted that the threshold question for determination remained whether the panel had a discretion in the matter. Pay Less' position was that it had exceeded the 115% threshold under section 45(4) and was therefore entitled to its costs.

[5] In our decision to adjourn the matter of costs, we had not intended to foreclose any of the questions around entitlement, including whether Pay Less had met the threshold requirement under section 45(4). Rather, we sought the benefit of submissions and, hopefully, clarifications from the parties regarding, on the one hand, the incomplete and somewhat conflicting evidence which was before us with respect to the advance payments made by the Ministry to Pay Less and, on the other hand, the proper interpretation to be given to certain statutory provisions relevant to costs entitlement. Our "assumption" regarding the characterization and treatment of "business losses" for the purpose of making the overall calculation in section 45(4) was not put forth as a definitive conclusion, although admittedly clearer language might have been chosen.

[6] At the conclusion of the reconvened hearing, we agreed to consider written submissions from both parties on the issue of whether the board had a discretion as to costs under section 45(5), or whether Pay Less was entitled as of right to its costs pursuant to section 45(4). We received those submissions during the final week of February, 2002.

2.  ISSUES

[7] The first issue for the hearing panel's determination is whether, on the evidence before us and on a proper construction of the relevant statutory provisions on costs entitlement, Pay Less is entitled to its costs under section 45(4).

[8] If instead we have a discretion as to costs under section 45(5), then the second question is whether we should exercise our discretion in the circumstances of this case to deny to Pay Less any portion of its costs.

3.  IS PAY LESS ENTITLED TO ITS COSTS UNDER SECTION 45(4)?

3.1  The Ministry's Position

[9] The Ministry points out that, under section 45(4), a claimant is only entitled to its costs as of right if "the compensation awarded…other than for business losses, is greater than 115% of the amount paid by the expropriating authority under section 20(1) and (12) or otherwise." Although we awarded compensation to Pay Less totalling $844,105.37, of this amount $281,124.00 was on account of business losses and a further $105,981.37 was on account of relocation costs. In the Ministry's submission, most of the amount awarded for business losses and all of the amount awarded for relocation costs must be deducted from the calculation in section 45(4), with the result that the Ministry's advance payments totalling $729,098.13 far exceeded the net compensation award.

[10] The Ministry relies on the board's initial costs entitlement decision in Sequoia Springs West Development Corp. v. British Columbia (Minister of Transportation and Highways) (2000), 71 L.C.R. 153. In that case the board considered what types of business loss were meant to be excluded from the calculation of compensation awarded under section 45(4). It examined the advance payment requirements under section 20(1), observing that under para. (d) the expropriating authority must "pay to the owner the amount the expropriating authority estimates is or will be payable to that owner as compensation, other than for business loss referred to in section 34(3)". The board in Sequoia Springs noted that section 34(3) is concerned only with business losses arising out of a business that has had to be relocated because of a taking. It then reasoned as follows, at p. 159:

[15] Section 45(4) compares the compensation awarded, excluding business losses, to the advance payment. Since section 20(1) specifies what type of business losses should be excluded from the advance payment, then reading sections 20 and 45 together, it is consistent that it is the same type of business loss that is excluded in section 45(4). It is only by qualifying the term "business losses" in section 45(4) with the words "under section 34(3)" that we can reconcile section 20 and section 45(4).

In Sequoia Springs there was no relocation and the business losses awarded were said to be "for expenses and losses that have not arisen as a result of the business locating on other land". The board therefore did not exclude them when doing its calculation under section 45(4).

[11] In the present instance, however, we have determined that Pay Less relocated its business. The Ministry maintains that all of the relocation costs and the majority of business losses incurred at both the old expropriated service station (Station 48) and the new relocated facility (Station 88) fall within the board's description in Sequoia Springs of "expenses or losses" resulting from a business relocation. The Ministry concedes that a small portion of our award was for business losses incurred prior to when Station 48 closed and this portion would not properly be regarded as relating to relocation. However, the Ministry, on a rough calculation, estimates these losses at only $13,184.

[12] While the Ministry accepts that evidence regarding the basis of the advance payments in this matter is not entirely clear, it also submits that section 45(4) does not require any apportionment among the various heads of compensation. The wording of the section with its reference to payments "under section 20(1) and (12) or otherwise" shows the legislative intent that all payments made by the expropriating authority are to be taken into account in the calculation. There is no suggestion, the Ministry says, that a deduction similar to the one applied to the award should also be applied to the advance payments.

[13] Even if section 45(4) did require the same kinds of deductions to be made from the advance payments as from the award, the Ministry contends that the corresponding deductions in this instance would still result in the balance of the advance payments being in excess of the appropriately adjusted compensation award. This is because on the evidence, it says, only a relatively minor portion of the total advance payments might arguably be said to relate to relocation.

[14] The panel was advised during the compensation hearing that the Ministry's advance payments totalled $695,206. According to the testimony of Virginia Currie, the Ministry's co-ordinator of property acquisitions at the relevant time, these payments were based on two appraisal reports prepared by Richard Gordon of D.R. Coell & Associates Inc. which were also in evidence at the compensation hearing. One report valued the improved site at Station 48 at $650,000 as a "going concern", including the real estate, fixtures, equipment, and goodwill. The other valued the vacant site directly across Deloume Road from Station 48 at $100,000, in respect of which Ms. Currie recalled that a pro rata amount had been paid for the portion taken. Neither of these appraisals, the Ministry contends, dealt with relocation. However, it acknowledges that the initial notice of advance payment dated January 9, 1991, did expressly allocate a payment of $50,000 to relocation costs.

[15] After the compensation hearing ended, the parties notified the board of further amounts paid by the Ministry to Pay Less totalling $33,892.13 which they agreed should be characterized as having been paid on account of disturbance damages in the nature of professional costs incurred in the course of relocation. These advance payments brought the total amount paid on account of compensation to $729,098.13.

[16] The Ministry says that, even if the amount of $50,000 allocated to relocation costs in the notice of advance payment and the amount of $33,892.13 allocated to professional costs were to be deducted from the overall advance payments made, they would not alter the fact that Pay Less had not reached the threshold for costs entitlement under section 45(4). Whereas, the Ministry says, the adjusted award is $470,184, the adjusted advance payments would amount to $645,206.

3.2  Pay Less' Position

[17] Pay Less submits that there are two main reasons why we should find that the claimant company is entitled to its costs under section 45(4). First, notwithstanding the advance payments made, the Ministry came to the compensation hearing alleging that it had made an overpayment. This allegation is noted at para. 7 of our decision. The Ministry argued that the maximum compensation to which Pay Less was entitled totalled $554,250, comprising $457,000 for the land taken and $79,250 for disturbance damages in the nature of lost good will on the termination of Station 48. Pay Less argues that the position taken by the Ministry at the compensation hearing renders the advance payments irrelevant for the purpose of determining entitlement to costs. The calculation under section 45(4), it says, must instead compare the amount ultimately awarded other than for business losses with the maximum land value posited by the Ministry at the hearing. Pay Less says the amount awarded other than for business losses comprised $457,000 for the land and $105,981.37 for relocation costs, totalling $562,981.37. When this amount is compared with the maximum $457,000 the Ministry argued should be awarded for the land component of the claim, it is clear that Pay Less is in excess of the 115% threshold.

[18] Second, if the advance payments are still relevant, Pay Less submits, evidently in the alternative, that information concerning the allocation of those payments is critical to making a proper determination under section 45(4). However, as we noted at para. 467 of our decision when dealing with the issue of interest, the information provided as to the way in which advance payments were allocated among the various heads of compensation was incomplete and somewhat conflicting. Pay Less asserts that the onus was on the Ministry to clarify the nature and allocation of the advance payments, but it failed to meet that onus. Having had ample opportunity to specify how its advances were allocated, the Ministry's failure to do so, Pay Less suggests, was either deliberate or careless. In these circumstances, any doubt concerning costs entitlement should be resolved in favour of the aggrieved party Pay Less.

[19] Pay Less contends that the advance payments in this matter include amounts advanced for business loss. It refers to the Ministry's pleadings as demonstrating this to be the case. The original Form B reply, filed with the board on January 13, 1994, referenced advance payments totalling $695,206, and plead that Pay Less had been adequately compensated for all matters arising out of the taking of its service station lands by those payments "other than for certain business losses and/or losses or costs associated with relocation". The Amended Form B, filed only at the outset of the compensation hearing on February 20, 1995, continued to reference the same advance payments but no longer held out the proposition that certain business losses remained to be calculated. In other words, according to Pay Less, at the time the pleadings closed, the advance payments made included payment for business losses.

[20] Nevertheless, Pay Less asserts that the Ministry has failed to disclose the amounts which it has allocated to business loss and now, in essence, seeks to take advantage of ambiguous advance payments which include business loss by asserting that all advance payments made "under section 20(1) or (12) or otherwise" must be taken into account in the calculation under section 45(4). The Ministry, says Pay Less, seems to subscribe to the notion that business losses are properly included in the credits it should receive for advance payments, while at the same time business losses must necessarily be excluded from the final award. In Pay Less' submission, the end result is both absurd and inequitable.

[21] Pay Less contends that the best evidence before us as to the amount of the advance payments which were not payments on account of business losses is summarized at para. 471 of our decision, where we made reference to the Ministry's notice of advance payment dated January 9, 1991, allocating $303,206 to "land and improvements" and $50,000 to "relocation costs." If these amounts were to be accepted as the advance payments for the purpose of section 45(4), Pay Less says, then the claimant company's award easily exceeds the 115% threshold.

3.3  Discussion

[22] The hearing panel's deliberation on the costs entitlement issue has resulted in a majority decision of the panel and a minority dissent. We will endeavour to make clear in the course of these reasons those observations, analyses and conclusions upon which there is unanimity by referring to them as those of the "panel" or by use of the first person plural "we" and "our". Where there is no unanimity, the observations, analyses and conclusions will be identified as those of the "majority".

[23] Before turning to the central issue of costs entitlement under section 45(4), the panel wishes to dispose of two arguments advanced respectively by the Ministry and Pay Less. The first is the Ministry's assertion that what we characterized in our compensation decision as "relocation costs" should be treated as "business losses" for the purpose of section 45(4). The second is Pay Less' assertion that the Ministry's allegation at the compensation hearing of an overpayment renders the advance payments irrelevant.

[24] As previously noted, we made separate awards of compensation for relocation costs and business losses in our decision. These awards were summarized at para. 465 of the decision. However, the Ministry has relied on certain language from the Sequoia Springs initial decision on costs entitlement (71 L.C.R. 153) to argue that, for the purpose of section 45(4), the two heads of compensation should be combined.

[25] The board in Sequoia Springs, it will be recalled, held that the "business losses" to be excluded under section 45(4) were only those losses in respect of which there was no requirement to make an advance payment under section 20(1), namely relocation business losses as referred to in section 34(3). The board therefore included in its calculation under section 45(4) the sum of $200,000 which it had awarded for business losses because this sum was "for expenses and losses that have not arisen as a result of the business relocating on other land". (Emphasis added.)

[26] In the present instance the Ministry says that the panel's compensation awards for both relocation costs and business losses referred to in para. 465 of our decision were for expenses and losses that arose primarily as a result of the business relocating on other land. Following the reasoning in Sequoia Springs, both should be excluded from the calculation under section 45(4). The relocation costs awarded all related to establishing Station 88 and should, ipso facto, be excluded from the award.

[27] The Ministry's argument overlooks the fact that we treated relocation costs as an item of disturbance damages primarily with reference to section 34(1)(b) of the Act, which entitles expropriated owners to the "reasonable costs of relocating on other land, including reasonable moving, legal and survey costs that are necessarily incurred in acquiring a similar interest or estate in the other land." The relocation costs awarded included amounts in respect of professional costs incurred in the relocation process as well as construction-related costs necessarily incurred at the Station 88 site which we considered had not already been fully compensated in our award for the market value of Station 48. In our view, these are a different species of disturbance damages from those that should properly be treated as business losses. We calculated business losses in the conventional sense by analyzing the evidence concerning actual and projected lost gasoline, propane and convenience sales and margins as well as the evidence concerning actual and projected operating expenses of the business.

[28] It is true that in our decision we held that some disturbance damages in the nature of relocation costs, even if not clearly covered under the wording of section 34(1)(b), might nevertheless be compensable under section 34(1)(a), which entitles an expropriated owner to the "reasonable costs, expenses and financial losses that are directly attributable to the disturbance caused to the owner by the expropriation". The board in Sequoia Springs also observed at pp. 158-159 (71 L.C.R.) that "[a]n expense or financial loss that is claimed as a disturbance damage may also be a business loss if it is claimed by an owner in the operation of a business."

[29] However, upon review of the elements which comprised our award to Pay Less for relocation costs, we are not persuaded by the Ministry's argument that they should be categorized instead as business losses on relocation. In our view, the compensation awarded for relocation costs in the amount of $105,981.37 should not be excluded from the calculation in section 45(4).

[30] We also find unconvincing the proposition advanced by Pay Less that the Ministry's allegation of an overpayment at the compensation hearing renders the advance payments which it made of no account in determining entitlement to costs under section 45(4). This proposition flies in the face of the statutory requirement under section 45(4) to take into account the amount paid by the expropriating authority "under section 20(1) and (12) or otherwise". The Act does not authorize the calculation under section 45(4) to be made on the basis of what the expropriating authority in its pleadings or submissions may have asserted to be the proper amount of compensation payable rather than on the amount which it has actually paid.

[31] Having rejected the foregoing arguments, we will now examine the central issue of costs entitlement in light both of the relevant statutory provisions and the state of the evidence.

[32] The panel considers that we should take a purposive approach to statutory interpretation, inquiring in this instance as to the purpose or intent underlying the requirements in section 45(4) and (5) in light of the broad objectives of the Act. In this regard we are guided by the recent decision of the British Columbia Court of Appeal in Peter Panagiotis Daflos, Evanthia Daflos and Konstandinos Daflos v. The Board of School Trustees of School District No. 42 (Maple Ridge-Pitt Meadows), unreported, April 29, 2002, CA026632, Vancouver Registry. The Court of Appeal in that case allowed an appeal from the decision of this board on the issue of penalty interest under section 47(b) of the Act. The Court found as a useful starting point in its analysis beginning at para. 14 a statement concerning general principles of statutory interpretation set out by the Supreme Court of Canada in Rizzo & Rizzo Shoes Ltd. (Re), [1998] 1 S.C.R. 27. Iacobucci J., speaking for the Supreme Court, cited Driedger on Construction of Statutes (2nd ed. 1983) as best encapsulating the preferred approach to the interpretation of legislation. At para. 21 of the judgment, Iacobucci J. commented as follows:

He [Driedger] recognizes that statutory interpretation cannot be founded on the wording of the legislation alone. At p. 87 he states:

Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.

[33] The Court of Appeal in Daflos went on to say at para. 15 that, in interpreting expropriation legislation, particular assistance could be found in the analysis of Cory J., speaking for the majority of the Supreme Court of Canada in Toronto Area Transit Operating Authority v. Dell Holdings Ltd., [1997] 1 S.C.R. 32. At paras. 20-21 of that decision, Cory J. stated:

The expropriation of property is one of the ultimate exercises of governmental authority. To take all or part of a person's property constitutes a severe loss and a very significant interference with a citizen's private property rights. It follows that the power of an expropriating authority should be strictly construed in favour of those whose rights have been affected. This principle has been stressed by eminent writers and emphasized in decisions of this Court. . . .

Further, since the Expropriations Act is a remedial statute, it must be given a broad and liberal interpretation consistent with its purpose. Substance, not form, is the governing factor.

Although the legislation in question in Dell Holdings was the Ontario expropriation statute, the Court of Appeal has since applied the foregoing analysis in decisions under the corresponding British Columbia statute.

[34] The costs provisions under the Act have been recognized to be an integral part of the overall remedial nature of the statute. In Tidmarsh v. Comox-Strathcona (Regional District) (1995), 55 L.C.R. 81 (B.C.S.C.), one issue on appeal from a final cost decision of a former chair of the board was whether interest should have been allowed on the costs awarded. The Court decided that interest charged on professional accounts could be included in an award of costs in a proper case and that, in this instance, the matter was to be remitted to the chair for hearing and decision. Shaw J. stated at p. 83:

I think an appropriate starting point is the proposition that the objective of the costs provisions of the Expropriation Act is to ensure as best as possible that the party being expropriated is made economically whole, not only with respect to the property that is taken, but also for the expenses reasonably incurred in the setting of the compensation.

Shaw J. also agreed with a comment of another former chair of the board in Creative Stretch Fabrics Ltd. v. Pitt Meadows (District) (1991), 46 L.C.R. 111, at p. 120, that "one of the elements of fair compensation that ensures that an owner is made economically whole is the payment of reasonable costs actually incurred."

[35] Although in recent years the "actual reasonable" standard has been displaced by the Tariff of Costs Regulation, B.C. Reg. 189/99 (the "Tariff") with respect to legal and real estate appraisal costs, the Tariff was not made retrospective in effect. Most of the costs to which Pay Less seeks entitlement as of right under section 45(4) would have been incurred prior to June 28, 1999, when the Tariff came into force. Therefore, costs entitlement in this matter is concerned largely with entitlement under the old "actual reasonable" standard.

[36] In light of the importance attached to costs entitlement under the Act, the question then arises: what was the legislative intent behind the provisions in section 45(4) and (5) which provide an automatic entitlement to costs where an owner is awarded greater than 115% of the advance payments other than for business losses but confer a discretion on the board with respect to costs where the compensation awarded is 115% or less of the amount of the advance payments?

[37] The legislative debates which preceded passage of the Act in late 1987, as reported in Hansard, Official Report of Debates of the Legislative Assembly, particularly an extract from the proceedings of June 22, 1987, indicate the public position taken by the government of the day on this question. At third reading a member in opposition argued that owners who obtain an award greater than 100% of the advance payment should be entitled as of right to their costs. The then Attorney General, the Hon. B.R. Smith, responded in part as follows, at p. 1918:

"I think there has to be some incentive to settlement…because what is being given here now is the appraised value in advance. That is a very major step forward….If you don't get 115 percent, if you get something less, it's merely a discretion on the part of the tribunal. They don't have to give you your costs. Suppose you got between 100 and 115 percent, which is what you're talking about. They could still give you your costs if they wanted to…If you get over 115, you get your costs as a right. I think that's fair. I think that balances out with the payments in advance, and it puts some premium on settlement, for sure. You've got to have some premium on that."

[38] In its recent decision in Golden Valley Golf Course Ltd. v. British Columbia (Minister of Transportation and Highways) (2001), 73 L.C.R. 81, the British Columbia Court of Appeal has also identified the calculation required under section 45(4) and (5) as being designed to promote settlement by including an element of risk for both the expropriating authority and the expropriated owner in connection with costs entitlement. On the one hand, Newbury J.A. at para. 28 states that "[t]he cost provisions are obviously designed to encourage the expropriating authority not to be overly parsimonious in making an advance payment and therefore to encourage settlement". On the other hand, Rowles J.A., concurring in the view that the cost provisions under section 45(4) and (5) "also appear to be designed to promote settlement", further observes at para. 88 that an owner who applies to the board to determine compensation after having received an advance payment "risks being unable to recover his or her costs."

[39] It is next necessary to consider what legislative purpose underlay the treatment of those business losses which are excluded under the advance payment provision in section 20(1) and the costs entitlement provision in section 45(4). We are unable to discern from our review of Hansard that this subject was specifically addressed by the government of the day during the legislative debates.

[40] The board in two previous decisions has expressed the view that, under section 20(1), it is only with respect to relocation business losses referred to in section 34(3) that the expropriating authority is relieved from the normal requirement to make an advance payment within 30 days of approval of the expropriation. In Bill's Frontier Restaurant Ltd. v. British Columbia (1994), 53 L.C.R. 175, the board stated at p. 195 that "an authority is not required pursuant to s. [20] to make a payment towards business loss related to relocation, but of course it may choose to do so at any time." In Sequoia Springs, the board put the matter this way, at p. 159 (71 L.C.R.):

Section 20(1) provides that the authority never has to make an advance payment for those business losses falling under section 34(3). However, section 20(1) does not exclude other kinds of business loss where there has been no relocation because the business closed down or because it was a partial taking. We note that losses under these sections that occur at some date after the taking can be ascertained and be the subject of further advance payments under section 20(12) up until 10 days before the compensation hearing is scheduled to commence.

[41] In our view, the legislative purpose in excluding relocation business loss under section 20(1) flows from the common sense proposition that it is extremely difficult if not impossible to estimate such losses at least until the expropriated owner has actually relocated the business to other land and recommenced operation for a period of time. These factors are, of course, expressly recognized within section 34(3), which states:

[42] It is perhaps open to interpretation on the wording whether the business losses referred to in section 34(3) encompass all of the losses experienced by the business during its process of relocation and start up, including losses during any period of "down time", or whether they include only those losses associated with the initial operation of the business at its new location. However, given the likely uncertainties around the time required to achieve the relocation, we consider that the broader interpretation is to be preferred. Certainly, the evidence which the panel detailed in its decision concerning the efforts by Pay Less to relocate from Station 48 to Station 88 underscores the difficulty which the Ministry would have had in estimating business losses during any stage of the process for the purposes of making an early advance payment.

[43] The situation facing an expropriating authority which must make an advance payment based on its estimate of the market value of the land taken or partially taken is less problematic inasmuch as the market value is to be estimated at the date of expropriation itself. Similarly, as the above-cited passage in Sequoia Springs suggests, business losses on the termination of a business are more readily ascertainable for the purpose of making an advance payment. Although an estimate of terminal business losses, including a component for the value of goodwill, requires a projection of lost future earnings, such projections begin with the past performance of the business prior to the date of expropriation. Relocation costs under section 34(1)(b) may initially be difficult to estimate and in more conventional cases are frequently dealt with by expropriating authorities through the use of "allowances" for conveyancing costs, moving expenses, and the like. In the present more complicated instance the evidence before the panel was that counsel for Pay Less had at least been able to provide to counsel for the Ministry, slightly more than a year after the taking, a reasonably detailed estimate of what it considered would be its relocation costs.

[44] Since the expropriating authority is not required to include relocation business losses in its advance payment, it is consistent with the legislative purpose earlier discussed also to exclude such business losses from the compensation award when calculating whether the expropriated owner, by proceeding to a compensation hearing rather than reaching a settlement based on the advance payment, has achieved the necessary level of success automatically entitling the owner to his or her costs.

[45] The panel agrees with the decision in Sequoia Springs that the business losses referred to in section 45(4) are intended to encompass only relocation business losses. However, in the view of the majority of the panel, it is important to recognize how the particular facts of that case as they were known to the board at the time of its initial costs entitlement decision led to a logical and equitable result. The evidence before the board at that time was that the expropriating authority had made an advance payment of $1,425,000 whereas the board's total compensation award was $1,680,000 or 118% of the advance payment. The board's award included $200,000 for business losses. Subsequent to the board's initial costs entitlement decision, new evidence came to light concerning the overall amount of the advance payments made which caused the board in a further decision (reported at 71 L.C.R. 315) to recalculate costs entitlement under section 45(4). Even so, there was no indication in Sequoia Springs that the expropriating authority had ever made an advance payment with respect to business loss. Furthermore, the business losses awarded were not losses resulting from a relocation of the business. There was therefore nothing to add to or subtract from either end of the equation under section 45(4).

[46] Even if the expropriating authority in Sequoia Springs had actually made an advance payment by way of what is sometimes described as a "termination allowance" on the closure of a business including a payment for the value of the goodwill, as contemplated under section 34(4), both the amount paid in advance on this account and any termination allowance subsequently awarded would be included in the calculation under section 45(4) — a result which is consistent with the underlying purpose of the costs entitlement provision.

[47] Anomalies can arise, however, where the fact pattern varies from that in Sequoia Springs, for example, where the business has been relocated and the expropriating authority, whether or not under a statutory obligation to do so, has actually made an advance payment on account of business loss. The majority of the panel view the present case as disclosing such an anomaly.

[48] This case is highly unusual in the sense that the parties at the compensation hearing disagreed even on the threshold question of whether the business carried on by Pay Less at Station 48 was permanently shut down by the Ministry's acquisition of the site or whether the business was relocated to other land. Pay Less asserted that, in consequence of the taking, it had relocated its business to Station 88 nearby. The Ministry's position was that, for the purpose of the Act, it was not feasible to relocate the business at Station 48, that the old business had been terminated, and that an entirely new business had been created at Station 88. In its preliminary observations on business losses, the panel made the following comment at para. 298:

Although the parties are agreed that Pay Less suffered a business loss in consequence of the Ministry's acquisition of Station 48, they have proceeded along entirely different paths to estimate the quantum of that loss. The principal difference in approach stems from their initial positions on whether the business at Station 48 was relocated or terminated.

The panel determined that Pay Less had relocated its business from Station 48 to Station 88. Most of the business losses which we awarded to Pay Less were consequently in the nature of relocation business losses within the meaning of section 34(3) as we have interpreted the scope of that provision.

[49] Although Pay Less prevailed in its argument before the hearing panel on the issue of relocation, it now faces the proposition advanced by the Ministry that it should be denied entitlement to costs and exposed instead to the risk of having its costs reduced. This is because, if the relocation business losses we awarded are deducted from the compensation award while all advance payments made by the Ministry "under section 20(1) or (12) or otherwise" (including payments on account of business loss) are taken into account, Pay Less fails to meet the threshold requirement for costs entitlement under section 45(4). The majority of the panel are unable to appreciate that this result is either logical or equitable, or that it accords with the intention of the legislature when it enacted section 45(4).

[50] A similar question arose in Bill's Frontier Restaurant in the context of whether the expropriated owner was entitled to an award of additional interest under the relevant provisions of the Expropriation Act, S.B.C. 1987, c. 23. Prior to the 1996 revision, advance payments fell under section 19, relocation business losses were dealt with in section 33(3), and additional interest was governed by section 45(4). Although the 1996 revision altered the numbering of these sections and made slight changes in wording, it effected no substantive changes to the provisions.

[51] The additional interest provision now reads as follows:

[52] The board in Bill's Frontier Restaurant raised the issue of how it should interpret the additional interest provision in the following terms, at p. 195 (53 L.C.R.):

The immediate question is whether the phrase "excluding interest and business loss" modifies only "compensation awarded" or whether it modifies both "compensation awarded" and "the amount of the payment under section [20(1)] or [(12)] or otherwise". In other words, are business loss and interest to be deducted from both sides of the equation?

[53] The board first considered the provisions for advance payment and business loss under the statute. It then considered how a one-sided interpretation of the phrase "excluding interest and business loss" could undermine the purpose behind the provision for entitlement to additional interest. The board stated at pp. 195-196:

…it is only "business loss referred to in section [34(3)]" which is excluded from the required advance payment of compensation. As a result, an authority is not required pursuant to s. [20] to make a payment towards business loss related to relocation, but of course it may choose to do so at any time. Such a payment would relieve the authority of interest which would accrue under s. [46(1)] and would constitute a payment under "or otherwise" as contemplated under s. [46(4)]. However, to read the provisions of the 90% calculation under s. [46(4)] as allowing the authority to include this payment as part of the funds advanced, while deducting the same amount from the compensation, could potentially relieve an authority of additional interest even if it did not make a realistic advance payment pursuant to the provisions of s. [20]. In Richland Farms Ltd. v. British Columbia (Ministry of Transportation and Highways) (1991), 46 L.C.R. 66, the chairman considered the 5% additional interest provision and found that the purpose of s. [46(4)] was to encourage an expropriating authority to make a realistic advance payment as contemplated under s. [20]. It would be unfair, therefore, in the board's opinion, to read a meaning into s. [46(4)] which could effectively defeat this purpose and potentially credit any payment towards business loss on two fronts: one in respect of interest under section [46(1)]; and two, in respect of avoiding additional interest on the required advance payment under s. [20].

[54] In order to harmonize the wording of the additional interest provision with the scheme and object of the Act, the board concluded at p. 196:

…that greater consistency and equity are achieved by reading the modifying phrase "less business loss and interest" as applicable, under the 90% calculation, to both the advance payments and to the compensation awarded.

[55] The panel recognizes that section 46(4) and section 45(4) are structured somewhat differently. The modifying phrase "excluding business loss and interest" within section 46(4) follows reference to both the advance payments and the compensation awarded. On plain reading there is arguably a more apparent ambiguity as to what is being modified than exists with respect to the phrase "other than for business losses" within section 45(4). That phrase immediately follows reference to the compensation awarded and precedes reference to the advance payments. However, in the view of the majority, this is not a determinative distinction.

[56] The panel also notes that the application of section 45(4) is not free from ambiguity in another respect. This becomes apparent when section 45(4) is compared with section 45(5). Section 45(5) addresses a situation where the compensation awarded is 115% or less of the advance payment. There is nothing in section 45(5) which expressly requires the exclusion of business losses. Therefore, again on plain reading of these provisions, an owner might be found not to have met the "greater than 115%" threshold under section 45(4) once business losses are excluded from the compensation awarded, and yet to have exceeded the "115% or less" provision when business losses are included in the compensation awarded for the purpose of section 45(5). The two provisions sit uneasily together unless one reads into section 45(5) the same exclusion of business losses that is required under section 45(4).

[57] Where on its face there appear to be lacunae in the wording of the Act leading to ambiguity or inconsistency, the panel considers that the governing legislation should be construed in a way which seeks to avoid ambiguity or inconsistency where possible. Utilizing recognized principles of statutory construction, this includes the "reading in" of language to the Act such as was done by the board in Sequoia Springs when it attempted to reconcile sections 20 and 45(4) by qualifying the term "business losses" in section 45(4).

[58] In the present instance the panel also finds highly persuasive the approach adopted in Bill's Frontier Restaurant. We consider that similar principles should govern our interpretation of costs entitlement under section 45(4). In other words, to achieve a more consistent and equitable result which also harmonizes with the overall scheme and object of the Act, the modifying phrase "other than for business losses" can and should be read as being applicable to both the advance payments and the compensation awarded when determining whether Pay Less achieved the "greater than 115%" threshold.

[59] There was sufficient evidence before the panel at the compensation hearing to show, in the opinion of the majority, that some portion of the advance payments made by the Ministry "under section 20(1) or (12) or otherwise" pertained to business loss. The Ministry ultimately argued that any business loss payable should be in respect of termination of the business. However, the panel agreed with Pay Less and awarded compensation for business losses largely in respect of relocation. In the peculiar circumstances of this case, logic and fairness consistent with legislative purpose dictate, in the majority view, that deductions for business loss should be made to both sides of the equation irrespective of the theory upon which the Ministry proceeded.

[60] It is apparent to the panel that some portion of the advance payments made between January 11, 1991 and November 29, 1994, totalling $729,098.13, as set out at para. 469 of our compensation decision, related to the market value of the lands acquired, another portion to relocation costs, and still another portion to what the majority on the panel would characterize as business loss. The state of the evidence remains somewhat unsatisfactory as to the amount paid by the Ministry on account of business loss. The appropriate conclusion to be drawn from this evidence for the purpose of making the calculation under section 45(4) is one matter upon which the panel has been unable to achieve unanimity.

[61] Pay Less has argued that the best evidence before us is the initial notice of advance payment dated January 9, 1991, which allocated $303,206 to "land and improvements" and $50,000 to "relocation costs". From this Pay Less evidently wishes us to infer that the balance of the advance payments should be treated as business loss payments. Clearly, if the calculation under section 45(4) were to be made on the basis of the January, 1991 notice, the comparison would be between advance payments "under section 20(1) or (12) or otherwise" of $353,206 other than for business losses and the compensation awarded of $562,981.37 other than for business losses, and Pay Less could be said to have achieved an award which was more than 159% of the advance payments.

[62] However, the panel has already noted that six other advance payments, identified to us only after the compensation hearing ended, totalling $33,892.13, were on account of disturbance damages in the nature of professional costs incurred in the course of relocation. These were not payments which could be characterized as being on account of business loss.

[63] With an adjustment made to reflect these six additional payments, the majority of the panel find considerable attraction in Pay Less' argument as to how the advance payments should be treated. There is additional evidence to support it which can be drawn from the two appraisal reports prepared by Mr. Gordon in December, 1989, some months before the Ministry's acquisitions.

[64] The Gordon appraisal report of the improved site, in reliance upon which the evidence indicates advance payments totalling $650,000 were made, reached its value conclusion by utilizing three approaches to value: the cost approach, the income approach, and the direct comparison approach. By the cost approach Mr. Gordon arrived at a value for the lands and depreciated improvements of Station 48 of $258,000, which he stated in his report did not reflect the "intrinsic value represented by a going concern operation." By the income approach Mr. Gordon arrived at a value of $455,000, which he said reflected "a passive type investor situation with value based on the probable rent an operator would pay for the facility, capitalized into a value estimate", but again he said it did not reflect "the operational component of the facility." Mr. Gordon arrived at a value of $650,000 by the direct comparison approach, which he considered "the only reliable method of measuring the fully going concern value of the operation", including the real estate, fixtures, equipment, business and goodwill.

[65] Mr. Gordon's appraisal of the vacant site, in reliance upon which the evidence indicates that an advance payment of $45,206 was made in respect of the partial taking, relied entirely on direct sales comparison with other vacant commercial sites to reach a value estimate for the whole of $100,000.

[66] The initial notice of advance payment in January, 1991, in allocating $303,206 to "land and improvements", is consistent with Mr. Gordon's value conclusion of $258,000 for the improved site based on the cost approach and $45,206 pro rata for that portion of the vacant site partially acquired based on his value conclusion of $100,000 for the whole. By May, 1991, the total advance payments (other than for disturbance damages in the nature of professional costs) had reached $695,206. Since the evidence was that the Ministry paid this amount based on the two Gordon appraisal reports, a reasonable inference can be drawn, in the view of the majority, that it ultimately compensated Pay Less for the improved site as a "going concern" operation. In other words, much if not all of the additional advance was to compensate Pay Less for the loss of its business at Station 48, including the value of the goodwill.

[67] In coming to the compensation hearing, the Ministry relied not on Mr. Gordon's appraisal reports but on those of another qualified appraiser, M. Carl Nilsen, for its estimate of the amount to which Pay Less should be entitled for the land value portion of the claim. Using only the income approach, Mr. Nilsen arrived at a value conclusion for the improved site of $425,500, an amount which we observe is not strikingly different from that of Mr. Gordon when he applied the income approach. The Nilsen report was prepared in December, 1994, long after the advance payments had been made. The fact that the Ministry ultimately favoured Mr. Nilsen's use of the income approach to determine the market value of the improved site leaves open to speculation what was in its mind in 1991. That is, how much of the advance payments did the Ministry at the time intend to go toward compensation of Pay Less for the lands acquired? In the view of the majority, the evidence available is insufficient to support a conclusion that the amount advanced for the land value portion of the claim was based on Mr. Gordon's value conclusion of $455,000 using the income approach.

[68] While some amount of inference is unavoidable in these circumstances, the majority of the panel conclude on the basis of the evidence, such as it is, that for the purposes of section 45(4) the amount advanced by the Ministry on account of the market value of the lands acquired and the costs of relocation should be construed as totalling $387,098.13 and that the balance of the advance payments should be construed as being on account of business losses. When business losses are excluded from both sides of the equation under section 45(4), Pay Less has achieved the threshold requirement.

[69] In reaching this conclusion, the majority of the panel also agree with the position advanced by Pay Less that the onus rests on an expropriating authority, which asserts that an owner has not met the greater than 115% threshold requirement for entitlement to costs because of the business loss exclusion under section 45(4), to show how it has allocated its advance payments. This the Ministry in the present instance has failed to do.

3.4  Conclusion

[70] Accordingly, the majority of the panel conclude that, on the evidence before us and on a proper construction of the relevant statutory provisions on costs entitlement, Pay Less is entitled to its costs under section 45(4).

[71] Because Pay Less is entitled to its costs under section 45(4), the majority consider that the panel has no discretion under section 45(5). It is therefore unnecessary to consider the grounds advanced by the Ministry as to why it says Pay Less should be deprived of some portion of its costs.

4.  IMPLICATIONS FOR ADDITIONAL INTEREST

[72] The foregoing analysis and conclusion of the majority with respect to costs entitlement puts in question the correctness of the panel's determination with respect to additional interest.

[73] At para. 477 of the compensation decision the panel stated:

[477] Since the total amount of the advance payments is more than 90% of the compensation awarded, excluding interest and business loss, the provision for additional interest under s. 46(4) does not apply.

[74] The question of additional interest was not before the panel at its reconvened hearing on costs entitlement, and accordingly the majority consider that it would be inappropriate in this decision to go further than simply alerting the parties to the nature of our concern. Moreover, it is arguable whether the panel has the jurisdiction to reconsider its determination or whether it is functus officio with respect to the matter.

[75] If the parties, in light of what has already been said, are unable to resolve between themselves any issue which may now arise around entitlement to additional interest, they are at liberty to apply to the board.

EXPROPRIATION COMPENSATION BOARD

DISSENT

[76] I differ from the majority of the panel on the question of whether Pay Less is entitled as of right to its costs pursuant to section 45(4), while at the same time agreeing with the majority on a number of the conclusions they have reached.

[77] I agree with the majority's reasoning and their conclusions in paragraphs 29 and 30 that:

[78] I also agree with the majority's conclusion that, following Sequoia Springs, the business losses referred to in section 45(4) encompass only relocation business losses under section 34(3) and not other kinds of business loss where there has been no relocation.

[79] While I have difficulty in concluding that the phrase "other than for business losses" in section 45(4) can be considered in a grammatical sense to modify the phrase "the amount paid by the expropriating authority under section 20(1) and (12) or otherwise" appearing later in the same section, I agree with the majority's conclusion in paragraph 58 that to achieve a consistent and more equitable result the deduction for business losses under section 45(4) should be applicable to both the advance payments made and the compensation awarded.

[80] However, for consistency to be achieved in my view the deduction must be for the same type of business losses on both sides of the equation. This is where I depart from the majority. Following Sequoia Springs I conclude that the business losses referred to in section 45(4) are relocation business losses under section 34(3). The only amounts to be deducted from the advance payments made would therefore be amounts paid in respect of relocation business losses under section 34(3). I do not consider the evidence before the panel sufficient to conclude, as do the majority in paragraph 59, that some portion of the advance payments made pertained to business loss. Certainly, the evidence does not support a conclusion that the advance payments included any amount in respect of relocation business losses as contemplated in section 34(3).

[81] The advance payments made by May 1991 totaling $695,206 were based on the two Gordon appraisal reports of December 1989. Of this total, I agree the evidence is that $45,206 was paid in respect of the partial taking land value. The remainder of $650,000 as acknowledged by the majority is equal to the "going concern" value of $650,000 arrived at by Mr. Gordon by the direct comparison approach. This was stated by Mr. Gordon to reflect the fully going concern value of the operation and to include the real estate, fixtures, equipment, business and goodwill. It is by its very nature an asset valuation not a business loss calculation. It is also a valuation as at the date of the expropriation and therefore cannot be construed to take into account business losses as envisaged by section 34(3) on relocation following the date of expropriation. Since it is a "going concern" valuation some portion as indicated by Mr. Gordon relates to the business and goodwill. In my view, this portion is the amount contemplated under section 34(4) of the Act and often referred to as a termination allowance. It is not in my view a business loss and certainly not a section 34(4) relocation business loss. I do not agree with the majority's characterization of this portion as business loss as set out in paragraph 60.

[82] The result is that there are no relocation business losses to deduct from the advance payments made. I conclude that the relocation business losses to be deducted from the compensation awarded are the loss in earnings at Stations 48 and 88 as determined by the board in the amount of $281,124 less that portion awarded for business losses prior to the closure of Station 48. The Ministry estimates these losses at $13,184 and this was not disputed by Pay Less. Accepting that estimate, the deduction is $267,940 leaving compensation awarded for the purposes of the calculation in section 45(4) of $576,165.37. The advance payments of $729,098.13 then clearly exceed the compensation awarded and Pay Less is not entitled to costs as of right.

[83] I agree with the majority that this situation arises because of the peculiar circumstances of this case and may be considered an anomaly. However, this is unlike the anomaly that arises when an expropriating authority elects to make an advance payment in respect of relocation business losses under section 34(3). In that situation there are relocation business losses to be deducted on each side of the equation. The different positions taken by the parties in the present case meant that the advance payments required to be made by the Ministry included an amount under section 34(4) as a termination allowance in respect of the goodwill of the business. Merely because a termination allowance under section 34(4) was made as required, I cannot come to the conclusion that it should be treated as a relocation business loss because of this unusual situation.

[84] Even were I able to do so, I would not come to the same conclusion as the majority regarding the dollar amount of the portion of the advance payments that could be characterized as business loss. I do not consider the initial notice of advance payment in January 1991 to be definitive of the nature of the amounts paid since additional amounts were subsequently paid.

[85] I consider the best evidence in this regard to be that of Virginia Currie that the total advance payments made by May 1991 were based on the two December 1989 Gordon appraisal reports. I conclude from the Gordon appraisal report of the improved site that the basis for the increase in the advance payments in respect of that site was the valuation of the improved site as a going concern. That value, as stated by Mr. Gordon, reflected the operational component of the business. In contrast, Mr. Gordon made it clear that neither the value of $258,000 he arrived at by the cost approach nor the value of $455,000 he arrived at by the income approach reflected an operational component. It is clear from Mr. Gordon's report that he attributed the difference between the values obtained by the cost approach and the income approach to the rental value of the real estate, fixtures and equipment and not to the operation of Station 48 itself. On the basis of the Gordon report, I conclude that the greatest amount that can possibly be attributed to the operational component or the business of Station 48 is the difference between the value of $455,000 arrived at utilizing the income approach and the going concern value of $650,000. This difference of $195,000 would on my view of the evidence be the maximum amount that could be characterized as a business loss if that term were to be used in its broadest sense.

[86] The difference of $195,000, if deducted from the total advance payments made of $729,098.13, leaves $534,098.13. Since the compensation awarded after deduction of relocation business losses as calculated above is $576,165.37, the resulting percentage for the purposes of section 45(4) is 107.9%. Thus, on my view of the evidence Pay Less would not in any event be entitled to its costs as of right.

[87] In conclusion, on my analysis the panel would have a discretion as to costs. It also follows from my analysis that no additional interest would be payable under section 46(4).