May 11, 2005, E.C.B. Control No. 76/01/258

REASONS FOR DECISION

1.0 INTRODUCTION

[1]  DKS & VW Venturers Corp., Elgon Investments Ltd., L'Abri Project Ten Ltd. and Oscar Dayton Estates Ltd. (collectively called the "claimants") were the owners of 3.689 hectares (approximately 9.115 acres) of unimproved land ("subject property") at 3745 Old Clayburn Road in the City of Abbotsford.

[2]  The Board of School Trustees of School District No. 34 (Abbotsford) (the "respondent") desired to build a middle school in the area and wished to acquire some of those lands. After several months of negotiation in the early part of 2001, the parties entered into an agreement pursuant to Section 3 of the Expropriation Act, R.S.B.C. 1996, c. 125 (the "Act") whereby it was agreed that 2.330 hectares (approximately 5.760 acres) of the claimants' land ("land taken") and several easements over the remaining 3.355 acres ("remainder") were to be transferred to the respondent and, that the compensation to be paid for such interests would be valued as of June 1, 2001.

[3]  Unable to reach agreement on compensation, the claimants brought these proceedings for the determination of the compensation to be paid for the value of the interests transferred to the respondent and other damages.

[4]  For the purposes of this proceeding, as the lands were acquired by the respondent by agreement, there was no expropriation per se. The board will, however, use the word "taking" and its variations throughout this award in discussing the subject property.

2. BACKGROUND

2.1 The Claimants' Real Estate Business

[5]  According to the evidence of Mr. Navnit Shah, a shareholder of one of the claimant companies and an officer of two others, the claimants were in the business of jointly developing real estate. They purchased raw land, and either took it through the development process and marketed the subdivided lots themselves or sold it to another developer who completed the development process and brought it to market. Mr. Shah was the project manager for the group. The group's philosophy, basically, was to proceed with their projects so that they would be self-financing.

2.2 Subject Property Prior to Taking

[6]  One of the claimants purchased the original lands comprising approximately 41.85 acres, including the part acquired by the respondent sometime in 1973. Between 1973 and 2001, the time of taking by the respondent, the claimants had partially developed parts of the original lands on about seven occasions either alone or with another like developer of adjacent lands. There was also an expropriation of almost 14 acres of the original lands in April 1990 by the respondent for the Robert Bateman High School. The developments were relatively small, generally two acres or less, except for a 13.277 acre portion sold in September 1999 to Lenco Development Ltd., Fernco Development Ltd. and The Norco Group Development Ltd. ("the Norco Group"). This sale plays a significant part in the board's valuation of the land taken by the respondent in this expropriation proceeding.

[7]  The Norco Group completed a 67 lot development on this 13.277 acre parcel which it combined with a small parcel acquired from a third party for a total of 13.488 acres. By 2004 it had sold off all the lots, including eight lots to the respondent which formed part of the ultimate school site. This 13.277 acre portion was immediately adjacent to the subject property. It had been partially taken through the development process by the claimants but the development approvals that had been obtained by the claimants had lapsed in 1997 before the sale to the Norco Group.

[8]  After the sale of the 13.277 acres to the Norco Group, the claimants made no progressive plans for the remaining 9.115 acres, the subject property. Mr. Shah said in evidence that before proceeding further with development of the subject property, he was waiting to see how the Norco Group's neighbouring development did, but the respondent intervened in early 2001 and that held up any further development activity by the claimants. But, as more fully detailed below, the evidence showed that there was no activity. Also, other events were occupying Mr. Shah's time and interfering with him applying his efforts to develop the lands. The board is not convinced that any work would have been done by June 1, 2001 even if the negotiations with the respondent had not intervened.

2.3 Subject Property - Topographical and Environmental Factors

[9]  There was considerable evidence given by a number of witnesses about the topographical and environmental factors affecting the subject property.

[10]  The topography was quite varied. The southeast one acre lay at the same elevation as the adjacent parcel to the east, comprising the parcel of eight lots the respondent purchased from the Norco Group (and part of the 13.277 acres purchased by the Norco Group from the claimants). A steep embankment with a slope grade of about 35% ran diagonally in a north easterly direction the entire depth of the subject property. On the west side of the embankment was a central area of several acres of relatively flat land approximately 10 metres lower than the land to the southeast. The most westerly area had another relatively steep embankment leading into a ravine.

[11]  The respondent acquired the most easterly 5.760 acres ("land taken") of the subject property, except for an area in the most north-easterly corner comprising about one fifth of an acre (0.208 acre). The claimants were left with the remainder comprising the westerly 3.147 acres and the aforementioned one-fifth acre.

[12]  Although there was some disparity of views as to the extent of the fisheries impact on the lands, it was generally agreed that the westerly area of the land taken and much of the remainder were affected by riparian issues. Such issues involve development constraints in the form of aquatic habitat protection enforced by Fisheries and Ocean Canada (hereinafter referred to as "DFO") and the BC Ministry of the Environment, Lands and Parks. These development constraints generally comprise setbacks or "leave strips", being areas of land and vegetation adjacent to watercourses that are to remain in an undisturbed state. The primary objective of "leave strips" is to protect the riparian zones critical to the maintenance of a healthy aquatic environment. Where such conditions are found, they may significantly affect the maximum development of lands as the developer is faced with a reduced return on his anticipated subdivision lot potential.

[13]  The subject property was thus affected topographically by two embankments and a ravine and a watercourse. The land taken contained about four acres of flat or level area, some of which was impacted by the riparian concerns. The remainder contained the ravine and some relatively level land but this was also impacted by the watercourse.

2.4 Section 3 Agreement

[14]  The Section 3 Agreement provided for the claimants to transfer the land taken and several easements, two permanent and two temporary. It is useful to set out some of the relevant provisions of the Agreement.

[15]  Paragraph 1 of the Agreement states:

1. The Owner consents to the transfer or dedication of those rights or interests to the Lands as set out in Schedules "A", "B" and "C" attached hereto.

[16]  Paragraph 8 states:

8. The Owner shall give to the School District, its agents or contractors possession of that portion of the Lands referred to in Schedules "A" and "B" effective on the day that both have signed this agreement (the "Possession Date"). The School District shall be allowed the use of the temporary workspace area (TWS) shown on the attached Schedule "C" for a period of 6 months from the commencement of construction on the Lands. The TWS shall be restored to a condition equal to or better than the existing condition following the expiration of the 6-month period.

[17]  Paragraph 11 states:

11. The School District shall make an advance payment pursuant to Section 20 of the Expropriation Act within thirty (30) days of this Agreement in the amount of One Million and Fifty Two Thousand, Seven Hundred and Fifty Dollars ($1,052,750.00) for the Lands and Forty Three Thousand One Hundred and Thirty Six Dollars ($43,136.00) for costs, for a total of One Million and Ninety Five Thousand, Eight Hundred and Eighty Six Dollars ($1,095,886.00).

[18]  The respondent made two advance payments to the claimants under Section 20 of the Expropriation Act. The first payment of $1,092,223.45 was made on June 1, 2001. It represented $1,052,750.00 for the land taken and the rights of way over the remainder and $43,136.00 for the claimants' costs broken down as follows:

Although this payment is really for costs that were settled prior to the hearing, the parties agreed that it was to be treated as disturbance damages and the claimants made it part of their claim.

[19]  The June 1, 2001 payment was less than the amount stipulated in the Agreement because it reflected a credit adjustment for property taxes of $3,662.55 pursuant to paragraph 15 of the Agreement.

[20]  A second advance payment was made by the respondent on November 28, 2002 of $196,850.00. The total advance payments made by the respondent equalled $1,292,736.00.

[21]  The Agreement provided that the date for determination of compensation was the date that transfer documents were registered in the Land Title Office. The parties agreed that the date of the fee simple transfer, June 1, 2001, was the date for the determination of the compensation.

[22]  The Agreement provided that the respondent would pay the claimants the reasonable costs for a storm sewer hook up for the remainder. The parties agreed that this cost would be fixed at $15,150. Although this item is settled, the claimants continue to make it part of their claim for disturbance damages.

2.5 Acquisitions by Respondent

[23]  Under the Section 3 Agreement, in addition to the fee simple taking of 5.760 acres, the claimants agreed to grant two permanent statutory rights of way over the claimants' remainder, one for emergency access purposes and another for waterline purposes. This was accordingly done and registration took place on May 13, 2002. A claim for compensation was made for each of the permanent statutory rights of way.

[24]  The Section 3 Agreement also provided for the claimants to "allow" the use of temporary workspace on the remainder for a period of 6 months from commencement of construction. This "allowance" was documented for reasons not disclosed in evidence as two statutory rights of way, one described as "temporary waterline purposes" and the other as "temporary emergency access", both registered at the same time as the "permanent" rights of way on May 13, 2002.

[25]  The claimants claim compensation for these "temporary" rights of way as if they were "permanent" rights of way, arguing that they were granted "in perpetuity" (language contained within the documents as registered). We were advised during the course of the hearing that these two rights of way had been discharged from title to the remainder as of July 2, 2004.

[26]  The board is puzzled why it was deemed necessary to document the "allowance of temporary workspace" in such a formal manner. In any event, despite the language of the registered documents, the board finds that the rights governing this "allowance" are contained in the Section 3 Agreement. The "allowance" was temporary and limited to a certain time period. This allowance was dischargeable at the claimants' request at any time after the period of time granted for its duration. That being the case, the two "temporary" rights of way are to be valued as such, not as "permanent" rights of way. This is dealt with below.

2.6 Claims

[27]  The claimants commenced these proceedings for the determination of compensation and filed a Form A, Application for Determination of Compensation under the Act on November 1, 2001. The respondent filed a Form B, Reply on December 21, 2001.

[28]  The final claim, after some amendments, was quantified as follows:

[29]  In addition, interest and costs pursuant to Sections 45 and 46 of the Act were sought by the claimants.

[30]  The parties agreed that allocation of compensation among the claimants was to be divided as follows:

2.7 Witnesses During the Hearing

[31]  The claimants called the following persons as witnesses to give evidence during the course of the hearing: (1) Navnit Shah, an officer of three of the claimant companies, authorized to speak for all of them and generally their development manager; (2) Teo Bate, an engineering technologist with Central Valley Engineering 2004 Ltd.; (3) Ron Hintsche, Senior Planner and Approving Officer for the City of Abbotsford; and (4) the claimants' appraisal expert, R.W. (Ron) Richardson of Richardson Appraisals Inc.

[32]  For the respondent, the following gave evidence: (1) Bob Mainman, Construction Manager for the City of Abbotsford; (2) Phil McKenzie, negotiator for the respondent; (3) Craig Sciankowy, Habitat Biologist for DFO; (4) Maureen Thomey, Biologist for Scott Resource Services Inc.; (5) Donald McLellan, Solicitor for the Norco Group; (6) Sylvia Letay, Habitat Protection Officer with the Ministry of Water, Land and Air Protection; (7) Len Noort, President and Director of Noort Developments Ltd.; (8) Paul Clarke, Director Finance for the respondent during the relevant period; (9) Oleg Verbenkov, MCIP, Land Use Development and Environmental Strategist with Pacific Land Group; and (10) the respondent's appraisal expert, Dale Hooker, of Hooker Umlah Craig Lum.

2.8 Agreements of the Parties During the Hearing

[33]  During the course of the hearing, by agreement of counsel, the parties agreed on a number of issues including the following:

3. VALUATION

3.1 Claimants' Position

3.1.1 The Richardson Appraisal

[34]  The claimants' appraiser was R.W. (Ron) Richardson, AACI, P.APP, RI(BC), SR/WA, of Richardson Appraisals Inc. He adopted the before and after method to value the effect of the taking.

[35]  The first step in his analysis was to value the 9.115 acre subject property before the taking. He used the direct comparison approach in accordance with his highest and best use both before and after the project: "to proceed with rezoning to Low Density Residential Use". Richardson utilized nine comparable sales and one listing. On a per acre basis, sale prices ranged from a low of $177,000 to a high of $560,976. On a price per raw lot basis, sale prices ranged from a low of $40,227 to a high of $86,250. Richardson noted that all 10 properties were designated low density residential on the Official Community Plan.

[36]  The comparable sales transacted between May 1997 and March 2002. After reviewing Fraser Valley Real Estate Board statistics, Richardson determined that no time adjustments were necessary.

[37]  While Richardson testified that he mentally made adjustments to some of his comparable sales, he made only one written adjustment in his report, and that related to his comparable sale number 2. Richardson considered only the developable 20 acres of this parcel, rather than the total parcel size of approximately 38 acres.

[38]  Richardson's ten sales provided a value range from a low of $177,000 per acre to a high of $560,97 6 per acre. He deemed it appropriate to remove the two upper and lower sales, leaving six sales ranging from a low of $225,271 per acre to a high of $297,059 per acre. From this, he de rived a mid range of $260,000 per acre for lands with development potential. The subject property was then worth 9.115 acres x $260,000 per acre, or $2,370,000 after rounding. Since he determined that the subject property in the before condition had potential for 40 lots, he calculated the raw lot value as $2,370,000/ 40 lots or $59,250.

[39]  Richardson's second step was to value the remainder without considering the four statutory rights-of-way. After the taking Richardson determined that six raw lots remained. He concluded that four of these six lots were normal, but two were affected by rights-of-way. From his before approach he applied the raw lot value of $59,250 to each of the four normal lots. He concluded that the other two lots suffered twenty percent damage and thus each was worth $47,400. This resulted in a value of $331,800 for the remainder before considering the four statutory rights-of-way.

[40]  Richardson's third step was to determine the loss in value to the subject due to the four statutory rights-of-way through the remainder. Richardson utilized survey information provided by Eric Peterson detailing the four statutory rights-of-way. According to Peterson, the four separate easements totalled 0.271 acres. Of this area, there was an overlap of 0.043 acres, essentially areas used by more than one easement. This reduced the net area impacted by easements to 0.228 acres. It is noted that Richardson treated all four easements as permanent easements.

[41]  Richardson considered that the easements had some residual value since the area could still be utilized for site density area calculations for the six potential raw lots. He concluded that the statutory rights-of-way left a residual value of 25%. Thus, Richardson applied a damage rate of 75%, or $195,000 per acre to the 0.228 acre statutory right-of-way area. This resulted in $44,500 (rounded) as compensation for the statutory right-of-way area.

[42]  Summary:

3.1.2 Claimants' Alternate Valuation

[43]  The claimants put forward an alternate valuation based on evidence from Mr. Shah, the claimants' project manager. Mr. Shah had qualified as a barrister in England and been licensed as a real estate agent in British Columbia.

[44]  Mr. Shah used a version of the summation method to value the land lost and the effect of the taking. He said that the land taken was the equivalent of 32 lots at a raw value of $80,000 per raw lot, or $2,560,000. To this was added Richardson's valuation for the four easements taken of $44,500. The reduction in value of the remainder was estimated as the loss of two lots at $80,000 plus damage to two more lots because they were next to an emergency access at $10,000 each for a total of $180,000.

[45]  Summary

3.2 Respondent's Position

3.2.1 The Hooker Appraisal

[46]  The respondent relied on appraisal evidence from Dale Hooker, AACI, P.APP, RI(BC), of Hooker Umlah Craig Lum. He utilized the summation method and his analysis was more complicated and detailed than Richardson's.

[47]  The first step in Hooker's analysis was to value the subject property using the direct comparison approach. His highest and best use before the project was "as a short term holding for future urban lot development". He used nine comparable sales, three of which overlapped with Richardson's. On a per acre basis, sale prices ranged from a low of $102,925 to a high of $306,430. On a price per raw lot basis, five of the nine sales were utilized and sale prices ranged from a low of $28,022 to a high of $54,231. Hooker also noted that all nine properties were designated low density residential on the Official Community Plan.

[48]  The comparable sales took place between May 1997 and July 2001. Instead of using Fraser Valley Real Estate Board statistics like Richardson, Hooker examined his nine comparable sales on a "paired sales basis" to determine an appropriate time adjustment during this four year period. Hooker compared specific sales on the basis of differences in size, location, view, etc. He then assumed that the remaining differences were due to time. At the end of this exercise, Hooker concluded a negative time adjustment of 0.70% per month between mid 1997 and September of 1999. He concluded no time adjustment was necessary between September of 1999 and the date of taking in June of 2001.

[49]  After correcting a mathematical error in his appraisal report, Hooker's time adjusted values ranged from a low of $96,477 per acre to a high of $267,966 per acre. On a price per raw lot basis, five of the nine sales provided adjusted values from a low of $28,022 to a high of $43,385.

[50]  Hooker then proceeded to examine each of the nine comparable sales and applied various adjustments for location, topography/soil conditions, statutory rights-of-way, size and shape. Most of t he total net adjustments were negative and ranged from a low of -10% to a high of -55%. One sale had a positive adjustment of +26%.

[51]  After discarding two sales Hooker's adjusted values for the remaining seven comparables ranged between $109,629 per acre and $134,656 per acre. Relying on the adjusted value of his sale number 1, the Norco Group Sale, at $119,523, Hooker concluded a value for the subject property of $125,000 per acre. The rate of $125,000 per acre x 9.115 acres resulted in a rounded total of $1,140,000. Hooker further noted that if there were 35 lots, each would have a raw lot value of $32,571.

[52]  Hooker's second step was to estimate the value for the owner's interests taken. He broke this step into two parts, each part dealing with the four types of property taken. The four types of property taken were the taking for the fee simple interest, the taking of the permanent statutory right-of-way for emergency access, the taking of the permanent statutory right-of-way for a water line, and the takings for the temporary statutory rights-of-way interests. The first part dealt with the minimum compensation under Section 40(3) of the Expropriation Act. The second part dealt with adjustments for the nature of interests taken under Section 40(5) of the Expropriation Act.

[53]  Section 40(3) states:

(3) ….but in no case, subject to Section 44, shall compensation be less than the amount determined by multiplying the ratio of the area of the land taken to the area of all of the land before it was taken, times the value of the land before it was taken with the appropriate reduction where the interest expropriated is an easement, right of way or similar interest less than the fee simple interest.

[54]  Applying this formula to the first type of taking, the fee simple interest, resulted in 5.760acre/ 9.115 acres x $1,140,000 or $720,400 (rounded) for the value of the taking. Hooker then addressed the second type of taking, the permanent statutory right-of-way for emergency access. He calculated that 2/3 of the 0.089 acres taken was within an already existing statutory right-of-way for a sewer line, and 1/3 was on previously unencumbered lands. Hooker determined that the damage for the previously unencumbered land was 100%, and the damage to the previously encumbered land was 65%. On a mathematical basis Hooker determined that the overall damage was thus 89% of the fee value for the total 0.089 acres. 89% of the fee value for 0.089 acres using the same acreage value as in the fee simple taking yielded a value for this statutory right-of-way for emergency access of $9,900. The next type of taking was the statutory right-of-way for the water line, which Hooker determined had an impact equating to 50% of the fee value. For the water line area of 0.012 acres the valuation was $750. The fourth type of taking was the temporary statutory rights-of-way interests. Hooker applied a ground rent of 10% for a 6-month term for the 0.333 acres occupied by the temporary statutory rights-of-way or $2,100.

[55]  Hooker then turned to Section 40(5) which states:

(5) Where, in the case of a partial taking, the character and use, or potential use, of the land before it was taken varies such that the land that was taken was, before the taking, more valuable or less valuable than the average value of the land that was not taken, the board may, after making a determination under subsection (3), make an adjustment to reflect that value accordingly.

[56]  For the first type of land taken, the fee simple interest, Hooker considered 27% of the entire subject property was non-developable, while only 12% of the land taken was in this category. Accordingly, in his opinion, an upward adjustment of 15% was necessary for the land taken to account for this factor. 15% of the $720,400 determined under the first part of this step yielded a further $108,060.

[57]  In Hooker's opinion, all three statutory rights-of-way were located on the developable portion of the remainder. Since Hooker had applied a 35% deduction to the subject property during his valuation to allow for non-developable area, in his opinion the value of the remainder occupied by the easements was worth 35% more than the subject property, and an upward adjustment of 35% to each of the easement values should be applied. The resulting adjustments were $3,465 for the emergency access, $263 for the water line, and $735 for the temporary statutory rights-of-way .

[58]  Hooker's third step was to determine the reduction in market value for the remainder due to the project. Once again Hooker examined the four types of takings separately. Regarding the fee simple lands, Hooker agreed with Mr. Shah that the taking results in a net overall loss of two raw lots. Hooker compared the remainder to his sale number 1, the Norco Group sale, which on his calculations sold for $37,018 per raw lot. Because the remainder was a much smaller site Hooker concluded that the lots would be worth more and made an upward adjustment of 15%. This resulted in a value of $42,500 per lot, or $85,000.

[59]  Summary:

3.3 Board's Analysis

3.3.1 Highest and Best Use

[60]  The appraisers are in general agreement that the Highest and Best Use for the Subject Property at the date of taking was for development in the short term to a "Low Density Residential Use" in conformity with the Abbotsford Official Community Plan .

3.3.2 Appraisal methodology:

[61]  Richardson employed the before and after approach, while Hooker employed the summation approach. Definitions of these two approaches are found in E.C.E. Todd, The Law of Expropriation and Compensation in Canada, 2nd edition, 1992. On page 345, Professor Todd states:

The 'before and after' method was described in an early leading case as follows: The principle on which the inquiry as to the compensation when some land is taken and some injuriously affected should be proceeded with is to ascertain the value to the claimant of his property before the taking…and its value after the part has been taken…and deduct the one sum from the other.

[62]  On page 344, he states:

The summation or aggregate method involves valuing the land taken and adding to that value compensation for the decrease in value, if any, to the remaining land by reason of severance damage or injurious affection.

[63]  The board has some concerns with Richardson's use of the before and after approach in this case, and with aspects of his methodology. In the before situation he used the valuation per acre but in the after he switched to a valuation per raw lot. However, this valuation per raw lot was based on the valuation per raw lot before the taking when the total number of lots was unclear. A preliminary subdivision layout prepared for the claimants by DeBaat and Associates suggested a potential of 40 RS3 zoned lots. However, at the date of taking, the subject property was not appropriately zoned and no application for a development permit or subdivision had been made to the municipality. The respondent's expert, Pacific Land Group, suggested that riparian concerns would eliminate at least 5 lots from the Debaat design. While this report had not been prepared at the date of taking there was evidence that the density of development on this property would be affected by fisheries concerns for several years prior to June 1, 2001. We accept that a potential purchaser who made prudent enquiries would have been alerted to this issue. The uncertainty with respect to the total number of lots that could be achieved undermines Richardson's ultimate conclusion on the loss of value as a result of the taking.

[64]  We also have concerns about the averaging model employed by Richardson. This method is based on somewhat arbitrary factors such as the number of comparables that are inferior or superior to the subject property rather than on the similarity of the comparable to the subject property. Richardson agreed that if the calculations of the sale price for one of the comparables was revised up or down the midpoint of the range would fluctuate in a similar fashion. In addition, under cross examination Richardson admitted that he actually dropped three low sales from his range which resulted in a revised range per acre of $214,983 to $267,346. We note that the midpoint of this range is lower at $245,000 per acre.

[65]  Richardson's analysis lacks sufficient detail in a number of areas. He made only one written adjustment in his comparison of ten comparable sales, despite the evidence establishing that the subject property was clearly different from every comparable sale in a number of ways. It was clear that the topography of the subject property was extremely varied, a factor that Richardson did not deal with adequately in his analysis. Finally, his analysis of the after situation was extremely brief; only half a page in a 67 page report. 

[66]  On the whole of the evidence we place more reliance on Hooker's report and the methodology he used to value the effect of the taking. Accordingly, we accept the summation method utilized by Hooker as appropriate in this case. Since the initial step in each approach is to value the subject property before the taking we will consider Richardson's evidence up to that point. After that point, we will consider Richardson's evidence where appropriate.

3.3.3 Acreage value versus value per raw lot

[67]  Before we address the relative positions of the two appraisers, we must consider the claimants' alternate claim with respect to the summation approach. Mr. Shah claimed for a loss of 32 raw lots at a value of $80,000 each. He gave two bases for this raw lot value of $80,000: the respondent School District's purchase of eight lots from the Norco Group at $86,250 per lot, as well as an offer for seven raw lots from the Krahn property of $50,000 per lot.

[68]  Phil McKenzie acquired the Norco Group lots for the School District. He advised that the Norco Group land was about 90% to 95% through the subdivision process. Rezoning had been done and a development permit was approved. McKenzie testified that these lots had a view, and were some of the best lots in the subdivision. Richardson utilized this transaction as a sale, but he discarded it from his range as it was the highest unadjusted sale. Hooker did not use this transaction as a comparable sale. Under cross-examination he indicated that he did not consider it as a comparable; that it would be like comparing apples and oranges.

[69]  McKenzie also represented the School District with respect to the acquisition of the Krahn lands. He testified that he offered Krahn $50,000 per lot for the 7 raw lots on an all-inclusive basis. This included legal, appraisal and all other fees. He advised that Krahn did not accept this offer and the School District later expropriated the property. According to McKenzie, Krahn had pre-paid the park dedication costs. Further, the land had an easement for servicing, no topographical problems, and sand present on site: servicing costs would likely be lower than for the subject property. The one negative aspect of this property was that it was dependent on the adjacent subject property for subdivision.

[70]  The board concludes that the School District acquisition from the Norco Group is not comparable to the subject property in the before condition. The subject property required re-zoning, an application for a development permit and an application for subdivision. We reject use of this transaction as support for a value of $80,000 per raw lot for the subject. We also reject the offer on the Krahn lands as a comparison. It was an all-inclusive offer, not a sale, and insufficient evidence was presented by the claimants to support this offer as a basis for valuation.

[71]  Both Richardson and Hooker valued the subject property before the taking on an acreage basis, and then related that amount to an equivalent value on a raw lot basis. As indicated above, however, there is uncertainty over the number of raw lots in the before situation. Mr. Shah, with his raw lot valuation of $80,000, is not an appraiser and as a shareholder of one of the claimants and an officer or two others, his opinion cannot be considered by the board as being independent and unbiased.

[72]  For these reasons, the board rejects any calculation of market value before the taking based on raw lot yield, and will confine its attention to the rates per acre determined by the appraisers.

3.3.4 Time Adjustments

[73]  Hooker applied a negative time adjustment of 0.70% per month between mid 1997 and September of 1999. Hooker applied no time adjustment between September of 1999 and the date of taking in June of 2001. Richardson applied no adjustment from 1997 until June 2001. Both appraisers agreed that the market increased between June 2001 and mid 2002. Thus, the only time frame in contention is from 1997 to September 1999.

[74]  Richardson reviewed graphs on Fraser Valley Real Estate Board sales for all types of property from 1990 to 2001, as well as a graph on the sales-to-active listings ratio for all types of property during the same time period. From this information, he concluded that "Overall, the market was relatively flat during the period 1997 until June 2001." Accordingly, he applied no time adjustments during this period. Two of Richardson's sales took place after June 2001. While he acknowledged under cross-examination that the market spiked upward after June 2001, he made no time adjustment to these two sales in his appraisal report.

[75]  Hooker examined his nine comparable sales on a "paired sales basis" to determine an appropriate time adjustment during this period. Hooker compared his comparable sale number 1, with four of his other comparables sales, separated out differences for size, location, view, etc, and then accounted for the remaining difference in price as a time adjustment.

[76]  The respondent argued that Richardson's statistics relate to all types of property, not just residential lots. The claimants argued that Hooker's approach would have been more helpful if he had analyzed repeated sales of the same property. This is the normal application of a "paired sales" analysis. The claimants further argued that Hooker made further substantial adjustments to each of the comparables utilized in his paired analysis, notably for soil conditions.

[77]  The board concludes that there is not sufficient evidence to apply a time adjustment for the period from 1997 to September 1999.

3.3.5 Valuation Before the Taking

[78]  The two appraisers used a total of 16 transactions to value the subject property. We find the best comparables to be the three sales used by both appraisers.

3.3.5.1 First Common Sale

[79]  The first, and most significant common sale, is the sale of 13.277 acres by the claimants to the Norco Group in September 1999. This property is adjacent to the subject property and in fact was formerly part of the subject property. The two appraisers view this transaction differently. An outline of their respective positions (before adjustments) is shown as follows:

[80]  The initial cash prices quoted are different because Hooker included the separate purchase of the remainder of Lot 3 for $52,500 in this comparable. This small lot of 0.211 acres was also purchased by the Norco Group from another party and later incorporated by the Norco Group in their subsequent 67 lot subdivision. Although Richardson included the separate small lot in his size determination he did not include its purchase price as part of the initial cash price. We accept the $1,877,500 figure provided by Hooker for the acquisition of a total of 13.488 acres in Lots 2 and 3.

[81]  The purchaser agreed to pay the vendor's real estate commission. We accept Hooker's value of $52,700 for this expense.

[82]  The purchaser agreed to provide five serviced lots back to the vendor. The appraisers disagreed on the value of these five lots. Richardson stated his figure of $117,500 came from values provided by Mr. Shah. This was the eventual sale price for each of the five lots sold by Mr. Shah between April and August 2002, approximately 3 years after the date of the agreement. As previously discussed, both appraisers have stated that residential real estate values rose between mid 2001 and mid 2002. Hooker asked Mr. Noort of the Norco Group what the lots would have been worth and reported that he had offers for lots in the range of $105,000 to $111,000 assuming the subdivision had been completed. Based on this evidence we accept Hooker's value of $110,000 per lot, for a total of $550,000.

[83]  With respect to the allowance for park dedication, Mr. Shah advised that he received $52,000 in exchange for the now smaller lots. Mr. Noort for the Norco Group denied making any such payment. No written evidence for this item was submitted. The respondent argued that the park dedication was not known as at June of 1999 and should not be reflected in the price. They further argued that the land for the park dedication would be a nil transaction. For a payment of $52,000 the owner is left with smaller lots. We agree and place no value for this item.

[84]  Richardson has listed several further engineering and other considerations that he has added to the Norco Group sale price. Some of these items were claimed in the alternative as disturbance damages. The claimants made clear that they were not seeking double compensation for any of these items. For a more detailed discussion of the individual engineering costs see section 4.2 on the Loss of Valuable Benefits under Disturbance Damages below. During argument counsel withdrew latecomer fees from this list to be considered as other considerations affecting market value. Mr. Shah claimed that the subject property benefited in comparison with this comparable as a result of each of these items. The issue is whether at the time of this sale in 1999 any of these items were sufficiently certain to be added to the purchase price in the same manner as the five fully serviced lots and, if so, at what amount.

[85]  Mr. Shah claims that the subject property would have benefited from the construction of services by the Norco Group on the proposed Kootenay Drive extension through a right of way across the subject property. As indicated at some length below there was no legal obligation for the Norco Group to place the services in that location. There were also environmental concerns about the proposed extension and services in this location. There were considerable risks associated with these services being created to the claimants' benefit and we conclude that at the relevant time there was not sufficient evidence that the vendor gave any consideration to this factor as part of the sale price.

[86]  We do accept that the potential construction of both the retaining wall and the stub road through Lot 60 were of some benefit to the claimants though it is not clear how much consideration was attributed to these factors at the time of the sale.

[87]  We conclude that the two parties to the transaction may have attributed a total allowance of $50,000 for all of these other considerations put forward by Richardson and Shah. Thus the total consideration for the transaction is $2,530,200 or $187,589 per acre.

[88]  The next step is to adjust this sale to the subject property. Neither appraiser made a time adjustment for this sale. Hooker made a negative adjustment of 5% for the longer development horizon of the subject property, a negative adjustment of 35% for the inferior topography, and a positive 5% adjustment for the smaller size. Richardson did not make any written adjustments for these factors, although he stated it should have an upward adjustment for size.

[89]  The board is then left with the information on adjustments that Hooker provided. We agree with Hooker's 5% downward adjustment for the longer time horizon for development for the subject property. The subject property would be developed after the Norco Group site. We also agree with Hooker's 5% upward adjustment for the smaller size of the subject property, and Hooker's downward adjustment of 35% for topography.

[90]  Our conclusions on this sale are as follows:

3.3.5.2 Second Common Sale

[91]  The second common sale was a 5.69 acre lot on Old Clayburn Road that sold in May 1997 for $1,410,000. Once again Richardson made no adjustments, although he did admit under cross-examination that the comparable was relatively flat, and had no riparian concerns. Hooker made four adjustments. He deducted $100,000 for prepaid engineering made available to the purchaser, then made downward adjustments of 20% for time, 5% for the longer development horizon for the subject property, and 35% for the inferior topography of the subject property. We agree with the $100,000 deduction for prepaid engineering. We do not agree with the time adjustment. We accept the 5% downward adjustment for the longer development horizon, and the 35% downward adjustment for topography.

[92]  Our conclusions on this sale of 5.69 acres on Old Clayburn Road are as follows:

3.3.5.3 Third Common Sale

[93]  The third common sale was a 38 acre property on Old Clayburn Road that sold in July 1997 for $4,405,000. Richardson adjusted this sale for the usable acreage, which in his opinion was 20 acres. Hooker used the gross acreage and made four adjustments. He made a downward adjustment of 18% for time, and upward adjustments of 10% for the superior topography on the subject property, 1% for the statutory right-of-way in the comparable and 15% for the subject property's smaller size. We do not agree with Richardson's approach of using only the usable acreage from this sale and comparing it with the total area of the subject property, both usable and unusable. We prefer Hooker's approach of comparing the total area involved in both the subject property and the comparable sale. Regarding necessary adjustments, we do not accept a time adjustment. We accept the 10% upward adjustment for topography, the 1% upward adjustment for the statutory right-of-way and the 15% upward adjustment for size.

[94]  Our conclusions on this sale of 38 acres on Old Clayburn Road are as follows:

3.3.5.4 Conclusion

[95]  In summary, we have concluded adjusted sale prices of $121,933 per acre for the Norco Group sale, $138,137 per acre for the second common sale, and $145,548 per acre for the third common sale. These three common sales support a sale price between $120,000 and $145,000 an acre. We note that Hooker concluded a higher value for the subject property than his adjusted prices for any of these three common comparables. After considering all of the relevant evidence we conclude a final valuation of $140,000 per acre for the subject property. Thus the total valuation for the subject property before the taking is 9.115 acres x $140,000 or $1,276,000.

3.3.6 Valuation of the Takings – Part 1

[96]  The value of the fee simple land taken o n an equal average basis per section 40(3) of the Expropriation Act is:

5.760 acres/9.115 acres x $1,276,000 = $806,400

[97]  Richardson valued the takings for the emergency access, the water line, and the two temporary easements all as permanent easements. He did not separate the areas. He simply took the net area from Eric Peterson's survey information, and then concluded that the net impact was 75% of market value for the net area of 0.228 acres affected by the easements.

[98]  Hooker's opinion was that the 0.089 acre emergency access easement impacted the remainder 65% for areas where it overlapped the existing sewer line, and 100% for areas previously unencumbered. The total overall impact was 89% of market value. Hooker valued the area for the water line, a much smaller area, at 50% of market value. Hooker's overall impact in this case is higher than Richardson's. The board prefers Hooker's approach for the valuation of each of these easements.

[99]  Thus, the value of the two permanent easements on an equal average basis under Section 40(3) of the Expropriation Act is as follows:

[100]  As previously discussed, the board has decided that the takings for the temporary statutory rights-of-way are not permanent takings and we will decide the compensation for the takings on a temporary basis. Since Richardson valued these takings on a permanent basis, we will not consider his evidence. Hooker's opinion was that a rate of 10% per annum over a 6 month term would be appropriate. We agree with this approach and determine the value of the temporary easements on an equal-average basis as follows:

0.333 acres/9.115 acres x $1,276,000 x 10% x 6 months/12 months = $2,350 (rounded)

3.3.7 Valuation for the Takings – Part 2: Adjustments for Nature of Interests

[101]  Under Section 40(5) of the Act we must now consider whether any of the land taken is more or less valuable than the average value.

[102]  The development of the subject property was affected by the varied topography and riparian factors. Hooker had applied a 35% negative adjustment as a result of these factors in his valuation of the subject property before the taking. But in his consideration of the land that was taken, Hooker concluded that a higher percentage of this land was flatter and therefore developable than on the subject property as a whole. As a result Hooker made an upward adjustment of 15% to the land taken to partially offset the earlier 35% adjustment downward. We agree with Hooker's approach. However we note that an upward adjustment of 15% to a valuation that has previously been reduced by 15% (as part of the 35% negative adjustment for topography) results in less than the original 100%. The board concludes an 18% upward adjustment to compensation is necessary (85% x 1.18 = 100%). The additional value to the fee simple interest taken is thus:

$806,400 x 18% = $145,152

[103]  Hooker concluded that the areas impacted by all the statutory rights-of-way located on the remainder were not impacted by any topographical or riparian concerns. However, as indicated above he had made a 35% deduction for these factors in his valuation of the subject property before the taking. Accordingly he deemed it appropriate to make a corresponding 35% upward adjustment for the easement area. We agree with this reasoning. Again, an upward adjustment of 35% to offset the earlier downward adjustment of 35% results in less than the original 100%. We conclude a 54% upward adjustment is necessary (65% x 1.54 = 100%). The additional values for the three statutory rights-of-way are:

3.3.8 Adjustments for Special Benefits

[104]  No special benefits were identified, and the board concludes that none should be applied.

3.3.9 Reduction in Market Value for the Remainder

[105]  Two separate issues were raised in this category. The first relates to the loss of two net lots. Both parties agree that two net lots are lost. At issue is the value of the lots. Richardson did not value the two lost lots for the claimants since this loss was already included with his appraisal approach, however, he did value the six remaining lots at $59,250 per lot. Mr. Shah valued the two lost lots at $80,000 each, but we have already rejected this valuation. Hooker, for the respondent, divided the consideration involved in the Norco Group sale by the number of lots and derived a value of $37,018 per raw lot. He adjusted this amount upward by 15% for size, and arrived at a value of $42,500 for each lot. We accept the analysis of the Norco Group sale as being the best indicator of raw lot value and accept Hooker's approach. However, we have adjusted the Norco Group sale price up to a value of $37,764 per raw lot. Applying the 15% upward size adjustment, we arrive at a rounded value of $43,400 per raw lot, or a total of $86,800.

[106]  The second issue relates to possible damage to the six lots left on the remainder due to the taking of the permanent statutory right-of-way for the emergency access. Richardson concluded that there was 20% damage to two of the remaining lots that would be sited next to the emergency access. Richardson stated that this damage was not related to the actual statutory right-of-way taking, but to the effect of being located adjacent to the emergency access statutory right-of-way. Mr. Shah advanced a separate claim that each of the two affected lots would be de-valued by $10,000 each. No market evidence was presented to support either of these claims.

[107]  Hooker, on the other hand, reviewed two separate sets of market transactions relating to sales of vacant residential lots. In each case one lot sold next to a walkway and the remaining lots sold close to the same date with no walkway influence. Hooker found no difference in sales price and concluded that the walkway would have no measurable impact on the remainder.

[108]  We find Hooker's evidence the most convincing, and conclude that there was no damage to the two lots next to the emergency access.

3.4 Board's Conclusion

[109]  Summary of the board's valuation

4. DISTURBANCE DAMAGES

[110]  The parties have agreed that the respondent shall reimburse the claimants for the following:

Section 3 Agreement negotiation expenses of $43,136.

Storm sewer hook-up costs of $15,150.

[111]  The claimants also seek payment of the following amounts:

4.1 Expenses Thrown Away - $35,206.

4.1.1 Claimants' Position

[112]  This represents a portion of the development costs relating to the subject property which were incurred by the claimants prior to July 21, 1999. The claimants produced invoices totalling $92,415.98 from the City of Abbotsford and a variety of suppliers including consulting engineers, development consultants, land surveyors, an excavating company, and geotechnical and environmental consultants. The claim of $35,206 is calculated by applying the ratio of the claimants projected lot yields from the 9.115 acre property comprising the land taken plus the remainder, to the projected lot yield from the adjacent 13.277 acre parcel which it sold to the Norco Group on June 28, 1999.

4.1.2 Respondent's Position

[113]  The respondent says that most of the costs relate to the property sold to the Norco Group and that a cost allocation based on projected lot yields is inappropriate.

4.1.3 Analysis and Conclusion

[114]  Mr. Shah agreed during his cross examination that some of the work done by Central Valley Engineering Services related to lots on Old Clayburn Road and Exbury Avenue and that these costs should be deducted from the total of $92,415.98. A review of the relevant exhibit shows that a portion of three of the Central Valley Engineering invoices include references to work on Old Clayburn Road or Exbury Avenue. Two invoices with references to Old Clayburn Road are for total amounts of $529.65 and $4,381.92 and the one invoice making reference to Exbury Avenue is for a total of $1,461.89. However, these three invoices all record a number of different services and the charge for each item of service is not broken out. Thus the amount charged for the Old Clayburn Road and Exbury Avenue work is unknown although it appears to be only a small portion of the total amounts billed on the relevant invoices. A review of all of the supplier invoices totalling $92,415.98 does not disclose any other work ascribed to unrelated properties. Based on our review of the invoices, we conclude that it would be reasonable to ascribe $600 for work relating to Old Clayburn Road and Exbury Avenue. This reduces the total amount relating to the 9.115 and 13.277 acre properties to $91,815.98.

[115]  There was no evidence showing how the amount spent on development work should be allocated between different portions of the property. While much of the work related to the eastern portion of the property which was sold to the Norco Group, we noted that many invoices included references to work involving the Department of Fisheries and Oceans which related to the western portion of the property. It was clear from the testimony of Mr. Shah and a number of the witnesses who appeared in these proceedings that the concerns and requirements of DFO were time consuming matters. In the absence of any more accurate measure we accept the claimants' methodology of allocating costs in the ratio of projected lot yields. We believe it is reasonable to project a total yield of 101 lots. The property sold to the Norco Group produced 66 lots, being the total of 67 lots in its subdivision less one lot attributable to a small parcel of land which it purchased from a third party. We do not know what the lot yield would have been from the Land taken but it is reasonable to assume 29 lots for the purpose of the calculation. The parties agree that the remainder will yield 6 lots. Thus the ratio of development costs relating to the land taken is 29 to 101 which yields an amount of $26,363.00 for costs thrown away and we award this sum to the claimants.

4.2 Loss of Valuable Benefits - $423,934

4.2.1 Claimants' Position

[116]  The claimants seek compensation for benefits associated with their ownership of the subject property which they state may not be reflected in the market value of the property. The amounts claimed are as follows:

4.2.2 Respondent's Position

[117]  The respondent said these amounts are not disturbance damages but potential benefits flowing to the subject property that should be reflected in the valuation of the property. It said, by way of example, that if the subject property had prepaid for servicing, that fact would have to be considered and an adjustment made when comparing it to other properties where that benefit was not present.

4.2.3 Analysis and Conclusion

[118]  The contract of purchase and sale between the claimants and the Norco Group gave the Norco Group a statutory right of way across the subject property which ran along the location of a proposed Kootenay Drive extension. This right of way would permit the Norco Group to construct sanitary and storm lines across the subject property that would join the lines located in the existing portion of Kootenay Drive at the northern boundary of the property. The installation of sanitary and storm lines in this location would benefit the claimants in the development of a single family subdivision on the subject property. Mr. Shah testified that the Norco Group were legally obligated to build the sewer lines in that location, however, this statement is not supported by the contract of purchase and sale. Both Mr. Noort, the principal of the Norco Group, and Mr. McLellan, the solicitor for the Norco Group, testified that the Norco Group had no obligation to build these services in that location.

[119]  The contract of purchase and sale made no reference to the construction of storm water detention facilities. Mr. Noort testified that the Norco Group was not obligated to provide these facilities to the claimants.

[120]  We heard extensive testimony with respect to the possible and probable requirements of DFO and the Provincial Ministry of Water, Land and Air Protection, including representatives of both of those Agencies, Mr. Shah, Mr. Bate of Central Valley Engineering, Mr. Hintsche a senior planner with the City of Abbotsford, Ms. Thomey of Scott Resources, Mr. Verbenkov of Pacific Land Group, and Mr. Richardson and Mr. Hooker the two appraisers. Mr. Shah testified that DFO was harsh in their dealings with him and he finally decided to "lay low" rather than continuing to seek their approval to the development of the claimants' lands. This was confirmed by Mr. Bate who testified that, upon instructions from Mr. Shah, he did no further work on this problem following on the receipt of a March 26, 1997 letter from DFO. We are satisfied that the extension of Kootenay Drive across the subject in the location originally anticipated by the claimants would have presented significant environmental problems, and it is questionable whether the sanitary and storm sewer benefits envisaged by the claimants would have been realized.

[121]  Mr. Shah acknowledged that an adjustment would be required to the $384,684 claim to allow for the fact that this is based on a 40 lot subdivision. We note that Marv's Excavating provided Central Valley Engineering with an estimate that the services expected to be provided by the Norco Group would save the claimants $191,500 made up of: sanitary sewer $17,400, storm sewer $34,100 and detention facility $140,000. The very large discrepancies between the estimates of cost benefits provided by TGK Development [$246,800]  and Marv's Excavating [$191,500], and the claimants' calculations based on the Hub Engineering report [$384,684]  were not explained. We also note that we do not know if the cost estimates provided by Hub Engineering and Marv's Excavating were calculated as at the date of the taking because this was not disclosed in their reports. These two estimates were made after the land was acquired by the respondent and one witness said he believed the Marv's Excavating estimate was made as at the date the estimate was made rather than as at the date of the taking.

[122]  The loss of the benefit of sanitary and storm sewers and storm water detention facilities advanced by the claimants is premised on the assumption that the Norco Group would construct these facilities in a location favourable to the development of the subject property. Mr. McLellan testified that the proposed Kootenay Drive extension anticipated by the claimants at the time of the Norco Group's land purchase was the most logical location for the sanitary and storm water sewers, but the Norco Group was not obligated to build at that location. He also said that the Norco Group would put the services where the City of Abbotsford wanted them. We are satisfied that there was no legal obligation for the Norco Group to locate sanitary and storm sewers along the right of way granted to them by the claimants. The environmental issues may have precluded or rendered uneconomic the building of services along the proposed Kootenay Drive extension. We believe the Norco Group would have placed their services in the location that was approved by the City of Abbotsford and best suited to the development of their own subdivision.

[123]  We agree with the respondent that if there was any benefit attributable to the possibility that the Norco Group would build services in a location favourable to the future development of the claimants' land, that benefit should properly be reflected in the value of that land. We are satisfied, based on an examination of the contract of purchase and sale and the testimony of Messrs. Noort and McLellan, that there was no legal obligation or requirement for the Norco Group to place services at any particular location and, as a result, no certainty that the benefits anticipated by the claimants would have been realized.

[124]  Further, we agree with the respondent that these are not really disturbance damages. In Whitechapel Estates v. British Columbia (Ministry of Transportation and Highways) (2002), 78 L.C.R. 32 (B.C.E.C.B.) this board stated at para 234:

While market value is measured on an objective basis as the sale price reached between a hypothetical purchaser and a hypothetical seller, disturbance damages are based on what financial losses the claimants have actually suffered. As a result we use hindsight and the actual events that have occurred in assessing these claims.

There is no evidence that the claimants suffered any costs, expenses or financial losses as a result of the elimination of the potential construction of services in a favourable location. Accordingly we reject any claim for loss of valuable benefits as disturbance damages relating to sanitary and storm sewer and storm water detention facilities.

[125]  The $10,000 claim for loss of sand is based on Mr. Shah's assertion that there was marketable gravel on approximately 6.5 lots to be developed on the subject property. Mr. McKenzie included an allowance for gravel in his negotiation of the price paid to the Norco Group for eight residential lots acquired by the Abbotsford School Board. However, he said that he did not know whether there was any gravel on the subject property and that Mr. Shah had never raised this issue with him during his negotiations with the claimants.

[126]  There was no evidence about the quantity or quality of any sand or gravel on the subject property. Accordingly we reject the claim relating to sand.

[127]  The $29,250 claim for loss of latecomer charges of $1,170 a lot for 25 lots is based on a 40 lot subdivision. The number of lots and the amount of the claim would be reduced if the lot yield is reduced. Mr. Shah testified that the Norco Group complained to him about the amount of the latecomer charges. The parties have agreed that the total amount paid by the Norco Group for latecomer charges on their 67 lot subdivision is $24,003 and that the City of Abbotsford also agreed that there would be no latecomer charges levied against the subject property. The claimants argued that this was not known at the date of the taking and that the claim should be based on a rate of $1,170 a lot. However, the fact that the total latecomer charge liability for the balance of 80 lots was settled for $24,003, which is $300 a lot, raises the question of whether a significant reduction from the $1,170 a lot paid prior to the taking could reasonably have been anticipated at the date of the taking.

[128]  In this case the evidence establishes that the claimants have suffered no costs, expenses or financial losses with respect to latecomer fees. Accordingly, we reject the claim for disturbance damages relating to latecomer charges.

4.3 Delay Losses - $522,962.

4.3.1 Claimants' Position

[129]  This claim is made up of: holding costs $494,115, increased construction costs $10,511, and increased development cost charges $18,336.

[130]  The claimants say that the development of the subject property was frozen during the 681 day period commencing July 21, 1999 when they first learned of the respondent's interest in their property, and ending on June 1, 2001 when the property was transferred under the Section 3 Agreement. They claim holding costs for the delay period of $494,115. This was calculated by applying a compounded annual rate of 8% to the $3,200,000 value ascribed to the subject property by Mr. Shah, this value being based on the assumption that it would yield 40 lots with a land value of $80,000 for each lot.

[131]  The claimants made two further calculations of the holding costs during the delay period by applying compounded annual rates of 7% and 10% to the value of $2,370,000 as estimated by Mr. Richardson. The 7% rate was suggested by Mr. Richardson as being appropriate for a revenue producing property. The 10% rate was an amount used by Mr. Hooker to calculate compensation for a right of way. This yielded holding costs of $318,879 using 7% and $461,241 using 10%.

[132]  The claimants point out that both appraisers agreed that real estate market values were stable between July 1999 and the date of the taking and, accordingly, they did not benefit from increasing market values during the delay period.

[133]  The claimants say that they had actively pursued development of their land until the latter part of 1997 when they became involved in a dispute with the City of Abbotsford. The claimants sued the city but were unsuccessful. Development was suspended during the course of the litigation. The claimants were discouraged by their loss in court and elected not to pursue development approval. The situation improved in January 1999 when they were approached by the Norco Group and the subsequent sale of the 13.277 acres to the Norco Group in June 1999 provided the claimants with funds to develop the subject property.

[134]  Mr. Shah stated that the claimants intended to await registration of the Norco Group subdivision plan and installation of sewers before proceeding with the construction work on the subject property. The claimants hoped to keep construction costs down by installing sewer connections for their lands in the same trenches that the Norco Group was expected to excavate through the subject property to service their own development.

[135]  Mr. Shah had previous experience with expropriation proceedings and concluded that re-zoning approval from the city council would be deferred until the school location had been conclusively established. Accordingly, the claimants decided to cooperate with the respondent while it pursued the school site planning process. This cooperation included giving access to the respondent for testing and evaluation purposes, consenting to the respondent's application to rezone the land taken for institutional use and for environmental approval under the Water Act.

[136]  The claimants point out that Mr. Noort and Mr. McLellan gave evidence of delay attributable to the respondent. The Norco Group subdivision plan was not filed until approximately 19 months after their purchase of the property and the claimants say that Mr. McLellan said that this would normally have taken between 6 and 8 months.

[137]  The claimants are not seeking compensation for delay of development of the remainder.

4.3.2 Respondent's Position

[138]  The respondent pointed out that the claimants said their development would follow after the Norco Group development and argued that the Norco Group had to rezone, obtain a development permit and complete a subdivision application before they could commence their development. The respondent also said that Mr. Shah told Mr. Richardson that the claimants would wait until one half to three quarters of the Norco Group development had been absorbed before they started with their own development.

[139]  The respondent pointed out that Mr. Clarke, the Director of Facilities and Transportation employed by the respondent, testified that he never told Mr. Shah to cease his development.

[140]  The respondent referred us to Mr. Shah's testimony that he was greatly distracted by litigation involving a Mr. Bakken, which was unrelated to the subject property, and ultimately led to his own personal bankruptcy. He also said he did not want to hire third parties to push the development forward because he did not want to lose his management fee.

[141]  The respondent said the capitalization rates used by the claimants to determine the delay loss are used for revenue producing property and have no application to the subject property. It also said the cost increases shown by Marshall Valuation Services are unreliable since they do not relate to the Abbotsford area.

[142]  The respondent cited The Law of Expropriation and Compensation in Canada by Eric C.E.Todd, (2nd edition) which states on page 101, "actual damages and costs are recoverable provided they have been reasonably incurred" and on page 322, "onus of proof lies with the owner first, to establish the amount claimed [for disturbance]  is a compensable item arising as a natural and reasonable consequence of the expropriation and secondly, to establish, by evidence, the amount or amounts of costs or loss which he has incurred". The respondent argued that the claimants have not incurred any costs or damages.

[143]  The respondent also cited the following cases:

a) Dell Holdings Ltd. v. Toronto Area Transit Authority (1990), 43 L.C.R. 138 (O.M.B.)

This was a partial taking where the Ontario board found that the claimant made every effort to obtain a decision from the city as to their actual requirements, and that no action or inaction by the claimant had resulted in delay of the actual development of the remaining lands. The board awarded disturbance damages arising from the delay. The case ultimately proceeded to the Supreme Court of Canada [1997]  1 S.C.R. 32; 60 L.C.R. 81 for determination of whether the damages awarded were compensable under the Ontario Expropriations Act. The parties in the proceedings had agreed that there was a delay, and the damages related to the delay of development of the portion of the appellant's land which was not expropriated.

b) Sequoia Springs West Development Corporation v. British Columbia (Ministry of Transportation and Highways) (2000), 69 L.C.R. 1 (B.C.E.C.B.); reversed in part on other grounds 2000 BCCA 482

This board allowed part of the claimant's delay claim and noted that the onus is on the claimant to prove any delay and link it to the expropriation.

c) McKinnon v. School District No 36 ( Surrey) (1994), 54 L.C.R. 23 (B.C.E.C.B.).

In this case this board denied the claimants' claim for disturbance damages because they had failed to establish that the costs and expenses claimed had actually been incurred.

d) Whitechapel Estates v. British Columbia (Ministry of Transportation and Highways) (2002), 78 L.C.R. 32 (B.C.E.C.B.)

A portion of a claim for delay damages was denied because this board found there was no evidence that the claimant had made any applications for development during that period.

[144]  The respondent submitted that the text references and case law clearly show that the onus is on the claimants to prove their loss and no such loss has been proven. It also argued that if any loss could be established the claimants have failed to properly mitigate their damages by engaging experts to further the development because Mr. Shah did not want to forgo his management fee.

4.3.3 Analysis and Conclusion

[145]  We believe there are two basic issues to be examined and determined in order to reach a conclusion on the claims for delay losses:

[146]  Mr. Shah testified that the claimants were a conservative group that liked to finance the development of their property from their own resources rather than borrowings. He said that the sale of the 13.277 acres to the Norco Group in June 1999 reenergized the claimants and provided them with the funds required to develop the adjacent subject property.

[147]  The permits obtained by the claimants had all expired by July 21 1999 so that the development of a single family residential subdivision on the subject property would require them to have the property rezoned, obtain development permits and complete a subdivision application. DFO and the Ministry of Water, Land and Air Protection would have to approve any subdivision plans. We have previously made reference to the testimony of a number of witnesses, including representatives from those two agencies and private sector consultants retained by both the claimants and the respondent to determine the requirements of DFO and the Ministry of Water, Land and Air Protection. We are satisfied that there were significant environmental issues that would have to be resolved before those agencies would agree to a subdivision of the subject property. This view is confirmed by Mr. Shah's comment that DFO were harsh with him and that he ceased working on the resolution of the environmental issues in 1997 and decided to "lie low" rather than continuing to work on the problem. In this connection we note that Ms. Thomey, an environmental consultant with Scott Resources who was retained by the respondent in April 2000, testified that DFO had become more conservative since 1996 when they first dealt with the subject property, and said she did not think that the Kootenay Drive extension anticipated by the claimants would have been allowed because of standards relating to habitat protection.

[148]  Mr. Shah testified that the development was not ready to go in July 1999 and that there was no prospective start date. He said the ideal time to start would be when the Norco Group was putting sewers along Kootenay Drive. Mr. Shah also said that the claimants' timing for commencement of development would be governed by a variety of factors including market conditions, and that they would not necessarily wait until the Norco Group sold its lots before commencing development. This statement is at variance with the testimony of Mr. Richardson who said that Mr. Shah told him that the claimants would wait until one half to three quarters of the Norco Group development had been absorbed before starting their own development, and inserted this comment in the appraisal that he prepared for the claimants. We accept the testimony of Mr. Richardson on this matter. Furthermore, it seems entirely reasonable that a conservative developer would wait for the Norco Group to sell a major portion of its lots before commencing its own development since there would then be less competition from alternative lots in the same area. In this connection we note that Mr. McLellan testified that the Norco Group filed its approved 67 lot plan on or about January 18, 2001. Mr. Noort testified that the Norco Group had some sales at the time of the respondent's acquisition of 8 of its lots in July 2001 and completed the sale of all of the lots in 2004. This suggests a total sale period of approximately three years and, assuming sales occurred evenly over that period, it would take 18 months to sell one half of the lots and 27 months to sell three quarters of the lots.

[149]  Mr. Shah testified that the Bakken litigation had taken between 25% and 40% of his time since 1995. He ultimately lost and the judgment that flowed from the court's decision led to his personal bankruptcy in April 2002. Mr. Shah said he had another real estate development in Aldergrove going on at the same time as the Bakken litigation. When questioned about the claimants' failure to develop the proposed five lots at the end of Kootenay Drive on the remainder, he said that the respondent had made his hands full, and that he had been fully occupied by the expropriation hearing and his work on the development of the single lot on Teslin Drive. Mr. Shah did not want to retain a third party to handle the development because he would then lose his fees and also because his investors were comfortable with him. He also said that there had been a significant increase in the market value of lots between 1999 and 2003 and that this increase would more than offset any increased development costs. Thus, the claimants had made money as a result of their delay in the development of the five lots.

[150]  Mr. Shah acknowledged that he filed a written statement in January 2003 in response to creditor opposition to his application for discharge from bankruptcy. His creditors had questioned his low income during the bankruptcy period and the period prior thereto. The statement included the following explanation:

The business provided me with commission income from listings and sale of subdivided lots. For the last nine years or so, however, I have not promoted any new projects as the development business became very frustrating and time-consuming, and as my life had been consumed by Bakken's litigation since 1995.

[151]  Mr. Shah testified that it should have taken the Norco Group four to five months to get its property rezoned and complete a subdivision application. This is at variance with the testimony of Mr. McLellan, the Norco Group solicitor, who said six to ten months would be normal, and Mr. Noort, the principal of the Norco Group, who said six to eight months. Mr. McLellan said the 13.277 acre subdivision took longer than usual partly because of reaching a decision on the location of storm and sanitary sewers, and also because of the time it took for the School Board to decide on the location of the school. Mr. Noort also confirmed that the process took longer than usual, the last six months because the School Board could not make up its mind.

[152]  We do not think the failure of the claimants to commence development of the subject property during the 22 month period from July 21, 1999 to the date of the taking can be attributed to the respondent. We have estimated, based on the approximate period of three years that it took the Norco Group to sell all of the lots in its subdivision, that it would have taken 18 months to sell one half of their lots and 27 months to sell three quarters of their lots. However sales could not commence until the subdivision application was completed and that would normally take at least four to five months according to Mr. Shah, or six to ten months according to Mr. McLellan, or six to eight months according to Mr. Noort. Thus the total time required for the Norco Group to go through the subdivision and sale process would be in the range of 22 to 28 months to sell one half of the lots and 31 to 37 months to sell three quarters of the lots. It follows that the taking was made before the earliest date that the claimant would have commenced development. Further, the subdivision approval time for the subject property would almost certainly be longer than normal because of the environmental issues. We are satisfied that all of the foregoing, combined with Mr. Shah's distraction by serious litigation and other business matters, and his aversion to engaging an outside person to handle the development, were the reasons for the claimants' failure to commence development before the date of the taking, and that their failure to proceed was not attributable to the respondent.

[153]  The claimants seek compensation for the absence of income from the subject property. It formed part of a larger parcel which they bought many years ago. There was no evidence of income flowing from the property other than through the sale or development of the lands. The claimants are seeking holding costs of $494,115 calculated by applying an 8% compounded interest rate to Mr. Shah's estimate of the value of the land, which they say was frozen for 22 months as a result of the expropriation proceedings. They also made alternative calculations using Mr. Richardson's estimate of the value of the land and compounded annual interest rates of 7% and 10%. The 7% rate was an estimate by Mr. Richardson of the rate of return applicable to an income producing property. The 10% rate was used by Mr. Hooker in his determination of the compensation for a right of way taken by the respondent. However, Mr. Hooker said there was no rental value for the subject property. We are satisfied that the subject property was not suitable for rental and that the only source of income would be from its sale or development. We have determined that it would not have been developed before the date of the taking. It follows that no income could have been generated from the property during the 22 months preceding the taking and the claimants suffered no loss of income as a result of the actions of the respondent. Accordingly, we reject the claim for holding costs.

[154]  We note that the amounts paid to the claimants in Dell Holdings Ltd. and Sequoia Springs West Development Corporation (supra) related to damages sustained as a result of delay to the development of a remainder and not the expropriated land. However, the claimants are not seeking damages for delay in development of the remainder because prices have increased by more than costs since July 1999 and Mr. Shah acknowledged that they have made money as a result of the delay.

[155]  The $10,511 claim for increased construction costs is based on Mr. Richardson's estimate based on Marshall Valuation Services. However, the calculation has been wrongly applied because the claimants have used an annual rate of 7% compounded rather than 7% for the 22 month period as estimated by Mr. Richardson. However, the claim must fail because the claimants have not incurred any construction costs on the subject property and will not incur any costs in the future because of the taking. The claimants did not incur any construction costs on the remainder during the 22 month period and have acknowledged that any increased future costs on the remainder are more than covered by increases in the sale price of lots. Accordingly we reject this claim.

[156]  The $18,336 increase in development cost charges represents an increase of $3,056 a lot on six lots which was put in place on March 26, 2001. We have already found that the claimants have not, and would not, have developed any lots prior to June 1, 2001 and have also acknowledged that increases in lot sale prices subsequent to July 1999 have more than covered increases in costs. Accordingly we reject this claim.

5. SUMMARY OF FINDINGS

[157]  The board concludes that the claimants are entitled to be compensated as follows:

[158]  Since the total of the two advance payments to the claimants at $1,292,736 is more than the compensation awarded, pursuant to section 30(2) of the Act we certify the difference of $147,728 as a debt due and payable by the claimants to the respondent. This amount may be reduced or set off against the interest and the costs owing to the claimants. The parties have agreed on the allocation of any compensation between the four claimants as set out above. The same allocation applies to the debt due.

6. INTEREST

[159]  The board has determined that the compensation payable to the claimants amounts in the aggregate to $1,145,008 for the loss in market value and disturbance damages. The respondent made advance payments to the claimants totalling $1,292,736 under Section 20(1) and (12) of the Act. A payment of $1,095,886 was made on June 1, 2001 under section 20 and another of $196,850 was made on November 20, 2002. The board made an earlier Order that the claimants were to be dep rived of any interest after September 2, 2003.

[160]  Section 46 of the Act provides:

Thus, the claimants are entitled to interest on any amount awarded in excess of any amount paid under Section 20.

[161]  The Board awards interest on the difference between the first advance payment of $1,095,886 and the amount awarded of $1,145,008, that is, on $49,122, at the rates payable under section 46(2) of the Act from the first of June 2001 to the date of the second advance payment on November 20, 2002. Interest shall be paid in accordance with the Appendix below.

7. COSTS

[162]  At the close of the hearing, by concurrence of counsel, the question of costs was left to be determined after the award was down and thus the matter of costs is adjourned.

APPENDIX

Interest under section 46(1) of the Act shall be calculated and compounded annually in accordance with sections 46(2) and (3) as follows: