Douglas A. Caldwell, Q.C. ) for the Applicants.
Robert H. Pineo, Esq. )
David Eidt, Esq. ) for the Respondent.
f) Site preparation for building lots, including
driveway, culvert, fill and dozer work
(Richard A. Harris/H.A.R. Construction) $ 22,720.00
j) Loss of future income from building and
selling house, undiscounted (Richard A.
Harris/HAR Construction) - claim for
injurious affection and/or loss of a special
economic advantage. $729,000.00
l) Lot clean up and remediation costs $442,942.42
m) Cost of installing driveway and culvert
on remaining land (Richard A. Harris/HAR
Construction) $ 3,000.00
o) Owner’s time in preparing and presenting
claim (estimated) (Richard A. Harris) plus all
additional time to and including trial and all
other damages or loss flowing from the
expropriation of these lands $113,282.00
THE LEGISLATION
[4] The relevant provisions of the Expropriation Act, R.S.N.B. 1973, Ch. E-14 and amendments follow:
PART II
COMPENSATION
25. Where land is expropriated or injuriously affected, or where property other than land is taken, interfered with or injured under authority of a statute that requires compensation to be paid, the statutory authority shall pay each owner compensation determined in accordance with this Part. 1973, c.6, s.25.
38(1) Where the land of an owner is expropriated, the compensation to the owner shall be based upon:
(a) the market value of the land,
(b) damages attributable to disturbance,
(c) damages for injurious affection,
(d) any special economic advantage arising out of his occupation of the land that is not reflected in the market value of the land
39(1) The market value of land expropriated is the amount that would have been paid for the land if it had been sold on the date of expropriation in the open market by a willing seller to a willing buyer.
“injurious affection” means,
(a) where a statutory authority takes part of the land of an owner,
(i) the reduction in market value thereby caused to the remaining land of the owner by the taking or by the construction of the works thereon or by the use of the works thereon or any combination of them, and
(ii) such personal and business damages resulting from the construction or use, or both, of the works as the statutory authority would be liable for if the construction or use were not under the authority of a statute, or
(b) where the statutory authority does not take part of the land of an owner,
(i) such reduction in the market value of the land of the owner, and
(ii) such personal and business damages,
Resulting from the construction and not the use of the works by the statutory authority, as the statutory authority would be liable for if the construction were not under the authority of a statute,
And for the purpose of this definition, part of the land of an owner shall be deemed to have been taken where the owner retains land contiguous to that taken or retains land of which the use was enhanced by unified ownership with that taken.
THE LAND
[5] The land is situate on the west side of the Broad Road (for purposes of this opinion the Broad Road runs north-south) between Oromocto to the north and Geary to the south and is located in Haneytown.
[6] It was purchased by the company in 1992 and consists of some 12.66 hectares. In 1993 the company subdivided and sold lots abutting on the Broad Road to Richard Harris, H.A.R.’s principal. These lots were numbered 92-1, 92-2 and 92-3 (throughout this opinion these identifiers are used rather than the respondents “parcel” identifiers), and along with two access lanes encompassed the total width of the 12.66 hectare property fronting on the Broad Road. To the rear, or westerly, the land is wider to the extent of the width of the “bicycle shop” lot. The two access lanes ran in a generally east-west direction running from the Broad Road to the remaining bulk land to the west of the above-mentioned subdivided lots fronting on the Broad Road. As one is standing on the Broad Road facing west, lot 92-1 is to the left or south, then moving north there is the south access lane, then lot 92-2, next there is lot 92-3 and, finally, the north access lane. To the north of that is the bicycle shop lot. The two access roads are 20 metres wide and are some 121.7 metres apart.
[7] Lot 92-1 has a frontage of 68.944 metres, a northerly sideline of 66 metres, and contains .4178 hectares. The adjacent southerly access road is 20 metres wide. Lot 92-2 has a road frontage of 61 metres, a southerly boundary of 66 metres with the above-mentioned south access road and contains .4026 hectares. To the north of lot 92-2 is lot 92-3 on which Mr. Harris built a convenience store, later converted to a duplex. To the north of that lot is the northerly access road. The land to the rear of these road-front lots consisted of 8.4 hectares. It is 278.587 metres wide at the front (east side) or rear of lots 92-1, 92-2 and 92-3. It has a depth, along its northerly sideline of about 271 metres from the rear of the bicycle shop lot to the westerly sideline of the subject land.
[8] The new highway sliced off the south side and southeast corner of the above mentioned lands. More specifically, the expropriation took all of lot 92-1, all of the south access road, about one-third of the south side of lot 92-2 (making that lot unmarketable) and a triangular part of the rear raw land. The triangle’s sides consists of the substantial portion of the south sideline of the raw land, secondly, the rear (west) sides of lot 92-1, the south access road, and a portion of lot 92-2 and the hypotenuse (with a slight kink) that runs southwesterly from the rear of lot 92-2 to the southerly sideline of the rear land. The total taking of the rear land (hereafter the “parent lot”) was about 1.004 hectares.
[9] On January 13, 1993, H.A.R. bought the complete parcel of land from Kierstead Mobile Home Sales Ltd. On November 5, 1993, the front lots (92-1, 2 and 3) were created and conveyed to Mr. Harris. Remaining in H.A.R.’s name were the two accesses created at the same time as the three lots and the raw undivided land to the rear or west.
[10] In 1994 Mr. Harris built a convenience store (see: Exhibit A-1, Tab 42) on lot 92-3. It was operated by he and his then wife Marilyn. It was a money losing venture from the beginning. Mr. Harris converted it to a residential duplex building. It was sold in March 1996.
[11] As noted, following the expropriation only the north access from the Broad Road remains.
THE EXPROPRIATION
[12] Shortly after December 12, 1996, Mr. Harris received a Notice of Intent to Survey from the respondent’s Chief Highway Engineer. This letter said survey crews may be required to enter the lands to acquire information with respect to a new divided highway being constructed.
[13] On September 30, 1997, Mr. Harris was sent a Notice of Intention to Expropriate.
[14] On December 17, 1997, a Notice of Expropriation was registered in the Office of the Registrar of Deeds and on the following day letters were sent to Mr. Harris as president of H.A.R. and in his personal capacity advising of the taking.
[15] In the interval between December 1996 and December 1997, the province negotiated with Mr. Harris and/or his then lawyers as reflected in the letters and offers contained in Exhibit A-1, Tabs 6–9, 11-13. Even after the Notice of Expropriation negotiations continued but proved fruitless.
THE APPLICANT’S EVIDENCE
[16] Mr. Harris was born on July 1, 1952. He has a limited formal education but is a licensed carpenter and is licensed to install onsite sewage disposal systems. He is, as well, a heavy equipment operator.
[17] The company’s best years were in the late 1980s and early 1990s. In each of the years 1993-96 the company lost money. The company was wound down in 1996 and the assets transferred to the applicant. Mr. Harris said on cross-examination that from 1993 to 1996 he did not have a reliable source of income. During that period he was, “definitely in the process of losing money”. In 1993 the company had several bulldozers, loaders, a small float and several trucks.
[18] When the property was purchased in 1993, for $25,000.00, it was Mr. Harris’s intention to construct a mobile home park. To that end, following the transfer of the front lots to him, he engaged an engineering firm who prepared a plan and engineering specifications for a mobile home park (see: Exhibit A-1, Tabs 37 & 38). This plan was never approved. In 1993, however, he did create the two access roads which went west into the property approximately 66 metres. He hired an individual to cut the wood from the rear of the land. During the highway construction, concrete, gravel and other debris was dumped on various parts of the property.
[19] After the duplex and lot 92-3 were sold he abandoned plans to build a mobile home park and concentrated on creating a subdivision on the land. Sometime around Christmas 1996, and after receiving the Notice of Intent to Survey, Mr. Harris became convinced the respondent was going to expropriate some of his land. He contacted the engineering firm who had created the mobile home park in 1993. Their 1997 plan (see: Exhibit A-1, Tabs 55 & 56) created a 16 lot subdivision on the raw land in addition to the two lots that had been created on the Broad Road, giving the applicants a total of 18 lots. This plan, along with the earlier mobile home park plan, was submitted to the Rural Planning District Commission for approval. On February 5th, 1997 the Development Officer wrote Mr. Harris and said in part (see: Exhibit A-1, Tab 5):
After our conversation on February 5, 1997, I asked the Department of Transportation to show how the new Trans Canada Highway will affect your property. When this information was received we reviewed your subdivision plan. Considering how the new highway may affect your property, you should consult with the Department of Transportation on how best to develop this property. The Department will have to take possession of any public streets created to service this land.
The new highway may make the lot unsuitable for your intended development. To save you any further expense, I am returning your cheque and plans. After consulting with the Department of Transportation you may submit a new plan to develop this property taking into consideration the effect the highway will have. Should you wish to submit new plans, it should be for either a mobile home park or for a subdivision on public streets.
[20] Mr. Harris was convinced the expropriation would result in the remaining land being undevelopable and did not submit any further plans for approval.
[21] Throughout 1995-97 Mr. Harris and his company were in financial difficulties. The convenience store was a money losing proposition. The company did not have any contracts and the applicant was unemployed. In 1995 he attempted to sell the two front lots (92-1 & -2) for $15,000.00 each. In fact, he obtained an offer of $11,500.00 for one of the front lots but rejected it, countering with $15,000.00. The prospective purchaser did not return. As well, he had the store listed for sale for $230,000.00 and the rear undeveloped land for $33,000.00 (see: Exhibit R-11). In cross- examination Mr. Harris said he probably could not afford to develop the land in 1995 owing to his financial condition. In that year he moved to Alaska seeking employment in the fishing industry.
[22] Subsequent to selling the duplex in 1996 the applicant testified he had some $218,000.00 in accessible cash which was to finance the creation of a subdivision and the building of homes. The homes would be constructed by him speculatively and sold by him privately. He said he intended to build two homes a year.
[23] Because his plans to create a subdivision and build houses had been foiled by the expropriation he left New Brunswick for Yellowknife in June 1997. He returned in the autumn of that year.
[24] He testified he did not start house construction on any part of his land in 1996, even though he had cash available, because he did not have a suitable float to transport earthmoving equipment between his gravel pit and the subject land site. He said he would have had to hire a float and there is “no money in that”. He did eventually purchase a float in September 1996. There was no evidence about why he did not start construction of one or two houses in September 1996 after he obtained the float. He did not attempt to rent a float. On another occasion, in cross-examination, Mr. Harris said he did not build on the front lots in 1996 (even though they were already subdivided and accessible) because the winter of 1995-96 was a “real wet one” and he couldn’t get on the land. In September 1997, after moving back from Yellowknife, the applicant sold his gravel pit and the company’s equipment. He has never tried to subdivide and build on the remaining land. He said this was because upon selling the gravel pit, subdividing and building became financially unfeasible. As well, the remnant land consisting of 7.2641 hectares, is not feasible to develop, according to Mr. Harris, because it is beside the divided highway.
THE EXPERTS
Daniel Babineau & Wayne Browne
[25] Daniel A. Babineau of Babineau Appraisals Ltd. gave evidence for the applicants (see: Exhibit A-2, Tab 69). He wrote and testified the highest and best use for the two front lots was as residential building lots and for the parent lot as a 16 lot residential subdivision. As to the latter, his opinion is that the partial taking (1.1359 hectares from 8.4 hectares) would reduce the subdivision from 16 to 7 lots. Because they are beside the new Trans-Canada highway the value will be reduced and there is a value for, “injurious affection”. This resulted in his using two different appraisal methods. For lots 92-1 and 92-2 he used the Direct Comparison Approach. He analyzed nine sales in the area which he used as comparable sales. He concluded each of these lots as of the date of expropriation had a market value of $16,000.00. A portion of Lot 92-2 remained unexpropriated which Mr. Babineau valued at $1,000.00. Thus, the net value for the two lots, in Mr. Babineau’s opinion was $31,000.00.
[26] The partial taking of the parent lot was appraised using a different methodology. He used the Subdivision Development method which is defined thusly (see: Exhibit A-2, Tab 69, page 21):
SUBDIVISION DEVELOPMENT - This technique, applicable chiefly to undeveloped lands, calls for estimating total value as if the lands were subdivided & sold and subtracting the development costs.
[27] He wrote at page 36:
MARKET VALUE OF LOT 97-2 AND 97-3 AND THE LOSS IN VALUE TO THE REMAINING LAND
The “Before and After” Method will be utilized to determine the Market Value of the land taken and the loss in value to the remaining land. The “Before and After” Method consists of valuing the property before the expropriation then subtracting the value of the property after the expropriation.
The Parent Property was a sixteen lot subdivision, therefore the Subdivision Development Approach will be used to determine the Market Value of Parcel 97-2 and 97-3 and the loss in value to the remaining land.
The Subdivision Development Approach will be analyzed using a sixteen lot subdivision in the “Before” scenario and a seven lot subdivision in the “After” scenario.
[28] Mr. Babineau assumed the building lots in the 16 lot subdivision would have a value of $18,000.00 and in the 7 lot subdivision which remained after the taking would have a reduced value of $12,000.00. He also assumed, left to his own devices, Mr. Harris would have built and sold four lots each year. In the seven lot subdivision, post-expropriation he assumed construction and sales of 2 lots a year. Thus, in summary, he concluded at page 44:
FINAL ESTIMATE OF VALUE OF LAND TAKEN INCLUDING INJURIOUS AFFECTION
The difference between the market value before and after represents the sum of the market value of Parcels 97-2 and 97-3, including injurious affection.
Before the expropriation: $72,567.49
After the expropriation: $ 5,120.65
Total Loss $67,446.84
ROUNDED TO
$67,500.00
(SIXTY SEVEN THOUSAND FIVE HUNDRED DOLLARS)
[29] As well, because Mr. Harris had the capability of not only building the houses but of constructing the subdivision infrastructure, Mr. Babineau determined his cost to develop the subdivision would have been less than in the above analysis. This he considered a business loss to Mr. Harris. He summarized this as follows:
FINAL ESTIMATE OF BUSINESS LOSS
The difference between the business loss before and after represents the total business loss, to the owner
Before the expropriation: $103,030.38
After the expropriation: $ 35,884.89
Total Business Loss $ 67,145.49
ROUNDED TO
$67,000.00
(SIXTY SEVEN THOUSAND DOLLARS)
[30] In summary then, for the complete land taking Mr. Babineau wrote:
SUMMARY OF VALUES
Parcel 97-1: $ 15,000.00 (fifteen thousand dollars)
Parcel 97-2: $ 16,000.00 (sixteen thousand dollars)
Parcel 97-2 and 97-3
Including the loss in
Value to the remaining
Land: $ 67,500.00 (sixty seven thousand five hundred dollars)
Business Loss: $ 67,000.00 (sixty seven thousand dollars)
Total Compensation
(Land Only): $165,500.00 (one hundred sixty five
Thousand five hundred dollars)
[31] The expertise of Mr. Babineau was then combined with that of Wayne Browne, a professional engineer and architectural designer. The latter estimated the cost to Mr. Harris to construct a certain type of bungalow on the subject land. He concluded it would cost between $50-70,000.00 to construct each house. He wrote (see: Exhibit A-2, Tab 76):
A cost assessment was compared to quotations supplied by Kent Building supplies, electrical and plumbing sub-contractors with accepted costing literature such as above, and they all fell within the accepted boundaries of anticipated cost. The going selling price of similar homes from local real-estate publications in the same area is about $110,000.00. Considering Mr. Harris is a journeyman carpenter and that he had excavation and grading equipment and granular material at his disposal, his cost to construct and complete specified homes would range between $50,000.00 and $70,000.00 each, pending site conditions and time of construction. Considering cost for sub-contracting requirements were only for electrical and plumbing specialties, Mr. Harris’ profit should average $50,000.00 per house and lot.
[32] Mr. Babineau in Exhibit A-4 determined a house of the type Mr. Harris contemplated building would sell for $108,500.00. Then, using Mr. Browne’s conclusions he opined (see: Exhibit A-2, Tab 70):
Value of a typical 1,200 sq ft bungalow in
the Harris Subdivision $108,500.00
Less cost to construct the house $ 50,000.00
Less land value $ 18,000.00
Profit per house $ 40,500.00
Possible number of houses before
expropriation 18
Total profit loss $729,000.00
The value of the house and the land value were obtained from my appraisals. The construction cost of $50,000.00 was obtained from Mr. Brown.
Please note that this does not take into account the absorption period, therefore, the profit loss has not been discounted.
[33] Finally, Mr. Babineau put it all together in his report to Mr. Harris dated August 10, 2001 (see: Exhibit A-2, Tab 69, Schedule “B”):
Dear Mr. Harris:
Please find enclosed the reports outlining the Total Compensation, due to the expropriation.
Appraisal No. 010412-D prepared by Daniel A. Babineau, B.I.A., AACI, contains the value of the land taken, including injurious affection and the business loss (land only) due to the expropriation, which has been established at $165,500.00 (ONE HUNDRED SIXTY FIVE THOUSAND FIVE HUNDRED DOLLARS).
Appraisal No. 011008-D prepared by Daniel A. Babineau, B.I.A., AACI, contains the value of a typical 1,200 sq ft bungalow located in the Harris Subdivision, which has been established at $108,500.00.
A report prepared by Wayne D. Browne, BSc, Bsc Eng, P.Eng, has established a business loss, due to the expropriation, for the house construction and re-sale. This amount has been established at $729,000.00 (SEVEN HUNDRED TWENTY NINE THOUSAND DOLLARS).
Therefore, based on the above information, the total compensation is $894,500.00 (EIGHT HUNDRED NINETY FOUR THOUSAND FIVE HUNDRED DOLLARS).
[34] In fact, Mr. Browne did not establish a business loss. He only gave evidence about the cost to Mr. Harris to build a certain type of house and the cost of certain infrastructure.
Malcolm J. Carter
[35] This appraiser was declared an expert and gave evidence for the Province. He used the direct comparison approach for all three takings. His opinion was that the partial taking of the 8.4 hectare lot did not result in injurious affection to the remainder of that lot. He believes the lots have less value than established by Mr. Babineau. The comparable sales used by Mr. Babineau were from subdivisions that were more upscale and were superior developments when compared with the Haneytown area.
[36] When discussing the lots 92-1 and 2 he knew that an arms length offer of $11,500.00 had been made and refused by Mr. Harris in late 1994 (see: Exhibit R-1, Tab 3). The applicant had countered with $15,000.00 but the prospective purchaser was not interested and the sale did not materialize. His view was that each of these lots fair market value was $10,000.00. Lot 92-2 was a partial taking (.1341 hectares from .4026 hectares) and he concluded the value of the part taken was $8,000.00.
[37] The parent lot, owned by H.A.R., had 1.1359 hectares of 8.4 hectares expropriated. Including any loss to the remaining lands, Mr. Carter estimated the value to be $2,726.00.
[38] In his report Mr. Carter noted the following under the heading, “Summary – Whole Parcel – Before the Take” (see: Exhibit A-2, Tab 73, pages 27-28):
Mr. Harris has a letter from Harry Libbey dated February 20, 1994 offering to purchase Lot 5 for $13,000 after streets and hydro poles are in, pending survey and deed.
…
The owner of the property does not have an approved subdivision or tentative plan. He does, however, have a sketched plan prepared by J.E. Brooks & Associates Ltd., dated April 1993 for a 75 lot mini-home park. This plan did not meet the classification for Zone No. 1 (Residential R-2 Zone) and hence would have required that the property be rezoned. The application for rezoning was not pursued.
In January 1997 Mr. Harris had prepared a tentative subdivision plan subdividing the parcel into 16 lots ranging in size from .4000 hectares to .5900 hectares. This plan was not approved as there was a freeze on development in this area for the proposed Route 2 realignment.
[39] After the expropriation Mr. Carter said there is still room for 10 lots and not only the 7 described by Mr. Babineau (see: Exhibit R-17).
[40] He attempted to perform an analysis using the subdivision approach favoured by Mr. Babineau but using different values. He testified the results were somewhat bizarre and there is simply too much subjectivity for this approach to be valuable. The subdivision approach should only be used where there are not any good direct comparable sales available. As well, based on two experts’ reports that he reviewed he concluded that land beside a major highway did not depreciate in value. As a consequence he did not allow anything for injurious affection.
[41] Mr. Carter’s final conclusions on the parent lot partial taking are set out at page 41 of Exhibit A-2, Tab 73, thusly:
Therefore, from my investigation and analysis, considering the factual data previously discussed and available market data analyzed, I have concluded the subject site has a market value, as of the fourteenth day of November 1997 as follows:
VALUE OF PARENT PARCEL BEFORE THE TAKING
8.4 hectares @ 2,400 per hectare $20,160
VALUE OF PROPERTY AFTER THE TAKING
7.2641 hectares @ $2,400 per hectare $17,434
VALUE OF THE PART TAKEN (PARCEL NO. 97-2
AND 97-3) AND ANY LOSS IN VALUE OF THE REMAINING LANDS
TWO THOUSAND SEVEN HUNDRED TWENTY- SIX DOLLARS ($2,726)
ANALYSIS & CONCLUSIONS
Lots 92-1 and 92-2
[42] There is no disagreement among the appraisers that these lots should be valued using the direct comparison approach. The only difference – and it is a substantial one – is the end result. This arises because different subdivisions/areas/lots were used by the two appraisers for comparison purposes.
[43] I conclude the lots used for comparison purposes by Mr. Babineau were not of comparable value. They principally were in subdivisions that were more developed and more attractive than the subject lots. Specifically, the Richmond Estate Subdivision in Lower Lincoln and the Gilbert Subdivision in Burton were not comparable and the sales utilized from these areas should be discounted. I accept as factual Mr. Carter’s view that the comparables used by Mr. Babineau were not appropriate.
[44] On the other hand, Mr. Carter’s opinion, in my view, about these lots value was too low. Some of the comparables were of inferior quality, including Index #4 in the two reports for Lots 92-1 and the partial taking of Lot 92-2.
[45] There was an arms length offer of $11,500 for one of these lots in late 1994. There was a counter offer of $15,000.00 which was obviously too high, at least for that particular prospective purchaser. While one cannot use a single sale as a sole criteria, I am of the view that these lots each had a value on the date of expropriation of $13,000.00. I accept Mr. Carter’s views about the residual value of Lot 92-2 (see: Exhibit A-2, Tab 72, pages 40-41) and conclude it was worth $2,000.00 on the expropriation date. The net value of the two front lots is therefore $24,000.00.
The Parent Lot – Partial Taking
[46] An almost triangular portion to the rear (or west) of lots 92-1 and 2 and the south access as well as the south access were expropriated from the H.A.R. lands. The appraisers differed in their respective approaches to this appraisal. Mr. Babineau used the so-called subdivision approach and Mr. Carter the direct comparison approach. It is evident the latter is, for most purposes, more favoured.
[47] In The Law of Expropriation and Compensation in Canada, 2nd Edition, 1992, Carswell, by Eric Todd, the author states about the subdivision approach at pages 218-219:
6. Land Development (Subdivision) Approach
In special circumstances the estimate of the market value of land may be made by the land development (subdivision) approach which is a modification of the direct sales comparison approach. It is not a valuation technique of general application.
This approach
may very simply be described as one in which a future potential subdivision is devised, and the selling price of the serviced lots is then estimated; this is then multiplied by the estimated potential number of lots in the subdivision; from the gross potential receipts of the sales, the servicing and development costs are estimated and deducted. The net result must then be discounted by deducting a percentage for future profits. The result is intended to be the present value as of the date of expropriation.
In order to utilize this approach a considerable amount of data must be assembled including a subdivision plan showing the number, size and type of lots from the gross acreage, market data to estimate the market value of the lots, estimates of direct and indirect development costs, estimate of developer’s profit and overhead, absorption estimate, and the discount or risk rate.
Courts and tribunals are usually reluctant to rely on the land development (subdivision) approach for two reasons. First, unless a proposed subdivision has actually been officially approved there is always some degree of uncertainty as to whether, and under what conditions, the subdivision would ever have materialized. In such a case
[I]t is speculation added to speculation to endeavour to compensate an expropriated owner on the basis of long-term possible sales at present estimated prices of lots theoretically carved out of acreage after expropriation, but as if no expropriation had occurred ….
Second, it is recognized that the approach is “volatile” in the sense that a comparatively minor change, for example in the costing of services, can produce a figure in the end result which will significantly affect the residual value. “As is shown from the variations and permutations of all the figures here, one slip of the pen seems to cost thousands of dollars, so care should be used.”
[48] If there is inadequate data to use the comparable sales approach and the development was imminent as of the date of expropriation (Todd (supra) page 220), this method can be utilized. If the land is not “reasonably ripe” for development this approach should not be used. Mr. Todd went on to say at page 220-221:
It has been stated that the land development (subdivision) approach “is applicable only if the lands are reasonably ripe for development, and its application must not result in a valuation of the land as if it had already been built upon.”
In the most favourable situation the subdivision is already underway at the date of expropriation. Short of this there must be convincing evidence or agreement as to ripeness, for example the filing of a subdivision plan with the appropriate authority, the availability of services and a market for subdivided lots.
Courts and tribunals “have indicated disapproval of the development approach in the valuation of raw lands.” For example, if there is “speculation as to the likelihood of getting the property rezoned, a subdivision plan approved, the number of lots that would be approved on the subject, the cost of developing them, (and) the time involved and the cost of selling them.” Use of the approach has been disregarded in cases where, but for the expropriation, the subdivision would not have been commenced until some years later. …
[49] The applicants had not obtained approval for the draft subdivision plan submitted in February 1997. Why was that plan submitted? Mr. Harris said he learned on December 1996 that his property was going to be affected by the highway. An acquaintance, Mr. Herb Colburne, told him, “If you don’t have a tentative plan submitted you will not get paid for lots”. On December 19, 1996, Heather Pugh, then a planning engineer with the respondent, wrote a memo (see: Exhibit A-8). It said, in part, referencing lots 92-1 and -2:
Mr. Harris was in on December 17, 1996 to see the plans. I explained what we required and he mentioned that he had intended to build next year on one of these lots.
[50] On January 13, 1997, Mr. Harris engaged J.E. Brooks & Associates Ltd., consulting engineers, to prepare a plan for a residential subdivision utilizing the parent lot. This plan was submitted on January 20, 1997 to the Rural Planning District Commission along with the 1993 plan for a mobile home park for the same land. When the plans were submitted for approval by Richard Giggie of Brooks on behalf of the applicant he wrote in part: “Mr. Harris is submitting the two layouts as he wishes to develop this land but has not yet decided which development option to pursue.”
[51] I accept Ms. Pugh’s evidence as being factual. I conclude Mr. Harris did meet with Heather Pugh on the date mentioned in the memo and that he knew on that date not only were the two front lots going to be affected but some of the parent lot including the access between lots 92-1 and 92-2. Supporting this conclusion is a portion of the Statement of Claim in an action Mr. Harris has commenced against an appraiser initially retained to value the subject lands. The Statement of Claim was prepared by Mr. Harris. Paragraph 3 says (see: Exhibit R-1, Tab 11):
On or about December 20, 1996, the Plaintiff received, by registered mail, an Intent to Survey Notice dated, December 12, 1996. Receipt of this letter cause (sic) the Plaintiff to cease his plans of further self-employment and land development, because of the intention of the Minister of Transportation to relocate a highway and expropriate land from the Plaintiffs. (page 4, paragraph 3)
[52] Mr. Harris acknowledged the two concepts were submitted by his engineers with his knowledge. Mr. Harris’s answers were often unresponsive to the questions posed. He contradicted himself on several occasions. Apart from these inconsistencies, however, and simply utilizing the documentation, I conclude the subdivision plan was prepared to bolster his claim for compensation in face of the impending expropriation which, when the plan was prepared, he knew was going to occur. He did not engage Brooks in January 1997 for the purposes of building a subdivision plan that was going to go forward. The plan was prepared solely for the purposes of augmenting the compensation available for the upcoming expropriation. Apart from that and taken at its best, the Brooks plan was not fully engineered or dimensioned.
[53] Up to then, and most particularly in the summer or fall of 1996, he had not begun construction of any houses on either lot 92-1 or 92-2. These lots were already subdivided, adjacent to the Broad Road and ready for development. In fact, they had been for sale for some time. He gave several reasons for not beginning construction during the 1996 building season. He said it was an unusually wet spring delaying building starts. Further, the sale of the store was not completed until March 1996 and the money from that sale was necessary for financial reasons. He also testified he did not begin construction because he did not have a suitable float for his heavy equipment until September 16, 1996. He had obviously been financially troubled for several years. According to him he had sufficient funds in early 1996 to begin financing house construction. His reasons, singly or cumulatively, for not starting construction do not stand scrutiny. For example, why didn’t he explore the rental of a float pending the purchase of one? Why didn’t he begin construction in September 1996 (after he purchased a float) long before the outdoor working season came to an end? His inaction in 1996 leads me to conclude he did not have the intention to construct homes on the already subdivided front lots. If he failed to begin construction for spurious reasons on the two front already subdivided lots, what conclusion can be reached about the parent lot to the rear?
[54] The two access roads were, at best, rough and not of any significance in relation to accessing the complete parent lot. I accept Mr. Carter’s evidence in this regard. The parent lot was far from being a subdivision ready for the construction of even one house. Thus, Mr. Harris did not display an active intention to construct houses. He had a subdivision plan prepared for a purpose other than to sell lots and construct homes. In R.P.B. Construction Ltd. v. New Brunswick [1995] N.B.J. No. 519, the applicant’s appraiser used the same approach as Mr. Babineau. The applicant had purchased the lands for future residential development. He had a sketch prepared by a surveyor. Mr. Justice Deschênes, then of the Court of Queen’s Bench wrote:
¶21 b) The purpose of all of the evidence adduced by R.P.B. was to demonstrate that if a subdivision plan was eventually approved, if a municipal water and sewerage system could one day serve the planned residential subdivision, if R.P.B. created residential lots and streets to serve them, then it was reasonable to believe that 17 residential lots could be sold within 5 years.
¶22 Of course, all of this evidence is based on assumptions, some of which may be somewhat realistic, but some obvious contradictions are not being taken into account. …
¶23 The Court is of the opinion that the residential development plan for parcel 90-8 is quite unrealistic and makes no provision for obstacles or the unexpected.
¶24 R.P.B.’s appraiser is merely adding speculation to speculation by endeavouring to determine the market value of parcel 90-8 by converting it to residential lots straight away and by setting a current value of approximately $20,000.00 per lot. …
[55] I conclude that is the situation here. I have found the subdivision plan was not prepared for purposes of subdividing and building on the parent lot. Mr. Harris was unprepared financially or otherwise to start construction for reasons already discussed. His financial condition was, and had been, precarious. Under these circumstances it is grossly speculative to utilize the subdivision approach. The inaction of the applicant in developing the subdivision prior to December 1996 reveals the difficulties in accepting Mr. Babineau’s speculative hypotheses about Mr. Harris’s ability to reduce costs. It is entirely provisional. The parent lot was not ripe for development. The subdivision approach is inappropriate. See also: Gay Ann Sutherland v. The Corporation of the Township of Langley, E.C.B. No. 07-97-173 (68 L.C.R. 49).
[56] Mr. Carter correctly utilized the Direct Comparison Approach and correctly analyzed available market data. Approximately 86.5% of the parent lot remains for future development with substantial access to the Broad Road. I conclude the value placed on the expropriated portion of the parent lot by Mr. Carter is appropriate as is his finding there was no injurious affection. The value of the H.A.R. lands taken is, therefore, $2726.00.
[57] Claims 7 d) and 7 j) are predicated on the Applicant building homes on the land. I have already concluded that, on balance, was not going to occur. If it didn’t start in 1996 the probabilities of construction starting in the future was negligible. The applicant’s position is that he had $217,000.00 in hand in 1996. Each house would cost him approximately $50,000.00 and each would sell for $108,500.00 according to his experts. The two roadside lots were accessible and ready for construction. Utilizing the applicants’ witnesses’ evidence, construction of two homes in the 1996 construction season (apart from living expenses) would have grown the $217,000.00 to $335,000.00 (217,000-100,000+(108500x2). The fact construction did not occur in 1996 leads to a conclusion that any future construction was extremely speculative. These two elements of the claim are disallowed.
[58] Item 7 f) is for site preparation, in particular, the construction of the two access roads. Mr. Harris said this cost $13,000. Mr. Withers, the applicant’s accountant, testified a further $5000.00 should be allowed for profit and wear and tear on his vehicles and equipment. I allow $18,000.00 under this head.
[59] Item 7 l) in the Amended Claim is for Lot cleanup and remediation. The amount of $442,942.42 is claimed. This arose from the dumping of debris and other waste material arising from the highway construction on the parent lands by Atcon Construction. Mr. Harris signed an agreement with Atcon permitting certain dumping. It is alleged that company exceeded its rights under that agreement. This claim was reduced to $5120.65. Despite its somewhat problematic nature I allow that amount.
[60] Item 7 m) is for a culvert in the amount of $3000.00. I allow this portion of the claim.
[61] Item 7 o) is for the owner’s time in preparing and presenting the claim including time spent at the trial. $113,282 is claimed but that is reduced, without more, to $10,000.00 in the Applicant’s post trial brief. There is no evidence Mr. Harris lost any employment income or other income from time spent in the preparation of this case. See: Rankin v. New Brunswick [2005] N.B.J. No. 95 @ paras. 68-75. I make no allowance under this head.
[62] The respondent has already paid $20,726.00. That will be deducted from the award.
[63] The applicants are entitled to 6% interest on the net amount from the time the Province took possession of the land (see: Section 50(1) of the Act). They are also entitled to costs in accordance with Section 52 of the Act as well as reasonable disbursements. Further directions can be sought concerning costs if necessary.
DATED at Fredericton, New Brunswick, this 3rd day of June, A.D. 2005.
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David H. Russell, J.C.Q.B.
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