Wednesday, February 11, 2009

legal fraud

Young v. City of Moncton, 2002 NBCA 26 94/99/CA


Turnbull, Drapeau and Robertson, JJ.A.

B E T W E E N:

RONALD R. YOUNG ) Douglas Caldwell, Q.C.

) and Bruno Roy, Esq.

(Applicant) APPELANT ) for the Appellant


- and - )


THE CITY OF MONCTON ) Stephen M. Trueman, Esq.

) and Anne F. Beaulieu, Esqe.

(Respondent) RESPONDENT ) for the Respondent


March 12, 1999

DATE OF HEARING: March 12, 2002

DATE OF DECISION: March 21, 2002



and Robertson, J.A.


The appeal is dismissed and the appellant is ordered to pay the respondent costs in the amount of $1,500.


[1] On November 29, 1995, the City of Moncton expropriated the appellant’s property, a 20,952 square foot lot and former school building located on the outskirts of the municipality. The parties failed to reach an agreement on the compensation payable under the Expropriation Act, R.S.N.B. 1973, c. E-14 and, as a result, the appellant invoked the jurisdiction of the Court of Queen’s Bench under the Act to settle the matter. Following a four-day trial, Justice Godin accepted the opinion of Daniel Doucet, the real estate appraiser who testified on behalf of the City, and determined that the market value of the appellant’s property was no more than $52,500, the amount offered by the City at the time of expropriation in full satisfaction of its obligations under the Act.

[2] The substantive challenge to the decision under appeal, now reported at reflex, (1999), 211 N.B.R. (2d) 26, is that it sets the subject property’s market value without regard to its highest and best use at the time of the expropriation, which was, according to the appellant, the conversion of the existing school building into a 12-unit apartment.

The Context

[3] The trial judge provides the following useful description of the subject property’s salient characteristics at paragraph 3 of his reasons for judgment:

The subject property was located on the Shediac Road and consisted of an irregular shaped lot with 117.2 feet of frontage on Shediac Road and 177.2 feet on Wortman Road. After being expropriated, the subject property was developed into a street linking the TransCanada Highway, at its Caledonia Industrial Park exit, to the Dieppe Industrial Park. The total area of the property is 20,952 square feet. There was a four room school building on the property which had been built in 1947 to serve the Harrisville subdivision. The school was closed in or around the year 1984. The main building was 76 feet by 46 feet. With the addition of 3 porches, it covered an area of 3,672 square feet. The building had a main floor where the classrooms were located as well as a finished basement which housed the washrooms, the furnace room, a staff room and an auditorium.

[4] In 1987, the Province of New Brunswick sold the school property for one dollar to the New Brunswick German Association so that it might turn the site into a cultural center. When the Association failed to secure the requisite financing for its project, the subject property was put up for sale on the open market and acquired, in March of 1989, by the appellant for the sum of $40,000. Later in that year, the appellant obtained a conditional re-zoning for the property from Parks and Institutional to Highway Commercial for the purpose of converting the school building into apartments and a computer showroom in the basement.

[5] The re-zoning was conditional on the property being developed for the requested purpose otherwise the zoning would revert to Parks and Institutional. The appellant drew plans for the redevelopment of the school building, but was precluded from obtaining a building permit for his project when modifications to the Municipal Plan earmarked his property for use in the construction of a street linking the Caledonia Estates Industrial Park to the Dieppe Industrial Park.

[6] At trial, the appellant claimed the sum of $255,000 as compensation under the Act. W.H. Goodwin Jr., who was qualified as an expert in the field of real estate appraisal, testified in support of the appellant’s claim. In Mr. Goodwin’s opinion, the highest and best use of the subject property at the time of expropriation involved the conversion of the four-room school building, which he found to be structurally sound and to have significant commercial value, into a 12-unit “motel plan” apartment building. Mr. Goodwin explained that there are no central hallways in a motel style apartment, each tenant having direct access from his unit to the outside, and that, by sparing the owner the cost of heating and lighting the hallways as well as the cost of their maintenance, a motel style apartment is significantly less expensive to operate than other, more conventional, types of apartment buildings.

[7] Mr. Goodwin concluded that, on the basis of its use as a motel type apartment, the subject property’s market value was in the order of $255,000. He arrived at that amount by reconciling the results obtained from his application of the three commonly employed approaches to the determination of real property market value: the market data or direct comparison approach, the income capitalization approach and the replacement cost approach.

[8] Daniel Doucet, who was also qualified as an expert in the field of real estate appraisal, testified that the replacement cost approach could not yield an accurate market value estimate because it did not reflect the impact of the subject property’s poor location. Mr. Doucet testified that a number of factors, including the high cost of converting the former school building into an apartment building and the subject property’s poor location, conjoined to undermine the financial feasibility of any plan to use the subject property as a site for an apartment building. The thrust of Mr. Doucet’s testimony was that neither Mr. Goodwin’s suggested use for the subject property, a motel style apartment, nor the appellant’s pre-expropriation project, apartments combined with a computer showroom in the basement, qualified as a “highest and best” use for valuation purposes.

[9] Aris Vautour’s testimony buttressed Mr. Doucet’s opinion on the key issue of the subject property’s unsuitability for development as an apartment project. Mr. Vautour, an experienced apartment building developer and owner, testified that location is the prime consideration in site selection for the construction of any financially viable apartment project. The explanation is simple: poor location hinders, to a significant extent, the landlord in his or her efforts to rent units and to obtain suitable rent. Mr. Vautour asserted that he would not build to own an apartment building on the subject property because of its distance from key services.

[10] Mr. Doucet added that, in his opinion, the cost of renovating the former school building was prohibitive no matter what use was proposed for it and that, as a result, the building in question was without any commercial value. In Mr. Doucet’s view, the highest and best use of the subject property was as bare land for the construction of a financially feasible residential or commercial project. Using the direct comparison approach, Mr. Doucet concluded that the bare land had a market value of $2.50 per square foot or $52,380 for the whole property.

[11] The appellant contends that the trial judge erred in law by failing to determine his property’s market value on the basis that its highest and best use was the conversion of the former school building into a 12-unit motel style apartment, by finding that the building in place was without commercial value and by relying upon Mr. Doucet’s direct comparison approach to the valuation of the bare land, an approach which, according to the appellant, failed to comply with the standards that govern professional appraisals, the Uniform Standards of Professional Appraisal and Practice. The appellant contends, as well, that the trial judge erred in law in not ordering Mr. Doucet to produce for inspection appraisal reports considered by him in the preparation of his report on the subject property’s market value.

[12] Finally, the appellant submits that the trial judge erred in law in considering that he was not free to reach his own conclusion as to the market value of the subject property and that he was bound to accept in toto the opinion of either one or the other of the experts who testified on the issue at trial. In support of that submission, the appellant filed a motion under Rule 62.21(2) of the Rules of Court requesting that this Court receive evidence by way of an affidavit from his counsel at trial, Ted Ehrhardt. In his written submission, the appellant summarizes the contents of Mr. Ehrhardt’s affidavit as follows:

Just prior to the commencement of the trial, the Appellant’s solicitor at the time, Mr. Edwin G. Ehrhardt and the solicitor for the City of Moncton, Mr. Stephen M. Trueman, attended an “in chambers” meeting with the trial judge. During this meeting, the trial judge, Mr. Justice Paul Godin, indicated to the solicitors that he was faced with two conflicting appraisal reports. The trial judge reminded the solicitors of one of his recent decisions wherein he had concluded that the Court should rely on one of the appraisal reports to the exclusion of the other in its entirety. Mr. Justice Godin gave the solicitors a strong indication that he may well be in the same position in this case. ...

Analysis and Decision

I. Preliminary Issues

Did the trial judge misapprehend, as the appellant contends, the scope of his adjudicative duties on the issue of the subject property’s market value?

[13] It is axiomatic that the trial judge was not bound to adopt the views of either of the two appraisers who testified at trial on the issue of the subject property’s market value. See A.R.N. Cross & C. Tapper, Cross and Tapper on Evidence, 8th ed. (London: Butterworths, 1995) at 556-57. Of course, had Justice Godin determined the market value under the mistaken belief that he was bound to accept in toto either Mr. Goodwin’s or Mr. Doucet’s opinion, he clearly would have been in error as to the scope of his adjudicative mandate under the Act.

[14] In my view, this Court can safely presume that Justice Godin, an experienced trial judge, knew that he was not under any legal compulsion to adopt, without any of the adjustments required by the evidence, one or the other of the expert opinions submitted by the parties for his consideration. I am comforted in that view by the fact that Justice Godin indicates in his reasons for judgment that he came to the conclusion that the former school building was without commercial value on the basis of the “preponderance of [the] evidence”. That brings me to the appellant’s motion to adduce further evidence.

[15] The affidavit evidence proffered by the appellant does not support the conclusion that the trial judge was operating under some misconception as to the scope of his adjudicative mandate under the Act. All that the trial judge is alleged to have stated in chambers is that he might find himself in the position of having to choose the opinion of one expert over that of the other. It is neither improper nor uncommon for a trial judge to be moved by the evidence to choose one of several conflicting expert opinions. I fail to see how the trial judge’s alleged statement evinces a misconceived atrophy of the scope of his adjudicative mandate. That being so, the admission of the evidence proffered by the appellant would serve no useful purpose. Accordingly, I would dismiss the appellant’s motion under Rule 62.21(2). I should add that the appellant did not argue that Justice Godin made the statement attributed to him in the context of a pre-trial conference pursuant to Rule 50. If that argument had been advanced, this Court would have had to consider whether Justice Godin had disqualified himself from presiding at the trial. See Rules 50.03 and 50.06.

Did the trial judge improperly refuse to order production of relevant documents?

[16] Mr. Doucet testified that he relied, in part, upon information contained in appraisal reports prepared in relation to apartment buildings owned by Aris Vautour to reach his conclusion on the issue of the subject property’s market value. The appellant immediately moved for production of those appraisal reports under Rule 52.01(4). In his written submission, the appellant contends that the trial judge improperly denied his motion for production. I disagree.

[17] After questioning whether the rule invoked by the appellant, Rule 52.01(4), had any application once the trial had begun, Justice Godin asked Mr. Doucet to produce the reports requested by the appellant. The record shows that Mr. Doucet complied with the trial judge’s request, prior to the conclusion of his cross-examination by counsel for the appellant.

Did Mr. Doucet fail to comply with the applicable standards in appraising the appellant’s land?

[18] The standards that governed professional appraisals at the time that Mr. Doucet employed the direct comparison approach to ascertain the market value of the subject property specified that any comparison undertaken involve properties similar to the subject property and that appropriate adjustments be made to account for any material differences. The appellant points out that none of the lots used by Mr. Doucet for comparative purposes were suitable for the construction of an apartment building. The appellant submits that, as a result, Mr. Doucet’s direct comparison approach strayed from the standards mentioned above and ought to have been discarded by the trial judge. I disagree.

[19] Once Mr. Doucet concluded that the subject property was not suitable, at least financially, for development as an apartment site, it followed that properties suitable for such purposes were not useful points of reference for valuation purposes. Mr. Doucet compared the subject property to lots suitable for residential (single-family dwelling) and commercial (e.g. office building and car wash) purposes. I am satisfied that Mr. Doucet’s direct comparison approach was in sync with the subject property’s highest and best use.

[20] In my view, Mr. Doucet’s direct comparison approach to the valuation of the bare land complied with the governing standards for professional appraisals. I now turn to the appellant’s substantive challenge to the market value determination made in the court below.

II. The Merits

[21] The review that the appellant asks this Court to undertake is one that must be conducted within a framework which, in the absence of some material error by the trial judge, calls for a high degree of deference for his findings of fact and his conclusion, one that was largely fact-driven, on the issue of the subject property’s market value. The several justifications for appellate deference toward the trial judge’s conclusions of fact are adumbrated in St-Jean v. Mercier, 2002 SCC 15 (CanLII), 2002 SCC 15; [2002] S.C.J. No. 17, online: QL (SCJ). Appellate deference for those conclusions is appropriate not only because of the special advantages that come with presiding over the trial but, as well, because, as Gonthier J. explains in St-Jean v. Mercier, at para. 42, “the autonomy and integrity of the trial process as well as resource allocation militate in favour of the finality of judgments”. Few would argue with the proposition that the finality of judgments serves the best interests of justice. See Friolet v. Friolet reflex, (1998), 201 N.B.R. (2d) 118, at paras. 22-23 (C.A.).

[22] While it is true that the principle of non-interference in a trial judge’s findings of fact does not apply with equal force to inferences drawn from conflicting expert testimony where, as here, credibility is not an issue, the setting aside of any such inference cannot be justified unless it was not reasonably open to the trial judge to extract it from the evidence. See Toneguzzo-Norvell (Guardian ad litem of) v. Burnaby Hospital, 1994 CanLII 106 (S.C.C.), [1994] 1 S.C.R. 114, at pages 121-22.

[23] Section 38(1) of the Act provides that the compensation payable upon expropriation shall be based, in part, upon the market value of the land. “Market value” is defined in s. 39(1) as “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”. The Act implicitly requires that “market value” be determined on the basis of the present potential of the expropriated property’s highest and best use. See E.C.E. Todd, The Law of Expropriation and Compensation in Canada, 2nd ed. (Scarborough, Ont.: Carswell, 1992) at 133. That use, which may be other than the property’s use at the time of expropriation, is the cornerstone for whatever compensation is payable under the Act and under most, if not all, other Canadian expropriation statutes. See Saint John Priory of Canada Properties v. Saint John (City), 1972 CanLII 133 (S.C.C.), [1972] S.C.R. 746 and Re Valley Improvement Co. Ltd. v. Metropolitan Toronto & Region Conservation Authority (1965), 51 D.L.R. (2d) 481 at p. 491, (Ont.C.A.), per Roach J.A.

[24] That said, it must be remembered that the concept of “highest and best use” refers to “the highest economic use to which a buyer and seller, each willing and knowledgeable, would reasonably anticipate the lands would probably be put” [Emphasis added]. See J.A. Coates and S.F. Waqué, New Law of Expropriation, looseleaf, vol. 1 (Scarborough, Ont.: Carswell, 1986), at 10-84. The highest and best use advocated by the owner of expropriated land should be rejected as the basis for the determination of its market value under the Act when that use is not economically feasible. See Guido (Estate of) et al. v. Ministry of Transportation and Communications (1977), 13 L.C.R. 97, at p. 98 (Ont.H.C.J.). What constitutes the highest and best use for a particular expropriated property is a question of fact.

[25] After referring to the statutory definition of “market value” and thoroughly reviewing the evidence offered by each expert appraiser, Justice Godin made the following observations concerning Mr. Goodwin’s approaches to the determination of market value in the case at hand:

Central to Mr. Goodwin’s approach is the theory that “motel” style apartments are premium apartments which brings in a higher rental for its owner than the more conventional apartments and cannot be compared to ordinary apartments. Thus, in arriving at his value, Mr. Goodwin has referred to “true motel” style apartments which is a reference to that type of apartments that have been built in and around Moncton in the last few years. There are two immediate problems with this approach. First, the applicant’s project is substantially different than the “true motel” style apartments that were used for comparison, and, secondly, the fact that there has been no sale of “motel” style apartments does not, in my view, justify Mr. Goodwin's refusal to consider the actual market for apartments generally.

The applicant’s project differs from the typical “motel” type apartment in that the applicant’s plan called for four apartments below grade and eight apartments that are on two levels where the bedroom is one floor above the kitchen and living room area. The typical “motel” type apartment is in the area of 1008 sq. feet whereas the applicant’s plan calls for apartments having an area of only 828 square feet or 13 to 18% less area than the typical “motel” style apartment that Mr. Goodwin uses as reference to arrive at the market value of the project. The typical “motel” style apartment also includes a dishwasher but none are included in the applicant’s project.

... [T]he cost method, does not satisfactorily dispose of the issue of the poor location of the subject property for development of an apartment building. The “motel” style apartments referred to by Mr. Goodwin in his appraisal all have better locations than the subject property. Mr. Vautour testified that he would not build an apartment building in an area such as that of the subject property which is 3 or 4 kilometres from services.

In my estimation, the differences between the intended project and traditional type of apartments are no greater than the differences between a true “motel” type apartment and the intended development of the subject property. By not considering actual sales in making his direct comparison approach, Mr. Goodwin was free to develop figures which were highly favourable to the applicant but not necessarily reflective [of] the market. ...

[26] The trial judge found that the subject property’s distance (3-4 kilometers) from services, such as grocery stores, made it a poor location for the development of a profitable apartment project. It is implicit from his reasons for judgment that the trial judge was satisfied that the uses advocated by or on behalf of the appellant were not economically feasible. That being so, the trial judge was unquestionably right in rejecting Mr. Goodwin’s opinion that the subject property’s highest and best use was the conversion of the school building into a 12-unit motel style apartment.

[27] Moreover, it was reasonably open to the trial judge to accept Mr. Doucet’s opinion that the subject property’s highest and best use involved the removal of the former school building and the development of the bare land for commercial and residential purposes, the latter being limited to the subject property’s use as a site for a single family dwelling as opposed to an apartment building. I am also satisfied that it was reasonably open to the trial judge to accept Mr. Doucet’s opinion that the market value of the bare land was in the order of $52,500.

Conclusion and Disposition

[28] The trial judge’s reasons for judgment reveal that he accurately instructed himself on the principles of law that govern the determination of market value under the Expropriation Act and that he correctly applied those principles to the facts as he found them. Having regard to the limited scope of appellate intervention allowed by the applicable standard of review, I am not persuaded that this Court ought to disturb the trial judge’s finding that the market value of the appellant’s property was $52,500 at the time of expropriation. I would dismiss the appeal with costs of $1,500.








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