Expropriation

Costs: How should they be treated?

Synopsis:
The case was heard by a single Nova Scotia Utility and Review Board (NSURB) member, Ms. Roberta J. Clarke, Q.C. Her 206 page decision comprehensively recounts the events leading up to the expropriation, details the testimony provided by the witnesses, and cogently lays out her findings and the logic path leading to each of them. The findings utilise, as their lodestone, the principle enunciated in the Supreme Court of Canada decision in the leading expropriation case "Toronto Transit Operating Authority v. Dell Holdings Ltd., [1997] 1 S.C.R. 32 ("Dell")" that the relevant expropriation legislation "should be interpreted in a broad, liberal and purposive manner". The Dell decision recognized a presumption in favour of compensation i.e. it acknowledged that expropriation was the exercise of police power and stated that the purpose of the expropriation legislation was to make the property owner "whole" in so far as that could be achieved through compensation.

In the mid to late 1990's the Province of Nova Scotia began to investigate the twinning of a stretch of the Trans-Canada Highway #104 running through Antigonish County. Public meetings were held in the area to obtain input on three options for the route. Two of the three options adversely impacted the Claimant's (S. & D. Smith Central Supplies Limited aka "Central") Lower South River property. Questionnaires were made available to the attendees, to be completed and returned to the Provincial Department of Transportation (DOT) with comments on the alternative routes. The owner of Central, Mr. Smith, attended a public meeting held by the Department in May 1998 and raised his concerns with its then Acquisitions and Disposals Officer and was warned, he says, that Central would not be compensated for anything they constructed on land which was subsequently required for the highway. (The Department's Acquisitions Officer, now retired, testified that he did not keep notes and could not remember the conversation but conceded that Mr. Smith's recollection was probably better than his own). Central also sent a letter to the DOT advising of the impact of two of the proposed routes on their plans for business expansion on their Lower South River property, but received no acknowledgement. In April 2000 DOT chose a route which unfortunately severed Central's 49 acre property into two parcels (the southern parcel of which was landlocked), took 11.34 acres and left it with a northern parcel on which the existing 8 buildings were located . Central were at that time, utilizing 17.72 acres of the property, but had intended to build a new Retail Store with an ancillary Distribution Centre to take advantage of what Central's owner, Mr. Smith, recognized was the emerging trend in the United States, and Quebec, for "Big Box" retail. The location of the Distribution Centre, to serve the new Retail Store, and Central's existing network of building supply outlets, would enhance profits by leveraging bulk purchase discounts and reduce the requirement for wholesalers. In the 1990's, and prior to the May 1998 public meeting, Central had been working with the municipality to extend the water supply to their property, since a sprinkler system was a prerequisite to the buildings proceeding. The complex would utilise the entire site. Central had not prepared any plans for the new buildings, and once they realized their land was going to be severed by the new highway, diverted their attention elsewhere by bringing forward the development of a new store in Sydney and, in 2003, started to look for an alternative site for their Retail Store elsewhere in Antigonish. The latter opened in May 2005 and Central converted their Lower South River property to a Distribution Centre, albeit smaller than that intended previously because of the proposed reduction in site size due to the highway re-alignment. (They subsequently acquired a property in Pomquet in late 2015 to accommodate their building supplies inventory and laydown requirements). After environmental assessment hearings, the route for the new TCA #104 alignment was confirmed in August 2005. Up to now Central had received no communication from DOT but in 2006 was able to secure a meeting with their new Acquisitions and Disposals Officer and had several meetings during which they expressed their concerns. Nothing happened until another, new DOT Acquisitions and Disposals Officer (the former also having retired), contacted Central in November 2011. There were no settlement negotiations and no offers were made to Central. In February 2012 DOT served notice on Central that they would be entering on the land to start clearing it in two days. On May 1st 2012 DOT formally expropriated the property but refused to provide funds to fence the rear, which was now exposed to the cleared corridor. On November 30th 2012, DOT's appraiser inspected Central's property, and was alerted to the aborted intention to redevelop the land with a big box Retail Store and Distribution Centre. No plans of the buildings had been prepared and since DOT's appraiser had not been engaged to determine business loss they were not mentioned in his final report issued on August 12th. 2013 (he had submitted a draft report to DOT in February 2013). An offer based on that final report was rejected by Central and the matter ended up before the NSURB. The Board hearing took 21 days and heard 19 witnesses: these are its material findings:

This NSURB decision was subsequently appealed by the acquiring authority, the Province of Nova Scotia, to the Court of Appeal. It, and the cross appeal, were dismissed by the Court on March 26th 2019: they ordered the expropriating authority to pay 80% of the property owner’s solicitor and client costs.

 In October 2019 the Province introduced Bills #169 and #170 to amend the Expropriation and Public Highways Acts respectively with intent, according to media interviews conducted with Justice Minister Mark Furey, to prevent a similar decision in future expropriation cases.

Expert Witness Qualifications

Sales to Provincial Government

Sales to Related Parties

Easement Impact on Comparable Sales

Easement Impact on Expropriated Property

March 2004:

Nova Scotia Utility and Review Board
M. Teresa MacIsaac
Expert Witness:  Lack of Professional Qualifications No Bar to Expert Testimony
Sales to Provincial Government of Little Evidenciary Value
Sales to Related Parties Reflective of Open Market Value

Easement:  No Reduction in Value on Comparable Sales

Easement:  Reduces Expropriated Property Value by 50%

Synopsis:
This case was heard by a single Board member, Mr. Wayne D. Cochrane, QC.  His decision rejected many of the principles, precedents and valuation practices that are currently employed in Canada and elsewhere in the world, for expropriation cases.

On 22nd August 2002 the Municipality of the County of Antigonish expropriated two parcels of land totalling 1.6968 acres to provide an access road leading to the site of a new school, the West Antigonish Education Centre, together with a drainage easement over a further 0.1838 acres.  The land was located just outside the Town of Antigonish in Nova Scotia.  The 14.714 acre school site had been acquired by the Provincial government in 1999 from three different property owners for a total cost of $582,500 i.e. $39,588/acre.  However two of the three parcels were encumbered with easements for sewer, water and rights of way.  In the case of one purchase, the Province had agreed, as part of the acquisition price, to convey any land surplus to their requirements, back to the vendor without charge.  A sales analysis by the claimant's expert appraiser, which took into account the free land, and made an allowance of 50% for the reduction in land values due to the impairment resulting from the easements, indicated fee simple acreage values of $29,850; $61,741 and $37,473. The $61,741/acre sale reflected the free surplus land given to the vendor:  if this benefit was ignored the sale price equated to $38,471/acre.  In addition to these three sales to the Province, three earlier sales were considered by Mr. Cochrane. They occurred between May 1996 and April 1998, four to six years prior to the date of expropriation, at acreage prices of $24,983; $21,653 and $26,934.  All three sales were between related parties, the vendor and purchaser companies were associated with the same family (the MacDonalds) and had a commonality of shareholders.  These six sales were the only sales considered in the decision. The claimant Ms. Teresa MacIsaac, retained as their expert witness our own Mr. Lee Weatherby, a Fellow of the Royal Institution of Chartered Surveyors (FRICS) and Accredited Appraiser of the Appraisal Institute of Canada (AACI).  Lee had 26 years valuation experience, 21 of which were post qualification with our firm, mainly on expropriation or litigation work as an expert witness.  The expropriating authority, the Municipality of the County of Antigonish, had as it expert witness Mr. P. Constable the owner of MacKay Group Limited, an appraisal firm.  He was not a qualified appraiser and so was not licensed to undertake appraisal work in the Province except as in a supporting role. His appraisal report had been signed by his supervisor, Ms. L.M. MacKay CRA a residential appraiser, and himself.  His supervisor did not appear at the Board hearing.

In determining the compensation that should be paid to the expropriated party, Mr. W.D. Cochrane QC the Board Member conducting the hearing, decided that:

LNG Plant:  Proximity To Gas Distribution System

September 2009:
Nova Scotia Utility and Review Board
James Irving Warner
Gas Distribution System, If Unavailable, Has No Impact on Value of LNG Site

Synopsis:

This decision by sole Board Member, Mr. Wayne D. Cochrane, QC rambles across 175 pages.  His logic is not readily apparent and the reader could be forgiven for concluding that the writer had lost the plot.  it refers to the expropriation by a municipality of a parcel of waterfront land strategically located at the landfall of the Sable Gas undersea pipeline. The sole purpose of the expropriation was to secure and sell the land to a private company who wanted to build a liquid natural gas (LNG) plant to take advantage of, (1) the property's harbour and (2) access to the adjacent natural gas distribution system.

James Irving Warner owned 187.75 acres of land strategically located on Nova Scotia's Eastern Shore near the community of Goldboro.  The property had 2,592 feet frontage to the Atlantic Ocean and a further 541 feet of waterfrontage to Dung Cove, an inlet cut off from the ocean by a narrow strip of land. The area had been selected as the landfall site for a natural gas pipeline to run along the sea bed from the Scotian Shelf offshore gas field.  By 1998 this pipeline, the Sable Offshore Energy Project (SOEP), had been built and came ashore at the intersection of the subject property's eastern boundary and the coastline. Thereafter it ran along the eastern boundary to Sable Offshore Energy's Gas Plant located just north of the subject property in the Goldboro Industrial Park.  By December 1999 natural gas had begun flowing and the gas plant began processing gas, liquids and condensates for market.  Natural gas flowed from the gas plant into the purpose built inland pipeline built by Maritimes & Northeast Pipeline to serve markets in Nova Scotia, New Brunswick and the northeastern United States.  Liquids and condensates from the plant are also transported by lateral pipeline to the SOEI fractionation plant at Point Tupper on the Strait of Canso:  a separate lateral also supplied natural gas to the Point Tupper area.  The Goldboro Industrial Park was established by the Municipality in 1998 to support the SOEI project and provide room for industrial growth.  It embraced the northern and western boundaries of the subject property.  Also in 1998, Nova Scotia Power Inc., (NSPI) the privately owned provincial electrical utility, acquired the 76.5 acre parcel which was contiguous to the subject property's eastern boundary as the site for a natural gas fired generating station.  The woodland was zoned for residential use only and they were able to purchase it for $3,922 per acre.  The subject property was now surrounded by lands earmarked for industrial development based on natural gas.

In August 2004, Keltic Petrochemicals Inc. publicly announced its intention to develop a petrochemical and LNG (liquified natural gas) facility in the Goldboro Industrial Park including the entire subject property. The project represented a $4.5 billion investment and included a world class petrochemical plant, an LNG re-gasification and receiving terminal, gas storage facilities, demethanising units, power and stream co-generation together with related utility and offsite infrastructure and systems.  In December 2005 the project took a major step forward with the announcement of an agreement between Keltic and Petroplus International BV (now operating as 4Gas) to advance development of the LNG component as a stand alone project. The majority of the LNG complex was to be located on the subject property; the storage tanks were to be strung along its shoreline adjacent to the proposed docking facilities.  To allow the development the Municipality rezoned the subject property from residential to industrial use.  The subject property was now the key that unlocked the door, earmarked as the site of the LNG complex, fronting the Atlantic Ocean on its southern boundary, surrounded by the proposed Petrochemical Complex on its northern and western boundaries, and flanked on its east by the site of NSPI's proposed natural gas fired generating station. Then, on 7th February 2006, the Municipality of the District of Guysborough expropriated the subject property.  The following month they granted an option to purchase the subject property, plus other lands, to Keltic Petrochemicals Inc. so that they could proceed to build their LNG facility.  That option to purchase was then immediately assigned to Maple LNG Ltd.  4Gas and its partner Suntera Canada purchased the project in March 2006.  In March 2009 4Gas bought out Suntera Canada's interest.  The Final Environmental permit was received in March 2008 and the Permit to Construct was issued in June 2008, allowing a start of production in 2012.  On 14th September 2009 Maple LNG received permission to connect its proposed liquified natural gas terminal to Maritimes and North East Pipeline.  No construction had begun on the subject site at the date of the Board decision.

Meanwhile in 2003, Access Northeast Energy had agreed to purchase Nova Scotia's only other LNG site, located 60 kilometres away on the Strait of Canso at Bear Head, from the provincial government.  The agreed price was $20,000/acre for the 179.0 acres of dry land, and $15,000/acre for the waterlot.  The option was transferred to Bear Head LNG Corporation (an affiliate of Anadarko Canada Corp.) and the sale closed in 2005 at the price agreed in 2003.  Whilst it too was located in the countryside, it had the advantage over the subject property of being about 3 kilometres away from the Statia Terminals bulk loading facility.  Unfortunately it was also 55 kilometres away from the terminus of the Maritimes & Northeast Pipeline, requiring a new lateral to be built.  In July 2005 Anadarko signed a pipeline transportation agreement with M&NP to construct and operate the new pipeline. The cost was not disclosed, but during the Board Hearing a figure of$200 million was promulgated, to be recovered in all or part by a transmission levy rather than a capital sum from Anadarko.  Site preparations continued in 2005 and the pads were laid for two tanks. However in March 2006 Anadarko announced it was having difficulty in sourcing a gas supply and construction halted.  In February 2007 the company announced it was mothballing the project and writing off its $111 million cost against its 2006 fourth quarter earnings.

In determining the value of the subject site as of the 7th February 2006 expropriation date, the sole Board Member conducting the hearing Mr. Wayne D. Cochrane, QC decided that his ruling would be based on a simple, mutually exclusive choice; the market value of the expropriated site could only be determined by comparing it to a single sale, either (1) the NSPI Goldboro purchase or (2) the Anadarko LNG Bear Head acquisition.  The decision is silent as to why the other twelve sales had to be ignored, or why consideration of the NSPI Goldboro purchase precluded use of the Andarko LNG Bear Head acquisition ... or vice versa.  The NSPI Goldboro land was contiguous to the subject property but it was residentially zoned, acquired for just $3,922/acre in 1998 (eight years prior to the expropriation date, before the gas came ashore, and prior to the Keltic - 4Gas plans to construct a petrochemical complex) and was still undeveloped. The Bear Head land had been purchased for $20,000/acre in 2005 (close to the expropriation date) by Anadarko who intended, and started, to build an LNG terminal on land that, like the subject, was zoned for that purpose.  The Bear Head site was close (3 km) to an ocean terminal, but they had purchased the water lot so presumably were not going to utilise it.  However it was close to an already established industrial area ... but 55 km away from the M&NP pipeline that was necessary to carry their product.  The cost of this lateral had been estimated at $200 million.

Mr. Cochrane decided that only NSPI Goldboro purchase could be considered.  The site purchased by Andarko for their LNG site at Bear Head had no evidenciary value in determining the value of the subject LNG site because, in his opinion, it was not comparable.  This opinion was based on the following:

Mr. Cochrane then based his estimate of the expropriated property's market value on the eight year old sale of the residentially zoned contiguous site, purchased by NSPI for a power station (though not developed), before Sable gas started to flow.  The sale price was then "adjusted" as follows:

Use of the Subdivision Approach

The Estate of Estella Gauvin owned approximately 12.4 acres of undeveloped land located on Champlain Street, a major thoroughfare in the City of Dieppe.  The property was located on the south side of Champlain Street, opposite the terminus of Dieppe Boulevard.  The purpose of the expropriation was to extend Dieppe Boulevard across Champlain Street through the subject property to allow expansion of the Dieppe Industrial Park.  At the date of expropriation the portion of the subject property fronting Champlain Street, to a depth of approximately 250 feet, was zoned "Highway Commercial".  The land at its rear bounded on the west by a prolongation of Dieppe Boulevard through the subject property, and on its east by Fox Creek, was zoned "Industrial Park".  The balance of the lands lying to the west of the prolongation of Dieppe Boulevard, was zoned "Residential R2" which permitted single family dwellings or duplexes.  The property had been advertised by a local broker with an on-site sign reading "Development Site - 13 Acres - Commercial" since 1987 or 1988.  The land was expropriated by the City of Dieppe on 18th April 2001.

The real estate broker testified that he had received permission to advertise the site, but had no authority to sell it.  His mandate was to bring parties who were interested in developing the site together with the property owner. Although he had made efforts to generate interest in the property over the fifteen years no lots had been sold since 1988.  In part he attributed the lack of interest to the proposal to extend Dieppe Boulevard in a southerly direction through the subject property.  Once this extension had occurred he was of the opinion that it would unlock the property's development potential.  Since the expropriation, and prior to the court hearing, Dieppe Boulevard had been extended through the property and the land which was surplus to the roadway right of way had been sold by the City of Dieppe to be developed for an hotel, commercial building and two restaurants.

The City of Dieppe's appraiser used the Direct Comparison Approach, essentially comparing the subject land with properties that had sold in the community, and adjusting their sale prices for differences between the comparable sales and the subject property.  He relied on 14 sales of commercial property and 12 sales of residential property to appraise the respectively zoned portions of the subject property.  Ten of the commercial property sales required adjustments in the 10% to 25% range:  the balance had to be adjusted by 33%, 55%, 65% and 75%.  He appraised the property at $474,600.

The Estate of Estella Gauvin's appraiser used a Subdivision Approach on the grounds that the Expropriation Act defined "market value" as being the result of negotiations between a vendor and purchaser who were "fully informed". The appraiser felt that this required a more sophisticated approach than simply comparing the property with the sales of other sites, and entailed instead a detailed analysis of its Highest and Best Use.  The latter was identified as a development which would include, (1) a gas bar, convenience store, quick service restaurant and car wash; (2) a three storey 78 unit travel inn; (3) a brand name family restaurant; and (4) a three building 96 unit motel style apartment complex: all achieved by extending Dieppe Boulevard into the subject property as a cul de sac.  He appraised the property at $2,005,000.

The Court determined the value of the property was $474,600 and ruled that the Subdivision Approach was not appropriate in this case on the following grounds:

Definition of Appraisal Report

Section 25(2) of the Expropriations Act provided that the expropriating authority had to "base its offer of compensation . upon a report appraising the market value of the lands being taken and damages for injurious affection, and shall serve a copy of the appraisal report upon the owner at the time the offer is made". The acquiring authority's offer of compensation was accompanied by an appraisal report comprising a two page document and a schedule listing the sale prices of three properties. The court held that the latter was not an appraisal report within the meaning of the Act and determined that "The person whose property is being expropriated should be able to determine from the appraisal report if he should proceed to arbitration or should accept the offer which has been made. This was not possible on the basis of the document which was served on the applicants".

Agrologist or Appraiser: Whose Evidence is Pertinent?

George Johnson and Carolyn Johnson owned and operated a blueberry farm on about 1,950 acres in Colchester and Cumberland Counties, Nova Scotia. On October 31st 23.69 ha. (59 acres) was expropriated by the Province of Nova Scotia Department of Transportation to construct a realigned Trans Canada Highway (Highway #104) between Masstown, Colchester County and Thomson Station, Cumberland County: a divided toll highway to be known as the Cobequid Pass.

This case was originally heard by the Nova Scotia Utility and Review Board. The principal differences in the valuation of the land by the two parties was one of approach. The Province of Nova Scotia relied upon the evidence of their appraiser who calculated the land value by reference to the sales of other parcels in the area. The Johnsons relied on the evidence of an agrologist who utilised a summation method: he established the value of the bare land ($100/acre) and then added a value for its blueberry potential ($900/acre) and timber ($577/acre) for a total of $1,557/acre. (The land was in timber production but had great potential for lowbush blueberries, a wild variety of berry which could not be cultivated but could be encouraged with selective pruning). The Board dismissed the evidence of the Province's appraiser because he had not contemplated the use of the land for blueberry production, was not aware that the Johnsons were major blueberry producers, and would not acknowledge that the area was one of the most productive in the world for wild blueberries .. an assertion readily accepted by the Johnson's blueberry expert Dr. Eaton.

Whilst the Court of Appeal accepted that the summation approach was not in itself a flawed approach, they ruled that the Board's decision was patently unreasonable because the Expropriation Act legislates "market value" as the underlying basis of compensation. The Johnson's agrologist was not a qualified real estate appraiser nor a blueberry specialist and he did not base his opinion on market sales data. He had in fact relied upon the hearsay evidence of other experts; and the facts on which they based their opinions were not adduced at the hearing before the Board. The Court of Appeal therefore dismissed the agrologist's evidence and relied instead on the testimony of the Province's appraiser and his sales data of other parcels in the vicinity of the expropriated land, some of which were in blueberry production.

(1) Definition of Privilege (2) Misuse of Planning Powers to Reduce Compensation

The City of Dartmouth (later the Halifax Regional Municipality) expropriated 44.54 acres lying to the east of Highway #118 for park purposes. Prior to expropriation the acquiring authority attempted to negotiate a settlement with the property owner. Both parties attempted to facilitate this negotiation process by jointly retaining an appraiser. During the Review Board hearing the property owner attempted to introduce this appraiser's report as evidence: the expropriating body objected claiming that the report was privileged. At the date of expropriation the land was zoned H-Holding. This zoning allowed development of the land with residential single family lots provided that water and sewer was available. The Board heard evidence that sewer capacity was available for R1-Single Family Residential development and determined that the acquiring authority's (the Municipality) position denying that this was the case was incorrect. The Board also reviewed the assessment of the property since the statutory regimes for arriving at market value under the Assessment and Expropriation Acts were similar. The Board ruled as follows:

(1) An appraisal report prepared under joint terms of reference is inadmissible; unless both sides agree to its inclusion as evidence because it is prepared for negotiation purposes and is thus privileged.

(2) An expropriating authority may not use their planning powers to first reduce the value by restricting development of the property . and then expropriate.

(3) The Assessment had to be ignored in arriving at an estimate of market value under the Expropriation Act because it contained too many errors and had not been computed in compliance with the Assessment Act.

Costs

The responsibility for the payment of appraisal, legal and other professional fees for the preparation and negotiation of compensation prior to any Board or Court hearing falls upon the acquiring authority. This responsibility flows from the underlying principle inherent in all compulsory takings that the landowner is to be left monetarily in the same position after expropriation as he/she was before the taking. There is also an assumption spelled out in some Expropriation Acts, and confirmed elsewhere by case law that these costs have to be reasonably incurred. Since the property owner cannot be expected to know whether the incurred costs are reasonable no onus is placed upon him/her to arbitrate the quantum of the costs themselves. The underlying assumption is obvious, expropriation is a serious infringement of private rights and the property owner is entitled to proper professional advice to ensure that monetarily he/she suffers no loss. Since acquiring authorities frequently overlook the obvious, the courts have enunciated this principle in their decisions. These decisions notwithstanding, acquiring authorities almost always attempt to use the question of costs (quantum and timing of payment) as a negotiating lever. Morality being notable by its absence, acquiring authorities utilise this tactic even when the Expropriation Act clearly spells out their responsibility. Prior to February 1st 1996 the Nova Scotia Expropriation Act Section 35 mandated that these costs were to be paid provided they were reasonably incurred. Acquiring authorities often refused to pay these costs, initially on the grounds that the Expropriation Act did not spell out when they were to be paid. Faced with court decisions that ruled payment was due when the invoices were rendered they then altered their tactics and argued the fees had to be reasonable . not just reasonably incurred . and of course in cases where professionals such as appraisers acted for the property owner rather than the acquiring authority, their fees were unreasonable . a remarkable coincidence with which the courts demurred. There are a plethora of decisions confirming that professional fees have to be paid in a timely manner where payment is mandated by the Expropriation Act, or that interest has to be paid if the payment is delayed:

The Village of Lawrencetown refused to pay the appraisal costs mandated by Section 35 of the Expropriation Act. (Section 35 was repealed on February 1st 1996. It provided for the payment of appraisal, legal and other costs reasonably incurred but made no specific mention of when they were to be paid). The acquiring authority also questioned the reasonableness of the property owner's costs. The Court ruled:

(1) Payment of costs are due when the invoices are rendered and failure to pay them results in interest being payable on the outstanding amounts.

(2) The property owner's appraisal costs can be compared with those of the acquiring authority to determine if they are reasonable.

(3) The property owner's legal costs are not restricted to the scale of fees pertaining to the area in which the expropriated property is located.

The Provincial Department of Transportation refused to pay for the costs of an appraisal report which also incorporated a report from an agricultural expert on the grounds that Section 35 of the Expropriation Act only provided for a single appraisal report. The Court ruled:

(1) An appraisal report which embodies other experts' reports is a single report if there is no duplication of work.

(2) The Utility and Review Board was acting within its jurisdictional powers when it ordered that these costs be paid prior to the Board decision on the actual compensation award.

The Provincial Department of Transportation appealed the decision of the Utility and Review Board which ordered it to pay (1) the property owner's fee for engineering services he rendered during and as a result of the expropriation; (2) the property owner's appraisal costs mandated by Section 35 of the Expropriation Act; (3) interest on the unpaid appraisal bills; (4) litigation support costs of the property owner's appraiser during the Board hearing. The Court ruled:

(1) The engineering fees were properly incurred and therefore were payable even though the property owner supplied the service.

(2) The timing of payment of appraisal fees had already been decided correctly in the Stevenson v. Village of Lawrencetown case (see above) and were payable when rendered.

(3) Interest was "a fact of life" and was properly payable.

(4) Litigation support by the appraiser during the Board hearing was a legitimate expense.

This was a re-run of the same issues with regard to appraisal costs and interest that had already been decided by the same court in the October 1996 L.E. Powell Properties Ltd. v. Attorney General of Nova Scotia case (see above)! In dismissing the acquiring authority's appeal the Court ruled:

(1) The Utility and Review Board had already found the appraisal fees to be reasonable and since no point of law was involved there was no basis for interfering with the Board's decision.

(2) The acquiring authority was obligated to pay costs on a solicitor and client basis in expropriation cases.

(3) Interest is payable on overdue accounts.

This was another re-run of the same issues with regard to appraisal costs and interest that had already been decided twice by the same court (see above) but with an added twist. The Utility and Review Board had delegated its taxing function to a taxing master with instructions that he rule on the quantum of the costs (including appraisal costs) and interest. The taxing master ruled on all of the costs with the solitary exception of the appraisal costs and the interest payable thereon . these he ignored. At issue were the pre-court (Section 35) costs, the court costs and interest at 2% per month. The Board itself then heard an application and taxed the costs, determining that they and the interest were reasonable and had to be paid in full by the acquiring authority the Halifax Regional Municipality (formerly the City of Halifax). The latter's legal staff promptly appealed on the grounds that (1) the Board's taxing master had rendered a decision by his non-decision! (2) the Board had no right to resume jurisdiction from its taxing master, (3) the property owner should have appealed from the taxing master's non-decision decision, or pursued a prerogative remedy, and had lost his rights by laches. In dismissing the acquiring authority's appeal the Court ruled:

(1) Taxing masters have no authority to reduce the fees the owner must pay to other professionals such as appraisers and it is better for the Board to retain control over expenses in issue between the expropriating authority and owners, other than legal expenses and disbursements, "otherwise the owner can be left out of pocket, which is contrary to the general intention of the legislation".

(2) The Board had the right to resume jurisdiction from the taxing master . but in this instance had never lost it because the taxing master had failed to deal with the issue and "jurisdiction over the statutory rights of an individual cannot be shunted into limbo".

(3) "This entire matter has proceeded at a leisurely pace on the part of all concerned, and it does not seem appropriate to exercise the equitable remedy of laches against Mr. Arab (the property owner) because of his delay in crafting a response to difficulties he could not have anticipated. That would be less than just when the interest question was created or exacerbated by the appellant's delay in paying the accounts. Mr. Arab cannot be faulted for delay in appealing from a taxing master's decision when the taxing master did not provide a decision for him to appeal from.

The Province of New Brunswick expropriated 23.5 acres of property on February 21st 1995 so that they could construct a four lane highway from Moncton to Saint John. The property was used as a woodlot, and for ecotourism, and was part of a 471 acre property in Penobsquis, King County. The expropriation severed the property into two parcels. Although the land was used as a woodlot, the McLeod's appraiser determined that its highest and best use was for blueberry production. The Court agreed. The Province's original offer of $5,393, which ignored injurious affection, was increased to $28,059 plus interest, about a month before the trial. The owner's appraiser assessed the total compensation at $139,627.23. The Court awarded $35,540.

Legal counsel for the owner claimed $201,228 for their fees. The owner's appraiser claimed $83,350. In arriving at its determination on legal fees, the Court decided that the case was not complex and did not require the level of effort expended. They compared the legal costs with the claim, and compensation awarded, and decided they were excessive. They disallowed travel costs for the out of Province counsel and awarded $72,825 as legal costs. The Court fixed appraisal fees at $28,750.

January 2013:
New Brunswick Court of Queen's Bench
L.E. McConnell Farms Ltd. v New Brunswick Department of Transportation
Reasonableness of appraisal costs

Appointment of "Out of Province" appraiser

Synopsis:

On July 15th 2004 the Province in the guise of the New Brunswick Department of Transportation expropriated part of a farm owned by L.E. McConnell Farms Ltd. near Woodstock, for the construction of the Trans Canada Highway. The new road severed the farm in two and rendered it unviable for nuclear seed production. The NB Department of Transportation offered L.E. McConnell Farms Ltd. $110,000 as full compensation for its loss. This sum was based on a formal appraisal prepared for NB DOT. The latter had instructed their appraiser to confine its calculation of compensable loss to the Market Value of the land taken and Injurious Affection. The appraiser made it clear in their report that the owner was entitled to compensation for two additional heads of claim: (1) damages due to Disturbance and (2) any Special Economic Advantage arising out of his occupation of the land that was not reflected in the market value of the land ... and that in accordance with their written instructions from NB DOT, these items had not been considered. When McConnell refused NB DOT's offer, they paid him $78,700, the portion of the $110,000 identified in the appraisal report pertaining to the Market Value of the land. McConnell's lawyer, Crocco Hunter, Woodstock, NB retained the valuation firm Turner Drake & Partners Ltd. The latter's head office was located in Halifax, NS and their provincial office in Saint John, NB. Sales information was not public knowledge in New Brunswick; it was only available to the Provincial government. However NB DOT had provided it to their private sector appraiser to aid him in his appraisal. Crocco Hunter therefore requested that the same sales information be provided to Turner Drake, McConnell's appraiser. These requests were ignored and Turner Drake were forced to undertake their own research acquiring the information from real estate brokers, vendors and purchasers. They completed their report assessing McConnell's compensable loss at $183,950 (excluding Disturbance and professional fees). Crocco Hunter retained an agronomist to assess the quantum of the Disturbance loss suffered by McDonnell. In preparing their report Turner Drake incurred costs of $27,241.60, in large part because they were forced to generate their sales data "from scratch" in the field. They nevertheless rendered an invoice to McConnell at their originally quoted fee of $7,000 (plus HST) writing off $20,241.60 (plus HST) as a "cost overrun". The invoice was paid by the Province. The latter also paid a later invoice of $400 (plus HST) incurred by Turner Drake in reviewing the NB DOT's appraiser's report.

The parties were unable to agree on compensation and the matter proceeded to court on January 24th 2011. It was settled by NB DOT four days into the trial, when their case collapsed, for a total of $300,297 excluding professional fees. At that point Turner Drake's fees for pre-court and court testimony stood at $24,445.04 (plus HST). the Province promptly declared them unreasonable and offered $6,490. McConnell requested that they be taxed and the matter was set down to be heard on October 24th 2011 by Madame Justice Paulette C. Garnett, the presiding judge for the earlier expropriation hearing.

In their Pre-Hearing Brief the Province argued that no fee at all should be paid to L.E. McConnell Farms Ltd. for Turner Drake's expert testimony. During the Court of Queen's Bench hearing to tax Turner Drake’s costs an affidavit was submitted on behalf of NB DOT. In it a Ms. Colleen Brown, Assistant Director of Planning and Land Management argued that it was unnecessary for McConnell to hire a Halifax appraiser since there were 48 real estate appraisers in New Brunswick including one in Woodstock, who could have been hired instead. Madame Justice Garnett observed that NB DOT had chosen their appraiser from Saint John, not Woodstock ... and pointed out that Turner Drake had invoiced all of their time and expenses from their Saint John office.

Ms. Brown's affidavit also argued that the Turner Drake invoices totalling $36,712.95 ($8,510 + $27,662.95) including HST were unreasonable since NB DOT's appraiser had only billed them $19,394.21. In her written decision rendered on January 22nd 3013 Madam Justice Garnett noted that the Province had agreed to a final settlement (excluding Turner Drake's fees) of $300,297 and "that this was almost three times as much as the initial all-inclusive offer of $110,000". She ruled that the number of hours and expenses Turner Drake had billed were reasonable but rolled back Turner Drake's hourly rates to their original involvement in 2004 because they had not informed their client they had increased. She also awarded Turner Drake its court costs plus interest on their fees and expenses at 6% from the date of the hearing. The amount awarded by the court was $21,130 (including the prior Turner Drake invoices already paid by the Province the amount totalled $29,640 including HST).

On February 1st 1996, Section 35 of the Nova Scotia Expropriation Act was repealed. In essence the New Brunswick, Newfoundland, Nova Scotia, Ontario and Prince Edward Island Expropriation Acts, and the National Energy Board Act only refer to the award of costs by the Board, Court or Tribunal thereby suggesting that costs are only available if the owner proceeds to a hearing. If the acquiring authority refuses to pay these costs it will be necessary to schedule a hearing to confirm that they have been reasonably incurred and are to be paid with interest from the date the invoice was rendered. The Federal Expropriation Act continues to provide for the payment of costs incurred prior to initiating court proceedings.

The property owner's costs incurred at the hearing are usually paid by the acquiring authority if the Board, Court or Tribunal award of compensation equals or exceeds a prescribed percentage of the amount offered by the acquiring authority (Federal, N.B., N.S., Newfoundland Acts > 100%; Ontario 85%; National Energy Board > 85%). If the award fails to meet this percentage, costs may be awarded to the property owner by the Board, Court or Tribunal under the Federal, N.B., Ontario and National Energy Board Acts; but under the N.S. and Newfoundland Acts the property owner bears the costs. The P.E.I. Act is silent about responsibility for costs but appears to anticipate their payment by the acquiring authority since it provides that they have to be taxed.

Pre-Expropriation Losses

Dell Holdings Ltd. was a developer who owned 40 acres of land that was ripe for development. The Municipality withheld approval to develop the entire parcel for three years until the transit authority had made up its mind on which of two possible 9 acre sites on the property were to be selected for a new GO Station. The site eventually selected was then expropriated from Dell Holdings Ltd. The latter had suffered a loss of $0.5 million by reason of the municipality's delay in granting approval for development of the entire site.

In a split decision the Court found in favour of Dell Holdings Ltd. and noted that "The expropriation of property is one of the ultimate exercises of governmental authority. To take all or part of a person's property constitutes a severe loss and a very significant interference with a citizen's private property rights. It follows that the power of an expropriating authority should be strictly construed in favour of those whose rights have been affected . Further, since the Expropriations Act is a remedial statute, it must be given a broad and liberal interpretation consistent with its purpose. Substance, not form is the governing factor."

The Court further held that damages incurred during the "shadow period" are compensable as Disturbance. (The shadow period being post-inception of the expropriation scheme but pre-expropriation.). It based its reasoning on the Shun Fung Ironworks Ltd. 1995 Hong Kong case.

Equitable Interest in Trans Canada Highway is Compensable

In 1966, the Province of Nova Scotia expropriated a strip of land for a controlled access highway (the Trans Canada Highway) that bisected the owner's farm. It paid compensation of $13,000 and constructed fences, gates and ramps to enable the owner to cross over the new highway with equipment and livestock. The Department of Transport continued to maintain the fences, gates and ramps for 27 years until, in 1993, it undertook a "twinning" of the highway and removed the ramps preventing the owner from crossing the highway in the future. The farm thus became injuriously affected by the loss of crossing rights.

The owners sought a declaration from the courts that they had a compensable interest which they were entitled to pursue. The Supreme Court of Nova Scotia agreed (54 LCR 96) but the Court of Appeal disagreed (56 LCR 252). Finally the Supreme Court of Canada (60 LCR 161) agreed, stating that:

(1) The owners had acquired an "equitable permission or interest" in the form of a right-of-way over the highway;

(2) That such an interest is a compensable interest in land within the meaning of Section 1 of the Expropriation Act;

(3) That the original agreement or permission to cross the highway need not be in writing; the actions of the Department in maintaining the fences, gates and ramps over a period of 27 years constituted "part performance" which was sufficient to demonstrate that an equitable interest existed.

(1) Claim for Injuries Affection not Time "Statute Barred". (2) Notice of Claim need not be in any Particular Form.

In 1981 the City of Halifax (now the Halifax Regional Municipality) expropriated a strip of land off the front of an operating gas station for road widening purposes, eliminating two of the four double pump islands. Irving Oil Ltd. made a claim for injurious affection with particulars of the claim set out in an appraisal report which accompanied the claim. The file then lay dormant for a period of 16 years until it was revived by Irving Oil Ltd. who filed a Notice of Hearing and Statement of Claim in 1997 at over double the amount, based on an appraisal by the same appraiser. The expropriating authority maintained that the claim for injurious affection was by that time "statute-barred" pursuant to Section 31(1) of the Nova Scotia Expropriation Act, which requires that such a claim be made . "within one year after the damage was sustained or after it became know to him" . The expropriating authority, the Halifax Regional Municipality, had also managed to lose or misplace its legal and appraisal files and pleaded laches claiming that the delay by Irving had thus prejudiced the Municipality. The Court of Appeal determined that the claim was not statute-barred, despite the lengthy delay by the claimant in filing a Notice of Hearing and Statement of Claim, since it had initially set out its claim in the 1981 letter with particulars contained in an accompanying appraisal report. The fact that the claim had more than doubled over the ensuing 16 years was immaterial to the basic validity of the claim. Section 31(1) of the Act had been satisfied because:

(1) The original claim had been made in writing to the authority (even though it was not in a prescribed form) and

(2) Full particulars of the claim had been set out in an appraisal report which accompanied the original claim (even though it was subsequently amended when the Notice of Hearing and Statement of Claim were filed some 16 years later).

The Court of Appeal was critical of the Halifax Regional Municipality for itself failing to act on the outstanding claim while at the same time claiming that it was being prejudiced by the actions of the claimant.

Gravel from Expropriated Land Used to Construct Highway

Stephen Moffett Ltd. leased land to a Chown Enterprises Ltd. for use as a commercial gravel pit. The Province of New Brunswick expropriated 13.7 ha. (34 acres) for the relocation and widening of the Trans Canada Highway (Route #2) between Moncton and Saint John. The expropriated property cut through the undeveloped granular aggregate reserves rather than the borrow pit, and divided them in two. The case involved Stephen Moffett Ltd.'s profit á prendre interest from future royalties; not Chown Enterprises Ltd.'s loss. The significant issues before the Court were:

(1) Should the market value of the aggregate reflect the fact that it was used by the acquiring authority in their road construction ... or should it be discounted to reflect future demand from other purchasers?

(2) What is the appropriate discount rate to employ in calculating the present value of the future income stream from the sale of the aggregate reserve?

The Court held that:

(1) It was barred by the Expropriation Act and case law (Point Gourde Quarrying and Transport Co. v. Sub-Intendent of Crown Lands) from reflecting the value of the aggregate to the expropriating authority in the compensation, even though the Province had utilised it in their highway construction, because there was no evidence they had targeted the natural resource for their own purpose.

(2) 13% would have been the appropriate discount rate to use had it not been for the fact that the aggregate was "higher quality cement aggregate". The Court therefore "arbitrarily" chose 12%.

This case was subsequently appealed by Stephen Moffett Ltd. to the New Brunswick Court of Appeal (31/04/CA 86 L.C.R. Page 188 March 17th 2005). The appeal was dismissed.

Business Loss (Property Taxes)

The Province of Nova Scotia acquired Superior Propane Inc.'s propane distribution facility at Westville, Pictou County to facilitate the twinning of Highway #104. There was no formal expropriation, but as part of the agreement the Province of Nova Scotia agreed to purchase land and build a substitute facility for Superior Propane Inc. at Trenton, Pictou County under the principle of "equivalent re-instatement". The parties agreed that any dispute regarding any items of business loss, other than those arising out of the increased property taxes at the new location, were to be submitted to arbitration. Any dispute as to the quantum of the loss arising from the increased property taxes were to be determined by the Nova Scotia Utility and Review Board (NSURB). During the NSURB hearing the Province of Nova Scotia argued that:

(1) business loss due to the increased property taxes should be decreased by any increase in profits arising from the new location.

(2) the discount rate used to compute the business loss should include risk: it was inappropriate to use a "risk free" discount rate.

The Board determined that the terms of the agreement between the two parties as to how business losses were to be adjudicated, restricted the Board to consider the loss arising from the increased property taxes, in isolation. The Board did however decide that it was inappropriate to utilise a "risk free" discount rate and adopted instead a weighted cost of capital rate of 6.93% for 38 years.

The Nova Scotia Court of Appeal (CA 215421 Halifax 83 L.C.R. Page 255 June 8th 2004) concurred with the Utility and Review Board's decision and went on to point out that even if there had been no agreement between the parties as to how the business losses were to be adjudicated, the Expropriation Act precluded betterment being set-off against anything other than injurious affection.

Highest and Best Use

Richard and Shirley McLeod owned a 471 acre property in Penobsquis, King County used as a managed model woodlot with subsidiary recreational activities such as sleigh rides, hiking trails and Nordic Skiing. On February 21st 1995 the Province of New Brunswick expropriated 23.5 acres so that they could build a four lane highway across the property. The highway severed the property in two. The appraiser retained by the owners noticed the presence of rhizomes, blueberries, jack pine and other indicia, and concluded that the property should be evaluated to see if it was appropriate for blueberry production. Upon receiving confirmation that such was the case, he determined the property's highest and best use was for blueberry production and assessed the compensation accordingly.

The Court determined that blueberry production was legally permissible, a demand existed, and production was profitable. The Court was uncertain as to whether it met the other two criteria, i.e. was within the realm of probability, and able to generate the highest net return for the longest period of time; but weighed the balance of probabilities and, bearing in mind the principles enunciated in the Dell Holdings Ltd. case, found in favour of the landowner. The Court determined the highest and best use of the property was for blueberry production, rather than its existing use as a woodlot.

Pipeline Easement:

(1) Admission of further evidence,
(2) Evidentiary weight to be applied to previous settlements,
(3) Applicability of Before and After Approach,
(4) Economic value of waterfront to be considered,
(5) Compensable impact of other pipeline in same easement,
(6) Appraisal and other costs.

Allan and Darlene Myers owned 40 acres of land with 3,937 ft. of water frontage at Bowles Point on the Milton Haven River in Guysborough County; a beautiful property, possessing wildlife and a fish habitat. The property was improved with a cottage, the building of which had commenced in 1997, and which was about ¾ complete. The cottage was insulated and used regularly. In the summer of 1997, Sable Offshore Energy Inc. began negotiating with property owners in the area to acquire easement rights for the construction of one or more pipelines between Goldboro and Point Tupper. Sable successfully negotiated the acquisition of easements from most private landowners with the exception of five properties, including that of the Myers. On January 8th, 1999 the Minister responsible for the Provincial Pipeline Act issued a vesting order, effectively expropriating an easement across the Myer's property. On February 8th, 1999, Maritimes and Northeast Pipeline Limited Partnership (M & NP) issued a notice to Myers under the National Energy Board Act that they too would be constructing a pipeline, to be located within the same easement as the Sable pipeline. Sable subsequently paid the Myers $42,650 in compensation for their pipeline easement and agreed to pay additional compensation for the above ground shut off valve and related apparatus. On the same day M & NP paid the Myers $25,866 in compensation for their easement.

The various heads of claim and the Board's decision thereon were as follows:

(1) Post hearing evidence on a gas leak was not admissible, even though the leak occurred after the hearing but before the decision was issued, primarily because the Board felt that the possibility of such a leak had been considered when the Myer's expert prepared his report.

(2) No evidentiary weight was placed on the monetary settlements agreed by Sable with the other property owners primarily because, (1) there was no evidence of similarity between the properties and the "pattern of dealing approach" was therefore not applicable, (2) there were not a great number of settlements, (3) there was no previous local experience of expropriation for gas pipelines, (4) the owners may not have acted knowledgeably because Sable did not advise them of their rights under the Expropriation Act.

(3) This was a partial taking and the "Before and After" test was the most appropriate way to determine the market value of the interest taken and the injurious affection to the remaining land.

(4) The economic value of the waterfront had to be considered in assessing compensation. The Myers' appraiser, Lee Weatherby of Turner Drake had assigned a "basic" land value and "waterfront benefit" in order to compute the market value. The Board concurred with his approach.

(5) Sable was not entitled to deduct the payment for the M & NP easement from their compensation to the Myers. Sable had advanced the argument that since their line was in the same easement as the Maritimes & North East Pipelines gas line, the compensation paid by the latter should be deducted from Myer's claim against Sable . something akin to the proposition that you should fly free if there are other passengers on the plane. The sheer logic of this argument was not readily apparent to the Board (nor we suspect to anybody other than Sable) and they declined to adopt it. The Board did point out that the M & NP line fell under Federal jurisdiction, related to a different activity, and a different ultimate purpose (it carried natural gas, while the Sable line carried gas liquids). However the Board went further and determined that even if such had not been the case, it would not have been appropriate to treat them as if they were a single easement . because they were not! The M & NP easement permitted the company to install one further pipeline; the Sable easement more than one pipeline.

(6) Appraisal costs incurred before the hearing could not be paid in advance of the hearing, notwithstanding the financial grief it may cause the expropriated party, because the Province had foreclosed such an opportunity when it repealed Section 35 of the Expropriation Act.

Pipeline Easement:

(1) Apprehension of Pipeline Explosion,
(2) Realty Taxes Paid on Pipeline Easement,
(3) Reduction in Value of Adjacent Property and Tree Farm,
(4) Compensation for the Lands Taken for the Easement,
(5) Compensation for Temporary 20 m Working Easement,
(6) Compensation for Annoyance and Aggravation During Construction,
(7) Compensation for Ongoing Annoyance and Aggravation.

In 1993 Trans Canada Pipelines Limited laid a second pipeline within their existing 30 m (98 ft.) wide pipeline easement and acquired a temporary 20 m (66 ft.) wide working easement contiguous to it for construction purposes for 3 months from Mr. Brian Burke and his spouse Jane Dickerson. Both the existing and the new pipeline were laid below ground so that Mr. Burke could continue to utilise the surface. The easement was covered with mixed brush. Stone fences had previously been installed across Mr. Burke's property, to discourage snowmobilers and all terrain vehicles. They were ineffective. Mr. Burke's residence was located at least 300 m (984 ft.) away from the easement. The property was situated in Rolph Township, Renfrew County, Ontario. The Committee's most significant decisions on the various heads of claim, were as follows:

(1) Mr. Burke's apprehension of a pipeline explosion, was not compensable because, (i) the arbitration hearings did not apply to "claims against a company, arising out of the activities of the company", and (ii) living alongside a pipeline was no more stressful than day to day events such as vehicular traffic.

(2) Realty Taxes paid on the pipeline easement were not compensable because Mr. Burke could seek a reduction in his assessment to the degree that his property was depreciated by the easement.

(3) There was no reduction in the value of Mr. Burke's adjacent property and tree farm: the original easement had already done the damage; no incremental loss had occurred by virtue of the second pipeline.

(4) Compensation for the pipeline easement was a nominal $500 since the new 10 m (33 ft.) wide easement lay within the existing 30 m (98 ft.) wide easement and Mr. Burke's reversionary interest was therefore not further diminished.

(5) Compensation was awarded for the 20 m (66 ft.) wide temporary working easement based on the annual rental value of the working easement, computed as 10% of its capital value.

(6) Compensation for annoyance and aggravation should be based on the entire three month construction period, not just the 19 days it occurred on Mr. Burke's property. The Arbitration Committee awarded $3,000 and made it clear that the sum reflected the fact that the residence was at least 300 m (984 ft.) away from the construction activity.

(7) Compensation of $1,000 was awarded for ongoing annoyance and aggravation since the increase in the swathe width, due to the temporary working easement, would encourage hunters, snowmobilers and all terrain vehicles.

Pipeline Easement:

Pipeline Easement:
(1) Damage Release,
(2) Sand and Gravel,
(3) Safety Zone,
(4) Costs

In April 1992 Trans Canada Pipelines prepared to lay a second pipeline within their existing 30 m (98 ft.) wide pipeline easement and acquire a temporary 20 m (66 ft.) wide working easement contiguous to it for construction purposes across lands owned by Irene Richard, and leased by her relatives John and Lise Houle. The property which the existing (and proposed) pipelines crossed, consisted of approximately 183 acres located at Lots 18 and 19, Concession 8, Township of Calvin, District of Nipissing, near Mattawa, Ontario. The Houles lived on the property, had a sand and aggregate business and extracted material from the Calvin Pit located on the lands near the pipeline easement. Most of their sand and aggregate however was extracted from the Corbeil Pit, which was located elsewhere. Sand and aggregate were in abundant supply in the area. Irene Richard had purchased the property in 1984 subject to the first pipeline easement. That pipeline easement was for a single pipeline. For compensation purposes Ms. Richard effectively merged her rights with those of the Houles, so for all intents and purposes the compensation claim was treated by the Arbitration Committee as though the Houles were the fee simple owners.

During the course of the negotiations it was agreed that the proposed 20 m (66 ft.) wide temporary working easement should instead become permanent. Thus the existing 30 m (98 ft.) easement was widened to 50 m (164 ft.). The second pipeline continued to physically lay within the existing 30 m (98 ft.) wide easement. As a condition of permitting the second pipeline, the Houles insisted on payment for the value of the aggregate below the entire 50 m wide easement. Eventually, Trans Canada Pipelines Limited agreed, paying a total of $32,100 for the 5.57 acre easement, including $20,000 for "sterilisation of Sand/Gravel in the existing and new R/W's including the area adjacent to the new R/W where a 3H:1V setback ratio is to be maintained". The "setback ratio" is a reference to the threat by the Houles to excavate to a 30 ft. depth by the existing easement. This would have threatened the stability of the pipeline. The balance of the compensation was for land ($500/acre), timber and miscellaneous items. Trans Canada Pipelines Limited obtained a Damage Release from Ms. Richard and Mr. Houle acknowledging that the monies were in full payment, settlement and satisfaction for all damages of every kind and character whatsoever caused by the construction of a pipeline across the property owned by Ms. Richard. Once the construction work was complete, the Houles took their case before the Arbitration Committee arguing (amongst other things) that the compensation thus far received from Trans Canada Pipelines Limited referred to the construction, not for the loss of use of the lands taken. The Committee hearing took 22 days and involved 26 witnesses. There were really two issues. (1) Did the original agreement cover all the compensable heads of claim? (2) If it did not, what additional compensation should be awarded? The Committee decided "no" to the former and "none" to the latter. Their most significant rulings were as follows:

(1) "Damage Releases" signed before completion of construction do not displace documents signed at the same date which contemplate compensation for further damages. Documents proffered by the pipeline company which purport to limit any further damages contemplated by the N.E.B. Act are probably invalid.

(2) The value of the aggregate was not a compensable head of claim even though the claimants extracted sand and gravel from the Calvin Pit on the property because there was no objective evidence that extraction of aggregate from the pipeline easement land was anything other than a "possibility". In order for the "possibility" to be transformed into "probability" the Farlinger Developments Ltd., and Borough of East York (1975), 9O.R. (2d) 553 (C.A.) (leave to appeal to the Supreme Court of Canada dismissed 20th October 1975) rule applies, viz. Probability > 50% possibility.

(3) The 30 metre Safety Zone was not an easement since Section 112 of the N.E.B. Act does not grant an easement to Trans Canada Pipelines Limited, or, for that matter, any interest whatsoever.

(4) Since the Safety Zone was not due to the activities of Trans Canada Pipelines Limited the Arbitration Committee had no jurisdiction to award compensation for losses accruing thereto.

(5) The section of the N.E.B. Act which permits the Arbitration Committee to award costs should not be used to encourage landowners to hold the pipeline companies to ransom by pursuing unmeritorious claims. The Committee refused to award costs to either party.

Pipeline Easement: Injurious Affection

Clayton C. Elliott and Linda L. Elliott owned land in the proximity to a pipeline constructed by the Maritimes and Northeast Pipeline Limited Partnership (MNP). The pipeline did not cross the Elliott's land but the 30 metre controlled area alongside the pipeline did cross it. The Elliotts claimed compensation for diminution in property value due to the proximity of the pipeline and applied to have the matter adjudicated by arbitration. The Minister of Natural Resources concurred and referred the matter to an arbitration committee albeit only for the Elliott's property which lay outside the 30 metre controlled area. The MNP applied to the Federal Court to have the Minister's referral quashed.

The Court ruled that lands in the controlled area may sustain damage, due to the existence of the pipeline, because of the legislated limitations regarding those lands. However since there was no such limitations which applied to land located beyond the controlled area, neither the Act, nor case law, supported a claim for arbitration to consider injurious affection. However had the Elliotts suffered a loss due to the activities of MNP (acquisition, construction, inspection, maintenance or repair of the pipeline) they would have been entitled to have the matter submitted to arbitration. The Court made it clear that had the Elliotts based their arbitration request on damage to their land within the controlled area, their decision may have been very different.