The Queen (Plaintiff)
v.
Joseph Edgar Skelton, Dorothy Marie Skelton
and Dain City Auto Wreckers Limited
(Defendants)
Trial Division, Heald J.—Welland, February 14,
15, 16, 17 and 18; Ottawa, March 10, 1972.
Expropriation—Parcel taken used as auto wrecking
yard—Value of—Principles determining—Highest and best
use—Business disturbance.
On December 6, 1965, the Crown expropriated land
belonging to defendant company in Welland County,
Ontario, pursuant to the St. Lawrence Seaway Authority
Act, R.S.C. 1970, c. S-1. The land was used by defendant
company in connection with its auto wrecking business.
Held: 1. The land should be valued on the basis of its
highest and best use which on the evidence was as an auto
wrecking yard, and taking into account its potential at the
time of taking.
Woods Manufacturing Co. v. The King [1951] S.C.R.
504; Duthoit v. Manitoba (1965) 54 D.L.R. (2d) 259,
[1967] S.C.R. 128; N.C.C. v. Marcus [1969] 1 Ex.C.R.
327, [1970] S.C.R. 39; N.C.C. v. Hobbs [1970] S.C.R.
337; Saint John Harbour Bridge Authority v. J. M.
Driscoll Ltd. [1968] S.C.R. 633, referred to.
2. On the evidence the value of the land at $400 an acre
was $5,233.20; a building $17,252; roadways, asphalt pad
and fences $2,715.27; cars and trucks $35,000; fill on 7
acres of land $2,000; the proper compensation for business
disturbance $15,000 for rent, relocation, business losses
because of a less favourable site, additional legal expenses,
etc.
EXPROPRIATION action.
Derrick Aylen, Q.C. and Barry Collins for
plaintiff.
Duncan McFarlane for defendants.
HEALD J.—This is an information to deter
mine the compensation payable in respect of
certain property in the Township of Humber-
stone, in the County of Welland, Ontario,
expropriated on December 6, 1965, with the
prior approval of the Governor-in-Council pur
suant to Order-in-Council P.C. 1965-2174 dated
December 2, 1965, pursuant to section 18 of
the St. Lawrence Seaway Authority Act, R.S.C.
1952, c. 242—now R.S.C. 1970, c. S-1, s. 19,
for the purposes of the said Act, in particular in
connection with the relocation of the Welland
Canal between Port Robinson and Port Col-
borne, by the deposit of a plan and description
in the Registry Office for the Registry Division
of the County of Welland on December 6, 1965.
The description of the land taken is set out in
Paragraph 4 of the Agreed Statement of Facts
as follows:
ALL AND SINGULAR that certain parcel or tract of land
and premises situate, lying and being in the Township of
Humberstone, County of Welland and being composed of
Part of Lot 20, Concession 5, Township of Humberstone,
County of Welland having an area of 13.083 acres more or
less, more particularly described as follows:
PREMISING that all bearings are astronomic and are
referred to the meridian through Longitude 81° 00' West:
COMMENCING at a point in the Westerly limit of Lot
20 distant therein 1112.94 feet measured North 1° 19' West
along the said Westerly limit from the Southwest corner
thereof:
THENCE South 1° 19' East along said Westerly limit
1012.94 feet:
THENCE North 88° 12' East 100.0 feet:
THENCE North 1° 19' West 12 feet to a point:
THENCE North 88° 12' East 132 feet:
THENCE South 1° 19' East 112 feet to a point in the
Southerly limit of lot 20:
THENCE North 88° 12' East along the Southerly limit of
said lot 20, 338.53 feet to an angle therein:
THENCE continuing along the said Southerly limit North
88° 30' East 583.95 feet:
THENCE North 1° 19' West 330.0 feet:
THENCE South 88° 30' 30" West 769.61 feet:
THENCE North 17° 12' West 805.49 feet more or less to
the Southerly limit of the Canadian National Railway lands
crossing said lots:
THENCE along a curve to the left, having a radius of
11,393.20 feet, an arc distance of 164.44 feet, the chord
equivalent being 164.44 feet on a course North 89° 56' 16"
West to the point of commencement.
The defendant Joseph Edgar Skelton pur
chased subject property in 1949 which at that
time was unimproved. Mr. Skelton had previ
ously operated an auto wrecking business about
one-half mile away from subject property, his
evidence at trial indicating that he has been in
said business for about thirty years.
Upon acquiring subject property, Mr. Skelton
carried out certain improvements, filling in the
land over a period of some time and construct
ing a building on it in 1950 for use in conjunc
tion with his business. Additionally, some bush
was removed at the rear of the building, some
drainage was installed, roadways throughout the
subject property were stoned and an area in
front of the building was asphalted.
In 1957, the defendant, Mr. Skelton, sold the
subject property and his auto wrecking business
to the corporate defendant, a company which
he had incorporated. Mr. Skelton's evidence at
trial was that he owned 98% of this company,
all except two common shares, one held by his
brother and one by a friend of his. Counsel for
the defendants stipulated at the trial that neither
of the personal defendants had any interest in
the subject property or the said business at the
date of expropriation and agreed that any and
all compensation awarded herein was payable
to the corporate defendant.
In 1963, an addition to the building was com
menced, but was not finished when the property
was expropriated in 1965. The floor was not
installed and the heating and electrical work had
not been started. Both parts of the building
were constructed of concrete block. Part of the
building was used for the repair of automobiles
and trucks. In the other part of the building,
automobile parts were stored, having been
removed from the wrecked cars brought to the
property. Other parts were stored in wrecked
vans, buses and trucks on the property.
Mr. Skelton's method of doing business was
to buy wrecked cars from insurance companies,
public garages, used car lots, etc. Certain valu
able parts such as radios, radiators, tires, batter
ies, axles, transmissions, etc., would be
removed and stored somewhere on the prem-
ises. Other parts would be left on the wrecked
cars in the yard.
Defendant's counsel submits that defendant
is entitled to compensation in the sum of $170,-
000 which he breaks down as follows:
A. Compensation for Land and Improve-
ments-except stoning $ 44,000
B. Compensation for defendant's Inventory
of Wrecked Cars and Trucks 42,500
C. Compensation for Stoning areas of Sub
ject Property 13,000
D. Compensation for Business Disturbance
including cost of relocation, business
losses because of a less favourable site;
additional legal expenses, etc. 70,500
Total $ 170,000
I consider it convenient to discuss this claim
under the above noted headings.
A. COMPENSATION FOR LAND AND IMPROVE
MENTS EXCEPT STONING.
Subject property is an "L" shaped parcel
situated on the north side of Forkes Road in
Lot 20, Concession 5, Humberstone Township,
approximately one-half mile east of the junction
of County Road 12A and Forkes Road. It is
located about six miles north of the City of Port
Colborne and about three miles south of the
City of Welland and contains 13.083 acres.
To the west, along the present Welland Canal,
is a built-up area of commercial, industrial and
residential properties. The lands to the east and
south of subject property are predominantly
rural in nature. Across the top of subject prop
erty runs a main line of the Canadian National
Railway and Wabash Railroad, while a branch
line runs between Welland and Port Colborne in
a lot immediately west of subject property. The
land in the immediate vicinity is flat and rela
tively poorly drained with some areas of marsh
and scrub bush. The subject property was origi
nally a low-lying, swampy area which has been
filled over a period of years and made useable
as an auto wrecking yard. Most of the useable
land on the subject property formed an island
between two creeks, one just outside subject
property to the East which flowed in a north-
westerly direction and the other, almost in the
centre of subject property.
Mr. Skelton conceded that these creeks
flooded in a normal spring resulting in many of
defendant's wrecks sitting in water for consid
erable periods of time. There is a primitive road
system throughout subject property enabling
the proprietor to travel from the shop to various
sections of the yard. The roads were in mainly
poor condition but passable even during wet
seasons. The front yard had been asphalted in
front of the building. In front of the parking
area, there is a white picket fence and in front
of the yard, along Forkes Road, a high board
fence. Utilities in the neighbourhood include
water (only as far east as subject property along
Forkes Road but not taken into subject proper
ty), hydro and natural gas. Forkes Road is a
well-travelled east-west artery, with some strip
residential and commercial development west
of subject property, in the immediate vicinity of
Dain City.
Defendant's claim of $44,000 under this
heading is further broken down as follows:
(a) Value of Building $ 17,750
(b) Value of land at $1,200 per acre 15,800
(c) Value of roadways, asphalt pad at
front of building, board and picket
fencing 10,686
Total $ 44,236
which was rounded to $44,000.
At the commencement of the trial, counsel
for both parties advised me that they had
agreed on a value for the building on subject
property at $17,750.
I accept this valuation as being reasonable
and will carry same forward in my award.
I proceed next to a consideration of the value
of subject land. The defendant called two
appraisers to give expert evidence of value, Mr.
W. A. Collings of Welland and Mr. J. C. Bro-
drick of St. Catharines. Both of these appraisers
valued subject land at $1,200 per acre.
I propose to deal firstly with the evidence of
Mr. Collings. This was the first time he had
given evidence as an expert appraiser in Court
proceedings. He gave evidence of ten compa
rable sales in support of his valuation of $1,200
per acre. The first comparable sale involved 3.4
acres which sold for $5,000 or $1,470 per acre.
However, what he did not tell the Court in the
first instance was that this was not an arm's
length transaction, that it was a sale in August
of 1965 by one Rose D'Amico to a trucking
company owned by her own family; or that
Mrs. D'Amico had purchased this same acreage
less than a month earlier in an arm's length
transaction for $1,000 in total. This information
came out in cross-examination and the relevant
certified copies of deeds were received in evi
dence. Whether Mr. Collings had the informa
tion concerning the earlier sale in his possession
or whether his investigations were less than
thorough, his lack of precision and accuracy in
respect of this particular comparable does cast
doubt on the value generally of his appraisal.
He was also in error in stating the acreage of
comparable No. 1 at 3.4 acres. A careful read
ing of the deeds would have informed him that
the acreage is, in reality, 2.7 acres.
Mr. Collings' comparables are subject to a
number of shortcomings. First of all, most of
the acreage in his comparables run from one to
five acres, considerably smaller than the subject
parcel. There is evidence from other witnesses
to the effect that the price tends to be higher
per acre when the total acreage is smaller.
Secondly, most of his comparables are from
two miles to six miles distant from subject land
and in a number of cases were in the industrial
area either of the City of Welland or City of
Port Colborne. By no stretch of the imagination
can this land be said to be comparable to the
subject property. In one case, his comparable
was not a sale at all but rather an offering by
the City of Welland at $1,200 per acre of land
in its new industrial area. Some of his compa-
rables had buildings, involving an arbitrary
valuation by Mr. Collings for said buildings in
order to extract a land value. I do not consider
these valuations to be very accurate or reliable.
His only comparable that was close at all to
the subject property was his comparable No. 7
(one-quarter mile West) but No. 7 comprised
only 4.67 acres and it was across the existing
Welland Canal to the west. There was uncon-
tradicted evidence to the effect that property
west of the Canal was more valuable than prop
erty east of the Canal. The other difficulty with
comparable No. 7 was that the sale took place
in October, 1967, nearly two years after the
expropriation date. There was uncontradicted
evidence that values in the expropriation area
increased considerably in the months subse
quent to the expropriation in December, 1965.
For all of these reasons, I have concluded
that I cannot accept Mr. Collings' appraisal.
I come now to the evidence of Mr. Brodrick,
the other appraiser called by the defendant who
also valued the subject property at $1,200 per
acre. Mr. Brodrick also relied on ten compa-
rables. It is significant that one-half of his com-
parables (5) were the same as Mr. Collings'.
Eight out of ten of his comparables were for
acreages ranging from 0.81 acres to 5.07 acres.
Six out of ten of his comparables were west of
the existing Canal. The only one of comparable
size was comparable No. 5 but it is on the west
side of the Canal and is in the industrial area of
the City of Welland and is some three miles
distant from subject property.
In my opinion, Mr. Brodrick proceeded on
the false assumption that the defendant could
not obtain a wrecking yard licence in the
immediate area of subject property unless he
were to relocate in the industrial area of the
City of Welland. The evidence was not to the
effect that he could not locate in the immediate
area if he were content to locate east of the
Canal. (Subject property is east of the Canal.)
As a matter of fact, he was successful in obtain
ing a wrecking yard licence one and one-half to
two miles east of the old location and that was
where he relocated his business.
Mr. Brodrick was wrong in assuming that the
only place he could get a licence was in the
Welland industrial area as proven by later
events and he was wrong in comparing subject
property with the Welland industrial area so far
as prices were concerned. This was really a
case of comparing "apples" with "oranges". I
am satisfied by the evidence that every one of
Mr. Brodrick's "comparables" are not really
"comparables" at all.
The plaintiff also called two expert appraisers
on land values, Mr. Ford and Mr. Mackenzie. I
was particularly impressed by the evidence of
Mr. Mackenzie. He possesses impeccable
qualifications. He is a member of various
Canadian and American real estate boards and
real estate appraisers associations. He has par
ticipated in numerous realtors' and appraisers'
courses, both in Canada and the United States.
He has been lecturer at Niagara College and
Mohawk College on principles of appraising. He
has been a real estate appraiser, broker and
consultant since 1958 and has given expert evi
dence in Court on many occasions. He has also
sold real estate and is Vice-President of a real
estate firm in Niagara Falls, Ontario.
He arrived at a land value of the subject
property at $350 per acre. He makes use of
twelve comparables in his appraisal report.
Mr. Mackenzie was quite emphatic in his
opinion that the size of a parcel makes a great
deal of difference in the unit price. He was
equally emphatic in his opinion that a two or
three acre parcel on the west side of the Canal
was in no way comparable to the subject prop-
erty—that such a parcel would be worth much
more per acre than subject property.
I thought his approach was preferable to the
other three appraisers. He said that he tried to
find sales geographically quite close to the sub
ject property and as close as possible, time-
wise, to subject expropriation on December 6,
1965. He used thirteen sales, in nine lots, in
three concessions of Humberstone Township,
as comparables. Most of his comparables were
within one mile of subject property.
I quote from his appraisal report on page 17
thereof:
Sales 4, 5, 6 & 7 are good indicators in estimating the land
value of "Subject" since they represent recent real estate
activity in an area close to "Subject" ... Sales 4, 5 and 6
are sales of comparable acreage to "Subject" and indicate a
maximum of $285 per acre (Sale 6) for land of this type in
this area. However, the interior location and distance from
main roads (i.e., Forkes Road) would indicate a higher value
for "Subject" property.
Mr. Mackenzie then refers to a sale west of the
Canal at $500 per acre (Sale 12) and makes the
observation that land values appear to be great
er west of the Welland Canal on Forkes Road.
He concludes with the following:
In the final analysis, the estimated land value of "Subject"
appear to lie in a range between the value indicated by Sale
6 ($285 per acre) for rural lands and a value less than that
indicated by Sale 12 ($500 per acre).
Therefore, it is my opinion that the Fair Market Value for
"Subject" property is 350 dollars per acre.
The other expert appraiser who gave evi
dence on behalf of the plaintiff was Mr. H.
Wilfrid Ford of Hamilton. Mr. Ford has been
twenty-seven years in the appraisal business.
He has testified as an expert appraiser in a
number of Court cases. He holds membership
in various r estate organizations and apprais
al institutes. ln his approach to the market value
of subject property, he utilized eight compa
rable sales. However, with the exception of one
comparable (No. 7-12.2 acres) the acreage in
his comparables ranged from a minimum of 50
acres to a maximum of 115 acres. Additionally,
many of these comparables were several miles
distant from subject property, one as far as
eight miles away.
His only comparable on which I place much
reliance is his comparable No. 7, which is the
same sale as Mr. Mackenzie's No. 6 (supra)—
which was a 12.2 acre parcel sold in November,
1965 at a price of $285 per acre.
Mr. Ford summarizes his opinion at page 14
of his appraisal report as follows:
In comparing subject property to the above sales, it must be
kept in mind that subject site is almost an island because of
the two creeks. This situation reduces the use of the site
unless a considerable amount of fill is brought in to raise the
ground level. On the `credit side' however, subject site is
close to filtered water although this supply (as explained in
the 'Site Data') is very limited.
Therefore, after taking all pertinent factors into consider
ation, and with due regard to any advantage which may
exist in connection with subject site's close proximity to the
hamlet of Welland junction, it is my opinion that the Market
Value of subject land, as of December 6, 1965, was $300
per acre.
There is considerable authority in our Courts
as to the rules to be applied in determining
compensation in cases of this kind.
Rinfret C.J., in delivering the judgment of the
Supreme Court of Canada in Woods Manufac
turing Co. v. The King [1951] S.C.R. 504, said
at pages 506-08:
While the principles to be applied in assessing compensa
tion to the owner for property expropriated by the Crown
under the provisions of the Expropriation Act, c. 64, R.S.C.
1927, and under various other Canadian statutes in which
powers of expropriation are given, have been long since
settled by decisions of the Judicial Committee and this
Court in a manner which appears to us to be clear, it is
perhaps well to restate them. The decision of the Judicial
Committee in Cedars Rapids Manufacturing and Power Co.
v. Lacoste ([1914] A.C. 569), where expropriation proceed
ings were taken under the provisions of The Railway Act,
1903, determined that the law of Canada as regards the
principles upon which compensation for land taken was to
be awarded was the same as the law of England at that time
and the judgment delivered by Lord Dunedin expressly
approved the statement of these principles contained in the
judgments of Vaughan-William and Fletcher-Moulton, LL.
JJ. in Re Lucas and Chesterfield Gas and Water Board
([ 1909] 1 K.B. 16). The subject-matter of the expropriation
in the Cedars Rapids case consisted of two islands and
certain reserved rights over a point of land in the St.
Lawrence River, the principal value of which lay not in the
land itself but in the fact that these islands were so situate
as to be necessary for the construction of a water power
development on the river. It is in this case that the expres
sion appears that where the element of value over and
above the bare value of the ground itself consists in adapta
bility for a certain undertaking, the value to the owner is to
be taken as the price which possible intended undertakers
would give and that that price must be tested by the
imaginary market which would have ruled had the land been
exposed for sale before any undertakers had secured the
powers or acquired the other subjects which make the
undertaking as a whole a realized possibility. That decision
was followed in the same year by a second judgment of the
Judicial Committee in the case of Pastoral Finance Associa
tion v. The Minister ([1914] A.C. 1083), where Lord Moul-
ton, in considering a claim for compensation for properties
taken by the Government of New South Wales under the
Public Works Act 1900 of that State, said that the owners
were entitled to receive as compensation the value of the
land to them and that probably the most practical form in
which the matter could be put was that they were entitled to
that which a prudent man, in their position, would have
been willing to give for the land sooner than fail to obtain it.
These statements of the law have been followed consist
ently in the judgments of this Court. In Lake Erie and
Northern Railway v. Brantford Golf and Country Club
((1917) 32 D.L.R. 219 at 229), in proceedings under the
Railway Act, R.S.C. 1906, c. 37, Duff J. as he then was, in
discussing the phrase "the value of the land to them", after
saying that the phrase does not imply that compensation is
to be given for value resting on motives and considerations
that cannot be measured by any economic standard, said in
part:
It does not follow, of course, that the owner whose
land is compulsorily taken is entitled only to compensa
tion measured by the scale of the selling price of the land
in the open market. He is entitled to that in any event, but
in his hands the land may be capable of being used for the
purpose of some profitable business which he is carrying
on or desires to carry on upon it and, in such circum
stances it may well be that the selling price of the land in
the open market would be no adequate compensation to
him for the loss of the opportunity to carry on that
business there. In such a case Lord Moulton in Pastoral
Finance Association v. The Minister ([1914] A.C. 1083 at
1088), has given what he describes as a practical formula,
which is that the owner is entitled to that which a prudent
person in his position would be willing to give for the land
sooner than fail to obtain it.
In the same year, in Lake Erie and Northern Railway v.
Schooley ((1916) 53 Can. S.C.R. 416 at 421), Davies J.
quoted the passage from the judgment of Lord Moulton
above referred to and adopted it as stating the true princi
ple, a statement with which Anglin J. concurred. In Mont-
real Island Power Co. v. The Town of Laval ([1935] S.C.R.
304 at 307), Duff C.J. again referred to the formula enun
ciated by Lord Moulton as accurately stating the principle
to be applied where land was compulsorily taken under the
authority of an expropriation act, and in Jalbert v. The King
([1937] S.C.R. 51 at 71); The King v. Northumberland
Ferries ([1945] S.C.R. 458) and in Diggon-Hibben Ltd. v.
The King ([1949] S.C.R. 712), the principle so stated was
adopted and applied. The proper manner of the application
of the principle so clearly stated cannot, in our opinion, be
more accurately stated than in the judgment of Rand J. in
the last-mentioned case at p. 715.
. the owner at the moment of expropriation is to be
deemed as without title, but all else remaining the same,
and the question is what would he, as a prudent man, at
that moment, pay for the property rather than be ejected
from it.
Said rules were also very aptly expressed by
Guy, J.A. in Duthoit v. The Province of Manito-
ba (1965) 54 D.L.R. (2d) 259 at p. 266 as
follows:
It is sufficient to say that, broadly speaking, the following
rules must be observed:
1. The value to be placed on the land taken is the value to
the owner, not the taker;
2. The value must be on a basis of the highest and best
use of the property taken;
3. The value is the value as at the date of expropriation;
4. The appraiser must take into account the potential of
the property at the time of the taking.
and his statement was approved on appeal in
the judgment of the Supreme Court of Canada
[1967] S.C.R. 128 at p. 131 where Cartwright
J., as he then was, said:
Guy J.A. after stating concisely and accurately the rules
to be observed in fixing the compensation to be paid for
expropriated property, ... .
President Jackett of the Exchequer Court
(now the Chief Justice of this Court), in the
case of National Capital Commission v. Marcus
[1969] 1 Ex.C.R. 327, affirmed by the Supreme
Court of Canada [1970] S.C.R. 39, discussed
the rules for determining values at page 349-
350 as follows:
What I must do, as I understand it, is put myself in the
position of a person owning the subject property just before
the expropriation willing to sell, but under no compulsion to
sell, and capable of appreciating all the factors bearing on
what a reasonably prudent and competent person would
take into account in the circumstances, and consider what
amount he would insist on having before he would sell; and
I must put myself in the position of a person desiring to buy
a property such as the subject property just before the
expropriation but under no necessity of obtaining that par
ticular property, and capable of appreciating all the factors
bearing on what a reasonably prudent and competent person
would take into account in the circumstances, and consider
what is the highest amount that he would be prepared to pay
to acquire the property.
Spence J., in delivering the judgment of the
Supreme Court in Saint John Harbour Bridge
Authority v. J. M. Driscoll Ltd. [1968] S.C.R.
633, said at page 638:
... As has been often repeated, the standard of valuation of
compensation for expropriation of lands has been put con
cisely by Rand J. in Diggon-Hibben Ltd. y, The King ([1949]
S.C.R. 712), at p. 715 as follows:
... the owner at the moment of expropriation is to be
deemed as without title, but all else remaining the same,
and the question is what would he, as a prudent man, at
that moment, pay for the property rather than be ejected
from it.
It is to find the amount which should be fixed by that
standard that is the task of the arbitrator. The arbitrator, of
course, must consider the value of the land for its highest
and best use. If that highest and best use is not the use to
which the lands were put at the time of the expropriation
then the potentiality of such highest and best use in the
future gives to the lands their value and the present value of
that potentiality must be considered.
Probably the most recent pronouncement on
this subject is the Supreme Court decision of
National Capital Commission v. Hobbs [1970]
S.C.R. 337, where Abbott J. said at pages
339-40 :
The rules for determining compensation in cases of this
kind have been discussed in a series of decisions in this
court: Diggon-Hibben, Limited v. The King ([1949] S.C.R.
712, [1949] 4 D.L.R. 785, 64 C.R.T.C. 295); Woods Manu
facturing Company Limited v. The King ([1951] S.C.R. 504,
67 C.R.T.C. 87, [1951] 2 D.L.R. 465); Gagetown Lumber
Co. Ltd. v. The King ([1957] S.C.R. 44, 6 D.L.R. (2d) 657).
No useful purpose would be served by referring to them in
detail. Generally speaking, an owner is entitled to the value
of the property to him, calculated on the basis of its highest
and best use. This value may be the market value, but it
may be more in those cases where, for some reason, the
land has a special value to the owner beyond what it would
have in similar use by somebody else.
Where it is claimed that a property has a special value to
the owner over and above its market value, the owner must
adduce the facts necessary to prove this value, which must
be such that it can be measured in terms of money. It is not
sufficient for a claimant to say that he would pay a certain
amount of money rather than be deprived of this property.
There must be proof that the land has special advantages
that gave it a special economic value for the expropriated
party, and no value should be attributed for sentimental
attachment.
The one fact upon which all four expert
appraisers were in agreement was that the sub
ject property was being put to its highest and
best use at the time of expropriation—i.e., as an
auto wrecking yard.
This consensus is reflected in paragraph 25 of
the agreed statement of facts wherein the par
ties also agree that the existing use at date of
expropriation was the highest and best use.
I said earlier that I was particularly impressed
by the evidence of appraiser Mr. Mackenzie.
He concluded that a maximum value in subject
area would be $285 per acre based on sales
very close to subject. He then adjusted upwards
to $350 per acre to compensate for the fact that
subject was on _a little better road and had a
slightly better location for a business like
defendant's business.
My only criticism of his appraisal is that, in
my view, he did not compensate enough for
these advantages of subject property over his
nearest comparables.
Subject property abutted on Forkes Road, a
paved all-weather road; his nearest comparables
abutted on Snider Road, a gravel all-weather
road. There was evidence that for at least two
months each spring, the gravel roads were sub
ject to half-load restrictions. This would be a
factor in defendant's business because it was
established that heavy loads and equipment are
a common occurrence in this type of business. I
am, therefore, of the opinion that defendant's
land should be valued at $400 per acre at date
of expropriation. I have reached this conclusion
on the basis of the evidence adduced and apply-
ing the principles of the authorities cited (supra)
to the facts of this case. In my opinion, $400
per acre represents the value to the owner at
date of taking on the basis of the highest and
best use of subject property. I have also taken
into account the potential of the property at
time of taking.
Such a value is a lesser value than property to
the west of the existing Canal ($500) because
the evidence was clear that such property defi
nitely has a higher value than the property east
of the Canal.
I think it interesting to observe that defendant
relocated one and one-half to two miles east of
subject property on the same Forkes Road on
property purchased in April of 1970 at a cost of
$390 per acre.
I would agree that replacement cost is not the
measure of value for the expropriated property
but it may suggest that the value I propose to
place on subject property is reasonable and fair
in all the circumstances. The evidence was that
after the expropriation of 1965, there was a
gradually rising market in the area. Even after
several years on a rising market, defendant was
able to relocate about one and one-half miles
away and to obtain a licence there for his auto
wrecking yard at a cost slightly less than $400
per acre.
In aggregate the value of subject land is as
follows:
13.083 acres @ $400 per acre—$5,233.20.
The other components of Claim A, are: the
value of the roadways; the asphalt pad at the
front of the building and the board and picket
fences.
Dealing firstly with roadways in subject prop
erty: the witness, Cohoon, a civil engineer, tes
tified there were 4,497 lineal feet of stone road
way having an average width of ten feet. He
also gave the measurements of the asphalt pad
as 110 feet in length and 75 feet in width
resulting in an area of 8,250 square feet. The
witness, Whitman, who is an estimator with a
construction company, gave a replacement cost
price on November 2, 1968 at $5,693 for the
roadways and $2,740 for the asphalt pad.
On the other hand, Ateo Isippon, an officer
of Dominion Construction Co. (Niagara) Ltd.,
general contractors, estimated the cost in June
of 1966, and testified that his company would
have replaced the roadways at that time for
$1,210. So far as the asphalt pad is concerned,
Isippon made no allowance for it. His evidence
was that when he visited subject property in
June of 1966, he did not see any asphalt pad,
that the roads in front of the building looked the
same as elsewhere. Several other witnesses who
inspected the property at a later date also said
they did not see any asphalt pad.
I think an asphalt pad was built all right but
the evidence as to its construction, the material
used, the thickness, etc., is far from satisfacto
ry. The evidence was that it had been there at
least for three or four years prior to the expro
priation date. The photographs show that it had
depreciated considerably—to the extent that
visitors to the property could not really tell it
from the roadways.
Accordingly, I think defendant's estimates
totalling $8,433 for the roadways and asphalt
pad are much too high. Conversely, plaintiff's
estimate of $1,210 is perhaps too low, and
makes no allowance whatsoever for the asphalt
pad. The witness, Cohoon's, evidence was that
there was about an acre of roadway on subject
property. The witness, Louis D'Amico, the
manager of a quarry, in the business of selling
stone testified that an acre of roadway stone in
1965 would have cost $1,627 to a thickness of
seven inches and that it would have cost $225
to spread, for a total in the order of $1,850. I
think such an operation would have left defend
ant with probably a slightly better surface than
he had at date of expropriation. Looking at all
of the evidence on this item, I fix the sum of
$2,000 as fair valuation for defendant's road
ways and asphalt pad.
I come now to the fences. Mr. Cohoon's
evidence was that there was 636 feet of 8 foot
high board fence and 242 feet of 3 foot high
picket fence.
Again the replacement cost estimates are
quite far apart.
Defendant's witness, Whitman, in his esti
mate of November 22, 1968, says $2,253.
Plaintiff's witness, Isippon, said his company
would have built both fences on June 15, 1966
for a firm price of $1,155. I accept Mr. Isip-
pon's cost figure. It was a firm price and it was
in mid 1966, only a few months after
expropriation.
Both fences have to be depreciated consider
ably. Mr. Skelton's evidence was that the first
fence was put up in 1949. No definite date
could be given for erection of the remainder.
The witness, Ford, would depreciate both
fences from 40% to 50% and says that he
inspected both fences. The photographs entered
as exhibits show that the top of the board fence
had a wavy appearance and indicated that some
of the posts may have rotted through. The
photographs of the picket fence show that it
was in a somewhat better condition, although it
also was wavy to a lesser extent.
Looking at all the evidence on this point, I
have concluded that the picket fence should be
depreciated at the rate of 30% and the board
fence at the rate of 40%.
I therefore propose to allow a figure for the
fences computed as follows:
(a) Picket fence—Replacement cost $ 222.64
less 30% depreciation 66.79
Value at expropriation date $ 155.85
(b) Board fence—Replacement cost $ 932.36
less 40% depreciation 372.94
Value at expropriation date $ 559.42
Total value of fences at expropriation date—$715.27
This will complete the items claimed under
defendant's Claim A and I recapitulate my
awards thereunder as follows:
A. COMPENSATION FOR LAND AND IMPROVE
MENTS EXCEPT STONING
(a) Value of building $ 17,750.00
(b) Value of land at $400 per acre 5,233.20
(c) Value of roadways, asphalt pad at
front of building, board and picket
fencing 2,715.27
Total $ 25,698.47
B. COMPENSATION FOR DEFENDANTS
INVENTORY OF WRECKED CARS
AND TRUCKS.
Here, the defendant claims the sum of
$42,500 which is based on the closing inventory
of December 31, 1968 as shown in the defend
ant's unaudited financial statement for that
year.
The evidence adduced on this item is far from
satisfactory. Mr. Skelton testified that for the
purposes of inventory valuation at year end, he
"walked through the yard" and valued the
inventory of wrecks on the basis of the "parts"
which could be resold, and then the balance on
the basis of their value for scrap at that particu
lar time. The evidence was to the effect that the
market value on scrap fluctuated from $5 to
$19 per ton at the yard.
Mr. Skelton said that in the earlier years, he
kept the inventory value low but that after an
income tax audit in 1964, he "might have raised
it some". Defendant's unaudited financial state
ments for the years from and after 1961 were
received in evidence. In 1961, the closing
inventory was $11,000; in 1962—$13,000; in
1963—$15,000; in 1964—$17,000. In other
words, it increased by $2,000 a year. This is
clearly a very rough and arbitrary estimate.
Then, in 1965, it was just as arbitrarily raised to
$27,500; in 1966 to $35,550; in 1967 to
$40,250 and in 1968 to $42,500. Mr. Skelton
could not explain how the inventory went up
from $17,000 to $27,500. He conceded that
these figures were "not an exact figure at all".
He also conceded that said closing inventory
figures "could be out $10,000 pretty easily".
Another difficulty in valuing this inventory is
that the wrecked cars are worth more for parts
than they are as scrap. After expropriation, they
were sold by plaintiff for scrap at a total cost to
the purchaser of $27,500. This probably places
a lower limit on the value of the inventory. The
practice in this business is to sell all possible
parts off the wrecks before selling the remain
der for scrap. Defendant was frustrated in its
normal practice by the expropriation and should
be compensated therefor.
The evidence of Mr. Walter Quinn, property
agent for the St. Lawrence Seaway Authority,
was to the effect that some of the older wrecks
(1924-30 vintages) were "in pretty sad condi
tion". He testified that in a "good 90% of the
cars" many parts were missing.
Considering all the evidence, imprecise and
unsatisfactory as it is, I have concluded that the
sum of $35,000 would be fair compensation to
the defendant as the value of inventory taken.
Such a valuation, being somewhat higher than a
minimal scrap value, recognizes partially
defendant's submission that, had he been
allowed to remain in business, he would have
realized more than the scrap value by selling off
the salvageable parts. At the same time, I have
not accepted defendant's wholly arbitrary
inventory valuation, in light of Mr. Skelton's
admission that he could be out as much as
$10,000 and that he valued inventory in a cur
sory manner.
C. COMPENSATION FOR STONING AREAS OF
SUBJECT PROPERTY
Here again, the evidence adduced to assist
the Court in fixing the value of this item was
much less than satisfactory. Mr. Skelton testi
fied that there was about seven acres of the
subject property covered with fill. This was
necessary because his inventory of wrecks had
grown to the point where they covered about
seven acres. This was low-lying land, and when
the wrecks were removed, heavy cranes were
used and it was necessary to have a firm base in
order to ensure that these cranes could reach
the wrecks the year around. He testified that
some of the fill was cinders from an old Canadi-
an National Railway right-of-way, some was
mostly earth from the John Deere excavation
nearby when their building was erected, and
some was stone acquired at different times
from different people. No cost figures were
available.
Defendant's claim under this item in the sum
of $13,000 arises through the evidence of Mr.
Louis D'Amico, who was asked to quote on the
cost of stoning seven acres on the basis of his
quarry company's December, 1965 price. He
estimated that the amount of stone required
would be 1,050 tons per acre at a price of $1.55
per ton delivered which would produce a stone
cost of $1,627.50 per acre—thus the stone cost
for seven acres amounts to $11,392.50. To this,
witness added bulldozing costs of $1,575 for a
total of $12,967.50 which was rounded to
$13,000.
First of all, there was no evidence upon
which I could conclude that defendant's fill was
in any way comparable to the comprehensive
kind of stone base contemplated in Mr. D'Ami-
co's quotation. Mr. Skelton's own evidence was
that some of the fill was cinders, some of it was
excavation dirt and some of it was stone. That
is a far cry from a solid stone base.
On the other hand, plaintiff's counsel urges
me not to allow anything for the fill because he
says all the fill accomplished was to bring sub
ject property up to the same level as good firm
land which we have been comparing it with.
I am of the opinion, that the sum of $2,000
would adequately compensate defendant for the
fill placed on subject property over the years. I
have to consider value to the owner and this fill
had some value to the owner. It enabled him to
operate his wrecking yard on these low, marshy
premises, it enabled him to move his inventory
with heavy cranes and thus it had a definite
value to the defendant owner at date of
expropriation.
D. COMPENSATION FOR BUSINESS DISTURB
ANCE INCLUDING COST OF RELOCATION, BUSI
NESS LOSSES BECAUSE OF LESS FAVOURABLE
SITE: ADDITIONAL LEGAL EXPENSES, ETC.
This is, without doubt, the most difficult item
of all.
The defendant's claim in respect of this item
is in the sum of $70,500 and arises through the
evidence and the reports of Messrs. Ronald
Hawkins and John Funk (filed as Exhibit D-42).
Mr. Funk is the President and Mr. Hawkins is
sales representative of a company known as
Canadian Corporation Brokers Co., Ltd. of St.
Catharines, Ontario.
This firm is registered under the Real Estate
and Business Brokers Act of Ontario and has
been engaged for the past fifteen years in the
sale of businesses and real estate. During that
period, more than seventy sales or mergers of
corporations were consummated and innumer
able companies were examined and studied
leading to their evaluation for sales purposes.
This company, at defendant's request, did an
evaluation of the defendant corporation in the
summer of 1971. This company had no personal
knowledge of the defendant prior thereto and
makes its projections and bases its opinions
mainly on defendant's unaudited financial state
ments for the years 1961 to 1970 inclusive.
Messrs. Hawkins and Funk take the sales
figures and the pre-tax profit or loss figures, for
the period 1961-1970 inclusive, of the defend-
ant corporation and from same, they conclude
as follows (Exhibit D-42, p. 11):
From Part II we note that sales were on a modestly increas
ing trend from 1961 to 1968 and profits were shown each
year. A rational expectation would be that sales would
continue to increase and that the historically attained profits
or greater would result. This was not the case.
Then, these witnesses take the pre-tax profits
for the last five years (1964-68 inclusive) and
apply a weighting factor to them after which
they calculate the weighted average pre-tax
profit for the years 1964-1968 inclusive at
$7,184.
This, they reason, would have been the profit
which defendant corporation could reasonably
have expected in 1969, 1970 and subsequent
years if it had not been for the expropriation.
They then proceed to make sales and profit
assumptions for the future years through to
1976 which produces the following table
(Exhibit D-42, p. 14):
(Loss) Calculated
Sustained or Expected
Year Profit Made Profit Compensation
1969 $ ( 6,971.00) $ 7,184.00 $ 14,155.00
1970 (10,227.00) 7,184.00 17,411.00
1971 ( 8,000.00) 7,184.00 15,184.00
1972 ( 4,000.00) 7,184.00 11,184.00
1973 7,184.00 7,184.00
1974 3,000.00 7,184.00 4,184.00
1975 5,500.00 7,184.00 1,684.00
1976 8,000.00 7,184.00
$ 70,986.00
which, for the purposes of defendant's claim is
rounded to $70,500.
I find it necessary to make a number of
comments about this valuation and defendant's
claim that is based on it:
1. The report is based entirely on unaudited
financial statements. This circumstance by
itself reduces substantially the evidentiary
value of this valuation. Two of the land
appraisers, Mr. Brodrick, who was called by
the defendant and Mr. Ford, who was called
by the plaintiff, declined to utilize the income
approach to value when appraising defend
ant's land because no audited figures were
available and they refused to use the income
approach on unaudited financial statements. I
commented earlier on the way in which the
year-end inventories were established for the
purpose of defendant's unaudited financial
statements. Mr. Skelton just "walked through
the yard" and then made his very rough and
arbitrary estimate. He conceded that these
figures were not exact at all and "could be
out $10,000 pretty easily". Additionally, Mr.
Paul Erickson, chartered accountant, of Burl-
ington, Ontario, was called as a witness by
the plaintiff and commented on the projec
tions and prognostications of Messrs. Haw-
kins and Funk. Mr. Erickson is a member of a
large auditing firm in Hamilton, has consider
able experience in auditing the books of
wrecking businesses. He attended in Court
throughout the trial and heard all of the evi
dence adduced on behalf of the defendant.
His opinion was that he would be hesitant to
make any prognostications based on these
unaudited financial statements; that with the
discrepancies and inaccuracies admitted by
Mr. Skelton, you could not be certain of
anything. His exact words were: "To prog
nosticate in a case like this was a very dan
gerous exercise".
2. Subject report uses pre-tax profit figures
for the years in question. The figures would
have been substantially lower if the income
tax payable in the years in question had been
taken into consideration. I am of the opinion
that the Court should look at after-tax profits
rather than pre-tax profits. My brother,
Gibson J., took this view in the case of Flor-
ence Realty v. The Queen [1967] 1 Ex.C.R.
226 at p. 241 as did Thurlow J. in the
unreported Exchequer Court judgment in the
case of Thorne's Hardware v. The Queen
(judgment dated February 22, 1961—see
page 25 of judgment).
3. Subject report is wrong in that it makes
use of a weighted average which is not justi-
fied in the circumstances of this case. Mr.
Erickson's evidence was to the effect that a
weighted average is only justified where there
has been a definite upward trend in profits in
recent years and the forecaster has sound
grounds for believing that such trend will
increase. Then in those circumstances, a
weighted average may be justified. However,
Mr. Erickson points out that no such trend
was evident in the case of the defendant
corporation.
Exhibit P-27 shows the after-tax profits of
defendant corporation based on its own unau-
dited financial statements as follows:
Year Profits after Taxes Sales
1961 $ 433.52 38,868.72
1962 4,416.68 67,404.13
1963 1,473.29 79,718.65
1964 1,010.11 76,911.95
1965 9,505.17 77,966.27
1966 6,191.99 58,611.84
1967 5,691.38 77,603.82
1968 4,296.21 71,599.47
From the above, it will be seen that there was
really no upward trend, either in profit or in
sales. The best year for profits was 1965,
declining every year thereafter. The best year
for sales was 1963, which declined slightly
every year thereafter.
4. The assumptions made in the report on
page 14 thereof concerning the losses and
reduced profits for the years 1969 to 1975
inclusive are purely theoretical and are not
based on any solid evidence upon which the
authors would be entitled to rely. The losses
shown for 1969, 1970 and 1971 on page 14
are not borne out by the company's own
records. The projected losses thereafter are,
in my opinion, pure guesses, with very little,
if any, solid basis in fact.
5. The report purports to value inventory at
selling price which would include, in normal
circumstances, a profit to the defendant.
Then the report purports to calculate loss of
profit which, it concludes, is $70,986. Thus,
there is some duplication in these two items.
The defendant is not entitled to total compen
sation for loss of profits when the profit on
the sale of its inventory has already been
taken into consideration in arriving at an
inventory valuation. In allowing the sum of
$35,000 as the value of defendant's inven
tory, I have valued same at the selling price,
which takes into consideration a profit for the
defendant.
In summary, I have reached the conclusion
that the appraisal report of Messrs. Hawkins
and Funk cannot be given any weight in consid
ering the proper amount to be awarded to the
defendant under this heading.
I have no doubt that the defendant suffered
considerable business disturbance commencing
in mid 1969 when he was dispossessed. He did
not get relocated until mid 1970, so he lost one
complete year at the outset.
The evidence is clear that it takes many years
to build up an inventory of wrecks such as the
one the defendant had in mid 1969. At his new
location, he was able only to acquire an inven
tory of about 100 cars by the end of 1970. By
the end of 1971, he had been able to increase
the inventory figure to somewhere between 250
and 300 cars.
During his last five full years in business
(1964-1968), the average sales were about
$73,000 per year. During the said five year
period, the average profits were in the order of
$5,300 per year, after deduction for income tax.
Using these figures as a guide, I am of the
opinion that defendant is entitled to compensa
tion for about 75% of an average year's profit
for 1969 because he was put out of business in
April of 1969. He did not get started in his new
location until half of 1970 had gone by. Addi
tionally, his business was very poor in the
remainder of 1970 for two reasons: first, it was
difficult to get to his new location because of
road construction and relocation, etc., and,
second, he had no inventory, he had nothing to
sell, and this adversely affected his business to
a very great extent. I, therefore, feel that he is
entitled to compensation in the order of 75% of
an average year's profit for 1970. In 1971, he
had the same two problems as in 1970, but to a
lesser extent, as is evidenced by his increased
sales in 1971 ($45,000) over 1970 ($20,000). I
would accordingly allow him compensation in
1971 in the order of one-half of an average
year's profit.
I believe he will continue to be affected in
1972 and 1973, but to a much lesser extent. By
then, he will, in the normal course of events,
have replenished his inventory even more. The
roads to and from Welland, Port Colborne and
the surrounding customer areas will be com
pleted, the tunnel under the new canal will be
installed resulting in a much better flow of
traffic than was the case with the old canal
where traffic was a problem because there were
only vertical lift bridges traversing the canal. In
my view, by 1974, defendant, both location
wise and business wise, will be in at least as
favourable a position as he was at the time his
business was dislocated by the taking of posses
sion by the expropriating authority.
Having regard to all of these matters, I would
fix the amount under this heading at $15,000
and I so assess this element of the value of the
expropriated property to the defendant.
To recapitulate, the defendants are entitled to
compensation as follows:
A. Compensation for land and improve-
ments—except stoning $ 25,698.47
B. Compensation for defendant's inventory
of wrecked cars and trucks 35,000.00
C. Compensation for stoning areas of sub
ject property 2,000.00
D. Compensation for business disturbance
including cost of relocation, business
losses because of a less favourable site;
additional legal expenses, etc. 15,000.00
Total $ 77,698.47
In my view, the said sum of $77,698.47 will
adequately compensate the defendants for
every element of the value of the expropriated
property in accordance with the legal principles
herein cited.
The defendants delivered vacant possession
of the lands expropriated to the St. Lawrence
Seaway Authority on April 8, 1969 and on that
same day, received from the said expropriating
authority the sum of $63,800.80 on account of
compensation.
As I have fixed the amount of $77,698.47 as
the compensation to which the defendants are
entitled, the defendants are entitled to recover
from the plaintiff the sum of $13,897.67 with
interest on that amount at the rate of 5% per
annum from April 8, 1969 to the date of judg
ment herein. The defendants are also entitled to
their costs to be taxed.
As stated earlier herein, counsel for the
defendants stipulated that neither of the person
al defendants had any interest in the subject
property or business at date of expropriation
and agreed that any and all compensation
awarded herein was payable to the corporate
defendant.
On this basis, therefore, the plaintiff is enti
tled to make all payments due under this judg
ment to the defendant Dain City Auto Wreckers
Limited.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.