A-699-82
William H. Gibson (Appellant) (Plaintiff)
v.
The Queen (Respondent) (Defendant)
Court of Appeal, Heald, Le Damn JJ. and Clement
D.J.—Toronto, March 2 and 7, 1983.
Expropriation — Compensation — Penalty interest — In
determining entitlement to penalty interest under s. 33(3) of
the Act, compensation means final award by Trial Judge,
relocation costs not excluded — Appeal allowed — Expro
priation Act, R.S.C. 1970 (1st Supp.), c. 16, ss. 14, 23(1)(a),
24, 25, 26, 27, 33.
This appeal is against the part of an unreported Trial Divi
sion judgment declaring that the appellant was not entitled to
penalty interest under subsection 33(3) of the Expropriation
Act. The Trial Judge had followed his own decision in Leach et
al. v. The Queen, [1982] 2 F.C. 258 (T.D.), and decided that in
paragraph 33(3)(b), compensation includes only the value of
the expropriated interest under subsections 24(2) and (3) and
has no reference to relocation costs under subsection 24(6).
Held, The appeal should be allowed. In section 33, compen
sation clearly means the total value of the expropriated interest,
including relocation costs. Subsections 24(2) to (9) establish a
comprehensive code of rules which, taken as a whole, produces,
in the final calculation, the total value of the expropriated
interest. Market value and equivalency value are only compo
nents of the compensation referred to in section 33.
CASE JUDICIALLY CONSIDERED
OVERRULED:
Leach et al. v. The Queen, [1982] 2 F.C. 258; 24 L.R.C.
1 (T.D.).
COUNSEL:
R. L. K. Smith, Q.C. for appellant (plaintiff).
T. Dunne for respondent (defendant).
SOLICITORS:
Blaney, Pasternak, Smela & Watson,
Toronto, for appellant (plaintiff).
McTaggart, Stone, Winters & Herridge,
Toronto, for respondent (defendant).
The following are the reasons for judgment
rendered in English by
HEALD J.: This is an appeal from a judgment of
the Trial Division [not reported, T-1830-74, judg-
ment dated June 15, 1982] but the appeal is solely
in respect of paragraph (c) of the judgment which
declared that the plaintiff appellant was not en
titled to penalty interest under subsection 33(3) of
the Expropriation Act (R.S.C. 1970 (1st Supp.),
c. 16).
The action proceeded to trial on the basis of an
agreed statement of facts which established that
the respondent expropriated from the appellant
some 10 acres in the Pickering area of Ontario on
which was situated the appellant's residence and
other associated buildings. The date of expropria
tion was January 30, 1973. By offer dated April
24, 1973, purportedly pursuant to section 14 of the
Act, the respondent offered the sum of $55,060 in
compensation for the appellant's interests in the
lands. That offer was accepted on May 29, 1973
and payment was made on June 14, 1973. By offer
dated August 16, 1973, also purportedly pursuant
to section 14, the respondent made an additional
offer in the amount of $8,280 which offer was
accepted on August 22, 1973 with payment being
made on August 31, 1973. By offer dated May 10,
1974, also purportedly pursuant to section 14, the
respondent made a further additional offer of
$1,669 which was accepted on June 4, 1974, with
payment being made on June 20, 1974. Thus by
June 20, 1974, the appellant had received from the
respondent a total amount of $65,009. This was
the total amount paid to the appellant prior to the
trial of this action.
It was agreed that the time when the Crown
became entitled to take physical possession of sub
ject land within the meaning of subsection 24(6) of
the Expropriation Act, was May 30, 1975. It was
further agreed that the respondent made no fur
ther offers pursuant to section 14 other than the
offers of April 24, 1973, August 16, 1973 and May
10, 1974 referred to supra.
The trial judgment held, inter alia:
(a) that the total value of the appellant's expro
priated interest in the subject property, as deter
mined under subsection 24(3)(b) of the Act, as of
January 30, 1973, was $58,000;
(b) that appellant's costs of relocating his resi
dence in premises reasonably equivalent to subject
premises on May 31, 1975, as determined under
subsection 24(6) of the Act were $90,000;
(c) that the appellant was not entitled to penalty
interest under subsection 33(3) of the Act;
(d) that the appellant was entitled to the sum of
$90,000 together with interest at the basic rate
pursuant to paragraph 33(3)(a) of the Act, less
such amounts as have already been paid.
The reasons given by the Trial Judge for refus
ing to award interest pursuant to subsection
33(3)(b) of the Act read as follows:
I disallow such claim as the total amount offered and paid to
the plaintiff in the amount of $65,009 is greater than the
amount found as the market value on January 30, 1973 by
either the plaintiff's or the defendant's expert. Even if the first
offer of $55,060 only is considered, it is still over 90% of the
market value. Such section has no relation to a payment under
subsection 24(6) of the Act.
The relevant provisions of section 33 follow:
33. (1) In this section
"basic rate" means a rate determined in the manner prescribed
by any order made from time to time by the Governor in
Council for the purposes of this section, being not less than
the average yield, determined in the manner prescribed by
such order, from Government of Canada treasury bills;
"compensation" means the amount of the compensation
adjudged by the Court under this Part to be payable in
respect of an expropriated interest;
"date of possession" means the day upon which the Crown
became entitled to take physical possession or make use of
the land to which a notice of confirmation relates;
"date of the offer" means the day upon which an offer was
accepted;
"offer" means an offer under section 14.
(2) Interest is payable by the Crown at the basic rate on the
compensation, from the date of possession to the date judgment
is given, except where an offer has been accepted.
(3) Where an offer has been accepted, interest is payable by
the Crown from the date of the offer to the date judgment is
given,
(a) at the basic rate on the amount by which the compensa
tion exceeds the amount of the offer, and in addition
(b) at the rate of five per cent per annum on the compensa
tion, if the amount of the offer is less than ninety per cent of
the compensation;
and where an offer has been accepted after the date of posses
sion, interest is payable at the basic rate on the compensation,
from the date of possession to the date of the offer.
Also germane to a determination of the issue are
the provisions of section 24 which are as follows:
24. (1) The rules set forth in this section shall be applied in
determining the value of an expropriated interest.
(2) Subject to this section, the value of an expropriated
interest is the market value thereof, that is to say, the amount
that would have been paid for the interest if, at the time of its
taking, it had been sold in the open market by a willing seller to
a willing buyer.
(3) Where the owner of an expropriated interest was in
occupation of any land at the time the notice of confirmation
was registered and, as a result of the expropriation, it has been
necessary for him to give up occupation of the land, the value of
the expropriated interest is the greater of
(a) the market value thereof determined as set forth in
subsection (2), or
(b) the aggregate of
(i) the market value thereof determined on the basis that
the use to which the expropriated interest was being put at
the time of its taking was its highest and best use, and
(ii) the costs, expenses and losses arising out of or inciden
tal to the owner's disturbance including moving to other
premises, but if such cannot practically be estimated or
determined, there may be allowed in lieu thereof a percent
age, not exceeding fifteen, of the market value determined
as set forth in subparagraph (i),
plus the value to the owner of any element of special econom
ic advantage to him arising out of or incidental to his
occupation of the land, to the extent that no other provision
is made by this paragraph for the inclusion thereof in deter
mining the value of the expropriated interest;
and in any case where the Crown has taken physical possession
or made use of the land upon the expiration of a period of
notice to the owner shorter than the ninety days mentioned in
paragraph 17(1)(c), there shall be added to the value of the
expropriated interest otherwise determined under this section
an additional amount equal to ten per cent thereof.
(4) Notwithstanding subsection (3), where any parcel of land
to which a notice of confirmation relates had any building or
other structure erected thereon that was specially designed for
use for the purpose of a school, hospital, municipal institution
or religious or charitable institution or for any similar purpose,
the use of which building or other structure for that purpose by
the owner has been rendered impracticable as a result of the
expropriation, the value of the expropriated interest is, if the
expropriated interest was and, but for the expropriation, would
have continued to be used for that purpose and at the time of
its taking there was no general demand or market therefor for
that purpose, the greater of,
(a) the market value of the expropriated interest determined
as set forth in subsection (2), or
(b) the aggregate of
(i) the cost of any reasonably alternative interest in land
for that purpose, and
(ii) the cost, expenses and losses arising out of or inciden
tal to moving to and re-establishment on other premises,
but if such cannot practically be estimated or determined,
there may be allowed in lieu thereof a percentage, not
exceeding fifteen, of the cost determined under subpara-
graph (i),
minus the amount by which the owner has improved, or may
reasonably be expected to improve, his position through
re-establishment on other premises;
and in any case where the Crown has taken physical possession
or made use of the parcel of land upon the expiration of a
period of notice to the owner shorter than the ninety days
mentioned in paragraph 17(1)(c), there shall be added to the
value of the expropriated interest otherwise determined under
this section an additional amount equal to ten per cent thereof.
(5) For the purposes of subparagraphs (3)(b)(ii) and
(4)(b)(ii), consideration shall be given to the time and circum
stances in which a former owner was allowed to continue in
occupation of the land after the Crown became entitled to take
physical possession or make use thereof, and to any assistance
given by the Minister to enable such former owner to seek and
obtain alternative premises.
(6) Where an expropriated interest was, immediately before
the registration of a notice of confirmation, being used by the
owner thereof for the purposes of his residence and the value of
the interest otherwise determined under this section is less than
the minimum amount sufficient to enable the owner, at the
earlier of
(a) the time of payment to him of any compensation in
respect of the interest, otherwise than pursuant to any offer
made to him under section 14, or
(b) the time when the Crown became entitled to take physi
cal possession or make use of the land to the extent of the
interest expropriated,
to relocate his residence in or on premises reasonably equivalent
to the premises expropriated, there shall be added to the value
of the interest otherwise determined under this section the
amount by which that minimum amount exceeds such value.
(7) Where an expropriated interest was, immediately before
the registration of a notice of confirmation, owned by the owner
thereof as a leasehold interest, there shall be substituted for the
amount determined under subparagraph (3)(b)(ii) or (4)(b)(ii),
or the amount by which the minimum amount referred to in
subsection (6) exceeds the value of the interest referred to
therein otherwise determined under this section, as the case
may be, such part of that amount as is appropriate having
regard to
(a) the length of the term of the leasehold interest and the
portion of the term remaining at the time at which the
determination is relevant,
(b) any right or reasonable prospect of renewal of the term
that the owner of the leasehold interest had, and
(c) any investment in the land by the owner of the leasehold
interest and the nature of any business carried on by him
thereon.
(8) Where an expropriated interest was, immediately before
the registration of a notice of confirmation, subject to an
interest in land that was held by the owner thereof as security
only (hereinafter in this subsection called a "security interest"),
(a) the value of the expropriated interest is the aggregate of
(i) the value thereof otherwise determined under this
section as though it had not been subject to any security
interest, and
(ii) the amount of any loss or anticipated loss to the owner
of the expropriated interest resulting from a difference in
rates of interest during the remainder of the period for
which any principal amount payable under the terms of
the security was advanced (such difference to be calculat
ed on the basis of an assumed rate of interest not in excess
of the prevailing rate of interest for an equivalent secu
rity), to the extent that no other provision is made by this
section for the inclusion of an amount in respect of such
loss or anticipated loss in determining the value of the
expropriated interest,
less the value of each security interest to which the expro
priated interest was subject, determined as provided in para
graph (b) but as though no amount were included therein by
virtue of subparagraph (ii) of that paragraph;
(b) the value of the security interest is the aggregate of
(i) the principal amount outstanding under the terms of
the security, and any interest due or accrued thereunder,
at the time of the registration of the notice of confirma
tion, and
(ii) an amount equal to three times the interest element,
calculated as a monthly amount, of any payment of inter
est or of principal and interest payable under the terms of
the security at the rate in effect thereunder immediately
before the registration of the notice of confirmation,
and where the expropriated interest was subject to more than
one security interest, the value of each security interest shall
be determined in the order of its priority but in no case shall
the value of any security interest to which an expropriated
interest was subject exceed the value of the expropriated
interest otherwise determined under this section as though it
had not been subject to any security interest, less the value of
each other security interest the value of which is required by
this subsection to be determined in priority thereto; and
(c) where part only of the interest that was subject to a
security interest was expropriated, the value of the security
interest is that proportion of the value thereof otherwise
determined under this subsection as though the whole of the
interest subject to the security interest had been expropriat
ed, that
(i) the value of the part only of the interest, otherwise
determined under this subsection as though it had not been
subject to any security interest,
is of
(ii) the value of the whole of the interest otherwise deter
mined under this subsection as though it had not been
subject to any security interest,
less the same proportion of the interest element of any
payment made under the terms of the security, between the
time of the registration of the notice of confirmation and the
time of payment of any compensation in respect of the
security interest, otherwise than pursuant to any offer made
to the owner thereof under section 14.
(9) In determining the value of an expropriated interest, no
account shall be taken of
(a) any anticipated or actual use by the Crown of the land at
any time after the expropriation;
(b) any value established or claimed to be established by or
by reference to any transaction or agreement involving the
sale, lease or other disposition of the interest or any part
thereof, where such transaction or agreement was entered
into after the registration of the notice of intention to
expropriate;
(c) any increase or decrease in the value of the interest
resulting from the anticipation or expropriation by the
Crown or from any knowledge or expectation, prior to the
expropriation, of the public work or other public purpose for
which the interest was expropriated; or
(d) any increase in the value of the interest resulting from its
having been put to a use that was contrary to law.
In arriving at his decision in this case that the
appellant was not entitled to the penalty interest
provided by paragraph 33(3)(b), the Trial Judge
appears to be following an earlier decision of his in
the case of Leach et al. v. The Queen' where a
similar situation prevailed. In the Leach case, the
Trial Judge after examining the provisions of sec
tion 14 of the Act 2 observed that the Minister's
' [[1982] 2 F.C. 258]; 24 L.C.R. 1 [T.D.].
2 The portion of section 14 relevant to this discussion is
subsection 14(1) which reads as follows:
14. (1) Where a notice of confirmation has been regis
tered, the Minister shall,
(a) forthwith after the registration of the notice, cause a
copy thereof to be sent to each of the persons then
appearing to have any right, estate or interest in the land,
so far as the Attorney General of Canada has been able to
ascertain them, and each other person who served an
objection on the Minister under section 7; and
(b) within ninety days after the registration of the notice,
or, if at any time before expiration of those ninety days an
application has been made under section 16, within the
later of
(i) ninety days after the registration of the notice, or
(ii) thirty days after the day the application is finally
disposed of,
make to each person who is entitled to compensation under
this Part in respect of an expropriated interest to which the
notice of confirmation relates, an offer in writing of com
pensation, in an amount estimated by the Minister to be
equal to the compensation to which that person is then
entitled under this Part in respect of that interest, not
conditional upon the provision by that person of any
release or releases and without prejudice to the right of
that person, if he accepts the offer, to claim additional
compensation in respect thereof.
obligation thereunder is to make an offer to the
expropriated owner in an amount estimated by the
Minister to be equal to the compensation to which
"that person is then entitled under this Part in
respect of that interest .... " ( Emphasis is added.)
Since subsection 24(6) speaks to the value of
relocation of residence in reasonably equivalent
premises on a date which, in Leach (as well as in
the case at bar) is conceded to be May 30, 1975, it
was the view of the Trial Judge that the Minister
could not be expected to estimate that cost in his
first offer under section 14 which was required by
the statute to be made in 1973. Accordingly it was
his view that when "compensation" is referred to
in paragraph 33(3)(b), it refers to and includes
only the value of the expropriated interest under
subsections 24(2) and 3 of the Act and has no
reference to the amount required to relocate the
plaintiff in an equivalent residence under subsec
tion 24(6).
With deference, I am unable to agree with that
view of the matter. Sections 23 to 27 inclusive of
the Act deal with the compensation to be paid to
owners of a right, estate or interest in land which
has been expropriated by Her Majesty in Right of
Canada, to the extent of the interest expropriated.
Paragraph 23(1)(a) requires the amount of that
compensation to be equal to the aggregate of "the
value of the expropriated interest at the time of its
taking ...." Subsection 24(1) supra provides:
"The rules set forth in this section shall be applied
in determining the value of an expropriated inter
est." Subsections (2) to (9) then proceed to detail
the rules for determining the value of an expro
priated interest.
Turning now to section 33, the section which
provides the authority for the payment of interest,
it is to be noted that the section provides that, in
section 33, compensation means the amount of the
compensation adjudged by the Court under this
Part to be payable in respect of an expropriated
interest. That figure in this case is clearly, in my
view, the sum of $90,000 which was awarded by
the Trial Judge. The other dollar figure which is
required in order to decide whether subsection
33(3)(b) is to be invoked is "the amount of the
offer". Subsection 33(1) defines "offer" for the
purpose of the section as "an offer under section
14". Accordingly, since it is agreed that the offer
here under section 14 as amended totals $65,009,
it seems obvious that the amount of the offer is less
than 90% of the compensation with the result that
this appellant is entitled to the 5% interest penalty
provided in paragraph 33(3)(b).
The respondent submits, however, that the Trial
Judge was correct in deciding that the valuation
under subsection 24(6) must be excluded from the
definition of "compensation" as that term is used
in paragraph 33(3)(b) and in support of this sub
mission, relies on the words "the value of the
interest otherwise determined" as they are used in
subsection 24(6). It was his view that those words
somehow operate so as to exclude the subsection
24(6) determination from the total compensation
to be awarded. In my view, it is clear that subsec
tions (2) to (9) of section 24 establish a code of
rules to be used in determining the value of an
expropriated interest. They are a comprehensive
code and they must be read together so as to apply
in the factual situations envisaged by the various
subsections. Subsection (6) is not the only subsec
tion where the expression "otherwise determined"
is used. The same expression is to be found in
other subsections of section 24. The various sub
sections, when read together, make it clear, in my
view, that the various items covered by the various
subsections are to be added or subtracted as the
case may be, to produce, in the final calculation,
the total value of the expropriated interest.
In this case, the figure arrived at by the Trial
Judge, after application of all the valuation rules
set out in section 24, was $90,000. That was the
amount of the "compensation" as defined in sec
tion 33. It is, therefore, the figure which must be
used to answer the question posed by paragraph
33(3)(b). In my view, the learned Trial Judge
erred when he considered the applicability of para
graph 33(3)(b) from the perspective of market
value and market value alone. Paragraph 33(3)(b)
speaks not of market value but of compensation.
Market value is only one of the components of the
compensation referred to in section 33. The
equivalency value established under subsection
24(6) is likewise a component of that compensa
tion.
For these reasons I have concluded that the
appeal should succeed. Since the offers made sub
sequent to April 24, 1973 were designated as
amendments to the original section 14 offer, it is
apparent that the computation of the interest
under paragraph 33(3)(b) should run from the
date of the acceptance of that original offer,
namely May 29, 1973. I would therefore allow the
appeal with costs and amend the judgment of the
Trial Division to provide that the appellant plain
tiff is entitled to interest on the sum of $90,000 at
five per cent per annum from May 29, 1973 to
June 15, 1982, the date of the judgment of the
Trial Division.
LE DAIN J.: I agree.
CLEMENT D.J.: I concur.
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.