| December 6, 1999, E.C.B. No. 44/97/177
(68 L.C.R. 296)
| Between: |
George Frederick Reti and Mary Genevieve Reti
Claimants | | And: |
The District Of Sicamous
Respondent | | Before: | Sharon
I. Walls, Vice Chair
Lesley Eames, AACI, P.App., Board Member
Julian K.
Greenwood, Board Member | | Appearances: | Reinhard
Burke, Counsel for the Claimants
James Yardley , Counsel for the Respondent |
REASONS
FOR DECISION 1. INTRODUCTION George
and Mary Reti bought a home for their retirement in the rural area of Sicamous
north of the Eagle River, at 1506 Solsqua Road, Sicamous, British Columbia. In
1995, the District of Sicamous ("Sicamous") acquired the field behind
their house to construct a sewage treatment facility and public works yard, to
service the community and the houseboat industry on the Shuswap Lakes. No
land was taken from the Retis. However, they say that the presence of the sewage
facility and the associated municipal works significantly reduced the value of
their property. In particular, they complain about vibrations during construction
of the plant, odour from the sewage, noise from trucks and other equipment, bright
lights and noises from the snow clearing equipment during the early morning hours
in the winter, and mists blowing across their property from a holding tank. The
claimants allege that these problems rendered continued habitation of their property
so unpleasant that they were eventually forced to sell at a considerable loss
and move elsewhere. They claim compensation for injurious affection under section
41 of the Expropriation Act, R.S.B.C. 1996, c.125 ("the Act")
and section 324 (now section 312) of the Municipal Act, R.S.B.C. 1996,
c. 323. 2. BACKGROUND
2.1 The Retis' property The
Retis' property was a rural lot of 0.24 hectares (0.59 acre or 25,535 square feet)
with a single family residence and a number of other improvements. One of the
features of the house was an indoor swimming pool and sauna. Other improvements
to their property included a garden shed, a detached garage or workshop, and a
summer kitchen or guest cottage. The subject property
was created in a 1971 subdivision. The residence was a four bedroom split level
house constructed in two stages, in 1971 and in 1977, with a total living area
of 2,154 square feet. An addition containing the 37 foot swimming pool and sauna
was added in 1979 and this area totalled a further 1,760 square feet. The residence
was described as having fairly standard construction for its age. The detached
garage/workshop (850 square feet) and summer kitchen (317 square feet) were both
built in 1990. They both had finished interiors with a concrete floor and electricity,
but no heat or plumbing. The garden shed (192 square feet) was unfinished with
a wooden floor and no electricity. The property had approximately
150 foot frontage on Solsqua Road with a semi-circular paved driveway in front
of the house (to the east). The property was approximately 170 feet deep and was
fenced on the other three sides. There were two sundecks and a patio at the back
or west-facing side of the house. The property was landscaped with lawns, garden
beds and a number of shrubs and trees. 2.2 The
neighbourhood The general neighbourhood
is primarily farmland with a scattering of some six houses on large lots, and
some industrial use. The area is separated from the core of Sicamous by the Eagle
River to the south. Next to the subject property, to the north on Solsqua Road,
is a house on a rural lot of 0.81 hectares (2 acres) owned by the Retis' neighbour,
John Stopanski. When the Retis bought the property in 1992 there was an 11.7 hectare
(29 acre) field immediately adjacent to the west and south of their property.
Both the Retis' and Stopanski's properties had originally been subdivided from
this field. A third house on a rural lot was located some distance to the south
on Solsqua Road. Across Solsqua Road to the east of the Retis' house is another
large field. There was some evidence that the fields adjacent to the Reti property
had been fertilized with manure every year, although the odour from this would
only last a short time. Other uses in the neighbourhood
include a British Columbia Hydro substation across from the Stopanski property.
Beyond that there was a yard at which telephone poles were made. On the north
side of the Stopanski property is the Canadian Pacific Railway mainline. There
was evidence that approximately 27 trains a day pass along this line, about a
quarter of a mile away from the Retis' house. Solsqua Road was a route into the
town centre, with a bridge over the Eagle River. Some heavy traffic, including
trucks from the pole yard, would use this route. Thus the subject property had
always suffered a certain amount of noise from neighbourhood activities, including
the pole yard, the railway and the road. However, we note that the Reti property
was separated by at least one property from the pole yard and the railway and,
that before the sewage treatment facility was built, the Reti property was surrounded
by fields, with the exception of the one neighbour, Mr. Stopanski. It
is on part of the 29 acre field immediately behind the Reti property that Sicamous
has now constructed the sewage treatment facility and public works yard.
2.3 Retis' purchase of the property and initial
dealings with the property Mr. Reti
was a retired rancher from Alberta. The Retis had lived in the Lower Mainland
of British Columbia for several years but said that they became increasingly dissatisfied
with the growing amount of automobile smog near Vancouver. In 1991 they decided
to come to the Shuswap region and made a trip to the region to investigate properties.
In 1992 their home in the Lower Mainland sold rather suddenly, and they returned
with Robert Burns, a real estate agent that they had known from Langley. They
looked at a number of properties in both Salmon Arm and in Sicamous before happening
on the subject property. The property appealed to them as being relatively close
to the core of Sicamous, yet in a rural surrounding. They bought the property
for $212,000 in September 1992. Although Mrs. Reti in particular
claimed to have been happy in their new home up to 1996, the fact is that the
Retis listed their property for sale in March 1993, only six months after purchasing
it. Their explanation for this was that they did not like the wood smoke arising
from numerous wood-fired heating systems in Sicamous. They listed the property
with a local real estate agent for $256,500, which appeared to the board to represent
what they would have liked to receive in light of what they had paid for the property,
rather than a considered opinion of what the property was truly worth. They were
not successful in selling the property that first year, and in January 1994 they
signed a new listing, this time with Mr. Burns, the agent who had helped them
find the property in the first place. That listing remained in effect until September
1995. Thus, for all except the first few months of their arrival in Sicamous,
the Retis were in fact behaving as if they would rather live somewhere else.
2.4 Sicamous' sewage treatment facility and
works yard In September 1994, Sicamous
formally announced its plans to construct a wastewater treatment facility on the
adjacent property. Sicamous bought the neighbouring field in February 1995, and
began building the sewage treatment facility, starting with its associated sewage
lagoons, in September of that year. The plant was completed around the end of
June 1996, and put into operation after that date. During the first year all the
sewage was brought in by tanker trucks because pipelines to the plant had not
yet been constructed. After the pipelines were in place, tanker trucks continued
to bring sewage from houseboats and other customers on a daily basis, more frequently
in the summer. Access to the sewage treatment facility
is by a driveway from Solsqua Road, to the south of the Reti property. The driveway
curves round to a paved yard immediately behind the Retis' house. At its nearest
point this paved yard is only 20 feet from the Retis' boundary. Immediately behind
the Retis' property is a long building built by Sicamous containing a public works
maintenance workshop in the first bay, the control room for the sewage facility
in the second bay and one of the tanks for the treatment of the sewage in the
third bay. Photos showed a number of employees' vehicles parked in front of this
sewage treatment building. Up to nine employees' vehicles would be parked in the
yard in the summer. Trucks bringing in raw sewage drive into this paved yard behind
the Reti property, drive past the sewage treatment building, and back up to a
covered holding tank where they empty the contents of the truck through a hose.
Mr. Reti estimated the distance of this tank to be 150 feet from his back fence.
The engineer who designed the sewage treatment system explained that the sewage
was first piped to the complete mix tank where maceration and mixing occurred.
This complete mix tank was inside the sewage treatment building and Mr. Reti estimated
that this part of the building was 115 feet from his property line. The sewage
was then piped into two long sewage lagoons behind the sewage treatment building,
where the sewage was aerated. After aeration, phosphate was removed from the sewage
and it was then pumped into infiltration lagoons, which were located beside the
two long aeration lagoons. In addition to the sewage treatment
facility Sicamous also started to use the property as a public works yard during
the late fall of 1996. Sicamous constructed a garage or shed for storage of four
of Sicamous' vehicles at the end of the driveway and south west of the Reti property
in May 1997. The workshop for maintaining public works vehicles and equipment
was in the first bay of the sewage treatment building, which was the part of the
building closest to the Retis' property. 2.5 Reaction
to the sewage treatment plant and works yard When
the municipality acquired the field next to the Retis and announced its plans
to build a sewage treatment plant there, the Retis were among an active group
of citizens who protested the decision, but to no avail. Construction began in
the fall of 1995. Mr. Reti started keeping a diary recording his activities in
relation to the project and the progress of the construction. From October 1995
onward there were references in the diary to the noise and dust caused by the
construction of the sewage lagoons and the sewage treatment building. In late
February 1996, Mr. Reti wrote a letter to Sicamous making complaints about the
noise and vibrations and specifically alleging damage from the construction: namely,
leaks in the swimming pool and cracks in the walls and ceilings of the residence.
As the plant began operation in June 1996 the diary recorded complaints about
unpleasant odours from the lagoons. These odours were intermittent but appeared
to be worse in the summer. There were also frequent complaints about noise, especially
in the early morning, when the employees arrived and started the equipment. When
the garage-style doors to the workshop, or the control room immediately behind
the house, were left open, there was noise from both the employees and the equipment.
The Retis also testified that there were mists rising from one of the lagoons
and on occasion blowing over their property. As a result
of all of these problems, the Retis said that their use of their property was
restricted. They were frequently wakened in the early morning by the noise. In
the winter, bright lights from the snow clearing equipment also bothered them.
When the smell was bad, they were forced to go inside the house. They associated
the sewage treatment plant and the mists with some problems with their shrubs
and plants; they stopped growing vegetables because they were uncertain as to
whether they would be safe to eat. Mrs. Reti was particularly emphatic in her
description, saying that life changed immensely with the advent of the treatment
facility and public works yard. A number of neighbours
were called to support the Reti testimony as to the effect of the arrival of the
municipal yard on their surroundings. The immediate neighbour, Mr. Stopanski,
and his partner also complained about odours and noise from the sewage treatment
facility. On occasion they had smelled a "chemical" smell rather than
the more typical sewage odour. They feared the air quality was damaging to their
plants and could perhaps harm their own health. Other neighbours, whose properties
were further away and on the far side of the aeration lagoons, testified that
they could smell the lagoons. They described the smell as "a mild septic
tank smell" when the wind was blowing towards their house and on one occasion
there had been a smell similar to insecticide. The neighbours also recalled an
occasion when foam bubbles drifted from one of the lagoons as far as their properties. There
also was evidence about the operation of the sewage treatment facility from the
engineer who designed the sewage treatment plant and two of Sicamous' employees.
These witnesses were generally of the view that the facility was working well,
and gave off little odour under normal conditions. The engineer and one of the
employees agreed that the odour near the complete mix tank was the strongest of
anywhere in the facility, although they said that the smell was only noticeable
on occasion. Blowers were used to add aeration to the complete mix tank and the
two aeration tanks behind the long building. These blowers were noisy and there
were acoustic panels in the control room behind the Retis' property to reduce
the sound. However, when the door to the control room was open the acoustic panels
were ineffective and the noise of the blowers could be heard. If there was a power
outage and the blowers were not working, the odour would increase. An alarm system
was installed to notify an employee at their home if the blowers shut down during
the night or on the weekend. Water was sprayed from nozzles into the complete
mix tank to control the amount of foam. The only chemical that was added to the
sewage was alum, which removed phosphates from the sewage before it entered the
infiltration lagoons. The alum was added in the control building. A municipal
employee admitted that a tanker truck had dumped sewage into the wrong tank on
one occasion and on another occasion a tanker truck delivered sewage containing
an unidentified chemical. There also had been problems for a week or two with
the hoses for the tanker trucks delivering sewage, requiring the tanker trucks
to dump the sewage directly into the holding tank. With
respect to the public works yard, one of Sicamous' employees explained that during
most of the year employees arrived at 7:00 am. However, snow-clearing equipment
is stored on the site and during the winter, the morning shift starts at 6:00
am. Employees arrive shortly before 6:00 am and turn the equipment on to warm
up, leaving the yard about 15 minutes later. They initially backed the equipment
out of the driveway beside the Retis' property. However, after complaints about
the beeping noises from vehicles being backed out at 6:00 am, the employees began
to back the equipment into the driveway in the afternoon when they returned to
the yard, so that the equipment could be driven straight out in the morning. The
salt and sand used for snow clearing were stored at another location. During the
spring the yard was used each morning by crews that sprayed swamps in the district
for mosquitoes. The Retis both complained about irritation
to their noses and eyes when they spent time outside. Mrs. Reti also complained
of headaches. Neither of them sought medical advice about these symptoms until
shortly before the hearing. They went to their doctor, David Williamson, in August
1998, and were referred by him to an internist, Christopher Main. Dr. Main's consultancy
letters were before the board, and he also testified by telephone. Dr. Main suggested
that the symptoms described by the Retis could be consistent with a chemical irritation.
However, he did not observe any physical symptoms in the Retis at the time of
his examination. He did not know whether they had suffered any symptoms prior
to the sewage treatment plant, when they had complained about smog in the Lower
Mainland or woodsmoke in Sicamous. There was evidence that Mrs. Reti had suffered
from blepharitis, an inflammation of the eyelids, before the sewage treatment
plant was built. 2.6 Sicamous'
negotiations with the Retis In May
1995, Sicamous offered the Retis and other residents adjoining the sewage treatment
plant, two options for compensation: either a maximum of 10% of the property value
based on 1995 values if the market value of the property declined after the sewage
treatment plant was operational or $7,500 for a statutory right of way releasing
Sicamous from all claims against normal operation of the facility. Sicamous also
indicated that it might purchase the property at fair market value at its option.
There were also references to other non-monetary assistance, but these items did
not appear to be of benefit to the Retis. The Retis responded
to Sicamous in January 1996 and asked that they be bought out for the 1996 assessed
value (stated to be reflective of the market value as of July 1995) of $226,000
plus 10%, for a total of $247,800. Sicamous replied in February 1996 that Council
had determined that it could not consider acquisition of the property.
2.7 Retis' sale of the property In
January 1997 the Retis again listed the property with Mr. Burns' firm, this time
for $237,000. In April 1997 the first offer received for the property was for
$100,000. Mr. Burns said this was a "ridiculous" offer under normal
circumstances but the sewage treatment facility was not a normal circumstance.
He contacted Sicamous to see if Sicamous would, in effect, pay the Retis the difference
between that $100,000 and a more typical price, pointing out that no other offers
of any kind had been received in 21/2 years. Sicamous did not accept the suggestion
that it help in the sale of the property. The Retis did not accept the offer,
nor did they make a counter-offer. In late September 1998,
a few months before the hearing in this matter, Mr. Burns received a call from
Mr. Burke, the claimants' lawyer. Mr. Burke said that the Retis had to move for
health reasons, and wanted to sell the property quickly. He suggested to Mr. Burns
that the price should be dropped to $110,000, which would allow a sale in the
$100,000 range and still leave something for Mr. Burns' commission. The listing
price was so amended, and indeed the property then sold very quickly. Within the
next two weeks several buyers viewed the property, and the Retis received three
offers. The property was sold on October 6, 1998 for the listed price of $110,000.
The buyer was an investor from out of town, who has since rented the property.
3. ISSUES The
main issues in this case are:
| 1. | Is
all or part of the claim barred by passage of time? | | 2.
| Do the "construction rule" and
the "actionable rule", (two tests referred to in cases on injurious
affection claims) apply in this case? | | 3.
| Has the sewage treatment facility had
an injurious affect on the subject property, and if so, what is the loss in value?
| 4. LEGAL
REQUIREMENTS 4.1 Limitation
Period Sicamous submitted that the
Retis' claim was out of time. Section 42 of the Act sets out the limitation
period in cases where no land is taken:
| 42 |
(1) | A
claim for compensation under section 41 (3) must be made in writing to the board
by the person suffering the damage, with particulars of the claim, within one
year after the damage | | |
| (a) |
was sustained, or | |
| |
(b) |
became known to the person. | |
| (2) |
If a claim referred to in subsection (1) is not made in accordance
with that subsection, the right to compensation is forever barred. |
Sicamous said that the plant started
operation on June 14, 1996 and that the Retis would have begun to notice any deleterious
effects beginning on that date. Since the application for compensation was not
filed until October 14, 1997, it was outside the one-year limitation period. This
particular argument had been raised a few weeks before the hearing in a motion
heard by the Vice Chair of the board (who was also the Chair of the panel at the
hearing). The Vice Chair denied Sicamous its motion for dismissal on the basis
that the evidence at the motion was not sufficient to determine the question (see
66 L.C.R. 57). She did, however, leave it open to Sicamous to assert the same
defence at the compensation hearing, and Sicamous has done so. The
difficulty with Sicamous' argument is that the claim is in the nature of a continuing
nuisance. Thus as long as the nuisance continues, there is always a new cause
of action on which a claim would lie at common law (but for the fact that the
municipality had statutory authority to build and use the plant); thus there is
no clear date from which to start measuring a limitation period. What therefore
has to be considered is the rather more subtle question of what damage the Retis
would have known about before October 14, 1996, one year prior to the date on
which they filed their application for compensation. The
cases on this issue have been canvassed in the preliminary decision of the Vice
Chair in this proceeding. We have not heard any evidence which would cause us
to depart from the view expressed by the Vice Chair, namely that the Retis, as
of October 1996, would not have had "sufficiently clear knowledge" or
"a real apprehension" of the loss in market value of their property
resulting from the presence of the sewage treatment facility and public works
yard. We do not accept Sicamous' argument that "damage" as referred
to in section 42 of the Act means the physical act or condition leading to the
claim, namely the construction of the plant itself. The plant and its operation
is the cause of any damage, but the damage, in its normal meaning, is the loss
of value experienced by the claimants' property. For the most part, therefore,
the respondent's argument on this point fails. The board
does accept, however, that certain particular complaints associated with the construction
phase of the plant in late 1995 and early 1996 cannot now be brought. These would
include the complaints about cracking in walls and ceilings and the development
of a leak in the pool piping. Since Mr. Reti associated these observations with
vibrations during the construction phase, and indeed made a written complaint
about them in February 1996, it is clear enough that he knew of this damage more
than a year before the present claim was commenced. Therefore, the claim for damages
from the cracking of the walls and the leaks in the pool are out of time under
section 42. 4.2 Common
law tests for injurious affection The
"actionable rule" and the "construction rule" are two of four
common-law tests for whether a claim for injurious affection can lie, set out
in The Queen v. Loiselle, [1962] S.C.R. 624, and St. Pierre et al.
v. Minister of Transportation & Communications (1987), 38 L.C.R. 1 (S.C.C.).
The Retis say that they have met the actionable rule and that the construction
rule does not apply. Sicamous submits that the requirements of neither rule have
been met. 4.2.1. Actionable
Rule The first of these
rules is the requirement that the damage must be such that it would have been
actionable under the common law, except for the fact that the respondent was authorized
by statute to act as it did. In this case the Retis say
that the actions of Sicamous in constructing and operating a sewage treatment
plant and maintenance yard constitute a nuisance. The smells, the mist, the vibrations,
and the noise interfere with the claimants' enjoyment of their property. Sicamous
submits that nuisance would not have provided relief to claimants because of two
factors: the pre-existing character of the neighbourhood and the unusual sensitivity
of the claimants themselves. We were reminded that the neighbourhood, prior to
the sewage treatment facility, was already affected to some extent by the noises
and smells associated with agricultural and industrial uses. Sicamous says that
the impact of the sewage treatment facility on such a neighbourhood was not significant
enough to support a claim for damages in nuisance. The second part of this argument
was based on the evidence that the claimants were susceptible to poor air quality.
Indeed they had moved from the Lower Mainland partly to find cleaner air, and
had already made up their minds to move from the subject property because of wood
smoke, before the sewage treatment facility came into existence. Despite
vigorous efforts by Sicamous to persuade us otherwise, the board does not accept
the pre-existing neighbourhood argument as a defence to nuisance in this case.
Noise and odours are factors that can be actionable in nuisance. See Allen M.
Linden, Canadian Tort Law, 6th ed., (Toronto: Butterworths, 1997); R.F.V.
Heuston and R.A. Buckley, Salmond and Heuston on the Law of Torts, 20th
ed., (London: Sweet and Maxwell, 1992). Thus we think that the threshold test
of being actionable is met regardless of the relative level of these two factors.
Further, although there were noise and odours from other sources prior to the
sewage treatment plant, these were of a relatively minor scale. After hearing
the evidence we are satisfied that the intermittent noise and odours emanating
from the sewage treatment plant and the public works yard directly behind the
claimants' property were sufficiently serious to be the basis for an action in
nuisance. However, we do accept that any mists blowing over the subject property
were almost certainly only water from the sprayers. The
sensitive claimant argument is slightly different. We heard some evidence which
suggested that Mrs. Reti, in particular, may have been particularly sensitive
to air quality. However, in our view, the evidence as a whole establishes that
a "reasonable" claimant would have a claim of nuisance in the circumstances
of this case. In any event, since the primary claim is for diminution in market
value of the subject property, it becomes immaterial to that determination whether
the claimants are especially sensitive. In summary on
this point, the board finds that the actionable rule is satisfied.
4.2.2 The Construction Rule
Another of the four injurious
affection requirements identified in St. Pierre is the rule that "the
damage must be occasioned by the construction of the public work, not by its user".
Sicamous argues that the essence of the complaint in this case is over the noise
and odours emanating from the sewage treatment facility and the public works yard
on a daily basis. These factors are the principal reason why the Retis claim to
have suffered damage and they arise out of the use of the plant, rather than from
the construction of the plant. The superficial cracking and pool leaks, which
the Retis blamed on the vibration during the construction period, were the subject
of complaints in February 1996, and as discussed above, the limitation period
precludes them being brought in October 1997. Thus, the respondent says that no
claim for injurious affection should lie since the claim arises out of the use
of the sewage treatment facility and the public works yard. The
Retis say that the construction rule does not apply in this case. They rely on
Currie v. Corporation of the Village of Chase (1986), 32 M.P.L.R. 172
(B.C.S.C.). The facts in Currie were similar to those in the present case.
The municipality constructed a sewage lagoon and the claimants brought a claim
for injurious affection to their property from the sewage lagoon. The Village
denied that there was any injurious affection from the sewage lagoon, and declined
to enter into an arbitration over compensation. In ordering the Village to enter
into an arbitration, Spencer J. observed that the construction rule did not apply.
At that time, section 544(1) of the Municipal Act provided that a municipality
must pay compensation for injurious affection resulting from the exercise of
any of the municipality's powers. Since those powers included both the power
to construct and the power to operate a sewage facility, the court held
that compensation was payable for any injurious affection caused either by construction
or use of the sewage lagoon. Similar language is in effect
today in section 312 of the Municipal Act, which provides in part:
A council must make adequate compensation to owners, occupiers
or other persons interested in real property ... injuriously affected by the exercise
of any of its powers, for any damages necessarily resulting from the exercise
of those powers ... Although the procedure
is now to bring such claims to the Expropriation Compensation Board, the wording
giving a right to a claim in injurious affection has not altered. The board therefore
adopts the Currie decision and finds that a claim under this section of
the Municipal Act may include damages arising from the use of the municipal
facility as well as its construction. 5. INJURIOUS
AFFECTION 5.1 Quantum
of Compensation The board heard expert
appraisal evidence from Danny R. Grant, of Interwest Property Services (1991)
Ltd., on behalf of the Retis. David C. Cavazzi, of D.C. Cavazzi & Associates
Inc., gave evidence for Sicamous. Both appraisers used a before and after
technique to attempt to measure the injurious affection to the subject property
as a result of the sewage treatment facility and works yard. The appraisers were
agreed on the highest and best use of the property as the existing use as a single
family residence. The main differences between the experts were their conclusions
as to the before value and the loss in value attributable to the works.
5.2 Before Value
Each of the appraisers used both the Cost
Approach and the Direct Comparison Approach to estimate the value of the subject
property without any regard to the presence of the project. Grant concluded a
before value of $245,000 and Cavazzi $175,000. The valuation dates varied: Grant
used November 1, 1996 while Cavazzi valued the subject property as of July 1,
1996. When there is no taking, the selection of the valuation date can be somewhat
arbitrary. However, in this case, the board agrees with Grant that the appropriate
valuation date is November 1, 1996. By that time the sewage treatment facility
plant had been in operation for five months, while the public works yard was just
beginning operation. 5.2.1 Cost
Approach Both appraisers used the
Cost Approach to obtain an estimate of value for the Reti property. While Grant
estimated the land value at $35,000, Cavazzi estimated it at $53,000. Using the
Marshall & Swift Valuation Service Grant estimated the cost of all the improvements
at $274,362 and Cavazzi estimated them at $338,500. Grant used a straight line
depreciation of 13.5% for all the improvements. Cavazzi, however, used an effective
rate of depreciation of 39.7% for the house, 5% for the detached garage and summer
kitchen, 60% for the pool and 80% for the pool equipment. This resulted in a depreciation
from all sources of $37,039 in Grant's analysis and $164,714 in Cavazzi's analysis.
Therefore the final conclusion of value from the Cost Approach was $272,000 for
Grant and $227,000 for Cavazzi. Although both appraisers
used the Cost Approach to determine an estimate of value, they both relied on
the Direct Comparison Approach for their final estimate of value. Cavazzi states
that the Market Data Approach (the Direct Comparison Approach) is often the most
reliable indicator of value, particularly when dealing with older properties.
Professor Todd in his book The Law of Expropriation, 2nd ed., (Carswell,
Toronto, 1992), at p. 216, gives a number of reasons as to why courts and tribunals
are reluctant to use the Cost Approach as their primary approach for estimation
of value: First, the process of valuing land
and improvements separately introduces an artificial element which is equally
recognized in appraisal theory...Secondly, improvements may never have been suited
to their location or have become unsuited as a result of changed conditions...Thirdly,
the necessity to deduct depreciation from the estimated replacement cost of the
improvements introduces a subjective or judgmental factor which may produce widely
differing estimates of value. The third reason
is particularly applicable in this case. Grant and Cavazzi have, amongst other
factors, very divergent views on the rate of depreciation for the buildings that
contributes to their widely differing estimates of value. In the circumstances,
we find the use of the Cost Approach unhelpful in this case.
5.2.2 Direct Comparison Approach
Both Grant and Cavazzi chose the value indicated
by the Direct Comparison Approach for their final conclusion of the before
value of the property. Grant was only able to find completed sales on three properties.
He also analyzed four listings active in November 1998, two years after the valuation
date. He selected improved sales or listings ranging from $189,500 to $350,000.
In comparing these to the subject property he purported to recognize that the
subject had over-improvements not found in the comparables, which he valued at
$64,500. This was based on a depreciated value of the enclosed pool, the summer
kitchen, and the garden shed. He provided no formal adjustment chart, claiming
that the subject property was too different from any of the comparables to justify
such a process. He also said that he preferred a more intuitive or judgmental
approach. He concluded a before value of $245,000 as of November 1996.
All of Grant's comparables had water frontage, either on a lagoon inlet of Shuswap
Lake or the Eagle River. Grant briefly addressed the
Retis' purchase of the property in 1992 at a price of $212,000. He did not undertake
the conventional adjustment for time. Instead, he relied on his Cost Approach
analysis, and adjusted the land and improvements separately. From paired lot sales
he derived an adjustment rate for land, which he applied to the estimate of the
land in 1996 of $35,000 to obtain an adjusted land value in 1992 of $15,000. Deducting
this from the purchase price gave him a residual value for the improvements in
1992 of $197,000. He derived an adjustment factor for improvements from a comparison
of Marshall & Swift estimates at the two relevant dates. Applying this adjustment
factor to $197,000 gave him a value for the improvements in November 1996 of $210,000.
By adding this estimate for the improvements of $210,000 to the 1996 land value,
he concluded a value of $245,000, which he claimed was in the range of value found
from the comparable listings and sales. Cavazzi used five
sales, three of which were subsequently listed for resale. He selected properties
located in rural settings with sales prices ranging from $117,000 to $224,000.
Three of Cavazzi's comparables were located in the Swansea Point area, about 10 km
south of Sicamous, close to Mara Lake. The other comparables were a waterfront
acreage and an active listing of a river front property, also referred to in Grant's
analysis. Cavazzi made only two adjustments to his comparables: one for time and
the second categorized as "other". On questioning from the board he
supplied a breakdown of the "other" category which included location,
condition, outbuildings, and pool area. Based on this analysis, he concluded a
before value of $175,000 as of July 1, 1996. 5.2.3 Before
Value Conclusion It is surprising
to the board that, despite the relatively small size of the Sicamous market, the
appraisers had only one property in common when making comparisons in the Direct
Comparison Approach. We do not find Grant's transactions to be helpful in establishing
a before value for the property. Grant appears to have selected his comparables
more on the basis of the asking or sales prices rather than for their comparability
with the subject property. Grant did not provide us with any analysis of locational
influences between the subject property as a rural lot and his sales of waterfront
properties. Further he relied heavily on subsequent listings rather than completed
sales, which we do not find of assistance in deriving a before value of
the Reti property in November 1996. We do not agree with
Grant that the Swansea Point neighbourhood 10 km south of the town of Sicamous
is outside of the Sicamous market area. Cavazzi stated that he considered this
area to have a 20% lower value than the Solsqua Road location and adjusted these
sales accordingly. The Retis did not provide any market evidence to contradict
this factor. Of the comparables used by Cavazzi, two of
the three properties located south of the town of Sicamous prove to be the most
persuasive. They sold for $163,000 and $224,000; Cavazzi adjusted these transactions
to $170,000 and $194,300. The latter sale was the more current transaction to
the November 1996 valuation date and was apparently the more comparable of the
two to the subject property. Only one property was included
by both appraisers in their Direct Comparison analyses. This was the Tidsbury
property, on Hillier Drive, on the opposite side of the sewage treatment facility
from the Retis' property. This comparable was a 1998 listing. There was significant
contradiction in the testimony on this property by Cavazzi and by Blake Tidsbury
himself, who testified by telephone. We do not find this property to be of assistance
for several reasons. First, the property was not a completed sale but merely a
listing, and one long after the valuation date. Second, the property was an acreage
with river frontage while the Retis' property was a rural lot. Third, Tidsbury
by his own admission gave Cavazzi a somewhat optimistic view of the marketing
potential of his property as he was under the mistaken impression that Cavazzi
was an agent for a purchaser rather than an appraiser retained by Sicamous. Finally,
Tidsbury was an active opponent to the sewage treatment facility leaving open
the question as to whether his Hillier Road property was also affected by the
project. We now turn to the market history of the subject
property itself. The Retis purchased the property in September 1992 for $212,000.
We find Grant's analysis of the purchase price unhelpful because of its dependence
on the Cost Approach and the difficulties with that approach discussed above.
The Retis subsequently, and unsuccessfully, offered the subject property for sale
for $256,500. While we do not consider an asking price a reliable indicator, except
to set an upper end of value, market trends since the original purchase may be
a guide to the November 1996 before value. We have three sources for changes
in real estate market conditions in Sicamous. The Retis' real estate agent, Robert
Burns, was of the opinion that property values had increased by "at least"
5% from 1992 to 1994. He admitted that his business was more focused in Salmon
Arm than Sicamous and that he was only generally aware of market trends. Grant,
in his report, undertook a paired sales analysis related to increases in lot values,
which he considered to have risen at a rate of 2% per month to 1995. He also provided
statistics showing an increase in the Sicamous population of 14% in the four years.
Cavazzi's adjustment for time only addressed the period covered by his sales;
he was of the opinion that market values were increasing by 0.45% per month from
January 1995 to mid 1996. While none of this gives us
a specific adjustment for the original purchase of the subject property, it is
clear that market values had not declined over this four year period. We can only
conclude that Cavazzi's adjustments are understated. While the possibility exists
that the Retis paid higher than market in 1992, we did hear that they spent several
days viewing properties in Sicamous and that they negotiated the price between
an asking price of approximately $220,000 and their offer of $189,000. Weighing
all the evidence on this point, we conclude that the appropriate value of the
subject property, without any regard to the sewage treatment plant and works yard,
is $220,000. 5.3 After
Value 5.3.1 Valuation
Evidence The task facing
the appraisal experts was not an easy one. Neither was able to find sales of properties
directly affected by a sewage treatment plant or public works yard. Both Grant
and Cavazzi agreed in general terms that there had been a loss but had differing
conclusions on the degree of impact. Grant's referred
to previous studies by his firm which had concluded that the proximity to freeways
could devalue a property by 20% to 30% and proximity to sanitary landfills could
devalue by as much as 25%. He also attached as an appendix to his report a number
of articles about various pathogens and chemicals, in most cases linked to livestock,
which might be present in water and cause problems for humans. Grant has no expertise
in medical or scientific matters. Sicamous objected to the inclusion of these
papers and the board agrees that they are of no legal relevance. In Grant's opinion,
the subject property was more severely affected than those in the other studies
done by his firm, and he concluded that the diminution of value would be 50% to
60%. He applied this to his before value of $245,000 to derive an
after value, based on these analyses, in the range of $122,500 to $147,000.
The board notes that this appears to be an error in his report which was not discussed
at the hearing, and the range of the after value ought to have been $98,000
to $122,500. Grant, for his final conclusion of injurious affection, accepted
the actual sale by the Retis in 1998 at $110,000. Cavazzi
for his part only addressed the sewage treatment plant and did not comment on
the additional impact of the public works yard. Cavazzi did not have any evidence
to support a specific loss. He simply assumed there would be some reduction in
value, essentially due to a stigma from the presence of the plant, in the range
of 10% to 25% of value. On this basis, he estimated that this loss would lie in
the range of $17,500 to $43,750. He conceded that this estimate was somewhat arbitrary.
Applying this to his before value of $175,000, the estimated range in the
after value would have been $131,250 to $157,500. 5.3.2 After
Value Conclusion We are not prepared
to accept the claimants' suggestion that the actual sale of $110,000 in October
1998 set the value. The evidence was clear that this price was chosen to achieve
an almost immediate sale, and that it had precisely that effect. The listing agent,
Burns, stated that the price was set in consultation with counsel. It cannot be
described as fitting the Appraisal Institute of Canada definition of market value
referred to by both Grant and Cavazzi in their reports: The
most probable price which a property should bring in a competitive and open market
under all conditions requisite to a fair sale, the buyer and seller each acting
prudently and knowledgeably, and assuming the price is not affected by undue stimulus...whereby:
buyer and seller are typically motivated;...[and] a reasonable time is allowed
for exposure in the open market. The board
is left with the opinions of both appraisers to the effect that negative influences
such as highways, sewage plants, transmission lines, and the like can decrease
property values. In this case Cavazzi says that the property value is lowered
10% to 25% while Grant used 55%. We also have the evidence from the photographs
and all of the witnesses about the impact of the sewage treatment plant and public
works yard on the Reti property. The board notes that the Reti property was in
a rural setting, backing onto arable land. Although Sicamous pointed out that
there were some pre-existing noises from the pole yard and the railway line, these
were at some distance from the property and do not negate the significant impact
of the unshielded sewage treatment facility and the public works yard immediately
behind the Retis' house. This is especially so, in this case where the receiving
tank for the raw sewage, as well as the complete mix tank and the control room
with the acoustic panels, are all within 150 feet or even less, of the Reti property.
In addition, the parking shed and the workshop for Sicamous' maintenance equipment
are within the same proximity. Although Sicamous emphasized the issue of credibility
a number of times with respect to the Retis' complaints about the sewage treatment
plant and the public works yard, we are satisfied after hearing all of the evidence
that these facilities had a substantial negative impact on the Reti property.
We do not, however, accept that the Retis satisfied their onus in showing causation
between their health and the sewage treatment facility. The
board considers that the amount of injurious affection falls between Cavazzi's
top end of 25% and the 50% indicated by the eventual sale of the property for
$110,000. Based on all the evidence before us, we conclude that the subject property
was injuriously affected by 30% by the establishment of a sewage treatment facility
and public works yard on the adjacent property. Both Grant and Cavazzi considered
that the injurious affection affected the entire property. Thus, 30% is a reduction
of $66,000 from the before value of $220,000, for an after market
value of $154,000. 6. CLAIM
FOR IMPROVEMENTS NOT INCLUDED IN MARKET VALUE The
Retis advanced a claim for the loss of various improvements including the swimming
pool, the sauna, the double garage and the summer kitchen on the grounds that
these items were not included in the market value of the land. Section 31(2)(b)
of the Act provides:
| 31 | (2)
| If not included in the market
value of land determined in accordance with section 32, the following must be
added to that market value: ... | |
| | (b)
| the value of improvements made by an owner
occupying a residence located on the land. | Section
32 defines market value under the Act:
| 32 |
The market value of an estate or interest in land is the amount that would have
been paid for it if it had been sold at the date of expropriation in the open
market by a willing seller to a willing buyer. | The
Retis say that as a result of the construction of the sewage treatment plant they
were forced to leave the property and lost the benefit of these improvements.
Grant relied on the difference between his conclusions of value by the Cost Approach
and the Direct Comparison Approach to provide a value for these improvements that
he says is not reflected in the market value of $27,000. The
designated improvements - the swimming pool, the separate garage and the summer
kitchen - were all present when the Retis purchased the property. There was no
evidence that the Retis expended any money on constructing these improvements.
In Branscombe v. British Columbia (1993), 51 L.C.R. 241 this board discussed
section [31(2)(b)] in the context of the equivalent Ontario section (which has
different wording), and the comments of both the Ontario Law Reform Commission
and the British Columbia Law Reform Commission. The board in Branscombe
specified the requirements for compensation under section [31(2)(b)] at p. 285:
First, it is clear that the provision applied
only to improvements made by an owner. Second, there must be improvements not
already included in market value. The onus is on the claimants to establish that
these conditions are satisfied. In our opinion,
the onus has not been met for either condition in this case. The board notes that
counsel for the Retis was also counsel in Branscombe, although the case
was not cited to us by either counsel. Further, we have already expressed our
doubts about the reliability of the Cost Approach from which Mr. Grant derives
his value for the improvements that he says are not reflected in the market value
of $27,000. We make no award under this claim. 7. CLAIM
FOR LOSS OF USE AND ENJOYMENT The Retis also made
a claim for the loss of use and enjoyment of the property for the period in which
they resided on the property after the construction of the sewage treatment plant.
Even though they did not immediately move, they argue that their occupation was
rendered less valuable. They claim that damages for the loss of use and enjoyment
of their property fall within the phrase "council must make ... compensation
to owners ... for any damages" in section 312 of the Municipal
Act and are recoverable in addition to damages for the loss in market value.
They rely on the Court of Appeal decision in Medomist Farms Ltd. v. Surrey
(District) (1991), 62 B.C.L.R. (2d) 169, as authority for awarding damages
for loss of enjoyment of land in addition to compensation for the damage to the
land. In that case, the plaintiff's fields were flooded by the District's overflowing
drainage ditches. The plaintiff was successful in obtaining a mandatory injunction
requiring the municipality to construct a pumping station and also in obtaining
damages for the crop that had been lost. In addition, relying on [section 312]
of the Municipal Act, the Court upheld the trial judge's award of $15,000
to the principal of the company for general damages for inconvenience, frustration,
anxiety and disappointment for Surrey's delay in abating the nuisance. Grant
was therefore asked to estimate the "diminished value of occupancy"
of the subject property between his valuation date of November 1996 and the date
that the Retis actually left the property in October 1998. This he did by estimating
that a normal (unaffected) rental value of the property should have been 5% of
the appraised value of $245,000, namely $1,020 per month. With the sewage treatment
plant behind the house, however, he thought that the property could only be rented
for about $600 per month. There was no rental market data presented for the choice
of numbers. Despite Grant's estimate of a diminished value
of occupancy of approximately 41%, the Retis asked to be compensated for 100%
of the notional rental loss. The sum claimed is $24,480 or 24 months at $1,020
per month. The board does not think that this is a realistic
claim. The claimants have requested and received an award for the reduction of
value of their property as of the beginning of this notional rental period. To
that award will be added interest for the fact that there has been a delay in
receiving compensation, with the result that the money is notionally treated as
having been received in November 1996. The claimants could use this money, with
the interest, in any way they choose. There is no ground for additional compensation
for rent for every month that they decided to stay on the property. In
the board's view Medomist is distinguishable. In that case, the damages
for non-pecuniary damages for the loss of enjoyment of the land were separate
from the damages for the loss of crops from flooding and the construction of a
pumping station in the future. In the present case, the Retis have sought damages
for the rental value of the property, which in our view overlaps with the damages
for reduction in value of the property. This board has consistently refused to
compensate for a claim that is an alternative measure to the loss in market value,
when to do so would result in a duplication of compensation. See Patterson
v. Ministry of Transportation and Highways (1994) 53 L.C.R. 88 (B.C.E.C.B.)
aff'd (1997), 62 L.C.R. 89 (B.C.C.A.); Ingham v. Creston (1996), 59 L.C.R.
113 (B.C.E.C.B.) rev'd on other grounds (1999), 66 L.C.R. 161 (B.C.C.A.). 8. INTEREST
This is a claim with no land taken and no advance payment.
This board in Jesperson's Brake & Muffler Ltd. v. District of Chilliwack
(1992), 47 L.C.R. 172, decided that the provisions with respect to interest in
section 46 are applicable in such cases. The British Columbia Court of Appeal
upheld this decision except with respect to the issue of additional interest under
section 46(4). The Court held that additional interest under section 46(4) is
not payable in cases where no land has been taken and there has been no advance
payment (see 52 L.C.R. 95). Therefore, interest pursuant to section 46(1) is payable
on the compensation awarded of $66,000 from November 1, 1996 until paid.
9. COSTS At
the close of submissions, counsel for the Respondent requested that no order for
costs be made at this time in order that costs could be spoken to separately.
Accordingly we adjourn the matter of costs at this time.
THEREFORE IT IS ORDERED THAT the District of Sicamous
shall pay to George and Mary Reti:
| 1. | Compensation
under section 41 of the Act for injurious affection of $66,000. |
| 2. | Interest
on the $66,000 under section 46(1) of the Act from November 1, 1996 until paid.
Under section 46(2) interest shall be calculated annually at the following rates:
| | | i)
| Six and one-half per cent
(6.5%) from July 1, 1996 to December 31, 1996. | |
| ii) |
Four and three-quarters per cent (4.75%) from January 1, 1997 to June 30, 1997.
| | | iii)
| Four and three-quarters per
cent (4.75%) from July 1, 1997 to December 31, 1997. | |
| iv) |
Six per cent (6.00%) from January 1, 1998 to June 30, 1998. | |
| v) |
Six and one-half per cent (6.5%) from July 1, 1998 to December 31, 1998. |
| | vi)
| Six and three-quarters per
cent (6.75%) from January 1, 1999 to June 30, 1999. | |
| vii)
| Six and one-quarter per cent
(6.25%) from July 1, 1999 to December 31, 1999. | |
