E.C.B. Number 48/95/230

December 19, 2002, E.C.B. 48/95/230

Between: 415528 B.C. Ltd.
Claimant

And: Greater Vancouver Sewerage and Drainage District
Respondent

Before: Robert W. Shorthouse, Chair
Diane M. Delves, AACI, P.App, Board Member
Gwendolynne Taylor, Board Member

Appearances: L. John Alexander, Counsel for the Claimant
Robert McDonell, Counsel for the Respondent

REASONS FOR DECISION

1. Introduction

[1] The claimant, 415528 B.C. Ltd., was the registered owner in fee simple of a parcel of land in Coquitlam, British Columbia. The claimant, a developer, purchased the property in 1992 and ultimately developed it as a residential subdivision project known as "Meadow Gate Estates".

[2] In 1994, the respondent, Greater Vancouver Sewerage and Drainage District, acquired a statutory right of way (the "SRW") on the claimant's property for a pre-existing sewer interceptor serving Coquitlam and surrounding communities. The Greater Vancouver Sewerage and Drainage District operates under the Greater Vancouver Regional District and representatives or employees of both entities were involved in discussions around the SRW. For the purposes of this discussion, the board has not found it necessary to make a distinction between the two. While the board recognizes, of course, that the claims to be determined are against the Greater Vancouver Sewerage and Drainage District, to facilitate matters any reference to the "respondent" throughout these reasons includes references to either.

[3] On or about July 11, 1994, the parties entered into an Agreement to Transfer or Dedicate Land under section 3(1) of the Expropriation Act, R.S.B.C. 1996, c. 125 (the "Act") and agreed that the date fixed for the determination of compensation by the board would be July 13, 1994. For convenience, within these reasons for decision, July 13, 1994 will be referred to as the date of taking or the date of valuation. The section 3 agreement provided for an advance payment to be made to the claimant by the respondent in the amount of not less than $109,000. The advance payment of $109,000 was made on July 6, 1994 with a further payment of $17,000 made on August 16, 1994. A total of $126,000 was paid with $5,000 allocated to costs under section 48, leaving $121,000 as the amount of the advance payment on account of compensation under section 20 of the Act.

[4] On August 16, 1995, the claimant filed with the board an application for determination of compensation (the "Form A"). This claim was twice amended prior to the start of the hearing and was further amended during the hearing. As finally amended the claim seeks compensation in the amount of $336,105 under four categories:

1. Market value of the interest in land taken and loss in value to the remainder (including two months' delay caused in the subdivision planning process): $161,569

2. Loss caused by further delay resulting in increased time to complete the project after the taking (30 months versus 22 months): 41,003

3. Extra administrative and management costs: (discounted) 58,994

4. Loss of profit and other increased costs (property taxes, marketing, etc.): 74,539

Total: $336,105

[5] The claimant asserts that the first item above falls within the heads of compensation provided under section 40(1)(a) and section 40(1)(b)(i) where there has been a partial taking, calculated in accordance with section 40(3) on a before and after basis. The second item, it says, can either be considered as a reduction in the market value of the remainder or, alternatively, as a disturbance damage. The third and fourth items the claimant characterizes as reasonable business losses directly attributable to the taking pursuant to section 40(1)(b)(ii). However, it should be noted that the total quantum of compensation claimed for all four items is derived from a before and after analysis by the claimant's real estate appraiser, Mr. Hilts.

[6] Mr. Hilts in his report also calculated additional damages for holding costs and a property tax adjustment as well as estimating the rental value of the impacted land for the period prior to the signing of the formal SRW agreement. The claimant has not requested compensation for these items.

[7] The respondent asserts that the advance payment represents all compensation to which the claimant is entitled by virtue of the taking and specifically denies any claim for damages or delay arising due to the presence of the sewer interceptor pipe and any dealings with the pipe prior to the date of taking. In the alternative, the respondent submits that any loss prior to the date of taking amounts to trespass and is not compensable under the Act as being directly attributable to an expropriation.

[8] The compensation hearing was held in Vancouver and occupied nine days over the period September 24, 2001 to October 10, 2001. Final submissions were made some six weeks later on November 26 and 27, 2001 in Victoria.

[9] Brian Craig, principal of the claimant company, testified at the hearing. The other witnesses for the claimant were six qualified experts: David Hilts, a real estate appraiser with Royal LePage Advisors Inc.; William Papove, a B.C. Land Surveyor with Papove Professional Land Surveying Inc.; Stan Russell, a professional engineer with Terra Engineering Ltd.; John Duguid, a planner with Genesis Development Consultants Ltd.; Evan Stregger, a quantity surveyor with Costex Management Inc.; and Victor Werchohlad, a project manager with Hunter Laird Engineering Ltd.

[10] The witnesses for the respondent were four qualified experts: David Johannson, a real estate appraiser with Nilsen Realty Research Ltd.; Iain Sinclair, a quantity surveyor with Conoca Projects Ltd.; Don Bowins, a professional engineer with D.K. Bowins and Associates Inc.; and Graham Farstad, a planner with Arlington Group. Callan Merry, a professional engineer with the respondent, also testified.

2. BACKGROUND

[11] The property in question is a 3.64 acre site north of the Lougheed Highway in the Cape Horn area of Coquitlam. The civic address of the property was 2376 Cape Horn Avenue and it was legally described as:

P.I.D. 011-427-788
Lot 1, District Lot 65, Group 1,
New Westminster District Plan 9662
(the "subject property").

[12] At the time of purchase by the claimant on July 29, 1992, the subject property was encumbered by a statutory right-of-way in favour of the Greater Vancouver Water District along the northwest boundary and encompassing 6,705.4 square feet. In spite of a miscellaneous note on title, the claimant was unaware that a sewer interceptor was located along the southeast boundary of the property since the encumbrance was not registered as a statutory right-of-way. The respondent pointed out that this miscellaneous note should have alerted the claimant to a "potential cloud on title" but acknowledged that the notation did not convey any legal interest in the lands.

[13] The claimant acquired the subject property initially as an income producing investment under its existing use but was aware that the land had the potential for rezoning for a higher use in the future. The property was zoned M-3, Industrial, and improved with an older industrial warehouse. The property was leased at the time of purchase.

[14] In December, 1992, the claimant retained Genesis Development Consultants Ltd. ("Genesis") to review the development potential of the subject property. Genesis contacted the City of Coquitlam ("Coquitlam") regarding a range of development options. Coquitlam indicated that an amendment to the Official Community Plan designation for the subject was under review for a change to Compact One-Family. Subsequently, on February 15, 1993, this amendment was adopted.

[15] Mr. Craig testified that the existence of the sewer interceptor became known to the claimant through the course of plotting lot layouts for a compact residential subdivision on the subject property in early 1993. At that time Mr. Craig was involved in negotiations with the respondent on an unrelated matter and he expressed his desire to settle a right of way agreement for the subject property. An internal memo in the respondent's files, dated June 17, 1993, reports Mr. Craig's request that the issue be resolved "within a few days".

[16] The claimant proceeded with plans to subdivide the subject property and proposed a number of lot layouts incorporating the sewer interceptor into the various configurations. The respondent had input into the various development scenarios that were proposed by the claimant. The size and restrictions of the proposed right-of-way for the sewer interceptor were amended several times during the course of negotiations.

[17] After negotiations over a period of approximately one year, the legality of the sewer interceptor was formalized on July 29, 1994 by registration of the SRW with four zones of varying restrictions. By this time the property had been rezoned to RS-4, Compact One Family Residential, and subdivision was imminent.

[18] The SRW for the sewer interceptor encumbered 1,294 square metres (13,928 square feet) of the subject property and was divided into A1, A2, B and C zones. The A1 zone covered the area within 3.16 metres on both sides of the sewer pipe and had the most stringent requirements. The A2 and B zones covered a significant portion of what became Lots 28, 29 and 30 within the subdivided subject property and the C zone also impacted Lot 27. House construction was allowed within these zones but all work had to be approved by the chief engineer of the respondent. The SRW document specified that houses constructed on these lots had be built on "piled" foundations although the house on Lot 27 was actually built on a "raft" foundation.

[19] The peat soil conditions on the lower part of the subject property, in the vicinity of the sewer interceptor, required construction methods appropriate to such conditions, including "preloading". Preloading involves placing a large amount of material, typically sand, on the property in order to compact the soil. The material is left on the property for an extended period and is removed prior to construction. Raft foundations are frequently used in these conditions as the foundation is a slab of concrete which distributes the weight of the structure and essentially floats on the ground. Typical perimeter foundations cannot be used in deep peat soils as the load bearing capacity is insufficient. With a piled foundation, a number of piles, typically wood poles, are driven into the soil until they provide a stable base for a foundation to be constructed on top of the piles.

[20] Shortly after the SRW was registered on title, the subject property was subdivided into 30 compact lots. Two phases were created and two consecutive subdivision plans registered on August 26, 1994. Phase one consisted of lots numbered 1 to 22 and was registered under Plan LMP18704. Phase two consisted of lots numbered 23 to 30 and was registered under Plan LMP18705. Phase two included the four lots, Lots 27 to 30, encumbered by the SRW for the sewer interceptor.

3. THE ISSUES

[21] The claimant asserts that the existence of the sewer interceptor not only impacted the value of the directly affected portion of the subject property but also contributed to costly delays in the pre-taking planning and approval stage and the post-taking construction and marketing stage of the subdivision. It also claims that a 31st lot could have been achieved without the sewer interceptor in place, that additional costs were incurred in dealing with the impact of the interceptor, and that its presence resulted in more costly house construction on the lots affected by the SRW. All of these factors figure in the claimant's claim for compensation totalling $336,105 based upon the market value of the interest in land taken, the loss in market value of the remaining land, and the reduction in profit from the development.

[22] The respondent acknowledges that the claimant is entitled to fair compensation for the interests transferred to the respondent through the section 3 agreement, and asserts that the respondent has fully compensated the claimant in the advance payment of $121,000. Its appraiser estimated the loss in value to the land resulting from the partial taking at $67,500 but did not consider the extent, if any, of disturbance damages. The respondent alleges that a 31st lot could have been obtained even with the sewer interceptor in place and that, if the claimant is entitled to be compensated on the basis of a 31 lot rather than 30 lot subdivision, this would constitute a different highest and best use of the property and would disentitle the claimant to disturbance damages. Further, if the claimant suffered additional damages or losses due to the presence of the pipe in the pre-taking stage, those damages or losses are not attributable to the expropriation and the claimant's remedy is through an action in trespass.

[23] The board must determine the following issues:

1) Was the planning and subdivision process in the pre-taking period delayed?

2) Is the pre-taking delay, if any, compensable under the Act or is it trespass?

3) Was there a delay in completing the construction and marketing phases of the project due to the sewer interceptor?

4) Were extra administrative and management costs incurred as a result of dealing with the sewer interceptor?

5) What was the highest and best use of the subject property and, in particular:

• Could the 30 lot subdivision which was finally created have achieved an additional 31st lot whether or not the subject property was encumbered by the sewer interceptor?

• Is a 31 lot subdivision a different highest and best use than a 30 lot subdivision, such that a valuation based on 31 lots would disentitle the claimant to disturbance damages pursuant to section 31(1) of the Act?

6) What is the most accurate and appropriate methodology to determine the losses incurred by the claimant as a result of the partial taking?

[24] The board will address each of the foregoing issues in turn.

4. PRE-TAKING DELAY

4.1 The Claimant's Case

[25] The claimant alleges that the initial planning process was delayed by the presence of the sewer interceptor on the subject property. It offers the following chronology of events in support of that allegation:

• On February 8, 1993, the claimant through its development consultant, Genesis, made a formal application to Coquitlam for preliminary layout approval ("PLA") of a proposed residential subdivision and an application to rezone the subject property to RS-4, Compact One Family Residential.

• During subsequent months the application proceeded through the planning department process and in early September, 1993, Coquitlam's subdivision committee found the lot layout technically feasible subject to the claimant's providing a geotechnical report.

• In June, 1993, the respondent began corresponding with the claimant concerning its unregistered sewer interceptor on the subject property.

• In November, 1993, the rezoning of the subject property passed second and third reading, and in December, 1993, passed final reading by Coquitlam.

• Also in November, 1993, the claimant was continuing its efforts to obtain approval for its subdivision application from Coquitlam. At that time, the tenant on the subject property was given six months notice of termination of the lease. Demolition of the building and construction of the subdivision could not begin until the tenant had vacated the property which was scheduled for the end of May, 1994.

• At the time it gave notice to the tenant, the claimant's proposed subdivision layout was based upon lots fronting Cape Horn Avenue as well as a street constructed through the southern portion of the property and a cul-de-sac off of the internal road — a layout that yielded 27 lots. In December, 1993, in response to information about adverse soil conditions on the lower portion of the property, the claimant decided against constructing the through street and revised the internal configuration to one with two cul-de-sacs and 29 lots.

• The 29 lot configuration was provided by Coquitlam to the respondent for comment. The claimant refers to a letter dated December 15, 1993 sent by Barry Patterson, a land agent for the respondent, to Coquitlam indicating concern with the new layout and noting that the respondent might have to purchase proposed Lots 27, 28 and 29 due to the inability to reduce the proposed restricted SRW area and allow for house construction on these lots.

• On December 22, 1993, Mr. Patterson wrote to the engineering firm of Klohn-Crippen Consultants Ltd. ("Klohn-Crippen") requesting advice on protecting the sewer line from the effect of preloading part of the subject property. He also corresponded on this matter with other staff employed by the respondent and again with Klohn-Crippen prior to the end of December.

• On January 5, 1994, Coquitlam sent a fax to the respondent asking if the proposed Lots 28 and 29 were acceptable.

• On January 6, 1994, Coquitlam sent a letter to Genesis indicating that the claimant's proposed 29 lot plan had been considered by its subdivision committee on December 21, 1993, and had been declined. Three reasons were cited:

1. a downhill cul-de-sac was not preferred;

2. a walkway between the cul-de-sacs had not been provided; and

3. "adequate building envelopes have not been provided on lots 27, 28, and 29 addressing public safety concerns in relation to the GVRD sewer pipe."

• Mr. Craig testified that the first two issues were dealt with promptly but the sewer interceptor remained an issue.

• On February 4, 1994, Genesis sent a revised lot layout to Barry Patterson for his consideration. This layout was similar to the previous plan but included 30 rather than 29 lots, four of which would be impacted by the sewer interceptor. The building envelopes on proposed Lots 29 and 30 encroached on the proposed restricted area for the sewer line. On February 7th, Mr. Patterson wrote to Coquitlam expressing concern about the safety of the sewer line under the claimant's 30 lot proposal.

• In order to address Mr. Patterson's concern, Genesis combined the proposed Lots 29 and 30 which removed the encroachment of the building envelope and thus reverted to a 29 lot layout. On February 8, 1994, Coquitlam approved this layout with conditions.

• The following day Mr. Patterson corresponded with Coquitlam to determine if, but for the sewer line, the 30th lot would have been approved. Coquitlam confirmed that it likely would have been approved.

• The respondent granted concessions on the building envelope requirements and Coquitlam then approved the 30th lot and granted PLA on April 6, 1994. Although the respondent required the piles for the houses to be at least 4.6 metres from the sewer line, it agreed that the houses could cantilever over the piles to within 3.16 metres of the sewer line.

• Victor Werchohlad of Hunter Laird Engineering Ltd. ("Hunter Laird") testified that subdivision engineering would not usually start until a development had received PLA. Hunter Laird began its engineering drawings for the construction of the subject subdivision in April, 1994, shortly after the project had obtained PLA. However, Mr. Werchohlad stated, requests for tenders would not be sent out until revisions had been made after the first drawings had been submitted to Coquitlam, effectively at the stage of application for final approval. Coquitlam received the first submission of the drawings on June 1, 1994, the approving officer signed off on the finally submitted plan on June 29, 1994, and Mr. Werchohlad testified that a request for tenders was sent out by Hunter Laird in early July of that year.

• The claimant received bids for the subdivision from Matcon Excavating Ltd. ("Matcon") on July 20, 1994 and a revised bid from Bel Construction Ltd. ("Bel Construction") on July 29, 1994. Matcon was retained and Mr. Craig testified that the first placement of fill on the site began on August 18, 1994.

[26] At the claimant's request made several years later in preparation of its compensation claim, Genesis undertook a review of the foregoing history and sequence of events that occurred during the rezoning and PLA stages of the project. Its purpose was to assist the claimant in completing a comparative analysis between the actual time which had been required to complete these stages of the project and the time which might realistically have been anticipated to do so in the absence of delays created by the presence of the sewer interceptor.

[27] On January 26, 2001, Genesis provided to the claimant a letter opinion stating that the rezoning process for the subject subdivision had been delayed by approximately 2 months. The letter also stated that the sewer encroachment added about 9 months to the PLA process. It was the opinion of Mr. Duguid, Genesis' planner, that with the preliminary layout having been submitted to Coquitlam on February 8, 1993, rezoning approval should normally have been obtained in October, 1993, with PLA granted at the same time. Rezoning approval was, in fact, given in December, 1993, indicating a two month delay, and PLA in April, 1994, for an overall delay of 6.5 months.

[28] The claimant submits that the foregoing evidence supports a conclusion that the initial planning process was delayed because of the sewer interceptor. Further, it says, the costs arising from the pre-taking delay are compensable under the Act.

[29] In the leading case relied upon by the claimant, Toronto Area Transit Operating Authority v. Dell Holdings Ltd. (1997), 60 L.C.R. 81 (S.C.C.), land development was frozen for more than two years while the expropriating authority determined what land it required. The issue was whether the substantial damages occasioned by that delay were recoverable in the expropriation proceedings. The Supreme Court of Canada found that the municipal authority had no choice but to refuse all development approvals until the expropriating authority decided what land it needed. Accordingly, the Court found that it was the prospective expropriation that caused the delay. The business losses flowing from the development delay were the natural and reasonable consequences of the expropriation and, as such, were compensable as disturbance damages, even though they were incurred prior to the date of taking.

[30] The claimant submits that the present case is similar to the Dell Holdings situation. In this case Coquitlam could not approve a subdivision plan until the respondent had determined what was required to safeguard the pipeline. In Dell Holdings, the Court noted that it is the project that triggers the right to compensation. The rezoning and planning process is part of the project. The Court stated at para. 38:

The approach to damages flowing from expropriation should not be a temporal one; rather it should be based upon causation. It is not uncommon that damages which occurred before the expropriation can in fact be caused by that very expropriation.

The Court continued at para. 41:

Dell simply could not take any action which would mitigate its loss in the development of its properties. The company had purchased the lands for development. It was in the process of seeking the necessary approval for their development when the authority expressed its interest in a portion of Dell's land. The result was that its lands were frozen for more than two years while the Authority considered how much and what portion of the land should be taken. There was nothing Dell could do but to wait for the authority's decision before it could get on with its business of land development.

[31] The claimant also referred to Sequoia Springs West Development Corp. v. British Columbia (Minister of Transportation and Highways) (2000), 69 L.C.R. 1. (B.C.E.C.B.) In Sequoia Springs the board applied the reasoning from the Dell Holdings case in finding at p. 31 that "if disturbance damages or business losses are otherwise recoverable, the fact that they occurred before the taking does not preclude their being awarded."

[32] For these reasons, the claimant submits that damages arising from the pre-taking delay are compensable in this proceeding.

4.2 The Respondent's Case

[33] The respondent denies that the presence of the sewer interceptor on the property caused any delay in the planning phase of the subject development.

[34] Graham Farstad, a planner with Arlington Group, produced a report for the respondent and testified at the hearing. Mr. Farstad reviewed documents from Coquitlam and the respondent and talked to staff at Coquitlam concerning the subdivision process and progress of the subdivision approval for the subject property. Mr. Farstad concluded that there was no discernable delay in the process and pointed out that the respondent's staff responded remarkably quickly when required.

[35] Under cross-examination, Mr. Farstad agreed that the only major change between the layout approved with conditions by Coquitlam on February 8, 1994 and the plan given PLA on April 6, 1994 was a result of the respondent's requirements. He agreed with claimant's counsel that it was possible there was a discernable impact but considered it minimal, as it was only two months.

[36] The respondent submits that, if there was any pre-taking delay or if the claimant suffered any loss or damages prior to the taking, both of which it denies, they are neither caused by nor attributable to the expropriation. Rather, the claimant's remedy lies in a civil action in trespass. The claimant's own evidence, it says, supports the conclusion that the claimant also treated the pipe as a trespass. The claimant's appraiser even presented a rental calculation for the pipe from July, 1992, when the claimant purchased the subject property, to the date of taking on July 13, 1994, on the premise that the intervening period constituted a trespass.

[37] The respondent also refers to paragraph 10 of the section 3 agreement, which provides:

"This Agreement shall not limit the rights and liabilities of the Owner or the Expropriating Authority in respect of the use of the Land by the Expropriating Authority prior to the Possession Date."

[38] Accordingly, the respondent submits that the agreement maintained the rights and liabilities of both parties respecting use of the land by the expropriating authority prior to the possession date and that both parties thereby implicitly acknowledged the distinction between what might be recoverable in trespass in civil proceedings before the courts and in expropriation compensation proceedings before the board. The claimant's proper course was to pursue an action in trespass.

[39] The respondent submits that it would be an error for the board to treat the presence of the pipe as an expropriation and refers the board to Maeckelburg v. Radium Waterworks District (1983), 28 L.C.R. 257 (B.C.C.A.) as authority for the distinction between actions in expropriation and trespass.

[40] The respondent seeks to distinguish the Dell Holdings case on a number of grounds. In Dell Holdings the land was frozen as a result of the expressed intention to expropriate. In this case, the pipe was a pre-existing trespass, the respondent was acting to protect the pipe not delaying development pending an expropriation, the respondent and Coquitlam approved some of the claimant's subdivision plans prior to the date of taking, the claimant proceeded to development prior to the date of taking, and the expropriation by way of the section 3 agreement was in any case a deemed expropriation, a legal fiction.

[41] In Dell Holdings, the Supreme Court of Canada held that for losses arising before the time of taking to be compensable as part of the expropriation, they must have been incurred in anticipation of the expropriation. The respondent submits that in this case, prior to the preliminary approval, the dealings between the parties and Coquitlam were not acts in anticipation of expropriation. Rather, it was only after preliminary approval, when the claimant was committed to the project and negotiations around the SRW began in earnest, that it could be said that expropriation was anticipated.

[42] For these reasons, the respondent submits that, if there was any delay prior to the date of taking, any losses or damages thus occasioned are not compensable in an expropriation proceeding.

4.3 The Board's Determination

[43] The board finds no fault with the conduct of the respondent's staff in dealing with the claimant's subdivision applications. Indeed, there were many instances that indicated prompt attention to matters and a willingness to make concessions. However, Coquitlam's need to accommodate the respondent's concerns as part of the approval process and the claimant's need to satisfy the respondent's requirements for protection of the sewer line while attempting to maximize the lot yield for its development clearly created additional difficulties for the claimant.

[44] The evidence supports the claimant's contention that the 30 lot subdivision could have been given PLA by late January or early February, 1994, roughly two months earlier than when it occurred, if the sewer interceptor had not been present. The additional time was caused by the need of the respondent to ensure that the area around the sewer interceptor was protected. Coquitlam could not responsibly approve the subdivision until the respondent gave approval.

[45] Based on the timing indicated by Mr. Werchohlad and Mr. Craig, if the engineering drawings had commenced two months earlier, tenders could have been requested and received earlier and the work on the subdivision, which started on August 18, 1994, could also have started earlier.

[46] The evidence does not, however, support Mr. Duguid's conclusion of a 6.5 month delay. Much of the additional time spent in the planning phase was a consequence of adverse soil conditions found to exist on part of the subject property and the claimant's own revisions to its subdivision applications to address those difficulties.

[47] The board finds that the presence of the sewer interceptor on the subject property caused a two month delay in the planning process.

[48] The board also finds that the dealings between the parties for preliminary lot approval were acts in anticipation of the expropriation, and that losses incurred as a result of the two month delay are compensable in expropriation proceedings, for the reasons that follow.

[49] The respondent asks the board to find that, because the sewer pipe was a pre-existing trespass and the parties entered into a section 3 agreement, this case is outside the parameters of an expropriation to the extent that any pre-taking delay would give rise only to a tort claim. It is not for the board to determine whether a claim in trespass would be sustained. However, even assuming a trespass had occurred, the board is not persuaded that this would negate a claim in expropriation. The board has considered the discussion in the Maeckelburg case and the other cases referred to there. While that discussion points to a distinction between actions in tort and expropriation, it does not state or imply that damages giving rise to a tort claim could not also be redressed in an expropriation claim. In the board's view, what is important here is that the respondent took steps to acquire compulsorily a portion of the claimant's land.

[50] The board considered a similar situation in the companion cases of McEachern v. British Columbia Hydro and Power Authority (1997), 60 L.C.R. 186, and McEachern v. Nanaimo (City) (1997), 60 L.C.R. 211. When the owner purchased the property which was the subject of these decisions, there was a hydro pole with lines running to and from it and there were water lines and meters and sewer lines, none of which was sanctioned by registered interests in the property. The board considered whether a claim in tort could also be a claim in expropriation and, at p. 198 of its decision concerning the claim against B.C. Hydro, referred to a previous board decision in Hruschak Estates v. Vernon (City) (1993), 51 L.C.R. 81:

Furthermore, the Hruschak Estates case relied upon by Hydro addressed whether the substance of certain claims were for disturbance damages under the Act, not whether the same facts could be relevant to separate tort and compensation claims. In Hruschak, the Court of Appeal accepted Professor Todd's definition of disturbance damages as "economic loss suffered by an owner by reason of having to vacate expropriated property". The claim was for a wide variety of pre-expropriation activities by Vernon, including a spraying program and construction on neighbouring land, rezoning of the subject land, and refusing to provide or allow the claimant to install a water line to serve the land. The City of Vernon argued that none of those claims was for disturbance damages, and some were for nuisance and other torts. Though the Court of Appeal held that the claims did not constitute disturbance damages, it did not say that conduct relevant to a tort claim, such as one in nuisance or trespass, could not also be relevant to a compensation claim under the Act. [Emphasis added.]

[51] In the McEachern cases, the board dismissed the claims because the authorities in question had not taken action to expropriate. The board stated, at p. 208 of the decision concerning B.C. Hydro:

To conclude, the presence of Hydro's pole and lines on McEachern's land is not an expropriation because, as a matter of law, there has been no exercise of a power of expropriation under s. 16(1)(a) of the Hydro Act. To the extent that Hydro has acted to unlawfully occupy McEachern's land, his remedy is to commence an action to recover damages and restrain or remove Hydro's works, not a compensation claim to the board."

[52] In the present case the respondent took action to secure the land around the sewer pipe when the claimant began subdivision planning. Even if the board accepts, without deciding, that the pipe was a trespass prior to conclusion of the section 3 agreement and registration of the SRW and therefore during the subdivision planning process, the board finds that it is consistent with the purposes and the remedial nature of expropriation legislation to compensate a claim which might also be provable in a tort action where a taking has occurred.

[53] The respondent characterized the section 3 agreement as a "legal fiction". In the board's view, the effect of the section 3 agreement does not differ legally from an outright expropriation in the determination of compensation. The fact that the authority acquired the land through a section 3 agreement rather than an outright expropriation does not alter the fact of the taking. The parties were cognizant from the outset that the result would be a SRW registered against the subject property.

[54] The British Columbia Court of Appeal has accepted that the reasoning of the Supreme Court of Canada in Dell Holdings has application to British Columbia expropriation law: see Bayview Builder's Supply (1972) Ltd. v. British Columbia (Minister of Transportation and Highways) (1999), 66 L.C.R. 176 at p. 191; Peter Panagiotis Daflos, Evanthia Daflos and Konstadinos Daflos v. The Board of School Trustees of School District No. 42 (Maple Ridge-Pitt Meadows), unreported, April 29, 2002, CA026632, Vancouver Registry, at para. 15. The board finds that this is an appropriate case to apply that reasoning.

[55] Accordingly, the board finds that the claimant is entitled to recover losses incurred as a result of the two month delay in the pre-taking period. Since the claimant has included these losses within its claim for the loss of market value of the subject property, the quantum of loss attributable to pre-taking delay will be considered later in these reasons.

5. POST-TAKING DELAY

5.1 The Claimant's Case

[56] The claimant alleges that, in addition to the delay which occurred prior to the taking, there was a significant further delay in completing the subdivision after the approval of the plan. Since the scope of the claimant's residential development included the sale of subdivided lots with completed houses on them rather than simply serviced vacant lots, the alleged post taking delay both in building out and marketing the development forms the basis for this claim.

[57] Mr. Hilts, the claimant's appraiser, proceeded from the assumption that in the before condition the subject property could have been serviced and ready for construction within 16 months of the date of taking and that a further six months would have been required to construct and market the homes, a total of 22 months. In the after condition he calculated that the project was actually completed and sold in about 30 months after factoring out a non-taking related delay which occurred when a grade beam within the development failed.

[58] To reach this conclusion, Mr. Hilts calculated that the houses in the first phase of the subdivision (Lots 1 through 22) sold within an average of 6.6 months from the date that the building permits were issued, and it was on this basis that he used 22 months as the expected time frame for completion and sale of the development if the sewer interceptor had not been present. Mr. Hilts analyzed in turn the average time frame for the completion and sale of the remainder of the lots. Lots 23 through 30 sold on average some 36.25 months after the date of taking. Included within this time period was the grade beam failure. Mr. Hilts estimated that the grade beam failure delayed completion of these lots for 6.58 months, and it was after adjusting for this factor that he derived approximately 30 months as the effective time frame for completion and sale.

[59] When testifying concerning his report, Mr. Hilts expressed the opinion that the market for new residential housing was "flat" in the period between the date of taking in July, 1994 and the date when the last of the finished houses in the subject development was sold in July, 1998. He also testified that developer's profits were declining in this same period.

[60] Mr. Hilts drew on the reports of Mr. Duguid of Genesis and of Mr. Stregger of Costex Management Inc. ("Costex") for their conclusions with respect to delay. Both of these reports were included in the appendix to his appraisal report.

[61] As previously noted, the Genesis report estimated that without the presence of the sewer interceptor the proposed subdivision for the subject property would have been granted PLA in October, 1993, while it actually received PLA in April, 1994, for a difference of 6.5 months. However, when considering the timeline for construction of the subdivision, the claimant acknowledged that the subject property was occupied by the tenant until May 31, 1994, and this was therefore the earliest date after which construction could proceed.

[62] The Costex report relied in part upon the Genesis report. However, in addition to accepting the time losses estimated by Genesis, Mr. Stregger pointed out that both the building permit process and the construction phase for the four affected lots, Lots 27 to 30, were also extended since the respondent first had to approve the plans upon which issuance of building permits depended, there were some delays in receiving those approvals, and additional time was also spent on pile driving the foundations for three of the lots. Mr. Stregger estimated that an added delay of 140 days was associated with the development of the four affected lots.

[63] Additionally, Mr. Russell of Terra Engineering Ltd. and Mr. Werchohlad of Hunter Laird both expressed the view in their respective reports that the sewer interceptor caused a delay in the planning process which flowed through into the construction process.

[64] Mr. Craig, the claimant's principal, also testified at length concerning the issue of post-taking delay. He prepared detailed timeflow charts for the compensation hearing which purported to show the delay effect of the sewer interceptor on each of the planning, construction, and marketing stages of the development. The admissibility of these charts was challenged by the respondent on the basis that they represented opinion evidence which Mr. Craig was not qualified to give. However, the charts were ultimately accepted in evidence by the board, subject to weight, on the basis that they purported to represent the developer's reasonable anticipation at the time the claimant gave notice to the tenant of how the project would have proceeded in the absence of the sewer interceptor as compared with how the project in fact unfolded in the presence of the SRW.

[65] The claimant's experts involved in the planning and construction stages were shown these charts and each of them expressed the opinion that the charts appeared to contain no obvious errors and generally reflected the timelines the experts themselves would have anticipated for such a project as well as information in the experts' own files on the time actually taken.

[66] The claim for post-taking delay focuses on the period from August, 1994 through early 1995 when, the claimant says, its already delayed construction timetable was further delayed by seasonal weather conditions which, in the absence of the pipe, would have been avoided. Other sources of delay identified by the claimant in this post-taking period included the obtaining of building permits in light of the respondent's SRW requirements and the need to create piled foundations on Lots 28, 29 and 30.

[67] The claimant's evidence in support of the post-taking delay claim shows that work first began on the construction of the subdivision when the claimant's soils contractor, Matcon, began preloading fill on the lower portion of the subject property on August 18, 1994.

[68] On August 26, 1994, Mr. Craig ordered Matcon to stop work on the site because he was unhappy with the moisture content in the fill. Matcon's contract was terminated and Bel Construction was retained in its place to continue the work on the subdivision. Mr. Craig testified that work resumed about September 6, 1994, for a delay of approximately one week.

[69] Mr. Craig further testified that filling and grading of the subdivision continued until October 21, 1994, when weather conditions prevented any substantial work from progressing. Approximately three days of work were completed in the intervening period until January 13, 1995, when the filling of the subdivision resumed. The claimant has referred to this delay as the "loss of a season". Mr. Craig stated that the filling of the site was completed on March 6, 1995. But for the presence of the pipe, the claimant maintains, the construction stage could have begun in early June, and excavation and preloading could have been effectively completed before the rainy season intervened.

[70] In explaining his own thinking around the timing of construction and marketing, particularly in regard to the second phase of the subdivision (Lots 23 to 30), Mr. Craig stated that he had kept in mind considerations around market absorption and how many lots he wanted to bring onto the market at one time. He testified that he had given thought to piling all of the lower lots, but that preloading was much less expensive and therefore the better option if time was in his favour. If the market became suddenly buoyant, he indicated, he would have had the ability to pile through the preload to get the houses on the market faster. Mr. Craig stated that he definitely would have preloaded Lots 28, 29 and 30 if the sewer interceptor had not been present. However, no such option was available with respect to those lots since they all had to be piled to meet the respondent's requirements under the SRW.

5.2 The Respondent's Case

[71] The respondent denies that construction and completion of the claimant's subdivision was delayed by the sewer interceptor on the subject property. The evidence regarding site preparation, site excavation, and preloading, the respondent says, shows that any delays were attributable to other unrelated factors, including the following:

• The claimant's own choice of timing as to when and how to proceed with the development and, in particular, the phasing of the development. The primary factors in regard to phasing, the respondent says, were, firstly, soil conditions which led to the decision to preload and, secondly, marketability which argued for initially developing and marketing the more profitable sites in the upper portion of the subdivision adjacent to Cape Horn Avenue and away from the Lougheed Highway. The respondent points to Mr. Craig's testimony that he had intended to proceed with development at a rate of nine lots at a time, starting with the upper portion.

• The large amount of fill that was required for the development, and lack of adequate planning to conduct the excavation and general site preparations including preloading during 1994 so as to avoid wet winter conditions. The respondent says the engineering evidence from both Mr. Russell, the claimant's engineer, and Mr. Bowins, the respondent's engineering expert, was that, contrary to what Mr. Werchohlad had stated, an owner of property is entitled to engage in site excavation and preparation without final engineering drawings being prepared and submitted for approval. Since PLA had been obtained on April 6, 1994, the tendering of contracts for site preparation could have proceeded thereafter, and site preparation work could in fact have commenced once the tenant had vacated at the end of May, 1994.

• The difficulty the claimant experienced with its initial contractor, Matcon, which resulted in work being stopped and Matcon being replaced by Bel Construction. The respondent says the documentary evidence suggests a period of delay extending through September and into October, 1994, much greater than the one week period described by Mr. Craig.

• Indications within the claimant's contract with Bel Construction in September, 1994, that site preparation work was to continue through the winter, casting real doubt on the claimant's submission that the climate in and around Coquitlam precludes winter work.

• The report to the claimant from Terra Engineering on January 5, 1995, that the required fill was at that point approximately 90% complete, and that it would be completed "as soon as structural fill becomes available," indicating that supply of site preparation materials was also a factor in any delay.

• The claimant's own need, based on its decision to preload, to wait up to one year for the preloading to accomplish its settlement of the lands before construction could begin on Lots 23 to 27 in the lower portion of the subject subdivision.

• Timing considerations around the development of the subject property in light of the construction of an adjacent subdivision to the east referred to as the Highland Glen Property, the road works for which were not yet developed in 1994. As a result, the respondent says, there was as yet no road access to the lower cul de sac on the claimant's subdivision, creating uncertainty in regard to the timing of the second phase of the development.

[72] The respondent also continues to dispute the proper admissibility and relevance of the timeline charts entered in evidence at the hearing which, Mr. Craig testified, described his own thinking about how the development would proceed at the time the claimant gave notice to the tenant to vacate in November, 1993. The respondent points to the fact that the second of these charts in fact deals with a 31 lot subdivision which it says Mr. Craig never contemplated at any time during construction. The respondent also suggests that the board should draw an adverse inference from the failure of Mr. Craig to produce contemporary plans and project schedules for the development which had been assembled in 1993 and 1994, were still in existence only a few months prior to the compensation hearing, but which Mr. Craig testified had subsequently been lost or discarded.

5.3 The Board's Determination

[73] The board finds that the claimant's evidence of substantial post-taking delay is not compelling for the reasons that follow.

[74] In the first place, it is necessary to adjust any period of delay estimated in various of the claimant's expert reports to account for what occurred in the pre-taking as well as the post-taking period. The Genesis report, which forms part of the basis for the delay claim both pre-taking and post-taking, estimated a 6.5 month delay in the planning and subdivision process. This delay occurred prior to the tenant having vacated the subject property at the end of May, 1994. Therefore, although the board has already accepted a two month pre-taking delay, the remaining 4.5 months is not relevant. This two month pre-taking delay is incorporated within Mr. Hilts' estimate of post-taking delay. The additional delay which he estimates post-taking is based upon his analysis of the sales period for the upper portion or first phase of the subdivision in comparison to the second phase of the subdivision part of which was impacted by the sewer interceptor.

[75] In the second place, attention must be paid to the evidence concerning market conditions during the period in question. The time period covered by the claim for post-taking delay is fairly lengthy. The taking occurred in July, 1994, and the last house was sold in July, 1998, some four years later. Mr. Hilts testified that, not only was the market flat over this period, but also developer's profits were falling in the same period. Since Mr. Hilts expressed the opinion that the market was rising in the two years prior to the taking, it is in the board's view a logical inference to draw that a period of at best level sales and declining profits would likely have impacted the pace of site preparation, construction and marketing for at least part of the subject development.

[76] Mr. Craig's own evidence offers support for the view that the market was not robust and that consideration of absorption rates played a factor in the timing of the development. As an astute developer, it is reasonable to suppose that he would have gauged the market to determine how quickly and in what manner he should proceed with the completion of the houses. This is precisely what the evidence shows he did. Mr. Craig testified that, given sufficient time, preloading of the lots on the lower portion of the subdivision where soil conditions were difficult was the cheaper and better option although it had the effect of lengthening the time for completion. He also said he would have preloaded the lots impacted by the SRW rather than putting in piled foundations if the respondent's requirements had not been otherwise. These observations undercut the claimant's assertion that the respondent should be held responsible for damages or losses arising from a lengthy period of delay. Although the board declines to draw the adverse inference which the respondent has sought from the claimant's failure or inability to produce plans and project schedules for the development assembled in 1993 and 1994, the foregoing observations cast in doubt how much reliance should be placed on Mr. Craig's timeline charts prepared for the purposes of the hearing.

[77] In the third place, the board observes that, over the development period of four years, a number of other difficulties arose which had an impact upon the pace of construction of the residential subdivision. On the evidence the board does not accept the respondent's submission that obtaining road access to the lower portion of the claimant's subdivision from the adjacent Highland Glen development was a delaying factor. However, the other difficulties did include adverse weather conditions, supply or contract related delays, and construction problems such as the grade beam failure. Apart from the issue of weather-related delay in the fall and winter of 1994-'95, to which the board will return momentarily, there is no suggestion that the respondent bears any responsibility for these other problems.

[78] In the fourth place, the evidence indicates that the time required to obtain building permits for the impacted Lots 27 through 30 was lengthened somewhat as a result of Coquitlam's need to secure approvals from the respondent. However, it is also fair to observe that the claimant knew at the time of taking that this would be the case and could reasonably have planned for this eventuality by submitting plans earlier than usual. The board also notes that although, as Mr. Stregger pointed out, there was some delay in receiving approvals for the house plans from the respondent, the correspondence in evidence shows that the plans the claimant submitted for Lots 27 through 30 contained deficiencies and did not conform to the site grading requirements under the SRW. This obviously caused some delay since the plans needed to be revised. However, the preparation and submission of proper plans was within the control of the claimant. The board finds that the claimant has not proven any appreciable loss in this regard as a result of the taking.

[79] This brings the board to the matter of weather-related delay. There was no direct meteorological evidence to underpin the claimant's assertion that wet weather caused a cessation of work on the subdivision development, including the completion of preloading, from late October, 1994 to mid-January, 1995, and therefore, in effect, the loss of a season. However, the indirect evidence from correspondence during the period as well as from the claimant's engineering and other witnesses lends support to this proposition and, on balance, the board accepts that a weather-related delay occurred. The question then becomes whether this delay should be attributable to the actions of the respondent.

[80] The board previously found that there was an initial two month delay in the pre-taking period, which resulted in PLA for the development being achieved only in April, 1994. This, in turn, extended the period for the preparation and submission of plans for final approval. Although there was evidence that the tendering of bids for initial site preparation work need not necessarily await submission of these plans or obtaining final approval, the board accepts the evidence of the claimant's engineer, Mr. Werchohlad, that the normal procedure would be to do so, and particularly when dealing with a "tricky subdivision". The board considers that it was reasonable and prudent for the claimant to do so in this case.

[81] The result of the initial two month delay was, the board finds, a further holding period commencing October 21, 1994 during the wet weather season when preloading and other site preparation work could not continue. This work was then finished approximately two months after its resumption on January 13, 1995. In the circumstances the board considers that, without the initial two month delay, this downtime should not have happened. As this disruption occurred in the early stage of construction, it appears that there was little else the claimant could do during this period other than wait it out.

[82] In fixing the period of delay, the board has also considered the extent to which the claimant's own actions in terminating Matcon and replacing that contractor with Bel Construction might have contributed. The board is satisfied from its review of the documentary evidence that the delay caused by the claimant's change of contractors was effectively more than the one week period described by Mr. Craig but not as prolonged as the respondent has suggested. This disruption is factored into the board's final determination that the period of post-taking delay attributable to the onset of wet weather for which the respondent bears responsibility is a period of two months.

[83] Beyond the two months lost over the rainy season in the late fall and winter of 1994-'95, the board finds that the claimant's claim for further post taking delay is simply too remote. The construction period was lengthy, market conditions were not favourable, and other factors could have and, in fact, did impact the development over the four year period of construction and marketing. The claimant has not proven that the sewer interceptor caused a delay in the completion of the development other than in the early stages both pre-taking and post-taking.

[84] Accordingly, the board finds that the post-taking delay attributable to the sewer interceptor was two months. This delay is in addition to the pre-taking delay of two months. The claimant has made a separate claim for post-taking delay in the amount of $41,003, which forms part of its overall claim for reasonable business losses consisting of post-taking delay, extra administrative and management costs, and loss of profit and increased costs totalling $174,536. The claimant suggests that post-taking delay can also be considered as a reduction in the market value of the remainder. At this juncture, the board's purpose has been to determine the period of compensable post-taking delay. It will defer determination of the quantum to be awarded under this head until later in these reasons.

6. EXTRA ADMINISTRATIVE AND MANAGEMENT COSTS

[85] It will facilitate the board's later discussion of alleged financial losses to deal at this point with what the claimant says is another significant impact on its development in addition to delay, namely, extra administrative and management costs.

6.1 The Management Invoice

[86] The claim of $58,994 for these extra costs rests on an invoice dated February 1, 1997, submitted to the claimant by a related company, 363670 B.C. Ltd. ("363BC"), for administrative and management work said to have been performed with respect to the SRW for the sewer interceptor, both in obtaining subdivision approval prior to the taking and during the construction of the development afterwards. Brian Craig, the principal of the claimant company, is also the sole shareholder of 363BC.

[87] The invoice itself is for $71,500 exclusive of GST, but the claim is based upon a discounted sum utilized by Mr. Hilts in his appraisal report. The invoice contains three sections, the contents of which may be summarized as follows:

• Section 1 concerns project management during the subdivision process in the pre-taking period. It bills the sum of $25,000 for dealings said to have taken place with the respondent between June, 1993 and July, 1994 in order to obtain subdivision approval, noting that five months' extra time was required in respect of the whole subdivision development. It also bills $12,000 for additional management involvement with a consultant and professional, said to have required two months' extra time at this stage. The amounts invoiced under section 1 total $37,000.

• Section 2 deals with administration and project management in relation only to Lots 27 to 30 of the subdivision in the post-taking period. It is concerned, firstly, with what is termed "plans processing" in relation to piping, geotechnical design of foundation pilings, and structural design. The extra time said to have been required on this account, as the board understands it, was 1.5 months applied to each of the four impacted lots at the rate of $1,500 per lot for administration and $2,500 per lot for management, for a total of $16,000. Section 2 is concerned, secondly, with the initial stage of construction on Lots 27 to 30, described as involving the actual piping, "mobilization of crew for piping", and foundation construction. According to the invoice, the extra time required was one month applied to each of the four lots at the rate of $1,000 per lot for administration and $1,750 per lot for project management, for a total of $11,000. The combined total billed under section 2 therefore amounts to $27,000.

• Section 3 of the invoice is expressed to be for site overhead for Lots 27 to 30, requiring one month's extra time, and billed in the lump sum amount of $7,500.

[88] It should be noted at this point that 363BC entered into a development and building agreement with the claimant company on February 1, 1994. A copy of the agreement was entered in evidence. It was executed on behalf of both companies by Mr. Craig. Under the agreement 363BC was given comprehensive responsibility for all aspects of the subdivision development, including planning, design, construction and sales, for the benefit of and under the direction of the claimant. Mr. Craig testified that at the construction stage 363BC acted as the general contractor, employing subtrades to build the homes and paying the bills. In turn, the claimant agreed to pay to 363BC for services rendered a minimum guaranteed remuneration equal to $50,000 plus GST per year and 5% of the net revenue from the development after deducting the minimum guaranteed amount. 363BC operated out of Mr. Craig's residence. He testified that during the development it employed a full time administrator and, at some point, there was also a manager on site.

6.2 The Claimant's Case

[89] The claimant alleges that the extra costs for administration and management billed by 363BC to the claimant are reasonable business losses compensable to the claimant under section 40(1)(b)(ii) of the Act. These extra costs are also factored into Mr. Hilts' financial analysis estimating compensable losses the claimant suffered as a result of the respondent's sewer interceptor. Mr. Craig testified that the management invoice was based upon estimated delays in creating the development as well as time spent dealing with the respondent.

[90] Mr. Stregger of Costex reviewed the management invoice in his report prepared for the claimant. He concluded that, based upon his experience, overhead costs for the kind of administrative and management work invoiced by 363BC would range between $10,000 and $15,000 per month exclusive of consulting fees. This would translate to a range of between $55,000 and $82,000 for the time said to have been expended by 363BC. The average of this range is $68,500 and, since the invoiced amount was $71,500, Mr. Stregger expressed the opinion that the invoice was reasonable.

6.3 The Respondent's Case

[91] The respondent submits that the management invoice lacks credibility in a number of respects. First and foremost, it argues, the claimant has not met the onus of showing that it actually suffered the loss or incurred the expense represented by the invoice. Referring to several previous decisions by the board which have considered claims for lost executive time or personal time, the respondent says the law is clear that such a claim must be proven with credible evidence in order to be compensable under the Act. In the present instance, Mr. Craig testified that he could not confirm that the invoice had actually been paid. He said he assumed that his accountant had taken care of the payment by way of a journal entry. Despite the opinion expressed in his report, Mr. Stregger testified that there might have been overlap between time billed under the invoice for extra services said to have been performed and work done by 363BC on other parts of the development. He suggested that it would be reasonable to adjust the amount of the invoice downward by 30% on this account.

[92] Second, the respondent points to evidence indicating that another related company known as Earthbound Enterprises Ltd. and owned by Mr. Craig's spouse had also billed the claimant for management and administration fees. This evidence arose out of a report prepared by Mr. Stregger on behalf of the claimant for litigation relating to the grade beam failure. When questioned about this at the compensation hearing, Mr. Stregger agreed that 363BC was providing services similar to Earthbound Enterprises Ltd., but said the billings were not necessarily for the same time frame. According to the respondent, the fact that two related companies, neither of which was at arms length from the claimant, were billing the claimant for the same kinds of services should heighten concern over the reliability of the 363BC management invoice.

[93] Third, the respondent drew attention to the fact that the invoice from 363BC to the claimant was dated February 1, 1997, which is some three years after the extra work allegedly done in regard to subdivision approval and almost a year after placement of the pilings on Lots 28 to 30. In the respondent's submission, this serves as further evidence that the invoice lacks credibility and that it was really prepared only in anticipation of the expropriation compensation proceedings.

[94] Fourth, since 363BC had already concluded a management agreement with the claimant on February 1, 1994, the respondent argues that it was not entitled to put forth an invoice which was in addition to the fees upon which the two related companies had already agreed. At the time of entering into the agreement, the respondent says, 363BC already knew that the sewer interceptor would be a factor in the development of the subject property.

[95] Finally, the respondent characterizes the invoice as excessive and extremely vague. Counsel for the respondent in his final argument brief, while denying that any part of the claim with respect to the management invoice was compensable, offered the figure of $2,500 as being a more reasonable reflection of any additional project administration and management costs which might have been caused by the sewer interceptor.

6.4 The Board's Determination

[96] In the board's view, the circumstances surrounding the rendering of the management invoice and the amount it purports to bill raise serious concerns. In the first place, it is an invoice between two non-arms length entities both controlled by the same principal, Mr. Craig. The increased costs claimed, as claimant's counsel in his final argument brief appears to have suggested, are in some ways akin to a claim for lost executive time.

[97] Claims for executive time in previous cases before the board, and the principles which govern an award under this head, have been reviewed recently in Pay Less Gas Co. (1972) Ltd. v. British Columbia (Minister of Transportation and Highways) (2001), 74 L.C.R. 81 at pp. 174-176. In order for such a claim to succeed, there must be a corresponding loss or expense, or one must be able reasonably to infer a consequential loss, as a result of the time expended by the executive officers of a claimant company.

[98] There was no evidence in the present instance to demonstrate that any additional time spent by Mr. Craig or those he employed in 363BC led to an actual loss to that company which, in any case, is not the claimant company. The basis of the claim must rest instead on the notion that it was reasonable in the circumstances for Mr. Craig through 363BC to bill the claimant for administration and management time expended over and above what the management agreement between the two related companies provided and that the claimant, in turn, should be reimbursed by the respondent for the extra expense.

[99] In the second place, the claimant's case in this respect is not assisted by evidence showing that another non-arms length entity was also billing the claimant for administration and management fees related to the same development.

[100] In the third place, the lengthy interval between the extra work said to have been performed by 363BC and its rendering of an invoice, together with the lack of any detailed backup evidence in the nature of time sheets or the like, raises at least a reasonable suspicion as to the underlying purpose the invoice was intended to serve. There was no documentary evidence before the board to support the claimant's assertion that the invoice had actually been paid.

[101] Finally, the quantum of the claim itself is large in relation to the overall compensation which the claimant is seeking. This becomes of particular concern when one considers that nearly half the total amount of the management invoice ($34,500 of the total $71,500 billed) relates to extra time said to have been expended on the design and construction of piping and house foundations on Lots 27 to 30 only.

[102] Despite these concerns, the board is persuaded that extra time and effort were required to deal with the presence of the respondent's sewer interceptor. It is true that, when the management agreement between the claimant and 363BC was concluded on February 1, 1994, the claimant was already aware that its proposed subdivision development was being impacted by the sewer pipeline. However, at that point PLA had not been granted and the terms and conditions imposed under the SRW, including the required setbacks and the requirement for piled foundations on lots directly affected by the sewer interceptor, remained to be finally determined. There is no specific recognition of these ongoing difficulties in the management agreement which appears to the board largely to be a standard form document. In the board's view, it was not unreasonable in these circumstances for 363BC to seek additional fees. The board accordingly finds that the claimant has suffered some loss in the nature of additional administration and project management costs. The board further finds that the loss is properly the responsibility of the respondent. The difficulty lies in attempting to determine what reasonable additional amount to recognize on this account.

[103] Reference to the management agreement between the claimant and 363BC is of some assistance. Under the terms of that agreement, 363BC was entitled at least to minimum remuneration of $50,000 per year. Since the agreement was concluded on February 1, 1994 and the last finished house in the claimant's subdivision sold in July, 1998, the total minimum remuneration calculated on that basis would be in the neighbourhood of $225,000. The management invoice, however, suggests that 363BC's involvement in the rezoning and subdivision approval process began earlier than the effective date of the agreement. Section 1 of the invoice refers to a period commencing in June, 1993. If that date were to be accepted as the point of commencement of remuneration (there is nothing in the management agreement itself which expressly backdates to 1993), total minimum remuneration would be in excess of $250,000.

[104] There appears to be a rough concurrence between the foregoing calculations based on the management agreement and the reported actual costs of administration and management as utilized by Mr. Hilts in his valuation and financial analysis. Mr. Hilts applied a figure of $8,500 per lot as representing the ordinary costs of administration and management. Across the 30 lot subdivision actually created, this equates to the sum of $255,000. The management invoice is, of course, treated by Mr. Hilts as a separate additional item of cost in the after taking condition.

[105] It is significant in the board's view that the minimum amount of $50,000 per year payable to 363BC under the management agreement converts to $4,167 per month. This figure is far below the $10,000 to $15,000 per month which Mr. Stregger reported to be overhead costs associated with development and construction management, and is also well below the $7,000 per month at a minimum which Mr. Stregger considered reasonable for the subject subdivision after applying a 30% reduction. Although the management agreement was at non-arms length, there is no suggestion that it did not realistically reflect the usual charges for administration and management. Therefore, considerable weight should be given to the amount of remuneration contemplated in the agreement when considering the management invoice presented.

[106] It is also significant that, if the additional costs billed under the invoice for dealing with piping and foundations and what is referred to as "site overhead" on Lots 27 to 30 are added to the ordinary administration and management costs of $8,500 per lot, the costs on this account for the four impacted lots calculate to $17,125 per lot, more than double the norm.

[107] Finally, the billings in the invoice are predicated on estimates of additional time spent which include an extra five months in the pre-taking period dealing with the respondent to obtain subdivision approval and two months in dealing with the consultant and professional. An extra 3.5 months is estimated for time spent on planning, design, and foundation construction for Lots 27 to 30.

[108] The foregoing considerations lead the board to conclude that the management invoice as presented is grossly excessive. The monthly rate applied to additional time spent is far too high in light of the terms of the management agreement between the claimant and 363BC. The additional time said to have been spent is also unreasonable in light of the board's findings on pre-taking and post-taking delay. The amount of extra administration and management costs which the invoice indicates were lavished on Lots 27 to 30 is entirely disproportionate. Doing the best that it can from its review of the available evidence, the board has determined that it would be reasonable to recognize two additional months of administrative and management effort for the whole of the subdivision approval process in the pre-taking period and an additional two months in the post-taking period with respect to Lots 27 to 30. The board considers that it would also be reasonable to assess administration and management fees of $5,000 per month in both the pre-taking and post-taking periods. Accordingly, the undiscounted amount which the board allows with respect to extra administration and management costs is $20,000.

7. HIGHEST AND BEST USE

[109] At the date of taking, July 13, 1994, the subject property was development land. It was not until August 26, 1994 that the two phased 30 lot subdivision plans were registered.

7.1 The Appraisal Evidence

[110] David Hilts, appraiser for the claimant, defined "highest and best use" within his report as:

"That probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and which results in the highest value."

[111] Mr. Hilts concluded that the highest and best use of the subject property was as a residential subdivision. Although he proceeded on the basis that if the sewer line had not been present the subject property would likely have yielded 31 lots rather than the 30 lots actually achieved, he essentially concluded that the highest and best use was the same before and after the taking.

[112] David Johannson, the appraiser for the respondent, defined highest and best use similarly as:

"The reasonably probable and legal use of vacant land or an improved property, which is physically possible, appropriately supported, financially feasible, and that results in the highest value."

[113] He concluded that the highest and best use of the subject property was subdivision and development into a 30 lot residential development, both before and after the taking.

7.2 The Prospect of a 31st Lot

[114] The issue of obtaining a 31st lot in the subject development only arose during the course of asserting a claim for compensation. The claimant did not attempt to obtain 31 lots in its subdivision applications with Coquitlam but argued that, if the sewer interceptor had not been present, a 31st lot would have been obtained and that compensation for loss should therefore be based on a hypothetical 31 lot configuration. The respondent argued that a 31 lot subdivision could have been achieved even with the sewer interceptor in place.

7.2.1 The Claimant's Case

[115] The claimant presented a 31 lot subdivision plan prepared by William Papove, a B.C. Land Surveyor. The plan was based upon the hypothetical premise that the sewer interceptor was not on the subject property.

[116] The Papove plan contained an unusual "bird beak" configuration where the normally circular cul-de-sac has an elongated portion in order to obtain the minimum frontage for the lots as required under the zoning bylaw. Mr. Papove testified that the actual road would have had the typical circular pavement area.

[117] In cross-examination, Mr. Papove agreed that there were undesirable features to the proposed 31 lot layout, in particular the building envelope on Lot 27 was set back much further than adjacent lots. In response to a question from the board, Mr. Papove estimated that the driveway on Lot 27, located on the "bird beak", would have a distance of approximately 25 metres (82 feet) from the paved road surface to the location of the dwelling.

[118] In support of the unusual configuration of Mr. Papove's hypothetical 31 lot layout, planner John Duguid of Genesis presented the board with a photocopied portion of a Coquitlam legal map. The map showed compact lot subdivisions to the northeast of the subject property with the same RS4 zoning. Many of these subdivisions had "bird beak" configurations including one that was more extreme than the Papove plan. It was Mr. Duguid's opinion that the Papove plan would have been approved if the sewer interceptor had not been present on the subject property.

[119] The claimant's witnesses took issue with the respondent's suggestion that 31 lots would have been approved even with the sewer interceptor in place. The respondent's hypothetical 31 lot subdivision plan, prepared by planner Graham Farstad of Arlington Group (the "Arlington plan"), included the SRW for the sewer interceptor. This plan would have required a variance to be granted as the radius of the cul-de-sac was only 14 metres whereas 14.5 metres was required by Coquitlam.

[120] Although Mr. Duguid agreed that a variance might be obtained for a 14 metre radius, he claimed that building envelopes shown on the Arlington plan would not meet with the approving officer's requirements. Both Mr. Papove and Mr. Duguid felt that Mr. Farstad had misinterpreted the property line setbacks for Lot 27.

[121] The Arlington plan assumed that the property line adjacent Lougheed Highway would be considered a side lot line and the boundary shared with Lot 22 would be construed as the rear property line. Mr. Papove and Mr. Duguid considered the lot line adjacent the Lougheed Highway to be the rear lot line and thus the required setback to be larger than that shown on the Arlington plan. The claimant provided an excerpt of definitions from the Coquitlam zoning bylaw in support of this assertion.

[122] Mr. Papove also pointed out that the Arlington plan was not fully dimensioned and was not prepared by a British Columbia Land Surveyor as would be required for subdivision.

[123] In order to appreciate the constraints imposed by the respondent under which the claimant submits it was acting to maximize lot yield and obtain the necessary municipal approval, it is necessary to advert again to the chronology of the subdivision approval process affecting the subject property. The relevant evidence concerning the sequence of events is as follows:

• On December 15, 1993, in response to the claimant's 29 lot subdivision proposal, Barry Patterson wrote to Coquitlam indicating that the respondent required a right of way 100 feet wide on either side of the sewer line with no buildings allowed within 35 feet of the line. The soil conditions in the vicinity of the sewer line were soft peat soils similar to what existed on the rest of the lower portion of the subject property. The sewer interceptor is apparently situated on piles and Mr. Patterson indicated that there was a concern about the pipe shifting if any building was to take place within 35 feet of the line. Additionally, the respondent intended to require any houses in the 65 foot restricted area to be constructed on piled foundations.

• The claimant amended its subdivision application when it became aware that there was a possibility of obtaining 30 lots on the property with a layout similar to the previous plan. This 30 lot plan was faxed to Mr. Patterson for his consideration. On February 7, 1994, Mr. Patterson responded that the building envelopes on the lots must be at least 4.61 metres (15.12 feet) from the centreline of the sewer pipe.

• In order to meet the respondent's setback requirements, the claimant combined proposed Lots 29 and 30, thus reverting back to a 29 lot plan. This plan was approved with conditions by Coquitlam on February 8, 1994.

• On February 9, 1994, Mr. Patterson wrote to Coquitlam with a number of questions regarding the proposed development of the subject property. Question No. 4 was:
"If Mr. Craig had submitted his plan for a 30 lot subdivision (copy attached) and our sewerline was not on his property and the proposal met all of the other conditions placed on it by the Committee, would the Committee have approved that layout? The answer to this question is crucial in how we determine what compensation we offer Mr. Craig."

• On February 15, 1994, Coquitlam responded to Mr. Patterson's letter. The answer to Question No. 4 was as follows:
"I can advise that if the GVS & DD sanitary sewer line was not located on the subject property, the Subdivision Committee would likely have approved the 30 lot subdivision layout which you faxed on February 9, 1994 subject to conditions similar to those given on February 8, 1994."

• The respondent then relaxed its requirements and agreed to allow the building envelopes for Lots 29 and 30 to be 3.16 metres from the sewer centerline although the building piles would have to be 4.6 metres away. The houses could cantilever out from the piles. The respondent also agreed to allow the hypothetical building envelope on Lot 29 to be as close as 2.6 metres from the sewer line but stressed that the actual buildings must be kept back 3.16 metres. The evidence was that hypothetical building envelopes must be shown for approval purposes but that the actual building constructed need not conform strictly to the hypothetical envelope.

• In the result, Coquitlam granted PLA for a 30 lot subdivision on April 6, 1994 on the basis of the revised setbacks from the sewer interceptor.

[124] In the claimant's submission, the 30 lot subdivision as approved was the maximum lot yield obtainable with the SRW in place.

7.2.2 The Respondent's Case

[125] Mr. Farstad, the planner who prepared the Arlington plan - a hypothetical 31 lot subdivision plan that included the sewer interceptor - testified for the respondent. He stated that he could not see any evidence of an impact on lot yield for the subject subdivision since the sewer interceptor was along the rear property line and was in the setback area for the affected lots. In regard to the rear yard setback shown for Lot 27 on his hypothetical plan, which had been earlier criticized by witnesses for the claimant, Mr. Farstad stated that lot lines could have been shifted if required.

[126] Mr. Farstad did agree that Coquitlam would have had to grant a variance for his hypothetical plan because the cul de sac radius was 0.5 metres less than the required 14.5 metres. In cross-examination, Mr. Farstad also gave the opinion that he thought the 31 lot plan prepared by the claimant's planner, Mr. Papove, which was based upon the assumption that the sewer interceptor was not on the property, would likely have been approvable.

[127] The respondent called Callan Merry, a professional engineer employed by the respondent and working in conjunction with the respondent's property department. He was personally familiar with the claimant's development. Mr. Merry testified that the main concern surrounding the setbacks for the sewer interceptor was to allow adequate access to the sewer line. He denied that safety of the sewer interceptor was an issue and, in reference to correspondence indicating otherwise, stated that the letter had unfortunate wording. He also testified that, if the claimant had asked for a smaller setback to allow a 31st lot, it would have been granted. In cross-examination Mr. Merry indicated that it was possible that the setback might have been reduced to as little as two metres if Mr. Craig had requested it.

7.2.3 The Board's Determination

[128] There was an abundance of documentary evidence provided to the board which referred to soil stability concerns and discussions about protecting the sewer line. In light of that evidence, the board has great difficulty in accepting Mr. Merry's testimony. While access was undoubtedly a concern, the board had no evidence to corroborate Mr. Merry's assertion that this was the main concern. From its review of the correspondence involving the respondent, Coquitlam, the consulting engineering firms and the claimant, the board does not consider that Mr. Craig could reasonably have expected to receive further concessions from the respondent had he simply asked. The respondent initially requested a 35 foot (10.67 metre) building setback but eventually relaxed that to 3.16 metres with the agreement that the piles for the foundations would be no closer than 4.6 metres. The board does not accept Mr. Merry's evidence as an accurate recollection of events.

[129] The claimant provided definitions from the zoning bylaw to support its experts' contention that the Arlington plan erred in considering the lot line adjacent to the Lougheed Highway as an interior side lot line with a 1.25 metre setback requirement. Mr. Papove stated that this was a rear lot line which required a 6 metre setback due to the adjacent Lougheed Highway. Based on a review of the definitions, it appears to the board that the lot line in question may actually be an exterior lot line with a 3 metre setback requirement. However, all of the definitions were not provided and the board is unclear on the impact of the Lougheed Highway as compared to a municipal street.

[130] Be that as it may, the board concludes that the Arlington plan showing 31 lots with the sewer interceptor did not meet subdivision approval requirements due to the insufficient radius. The evidence is that a variance would have been required but there was no evidence as to the probability that this would have been granted. Mr. Craig clearly pressured the respondent for concessions in order to maximize his lot yield in the subject development and it is not reasonable to believe that further concessions would have been forthcoming. The board finds that a 30 lot subdivision was the maximum yield with the sewer interceptor in place.

[131] Mr. Papove for the claimant presented a 31 lot subdivision layout for the subject property ignoring the sewer interceptor. This plan met all of the requirements of the zoning bylaw and there was no evidence to indicate that it would not have been acceptable if the sewer interceptor was not on the subject property. Indeed, the respondent's own planner, Mr. Farstad, acknowledged the likelihood that it would have been approved. Accordingly, the board finds that 31 lots could have been obtained on the subject property if the sewer interceptor had not been present.

7.3 The Effect of a 31st Lot

[132] The parties strongly disagree as to the significance for highest and best use and, in turn, entitlement to disturbance damages, of finding that a 31st lot would have been achievable in the absence of the SRW.

[133] Counsel for the respondent argued that a 31 lot subdivision was a different highest and best use than a 30 lot subdivision. The respondent thus tried to invoke the provisions of section 31(1) which limit compensation payable in those circumstances to the greater of the market value of the highest and best use of the property and the market value based on its existing use plus reasonable damages under section 34.

[134] Section 31 (1) of the Act states:

31 (1) The board must award as compensation to an owner the market value of the owner's estate or interest in the expropriated land plus reasonable damages for disturbance but, if the market value is based on a use of the land other than its use at the date of expropriation, the compensation payable is the greater of

(a) the market value of the land based on its use at the date of expropriation plus reasonable damages under section 34, and

(b) the market value of the land based on its highest and best use at the date of expropriation.

[135] Section 34(1) provides in part:

34 (1) An owner whose land is expropriated is entitled to disturbance damages consisting of the following:

(a) reasonable costs, expenses and financial losses that are directly attributable to the disturbance caused to the owner by the expropriation;

(…)

[136] Since the respondent's SRW is a partial taking of the subject property, section 40 of the Act is also prominently engaged. Section 40(1) states:

40 (1) Subject to section 44, if part of the land of an owner is expropriated, he or she is entitled to compensation for

(a) the market value of the owner's estate or interest in the expropriated land, and

(b) the following if and to the extent they are directly attributable to the taking or result from the construction or use of the works for which the land is acquired:

(i) the reduction in the market value of the remaining land;

(ii) reasonable personal and business losses.

[137] The respondent's main expressed concern was to avoid double counting or recovery which it said might occur if effect was not given to the limiting provision under section 31(1), and sections 34(1) and 40(1)(b)(ii) were applied. In other words, if the board found that market value was based on the existing use at the time of the taking, the claimant would be entitled to disturbance damages under section 34(1) and, because this is a partial taking, to reasonable personal and business losses under section 40(1)(b)(ii). In the respondent's view, there would be double recovery if the claimant were compensated for the extra costs of pursuing the 30 lot subdivision as a result of the taking and at the same time compensated on the basis of a 31 lot subdivision at the date of taking.

[138] The respondent therefore stressed the importance of finding that the use as a 31 lot subdivision is a different highest and best use from the actual use as a 30 lot subdivision. Such a finding, it said, would likely negate compensation for disturbance damages but would adequately compensate the claimant because the subdivision development approach used to value the subject property accounts for costs and losses such as disturbance damages or business losses. Based on the evidence the respondent contended that, if the claimant had asked for the 31st lot, the respondent would have accommodated it and Coquitlam would have approved it. Since in the respondent's submission a 31 lot subdivision is a totally different development requiring a wholly new lot configuration, it constitutes a different and, in this case, a higher and better use.

[139] The respondent referred to the board's decision in Daflos v. School District No. 42 (Maple Ridge-Pitt Meadows) (1999), 68 L.C.R. 167, at p. 204:

Where compensation for expropriated land is based on the market value of that land in its highest and best use, which is different from its existing use, care must be taken not to over indemnify the owner. Section 31(1) of the Act, which generally excludes claims for disturbance damages in such a case, has often been construed as a statutory enactment of the so-called "rule against double recovery": see E.C.E. Todd, The Law of Expropriation and Compensation in Canada, 2nd ed. (Scarborough, Ont.: Carswell, 1992), pp., 306-313; J.A. Coates and S.F. Waque, New Law of Expropriation (Scarborough, Ont.: Carswell, 1997 release 2), pp. 35-79 to 35-86.
The rule was first enunciated and applied by the English Court of Appeal in Horn v. Sunderland Corp., [1941] 2 K.B. 26, [1941] 1 All E.R. 480….The rule against double recovery established in Horn was applied by the Supreme Court of Canada in Saskatoon (City) v. Smith-Roles Ltd. (1978), 15 L.C.R. 104, 86 D.L.R. (3d) 321, [1978] 2 S.C.R. 1121, [1978] 5 W.W.R. 79.

[140] The respondent also referred to Vision Homes Ltd. v. Nanaimo (City) (1994), 54 L.C.R. 103 (B.C.E.C.B.) aff'd 59 L.C.R. 106 (B.C.C.A.), and Kliman v. Phoenix Estates Ltd. (1997), 60 L.C.R. 246 (B.C.C.A.) as examples of the board and the courts addressing section 31(1) and the general principle against double recovery. In Kliman the Court of Appeal interpreted the language of section 31(1) as excluding compensation for disturbance damages where highest and best use was different from existing use whether or not the disturbance damage claim would result in double recovery.

[141] The claimant acknowledged that there is a principle against double recovery but disagreed with the respondent's suggestion that a difference in lot yield amounts to a difference in the highest and best use and noted that neither appraiser adopted that view. Further, it submitted, there is no support in the cases, literature or appraisal techniques for that proposition.

[142] The board agrees with the claimant's position on this issue. Section 31 addresses compensation based on the market value of the owner's interest in the expropriated land. Market value is based on first determining the highest and best use.

[143] In spite of the novel argument advanced by the respondent's counsel, the board finds that the appraisers were essentially agreed that the highest and best use of the property was as a compact lot residential subdivision and accepts that conclusion. The board does not accept the argument that a 31 lot subdivision is a different highest and best use than a 30 lot subdivision. Since the board found that a 31st lot could have been obtained without the sewer interceptor present but not with the sewer interceptor in place, essentially the highest and best use is as a compact single family subdivision to the maximum density possible — that being 31 lots in the before condition and 30 lots in the after.

[144] In the board's view, the use at the time of taking was the same as the use after the taking, regardless of the slight difference in lot yield. Under section 31(1) the claimant is therefore entitled to recover reasonable disturbance damages under section 34(1) to the extent proven. It is, in any case, entitled to recover reasonable business losses under section 40(1)(b)(ii), which are not expressly subject to the same limitation set out in section 31(1). In so deciding, the board remains cognizant of the general compensation principle that double recovery is to be avoided and will be vigilant in its analysis of market valuation and the claims for damages and business loss to ensure that the principle is observed.

8. MARKET VALUATION AND FINANCIAL ANALYSIS

8.1 Appraisal Methodology

[145] There are some surface similarities between the methodologies employed by the two appraisal experts, Mr. Hilts for the claimant and Mr. Johannson for the respondent. Both used a before and after analysis. Both also used the land development method or subdivision development approach, making use of direct sales comparisons for some components of their analysis. Both estimated the market value of the underlying land in its serviced and unserviced state as residential building lots upon which development was imminent. From the before and after comparison, their estimates of loss in land value flowed.

[146] The direct comparison approach involves comparing or contrasting the recent sales, listings, or optioned prices of properties considered to be comparable to the subject and adjusting for any significant differences between them. The land development method, also known as the subdivision development approach, was described by Mr. Hilts as follows:

"The Land Development Method is most often used to value undeveloped acreage when a potential urban development represents the highest and best use. It values the land by projecting a hypothetical development (building or subdivision) on it. The sale price of the completed building or lots is estimated, from which deductions are made for all the necessary costs to create and market the completed project as well as a reasonable developer's profit. Because it might take some time to develop the project, the net proceeds are typically discounted to reflect present day value. The resulting figure is a land value expressed as a present day value."

Mr. Johannson's definition of the method, while more compressed than that of Mr. Hilts, essentially described the same elements.

[147] In most other significant respects, however, the approaches followed by the two appraisers are more notable for their differences than their similarities.

[148] Firstly, Mr. Hilts based his before analyses on the assumption of a hypothetical 31 lot subdivision and his after analyses on the 30 lot subdivision which was actually created in the presence of the sewer interceptor. Mr. Johannson did not factor the possibility of a 31st lot into his discussion.

[149] Secondly, Mr. Hilts undertook an initial before and after analysis of the entire subdivision in order to estimate what he described as the "direct loss in value to the land as a result of the partial taking". He then undertook a further before and after analysis of phase two only of the completed development comprising Lots 23 through 30 (including the additional hypothetical Lot 31 in the before), with the houses on them finished and sold. He did so in order to derive what he described in his report as both "damages to the remainder" and "reduction in profit". Mr. Johannson accepted the conclusion of the respondent's planner that the taking had no impact on the subdivision as a whole. He therefore limited his own before and after analyses to the four lots which were directly impacted by the sewer interceptor, Lots 27 through 30, in order to estimate their loss in market value caused by the SRW taking. Unlike Mr. Hilts, he did not give any consideration to disturbance damages or business losses.

[150] Thirdly, Mr. Hilts accepted that the presence of the sewer interceptor had created delays in both the planning and construction stages of the claimant's subdivision development and factored these delays into his calculations. The pre-taking delays in planning and approval impacted the entire subdivision and were reflected in the first calculation — the direct loss in value to the land. The post-taking delays in construction were confined to phase two of the development and formed part of the second calculation of damages to the remainder or reduction in profit. Mr. Johannson assumed that the presence of the sewer interceptor was not the cause of any delay in the claimant's project. He said in his report that he was "instructed to ignore the impact (if any) which the taking had on the timing of the approval process prior to the date of valuation" and to ignore generally any impact on the timing of development.

[151] Fourthly, the two appraisers relied on different kinds of evidence to underpin or support their analyses. Mr. Hilts used the figures of reported actual sales and revenues from the development as supplied by the claimant, together with market derived evidence, and reported actual site preparation, foundation and house construction costs as provided by several of the claimant's contractors and experts, including Bel Construction, Hunter Laird and Costex. Mr. Johannson eschewed the use of data based on reported actual sales revenues and costs for the development. He did not, for example, incorporate any evidence drawn from sales of the finished houses on the affected lots, preferring instead to estimate the market values of the subject homes upon completion of construction through use of the direct comparison approach. Rather than using the reported actual cost figures, Mr. Johannson relied on what he described in his report as "generalized input figures" from the respondent's various cost consultants, including the quantity surveyor, Mr. Sinclair, of Conoca Projects Ltd. ("Conoca") and the professional engineer, Mr. Bowins. For the purposes of his exercise, Mr. Johannson further stated in his report, he was "instructed to use the construction figures provided."

[152] Finally, although generally agreeing on a few matters such as the appropriate discount rate to be applied, the respective appraisers were at considerable variance on such questions as appropriate adjustments to the subject lots in light of comparable sales data and the appropriate levels of sales commissions, developer's profit, and builder's profit for the claimant's development.

[153] The board has already dealt with some of the issues involved, such as development delay attributable to the taking and the hypothetical 31st lot, and will return to examine the appraisers' approaches and conclusions more closely in light of these and other issues after having first set out the respective cases advanced.

8.2 The Claimant's Case

[154] The first step in Mr. Hilts' four-step analysis was to estimate the market value of land for serviced building lots throughout the claimant's subdivision in the before and after by direct comparison. He undertook a review of comparable sales for single family lots in the Coquitlam area in order to derive the average selling price per serviced building lot, taking into account those adjustments he considered necessary for location, view potential, lot size, soil conditions and level of servicing. He identified a 19 lot subdivision immediately west of the subject property as offering the most nearly comparable data. However, most of these lots sold in late 1992 and early 1993, and given the upward trend in prices between then and July 13, 1994, the date of valuation, he considered a price adjustment of 2% per month was warranted. The adjusted price range was in the order of $125,000 to $135,000 per serviced building lot, and Mr. Hilts concluded that, on average, a market value of about $130,000 per lot was reasonable for the subject development.

[155] In the before condition Mr. Hilts, relying on the lot layout plan prepared by Mr. Papove, assumed a 31 lot subdivision. He recognized that 31 lots would result in a slightly smaller average area per lot than a 30 lot subdivision, but considered the size differential did not warrant a price adjustment. Therefore, he estimated the gross sales proceeds of the 31 serviced building lots at $130,000 per lot or $4,030,000 in total.

[156] In the after condition Mr. Hilts dealt with the 30 lot subdivision actually created. In addition to recognizing the loss of one serviced building lot, he considered that an adjustment was also required to reflect the impact the SRW would have on the market value of Lots 27 to 30. First, there were the direct additional costs to provide piled rather than raft foundations for Lots 28 to 30 which, based on the claimant's detailed cost spreadsheets, he calculated to be approximately $13,500 per lot. Second, Mr. Hilts doubled this figure to take into consideration the cost of additional consultation and planning and the need for what he described as an "incentive factor" to attract a knowledgeable builder to purchase these lots in the presence of the sewer interceptor. Third, although no allowance was made for the cost of piling Lot 27 which in fact used a raft foundation, he considered that an incentive allowance for this SRW-impacted lot would also be required. In estimating the market value of the subdivision as serviced building lots in the after condition, Mr. Hilts therefore made a downward adjustment of $95,000 for the four directly impacted lots, and arrived at adjusted gross sales proceeds of $3,805,000.

[157] The second step in Mr. Hilts' analysis was his use of the subdivision development approach to estimate the residual discounted land value of the subdivision before and after the taking. He recognized that this approach is sensitive to the input of numerous assumptions, particularly when the analysis involves a hypothetical development. In the present instance, however, he wrote that "any uncertainties in regard to the redevelopment of the property had been removed by the date of taking. The redevelopment of the site was proceeding at the date of taking."

[158] Mr. Hilts' principal sources for the cost of development to bring the subdivision "on stream", that is to say, ready for house construction, were the reported actual costs incurred by Bel Construction as incorporated in the report of Hunter Laird. Bel Construction's costs included those of demolishing the existing warehouse, bulk excavation and backfill, site services, road works and extra works, a siltation pond, grade beam and piling, asphalt, and fencing, together with development cost charges, other municipal fees and utility charges. To these were added the costs of engineering, surveying and geotechnical services.

[159] In the before condition, the evidence from Hunter Laird was that the addition of a 31st lot would require the placement of extra fill as well as construction of a retaining wall at the rear of Lots 28 through 31 at an additional total cost of $27,240. Otherwise, Mr. Hilts' report indicates, there was little significant difference between the cost of constructing a 31 lot versus a 30 lot subdivision. Actual reported costs for the 30 lot subdivision in the after were $805,147 or $26,838 per lot while estimated costs for the 31 lot subdivision in the before were said to be $837,492 or $27,016 per lot. Mr. Hilts estimated a 2.5% sales commission based on gross sales revenue and a 15% developer's profit in both the before and after. The resulting residual land values were discounted at the rate of 8% per annum for 19 months in the before condition (16 months for planning and construction of serviced building lots and an average of 3 months to market the lots) and 21 months in the after condition, reflecting two months of pre-taking delay in the planning stage attributable to the presence of the sewer interceptor.

[160] In the end result, the total discounted land value of the serviced building lots calculated to $2,200,334 in the before and $2,038,765 in the after, for a difference of $161,569. According to Mr. Hilts, this difference represented the direct loss in value to the land across the entire subdivision as a result of the partial taking.

[161] Mr. Hilts next turned his attention to what he termed "damages to the remainder", in the board's view a misnomer for what is really intended as an estimate of the market value of finished houses in the subdivision and the reduction in profit realized upon sale as a result of increased construction costs, lowered sales prices, and delay. The next two steps of the analysis examined only the second phase of the claimant's development — the hypothetical further development of nine lots (Lots 23 to 31) in the before and the actual further development of eight lots (Lots 23 to 30) in the after. This more limited approach proceeded on the premise that the partial taking had no further effect on the first phase (Lots 1 to 22).

[162] For his third step, which was to estimate the market value of the finished single family residences, Mr. Hilts utilized the direct comparison approach, relying upon both the reported actual sales history for the subject Lots 23 to 30 and the available market evidence for comparable properties in the area. The comparisons were based on the price per square foot of finished floor area.

[163] Mr. Hilts examined the details of sales of new single detached dwellings and resales for newer homes within the Cape Horn area and competing neighbourhoods within Coquitlam, but ultimately relied on the subdivision development located immediately to the west of the subject property as his primary comparable. Sale prices for that completed development were in the region of $140 per square foot to $145 per square foot of finished floor area. In Mr. Hilts' opinion, the claimant's houses, while similar in design and locational features, had a superior quality of construction. After timing adjustments, he suggested that the claimant's sale prices should have been approximately 10% higher than those in the neighbouring development. This equated, in his view, to a value in the region of $160 per square foot of finished floor area. The claimant's entire subdivision development, he noted, achieved an overall average price in the order of $175 per square foot of finished floor area.

[164] In the before condition, factoring in a single family dwelling on the hypothetical 31st lot, Mr. Hilts indicated that Lots 23 to 31 would have had a combined finished floor area of 14,190 square feet. At $160 per square foot, this equated to sales revenue of $2,270,400. In the after condition, he indicated in his report that the actual aggregate sales price for Lots 23 to 30 was $1,994,312, a difference of $276,088. To the gross sales revenue in both the before and after, Mr. Hilts applied a sales commission of 2.17%, which he said was based on the average actual commission charged.

[165] Mr. Hilts' fourth step focused on the effect of increased construction costs, extra administrative and management fees, additional holding costs and further delay in the after condition on what he termed "the discounted value of the potential gross profit including land" in the second phase of the claimant's development.

[166] For the actual costs of construction, Mr. Hilts relied primarily on the figures provided by Mr. Stregger of Costex. Mr. Stregger reported that the actual construction costs for Lots 23 to 30 totalled $847,146. He broke down his analysis as between Lots 23 to 26 which were unaffected by the sewer interceptor and Lots 27 to 30 which were directly impacted. Drawing on Mr. Stregger's analysis as well as the claimant's own records, Mr. Hilts used the average figure of $60.25 per square foot of finished area as the cost to construct houses on Lots 23 to 26 and $71.85 per square foot of finished area for the houses on Lots 27 to 30. The difference was almost wholly accounted for by the increased cost of the foundations for Lots 27 to 30. Mr. Hilts concluded that in the before condition, absent the sewer pipe, Lots 27 to 30 as well as the hypothetical Lot 31 would have been built out utilizing similar development methods and at similar costs as for Lots 23 to 26, that is, $60.25 per square foot of finished area. The only difference lay in the need for extra fill and a retaining wall, the costs of which, he noted, had already been accounted for in his earlier estimate of direct loss in value to the land.

[167] The factoring in of extra administrative and management costs, based on the management invoice from 363BC for $71,500, had a significant impact on Mr. Hilts' further after analysis. The additional holding costs for property taxes and promotion in the after as compared with the before condition were somewhat offset by lower administration and project management costs, calculated on a per lot basis, for a 30 lot rather than 31 lot subdivision.

[168] Mr. Hilts derived a gross profit including land of $1,278,452 in the before and $1,012,635 in the after. These figures again required discounting to present value, and it was here that he identified a further delay factor arising from the requirements attached to the SRW in the completion of phase two of the development. In Mr. Hilts' opinion, the lots in phase two could have been serviced and ready for construction within a 16 month time frame from the date of valuation and a further six months would have been required for construction of houses and marketing of the completed units. This time frame of 22 months or 1.83 years, he stated, was consistent with the result achieved for phase one. However, Mr. Hilts calculated that the average time actually required to sell the completed Lots 23 to 30 after the date of valuation was 36.25 months. Factoring out the unrelated time delay caused by the grade beam failure, he said the average absorption period was more in the order of 30 months or 2.5 years from that date.

[169] Accordingly, Mr. Hilts discounted the before gross profit including land at 8 per cent per annum for 1.83 years (a factor of 0.8681) and the after gross profit including land at 8 per cent per annum for 2.5 years (a factor of 0.8244). This resulted in a before figure of $1,109,767 and an after figure of $773,662. From the difference of $336,105, Mr. Hilts subtracted his earlier estimated direct loss in value to the land of $161,569 to derive a reduction in profit amounting to $174,536.

[170] The claimant suggests that various components comprising the damages or losses which total $174,536 in Mr. Hilts' analysis can be separately quantified as set out in para. 4 of these reasons. First, if the discount figure of 0.8681 related to the expected time frame of 1.83 years is utilized in both the before and after, the difference reduces to $295,102, which is $41,003 less than what the appraisal indicates. Therefore, the claimant says, the figure of $41,003 indicates the amount attributable to delay. Second, if the discount figure of 0.8244 is applied to the extra administrative and management costs of $71,500 in the after, then the discounted amount becomes $58,944. Third, once the delay figure of $41,003 and the discounted extra administrative and management costs figure of $58,944 are subtracted from Mr. Hilts' total of $174,536, the balance of $74,539 represents the remaining loss of profit together with other increased costs such as those for property taxes and promotion.

8.3 The Respondent's Case

[171] Mr. Johannson embarked on what was essentially a six-step process in his before and after analysis. However, his analysis was confined entirely to determining the impact of the partial taking on the four directly affected lots, Lots 27 to 30. The first four steps were concerned with the claimant's development in the before condition, the fifth looked at it in the after, and the sixth step was essentially a cross-check to ensure that the final loss in value derived by a before and after analysis at least met the minimum statutory requirements under section 40(3) of the Act.

[172] As his first step Mr. Johannson used what he termed a "modified" direct comparison approach to estimate the market value of the four lots as serviced building sites in the before condition. He considered that the preferred indicators of value would be other building lots in the same vicinity and therefore found the more relevant data in the sales of other lots in two adjacent or nearby subdivisions. All of these sales occurred between July and November, 1992, and having regard to price trends between then and July 13, 1994, the date of valuation, Mr. Johannson concluded that an upward time adjustment of 1% per month compounded was necessary. After further small adjustments, he concluded that the indicated value of the four subject lots as serviced building sites, before consideration of some additional factors, was $130,000 per lot. It will be recalled that Mr. Hilts also valued each of the serviced building lots throughout the subdivision at an average of $130,000 per lot.

[173] However, Mr. Johannson proceeded to modify his initial conclusion in light of several additional factors all of which he said required downward adjustments to the subject lot values. By comparison with the comparables, all four lots in his opinion had inferior locational and topographical features, leading to an adjustment of $7,500 per lot. Lots 28 and 30 were also significantly smaller than the comparables and these smaller lot sizes he thought would have "a slight impact on value", leading to an adjustment for each of them of $5,000. Finally, Lot 30 was encumbered by the pre-existing sewer right of way which ran along the eastern boundary of the subject property, and Mr. Johannson estimated a further reduction in value for this lot based on 50% of the fee simple value of the encumbered portion, leading to a reduction of $15,296. Consequently, in Mr. Johannson's opinion, the adjusted values as serviced building lots in the before condition were, in rounded numbers, $123,000 for each of Lots 27 and 29, $118,000 for Lot 28, and $102,000 for Lot 30.

[174] As his second step Mr. Johannson applied the subdivision development approach to the foregoing serviced lot values to arrive at an estimate of their undeveloped worth at the date of taking. For servicing and site preparation costs he relied on the estimates provided by Mr. Bowins. The Bowins report analyzed the site servicing "hard" costs based on Bel Construction's quotations for the work totalling $571,805 with a $15,000 addition to account for sewer piling costs along the eastern boundary of the claimant's development. To arrive at an estimate of "soft" costs in the nature of consulting fees, the Bowins report analyzed the quotations from Hunter Laird and Terra Engineering. Other soft costs in the nature of municipal inspection fees, development cost charges, utility fees and legal costs were based either on actual billings or normalized estimates. Finally, Mr. Bowins relied on Conoca for his estimate of foundation costs. In the result, the Bowins report estimated site development costs in the before condition at $782,087 for the entire 30 lot development or $26,070 per lot. However, the report added, some costs amounting on average to $2,531 per lot had already been incurred prior to the date of taking so that the remaining development costs were $23,539 per lot. Mr. Johannson applied this last figure to each of Lots 27 to 30.

[175] It was Mr. Bowin's opinion that developers would, at a minimum, want a 20% return on the cost of developing as a profit margin and to pay for overhead. Mr. Johannson applied this 20% figure to both development costs and to what he indicated were the acquisition costs of the land for each of the four lots in question. Since he estimated that the required lot servicing period was one year, he also deferred the undeveloped value of each of the lots at the commencement of development over this period using a discount rate of 8% per annum. Unlike Mr. Hilts, he did not deduct the cost of a selling commission for the serviced lots because in his opinion the notional buyers of the undeveloped sites would retain them to construct houses once they were serviced. He did, however, factor in property purchase tax, which Mr. Hilts did not.

[176] In the end result, Mr. Johannson estimated the rounded value of each unserviced lot in the before condition as follows: Lot 27 — $73,500; Lot 28 — $69,500; Lot 29 — $73,500; and Lot 30 — $57,000, for an aggregate of $273,500.

[177] The third step in Mr. Johannson's appraisal analysis involved the further use of the direct comparison approach to estimate the before market value of each of Lots 27 to 30 with completed houses. In order to estimate their value, he researched a number of sales of new homes located within other subdivisions in the local vicinity. While Mr. Hilts had performed this analysis of his comparables on the basis of price per square foot of finished floor area, Mr. Johannson analyzed his comparables on the basis of price per square foot of total floor area. Considering differences in quality and size, he concluded that the houses constructed on Lots 27 to 29 would have a slightly higher pro rata value than his best comparable and that a figure of $100 per square foot of total floor area was appropriate. This resulted in estimated dwelling values upon completion rounded to $260,000 for Lot 27 and $250,000 for each of Lots 28 and 29. Lot 30 had a considerably smaller house than the others and the site was also encumbered by the pre-existing statutory right of way. Nevertheless, Mr. Johannson considered that market perception of this house would result in its value being only 10% less than that on the adjacent Lot 29. He therefore estimated the dwelling value of Lot 30 at $225,000.

[178] The fourth step utilized the subdivision development approach to estimate the unimproved property value of each of the four lots at the sale date in the before condition and to derive therefrom the estimated amount of builder's profit that would be realized. From the estimated dwelling value upon completion, Mr. Johannson began by deducting what he considered to be an appropriate market estimate of selling commission costs: 5.5% of the first $100,000 of the sale price and 2.5% on the balance. For the four lots in question this equates effectively to a commission rate of approximately 3.7%.

[179] Mr. Johannson next deducted the house construction costs. For this part of the analysis he relied on the Conoca report for the estimated foundation costs of each house and on the Bowins report for the balance of construction costs.

[180] In the before condition Conoca had estimated costs under two principal options: the "preload and shallow foundation" method, in which the pro rata costs were said to be $20.37 per square foot or $116,400 for all four houses; and "preload and raft foundation" method, with pro rata costs of $21.40 per square foot or $122,300 for the four houses. Mr. Johannson's figures reflect a total cost for foundations for Lots 27 to 30 of $118,018.

[181] The Bowins report observed that the average cost for house construction including plans, lot preparation, foundations, framing, finishing, engineering if required, and project management was normally in the range of $65 per square foot for standard type construction. From his review of the claimant's files, Mr. Bowins worked out the average house cost for phase one of the claimant's development, Lots 1-22, to be $65.07 per square foot of finished area. However, after deducting the site preparation and foundation costs already separately considered in his report, Mr. Bowins derived a cost for main floor house construction of $56.88 per square foot and for lower level construction of $15.00 per square foot. These latter two figures were applied by Mr. Johannson in his analysis to estimate total remaining construction costs for each of the four dwellings built on Lots 27 to 30, net of the foundation costs.

[182] In the result, Mr. Johannson after deducting selling commission, foundation costs and remaining house construction costs derived an unimproved property value at the sale date for each of the four lots. The values included builder's profit. He estimated that each of the four houses would be absorbed by the market approximately six months after the date of commencement of construction, and accordingly discounted the values for six months at the rate of 8% per annum. From these discounted values he then deducted the adjusted values of the serviced lots as derived in the first step of his analysis to arrive at an estimate of builder's profit. He calculated the average profit per lot at $4,028, which equated to an average builder's profit of 1.6% per lot expressed as a percentage of the completed house value.

[183] The fifth step in Mr. Johannson's appraisal analysis was to estimate the value of the four subject lots after the taking by utilizing the subdivision development approach. At the outset he recognized that the presence of the SRW had a negative impact on ownership attributes which would be reflected in the market value of completed houses on Lots 27 to 30. He wrote in his report that "a house which is encumbered with a right of way such as the subject is inferior to one which enjoys unencumbered ownership of the land." His analysis indicated to him a negative impact ranging between 2% and 12%. Since the SRW contained four zones of varying restriction, and each of the four lots was impacted to varying degree by them, Mr. Johannson made downward adjustments from the market value of the completed homes accordingly. He reduced the value of Lot 27, the least impacted lot, by $10,000. Lots 28, 29 and 30 were at or slightly above the midpoint of the range, and he reduced their values by $18,000, $20,000 and $18,000 respectively. In other words, the starting point for Mr. Johannson's after analysis was lots with completed houses having a market value of $250,000 for Lot 27, $232,000 for Lot 28, $230,000 for Lot 29, and $207,000 for Lot 30.

[184] Mr. Johannson's discussion of the four lots in the after condition proceeded from several other key assumptions, drawn mainly from the expert reports indicated in the brackets, including the following:

• The taking had no impact on the timing of development either of the four lots in question or the remaining subdivision. (Arlington)

• The taking had no impact on servicing costs for the four lots which remained the same before and after except with respect to $20,300 in additional consulting fees. (Bowins)

• The taking had no impact on the buildable floor area of the lots or on house sizes. (Arlington)

• The method of construction used for the foundations on Lot 27 was the same in the after as it would have been in the before.

• The taking resulted in additional foundation costs primarily for Lots 29 and 30 which totalled $3,102. (Conoca)

• Otherwise, the construction costs for the four lots were the same in the before and after condition. (Bowins)

[185] From the estimated dwelling value upon completion in the after condition, Mr. Johannson deducted a builder's profit of 1.6% and a selling commission which averaged about 3.8% based on the same formula as in the before. He deducted house construction costs which varied from the before condition only in the small amount of increased costs for foundation work. He discounted the resulting unimproved site value upon sale by six months at the same rate of 8% per annum. Mr. Johannson next deducted the servicing costs, which in the after condition included the cost of additional consultant fees totalling $20,300 for the four lots, and the development costs again assuming a 20% developer's profit. Finally, he again discounted the undeveloped value of the lots at commencement of development for one year at the same rate and factored in property purchase tax. Mr. Johannson's estimates of the value of the four subject lots at the date of taking in the after condition were, in rounded numbers, $61,500 for Lot 27, $52,000 for Lot 28, $48,500 for Lot 29, and $44,000 for Lot 30.

[186] Using the before and after values he derived from his analysis, Mr. Johannson then concluded his estimate of loss in value at $67,500, as the following table shows:

	Lot 27	Lot 28	Lot 29	Lot 30	Aggregate
Market value before taking	$73,500	$69,500	$73,500	$57,000	$273,500
Market value after taking	61,500	52,000	48,500	44,000	206,000
Loss in Market Value	$12,000	$17,500	$25,000	$13,000	$ 67,500

[187] The sixth and final step in the before and after analysis was to estimate the value of land taken for the SRW in accordance with section 40(3) of the Act. Section 40(3) provides:

40 (3) If part of the land is expropriated, the market value of the land expropriated may be established by determining the market value of the area of all of the land before the date of expropriation and subtracting from it the market value of the land remaining after the expropriation occurs, but in no case, subject to section 44, must compensation be less than the amount determined by multiplying the ratio of the area of the land taken to the area of all of the land before it was taken, times the value of the land before it was taken with the appropriate reduction if the interest expropriated is an easement, right of way or similar interest less than the fee simple interest.

[188] Mr. Johannson calculated the value of the land encumbered by the SRW on each of the four lots by reference to the four zones of restriction it contained. The most stringent restrictions were within zone A1 and he estimated the value of land taken which fell within that zone at 50% of the fee simple value in the before condition. The proportion of value that fell within zone A2 was put at 30% of the fee simple value, within Zone B at 15%, and within Zone C at 5%. He also took into account that Lot 30 was already pre-encumbered by another right of way and reduced the value of the pre-encumbered portion by 50%. In the result, Mr. Johannson estimated the value of the interest acquired for the SRW as being $1,000 for Lot 27, $13,000 for Lot 28, $22,000 for Lot 29 and $13,000 for Lot 30, for a total of $49,000.

[189] Since the minimum compensation calculation of $49,000 under section 40(3) was less than or equal to his estimate of the loss in value of each lot by the before and after method, Mr. Johannson concluded the total loss in value at $67,500. As previously noted, Mr. Johannson did not attempt to identify or estimate any elements of disturbance damage.

8.4 The Board's Determination

[190] In the board's view, neither appraiser's methodology and analysis provides a wholly satisfactory basis for the determination of loss in this matter. However, the approach taken by the respondent's appraiser, Mr. Johannson, is the more problematic, especially given the board's findings on the issues of delay and the 31st lot, while that of the claimant's appraiser, Mr. Hilts, is in a number of respects to be preferred.

8.4.1 The Respondent's Appraisal Analysis Considered

[191] Mr. Johannson's analysis suffers from the severe limitations which were imposed on it. He assumed that the presence of the sewer interceptor and the respondent's partial taking for the SRW had no impact on the claimant's subdivision development as a whole. He was instructed to ignore any impact these may have had on the timing of the development. He therefore confined his analysis to the four directly impacted lots. The board has recognized that it is not always necessary to undertake a before and after analysis of an entire development when dealing with a partial taking from only a small part: see Double Alpha Holdings Corp. v. Centra Gas British Columbia Inc. (1998), 65 L.C.R. 99 at p. 107. However, in this instance, by so limiting his analysis Mr. Johannson has failed to take into account the pre-taking delay caused by the presence of the sewer interceptor and the consequent need to satisfy the respondent's safety and other concerns. The board has found that the effect was a two month delay in the planning and approval stage of the entire development. Mr. Johannson further failed to take into account what the board has found to be an additional two month delay in the site preparation and construction stage of phase two of the development — a finding which necessarily affects the appropriate discount period to be used in the after analysis.

[192] The narrow focus in Mr. Johannson's report on Lots 27 to 30 also seems to have precluded any consideration of a 31st lot. This observation is not intended as a criticism of the respondent's appraiser since the matter of the 31st lot came up rather late in the proceedings and was outside the scope of his assignment. However, it would have been useful to the board if his instructions had been extended to take into account this further possibility. As it turns out, the board has found that a 31 lot subdivision would have been achievable in the before condition but would not have been approved in the after. This finding has obvious consequences when determining the quantum of loss.

[193] Generally speaking, Mr. Johannson's use of estimated rather than actual revenues and costs is also not in itself open to criticism. After all, his assignment was to undertake a market valuation at the date of taking prior to when most actual costs were incurred and actual revenues realized. This is a matter which the board will address more fully when it turns to examine Mr. Hilts' report.

[194] However, the board has considerable difficulty — as evidently did Mr. Johannson himself — with the way in which he relied on the estimates provided by other experts and many of their underlying assumptions as well as with his acceptance of instructions simply to assume that these estimates and assumptions were correct. He did so while somewhat distancing his report from the conclusions which it then reached, noting for instance that the "generalized input figures…may not accurately reflect the actual costs which would have been experienced in the construction of the above-described homes." In the board's view, this approach weakens the reliance which can be placed on the analysis.

[195] A particular example was Mr. Johannson's use of the estimates provided by Conoca and utilized in the Bowins report of the additional costs to construct piled foundations on Lots 28 to 30. According to the Conoca report, there would have been almost no pro-rata cost difference between using the piled foundation method in the after condition ($20.28 to $22.26 per square foot) and the pre-load and raft foundation method in the before condition ($21.40 per square foot). Overall, Conoca estimated that the additional cost of foundations for Lots 27 to 30 in the after amounted to only $3,102 — a figure adopted by Mr. Johannson in his analysis. However, there was convincing evidence at the hearing that the piled foundation method, while superior, is substantially more expensive than other methods, and indeed, the reported actual costs for piling Lots 28 to 30 demonstrate this to be the case.

[196] Mr. Johannson also relied upon Mr. Farstad, the respondent's planner, for an opinion that there was no impact on the building envelopes on the four affected lots. When questioned by the board on the rear yard setbacks of the dwellings, Mr. Johannson did not know how far the houses were from the rear property line. A plan showing the location of the foundations on Lots 27 through 30 included in his report showed that the houses on Lots 29 and 30 were much further back from the rear property line than Lot 27 and yet the houses were built to the edge of the SRW.

[197] While Mr. Johannson relied almost completely on the estimates and assumptions which others provided to him, curiously his own analysis led him to depart from one key observation having to do with the appropriate level of builder's profit. Mr. Bowins in his report had commented that a builder in 1994 normally would have budgeted for a 10% profit on the cost of the land and building, although this profit margin had subsequently been pared down often to a level which comprised "wages plus 10% on the cost of house construction only". Mr. Johannson's use of the subdivision development approach resulted in an estimate of builder's profit for the four directly impacted lots averaging about 1.6% of the value of the finished houses. The figure of 1.6% is so far below the opinion of the expert upon whom Mr. Johannson had generally relied for part of his analysis that it necessarily casts in doubt the validity of his prior assumptions.

[198] Finally, some of Mr. Johannson's adjustments are also suspect. The downward adjustments he made to the market value of the four subject serviced building lots for location and topography as well as for lot size in light of the comparables are not well supported from the evidence and seem excessive. Moreover, the additional downward adjustment of more than $15,000 to Lot 30 was based on anecdotal evidence from interviewing one purchaser of a lot used as a comparable which had also been impacted by a pre-existing statutory right of way. The purchaser had indicated that he would have been willing to pay more for his lot if he could have built a larger house. Since he was unaware at the time of purchase that the statutory right of way on his lot impacted the building envelope, one has to question whether his hindsight opinion represents that of a typical and informed purchaser. At over $15,000 this is a large adjustment on a low priced lot and there was no cogent market evidence to support it.

[199] For all of the foregoing reasons, the board has been unable to place much weight on the conclusions reached by the respondent's appraiser for the purpose of determining the loss incurred.

8.4.2 The Claimant's Appraisal Analysis Considered

[200] The claimant's appraiser, Mr. Hilts, included in his analysis several factors which the board has accepted as appropriate in light of the evidence. First, he recognized that the presence of the sewer interceptor and the respondent's partial taking for the SRW led to development delay in both the pre-taking planning and approval stage and the post-taking construction and marketing stage of the claimant's subdivision. Second, he operated from the premise that a 31 lot subdivision would have been achievable in the before condition, that is to say, in the absence of the sewer interceptor, but that only the 30 lot subdivision actually created was achievable in the after condition. Third, he concluded that foundation construction costs for the four directly impacted lots were significantly increased in the after condition by the need to use piled foundations on Lots 28 to 30 and to find an ultimately acceptable foundation method for Lot 27.

[201] In order to identify pre-taking delay, on the one hand, and post-taking delay and increased costs contributing to reduction in profit, on the other, Mr. Hilts approached his analysis from a broader examination of the claimant's subdivision development than that used by the respondent's appraiser. Rather than focusing only on the four directly impacted lots, he looked at the entire subdivision potential of 31 fully serviced building lots in the before and 30 lots in the after, and at the whole of phase two of the subdivision comprising Lots 23 to 31 in the before condition and Lots 23 to 30 in the after condition with houses on those lots completed and sold.

[202] To acknowledge that Mr. Hilts used a methodology which the board finds more suitable in some important respects is not, however, to overlook other questionable aspects of his analysis.

[203] Mr. Hilts' use of two separate models — the first incorporating the entire subdivision and the second dealing only with phase two — leads to some difficulty. His rationale for using two separate models was evidently to isolate the impact the presence of the sewer interceptor had on the whole development, primarily in the nature of pre-taking delay and the loss of a 31st lot, from impacts which affected only phase two of the development, including post-taking delay.

[204] The board finds that use of a single complete model which examined the whole of the subdivision development before and after would have produced a more reliable result overall. That would have avoided the overlap in Mr. Hilts' estimate of development delay which occurred when he initially factored in a two month pre-taking delay (21 months versus 19 months), applicable to the entire subdivision, and a further eight month post-taking delay (30 months versus 22 months) applicable only to phase two of the development. He incorporated the two month pre-taking delay into his estimated eight month post-taking delay. The board has found that the total amount of delay attributable to the presence of the sewer interceptor and the partial taking for the SRW was four months - two months pre-taking and two months post-taking. This finding has a significant impact on the discount factor which Mr. Hilts applied to his second model.

[205] Additionally, use of one complete model would have avoided the double counting of foundation costs which occurred. To estimate initially the market value of the 30 lot subdivision if sold as fully serviced building lots in the after condition, Mr. Hilts first subtracted $95,000 from the value of the four directly impacted Lots 27 to 30, which included the direct additional costs to provide piled foundations for Lots 28 and 30 as well as the cost of additional consultation and planning and an "incentive factor". These additional costs were therefore incorporated into his estimated direct loss in value to the land, which amounted to $161,569. To estimate the reduction in profit from the sale of finished houses on Lots 23 to 30 in the after, which he found to be $174,536, Mr. Hilts again factored in the additional cost of building houses on piled foundations when these foundation costs were already captured in his earlier analysis of loss.

[206] Since Mr. Hilts was utilizing reported actual revenues and costs, an abundance of spreadsheet information was available to have undertaken in one model a before and after analysis of the complete development. The board has not undertaken this task, confining itself to a review of the approach which Mr. Hilts actually adopted.

[207] The board has also considered the appropriateness of Mr. Hilts' reliance on reported actual revenues from the completed development and sale of Lots 23 to 30, and the reported actual costs of site preparation and construction as they pertain to those lots. The costs were incurred and the revenues realized long after the date of valuation. Since at the valuation date the subject property had not yet been formally subdivided and the preponderance of evidence indicates that neither site servicing, construction nor marketing had begun, there was obviously a large element of hindsight involved in this exercise if viewed from a market valuation perspective. In this instance Mr. Hilts used evidence of reported actual revenues and costs in analyzing a subdivision project which stretched for approximately four years beyond the date of taking.

[208] A potential difficulty arises from the definition of market value in section 32 of the Act which the board must use in determining the amount of compensation payable to an owner in respect of expropriated land. Section 32 provides:

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.

[209] Flowing from this definition, the object is to determine at the date of taking what an informed and prudent notional purchaser would have been willing to pay for the subject property based on that purchaser's projections of costs and revenues and in the absence of actual cost and revenue data.

[210] The board has expressed concern about and sometimes rejected the use of hindsight evidence in market valuation analyses: see, for example, Double Alpha Holdings at pp. 108-109 (65 L.C.R.). See also Premanco Industries Ltd. v. British Columbia (Ministry of Environment, Lands and Parks) (2001), 72 L.C.R. 1 (B.C.C.A.), at pp. 2-4, in which leave to appeal from an interlocutory decision of the board rejecting the use of hindsight evidence was refused. On the other hand, the board has recognized that hindsight evidence is permissible for the purpose of confirming what a purchaser at the date of valuation would reasonably have anticipated: see Mayfair Resources Corp. v. Greater Vancouver Water District (1997), 61 L.C.R. 183 at p. 201.

[211] In the present instance Mr. Hilts has characterized the losses experienced in phase two of the subdivision, including in particular Lots 27 to 30, as a reduction in profit as distinct from the direct loss in value of the land. The claimant has pleaded these further losses as disturbance damages or reasonable business losses. The strictures against hindsight evidence that apply under the definition of market value do not apply when considering business losses. It is generally the case that business losses other than perhaps terminal business losses cannot be determined at the date of taking and that evidence of actual costs and revenues into the future must be considered. The board finds in principle that the reduction in profit identified by Mr. Hilts can properly be characterized as a business loss.

[212] The claimant made reference to Mr. Stregger's comment in his report that he had used actual costs rather than hypothetical estimates since "with the project complete the actual costs are in my opinion the more accurate measure". Reported actual costs cannot, however, be used uncritically. In this case the board is satisfied that most actual costs were subjected to proper verification in the Costex report and have met the overall test of reasonableness. In fact, the actual costs of development used by Mr. Hilts overall are not significantly different from the estimated costs used by Mr. Johannson, lending support in this case to the view that a notional purchaser/developer of the subject property at the date of taking could reasonably have anticipated the amount of costs later incurred.

[213] In these circumstances the board for the most part accepts Mr. Hilts' use of reported actual revenues and costs for the purpose of determining losses in this matter.

[214] One item which the board has been unable to accept in its unvarnished form, however, is the management invoice rendered to the claimant by 363BC and fully incorporated into Mr. Hilts' after analysis. Of the $71,500 undiscounted amount which Mr. Hilts included as extra costs in relation to phase two of the development, the board has found that only $20,000 undiscounted should be included. There are also several other significant adjustments, additions and corrections to be made to Mr. Hilts' valuation and financial analysis and these will be noted shortly.

[215] Despite its shortcomings, the appraisal analysis by Mr. Hilts, properly adjusted, contains the necessary ingredients by which the board considers that it is able to arrive at a determination of the compensation properly payable in this matter.

8.4.3 The Board's Calculation of Loss

8.4.3.1 The First Hilts Model (Subdivision Development)

[216] The board has examined the first model employed by Mr. Hilts to derive the discounted land value underlying the entire hypothetical 31 fully serviced lots in the before and the actual 30 fully serviced lots in the after condition in order to estimate the direct loss in value to the land as a result of the partial taking. Although it is perhaps open to some doubt whether 31 serviced lots which were necessarily slightly smaller in size than 30 serviced lots would command the same average sale price of $130,000 per lot, the board accepts Mr. Hilts' considered opinion on the matter that they would. The board also accepts that, to attract an informed and prudent builder to purchase Lots 27 to 30 in the after condition, a discount reflecting both the anticipated hard and soft costs of piled foundations together with an incentive to undertake the project would be necessary, and considers the total discount of $95,000 suggested by Mr. Hilts to be reasonable. No other locational or size adjustments beyond those already made in the Hilts report appear to the board to be warranted. The board accepts as reliable the total development costs set out by Mr. Hilts in his first model and considers reasonable his use of a 15% developer's profit for a subdivision development which at the date of taking was approved and imminent. The discount factor for 19 months in the before condition and 21 months in the after condition appropriately reflects the two months' pre-taking delay which the board has determined affected the entire subdivision.

[217] In the board's view, there are three additional cost components required for this model. The first is a provision for property taxes which would have been payable over the period of planning and construction of serviced building lots — 19 months in the before and 21 months in the after. Mr. Hilts in his report calculated property taxes for 1994 on a per lot basis as amounting to $3.77 per day but did not include them in the first model. The board has applied Mr. Hilts' calculation to its own analysis. The second is a provision for the costs to finance the development to this stage. Mr. Hilts in his report suggested as appropriate a financing rate of 9.5% per annum and confirmed with Mr. Craig that this was the approximate rate he was able to negotiate. Since development costs are not incurred all at once, the board considers in this instance that financing charges should be assessed over 50% of the development time frame at the rate of 9.5% per annum — that is, over 9.5 months in the before and 10.5 months in the after. The third cost component is a provision for the property purchase tax payable, based on 1% of the first $200,000 of net or residual value of the land and 2% on the balance.

[218] The following chart compares Mr. Hilts' figures in his first model with what the board has determined to be the direct loss in value to the land throughout the subdivision development on the basis of 31 serviced lots in the before condition and 30 serviced lots in the after condition:

Hilts Before Hilts After Board Before Board After

Gross Sales Revenue $4,030,000 $3,805,000 $4,030,000 $3,805,000

Less: Commissions @ 2.5% 100,750 95,125 3,929,250 3,709,875

Net Sales Revenues 3,929,250 3,709,875 3,929,250 3,709,875

Less: Developer's Profit @ 15% 604,500 570,750 604,500 570,750

Less: Development Costs 837,492 805,147 837,492 805,147

Less: Property Taxes 19/21 mos. 0 0 67,541 72,243

Less: Financing on Costs

@ 9.5% for 9.5 mos. 0 0 68,065

@ 9.5% for 10.5 mos. 0 0 72,932

Less: Property Purchase Tax 0 0 44,189 40,996

Net or Residual Land Value
Before Discounting $2,487,258 $2,333,978 $2,307,463 $2,147,807

Discount Factor 19 mos. @ 8% 0.8846 0.8846

Discount Factor 21 mos. @ 8% 0.8735 0.8735

Discounted Land Value $2,200,334 $2,038,765 $2,041,182 $1,876,109

Direct Loss in Value $ 161,569 $ 165,073

8.4.3.2 The Second Hilts Model (Business Loss Calculation)

[219] Mr. Hilts' second model requires more fundamental revision. It concerns the construction and sale of houses in phase two only of the subdivision. It carries through an analysis to estimate the discounted value of the potential gross profit including land available to the developer and, thereafter, by deducting the loss in value to the land derived from the first model, the resulting reduction in profit. The board in the past has declined to award lost profit where a subdivision development was merely hypothetical or speculative but in this instance the development was actually completed and its results are known. In the board's view, while some parts of Mr. Hilts' analysis of reduction in profit appear sound, there are a number of both major and minor adjustments to be made.

[220] The board accepts the following components of the Hilts analysis:

• Although the addition of a 31st lot would necessarily reduce the size of some of the other lots, in fact, dwellings on several of the lots did not maximize the buildable area and thus there would have been no significant impact on the average lot value.

• Gross sales revenues of $2,270,400 for completed dwellings on Lots 23 to 31 in the before condition, based on $160 per square foot of finished floor area, are supportable in light of the direct comparison analyses undertaken by both the claimant's and the respondent's appraisers. Mr. Hilts noted that sales prices in the neighbouring subdivision development were in the region of $140 to $145 per square foot of finished floor area. Mr. Johannson, looking at essentially the same comparables, indicated prices that equate on average to just under $145 per square foot when calculated on a finished floor area basis. After adjusting for time and quality of construction, Mr. Hilts suggested — and the board accepts — that the claimant's sale prices would have been approximately 10% higher.

• The use of a sales commission rate of 2.17% in both the before and after calculations accords with the average rate actually paid on Lots 23 to 30 and is appropriate in view of the promotional expenses which the claimant itself undertook.

• It is also appropriate to apply the reported actual costs of construction of $71.85 per square foot of finished area to Lots 27 to 30 in the after condition, while using construction costs of $60.25 per square foot for the whole of phase two of the development in the before condition based on the average costs incurred for Lots 23 to 26 which did not have the more expensive foundation requirements imposed by the SRW.

• As best the board can discern, the administration and management fees amounting to $76,500 for Lots 23 to 31 in the before condition and $68,000 for Lots 23 to 30 in the after condition relate to the management agreement entered into between the claimant and 363BC. The board accepts Mr. Hilts' inclusion of these fees in the model but observes that to some extent they really form part of the builder's profit and overhead component.

• A discount rate of 8% per annum, which was adopted by both Mr. Hilts and Mr. Johannson, is considered acceptable by the board.

[221] The board finds that the following components of the Hilts analysis require adjustment:

• In his report Mr. Hilts stated that gross sales revenue for Lots 23 to 30 in the after condition totalled $1,994,312. During the hearing the claimant acknowledged an arithmetical error. The corrected figure is $1,998,312.

• The invoice from 363BC to the claimant for extra administration and management fees said to have been incurred in the after condition was presented in the sum of $71,500 but, for the reasons earlier stated, has been reduced by the board to the sum of $20,000 prior to discounting.

• Mr. Hilts did not include an expense for property taxes in the before condition and only included the additional tax burden of $5,163 arising from what he estimated was the delay period in the after condition. The board finds no sound reason to exclude the incidence of property taxes from this model in the before. The net difference in property taxes before and after is also reduced under the board's calculation since it has found that the delay period was less than that estimated by Mr. Hilts.

• Mr. Hilts used the reported actual costs of promotion in the after condition but considered that the need to spend on promotion would have been significantly less in the before. Since the board has found a shorter period of delay to be applicable, it is appropriate to reduce the difference in these costs by increasing those in the before condition. The board has simply prorated this amount for the difference in the delay period.

• As was the case with the first model, Mr. Hilts did not factor in the cost of construction financing. The board accepts that six months would normally have been required to construct the houses and market the completed units in phase two of the development, and that financing charges should be calculated over half that time frame at the rate of 9.5% per annum.

• An important omission from the second model utilized by Mr. Hilts was his failure to reflect any component representing the discounted cost of the land. In his first model the claimant's appraiser arrived at a figure which he said included the direct loss in land value. He then deducted this figure from what he termed the discounted value of the potential gross profit including land available to the developer to arrive at his estimate of reduction in profit. It will be recalled that Mr. Hilts in his first model deducted the extra cost of piled foundations in the after condition as well as an incentive factor for Lots 27 to 30. By not then inputting the discounted value of the land to the builder in the second model, the cost of the piled foundations is effectively double counted since the expense is calculated in both instances. In the board's view, the appropriate methodology would be to deduct the previously discounted land value in order to arrive at a complete picture of the impact of the SRW. The land costs if applied to the second model are $130,000 per lot for Lots 23 to 31 in the before condition, resulting in an undiscounted total of $1,170,000, and $130,000 per lot for Lots 23 to 30 in the after condition which, after deducting the costs of piling and the incentive factor, result in an undiscounted total of $945,000. Discounted by 19 and 21 months respectively, the resulting land cost to be deducted is $1,034,982 in the before and $825,458 in the after.

[222] After taking into account the foregoing adjustments, the board's before and after calculation of reduction in profit based on Mr. Hilts' second model is as follows:

Hilts Before Hilts After Board Before Board After

Gross Sales Revenue $2,270,400 $1,994,312 $2,270,400 $1,998,312

Less: Sales Commission @ 2.17% 49,268 43,222 49,268 43,363

Net Sales Revenue 2,221,132 1,951,949 2,221,132 1,954,949

Less: Construction Costs 854,948 847,146 854,948 847,146

Less: Extra Costs (Admin./Mgt.) 0 71,500 0 20,000

Less: Holding Costs —

Property taxes 0 5,163 7,224 8,256

Promotion 11,232 20,826 16,029 20,826

Administration 22,500 20,000 22,500 20,000

Project Mgmt. 54,000 48,000 54,000 48,000

Construction Financing
3 mos. @ 9.5%) 0 0 20,305 20,120

Less: Total Cost 942,680 1,012,635 975,006 984,348

Gross Profit Incl. Land $1,278,452 $ 938,455 $1,246,126 $ 970,601

Discount @ 8% 22 months 30 months 26 months 30 months

Discounted amount $1,109,767 $ 773,662 $1,048,408 $ 795,181

Less: Discounted Land Cost 0 0 1,034,982 825,458

Net Profit or Loss $1,109,767 $ 773,662 $ 13,426 ($ 30,277)

Difference: $ 336,105 $ 43,703

Less: Loss in Land Valu 161,569

Reduction in Profit $ 174,536 $ 43,703

8.4.4 The Board's Conclusion as to Compensation

[223] From its analysis the board has determined that the measure of compensation to which the claimant is entitled is the amount of $165,073, representing the direct loss in value to the land resulting from the partial taking, and the amount of $43,703 representing the reduction in profit realized from the development as a result of the partial taking, or in total the sum of $208,776.

[224] Although under the board's analysis the level of profit realized from phase two of the development in the before condition seems low, and in the after condition phase two actually experiences a loss, the board has already observed that a considerable measure of the real profitability is in the administration and management fees which the builder extracted from the project.

9. INTEREST

[225] Section 46(1) of the Act provides:

46 (1) The expropriating authority must pay interest on any amount awarded in excess of any amount paid by the expropriating authority under section 20(1) or (12) or otherwise, to be calculated annually,

(a) on the market value portion of compensation, from the date that the owner gave up possession, and

(b) on any other amount, from

(i) the date the loss or damages were incurred, or

(ii) any other date that the board considers reasonable.

[226] The board has determined total compensation in the amount of $208,776, whereas the advance payments made by the respondent on account of compensation total $121,000. Subject to an interest penalty which the board earlier imposed on the claimant to which reference will be made shortly, the provision for interest under section 46(1) therefore applies.

[227] There are two components to the board's compensation award. The first is for the loss in value to the land which the board has determined at $165,073. Interest on this component is governed by section 46(1)(a) pertaining to the market value portion of compensation and therefore runs from the date that the owner gave up possession which is agreed to be July 13, 1994. The initial advance payment of $109,000 was actually made on July 6, 1994, and a further advance payment on account of compensation in the amount of $12,000 was made on August 16, 1994.

[228] The second component is for reduction in profit, otherwise expressed as disturbance damage or business loss, which the board has determined at $43,703. Interest on this component is governed by section 46(1)(b) and runs from the date the loss or damages were incurred or any other date the board considers reasonable. These losses pertain to the construction and marketing of houses in the second phase of the development. However, since the losses have been discounted to the date of taking, the board concludes that the reasonable date from which interest should be calculated is also July 13, 1994.

[229] Section 46(4) of the Act provides:

46 (4) If the amount of the payment under section 20(1) or (12) or otherwise is less than 90% of the compensation awarded, excluding interest and business loss, the board must order the expropriating authority to pay additional interest, at an annual rate of 5%, on the amount of the difference, calculated from the date that the payment is made to the date of the determination of compensation.

[230] Excluding the business loss portion, the board has awarded the claimant compensation in the amount of $165,073. The respondent's advance payments totalling $121,000 calculate to 73.3% of the compensation awarded. Accordingly, the claimant is entitled to additional interest under section 46(4).

[231] At the hearing on January 19, 2000 of an adjournment application brought by the claimant, the board granted the adjournment but imposed an interest penalty on the claimant for unreasonable delay in proceedings pursuant to section 47 of the Act. The claimant was to be deprived of interest for the period from and including October 15, 1999 until the date of commencement of the compensation hearing which ultimately commenced on September 24, 2001. The penalty applies to interest under both section 46(1) and 46(4).

10. COSTS

[232] Section 45(4) of the Act provides that, if compensation awarded to an owner other than for business losses, is greater than 115% of the amount paid by the expropriating authority under section 20(1) and (12) or otherwise, the authority must pay the owner his or her costs. The claimant has met the threshold requirement in this respect.

[233] It would appear that some of the legal, appraisal and other costs which the claimant incurred are governed by the "actual reasonable" standard set out in section 45(7)(a), while others fall within the Tariff of Costs Regulation, B.C. Reg. 189/99 (the "Tariff") pursuant to section 45(7)(b) of the Act.

[234] Section 3(3) of the Tariff provides that, if costs are payable under section 45, the board may, when it makes an adjudication of compensation following a hearing, fix the scale, from Scale 1 to 3, under which the costs will be assessed. Scale 1 is for matters of less than ordinary difficulty or importance while Scale 3 is for matters of more than ordinary difficulty or importance. The board may also order that legal costs be assessed on a different scale from real estate appraisal costs and that one or more steps in the proceeding be assessed under a different scale from that fixed for other steps.

[235] In the present instance the board is satisfied that those legal and appraisal costs which are subject to the Tariff should be assessed under Scale 3. Although the case involved only the partial taking of a statutory right of way interest through a small portion of the subject property, the fact that it occurred in the midst of an ongoing subdivision development complicated the assessment of loss in market value and financial loss. It required the bringing together and analysis of evidence from experts in civil and geotechnical engineering, surveying and costing, and included the consideration of a number of significant legal and valuation issues. The hearing of evidence and argument occupied eleven days during which a total of ten expert witnesses testified. Although none of the issues perhaps rose to the level of more than ordinary importance, taken cumulatively they did constitute a matter which was of more than ordinary difficulty.

THEREFORE IT IS ORDERED THAT:

(1) The respondent, Greater Vancouver Sewerage and Drainage District, shall pay to the claimant, 415528 B.C. Ltd., compensation pursuant to sections 31 and 40(1)(a) for the market value of the land partially taken and the loss in value to the remaining land of $165,073.

(2) No interest shall be payable by the respondent to the claimant for the period from and including October 15, 1999 to and including September 23, 2001, pursuant to section 47(a).

(3) Subject to item (2), the respondent shall pay to the claimant interest pursuant to section 46(1)(a) on the amount in item (1) from and including July 13, 1994 until paid after adjustment to take into account moneys paid by the respondent to the claimant on July 6, 1994 and August 16, 1994 under section 20.

(4) The respondent shall pay to the claimant compensation pursuant to sections 34 and 40(1)(b) for disturbance damages and business losses of $43,703.

(5) Subject to item (2), the respondent shall pay to the claimant pursuant to section 46(1)(b) interest on the amount in item (4) from and including July 13, 1994 until paid.

(6) Pursuant to sections 46(2) and (3), the interest payable under items (1) and (3) shall be calculated annually at the following rates:

(a) Eight per cent (8.00%) from July 13, 1994 to December 31, 1994;

(b) Eight per cent (8.00%) from January 1, 1995 to June 30, 1995;

(c) Eight and three-quarters per cent (8.75%) from July 1, 1995 to December 31, 1995;

(d) Seven and one-half per cent (7.50%) from January 1, 1996 to June 30, 1996;

(e) Six and one-half per cent (6.50%) from July 1, 1996 to December 31, 1996;

(f) Four and three-quarters per cent (4.75%) from January 1, 1997 to June 30, 1997;

(g) Four and three-quarters per cent (4.75%) from July 1, 1997 to December 31, 1997;

(h) Six per cent (6.00%) from January 1, 1998 to June 30, 1998;

(i) Six and one-half per cent (6.50%) from July 1, 1998 to December 31, 1998;

(j) Six and three-quarters per cent (6.75%) from January 1, 1999 to June 30, 1999;

(k) Six and one-quarter per cent (6.25%) from July 1, 1999 to December 31, 1999;

(l) Six and one-half per cent (6.50%) from January 1, 2000 to June 30, 2000;

(m) Seven and one-half per cent (7.50%) from July 1, 2000 to December 31, 2000;

(n) Seven and one-half per cent (7.50%) from January 1, 2001 to June 30, 2001;

(o) Six and one-quarter per cent (6.25%) from July 1, 2001 to December 31, 2001;

(p) Four per cent (4.00%) from January 1, 2002 to June 4, 2002;

(q) Four and one-quarter per cent (4.25%) from June 5, 2002.

(7) Subject to item (2), the respondent shall pay to the claimant pursuant to section 46(4) additional interest on the amounts in items (1) and (4) from and including the date of the initial advance payment to the date of determination of compensation, after adjustment to take into account moneys paid by the respondent to the claimant, at the annual rate of 5%.

(8) The respondent shall pay the claimant's actual reasonable legal, appraisal and other costs of, and incidental to, the application and hearing before the board pursuant to section 45(3), (4) and (7)(a) of the Act. However, for the period after and including June 28, 1999, the legal and appraisal costs payable shall be those prescribed pursuant to section 45(7)(b) of the Act and the Tariff and assessed at Scale 3. The costs shall be in such amount as may be agreed upon, and failing such agreement in such amount as may, upon application to the board, subsequently be determined and allowed by the chair.

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