Fundy Contractors v. Province of New Brunswick, 2022 NBKB 207

SJM-40-2010 SJM-41-2010 IN THE COURT OF KING’S BENCH OF NEW BRUNSWICK JUDICIAL DISTRICT OF SAINT JOHN TRIAL DIVISION CITATION: Fundy Contractors v. Province of New Brunswick 2022 NBKB 207 Date: November 3, 2022 BETWEEN: FUNDY CONTRACTORS LIMITED, Applicant -and- THE PROVINCE OF NEW BRUNSWICK Respondent AND BETWEEN: NANCY H. YOUNG AND FUNDY CONTRACTORS LIMITED, Applicants -and- THE PROVINCE OF NEW BRUNSWICK, Respondent BEFORE: Justice William T. Grant HEARING HELD: Saint John

DATES OF HEARING: March 23. April 4,5,6,7,8,11,12,13,14 and May 4, 2022 COUNSEL: Thomas G. O’Neil, K.C. and Peter Ashfield on behalf of the Applicants Richard Williams, K.C. on behalf of the Respondents DECISION GRANT, J [ 1 ] This is an assessment of the damages owing by the respondent, the Province of New Brunswick, to the applicant, Fundy Contractors Limited, for the taking of land pursuant to the Expropriation Act , R.S.N.B. 1973, c. E-14 (“the Act ”). The other applicant, Nancy Young, has an interest in property of which Fundy is a trustee but took no

part in this litigation. OVERVIEW OF FUNDY [ 2 ] Fundy is a heavy civil contractor which operates a ready mix concrete plant at or near Bethel in Charlotte County, New Brunswick. It also owns a number of properties in Charlotte County from which it sources most of the aggregate that it uses in its business. [ 3 ] By Notice of Expropriation dated October 20, 2009, the province expropriated portions of three of those properties, known as the Dexter pit, the Hawkins pit and the Penfield property, for the Gateway Project which involved building a four lane highway from the Maine border at St. Stephen to Saint John.

It took most of the Dexter pit as part of the Bethel interchange and portions of the other two properties which are the subject of this litigation. [ 4 ] Mel Young testified that he is the owner of Fundy which was started by his father and others in 1958 and that he has been working with it since 1969. Initially, they built wharves, docks and harbor improvements in Charlotte County and the Fundy Isles. While they still do some of that work they have expanded to building roads, overpasses, foundations and bridges which involves earthwork, rock breaking and concrete.

He testified that, at the time of the expropriation, Fundy was the only heavy civil contractor in Charlotte County. [ 5 ] In the early 1970s, Fundy built a batch plant from which it sells ready mix concrete. That plant is still located in Bethel near the Dexter pit which it bought in 1983. They both border the north side of what was, before the expropriation, the main highway through Charlotte County, Route #1. [ 6 ] Mr. Young testified that high quality aggregate is an essential ingredient in concrete and, before the Dexter pit was expropriated, it was Fundy’s source of that aggregate.

He testified that the aggregate from the Dexter pit was clean and hard with little silt or clay which enabled Fundy to produce concrete that met the standards set by CSA, NBDOT (now “DTI”) and others. [ 7 ] Michael Whitford, a geotechnical engineer, whose evidence will be considered later in this decision and who has lived in Charlotte County for more than 70 years, discussed the overall quality of the aggregate from the Dexter pit in his report (Exhibit 1, tab 4b) where he stated at page 8: Due to the complex geology in southern New Brunswick, natural aggregate sources that meet the requirements of CSA, in southwestern New Brunswick are rare.

Based on the test results reviewed, the aggregate meets the requirements for NBDOT, and CSA. Of further note, the material from the Dexter Pit has been accepted by NBDOT and The Maine Department of Transportation as an acceptable concrete aggregate source. [ 8 ] Mr. Young testified that the Dexter pit gave Fundy an inventory of good concrete aggregate for many years. As such, Fundy didn't use it for jobs where lower quality aggregate would suffice. Because of its high quality, Fundy had an advantage over its competitors who had to purchase this aggregate when they required it for a job.

He testified that the batch plant and the Dexter pit enabled Fundy to bid large jobs in southern New Brunswick and Maine. Its location also allowed Fundy to submit more competitive prices on jobs in Charlotte County due to lower transportation/haulage costs as the closest pit with comparable product – the Blagdon pit - is located approximately 100 kilometers away in Welsford, NB. [ 9 ] Greg Corbett, who has worked for Fundy since 1977, is currently Fundy’s Operations Manager. He testified that Fundy processes its aggregate from pit-run gravel to various smaller sizes, depending on the job.

Examples he gave of the types of processed products it produces included concrete, drain tile for sewage systems, driveways and roads. [ 10 ] He described the Dexter pit as a large sand and gravel pit producing similar quality products to the Blagdon pit.

Together they supplied most of the sand and gravel to the Saint John, Fredericton and southwestern regions of the province before the expropriation. [ 11 ] Mr Corbett testified that the Dexter pit was one of only a few local pits supplying aggregate suitable for making concrete and that at the time of the expropriation it had the highest quality aggregate of any of the pits owned by Fundy. It met not only the CSA and DTI standards for aggregate to be used in concrete but those in Maine as well where Fundy sold it for large jobs near the New Brunswick border.

As such, Fundy’s strategy was to only sell aggregate from the Dexter pit when job specifications called for high quality aggregate. [ 12 ] Because of its location and the high quality of aggregate in the Dexter pit, Fundy was often the general contractor on large concrete jobs in southern New Brunswick or the supplier of concrete to the general contractor.

The latter role also frequently lead to Fundy obtaining other work on large projects. [ 13 ] Mr Corbett also testified that Fundy owns other pits with gravel that it uses to make concrete but the gravel from those pits is not as clean as the gravel from the Dexter pit and is therefore more expensive to mix. The other pits are also not as conveniently located – i.e.adjacent to the main highway - nor do they have as much gravel as the Dexter pit.

He testified that the Dexter pit was “just a nice big resource” and its loss left a large hole in Fundy’s inventory that has yet to be replaced. [ 14 ] On cross examination he agreed that there is an abundance of gravel in Charlotte County but he said that what separates the Dexter pit is the cleanliness of its gravel. He did not agree with Mr.

Young’s evidence on Discovery to the effect that there are other very clean sources of aggregate in Charlotte County and testified on re-direct that, regardless, there were no other pits in Charlotte County with aggregate comparable to the Dexter pit that also had the road access and corresponding lack of weight restrictions to make them viable competition. EXPROPRIATIONS AND PAYMENTS [ 15 ] At the time of the expropriation, the province offered Fundy the sum of $496,857 as the market value of the Dexter pit and $32,675 for the Hawkins pit and the Penfield property.

These were based on an appraisal prepared for the province by Clifford Lawrence of de Stecher Appraisals Ltd. [ 16 ] On December 31, 2021 the province offered another $60,143 for the market value of the Dexter pit after receiving a new appraisal from David Babineau of de Stecher in preparation for the trial of this matter.

In total, the province says the market value of the Dexter pit is $557,000. [ 17 ] As set out below, Fundy claims a higher amount than the province has offered for the fair market value of the Dexter pit as well as a special economic loss resulting from the decrease in value of its business occasioned by the expropriation of the Dexter pit. It also claims reimbursement for the aggregate the province used from both the Hawkins pit and the Pennfield property as well as for injurious affection to the Pennfield property.

[ 18 ] It does not claim more than the province has offered for the fair market value of the Hawkins pit or the Pennfield property. FUNDY’S CLAIMS [ 19 ] In

summary Fundy’s remaining claims are: A. Dexter pit (

i) Fair Market value $947,500 - $1,007,500.00 (ii) Special Economic loss 1,120,000.00 B. Hawkins pit (i)Special economic damages - loss of gravel $510,000.00 C. Pennfield property (i)Special economic damages - loss of gravel $249,997.00 (ii) injurious affection $259,543.00 Fundy’s total claim $3,087,040.00 – $3,147,040.00 [ 20 ] The province has already paid Fundy an amount towards the fair market value of the three properties for which it will be credited.

During final summations the province conceded that it owes Fundy $331,791.50 for the cost of relocating stockpiles of aggregate from the Dexter pit. [ 21 ] Fundy also claims an amount for owner’s time and has requested that the issue be dealt with in a post-trial hearing on costs and interest. LAW [ 22 ] Sections 38 and 39 of the Expropriation Act , supra., set out the parameters for assessing damages for expropriated land. The sub- sections relevant to this case are as follows: 38(1) Where the land of an owner is expropriated, the compensation to the owner shall be based upon (

a) the market value of land, (

b) damages attributable to disturbance, (

c) damages for injurious affection, (

d) any special economic advantage arising out of his occupation of the land that is not reflected in the market value of the land, but where the market value is based upon a use of the land other than the existing use, compensation under paragraphs (

a) and (

b) shall not exceed the greater of (

e) the amount based upon the existing use to which the land is being put and disturbance damages, or (

f) the amount based on the highest and best use to which the land may be put, and no compensation shall be awarded under paragraph (d).

39(1) The market value of land expropriated is the amount that would have been paid for the land if it had been sold on the dateof expropriation in the open market by a willing seller to a willing buyer. (2) …

(3) Where only part of the land of an owner is taken and such

part is of a size, shape or nature for which there is no generaldemand or market, the market value and the injurious affection caused by the taking may be determined by determining themarket value of the whole of the owner’s land and deducting therefrom the market value of the owner’s land after the taking.

(4) In determining the market value of the land, no account shall be taken of (

a) any anticipated or actual use to which the expropriating authority will put the land; (b) … (c) … [23] In Toronto Area Transit Operating Authority v. Dell Holdings Ltd. (SCC), [1997] 1 S.C.R. 32 Cory J. stated atpara. 20: 20. The expropriation of property is one of the ultimate exercises of governmental authority. To take all or part of a person'sproperty constitutes a severe loss and a very significant interference with a citizen's private property rights.

It follows that thepower of an expropriating authority should be strictly construed in favour of those whose rights have been affected. … DEXTER PIT – FAIR MARKET VALUE [24] The Dexter pit was a potion of a larger parcel of land on the northern side if the former Route #1 (“the parent parcel”) that waspartially taken in the expropriation. The pit or southerly portion of the take consisted of three parcels containing approximately 15.6hectares; the remainder of the take (“the northerly portion”) consisted of three parcels containing approximately 6.1 hectares.

Thenortherly portion is not part of what I will refer to as the Dexter pit. [25] The remainder of the parent parcel consists of three lots - Parcels “A”, ”B” and “C” –comprising 11.1 hectares which are stillowned by Fundy: see copy of exhibit #21 attached hereto as

Schedule ”1”. A. TARGETING OF DEXTER PIT BY THE PROVINCE [26] Fundy alleges that the province targeted the Dexter pit due to the abundance and quality of the aggregate in the pit. Mr. Youngtestified that since the expropriation, what remains of the Dexter pit is of no further use to Fundy. [27] Though it was announced in 2006 Mr.

Young testified that he first learned of the proposed location of the Bethel interchangeportion of the Gateway Project in 2008 or 2009 when Greg Corbett attended a meeting where the plans showed that the route would besouth of the former Route #1 and would not directly impact the Dexter pit. [28] Mr. Corbett, however, agreed on cross examination that he attended a meeting for which he registered in 1998 where theprovince’s plans showed that the proposed route was to follow its current path north of the former Route #1 and impact the Dexter pit.He also testified that he advised Mr.

Young of that development and recalled that Mr. Young responded that since they had previouslybeen advised the route would go south of the old highway they shouldn’t make any plans until they were certain where the final routewould go. I accept Mr. Corbett’s evidence on the issue of when Fundy was notified of the proposed route [29] Sylvan Levesque is a former employee of Fundy who worked for the general contractor, Dexter Construction, on the 20 kilometersection of the Gateway Project between Bethel and St. George.

He testified that in order to build overpasses Class A backfill, i.e. backfillthat was clean with good compaction, was required to ensure stability for the structure and that it was his job to identify a source for thatbackfill. He testified that he found it in the Dexter pit where the aggregate was clean, well-graded material with less than 10% dirt. Itneeds to be clean, he testified for good compaction which is very important for backfill.

He further testified that all of the backfillmaterial for the Bethel interchange came from the Dexter pit. [30] He also testified that the backfill material had to be analyzed weekly to ensure the quality remained high and that in the two to threeyears that he worked on that

section of the highway, there was never a sample from the Dexter pit that failed.

[ 31 ] Scott MacDonald, who worked for the province from 1987 until 2021, testified that in highway construction the planners try to “average out” the cuts and fills so as to avoid having to bring in aggregate from other sources. Whether or not that's possible depends on factors such as the terrain and the quality of the aggregate in the cuts and fills. [ 32 ] Roger Kierstead who, in 2006 when he became involved in the alignment and routing of the Gateway Project, was a senior functional planning engineer for the province.

He testified that the routing of the Gateway Project in the area of the Bethel interchange involved public meetings in 1998, 2006 and 2008 and was finalized in 2009. [ 33 ] He also testified that the province received a petition dated November 17/18, 1997 signed by 22 property owners in the Bethel to St. George area requesting that the alignment of the highway between Kelly Rd. and Bethel be changed from the south side of Route #1 to the north side.

The primary reason the petitioners gave was that the proposed southerly route would create a “wall of traffic” that would physically divide the residents of the Bethel area. [ 34 ] He also testified that the concerns raised in the petition were considered along with geotechnical and other issues in deciding to move the four lane highway to the north of Route #1. [ 35 ] On cross examination he identified pits at or near Bethel that were owned by the province but spent by the time of the expropriation.

He disagreed with the suggestion that the route north of the former Route #1 was chosen so the province could acquire the Dexter pit. [ 36 ] While I accept that the loss of the Dexter pit left a huge hole in Fundy’s inventory of aggregate, I am not satisfied, on a balance of probabilities, that the province targeted it for that purpose. Clearly it was known as a pit with high quality aggregate but that alone is not sufficient for me to infer that it was targeted by the province. I accept Mr.

Kierstead’s evidence and find that the location of the highway at the Bethel interchange was not chosen to target the Dexter pit. B. THE APPRAISALS OF THE DEXTER PIT 1. DeStecher Appraisals Ltd. [ 37 ] The province hired de Stecher Appraisals Ltd. to determine the fair market value of the property taken as well as the value of any injurious affection. [ 38 ] In 2009, Clifford Lawrence of de Stecher, who has since died, appraised the fair market value of the Dexter pit to be $496,857.

In an updated report on August 11, 2021, (exhibit #1, tab 3A), David Babineau of de Stecher revised that appraisal to $557,000. [ 39 ] Mr. Babineau, who has been a real estate appraiser since 1980 was called as a witness by the province and declared an expert in the field of real estate appraisals. [ 40 ] He testified that in his opinion the highest and best use of the Dexter pit was a continuation of its use as a gravel pit, aggregate processing area and storage yard.

He determined that there was not sufficient data available about comparable properties for him to use the direct comparison approach so he did his appraisal using the income approach. In order to do so he needed to know the volume of extractable aggregate on the property. [ 41 ] Scott MacDonald, whose job as a geotechnical engineer with the province, involved testing for quantities and quality of aggregate in the various sections during highway construction, calculated the volume of aggregate in the Dexter pit in 2009 to be 2,280,000 tonnes for purposes of compensating Fundy.

He later revised his estimate to 2,710,000 tonnes as he understood there was another 430,000 tonnes of aggregate in one of Fundy’s remnants - Parcel “A” - outside of the take that had been rendered inaccessible by the take. [ 42 ] By the time he testified, Mr. MacDonald assumed that Fundy actually had access to the other 430,000 tonnes so he revised his calculation again and settled on 2,280,000 tonnes. This calculation was based on the water table being located at an elevation of 55 meters. He also did some rough calculations at 54 meters - 2,500,000 tonnes - and 53 meters - 2,710,000 tonnes.

[ 43 ] Mr. MacDonald's calculation of the volumes were forwarded to de Stetcher Appraisals for purposes of calculating the compensation the province owed to Fundy. He assumed that the quality of the material in the expropriated portions of the pit was the same as the quality in the remnants. He also agreed that the aggregate in the Dexter pit was of a very high quality. [ 44 ] On cross examination, Mr.

MacDonald testified that the water table varies seasonally and that a pit should never be worked any closer than 1/2 meter above the highest level of the water table. [ 45 ] The province also hired Gemtec, an Engineering consulting company, to estimate the volume of aggregate in the Dexter pit and Mr. Babineau relied on their estimate - approximately 2.2 million tonnes – which was very similar to that of Scott MacDonald. [ 46 ] Mr.

Babineau testified that he then had to determine the price per tonne of aggregate and since that was not within his expertise, he relied on Daryl DeMerchant of Gemtec who advised him that the price was $0.65 to $0.85 per tonne for good quality in situ gravel so he assumed a price of $0.85 due to the Dexter’s pit’s advantageous location. Clifford Lawrence had used $0.75 per tonne in his appraisal. [ 47 ] Mr. Babineau testified that he then had to determine a reasonable depletion period for the pit. He testified that Mr. Young told him it would be 30 to 40 years.

A depletion period of 40 years was used in Gemtec’s report (exhibit #1, tab 3C). [ 48 ] He then considered the discount rate and concluded that, given the illiquidity and the relatively speculative nature of the investment due to factors such as quality of the resource and rate of depletion compared to other types of investments, a discount rate of 8 to 12% would be reasonable. [ 49 ] In his report he states that a lower depletion period would result in a higher discount rate.

In the end, he concluded that the most reasonable approach was to use the midpoint between a 35 year depletion period with a 9% discount rate and a 30 year depletion period with a 10% discount rate. The result was a value of $25,800 per hectare. As the taken portion of the Dexter pit consists of approximately 21.6 hectares, including both the pit area and the northern portion, he concluded that the fair market value was $557,000.00. [ 50 ] On cross examination Mr Babineau testified that his instructions did not direct him to consider any injurious affection to the portions of the Dexter pit that were not taken.

Nor was he directed to consider any special economic loss to Fundy resulting from the take. [ 51 ] He testified that he drove past the remnants but he didn't walk on them because he did not have the owner's permission though he tried unsuccessfully to contact Mr. Young. [ 52 ] Mr Babineau agreed that he didn't ask Stantec about its differing opinions on the quality of the gravel in the Dexter pit and the price per tonne of in situ gravel ($1.33) before finalizing his report.

He also agreed that he did not check the price per tonne that Lafarge Cement, another large pit owner with high quality aggregate, was charging for in situ gravel in 2009 ($3.25) before finalizing his report. [ 53 ] He also conceded that he assumed that the three remnant portions of the Dexter property, totaling 11.1 hectares, contained gravel and that he relied on the province’s representation that the largest of the three remnant parcels – Parcel “A” - had 430,000 tonnes of extractable gravel. He also agreed that if one of the parcels was a wetland it wouldn't have much value. [ 54 ] Mr.

Babineau testified that he entered the volume, depletion period and discount rate into a computer program to get the total value of the land and divided by the number of hectares to get the value per hectare. In doing so he used the midpoint values for the discount rate and the depletion period. These valuations are found in Mr. Babineau’s report (exhibit #1, tab 3C) at page 35, table 8. [ 55 ] Greg Corbett was asked in his evidence about the values placed by Mr. Babineau on the three remnant parcels. With respect to Parcel “A”, which consists of 8.2 hectares and which Mr.

Babineau valued at between $188,600 and $211,560 based on a per hectare value of between $23,000 and $25,800, Mr. Corbett testified that if these per hectare values were premised on the assumption that Parcel “A” contained 430,000 tonnes of extractable gravel, that would be wrong because all of this gravel is located within the required set-back

from the adjacent road where extraction is not permitted. As such both the gravel and the parcel itself are of minimal or no value to Fundy. [ 56 ] Parcel “B”, consisting of 1.9 hectares was assessed by de Stecher at between $43,000 and $49,020 based on per hectare values of $23,000 and $25,800. Mr Corbett testified, however, that it is a wetland with a series of ponds and a brook and the realignment of Route #760 created a 15-20 foot drop in elevation making the lot virtually inaccessible. [ 57 ] Parcel “C”, consisting of 1.0 hectares, was appraised by de Stecher at between $23,000 and $25,800.

However, according to Mr Corbett, it has so little usable space that the adjacent church declined the opportunity to buy it to expand its parking lot. I accept Mr. Corbett’s evidence concerning these three remnant parcels which is confirmed by James McDonald, infra . 2. James McDonald [ 58 ] Fundy called James McDonald who has been a real estate appraiser since 1970. He testified that he has done many evaluations of pits and quarries mostly for the province of New Brunswick.

He was declared an expert in real estate appraisals. [ 59 ] He testified that his mandate was to estimate the market value in 2009 of the property taken together with any loss in market value to the remaining land as a result the expropriation. [59] He determined that the highest and best use of the Dexter pit portion of the lands - the area with extractable aggregate - was what it had been historically, an industrial use, viz. , a gravel pit.

For the remainder of the property taken he concluded that the highest and best use was woodland as it contained no aggregate and residential development was not feasible. [ 60 ] With respect to the fair market value he considered the pit area of the property separately from the northern portion of the take and concluded that the fair market value of the pit area was $940,000 to $1,000,000. [ 61 ] He valued the 6.1 hectare parcel that was the northern portion of the take at $6,100 as it had no aggregate and was woodland. [ 62 ] He testified that he walked around the site and observed that the new highway and the off-ramp portion of the interchange at this location created a lack of access to the remainder of the property, particularly Parcel “B” which also has a stream running through it. [ 63 ] With respect to the remnant parcels, “A”, “B” and “C”, Mr.

MacDonald concluded that Parcels “A” and “C” had not been injuriously affected and Parcel “B”, the lot with a 15-20 foot drop resulting from the alterations to Route #760, had suffered a loss in value of $1,400. [ 64 ] He testified that he also used the income approach where the first step is to estimate the value of the aggregate within the take. To do that he needed to know the volume of that aggregate. [ 65 ] Steven Saunders, when he worked with Kierstead, Quigley and Roberts Ltd. (“KQR”), was retained by Fundy to calculate the volume of aggregate in the Dexter pit.

He testified that assuming an elevation of 53 meters for the water table, his estimate was 1,405,324 cubic meters or 2,909,020 tonnes. [ 66 ] Michael Whitford of Stantec Engineering also calculated the volume as of the date of expropriation for Fundy who called him as a witness. He testified that he is a civil engineer dealing with soils, rock, foundations, dams, concrete and aggregates, including the testing of aggregates. He has been working in the field since the 1980s. He described Stantec as a worldwide engineering company with 22,000 employees. He is vice-president of geotechnical operations for Canada.

He was declared an expert in geotechnical engineering. He prepared a report dated January 12, 2018, which is in evidence as exhibit #1, tab 4B.

[ 67 ] He testified that in calculating the volume of the aggregate the elevation of the water table must first be determined because, as all witnesses agreed, extraction below that level is not viable. Mr. Whitford says in his report that the water level readings taken by the province varied from 53 meters to 54.8 meters.

Using the province’s investigation done prior to excavation of the pit for the highway and assuming that the surface is at an elevation of 68 meters, he concluded: “The borehole, piezometer and observational data show that material is extractable to a depth of 15.0m (el 53m) as a minimum.” [ 68 ] Mr.

Whitford testified that he also believed that using a water table level of 53 meters was appropriate because there was no evidence that either Fundy or Dexter Construction - the general contractor on the Gateway Project - stopped digging at 55 meters due to the water table. [ 69 ] He also testified that he factored in the applicable set-backs and a 2:1 slope in his calculations and used historical aerial photography as well as topographical surveys done by KQR in 2010 and 2011. [ 70 ] His estimate of the quantity of extractable aggregate in the Dexter pit in 2009, based on a depth of 15 meters, was 1,453,667 cubic meters or 3,008,677 tonnes.

That does not include remnant Parcel “A”, where he agrees with Mr. Corbett that there is no extractable aggregate. It also does not include Parcels “B”, “C” or the northern portion of the take. [ 71 ] When asked about the difference between his estimate of volume and that of KQR he explained that in their first estimate KQR did not use the correct northern boundary for the pit so their estimate of 1,197,769 cubic meters was for a smaller pit than the one that Stantec estimated. After KQR changed the northern boundary their estimate was 1,405,324 cubic meters.

Mr Whitford testified that the difference between that estimate and Stantec’s was likely because KQR’s was not done using computer modelling and was therefore not as precise as Stantec’s. [ 72 ] He further testified that if the piezometers revealed that the water table varied between 53 meters and 55 meters, as they did in some locations, that indicates to him that the water table varies seasonally and that the aggregate is extractable at 53 meters. [ 73 ] He also testified on cross examination that because of the dense gravel in the Dexter pit it would be possible to work very close to the water table, particularly when it's lower, typically in the fall of the year. [ 74 ] He also testified on cross examination that 54 meters would be a reasonable level to use in calculating the volume of the aggregate.

Referring to the table of incremental excavation volumes on exhibit # 17 he testified that the volume at that level would be 1,365,270 cubic meters or 2,826,150 tonnes. That said, he testified on re-direct that he stood by his opinion that the volume should be estimated assuming that the water table is located at 53 meters. [ 75 ] Mr.

Whitford also agreed that all the volumes are estimates only and said that the difference of 3.5% between Stantec’s estimate and that of KQR are within expected variations, particularly considering the difference in the two surveys that he noted earlier. [ 76 ] The province called Sean Pelkey of Gemtec Engineering who was declared an expert in geological engineering.

It retained him to comment on the quantity and quality of aggregate at the Dexter pit and discuss these in the context of other aggregate sources in Charlotte County. [ 77 ] Mr Pelkey testified about his estimate of the volume of extractable aggregate in the Dexter pit in which he assumed an elevation of 54 meters – 14 meters below the surface - which, in his opinion was “quite fair” based the seasonal piezometer readings. He estimated the volume to be 1,120,611 cubic meters.

He then took the median of the volumes calculated by himself, the province (1,101,449), Steven Saunders of KQR (1,197,769) and Stantec (1,453,467) and arrived at a figure of 1,103,650 cubic meters as his estimate. He then multiplied that by 2.07 and concluded that the volume in tonnes was 2,284,555. [ 78 ] He would also deduct 65-70,000 cubic meters from the median estimate to account for the slope at the boundaries of the pit that would be necessary to extract the aggregate. [ 79 ] On cross examination he admitted that while he believed the stockpiles of aggregate in the Dexter pit at the time of expropriation

were included in the Stantec and Kierstead, Quigley volume estimates, he couldn't say that with certainty. [ 80 ] Mr Pelkey also agreed that the volume calculations done by Stantec and KQR were based on 3000 data points, while his was based on 30. However, he did not believe that would explain the large difference between their volume calculations and his. [ 81 ] He also agreed on cross examination that he calculated the median of the four estimates by discarding the high and low estimates and averaging the two remaining estimates to arrive at a median estimate of 1,103,650 cubic meters.

However, using that method yields an estimate of 1,159,190 cubic meters, a difference of 55,540 cubic meters or 114,968 tonnes. It also appears that Mr. Pelkey didn’t use KQR’s final estimate of the full pit which was 1,405,324 cubic meters as Mr. Saunders testified. [ 82 ] Mr. McDonald relied on Stantec’s estimate of the volume in his calculation of the fair market value and while I don’t adopt Mr. Whitford’s evidence entirely, I find his calculations of the volume more reliable than that of Mr.

Pelkey. [ 83 ] The evidence that stands out to me from these various experts is that their calculations are “estimates” and that 54 meters is a “reasonable” and “fair” assumption to make for the water table elevation as stated by Mr. Whitford and Mr. Pelkey respectively. I am also cognizant of Mr. Young’s evidence that he does not like to dig too close to the water table so I find it is more likely than not that Fundy would not be digging any deeper than the 54 meter level.

I therefore find that the most reasonable assumption to use in estimating the volume of aggregate in the Dexter pit is that the water table is at an elevation of 54 meters. [ 84 ] Based on that assumption I accept Mr. Whitford’s method of calculating the volume of extractable aggregate in the Dexter pit and find, based on the table of incremental excavation volumes that is part of exhibit #17, that the volume is 1,365,290 cubic meters or 2,826,150 tonnes. [ 85 ] Mr. McDonald then needed to determine a price per tonne for the aggregate in the ground, the in situ material.

He testified that since the pit wasn't operating when he did his appraisal and there were no pits of comparable quality and sophistication in Charlotte County, he didn't have ready access to a comparable price per tonne for the aggregate so he had to rely on Stantec. [ 86 ] Mr. Whitford, who was also retained to assist in the calculation of the market price of the aggregate in the Dexter pit testified that he did so by determining the cost to replace the resource as it existed in its natural state. To do so, he used sales figures for the years 2005 to 2009 as supplied by Fundy.

He also considered comparable product prices, production costs, haulage rates, and material composition in making this calculation. [ 87 ] He considered the prices of six different products sold by Fundy and Lafarge, which operates the Blagdon pit, from pit-run gravel to ¾” stone. While Fundy sold other products during that time he included only those products that represented more than 5% of Fundy’s sales between 2005 and 2009. [ 88 ] From those prices he then subtracted the production costs such as crushing, screening and washing.

He testified that the more processing required the higher the price of the finished product. He then estimated a price per tonne for three categories of product:

a) heavily processed $3.66 to $10.48;

b) moderately processed $1.11 to $3.91; and

c) unprocessed $1.33 [ 89 ] When asked about a comment in a letter from Daryl DeMerchant of Gemtec (exhibit 1, Tab 3C, page 2) to the effect that it is unclear why a purchaser would pay $1.33 per tonne for in situ material from the Dexter pit when similar material could be bought elsewhere in Charlotte County for $0.65 to $0.85 per tonne, Mr Whitford agreed that Mr.

DeMerchant was correct that pit run gravel was available in Charlotte County at that price but he didn't agree that it was similar material to that in the Dexter pit; he said that was like comparing apples and oranges. [ 90 ] He also testified that his investigations revealed that unprocessed pit run gravel only sold for $0.65 to $0.85 per tonne where the purchaser extracted the gravel themselves, not where it was extracted, loaded and delivered by the pit owner.

[ 91 ] He also testified that while Gemtec makes a valid point about the large amount of aggregate in Charlotte County they do not account for the advantage that Fundy had because of the Dexter pit’s location, i.e. adjacent to the main highway, which eliminates issues such as weight restrictions and reduces the haulage costs considerably when compared with those incurred when hauling gravel for miles from a remote pit over a secondary road just to get to the main highway. [ 92 ] Regarding Gemtec’s comments concerning the costs of excavating and loading pit run gravel which were based on the Means Manual, Mr.

Whitford testified that while that is an authoritative document, it is not as accurate, in his opinion, as using actual numbers, as he did, from Fundy and Galbraith Construction which has been in the heavy civil contracting business for more than 35 years. He testified that he only uses a manual when actual data is not available. [ 93 ] Mr. McDonald felt that Mr. Whitford’s price of $1.33 per tonne for in situ material should be reduced by 5% to account for waste and settled on a price for his purposes of $1.26 per tonne. [ 94 ] Mr.

McDonald further testified that for the depletion rate, the only information he had was what Mr. Young told Clifford Lawrence, i.e. 30 to 35 years. He also worked with Greg Corbett and determined that in the years between 2005 and 2009 there was 2 to 2.5 million tonnes per year of comparable sized aggregate sold from all pits in Charlotte County and that a reasonable estimate of Fundy’s share of that was 50 - 55,000 tonnes per year from the Dexter pit.

He added 5% to the average of 52,500 tonnes to account for waste and estimated the depletion rate to be 55,264 tonnes per year which translated to a depletion period of 54 years. [ 95 ] Mr. McDonald considered the depletion rate without taking into account Fundy’s strategy of holding back on exploitation of the resource. Had he done otherwise, the rate of depletion from 2005 to 2009 would be 238 tonnes per year and the depletion period would be more than 12,000 years.

I find that he was correct in doing so because fair market value is not to be determined on the basis of subjective factors such as Fundy’s strategy. Rather it must be determined based on the objective standard prescribed in section 39(1) of the Act which defines it as, “the amount that would have been paid for the land if it had been sold on the date of expropriation in the open market by a willing seller to a willing buyer.” I therefore accept his conclusion on the issue of the depletion rate. [ 96 ] Mr. McDonald testified that he then had to consider a discount rate to apply to his calculations.

In his report (exhibit #1, tab 4A) he states at pp.50-1: … Given the level of risk perceived to be associated with this form of investment, a discount rate in the nature of 8.0 percent, to 11.0% would seem reasonable. However, we will again follow the decision rendered in Moffett Ltd. vs. Province of New Brunswick by Justice Alfred R Landry in dealing with the topic of discount rate selection. Justice Landry concluded that an adjustment should be made to the discount rate in order to recognize the higher quality cement aggregate contained in the pit lands taken … .

There is little doubt about the quality of stone for the production of concrete as well as of the absence of clay insofar as the Dexter property is concerned.

After considering all of the foregoing, we elected to employ discount rates ranging from 8.0% to 10.0% in order to carry out this valuation process. [ 97 ] Using Stantec’s volume estimate, the extraction rate of 55,264 tonnes per year, a price of $1.26 per tonne, a 2% per year inflation factor and 3% per year for unexpected operating costs and applying discount rates of between 8.0 and 10.0% he then calculated various market values ranging from $1,074,328 at 8.0% to $829,984 at 10%. [ 98 ] In the end Mr.

McDonald's opinion was that the fair market value of the pit portion of the property that was taken was between $940,000 and $1,000,000. He found no injurious affection to remnant Parcels “A” and “C”. He calculated the value of the injurious affection to remnant Parcel “B” to be $1,400.00 and the fair market value of the northern portion of the take to be $6,100. In total, he estimated the fair market value and injurious affection to be between $947,500 and $1,007,500. [ 99 ] Mr.

McDonald was critical of the appraisal done by Clifford Lawrence for applying the same value per hectare to the entire property including the remnant parcels, “A”, “B” and “C” which have minimal or no value, as well as the northern portion of the take which has no aggregate. He testified that Mr. Lawrence used the Before and After approach, valuing the entire property at $752,157 and subtracting $255,130 for the values he assigned to remnant Parcels “A”, “B” and ”C” at a rate of $23,000 per hectare. That, he testified, cannot be justified given their lack of value.

[ 100 ] In his opinion Parcels “A” and “B” should have been valued at $1,000 per hectare, or $10,100, and Parcel “C” has no value. He testified that the fair market value of the pit portion of the take should also have been valued separately from the northern portion of the take which has no aggregate and should be valued at $1,000 per hectare or $6,100. [ 101 ] In Mr. McDonald’s opinion that was an obvious and significant error by Mr. Lawrence. He also testified that Mr. Babineau made the same error using an even higher value per hectare of $25,800. [ 102 ] On cross examination, Mr.

McDonald testified that it was his understanding that $0.85 per tonne for pit run gravel generally was used by Stantec but that its conclusion that $1.33 per tonne for the Dexter pit was based on its high quality of its aggregate. [ 103 ] He also agreed that if other pits in Charlotte County were selling aggregate that met the CSA and DTI standards for $0.85 per tonne it would be hard for Fundy to sell its aggregate for $1.33 per tonne.

However, he understood that the nearest pit with comparable quality gravel was the Blagdon pit in Welsford which sells pit run gravel at $3.25 per tonne. [ 104 ] I find that the two appraisals by de Stecher are indeed fatally flawed as explained by Mr. McDonald. I accept the evidence of Mr. Corbett as to the limitations of the remnants. I also accept Mr. McDonald’s evidence as to the values of the remnants and the northern portion of the take. Having done so I do not accept the opinions of Mr. Babineau ($25,800 per hectare) and Mr.

Lawrence ($23,000 per hectare) concerning the values placed on those four parcels and I find Mr. McDonald’s opinion on fair market value to be more reliable. [ 105 ] Mr. McDonald gave a range for the fair market value of the land taken plus injurious affection of $947,500 to $1,007,500 which was based on the volume calculated by Stantec using an elevation of 53 meters for the water table which results in a depletion period of 54 years. I have found an elevation of 54 meters to be reasonable in this case which results in a depletion period of 51 years using Mr.

McDonald’s assumption that the rate of depletion will be 55,264 tonnes per year. [ 106 ] At Appendix A-1 of his report. Mr McDonald provides the present values of each year in the depletion period so I will adjust his fair market value estimate by deleting the present value of years 52-54 which total $9,615 using a discount rate of 8%. At a 10% discount rate the adjustment is $3,640. Thus his range of fair market value for the pit becomes adjusted to $936,400 to $990,400.

Adding in $6,100 for the value of the northern portion of the take and $1,400 for injurious affection to Parcel “B” I adjust Mr McDonald's range for the fair market value of the land taken and injurious affection to $942,500 to $996,500. [ 107 ] Taking the midpoint I therefore find that the fair market value of the taken portion of the parent property is $969,500 and the value of the injurious affection to the remainder of the parent property is $1,400 for a total of $970,900. The amount already paid by the province to Fundy for the fair market value of the Dexter pit will be deducted from that figure.

DEXTER PIT - BUSINESS LOSS [ 108 ] Fundy also claims the amount of $1,120,000 as a special economic loss to its business arising from the effects on its business of the loss of the Dexter pit including the loss of profits from selling aggregate and the loss of profits from processing and selling aggregate to third parties. [ 109 ] The province says that Fundy has not proven that loss and that the evidence, particularly that of its expert, Suzanne Loomer of KPMG, demonstrates that Fundy has not suffered any business loss. 1.

PAUL BRADLEY [ 110 ] To quantify its loss Fundy retained Paul Bradley of the accounting firm of Deloitte who specializes in business valuations. He has testified in New Brunswick courts about the loss in the value of a business arising from expropriation. He was declared an expert in business valuation with expertise in evaluating losses caused by expropriation. [ 111 ] Mr. Bradley prepared a report (ex. #23) dated April 4, 2022 in which he refers to Fundy as “FCL” and calculates its losses that are “directly attributable to the expropriation of lands upon which FCL carried on its business”.

[ 112 ] He testified that the valuation of Fundy’s business loss included two streams of income:

a) the stream of royalties that Fundy lost from its inability to sell unprocessed aggregate; and

b) the stream of royalties it lost from its inability to sell processed aggregate. [ 113 ] In broad strokes Mr. Bradley assumed that Fundy would have annual sales of 55,000 tonnes of aggregate and concluded that its loss was $1,120,000 over the life of the Dexter pit. [ 114 ] He testified that his valuation was a retrospective one in that it reflects the value of Fundy’s loss as of the date of expropriation, October 20, 2009.

He testified that it would not be proper for him to use any data generated after the date of expropriation, known as hindsight information, although data from before the date of expropriation is essential in preparing a report that reflects the value of Fundy’s losses as of the date of expropriation. [ 115 ] Mr. Bradley determined that in the five years prior to the expropriation Fundy sold an average of 40,000 tonnes of aggregate per year from its Bethel area pits. In those five years, however, it only sold 1,191 tonnes in total from the Dexter pit.

He assumed that was because of Fundy’s strategy to limit the sale of Dexter pit aggregate to projects that required the very best quality aggregate [ 116 ] Based on its 2005 to 2009 financial statements, Mr Bradley concluded that Fundy was a relatively successful company with profits ranging from $240,000 to $942,000 per year depending on discretionary decisions made by the owner, the timing of projects it was working on and the like.

He testified that Fundy’s balance sheet showed that it was well-financed as indicated by its retained earnings, which increased from $4.5 million in 2005 to $6.4 million in 2009. [ 117 ] It also had a low amount of long-term debt so it was well -positioned to withstand periods of diminished activity. He also concluded that the economic outlook and business environment at the date of the expropriation were both stable. [ 118 ] He described his approach to quantifying Fundy’s loss at page seven of his report where he states: 22.

The objective of our quantification was to calculate FCL's business disturbance losses from expropriation, being an amount sufficient to put FCL in the position it would have been, but for the taking of the expropriated property. As we understand it, but for the taking, FCL: • would have continued ownership and use of the Dexter pit as a source for concrete aggregate for sales of concrete and aggregate products to third party purchasers; and • would have continued use of the Dexter pit as a source of product when carrying out construction projects. 23.

As a result of the taking, the income stream associated with aggregate sales to third party customers and internal sales for construction contracts associated with the Dexter Pit has been lost. Accordingly, we have quantified FCL’s business loss as the amount of profits from processing and sale of aggregate products that FCL would have earned but for the taking. 24. In general, the loss of profits was calculated as: Annual volume of extraction from Dexter pit x Selling prices of (aggregate products) less (direct costs). 25.

More specifically, the loss of profits is calculated as the present value of the stream of profits until the deposit is depleted. Due to the uncertainty regarding volume of annual extraction, and the impact of the assumed volume on the loss quantum, our approach is to present scenarios based on assumed levels of production and sale. We used the discounted cash flow methodology, as it is typically applied in situations involving the valuation of resource properties and other finite life assets. [ 119 ] Mr.

Bradley testified that in addition to both of the income streams from the sales of aggregate, Fundy also lost its ability to use the aggregate on its own projects.

[ 120 ] He relied on the Stantec report for the calculation of volumes and the report of James McDonald concerning the fair market value at the date of expropriation. He assumed a total volume of 3,008,677 tonnes at a depletion rate of 55,000 tonnes per year. [ 121 ] He then had to decide on a discount rate to determine the present value of the loss. He testified that the discount rate depends to a large extent on the level of risk that an investor in the business would be taking.

For a start-up company, for example, he would use a rate of approximately 25%, whereas for a low risk or well-established company, he would use a much lower discount rate. [ 122 ] Because Fundy’s debt was only 1/3 of its capital structure and it had an abundance of land assets which could be used as security for its debt and taking into account other factors such as the size of the company and the nature of the industry he concluded that an investor in this company would want a return on their investment of 16.77%. [ 123 ] Mr Bradley then calculated the percentage of sales for each of Fundy’s six largest selling products and took the average prices per tonne for those products as calculated by Stantec.

He then calculated the cost to produce each of those products which he obtained from Mr Corbett who uses the information for bidding on jobs which, in Mr.

Bradley’s opinion, made it inherently reliable. [ 124 ] After determining the gross profit per tonne for each product he calculated the weighted average gross profit per tonne that Fundy would have earned on its products but for the expropriation to be $2.79 per tonne. [ 125 ] He further testified that in a calculation of a future loss such as this, approximately 75% of the loss occurs in the first ten years and that by the last year of the depletion period the loss would be less than $1,000. [ 126 ] On cross examination Mr Bradley testified that the purpose of his report was to determine what amount of money it would take in 2009 dollars to put Fundy where it would have been without the expropriation, i.e. but for the expropriation, what was the loss in value of the business. [ 127 ] Mr.

Bradley further testified that in order to calculate the value he multiplied the volume by the gross margins per tonne of the various products sold by Fundy. [ 128 ] He testified that he used 55,000 tonnes per year as the average number of tonnes that Fundy could be expected to extract from the Dexter pit because that was the average volume for Fundy from all of its pits in the years 2008 and 2009. [ 129 ] He also testified that while the earlier volumes of aggregate used from the Dexter pit were considerably lower, he understood that the other Fundy pits were nearing depletion and therefore felt it was justified to project larger volumes being extracted from the Dexter pit in the future.

He also testified that implicit in the assumption of 55,000 tonnes per year was the further assumption that Fundy would use only aggregate from the Dexter pit during the forecast period. [ 130 ] He also testified that if the actual volumes of aggregate that Fundy extracted from the Dexter pit in the five years prior to the expropriation were used then Fundy would be penalized for its strategy of only using Dexter pit aggregate when it was required and would lose the opportunity to process and sell its high quality aggregate. [ 131 ] He testified that the sale prices of the various products that he used, were based on the prices that Fundy was charging in the marketplace. [ 132 ] He also testified that if the volume of aggregate in the Dexter pit is less than the Stantec estimate his calculation is not affected significantly, particularly if it remains at more than 2.5 million tonnes.

[ 133 ] Mr Bradley further testified that Fundy was in a competitive business in Charlotte County and that simply increasing prices as suggested by the province’s expert, was unlikely to compensate Fundy for its loss of the Dexter pit. 2. SUZANNE LOOMER [ 134 ] The province called Suzanne Loomer of the accounting firm of KPMG who is a CPA and specializes in business valuations. She was declared an expert in business valuation and loss quantification. [ 135 ] Ms.

Loomer testified that her approach to this case involved looking at what Fundy’s profits would have been and deducting what they actually were following the expropriation in order to quantify Fundy’s loss, if any. In other words, she relied on hindsight information. She testified that doing so ensures that the owner doesn't get a windfall profit. [ 136 ] Ms. Loomer used December 31, 2018 as the valuation date instead of October 20, 2009, the date of the expropriation.

In doing so, she concluded, based on eight years of Fundy’s post expropriation financial information that because Fundy was able to access aggregate from other pits, it suffered no loss to its business by reason of the expropriation of the Dexter pit. [ 137 ] Mr. Bradley took issue with her for using this hindsight information. He testified that, in his opinion, using hindsight information is not proper in valuing losses in expropriation cases.

He stated that the correct approach is to use a discount rate to calculate the present value of the loss, the present date being the date of expropriation, October 20, 2009 in this case. [ 138 ] In the text, The Law of Expropriation and Compensation in Canada , Carswell, Second Edition, Eric C.E.Todd, the author states at pp. 106-8: A question which frequently arises is to what extent, if at all, the evidence of facts which occurred after the date of expropriation may be considered in the assessment of compensation. Sometimes in the past it was thought that such evidence must be excluded from consideration.

However, it is now well established that there is no automatic cut-off date. Accordingly, evidence of facts occurring after the date of expropriation may be considered, subject only to the question of the weight to be given to such evidence. … Another situation where the courts have admitted evidence of facts occurring after date of valuation is where the expropriated interest is claimed to have some special economic value to the owner. The assessment of such special value may be made more readily and realistically if and when, for example, the owner has acquired a new location on which to carry on activities.

In such a case, it is appropriate to compare the advantages and disadvantages of the new site as compared with the subject property. This approach was adopted by an arbitrator, and approved on appeal in Canada Steamship Lines Ltd v. Toronto Terminals Railway . [ 139 ] I am satisfied that the law does allow the approach adopted by Ms. Loomer but in this case I would give it little weight because, as Mr.

Bradley testified, hindsight information does not provide an accurate comparison because it dealt with Fundy’s operations using material from other pits which were not of the quality found in the Dexter pit and would not, therefore, have generated the two streams of income that were available to Fundy from the Dexter pit. [ 140 ] With respect to the quality of the aggregate in the Dexter pit, Mr.

Whitford testified that his tests showed that it was “top quality” material and that all test results showed that it met CSA and NBDOT (now “DTI”) requirements for concrete aggregate. [ 141 ] He testified he has lived and worked in Charlotte County since 1975 and that the Dexter pit was, in his opinion, “the best around” in 2009 and while there was lots of aggregate in Charlotte County, the Dexter pit was the only one, to his knowledge, where the aggregate met all the specifications of CSA, DTI and the state of Maine’s Department of Transportation.

As noted earlier in this decision, he described that as “rare” for southwestern New Brunswick in his report. [ 142 ] Mr. Pelkey testified that while the quality of the aggregate in the Dexter pit meets the CSA and NBDOT standards for concrete it could, nevertheless, be used for a variety of purposes. Moreover, he noted that quality of aggregate in a pit can change and that is why it must be tested on an ongoing basis. He did not believe enough testing was available to confirm that the entire Dexter pit was adequate

for concrete aggregate. Mr Pelkey agreed on cross examination that he works mostly as a hydrogeologist and that he has not worked on aggregate for ready mix concrete. He also agreed that he did not do testing on any other sources of aggregate in Charlotte County. [ 143 ] When Mr. Whitford was asked about Mr. Pelkey’s comments about the possibility that the quality of the Dexter pit aggregate could change he responded that in his opinion that was very unlikely as it had never failed a quality test prior to the expropriation to his knowledge. [ 144 ] Based on the evidence of Mr. Whitford as well as that of Mr.

Corbett, Mr. Young, Mr. Levesque, James McDonald and Scott MacDonald I find that as a result of the expropriation Fundy lost a valuable asset, viz ., a pit with a prime location and a quality of aggregate that was “rare”; a pit that it was using strategically to ensure its continued competitiveness in the heavy civil contracting industry in Charlotte County for a very long time.

To say that it replaced that asset with aggregate from other pits is, in my opinion, tantamount, as Mr Whitford testified, to comparing apples to oranges. [ 145 ] Consequently I find that this is not a case where the assessment of the loss should be based on hindsight information because in my view, Fundy clearly suffered a loss as a result of this expropriation which, I find, is not reflected in the evidence of Ms. Loomer who agreed on cross examination that she assumed that the quality of aggregate in all of Fundy’s pits was the same. [ 146 ] I therefore find that while Ms.

Loomer’s approach is not improper, it does not take account of the high quality of the aggregate in the Dexter pit and Fundy’s loss of that valuable asset as a result of the expropriation. [ 147 ] Moreover, Ms. Loomer made a significant factual error in her report when she conflated the Dexter pit with a property known as the Dexter quarry which is not owned by Fundy. Relying on that error she stated that Fundy had actually used more aggregate from the Dexter pit after the expropriation than before. The province submits that Ms. Loomer was simply relying on information received from Fundy’s counsel.

That may or may not be but it doesn’t relieve her from the obligation to ensure that her opinions are based on sound factual foundations. The mere fact that one was called a pit and the other a quarry should have given her pause to inquire further in my view. Nor does the source of the error rehabilitate her conclusions. [ 148 ] The province also says that if Fundy suffered a loss because it lost the aggregate from the Dexter pit it is nothing more than a loss of inventory which can be replaced and the only loss would be any incremental haulage costs.

That submission also does not account for the quality of the aggregate which Mr. Whitford described as “rare”. Fundy couldn’t have replaced it from its other pits; in fact there were no other pits in Charlotte County that could have provided aggregate of the same quality. [ 149 ] As Mr.

Whitford testified the closest source of comparable aggregate would have been from the Blagdon pit approximately 100 kms away but presumably the loss of the high quality aggregate in the Dexter pit would mean that the owner of the Blagdon pit would be in a position to raise its prices and the viability of sourcing their aggregate from Blagdon then becomes questionable.

Without evidence to support the viability of using that pit as a replacement for the Dexter pit aggregate I find that the province’s submission in this regard is speculative. [ 150 ] I will therefore quantify Fundy’s loss based generally on Mr Bradley's approach. [ 151 ] In addition to the difference in the volume of the aggregate in the Dexter pit I do not accept Mr. Bradley’s depletion rate of 55,000 tonnes per year and while that was used by Mr.

McDonald and approved by this court for purposes of calculating fair market value, the business loss calculation is not governed by the requirement for objectivity found in section 39(1) of the Act , supra .. [ 152 ] At the same time, a depletion rate of 238 tonnes per year and a depletion period of more than 12,000 years is neither reasonable nor realistic. That said I feel compelled to recognize that Fundy did not sell aggregate from the Dexter pit at the rate of 55,000 tonnes per year and more likely than not, it would never have done so under Fundy’s ownership.

I agree that it should not be penalized for its legitimate business strategy with respect to the sale of the Dexter pit aggregate, but at the same time its actual extraction numbers must carry some weight in this analysis. [ 153 ] In my view, a rate of 25,000 tonnes per year would be a more realistic rate to use in calculating Fundy’s business loss. In his report, Mr. Bradley prepared schedules calculating the loss at various depletion rates. Based on

Schedule 3A on page 20 of his report I therefore find that Fundy's loss before accounting for other differences is $509,707.

[ 154 ] On cross examination Mr. Bradley denied that his calculation of Fundy’s loss would result in double recovery but I don’t accept that. Since the fair market value assessment by Mr. McDonald essentially valued the unprocessed aggregate that Fundy lost in the expropriation of the Dexter pit and Mr. Bradley testified that one of the streams of income that Fundy lost was the royalties from its inability to sell the unprocessed aggregate from the Dexter pit I find that his valuation clearly overlaps that of Mr. McDonald and I will reduce the amount of Fundy’s business accordingly. [ 155 ] In his report at

schedule 4 on p. 27 Mr. Bradley calculates the weighted average gross profit per tonne of the products that Fundy historically sold. From the Stantec report he took their percentages of Fundy’s mix of products (see exhibit #1, tab 4B at p. 12) and concluded that of Fundy’s six top-selling products which totaled 93.5% of its total sales, pit run gravel, which is unprocessed, comprised 29.4% of the overall total and 31.4% of the group of six that he used. The remaining products were all processed products. I therefore find that 31.4% of the business loss as calculated by Mr.

Bradley represents double recovery and I will reduce Fundy’s business loss claim by that amount or $160,000 to $349,707. [ 156 ] Finally, the adjustment in the total volume of extractable aggregate from 3,008,677 tonnes to 2,826,150 tonnes represents a reduction of 182,527 tonnes which would reduce the depletion period by 7.3 years. While there is no table in Mr.

Bradley's report showing the decreasing annual cash values, I accept his evidence that towards the end of the depletion period the yearly amounts will be minimal and I find that for a depletion period of 114 years the loss in the final seven years would, more likely than not, be substantially less than $1,000 per year. I will therefore deduct $4,707 from the amount calculated by Mr. Bradley at

schedule 3A and I therefore find that the value of Fundy’s business loss as a result of the expropriation of the Dexter pit was $345,000. HAWKINS PIT [ 157 ] The Hawkins pit, which was located north of the Dexter pit, was purchased by Fundy in 2006. Fundy had been buying lower grade aggregate from that pit since 2000. Mr. Young testified that it was good for projects like the sub-base of a road but not for concrete aggregate. The province expropriated a portion of it to build a new connector road. [ 158 ] Mr.

Young testified that the province offered Fundy the sum of $17,491.00 for the fair market value of the portion of the Hawkins pit taken based on the appraisal of Clifford Lawrence of de Stecher Appraisals.

He further testified that while Fundy doesn’t agree with the amount the province has paid for the fair market value of that property, it has no expert evidence to challenge it. [ 159 ] Fundy also claims that the province used approximately 600,000 tonnes of gravel from the Hawkins pit to build the Heron Road which cuts through that pit and connects Route #760 to the Burns Brook Road but has offered no compensation to Fundy for that material. Fundy relies on the calculations prepared by the province’s Scott MacDonald as its evidence of the volume of that aggregate.

Fundy claims that it is entitled to $0.85 per tonne for a total of $510,000.00. [ 160 ] Mr. MacDonald testified that in the spring of 2008 he estimated the volume of aggregate in the Hawkins pit at the request of the planning branch of the Department of Transportation and Infrastructure. He estimated that there was 591,000 tonnes of aggregate in the portion of the Hawkins pit that was taken to a depth of 6 meters.

He didn't determine the depth of the water table or consider setbacks. [ 161 ] Roger Kierstead testified that the construction of the Heron Road from Route #760 through the Hawkins pit was necessary to provide access to the Burns Brook Road, which was isolated by the construction of the new four lane highway. [ 162 ] What Fundy is claiming is the undiscounted value of the aggregate used by the province from the Hawkins pit to build the Heron Road.

It claims these damages as a special economic loss but in my view, in the absence of a valid reason, such as the land having been targeted by the province because of the aggregate as opposed to its location or the take having negatively affected a business it was operating, it would not fall within that category. In my view this claim is, in actuality, part of Fundy’s claim for the fair market value of the property taken. [ 163 ] Section 39(4) of the Act makes it clear that in determining the market value of the land, no account will be taken of, inter alia , the actual use that the province makes of the land.

I therefore find that this claim is prohibited by section 39(4) (

a) of the Act , supra , and it is therefore denied. See also Stephen Moffett Ltd. v. New Brunswick (Minister of Transportation), 2004 NBQB 32 at paras. 94-103 . PENNFIELD PROPERTY

[ 164 ] Fundy bought the Penfield property in 2005. Before that it had been used by the previous owner for growing and harvesting blueberries. [ 165 ] Fundy claims, in addition to what the province has paid it for the fair market value of that take, the sum of $595.00 for injurious affection by reason of the reduction in the value of the remaining property as calculated by David Babineau of de Stecher Appraisals Ltd., the province’s appraiser (see exhibit #1, tab 5B at p. 21).

I allow that claim. [ 166 ] Fundy also claims an amount for the aggregate used by the province in the construction of the Gateway Project and for the value of aggregate rendered inaccessible to it due to the construction of the highway. It relies on the calculations of Steven Saunders of KQR who calculated the volumes of gravel in respect to these two claims as follows:

a) gravel used by the province for the construction of the highway - 293,526 tonnes; and

b) gravel made inaccessible to Fundy by the take - 304,704 tonnes. [ 167 ] With respect to the gravel used by the province for the construction of the highway, Fundy claims the undiscounted value of that aggregate at $0.85 per tonne for a total of $249,497.10. [ 168 ] There is evidence from both Mr. Young and Mr Corbett that the province used aggregate from the portion of the Pennfield property that was expropriated but that does not lead to the conclusion that the property was targeted by the province.

Moreover, the evidence of Steven Saunders confirms that it is common practice in highway construction to use suitable aggregate from the land that has been taken when building a highway.

Further, there is no evidence that the province expropriated this property for the aggregate as opposed to its location so, for the reasons set out above concerning Fundy’s claim for gravel used by the province from the Hawkins pit, this claim is also denied. [ 169 ] Fundy also claims, as damages for injurious affection, the value of the gravel contained in that portion of the remainder of the Pennfield property which has been rendered inaccessible by virtue of the construction of the highway. [ 170 ] Both Mr. Young and Mr.

Corbett testified that Fundy has the same access to virtually all of the Penfield property that was not taken as it had before the expropriation. Where Fundy claims it has suffered injurious affection to the Penfield property is in the area that it cannot now exploit due to set-back requirements and slope issues created by construction of the highway. [ 171 ] Mr Corbett testified that prior to purchasing it in 2005, Fundy dug test holes on the Penfield property and determined that it contained gravel throughout.

Based on those investigations it bought the property with the intention of extracting gravel from it eventually and when it was expropriated Fundy considered it as part of its inventory of aggregate. [ 172 ] He further testified that it was being used as a blueberry field when purchased and, while Fundy continued to lease it to the grower and use it for storage and repair of equipment, its intention at the time of the expropriation was to use the gravel in its contracting business. I accept that evidence of Mr.

Corbett. [ 173 ] Fundy relies on the calculations of Steven Saunders who, in his report (see exhibit #1, tab 4D at pp. 44 and 47) calculates the volume of the aggregate in those areas down to a depth of five meters to be 147,200 cubic meters, which is equivalent to 304,704 tonnes. I accept those calculations and I find that Fundy is entitled to compensation for the loss of that aggregate as injurious affection to the Penfield property caused by the expropriation. I find that Fundy's damages at the rate of. $0.85 per tonne total of $258,998. DISPOSITION [ 174 ] In

summary the following claims made by Fundy are allowed: A. Dexter pit (

i) fair market value $969,500 (ii) injurious affection 1,400

(iii) special economic loss 345,000 B. Hawkins pit (

i) Special economic loss nil C. Pennfield property (

i) Injurious affection $259,543 Total $1,575,443 [ 175 ] The amounts already paid by the province to Fundy will be credited against this total. That does not include any amounts the province has paid to Fundy for the fair market value of the Hawkins pit and the Pennfield property. OWNER’S TIME, COSTS AND INTEREST [ 176 ] The issues of owner’s time, costs and interest are deferred to a subsequent motion. ___________________________________________ William T. Grant Judge of the Court of King’s Bench of New Brunswick