Town of Russell v. Her Majesty the Queen Date:, 2011 MBCA 56

Citation: Town of Russell v. Her Majesty the Queen Date: 20110704 in Right of the Province Docket: AI 10-30-07435 of Manitoba, 2011 MBCA 56 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Barbara M. Hamilton Mr. Justice Martin H. Freedman Mr. Justice Richard J. Chartier BETWEEN : TOWN OF RUSSELL ) W. G. McFetridge ) for the Appellant (Owner) Respondent ) ) M. G.

Tramley - and - ) for the Respondent ) HER MAJESTY THE QUEEN IN RIGHT ) Appeal heard: OF THE PROVINCE OF MANITOBA ) April 20, 2011 ) (Authority) Appellant ) Judgment delivered: ) July 4, 2011 HAMILTON J.A. 1 The appellant (Manitoba) appeals the market value determination under The Expropriation Act , C.C.S.M., c.

E190 (the Act ), by the Land Value Appraisal Commission (the Commission) for 2.72 acres (the land) taken from its parent parcel of land owned by the Town of Russell (the Town) and used as the Russell & District Airport. 2 At issue are the adequacy of the Commission’s reasons and the reasonableness of its decision to use the income approach instead of the direct comparison approach to value the land. 3 For the reasons that follow, I am of the view that the Commission’s reasons are adequate and that its decision is reasonable.

Background 4 On June 30, 2006, Manitoba expropriated the land for the purpose of expanding Provincial Highway 16. The land is located just outside the limits of the Town along Highway 16. While zoned agricultural rural, the 85.10-acre parent parcel was a functioning airport, with runways, hangars and aerodrome amenities. 5 The expropriation affected the useable length of the aerodrome’s main runway and required that it be extended at its other end.

Manitoba and the Town agreed on the damages for injurious affection for the “displacement of the airport runway.” They were not able to agree on the market value for the land. This was the sole issue to be determined by the Commission (see s. 26(1) (

a) of the Act ). 6 At the two-day hearing, the Commission heard evidence from the accredited appraisers who had prepared appraisal reports for each of Manitoba and the Town. 7 Manitoba’s appraiser was of the view that the highest and best use of the land was highway commercial. He noted that there are three well-known methods of valuation: the direct comparison approach, the income approach and the cost approach. However, he considered and relied only upon the direct comparison approach. He compared five properties and opined that the market value of the land was $27,200. 8 The Town’s appraiser was of the view that the highest and best use of the land was either highway commercial or

aerodrome usage. He considered the three methods of valuation and relied on two: the direct comparison approach and the income approach. 9 For the direct comparison approach, he compared 11 properties, two of which were included in the report from the Manitoba appraiser. Given the aerodrome usage, he was of the view that the income approach was also a viable method of valuation.

For this analysis, he chose the airport in Yorkton, Saskatchewan, to be the most similar to the Russell & District Airport and he used a nine per cent capitalization rate. 10 The Town’s appraiser concluded that the market value for the land was $89,000 using either the direct comparison approach or the income approach. 11 In addition to their original appraisal reports, each appraiser provided a further written report responding to the other’s report.

All the reports were filed as evidence at the hearing and provided the basis for the evidence before the Commission, including that given during extensive cross-examination of the appraisers. 12 Using the income approach, the Commission valued the market value of the land at $67,200. The Commission’s Reasons 13 After noting that the only contested issue before it was the valuation of the land, the Commission commented on the appraisers’ use of different valuation methods and summarized their respective conclusions.

With respect to the direct comparison approach, the Commission noted that: Both parties questioned the validity of properties used by the other Appraiser in determining the appropriate value of the property in question.

Neither Appraiser used any of the properties of their counterpart in arriving at a value. 14 The heart of the Commission’s decision is found in the following paragraphs: The Commission found that the concerns raised by each party about the appropriateness of the properties being used by the other party were of sufficient concern for us to determine that we would not use this approach in determining an appropriate value for the said property. We were also persuaded that the said property being an aerodrome was of sufficient importance to cause us to consider the Income Approach.

Following an examination of the evidence presented, the Commission determined that with some adjustments to the submission made by the Town, the Income Approach was the best option remaining to determine the value for the expropriated property. The Commission has modified the capitalization rate from 9% to 11%. This position was taken by removing the highest and lowest rates provided by the Town and averaging the remaining four rates from the table on page 62 of their submission (Exhibit No. 8). The Commission also considered the rental rate used in determining the value.

We were provided with a number of examples from other airports, including several locations in Manitoba. The Town’s submission proposed the use of Yorkton, Saskatchewan as the comparable to use at a rental rate of $4,000. This was the lowest of all the comparables presented. The Province argued that using Yorkton as the comparable was inappropriate because Yorkton has a population of approximately 17,000 to Russell’s 2,000. Being left without any submission of an alternative rate, the Commission determined that it would use the proposed rate of $4,000. This established a value of $36,363 per acre.

The Commission also accepted that 60m x 60m equals 0.89 acres, thus adjusting the size of the expropriated land affected at the rate of $36,363 to be 1.83 acres. 15 The Commission then concluded its reasons: 2. The Commission determines that the value of the land taken by the Province of Manitoba from the Town of Russell is: 0.89 acres x $750 per acre $ 668

1.83 acres x $36,363 per acre $66,544 Total $67,212 Rounded to $67,200 plus reasonable appraisal, legal and other costs that are reasonably incurred. Positions of the Parties 16 Given that this appeal calls for a review of a decision of an administrative tribunal, the parties acknowledge that the now well-known principles of judicial review articulated in Dunsmuir v. New Brunswick , 2008 SCC 9 , [2008] 1 S.C.R. 190, apply and that the applicable standard of review is reasonableness. 17 Manitoba’s principal ground of appeal is that the Commission’s five-page reasons are not adequate.

It contends that the reasons are cursory in nature and as such, they do not permit appellate review or explain to the parties why it made the decision that it did. This is so, it asserts, because the reasons do not mention the highest and best use of the land or explain its choice of valuation methods and, particularly, why it did not accept the evidence of Manitoba’s appraiser and use the direct comparison approach. It relies on, among other decisions, this court’s recent decision in Friesen (Brian Neil) Dental Corp. et al. v.

Director of Companies Office (Man.) et al. , 2011 MBCA 20 , 262 Man.R. (2d) 197. 18 Manitoba also asserts that the Commission’s decision with respect to the valuation of the land, and particularly its use of the income approach, is unreasonable given the nature of the land, its potential use and the evidence at the hearing. 19 In response to Manitoba’s position that the Commission’s reasons are not adequate, the Town says that this argument is without merit given the voluminous written and oral evidence before the Commission and the submissions of counsel, which must be factored into any determination of the adequacy of the reasons.

The Town says that the parties and the court know what was decided and why and distinguishes these reasons from those in Friesen , where there were no reasons and no record. 20 The Town asserts that Manitoba’s real objection is not the adequacy of the reasons, but the Commission’s substantive decision to use the income approach and the monetary result derived from that approach. In that regard, the Town says that Manitoba is ignoring the fact that, except for .7 acres that cannot be developed, the land was part of a functioning aerodrome.

It also says that the Commission’s use of the income approach is a question of methodology with which this court should not intervene given the deference owed to the Commission. Analysis 21 The parties correctly acknowledged that the standard of review for this appeal is to be determined pursuant to the principles articulated in Dunsmuir and that the applicable standard is reasonableness. See Rebel Holdings Ltd. et al. v.

Division Scolaire Franco- Manitobaine , 2008 MBCA 65 at paras. 127-44 , 228 Man.R. (2d) 157. 22 The standard of review of reasonableness demands deference and presents two tasks for the reviewing court. One is to assess the reasons and the other is to assess the outcome ( Dunsmuir at para. 47 ): .... A court conducting a review for reasonableness inquires into the qualities that make a decision reasonable, referring both to the process of articulating the reasons and to outcomes.

In judicial review, reasonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process.

But ... also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law. 23 Steel J.A., in Friesen , noted that the two tasks are separate (at para. 89): ... [T]he task of assessing the adequacy of reasons given by an administrative tribunal must be separated from the task of assessing the substantive decision made. …. 24 This appeal requires this court to perform both tasks given that Manitoba takes issue with the adequacy of the Commission’s reasons and its substantive decision to use the income approach to value the land. 25 The Commission’s reasons are to be reviewed on a functional basis to address whether the following three purposes have been met ( Friesen at para. 91):

… 1. to tell the parties and others why the [tribunal] made the decision it did; 2. to provide public accountability with a view to justice done and being seen to be done; and 3. to permit effective judicial review. See also Hill v. Hamilton-Wentworth Regional Police Services Board , 2007 SCC 41 , [2007] 3 S.C.R. 129, R. v. R.E.M. , 2008 SCC 51 , [2008] 3 S.C.R. 3, and Clifford v.

Ontario (Attorney General) , 2009 ONCA 670 , 312 D.L.R. (4th) 70. 26 Given the limited nature of the issue before the Commission, I think it is fair to say that the functional analysis called for here really concerns purposes one and three. Do the reasons tell the parties and others why the Commission used the income approach, and do the reasons permit appellate review? If those questions are answered in the affirmative, then, at least in this case, justice will have been seen to be done. 27 A functional analysis is done “in the context of the record before the court” ( Friesen at para. 90).

Steel J.A. explained this (at para. 92): In determining whether these purposes have been achieved, a court will look to the reasons as a whole, in the context of the evidence, arguments and the hearing, and with an appreciation for the purposes and functions for which the reasons have been delivered . Good reasons will address the major points in issue. They will explain how and why the decision-maker reached the decision it did, setting out the facts, the law and the reasoning which formed the basis for the decision.

They will also show that the decision-maker did not fail to consider the arguments and evidence presented by the parties, although, as noted by the Supreme Court of Canada in R.E.M. , not all the evidence need be recited and a detailed description of the reasoning process followed is unnecessary “so long as the findings linking the evidence to the verdict can be logically discerned” (at para. 20). [emphasis added] 28 Reasons do not need to be perfect, nor need they be long. As stated by Stratas J.A. in Vancouver International Airport Authority v. P.S.A.C. , 2010 FCA 158 , 320 D.L.R. (4th) 733 (at para. 17 ): …. (

b) The adequacy of reasons is not measured by the pound . The task is not to count the number of words or weigh the amount of ink spilled on the page. Instead, the task is to ask whether reasons, with an eye to their context and the evidentiary record, satisfy, in a minimal way, [their] fundamental purposes .... …. 29 Here, the context can be simply stated. The sole issue before the Commission was the market value of the land, which had been a part of a functioning aerodrome and was located adjacent to Highway 16. Each party arranged for an accredited appraiser to prepare an appraisal.

The appraisal reports were detailed, the report of the Town’s appraiser more so. Manitoba’s appraiser limited his opinion to the direct comparison approach. The Town’s appraiser provided his opinion based on that approach and the income approach and explained why. Each appraiser provided a written critique of the other’s report. The appraisers were cross-examined at length at the hearing about their reports. 30 In their respective critiques, each appraiser criticized the appropriateness of properties chosen to support the other’s direct comparison methodology. It is not necessary to detail these criticisms.

Suffice it to say that they were many and varied. 31 While the reasons of the Commission are brief, they are not in the nature of the “conclusory” reasons found to be inadequate in Friesen , as asserted by Manitoba. In that case, the Director of the Companies Branch gave a three-line decision for refusing to cancel a business name registration after receiving written submissions from the parties. There was no evidentiary record, or reasons, as there are here. 32 I know from the reasons what the issue was and what the evidence was, albeit in a general way.

I know that the Commission chose to value the land on the basis of the income approach for two reasons. First, it had concerns about the properties relied on by the appraisers for the direct comparison approach. A review of the evidence explains why the Commission found that “the concerns raised by each party about the appropriateness of the properties being used by the other party were of sufficient concern for us to determine that we would not use [the direct comparison approach].” Second, the Commission accepted that the land had been part of a functioning aerodrome.

Clearly, the Commission concluded, without using the specific words, that the highest and best use of the land was

aerodrome usage. 33 The reasons “describe both what is decided and why” (Law Society of Upper Canada v. Neinstein, 2010 ONCA 193 at para.61, 317 D.L.R. (4th) 419). Certainly in the context of the record, the parties would have known this. The reasons permit appellatereview and have permitted Manitoba to exercise its right of appeal in a meaningful way.

See Neinstein and Vancouver InternationalAirport Authority. 34 To conclude, I agree with the Town that the reasons of the Commission meet the functional test of adequacy when they areread “as a whole, in the context of the evidence, arguments and the hearing, and with an appreciation for the purposes and functions forwhich the reasons have been delivered” (Friesen at para. 92).

They demonstrate the Commission’s awareness of the sole issue before it,the competing evidence of the appraisers, what evidence the Commission preferred and why and how it applied the income approach tovalue the land. 35 I turn now to the task of assessing the substantive decision, which, in my view, is easily addressed. 36 The Commission’s valuation decision is a decision of methodology that is statutorily mandated to be within the expertise ofthe Commission. Methodology is a question of fact. See Manitoba (Provincial Municipal Assessor) v. Ducks Unlimited Canada,[1998] M.J. No. 547 (C.A.) (QL).

As stated often, this court does not concern itself with methodology unless it is evident that a wrongprinciple was applied by the tribunal. That is not evident here. 37 My reasons for concluding that the Commission’s reasons are adequate lead me to conclude that the Commission’s decisionfalls within a “range of possible, acceptable outcomes which are defensible in respect of the facts and law” (Dunsmuir at para. 47), and istherefore reasonable. Other Issues on Appeal 38 Manitoba raised a new issue on appeal concerning s. 27(4) of the Act. This

section determines how to value a partial takingof land “[w]here an authority expropriates for a highway … a part of a parcel of land that is not within an incorporated … town … andthat is undeveloped or used for agricultural purposes.” 39 Because this issue was raised for the first time on appeal, I am of the view that it should not be addressed as we do not havethe benefit of the Commission’s findings of fact and its analysis on this point. See Dorge v. Cummine et al., 2004 MBCA 86,Gardentree Village Inc. v. Winnipeg (City) Assessor, 2008 MBCA 117, 50 M.P.L.R. (4th) 31, Quan v.

Cusson, 2009 SCC 62, [2009] 3S.C.R. 712, and Kirkfield Park & Arthur Oliver Residents Association Inc. v. Winnipeg (City) et al. (1996), (MB CA),107 Man.R. (2d) 259 (C.A.). In any event, it would seem that there was good reason that it was not raised, given that the land wasdeveloped to some extent for aerodrome usage and it was not used for agricultural purposes. 40 Finally, the Town sought its reasonable legal fees pursuant to ss. 15(6) and 44(3) of the Act. Manitoba agreed at the appealhearing that the Town would be entitled to those costs if the appeal was dismissed.

Conclusion 41 The reasons of the Commission meet the functional test of adequacy and the decision is reasonable. I would dismiss theappeal and award costs in favour of the Town on the basis noted above and agreed to by Manitoba. J.A. I agree: J.A. I agree: J.A.