Kleysen v. Her Majesty the Queen in Right Date:, 2015 MBCA 54

Citation: Kleysen v. Her Majesty the Queen in Right Date: 20150601 of the Province of Manitoba, 2015 MBCA 54 Docket: AI14-30-08202 IN THE COURT OF APPEAL OF MANITOBA Coram: Mr. Justice Michel A. Monnin Madam Justice Holly C. Beard Mr. Justice William J. Burnett BETWEEN : HUBERT KLEYSEN ) W. G. McFetridge and ) T. J. Björnson (Owner) Respondent ) for the Appellant ) - and - ) J. A.

Mercury ) for the Respondent HER MAJESTY THE QUEEN IN RIGHT ) OF THE PROVINCE OF MANITOBA ) Appeal heard: ) March 24, 2015 (Authority) Appellant ) ) Judgment delivered: ) June 1, 2015 MONNIN J.A. [ 1 ] This is an appeal from a compensation award made by the Land Value Appraisal Commission (LVAC) with respect to a 39-acre parcel of land that the authority, the Province of Manitoba (Manitoba), expropriated from the owner, Hubert Kleysen (Kleysen). [ 2 ] At the hearing before the LVAC, Manitoba called one appraiser.

In his opinion, the highest and best use of the property would be to consider the property as a speculative holding. The appraiser opined that the land was 30 to 50 years away from development, although in cross-examination he conceded that development could be as close as 10 years. Based on the comparables he considered, he estimated the value of the property to be $15,000 per acre or $585,000 in total. [ 3 ] Kleysen testified on his own behalf and also called an appraiser, as well as a planner with expertise in land development.

The appraiser and the land use planner concluded that the highest and best use of the land would be to develop it as a rural enterprise subdivision. The appraiser called by Kleysen, based on the comparables that he considered, calculated the value of the property to be $100,000 per acre or $3,900,000 in total. [ 4 ] The LVAC determined that the value of the land should be set at $50,000 per acre for a total market value of $1,950,000.

In arriving at its decision, the LVAC wrote: The Commission concludes, based on the evidence, that the time frame for development being potentially within 10 years means that this is not “speculative or too remote” and makes it a reasonable conclusion to expect that development would have occurred in a reasonable time frame and that the necessary rezoning would have been approved. …. The Commission concludes that the highest and best use of the subject property is for use as a commercial/industrial development. The Commission found the comparables of both parties difficult to assess.

There were so many variables affecting sale values that we

felt both were off the mark on the subject property. The comparables of the Authority were too low given the evidence before us while the comparables of [Kleysen] we saw as too high under the circumstances. The comparables of [Kleysen] tended to be much smaller properties than the subject while the majority of the comparables of the Authority were significantly larger than the subject property. . . . . . It is our conclusion that Mr.

Kleysen purchased the subject property in 1995 as “a prudent prospective purchaser on the open market” and he continued to view his holding in that context until the expropriation in 2010. He took direct action to increase the value of his property by being one of the proposers and supporters of Winnport. He was prepared to be patient and wait for an opportune time to develop or sell the subject property. We are convinced that he would not have considered selling the property at $15,000 an acre in 2010 but believe he may well have been interested at a level lower than $100,000 an acre.

Todd notes further on page 138 that: “The determination of the present value of a future potentiality may be exceedingly difficult. In some circumstances, ‘it is a guess rather than an estimate but it is a guess which [Kleysen] is entitled to have taken in his favour, and it is a guess which can be supplied as readily by the Court as by an appraiser’.” Aylesworth J.A. in T & P Holdings v. Metropolitan Toronto (Municipality) [ [1972] O.J. No. 61 (QL) ].

In this case we will assume “Court” can be exchanged with Commission and therefore, we determine that the value of the subject land should be set at $50,000 per acre. …. [ 5 ] The LVAC also wrote: …. Our conclusion is that Mr. Kleysen was not a willing seller at the time of expropriation and had no intention of selling the subject land at that time. [ 6 ] An appeal of a compensation award is taken pursuant to subss. 44(1) and (2) of The Expropriation Act , C.C.S.M., c.

E190 (the Act ), which provide: Appeal of certified amount to Court of Appeal 44(1) A party to a proceeding before the commission may appeal the amount certified as compensation payable to The Court of Appeal within 40 days after the day the commission certifies the amount under subsection 15(2), or within seven days from the day the commission issues a decision or certifies an amount under subsection 15(5), whichever is the later. Powers of Court of Appeal 44(2) An appeal under subsection (1) may be made on questions of law or fact or mixed law and fact, and The Court of Appeal may (

a) refer any matter back to the commission for determination; or (

b) make any determination that the commission has the power to make. [ 7 ] Manitoba raises two grounds of appeal. It argues, firstly, that the LVAC failed to properly apply the definition of market value as set out in the Act , and secondly, that the award of value it made was unreasonable, based on the evidence before it.

[ 8 ] The parties agree that the standard of review that this court is to apply is one of reasonableness. See Roeland v. Manitoba , 2012 MBCA 37 , 280 Man.R. (2d) 86; and Russell (Town) v. Manitoba , 2011 MBCA 56 , 268 Man.R. (2d) 140. Also see Mouvement laïque québécois v. Saguenay (City) , 2015 SCC 16 at paras. 29 , 38). [ 9 ] The sections of the Act which are applicable to the issues in this appeal are the following: Market value defined 27(1) The market value of land is the amount that the land might reasonably be expected to realize if sold in the open market by a willing seller to a willing buyer.

Factors not considered 27(2) In determining the due compensation payable to the owner no account shall be taken of (

a) the special use to which the authority will put the land; or (

b) any increase or decrease in the value of the land resulting from the imminence of the development in respect of which the expropriation is made or from any imminent prospect of expropriation; or (

c) any depreciation of the value of the land which is attributable to the fact that, whether by way of designation, allocation or other particulars contained in a development plan published by any government or government authority or whether by any other means, an indication has been given that the land is, or is likely, to be acquired by any authority; or (

d) any increase in the value of the land resulting from the land being put to a use that could be restrained by any court or is contrary to law or is detrimental to the health of the occupants of the land or to the public health. [ 10 ] Manitoba argues that the value-to-the-owner test is not the test that the LVAC was required to apply.

It argues that what an owner would have accepted is not relevant in determining the market value of land. [ 11 ] With respect to this argument, Manitoba is without a doubt relying on the LVAC’s comments that Kleysen “was not a willing seller at the time of expropriation and had no intention of selling the subject land at that time” and “ that he would not have considered selling the property at $15,000 an acre in 2010 but believe he may well have been interested at a level lower than $100,000 an acre.” [ 12 ] There is no doubt that Manitoba is correct in advancing this argument, but I have not been persuaded that that is what the LVAC, in fact, did in arriving at its award.

When the reasons of the LVAC are read as a whole, it becomes evident that Kleysen’s intention to sell or not sell was not, in the final analysis, the reason for the LVAC coming to the award that it did. [ 13 ] Further, after finding that the land value should be set at $50,000, the LVAC went on to state that “this ... enables [Kleysen] to receive a fair return on his investment.” The question of return on investment to the property owner is irrelevant to the determination of fair market value, and reference to such irrelevant factors should be avoided in order to avoid confusion as to the basis of the valuation. [ 14 ] That said, the sentences that I have just quoted, although misleading and wrong in law, are not, in my view, the basis for the LVAC’s award.

The reasons go on to conclude that the highest and best use of the property is for use as commercial development in the near future as opposed to decades. The LVAC then considers the evidence of both appraisers’ comparables in that context, which is in conformity with the Act . [ 15 ] The question then properly and justly becomes whether the LVAC’s award is reasonable, which brings us to Manitoba’s second and true ground of appeal; namely, that the award was not reasonable. [ 16 ] Reasonableness was defined in Dunsmuir v. New Brunswick , 2008 SCC 9 , [2008] 1 S.C.R. 190, in the following terms (at para. 47):

Reasonableness is a deferential standard animated by the principle that underlies the development of the two previous standards ofreasonableness: certain questions that come before administrative tribunals do not lend themselves to one specific, particular result. Instead, they may give rise to a number of possible, reasonable conclusions. Tribunals have a margin of appreciation within the range ofacceptable and rational solutions. A court conducting a review for reasonableness inquires into the qualities that make a decisionreasonable, referring both to the process of articulating the reasons and to outcomes.

In judicial review, reasonableness is concernedmostly with the existence of justification, transparency and intelligibility within the decision-making process. But it is also concernedwith whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law. [17] The meaning of reasonableness was again considered in Canada (Citizenship and Immigration) v. Khosa, 2009 SCC 12,[2009] 1 S.C.R. 339, where Binnie J., for the majority, stated (at para. 59): Reasonableness is a single standard that takes its colour from the context.

One of the objectives of Dunsmuir was to liberate judicialreview courts from what came to be seen as undue complexity and formalism. Where the reasonableness standard applies, it requiresdeference. Reviewing courts cannot substitute their own appreciation of the appropriate solution, but must rather determine if theoutcome falls within “a range of possible, acceptable outcomes which are defensible in respect of the facts and law” (Dunsmuir, at para.47). There might be more than one reasonable outcome.

However, as long as the process and the outcome fit comfortably with theprinciples of justification, transparency and intelligibility, it is not open to a reviewing court to substitute its own view of a preferableoutcome. [18] In Alberta (Information and Privacy Commissioner) v.

Alberta Teachers’ Association, 2011 SCC 61, [2011] 3 S.C.R.654, Rothstein J. had the following to say with respect to reasonableness and its application (at para. 47): .… The majority reasons in Dunsmuir do not recognize variable degrees of deference within the reasonableness standard of review andwith respect neither do the reasons in Canada (Canadian Human Rights Commission) [2011 SCC 53, [2011] 3 S.C.R. 471]. Once it isdetermined that a review is to be conducted on a reasonableness standard, there is no second assessment of how intensely the review is tobe conducted.

The judicial review is simply concerned with the question at issue. A review of a question of statutory

interpretation isdifferent from a review of the exercise of discretion. Each will be governed by the context. But there is no determination of the intensityof the review with some reviews closer to a correctness review and others not. [19] These cases thus indicate that, even though reasons have clearly expressed why or how a specific decision was arrivedat, the decision must still fall within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.

In thisregard, the context in which the decision was made will be relevant to the determination of whether or not the decision is reasonable. [20] Russell was also an appeal from the LVAC. In that case, this court had to deal with the adequacy of the LVAC’sreasons and the reasonableness of its decision, issues similar to those presently under consideration in the case at bar. Hamilton J.A.,writing for the court, set out the positions of the parties as follows (at paras. 17, 19): Manitoba’s principal ground of appeal is that the Commission’s five-page reasons are not adequate.

It contends that the reasons arecursory 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 isso, 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, amongother decisions, this court’s recent decision in Friesen (Brian Neil) Dental Corp. et al. v.

Director of Companies Office (Man.) et al.(2011), 2011 MBCA 20 , 262 Man.R. (2d) 197; 507 W.A.C. 197; 2011 MBCA 20. In response to Manitoba’s position that the Commission’s reasons are not adequate, the Town says that this argument is without meritgiven the voluminous written and oral evidence before the Commission and the submissions of counsel, which must be factored into anydetermination of the adequacy of the reasons.

The Town says that the parties and the court know what was decided and why anddistinguishes these reasons from those in Friesen, where there were no reasons and no record. [21] In her analysis, Hamilton J.A. referred to the decision of this court in Friesen (Brian Neil) Dental Corp. et al. v.Director of Companies Office (Man.) et al., 2011 MBCA 20, 262 Man.R. (2d) 197. She stated (at para. 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.” [ 22 ] Quoting further from Friesen , Hamilton J.A. then went on to refer to what constitutes a functional analysis (at para. 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. [2008 SCC 51 , [2008] 3 S.C.R. 3 ], 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) [ 23 ] She then went on to find (at paras. 31-32): 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. 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. [ 24 ] She concluded (at para. 34): To conclude, I agree with the Town that the reasons of the Commission meet the functional test of adequacy when they are read “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” ( 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 to value the land. [ 25 ] For a last word on the issue of reasonableness and its application, I go to Communications, Energy and Paperworks Union of Canada, Local 30 v. Irving Pulp & Paper, Ltd. , 2013 SCC 34 , [2013] 2 S.C.R. 458 , another decision of the Supreme Court of Canada.

Rothstein and Moldaver JJ. (in dissent with McLachlin C.J.C.) set out the law with respect to the reasonableness standard and the requirement to consider the context in which an arbitrator’s decision was made. They wrote (at para. 74): In recent years, this Court has emphasized that reasonableness is “a single standard that takes its colour from the context” ( Canada (Citizenship and Immigration) v. Khosa , 2009 SCC 12 , [2009] 1 S.C.R. 339, at para. 59 ; see also Alberta Teachers , at para. 47).

The factual and legal context in which a decision is made is critical to assessing its reasonableness for the simple reason that

“[r]easonableness is not a quality that exists in isolation” (Paccar [ (SCC), [1989] 2 S.C.R. 983], at p. 1018, per SopinkaJ.). Rather, when a reviewing court brands a decision as “reasonable” or “unreasonable”, it is necessarily making a conclusion about therelationship between the ultimate decision and the facts and law that underlie it.

The context of a decision thus shapes the “range ofpossible, acceptable outcomes which are defensible in respect of the facts and law” (Dunsmuir, at para. 47) or, more simply, the “rangeof reasonable outcomes” (Khosa, at para. 4). [26] The gist of Manitoba’s argument is set out in para. 100 of its factum.

It submits that the LVAC’s decision on areasonableness standard provides no justification, transparency or intelligibility within the decision-making process that would justifyhow it would or could adjust sales within a $3,500 to $21,500/acre range up to $50,000/acre. [27] Kleysen’s position is that Manitoba is seeking to simply reargue its case before this court and, at the end of the day,have this court substitute the LVAC’s market-value award with the value put forward by its own appraiser. [28] In Roeland, Scott C.J.M. summarized the position taken by the appellant in that case, which was also Manitoba, in thefollowing words (at para. 13): In reality, what this court is being asked to do is to conclude that the Province’s appraiser was the most reasonable and to substitute hisopinion of market value for that of the LVAC.

In effect, we are being asked to review all of the evidence and come to the conclusionthat the Province’s appraiser should have been relied on. This I am not prepared to do. The LVAC made it clear that it did not relysolely on comparable No. 7 in arriving at its conclusion. The LVAC’s conclusion is well within the boundaries of its expertise; itcertainly cannot be said that the decision did not fall “within a range of possible, acceptable outcomes which are defensible in respect ofthe facts and law” (Dunsmuir at para. 47). [29] In Carloni v.

Manitoba (2006), 2006 MBCA 37 , 205 Man.R. (2d) 84 (C.A.), while writing for the court, I setout one of Manitoba’s grounds of appeal as follows (at para. 10): ….

Secondly, the appellant alleges that the Commission erred in its assessment of the evidence in its certification of the market value ofthe property or, in other words, that it should have determined that the appraisal report submitted on behalf of the respondent was flawedand the valuation therein contained should have been rejected. [30] In both of the above-noted cases, and as argued by Kleysen, the grounds of appeal referred to are very similar to whatManitoba is again arguing in the case at bar. I agree.

Manitoba is in fact arguing that the LVAC erred when it did not accept thevaluation of its appraiser and that, by doing so, its award was unreasonable.

Confirmation of Manitoba’s position can be found in itsfactum, where it conducts an extensive review of the comparables considered by both expert appraisers and then asks this court to choosethe evidence of its appraiser over that of Kleysen’s appraiser. [31] I am not prepared to do so because, on a functional analysis of the LVAC’s reasons, read in light of the whole of theevidence before it, including the submissions of counsel, I have not been persuaded that the award made by the LVAC is unreasonable. [32] The reasons might not be as detailed and precise as one might wish them to be, but they demonstrate how and why theLVAC arrived at the decision that it did and they are sufficient to permit effective appellate review.

The LVAC stated that it found thecomparables of both parties difficult to assess and that it considered one appraiser to be too low with the other one being too high, andcame to a decision, which, while maybe not perfect, is within a range that the evidence allowed it to reach.

It also rejected the evidenceof Manitoba’s appraiser as to the best use of the land and the timeframe within which the property would be developed. [33] It is not the function of this court to conduct an extensive review of the evidence that was before the LVAC andsubstitute its own award unless the award being appealed is not “within a range of possible, acceptable outcomes which are defensible inrespect of the facts and law” (Dunsmuir at para. 47).

To the contrary, the award in this case was within an acceptable and reasonablerange and sufficiently explained by the LVAC. [34] I would conclude these reasons by adopting as applicable to this case Hamilton J.A.’s statement at para. 34 in Russellwhich I have previously quoted at para. 24 of these reasons. [35] Accordingly, I would dismiss the appeal with costs in accordance with s. 15(6) of the Act. J.A. I agree: J.A.

I agree: J.A.