Houle v Manitoba, 2016 MBCA 76

Citation: Houle v Manitoba, 2016 MBCA 76 Date: 20160719 Docket: AI15-30-08433 IN THE COURT OF APPEAL OF MANITOBA Coram: Madam Justice Barbara M. Hamilton Mr. Justice William J. Burnett Madam Justice Jennifer A. Pfuetzner BETWEEN : DENIS ARTHUR HOULE, KELLY ) W. G. McFetridge and HOULE, MARC HOULE and HOULE ) T. J. Björnson FARMS LTD. ) for the Appellant ) (Applicants) Respondents ) A. F. Hacault and ) M. L.

Grande ) for the Respondents - and - ) ) Appeal heard: ) February 3, 2016 HER MAJESTY THE QUEEN IN RIGHT ) OF THE PROVINCE OF MANITOBA ) Judgment delivered: ) July 19, 2016 (Authority) Appellant ) On appeal from (2015), 115 LCR 77 (Man LVAC) BURNETT JA Introduction [ 1 ] In 2009, the Province of Manitoba (Manitoba) expropriated a portion of a family farm for the purpose of realigning a provincial road and constructing a bridge over the Red River. [ 2 ] In this appeal, Manitoba seeks to set aside or vary the amount certified by the Land Value Appraisal Commission (the Commission) as compensation payable for the expropriated property. [ 3 ] In particular, Manitoba says that some of the amounts certified by the Commission are contrary to the intent of The Expropriation Act , CCSM c E190 (the Act ), significantly over-compensate the respondents and are unreasonable. [ 4 ] For the reasons which follow, the issues raised on appeal can be resolved by the application of established expropriation law principles to the specific facts of this case.

Background [ 5 ] The respondents and their ancestors have operated a mixed dairy and grain farm on property adjacent to the Red River since 1898. [ 6 ] In 2009, Manitoba expropriated the land (84.07 acres), buildings and improvements on River Lot (RL) 127 (collectively, the expropriated property) for the purpose of realigning Provincial Road 201 (PR 201) and constructing a new bridge over the Red River. [ 7 ] At the time of the expropriation, there was a house, barn and other structures on RL 127. The respondent Marc Houle resided on RL 127.

The respondents owned other lands contiguous to RL 127, namely RL 125, 126, 128 and 129. The respondents Kelly Houle and Denis Houle resided on RL 128.

[ 8 ] RL 128 was not expropriated. According to Manitoba, access to the residence on RL 128 from PR 201 was altered for traffic safety reasons. Following the expropriation, the respondents were granted a permit to use a portion of the old PR 201 as a driveway to access the new (re-aligned) PR 201. The respondents are required to maintain and clean this portion of the old PR 201, which can also be accessed by the public. [ 9 ] Following the expropriation, the respondents decided to purchase additional property (the new property).

The respondents subsequently moved the house, various farm buildings (but not the barn) and the grain bins which had been on RL 127 to the new property, as well as the milking cows and the dairy operation. The distance between RL 127 and the new property is approximately two and one-half miles.

The Commission found that the respondents made a reasonable choice when they decided to purchase the new property and that: “ The lack of cooperation on the part of [Manitoba], including the attempts to put the [respondents] ‘out of business’ contributed to the [respondents’] decision” (at para 461). [ 10 ] The Commission also concluded that the existing barn “could not be reasonably moved to the new site” (at para 197).

The respondents tore down old buildings at the new property, installed a new grain bin and constructed a new dairy barn with an underground manure storage system. [ 11 ] The Commission’s initial decision dated June 11, 2015, followed 21 days of hearings and 4 days of oral submissions. A further decision, issued for clarification purposes on September 25, 2015, has not been appealed. [ 12 ] In determining the “due compensation payable” to the respondents, the Commission calculated the market value of the expropriated property pursuant to section 26(1) (

a) and

section 27 of the Act . The Commission also awarded various other amounts on the basis that they were costs, losses and expenses arising out of, or incidental to, the respondents’ disturbance and/or the expropriation within the meaning of section 26(1)(

b) and section 28(1) (disturbance costs), damages for injurious affection as contemplated by section 26(1)(

c) and, in one instance, the value of the special economic advantage to the respondents arising out of, or incidental to, their occupation of RL 127 pursuant to section 26(1) (d). [ 13 ] The amount of due compensation certified by the Commission was $2,735,543.33. In addition, the respondents were awarded reasonable appraisal, legal, consulting, expert witness and other costs.

Relevant Statutory Provisions [ 14 ] The sections of the Act which are relevant to the issues raised in this appeal (other than the issue of legal costs) are as follows: Offer of compensation 16(1) Within 120 days after the registration of the declaration and before serving a notice for possession of the land the authority shall serve upon every registered owner of the land an offer in writing stating (

a) the amount that the authority offers in compensation for the market value of the owner’s estate or interest in the land and the amount that the authority offers in compensation for the market value of all the estates and interests in the land; (

b) that the authority offers to pay immediately to the person entitled thereto the entire amount offered in compensation for the market value of the owner’s estate or interest in the land; (

c) unless the market value has been estimated for the purposes of clause (

b) upon the basis of a use of the land other than the existing use, that the authority offers to pay (

i) the moving costs, as they are incurred, that are reasonably incurred by an owner in possession of the land at the time the declaration or expropriation was filed, and (ii) the costs, as they are incurred, that are reasonably incurred by any owner in possession of the land at the time the declaration or expropriation was filed of removing and relocating any fixture or structure owned by that owner and situated on the land at the time the declaration or expropriation was filed; and (

d) that the payment and receipt of the amount estimated for the purposes of clause (

b) or of any amount under clause (

c) is without prejudice to the rights conferred by this Act in respect of the determination of the compensation and that the amounts are subject to adjustment in accordance with the compensation that is subsequently agreed upon or determined under this Act.

Due compensation for land 26(1) Where land is expropriated, the due compensation payable to the owner therefor shall be the aggregate of (

a) the market value of the land determined as hereinafter set forth; (

b) the reasonable costs, expenses and losses arising out of or incidental to the owner’s disturbance determined as hereinafter set forth; (

c) damages for injurious affection as hereinafter set forth; and (

d) the value to the owner of any special economic advantage to him arising out of or incidental to his actual occupation of the land, to the extent that no other provision is made therefor in due compensation. Special value of residence of owner 26(2) Where the land expropriated includes a building occupied by the owner thereof as his residence, the due compensation payable for the land shall include (

a) compensation for the value of any improvements made to the land that is not adequately reflected in the market value of the land, and (

b) an amount, in addition to the market value of the land and any amount for improvements under clause (a), necessary to enable the owner to acquire other land that will afford him residential accommodation at least equivalent to that afforded by the land expropriated. Equivalent reinstatement in certain cases 26(3) Where land is devoted to a purpose of such a nature that there is no general demand or market for land for that purpose, and the owner intends in good faith to relocate in some other place, the due compensation shall be assessed on the basis of the reasonable cost of equivalent reinstatement.

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. Compensation for disturbance of owner 28(1) Subject to subsection (3), the authority shall pay to an owner in respect of disturbance, such reasonable costs, expenses and losses as arise out of or are incidental to the expropriation, including (

a) where the land includes the residence of an owner, other than a tenant, an allowance to compensate for the inconvenience and the cost of finding another residence in the amount of five per cent of the compensation payable in respect of the market value of that part of the land expropriated that is used by the owner for residential purposes, if that part was not being offered for sale on the date the declaration was signed; (

b) where the land taken does not include the owner’s residence, the owner’s costs of finding premises to replace those expropriated, if the lands were not being offered for sale on the date the declaration was signed;

(

c) relocation expenses, including (

i) moving costs, and (ii) legal fees, land survey costs and other expenses reasonably incurred in acquiring other lands; and (

d) where the land is subject to a security interest, the amount of any loss he is likely to sustain as a result of the acceleration of payment thereof due to the expropriation where the prevailing rate of interest for an equivalent security is greater than the rate of interest provided for by the security interest on the land.

Determination of business loss may be deferred 29(2) Where a claim for compensation for disturbance includes any amount for business loss alleged to result from the relocation or intended relocation of a business from the land expropriated, the determination of the compensation in respect of the business loss shall, unless the authority and the owner otherwise agree, be deferred until the business has been relocated and in operation for six months; and the operating experience of the business following its relocation may be considered inter alia in determining the compensation.

Injurious affection in partial takings 30(1) Compensation for injurious affection where an authority expropriates part of the land of an owner shall consist of the amount of (

a) any reduction in market value of the remaining land of the owner caused by the expropriation of the part; (

b) the damages sustained by the owner as a result of the existence and the use but not the construction of the works upon the part of the land expropriated; and (

c) such other damages sustained by the owner as a result of the existence, but not the construction or use, of the works as the authority would otherwise be responsible for in law if the existence of the works were not under the authority of a statute. Partial taking defined 30(2) For the purposes of this

section it shall be deemed that part of the lands of an owner is expropriated only where the owner from whom land is expropriated retains land contiguous to that expropriated or retains land of which the value was enhanced by unified ownership and unity of use with that expropriated. Due compensation to include amount for injurious affection 30(3) Compensation under this

section shall be determined in the proceedings for the determination of and as part of the due compensation payable for the land expropriated. Betterment considered 32 The value of any advantage to the lands or the remaining lands of an owner derived from the works for which part of the lands of the owner was expropriated or by which the lands were injuriously affected shall be set-off, but only against the amount of the damages for injurious affection. [ 15 ] Unless otherwise indicated, all references in this decision to

section numbers are references to sections of the Act . Manitoba’s Position Generally

[ 16 ] Manitoba submits that the Commission lacked jurisdiction to make some awards, misapplied the compensation provisions of the Act and made awards that were not supported by the evidence, with the result that certain awards for disturbance costs, injurious affection and special economic advantage were either not payable or were not reasonable. [ 17 ] Manitoba’s main argument is that the Commission erred when it determined that the respondents were entitled to receive both the market value of the expropriated property (pursuant to section 26(1) (a)) and payment for disturbance costs to replace the land and to replace and/or relocate the buildings and improvements (pursuant to sections 26(1)(

b) and 28(1)(c)). According to Manitoba, payment of both the market value and the disturbance cost awards contravenes the intent of the Act and amounts to significant over- compensation or double recovery. [ 18 ] More specifically, Manitoba says that relocation costs are not intended to cover the costs to replace, or to relocate, land, buildings and improvements, except in the special circumstances contemplated by section 26(2) and section 26(3).

In all other circumstances, compensation payable for such property and the cost to replace that property is intended to be covered by the market value award pursuant to section 26(1)(a). Manitoba emphasizes that, where the circumstances contemplated by section 26(2) and section 26(3) are not present, equivalent reinstatement is not permissible under section 28(1)(

c) simply by characterizing relocation expenses as disturbance costs. [ 19 ] Manitoba acknowledges that valid relocation expenses include moving costs, which are a specifically identified cost in section 28(1)(c)(i). By way of example, Manitoba says that costs to remove and reassemble machinery and equipment (i.e., chattels as opposed to buildings and structures) at a new location are valid moving costs.

Manitoba also concedes that, if an owner at a new location is required to incur an expense because of building code requirements or environmental regulations that were not applicable at the expropriated location, then that expense can reasonably be considered to be a valid relocation cost, subject to the proviso that it must be incidental to, or arise from, the expropriation.

The Respondents’ Position Generally [ 20 ] The respondents say that the Commission properly applied the provisions of the Act to the evidence and that the analysis and findings of the Commission meet the standard of review, which is that of reasonableness. They submit that the portions of the award, which Manitoba objects to, fall within a range of possible, acceptable outcomes and are defensible in respect of the facts and the law.

In particular, the respondents say that the amounts awarded are reasonable, that the Commission considered, and properly rejected, Manitoba’s position on double recovery, that the Commission made appropriate adjustments to ensure that the respondents only received due compensation without duplication, and that the public purse was protected. Jurisdiction and Standard of Review [ 21 ] Pursuant to section 44(1) and section 44(2), a party may appeal the amount certified by the Commission to this Court, and the appeal may be made on questions of law or fact or mixed law and fact.

The Court is authorized to refer any matter back to the Commission for determination, or the Court may make any determination that the Commission has the power to make. [ 22 ] The standard of review applicable to the issues raised by Manitoba is the standard of reasonableness.

See Kleysen v Manitoba , 2015 MBCA 54 at para 8 , 319 ManR (2d) 171 ; and Manitoba v Russell Inns Ltd et al , 2013 MBCA 46 at para 77 , 291 ManR (2d) 244 ( Russell Inns #1 ) .) The classic articulation of that standard, found in Dunsmuir v New Brunswick , 2008 SCC 9 , [2008] 1 SCR 190 , is that (at para 47): [R]easonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process. But it is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.

Disturbance Costs, Equivalent Reinstatement and Injurious Affection [ 23 ] Before analysing each of Manitoba’s specific complaints, it is useful to briefly examine:

a) the costs, expenses and losses (i.e., the disturbance costs) contemplated by section 26(1)(

b) and section 28(1);

b) the distinction between disturbance costs and equivalent reinstatement;

c) the relationship between disturbance costs and claims for injurious affection; and

d) whether an owner can receive the market value of the land as well as disturbance costs associated with acquiring replacement land and relocating buildings to that property.

a) Disturbance Costs [24] Section 26(1) identifies four discrete categories of compensation payable to an owner where land is expropriated,namely:

a) the market value of the land;

b) disturbance costs;

c) damages for injurious affection; and

d) the value to the owner of any special economic advantage incidental to his actual occupation of the land. [25] Disturbance costs are described generally in section 28(1) as the reasonable costs, expenses and losses arising out of, orincidental to, the expropriation. [26] A useful starting point for an analysis of disturbance costs is the following commentary by Kenneth J Boyd,Expropriation in Canada: A Practitioner’s Guide (Aurora: Canada Law Book, 1988) (at pp 27-28, 95-96): The primary purpose of compensation is to place the owner whose land has been taken in the same position financially as he was prior tothe taking.

On the one hand, the owner should not receive a windfall or unjust enrichment as a result of the taking. On the other hand,the owner should not be required to shoulder an economic loss for the general public benefit which is achieved as a result of the taking. Emphasis must be placed upon the word “economic” in weighing the purpose of compensation. . . . The result sought is to place the owner in the same economic position after the taking as he enjoyed before the taking occurred.

Thatresult is achieved through a careful analysis and quantification of the value of the parcel of land taken, injurious affection to the landwhich remains, and the consequential disturbance or incidental damages which result from or are likely to result from the taking. . . . Disturbance damages fall into one of two general categories: (

i) damages which are characterized as a one-time loss or cost; for example, moving costs, costs of relocation, or loss of a growingcrop. These damages will not recur or continue and usually can be established with certainty and precision; (ii) damages which are of a continuing nature; for example, business loss or the various claims which arise out of changed agriculturaloperations. Usually, but not always, claims of a continuing nature arise out of partial takings.

These claims are more difficult to assessand quantify than claims for one-time disturbance. [27] The Supreme Court of Canada’s most recent pronouncement on the subject of disturbance costs continues to be itsdecision in Toronto Area Transit Operating Authority v Dell Holdings Ltd, (SCC), [1997] 1 SCR 32. In that decision,the sole issue before the Court was whether certain damages were compensable under the Expropriations Act, RSO 1980, c 148.

Cory J,writing for the majority, confirmed that the legislation “is clearly a remedial statute enacted for the specific purpose of adequatelycompensating those whose lands are taken to serve the public interest” (at para 19). With respect to disturbance damages, he concludedthat (at paras 26-28): This then is a charging

section which provides that compensation is to be awarded on the total of the amounts calculated under each ofthe four components. I agree with the view expressed by K. J. Boyd in Expropriation in Canada (1988), at p. 109, that the objective ofthese provisions is to ensure “that on the one hand double recovery does not occur, and on the other hand that no legitimate item of claimis overlooked”. Indeed, the overriding objective of the entire Act is to provide fair and proper indemnity for the owner of theexpropriated land. The words of the

section should be given their natural and ordinary meaning in the context of the clear purpose of the legislation toprovide fair indemnity to the expropriated owner for losses suffered as a result of the expropriation. . . . [I]t is clear that the Act shouldbe interpreted in a broad, liberal and flexible manner in considering the damages flowing from expropriations.

. . . If damages are to be awarded they must be the natural and reasonable consequence of the expropriation. [28] Professor Eric C E Todd, The Law of Expropriation and Compensation in Canada, 2nd ed (Scarborough: Carswell,1992) at 274, explains that: “Disturbance damage may be defined generally as economic loss suffered by an owner by reason of havingto vacate expropriated property.” This definition has been adopted by this Court and others.

See, for example, Rebel Holdings Ltd et al vDivision Scolaire Franco-Manitobaine, 2008 MBCA 65 at para 106, 228 ManR (2d) 157; and MCA Land Development Corp et al vBritish Columbia (Minister of Transportation and Infrastructure), 2014 BCCA 435 at para 28, 363 BCAC 168. [29] There would not appear to be a great deal of judicial consideration of section 26(1)(b), section 28(1) or similarprovisions in other jurisdictions. [30] In MCA Land Development Corp at paras 31-32, the Court was of the view that disturbance damages contemplated bysection 34 of the Expropriation Act, RSBC 1996, c 125, must be objectively reasonable and that the “reasonableness of disturbancedamages relates to its economic reasonableness”. [31] And in Rebel Holdings at para 198, this Court concluded that it was permissible for the Commission to awardcompensation for disturbance costs that would be incurred in the future and that such compensation need not be limited to costs,expenses or losses that have already been incurred. [32] The Commission has dealt with section 26(1)(

b) and section 28(1)(

c) on numerous occasions, and an examination of itsdecisions reveals a broad range of costs, expenses and losses which have been allowed as disturbance costs.

For example, in Berry vManitoba (Department of Highways & Transportation) (1991), 45 LCR 62 (Man LVAC), disturbance cost awards were made for: • the loss of alfalfa; • the loss of the use of land for pasture; • the cost of a new entrance to a yard site or access to land; • the loss of interest on the purchase price of and additional costs for a new house; • the cost of winterizing the old house; • the cost of temporary floors for granaries; • the cost of new fence maintenance; • the cost of dealing with flooding resulting from a bypass; • the loss of a shelter belt; and • the cost of increased travel.

And in Driedger v Manitoba (Department of Natural Resources) (1989), 42 LCR 306 (Man LVAC), the Commission confirmed thatcontinued fixed farming costs are one type of disturbance compensation.

b) The Distinction Between Disturbance Costs and Equivalent Reinstatement [33] The concept of equivalent reinstatement is a valuation methodology employed in a small number of expropriationcases. In section 26(2)(b), equivalent reinstatement is contemplated in cases involving residential properties and the “home for a home”concept, where an attempt is made to place the owner “in a substantially equivalent condition by means of substituted property” (Todd atp 228, citing Rand J in The King v Northumberland Ferries Ltd, (SCC), [1945] SCR 458 at 504).

And in section 26(3),equivalent reinstatement arises where the property in question has no market value in the normal commercial sense, such as land used forpublic or quasi-public purposes like hospitals, schools or churches. [34] As Todd explains (at p 249): In addition to disturbance damages, in a reinstatement case compensation must adequately cover two components, namely the substituteland and the substitute improvements.

Reinstatement means that the claimant must be left in the same economic and physical positionqua land and improvements as before the expropriation. [35] The distinction between disturbance costs and equivalent reinstatement has sometimes been confused. In MCA LandDevelopment Corp, Smith JA explained the difference between economic reinstatement to compensate for disturbance costs andequivalent reinstatement (at para 28):

Disturbance damage has been defined as “economic loss suffered by an owner by reason of having to vacate expropriated property”: seeEric C.E. Todd, The Law of Expropriation and Compensation in Canada, 2d ed (Scarborough, Ontario: Carswell, 1992) at 274. Theaward is in the nature of indemnification for costs, expenses and losses caused by relocation. Its purpose is to provide economicreinstatement for an owner of expropriated or taken land.

This is distinct from equivalent reinstatement, which places the owner “fromwhom property is taken in a substantially equivalent condition by means of substituted property” (Todd at 228). Equivalentreinstatement is limited by s. 35 of the Act to circumstances where a limited market exists for “land that is used for a church, hospital,school or similar use for which there is no general demand or market”. [36] It is important to note that, at the hearing of the appeal, counsel for the respondents confirmed that no claim had beenmade or was being advanced for equivalent reinstatement.

c) Disturbance Costs and Injurious Affection [37] According to Boyd (at pp 109-10): Some claims for continuing disturbance damage may be closely associated with or relate to claims for injurious affection. Consequently,care must be exercised in making that differentiation and ensuring that on the one hand double recovery does not occur, and on the otherhand that no legitimate item of claim is overlooked. Whether the claim is treated as a separate item of compensation or is included as a part of injurious affection, the approach and principlesto be applied in dealing with the claim are the same.

Furthermore, the admonition to avoid double recovery or omission also continuesto apply. . . . There are grey areas between claims for continuing disturbance damages and claims for damages for injurious affection. These greyareas must be examined carefully and claims segregated into the appropriate category.

The objective is to avoid elements of doublerecovery but at the same time to ensure that all elements of economic loss are appropriately recognized and compensated. [38] Thus, while section 26(1) creates four separate and distinct categories of compensation, certain claims may be advancedas either a claim for disturbance damages or a claim for injurious affection. In such cases the Commission must decide whether aparticular claim is one or the other. The characterization is important and may impact the amount of compensation because section30(1)(

b) and section 30(1)(

c) restrict the damages which the owner can recover for injurious affection in cases involving partial takings. As Boyd observes (at p 109), the grey areas must be examined carefully, and while double recovery is to be avoided, no legitimate claimshould be overlooked.

d) Market Value Plus Disturbance Costs [39] Although section 26(1)(

a) refers to “the market value of the land”, there is no specific reference in section 26(1) tobuildings. In addition, the definition of “land” in section 1(1) does not include buildings. However, section 16(1) clearly contemplatespayment for both the market value of the land as well as relocation costs related to moving buildings or structures situated on the land. [40] There are many examples in the case law of compensation being ordered for both the market value of the land andbuildings plus disturbance costs related to relocation.

For examples from this Court, see JY Investments Ltd v Manitoba (1986), (MB CA), 39 ManR (2d) 317; and Rebel Holdings. For examples from the Commission, see Edison Electric (Manitoba)Ltd v Department of Urban Affairs (1983), 29 LCR 211 (Man LVAC); Northwest Cycle and Motor Co Ltd v Department of UrbanAffairs (1985), 33 LCR 276 (Man LVAC); Genstar Corp v Department of Urban Affairs (No 2) (1986), 35 LCR 253 (Man LVAC);Cosman’s Furniture

(1972) Ltd v Department of Urban Affairs (1987), 37 LCR 246 (Man LVAC); and Toronto Dominion Bank vManitoba (1997), 61 LCR 111 (Man LVAC). These authorities confirm that the assessment of due compensation in relocation cases isextremely fact specific. Analysis and Decision Regarding Manitoba’s Specific Complaints [41] The following is my analysis and decision regarding each of Manitoba’s specific complaints: 1. $25,613.75 to seed the yard around the relocated house and to improve the driveways (by adding limestone) at the new property. [42] This complaint relates to three awards made by the Commission, namely: 1. rental of a lawn seeder—$200;

2. seeding the yard around the respondent Marc Houle’s residence—$413.75; and 3. placing limestone at seven locations on the new property to improve areas where vehicles are required to drive—originalclaim $52,920 reduced by the Commission to $25,000. [43] Manitoba submits that the claims for seeding and limestone at the new property were duplicate claims because theCommission allowed $30,000 for improvements on RL 127 (which included amounts for landscaping and driveways). [44] In its decision the Commission apparently accepted the respondents’ argument that “because of required construction onthe new farm site it was necessary to reseed parts of the farm site to replace what had been lost during construction” (at para 77).

Further, the Commission determined that “the seeding of the yard around Marc Houle’s home . . . was not covered by the yardimprovements that were part of the market value of RL 127” (at para 357). [45] With respect to the limestone, the Commission found that “a significant part of this claim is based on the amount usedfor a dike on RL 127” (at para 141), but the Commission was also satisfied “that there was a need for improving the quality of theheavily traveled areas on the [new property]” (ibid).

The Commission questioned “the level of need for the limestone” (ibid), apparentlybecause there was only an estimate of cost at the time of the hearing, but concluded that $25,000 was a reasonable award for improvingthe new property. [46] It is apparent from the Commission’s reasons that the damages awarded for seeding and limestone were “the naturaland reasonable consequence of the expropriation” (at paras 16, 223, 426-27) and represent economic loss suffered by the respondentswhen they were required to vacate RL 127 (i.e., economic reinstatement).

The Commission has provided reasonable explanations as towhy these amounts do not duplicate the amounts for improvements on RL 127, and why they are proper disturbance cost awards.

TheCommission’s decision is therefore reasonable and falls within the range of possible, acceptable outcomes which are defensible inrespect of the facts and the law. 2. $90,000 representing the premium paid as a portion of the purchase price to acquire the new property (160 acres). [47] The Commission determined that the respondents paid a $90,000 premium to acquire the new property. [48] Before the Commission, Manitoba argued that this was a duplicate claim on the basis that the respondents had beenawarded the market value of the expropriated property. (Manitoba also argued that the respondents had made a decision to buy asuperior property, but the Commission noted that Manitoba’s appraisers were of the view that the new property was inferior to RL 127.) [49] The Commission did not agree that this claim would result in double recovery.

The Commission determined that, “Itwas the cost to the [respondents] of finding a farm site within a reasonable distance of RL 127, at a time when they were facing limitedoptions” (at para 132). [50] In my view, this award compensates the respondents for a cost or expense caused by the relocation. Similar to theawards for seeding and limestone, this award constitutes economic reinstatement, not equivalent reinstatement.

While it is true that therespondents purchased 160 acres, as compared to the 84.07 acres that had been expropriated, there was no evidence that the respondentscould purchase a smaller, suitable parcel of land. The Commission noted that the respondents had little time and limited options, and itis apparent that the premium was a required expenditure. [51] Clearly the Commission believed that the premium paid for the new property was a natural and reasonable consequenceof the expropriation and/or disturbance. Deference is owed to that determination, which was made in the context of the peculiar facts ofthis case.

It follows that in different circumstances, payment of a premium may not be warranted. As this Court has observed, albeitunder the previous expropriation regime (All Star Dev Co Ltd v Metro Corpn of Gr Winnipeg (1968), (MB CA), 65WWR 382 at 384): [I]t would be a dangerous principle to say that an owner of land, in anticipation of expropriation proceedings affecting his land, is entitledto pay … “premium prices” for alternative land and to incur other expenses arising from such acquisitions in the confident expectationthat he will later simply be able to pass on these expenditures to the expropriating authority.

The overarching requirement of “reasonableness” will always apply to expenses of this nature. [52] In short, on the facts of this case, the Commission’s decision is reasonable and falls within a range of possible,acceptable outcomes which are defensible in respect of the facts and the law. 3. $310,880.12 to remove and relocate certain buildings and improvements from RL 127 to the new property. [53] The Commission determined that the market value of the buildings which were moved was $267,600, that the actualcost to relocate them was $392,080.20 and that the salvage value of those buildings was $81,200.

The Commission awarded therespondents $267,600 for the market value of the buildings (pursuant to section 26(1)(a)) and $310,880.20 (i.e., $392,080.20 minus$81,200) as disturbance costs (pursuant to section 26(1)(

b) and section 28(1)(c)). [54] The Commission decided to use the salvage value rather than the market value when calculating the value to beattributed to the disturbance costs for relocating the buildings (at paras 44-45): It is suggested by the [respondents] that the salvage value represents, in fact, the cost of buying these outbuildings. The Commission

agrees that this is a reasonable conclusion. The conclusion is supported by the fact that [Manitoba] received no successful offers when the outbuildings not moved to the new farm site were put out for tender. Under the circumstances in this expropriation we believe the salvage value is the appropriate value to use when providing a credit to [Manitoba]. The Commission will reduce the claims for compensation, by subtracting the salvage value of the structures moved from RL 127 to the new [property], whenever the appropriate structure is being addressed.

The total salvage value granted is $81,200. [ 55 ] Manitoba says that the Commission erred in awarding the market value of the buildings and disturbance costs representing the cost to relocate each structure. According to Manitoba, by awarding the market value and the cost to relocate each building, there was an overpayment and double recovery.

Alternatively, Manitoba says that the Commission erred in using the salvage value rather than the market value of the buildings when calculating the disturbance cost awards. [ 56 ] I agree with Manitoba’s submission that there was an overpayment, but I do not agree that the disturbance cost awards should be set aside. The Commission’s error was in awarding the respondents the market value of the buildings.

The buildings in question were relocated to the new property, and section 16(1)(c)(ii) makes it clear that Manitoba must pay the costs reasonably incurred by the respondents in removing and relocating fixtures and structures from the expropriated land. The respondents are entitled to be fairly indemnified but not overpaid. In my view they are entitled to receive the actual cost to relocate the buildings with no reduction for salvage value, but they are not entitled to be compensated for the market value of the buildings which they kept.

For this reason, the difference between the market value attributed to the buildings ($267,600) and the salvage value that was deducted by the Commission ($81,200), being the sum of $186,400, must be deducted from the respondents’ overall compensation in order to avoid double recovery (i.e., duplicate compensation). 4. $1,010,235.89 for the new dairy barn, the cost of new dairy equipment and the cost to build a new underground manure storage facility at the new property. [ 57 ] In its decision the Commission noted that prior to the expropriation, the respondents had a dairy barn that had been constructed in phases.

According to a market value appraisal report (the market value appraisal report) filed by the respondents as an exhibit before the Commission, the original milk barn was built in 1950, the milk house was built in 1964, a one-story extension was added in 1976, and a final

section was added in 1984. The dairy barn was equipped with tie-stall equipment and could accommodate 60 cows. Because the barn had been built in stages, physically moving it to the new location was problematic. The respondents therefore decided to build a new barn on the new property. The new barn was a free-stall barn that could accommodate 60 cows. The milking system was changed, and an underground manure pit was also built.

Previously, manure removed from the old barn was stored outside on a mole hill. [ 58 ] The Commission concluded that the old barn could not be reasonably moved to the new property, and it attributed a market value of $64,362 to the buildings and $64,438 to the equipment (for a total of $128,800), after taking depreciation into account. The Commission also concluded that the old barn had no salvage value. [ 59 ] An expert witness, Roger Mills (Mills), testified regarding the betterment calculation related to the new barn. He outlined three scenarios. Scenario 1 detailed the cost of relocating the existing barn.

Scenario 2 involved building a new barn identical to the existing barn. Scenario 3 paralleled the respondents’ actual position—building a new, better barn. [ 60 ] Mills calculated the cost of Scenario 1 to be $932,833.32, which included the cost of moving the barn and animals, site preparation, barn equipment costs, manure storage facilities and loss of revenue due to the move. The total cost of Scenario 2 was $1,009,181.82.

The total cost of Scenario 3 was $1,386,958.52. [ 61 ] Mills then determined that building an underground manure storage facility did not provide betterment, because it was in fact the least expensive option. To calculate overall betterment, he removed the manure storage facilities from the equation and then subtracted the cost of Scenario 1 (relocating the existing barn) from the cost of Scenario 3 (building a new barn).

The result was betterment of $479,996.15. [ 62 ] The Commission accepted Mills’ evidence and awarded $1,010,235.89 as compensation for the new barn ($1,490,232.04, minus betterment of $479,996.15). The sum of $1,490,232.04 was calculated as follows: Construction of new barn $836,220.00 New barn equipment $450,774.80 Gravel & excavation for new barn & yard $159,255.22 Galvanized columns, etc. $13,581.12 Barn waterline $7,272.99 Heating barn during construction $6,903.01 Insurance $6,516.00 Electrical costs $4,776.53 Soil testing $3,495.32 Rentals & telecom $827.05 Milk tank calibration $610.00 TOTAL $1,490,232.04

[ 63 ] Manitoba says that the Commission erred in awarding the respondents both the market value of the old barn in the amount of $128,800 under section 26(1)(

a) and the additional sum of $1,010,235.89 as a disturbance cost under section 28(1)(c). According to Manitoba, these awards amount to an overpayment and double recovery. [ 64 ] Manitoba also submits that the Commission’s decision amounts to equivalent reinstatement, which is not allowed, and that there should have been a different adjustment for betterment.

Manitoba says that the proper amount resulting from the expropriation of the barn would have been the market value of the barn and the equipment ($128,800), and a disturbance cost to build an above-ground manure storage system, for a total of $296,800. [ 65 ] The respondents say that the Commission’s approach, in calculating the reasonable cost which Manitoba bears and the betterment which the respondents are required to bear, has struck an appropriate balance between the indemnity principle and the need to protect the public purse. [ 66 ] The Commission was clearly of the view, as am I, that the respondents are entitled to a disturbance cost award to compensate them for the loss of the existing barn arising from the expropriation. [ 67 ] I have no difficulty with the Commission’s determination that the cost of the new barn was a proper disturbance cost, particularly in light of the fact that “the only testimony received by the Commission was that an attempt to move the barn would be imprudent” (at para 204).

In arriving at that decision, the Commission was interpreting its own statute and rendering a decision on the basis of the evidentiary record before it. [ 68 ] For much the same reasons, I do not have a concern with the Commission’s choice of methodology in determining the monetary compensation to be paid as a disturbance cost for the new barn. In Russell Inns Ltd v Manitoba , 2016 MBCA 43 , 326 ManR (2d) 317 ( Rusell Inns #2 ) this Court recently said (at para 12): Methodology is a question of fact, and decisions as to methodology are directly within the expertise of the Commission.

This Court will not intervene in decisions of methodology unless there has been a clear error in principle. [ 69 ] However, there is merit to Manitoba’s argument that there has been double recovery because the Commission failed to make any allowance for either the market value or the salvage value of the old barn. [ 70 ] If the respondents receive $128,800 (i.e., the section 26(1)(

a) award for market value of the old barn), as well as the cost of the new barn with an adjustment for betterment, there will be double recovery. In other words, it cannot be correct that the respondents would receive full payment for the old barn and payment for the cost of a new barn.

In my view, the Commission’s award must therefore be reduced by $128,800. 5. $320,054 being the present value of increased property taxes, utility costs and travel costs. [ 71 ] The Commission made the following disturbance cost awards for permanent increased costs caused by the expropriation: Type of Claim Time Period Amount Awarded Increased property taxes 35 years $28,629 Increased water costs (farm) 20 years $150,934 Increased water costs (Marc) 20 years $8,977 Increased grain hauling costs 30 years $40,918 Increased travel 30 years $90,596 TOTAL = $320,054 The Commission found that these costs had been and would continue to be incurred, were reasonable and were not too remote.

In its reasons, the Commission said that it would pay careful attention to how speculative it believed each claim to be and that the use of conservative estimates was warranted. [ 72 ] Manitoba submits that all of these claims for increased permanent costs are too speculative and remote to be allowed as proper disturbance costs. The respondent Houle Farms Ltd. (the corporate respondent) made no claim under section 29(2) for disturbance by way of business losses resulting from the relocation.

And with respect to the increased grain hauling costs and increased travel costs, these claims fail to acknowledge the betterment to the corporate respondent’s grain operation because of the replacement of the bridge. [ 73 ] Manitoba says that the increased travel costs of the respondent Denis Houle is an injurious affection claim because it relates to increased travel costs to and from RL 128 which, if compensable, would be covered by section 30(1)(b). Under

section 32, there is a mandatory requirement that a set-off for betterment must be made for any advantage derived from the works which caused the injurious affection.

[74] The respondents say the Commission determined that the permanent increased costs are reasonable, will be incurred,and are the consequence of the expropriation. They also say that the increased permanent costs are a disturbance claim, not a claim forinjurious affection. [75] The starting point for this analysis is this Court’s decision in Rebel Holdings.

In that decision, the majority confirmedthat the Commission can award compensation for future expenses provided that the expenses are not too remote. [76] There are a few reported decisions that address the issue of compensation for increased property taxes, most of whichsupport the notion that claimants should be compensated for increased property taxes caused by an expropriation of their property. Forexample, in Nova Scotia v Superior Propane Inc, 2004 NSCA 73, 224 NSR (2d) 193, the Court upheld an award relating to increasedproperty taxes caused by an expropriation.

Saunders JA (writing for the Court), citing Toronto Area Transit, opined as follows (at para18): The Board did not err in law by awarding disturbance damages for the increased tax liability without first finding that Superior hadsuffered a loss of overall profitability.

No such requirement is found in the Act [RSNS 1989, c 156] and to impose such a requirement inthis case would . . . be contrary to the broad and purposive manner of interpreting expropriation legislation favouring full compensationto the land owner. [77] The Commission has previously awarded compensation for increased business taxes at new premises (see Kaplan vManitoba (Government Services) (1990), 43 LCR 289 (Man LVAC)), and tribunals in other jurisdictions have made similar awards (seeTarani Rebuilders Inc v Edmonton (City) (2000), 69 LCR 161 (Alta LCB); and Pay Less Gas Co

(1972) Ltd v British Columbia(Minister of Transportation and Highways) (2001), 74 LCR 81 (BC ECB)). [78] There would appear to be even fewer reported decisions which address the issue of compensation for increased utilitycosts.

While property tax and utility charges were taken into account in Pay Less, in Bartle & Gibson Co v Edmonton (City) (1992), 48LCR 1 (Alta LCB), the Board’s decision denying compensation for increased utility costs was upheld by the Alberta Court of Appeal(see (1995), 1996 ABCA 42 , 181 AR 256). [79] Finally, there are a number of cases that have addressed the compensability of increased travel costs, particularly in thefarming context. As one would expect, each of these cases turns on its own facts.

See, for example, Postman v The Queen (1985), 32LCR 369 (Alta LCB); Genstar; Nolette v Manitoba (Department of Highways) (1988), 39 LCR 76 (Man LVAC); Wilpark Farms Ltd vManitoba (Department of Highways) (1990), 44 LCR 130 (Man LVAC); Berry; Michaluk v Manitoba (Department of Highways andTransportation) (1993), 51 LCR 153 (Man LVAC); Cinquemani v Ontario (Ministry of Transportation) (2005), 87 LCR 10 (Ont MunBd); Nova Scotia v Johnson, 2005 NSCA 99, 234 NSR (2d) 260; and Meghani v Alberta (Infrastructure), 2015 ABLCB 1, 114 LCR 165. [80] A review of these decisions confirms that disturbance damage claims may either involve a one-time cost or may beongoing, and that the main limitations on calculating disturbance damages would appear to be causation, certainty (i.e., that the damageshave been or will be incurred), remoteness and reasonableness. [81] In the present case the Commission specifically determined that (at paras 464-65): There is no doubt that permanent increased costs exist, that the operation of the farm has necessitated the payment of these costs and thatthese costs will continue to exist for an indefinite time into the future.

The Commission, having concluded that the move to the [new property] was a direct result of the expropriation and further that theprojected permanent increased costs exist, we conclude that the projected permanent increased costs are not too remote. [82] The Commission made all of these determinations on the basis of the evidentiary record before it and was interpretingits home statute.

As was the case in Rebel Holdings: “It was reasonable for the Commission to conclude that the increased permanentcosts were indeed incidental to this expropriation” (at para 169). [83] The Commssion found that Manitoba had failed to provide a value for betterment and saw no validity to that argument.

This is consistent with Todd’s observation that: “The onus is on the expropriating authority to establish that any actual or potentialadvantage accrues to the remaining land and the value of any such advantage” (at p 365). [84] Having concluded that the claims for permanent increased costs were caused by the expropriation, would be incurred,were reasonable and were not too remote, the Commission’s decision is entitled to deference.

Simply put, the Commission’s decisionwas reasonable and falls within the range of possible, acceptable outcomes which are defensible in respect of the facts and the law. 6. $7,200 for injurious affection (section 30(1)(a)) to RL 125 and RL 126. [85] The respondents claimed compensation in the sum of $14,400 for injurious affection to RL 125 and RL 126 resultingfrom the expropriation of RL 127. [86] In the market value appraisal report, the respondents’ expert opined that the “injurious affection of these two parcels is

severe”, and he explained that he would: apply a 30% discount utilizing a rational [sic] that this amount is equal (negative rather than positive) to what a producer would payadditionally for land assemblage. This being the case it appears reasonable that a discount for impaired property due to severance wouldbe at minimum reduced by a similar level, that being 30%.

The injurious affection will be calculated as follows: Value of Subject lands – $1,500 per acre $1,500 x 32.06 = $48,090 $48,090 x 30% = $14,427 Total Value = $14,400 (Rounded) [87] In its reasons, the Commission stated (at para 50): Following lengthy consideration of all the evidence we have concluded that the primary value of RL 125 and RL 126 to the[respondents] arose from the operation of the dairy farm on RL 127. Once the expropriation of RL 127 had occurred, the value to the[respondents] of RL 125 and RL 126 was immediately reduced.

To what level it was reduced is inconclusive but in our assessment webelieve it is reasonable to use 15% rather than the 30% reduction proposed by the [respondents’] Appraiser. [emphasis added] [88] Manitoba says that the test for injurious affection described in section 30(1)(

a) is not the value of the land to the owner,but rather, any reduction in “market value of the remaining land” caused by the expropriation, and that the Commission’s determinationwas not reasonable having regard to the evidence. [89] The respondents submit that Manitoba did not adduce any evidence to challenge the opinion of their appraiser that thequantum of the injurious affection was $14,400.

The Commission concluded that the value to the respondents of RL 125 and RL 126was reduced and preferred a 15 per cent reduction as opposed to the 30 per cent reduction proposed by the respondents’ appraiser (i.e.,50 per cent multiplied by $14,400). [90] A literal reading of the Commission’s decision might suggest that the Commission applied the wrong test and that theamount of the reduction was not proven. Section 30(1)(

a) clearly provides that compensation shall be calculated on the basis of the“reduction in market value”, not on the basis of the reduction in value to the owner, and the Commission found that the value was“immediately reduced” (at para 50), but that the level of reduction was “inconclusive” (ibid).

Having said all of that, I am not convincedthat the Commission erred. [91] Black’s Law Dictionary, 10th ed, defines “inconclusive” as “not leading to a conclusion or definite result”; and thedefinition in the Oxford Dictionary of English, 3rd ed, is to a similar effect (i.e., “not leading to a firm conclusion or result; not endingdoubt or dispute”). [92] In my view, the Commission considered the market value evidence which was presented (in particular, the opinion ofthe respondents’ appraiser), and while the precise quantum could not be assessed, it felt that the market value had been reduced byapproximately 15 per cent.

It is well established that difficulty in assessing damages is not a reason to deny compensation where it isappropriate (see, for example, Penvidic Contracting Co Ltd v International Nickel Co of Canada Ltd, (SCC), [1976] 1SCR 267; Sequoia Springs West Development Corp v British Columbia (Minister of Transportation and Highways) (2003), 2003 BCCA8 , 78 LCR 1 (BC CA); TMS Lighting Ltd et al v KJS Transport Inc et al, 2014 ONCA 1 at paras 61, 64, 314 OAC 133; and SMWaddams, The Law of Damages (Toronto: Canada Law Book, 1991) (loose-leaf updated 2013, release 22), ch 13 at 13.30). [93] In these circumstances, I believe that the Commission’s decision meets the standard of reasonableness in that it fallswithin the range of possible, acceptable outcomes which are defensible in respect of the facts and the law. 7. $18,900 for the special economic advantage to the respondents (awarded pursuant to section 26(1)(

d) of the Act) that arose out oftheir actual occupation of RL 127 and that was not covered by the Commission’s determination of the market value of the expropriatedland. [94] At the hearing before the Commission, the respondents claimed compensation in the sum of $37,800 pursuant to section26(1)(d). In particular, the respondents argued that because RL 127 was centrally located in relation to the other property which they

owned, it had an additional value of 30 per cent. [ 95 ] In support of this claim, the respondents again relied on the market value appraisal report. In that report the expert opined: Special Value/Disturbance : As noted earlier in this report the land owner is, in the opinion of the appraiser, entitled to special value/disturbance for due compensation. The special value/disturbance compensation is deemed reasonable as the influence of location/assemblage would be present for this property as the land owner has made it an on-going practice to increase his land base within near distance to the homestead property.

As outlined within the addendum of this report (actual sale examples of location/assemblage influence), farmers will pay in the range of a 30% premium over farm land market rates. This premium is paid in light of the operational savings realized by farmers when their land base is within a five to ten mile radius of their homesteads.

This being the case the special value/disturbance entitlement will be calculated as follows: Value of Subject lands – $1,500 per acre $1,500 x 30% = $450/acre $450 per acre x 84.07 acres = $37,800 (Rounded) [ 96 ] The Commission decided (at paras 62-63): [Manitoba] concludes that the claim of $37,800 “should not be allowed because there is no evidence to support this claim other than a guess.” It is the position of the Commission that the evidence, when reviewed in its totality, is weighted toward the [respondents].

However, we are unconvinced that the use of a 30% increased value, based on the evidence, is appropriate. Therefore we have decided to use 15% to determine the level of the award. The award is $1,500 per acre [x] 15% = $225 [x] 84.07 acres = $18,915.75, rounded to $18,900. [ 97 ] Manitoba submits that the Commission’s decision was not reasonable because:

a) there was no evidence that the expropriated land had a special economic advantage to the owners that arose out of or was incidental to their actual occupation of the land and that was not covered by the Commission’s determination of the market value of that land; and

b) there was no evidence to support the opinion that the market would have paid this premium for the expropriated land. [ 98 ] In response, the respondents submit that the Commission’s determination was reasonable. The Commission weighed the evidence and concluded that 15 per cent was more appropriate than 30 per cent .

According to the respondents, there is no basis for appellate intervention. [ 99 ] Similar to my reasoning in paras 92 and 93 herein, the Commission’s decision was reasonable, and I would dismiss this ground of appeal. 8. $4,770 to compensate the respondents for the cost of finding another residence. [ 100 ] The Commission awarded compensation in the sum of $4,770 pursuant to section 28(1)(

a) to compensate the respondent Marc Houle for the inconvenience of a “forced move” (at para 149), namely relocating his residence from RL 127 to the new property. (The sum of $4,770 was calculated as 5 per cent of the market value attributed to the residence on RL 127.) [ 101 ] Manitoba submits that this claim should have been denied because section 28(1)(

a) contemplates inconvenience in “finding another residence” (i.e., not moving a house to a new location) and because the Commission awarded $16,725 for mileage, time spent by the respondents on expropriation matters and equipment rental charges. (The sum of $16,725 was calculated as 3 per cent of the market value ($557,500) attributed to the land, old barn, buildings (including Marc Houle’s residence) and site improvements on RL 127.) [ 102 ] While it is true that the mathematical calculation of the sum of $16,725 includes an allowance for Marc Houle’s residence, the Commission specifically considered and rejected Manitoba’s assertion that there was duplication.

The Commission said that the claim pursuant to section 28(1)(

a) was not a duplicate claim and that: “The evidence in each case stands on its own” (at para 151). The Commission’s decision is consistent with a broad, liberal and flexible

interpretation of the Act and meets the standard of

reasonableness. 9. $31,914.63 for a new front-end loader and storage garage for RL 128. [ 103 ] The Commission awarded compensation pursuant to section 26(1)(

b) and section 28(1)(

c) for the estimated cost to acquire a small tractor ($20,238.75) and a shed ($11,675.88). [ 104 ] The respondents maintained that the expropriation had created a need for a tractor with a mower, front-end loader and snowblower on RL 128. Prior to the expropriation, this type of equipment had been stored on RL 127, but following expropriation, that equipment had been moved to the new property. [ 105 ] Manitoba says that these claims are injurious affection claims, not disturbance claims, and, as such, would have to comply with the requirements of section 30(1)(

b) or section 30(1)(c). As they fail to meet those requirements, the claims are not compensable. Further, the claims are unreasonable because the respondents are still able to accomplish the required tasks on RL 128 without having to incur these expenses. [ 106 ] The Commission rejected Manitoba’s argument that the claims were injurious affection claims and concluded that they were reasonable claims arising out of the disturbance. [ 107 ] The determination by the Commission of due compensation is particularly challenging in circumstances involving a partial taking and relocation of farm property.

The Commission is owed considerable deference when it determines, on the basis of the evidentiary record before it, that a particular claim is to be characterized as a claim for disturbance damages, equivalent reinstatement or injurious affection. [ 108 ] These claims fall within the “grey areas” identified by Boyd (see para 37 herein). There is no suggestion of double recovery, and the Commission was satisfied that the claims were legitimate.

While I might have come to a different conclusion, the Commission’s decision meets the standard of reasonableness and is entitled to deference. 10. $15,711.50 for harvesting and spraying costs paid by the corporate respondent to third parties. [ 109 ] The Commission awarded compensation to the respondents for custom harvesting costs ($10,010) and spraying of crops ($5,701.50). [ 110 ] Manitoba says that the Commission erred in awarding these business expenses incurred by the corporate respondent.

According to Manitoba, these were business expenses, but no claim was made for business loss resulting from the expropriation pursuant to section 29(2). Alternatively, these expenses were not reasonably incurred having regard to the evidence before the Commission.

Further, Manitoba says that it is unclear why these costs were incurred or whether they even constituted out of the ordinary costs incurred by the corporate respondent because no loss of income claim was made. [ 111 ] The respondents point out that the Commission was satisfied that the action taken by them to engage the third party contractors was necessary because of the court action and the Commission hearings, and the Commission concluded that the claims were reasonable. [ 112 ] In my view, these claims are clearly business losses which fall within section 29(2).

As the respondents have made no claim for compensation for business losses, the Commission’s award of $15,711.50 for harvesting costs and spraying of crops is unreasonable. Manitoba is therefore entitled to a credit in that amount. 11. $32,117.22 for legal costs incurred by the respondents for a possession hearing in the Court of Queen’s Bench. [ 113 ] The Commission awarded the respondents legal costs in the sum of $32,117.22. These costs related to an application in the Court of Queen’s Bench filed by the respondents on October 7, 2009.

The relief sought in the application (brought pursuant to section 20(3)) was a declaration that Manitoba be required to serve an offer to pay moving and relocation costs, an order changing the date of possession, and an order that the respondents “be compensated for their solicitor and own client costs”. [ 114 ] According to the respondents, they “made a decision to seek Court assistance for time to relocate the buildings needed to operate their dairy and grain farm”, and they were “ultimately granted an extension of time to relocate their . . . farm.” [ 115 ] In response to the application, Manitoba filed a motion pursuant to section 20(4) asking the Court for an order of possession by October 28, 2009. [ 116 ] At the hearing, the parties agreed to a consent order allowing partial possession of RL 127 on or before October 28, 2009, and possession of the remainder of RL 127 on or before August 15, 2010. [ 117 ] The Commission’s reasons for allowing the claim for legal costs were as follows (at para 102): Both parties provided lengthy legal arguments before the Commission related to how this matter should be addressed.

In

summary, the [respondents] argued that we had the legal authority to award this claim and [Manitoba] argued that we did not. Following careful consideration of the material provided, the Commission is satisfied that on the balance of arguments made, the [respondents’] case is more compelling. We believe it makes more sense to have this claim come before the Commission as part of the hearing then to have gone back to the Courts to have costs paid.

[ 118 ] Sections 15(6) and 15(7) describe the Commission’s jurisdiction with respect to costs: Authority to pay costs of owner 15(6) The authority shall pay reasonable appraisal, legal and other costs that are reasonably incurred by an owner for the purpose of determining the compensation payable under this Act for an expropriation . Commission may determine costs 15(7) W here the amount of compensation payable under this Act for an expropriation is settled by the authority and an owner without a hearing or is determined by the commission, the commission may, on application by the authority or owner, determine the costs. [emphasis added] [ 119 ] In addition,

section 20 provides: Right to take possession 20(1) Where land vests in an authority under this Act and the authority serves the registered owner and the occupant of the land with a notice that it requires possession of the land on a date specified in the notice, the authority subject to any agreement to the contrary and subject to subsection (3) may take possession of the land on the specified date.

Notice for possession 20(2) A notice under subsection (1) shall be served on the registered owner and the occupant of occupied land at least 30 days before the date specified therein for possession; and where the land is not occupied, the notice shall be served on the registered owner at least 10 days before the date specified for possession.

Court may vary date 20(3) Any person served or entitled to be served with a notice under subsection (1), may apply to a judge of the court for an order changing the date for possession specified in the notice, and the judge may make such order either to confirm or to change the specified date as in the circumstances of the case he deems just and expedient; and the notice shall have effect as confirmed or amended by the order.

Order for possession 20(4) If the owner or occupant of the land fails to deliver up possession to the authority in compliance with the notice for possession, the authority may apply to a judge of the court for an order for possession; and upon hearing the application, the judge may grant an order for possession and may require the authority to pay into court such sum of money as he deems sufficient to secure payment of the compensation for the land.

Writ for possession 20(5) Upon an order for possession being granted, the authority may enter upon and take possession of and use the land; and if any person refuses to give up possession, or offers any resistance or forcible opposition to the authority taking possession, a judge may, with or without notice to that person, issue a writ for possession to the sheriff of the court directing him to require that person to give up possession and to put down any resistance or opposition, and to put the authority into possession thereof.

Execution of writ 20(6) The sheriff shall, in the execution of the writ, take with him sufficient assistance for the purpose, and shall put down any

resistance or opposition and put the authority in possession of the land.

Judgment for costs 20(7) The cost of any proceedings for obtaining and execution of the writ may, with leave of the judge, be entered as a judgment inthe court and recovered by the authority from the person whose refusal to give up possession made the writ necessary. [120] Section 20(7) only appears to address the costs relating to motions made under section 20(5) and the execution costsflowing from section 20(6); it does not encompass applications brought by owners under section 20(3), and it is unclear whether itextends to applications under section 20(4). [121] Manitoba says the Commission had no jurisdiction to make a disturbance award for legal costs because theCommission’s jurisdiction to award such costs is governed by section 15(6).

According to Manitoba, this claim is for legal costs relatingto the possession hearing in the Court of Queen’s Bench, which was not for the purpose of determining the compensation payable underthe Act for the expropriation. Manitoba believes that this issue was settled in Fouillard v Ellice (Rural Municipality), 2007 MBCA 108,220 ManR (2d) 113. [122] In Fouillard, Scott CJM (writing for the Court) reasoned as follows (at paras 53-55): Concerning the solicitor and client costs, I am of the opinion that the award of costs to the appellants cannot stand.

With all due respectto the decision in Costello [(1997), 1997 ABCA 281 , 209 AR 1 (CA)], there is a clear distinction between compensationproceedings where there is a statutory scheme providing for payment of costs to the land owner, and court proceedings to challenge thevalidity of the expropriation itself. In the former, the only issue is compensation and it is fit and proper that the land owner who is beingdeprived of his/her property should be compensated in such circumstances. In the latter, it is an ordinary court proceeding to quash anorder in the Court of Queen’s Bench.

The rationales with respect to costs are decidedly different, a distinction recognized in the Actitself. Section 15(6) of the Act mandates that the authority pay reasonable costs incurred by the owner in determining compensation; onthe other hand, s. 20(7) enables the authority, with leave of the judge who granted the order, to recover costs in the event it is necessaryto proceed to court to obtain an order for possession of the expropriated property.

I agree with counsel for the municipality that, as a matter of policy, challenges to expropriation orders should not be encouraged by thecourts by providing litigants with financial support regardless of outcome. It follows from the above that the normal principles dealing with the order for solicitor and client costs should be applied. At commonlaw, solicitor and client costs are only awarded, even to successful parties, in rare and exceptional circumstances where the conduct ofthe other party is unconscionable. See Hamilton v.

Open Window Bakery Ltd. et al., 2004 SCC 9 , [2004] 1 S.C.R. 303; 316N.R. 265; 184 O.A.C. 209; 2004 SCC 9. It is definitely not the practice to award costs, even party and party costs, to an unsuccessfulparty in the absence of misconduct. A case on point is Smuck v. St. Thomas (City) Corp. (1982), (ON SC), 32 O.R.(2d) 698 (H.C.). See as well Favor v.

Winnipeg (City) et al. (1988), (MB KB), 51 Man.R. (2d) 81 (Q.B.), affd.(1988), (MB CA), 52 Man.R. (2d) 66 (C.A.). [emphasis added] [123] The respondents say that they were required to bring the proceedings and that they were ultimately granted an extensionof time to relocate their farm. They submit that the decision to award legal costs is consistent with:

a) this Court’s decision in Russell Inns #1 at paras 178-79, where Court proceedings “incidental to the expropriation” were held tobe a category where solicitor-client costs could be recovered at the Commission; and

b) the Supreme Court of Canada decision in Smith v Alliance Pipeline Ltd, 2011 SCC 7 at para 48, [2011] 1 SCR 160, where theCourt found that the court proceedings were sufficiently related to the question of expropriation compensation, and where the land ownerwas reimbursed for the costs he incurred responding to two interim injunction motions filed by the pipeline company. The respondents say that costs may be awarded either as a disturbance item or as a section 15(6) cost award. [124] In Russell Inns #1, Beard JA (writing for the Court) considered both Fouillard and Smith, and concluded (at paras 179,181): In

summary, the applicable principles are:

. . . - if proceedings are taken in court that are incidental but necessary to the expropriation, costs are determined in accordance with the usual court rules for costs, not in accordance with s. 15(6); - if the court awards costs as part of that incidental litigation that are less than his actual legal expenses, the owner can ask the administrative tribunal to include in his compensation the difference between his actual expenses and the costs awarded by the court; and - in determining whether to grant that application, the administrative tribunal would be guided by the principles applicable to expropriation proceedings and the applicable law, including the presumption of full indemnification, who had initiated the incidental proceedings, the nature of those proceedings and whether they were necessary, and the requirement in s. 15(6) that the costs and expenses be both reasonable and reasonably incurred. [Section] 15(6) does not apply to all proceedings, but is limited in its application to proceedings that are “for the purpose of determining the compensation payable under this Act .” In this case, the issues raised before the LVAC and on judicial review before the application judge related only to the timing of the payment of costs and the timing of the determination of the reasonableness of those costs, and they had nothing to do with the determination of either the compensation payable or the ultimate costs payable.

Thus, the application for judicial review is not a proceeding governed by s. 15(6) , and s. 15(6) does not apply. As a result, there is no conflict between that provision and the cost provisions of The Court of Queen’s Bench Act and the Queen’s Bench Rules in relation to this application for judicial review, which means that the exclusions in ss. 93(1) and 96(1) do not apply in this case. [ 125 ] There are a number of expropriation tribunal decisions that have addressed whether costs were incurred for the purpose of determining due compensation.

In Golfscape International Corp v Alberta (Minister of Infrastructure & Transportation) (2012), 105 LCR 142 (Alta LCB) , the Land Compensation Board noted that “the relationship of costs to an expropriation is contextual, not absolute” (at para 25), and found that there was sufficient evidence that these costs were related to the expropriation to warrant a partial, interim payment to cover them. A similar result was reached in McKean v Ontario (Minister of Transportation) (2008), 94 LCR 185 (Ont Mun Bd) .

There, the Ontario Municipal Board found that the costs were incurred for the purpose of determining the compensation payable, as but for the court proceedings, the expropriating authority could not have determined which lands would be expropriated or to what extent. [ 126 ] Similarly, in Gadzala v Toronto (City) (2004), 84 LCR 176 (Ont Mun Bd) , costs of proceedings before the Ontario Boundary Commission to determine ownership of certain portions of the expropriated lands were allowed as part of the expropriation compensation payable, as those costs were “occasioned because of the expropriation.” [ 127 ] Todd makes the following observations (at pp 505-6): A distinction is made between costs incurred in determining compensation and costs incurred in extraneous litigation.

For example, costs incurred in an action challenging the validity of the expropriation or to recover damages in nuisance or for work done in an attempt to have the authority abandon the expropriation cannot be claimed as costs “incurred by the owner for the purposes of determining the compensation payable” under the Ontario Act and other similar statutory provisions. . . .

On the other hand, costs incurred in determining the precise area of the expropriated land or the title to it are directly related to the expropriation and recoverable as costs incurred in determining the compensation payable. [ 128 ] The Commission’s reasons for awarding legal costs are neither transparent nor intelligible.

The Commission simply concluded that the respondents’ case was more compelling without explaining why. [ 129 ] The fundamental question is whether the legal costs were incurred by the respondents “for the purpose of determining the compensation payable under this Act for an expropriation” (at section 15(6) ). The respondents admit that the proceedings were not taken for that purpose (they were taken for the purpose of obtaining additional time to relocate the farm), and in my view, there was no other statutory basis for the Commission to make an award.

In particular, I do not agree that legal costs can be awarded as disturbance costs other than in the limited circumstances contemplated by section 28(1)(c)(ii) (i.e., legal fees reasonably incurred in acquiring other lands). [ 130 ] I recognize that the Act is remedial legislation, that its objective is to provide fair and proper indemnity, and that it is to be interpreted in a broad, liberal and flexible manner. However, the Act provides a “statutory scheme providing for payment of costs” ( Fouillard at para 53 ).

If any legal costs that arise out of, or are incidental to, the expropriation can be awarded as disturbance costs pursuant to section 26(1)(

b) and section 28(1), section 15(6) and the requirement in that

section that legal costs be incurred “for the purpose of determining the compensation payable under this Act for an expropriation” would have no meaning or consequence. [ 131 ] It is also my view that, where parties commence proceedings in the Court of Queen’s Bench, it is for the Court, and not the Commission, to make the initial determination of costs payable as a consequence of those proceedings. Until the Court has determined the issue of costs, the court proceedings cannot be said to have been completed. As noted in Russell Inns #1 , if the

proceedings were brought for the purpose of determining the compensation payable for the expropriation and if the Court has awarded something less than solicitor-client costs, the Commission has the ability to award an additional amount pursuant to section 15(6) , if appropriate. [ 132 ] It follows that I find the Commission’s decision unreasonable and that this ground of appeal should be allowed.

The motion judge indicated that costs could be spoken to, and presumably the respondents still have the ability to apply to the Court of Queen’s Bench for determination of that issue. 12. $165,564 for a new driveway on RL 128. [ 133 ] The Commission awarded the sum of $165,564 for the construction of a new driveway on RL 128. [ 134 ] As noted previously, access to the residence on RL 128 from PR 201 was altered for traffic safety reasons, and the respondents were granted the right to use a portion of the old PR 201 as a driveway to access the new (re-aligned) provincial road. [ 135 ] The Commission concluded (at paras 502-3): Ultimately, [Manitoba] decided that they would retain the old PR 201 as a public road but would grant the [respondents] the right to use it as their driveway.

The [respondents] would, however, be required to maintain the road as well as be responsible for snow removal. This requirement was made in spite of the fact that the old PR 201 remains a public road and can be accessed by anyone who chooses to use it. The evidence was that this road leads to a favorite fishing hole and is regularly used by people in the area. The Commission finds this to be an unreasonable arrangement for the [respondents]. The actions by [Manitoba] related to the driveway are difficult to understand and have created considerable unnecessary frustration for the [respondents].

The only reasonable option left to the Commission is to award sufficient money to allow the [respondents] to build a driveway. [ 136 ] According to Manitoba, this claim was advanced as a disturbance claim under section 28(1), but it is, in reality, an injurious affection claim because the damage resulted from the existence and use of the project. It is Manitoba’s position that the Commission erred in awarding the cost

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