2021 MBCA 94, 2021 MBCA 94

Citation: Madison Holdings Ltd v Winnipeg (City of), Date: 20211103 2021 MBCA 94 Docket: AI20-30-09550 IN THE COURT OF APPEAL OF MANITOBA Coram: Mr. Justice Christopher J. Mainella Madam Justice Karen I. Simonsen Madam Justice Lori T. Spivak BETWEEN : ) K. T. Williams and MADISON HOLDINGS LTD. ) J. M. Nordlund ) for the Appellant ) (via videoconference) (Applicant) Respondent ) ) J. A.

Mercury - and - ) for the Respondent ) (via videoconference) THE CITY OF WINNIPEG ) ) Appeal heard: ) June 15, 2021 ( Respondent) Appellant ) ) Judgment delivered: ) November 3, 2021 COVID-19 NOTICE: As a result of the COVID-19 pandemic and pursuant to r 37.2 of the MB, Court of Appeal Rules , MR 555/88R , this appeal was heard remotely by videoconference.

SPIVAK JA Introduction [ 1 ] This is an appeal by the respondent, the City of Winnipeg (the City), from a decision of the Land Value Appraisal Commission (the Commission) in respect of the expropriation of a car wash and rustproofing operation owned by the applicant, Madison Holdings Ltd. (Madison), at 505 Madison Street in the City of Winnipeg (the expropriated property). As a result of the expropriation, Madison acquired vacant land at 1530 St. James Street (the replacement land) and constructed a larger new facility there (the replacement building) (collectively, the replacement property).

Pursuant to The Expropriation Act , CCSM c E190 (the Act ), the Commission awarded Madison compensation of $3,104,681.99 (the award) which included disturbance damages of $2,604,682, the bulk of which related to the cost of acquiring and constructing the replacement property. [ 2 ] The issues in this appeal concern the assessment of disturbance damages where a business relocates and constructs a replacement property and how the principle of betterment should be addressed.

The deferential standard of review this Court must apply to the Commission’s decision plays a significant role in my decision. [ 3 ] The City appeals on the basis that the Commission erred in compensating Madison for the cost of acquiring and constructing the replacement property without taking into account the market value of the replacement property or properly accounting for betterment; improperly certifying compensation for both the costs of the replacement property and the market value of the expropriated property; failing to account for betterment in awarding compensation for the cost of increased municipal property taxes (property taxes) and utility costs; and wrongly compensating Madison for its owners’ time spent on the expropriation.

It seeks a reduction of $2,318,571.45 from the award.

[ 4 ] For the reasons that follow, I would allow the City’s appeal in part and reduce the disturbance damages award by $532,363, representing a credit for the market value of the expropriated property to avoid double recovery and for the improper certification of compensation for the owners’ time. Otherwise, there is no basis to disturb the Commission’s decision. Background [ 5 ] In 2015, the expropriated property was taken by the City for the purpose of extending and widening St. Matthews Avenue at St.

James Street for the Polo Park Area Infrastructure Improvements Project. [ 6 ] Prior to the expropriation, Madison had operated a family business at the expropriated property since 1986 (the business). The business was started by George Kunkel and is now owned and operated by his two sons, Brian and Larry Kunkel (the owners). There are two components of the business—the rustproofing of vehicles and a car wash facility.

The owners had intended to continue their business at the expropriated property for the foreseeable future. [ 7 ] The expropriated property consisted of a 3,042 square-foot building made of concrete block (the Madison building) on a 15,747 square-foot lot. It included three car wash bays and two rustproofing bays. Brett Ferguson, an appraiser retained by the City to evaluate the expropriated property, was of the opinion that, given its age, the remaining economic life of the Madison building at the time of expropriation was 15 years if “left ‘as is’”.

To mitigate its loss, following the notice of expropriation and the notice of possession, Madison made arrangements with a competitor to temporarily operate the business from their facilities before a replacement facility could be acquired. [ 8 ] Madison investigated a number of properties for relocation, but wanted the business to remain in the same vicinity as its previous location to be in the area of its customer base.

After certain surplus lands owned by the City in the same neighbourhood were determined by the City to be unfeasible for relocation due to building restrictions, Madison ultimately purchased the replacement land at 1530 St. James Street for $425,000. [ 9 ] Madison engaged a contractor, Pre-Con Builders Ltd. (Pre-Con), to construct the replacement building. It opted for newer, steel-frame construction, as it was more cost-effective than constructing a concrete building and it was not possible nor economical to replicate the Madison building at the replacement land.

Jeff Hawryluk from Pre-Con testified that Pre-Con was obligated to account for various building code requirements imposed by the City. According to Isaac Gwendo, a quantity surveyor retained by Madison, the cost to construct a building the same size and type as the Madison building to code (i.e., using concrete block), would have been $1,440,800. The cost of construction of the replacement building was $1,517,761. The replacement building was over twice as large as the Madison building — 6,750 square feet — and included four additional car wash bays and two rustproofing bays.

The replacement land was 31,413 square feet. [ 10 ] Madison’s expert estimated the market value of the expropriated property at $510,000 using the income approach and at $500,000 using the direct comparison approach, while the City’s appraiser valued it at $500,000 using the income approach and $460,000 using the direct comparison approach. [ 11 ] At the hearing before the Commission (the hearing), the City led evidence as to the market value of the replacement property. The replacement property was appraised for mortgage financing purposes at $2,200,000 and Mr.

Ferguson estimated the replacement property to have a market value of $1,800,000. The City valued the replacement property for taxation purposes at $1,062,000. [ 12 ] The replacement property had higher property taxes, business taxes and utility costs.

An appraiser, called as a witness by Madison, evaluated the present value of the total of these future costs for a period of 35 years to be $433,511. [ 13 ] The Commission heard evidence as to the time spent by the owners in establishing a temporary location for the business, looking for a replacement property, supervising the construction of the replacement property and preparing documentation relating to the expropriation. Madison claimed $36,863.70 as compensation for the owners’ time.

The Commission Decision [ 14 ] At the hearing, Madison advanced a claim for the market value of the expropriated property and various disturbance damages, including the cost of acquiring the replacement land and constructing the replacement building ($425,000 for the land plus $1,517,761 for the building); future costs for 35 years ($433,511); and compensation for the owners’ time related to the expropriation ($36,863.70).

Madison acknowledged that the amount certified as the fair market value of the expropriated property should be deducted from the disturbance damages awarded. [ 15 ] Before the Commission, the City argued that it would be inappropriate if Madison’s disturbance damages were calculated merely on the basis of the expense incurred for the replacement property and that the “proper methodology” to calculate such loss must account for the market value of the replacement property to the expropriated owner.

The City therefore asserted that the market value of the replacement property ($1,800,000-$2,200,000) should be credited to the City to properly measure Madison’s loss associated with the cost of the replacement property. The City disputed Madison’s claim for future costs as speculative but, alternatively, argued that only 50% of these costs for a 15-year period should be awarded. It contended that the owners’ time was not compensable.

[ 16 ] The Commission awarded Madison compensation of $3,104,681.99, consisting of $500,000 for the market value of the expropriated property and $2,604,682 (rounded) as disturbance damages. The disturbance damages awarded relevant to this appeal included $425,000 for purchasing the replacement land and $1,440,800 for the construction of the replacement property, $195,279.45 for future costs and $32,363.70 for compensation for the owners’ time. [ 17 ] The Commission’s award of $1,440,800 was approximately 95% of the actual cost of construction of the replacement building ($1,517,761).

The Commission explained that, since the replacement building was larger, it was therefore adjusting this award to the amount it would have cost to build a new concrete block building the same size as the Madison building. As for the increase in future costs, the Commission viewed the 35-year period requested by Madison as excessive. Acknowledging that the owners chose to build a larger building, it awarded $195,279.45, comprised of 95% of property taxes ($173,703.70), 75% of utility costs ($11,783.25) and 50% of business taxes ($9,792.50), all for a period of 15 years.

In certifying the award for the owners’ time, the Commission indicated that these costs are expenses related to the expropriation and recoverable under the Act . Issues [ 18 ] The City raises the following issues on appeal:

(1) Did the Commission err in awarding disturbance damages for the cost of acquiring and constructing the replacement property? More specifically, did the Commission misapply the test for quantifying disturbance damages under section 26(1) of the Act by: (

i) failing to give credit to the City for the market value of the replacement property; (ii) failing to account for the principle of betterment; and (iii) improperly certifying compensation for both the costs associated with constructing the replacement property and the market value of the expropriated property?

(2) Did the Commission err by failing to account for the principle of betterment in awarding compensation for increased property taxes and utility costs?

(3) Did the Commission err in awarding compensation for the owners’ time spent on the expropriation when there was no corresponding out-of-pocket loss? Standard of Review [ 19 ] This is a statutory appeal pursuant to

section 44 of the Act , which provides that a party may appeal the amount certified by the Commission as compensation to this Court and the appeal may be brought on questions of law or fact or mixed law and fact.

This Court is authorized to refer any matter back to the Commission for determination, or make any determination that the Commission has the power to make. [ 20 ] As determined by the Supreme Court of Canada in Canada (Minister of Citizenship and Immigration) v Vavilov , 2019 SCC 65 at para 37 , the appellate standards of review, as set out in Housen v Nikolaisen , 2002 SCC 33 , apply (see also Lynch v St John’s (City) , 2020 NLCA 31 at para 73 ; and The Corporation of the City of Windsor v Paciorka Leasehold Limited , 2021 ONSC 2189 at para 43 ( Paciorka ) ). [ 21 ] The applicable standard of review depends on the nature of the question in issue.

Questions of law, which include questions of statutory

interpretation, are reviewed on the correctness standard. Findings of fact, including inferences drawn from the facts, are reviewed for palpable and overriding error. Questions of mixed fact and law are also reviewed for palpable and overriding error, unless an extricable legal error is evident, in which case deference is not owed and the correctness standard applies. Whether the law has been stated correctly or has been applied correctly is a question of law to be reviewed on correctness.

The application of the law to a set of facts is a question of mixed fact and law to be reviewed on a standard of palpable and overriding error ( see Housen at paras 8, 10, 26-27, 37 ). [ 22 ] I will address the applicable standard of review when I discuss the issues raised on appeal. Analysis and Decision The Statutory Regime [ 23 ] Before analyzing the issues raised by the City, it is helpful to review the statutory regime under the Act and the applicable principles of compensation.

[ 24 ] The purpose of compensation is explained by Kenneth J Boyd in Expropriation in Canada: A Practitioner’s Guide (Aurora: Canada Law Book, 1988) as follows (at p 27): . . . The primary purpose of compensation is to place the owner whose land has been taken in the same position financially as he was prior to the 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. . . . . . . [footnote omitted] [ 25 ] Section 26(1) of the Act creates a statutory formula for compensating the owner of the expropriated land consisting of the aggregate of four different categories: (1) market value of the land, (2) disturbance damages, (3) injurious affection, and (4) loss of special economic advantage.

It provides as follows: 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 no other provision is made therefor in due compensation. [ 26 ] Section 28(1) defines what may be awarded for disturbance damages under section 26(1)(

b) and describes them generally as the reasonable costs, expenses and losses arising out of or incidental to the expropriation. Sections 28(1)(

b) and 28(1)(

c) address compensation damages in respect of relocation. They state: 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 . . . (

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 . . .. . . . [27] Disturbance damages have been defined generally as “economic loss suffered by an owner by reason of having to vacatean expropriated property” (Eric CE Todd, The Law of Expropriation and Compensation in Canada, 2nd ed (Scarborough: Carswell,1992) at 274).

This definition has been cited with approval by this Court in Christie, MacKay & Co v Manitoba (Department ofGovernment Services) (1994), (MB CA), 111 DLR (4th) 607 at 612 (Man CA); Rebel Holdings Ltd et al v DivisionScolaire Franco-Manitobaine, 2008 MBCA 65 at para 106 (Rebel); and Houle v Manitoba, 2016 MBCA 76 at para 28. [28] Disturbance damages are a broad category of losses directed to damages that are not addressed by compensation formarket value or injurious affection.

As noted by Christopher J Williams, Andrea Skinner & Matthew Helfand in Expropriation Law inOntario (Toronto: LexisNexis, 2021) (at p 53): . . . Damages attributable to disturbance are a broad category of losses compensable under the [Act]. Disturbance damages can be understoodas the broader economic losses suffered by an owner as a consequence of an expropriation . . ..

Disturbance damages are not intended toaugment the market value of expropriated land, but rather are directed to losses that are a consequence of the expropriation that are notaddressed by the compensation for market value or injurious affection. [footnote omitted] [29] In the leading decision of Toronto Area Transit Operating Authority v Dell Holdings Ltd, (SCC),[1997] 1 SCR 32, the Supreme Court of Canada addressed the principles of

interpretation for expropriation legislation and disturbancedamages provisions. It confirmed that expropriation legislation is clearly a remedial statute that “should be read in a broad andpurposive manner in order to comply with the aim of the [Act] to fully compensate a land owner whose property has been taken” (at para23). [30] In Rebel, this Court reviewed the nature of disturbance damages in the context of an expropriation that involved therelocation of a manufacturing business.

It stated (at para 107): While disturbance damages are awarded pursuant to the Act, they are generally “assessed on the same [basis] as damages in tort andcontract” (Todd, at p. 318).

Overarching damage assessment concepts such as remoteness, as explained in Dell Holdings, and mitigationare often utilized in expropriation cases because they are implicit in the statutory requirement that costs, expenses and losses be“reasonable.” [31] In Rebel at para 183, this Court endorsed the view expressed in Pitblado v Oakville (Town), 2005 CarswellOnt 6382(Mun B), that “[t]he thrust of the [Act] in dealing with business relocation is to get the business back on its feet, not to provide ongoingsubsidy” (at para 88).

It further noted that the whole concept of disturbance damages is intended to indemnify for the cost, expenses andlosses caused by the relocation, provided the damages are not too remote (see Rebel at para 201). [32] Similarly in Houle, which involved the expropriation of a family farm, this Court commented that a review of thejurisprudence confirms that claims for disturbance damages may either involve a one-time cost or may be ongoing, and that the mainlimitations on calculating disturbance damages would appear to be causation, certainty (the damages have been or will be incurred),remoteness and reasonableness (see para 80).

While double recovery is to be avoided, no legitimate claim should be overlooked (seepara 38). [33] It is within this context that the specific issues raised on appeal are to be considered. Disturbance Damages for the Cost of the Replacement Property

[ 34 ] The assessment of disturbance damages involves the application of the law to the facts. It is a question of mixed fact and law which is reviewed for palpable and overriding error, unless an extricable error of law can be found, in which case the standard of correctness applies to that extricable legal question ( see Rebel at para 142 ; Housen at para 26 ; and Paciorka at para 43 ). [ 35 ] The City submits that the Commission made several extricable legal errors in awarding disturbance damages for the cost of acquiring and constructing the replacement property.

First, it argues that the Commission erred in the quantification of Madison’s economic loss by failing to account for the value of the replacement property to the owners. Next, it argues, in the alternative, that the Commission erred by failing to properly account for betterment in awarding approximately 95% of the cost of the replacement building i.e., $1,440,800. Further, it says that the Commission erred by awarding damages for the market value of the expropriated property in addition to disturbance damages for the cost of the replacement property. I will examine each of these alleged errors in turn.

Accounting for the Value of the Replacement Property [ 36 ] The City submits that the Act and expropriation principles require that the methodology to be used for calculating disturbance damages, when the expropriated owner constructs a replacement property, must account for the value of the replacement property to ensure compensation for actual economic loss.

As such, it argues that the Commission erred in law in the disturbance damages award by not using a formula that offsets against the cost of acquiring and constructing the replacement property the inherent market value, which the City asserts is $2,200,000 as per the financing appraisal.

The City seeks a reduction of this amount from the award. [ 37 ] As I will now explain, I do not accept that the Commission erred in law by failing to deduct the market value of the replacement property in making its award. [ 38 ] There is no required formula for the assessment of disturbance damages where a replacement property is acquired for an operating business.

However, the Act and the jurisprudence provide some guidance on the parameters of this analysis for the Commission to consider. [ 39 ] As a general principle, compensation for disturbance damages is assessed on the same basis as damages in tort and contract. The legal principles of remoteness, mitigation and reasonableness therefore apply. There must be a causal connection between the expropriation and the disturbance damages, and the disturbance damages cannot be too speculative. Overcompensation and double recovery are to be avoided (see Todd at pp 303, 318-19).

More will be said about this later in these reasons. [ 40 ] The point being, as stressed in Houle , that the assessment of due compensation in relocation cases is extremely fact- specific (see para 40). There is no “correct methodology” as the City argues. To the contrary, as has been noted, methodology is a question of fact for the Commission to decide.

This Court will not intervene in decisions of methodology unless there has been a clear error in principle (see Russell Inns Ltd v Manitoba , 2016 MBCA 43 at para 12 ; and Town of Russell v Her Majesty the Queen in Right of the Province of Manitoba , 2011 MBCA 56 at para 36 ). [ 41 ] It is important to keep in mind the framework and language of the Act when reviewing expropriation awards and the fact that the Legislature has tasked the Commission with determining expropriation matters (or compensation) in this province.

As I already noted, the Act provides for compensation on several bases, including the market value of the expropriated land (see section 26(1) (a)) and the reasonable costs, expenses and losses arising out of or incidental to the owner’s disturbance (see section 26(1)(b)). The owner’s “due compensation” (at section 26(1)) is the aggregate of these amounts. The Act does not mandate a deduction of the market value of the replacement property in the calculation of compensation.

To accept the City’s position in this case would result in a finding that Madison has not suffered any economic loss associated with the cost of acquiring and constructing the replacement property (other than financing costs). This is despite the fact that Madison was required to incur those costs to continue in business as a result of the expropriation. [ 42 ] Here, the owners would not have had to purchase the replacement land and construct the replacement building, but for the expropriation. It needed somewhere to operate its business after the City took its property.

Since the City expropriated Madison’s property, it is liable to pay the market value of the expropriated land and the reasonable costs, expenses and losses arising out of the disturbance of the business. These disturbance damages include the cost of finding replacement premises (see section 28(1) (

b) of the Act ) and all reasonable relocation expenses (see section 28(1) (c)). [ 43 ] Consistent with the above principles, as noted in Houle , there are many examples in the case law of compensation being ordered for both the market value of the land and buildings expropriated plus disturbance costs related to relocation (see para 40).

Further, the expense of constructing a replacement property (not covered by the market value award) has been viewed as a proper disturbance cost where a business is required to build new facilities to remain in operation (see Genstar Corp v Manitoba (Dept of Urban Affairs) , 1986 CarswellMan 486 (LVAC) ; Bartle & Gibson Co v Edmonton (City) , 1995 CarswellAlta 1181 (CA) ; Rebel at para 189 ; and Houle at paras 40, 67 ). The question is whether the costs were reasonably justified as incidental to the taking and the need to relocate to premises suitable to continue its business operations ( see Rebel at para 66 ).

What is reasonable has been described as a question of fact depending on the particular circumstances of the case (see 2438667 Manitoba Ltd et al v Husky Oil Limited et al , 2007 MBCA 77 at para 53 ; Rebel at para 143 ; and Todd at p 319). [ 44 ] In Rebel , the Commission awarded as disturbance damages the incremental costs needed to retrofit the replacement

property, construct an addition and attend to code compliance to enable Rebel to continue operating its business. The majority referredthe matter back to the Commission to determine whether Rebel satisfied its onus that these costs awarded, but not yet incurred, would infact be incurred (see para 207). However, while recognizing that this award was high, the Court did not accept that the Commissionerred in finding that these costs were justified as incidental to the taking and the need to relocate.

Nor did the Court agree that appellateintervention was warranted on the grounds of unreasonableness or how betterment was addressed, given the deferential standard ofreview (see paras 66, 189, 206, 208). [45] In support of its position, the City argues that a methodology that accounts for the value of the acquired asset wasapplied in Houle in awarding disturbance damages for the cost of the replacement land following the expropriation of the farm (theHoule land approach). In Houle, the expropriated land was approximately 84 acres valued at $1,500 per acre.

The Houles purchased a160-acre replacement farm which, at $1,500 per acre, would have cost $240,000. The Houles actually paid $360,000. After deducting$30,000 for the value of an existing building on the replacement property, this meant they paid a premium of $90,000 in respect of theentire 160-acre site ($330,000 less $240,000). The Commission awarded $90,000 as disturbance damages. [46] I do not agree with the City that this Court, by the Houle land approach, adopted a mandatory methodology ofaccounting for the inherent value of the replacement property.

The issue in Houle was whether paying a premium for the replacementland was an appropriate head of disturbance damages. This Court deferred to the Commission’s finding that the premium was areasonable consequence of the expropriation, commenting that, while the owners had purchased 160 acres (as compared to the 84 acresthat had been expropriated), there was no evidence that a smaller, suitable parcel of land could be acquired (see para 50).

The notion thatdisturbance damages must be offset by the market value of the replacement property was not argued, endorsed or applied. [47] In any event, as already highlighted, the flaw in the City’s position is that it focusses on the value of the replacementproperty as a required offset, when the Act does not prescribe a mechanism for incorporating this amount into the calculation of duecompensation. The focus should remain on the market value of the expropriated property and the reasonable disturbance damagesincurred by the owners. Because of this expropriation, the owners relocated their business.

There were no other similar facilities topurchase so they had to buy vacant land and construct premises to continue in business. The fact that the replacement property is largerand newer does not dictate a denial of compensation. [48] That said, while the value of the replacement property is not a required credit to the expropriating party as the Cityargues, it does relate to the principle of betterment. Betterment must be accounted for to avoid overcompensation and double recovery.

However, no rules can be fashioned by which betterment can invariably be determined and it turns on the facts peculiar to the case (seeNan v Black Pine Manufacturing Ltd (1991), (BC CA), 80 DLR (4th) 153 at 157 (BCCA)). The Commission heardevidence about the different construction techniques and their costs, and decided that $1,440,800 was reasonable compensation for thecost of the replacement building and an appropriate discount for betterment.

This leads to an examination of the City’s alternativechallenge that the Commission failed to properly account for betterment in its disturbance award for the cost of the replacement property. Betterment [49] The City’s alternative position is that, in awarding $1,440,800 for the cost of constructing the replacement building, theCommission erred by failing to adequately account for betterment, as the replacement building could have been constructed forsignificantly less. [50] The concept of betterment is applicable to the law of damages generally and also applies in the expropriation context.

The application of the principle of betterment to the facts is a question of mixed fact and law which attracts the deferential palpable andoverriding standard of review. [51] In Laichkwiltach Enterprises Ltd v F/V Pacific Faith (Ship), 2009 BCCA 157 (Laichkwiltach), the cost of repairs to adamaged fishing vessel was reduced due to betterment. The Court noted that betterment is a question of fact to be determined on theevidence with regard to what is reasonable in the particular case (see para 36).

Similarly, in Rebel, Monnin JA referred to the issue ofwhether the Commission’s award failed to account for betterment as a question of mixed fact and law subject to a deferential standard(see para 56). [52] As for the meaning of betterment, in Laichkwiltach, the Court confirmed the general principle from Upper LakesShipping Ltd v St Lawrence Cement Inc (1992), (ON CA), 89 DLR (4th) 722 at 723-24 (Ont CA), that a plaintiffshould have deducted from their award the amount by which their property is improved (see para 35).

As recently explained in Kent vMacDonald, 2021 ABCA 196, betterment is simply “compensation greater than loss” (at para 38). [53] The principle of betterment has been applied in expropriation cases in relation to relocation costs. In Bayview Builder’sSupply v British Columbia (Minister of Transportation and Highways), 1999 BCCA 144, the Court observed that “[r]elocation costsinclude the construction of new premises and moving expenses and would be adjusted to exclude the net improvement inherent in thenew premises as compared with the old” (at para 20).

In Haras Management et al v Gov of PEI, 2017 PESC 14, the Court referred tobetterment as “the cost of construction of a new building which will be a better building than the one left behind” (at para 98; see alsoGray Coach Lines v City of Hamilton, (SCC), [1973] SCR 108 at 117-19; and Spruce Grove Equipment Ltd v Alberta(Minister of Transportation), 1981 CarswellAlta 623 at paras 21-23 (LCB)). [54] The City asserts that the Commission erred by accounting for betterment by awarding damages equivalent to the cost ofconstructing a new concrete block building to the same size as the Madison building (i.e., $1,440,800), as Madison was not entitled to abuilding of this type.

The City argues that, since a steel-frame building the size of the Madison building would have been less expensive,the award must be reduced accordingly.

[ 55 ] The onus of proof of betterment, to reduce quantum of damages, is on the party advancing that defence ( see Kent at para 40 ). At the hearing, Madison led evidence that the replacement building was in certain respects inferior to the Madison building and it was not in a better financial position as a result of the relocation. The City led no evidence on betterment, but relies on extracts from the evidence of Mr. Gwendo and Mr. Hawryluk who provided general or rough estimates concerning the cost of constructing a steel building the size of the Madison building. During cross-examination, Mr.

Hawryluk indicated that such a building would cost substantially less, while Mr. Gwendo, in response to a question from the Commission, roughly estimated that cost to be $700,000.

Since the $1,440,800 estimate consisted of a cost of $899,999 for the concrete building alone (excluding other site costs that would be applicable regardless of the size of the building), the City argues a proper measurement of betterment therefore requires an additional reduction of approximately $200,000 ($899,999 less $700,000). [ 56 ] In my view, there is no basis for appellate intervention; the City is asking this Court to substitute its own factual finding for the one made by the Commission.

The Commission heard testimony about the construction of the replacement property, including why Madison built the replacement building to the size and configuration it did. This included that the cost to construct a concrete building similar to the Madison building ($1,440,800) was approximately 95% of the cost of the larger steel structure that Madison chose to build ($1,517,761). The Commission thus accounted for betterment by reducing the actual cost claimed of $1,517,761 to $1,440,800 (i.e., a reduction of approximately 5%).

It concluded that Madison’s course of action was reasonable as was an award for approximately 95% of the replacement building’s cost in the circumstances. [ 57 ] The Commission did consider betterment, just not to the extent requested by the City. In the absence of any evidence by the City and having regard to the onus of proof, the Commission was entitled to assess betterment as it did based on the evidentiary record before it and it made no palpable and overriding error in doing so. It is not the role of this Court to reweigh or reassess the evidence ( see Paciorka at para 95 ).

The Commission’s decision is entitled to deference. [ 58 ] I would not accede to this ground of appeal. Market Value of the Expropriated Property and Disturbance Damages [ 59 ] The City submits that the Commission erred in law in certifying compensation for the market value of the expropriated property in addition to the cost associated with acquiring the replacement property. It argues that, if the expropriated owner is compensated for the cost to acquire the replacement property, it is not entitled to compensation for the fair market value of the expropriated property so the award must be reduced by $500,000.

This raises an issue as to whether the Commission awarded duplicate compensation or double recovery, which is an extricable legal question to be reviewed for correctness. [ 60 ] As noted in Williams, Skinner & Helfand, double recovery is a windfall situation where a claimant receives compensation for the same injury under two separate heads of damages (see p 63).

In Haras , the Court described this concept as being compensated twice, once in the value of the property that has been taken and again in the calculation of what will replace it (see para 115). [ 61 ] I agree that the Commission erred in law in awarding double recovery and that the award should be reduced by $500,000. Nonetheless, I would not characterize the error in the manner the City suggests. [ 62 ] The Commission did not err in certifying compensation for the market value of the expropriated property as the City contends.

However, since the market value compensation received by Madison is intended to be put towards the cost of purchasing a replacement property, the certified market value must be applied towards relocation costs.

Therefore, to avoid double recovery, the disturbance damages award should be reduced by $500,000 (the cost of the replacement property $425,000 plus $75,000), reflecting a credit for the market value of the expropriated property against the disturbance damages incurred. [ 63 ] In fact, and as earlier mentioned, at the hearing, Madison acknowledged that the City is entitled to a credit for the market value of the expropriated property to be applied towards relocation costs.

On this appeal, Madison also conceded that the Commission erred in failing to do so. [ 64 ] I add that this result is consistent with this Court’s decision in Houle , regarding the compensation awarded for the dairy barn. In Houle , a new dairy barn was built on the replacement property. The Commission attributed a market value of $128,800 to the old dairy barn, but also awarded $1,010,235.89 as compensation for the new dairy barn after taking into account betterment.

The Commission was found to have erred in awarding the owners both the market value of the old barn in the amount of $128,800 (under section 26(1) (

a) of the Act ) and the additional sum of $1,010,235.89 for the new barn as a disturbance cost (under section 28(1) (c)), as this amounted to an overpayment and double recovery. The award was reduced by $128,800 to reflect a credit of the market value of the old barn.

Similarly, and contrary to the City’s position that, in Rebel , the owner was compensated for all relocation costs plus compensation for the market value of the expropriated property, the Commission actually only awarded incremental relocation costs and credited the market value of the expropriated property against the disturbance damages award in that case ( see Rebel Holdings Ltd v Division Scolaire Franco-Manitobaine , 2006 CarswellMan 332 at para 22 (LVAC) ( Rebel LVAC ) ). [ 65 ] I would therefore reduce the award by $500,000.

Betterment and Future Costs [ 66 ] On this appeal, the City does not dispute the Commission’s award for future property taxes and utility costs in principle. Indeed in Houle , this Court deferred to the Commission’s decision to award the present value of future property taxes and utility costs, as these were caused by the expropriation, would be incurred, were reasonable and were not too remote (see para 84).

The City argues that the Commission erred here in failing to certify compensation for 50% of the future property taxes and utility costs over a 15-year period since this properly accounts for betterment as it represents the degree to which the replacement building was larger in size than the Madison building. [ 67 ] As I have just noted, the application of the principle of betterment to the facts is a question of mixed fact and law subject to the deferential standard of palpable and overriding error. [ 68 ] It should be remembered that, at the hearing, Madison sought 100% of future property taxes, business taxes and utility costs for 35 years amounting to $433,511 (comprised of $363,198, $39,104 and $31,209, respectively).

The City primarily argued that such an award should be disallowed, but alternatively suggested that only 50% of these costs for 15 years should be awarded to account for betterment.

As previously mentioned, the Commission certified much less, a total of $195,279.45 for future costs ($173,703.70 for property taxes, $11,783.25 for utility costs and $9,792.50 for business taxes). (The City is not appealing the Commission’s award in respect of future business taxes.) [ 69 ] Again, the Commission discounted the award for future property taxes and utility costs to account for betterment, albeit not in the manner that the City suggested.

The Commission considered betterment in several respects: (1) by awarding a percentage of the costs claimed given the larger building constructed, and (2) limiting the length of the award to 15 years consistent with the evidence about the remaining life of the Madison building. [ 70 ] In particular, the Commission rejected Madison’s claim for increased future costs for 35 years, stating that costs for this length of time were excessive, but that an award representing 15 years of increased cost was reasonable.

It specifically recognized that Madison chose to construct a larger building, which required a reduction of the award for future costs to be incurred. It concluded, consistent with the reduction made in respect of the cost of constructing the replacement building, that the City should be responsible for 95% of future property taxes.

It took a greater discount off of the future utility costs, awarding 75%, as it was of the view that utilities would be higher in a larger building, but not at a rate of 95%. [ 71 ] The Commission weighed the evidence and made no palpable and overriding error in how it accounted for betterment in the award for future costs. There is no basis for appellate intervention. Compensation for Time Spent [ 72 ] Whether an owner is entitled to compensation when there is no corresponding out-of-pocket loss is a question of law subject to a standard of review of correctness. It involves an

interpretation of sections 26(1) (

b) and 28 of the Act , and whether compensation for an owner’s time constitutes a cost or loss within the meaning of the Act (see Johnson (Re) , 2005 NSCA 99 at para 46 , leave to appeal to SCC refused, 31124 (19 January 2006)). [ 73 ] The City contends that the Commission erred in law by merely compensating for time spent by the owners and not an actual loss. [ 74 ] A review of the Commission’s previous decisions reveals that it has awarded compensation for these types of claims on two bases: (1) for actual out-of-pocket losses reasonably incurred by a person for their involvement in the expropriation, or (2) where there is no out-of-pocket expense, but actual loss can be readily surmised from the nature of the landowner’s business and the extraordinary involvement of the landowner in the expropriation (see, for example, Gulak v Winnipeg (City) , 1983 CarswellMan 431 (LVAC) ; Green , Gamble & Taylor v Manitoba (Department of Urban Affairs) , 1986 CarswellMan 491 (LVAC) ; and Rebel LVAC at para 28 ). [ 75 ] The applicable principles were summarized by the Commission in Rebel LVAC , where the Commission rejected a claim of $31,040.69 for management salaries and awarded a nominal sum of $5,000.

The Commission stated (at paras 28, 31): . . . The compensation payable for time spent dealing with an expropriation by a landowner or employees of a landowner is not to compensate for the value of time spent per se, but rather . . . for an actual loss or out-of-pocket cost incurred. A landowner who is an hourly wage earner or works on commission who actually loses or has to give up earning hours or commissions obviously incurs a loss. . . .

The Commission has certified compensation for a landowner, who works for herself and for management personnel, who are paid an annual salary and not paid for overtime, only if it can be readily surmised from the nature of the landowner’s business and the extraordinary involvement of the landowner or management personnel in dealing with the expropriation that an actual loss of income must have been incurred. In those cases in which the Commission surmised a loss of income, the Commission has certified only nominal compensation ranging from $2,000.00 to $3,500.00 . . ..

[ 76 ] On appeal, the owners in Rebel sought to have the award of management salaries increased to $31,040.69 as claimed before the Commission. This Court deferred to the Commission’s findings, noting that the management employees were not hourly wage earners and the Commission could not find that they had an extraordinary involvement in dealing with the expropriation that led to an actual income loss ( see Rebel at para 70 ). [ 77 ] This approach was followed in Rankin/Rowan v PNB , 2005 NBQB 106 , where compensation for the owner’s time was denied because the owner was retired and no loss was substantiated.

The Court adopted the principle from Genstar at pp 269-70, where the Commission reiterated that “compensation payable for time spent dealing with an expropriation is not to compensate for the value of the time spent per se but rather to compensate for a loss incurred” ( Rankin at para 72). [ 78 ] The requirement to link an owner’s time to pecuniary loss was also endorsed in the recent case of Atlantic Mining NS Corp (DDV Gold Limited) v Oakley , 2019 NSCA 14 , leave to appeal to SCC refused, 38620 (24 October 2019).

The Court stated (at para 76): Some owner’s time—apart from preparing for litigation—will be involved in most expropriations. Unless it can be linked to pecuniary loss—as in losing employment or business income, it lacks pecuniary character and should not attract compensation: Durette v. New Brunswick (Minister of Transportation) (1980), 21 L.C.R. 124 , ¶28; Lauzon v. Windsor (City) (1974), 7 L.C.R. 11 , ¶40; Glenlea 75 Servicentre Ltd. v. Manitoba (Department of Highways & Transportation) (1993), 52 L.C.R. 70 , ¶12.

The point is not to compensate for time spent, but for a loss incurred. [ 79 ] At the hearing, Madison provided documentation detailing the number of hours spent by the owners related to expropriation matters, which it valued at $30 per hour, and claimed compensation on that basis.

The Commission certified compensation for time spent by the owners in the amount of $32,363.70, as follows: (a) $435 for time to set up and supervise the temporary location. (b) $28,808.70 for time spent searching for a replacement property and supervising construction of replacement facilities. (c) $3,120 for time spent dealing with all aspects of the expropriation, including document preparation. [ 80 ] It is apparent that the Commission simply accepted Madison’s evidence of the time spent by the owners and its value in certifying this compensation.

In my view, the Commission erred in law in failing to consider whether there was any out-of-pocket loss, or whether some actual loss could be ascertained from the nature of the owners’ business and from the extraordinary involvement of the owners in the expropriation. [ 81 ] There was no evidence of any out-of-pocket loss. In fact, Larry Kunkel testified that he was semi-retired, not earning any hourly wages and never missed any work to attend the meetings forming part of the claim for time spent on various tasks.

Further, the Commission did not address whether an actual loss had otherwise been proved or whether the owners’ time could be linked to a pecuniary loss. In short, the Commission compensated for time spent per se and not for a loss incurred. And, even deferring to the Commission’s finding that the owners spent the time attested to, the evidence is insufficient to conclude that some loss can be ascertained from the nature of the owners’ business and their extraordinary involvement in the expropriation. [ 82 ] I would therefore grant this ground of appeal and reduce the award by $32,363.70. Conclusion [ 83 ] In

summary, for the foregoing reasons, I would allow the City’s appeal in part and reduce the disturbance damages award by $500,000 to give credit for the market value of the expropriated property and a further $32,363.70 to reflect the Commission’s erroneous award for the owners’ time.

As appellate intervention is not otherwise warranted, I would dismiss the City’s appeal of the other aspects of the Commission’s award. [ 84 ] Since Madison is substantially successful, I would grant it solicitor-client costs on appeal in accordance with sections 15(6) and 44(3) of the Act ( see Carloni v Manitoba , 2006 MBCA 47 at para 6 ; Smith v Alliance Pipeline Ltd , 2011 SCC 7 at para 74 ; Manitoba v Russell Inns Ltd et al , 2013 MBCA 46 at para 178 ; and Mark M Orkin, Orkin on the Law of Costs , 2nd ed (Toronto: Thomson Reuters, 2021) vol 1 (loose-leaf updated 2021, release 5), ch 2 at

section 2:32). JA I agree: JA I agree: JA