| T-1545-96 |
B E T W E E N:
MUSQUEAM INDIAN BAND and CHIEF JOSEPH RALPH BECKER, ERNIE CAMPBELL, WAYNE SPARROW, LEONA M.
SPARROW, NOLAN CHARLES, MARY CHARLES,
JOHNNA CRAWFORD, GAIL Y. SPARROW,
MYRTLE MCKAY, LARRY GRANT, and
HER MAJESTY THE QUEEN
Plaintiffs
- and -
MARY GLASS, HIN F. KO, MABEL W. KO,
ROY WESTWICK, GWYNETH M. WESTWICK,
KERRY-LYNNE FERRIS, STEPHEN W. FINDLAY,
NORAH C. FINDLAY, JERRY JANES, DIANA JANES,
GREGORY PAPPAS, TASIE PAPPAS, SOLON S. WANG,
PETER M. LEE, HERBERT M. LEWIS, ALEXANDER KALINOWSKI, KATARINA KALINOWSKI, JOHN W. WHITEFOOT, SHEILA M. WHITEFOOT, LISBET MACKAY, PIERRE DOW, MONA MCKINNON, WONG L. LEE, MAN-LOONG LEE, JOHN M. GLAISERMAN, JUAN L.G. CAM, ELIZABETH C. CAM, EVELYN M. MURRAY, WILLIAM T. ZIEMBA, JAMES R. THOMPSON, ANN B. THOMPSON, YUM C. LAU, IRENE LAU, JAMES Y.P. KING, TJIN K. TAN, EIJI MURAKAMI, MIYAKO MURAKAMI, THOMAS W. F. FUNG, AMY M. L. CHAN, GERTRUDE HENNEKEN, HANS T. HENNEKEN, HOWARD G. ISMAN, MARJORIE E. ISMAN, STANLEY EVANS, DOROTHEY EVANS, KHI YOENG TJIN, WEN-TIEN TAI, KUI-HSIANG HUANG, PHYLLIS WEINSTEIN, PATRICIA LAI, WILFRED E. PATTON, JEAN M. PATTON, ATTILIO GIRARDI, MARY GIRARDI, IRMA E. BOULTER, GEORGE S. BOULTER, JOHN G. CRAGG, OLGA B. CRAGG, HOWARD E. CADINHA, ARLENE B. CADINHA, MARIA C. ORMOND, DOUGLAS R. EYRL, JUDITH F. EYRL, CHEUNG K. CHOI, CHAN P.K. CHOI, CELIA KAAN, CECIL S. C. KAAN, RAMON Y. KAN, HELENA KAN, LESLIE BARA, OTTILIA BARA, ALFRED K. LEE, ESTHER K. LEE, DIANA W.C. SUNG, DONALD C. GRAHAM, WINNIFRED A. GRAHAM, RONALD J. MACKEE, ALEXANDER H. WONG, STELLA L. WONG, EDWARD B. JUYCK, DOROTHY A HUYCK, FREDERICK S. EDY, ELLEN V. EDY, VICTOR H. HILDEBRAND, JOHN E. EGAN, CHI K. CHING, SIU Y. CHAN, LAVENDER CHU, FREDERICK CHU, GEORGE E. RUSH, ANNE L. RUSH, HERTA J. NEUMANN, CORNELIUS NEUMANN, JAMES A. FORSYTHE, DIANE R. FORSYTHE, PETER J. FUNK, ELIZABETH FUNK, ELFRIEDE MACHEK, ADELHEID MACHEK, LILLIAN P. TOEWS, HUI C. KEUNG, PATRICIA H.K.S. WAH, VADILAL J. MODI, MIRA V. MODI, CHARLES H. SHNIER, ELAINE C. SHNIER, AGNES P. C. SHEN, CAROL M. LAU, DENNIS LAU, MARJORIE MCCLELLAND, ARTHUR NEE, LAURA T NEE, DONALD W. SCHEIDEMAN, KATRHYN M. SCHEIDEMAN, WILLIAM N. KING, ALLAN J. HUNTER, GRACE K. HUNTER, GRACE NG, IRVING GLASSNER, NOREEN G. GLASSNER, PRISCILLA FRATKIN, NANCY B. BERNER, GREGORY HRYHORCHUK, DARCY L. HRYHORCHUK, ASTLEY E. SMITH, BETTY ANN SMITH, LILY R. ENG
Defendants
TABLE OF CONTENTS
ISSUES
CONTEXT OF THE DISPUTE
CHRONOLOGY OF EVENTS
THE RENT PROVISIONS OF THE LEASES
OVERVIEW OF THE PARTIES' POSITIONS AND APPRAISAL EVIDENCE
ISSUE 1: THE LAND INTEREST AND TENURE TO BE VALUED
ISSUE 2: DETERMINING THE CURRENT VALUE OF SERVICED MUSQUEAM PARK LAND
| Factors Affecting the Value of a Long-Term Leasehold Interest in Land Located on an Indian Reserve |
Evidence Bfore the Board of Review
| Land Assessment in 1995/96 Pursuant to Board of Review Decision |
| Evidence of Real Estate Agent Tebbutt |
| Evidence of Appraiser Oikawa and Criticisms by Appraisers Johnston and Grant of the Oikawa Approach |
| A. Lease Term Effect: |
| B. Economic Obsolescence |
| C. Double Discounting |
| D. Access Affecting Salish Park Values |
| E. Temporary Impact of Adverse Publicity |
| F. Weaknesses of Land Residual Method |
| Conclusion Respecting Valuation |
ISSUE 3: SERVICING
| The Parties' Positions |
| Analysis Respecting Servicing |
ISSUE 4: CALCULATION OF SERVICING COSTS
CONCLUSION
REASONS FOR JUDGMENT
ROTHSTEIN J.:
ISSUES
This case involves the determination of the "fair rent" to be paid annually for land by lessees of 75 lots located in Musqueam Park (or sometimes called Musqueam subdivision) on the Musqueam Indian Reserve No. 2 in southwest Vancouver for the 20-year period commencing June 8, 1995. In accordance with the relevant leases, the annual "fair rent" is to be calculated at 6% of the "current land value" immediately before June 8, 1995.
The primary issues are:
| 1. Whether "current land value" is based on a fee simple estate in land or an interest in land located on an Indian reserve. |
| 2. Determination of the serviced "current land value". |
| 3. Whether "current land value" is based on unserviced or serviced land. |
| 4. Determination of servicing costs. |
CONTEXT OF THE DISPUTE
To place this dispute in context, I set out the annual rent that had been paid prior to June 8, 1995, the current land values estimated by each of the appraisers and the annual rent to be derived by application of the 6% rate to the current land values. The land in question is in the southwest part of Vancouver, close to the University of British Columbia, university endowment lands and several golf courses. The lots are large, ranging from 8,628 square-feet to 27,094 square-feet (by comparison a residential lot with dimensions of 50 x 120 feet is 6,000 square feet). There is no doubt the area is one of the most attractive and desirable locations in Vancouver.
The 75 lots in question are subject to 99-year leases commencing June 8, 1965 and terminating June 7, 2064. For each of the first three 10-year periods of the lease term, the land rent was pre-determined. The rent for the first 10-year period was a fixed amount. The rent for the second 10-year period was 10% more than for the first 10-year period and for the third 10-year period 20% more than for the first 10-year period. As of June 8, 1995, and every 20 years thereafter the annual rent was to be determined by application of the 6% rate to the "current land value".
The average current land value per lot immediately before June 8, 1995 was estimated as follows:
1. plaintiffs' appraiser Johnston $712,5001
2. plaintiffs' appraiser Grant $607,0002
3. defendants' appraiser Oikawa $134,0003
The average annual rent per lot for the three historic periods under the lease and for the current 20-year period commencing June 8, 1995 is as follows:
Average Annual Land Rent per Lot
| 1. June 8, 1965 - June 7, 1975 $328.034 |
2. June 8, 1975 - June 7, 1985 $360.83 4
3. June 8, 1985 - June 7, 1995 $393.64 4
4. June 8, 1995 - June 7, 2015
a) 6% of current land value estimated by
plaintiffs' appraiser Johnston $42,750.00
b) 6% of current land value estimated by
plaintiffs' appraiser Grant $36,420.00
c) 6% of current land value estimated by
defendants' appraiser Oikawa $8,040.00
These figures make it apparent why the dispute is so controversial. Even the defendants' evidence demonstrates that the defendants are facing a significant increase in annual rent, i.e. on average from $393.64 to $8,040.00, an increase exceeding 20 times the prior rent.
If the plaintiffs' evidence is accepted, the defendants will face an increase in land rent in the range of 100 times their prior rent. The issue is an emotional one because the plaintiffs believe that the reference to "current land value" means that they are entitled to receive the equivalent of what they could if they were able to sell the land in its present condition (exclusive of improvements but including servicing) and invest the proceeds and earn at least 6% per year. The defendants, while conceding a large increase in rent is required, are facing annual rent, if the plaintiffs are successful, that some may not be able to afford.
The foregoing provides some background as to why this dispute has arisen. However, whether the plaintiffs are to receive what they believe they are entitled to, or the defendants can afford to pay the annual rent, are not considerations for the Court. The fair rent is not a conclusion based on the Court's assessment of what is economically or socially desirable. It is a determination based on the interpretation of the relevant documents and the acceptance of relevant and credible evidence.
CHRONOLOGY OF EVENTS
On February 17, 1960, the Musqueam Band of Indians surrendered the subject land " approximately 405 acres of Musqueam Indian Reserve No. 2 " to Her Majesty the Queen for purposes of leasing. The surrender form states:
| TO HAVE AND TO HOLD the same unto Her said Majesty the Queen, her Heirs and Successors IN TRUST TO LEASE THE SAME to such person or persons, and upon such terms as the Government of Canada may deem most conducive to our Welfare and that of our people. |
On April 20, 1961 the Governor in Council accepted the surrender. Pursuant to section 53 of the Indian Act, R.S.C. 1952, c. 149, the Minister of Citizenship and Immigration was authorized to lease the subject land in accordance with the Act and Terms of Surrender.
On June 8, 1965, Her Majesty the Queen as represented by the Minister of Citizenship and Immigration entered into a "Master Agreement" with the Musqueam Development Company Limited (Company) (unrelated to the Musqueam Indian Band) for the development of the subject land. By the Master Agreement the Company was required to prepare and file a plan of subdivision, provide services such as roads to each lot on the plan, water and sewage disposal facilities, storm sewers for land drainage, street lighting and ensure that telephone, electric power, natural gas and garbage disposal services would be available when required. Upon the Company satisfying these requirements, the Minister was to deliver to the Company leases in favour of the Company for each of the lots on the subject land.6
The plan of subdivision was filed in the Land Title Office on December 15, 1965. No services had been provided at this time. However, services were provided in 1966. Leases for each subdivided lot in accordance with the "Draft Lease (Residential)", which was a schedule to the Master Agreement, were delivered by the Minister to the Company in 1966.7
It appears that the Company then marketed the serviced lots. In consideration for a lump sum payment to the Company and the annual rent to be paid to the Minister on behalf of the Musqueam Indian Band, the Company assigned each lease to individuals who would then have a residence built on the leased lot.
THE RENT PROVISIONS OF THE LEASES
As no plan of subdivision had been filed when the Master Agreement was entered into on June 8, 1965 and the number and size of the lots were not then known, the Master Agreement provided for the aggregate annual rent for the entire surrendered land. Section 15 provides:
| 15. (1) The rent reserved in each of the Leases referred to in Paragraph 14 shall be set at such sum that the total rent reserved from all the said Leases shall provide an annual net rent of not less than |
| (a) $23,442.00 annually until 18 February 1969, or the sooner termination of the hereinabove described Lease to Eddie's Nurseries Ltd; |
| (b) $24,602.00 annually commencing on the 19 February 1969, or upon the sooner termination of the hereinabove described Lease to Eddie's Nurseries Ltd. until the end of the first ten-year period of the terms thereof; |
| (c) $27,062.00 during the second ten-year of the term; |
| (d) $29,522.00 during the third ten-year period of the term being until the 7th day of June, 1995. |
| (2) The rent for each year of the three succeeding twenty (20) year periods, and for each year of the final nine (9) year period shall be a fair rent for the land comprised in each of such leases negotiated immediately before the commencement of each such period. In conducting such negotiations the parties shall assume that, at the time of such negotiations, the lands are; |
| (a) unimproved lands in the same state as they were on the date of this agreement; |
| (b) lands to which there is public access; |
| (c) lands in a subdivided area, and |
| (d) land which is zoned for single-family residential use; |
| and the foregoing assumptions shall also be made in the case of any determination of the rent pursuant to the provisions of subparagraph (3) hereof. |
| (3) In the event the Minister and the Corporation or its assignees cannot reach agreement on the rents to be paid in any of the Leases, for any of the succeeding periods as provided in subparagraph (2) above, the question shall be determined under the authority of paragraph (g) of subsection (1) of Section 18 of the Exchequer Court Act. |
| (4) An annual clear total rental which represents six percent (6%) of the current land value, calculated at the time of renegotiation, and on the basis set out in subparagraph (2) hereof, shall be regarded as a "fair rent" for the purposes thereof. |
The individual leases themselves contain a similar rental provision. It would appear that the aggregate rent referred to in paragraphs 15(1)(b), (c) and (d) of the Master Agreement was pro-rated, probably according to size of lot, and perhaps location and other factors, to each of the 75 individual leases. In the lease for lot 36, which is typical of all the leases, the rent provision states:
| 2. (1) YIELDING AND PAYING therefor, yearly, and every year in advance during the said term to the Minister a rent as follows: |
| (a) for each year during the first ten years of the term, the sum of ($298.00); |
| (b) for each year during the second ten years of the term, the sum of ($343.75); |
| (c) for each year during the third ten years of the term, the sum of ($375.00); |
| (2) The rent for each year of the three succeeding twenty (20) year periods and for the final nine (9) year period of the term hereof, shall be a fair rent for the land negotiated immediately before the commencement of each such period. In conducting such negotiations the parties shall assume that, at the time of such negotiations, the lands are |
| (a) unimproved lands in the same state as they were on the date of this agreement; |
| (b) lands to which there is public access; |
| (c) lands in a subdivided area, and |
| (d) land which is zoned for single-family residential use, |
| and the foregoing assumption shall also be made in the case of any determination of the rent pursuant to the provisions of subparagraph (3) hereof. |
| (3) In the event the Minister and the Lessee or its assignees cannot reach agreement on the rents to be paid in any of the succeeding periods as provided in subparagraph (2) above, the question shall be determined under the authority of paragraph (g) of subsection (1) of Section 18 of the Exchequer Court Act. |
| (4) An annual clear total rental which represents six percent (6%) of the current land value, calculated at the time of renegotiation, and on the basis set out in subparagraph (2) hereof, shall be regarded as a "fair rent" for the purposes thereof. |
It is subsections 2(2) and 2(4) of the leases that govern the determination of rent for the twenty-year period commencing June 8, 1995 and it is subsection 2(3) that brings the matter before this Court. The relationship of section 2 of the leases and section 15 of the Master Agreement, and the relevance of the Master Agreement, will be dealt with subsequently.
The formula for determining annual rent is set out in subsection 2(4) of the leases - 6% of the current land value. This sum is to be regarded as a "fair rent" as that term is used in subsection 2(2). The time for determining "current land value" is at the time of renegotiation which, according to subsection 2(2) shall be immediately before the commencement of the relevant term, i.e. immediately before June 8, 1995. Under subsection 2(2) the parties are to make a number of assumptions, i.e. that the lands are unimproved, that there is public access, and that the land is subdivided and zoned for single family residential use. Other than these assumptions and the direction as to when current land value is to be calculated, there is no other express reference in the lease to assist in interpreting the term "current land value".
The evidence of the appraisers in this case is that the formula for determining land rent, a percentage applied to "current land value", is a well accepted approach for determining rent under long-term leases in the real estate industry. In the case of long-term leases, the parties agree not to be bound to a predetermined rent for the entire lease term. Rather, they agree to redetermine rent periodically on the basis of current land value from time to time. Normally this is recognition of the fact that the lessor could, if not subject to the long-term lease, dispose of the land based upon its current value at the time of renegotiation.
OVERVIEW OF THE PARTIES' POSITIONS AND APPRAISAL EVIDENCE
The plaintiffs say that the subject land is to be valued as if each lot was "for sale in the real estate market, i.e. their fee simple value". The plaintiffs' argument is that the subject land is in the name of the Crown and should be valued on the same basis as any other property held by the Crown namely:
| ... on the basis of its exchange value, the value actually or theoretically ascertained by the test of competition between a free and willing purchaser and a like vendor.8 |
In particular the plaintiffs say there is nothing unique about Indian lands. The lands may be alienated, albeit not directly by an Indian Band, but through agreement with the Crown which acts in a fiduciary relationship to the Band. Counsel for the plaintiffs concedes there is a line of authority in this Court (Leighton v. Canada (1987), 13 F.T.R. 198 (F.C.T.D.), Golden Acres Limited v. Canada (1988), 22 F.T.R. 123 (F.C.T.D.), Devil's Gap Cottages (1982) Ltd. v. Canada (court file T-2468-88, November 18, 1981 per Strayer J. (F.C.T.D.), Rodgers v. Canada (1993), 74 F.T.R. 164 (F.C.T.D.) and Morin v. Canada (1996), 114 F.T.R. 141 (F.C.T.D.)) which approaches valuation of Indian lands by reference to other Indian lands (unless otherwise specified in the lease documents)9 and not by comparison with non-Indian freehold land. Plaintiffs' counsel says that this line of authority is "misconceived, if not mischievous, and contrary to legal principle," and that this Court "must not follow this ill-conceived, unprincipled and unsupportable line of authority".10
The defendants say the subject land is to be valued on the basis of a leasehold interest in land on an Indian reserve. They concede that the value of the leasehold interest cannot have been intended to be based on the remaining term left in each lease as that would result in a depressing effect on current land value and thus a lower rent as each lease approached maturity, i.e. where a lessor improves leasehold property, a leasehold interest with only two or three years left in the term is worth much less than a leasehold interest with a term of 99 years remaining. The defendants' position is that the "current land value" means the value of a 99-year leasehold interest on an Indian reserve at the time of each renegotiation.11
Largely because of the uncertainty arising as a result of the 1995 rent review, there have been very few transactions respecting the subject land in the Musqueam Park in recent years.12 Further, as there are no bare lots in Musqueam Park there is no easy way of determining the "current land value" from such transactions as there were. Further, such transactions could have been affected by the uncertainty of the rent review and as I will shortly explain, this is not a factor to be taken into account in determining current land value. As a result, there is no reliable evidence of "current land value" that can be derived from market data pertaining to Musqueam Park. Therefore, both the plaintiffs' and defendants' appraisers have resorted to market data relating to other areas in southwest Vancouver which they say are comparable in value to Musqueam Park.
The plaintiffs' appraiser Jeffrey Johnston estimated the current market value of land on four lots in Musqueam Park on the assumption that the value estimate was based on the "unencumbered fees simple of the subject properties".13 Mr. Johnston acknowledged that a fee simple estate does not exist on the Musqueam Indian Reserve,14 but he interpreted current land value as defined in the lease as a fee simple estate in the land. Mr. Johnston used a "direct comparison approach" with sales of properties he considered comparable in nearby neighbourhoods in southwest Vancouver. Many of his comparables involved properties with sizes similar to those in Musqueam Park, but with dwellings of little or no value. Mr. Johnston was obliged to use such comparables as there is virtually no vacant land in the area, and no transaction involving vacant land on which to base a bare land comparison. In many of the cases, the buildings on the lots were torn down thereby confirming that the selling prices of these comparables were for land only.15 As a result of using these comparables, Mr. Johnston concluded that the land value of the hypothetical "fee simple" estate in the four Musqueam Park properties would be $675,000, $700,000, $725,000 and $750,000 or an average of $712,500.
The plaintiffs' appraiser Danny Ronald Grant appraised the lots in Musqueam Park also by use of the direct comparison approach with fee simple properties in other locations in southwest Vancouver. Like Mr. Johnston, Mr. Grant utilized "comparable" properties on which the buildings were of little or no value and he was therefore able to ascribe virtually the entire selling prices in most cases to the land. To adjust for the time when the properties were sold, Mr. Grant applied a factor of .9% per month prior to June 1995, but no adjustment thereafter as, in his view, prices did not increase over the June 1995 level.
A number of specific adjustments were made by Mr. Grant to account for some lots having golf course frontage, some requiring sound attenuation measures, some large lots having a smaller effective size and other considerations. Mr. Grant's valuation placed the "fee simple" land value in a range of $530,000 to $705,000 per lot with a weighted average of $607,000 per lot.16
Defendants' appraiser George Oikawa says he was instructed "to value the interest in land as Indian reserve land surrendered to the Crown for the purpose of leasing for a period of 99 years".17 Unlike the plaintiffs' appraisers, Mr. Oikawa did not use the direct comparison approach because of "the virtual absence of sales and offerings of similar unimproved sites".18 Mr. Oikawa acknowledged that redevelopment of properties has occurred in nearby neighbourhoods and that sales of such properties prior to redevelopment might represent "current land value" if the subject land was not on an Indian reserve. However, he concluded that the Musqueam Park lots are unique as they are part of an Indian reserve to which he attributes uncertainties relating to property taxation, native self government, servicing and other matters.19
Instead of the direct comparison approach, Mr. Oikawa used the land residual method for establishing the land value of the subject properties. He applied the land residual method to properties in the Salish Park subdivision, a short distance from the subject properties. These properties are located in the Musqueam Indian Reserve No. 2, they are subject to long-term leases and their location minimizes adjustments for comparison purposes. However, these leases were structured on the basis of prepaid rent which eliminated the uncertainty attributable to the redetermination of rent in the Musqueam Park subdivision. He described his use of the land residual approach as follows:
| Of the five methods presented, the Land Residual Method is considered to be the most appropriate in estimating the "current land value". For the purpose of this report, the starting point utilized in applying the Land Residual Method was the sale price of the applicable improved lots. The depreciated replacement cost of the improvements were then deducted from the sale price. The resulting residual value is then attributed to the land and it effectively represents an estimate of the Market Value of the leasehold interest in the land as if the lot were available in the open market but affected by the use restrictions stated within or implied by the applicable ground lease and also as affected by any uncertainties associated with the Indian Reserve status of the lot. The Land Residual Method was applied to a number of sales and offerings for sale of the improved properties to result in a range in residual values to land. This range was then analyzed in detail with consideration of the characteristics of the subject lots. Similarities and differences between lots were addressed with the result that the lots were segregated into five groups termed herein as Lot Groups A to E. Based on the range in indicated residual values, base value orders for each of the five groups were estimated.20 |
| . . . |
| In applying the Land Residual Method, we analyzed recent market evidence of sales in the neighbouring Salish Park detached single family residential subdivision. Salish Park was analyzed since it is similar to the subject in three important respects. First, it is part of IR2; second, the lots are encumbered by ground leases from which flow leasehold interests; and third, the proximity of the two areas to one another minimizes the need for locational adjustments. Specifically, the Salish ground leases were structured on the basis of prepaid rent, which removes the financial uncertainty associated with situations such as that of the subject wherein rent must be paid annually and must be renegotiated periodically. Uncertainty over the magnitude of the future rent payable is, in our experience, significant in terms of market perception and can, in cases, affect both the price achievable and the marketability of a leasehold interest. This influence should not be reflected in the underlying land value for the purpose of determining land rent. |
| The Land Residual Method was applied to 10 improved properties and the process utilized was the deduction of the estimated depreciated replacement cost of buildings plus other work such as landscaping from the sale prices to yield a residual value to serviced land. Due, however, to the provisions of Standard Ground Leases A and B, current land value was estimated based on unserviced land and, therefore, also deducted were projected off-site servicing costs to result in a residual amount to unserviced land.21 |
Using the 10 sales in Salish Park, Mr. Oikawa derived a serviced land residual value on average of about $247,000 per Salish Park lot. He then made certain adjustments for Musqueam Park lots that have direct frontage onto South-West Marine Drive, other lots somewhat exposed to Marine Drive, lots affected by major traffic corridors, lots adjacent to Shaughnessy Golf Course and finally the most attractive lots due to their shape, size, access and flexibility. The range of values was from $225,000 to $280,000 with a weighted average of $254,000 for the Musqueam Park subdivision. Mr. Oikawa's valuations of Musqueam Park lots based on the land residual method applied to sales in Salish Park are about 42% of Mr. Grant's fee simple values ($254,000 versus $607,000).22
ISSUE 1: THE LAND INTEREST AND TENURE TO BE VALUED
The parties approach the interpretation of the words "current land value" in the leases in very different ways, at least from a conceptual standpoint. The plaintiffs say that those words are intended to refer to the value of the Musqueam Park land if sold in the open market, i.e. its fee simple or freehold value. This means, of course, that off-reserve land must be looked to for valuation purposes as the Musqueam Park land itself cannot be alienated (sold) as fee simple, under the current Terms of Surrender by the Band to the Crown. The plaintiffs thus argue that the rent should be 6% of an essentially hypothetical value " the value of the Musqueam Park land if it were freehold (and therefore non-Indian) land. On the other hand, the defendants interpret "current land value" as the actual or intrinsic value of the Musqueam Park land itself.
Contrary to the submissions of counsel for the plaintiffs, I do not accept that the words "current land value" mean that the leases call for the rent to be based on a hypothetical off-reserve value that might be different from the actual value of the land on the Reserve. Except for the assumptions to be made pursuant to subsection 2(2), there is no suggestion in the leases that the "current land value" refers to anything other than the actual value of the land which forms the subject of the leases. There is no mention in the leases in this case of land outside the Reserve. This is distinguishable from other cases which have come before this Court where the lease expressly directed that the rent should be determined by looking to the rental value of a parcel of vacant land, similar in area, character and permissible use but situate outside the Reserve. (Devil's Gap, Rodgers.) As Strayer J. found in Devil's Gap at pages 8 to 11:
| For whatever reason, the parties agreed by the lease that the market value of the subject-property was to be determined, not from its own intrinsic value taking into account the actual use being made of it, but instead by reference to hypothetical unimproved parcels off the Reserve whose potential use could be compatible with the uses permitted by the lease. |
| . . . |
| In coming to these conclusions one is forced by the wording of the lease in a sense to ascribe purely hypothetical values to the subject-property. . . |
That is not the case under the leases under consideration here.
It is clear, however, that, because of a dearth of transactions involving Musqueam Park properties, and irrelevant influences on the transactions that did take place,23 transactions outside Musqueam Park must be used in the valuation exercise to arrive at a value for Musqueam Park land. Those transactions may even involve fee simple off-reserve properties, although account must be taken, unlike in Devil's Gap, of the unique attributes of the particular land being valued. Nonetheless, one must distinguish here between the conceptual approach to valuation, based on the words in the leases, and the technique or methodology, including data sources, that will be employed to give effect to those words. These matters are considered below. On the conceptual level, I agree with the defendants that the words "current land value" in the leases are intended to mean the actual current land value of the lots in Musqueam Park on the Musqueam Reserve No. 2 subject only to the assumptions prescribed by subsection 2(2) of the leases.
What then is the appropriate land interest to be valued in Musqueam Park in order to determine actual current land value? I have found defendants' submissions to be particularly helpful on this point and I have borrowed from them freely. Indian title is said to be unique. This uniqueness is manifested in what the cases refer to as a "general inalienability" of the Indians' interest in the land. In Guerin v. the Queen, [1984] 2 S.C.R. 335 Dickson J. (as he then was) writing for four members of the Court, explains this feature of Indian title at page 382:
| It appears to me that there is no real conflict between the cases which characterize Indian title as a beneficial interest of some sort, and those which characterize it a personal, usufructuary right. Any apparent inconsistency derives from the fact that in describing what constitutes a unique interest in land the courts have almost inevitably found themselves applying a somewhat inappropriate terminology drawn from general property law. There is a core of truth in the way that each of the two lines of authority has described native title, but an appearance of conflict has nonetheless arisen because in neither case is the categorization quite accurate. |
| Indians have a legal right to occupy and possess certain lands, the ultimate title to which is in the Crown. While their interest does not, strictly speaking, amount to beneficial ownership, neither is its nature completely exhausted by the concept of a personal right. It is true that the sui generis interest which the Indians have in the land is personal in the sense that it cannot be transferred to a grantee, but it is also true, as will presently appear, that the interest gives rise upon surrender to a distinctive fiduciary obligation on the part of the Crown to deal with the land for the benefit of the surrendering Indians. These two aspects of Indian title go together, since the Crown's original purpose in declaring the Indians' interest to be inalienable otherwise than to the Crown was to facilitate the Crown's ability to represent the Indians in dealings with third parties. The nature of the Indians' interest is therefore best characterized by its general inalienability, coupled with the fact that the Crown is under an obligation to deal with the land on the Indians' behalf when the interest is surrendered. Any description of Indian title which goes beyond these two features is both unnecessary and potentially misleading. |
| [emphasis added] |
The reason why the Indians' interest in reserve land is inalienable is explained by reference to the Indian Act and the case law. The underlying title to Indian reserve land is vested in the Crown in Right of Canada. Subsection 2(1) of the Indian Act provides:
| 2. (1) In this Act . . . |
| "reserve" |
| (a) means a tract of land, the legal title to which is vested in Her Majesty, that has been set apart by Her Majesty for the use and benefit of a band... |
While legal title to reserve land is vested in the Crown, this title is not an unfettered estate because the Crown's title is encumbered by the burden of the Indians' interest. The limited nature of the Crown's estate is addressed in subsection 18(1) of the Act:
| 18. (1) Subject to this Act, reserves are held by Her Majesty for the use and benefit of the respective bands for which they were set apart, and subject to this Act and to the terms of any treaty or surrender, the Governor in Council may determine whether any purpose for which lands in a reserve are used or are to be used is for the use and benefit of the band. |
Section 18 was dealt with by Wilson J. in Guerin v. The Queen, (supra), who, writing for three members of the Court, stated at page 349:
| I think that when section 18 mandates that reserves be held by the Crown for the use and benefit of the Bands for which they are set apart, this is more than just an administrative direction to the Crown. I think it is the acknowledgement of a historic reality, namely that Indian Bands have a beneficial interest in their reserves and that the Crown has a responsibility to protect that interest and make sure that any purpose to which reserve land is put will not interfere with it. This is not to say that the Crown either historically or by s. 18 holds the land in trust for the Bands. The Bands do not have the fee in the lands; their interest is a limited one. But it is an interest which cannot be derogated from or interfered with by the Crown's utilization of the land for purposes incompatible with the Indian title unless, of course, the Indians agree. I believe that in this sense the Crown has a fiduciary obligation to the Indian Bands with respect to the uses to which reserve land may be put and that s.18 is a statutory acknowledgment of that obligation. |
| [emphasis added] |
Thus it is apparent that the Indians' interest in reserve land is sui generis. It has no counterpart in the general law of real property.
The Indian Act contains express limitations on the Indians' right to alienate or encumber reserve land. For example, subsection 37(2) provides:
| 37. (2) Except where this Act otherwise provides, lands in a reserve shall not be leased nor and interest in them granted until they have been surrendered to Her Majesty pursuant to subsection 38(2) by the band for whose use and benefit in common the reserve was set apart. |
Subsection 28(1) provides:
| 28. (1) Subject to subsection (2), any deed, lease, contract, instrument, document or agreement of any kind, whether written or oral, by which a band or a member of a band purports to permit a person other than a member of that band to occupy or use a reserve or to reside or otherwise exercise any rights on a reserve is void. |
Section 29 provides:
| 29. Reserve lands are not subject to seizure under legal process. |
In order to sell or otherwise encumber reserve land, a band must act through the Crown by way of surrender. But the Crown is not obliged to accept a proposed course of dealing. Under paragraph 39(1)(c), a surrender is stated to be void unless it is accepted by the Governor in Council:
| 39. (1) An absolute surrender or designation is void unless |
| (a) it is made to Her Majesty; |
| (b) it is assented to by a majority of the electors of the band |
| (i) at a general meeting of the band called by the council of the band; |
| (ii) at a special meeting of the band called by the Minister for the purpose of considering a proposed absolute surrender or designation; or |
| (iii) by a referendum as provided in the regulations; and |
| (c) it is accepted by the Governor in Council. |
These provisions of the Indian Act have the effect that neither the interest of the Crown nor that of the Indians in reserve land can be equated to a freehold estate in fee simple. There is only one way in which reserve land could be truly comparable to freehold land held in fee simple. That is by way of absolute surrender to the Crown for the purposes of sale, pursuant to sections 37 to 39 of the Indian Act. However, an absolute surrender extinguishes the Indians' interest in the land and causes the land to lose its character as land reserved for Indians. Upon absolute surrender, such land is no longer reserve land.
That is not the case here. In this case, the land was only surrendered for the limited purpose of leasing. Accordingly, it retains its character as land reserved for Indians with all of the benefits and limitations flowing from that character.
The scheme of the leases in question here pertaining to periodic determinations of "current land value" is, as earlier indicated, a common way of updating rental rates. In most leases, words such as "current land value" will be taken to mean the freehold value because it is open to the lessor, subject to the lease, to sell the freehold estate which he or she holds. However, from the surrender document it is apparent that the land in question in this case is on an Indian reserve and is held by the Crown "in trust to lease the same to such person or persons, and upon such terms as the Government of Canada may deem most conducive to our Welfare and that of our people". The greatest estate in land which can be granted by the Crown on behalf of the Musqueam Band in accordance with its surrender to the Crown is a long-term leasehold interest.
At the time of the Master Agreement the land was leased for 99 years and I think it follows, that for rent renegotiation purposes, the estate and tenure contemplated is a 99-year leasehold. Any greater estate, i.e. freehold, would not recognize the inalienability of the lands and the continuing and residual reserve status of the lands according to the Terms of Surrender. Any lesser estate, i.e. leasehold only for the remaining terms of the leases would, in essence, value the specific leasehold interests and not the greatest estate that could be granted by the Crown on behalf of the Band if it was free to do so and was not bound by the current leases.
Indeed, the defendants do not argue for valuation based on the current leases (except for the prescribed assumptions). Further, valuing the interest granted under the current leases would require that account be taken of the impact on the value of the leasehold interest of the 6% annual rate (if that was lower than prevailing rates in 1995, thereby increasing the value of the leasehold interest), and uncertainty due to rent review, in addition to the declining balance of the lease term, (both latter considerations having the effect of decreasing the value of the leasehold interest). These are not considerations that are relevant in determining current land value because the object and purpose of periodic reevaluation is to treat the land as if it was not encumbered by the existing leases and was free to be leased under newly negotiated terms at the time of each rent review.24
I conclude therefore that the estate and tenure being valued for "current land value" purposes is a 99-year leasehold on the Musqueam Indian Reserve No. 2 unaffected by the terms of the current leases except for the prescribed assumptions in subsection 2(2) of the current leases.
ISSUE 2: DETERMINING THE CURRENT VALUE OF SERVICED MUSQUEAM PARK LAND
Factors Affecting the Value of a Llong-Term Leasehold Interest in Land Located on an Indian Reserve
The approach to valuation has been a sensitive issue in this case. The plaintiffs say that treating the land in Musqueam Park by having regard to its Indian reserve status is discriminatory and contrary to section 15 of the Canadian Charter of Rights and Freedoms.25 They say that to consider the inalienability of Indian land unfairly devalues reserve land and wrongly perpetuates the historic disadvantage and discrimination against Indians and their land.26
While I have rejected the plaintiffs' position that the lease provisions require fee simple value to be used for valuing the subject land I cannot, without analysis of the market evidence, rule out that fee simple off-reserve values cannot be used to help determine current land value in Musqueam Park. If it is demonstrated by market data that the subject land has an actual current value comparable to the value of fee simple land, it would be wrong to ignore fee simple data. If, on the other hand, market evidence reveals that the actual current value of land on the Musqueam Indian Reserve is not comparable to off-reserve fee simple land, it would be artificial and not consistent with the words of the leases to value the Musqueam Park land equivalent to those fee simple values.
For this purpose, I turn to the evidence of factors that might negatively affect the value of a long-term leasehold interest in land on an Indian Reserve to see whether such an interest is likely to have a lower, as opposed to a substantially similar, value than nearby off-reserve land. Because of the sensitive nature of the issue, I summarize and cite examples from the evidence in some detail.
One consideration is the Indians' jurisdiction over the land and uncertainty relating to such matters as property taxation and, in particular, assessment for property taxation purposes by the Indian authority. Another is the publicized unrest on Indian reserves in British Columbia including road blockades in Penticton and Douglas Lake.27 A further reason is that non-natives cannot stand for election to the body governing the reserve, the Indian Band Council. Non-Indian residents have no vote on issues such as planning, zoning or taxation. Ministerial approval is needed for certain sales or mortgages or construction. Finally, services provided by the City of Vancouver are contracted but permanent arrangements have not been finalized.28
Plaintiffs' appraiser Johnston's evidence before the Musqueam Indian Band Board of Review in 1993 which he reconfirmed in evidence before this Court was:
| Q Now, in section 3, I note from your title, is the value of property as a freehold within the Musqueam Indian Reserve. Why didn't you apply the values that you estimated in section 2 in order to value the property as a freehold within the Musqueam Indian Reserve? |
| A I don't think the two are the same. |
| Q And why do you believe they aren't the same? |
| A Property that's owned within the city of Vancouver has the historical privileges of ownership attached to it and we have a long history of how that property is administered by the city and by the governing authority. To my knowledge, there is no freehold interest on the Reserve and if such were to be created we would be uncertain at this time as to what those rights would involve and how they would be politically administered. Consequently, I think there would be a difference in value and I don't think the freehold sales from Vancouver would illustrate freehold on the Reserve. |
| Q Now, if I understand you, Mr. Johnston, you're saying there's a bundle of rights that are associated with freehold off the Reserve and a different bundle of rights for residents located on the Reserve, is that correct? |
| A Well, that's almost correct. I don't know what the bundle of rights would be on the Reserve. It appears that it would be different from what we're used to in the City of Vancouver, just judging from what I see under the leaseholdings. |
| Q Then how does the fact that the property, 4222 Musqueam Drive, being located on the Reserve, how does that affect the value of the freehold? |
| A Well, I think it limits the value of the freehold somewhat in that if there is uncertainty as to what rights will attach to ownership, whereas in Vancouver, in the perception of the purchaser, there is very little uncertainty because the record is there and they know what their rights are. |
| Q In your opinion, is the market value of the freehold off the Reserve different than on the Reserve? |
| A Yes, I believe it is. |
| Q And why is that so? |
| A I believe that's so because of the uncertainty, number 1.29 |
The evidence of Bruce Evans-Atkinson, an appraiser for the assessor for the Musqueam Indian Band in the 1993 proceeding before the Musqueam Indian Band Board of Review states in his appraisal report, entered in the proceedings before this Court:
| Due to the remaining terms of these leases, the impact of the length of the lease term would be expected to be of minor significance in estimating the value of the properties as if held in fee. However, the significant reduction in the amounts being paid for these interests is indicative of the fact that they represent the prices for properties being traded on the Musqueam Indian Reserve. A valuation of fee simple interest would have to ignore the ownership of the properties by the Indian Band.30 |
Mr. Johnston agreed with this position in evidence before this Court.31
The decision of the Musqueam Indian Band Board of Review dated January 26, 1994 tendered as an exhibit before this Court, states:
| Unquestionably there is a difference between the leasehold market values properties are achieving on the Musqueam Indian Reserve and what similar properties are achieving on a fee simple basis off the reserve in spite of lease terms that have in excess of 70 unexpired years. The evidence from this hearing indicates that properties in the prepaid area of Salish Park are achieving values of about 68% of fee simple values off the reserve while Musqueam Park properties are at a level of about 54%. Both appraisers confirm a disparity in their valuations, albeit to a lesser degree, suggesting values on a leasehold basis in the order of 74% to 78% of estimated fee simple values if the properties were located off the reserve.32 |
At page 16 the Board states:
| The evidence is clear that market values of the leasehold interests on the reserve are markedly different than the fee simple interests off the reserve even after adjustments for physical dissimilarities and in spite of the lengthy leases in place. The factors that account for those differences may be varied and somewhat intangible. |
The evidence of plaintiffs' appraiser Johnston before this Court was:
| The controversies surrounding leased Indian lands referred to by Mr. Oikawa have intensified during the past ten years or so, and have had a negative impact on both the marketability and the value of Salish Park dwellings.33 |
Mr. Johnston expressed the view that there is no suggestion these difficulties will not continue into the future.34
Plaintiffs' appraiser Grant attempted to demonstrate that recently, land in the Musqueam Reserve would achieve a value comparable to fee simple land off the Reserve. However, he did acknowledge that the sales data used by the defendants' appraiser pertaining to the period prior to June 8, 1995 did reflect a lower value than freehold lands, although he says that "... this may have been an anomaly":
| With regard to the supplemental Addendum dated April 30, 1997, the letter does not reveal which 10 Salish properties are referred to, but it is clear from reviewing the earlier dated sales in the main Oikawa report, that they were during a period of publicized unrest at two or three of the Indian reserves in the province, including the road blockades at Penticton and Douglas Lake and this may have been an anomaly reflecting problems elsewhere.35 |
Mr. Grant performed a comparison of Stahaken subdivision lots (on-reserve land) with Rosehill and Imperial subdivision lots (freehold off-reserve land) in Tsawwassen and concluded there was no measurable difference.36 However, real estate agent Tebbutt for the defendants was of the opinion that Mr. Grant's comparisons between Stahaken on the one hand and Rosehill and Imperial on the other, were not useful because lot sizes, slope, neighbourhood characteristics and other considerations were very different, e.g. traffic and overhead wires are quite different. I accept Mr. Tebbutt's evidence that the comparisons made by Mr. Grant in Tsawwassen are not useful.
Mr. Grant placed some reliance on the comparability of rental rates in the multiple residential Shalimar development on the Musqueam Reserve and rental rates for multiple residential properties off-reserve land. However, apart from Mr. Grant's own admission that the Shalimar comparisons are not a strong basis for estimating the value of land in Musqueam Park, I would observe that a comparison of rents under annual leases is not a useful tool in establishing the value of underlying land when a critical issue is the relative risk to leaseholders who improve property under long-term leases. A major component of risk is whether the leaseholder is going to be able to dispose of his or her leasehold interest including improvements and at what price. These are not considerations that affect tenants under annual leases. Therefore, the Shalimar evidence is not helpful.
Defendants' appraiser Oikawa, states:
| Such lands are, however, very different compared to the subject. Specifically, the subject lots are unique because they are a part of an Indian Reserve (IR2). The reserve situation is considered significant, particularly in terms of uncertainties related to issues such as property taxation, Native self government, servicing, etc.37 |
| The key conclusion is that the leasehold property sold at a price only $73,750 higher than the vacant freehold lot, despite being improved with a large, modern custom-built home worth several hundred thousand dollars. In this instance, it is clear that the leasehold and Indian Reserve aspects had a significant negative influence of the marketability and value of the property. |
| ... |
| Overall, the fact that a leasehold property improved with a very substantial and attractive home sells for only slightly more than the land value for a fee simple lot indicates that the value of leasehold land on Indian Reserve must be discounted substantially from freehold value.38 |
The defendants' real estate agent witness Tebbutt states, with respect to the comparison of freehold land and leased Indian reserve land in Tsawwassen:
| In my opinion, there is a significant difference in the current market value of lots situated on the Stahaken subdivision and the immediately adjacent lots situated on freehold fee simple land.39 |
At page 4, he states:
| On the basis of the foregoing sales data, and my own experience as a realtor for 20 years in this area, I believe the unimproved lot values on Stahaken would sell for approximately 50% of similarly situated land on the fee simple freehold portion of English Bluff/Pacific Drive. |
| In my experience as a realtor, the paramount concern expressed by potential purchasers of lots and/or improved properties on Stahaken is a perception of controversy and uncertainty associated with lots situated on Indian Reserve lands. |
| Recent events, which have been expressed to me by purchasers as concerns, include the change in jurisdiction for the collection of property taxes and provision of local services from the municipality to the Indian Band along with recent disputes between the Tsawwassen Indian Band and the Municipality of Delta regarding a sewage treatment plant servicing lands situated below English Bluff. |
City of Vancouver's assessor Jones stated in his evidence:
| Q. And what would be the second part? |
| A. Probably a lot of the adverse publicity that had been surrounding -- |
| Q. Indian reserve Lands. |
| A. Specifically the Musqueam lands at that time. |
| Q. And some of that controversy included the change of tax jurisdiction? |
| A. It started with that and went on into the lease renewals. |
| Q. Yes. And in fact, you, yourself personally observed that the residents on the Musqueam Reserve exhibited fear about the issue of taxation and the issue of services that would be provided following the change over? |
| A. During the early nineties articles in the newspaper or on radio were quite common dealing with that type of thing. |
| Q. And the concerns went to such things as, is the garbage going to be picked up, to is there going to be water and sewer services? |
| A. That was some of the things that were mentioned. |
| Q. So there was a level of uncertainty and controversy? |
| A. Yes. There had been no long term contract with the City of Vancouver to continue providing those services and that was the upshot of the concerns, that those things may not happen. |
| Q. Yes, and that fear spilled over into the marketplace as well? |
| A. Yeah. Real estate market is very sensitive to adverse criticism. |
| A. As the real estate market is very sensitive to adverse criticism. |
| Q. You'd accept the proposition that nothing will hurt real estate more than controversy. |
| A. I think that's a pretty fair statement. |
| Q. I think it's a quote -- from you. |
| A. I would agree with it then.40 |
The evidence amply supports the proposition that land on the Musqueam Reserve may be expected to have a lower value than neighbouring fee simple land. The factors affecting land value on the Musqueam Reserve do not constitute the imposition of artificial or discriminatory considerations by this Court. The appraisers and real estate agent who have testified have observed that the marketplace values leased Indian reserve land at less than fee simple land and have provided substantive reasons, which happen to be linked to the nature of that land, as to why this occurs.
This lower value is not significantly related to the leasehold aspect of the interest granted by the Crown on behalf of the Band. Mr. Bruce Evans-Atkinson before the Board of Review found the value of a long-term lease, other things being equal, is very close to freehold value at the commencement of the leasehold and Mr. Johnston agreed with this evidence. Mr. Grant stated that at the start of a long-term lease of land, there is no discernable difference between the value of leasehold and freehold interests.41 Mr. Oikawa also found that the leasehold versus freehold factor was not of significance at this time (although twenty years ago or more, it was, in his opinion, a more significant factor). Mr. Jones thought the market did consider a leasehold to have a lesser value than freehold but he seemed to be alone in this view. I accept the view of the appraisers that at the commencement of a long-term lease, all other things being equal, there is no material difference between the value of a leasehold and freehold interest in land. Having regard to the fact that current land value presumes a long-term lease of land on the Musqueam Indian Reserve No. 2, this leaves any material difference between the value of freehold land off the Reserve and leasehold land on the Reserve attributable to the Indian reserve feature of the reserve land.
Based on the foregoing evidence, I conclude that land in Musqueam Park will have a lower value than neighbouring fee simple land off the Reserve, that the lower value is essentially attributable to the Indian reserve feature of the land and not the leasehold feature and that the lower value is supported by convincing evidence of both the plaintiffs' and defendants' witnesses.
Evidence Before the Board of Review
In evidence before the Musqueam Indian Band Board of Review in 1993, Mr. Johnston testified that selected properties in Salish Park had a value of approximately 78% of "comparable" freehold properties. Other appraisal evidence before that Board of Review was to the effect that Salish Park properties had a value of 74% of off-reserve properties. The Board found the value to be 68% of off-reserve properties.42
However, that Board of Review made no allocation between land and improvements due to the inadequacy of evidence for that purpose. Nonetheless, there is no evidence of tear downs of dwellings in Salish Park and therefore the vast majority of the difference between Salish Park on-reserve and southwest Vancouver off-reserve values would have to be attributable to land. Taking account of land only, the Salish Park land value compared to off-reserve freehold land would be worth something less than the percentages referred to in the Board of Review decision. Further, the Board of Review was dealing with evidence of values as of July 1, 1992 and between July 1, 1992 and June 8, 1995 there had been a significant increase in off-reserve freehold land values " Mr. Grant calculated an increase of .9% per month. Accepting that up to 1995 Salish Park land values suffered from uncertainty pertaining to its reserve status, increases in land value off the reserve would have outstripped increases in Salish Park up to that time with the effect being to further reduce the value of Salish Park land as a percentage of off-reserve freehold land value.
Land Assessment in 1995/96 Pursuant to Board of Review Decision
The 1995/96 assessments of land in Musqueam Park based on the Board of Review decision using on-reserve comparables in Salish Park were set forth in exhibit 16. The average land assessment was approximately $349,000, 57% of Mr. Grant's fee simple average value for June 1995 of $607,000. There are weaknesses with this comparison because, amongst other things, the assessments relate to different time periods, i.e. June 1995 versus 1995/96. Nevertheless, the comparison does provide an order of magnitude difference which indicates a substantial discount for on-reserve versus off-reserve land values.
Evidence of Real Estate Agent Tebbutt
Mr. Tebbutt's direct evidence was that on-reserve lots in the Stahaken subdivision in Tsawwassen had a value of approximately 50% of comparable off-reserve land held in fee simple.43 During his oral evidence he suggested that the value might be in the 40% to 45% range.44
Evidence of Appraiser Oikawa and Criticisms by Appraisers Johnston and Grant of the Oikawa Approach
It will be recalled that Mr. Oikawa's evidence started with recent transactions involving improved Salish Park properties. Depreciated replacement cost of improvements was deducted from selling prices to arrive at the residual market value of the land. Using that market value of Salish Park land, he made adjustments to reflect land in Musqueam Park to arrive at the value of Musqueam Park land. On average, Mr. Oikawa's Musqueam Park values were approximately 42% of Mr. Grant's fee simple values.
However, there are alleged weaknesses to Mr. Oikawa's use of the land residual method applied to Salish Park values. Mr. Johnston criticized Mr. Oikawa for using Salish Park data because of the influence of the declining lease term, negatively affecting Salish Park values. He also said that the land residual method suffers from the difficulties of accurately estimating accrued depreciation on the buildings, particularly in respect of "economic obsolescence", namely the decline in value caused by external forces over which property holders have no control, as distinct from the physical deterioration or functional obsolescence considered by Mr. Oikawa.
Mr. Grant criticized the Oikawa approach on a number of grounds including the following. The land residual approach fails to take account of economic obsolescence. Salish comparables are inapplicable because one of two access roads to the Salish subdivision is "through the Musqueam Reserve, some of which is in very poor condition" whereas access to the subject subdivision is "directly from South-West Marine Drive, with no indication that the subject development is a portion of a Reserve".45 No account is taken of the fact that Salish leases are some 20 years shorter than the subject leases. Current sales data in Salish Park indicates a higher price situation than in 1994 and 1995, contrary to the current market generally, suggesting that any publicity that may have adversely affected Indian lands was short-term in nature and should be ignored. Finally, Mr. Grant says that the 6% annual rate was significantly less than the long-term mortgage rate prevailing at the time of rent review, i.e. 10%. He says Mr. Oikawa ignored the low 6% rate which would permit occupancy of a more valuable property (and thus a higher current land value) than if long-term mortgage financing had to be resorted to.
I have carefully considered the Johnston and Grant criticisms of the Oikawa land residual approach using Salish Park data.
A. Lease Term Effect:
As I concluded above, the evidence of all appraisers suggests that all other things being equal, today the market values land under long-term leases at or close to freehold values at the commencement of the lease term. The only consideration here is whether the Salish Park values are a good proxy for Musqueam Park values notwithstanding that the Salish Park leases had unexpired terms of 78 years versus 99 years which is the term for determining "current land value" in Musqueam Park. Mr. Johnston conceded in evidence that mathematically any difference would be very small. Mr. Oikawa was of the same view. In the circumstances, I am satisfied that any adjustment for difference in lease terms would be minimal.
B. Economic Obsolescence
The economic obsolescence that is relevant in this case arises from the significant and rapid increase in land values in southwest Vancouver and the virtual unavailability of vacant lots in the area. This is what has given rise to the "tear downs" of dwellings on off-reserve fee simple land that otherwise are not physically or functionally fully depreciated. The dwellings, while habitable, are of a quality and/or size that do not match the value of the land. The evidence was that as land value exceeds $500,000, dwellings that had originally been constructed when the land was worth much less are being torn down in favour of much more expensive dwellings that justify the expenditure of $500,000 or more for land.
In the case of some off-reserve transactions, the improvements remained. However, the appraisal evidence was that even so, they added little or nothing to the value of the property. Thus, although a particular improvement may not have been torn down it may still be economically obsolescent. It seems that if, as Mr. Grant put it, everyone in an area was building 4,000 square foot homes, a 1,000 square foot home would not be the highest and best use of the land. A 1,000 square foot home would be economically obsolescent.46
The converse is that where there is no evidence of tear downs, and the improvements were constructed years ago when land values were less, the land is unlikely to have a current value of $500,000 or more. Otherwise, tear downs would be observed on that land. It is the absence of observed tear downs that suggests that the highest and best use of the land remains the dwelling already located on it.
In theory, economic obsolescence may be attributable exclusively to land or improvements, or to both.47 However, where increased land values give rise to economic obsolescence, that economic obsolescence must be imputed exclusively, or at least predominantly, to the improvements. That this is so is proven by the evidence of tear downs of the improvements and construction of new more expensive dwellings on the land.
In Salish Park there is no such observed tear down activity. Nor is there other evidence that would signal that the existing dwellings were not the highest and best use of the land.48 Nonetheless, Mr. Oikawa did say that there might be some economic obsolescence in Salish Park but that it would not be great.49 Because there is no evidence of tear downs in Salish Park, it is difficult to justify any significant deduction in the value of improvements for economic obsolescence.50
In his evidence, Mr. Johnston seemed to suggest that to the extent Indian reserve controversies have negatively impacted on values in both Salish Park and Musqueam Park, the land residual approach as used by Mr. Oikawa wrongly assigns the loss entirely to the land rather than at least in part to the dwellings. If some of the loss is attributable to the dwellings, the residual land value under the land residual method would be higher than as found by Mr. Oikawa. However, the Indian reserve controversies to which Mr. Johnston refers are locational in nature. They do not pertain to the value of the dwellings. They are land related. There is no suggestion that the Indian reserve controversies change the fact that these dwellings represent the highest and best use of the land, or that the value of the land and dwellings together add up to less than the bare land value, i.e. that the land has a negative value. In either of those cases it might be valid to attribute loss in value to the dwellings, but neither condition applies here. Accordingly, I see no reason why the loss in value resulting from the Indian reserve controversies would be attributable to the dwellings.
Mr. Grant performed an exercise of comparing Salish Park transactions to southwest Vancouver transactions to attempt to demonstrate that accrued depreciation on improvements was similar in both Salish Park and southwest Vancouver.51 The objective was to show that Salish Park dwellings were incurring economic obsolescence in a manner similar to southwest Vancouver fee simple dwellings. The difficulty with the exercise as I see it is that it is reliant on treating the land in Salish Park as if it were off-reserve freehold land and valuing it as such. However, I have found that freehold land values are not applicable to on reserve leased lots. I cannot see that it is helpful to assume freehold land values in Salish Park and I do not place weight on this evidence.
In the absence of evidence of tear downs in Salish Park, but having regard to Mr. Oikawa's evidence, I would not ascribe more than minimal economic obsolescence with respect to Salish Park dwellings.
C. Double Discounting
Mr. Grant's argument on this point is based on the 6% annual rate under the leases being less than the prevailing long-term mortgage rate in 1995, i.e. 10% according to him. He says that if a lower value is attributable to Musqueam Park land because it is leasehold and not freehold, a double discount occurs. As best as I can understand the argument, it is based on comparing occupancy costs. Assuming the market would equalize occupancy costs, if a leaseholder is required to pay only 6% as compared to a freeholder paying 10%, the underlying value of the leased lot would be greater than if it was freehold. To treat the leasehold lot as worth less than the freehold lot when the lease rate is less than the mortgage rate penalizes the Band and grants a windfall to leaseholders.
I have difficulty with the comparison Mr. Grant attempts to make for a number of reasons. For example, I do not think occupancy cost is the only consideration in attempting to compare the value of freehold and leasehold interests. However, suffice it to say the 6% rate is a term specific to the current leases. I have already found that the terms of the current leases, except for the assumptions that are expressly required to be made, should not affect the calculation of current land value. The basic point is that what is being valued is "current land value", i.e the current value of the 99-year leasehold interest, and not of the existing leasehold interest. If the current leaseholds were being valued, it would be relevant to take account of the 6% annual rate. However, it would then also be necessary to take account of the declining lease term and the uncertainty occurring at each rent review. The 6% rate as well as these other considerations arising from the current lease are independent of the calculation of current land value and cannot affect that calculation.
D. Access Affecting Salish Park Values
There is a conflict between Mr. Grant and Mr. Oikawa as to whether Salish subdivision values are influenced by one access being through poor conditions on the Musqueam Reserve. Mr. Grant has not provided any quantitative estimate of what the access effect would be. In the circumstances, I cannot attribute more than a minimal valuation difference between Salish Park and Musqueam Park for this factor.
E. Temporary Impact of Adverse Publicity
Mr. Grant suggests that Salish Park values may have been temporarily impacted in 1995 by adverse publicity involving Indian bands. In his view, this factor may be less important today, having regard to recent increases in Salish Park values as compared to the market in general in southwest Vancouver. However, other evidence suggests the effect of such adverse publicity continues and may be more severe now than before, and the transactions used by Mr. Grant to arrive at his conclusion about recent increases in Salish Park may not be representative.52 While unusual temporary anomalies may, for some purposes, be ignored or discounted in assessing values, the leases are specific that current land value is to be calculated at the time of renegotiation which is to be immediately before the commencement of the relevant twenty-year period, i.e. immediately before June 8, 1995. The evidence is that the adverse publicity affected land values at that time and accordingly it cannot be ignored for purposes of determining a fair rent under the leases.
F. Weaknesses of Land Residual Method
While for appraisal purposes a direct comparison approach is to be preferred, it is not possible in this case unless fee simple values could be used to value Musqueam Park lots or unless there was vacant land in comparable Indian reserve property such as Salish Park. I have found that it would be inappropriate to consider off-reserve fee simple values as Musqueam Park land values and there is no vacant land in Salish Park. Therefore it is necessary to resort to the land residual method. The land residual method has previously been accepted by this Court (Elworthy v. Canada, Court File T-1788-80, December 16, 1981, per Collier J. (F.C.T.D.)).
Nonetheless, the estimation of accrued depreciation of dwellings based on cost tables suffers from the weakness that it is based on assumptions, averages and estimates and is not market based. Further, to the extent economic obsolescence may be a factor, and Mr. Oikawa allowed that it might, although minimally, the calculation made by him does not take this into account. However, the weaknesses identified with the land residual approach used by Mr. Oikawa are not systematically biased up or down. While the Supreme Court of Canada has cautioned that the land residual approach "should be used with great care" (City of Halifax v. S. Cunard & Co. Ltd., [1975] 1 S.C.R. 458, at 464), I find that it may be used here in deriving an order of magnitude indication of the value of Musqueam Park land. I do not think Mr. Oikawa advanced the Salish Park land residual approach as a "mathematically accurate" estimate of Musqueam Park value and I do not treat it as such.
Conclusion Respecting Valuation
The evidence, including the evidence of the plaintiffs' own witnesses, is overwhelming that the market values land under long-term leases on an Indian reserve at a significantly lower level than off-reserve fee simple land in neighbouring areas. The difficulty is to quantify the difference.
Needless to say, land appraisal is not an exact science. That is particularly the case here where the direct comparison approach is not available and the land residual approach suffers from the weaknesses earlier indicated. Nonetheless, the Court must make a determination based upon the evidence presented.
Mr. Oikawa agreed with Mr. Grant's "fee simple" values if, contrary to his view, fee simple values were applicable to Musqueam Park.53 There is evidence that accounting for the on-reserve character of the land, Musqueam Park land value would range between 40% and up to perhaps 70% of the hypothetical fee simple value. I place greater weight on the evidence of Mr. Oikawa towards the lower end of the range because it was directly addressed to the issues in this case.
In this respect, Mr. Oikawa's addendum evidence compared ten Salish Park properties sold in the period June, 1994 to November, 1995 with eleven West Side properties sold between June 1994 and October 1995. Mr. Oikawa states:
| The average Salish Park price is approximately $305,000 less than the average price of the eleven West Side properties. Given the similarity of the properties from a physical standpoint, it is apparent to us that this discount reflects the Salish Park properties' location on leased Musqueam Indian Reserve land.54 |
Mr. Oikawa says that if the $305,000 difference is deducted from Mr. Grant's hypothetical fee simple average value, the resulting land value would be close to his Musqueam Park range of $225,000 to $280,000. I calculate that the resultant value would be $302,000, i.e $607,000 minus $305,000 or close to 50% of the hypothetical fee simple value.55
The appraisal evidence involves some degree of rounding. Given its lack of precision it would reflect a degree of accuracy that would not be consistent with the evidence for me to select one or more specific numbers advanced by the parties in arriving at current land value. As will be apparent, I do use a hypothetical fee simple value as a benchmark to determine the actual value of Musqueam Park land. The hypothetical value is the value if Musqueam Park land was off-reserve and held in fee simple title. Based on the evidence before me I conclude that the hypothetical fee simple value of serviced land in Musqueam Park would, on average, approximate $600,000 per lot or $45,000,000 for the entire 75 lots in the subdivision. The actual value of such serviced land having regard to the long-term leasehold interest and Indian reserve features pertaining to it would be approximately 50% of the fee simple values - $300,000 per average lot or $22,500,000 for all 75 lots.
Counsel for the defendants informed the Court that the defendants have agreed to the distribution of land value among the Musqueam Park lots as set forth in Mr. Oikawa's evidence.56 There is no need to alter the relationship of value set forth by Mr. Oikawa so long as the total equals $22,500,000. For some reason, 7 lots did not appear in Mr. Oikawa's table.57 Therefore, I cannot calculate the precise increase required in each case. I expect the increase required is about 19% but there is no need to speculate. The defendants should prepare a table consisting of Mr. Oikawa's lease lot values for the 75 lots, and increase the value of each lot proportionately so that the total is $22,500,000.
ISSUE 3: SERVICING
The Parties' Positions
Up to this point, serviced current land value has been determined. The question now to be addressed is whether and to what extent servicing costs should be deducted from the serviced land value in Musqueam Park to comply with the prescribed assumption of paragraph 2(2)(a) of the lease "unimproved lands in the same state they were in on the date of this agreement". The dispute relating to servicing involves both the interpretation of the rent review clause of the leases and the components of servicing costs. The plaintiffs say servicing costs (except landscaping) should not be deducted to determine current land value but that if they are deducted, only "hard costs" are relevant. The defendant says that all servicing and development costs must be deducted.
The plaintiffs say that if the cost of servicing is to be deducted, the appropriate deduction would be $28,635.19 per lot.58 This cost represents "hard costs" for water, storm sewers, sanitary work, utility costs (heat, lights, hydro etc.) and off-site costs but not roadworks. The defendants say that costs to be deducted amount to $117,818 per lot.59 The defendants' hard costs include roadworks which were excluded by plaintiffs. The defendants' costs also include "soft cost" such as sales commissions of the developer; municipal fees; developer's profits; financing costs; property purchase tax; and property taxes during holding.
Analysis Respecting Servicing
The leases contain the following clauses:
| AND WHEREAS the land described in the said Master Agreement has been subdivided, and serviced as set forth in the terms of the said Agreement,... |
| NOW THEREFORE THIS AGREEMENT WITNESSETH that in consideration of the rents, covenants, and agreements on the part of the Lessee herein reserved and contained and covenants and agreements of the Lessee as set forth in the Master Agreement between the Minister and the Lessee, the Minister HEREBY DEMISES AND LEASES unto the Lessee that certain parcel or tract of land situate, lying, and being in the City of Vancouver... |
| [emphasis added] |
By virtue of these clauses in the leases, the Master Agreement is incorporated by reference into each lease. Both plaintiffs and defendants agree with this interpretation.60 As a result there are two provisions, one in the leases themselves (paragraph 2(2)(a)), and one in the Master Agreement (paragraph 15(2)(a)) that is incorporated into the leases, that read almost identically. It is obvious that paragraph 2(2)(a) of the leases has been lifted from paragraph 15(2)(a) of the Master Agreement.
To which "agreement" is reference made in subparagraph 2(2)(a) of the leases? If it is the Master Agreement, the state of the lands on June 8, 1965 were clearly unserviced. If it is the lease, the state of the lands was, according to the preamble in the lease, serviced.61 Words must always be construed having regard to context. The context here indicates that "this agreement" in paragraph 2(2)(a) of the lease means the Master Agreement. I arrive at this conclusion for the following reasons.
First, the preamble in the lease makes express reference to the land described in the Master Agreement having been subdivided and serviced. However, paragraph 2(2)(c) requires the parties to assume that the lands are in a subdivided area. If the agreement referred to in paragraph 2(2)(a) was the lease, which itself provides that the land has been subdivided, it would not be necessary for the parties to assume, on rent review, that the land is in a subdivided area. The only reasonable inference is that paragraph 2(2)(a) of the lease was lifted from paragraph 15(2)(a) of the Master Agreement with no intent to change the antecedent agreement and the reference to "this agreement" is a reference to the Master Agreement.
Second, if "this agreement" referred to the lease, it would follow from the preamble to the lease that the state of the land was known to be subdivided and serviced and paragraph 2(2)(a) would surely have been worded to the effect:
| unimproved subdivided and serviced lands. |
rather than:
| unimproved lands in the same state as they were on the date of this agreement; |
It was not, necessarily implying that "this agreement" must mean the Master Agreement.
Third, the rent paid in the first 30 years is approximately $300 to $500 per lot. This rent was derived from the aggregate rent for the entire subdivision set forth in section 15 of the Master Agreement. This was before servicing took place, and obviously excluded servicing costs.62 Why rent for the first 30 years would exclude compensation for servicing, but for purposes of rent review after thirty years, would include such compensation is an inconsistency that has not been explained. If the parties intended such a change I would think there would have been explicit reference in the lease. There is no such reference.
Fourth, construing the date of "this agreement" as being the date of the Master Agreement accords with reality. The Band provided unimproved, undeveloped land. The developer expended the funds and assumed the risk of development, including servicing costs. I have difficulty thinking that the parties intended that at rent review, the Band was to receive compensation in respect of servicing and development for which it did not pay and for which it was not responsible.
For these reasons, I conclude that "this agreement" referred to in paragraph 2(2)(a) of the lease is the Master Agreement and that the lease requires the parties to assume that for rent review purposes, the land is unserviced.
I now turn to whether the prescribed assumption in paragraph 2(2)(b) of the lease "lands to which there is public access" implies that the existence of roadworks is to be assumed for purposes of rent review as argued by the plaintiffs. I do not think it does. If, as I have found, the date of "this agreement" in paragraph 2(2)(a) of the lease means the date of the Master Agreement, "in the same state" refers to the time prior to any roadworks having been done on the land. To infer from paragraph 2(2)(b) that roadworks are implied in the words "public access" would lead to an inconsistency between paragraphs 2(2)(a) and 2(2)(b).
Further, there are numerous express references to roads in the Master Agreement, to which the lease was a schedule and which was incorporated by reference into the lease. Roads were not treated in the Master Agreement in any manner different than other services. If the parties had intended that the rent review should assume that the relevant lands were to be serviced by roads, the rent review assumptions in the lease would have made express reference to roads.
Finally, as with other services, roads were provided by the developer and the City of Vancouver.63 I do not think the parties intended that the Band be compensated on a rent review for something it did not provide. For these reasons, I do not think that the reference to "public access" in paragraph 2(2)(b) implies that the existence of roads is to be assumed for purposes of rent review.
The plaintiffs then argue that the prescribed assumption "lands in a subdivided area" in paragraph 2(2)(c) of the lease implies that for rent review purposes, the parties are to include the cost of the plan of subdivision. I do not agree. I think the assumption of subdivision is relevant only for the purpose of having rent reviewed on a per lot basis rather than on an aggregate basis. To infer that the reference to subdivision implies that the rent review is to assume that the cost of the plan of subdivision is to be included, would compensate the Band for something it did not provide. There is no reason to believe that rent for the first thirty years, having been established before any plan of subdivision was filed, includes compensation for the cost of a subdivision. Without a pointed indication that there was to be a change for the purpose of rent review, I cannot infer that the cost of a plan of subdivision is to be included for subsequent periods.
For these reasons, all servicing costs must be deducted from the current value of serviced lots in Musqueam Park in order to return the land to the "same state as they were on the date of this (Master) agreement".
ISSUE 4: CALCULATION OF SERVICING COSTS
I now turn to the calculation of servicing costs in order to determine the amount to be deducted from the current serviced land value to return the land to the same state it was in on June 8, 1965. The plaintiffs have taken a firm position that if servicing costs are to be deducted only the "hard costs" should be deducted. They do not provide a rationale for that restrictive approach. As stated by Mr. Oikawa, in order to develop land and bring it to its current serviced value, more than just hard costs are involved. In cross-examination Mr. Grant did not disagree with this approach.64 All costs associated with servicing and development must be deducted to determine current value of "unimproved lands in the same state as they were" on June 8, 1965.
The parties agreed to the quantification of certain "hard costs". However, the plaintiffs did not deal with any of the other costs in any detail or challenge any of the specific calculations. I only have the evidence of Mr. Oikawa that these other costs would be incurred and presumably are reasonable. The costs outlined in Mr. Oikawa's evidence are recognizable as appropriate ones to deduct to return the land to its unimproved state as at June 8, 1965.
While I accept Mr. Oikawa's soft costs as those associated with the valuation of serviced land, an adjustment must be made to account for serviced current value at which I have arrived. A number of development costs are related to the "gross income from lot sales" which he determined to be $19,050,000 as of June 8, 1995 but which I have determined to be $22,500,000 as of that date. These calculations will have to be adjusted to reflect gross income from land sales of $22,500,000.
The servicing and development costs are therefore the agreed upon hard costs plus the soft costs based on serviced current land value of $22,500,000. The result should be allocated equally to each of the 75 lots in Musqueam Park, rounded to the nearest thousand and deducted from the serviced current land value of each lot.
CONCLUSION:
I would increase the value of serviced lots set forth opposite page 49 of exhibit 3, the Oikawa appraisal, (plus the 7 serviced lots not included therein but which undoubtedly Mr. Oikawa has valued) by an amount which will result in the total value of the 75 lots being $22,500,000, 50% of the value if these lots were off-reserve and held in fee simple, i.e. $45,000,000. I would then calculate and deduct servicing costs in the manner outlined above to return the lots to the state they were in on June 8, 1965. The annual "fair rent" for the twenty-year period commencing June 8, 1995, shall be calculated by application of 6% to the resultant figure for each lot.
The defendants are entitled to costs. If the parties cannot agree, the Court will fix the costs upon application of either party.
Within fourteen (14) days from the date of these reasons, counsel for the defendants shall prepare a judgment giving effect to these reasons (including costs) and seek approval as to form and content from counsel for the plaintiffs and submit the same to the Court for signature. If the parties cannot agree as to the form and content of the judgment and submit it to the Court within the time specified, or if one or both parties consider it necessary to seek the Court's directions with respect to the preparation of the judgment in accordance with these reasons, and in particular the calculation of servicing costs to be deducted or cost, either may apply to the Court without delay.
Marshall Rothstein
J U D G E
OTTAWA, ONTARIO
OCTOBER 10, 1997
__________________1 Average based upon 4 lots including all servicing (exhibit 2, page 2).
2 Average based upon 75 lots including all servicing except landscaping (exhibit 16, pages 146 to 148). (Defendants' appraiser Oikawa calculated the average lot value estimated by Mr. Grant at $592,000 " (transcript, page 1250) but I cannot verify that average).
3 Average based upon 68 lots excluding servicing (exhibit 3, facing page 54).
4 Based on the total rent for the entire subdivision as set out in paragraphs 15(1)(b), (c) and (d) of the Master Agreement, dated June 8, 1965, divided by 75 lots.
5 The area of the subject land is referred to variously in the evidence as consisting of different acreages, e.g. 38.49 acres, 40 acres and 40.53 acres. Nothing turns on the exact area.
6 A portion of the land was encumbered by a prior lease, so leases for that land appear to have been provided later. Nothing turns on this distinction.
7 On the lease for lot 36, the date is said to be May 16, 1966, although the document does not appear to have been signed until August 1966. For the reasons I will give, nothing turns on the difference in these dates and I accept that the lots which were the subject of the leases were each serviced prior to the date of the leases.
8 Gulf Oil Canada Limited v. Montreal Harbours Board (September 15, 1972), Federal Court file T-1478-71, at page 19 per Kerr, J.
9 Although in Golden Acres the lease contained the words "as if held in freehold", suggesting that a hypothetical off-reserve value might have been intended, the judgment in that case did not determine a hypothetical off-reserve value.
10 Plaintiff's closing argument, paragraphs 73, 82.
11 Transcript, pages 2109-2110.
12 See exhibit 3, page 20, 1992 - 3 sales, 1993 - 3 sales, 1994 - 1 sale, 1995 - no sales up to June 8, 1995. A number of properties were available for sale but did not sell apparently due to the softness of the market due to the uncertainty created by the rent review.
15 Salvage was negligible or negative after the cost of tear down and removal. Transcript, pages 111-113.
16 During argument, counsel for the plaintiffs submitted that Mr. Grant's (as opposed to Mr. Johnston's) more conservative valuations should be adopted by the Court (Transcript pages 1800-1801). The defendants' appraiser George Oikawa did not use a direct comparison approach with neighbouring fee simple properties for valuation purposes. However, he agreed that if the subject properties were to be valued on a fee simple basis, their land values would be approximately as estimated by Mr. Grant (Transcript, page 1484).
23 Such as the uncertainty due to rent review, declining balance of the lease term, and the 6% annual rate (see my conclusions at the end of this section).
24 Plaintiffs also argued that an agreement entered into by the Crown on behalf of the Musqueam Band wherein the Band would receive diminishing rental returns over the 99-year term of the lease is antithetical to Crown's fiduciary duty to obtain proper market value in leasing surrendered Indian land. As I have concluded that the declining lease term is not relevant to the current land value, I need not consider this argument.
25 Part I of the Constitution Act, 1982, being Schedule B of the Canada Act 1982 (U.K.), 1982, c. 11.
26 See transcript pages 41 and 42.
27 E.g. evidence of Grant, exhibit 23, page 35, transcript page 650; evidence of Johnston, transcript, page 231.
28 E.g. evidence of Johnston, transcript, pages 290-292.
29 Evidence of Johnston, transcript, pages 296 to 299, and exhibit 14, pages 18-20.
36 Exhibit 16, pages 140 and 170, exhibit 23, pages 33 and 34.
38 Exhibit 3, tab 2, pages 6-7.
42 Exhibit 11, pages 6, 7 and 18.
48 There may well be physical and functional depreciation of the dwellings in Salish Park. However, these conditions are both accounted for in the calculations made by Mr. Oikawa. Exhibit 3, page 45.
52 Evidence of Johnston, transcript, page 231, Oikawa pages 1208 and 1209.
55 Mr. Oikawa calculated the average hypothetical fee simple value derived by Mr. Grant as $592,000 but I believe this was in error. The mathematically correct average is $607,000.
58 Based on the parties' agreed estimate of costs for servicing the lots, less the costs for roadworks, divided by 75 (Exhibit 41).
59 Based on Mr. Oikawa's estimated servicing costs (exhibit 3, opposite page 50, and transcript, page 1279) as modified by the parties' agreement respecting servicing costs (Exhibit 41). The total servicing costs in the agreement replace Mr. Oikawa's estimates for "hard costs" and "design and survey fees", and the total is divided by 75.
60 Transcript, pages 1829 and 2072.
61 According to the evidence of Mr. Grant, although services were not completed when all the leases were executed they were completed over the next two months. I do not think evidence outside the lease document itself is admissible on this point. The leases provide that the land has been serviced and in the absence of some ambiguity which is not apparent here, the terms of the leases govern.
FEDERAL COURT OF CANADA TRIAL DIVISION
NAMES OF SOLICITORS AND SOLICITORS ON THE RECORD
COURT FILE NO.: T-1545-96
STYLE OF CAUSE:MUSQUEAM INDIAN BAND ET AL v.MARY GLASS ET AL
PLACE OF HEARING! VANCOUVER B.C.
DATE OF HEARING: JUNE 10-13,17-19 and 23-27,1997 REASONS FOR JUDGMENT OF ROTHSTEIN J. DATED: OCTOBER 10, 1997
APPEARANCES:
SOLICITORS OF RECORD ROBERTS AND GRIFFIN VANCOUVER B.C.
FOR PLAINTIFFS
McALPINE AND ASSOCIATES VANCOUVER B.C. FOR DEFENDANTS OTHER THAN DIANE R.FORSYTHE AND and JAMES A. FORSYTHE
D.W.ROBERTS Q.C. and MS.B.J.CURRAN
FOR PLAINTIFFS
J.McALPINE QC. and H.A.MICKELSON
FOR DEFENDANTS OTHER THAN D.R.FORSYTHE and J.A.FORSYTHE WHO WERE NOT REPRESENTED BY COUNSEL