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Sale to the authority not good evidence of market value
December 3, 2001

At one time, the law was fairly strict about admissibility of evidence of sales to expropriating authorities. Such evidence was generally not admissible. The policy justification was that normal market forces were not in place where sales were made to an authority having a power of expropriation.

In more recent times, this rule of evidence has been relaxed somewhat. The position now is that evidence of sales to authorities can be examined but the weight to be given to any particular sale depends upon how reflective it is of an open and competitive market. This requires careful examination of the circumstances of each sale.

Although sales to an authority can now be admitted as evidence, few claimants have been successful in relying upon this type of evidence.

In a recent B.C. decision, Pay Less Gas Co. (1972) Ltd. v. British Columbia (Minister of Transportation and Highways) [2001] EXLAW 331, the Claimant attempted to prove the market value of its land by introducing evidence of the price paid by the authority for a similar property located directly across the highway. The authority had acquired this property at about the same time and for the same project. At first glance, the comparison seemed quite reasonable and perhaps the Claimant was confident that the evidence of this sale would be sufficient to win the day because the Claimant did not introduce any appraisal opinion evidence on the market value issue.

Counsel for the Claimant, Dennis Coates, argued that there was no presumption in law against admissibility of the evidence of the sale. Further, he argued that the sale was negotiated in the open market between a willing vendor and a willing purchaser.

However, the Authority's appraiser, Carl Nilsen, testified that he had considered using the sale but rejected it after noting certain deficiencies in an appraisal report which the Authority had relied upon in negotiating this sale. Mr. Nilsen also expressed reservations about the true market nature of the transaction.

In case this wasn't enough to destroy the Plaintiff's argument, the Authority led evidence confirming that the price which it had paid for the nearby property had been influenced by an appraisal that caused it to agree to a price that was in excess of market value. It also introduced a copy of a writ to prove that it had commenced litigation to recover damages for negligence from the appraiser who had prepared the report although there was no indication whether the action had been successful or whether it was being actively pursued by the Authority.

In the end the Board declined to use the evidence of the sale to the Authority. The Board stated that the transaction raised a number of unresolved questions which cast serious doubt upon whether the transaction was a reliable indicator of value for the subject property. The award for market value was therefore decided entirely on the basis of the evidence provided by the Authority's appraiser.

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