Reviews

The facts

This case involves a compensation claim arising from the expropriation in 1996 of an Easement for Municipal Services in the City of St. John, New Brunswick. The easement was required to accommodate a sanitary sewer pipeline and water main. The property from which the easement was taken was a large tract of waterfront land at MacLaren's Beach on the Bay of Fundy in the City of St. John. The taking involved both a permanent easement and a temporary construction easement area alongside.

Complicating the expropriation was the fact that a railway had once been located on the Claimants' land. Trains had operated through the Claimants' land up to the early 1980's. However, by the date of expropriation, the railway had been formally abandoned and the tracks removed. In 1995, prior to expropriation, the railroad company assigned its interest in the railway right of way to the City. The expropriated easement was located within the area of the Claimants' property formerly occupied by the railroad.

The City carried out the expropriation pursuant to the procedures found in the Expropriation Act, R.S.N.B. 1973, c. E-14. As required by the Act, the City tendered an advance payment on compensation before taking possession of the easement. The advance payment was supported by an outside appraisal performed by Clifford Lawrence of de Stecher Appraisals Ltd. The amount of the advance payment was $1,700.00.

The issues

The primary issue in dispute was the ownership of the land from which the easement was taken. In particular, was there an existing easement or similar interest in the Claimants' land held by the City prior to the expropriation as a result of its agreement with the railroad company. In addition, the court was required to consider the market value of the interest taken, whether the Claimants were left with any value in their residual interest in the easement area and whether there was injurious affection.

The evidence

The parties were far apart in their estimates of fair compensation. The Claimants sought compensation in the amount of $40,600. Their claim was supported by an appraisal performed by David Hildebrand, of Fredericton Appraisal Associates Ltd. Mr. Hildebrand assumed that the Claimants' land was not subject to any easement in favour of the city prior to the expropriation. He estimated the market value of the permanent easement at $12,100 with no reduction for the residual interest retained by the Claimants in the easement area. He also used an annual lease rate of 8% for a period of one year to estimate compensation at $500 for use of the temporary easement area. A further claim was advanced for injurious affection.

For purposes of the advance payment appraisal, Mr. Lawrence was instructed to assume that the City held an easement in the Claimants' property prior to expropriation by virtue of the assignment of the railroad right of way. At the hearing however, Mr. Lawrence produced a second opinion of loss based on the alternate assumption that the City did not have an easement over the Claimants' land prior to the expropriation. Under this assumption, he concluded that $5,154 was appropriate. This figure included an allowance for the temporary easement based upon an annual lease rate of 8% of the fee simple value. He allowed a 50% reduction from the fee simple value for the value of the Claimants' residual interest in the easement area. He also concluded that there was no injurious affection.

The decision

The court found that whatever interest the railroad might have had in the Claimants' land had ceased to exist when the railroad was formally abandoned and the rails removed. At that time, any such railway interest had reverted to the Claimants and there was no railway interest left to assign to the City in 1995. As a result the City had no rights to the Claimants' land prior to the expropriation. It rejected the injurious affection claim but accepted the market value evidence of the Claimants, including the allowance of a 100% loss in market value within the easement area. The court awarded $12,600 in compensation plus costs and interest.

Commentary

The valuation issues are quite typical of utility easement cases. However, what made this case unusual was clearly the dispute over ownership of the land.

The court appears to have heard considerable evidence about the history of railroad operations over the Claimants' property. The railroad branch line was initially authorized by legislation adopted by the Province of New Brunswick in 1856. However, it was not constructed until the 1870's. Railroad operations were never extensive and ownership changed hands numerous times. By the 1980's, the Canadian Pacific Railway was the owner. It applied for and obtained approval from the Canadian Transport Commission to abandon the branch line in 1987 and the rails were removed in 1988.

A significant reason why the ownership dispute arose is because the nature and existence of the railway right of way interest in the Claimants' land was not well documented. For example, the Deed by which the Claimants acquired title in 1982 made no reference to the railway interest. In fact, it appears that the railway right of way was acquired by expropriation when the railway was built. The expropriation legislation then in effect provided few safeguards for property owners. The court describes the railway expropriation legislation of the day as draconian but observes that it was typical of the era. One of the features sadly lacking from expropriation legislation of this early period was any substantive law regarding the nature of the interest acquired and whether the interest would continue even after railroad operations ceased.

There is an interesting hint found in the decision of a bigger issue that has become important in many Canadian communities today. As former railways are abandoned, there is often a public demand for retention of the rights of way either for alternative transportation uses or for recreation. The Trans Canada Trail project is a well known example of a "Rails to Trails" project that utilizes a significant number of former railway rights of way. Of course, where an abandoned railway has been operated over land with no better interest than that held in the Vihvelin property, the railway corridor may no longer be available for alternative uses.

The Claimants were represented by Rodney J. Gillis, Q.C., and Nancy E. Forbes. G. Patrick Gorman and Lynda D. Farrell appeared for the expropriating authority.