T-5370-73
Wong Wing Food Products Co. (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Walsh J.—Montreal, February 2,
3, 4; Ottawa, March 3, 1976.
Expropriation—Montreal, Chinatown—Whether defendant
can charge plaintiff rental for premises it continued to occupy
rent free after acceptance of defendant's offer of indemnity—
Expropriation Act, R.S.C. 1970 (1st Supp.) c. 16, ss. 17,
24(3)(b)(ii),(4)(b)(ii),(5), 29(1), 33(3)—Quebec Civil Code, art.
1634, 2214, 2215—Federal Court Act, s. 17(4) and Rule 420.
The question to be determined is whether defendant can
charge plaintiff rental for premises it continued to occupy rent
free following acceptance of defendant's offer of indemnity in
light of the fact that it has been held in The Queen v. Trustee
Board of the Presbyterian Church in Canada [1976] 1 F.C.
632 that interest must be paid by defendant pursuant to section
33(3) from the date of the offer to the date of judgment.
Defendant moved to amend its defence to claim rental, and
plaintiff countered that its damage claim had been settled, save
for a few items, and that it was too late to make this
counterclaim.
Held, the Court can grant leave to produce the amended
statement of defence under Rule 420. Defendant's right to
make an amendment to claim rental is not prescribed under the
Expropriation Act or the Quebec Civil Code. Section 24(5) of
the Expropriation Act permits the reduction of an award in
circumstances in which a former owner is allowed to continue
in occupation after the Crown becomes entitled to take physical
possession or make use thereof (or where the Minister has
assisted the former owner in seeking and obtaining alternative
premises).
It may be that defendant, in settling, was under the impres
sion that it would not have to pay interest until after surrender
of the premises by plaintiff, but, if so, this was an error in law
which does not justify a belated claim for rental which would
never have been made had defendant not found as a result of
the Presbyterian Church case (supra) that it would have to pay
interest to plaintiff during its period of continued occupancy
after defendant became entitled to take possession. Under the
new Act, it appears that in order to protect its interests, the
Crown will have to enter into leases with former owners who
remain in occupancy after the date on which the Crown
becomes entitled to take possession. Defendant's counterclaim
cannot be brought within section 24(5) and (3)(b)(ii) so as to
reduce amounts already agreed on.
The Queen v. Trustee Board of the Presbyterian Church
in Canada [1976] 1 F.C. 632, applied.
MOTION.
COUNSEL:
S. Handelman for plaintiff.
R. Cousineau for defendant.
SOLICITORS:
Handelman & Handelman, Montreal, for
plaintiff.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
WALSH J.: The present proceedings started out
as an action to determine the amount to be paid by
defendant to plaintiff for the expropriation of its
industrial property in the area of Montreal com
monly known as Chinatown, on December 21,
1972, as part of the property in that area being
acquired for the proposed Place Guy Favreau de
velopment. As a result of various agreements
reached between the parties prior to the hearing
and during the course of same the only issue
remaining for adjudication is whether defendant
can now charge plaintiff rental for the premises
which it continued to occupy rent free following
the acceptance without prejudice on January 8,
1973, of defendant's offer of indemnity in the
amount of $335,700, in view of the fact that it has
now been held that interest must be paid by
defendant pursuant to section 33(3) from the date
of the offer to the date of judgment. Plaintiff
continued to. occupy the premises until about May
1st, 1974, when it completed its move to new
premises which it had been forced to construct
elsewhere in order to carry on its business. Defend
ant now wishes, in lieu of interest, to charge rental
for the 13 months' period from April 1st, 1973 2
until May 1st, 1974.
The Queen v. Trustee Board of the Presbyterian Church in
Canada [1976] 1 F.C. 632.
2 Defendant could, by virtue of the provisions of section 17 of
the Expropriation Act, R.S.C. 1970 (1st Supp.) c. 16, have
taken possession of the property on April 1, 1973, pursuant to
notice given on December 21, 1972.
Prior to the hearings the parties had agreed on
the following figures:
The replacement value of the expropriated
immoveables (paragraphs 8(a),(b) and (c) of
plaintiff's amended statement of claim) $320,000.00
Damage occasioned by moving and re-installa
tion of specialized equipment in new premises—
(paragraphs 9(a)(i),(ii),(iii),(iv) and (v)) $ 57,244.04
Additional damages occasioned by expropriation
(paragraphs 9(b)(i),(ii),(iii),(iv),(v),(vi),(XI) and
(XII)) $ 80,152.00
No agreement had been reached at that stage
for the items claimed in paragraphs 9(b)(vii),
(viii),(IX) and (X) as follows:
(vii) demolition of building on premises, pre
paratory to aborted expansion $ 2,800
(viii) plans of expansion $ 7,500
(IX) Elevator $ 500
(X) Damages for delays resulting from alleged
undertakings given by defendant's representatives
that plaintiff could relocate in Chinatown as a
result of which plaintiff's costs for reconstruction
were increased by $111,000
Shortly before the hearing of this action the
Appeal Court judgment in the case of The Queen
v. Trustee Board of the Presbyterian Church in
Canada (supra) was rendered, as a result of which
defendant now found that it would have to pay
interest to plaintiff despite the fact that it had
remained in occupancy of the premises while con
structing its new building elsewhere until nearly
May 1st, 1974. Up to this time, defendant had
been under the impression that in accordance with
the jurisprudence under the former Expropriation
Act no interest could be claimed by an expropriat
ed party while remaining in possession of the
premises rent free. As a result of this defendant at
the opening of the hearing moved for leave to
amend its statement of defence so as to claim
rental from the date of expropriation, October 4,
1972, until April 30, 1974, or a period of approxi
mately 19 months. Plaintiff opposed this amend
ment, which is really in the nature of a counter
claim, on the ground that its claim for damages as
a result of the move had already been settled by
agreement save for a few items remaining in issue
and that it was now too late for defendant to make
this counterclaim. Section 24(5) of the Act was
invoked which reads as follows:
(5) For the purposes of subparagraphs (3)(b)(ii) and
(4)(b)(ii), consideration shall be given to the time and circum
stances in which a former owner was allowed to continue in
occupation of the land after the Crown became entitled to take
physical possession or make use thereof, and to any assistance
given by the Minister to enable such former owner to seek and
obtain alternative premises.
It is subparagraph (3)(b)(ii) referred to therein
which would be applicable in the present case. It
reads as follows:
(3) Where the owner of an expropriated interest was in
occupation of any land at the time the notice of confirmation
was registered and, as a result of the expropriation, it has been
necessary for him to give up occupation of the land, the value of
the expropriated interest is the greater of
(b) the aggregate of
(ii) the costs, expenses and losses arising out of or inciden
tal to the owner's disturbance including moving to other
premises, but if such cannot practically be estimated or
determined, there may be allowed in lieu thereof a percent
age, not exceeding fifteen, of the market value determined
as set forth in subparagraph (i),
plus the value to the owner of any element of special econom
ic advantage to him arising out of or incidental to his
occupation of the land, to the extent that no other provision
is made by this paragraph for the inclusion thereof in deter
mining the value of the expropriated interest.
It is plaintiffs contention that since the items
covered in section 24(3)(b)(ii) have already been
settled section 24(5) cannot now be applied.
Defendant for its part contends that since section
24(3)(b)(ii) refers to "owner's disturbance" sub
section (5) could be applied in any event, even
without an amended defence, since by permitting
plaintiff to remain in undisturbed occupancy until
the construction of its new premises could be
completed it certainly reduced the "disturbance"
element of plaintiff's claim, and furthermore the
Court is not obliged to accept the terms of any
settlement, and should not in this case as the
settlement for the damage element of plaintiffs
claim was made by defendant in good faith and
under the impression that plaintiff would not be
awarded interest on the additional amount of the
claim during the period of its continued occupancy
of the premises. In answer to this argument plain
tiff contends that the Court should not use section
24(5) of the Act so as to reduce the interest claim
indirectly when it has now been held that such
interest can properly be claimed by virtue of sec
tion 33(3).
It might be convenient at this stage to quote this
section which reads as follows:
33. (3) Where an offer has been accepted, interest is pay
able by the Crown from the date of the offer to the date
judgment is given,
(a) at the basic rate on the amount by which the compensa
tion exceeds the amount of the offer, and in addition
(b) at the rate of five per cent per annum on the compensa
tion, if the amount of the offer is less than ninety per cent of
the compensation;'
The meaning of "basic rate" appears in section
33(1).
Plaintiff further claims that the counterclaim
would be prescribed in any event invoking section
29(1)(a) of the Act which reads as follows:
29. (1) Subject to section 28,
(a) a person entitled to compensation in respect of an expro
priated interest may,
(i) at any time after the registration of the notice of
confirmation, if no offer under section 14 has been accept
ed by him, and
(ii) within one year after the acceptance of the offer, in
any other case,
commence proceedings in the Court by statement of claim
for the recovery of the amount of the compensation to which
he is then entitled.
contending that as plaintiff was obliged to com
mence its proceedings within one year from the
date of the acceptance of the offer, which is the
applicable date in the present case, then the same
delay should apply to the counterclaim. Defendant
however invokes section 29(1)(b) which reads as
follows:
29. (1) Subject to section 28,
(b) the Attorney General of Canada may at any time after
the registration of the notice of confirmation, whether or not
proceedings under paragraph (a) have been commenced, file
a notice in the matter in the Court setting forth
The concluding clause is not quoted here as it has no
application as the offer was accepted before the date of posses
sion which by definition was April 1, 1973 the date on which
the Crown by virtue of its notice of December 21, 1972, became
entitled to take possession.
(i) the particulars of the expropriation in relation to any
parcel of land to which the notice of confirmation relates,
(ii) the names so far as they have been ascertained of each
of the persons entitled to compensation in respect of an
expropriated interest and the names of the persons who are
to be parties to the proceedings,
(iii) the amount of any offer made under section 14 to any
of the persons who are to be parties to the proceedings, and
(iv) such further facts as appear to be relevant. 4
and emphasizes that as far as defendant is con
cerned such further facts as appear to be relevant
can be invoked at any time. Defendant further
invokes articles 2214 and 2215 of the Quebec Civil
Code which read as follows:
Art. 2214. The rights of the crown to the principal of rents,
dues, and revenues owing and payable to it, and to the capital
sums accruing from the alienation or from the use of crown
property, are also imprescriptible.
Art. 2215. All arrears of rents, dues, interest and revenues
and all debts and rights, belonging to the crown, not declared to
be imprescriptible by the preceding articles, are prescribed by
thirty years.
The admissibility of the amendment was taken
under advisement and the parties proceeded with
their proof. Before the termination of same a
further agreement was reached accepting plain
tiffs claims under paragraphs 9(b)(vii) and (viii)
of the amended statement of claim for demolition
of the building on the premises preparatory to
aborted expansion in the amount of $2,800 and for
expansion plans in the amount of $7,500 and
plaintiff withdrew its claim for the elevator in the
amount of $500 and for the damages occasioned
by delay while seeking relocation in the amount of
$111,000. It was further agreed that solicitor's fees
and costs would be fixed at $15,000 including the
costs of the present proceedings and appraiser's
fees at $9,170 and that interest would be payable
in accordance with section 33 of the Act.
Before entering into any consideration of the
merits of defendant's amended statement of
defence it is necessary to decide whether this
amendment should be permitted. There is no doubt
that the Court has the right to grant leave to
produce the amended statement of defence by
virtue of its discretionary powers under Rule 420.
4 Underlining mine.
I have reached the conclusion that defendant's
right to make an amendment seeking to claim
rental from plaintiff is not prescribed by passage
of time either under the provisions of the Expro
priation Act or of the Civil Code of the Province of
Quebec. I further reach the conclusion that section
24(5) of the Expropriation Act (supra) is not, as
plaintiff contends, a section merely permitting an
increase in the amount to be awarded when an
expropriated party is required to give up occupa
tion of the premises, but is on the contrary a
section permitting the reduction of the amount
awarded in circumstances in which a former owner
is allowed to continue in occupation of the land
after the Crown became entitled to take physical
possession or make use thereof, or where the Min
ister has given assistance to the former owner to
seek and obtain alternative premises, which latter
provision does not apply in the present case. I
believe that the amended statement of defence
should therefore be received into the record and
accordingly grant defendant's motion for leave to
amend. This is not to say, however, that the
amended defence should be sustained on the
merits.
As has been pointed out, section 24(5) permits
consideration to be given in the present case to the
continued occupancy of the premises by plaintiff
after the Crown was entitled to take possession of
same but only for the purposes of subparagraph
(3)(b)(ii) which is the paragraph providing for the
calculation of the costs, expenses and losses arising
out of or incidental to the owner's disturbance
including moving to other premises. The claims
under these headings had already been settled by
the parties prior to the commencement of the trial
and it may be noted the amounts originally
claimed by plaintiff in its amended statement of
claim for these items were somewhat reduced in
the negotiated settlement. It may well be that
defendant in making this settlement was under the
impression that it would not be called upon to pay
interest on the amount awarded until following the
date on which plaintiff had surrendered the prem
ises on May 1st, 1974, but, if so, this was an error
in law although an understandable one in view of
some of the previous jurisprudence, and this error
does not in my view justify an admittedly belated
claim for rental value of the premises while plain
tiff remained in occupation, which claim would
never have been made had defendant not found as
a result of the Appeal Court judgment in the case
of The Queen v. Trustee Board of the Presbyterian
Church in Canada (supra) that it would have to
pay interest to plaintiff during its period of con
tinued occupancy after defendant became entitled
to take possession. The old practice can now no
longer be followed by virtue of the new Expro
priation Act and the said jurisprudence, and it was
at best a rough and inexact manner of reaching
what approximated an equitable result. An expro
priated owner who, as a matter of convenience to
him, or because the Crown did not immediately
require the property, was allowed to stay on the
premises was usually not charged rent for this, but
interest on the amount eventually awarded to him,
or on the excess of this award over the amount
previously paid, then commenced only from the
date when he vacated the premises. It is evident
that, depending on the amount of the award on the
one hand, and the rental value of the premises on
the other, the interest might amount to consider
ably more or considerably less than the rental
value. If it were more there was of course nothing
to prevent the owner from moving out so that
interest would start to run. If it were less, the
Crown frequently tolerated the situation until it
actually needed to take physical possession of the
property. Under the new Act it appears that the
Crown in order to protect its interest will have to
enter into lease agreements with the former owners
of the property who remain in occupation after the
date on which the Crown becomes entitled to take
possession under the provisions of the Act.
This was recognized by defendant although not
done in the present case. In a letter dated January
12, 1973, from J. R. Desnoyers, Acting Assistant
Director of the Property Services Branch to plain
tiff's solicitor, it is stated:
As to the Notice of Possession which was sent, the Department
is only taking over administration of the property on April 1,
1973 as mentioned in the notice. Therefore this means that we
will be entitled to receive rent for the premises expropriated
from that date.
To the best of our knowledge vacant possession of the proper
ties will not be required before October 1, 1973.
There was no follow up on this letter however nor
any lease agreed to but plaintiff cannot claim not
to have been warned that rent could be claimed.
The Quebec Civil Code, article 1634 reads as
follows:
Art. 1634. A person occupying an immoveable by sufferance
of the owner is presumed to be a lessee, saving proof to the
contrary.
In such a case, the term of the lease is indeterminate. It
begins with occupancy and carries with it the obligation to pay
a rent corresponding to the rental value.
Plaintiff was certainly an occupant by sufferance
within the meaning of this section and under an
obligation to pay a rent corresponding to the rental
value. Defendant contends that if this claim cannot
be made by way of counterclaim in the present
proceedings arising out of its amended statement
of defence, separate proceedings could nevertheless
be brought by virtue of the civil law and that this
Court would have concurrent jurisdiction over
such proceedings by virtue of section 17(4) of the
Federal Court Act. Defendant argues that to avoid
a multiplicity of proceedings this issue should be
dealt with in the present case. While there is some
merit to this argument I cannot conclude that
defendant's counterclaim for rental can be brought
at this time within section 24(5) and (3)(b)(ii) of
the Expropriation Act so as to reduce the amounts
already agreed to by the parties as a proper award
under those sections. In reaching this conclusion I
express no view as to whether defendant remains
entitled to claim the said rental by way of appro
priate proceedings in this Court or in the Superior
Court of the Province of Quebec.
Having reached this conclusion it is unnecessary
to deal with the amount which the Crown claims
for the said rental, but since evidence was made
with respect to this, and in view of the possibility
of this judgment not being sustained in appeal, it is
desirable to deal briefly with the evidence as to the
amount involved.
Although defendant's amended statement of
defence claimed rental from October 4, 1972, the
date defendant became owner of the expropriated
property, it is in evidence that it only became
entitled to possession of same as of April 1st, 1973.
I am of the view that rental should only commence
from the latter date. Defendant's counsel did not
seriously dispute this in argument. There is some
evidence that plaintiff commenced moving to its
new premises some time during the month of April
1974, and may well have entirely vacated the old
premises prior to May 1st of that year, but I
believe that rental should be calculated on a
monthly basis in any event and that if it were
allowed it would therefore run until May 1st, 1974
or for a total period of 13 months.
Defendant's expert, James D. Raymond, com
mencing with the agreed figure of $320,000 for
plaintiffs lands and buildings calculated that in
order for this sum to yield an 8% return the net net
rent would be $25,600 per annum. He also inspect
ed the premises and reached the conclusion that
the rental value on a net net basis would be about
$1.30 per square foot and as there were 18,569
square feet of floor space this would result in a
rental of approximately $24,000 per annum. Using
both methods of calculation he arrived at a figure
of approximately $2,000 a month but in cross-
examination he admitted that net net leases are
usually for a long term whereas in the present case
the plaintiff did not know how long it could occupy
the premises and in fact in the letter advising it
that rent could be charged it was indicated that
the Crown might require vacant possession by
October 1st, 1973. For this reason he would reduce
the rental by about 25% arriving at a figure of
$1,500 per month.
Another expert, Mr. Raymond Sanschagrin, on
behalf of plaintiff testified that a property next
door rented by Lacote Realties Limited to Bédard
and Gérard for a 66 month period from November
1st, 1970 to April, 1976, called for rent of $23,400
for 39,819 square feet or about 59¢ a square foot,
and on this basis the rental for plaintiffs property
should be about $913.00 a month. He also gave
some evidence as to the taxes which plaintiff had
to pay on the new property which it acquired while
constructing its building on same before it could
move into it which more than offset the rental
claimed for the subject property. This evidence
cannot be accepted however as this introduces a
new element by dealing with costs of reinstatement
which only applies to institutions such as schools,
hospitals, municipal or religious or charitable insti
tutions under section 24(4) of the Act and not to
the present plaintiff. Moreover, Mr. Sanschagrin's
evidence was considerably weakened when in
cross-examination he admitted that Lacote Real-
ties and Bédard and Gérard are associated and
therefore not dealing at arm's length and that the
Lacote Realties building is very old while the main
portion of plaintiff's building is much newer being
only about eight years old. He also admitted that
on the basis of his figures Lacote Realties Limited
property would only yield about 3 1 / 2 % income on
its value. Mr. Raymond when recalled stated that
he knows the said property well as he acted for the
Crown in connection with the settlement of Lacote
Realties claim and that of the tenant, Bédard and
Gérard, in the expropriation of that property the
Lacote Realties claim being settled on an income
approach at 71%, and the settlement with Bédard
and Gérard added 50¢ a foot to the rental called
for by the lease in order to reach an agreed
economic rental. He stated that he had examined
various comparables in arriving at his figure of
$1.30 a foot for the subject property. His evidence
of rental value appears therefore to have been
made on a much sounder basis than that of the
other witness, and if the counterclaim of defendant
for rental were to be allowed I would have allowed
the sum of $1,500 a month for 13 months or a
total of $19,500.
To summarize, plaintiff is entitled to the follow
ing amounts as agreed to between the parties.
Replacement value of expropriated immoveables. $320,000.00
Damage occasioned by moving and re-installa
tion of specialized equipment. $ 57,244.04
Additional damages occasioned by expropriation. $ 80,152.00
Demolition of building on premises preparatory
to aborted expansion. $ 2,800.00
Plans for expansion. $ 7,500.00
TOTAL $467,696.04
On January 8th, 1973, the plaintiff accepted
without prejudice the sum of $335,700 leaving a
balance due of $131,996.04. The basic rate is
defined in section 33(1) of the Act as follows:
"basic rate" means a rate determined in the manner prescribed
by any order made from time to time by the Governor in
Council for the purposes of this section, being not less than
the average yield, determined in the manner prescribed by
such order, from Government of Canada treasury bills.
No evidence was made as to what this rate would
be at the time in question. In argument counsel for
defendant suggested 8% and this was not seriously
disputed. If the parties are not satisfied to agree on
this rate one or the other can no doubt readily
obtain the necessary information to apply the basic
rate to the amount of $131,996.04 from the date of
the offer on December 21st, 1972 to the date of
judgment. In addition to this since the amount of
the offer was less than 90% of the compensation as
appears from the above figures, additional interest
will be payable at the rate of 5% on the amount of
$467,696.04 from December 21st, 1972 to the date
of judgment. In addition additional amounts are
payable for solicitor's fees including court costs as
agreed amounting to $15,000 and appraiser's fees
of $9,170.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.