B.G v. British Columbia

2002BCCA0690 Citation: Cedar Grove Marina and Sales Ltd. v. British Columbia (Minister of Environment, Lands & Parks) 20021218 2002 BCCA 690 Docket: CA029437 COURT OF APPEAL FOR BRITISH COLUMBIA ORAL REASONS FOR JUDGMENT Before: The Honourable Madam Justice Huddart December 18, 2002 The Honourable Madam Justice Saunders The Honourable Madam Justice Levine Victoria, B.C. BETWEEN: CEDAR GROVE MARINA AND SALES LTD. APPELLANT AND: HER MAJESTY THE QUEEN IN RIGHT OF THE PROVINCE OF BRITISH COLUMBIA AS REPRESENTED BY THE MINISTER OF ENVIRONMENT, LANDS AND PARKS RESPONDENT D. Mildenberger for L. John Alexander appearing for the Appellant N. Poole appearing for the Respondent [1] LEVINE J.A.: The appellant, Cedar Grove Marine and Sales Ltd., claims that the respondent, the Minister of Environment, Lands and Parks (as he then was) incorrectly calculated the rental payable by Cedar Grove under a lease of filled foreshore lands used by it in operating a marina in Sidney, B.C. Cedar Grove's petition for judicial review and interpretation of the lease was dismissed by Quijano J. [2] Cedar Grove leases both filled and unfilled foreshore adjacent to upland property owned by it in fee simple. The unfilled portion of the leased property (that is, the water) is rented by Cedar Grove for boat moorage, and the filled portion is used for automobile parking, provided free of charge to users of the moorage. The parking is required by the zoning bylaw. [3] The lease between Cedar Grove and the Government was entered into in September 1993 for a term of 30 years. The lease provides that the "Land" is leased for "commercial marina purposes". The rent for the filled portion is determined based on the "Land Value", established by the Lessor for the first five years of the lease and subject to review at five year intervals during the remainder of the term. [4] The lease contains no provisions for the determination of "Land Value". During the term of the lease, however, the Government had in place a published general commercial land use policy that was to apply to "all uses of Crown upland and aquatic land for general commercial purposes...". The policy provided that the rental for filled land would be charged on a percentage of land value, and specified that: The land value will be established every 5 years by independent fee appraisal, using standard Ministry appraisal instructions. Appraisal for leasehold interest is based on existing use of the land rather than highest and best use. [5] Before the sixth anniversary of the lease, the Government instructed an appraiser to appraise the filled foreshore. The appraiser was instructed to provide an estimate of the "current market value of the ... parcel to be used as the basis for an offer for sale" to Cedar Grove and, in addition, to provide a value of the filled foreshore "for the purpose of calculating the ongoing lease rental based on the existing rather than the highest and best use of the filled area". [6] The appraiser confirmed the terms of reference for the appraisal and set out a summary of his intended approach to the appraisal. He said he would "firstly utilize the Direct Comparison Approach for the upland (i.e. filled foreshore and/or consolidated parcel)..." In the appraisal, the appraiser stated that the "highest and best use" of the filled foreshore "is considered to be consolidation with the fee simple marina lands" (that is, those owned in fee simple by Cedar Grove). The comparables used in the appraisal were other marina operations. On that basis, the appraiser determined that the "market value for sale to the current lessee" was $119,400. He discounted that value by 33%, to $80,000, to determine the "value based on the existing use for lease purposes", noting that while the parking areas were required by zoning bylaw, they do not require a waterfront location. [7] Cedar Grove objected to the appraisal being based on the value of the filled foreshore at its highest and best use as if consolidated with the upland fee simple owned by Cedar Grove. It took the position that to value the filled foreshore on the basis of its existing use the appraiser had to consider that it was used only for parking, generated no revenue and should be considered to be consolidated with the unfilled foreshore portion of the lease, not the upland fee simple. [8] The Government agreed to a second appraisal, using an income approach. It yielded a higher value for the filled foreshore, and the Government advised Cedar Grove that it would use the first appraisal. [9] Quijano J. dismissed Cedar Grove's application for judicial review, holding that there was no exercise of statutory authority that could be the subject of judicial review. Cedar Grove abandoned its appeal on that part of the decision (as a result of the decision of this Court in Valley Rubber Resources Inc. v. British Columbia (Minister of Environment Lands and Parks) 2002 BCCA 524). [10] Quijano J. also dismissed Cedar Grove's application for, as she put it (at para. 2): ... a determination that it is an implied term of the agreement that the amount of the rental payments will be determined fairly, which requires that the appraised value must be determined without regard to the proximity of the leasehold property to the upland property owned by [Cedar Grove]. [11] She said, (at paras. 24-5): In the instant case the language of the contract in relation to the way in which the lease payments are to be determined is unambiguous. The lease payment is to be based on the appraised value of the property which, in turn, is to be based on the existing use rather than the highest and best use. While the petitioner does not agree with the way the appraiser appears to have approached the valuation of the property, it is apparent that the appraiser was instructed in accordance with the language of the agreement and that the value, according to the appraiser, is based on existing use. I cannot find that there is an implied term of the agreement as sought, nor do I find that the government has proceeded in any manner contrary to the agreement. [12] Cedar Grove argues that Quijano J. erred in stating that the "language of the contract in relation to the way the lease payments are to be determined is unambiguous", because the manner in which the lease payments are to be determined is not set out in the lease, but only in the Government's policies. Counsel says that his argument was that the policies should be incorporated as an implied term of the lease, and Quijano J.'s refusal to imply such a term is inconsistent with her reasons for finding that the Government did not proceed in any manner contrary to the agreement. [13] The issues were argued very differently on the appeal than before Quijano J., principally on the basis of the case of Ladoski v. British Columbia Assets and Land Corp., [2002] B.C.J. No. 150 (S.C.)(QL), 2002 BCSC 114, released eight days after the judgment in this case. In Ladoski, Williamson J. held that the policy applied by the Government in valuing leased commercial land did not take into account the restriction on the use of the land contained in the lease. He said (at para. 8), "...the calculation of rent must be based upon what is actually the subject of the lease" and valuing the subject property without reference to the restrictions "is to disregard the terms of the lease itself" (at para. 10). The decision of the Supreme Court of Canada in Musqueam Indian Band v. Glass, [2000] 2 S.C.R. 633 provides further support for the principal that a valuation of land must take into account the nature of the land being valued, including all of the applicable legal restrictions on its use (see paras. 41 and 47). [14] The crux of Cedar Grove's argument on appeal is that in instructing the appraiser the Government and, in carrying out the appraisal, the appraiser, did not proceed in accordance with the language of the contract. Counsel says that the Government's instructions to the appraiser did not take into account the restriction in the lease that the land must be used for "commercial marina purposes", in accordance with Ladoski and Musqueam. Furthermore, the Government's policies for valuing filled foreshore should be implied as a term of the lease and, in valuing the filled foreshore on the basis that it was consolidated with the upland fee simple, the appraiser incorrectly interpreted the meaning of "existing use" in the policy. [15] On the appeal, Cedar Grove seeks declarations, as set out in the petition, that: 1. [The appellant] is entitled to a determination of an annual fee under its Lease dated the 17th of September, 1993 with the Respondent, in accordance with the Respondent's policies, and that the Respondent has unlawfully or unfairly failed or refused to apply its policies in a proper manner to the said Lease. 3. [That] the annual fee paid in the first 5 years of the Lease, and since the fifth anniversary of the commencement of the Lease has not been in accordance with the Lease or in accordance with the Respondent's policies and procedures used for determining annual fees payable. [16] The "Nature of the Order Sought" by Cedar Grove in its factum is different. It sought an order "directing" that the Minister (through its agent, B.C. Assets and Lands Corporation): Instruct the appraiser to undertake valuation of the filled portion of the aquatic lands which are shown on and form a part of District Lot 356, Cowichan District based on the existing use of the land. For the purposes of the appraisal the existing use of the land isfor vehicle parking included as part of the operation of a moorage facility on District Lot 356, Cowichan District. The filled portion of the aquatic lands is not to be considered as consolidated with fee simple marina lands. The filled portion of the aquatic lands is consolidated with the water covered portion of the aquatic lands of District Lot 356. [17] Counsel for Cedar Grove clarified his position by saying that he is seeking a declaration that the lease payments were not properly calculated in accordance with the lease because the appraiser, acting on instructions from the Government, did not interpret "existing use" as vehicle parking as part of the operation of a moorage facility, and considered the filled foreshore to be consolidated with the fee simple marine lands instead of the water-covered portion of the aquatic leased lands. [18] The respondent claims that the Government correctly interpreted the lease and followed its policies in instructing the appraiser. If the appraiser made an error in carrying out the appraisal, that is not a matter in which this Court can involve itself in this proceeding. [19] I agree with the respondent. The language of the lease, which restricts the use of the leased lands to "commercial marine purposes", does not assist Cedar Grove. The Government's general policy for valuing commercial lands is to use the actual land value as determined by the B.C. Assessment Authority. That was the policy applicable in Ladoski. The policy applicable to leased filled foreshore, requiring valuation on the basis of "existing use", is an exception to the general policy and was applied in this case. [20] The Government instructed the appraiser, in accordance with the language of the policy, to value the filled foreshore for the purposes of the lease based on "existing use". There is no basis for the Court, in this proceeding, to inquire into and determine whether the assumptions and methodology adopted by the appraiser in carrying out the Government's instructions were correct or not. There is no evidence of the proper methodology for an appraiser in determining "existing use". All that is before the Court are the assertions of Cedar Grove that the appraiser did not define "existing use" in the manner sought by Cedar Grove. [21] Cedar Grove is technically correct that Quijano J. erred in stating that the "contract" (the lease) included the way the lease payments are to be determined, when those terms are found only in the Government's policies. That error, however, does not affect the result in any way. Whether the Court accedes to Cedar Grove's argument that the policies should be an implied term of the lease, or simply applies the policies as Cedar Grove argues they should be, Quijano J. was correct in stating that the appraiser was instructed in accordance with the language of the policies and that the appraiser stated that the value is based on existing use. [22] I would dismiss the appeal. [23] HUDDART J.A.: I agree. [24] SAUNDERS J.A.: I agree. [25] HUDDART J.A.: The appeal is dismissed. "The Honourable Madam Justice Levine"