R. v. Superior Propane Inc.

R. v. Superior Propane Inc. Court Court of Appeal Date 2004-06-08 Citation 2004 NSCA 73 Docket CA 215421 Judge/Registrar/Adjudicator Oland, Linda L. (Honourable Justice); Roscoe, Elizabeth A. (Honourable Justice) (CA); Saunders, Jamie W. S. (Honourable Justice) (CA) Document Type Decision Relations Library Sheet - R. v. Superior Propane - 2004 NSCA 73 - 2004-06-08 - Library Sheet Decision Content NOVA SCOTIA COURT OF APPEAL Citation: R. v. Superior Propane Inc., 2004 NSCA 73 Date: 20040608 Docket: CA 215421 Registry: Halifax Between: Her Majesty the Queen in Right of the Province of Nova Scotia Appellant v. Superior Propane Inc. Respondent Judges: Roscoe, Saunders & Oland, JJ.A. Appeal Heard: June 3, 2004, in Halifax, Nova Scotia Held: Appeal dismissed, as per reasons of Saunders, J.A, Roscoe and Oland, JJ.A. concurring. Counsel: Kirby Eileen Grant, for the appellant Douglas A. Caldwell, Q.C. & Robert H. Pineo, for the respondent Reasons for judgment: [1] After hearing the appellant’s submissions we recessed and then returned to indicate that the appeal was dismissed with reasons to follow. These are our reasons. [2] The issue on this appeal is whether the Nova Scotia Utility and Review Board erred in ordering the Province to pay compensation to the respondent in the amount of $369,200.00 representing the present value of future property tax increases as a result of the closure and relocation of the respondent’s plant in Westville to a site in Trenton. [3] The respondent, Superior Propane Inc. (“Superior”) is a corporation carrying on the business of selling propane in the Province of Nova Scotia. At times material to this case Superior operated plants in Westville, Truro, Port Hawkesbury and various other locations in Nova Scotia where it holds propane inventory, repairs propane tanks, loads and dispatches propane trucks, maintains office staff and undertakes various other ancillary activities. [4] In the early 1990's the appellant announced plans to twin the portion of Highway 104 between Truro and New Glasgow. The project required the acquisition of Superior’s plant at Westville. The present claim arises as a result of the necessary closure of the Westville plant and its relocation to the town of Trenton in Pictou County, Nova Scotia. The Westville plant was not formally expropriated; rather, the transition was settled upon terms negotiated by the parties in an agreement dated January 9, 1997. [5] The agreement resolved issues of compensation with respect to the Westville plant and provided, among other things, for: 1. the purchase by the Province of the Westville plant; 2. the purchase and establishment of a new plant by way of equivalent reinstatement in Trenton; and 3. the payment of certain additional compensation including losses to business operations and increased property taxes. [6] After commencing operations at its Trenton plant, Superior incurred property taxes at a significantly higher rate than those experienced at the Westville site. Superior brought a claim before the Nova Scotia Utility and Review Board (URB) for the value of increased property taxes suffered as a result of the relocation. The matter was heard over three days of hearings in November, 2003 before URB member Peter W. Gurnham, Q.C. After taking a view of both facilities Mr. Gurnham filed a written decision dated January 12, 2004 in which he allowed Superior’s claim and awarded compensation of $369,200.00 plus interest and costs. (See: [2004] N.S.U.R.B.D. No. 2 (Q.L.) ) The present appeal is brought by the Province of Nova Scotia from that decision. [7] The Province argues that the URB erred by wrongfully restricting its jurisdiction and therefore its inquiry to two questions: whether Superior’s property taxes had increased as a result of the relocation and, if so, to what extent? By improperly limiting its inquiry the appellant argues that the URB erred in law by failing to consider whether Superior had proven a business loss based on Superior's profitability following the relocation of its business. The appellant says the agreement entered into between the parties required that any claim for compensation be determined pursuant to the Expropriation Act, R.S.N.S. 1989, c. 156 and expropriation jurisprudence generally, which would then oblige the Board to assess any claimed business loss resulting from relocation as part of an investigation into the overall net effect on the profitability of the business. [8] Based on these errors the appellant asks that Mr. Gurnham's decision be set aside and the matter remitted to the Board to determine the issue of whether or not Superior has proven that it suffered a business loss of its overall profitability on account of the relocation of its plant to Trenton. [9] We disagree. In our opinion there is no merit to the appeal and it ought to be dismissed. [10] In a thoughtful and well-reasoned decision, Mr. Gurnham thoroughly reviewed the testimony and documentary evidence presented at the hearing and used proper legal principles when construing the contract and applying its terms and the relevant statutory provisions to his assessment of that evidence. [11] He carefully analysed the different approaches taken by the two expert business valuators, Mr. Brian Keough, C.A., C.B.V. for Superior and Mr. Paul Bradley, C.A., I.F.A., C.B.V. for the Province. The Board found as a fact that Superior was displaced from its former Westville site and had incurred increased property taxes as a result of the relocation. Those findings have not been challenged on appeal. [12] In preparing his opinion Mr. Keough used an annual tax difference of $19,043.00, factored in assumed percentage annual rate increases at both locations, applied a 2.5% discount rate and predicted there was a high probability Superior would continue its operations at Trenton for many years. This led him to calculate the present value of future property tax increases as ranging between $496,100.00 and $579,600.00. [13] By contrast Mr. Bradley, as noted by the Board, prepared a report consistent with the Province's theory of its case, that entitlement to compensation ought to be determined by applying traditional methods for evaluating business losses. The Board described Mr. Bradley's approach as follows: [58] . . . In his opinion this requires a consideration of the impact of the loss event on both the revenues and expenses required to realize the company’s profit. . . . [60] At the end of the day Mr. Bradley did not come to any conclusion with respect to a business loss and he did not come to any conclusion with respect to discount rate saying that he did not have sufficient information to quantify either. [14] After referring to sections 26 and 29(1) of the Act which are relevant to this case, the Board went on to find as follows: [81] The parties in the Agreement established the legal framework for resolving issues related to the relocation from Westville to Trenton including disturbance damages. Specifically clause 2.04 of the Agreement provides: “2.04 Property Tax Increases - The Parties agree that, if there is a claim by SPI for the value of increased property taxes resulting from the relocation of SPI from the Property to the Alternate Premises, such claim shall be determined by the Nova Scotia Utility and Review board pursuant to the Act.” [82] Other relevant provisions of the Agreement are as follows: “1.01 Definitions ... (a) “Act” means the Expropriation Act, R.S.N.S. 1989, c. 156, as amended from time to time; ... 2.01 Agreed Compensation - DOT&PW agrees to pay to SPI as Agreed Compensation for the Property the actual expenditures incurred or losses suffered with respect to the various claims set out in Schedule “A” to “F” hereto, payable as follows: ... (d) With respect to business losses that SPI may incur as a result of the relocation of the Business, DOT&PW shall pay to SPI the amount of such losses as determined by SPI within 30 days of receiving notice from SPI of the amount of such losses if DOT&PW agrees with the calculation of such losses by SPI. DOT&PW agree that business losses are limited to those arising out of the timing of the relocation and any increased overhead costs. DOT&PW agrees that SPI shall be entitled to determine its business loss from relocating, if any, with a period of 15 months of the Vacant Possession Date and the compensation which may be agreed upon or otherwise determined by the provisions of the Act shall be paid as described herein. If DOT&PW does not agree with the calculation of the amount of the business loss by SPI, then DOT&PW agrees that SPI shall have the right to refer this matter to arbitration; (e) SPI agrees that DOT&PW shall be entitled to offset any business gains arising from decreased overhead costs (which shall mean “maintenance, fuel, and plant and equipment repair costs) of the Alternate Premises within a period of fifteen (15) months from date of vacant possession against compensation otherwise agreed to under this agreement. SPI further agrees to provide DOT&PW with all of the information reasonably requested to determine whether there is such a business gain within that period of time; ... 2.05 Further Claims - Both Parties acknowledge and agree that there are possible claims of SPI that either could not be the subject of an agreement at this time or have not been agreed upon. SPI is entitled to refer any right to compensation conferred by the ACT upon a landowner which is not agreed on by DOT&PW to arbitration (excluding the Property Tax) as if the Property had been expropriated pursuant to the Act on the date of this agreement. The cost of an arbitration shall be awarded as if the arbitration were an expropriation under the Act. 2.06 Arbitration - The Parties agree that all disputes or differences arising out of or in regard to this agreement save the issue of property tax increases shall be settled by arbitration in accordance with the provisions of the Arbitration Act of Nova Scotia, and the Parties further agree that a reference under the Arbitration Act shall be to a single arbitrator, to be agreed upon by the Parties. The Parties further agree that interest on overdue amounts found on arbitration will be recoverable from the date the amount was due and owing under this agreement at the same rate of interest charged by the Contractor or Supplier on overdue accounts under the Prime Contract.” [83] Claims for business loss (limited to those arising only out of the timing of the relocation and any increased overhead costs) are to be arbitrated under clause 2.01(d) of the Agreement. Offsetting business gains arising from decreased overhead costs are governed by clause 2.01(e) of the Agreement. All other claims (excluding property tax) are to proceed to arbitration under clauses 2.05 and 2.06. [84] The Claimant, in argument, characterized the arrangements as follows: “Paragraph 2.04 of the agreement allows the Claimant to advance a claim for increased property taxes in isolation. Clearly from a plain and ordinary reading of paragraph 2.04 the parties contemplated the damages for increased property taxes could be compensable upon proof, factual proof, to this Board. The Claimant submits that the present case is not unlike a settlement reached in any other area of litigation. The difference in this case is the settlement was reached before damage arose, and comparing that to my last example of a settlement before litigation, all issues, all heads of damage would be settled except for one, leaving one to be determined by the trier of fact.” The Respondent cites several cases in support of its argument that the Claimant’s entitlement to damages must be calculated applying traditional methods for evaluating business loss and, therefore, any entitlement to damages must be considered in the context of overall profitability. These cases include Reardon et al v. City of Dartmouth (No. 2)(1983), 26 L.C.R. 332; O’Hearn v. City of Dartmouth (1981), 20 L.C.R. 373; Atlantic Trust Co. v. City of Dartmouth (1979), 16 L.C.R. 332; and Ben’s Limited v. City of Dartmouth (1978), 14 L.C.R. 357, 26 N.S.R. (2d) 439. [85] While the Respondent may well be correct with respect to the methodology to be used to determine business loss claims generally (that being the method suggested by Mr. Bradley) in this case the board’s jurisdiction under the Agreement appears to be restricted to a determination of whether: (a) property taxes have increased as a result of the relocation; (b) if yes, what is the value of the increased property taxes resulting from the relocation? [86] The Board agrees with the claimant that this exercise is to be done “in isolation” as all other possible claims under the Act are by the Agreement referred to arbitration. The Board finds that its jurisdiction in the matter is limited to the adjudication of the two issues noted above. [87] Given the interpretation of the Agreement, the Board is not required to deal with the setoff issues raised by Mr. Bradley; however, in the event the board is in error with respect to jurisdiction, certain findings will be made with respect to possible setoff issues. [15] In our opinion Mr. Gurnham’s conclusion was correct. The agreement settled all issues of compensation flowing from the expropriation except the question of business losses, including losses sustained for the increased liability for property taxes following the relocation of Superior’s plant from Westville to Trenton. Clause 2.04 did not simply confer jurisdiction, but manifests the parties’ clear intention that the issue of compensation for increased property tax liability would be tried and decided by the URB, as all other possible claims under the Act were to be referred to arbitration. [16] In ascertaining the intention of the parties to a commercial contract, words or phrases should not be read in isolation but rather interpreted upon reading the contract as a whole, and not construed as to result in a commercial ambiguity. See, for example, Consolidated-Bathurst Export Ltd. v. Mutual Boiler and Machinery Insurance Co. (1979), 32 N.R. 488 (S.C.C.); McClelland & Stewart Ltd. v. Mutual Life Assurance Co. of Canada (1981), 37 N.R. 190 (S.C.C.); and Hillis Oil & Sales v. Wynn’s Can. (1986), 71 N.R. (2d) 353 (S.C.C.) [17] Upon reading the agreement as whole it seems clear that the intention of the parties was to settle all issues of compensation that could be settled and to provide a mechanism for those that could not. It makes sound commercial sense that the parties chose to leave open the increased property tax liability for future determination because, at the time of their agreement, it was unknown whether there would be any such increase, or if so, its extent. That single issue, as found by the URB, could be considered “in isolation” by the Board. [18] The Board awarded Superior damages that it incurred and will continue to incur as a result of the higher municipal property tax liability at its new site in Trenton. The Board did not err in law by awarding disturbance damages for the increased tax liability without first finding that Superior had suffered a loss of overall profitability. No such requirement is found in the Act and to impose such a requirement in this case would defeat the clear intention of the parties as expressed in their agreement and be contrary to the broad and purposive manner of interpreting expropriation legislation favouring full compensation to the land owner. Toronto Area Transit Operating Authority v. Dell Holdings Ltd. (1997), 206 N.R. 321 (S.C.C.) [19] Mr. Gurnham reviewed Mr. Keough’s calculation of losses and found them reasonable. He also accepted Mr. Bradley's evidence on the point that generally speaking, in most cases where a business loss is calculated, it is appropriate to use a risk-adjusted rate. The Board then adopted Mr. Keough's calculation of 6.93% as being the appropriate discount rate in this case. Impressed by the fact that Superior: [111] . . . has carried on business in Pictou County since the 1960's and is a large, national, well-established company . . . Mr. Gurnham considered it appropriate to calculate the damages spread over a time frame of 38 years resulting in an award of $369,200.00. [20] In light of his interpretation of the agreement, Mr. Gurnham found that he was not required to deal with certain set-off issues raised by Mr. Bradley, but that in the event he was found to have erred in his conclusions with respect to jurisdiction he went on to find that entitlement to set-off, if any, ought to be rejected because the appellant had failed to meet the burden of proving that any item should be set-off against the value of the increased taxes. We agree with the Board’s conclusion in this respect and would also note that set-off is only available against injurious affection claims (Expropriation Act, s. 32) and would not arise in this case, advanced as a claim for business disturbance losses. [21] We are not persuaded that the Board erred in law either in interpreting the Act or in construing the contract. Nor can it be said that any of its factual conclusions are the result of palpable and overriding error. Housen v. Nikoaisen, [2002] 2 S.C.R. 235. [22] The appeal is dismissed. In accordance with the provisions of the Act and the agreement between the parties, the respondent is entitled to costs on a solicitor and client basis, together with disbursements, either as agreed or upon taxation by the Board. Saunders, J. A. Concurred in: Roscoe, J.A. Oland, J.A.