Land owners adjacent to road projects claiming compensation for injurious affection based on loss of visibility will want to carefully consider the recent decision of the Ontario Municipal Board (the "Board") in F & F Realty Holdings Inc. v. MTO. In a Decision of Mr. Yao released January 5, 1998, the Board rejected the Claimant’s claim for injurious affection to its remaining lands allegedly due to the loss of visibility for its commercial property adjacent Highway 400 at Rutherford Road. In reaching this conclusion the Board held that it was mandated by it's interpretation of s.14(4)(b) of the Expropriations Act (''the Act''). Moreover, the Board also surprisingly found that the erection of a 25-30 foot high exit ramp, represented a special benefit to the Plaintiff that allowed MTO a set off against any damages for injurious affection and eliminated the claim. While an appeal was launched it has been settled and the case thus will stand as a precedent. This comment considers the Board's reasoning and the precedential value of the case.

F & F acquired a holding of 19.5 acres in 1987 on the northwest corner of Highway 400 and Rutherford Road. An interchange had been constructed in 1979 to allow northbound patrons to Canada’s Wonderland to exit Highway 400 and also to return to Toronto. In 1993 the Toronto bound loop was dismantled and a full interchange constructed. MTO expropriated 4.3 acres on April 10, 1992 from F & F, moved the southbound loop further north and created a new exit ramp from southbound Highway 400 to Rutherford Road. At the same time, Rutherford Road was widened along the frontage of the F & F lands and 75 metres to the west. The construction of the new exit ramp raised the gradient substantially (approximately 30 feet) from F & F’s remaining lands thereby allegedly causing a loss of visibility and a consequential reduction in market value to the remainder lands. The Board was faced with two primary issues, being the market value of the taking and the injurious affection, if any, to the remaining lands. This comment focuses upon the injurious affection findings.

MTO conceded that the construction caused some visual impairment of visibility to the remainder lands which were as yet vacant and undeveloped. They also took the interesting position, however, that there was no compensatory claim on the basis that s.14(4)(b) of the Expropriations Act prevented any account being taken of such impairment. Moreover, they asserted that the interchange represented a special benefit to the F & F lands and a set off that eliminated any award for injurious affection. The Board accepted both of these submissions.

MTO apparently advanced its case on the theory that the Board must not consider the "scheme" in valuing injurious affection. In accepting this proposition the Board drew no distinction between the screening out of the scheme required when determining market value from it’s consideration when determining injurious affection. The Board was apparently unaware that the Court of Appeal has previously held in Salvation Army that:

"This ... (screening out) had no application to the 50.593 acres not expropriated. Section 14 (4) (b) only applies to lands actually taken ... It does not deal with injurious affection". (see reference 1)

The Board, in relying upon its interpretation of s.14(4)(b) did not refer to such statements relying instead for authority on the Runnymede (see reference 2) case that dealt only with the question of market value and not with injurious affection.

The F & F case has thus further muddied the water as to when the screening out process is required. In a series of cases such as Torvalley (see reference 3), the Board has ruled that when determining highest and best use of the subject lands (for the purposes of determining market value) events taking place over a lengthy period of time that were influenced by even the prospect of expropriation must be disregarded. This has required the actual historical facts to be viewed through a special prism that reconstructs what might have occurred but for the expropriation or any prospect of it. That framework of analysis however, if applied to a consideration of injurious affection would omit consideration of the very impacts that are the essence of injurious affection.

In order to consider the impact or effect of the taking so as to assess injurious affection to the remainder, how can there be screening out of the project that caused the alleged impact? The question confronts the logical inconsistency of screening out when considering injurious affection claims. The Board was faced with the difficult exercise of having to view the claims for market value and injurious affection through separate frameworks of analysis but failed to do so. The result it is submitted was to cause the Board to fail to award damages for injurious affection that were admittedly occasioned.

The key concern of the Court of Appeal in the Salvation Army case was on an issue of causation so as to avoid compensating the Plaintiff for losses caused not by the expropriation for the hydro corridor project but from the down-zoning occurring under the related planning for the Parkway Belt. It was not however concerned to reject any claims for injurious affection caused ''by the acquisition or by the construction of the works thereon or by the use of the works thereon or any combination of them''. Moreover, the Court of Appeal was careful to emphasize that s.14(4)(b) only applies to the determination of market value and not injurious affection. In practice what does this mean? In the F & F case it surely must mean that the Board was in error in concluding:

"MTO concedes there has been some visual impairment. This is a "decrease in land value resulting from the development" and no account can be taken of it."

To the contrary, the very purpose of the Act to provide full and fair compensation would be defeated if this proposition of the Board were correct. If increases or decreases to the value of the remainder from the taking were excluded from compensation then the term "injurious affection" would be stripped of meaning. The essence of injurious affection after all are the very impacts caused by the taking, described by Eric Todd as:

"Partial Taking - Pure Injurious Affection

Where part of the owner’s land is expropriated the remaining piece or pieces may be less valuable as a result of the actual or intended use made of the portion expropriated. Here a claim may be made for "injurious affection" or "pure injurious affection" as it is sometimes described." (see reference 4)

Despite it's findings against the Claimant on MTO's liability for injurious affection damages the Board properly proceeded with valuation of the injurious affection from loss of visibility and access in the event of an appeal. After reviewing various planning and sales evidence the Board concluded that certain sales data:

"suggest that the premium according to the market for visibility (is) almost non-existent [sic] ... . To conclude, a loss of visibility seems like a simple idea but it is not, because it needs to be analysed in the complicated context of marketing, planning and physical engineering considerations. When placed in this context, any losses are likely to be small because the site still retains a potential for a neighbourhood commercial use in a location known to area residents and with good views from the western side of the Rutherford Road Bridge."

In this case, the Board also found that, contrary to the Claimant’s theory, the property would ultimately be developed as a neighbourhood commercial centre serving the surrounding area and not be dependent upon visibility from Highway 400 for its customers. It is interesting to contrast this finding with the finding of the Board in Airport Corporate Centre Inc. v. Minister of Transportation, (1995) 55 L.C.R. 135; aff’d, (1996) 58 L.C.R. 2 (D.C.) wherein the Board commented that:

"It does not take a mental giant to recognize that industry, rightfully or wrongfully, will pay a premium for the privilege of locating in an identifiable location with what is seen as an added benefit because of its direct exposure to a facility such as the 401."

It seems quite surprising that a significant premium could have been found to apply in the Airport and not in the F & F case. It would suggest that the sales data must be carefully examined to support any such premium.

Typically there was a big gap between the appraisers on the valuation of the loss of visibility. The Claimant’s appraiser placed the injurious affection value at $85,000.00 per acre on all of the remaining 15.1 acres, while the Respondent’s appraiser attributed no loss arising from what he saw as a reduction from poor exposure to no exposure and on the basis of betterment to all of the remaining lands. The Board member, Mr. Yao, proceeded to calculate the loss at $32,900.00 in total, relying upon his previous Decision in Captain Developments v. MTO (1993) 50 L.C.R. 176. In that case he found that the exposure premium was restricted to a depth of 120 metres rather than the full remainder property. The application of this 120 metre premium depth in the F & F case (without apparent evidentiary basis beyond the decision in Captain) restricted the injurious affection finding to approximately 2 acres of F & F’s lands fronting on Highway 400. The source of this conclusion does not appear in the Reasons to be based on the evidence. Nevertheless, the Board adopted that general approach but reduced the highway exposure premium from 10% in the Captain case to 7%. This approach raises serious concerns for counsel that a case may be decided not on the evidence led at the hearing but from factual findings in prior cases.

The Board also adopted the Respondent’s theory that betterment accrued not just to the 2 acres directly adjacent Highway 400 but to all of the remaining lands on the basis of the exit ramp by providing a "panoramic view" of the site. The Board thus found that the requirement for "special benefit" to the remainder lands to allow a set off to apply was met. This is a surprising finding given the panoramic view atop the ramp extends for many miles. It also raises the question as to how a willing purchaser, driving on the southbound exit ramp, can view the "panoramic" perspective for many miles while distinguishing the 2 acres adjacent the 400 (for which he would pay a notional 7% premium) but limit his view to the boundaries of the remaining 15 acres and no lands beyond. The mental gymnastics necessary to support such a finding casts some doubt on the validity of the finding itself. Again it is useful to contrast this Decision with that of the Board in the Airport case where the Board found that:

"The Board finds that the Application before it does not concern the loss of aesthetic amenities as suggested by counsel for the Respondent; it concerns the loss of business visibility for which a cost can be, and was, determined. The Board also finds that the works themselves are responsible for the lack of visibility. Those works find their foundation upon the lands which were expropriated from the Claimant, rendering the balance of the lands as compensable."

It is difficult to understand why the Board in F & F came to such a contrary conclusion to that in Airport, particularly when MTO conceded diminished views. It may be that the Board was concerned with a claim for a 30% decrease in value to the remainder that it viewed as excessive. At a minimum, it suggests that the evidence to support such a claim will be subject to very close scrutiny.

I understand that, while an appeal was launched on 51 grounds of appeal, the matter has now been settled.

The case raises a number of concerns as to how the injurious affection claim was decided. Those concerns may provide a basis for distinguishing this case, but the net result will be further uncertainties as counsel strive to find creative arguments for and against it’s application in later cases. Until we have commentary from appellate courts this uncertainty will continue.