T-1420-75
Bodner Fish Distributors Limited (Plaintiff)
v.
The Queen (Defendant)
T-1419-75
Canadian Fish Producers Ltd. (Plaintiff)
v.
The Queen (Defendant)
Trial Division, Addy J.—Winnipeg, June 9;
Ottawa, September 17, 1980.
Crown — Legislation amounting to expropriation of assets
— Determination of amount of compensation to be paid to
plaintiff — Agreement as to the method of calculation —
Formula: fair market value of business as a going concern
minus residual value of remaining assets — Whether 5%
interest representing compensation for loss of use of assets to
be calculated on result of that formula — Whether residual
value of remaining assets to be expressed in units of currency
as of the date of the judgment or date the right to compensa
tion arose.
The issue in the cases at bar turns on the ascertainment of
the amount of compensation to be paid to plaintiff by defend
ant as a result of legislation effective May 1, 1969, which
amounted to an expropriation of assets. While agreeing on the
method of calculation of the compensation, i.e. the fair market
value of the business as a going concern minus the residual
value of the remaining assets—the formula determined by the
Supreme Court in the Manitoba Fisheries case—and arriving
at a consensus as to the fair market value of the land and the
value of the residual assets, the parties disagree as to whether
the 5% interest as compensation for the loss of use of the assets
referred to in that case is intended to be calculated on the gross
amount of the assets or on that amount less the value of the
remaining assets. The second question is whether, where there
is a variation in value of the currency, the residual value of the
remaining assets should be expressed in the number of dollars
as of the date of the judgment or as of the date the right to
compensation arose.
Held, the 5% is to be calculated on the difference between
the fair market value of the business as a going concern as of
May 1, 1969, and the fair market value as of that time of the
residual assets remaining in the hands of the plaintiff; this is
the interpretation to be given to the expression "fair market
value ... determined as aforesaid" as used by the Supreme
Court in the Manitoba Fisheries case. This interpretation
conforms to the general principle in expropriation cases that
until the expropriated party is actually paid, he is entitled to
interest as compensation for being deprived of the value of the
assets which the amount of compensation due is presumed to
replace. There is no reason why interest should be paid on the
value of the residual assets which remained with the expropria
ted party; such value, since it could not be enjoyed by a use of
the assets, could, however, be realized on their sale. With
respect to the second question, it is universally recognized that,
when sums are paid to liquidate either past debts or past
obligations of any kind, they are invariably required to be paid
in the number of units of currency which represented the debt
or obligation at the date when it arose or was incurred and
never in accordance with the true value of the currency at the
time of payment.
Manitoba Fisheries Ltd. v. The Queen [1979] 1 S.C.R.
101, explained. Central Control Board (Liquor Traffic) v.
Cannon Brewery Co., Ltd. [1919] A.C. (H.L.) 744,
referred to.
ACTION.
COUNSEL:
D. C. H. McCaffrey, Q.C. and K. Arenson for
plaintiffs.
B. Meronek and C. Morrison for defendant.
SOLICITORS:
Arenson & Company, Winnipeg, for plain
tiffs.
Deputy Attorney General of Canada for
defendant.
The following are the reasons for judgment
rendered in English by
ADDY J.: These two cases each involve solely the
ascertainment of the amount of compensation to
be paid to the plaintiff by the defendant as a result
of legislation which, in effect, amounted to an
expropriation of assets.
The parties agreed that, as the cases were listed
for hearing at the same time and involved the same
solicitors and identical legal issues, they should be
heard one immediately following the other. In the
Canadian Fish Producers case no evidence was
required to be led as all relevant factual matters
had either been settled or determined ahead of
time. At the outset it was indicated that, as the
legal issues to be determined by the Court in that
case were identical to those in the Bodner case,
after evidence had been received in the Bodner
case the argument in that case would be con
sidered as applying to the Canadian Fish Pro
ducers case. The Court ordered that this procedure
be followed.
The question of liability had been determined in
a related case by the Supreme Court of Canada,
namely, the case of Manitoba Fisheries Limited v.
The Queen'.
It had also been previously agreed that determi
nation of all issues as to liability and as to entitle
ment to and method of calculation of compensa
tion, as determined by the Supreme Court of
Canada in the Manitoba Fisheries case, would be
binding for all purposes upon all parties to both
actions before me. In view of this, I will set down
verbatim the formula ordered to be applied by that
Court for ascertaining the amount of compensa
tion in that case. In delivering the reasons for
judgment on behalf of the Court, Ritchie J. stated
in the last two paragraphs at page 118 of the
above-mentioned report:
For all these reasons I would allow this appeal, set aside the
judgment of the Court of Appeal and direct that judgment be
entered providing for a declaration that the appellant is entitled
to compensation in an amount equal to the fair market value of
its business as a going concern as at May 1, 1969, minus the
residual value of its remaining assets as of that date, together
with a declaration that the said fair market value is to be
agreed to by the parties, and failing agreement within a reason
able time, that either party may apply to a judge of the Federal
Court to have that value determined.
The appellant's claim is for "compensation" and in my view
full compensation cannot be determined without taking into
account the loss to the appellant of the use of the assets of its
business since 1969, and I think it to be only fair and equitable
that this loss should be reflected in the amount of compensation
awarded to the appellant hereunder. To this end the judgment
herein will include a further declaration that the appellant is
entitled to a sum equal to 5 per cent per annum of the fair
market value agreed or determined as aforesaid from May 1,
1969, until the date hereof.
The formal judgment issued uses identical lan
guage in so far as the formula for determining
compensation is concerned and no useful purpose
would be served in reproducing it here.
After some evidence had been led in the Bodner
case, the parties arrived at a consensus to the
effect that the fair market value of all of the
assets, inclusive of goodwill, as of the 1st of May
1969, was $512,500 and that the value of the
residual assets was $70,000. I have examined the
reports of the experts and accept these figures.
What the parties could not agree upon was wheth
er the 5% of the fair market value referred to in
the Manitoba Fisheries case, supra, was intended
by the Supreme Court of Canada to be calculated
1 [1979] 1 S.C.R. 101.
on the gross amount of the assets, which in Bodner
case amounts to $512,500, or on that amount less
the value of the remaining assets, that is $70,000,
for a net amount of $442,500.
The same legal issue also remains in dispute in
the Canadian Fish Producers case and I shall,
therefore, deal with it first.
At the trial, I expressed to counsel (who, inci
dentally, were the same as those involved in the
Manitoba Fisheries case) my belief that I was
being asked to make a finding which would have
the same effect as a settling of the minutes of the
judgment of the Supreme Court of Canada in that
case which, by agreement of all parties, was to be
a test case governing the disposition of the cases at
bar and other similar ones now pending before this
Court as a result of the same legislation which led
to the litigation in the Manitoba Fisheries case.
It was suggested to counsel that the preferable
procedure and the correct procedure in the circum
stances would perhaps be to apply to the Supreme
Court of Canada to have the minutes of its judg
ment settled in view of the misunderstanding be
tween the parties arising out of its wording, and
that, in the meantime, both cases before me should
be adjourned until a decision had been rendered on
the application. They expressed the view that no
such procedure seemed to exist and that this Court
should, therefore, determine the question as part of
its duty of ascertaining the fair market value of the
assets as directed by the Supreme Court of
Canada. I do not agree that no such procedure
exists and feel inclined to believe that instead of
requiring or requesting a ruling of this Court, the
problem should be submitted to the Court which
issued the judgment. One must bear in mind that
it is not merely a question of deciding what was
meant by the Supreme Court of Canada by its
pronouncement in a similar case or even one which
is in fact identical to the cases at bar from the
standpoint of the legal issues involved, but of
effectively determining the meaning of the word
ing which will at law, by agreement of the parties
entered into previous to the hearing of the
Manitoba Fisheries case, serve also as the formula
for fixing the compensation to be paid in the cases
before me and in several other cases pending in
this Court as a result of the same enactment as
that considered in that case. The parties, to all
intents and purposes, did apparently cast their lot
with the outcome of the Manitoba Fisheries case
as if they had been named parties therein.
It is to be noted also that my interpretation of
the Manitoba Fisheries case would have no bind
ing effect whatsoever on the parties not before me,
while a clarification by the Supreme Court of the
Manitoba Fisheries case would settle the matter
finally for all interested parties.
It is only by reason of the strong urging by
counsel for all parties that I consented to deal with
the issue at this stage. It is to be hoped that
additional litigation will not result from my deter
mination and that none of those who have prayed
this Court to decide the issue will at some later
date complain that they were in the wrong church
as well as in the wrong pew.
It is interesting to note that the Supreme Court
of Canada, although it approved and adopted the
reasoning in the House of Lords in Central Con
trol Board (Liquor Traffic) v. Cannon Brewery
Company, Limited 2 , on the principle that where
the effect of the statute amounts to expropriation,
unless it so specifies to the contrary, the intention
to compensate for the loss is to be imputed to the
Legislature, it did not follow the rule laid down in
that case as to the means of ascertaining or com
puting that compensation. In both cases, the
Courts came to the conclusion that the terms of
the existing expropriation statute did not specifi
cally cover the case under consideration. In the
English case the relevant statute was the Lands
Clauses Act and in the Manitoba Fisheries case
the statute would be the Expropriation Act as it
existed, on the 1st of May 1969. The House of
Lords held that the method of ascertaining com
pensation provided for in the Lands Clauses Act
would apply because "it was not expressly or
impliedly excluded" from that Act. The Supreme
Court of Canada, on the other hand, chose not to
apply the method provided in the Expropriation
Act because the situation was not specifically cov
ered by that Act and devised instead the formula
which I have quoted at the outset and which will
most likely serve as a precedent in the case of
2 [1919] A.C. (H.L.) 744.
businesses similarly affected by the action of Gov
ernment and which do not fall within the terms of
the Expropriation Act.
The formula refers to the fair market value of
the business as a going concern minus the residual
value of the remaining assets. It necessarily follows
that, in so far as the latter are concerned, the
Court must also mean the fair market value of
these assets since they, as in the cases before me,
were no longer of any use whatsoever to the owner,
the expression could not mean "value to the own
er" of the assets in actual use.
In the last sentence of the above-quoted extract
from the reasons of the Court where reference is
made to 5% interest as compensation for the loss
of use of the assets, the expression "fair market
value ... determined as aforesaid" is used. The
Court does not refer here to the "fair market value
of the business as a going concern" but to a fair
market value "determined as aforesaid": the only
specific mention of any method of determination is
that arrived at by deducting the value of the
residual assets from the value of the business as a
going concern. The Court must therefore be refer
ring to the result of that determination.
Furthermore, this interpretation appears to me
to be more logical and equitable and to conform
more to the general principle in expropriation
cases which has existed for many years now, that,
until the expropriated party is actually paid, he is
entitled to interest as compensation for being
deprived of the value of the assets which the
amount of compensation due is presumed to
replace.
In the case at bar, the value of the residual
assets remained with the expropriated party and
such value, since it could not be enjoyed by a use
of the assets, could, however, be realized on their
sale. I can see no reason why any interest should
be paid on this. There might exist cases where
some time would be required to elapse before the
fair market value could reasonably be expected to
be obtained by a sale of the assets, where they are
no longer of any use whatsoever to the expropriat
ed party, but the question which, by agreement of
the parties, I have been requested to determine
does not involve this factor.
If interest over a certain period were to be
applied to the whole of the fair market value of the
business as a going concern, without regard to the
value of the residual assets, such a compensation
would necessarily be directed somehow to a loss of
the profits of the business as a whole. A fair
compensation for what in effect would be the
deprivation of loss of net profits of an entire
business would necessarily involve the determina
tion of what would be a reasonable period to take
into account and not the fortuitous length of time
existing between the date when the right to com
pensation arose and the actual date of judgment.
In any event, the fair market value of all of the
assets of a business as a going concern as of a
certain date, since it includes goodwill, necessarily
includes a consideration of the value to an
informed purchaser as of that date, of the future
profits or losses which that business might reason
ably be expected to generate. Interest could not
fairly be applied to this amount without taking
into consideration the value of the assets of that
business which would in fact be remaining in the
hands of the vendor.
For these reasons I conclude that, in the
Manitoba Fisheries case, the Supreme Court of
Canada intended that the 5% would be calculated
on the difference between the fair market value of
the business as a going concern as of the 1st of
May 1969 and the fair market value as of that
time of the residual assets remaining in the hands
of the appellant. The interest was to be so calculat
ed until the 3rd of October 1978, being the date of
judgment in that Court. According to the agree
ment between the parties this formula will be
applied to both cases at bar and also, as agreed,
the total amount will then bear interest at 5% from
the last-mentioned date until date of payment.
In the Canadian Fish Producers case before me,
there was an agreement between the parties to the
effect that the fair market value of the business of
the plaintiff as a going concern, as of the 1st of
May 1969, was $285,000. There remains in that
case, however, another issue to be determined by
the Court: the parties agreed that the residual
value of the remaining assets as of the above-men
tioned date was $169,000 when expressed in 1969
dollars and $185,000 if the value is to be expressed
in 1980 dollars, because of the depreciation in the
value of the dollar since 1969. They could not,
however, agree as to which of the two amounts is
to be applied.
It is true that money is but a measure of true
value and is capable of representing value only in
so far as it possesses the power to purchase or be
exchanged for other assets. Where the true value
of an award of damages is to be expressed in
money at any given time by a measure or currency
such as dollars and where, for instance, the value
of the currency has changed in the interim, it
seems to make sense, at least from a philosophical
standpoint, that where there has been a variation
in value of the currency, the number of dollars
which represent the value as of the date of the
award should be used rather than the number of
dollars as of the date when the damage actually
occurred. This reasoning becomes all the more
appealing by reason of the consistent and appar
ently irreversible inflation which has been occur
ring in the last few decades. I know of no court,
however, which has ever applied this principle. On
the contrary, it has, to the best of my knowledge,
always been universally recognized that, when
sums are paid to liquidate either past debts or past
obligations of any kind, they are invariably
required to be paid in the number of units of
currency which represented the debt or obligation
at the date when it arose or was incurred and never
in accordance with the true value of the currency
at the time of payment.
One can, of course, think of many sound and
valid practical and commercial reasons for this
custom including the obvious difficulties in all
business transactions and in the settling of debts
and other obligations which would arise out of
allowing local currency fluctuations to be taken
into account.
Furthermore, the courts in many cases allow
interest to be added to compensate for loss of use
of the money which was previously payable and it
would be manifestly unfair and inequitable as well
as illogical to calculate that interest on an amount
of dollars determined in accordance with their
value at some later date rather than at the date
when the debt or obligation arose.
In any event, I fail to see how the problem even
arises in the case at bar, since the plaintiff enjoyed
the residual assets from the very beginning and
they in effect constitute a diminution of the
damage which occurred to the business as of that
day. The value determined in accordance with the
market at any given time must necessarily include
any diminution in value due to severance or to the
difficulty of disposing of the asset, for these are
considerations which an informed purchaser and
an informed vendor would both take into account
at the time of the sale. It is that value, presumably
so adjusted, which has remained with that plaintiff
since the 1st of May 1969.
Under these circumstances it seems clear to me
that the value of the residual assets as of the 1st of
May 1969 must be calculated in dollars according
to the value of the Canadian dollar as of that date.
The lesser amount of $169,000 will therefore be
used as opposed to the greater amount of $185,000
if the value were to be expressed in 1980 dollars.
Judgment will issue in these two cases in accord
ance with the above reasons and, as agreed be
tween the parties, the plaintiffs will be entitled to
their costs.
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.