Masae Ltd. v. Toronto (Metropolitan) (1992)


In the Masae case, BLG acted for the City of Toronto and established for the first time that environmental remediation costs can be deducted from the market value of expropriated land. The case also represented another decisive victory for BLG on the overall question of valuation.

The City acquired approximately five acres in an industrial area for purposes of extending Front Street. The owners claimed $17.4 million in compensation based on their plans to redevelop the property and lease it as a corporate headquarters. The City offered $3.8 million and argued that the owners could not prove key propositions in support of their claim.

The Board observed that the case would be based on cross-examination of the owners’ experts and that, “If one link fails, and if the chain is truly a chain, the chain must fail.” In this sense the case was similar to the Torvalley case, but this time BLG acted for the expropriating authority and proceeded to prove that each of the five “links” in the owners’ chain would indeed fail.

On the key question of whether the owners would have received the necessary planning approvals for their project, the Board agreed with BLG that the City would not have approved increased density on the site. The owners also relied heavily on the value of an executed lease with their proposed corporate tenant, but BLG presented 40 different reasons why the lease was not an arms-length transaction and should not be considered as evidence of value. The Board agreed.

On the appraisal evidence, the owners argued that the “highest and best use” was comparable to mixed-use properties further north and east. BLG argued that the highest and best use was industrial, and that the property would be built at less than maximum density. The Board agreed that the owners’ plans were “unreasonable and speculative” and had not taken into account important factors such as poor traffic patterns at the site, a lack of transit, and limited visibility from the Gardiner Parkway. Once the Board arrived at these conclusions, they also rejected the owners’ evidence on market value and instead accepted BLG’s positions.

The City had offered $3.8 million for the land, but had not deducted the costs of demolishing existing buildings or remediating the soil. BLG argued that these costs should be deducted from market value and broke new ground when the Board agreed to deduct not only the demolition costs, but also the remediation costs. The Board thus reduced its final award for market value from $3.8 million to $2.9 million, or $14.5 million less than claimed by the owners.

Stephen Waqué, Frank Sperduti and Sean Gosnell are partners at Borden Ladner Gervais LLP and members of BLG’s EMER Group (Environmental, Municipal, Expropriation, and Regulatory Law). For more information on any of these professionals, please visit: www.blg.com.

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