IN THE SUPREME COURT OF BRITISH COLUMBIA

Date: 20120718

Docket: S74833

Registry:
New Westminster

Between:

Trinden
Enterprises Ltd.

Plaintiff

And

Douglas Ramsay
also known as Douglas Ramsay Jr., and

Leone Audrey
Ramsay

Defendants

And

Royal LePage
Commercial Inc. and

G.J.
Eastman also known as Rick Eastman

Third
Parties

Before:
The Honourable Mr. Justice Crawford

Reasons for Judgment

Introduction

[1]          
In March 2002, Mr. Cocco, the principal of the plaintiff company, Trinden
Enterprises Ltd. (“Trinden”), entered a contract to purchase two acres of
vacant industrial land at 1368 Kingsway Avenue, Port Coquitlam. The defendant Mr. Ramsay
refused to complete the sale in mid-May 2002. The plaintiff company sued for
specific performance. In February 2004, Meiklem J. held that the plaintiff
was entitled to damages and not specific performance. This decision is indexed
at 2004 BCSC 226. An assessment of damages was overturned on appeal and led to
this re-trial. I find that the plaintiffs are entitled to damages for the
reasons that follow.

The Parties

[2]          
Mr. Cocco is the principal of Trinden Enterprises Ltd. He has
extensive experience in the construction industry.

[3]          
Mr. Ramsay is in the land development business and appears to be following
in the wake of his mother who also had lands in the nearby area. He developed a
nearby property at 1320 Kingsway, Port Coquitlam, and more recently the
property at 1368 Kingsway, Port Coquitlam. The co-defendant Mrs. Ramsay
played no part in the court proceedings.

The Events Leading to the Breach of Contract

[4]          
Mr. Cocco said he was looking for a one to two acre vacant property
to develop a multi-tenant warehouse. Through an agent he located the
defendant’s property. In March 2002 the parties entered an agreement for sale
and purchase for $710,000 with the closing date being May 1, 2002.

[5]          
The date was extended to May 20, 2002 to allow the defendant to deliver
the property “stripped and filled with clean structural fill”.

[6]          
Mr. Cocco said he had cash, cash flow from his other businesses and
a construction loan in hand. He hired an architect to provide conceptual
drawings. A construction estimate and schedule was prepared; geotechnical
testing was undertaken regarding the weight-bearing of the soil on the
property. Pre-load preparations began with consultation with the geotechnical
advisor. Mr. Cocco put together a budget and investigated current lease
rates. He obtained a fixed price quotation from Cape Construction for the building
of the tilt-up walls and roofing shell of two warehouses.

[7]          
Mr. Cocco discussed his plans with Mr. Ramsay and showed him
his drawings.

[8]          
Mr. Ramsay had consulted a soils expert, Mr. Ko, and referred
him to Mr. Cocco. Mr. Ko advised pre-loading would take a year but
the process could be speeded up if a larger volume and heavier weight of
pre-loading were utilized. The process could be speeded up even more by digging
gravel filled drain holes which would allow the water being compressed by the
pre-loading to drain faster. Mr. Cocco’s plan was to pre-load and build
one building and move the pre-load to the other half of the property, thereby
halving the amount of pre-load sand.

[9]          
However, difficulties between the parties occurred in early May 2002
with Mr. Ramsay refusing to comply with the obligation to strip and fill
with clean structural fill which led to arguments over what the precise
requirements were and eventually the defendant resiling on the sale.

[10]       
The plaintiff promptly sued for specific performance.

[11]       
By way of summary trial, Meiklem J. heard the liability issue
November 26 and 27, 2003 and handed down judgment on February 17, 2004. He
found the agreement was not uncertain and that it was Mr. Ramsay’s
obligation to provide the bare land in a condition suitable for pre-loading. He
dismissed Mr. Ramsay’s arguments as to uncertainty of contract.

[12]       
As to the entitlement of the plaintiff to specific performance or
damages, Meiklem J. said this:

[46]      The parties agree that this question must be
decided in accordance with the principle set out in Semelhago v. Paramadevan
et al, [1996] 2 S.C.R. 415 (S.C.C.). The frequently quoted comment of
Sopinka J. from para. 22 of that judgment is:

Specific performance should,
therefore, not be granted as a matter of course absent evidence that the
property is unique to the extent that its substitute would not be readily
available. The guideline proposed by Estey J. in Asamera Oil Corp. v. Sea
Oil & General Corp. (1978), 89 D.L.R. (3d) 1, [1979] 1 S.C.R. 633, 5
B.L.R. 225, with respect to contracts involving chattels is equally applicable
to real property. At p. 26, Estey J. stated:

Before a plaintiff can rely on a
claim to specific performance so as to insulate himself from the consequences
of failing to procure alternate property to mitigation of his losses, some
fair, real and substantial justification for his claim to performance must be
found.

[47]      Both parties cite and rely on John E. Dodge
Holdings Ltd. v. 805062 Ontario Ltd. (2001), 46 R.P.R. (3d) 239 (Ont. S.C.)
the report of which includes a very useful annotation by Theodore Rotenberg,
the concluding words of which are:

The upshot of all the cases is that
now there is only one question the court should ask:  “Why is this land so
different from other land that the purchaser in justice should have it?” 
But there are also 3 questions that will help judges to arrive at the correct
answer:

(1) Is
there evidence that the land is especially suitable for the purchaser?

If the purchaser is a home buyer, a
bona fide subjective preference should make the land suitable. If the
purchaser is a commercial user, the business rationale for the location must be
objectively reasonable. As Lax J. points out, there can be any number of facts
that answer this question.

(2) Is there evidence
that a “substitute” is not “readily available”?

The more difficult and uncertain
the factors that must be adjusted to compare the land to other properties, the
less likely it will be that a substitute is in fact either “suitable” or
“readily available”.

(3) Are damages
“comparatively inadequate” to do justice?

If the damage assessment process
lacks precision, or the vendor’s conduct is a flagrant and deliberate
infliction of risk and loss on the purchaser, then damages are not likely to be
the suitable remedy. The evidence for this question will often overlap the
second question, but the concepts are not identical since the emphasis in this
question is on the “justice” of the case, not the suitability of the substitute
property.

[48]      The only evidence pertinent to this issue is that
of Mr. Cocco in his affidavit sworn June 24^th, 2003. He states
that in the spring of 2002, he began looking for a parcel of one or two acres
that either had an existing multi-unit commercial warehouse on it, or that
would be suitable for building one. He had a price range of $375,000 to
$400,000 per acre and he was looking for a location with good exposure to a
high traffic area in the Burnaby, Coquitlam, Port Coquitlam, Langley, Maple
Ridge, and Pitt Meadows area. He said that he spoke with a number of realtors
and there were no other properties which met his criteria other than the
subject property and one other property which he made an offer on and wasn’t
able to come to terms on the price. He also says that since April of 2002 he
has not seen any other properties meeting his criteria on the market. The
subject property has ready access to main thoroughfares heading east, west and
south and high visibility which is important for distribution purposes. Because
of the unique shape of the lot and the size of the exposure on Kingsway he is
able to build two multi-unit warehouses in an unusually attractive design in
two phases. The property is in a high growth area.

[49]      Clearly this location
was especially suitable for the plaintiff’s purposes but the plaintiff’s
purpose is nevertheless a commercial investment purpose and the suitability
factors merely go to optimizing the use of the facilities and consequently
maximize revenues and, in turn, profits. It cannot be said that damages are
comparatively inadequate and the evidence does not establish that a substitute
location is not readily available. Mr. Cocco’s affidavit is not
convincing, and does not demonstrate exhaustive or comprehensive efforts to
locate a substitute property.

[13]       
Mr. Cocco’s evidence by way of an affidavit
dated June 24, 2003, at para. 4 stated that he had made an offer on
another property but was unable to come to terms. The rest of his affidavit is
silent save para. 16 which reads (without change):

I spent most of
my time on this project roughly from mid-March 2002 through April 30, 2002
putting in a great of time including being on the phone and meeting with people
to put together this project. It remains my intention to construct the
warehouse on this property and continue to hold it over the long term. Since
April of 2002 I have not seen any other properties on the market…There is no
other parcel of that size and in that price range was out in Aldergrove, that I
have found.

[14]       
There is no other evidence of Mr. Cocco
seeking a replacement property in the affidavit.

[15]       
Meiklem J. found damages would be an
adequate remedy.

The Damages Trial

[16]       
The trial took place in October 2010. The
evidence of Mr. Cocco, his primary expert witness, Mr. Reilly, Mr. Ramsay,
and the primary expert witness for the defendant, Mr. Dybvig of the Grover
Elliot firm, took up most of the two weeks of trial.

Mr. Cocco

[17]       
I accept much of Mr. Cocco’s evidence. He
had extensive experience in the construction industry, starting off in the
brick and concrete brick supply business and gradually expanding his interests
to re-building houses and eventually owning and operating a six bay warehouse
in Burnaby, and purchasing an apartment complex in Kelowna. He researched the
warehouse project and looked for land in a number of municipalities. He made an
initial bid on another property in Port Coquitlam in early 2002 and entered the
contract to buy Mr. Ramsay’s property on March 3, 2002.

[18]       
It is evident that he moved the process along.
He had funds to purchase; he obtained an architect to draw conceptual
drawings. He obtained a construction estimate including a construction schedule;
he entered discussions with the geotechnical advisor on the necessary land
preparation and pre-load preparation. He investigated lease rates and he
prepared budgets, and obtained landscaping estimates.

[19]       
It is apparent that it was an extremely wet
spring, which led to the problems over whether glacial till fill could be used
or whether sand had to be used. It was evident that had glacial fill been used
the site would have turned to mud. The site required the use of sand and that
was the issue that caused the breakdown in the contract negotiations.

[20]       
It also led to Mr. Cocco inquiring as to
how to speed up the pre-load process and obtain costing for the drilling of
weep holes so that the pre-loading process could be reduced from nine months to
something in the order of three months.

[21]       
The conceptual plan allowed for two buildings
with 16 front-loading bays, each of some 2,800-2,900 square feet.

[22]       
Pre-loading timelines varied from one to one-and-a-half
years, but if “super-loaded” with nine feet of sand, some six to eight months. It
was suggested that insertion of drain holes might reduce pre-loading time to
three to five months. Thus, Mr. Cocco was “leaning towards the third
option”, for the quicker the land was ready, the sooner construction would
begin and end and the finished product would be available on the market. He was
proposing to pre-load one side, and move the sand to the other side, then build
on the first side, thereby halving his sand pre-loading costs.

[23]       
Evidence was introduced regarding the costs of
weep holes in the order of $18,400.

[24]       
Mr. Cocco’s notes show he was methodically
preparing to go ahead with the project. His budget was dated April 20, 2002.

[25]       
He obtained a quotation from Cape Construction
regarding the shell and roof at $1,840,799 with an eight-month construction
time. Architectural costs were put at $50,000.

[26]       
Mr. Cocco shared his plans and intentions
with Mr. Ramsay and Mr. Ramsay said he was planning a similar
development in terms of warehouse use of his lands nearby at 1320 Kingsway.

[27]       
Mr. Cocco said after the sale fell through,
he promptly moved to purchase another property in the Gloucester Estates, 56^th
Avenue, Langley, making an offer on June 3, 2002 on 1.37 acres for $460,000.
This evidence was not in his affidavit of June 2003.

[28]       
He then decided not to pursue the Langley
purchase for several reasons including the proximity of big box competition,
area restrictions on the land, and nearby competitors offering rental
inducements.

[29]       
Exhibit 2, Mr. Dybvig’s report of July 21,
2010, shows 170 potential industrial sites were sold in the Lower Mainland. Mr. Cocco
acknowledged he did not know of all of them which likely indicated they were
not on a multiple listing service.

[30]       
Mr. Cocco’s response was that he had
investigated several of the Lower Mainland municipalities and when he compared
the property at 1368 Kingsway, he was looking at different zoning issues in
various municipalities, higher land costs, traffic flow issues, other
pre-loading issues, different service charges, different development cost
charges, different set back requirements, and different lot sizes (though I
note he was looking at one to two acres). Some of the properties were owned by
Beedie Construction (“Beedie”), who offered the properties for sale but also
tied in a building contract which took out the possibility of “developer’s
profit”. That was exemplified by the property at Mustang Place which was the
only other land Mr. Cocco knew of in Port Coquitlam. He did not know of
169 Golden Drive, Coquitlam being for sale. He acknowledged there were many
properties that if not listed on MLS, he would not be aware of them.

[31]       
In cross-examination, he agreed he had not
developed any property since 2002 though he did purchase a commercial retail
property in 2005 for $1.2 million.

[32]       
Mr. Cocco has never constructed a
residential or commercial building with Trinden Enterprises Ltd.

[33]       
He agreed he was looking at a variety of
commercial properties in early 2002. He wanted to build or buy a warehouse not
of any particular size, just that it be profitable and he was looking at costs
of $1 to $1.5 million dollars. He had no tenants lined up, nor was he aware of
any potential tenants.

[34]       
He agreed he had looked all over the Lower
Mainland for the right property and was looking for at least a one-acre
multi-tenant warehouse. The two small warehouses that he proposed on 1368 Kingsway
were peculiar to that property’s dimensions.

[35]       
With respect to the budget he prepared on April
20, 2002 (Ex. 1, Tab 28), he had those cost quotes “nailed down”.

[36]       
He had estimated at the previous trial in 2007
that the rental loss was premised upon $5.25 per square foot on 46,000 square feet
of rental space and his potential loss was $250,000 per annum.

[37]       
He had in 2007 come to the view that he would
have sold the property, whereas in May 2002 his intention was to keep it as a
revenue generator.

[38]       
He agreed there were many other costs of
mortgage borrowing that he had not taken into account including the interest
rate, appraisal fees, property taxes, placement fees, and legal fees. He also
did not take into account the pre-loading estimate of $175,000 and a $25,000 fee
to move the pre-load sand from Building B to the site of Building A.

[39]       
He said that in terms of alternative sites he
could not find any that were comparable. Plainly a factor in his opinion was
the price of land going up sharply in mid-2002 and the revenue rates falling. He
said the land prices doubled while lease rates remained the same, interest
rates went up and construction costs went up.

[40]       
He agreed his out-of-pocket expenses of $14,331 for
the collapsed sale had been paid.

[41]       
Mr. Cocco acknowledged there would be
additional costs for the weep holes of $18,000. He agreed his budget had no
allowance for mechanical and electrical work. He agreed if eight months were allowed
for pre-loading and building that he might have had Building B available
in December 2002 and it would have been another three or four months before Building A
would be available.

[42]       
He agreed his landscaping costs were $18,485 and
there were additional design costs of $7,500.

[43]       
He agreed there could be problems with Mr. Ramsay
as an adjoining land owner who might not consent to pre-loading to the edge of
his property as that would affect the adjoining land owner. Ordinarily one
would get the adjoining land owner to agree that pre-loading could spread over
the edge of the property.

[44]       
With respect to his offer on the Langley property
he never got to planning the size of the building. It was put to him he only
had provided a bare-bones budget with no contingencies. Mr. Cocco claimed
he built in some cushion. He agreed costs of bringing the utilities to the site
would be $60,000, and that with respect to leasing the warehousing there would
be sales commissions of $55,000.

[45]       
He was not aware that development cost charges
were in the order of $86,000 but believed those had been previously paid. He
agreed no permit fees were budgeted and could be in the order of $30,000.

[46]       
With respect to the weep holes, he acknowledged
that might be only with respect to one building, in which case the weep hole
charges would be $36,000.

[47]       
He agreed he went on his holiday on the first of
May without a pre-load permit, without surveys done, and with no settled quotes
for the weep holes.

[48]       
He agreed his plans called for front-loading
bays and that back-loading bays are preferred in the market, if one has the
land to create that access.

[49]       
He agreed he never discussed building costs with
Beedie on the 1462 Mustang property, nor had he seen the 169 Golden Drive
property.

[50]       
He agreed that Mr. Dybvig’s opinion
indicated that there were many properties, perhaps as many as a 170 on the
market for sale in the immediate post-May-2002 period and that Mr. Dybvig
listed 50 to be similar in terms of potential warehouse use.

Mr. Mynett

[51]       
Mr. Mynett’s opinion was that depending on
completion dates and a rental rate of $7.25 per square foot, potential lost rental
revenue to February 2004 would be $139,331 after accounting for all costs.

[52]       
Completion dates would affect such a conclusion (i.e.
if the work were finished two months earlier it would be $185,000 and if later
$93,000).

[53]       
Mr. Mynett’s conclusions were premised on
completion of Building B by February 28, 2003 and Building A by July
31, 2003, with each building being fully leased one month after completion.

[54]       
Mr. Mynett conceded the opposing expert, Mr. Miller,
in his report of August 31, 2010, using the higher construction costs,
along with a longer construction time, lower rental rates, and lower interest
rates, concluded that Building B would not be ready for leasing until late
August 2003 and that Building A would not be ready for occupancy until
February 2004. Mr. Miller considered lost rental income would be roughly
$63,800 based on rentals of $6.50 per square foot. However, taking into account
other costs, Mr. Miller concluded there was no economic loss incurred by
Trinden for not completing the purchase of the property. In fact, by keeping the
cash monies in the bank, the plaintiff made a profit on those interest monies.

Mr. Miller

[55]       
Mr. Miller is a business evaluator. His
opinion dated August 31, 2010 was made in response to Mr. Mynett’s reports
(Ex. 1, Tab 32, dated September 30, 2006 and Tab 33, dated July 26, 2010).

[56]       
Using the same methodology but different inputs,
he concluded that Trinden had not suffered any economic loss (loss of rentals),
and that by keeping the cash sum of $1,173,000 in the bank invested at 3
percent per annum for 22.6 months, it would have earned approximately $66,275.
After deducting the specific costs of $14,331 already paid by the defendant to
the plaintiff, it had received a profit of $54,000.

[57]       
The differences in input were the utilization of
a lower rental rate of $6.50 per square foot, compared to Mr. Mynett using
a lease rate of $7.25 per square foot, a different construction time line, and
the assumption that the warehouses would not be completed until February 2004;
therefore, there was no lost income.

[58]       
The premise was that it would take seven months
to pre-load the property and eight months of construction or 15 months in
total.

[59]       
The assumptions as to rental income and
construction timelines were in Mr. Dybvig’s report. Mr. Miller agreed
his figures were sensitive to the timing for completion of pre-loading and
building time.

[60]       
The total project costs for financing were taken
from Mr. Dybvig’s report in the amount of $3,675,000 and included the land
costs.

[61]       
As to the construction timeline, Mr. Miller
said he had discussed the super-loading found in Mr. Dybvig’s report at
pg. 12 with Mr. Dybvig.

Mr. Reilly

[62]       
Mr. Reilly is a senior appraiser and
president of Canamera Appraisal Group, whose qualifications were not disputed.

[63]       
He provided a retrospective appraisal for the
vacant industrial property located at 1368 Kingsway Avenue, Port Coquitlam (Ex. 3).
He provided his opinion as to the market value and an estimate of developer’s
profit as at May 20, 2002 and February 17, 2004 in accordance with his
instructions.

[64]       
He noted that the area was approximately two
acres and the zoning is M1 or general industrial, that the land was vacant and
the proposed improvements were two new strata titled industrial warehouse
buildings with a total floor area of 45,411 square feet. Building A
comprised 19,453 square feet demised into seven units while Building B of
25,958 square feet was divided into nine units. In terms of estimated market
value, the vacant land as at May 20, 2002 was $700,000 and as of February 17,
2004, was $830,000.

[65]       
Mr. Reilly considered the estimated market
value as if the warehouses were completed by three methods, namely cost, income,
and direct comparison.

[66]       
With respect to the cost method as at May 20,
2002, he evaluated the improved property at $3,265,000, and on February 17,
2004, at $3,270,000.

[67]       
By the income approach he set the value at May
20, 2002 at $3,750,000 and on February 17, 2004, at $4,170,000.

[68]       
By direct comparison to other properties, he
valued 1368 Kingsway as of May 20, 2002 at $3,860,000 and on February 17,
2004, at $4,180,000.

[69]       
He defined developer’s profit as the difference
of construction costs and land cost deducted from comparative completed
market value. He concluded the estimated developer’s profit as of May 20, 2002
at $595,000, and as of February 17, 2004, at $910,000.

[70]       
In determining the cost values, he used the well
known quantity survey program Marshall Swift to input the building costs for tilt-up
concrete construction and obtained a total of $1,950,642. To that he added the
land costs, pre-loading, land tax, off-site costs, landscaping, paving,
marketing costs, and development cost charges.

[71]       
He also took into consideration the estimate
obtained from Cape Construction.

[72]       
With respect to the income approach on a survey
of related properties, he found the lease rates as of May 2002 at $7.00 per
square foot and as of February 2004 at $7.50 per square foot.

[73]       
Generally, he considered the small bays would be
easy to rent and the plaintiff would obtain a higher price per square foot. He
noted that with respect to the developer’s profit as between May 2002 and
February 2004, there was relatively little change in costs while market values
increased.

[74]       
With respect to Mr. Dybvig’s “rebuttal
report” and his original report, two principal differences were apparent.
Namely, one, Mr. Dybvig’s construction costs were higher and two, Mr. Dybvig’s
market lease rate for completed buildings was less.

[75]       
Mr. Reilly did not believe Mr. Dybvig
appreciated the better location of the 1368 Kingsway property to its comparables,
nor did he take into account the 24 foot ceilings in the proposed building, the
fact that it was a new building, and the smaller unit sizes.

[76]       
On the premise that the buildings would complete
in 2003 and that demand was apparently increasing, Mr. Reilly believed the
rental rates would be going up.

[77]       
On cross-examination, Mr. Reilly agreed
that the evidence was that construction even on his instructions was not complete
until July 2003 and made his 2002 calculations less relevant.

[78]       
Mr. Reilly had performed other appraisals
in 2006 (Ex. 13) and 2007 (Ex. 14), and amended this report (Ex. 9).

[79]       
He agreed that all of his appraisals used the
Marshall Swift quantity survey program.

[80]       
He agreed the 2007 appraisal included
pre-loading and the development cost charges from Port Coquitlam.

[81]       
He agreed he did his calculations as if one
building had been built and not two, which could result in increased costs of
$50,000.

[82]       
Mr. Reilly agreed the land was vacant. His
dates of estimated market value were set by instructions from counsel. The
estimated completion date for construction was July 30, 2003 on instruction
from counsel.

[83]       
He agreed some of the previous estimates
contained different information such as pre-loading and development cost
charges.

[84]       
He agreed that using the Marshall Swift
segregated estimator, he provided the information on the basis of one building
with an area of 45,411 square feet rather than two separate buildings, and that
the cost for two separate buildings would cause an approximate $50,000
increase.

[85]       
With respect to where he had assembled the
figures as to the cost approach value as at May 20, 2002 (Ex. 4, pg. 62),
he agreed he had deleted $130,000 regarding offices and a two-piece handicap
bathroom for each unit on the basis that it would be included in the Marshall
Swift estimator.

[86]       
He disagreed with the proposition that the
Marshall Swift estimator would not include the demising walls and only provide
for one office and one washroom. Mr. Reilly said the estimator costs under
the heading “Interior Constructions” (at Ex. 4, pg. 62.2) in the amount of
$103,991 would include the demising walls and other improvements (i.e. for 16
offices, washrooms and demising walls).

[87]       
His $60,000 allowance for site servicing was for
connections from offsite to onsite. He agreed the Marshall Swift program did
not specify any contingency allowance but believed the building could be built
for the monies estimated.

[88]       
The instruction regarding strata titling came
from counsel.

[89]       
He saw no reason to change his opinion in spite
of Mr. Dybvig’s report comments at Ex. 4, pg. 10-11.

[90]       
He disagreed there was any difference in the
taxes involved, saying there was little difference in the assessed values of
strata units or lease holding. He agreed a principal difference was his
estimated building costs of $3,150,000 compared to Mr. Dybvig’s (Grover
Elliott) estimate of $3,650,000.

[91]       
Mr. Reilly did not give consideration to
Cape Construction’s estimates, as he had questions as to their estimates, and
thus he did his own calculations.

[92]       
With respect to the lease rate data chart (Ex. 3,
pg. 65) which shows five comparables, he agreed the first two showing lease rates
of $6.00 and $5.20 per square foot pre-dated February 2002. The third
comparable of February 2004 showed a lease rate of $6.31 and was the only one
of directly comparable date. The last two comparables had leases beginning March
and May 2004. The March 2004 lease was located at 1320 Kingsway (owned by Mr. Ramsay)
and had the benefit of the nearby Chevron gas station and Wendy’s restaurant.
The lease rates began at $7.65 for buildings with 20 foot ceilings.

[93]       
The first three comparables were older buildings
with lower ceilings.

[94]       
He agreed if lower rental rates were put into
the calculation, there would be an appreciable difference (i.e., at $6.25 cents
per square foot per annum), the estimated potential net income per annum would
be $278,142, and the valuation would then be at $3,371,418 as at May 20, 2002, whereas
if a lower square foot figure such as $5.50 (as estimated by Mr. Cocco)
were inserted, the capitalized value would be $2,966,844 (see Ex. 15-16).

[95]       
If Mr. Dybvig’s figure of $6.75 was used,
the estimated market value as of February 17, 2004 would be $3,641,127 (Ex. 17).

[96]       
He agreed in assessing the value of the
developer’s profit, the difference between him and Mr. Dybvig lay in the
construction costs of some half million dollars and the difference in rental
rates.

[97]       
He was asked the basis for using either the
income approach or the comparison approach and he said he would use whichever
gave the largest value as showing the highest and best use.

[98]       
He agreed that his note (at the bottom of pg.
99) showing the correlation and final estimates of value indicated that the
strata titled income producing properties would be purchased by investors based
on income production, rather than comparison method values.

[99]       
On re-examination, Mr. Reilly was asked
whether the $103,991 listed in the Marshall Swift interior construction figure
included tenant office walls and washroom walls. He said he believed it was
included in the general 3 to 12 percent “build out” included in the overall
figures, but when pressed, he said he simply did not know whether in fact
Marshall Swift included it in their calculations.

Steve Caldwell

[100]     Mr. Caldwell is an experienced realtor with DTZ Barnicke in
Vancouver with some 32 years of experience. Particularly, his interest is
industrial lands east of Vancouver and north of the Fraser River, with a focus
on the Tri-Cities area.

[101]     He obtained a listing for 169 Golden Drive, Port Coquitlam on April
12, 2004. The property was owned by Rolls Royce Production and comprised two
properties, a 2 acre site with a large industrial shop and offices, with an additional
1.6 acre vacant lot across the street. The asking price was $4.2 million for
both properties and Rolls Royce wanted to sell both properties. It was easier
to sell the bare land separately but the owner’s focus was to sell the building
first, and if need be, sell the land separately.

[102]     Both properties were sold after an offer was received July 19, 2004
with a closing date of September 30, 2004.

[103]     He said there was little vacant land in the area in mid-2004.

[104]     He commented on the aspects of Kingsway Avenue and Broadway Street,
which if Mary Hill Bypass is considered the base of a triangle, Broadway Street
is the left vertical and Kingsway Avenue is the right vertical.

[105]     He had sold properties on Broadway Street and was familiar with the
developments describing them as mostly bought up by large developers creating multi-tenant
buildings using a “cookie cutter approach” with total areas of 110,000 square
feet and 4,200 square foot bays. He noted there are now six buildings of that
size along Broadway Street.

[106]     He noted a local developer had built some smaller warehouses at the
corner of Broadway Street and Mary Hill Bypass.

[107]     He described Kingsway Avenue as being an arterial connection between
downtown Port Coquitlam to Mary Hill Bypass and that Broadway Street was a
connection for Mary Hill Bypass to the downtown. While he considered Kingsway Avenue
had more traffic, he said both had two lanes and it was hard to say what the
difference would be.

[108]     He acknowledged Kingsway Avenue had a large open ditch on its west
side which was an additional expense for the developer to bridge. With respect
to other aspects he did not think there was so much difference, but the
developments with heavy industrial purposes were on the north side of Kingsway
on large properties, whereas the south side of Broadway Street had smaller
properties out by the Mary Hill Bypass. Generally, he said there was a
nicer level of development on the south side of Kingsway Avenue.

[109]     He considered there to be a fair mix of different sized lots on the
south end of Broadway Street. Large acreage properties had been subdivided so
there were many different sizes. He noted Broadway Street had long thin lots
developed because of the large acreage being sold and developed and in a sense
they were “not as nice” as the developments on Kingsway Avenue but there were
many similarities.

[110]     He acknowledged the long narrow lot would have less exposure and
that a rectangular lot sideways to the street obviously would have more
exposure.

[111]     He noted Broadway Street now has access from Lougheed Highway thanks
to the flyover across the railway tracks which had been announced some four or
five years previously and has been in effect the last two years.

[112]     In cross-examination, he agreed with the statements by his firm (in Ex. 2,
pg. 23) regarding the decreasing vacancy rates in industrial land markets
in late 2001 and remaining stable in early 2002.

[113]     He did not disagree with the Colliers International quoted rates of
$5.00-$6.00 per square foot for small bay warehouses, though his description of
a small bay warehouse was at less than 5,000 square feet whereas Colliers’ was
at less than 15,000 square feet.

Mr. Ramsay

[114]     Mr. Ramsay said his first development experience was with the
nearby property at 1320 Kingsway Avenue on which he initially placed a Tim
Horton’s/Wendy’s franchise and a Chevron gas station and later added a
warehouse. He pre-loaded the whole property. In 2002, his knowledge of local
warehouse rentals was that the usual price was $5.00 per square foot.

[115]     He believed an advantage to the 1320 warehouse was rear-loading,
which allows the tenant to use the entire frontage for offices or showrooms. As
well, he rezoned the property for comprehensive development which took another
13 months.

[116]     With respect to the contract made with Mr. Cocco, he agreed the
contract fell over the issue of whether or not he was to put in the structural
fill.

[117]     With respect to the development of 1320 Kingsway Avenue, in May 2002
he was pre-loading the site. He said he pre-loaded in five or six stages over
two-and-a-half to three years. After he finished the pre-loading in July 2003,
he began construction. He said he tried to minimize the amount of sand
pre-loading and had difficulty getting rid of it. He had it for sale for six
months without any takers and eventually moved it to 1368 Kingsway Avenue.

[118]     His warehouse at 1320 Kingsway Avenue is 21,500 square feet. The
contractor was Titan Construction who completed substantial construction on the
site at the end of February 2004. The warehouse is comprised of 14 units. It
was a tilt-up shell construction, asphalt paving and provision of some
services. There was a seven month construction period. MGX Enterprises then
provided the leasehold improvements taking six to ten weeks to complete.

[119]     Mr. Ramsay said there would be a difference in tenants as 1368
Kingsway Avenue would attract industrial users exclusively, whereas the 1320
site with Tim Horton’s and the gas station attracted a number of businesses
that profited from the “great exposure”, though the tenants were not purely
retail.

[120]     Exhibit 1, Tab 24 is 1750 Kingsway Avenue, the immediate
neighbour of 1368 Kingsway Avenue (picture taken May 6,
2006). It shows tenancy starting at $5.00 per square foot.

[121]     With respect to 1320 Kingsway Avenue, Mr. Ramsay started
marketing the rentals in the fall of 2003 and the building was wholly rented by
August 2004. Tenant inducements were offered including mezzanine or offices. As
well, most obtained a rent-free period (see Ex. 1, Tab 29).

[122]     With respect to 1368 Kingsway Avenue, pre-loading started in 2007. Highway use
permits, bonds, and notification of insurers was required regarding
transportation of sand fill to the site. The first pre-loading started November
1, 2007. It took some six weeks to get the city permit. Then the planned staged
pre-loading process took place while pre-loading was stacked to 11 feet high.

[123]     The west side neighbour was not accommodating and on the east side
was Sysco Industries who were built to the end of their property. That meant
that Mr. Ramsay bought 140 concrete blocks ($90 delivered) and had 40 of
his own which he used to block the edge of the property. The blocks were placed
on compacted soil so as not to tip; they were held by a wooden curb.

[124]     With respect to the plan that Mr. Ramsay had developed, he
provided no information to the architects, save the lot size and a request to
obtain the best layout.

[125]     The pre-loading went from November 1, 2007 to October 30, 2008 and
then it took a month to remove the pre-load.

[126]     Mr. Ramsay did give some consideration to Mr. Ko’s
proposal (Ex. 1, Tab 13) as to the use of weep drains. However, he found
no other use of the process in the neighbourhood, nor had Mr. Ko actually
used the process.

[127]     Based on 10 foot centres, Mr. Ramsay figured 536 weep holes
would be necessary but he did not use that process. He did consider the use of
wick drains but obtained a quotation for $200,000 (Ex. 18). The cost was
prohibitive.

[128]     After the pre-loading was completed, the construction took from
September 2009 to July 2010, approximately 10 months. He used the trades
sequentially, i.e. framing being done for Building 1, then moving over to
Building 2 and then the concrete being poured on Building 1 and then
on Building 2 and so on.

[129]     He gave away the pre-load sand.

[130]     The cost of bringing utilities to the property line was $60,000.

[131]     He contrasted the 1320 site with its high exposure to Mary Hill
Bypass and Kingsway Avenue, the sign posting of this to the traffic on both
main roads and the fact that rear-loading to the back of the units encouraged a
“retail atmosphere” in line with having the Tim Horton’s/Wendy’s and Chevron onsite.

[132]     With respect to 1368 he said his competitors would be found along
both Broadway and Kingsway with different sizes of units available.

[133]     He said he understood Mr. Cocco’s intentions were to build a
multi-tenant building for long term holdings for rent.

[134]     Asked whether the time line of the plaintiff for three months
pre-loading and four months construction was feasible, he described it as “pure
fantasy”.

[135]     With respect to other sites he was aware of for development in May
2002 he mentioned 1462 Mustang Place, (across the road on Mary Hill Bypass that
had been pre-loaded by Beedie Developments); Mr. Ramsay claimed to have
seen a sign for the property at 169 Golden; as well, he said there was huge
acreage available in the Pacific Reach Park which is located between the Port
Mann bridge in New Westminster on the Fraser River side south of Highway
1. He said that the site was pre-loaded and had access to Mary Hill, Lougheed
Highway, and Highway 1.

[136]     On cross-examination, Mr. Ramsay acknowledged he was the
effective owner of both 1320 and 1368 Kingsway Avenue.

[137]     Reference was made to a memo from Mr. Eastman of February 14,
2002, stating that the development cost charges had been paid (Ex. 1, Tab
14). Mr. Eastman was the listing agent.

[138]     Mr. Ramsay acknowledged that in 2010 the city advised
development cost charges were outstanding in the amount of $86,000. Mr. Ramsay
agreed that at the time the agreement was made with the plaintiff, it was
believed that the development cost charges had been paid. As yet, he had not
been required to make payment and in fact had developed the property with a
building permit.

[139]     Mr. Ramsay had obtained an appraisal of 1368 Kingsway Avenue dated
July 18, 2007 (Ex. 19). The evaluation was obtained for financing
purposes. Mr. Young of Grover Elliott concluded the value of the vacant
land at 1368 Kingsway Avenue in mid-2007 was 2 million dollars (Ex. 19, pg.
20).

[140]     An earlier appraisal had been done by Mr. Young with respect to
1320 Kingsway Avenue dated February 19, 2003 (Ex. 20). He agreed Mr. Denis
Carlin had been his consultant on both properties, assisting in gathering
information, helping obtain appraisals and dealing with the financing issues.

[141]     Mr. Ramsay said he had not read the rebuttal report of Mr. Dybvig
(Ex. 4).

[142]     Mr. Ramsay agreed if the costs were more than the value of
developing the site, there would be no developer’s profit. He agreed there
might be other reasons to still proceed with a development. It was put to
him that was the situation on 1320 Kingsway Avenue, that is, the cost of improvement
was greater than the value as built. He said that was more a question of
calculation.

[143]     Mr. Ramsay agreed in his evidence at the first damages trial
that he would spend $1.6 million developing the 1320 Kingsway Avenue site for a
gross valuation of $3.1 million. He justified it as the prime front corner
location increasing the value and lease rates.

[144]     He then pointed out that he borrowed $1.6 million but the actual
building cost was $1.2 million and the lease rates he obtained was $7.00 per
square foot generating income of $140,000 on a $1.2 million expenditure. In
essence, he thought it was worth the investment.

[145]     He was then questioned regarding the development of the 1320 Kingsway
site which is some 175 metres away from the 1368 Kingsway site. He agreed he
obtained changes in zoning for uses from commercial development to M3.

[146]     The buildings on the 1320 Kingsway site were ready for leasing in
February 2004 and he did not sell strata title. The warehouses were 21
feet in height. He agreed it was a special property in terms of corner exposure
and the Tim Horton’s/Wendy’s and gas station on the corner were an attraction.

[147]     As well, the sign positing was evident to the Mary Hill Bypass and
Kingsway Avenue.

[148]     He agreed the 1368 Kingsway site had 270 feet of frontage and that
he planned two buildings of 25,313 feet containing eight units of 2,790 square feet
and a 19,530 square foot warehouse with seven units. The building had a ceiling
height of 21½ feet.

[149]     He agreed the buildings provided for front-door loading and that was
the advice of the architect as to the best use of the land.

[150]     With respect to his building permit, he said it would take a minimum
of 13 months and in that particular case they waited until September 2009
before “picking up the building permit”.

[151]     He believed he obtained the construction costs from Titan Construction
in August 2008 and the remainder of the prices in 2009. With respect to ceiling
heights, it was put to him there was a trend towards 24 foot ceilings. He said
the smaller size tenancies also reflected in the heights of the building at 21
feet.

[152]     He agreed he went to strata titling as he had decided to sell and
rent; he sold for financial reasons.

[153]     He could not recall if indeed substantial completion was in April
2010 and whether he agreed to obtain that information from Titan Construction.

[154]     With respect to the cost of pre-loading, he agreed he thought
$175,000 was a reasonable cost in 2002. He said the cost of moving sand for
pre-loading from one half of the site to the other half would be
$25,000-$30,000.

[155]     He agreed that in his evidence at trial on December 19, 2007, he had
agreed to a total cost of $178,000. It was then put to him that that was
generous in light of the November 2006 memorandum of Mr. Carlin which
noted that pre-loading costs had been left out of Mr. Reilly’s first
report (Ex. 13) and that Mr. Carlin put the cost of pre-loading in
total at $151,000.

[156]     With respect to the use of wick drainage system to assist in
speeding up the time for pre-loading, he agreed the quotation that was obtained
in December 2007 would have been for litigation purposes as he had already
begun to pre-load the 1368 Kingsway site in October 2007.

[157]     He confirmed his earlier evidence as to the plaintiff’s proposed
four month building construction schedule as being a fantasy (i.e. that was not
enough time).

[158]     A portion of the re-examination time was spent reviewing the events
leading to the breakdown of the sale of 1368 Kingsway Avenue to Trinden.

[159]     Mr. Ramsay repeated that his belief was that the developer’s
cost charges had been paid. He agreed the advertising showed “services and
street lighting in place” but a sidewalk was required to be built by the city.
He said he had bought gas, electric, and phone line to the property but the
advertisement should be taken as caveat emptor. It was put to him that
the industry understanding of saying “lots with service” meant that utilities
were at the property line. Mr. Ramsay said the city services were in place
but not phone line, gas, or hydro, as compared to sewer and water services.

[160]     He agreed that by May 1, 2002^, he knew the plaintiff
intended to build a tilt-up warehouse and intended to begin building in August
2002, but the advice from Mr. Ko that he would have to put in two feet of
sand caused the deal to collapse. He agreed an alternative was proposed of one
foot of sand plus one to two feet of other fill. He agreed the use of glacial
fill would not allow for the pre-loading as it would turn to mud. He agreed he
thought Mr. Ko’s solutions were too conservative and too expensive.

[161]     Given that the issue of the breach of the contract had already been
dealt with I do not intend to continue reviewing this part of the evidence. It
is simply a duplication of the evidence that Meiklem J. found gave rise to
the breach of contract by the defendant and the plaintiff’s entitlement to
damages.

[162]     A document dated May 2002 prepared by Mr. Carlin (Mr. Ramsay’s
advisor) was put to Mr. Ramsay. It estimated construction costs based on
Trinden’s building plans of developing 45,411 square feet of warehouse space. Mr. Ramsay
had no knowledge of the document.

[163]     With respect to pre-loading, Mr. Ramsay agreed he used up to 11
feet of pre-loading on 1368 Kingsway Avenue with the edges being held in by
stacking four foot high concrete blocks on the edges.

[164]     A Google picture was put to Mr. Ramsay which he had difficulty
in dating as it could have been either 2007 or 2008 showing a few feet of sand
and plainly not the full pre-load. There were no concrete blocks on the edge in
the picture.

[165]     Mr. Ramsay was then asked whether he had provided his actual
costs of construction and construction schedule for the building of 1368
Kingsway warehouses in 2009-2010. There was a lengthy pause. Then, Mr. Ramsay
said he had given Mr. Dybvig a lot of information.

[166]     Mr. Ramsay was asked how Mr. Dybvig had provided
information to Mr. Miller of possibly eight months construction for each building
and he said he did not know.

[167]     Mr. Ramsay agreed 1368 Kingsway Avenue had good exposure,
particularly towards the ends of the building on Kingsway Avenue and that it is
a busy road with good visual exposure.

[168]     With respect to the 10-month construction time he had given in his
direct evidence, he said he had been mistaken. He had found the final
inspections were in mid-June 2010, but some time thereafter he obtained the
occupancy permit. He stated that eight months of construction was not enough
time for Trinden to build, and that it had taken him nine-and-a-half months building
on a consecutive basis.

[169]     Certificates of subcontract completion had been obtained on April 7
and April 30, 2010. Mr. Ramsay agreed that Titan Construction had
substantially completed the buildings in May 2010. The certificates of subcontract
completion were marked Ex. 31.

[170]     A four page document from Mr. Ramsay to Mr. Dybvig dated
August 31, 2010 (Ex. 32) was the documents from Titan Construction to Mr. Ramsay
showing contract and extra costs over and above contract, and invoices for
progress work to May 31, 2010. The total revised contract price was
$3,052,604.49.

[171]     The remaining work related to tenant improvements, namely steel stud
drywall, insulation, flooring, and washing accessories. The contract for the
warehouses was 93.81 percent complete.

[172]     A pg. 2 reference to development cost charges being $106,618.77
appeared to mystify Mr. Ramsay.

[173]     Mr. Ramsay agreed with the hydro, gas, and phone charges of
$33,000 and additional works relating to offsite work for hydro and Telus work
of $31,848.

[174]     In reviewing the construction time period, Mr. Ramsay said the
calculation was from the time the contractors went onsite September 2009 to
obtaining the occupancy permit in June 2010, that is, 10 months.

[175]     Asked why he would have forwarded the information to Mr. Dybvig
in August 2010, Mr. Ramsay could not recall.

[176]     He believed he had made his contract with Titan Construction in the
spring or summer of 2008, and there would have been progress draws throughout
the contract.

[177]     Mr. Ramsay’s cross-examination closed with questions regarding
other properties in the area. Mr. Ramsay had given evidence that he saw the
Rolls Royce property, 169 Golden Drive, Coquitlam, available for sale in 2002.
It was put to him that Mr. Caldwell said he had not listed it until 2004. Mr. Ramsay
persisted in his opinion that he had seen a sign for sale in 2002.

[178]     He was shown Mr. Young’s December 2004 market survey for 1368 Kingsway
Avenue and agreed that Mr. Young had not listed 169 Golden Drive
property in the 13 sites listed therein.

[179]     He agreed his office was situated on Langdon Avenue which enters
onto Broadway Street. It was put to him that the street improvements on
Kingsway Avenue were better in terms of curb parking, street lighting, and
concrete sideway. The pictures evidence that as well as the ditch on side of
the street.

[180]     In re-examination he was directed to pictures of Kingsway Avenue in
mid-2010 (Ex. 2, pg. 15) showing city services on the south side.

[181]     Mr. Ramsay’s diffidence, lack of knowledge, and lack of
awareness on such matters as the Carlin memorandum, information passed to Mr. Dybvig,
and actual construction costs, diminished his credibility.

Mr. Dybvig

[182]     Mr. Dybvig is an accredited appraiser of real estate. His qualifications
were not contested.

[183]     He provided two reports to the Court. In Ex. 2 he gave his
opinion as to the bare land values in May 2002 to February 2004 of 1368
Kingsway. His valuation was much the same as the sale price of $710,000 in May
2002. By February 2004 comparison to other land sales showed a value of
$950,000 for that property, an increase of $240,000.

[184]     He noted that in early 2002, industrial market vacancy rates were as
low as 2.4 percent while Colliers International gave lease rate values for
small bays (less than 15,000 square feet) of $5.00-$6.00 per square foot.

[185]     With respect to the availability of similar or substitute sites in
the area between May 2002 and May 2004, a study of the 24-month period
involving industrial investment properties in the Greater Vancouver and Fraser
Valley areas between $1.5 and $5 million showed 170 closed sales. He then
listed 41 examples from Burnaby, Coquitlam, Langley, Maple Ridge, Port
Coquitlam, and Port Moody, concluding there were numerous properties available
for sale in that time period. He presented a study of substitute development
sites for industrial lands (of which there were 50) and said most had been built
out or completed. He felt that pre-loading for most of the sites would take six
to eight months. The median sale date was October 2003 with a median value of
$716,350 and a median acreage of 1.6 acres.

[186]     Exhibit 4 is Mr. Dybvig’s “rebuttal report” to the reports of Mr. Reilly
and the BTY Group. At pgs. 10 and 11 he summarizes the variances between Mr. Reilly’s
analysis (Ex. 3) and his response.

[187]     He noted Mr. Reilly limited his analysis to a Marshall Swift
“storage warehouse” program. He said that is usually structured with an office
at the front and a large warehouse behind, i.e. a single-tenant building.

[188]     He said that he used “shell industrial building” which is typically
used for a strip warehouse and can provide for customized finishing.

[189]     A second principal difference was that Mr. Reilly had premised
his input on the Marshall Swift program using one building whereas he used two
smaller buildings which required more exterior wall foundation and other costs
and were consequently more expensive.

[190]     Mr. Dybvig in Appendix B of his report used the same Marshall
Swift inputs and obtained a different number, which results in a total of
$2,234,341, which he believed primarily reflected the cost of building two
smaller warehouses rather than one. The other principal differences were the
costs of demising walls ($171,481) and financing ($73,636). There were smaller
variations with land taxes, removal of pre-load and tenant improvements.

[191]     He noted that Cape Construction costs were a pre-tender estimate but
did include offsite charges that would not be related to the Marshall Swift
program.

[192]     He utilized a pre-loading period of six to eight months for the
first phase and the same for the second phase of the development as proposed by
Mr. Cocco for the plaintiff’s warehouse development.

[193]     As well he built in a contingency allowance of some $90,000 allowing
for the fact that typically estimates are somewhat under actual building costs.

[194]     The difference in construction costs between him and Mr. Reilly
was $484,916 (pg. 11).

[195]     Mr. Dybvig also agreed a new building could seek a higher
rental rate.

[196]     Mr. Dybvig agreed Kingsway was a more travelled road with
better exposure than Broadway.

[197]     Mr. Dybvig provides a critique of the BTY Group construction
costs (Ex. 4, pg. 35).

[198]     Mr. Dybvig considered several sources of costs for warehouse
construction including BTY Group, Marshall Swift, Cape Construction, and his
own experience.

[199]     Mr. Dybvig’s opinion as to the completed value by cost approach
was $3,675,000.

[200]     As to the income approach used (at pgs. 48-73) he arrived at a
total of $3,230,000, in contrast to Mr. Reilly’s total of $3,241,000. He
noted Mr. Reilly only considered strata titles.

[201]     Mr. Dybvig’s opinion of completed value by the direct
comparison method was $3,390,000.

[202]     Mr. Dybvig noted a contingency allowance is typically included
in estimates and thus included this in his cost appraisal.

[203]     He noted the importance of timing in the various reports and that he
has assumed a 6 to 8 month pre-loading time. He discussed Mr. Reilly’s
comparables as to the lease rate calculation noting that some were not
comparable and that only the first and second were close in time (pg. 14).

[204]     Other factors would include total land use, storage space, parking,
and turning space.

[205]     With respect to rental incomes, he noted Mr. Ramsay had to
provide inducements for new tenants, either through reduced rent or other
perquisites (pgs. 26-7). His conclusion was that the appropriate rental
rate in 2002 was $6.25 and in 2004 was $6.74 per square foot. Should there be strata
titling, he would reduce the rent by $.50.

[206]     He summarized his criticisms of Mr. Reilly’s report regarding
rental income (pgs. 30-1). The differences were reduction in leasable area, the
market rent, allowance for vacancy and allowance for expenses. These resulted
in a difference of $534,000 in 2002, and $838,000 in 2004.

[207]     Mr. Dybvig provides an analysis regarding strata titles (pg.
33). However, given Mr. Cocco’s evidence that his initial intent was in
leasing and not in strata titling, this is not relevant.

[208]     Mr. Dybvig concludes that Mr. Reilly significantly
understated construction costs of $532,000 (pg. 34). Secondly, he
considered the income valuation by Mr. Reilly overstated by $450,000 to
$475,000 and thus, there was in his view, no development profit.

[209]     Mr. Dybvig commented on the BTY Group quantity survey estimate
of construction costs (pgs. 35-6). He noted that the pre-loading time
estimate of four months did not seem to consider the evidence of time
needed for pre-loading and construction time. As well a variety of expenses
that would be incurred by the developer were not included, namely, a
contingency allowance, landscaping, engineering and design, land costs,
leasing, sales costs, development cost charges, permits, financing, property
costs and property purchase of approximately $1.3 to $1.4 million giving a
total cost figure of $3.775 to $3.895 million.

[210]     Mr. Dybvig sets out a cost analysis (pgs. 37-45),
concluding on a value of $3.675 million (pg. 48).

[211]     He performed an income analysis, considering reported rental costs
in the local marketplace and settled on an achievable market rent for 1368
Kingsway at $6.25 a square foot (pg. 70) and thus a net operating income
of $266,243 (pg. 71). He then surveyed the marketplace considering eight
transactions between 1998 and the end of 2002 and using an overall cap rate of
8.25%, concluded the market value based on the income approach was $3,230,000.

[212]     By a direct comparison of 8 properties, Mr. Dybvig concluded
that the value was $75 per buildable square foot, giving a total value of
$3,390,000 (pg. 94).

[213]     He then summarizes his cost approach at $3.675 million, income
approach at $3.2 million dollars and direct comparison of $3.390 million (pg.
98).

[214]     He moved on to consider a strata project development and summarized
by conducting a “profitability analysis” (pgs. 140-3).

[215]     On cross-examination, Mr. Dybvig agreed on either analysis
there was no, or at best a very small profit to be made in developing the
property in 2002. He agreed that Mr. Reilly and he had the same market
value of the land as of May 2002.

[216]     With respect to Ex. 2, pg. 50, Mr. Dybvig noted 170
transactions after May 2005 involving Industrial Investment properties
between $1.5 and $5 million in the Greater Vancouver or Fraser Valley area. He
then cited 41 examples from Burnaby, Coquitlam, Langley, Maple Ridge, Port
Coquitlam and Port Moody.

[217]     Mr. Dybvig agreed municipalities created different factors with
varying regulations concerning fees, parking, services, and the like. Although
he said he looked at industrial building sites alone, he utilized the $3 to $4
million criteria to find equivalent properties.

[218]     He agreed 1462 Mustang Place would be sold with a building contract
and thus as with other similar sites he did not consider that as a like purchase
for the plaintiff. He agreed 1462 Mustang Place had a limited area for the
development and could not maximize site coverage.

[219]     He agreed he styled Ex. 4 a “rebuttal”, and said it equally
could stand for a “response”. He agreed other reports had been prepared by his
firm, Grover Elliott, either for other litigation or for mortgage financing for
the land development at 1320 or 1368 Kingsway, properties owned by Mr. Ramsay.
He acknowledged he made no reference to the 2007 report regarding 1368
Kingsway, or the 2003 report regarding 1320 Kingsway.

[220]     With respect to the road traffic exposure, he agreed that Kingsway
is a busy arterial road.

[221]     He agreed with Mr. Young’s earlier report regarding 1368
Kingsway that stated that there was very good exposure to the traffic.

[222]     Mr. Dybvig was asked to agree that if the project was “on
stream” in mid-2003, it would be in a fairly strong market. He responded that
he was commenting as of May 2002. Asked if he assumed the project would be
getting ready to go into a strong market, he said he hadn’t studied that issue.

[223]     He agreed the market did improve in 2004 and the land market had
improved in May 2003. He agreed the land values increased at approximately
6% per annum, but he did not inquire as to market demands in mid-2003. He
agreed there was an increase in land prices, that there was less rental
warehousing available and there was a strong absorption due to a strengthening
market.

[224]     He was referred to Ex. 2 and the reference to the Colliers
International Market Survey regarding lease rates of the small bays. Colliers
defined “small bay” as being less than 15,000 square feet. He agreed the
smallest spaces would give rise to a higher rental rate, and he further agreed
that Colliers’ valuation in mid-2002 at $5.00 to $6.00 per square foot was an
average for all warehousing in that category.

[225]     He agreed the vacancy rates kept falling in late 2001 and early
2002, while there was an increased supply of warehousing, i.e. there was new
product on the market, but less vacancy and therefore the market was absorbing
the new product at “a good clip”.

[226]     He agreed the figures showed the Port Coquitlam area absorbing new
product throughout 2002, 2003 and 2004 and vacancy rates stayed low even with
new space becoming available. He agreed the last page of Ex. 36 showed
Port Coquitlam was the strongest in respect of absorption rates in the Lower
Mainland.

[227]     Mr. Dybvig was then asked about his comment about the need to
consider the floor space ratio to the overall site. He had postulated a lower
floor space ratio to the overall site area provides a larger area around the
building in terms of parking, vehicle circulation and outdoor storage, which in
turn causes an increase in rentals. It was pointed out that 1320 Kingsway was
an anomaly (it has the gas station and the Tim Horton’s onsite as well).

[228]     Mr. Dybvig further agreed that he did not use the floor space
ratios in assessing his own lease rate comparables. He concluded by saying that
four of Mr. Reilly’s had less floor space ratio.

[229]     Mr. Dybvig agreed that the two main differences in the expert
reports related to the lease rates and the development costs.

[230]     He agreed that he had assessed 12 comparables and made adjustments
and that such adjustments were subjective in the eyes of the appraiser.

[231]     He agreed a new building would get a higher rent. It was pointed out
there was a trend towards higher ceilings and that such a trend showed in the
Colliers reports. He agreed Trinden Enterprises postulated having units on the
market by mid-2003. He agreed vacancy rates were down in late 2002 and early
2003 and therefore conditions were improving.

[232]     With respect to road exposure, while agreeing that Kingsway had a
better road exposure he said units off the road would be similar (in respect of
lack of road exposure) both on Kingsway and Broadway. He agreed most of his
comparables were on Broadway Street. He agreed Broadway Street lacked street
lighting. He agreed the traffic flows on Broadway Street were materially
lighter than Kingsway.

[233]     He agreed a number of his comparables in Ex. 4 were strata
titled and accordingly he reduced the rental. He agreed he took into account
both positives and negatives to calculate rent but did not quantify the
adjustments. He arrived at a rental rate of $6.25 but reduced it by $.50 for
strata titling.

[234]     He agreed Mr. Young in his appraisal of 1368 Kingsway in 2007
stated 1368 Kingsway warehouses would be strata titled but made no
adjustment to their potential income value.

[235]     With respect to the vacancy rates found at Ex. 2, pg. 24, he
agreed Colliers’ definition of small bays was less than 15,000 square feet.

[236]      As to comparables, he agreed 2-1525 Broadway were larger sized
units. With respect to 5-1525 Broadway, it was noted the lease was two to three
years old. Mr. Dybvig said he wanted to take into account pre-May 2002
information. He agreed that was in spite of the fact that it was being proposed
that the potential warehouse units for 1368 Kingsway would not be leased until
mid-2003.

[237]     With respect to 3-1525 Broadway, it was noted Mr. Young had
referenced this in Ex. 20, pg. 6 and found rents of $6.50 to $7.00. Mr. Dybvig
said that he had included that in his figures of $5.50 to $7.00.

[238]     With respect to the use of the Marshall Swift estimator, he agreed
he used the Commercial estimator, while Mr. Reilly had used a Segregated
estimator. He agreed that the Segregated estimator allows for a consideration
of major construction components, and with more data input, it was possible to
be more accurate in an estimate. He said his firm paid an annual fee for the Commercial
estimator and still needed the input of the appropriate specification and
quantities.

[239]     He agreed in using the Commercial estimator he used the format for
“Shell Industrial” and he could have used the format for “Storage Warehouse”.

[240]     He agreed the Segregated estimator used a category called “Storage
Warehouse”.

[241]     He agreed that both estimators could be used as being designed for
storage but claimed that Marshall Swift said Shell Industrial was best for this
use, i.e. small bay warehouse. He agreed there was a difference.

[242]     Mr. Dybvig agreed he used Shell Industrial 454, plus Office
Space Builder 994 using the Commercial estimator, whereas, Mr. Reilly had
used the Segregated estimator and the category 406, Storage Warehouse, which
includes within it an office space allowance. That “build-out” may be between
3% to 12% and Mr. Dybvig had used a build-out of 7%.

[243]     Mr. Reilly, at trial, came to the conclusion that he was
duplicating the build-out costs (Ex. 3, pg. 62) and deducted $130,000 from
his cost approach as of May 2002. Mr. Dybvig agreed he calculated the
build-out at $158,000.

[244]     Mr. Dybvig agreed that difference reflected the total cost
approach to construction.

[245]     With respect to pre-loading, Mr. Dybvig said his $200,000 came
from his own calculations. He acknowledged he had seen the calculation of Mr. Carlin
(Mr. Ramsay’s advisor) of $151,000, but he did not rely on it.

[246]     Mr. Dybvig costed demising walls at $171,481 based on 28 foot
walls (Ex. 4, pg. 11).

[247]     Mr. Dybvig included land financing costs of $73,636. Mr. Dybvig
said it was standard and considered the residual value analysis of the foregone
cost of money in the bank. He distinguished that from construction cost
financing which would be included in the Marshall Swift calculation. He said
with respect to the land, there must be a charge for the implicit costs and it
must be factored in to the cost approach to value.

[248]     Mr. Dybvig could not explain why there were no apparent
financing calculations made in Mr. Young’s valuations (Ex. 19 and 20)
though he noted financing costs were included.

[249]     Mr. Dybvig calculated financing costs for land and construction
at $152,566.

[250]     Mr. Dybvig was asked if he had compared the Marshall Swift
figures to his client’s budgets. Mr. Ramsay had built his warehouse at
1320 Kingsway in 2004 and therefore had actual costs. As well Mr. Ramsay
had Titan’s budget costs for 1368 Kingsway. Mr. Dybvig said he confined
himself to consideration of May 2002 costing and the information available
at that time.

[251]     He also suggested that a later market can be misleading.

[252]     Asked if he agreed he could use actual costs to determine the
accuracy of his estimates, he said he didn’t, and that he just did a “normal
valuation”.

[253]     He agreed he had been sent the information on the Titan Construction
budget of 2009 for the construction of the warehouses at 1368 Kingsway.
Examination of Ex. 32, Titan’s progress invoices and estimates as of
May 31, 2010, showed a revised total of $2,907,432.

[254]     Counsel then referred to the Statistics Canada industrial structures
price index in Vancouver from 2001 to 2010 which had its base of 100 in the
second quarter of 2002.

[255]     It was put that Mr. Ramsay had negotiated his costs with Titan
in early 2008 when the index was at a peak of 169.3 and if that was discounted
to the second quarter of 2002, the construction costing would be $1,717,325. If
most of Mr. Dybvig’s costs were added back in with some variations, it
would give a total cost figure of $2,860,252.

[256]     Mr. Dybvig, after questioning the calculation, said that he did
not use Statistics Canada and would be more inclined to look at the Marshal
Swift changes in values.

[257]     He agreed that through Ex. 4, pgs. 37-44, he in effect averaged
the construction figures for Cape Construction and Marshall Swift as he felt
that was a better indication of reliability.

[258]     Counsel contrasted Mr. Dybvig’s financing figures to Ex. 19
and 20, Mr. Young’s valuations. It was noted that the figures including
financing in Mr. Young’s opinions were based on the developer’s cost
estimates.

[259]     With respect to the contingency allowance, Mr. Dybvig conceded
that he should not add that, as Marshall Swift included the contingency
allowance in their figures.

[260]     When questioned about the $171,481 figure given as the cost of
demising walls (Ex. 4, pg. 11), he agreed he had simply calculated it and
had not compared that to any actual cost figures of Mr. Ramsay.

[261]     In comparison to the Titan cost figures in Ex. 32 in 2010, it
was put that Mr. Dybvig’s calculation was 90% of the 2010 figure, when
costs would have risen substantially. Mr. Dybvig said he didn’t make that
comparison but simply figured that on his experience, $10,000 to $15,000 was
appropriate for each demising wall.

[262]     With respect to the Colliers survey of 2002, it was noted the fourth
quarter 2007 Colliers figures for small bays had increased to a range of $6.50 to
$7.50. Mr. Dybvig agreed the industrial lease rates did go up after 2002.

[263]     Mr. Dybvig agreed his “rebuttal” report concluded there was a
negative residual value, i.e. that the costs of developing the property would
exceed the improved value by $253,975. He agreed that would lead to the
conclusion that the market was not appropriate for building and the property
should be held, i.e. a test of feasibility.

[264]     He agreed that on that basis developing was not the highest and best
use as of May of 2002.

[265]     He was then asked to look at Ex. 2, the land valuation dated
July 21, 2010, a retrospective appraisal of the vacant land as of May 1,
2002. He agreed that he stated at pg. 25 the highest and best use of the
property as if vacant would be development in conformity with the M1 zoning as
proposed and financially feasible.

[266]     It was put to him that the reports conflicted, i.e. that the Ex. 4
rebuttal report indicated that the highest and best use was as a holding
property while Ex. 2 said the highest and best use was development of the
property. Mr. Dybvig disagreed saying the words “subject to market
conditions” were appropriate and that he had not considered the market
conditions in Ex. 2. When it was put to him he should have said that in Ex. 2
it was a holding property, he said he could not add to his opinion, and that
there was no inconsistency in his two reports.

[267]     He agreed that Ex. 4 said that 1368 Kingsway was a holding
property. He agreed he did not say the market conditions prevented development.
Mr. Dybvig concluded the proposed development was the logical development
of the lands but subject to market conditions.

[268]     Mr. Dybvig said the development proposal, as it had been put
and as it was built, was the best use of the property and the issue was whether
it was economically feasible.

[269]     He further noted that clues could be found by looking at nearby
developments (Ex. 2, pg. 9) where new developments of warehouses in the
immediate area had been economically feasible.

The Plaintiff’s Argument

[270]     Counsel reviewed the evidence and especially criticized Mr. Dybvig’s
rebuttal report which, he submitted, bordered on advocacy.

[271]     Counsel submitted there was no difference between common law and
equitable damages and the Court had discretion to assess the date of damages
with the object of doing justice between the parties: see Anderson J.A. in Ansdell
v. Crowther (1984), 55 B.C.L.R. 216 (C.A.); McLachlin J. (as she then was)
in Richter v. Simpson (1982), 37 B.C.L.R. 325 (S.C.), at para. 4.

[272]    
Counsel submitted the plaintiff had lost an
opportunity which was not “fanciful” and had proven a reasonable probability of
realizing profit with the development of 1368 Kingsway: see Graybriar
Industries Ltd. v. Davis & Co. (1992), 72 B.C.L.R. (2d) 190 (C.A.);
Baker J. in Pan-Asia Development Corp. v. Smith, [1996] B.C.J. No. 1919
(S.C.), at para. 60; and Satanove J. in Rec Holdings Co. v. Peat Marwick
Thorne, [1997] B.C.J. No. 1640 (S.C.) [Rec Holdings]. Counsel
submitted the lost option to develop the land was compensable in damages,
citing Cottrill v. Steyning and Littlehampton Building Society, [1966] 2
All E.R. 295 (Q.B.D.); Nemetz C.J.B.C. in New Horizon Investments Ltd. v.
Montroyal Estates Ltd., [1982] B.C.J. No. 1481 (S.C.) [New Horizon
Investments]; Jenkins Road Developments Ltd. v. Wille, 2002 BCCA 399
[Jenkins Road Developments]; and Olive Hospitality Inc. v. Woo,
2007 BCCA 355, Lowry J.A., at para. 14.

[273]    
The assessment of damages was not a matter of
calculation. As Nemetz C.J.B.C. said in New Horizon Investments at para. 33:

…it is
necessary to be conservative in assessing damages based upon timing in an
uncertain market. We proceed cautiously upon a balance of probabilities

[274]     Satanove J., in Rec Holdings, noted the two-step process at para. 120,
namely (1) evaluation of the existence of the opportunity for profit and (2)
the cause of its loss on a balance of probabilities. But, in assessing the
amount of compensation, the assessment of damages should be resolved keeping in
mind it is the defendants’ conduct which caused the loss: see also Cumming J.A.
in Pacific Destination Properties Inc. v. Granville West Capital Corp.
(1999), 65 B.C.L.R. (3d) 27 (C.A.), at 41-42.

[275]     As to the duty to mitigate, the plaintiff argued that its duty to
mitigate was suspended if there was a legitimate claim for specific
performance, citing Estey J. in Asamera Oil Corporation Ltd. v. Sea Oil
and General Corporation et al., [1979] 1 S.C.R. 633 [Asamera Oil
Corp.].

[276]    
Estey J. stated the general principle that
mitigation prevails unless there is a substantial and a legitimate interest
represented by a claim for specific performance. He noted the interaction
between the principle of mitigation and an award of damages in lieu of or in
addition to specific performance in equity. He said the plaintiff cannot
simply, by instituting proceedings seeking specific performance for damages,
shield himself from the defendants’ argument that the plaintiff should
mitigate. He put it this way at pp. 667-669:

On principle it is clear that a plaintiff
may not merely by instituting proceedings in which a request is made for
specific performance and/or damages, thereby shield himself and block the court
from taking into account the accumulation of losses which the plaintiff by
acting with reasonable promptness in processing his claim could have avoided.
Similarly, the bare institution of judicial process in circumstances where a
reasonable response by the injured plaintiff would include mitigative
replacement of property, will not entitle the plaintiff to the relief which
would be achieved by such replacement purchase and prompt prosecution of the
claim. Before a plaintiff can rely on a claim to specific performance so as to
insulate himself from the consequences of failing to procure alternate property
in mitigation of his losses, some fair, real, and substantial justification for
his claim to performance must be found. Otherwise its effect will be to cast
upon the defendant all the risk of aggravated loss by reason of delay in
bringing the issue to trial. The appellant in this case contends that it ought
to be allowed to rely on its claim for specific performance and the injunction
issued in support of it, and thus recover avoidable losses. After serious
consideration, I have concluded that this argument must fail.

It is, of
course, an eminently reasonable position to take if, as Lord Reid suggests in White
and Carter (Councils) Ltd. v. McGregor [[1962] A.C. 413.], in the case of
anticipatory breach, there is a substantial and legitimate interest in looking
to performance of a contractual obligation. So a plaintiff who has agreed to
purchase a particular piece of real estate, or a block of shares which
represent control of a company, or has entered into performance of his own
obligations and where to discontinue performance might aggravate his losses,
might well have sustained the position that the issuance of a writ for specific
performance would hold in abeyance the obligation to avoid or reduce losses by
acquisition of replacement property. Yet, even in these cases, the action for
performance must be instituted and carried on with due diligence. This is but
another application of the ordinary rule of mitigation which insists that the
injured party act reasonably in all of the circumstances. Where those
circumstances reveal a substantial and legitimate interest in seeking
performance as opposed to damages, then a plaintiff will be able to justify his
inaction and on failing in his plea for specific performance might then recover
losses which in other circumstances might be classified as avoidable and thus
unrecoverable; but such is not the case here.

[277]     See also the Saskatchewan Court of Appeal’s decision in Kopec v.
Pyret, [1987] S.J. No. 204 (C.A.), paras. 72-74 [Kopec].

[278]     Thus there is a duty requiring the plaintiff to act reasonably. The
plaintiff submitted the reasonableness of its conduct in mitigation should not
be judged “too rigorously”, citing the House of Lords in Banco de Portugal
v. Waterlow & Sons Ltd., [1932] A.C. 452 (H.L.); Kopec, at paras. 62,
64; Johnson v. Morgan, [1987] B.C.J. No. 2890 (S.C.); and Greenforco
Holding Corp. v. Yonge-Merton Developments Ltd., [1999] O.J. No. 3232 (S.C.J.).

[279]     The plaintiff submitted the defendants could not simply identify
available opportunities to mitigate, but must also go further and show how the
plaintiff’s loss could be avoided since “mitigation is seldom all or nothing”.

[280]     The plaintiff submitted that the onus was on the defendants not only
to prove circumstances whereby the plaintiff’s loss could have been diminished,
but also to show how and to what extent that loss could be minimized, citing Yoshikawa
v. Yu, [1994] B.C.J. No. 748 (S.C.); varied [1996] B.C.J. No. 623,
21 B.C.L.R. (3d) 318 (C.A.), which in turn refers to the decision of the
Supreme Court of Canada in Janiak v. Ippolito, [1985] 1 S.C.R. 146,
which cited and quoted from Buczynski v. McDonald (1971), 1 S.A.S.R.
569.

[281]     The plaintiff submitted its plan to develop that land was plain and
not fanciful. By the end of April 2002, Trinden had taken steps to commence
pre-loading, was ready to submit a development application to the municipality,
had obtained a firm construction price, had obtained conceptual drawings and
had funds in hand to complete the two warehouses.

[282]     The plaintiff noted the defendants began their own warehouse project
at 1320 Kingsway, completing that in early 2004, and more recently has
built a two warehouse development on 1368 Kingsway, remarkably similar to that
proposed by the plaintiff.

[283]     There was evidence that construction costs increased dramatically
from 2002 to mid-2008, and land costs increased threefold (but lease rates
only increased 15% to 20%).

[284]     It was noted that, in 2007, Mr. Young of Grover Elliott
forecast the defendants would profit from developing 1368 Kingsway, although
that appraisal was for financing purposes.

[285]     As to the valuation of the lost opportunity, the plaintiff submitted
it would have: (a) used a drain-hole method combined with ten feet of
pre-load because that would have accelerated the ground preparation readiness
in comparison to ordinary pre-loading from six to eight months to about three
months; (b) then proceeded with construction to bring Building B on
stream by the end of February 2003 and Building A by the end of July 2003;
and (c) leased both buildings as soon as possible following completion of
construction. There was evidence that the vacancy rate in Port Coquitlam was
low and the industrial market readily absorbed the supply.

[286]     The plaintiff noted the principal difference between the parties’
estimates of the developer’s profit related to the estimated cost of the
project.

[287]     The plaintiff relied on: (a) the Marshall Swift segregated cost
estimator; (b) the BTY Group quantity survey; (c) Mr. Cocco’s
April 2002 estimate; and (d) the Cape Construction budget obtained by the
plaintiff.

[288]     The defendants relied on Mr. Dybvig’s analysis, which was
premised on the Marshall Swift commercial estimator; the use of the Cape
Construction budget and other non-construction costs, including interior
demising walls, although counsel submitted Marshall Swift built that cost into
its calculation.

[289]     The plaintiff argued that Mr. Dybvig failed to consider the
defendants’ actual costs of building the concrete tilt-up multi-tenant
warehouse at 1320 Kingsway in 2003/4 and the multi-tenant warehouses on 1368
Kingsway in 2009.

[290]     The plaintiff also pointed to other potential sources of
cross-checks in the budget estimate of the defendants’ consultant (Mr. Carlin)
before March 2002, and Mr. Young’s 2007 report, which had a detailed
budget for construction.

[291]     The other factor was the different lease rate conclusions arrived at
by Mr. Reilly and Mr. Dybvig. The plaintiff submitted Mr. Reilly
was sensible in his adjustment of comparables, whereas Mr. Dybvig failed
to take into account the age of the leases, larger bay sizes, and age of the
buildings. The plaintiff submitted that Mr. Reilly was correct to note the
buildings would be brand new and that Kingsway was a busier street than other
comparables, thus having better access to the interested tenants and users of
the premises.

[292]     As to the appropriate date for assessment, the plaintiff submitted
the claim for specific performance kept the contract alive and the defendants
could complete the contract before the Court decided the matter. The plaintiff
submitted the obligation to mitigate was also postponed, yet conceded the
obligation arose upon a breach of the contract.

[293]     The plaintiff submitted it had diligently prosecuted its claim for
specific performance. Mr. Cocco did in fact enter into another agreement,
but then did not complete. In the circumstances the plaintiff submitted it had
been duly diligent, had not delayed the ultimate resolution of the claim, and
the appropriate date for assessment should be the date of Meiklem J.’s
judgment in February 2004.

[294]     In sum, Trinden submitted it had reasonably maintained its claim and
acted reasonably in mitigation, but was not able to find a suitable alternative
building site. Further, it submitted the defendants had not established real
alternatives existed and that, on the evidence, mitigation became increasingly
difficult with the passage of time due to the upward market forces after
mid-2002.

[295]     In particular, it submitted the defendants’ focus on the properties
at 1462 Mustang and 169 Golden Drive were shown in evidence not to be true
substitutes or comparables.

[296]     The plaintiff reiterated its criticism of Mr. Dybvig’s report,
and submitted it did not stand up on a close analysis. Comparative construction
costs per square foot were put forward, namely Mr. Carlin’s March 2001
estimate ($40.40); Trinden’s budget of April 2002 ($43.44); Cape Construction’s
budget dated May 1, 2002 ($40.58); the BTY Group quantity survey ($44.06);
Canamara Group ($42.95); Grover Elliott’s appraisal dated July 18, 2007
($34.28); Titan Construction’s estimate regarding 1368 Kingsway for 2009-2010
($33.36); and Mr. Dybvig’s report of August 26, 2010 regarding May
2002 costs ($47.17).

[297]     In sum, the plaintiff submitted the project was feasible, was well
located, and was being proposed at a time when the market was strong.

[298]     The plaintiff submitted a damage award approximate to Mr. Reilly’s
assessment of $900,000 (based on a February 2004 assessment date) was
appropriate.

The Defendants’ Argument

[299]     The defendants noted that Mr. Cocco had made an offer on an
existing warehouse in February 2002 for $1.2 million on Kebet Way at a location
east of the subject property, and then entered the contract to purchase the
defendants’ vacant land on March 3, 2002 for $710,000. The evidence was that
the plaintiff was purchasing the property as a long-term investment with the
intent of leasing the warehouse bays.

[300]     The plaintiff’s intention was to construct two multi-tenant
warehouses totaling 45,411 square feet.

[301]     The defendants submitted the plaintiff’s budget failed to include
many additional costs, such as moving utilities across the street; demising
walls; tenant improvements; landscaping costs; leasing commissions of $55,000;
actual development cost charges; permit fee costs; real property taxes during
construction of some $21,000; a property purchase tax of $13,200; plumbing and
engineering; financing pre-load drain holes; and costs for sidewalk and paving.

[302]     The defendants noted pre-loading could be reduced to some six or
eight months with nine feet of sand, plus a further acceleration of pre-loading
could be achieved by installing of drain holes, but pointed out that this had
not been tested or apparently used in the neighbourhood.
As well, issues could have arisen if pre-loading was to be taken to the edge of
the property lines without permission from adjoining landowners. The proposal
by the plaintiff to move the pre-loading sand from one side to another would be
an extra $25,000 cost.

[303]     The defendants noted the plaintiff entered another contract of
purchase and sale for 1.37 acres on 56^th Avenue at Gloucester
Estates in Langley for $460,000 on June 3, 2002. The agreement collapsed on
July 31, 2002. The site had been pre-loaded.

[304]     The defendants submitted that had liability and damages been heard
by Mr. Justice Meiklem in November 2003, the damage issues would have been
curtailed within that time frame.

[305]     As to loss of opportunity, the defendants submitted there were four
principal factual issues, namely:

1.         pre-load
time line;

2.         construction
costs;

3.         construction
time line; and

4.         rental
rates.

[306]     The estimated time line for pre-loading ranged from Mr. Cocco
believing he might take three months to use the pre-load plus drainage system
to Mr. Ramsay saying it took a year to do so.

[307]     With respect to total development costs, Mr. Reilly’s opinion
at trial was $3,150,000, while Mr. Dybvig was $3,675,000.

[308]     Estimates of construction time per building shell ranged from Mr. Cocco
at four months to Mr. Ramsay at nine to ten months.

[309]     The rental rates as of May 2002 varied from Mr. Cocco at $5.50
a square foot; Colliers International at $5.00-$6.00 a square foot; Mr. Dybvig
at $6.25 a square foot; and Mr. Reilly at $7.00 a square foot.

[310]     The parties agreed the use of an 8.25 cap rate was the appropriate
multiplier in considering the income approach of valuation for the multi-tenant
warehouse investment.

[311]     The defendants submitted the plaintiff was entitled to compensatory
damages subject to its duty to mitigate. The defendants cited Sopinka J.’s
judgment in Semelhago v. Paramadevan, [1996] 2 S.C.R. 415 [Semelhago],
at paras. 20-22, where he noted that real estate would no longer be
considered unique given the mass production of real property products.
Consequently, specific performance would no longer be granted as a matter of
course absent evidence of the property being unique to the extent that a
substitute would not be readily available. Reliance was then placed on
Estey J.’s judgment in Asamera Oil Corp., and the principle that
before a plaintiff can rely on a claim for specific performance so as to
insulate himself from the consequence of failing to procure alternate property
in mitigation of his losses, the plaintiff must show some fair, real and
substantial justification for his claim for performance. Further the defendants
submitted damages should be assessed as of the date of breach.

[312]     The defendants cited McNabb v. Smith (1981), 124 D.L.R. 547,
30 B.C.L.R. 37 (S.C.); and Buchanan v. Fisher [1993], B.C.J. No. 548
(S.C.), as cases where lands were bought as an investment and in which damages
were found to be the appropriate remedy.

[313]    
The defendants referred to the classic statement
of contract damages in Hadley v. Baxendale (1854), 9 Exch. 341 at 354,
156 E.R. 145 [Hadley]:

Where two
parties have made a contract which one of them has broken, the damages which
the other party ought to receive in respect of such breach of contract should
be such as may fairly and reasonably be considered either arising naturally,
i.e., according to the usual course of things, from such breach of contract
itself, or such as may reasonably be supposed to have been in the contemplation
of both parties, at the time they made the contract, as the probable result of
the breach of it.

[314]     The defendants submitted damages should be based on objective
factors reasonably foreseeable on the information available at the time of the
breach and based on retrospective evidence in quantifying the damages available
at the time of breach. This, the defendants submitted, led to the conclusion
that the plaintiff was proposing to construct two concrete tilt-up multi-tenant
rental warehouses as a long term investment with a projected rental rate of
$5.50 a square foot and a pre-load time of six to eight months.

[315]     The defendants submitted the Court had to approach the damages
either as loss of bargain or alternatively for loss of profit.

[316]     I note, however, in Kopec that the lost profit was said to
relate to profits that might have been earned by harvesting the crops (which
may be equated to rental income) as compared to an improvement in value, as is
being claimed here.

[317]     In Jenkins Road Developments, at para. 17, the Court
awarded damages for loss of profit on the basis of the fair market value of the
property at the time of the breach less the costs of completing plus costs
thrown away.

[318]     The defendants submitted it was also necessary to consider the
plaintiff’s expenses related to completion of the project, such as property
transfer taxes, property taxes, appraisals, financing fees and the like: see Van
Dyk and Van Dyk v. Durno et al., 2005 BCSC 691.

[319]     The defendants also argued that interest on the plaintiff’s monies
should be a benefit to be taken into account.

[320]     The defendants submitted the effect of Mr. Justice Meiklem’s
reasons for judgment was that the plaintiff had not succeeded in proving that
the 1368 Kingsway property was unique, and the issue was therefore res
judicata.

[321]     As to time of assessment of damages, the defendants submitted they
be fixed at the time of breach: see Asamera Oil Corp. and Semelhago.

[322]     While recognizing that the English and Canadian courts have allowed
damages as assessed at the trial date, they submitted this should only be done
in exceptional circumstances, and this was a case where the date of breach was
the appropriate date for the assessment of damages. On the other hand, the
defendants did concede the property had increased in value: see Mr. Dybvig’s
July 2010 report (Ex. 2), where Mr. Dybvig found the increase in land
value from May 2002 to February 2004 was $240,000.

[323]     The defendants submitted the plaintiff’s measure of damages was loss
of bargain, and given the value of the land at the time of breach was the same
as the contract price, there should be no award of damages. The defendants noted
that the plaintiff’s special costs in the amount of $14,331 had been paid.

[324]     The defendants submitted that if loss of opportunity was the basis
for awarding damages, the property should be considered a long term investment
with the date of breach being the appropriate time for assessment of damages.
Given the submissions as to rental rates, construction costs, and pre-loading,
it was submitted there was no loss.

[325]     Last, they argued that economic loss should be based on the pre-load
time construction costs and rental rates, in accordance with Mr. Dybvig’s
opinion that there was no loss.

[326]     Similarly, economic loss (loss of rental income) was premised on the
warehouses being constructed and ready for rental by February 2004. It was submitted,
given the pre-loading and construction time lines, that there was no basis for
the economic loss alleged by the plaintiff. Similarly, the claim for
developer’s profit was premised on unrealistic construction and land costs and
the proposed development was not economically viable.

[327]     As well, the defendants submitted the plaintiff had failed to
mitigate. Counsel referred to Southcott Estates Inc. v. Toronto Catholic
School Board, 2010 ONCA 310 [Southcott Estates], where the defendant
repudiated a contract for sale of land for a proposed subdivision. The
defendant led evidence that there were 81 parcels of vacant land in the Toronto
area which had been sold or developed. The trial judge ruled the defendant did
not meet its onus to establish want of mitigation by the plaintiff, but the
Court of Appeal held it was not necessary for the defendant to prove the
precise manner in which one of the 81 parcels might be sold, that suitable
lands were available to mitigate, and damages were set at $1.00.

[328]     The defendants pointed to Mr. Dybvig’s evidence that there were
170 completed sales of industrial investment properties in Greater Vancouver
and the Fraser Valley in the 24 months after May 2002 , with values between
$1.5 and $5 million. Further, Mr. Dybvig gave evidence that there
were 50 substitute development sites that sold in the two or three years after
May 2002, with a median value of $716,350.

[329]     Counsel referenced Mr. Ramsay’s evidence regarding 1462 Mustang
Place, 169 Golden Drive, and the Pacific Development Park in Coquitlam as
possible substitute sites.

[330]     The defendants noted Mr. Cocco had made an offer on the
property at Gloucester Estates in Langley on June 3, 2002, and claimed that he
did not go into the market due to the market’s volatility and other peculiarities
of the various municipalities’ development regulations.

[331]     The defendants submitted the plaintiff was seeking a windfall award
of damages based on a $14,331 investment.

[332]     In sum, the defendants submitted the plaintiff’s damages were
nominal and limited to loss of opportunity assessed at the date of breach, and
any award should have deducted from it the interest on the monies that the
plaintiff had kept in the bank, property transfer fees, and legal fees and
disbursements of $2,500.

[333]     Alternatively, if the Court assessed damages based on loss of
opportunity using the income approach, the fact that construction costs
exceeded the income based valuation resulted in there being no developer’s
profit, and therefore no award should be made.

Discussion

The Law

[334]     Satanove J., in Rec Holdings, noted at para. 120
that the burden of proof lies with the plaintiff, firstly to show on a balance
of probabilities that there was an opportunity to profit that was lost, and
secondly, that the loss was caused by the defendants. In assessing an
appropriate amount of compensation for the plaintiff, the Court is to take into
account possibilities or contingencies. At the same time, Nemetz C.J.B.C. in New
Horizon Investments called for conservatism when assessing damages where
one might be considering the timing in an uncertain market.

[335]     Here, I find 1368 Kingsway was in an attractive location, close to
the Mary Hill Bypass, on an arterial road and easily accessed, visible,
serviced, and the plaintiff had a viable warehouse plan to develop the
property.

[336]     Meiklem J. found the defendants in breach of the contract. The
plaintiff had a substantial and legitimate interest in obtaining specific
performance. The experts agree there was a rapid increase in the land value,
plainly showing there was an opportunity for profit. As well, the plaintiff
contended there was a developer’s profit to be obtained. There was no issue
about the increase in land value at trial. The issue at trial related to the
time to pre-load and build the warehouses, the costs of building the
warehouses, and the rental rates achievable, which in turn would give rise to
the arguments over the value of the land as developed with the two small bay
warehouses.

Mitigation

[337]     The issue of mitigation is well examined in Estey J.’s judgment in Asamera
Oil Corp. There is conflicting law on the issue in this case. The Ontario
Court of Appeal in Southcott Estates found that simple proof of a viable
marketplace could be evidence of mitigation, contrary to the finding of the
trial judge.

[338]     But there is other case law referred to by the plaintiff which shows
that the defendants are required to be more specific and need to establish more
than just general opportunities. Rather, the defendants must show that there is
some specific correlation between alternative or substitute properties that
could have been accessed by the plaintiff and thereby either decreased or nullified
its claim for damages.

[339]     As Estey J. notes in Asamera Oil Corp., there are many
factors coming into the consideration of mitigation. From the outset Mr. Cocco
showed Mr. Ramsay his plan to develop the property. The plan was sound and
realistic, and the plaintiff was ready and able to buy and develop the
property. When the contract was broken by the defendants, the plaintiff sought
other property and entered into one contract but then withdrew. The plaintiff
then promptly started its action for specific performance and pursued it with
reasonable speed. While 1368 Kingsway cannot be said to be unique, it had many
good features as compared to other potential sites (which doubtless caused the
defendants to hold onto the land) and thus the plaintiff had good reason to
pursue its claim for specific performance. The defendants’ attempts to show
nearby properties that were good substitutes proved to be without substance and
the generalizations about the remainder of the Lower Mainland market were not
specifically developed in evidence (for instance, the Langley property could
well have been taken through a hypothetical development exercise). The defendants
did not meet their burden of proof, but that is not to say that the general
evidence of the industrial land market is to be wholly discounted.

Time of Assessment

[340]     Meiklem J. found the defendants in breach of the contract. The case
law allows the Court to consider how the interests of fairness and justice are
best achieved by considering assessment at the time of breach or at a
subsequent time, up to trial.

[341]     It may be noted that Mr. Dybvig’s opinion is plainly based on
an instruction that he consider assessment as of the date of breach in May
2002. But he appears to have drawn on a lot of material at a subsequent time
(e.g. his discussions with Mr. Ramsay on various matters).

[342]     The evidence is clear. The industrial land market started into a
steady upswing and consistently maintained that movement through the period in
issue. Given the passage of time, the parties and the Court have the benefit of
hindsight.

[343]     Based on the classic statement in Hadley, the Court, in
assessing damages, can look to those matters that fairly and reasonably were
supposed to have been in the contemplation of both parties at the time they
made the contract. Given the defendant’s breach of the contract and his
knowledge of the plaintiff’s intention to develop the two warehouses, and the
subsequent post-contract conduct of the parties, fairness and justice lead to
my conclusion that the damages award should  take into account the upswing in
the market through to the end of November 2003.

Construction Times

[344]     Mr. Cocco led evidence that there could be a reduced time for pre-loading
by using 10 feet of sand together with grain or weep holes and that such
systems could shorten the pre-load time to some three or four months. However,
no evidence was led on any neighbouring property being so developed. As well, I
keep in mind that the plans for development were already in outline form but
had not been finalized, nor had an application been made for building permits
and other necessary municipal permits to pre-load and begin construction.

[345]     Thus, in my view, the evidence indicates, along the lines of Mr. Ramsay’s
subsequent development of the property, that pre-loading could take six to
eight months, but the plan was to pre-load half of the property, then move the
pre-load to the other half of the property, and then begin construction. That
could take some six to eight months, and then there would be some two months in
leasing the warehouse spaces. Mr. Ramsay’s evidence leads me to the
conclusion that the warehouses would not have been ready to lease until late
2003 or early 2004.

Cost of Construction

[346]     This was a primary issue. Mr. Cocco had obtained an estimate
from Cape Construction of $1,840,800. Mr. Reilly’s Marshall Swift
construction costs were $1,950,642. Mr. Dybvig’s Marshall Swift base calculation
was $2,141,963.

[347]     Those estimates and calculations have to be tempered with the
acknowledgement that actual costs might well be less. The per square foot costs
comparison was enlightening and persuasive. In my view, the likely actual base
building costs would have been towards the lower end of the various opinions.

[348]     And there were legitimate areas of dispute. Mr. Dybvig pointed
out a large number of areas where he felt Mr. Reilly had not adequately
considered additional factors such as demising walls, office and bathroom
space, landscape, side preparation, sidewalk, asphalt, design fees, development
cost charges, building permits, property tax, and land and construction
financing. All told, these were in the realm of another million dollars.

[349]     Exhibit 4 was Mr. Dybvig’s “rebuttal”, in large part a critique
of Ex. 3, Mr. Reilly’s opinion on the developer’s profit. In reality
it was Mr. Dybvig’s opinion on developer’s profit. Mr. Dybvig’s
opinion was that the cost of construction would exceed the increase in the
value of the land and that opinion in large part goes premised on differences
in the time for pre-loading the property; time for construction of the
warehouses; the cost of construction; and the rental rates that would be
achieved once the property development was completed and the warehouse units
offered for lease.

[350]     The other difference of opinion lay in the additional items of
construction cost, namely a contingency allowance; cost of demising walls; cost
of tenant improvements; cost of landscaping; development cost charges (said to
be $86,000 which I remove as they were unknown in 2002); permit fees; property
taxes during construction; property purchase tax; plumbing and engineering
fees; finance costs; and costs of sidewalk and paving.

[351]     However many matters weakened Mr. Dybvig’s opinion. He had
access to actual cost figures of development by Mr. Ramsay of the nearby
1320 Kingsway warehouse in 2004; he had access to the 2009/10 actual costs of
the almost identical warehouse development at 1368 Kingsway by Mr. Ramsay
which plaintiff’s counsel pointed out could be “rolled back” using the 2002
Statistics Canada Industrial Index and on that basis the costs were
substantially less than those calculated by Mr. Dybvig; financing costs of
the land were calculated though the plaintiff had substantial cash on hand
(though I concede there is a value to the use of money in hand and an
interest-earning ability at the bank); the construction costs and estimates of
Cape Construction, BTY, Mr. Carlin (advisor to Mr. Ramsay), Mr. Young
(another appraiser from Mr. Dybvig’s firm) and Titan Construction were all
significantly less than Mr. Dybvig’s cost per square foot figures; he said
in cross-examination that actual costs would help in settling whether the use
of the Marshall Swift commercial estimator was reliable, but he had not made
such a comparison; his pre-loading costs exceeded those of the plaintiff; the
cost of demising walls seemed very high compared to the actual recent costs; it
appeared that demising walls would have been part of the Marshall Swift
quantity costing; many of his comparable properties were on Broadway Street
which he conceded was less traveled, not an arterial road, it had no lighting,
and it had a large ditch on one side of the street, all factors which would
affect value and rental rates.

[352]     I accept many of Mr. Dybvig’s additional headings of expense,
but a number are subject to criticism.

[353]     Mr. Reilly used a segregated estimator which did include framed
interior construction, but still one would have to consider and add office and
washroom facilities; the side preparation or pre-loading could well be less;
the development cost charges seem questionable and I give this factor little
weight as the agent had indicated in 2002 they were a relatively small amount,
and it appeared that only recently, well after construction, that Mr. Ramsay
had been notified they might be a more substantial sum; and strata titling was
a red herring given Mr. Cocco’s intentions in 2002-2004 were to lease the
property. With respect to financing, Mr. Cocco had cash to buy the land so
he would not incur land financing charges; whether or not a contingency fund
would come into play would be a matter of fact and difficult to hypothesize on.

[354]     As well, to confine the assessment to May 2002 ignores what Mr. Cocco
intended to do, namely to develop the land by building the two warehouses. By
November 2003 he would have known the market was improving, that his building
had taken place at a propitious time, and the warehouse space could be leased
out in one to two months at rental rates approaching $7.00 in comparison to his
premise of $5.50.

[355]     So while Mr. Dybvig’s calculations say that, in May 2002, the
developer’s costs would not have been recovered in the rental market as he
thought, I find that not to be the case.

[356]     I conclude that actual construction costs would have been less than Mr. Dybvig
anticipated and that the plaintiff would have achieved better rental rates for
the new warehouse buildings with the high ceilings on the ideal location at
1368 Kingsway.

[357]     With respect to Mr. Dybvig’s comparable properties, a large
number were on the less travelled roadway street, they were older buildings,
and generally had less ceiling height, with older leases.

[358]     I note that at pg. 30 of his report, Ex. 4, Mr. Dybvig
stated the market rent for non-strata space for 2004 would have been $6.75. Mr. Reilly
put forward rental rates of $7.00 for 2002 and $7.50 in 2004, and using
somewhat different parameters from Mr. Dybvig for calculation of the
income approach to valuation, arrived at values of $3,775,000 and $4,170,000.

Quantum of Damages

[359]     The findings I have made as to pre-loading the site and building the
two warehouses favour the defendants’ argument that the buildings would not
have been ready to lease until very late in 2003. Accordingly, I find the
plaintiff suffered no loss of rental income.

[360]     The two sides put forward changes in land value from May of 2002 to
February of 2004. Mr. Reilly found a difference of $130,000 from the value
in 2002 of $700,000 to $830,000 in 2004. Mr. Dybvig opined that in 2002
the contract price of $710,000 was appropriate but the value of the land had
increased to February of 2004 to $950,000, a difference of $240,000:
Ex. 2.

[361]     However on the argument as to a developer’s profit i.e. to build the
warehouses on 1368 Kingsway and rent them, the defendants argued the cost of
such development would exceed the increase in value added, and therefore it was
not economic to develop the property: Ex. 4.

[362]     The plaintiffs on the other hand argued that if such loss was
assessed at the date of breach, May 2002, the loss would be $595,000, and if assessed
at the date of Meiklem J.’s judgment in February 2004, $910,000: see
Ex. 3.

[363]    
As the case law reminds us, assessment of
damages is not a matter of arithmetical precision, but rather a consideration
of all of the evidence that leads to an award of damages. As Nemetz C.J.B.C.
said in New Horizon Investments at para. 48:

[48] The
law does not intend that damages should be calculated. Damages are to be
assessed, not calculated. An assessment of damages is the application of
judgment and fairness (to both parties) which requires me to consider all
relevant factors as of the date of the breach without the constraints which the
assumptions mentioned above (or any assumptions) impose upon an arithmetical
calculation.

[364]     Given (a) the defendants’ breach of the contract as found by
Meiklem J.; (b) the strong factors favouring the ideal features for
development of the property at 1368 Kingsway; (c) the likely 18 to 24
month timelines for pre-loading and construction; (d) the gradual tightening
of the vacancy rates; (e) the timing of the project; (f) the likely
construction costs (which I would put at approximately, and perhaps less than $3,500,000);
(g) the increase in the value of the land from May 2002 to late 2003;
(h) the increase in rental rates for the same period; (i) the
steadily improving economic and market conditions; and (j) the improved
value of the land with the construction of the two warehouses, but taking into
account that it was an investment property and the potential other investments
that might have been made, I assess the plaintiff’s damages at $275,000.

[365]    
However, that assessment is subject to an issue that
was touched on by the defendants in argument but not argued by the plaintiff,
i.e. the taking into account of the approximate $60,000 interest said to have
been earned on Mr. Cocco’s cash monies sitting in a bank account instead
of being used to purchase the property at 1368 Kingsway. With respect to that
matter, there may be direct evidence to be proffered. In that regard, I will
ask counsel to contact Supreme Court Scheduling to arrange a mutually
convenient date to give directions as to evidence and argument.

“The
Honourable Mr. Justice Crawford”