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LANDLORD AND TENANT RELATIONSHIP - Contract

Wednesday, April 17, 2019 @ 8:41 AM  


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Appeal by the Crown from a Federal Court decision regarding the appropriate methodology for determining the fair market value of reserve land pursuant to a 1991 lease between 2010 and 2014. The leases were for a term of 20 years, but the rent was fixed for five-year periods. The lease required rent to be set based on the fair market value of the land. The setting of the rent for a given five-year period was founded upon an appraisal of the leased lands. In 2009, the First Nation obtained an appraisal for the 2010-2014 renewal period which recommended very significant increases in lease rates. The First Nation adopted the recommended rates and advised the lessees. The lessees then commenced the present class action. The Federal Court heard expert evidence regarding the appropriate valuation methodology from two appraisers. The Court preferred the evidence of the lessees’ appraiser to that of the Crown’s appraiser because of his strength, persuasiveness, consistency, logic and knowledge of the subject properties. The Court did not examine the particulars of the appraiser’s analysis but justified its preference for his conclusions based on his characteristics and credibility or on the basis of weaknesses in the Crown’s expert evidence. The Crown alleged several errors in the Federal Court reasons flowing from the Court’s statement that it was in no position to reach its own conclusions on specific valuation factors and that it was to accept which of two competing views it preferred.

HELD: Appeal allowed. The Federal Court fell into a palpable and overriding error in its treatment of some of the evidence and its acceptance of expert evidence about the reserve factor calculation. The Federal Court’s statement of its role in relation to the expert evidence was an error of law. The trial judge erred by concluding that he was required to choose and rely solely on one of the expert opinions rather than exercising his own independent judgment to determine the appropriate methodology. Trial judges could not simply defer to the experts on the ground that they lacked the expertise to decide the factual question in issue. The lessees’ expert failed to do a time-trend analysis for the on-reserve lease rates so that his use of the 2008-2009 Indian Point/Grenfell Beach lease rates without adjustment resulted in a systematic understatement of on-reserve values which, in turn, led to an overstatement of the reserve factor. Based on the evidence of substantial increases in lease rates in recreational properties in the 2004-2009 period, the use of unadjusted Indian Point/Grenfell Beach 2008-2009 rates in the reserve factor calculation made the resulting reserve factor wholly unreliable.

Piot v. Canada, [2019] F.C.J. No. 339, Federal Court of Appeal, J.D.D. Pelletier, D.W. Stratas and Y. de Montigny JJ.A., March 25, 2019. Digest No. TLD-April152019007