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Thursday, June 23, 2011

Saskatchewan Court of Appeal awards farm to son

In a recent decision, the Saskatchewan Court of Appeal has ordered that parents, Barbara and Alfred Raymond transfer their one-quarter interests in a quarter section of land to their son, Barry.  The trial judge in the proceeding had instead ordered the payment of damages as opposed to specific performance of a transfer agreement that was found to have been in place between parents and son.

Barbara and Alfred are deceased, but their estates were respondents in the appeal.  The action by Barry arose out of a broader dispute between him and his brother, Alan, as to their succession to the farm land owned by their parents.  The trial judge found that a valid sale agreement for one-half of one quarter section of land had been in place between the parents and Barry and should be enforced.  Barry already owned another one-quarter interest in the property.  However, the judge declined to award specific performance of the agreement (i.e. the transfer of the land) because it was found that the land involved was not "unique or irreplaceable in the sense that it cannot be compensated by damages."  Instead, the trial judge awarded $70,500, which was one-half of the appraised value of the property.

The Court of Appeal decided differently and awarded the land to Barry.  The Court commented on the change in the law that took place in 1996 following a Supreme Court of Canada decision:
Until 1996 it had long been a tenet of our law that each parcel of real property was inherently unique. Given this inherent uniqueness, our courts made the equitable remedy of specific performance readily available to a plaintiff purchaser who claimed the vendor had breached a contract for the sale of real property. In 1996, Sopinka J.’s majority decision in Semelhago v. Paramadevan, 1996 CanLII 209 (SCC), [1996] 2 S.C.R. 415 (“Semelhago”), questioned these longstanding, rudimentary elements of our law of real property. His comments, although obiter, were thereafter generally accepted as law. However, Sopinka J. did not so much make new law as remind us that a basic legal rationale based on the presumed inadequacy of expectation damages has always underpinned the availability of specific performance as a remedy in cases involving real property. Unfortunately, post-Semelhago there has been some confusion as to when the remedy of specific performance will be made available to an aggrieved prospective purchaser of land. For this reason, Semelhago has been criticized for founding legal uncertainty in once settled law. This appeal results in part from that uncertainty.
The Saskatchewan Court of Appeal says that the SCC decision in Semelhago does not stand for the proposition that the presumption of uniqueness has been supplanted by a presumption of replaceability.  Judges must not longer presume the inadequacy of damages (i.e. a monetary payment rather than the land itself) as a remedy whenever real property is involved, but instead a judge must decide whether, in the cirucmstances, damages would be an inadequate remedy.  The Court of Appeal described the inquiry as follows:
In practical terms, this means the prospective purchaser bears the burden of adducing evidence that the subject property is specially suited to the purchaser and that a comparable substitute property is not readily available. These evidentiary points are necessarily intertwined because, on the basis of the evidence, the prospective purchaser must discharge the overall burden of persuading the judge that the subject property is so different from others that damages is an inadequate remedy and that justice dictates the purchaser should have the subject property. The judge, in turn, must conduct a critical inquiry on the evidence as to the nature and function of the subject property in relation to the prospective purchaser. The evidence and analyses will necessarily overlap, but the overall question the judge must answer is whether the justice of the matter calls for an award of specific performance because damages would be inadequate.
In the circumstances of this case, the Court of Appeal found that the land held unique value for Barry and was not simply a commodity.  It commented on Barry's specific case and on the unique value of family farm land in general:
It cannot be said that the Land is, or that Barry treated the Land as, more akin to a commodity than a tract of land having special attributes not found in any other farm land. The Land is immediately across the road from Barry’s home quarter. Barry already owns an undivided one-quarter interest in the Land. The Land once belonged to his grandfather and is home to his parents’ yard-site. Barry used the Land for over 40 years, with his parents, his brother, and his deceased son. These factors or attributes are cogent and impossible to value precisely. On this basis, I would find that an award of damages cannot restore Barry to the position that he would have been in had the Parents’ Estates performed under the agreement for sale of the Parents’ Interests. Furthermore, Barry’s evidence was also that there are no “reasonable yard-sites” located in close proximity to his home quarter. Whether or not reasonable yard-sites are available, no other yard-site could have the attributes of the Land. In other words, there is no comparable substitute property, let alone one that is readily available. If there is any farm land in respect of which compensatory damages is inadequate, it is typically that farm land which sits directly across the road from a farmer’s home quarter. This is especially so where the farmer has an existing legal interest in it, strong emotional and familial ties to it, and sound economic reasons for making it part of his farming operations. Whether pre- or post-Semelhago, such farmland is “unique” and the appropriate remedy in such a case is an order for specific performance.
Read the decision at: Raymond v Anderson.