1. Koch v AltaLink Management Ltd.
Appeal Outcome and Implications
Alberta Expropriation Association, Fall Conference, October 12-14, 2017
Michael B. Niven, QC, Carscallen LLP
Fiona Ellington, Duncan Craig LLP

2. FACTS LAND: 229 acres on 2 ¼ sections adjacent to the Red Deer River.
OWNERS: Mr. and Mrs. Koch. Purchased in March Had farmed the land for 27 years prior to purchase.
Purchase of Lands: Paid $511,500 in March 2013.
WATL: transmission line intersects property to the west of the centre line, running north-south. 3 structure on the lands.

9. Timeline Consultations: started in Spring 2011
AUC Hearing: Summer 2012
WATL Permit and License Granted: December, 2012
Koch Purchase: March, 2013
ROE Order: February, 2014
SRB Hearing: February, 2015
Appeal: June, 2016

10. ISSUE at SRB
Parties agreed on all issues of compensation other than “injurious affection”
Injurious affection
Subset of adverse effect – S. 25(1)(d) SRA
Diminution in the value of remaining land

11. SRB Positions KOCH: ALTALINK: Parties Agreed:
Purchase price is irrelevant
Right to compensation flows from the ROE order and not other factors such as a “good deal”
ALTALINK:
No compensation for IA
No economic loss
Transmission line factored into purchase price
Principles of compensation, double recovery
Parties Agreed:
Transmission line likely negatively impacted value of land
Appraisers on pre-transmission line value: $902, $933,000.00

12. SRB Decision Majority:
Confirmed that as the vendor was not a party to proceedings, whether she suffered loss not an issue
Determined that the question for them to answer was whether the landowners suffered an economic loss as a result of a change in financial position after the ROE Order
Market value of the land before and after ROE is relevant measure of landowners financial position
“reasonably informed potential purchaser” would have considered the AUC approval when assessing price to pay for land
Landowners failed to show that their financial position changed as a result of the diminished market value of the remaining lands
DECISION: No compensation for Injurious Affection

13. SRB Decision Minority:
Compensation of $125, payable to landowners
Value of remaining lands decreased by 15%
Accepted landowners’ evidence that transmission line was NOT factored into the purchase price
Advantage gifted to the landowners should be their advantage, not AltaLink’s
Would have purchased lands for $511,500 regardless of transmission line

14. Appeal
Under the Surface Rights Act, new evidence is allowed on appeals. However, deference is given to the SRB’s decision.
Only issue on appeal was compensation for decreased value of the rest of the property owned by the Kochs outside the right-of-way.
Kochs took the position that the new power line decreased the value of their land outside the right-of-way and that they were entitled to compensation for that decrease in value. This is called “injurious affection” or “IA”
AltaLink said Kochs not entitled to compensation for IA because (1) Kochs suffered no financial loss; and (2) Kochs knew or ought to have known the line would go through the middle of their property when they bought the land in February 2013.
Court found that the SRB majority’s decision was unreasonable.
Court determined that payment for IA is based on the impact on the value of the remaining land, not the impact on the landowners’ financial position.
Court found that the relevant values were the value of the land just prior to the issuance of the right-of-entry orders and the value of the land when the line is built.

15. Appeal Cont.
As to amount of IA, Court found that the lands still had potential for residential use, but the transmission line had an adverse impact on the value of that use, particularly because of its location down the middle of the property.
In calculating IA, the Kochs’ appraiser applied a percentage loss to the entirety of the remaining land, while AltaLink’s appraiser estimated the power line’s effect on potential building sites only.
Court felt AltaLink’s approach did not reflect the reality that the reduction in desirable and available building sites affects land value as a whole.
Court did not accept evidence of Koch’s appraiser that IA was 30%.
Court rejected opinion of Koch’s appraiser that lands no longer suitable for residential use.
In the result, the Court adopted the opinion of the dissenting SRB member and found IA in the amount of $125,780.

16. Why the Court Got it (Mostly) Right
Majority of the SRB didn’t properly apply the test for establishing a claim for injurious affection. Test is whether (1) affected land was ‘held with’ expropriated land; (2) affected land depreciated in value; and (3) damage suffered was not too remote.
Timing of land acquisition has no basis in the Surface Rights Act or jurisprudence for awarding IA.
Question is not whether land decreased in value because of the line during the time the Landowners owned the land; question is whether land decreased in value because of the line as at the Effective Date.
It is a fundamental principle that compensation under the Act is concerned with loss at the Effective Date.

17. Why the Court Got it (Mostly) Right
Neither expert appraiser followed the SRB majority’s proposed method for determining IA, both at the SRB level and on appeal.
If a landowner inherits land and pays nothing for it, does that mean they aren’t entitled to compensation for IA? Cannot be intent of legislation, which is remedial.

18. Why the Court Got it (Mostly) Right
If AltaLink’s caveat emptor position was correct, potential buyers will only be willing to buy land at a discount if they know they can’t recover IA from operator. What recourse would the seller have to get compensation for that loss from the Board?

19. APPEAL: Why the Court Got it Wrong
Error in law
Section 25(1)(d):
The Board, in determining the amount of compensation payable, MAY consider…the adverse effect of the area granted to the operator on the remaining land of the owner or occupant...
Section 25(1)(f):
The Board, in determining the amount of compensation payable, MAY consider…any other factors that the Board considers proper under the circumstances

20. APPEAL: Why the Court Got it Wrong
If a prudent investor becomes aware of a proposed project that has been issued permit and license, should he or she be able to approach the landowner to buy the land at a discount because of the impending transmission line, and turn a tidy profit by thereafter seeking injurious affection?
Is this the intent of the legislation?