By J. Bradford Nixon

Walker Poole Nixon LLP

Re: February 21, 2013 – First pre-budget consultation held by the new Minister of Finance, Charles Souza.

I appeared in my capacity as President of the Canadian Property Taxpayers Association:

“The Canadian Property Taxpayers Association offers you congratulations on your appointment as Minister of Finance.

The Canadian Property Taxpayers Association has 440 members across Canada, all of whom are professionals in the field of municipal assessment, property tax, whether they be consultants, appraisers, lawyers or paralegals.

We are over 200 members in Ontario, many of whom are employed by large real estate companies, large industrial and commercial concerns, and multi-residential property owners.

The property tax is the second largest source of governmental revenue in Ontario. The property tax expense is the second largest or third largest corporate expense after debt service.

We work directly with MPAC and municipalities appealing or negotiating fair and equitable assessments on behalf of our clients or employers.

The biggest concern we raise with you is the separation of MPAC from any direct supervision and policy management by the Province. Too often tax issues erupt because MPAC changes valuation or classification methodologies or principles without notice or consultation. The resulting uncertainty can be devastating to a taxpayer’s business operation. 2

Prior to 1998, MPAC’s function was performed by the Ministry of Finance and prior to that, the Ministry of Revenue.

Now MPAC is not directly accountable to the Minister and tax problems erupt suddenly which require tax policy intervention by the Minister. We believe the Ministry of Finance has to take a leadership role in consultation with the private sector on workable tax policies.

Let me give you an example which will soon require your decision: the dramatic increase and expansion of assessment of outdoor and indoor signage which has thrown an industry into turmoil, and created unconscionable tax burdens on some properties.

There are many others.

We urge you to take control and make MPAC accountable, and use your authority to provide tax policy solutions to the assessment problems. We urge the provincial Ministry of Finance to assume an activist role in developing tax policy solutions – working with all the stakeholders, MPAC, municipalities, and taxpayers. The field cannot be abandoned to only three of the four players. The Ministry has a critical role to play.

Thank you for your time; thank you for listening and we wish you well.”

By:  J. Bradford Nixon, Walker Poole Nixon LLP

This application for a vacancy tax rebate was heard by the Assessment Review Board on July 22, 2011.  Kitchener Frame sought vacant unit rebates under section 364 of the Municipal Act, 2001 in respect of vacant areas in the building.  The Board rejected the application stating “the evidence indicates that the building was not vacant and was still in use. . .”. 

The parties agreed that 103,700 square feet of the former manufacturing plant was being used to store disassembled equipment.  Kitchener agreed that it had previously processed vacancy tax rebate applications in relation to this plant for vacant space which still had idled equipment.  Kitchener Frame acknowledged that “much of the manufacturing equipment was still in place and adhered to the floor in the main manufacturing and processing area of the plant”. 

Both parties agreed that the staging area of 103,700 square feet was designated for equipment which was dismantled and taken out of the plant. Both parties also agreed that the remainder of the plant still had the existing manufacturing equipment which was slowly being removed through the staging area.

The Board concluded that the building was not vacant because a portion was still occupied by idle equipment owned by the manufacturer and there was no evidence of physical separation between the staging area and the manufacturing area where the equipment lay idle.  Kitchener Frame sought a review of the Board’s decision pursuant to Rule 147.  The reviewing Board found that there was an error of law.

The Board said on review:  “the conclusion that the presence of the idle equipment precluded the portion of the property eligible for a vacancy rebate is not within a reasonable range of outcome because subsection 1(4)(ii) [of O/Reg. 325/01] provides that the presence of fixtures does not constitute a usable portion of a building.”  Unfortunately for Kitchener Frame, this section was not “raised or argued at the hearing or was considered by the Board”. 

The review decision also identified discrepancies between the original Board decision and the agreed facts identified by the presiding Member. 

Ultimately, the Board on review found that it was “not satisfied that the decision is transparent and defensible as being within a range of possible and acceptable outcomes”.  And, therefore, found that it would be a denial of justice not to allow the parties “the opportunity to fully reargue the case with reference to all of the applicable law, which does not appear to have been argued before the Member who presided at the original hearing”. 

Submitted By:  J. Bradford Nixon

The latest ruling of the Supreme Court of Canada on standard of review of administrative tribunals is Alberta (Information and Privacy Commissioner) v. Alberta Teachers’ Association, 2011 SCC 61.

The majority of the Supreme Court confirmed that deference to the tribunal will usually result where the tribunal is interpreting its own statute or statutes closely connected to the function, unless the question falls into a category of question to which the correctness standard continues to apply, eg. a constitutional question, a question regarding the jurisdictional lines between competing specialized tribunals, a question of central importance to the legal system as a whole, or a true question of jurisdiction or vires.

The Court reiterated that the category of true questions of jurisdiction attracting a correctness standard of review in statutory interpretation is narrow.  The Court went on to say that, pending clarification of the scope of true questions of jurisdiction by the Court, unless the situation is exceptional, the interpretation by a tribunal of its home statute, or of statutes closely connected to its function, should be presumed to be a question of statutory interpretation subject to deference.

This decision suggests that the reasonableness standard is here to stay as the standard of review of Assessment Review Board decisions interpreting the Assessment Act and related regulations.

One practical consequence of this level of deference seems to be an abrupt and marked decrease in grants of leave to appeal from Board decisions.  This will achieve the policy direction of the Supreme Court of Canada, but at what cost to the taxpayer and municipalities?

Steelcare Inc. v. Municipal Property Assessment Corporation

By:  J. Bradford Nixon, Walker Poole Nixon LLP 

Steelcare was a long-term tenant of a portion of rail lands in the City of Hamilton owned by Canadian Pacific Railway (“CPR”).  On the 14.4 acres which it leased from CPR, Steelcare constructed a 167,000 square foot single storey industrial warehouse with drive-through rail and truck loading/unloading facilities.  The entire property was assessed by MPAC using the cost approach for buildings and structures and the comparative sales approach for land.  Unlike other industrial properties in the City of Hamilton, no market adjustment factor (“MAF”) was applied by the assessor.  The parties agreed that the cost approach was the appropriate method of valuation. 

MPAC had developed the MAF after observing that industrial properties were selling in the marketplace for less than the cost values.  According to MPAC’s in-house policy, the MAF is not applied to certain lands, including railway yards, because they do not typically sell in the marketplace, although the MAF is applied to Port Authority lands and petro-chemical plants for example.

MPAC argued that the entirety of the lands, both those occupied by CPR and those leased by Steelcare should be assessed under section 30(2)(d) of the Assessment Act which is the special valuation section for rail yards “in actual use and occupation” by the railway company.

The facts indicated that:

• ·       Steelcare had built, owned and maintained the 167,000 square foot warehouse.
• ·       Steelcare controls access and moves railcars in and out
• ·       Steelcare services both CPR and its own customers from the warehouse
• ·       CPR does not conduct any business on the Steelcare personal lands
• ·       The facility is operated by and for the sole benefit and profit of Steelcare

Member Ian Birnie, of the Assessment Review Board, wrote:

“The evidence is that standard industrial properties in the City of Hamilton receive a MAF reducing their assessments by around 20%.

Consequently, the result of not applying the MAF to properties which do not sell, is that they are assessed higher than identical properties which do sell.

This makes no sense to the Board since surely a property for which there is no market cannot be no more than an identical property for which there is a market.”

Member Birnie found that:

“By valuing the subject property by the same Cost Approach methodology, without a MAF, MPAC has over-assessed the subject property.

. . . the Board can find no justification for this by reason of the subject properties being a type of property that typically does not sell or because rail yards have to be assessed under section 30(2)(d).”

On June 25, 2012, the Superior Court of Justice (Divisional Court), denied MPAC’s Motion for leave to appeal stating:

“I see no error of law in the Board’s conclusion that the MAF should be applied in order to value the CPR property.”

The Decision of the Superior Court of Justice in Ebrahim v. Continental Precious Minerals Inc., 2012 ONSC 2918, released May 22, 2012 adds to the jurisprudence regarding the role of expert witnesses and the admission of expert testimony.

This was litigation arising from dissident shareholders seeking an oppression remedy from actions of the corporation, which relief the Judge denied.

Apparently at the hearing of this application (for which there had been cross-examinations) the Judge ruled affidavit evidence of an opinion expert to be inadmissible. See paragraphs 45-46.

This expert was the principal of a large shareholders services firm under contract to the corporation. The firm was retained to provide services for shareholding meetings of the corporation; one of the meetings was the subject of contention in the court proceeding.

Mr. Justice D.M. Brown held that “….a person under retainer to a party to litigation, however qualified he might be in the subject area, lacks the independence necessary to provide opinion evidence that is ‘fair, objective and non-partisan…’”, citing rule 4.1.01 of the Rules of Civil Procedure.

Presumptively, this decision suggests that a party (i.e. a landlord) maintaining a standing retainer with a property tax consultant may not be able to rely upon an employee of that consultant as an expert witness when the firm’s work is the subject matter of the dispute (i.e. taxes charged back to a tenant, in a lease interpretation dispute).