Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: July 02, 2020 FILE NO.: DM 164099

Moving Party(ies): City of Vaughan Respondent(s): Municipal Property Assessment Corporation Region 14 Respondent(s): Promenade General Partner Inc.

Property Location(s): 1 Promenade Circle Municipality(ies): City of Vaughan Roll Number(s): 1928-000-190-14400-0000 Appeal Number(s): 3246910, 3256675, 3302103, 3357794 and 3403971 Taxation Year(s): 2017, 2018, 2019 and 2020 Hearing Event No.: 729885

Legislative Authority: Rule 45 of the Assessment Review Board Rules of Practice and Procedure

Parties	Counsel*/Representative
City of Vaughan	Jaroslaw Wowk
Municipal Property Assessment Corporation	Jeffrey E. Feiner*
Promenade General Partner Inc.	Andrew Valyi

HEARD: February 26, 2020 in writing

ADJUDICATOR(S): Dirk VanderBent, Vice-Chair

MOTION DECISION

OVERVIEW

1In 2017, Ontrea Inc. was the owner of a property located at 1 Promenade Circle, City of Vaughan (the “Subject Property”), which is described as a shopping centre that consists of over 200 retail, office, and storage units. On April 17, 2017, the Subject Property was sold to Promenade General Partner Inc (“Promenade”).

2CentreCorp Management Service (“CentreCorp”) has filed an appeal for the 2017 taxation year with the Assessment Review Board (the “Board”), pursuant to sections 32 and 40 of the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”), which now includes deemed appeals for 2018, 2019 and 2020 taxation years. It appears that CentreCorp filed the appeal in its name, apparently acting as agent on behalf of the former owner Ontrea Inc. and now the current owner Promenade. As assessed persons, both Ontrea Inc. and Promenade are statutory parties to CentreCorp’s appeals.

3In this proceeding, the City of Vaughan (the “City”) has filed a Motion requesting that Promenade provide disclosure of documents, pursuant to Rule 45 of the Board’s Rules of Practice and Procedure (the “Rules”). The Municipal Property Assessment Corporation (“MPAC”) supports the City’s request and relies on the evidence and submissions provided by the City. In responding to this Motion, it appears CentreCorp’s legal representative indicates that Promenade is the Appellant in this proceeding. For this reason, the Board is proceeding on the basis that Promenade, as the current owner of the Subject Property, is responding to the City’s Motion and that CentreCorp is, practically speaking, Promenade’s corporate representative.

4The Board directed that the Motion be heard in writing.

Background

5In summary, upon being served with Promenade’s Statement of Issues, the City requested that Promenade provide copies of documents which fall into three categories:

1. Full leases respecting certain tenancies in the Subject Property;
2. Original and Amended Agreements of Purchase and Sale, relating to the sale of the Subject Property on April 19, 2017; and
3. An appraisal report respecting the Subject Property prepared by Tim MacLeod of Altus Group for Promenade

Issue

6The issue in the Motion is whether the Board should grant the City’s request that Promenade provide the City and MPAC with the requested documents.

7The Board has considered all of the submissions made by the parties but references only the most salient submissions in this Decision.

RESULT

8The Motion is granted.

ANALYSIS

The Test to be Applied

9The Board’s Rules of Practice and Procedure:

Proportionality

5. These Rules shall be applied in a manner proportionate to the importance and complexity of the issues in a proceeding and with a view to resolving appeals within the four year cycle.

Disclosure

45. All parties must serve a copy, in paper or electronic form, of all relevant documents in their possession, control or power to all other parties in the proceeding, except for privileged documents, or documents that cannot be disclosed by law.

10The test to be applied has been set out in Walmart Canada Corporation and Target Canada Corporation v Municipal Property Assessment Corporation, Region 01, 2018 CanLII 67789 (ON ARB).

[18] Relevance is determined in relation to whether a document is relevant to an issue in dispute. However, this is not the only criteria that the Board will consider when determining whether a document, which may be relevant, should be disclosed. Rule 45, itself, provides an exception for privileged documents. In addition, Rule 5 provides that “These Rules shall be applied in a manner proportionate to the importance and complexity of the issues in a proceeding and with a view to resolving appeals within the four year cycle’. Therefore, the requirement to disclose relevant documents must also be applied in a proportionate manner. Rule 45 does not include specific criteria to assess proportionality. However, the Board finds that the criteria in Rule 29.2.03(1) and (2) of the Rules of Civil Procedure (Ontario) are applicable, namely:

1. the time required for the party or other person to answer the question or produce the document would be unreasonable;
2. the expense associated with answering the question or producing the document would be unjustified;
3. requiring the party or other person to answer the question or produce the document would cause him or her undue prejudice;
4. requiring the party or other person to answer the question or produce the document would unduly interfere with the orderly progress of the action; and
5. the information or the document is readily available to the party requesting it from another source.
6. whether an order for disclosure would result in an excessive volume of documents required to be produced by the party or other person.

The Board observes that this is a non-exhaustive list. There may be other criteria identified on a case by case basis.

[19] In applying the above criteria, the Board must balance these considerations against relevancy, i.e. the degree to which it appears that the document is relevant to an issue in dispute, and, if so, how probative this evidence may be. The onus to establish that a document should be disclosed pursuant to Rule 45 rests with the party who requests the disclosure.

[20] In addition to the above, it should also be noted that Rule 45 only requires disclosure of documents in a party’s possession, control, or power. A party is not required to produce new information, or obtain documents that are not within its possession, control, or power.

Disclosure Request No. 1

11The City’s specific disclosure request is for the full lease (including any lease renewals, lease extensions, lease amendments, lease assignments) of each tenant that held a leasehold interest in either 2014, 2015, 2016, 2017, 2018, or 2019 that is assessed in any of the following Occupancy Levels of the Subject Property:

1. 110 – Storage – Ground Fl
2. 310 – Kiosk – Ground Fl
3. 510 – Allied – Gr Fl Std
4. 622 – Big Box Franchise (Urban Planet)
5. 632 – Other (Women’s Fitness)
6. 11 – Department Store (Sears)

Submissions

The City

12The City states the requested leases are relevant to the issue of the fair market rent to be attributed to each of these occupancy levels.

Promenade

13Promenade does not dispute that some of the information in the leases is relevant.

14Promenade relies on the affidavit evidence of Tristan Bock, who is a Senior Director employed by Altus Group, which acts as Promenade’s legal representative. Mr. Brock’s qualifications include an Accredited Appraiser Canadian Institute Designation with the Appraisal Institute of Canada, and an Accredited member with the Institute of Municipal Assessors. He indicates that he is a specialist in the valuation of shopping centres for assessment purposes. He states that leases typically include several clauses that are unrelated to the issue of market rent, citing several examples. He explains that, if there is reason to believe that rent rolls are inaccurate, then he may require inspection of actual lease documents to confirm information he considers to be relevant for the purpose of a market rent review, which includes:

1. Gross Leasable Area
2. Lease Commencement Date and Expiry Date
3. Minimum/base rent to be paid in the base and shoulder years of the base date of assessment
4. Additional Rent (CAM/Tax contributions) and confirmation whether tenant is responsible for payment separately
5. Tenant inducements (i.e. free rent periods, cash allowances)
6. Lease renewal/extension terms to confirm whether renewal rents are predetermined or to be predicated on prevailing market rent at time of renewal

15Mr. Bock states that the production of the requested documents is disproportionate, as it will amount to 53,000 pages. Promenade submits that the workload to provide a copy of these documents is both unreasonable and unacceptable. In this regard, Promenade relies on 183119 Canada Inc. v Municipal Property Assessment Corporation, Region 20, 2019 CanLII 50344 (ON ARB) (“183119 Canada Inc.”).

16Promenade also asserts that extensive disclosure has already been provided. Promenade submits that the City has access to extensive public and other information which can be used to establish rental rates. Promenade argues that the City has not established: (i) why the information currently available to the City and MPAC is insufficient for preparing its Statements of Response; and (ii) why the requested leases are relevant.

17Mr. Bock also states that many of the leases requested by the City were negotiated more than five years before the January 1, 2016 Valuation Date, and as such, it is his view that they do not reflect market rents that are relevant to the appeals in this Board proceeding.

18In his affidavit, Mr. Bock states that the confidential nature of lease documents is significant. He cites examples of data breaches and cyber-attacks on data systems, stating his opinion that they are “becoming more commonplace”. Promenade confirms that it is prepared to make the leases available for inspection at its offices, or at the offices of the Moving Party, provided that Promenade’s representative is present for the inspection of the documents.

The City’s Reply

19The City objects to Promenade’s proposal to inspect the leases, emphasizing that Rule 45 states that all parties must serve a copy, in paper or electronic form, of all relevant documents. The City further states that that Promenade has already provided confidential information, including full leases, in paper or electronic format, and asserts that it is unclear why remaining documents cannot be disclosed in the same format. The City submits that Promenade has not provided any compelling reasons why the documents cannot be provided, and that Promenade has not demonstrated that production of the documents would cause undue prejudice. The City further submits that any concerns regarding confidentiality can be protected by a confidentiality agreement.

20The City disagrees that it can access other sources of information to acquire the information provided in the leases. In this regard, the City further submits that Mr. Bock reviewed the leases to provide lease analysis and summaries to the City and MPAC. The City further maintains that the lease summaries prepared by Mr. Bock fall below the standard of a typical lease summary and in certain cases are missing critical information regarding a tenant’s lease terms which includes tenant inducements, rent-free periods, step-ups, lease extension or renewal terms, and percentage rents.

21Regarding Promenade’s submission that the requirement to disclose the leases is disproportionate, the City emphasizes that Promenade’s Statement of Issues alleges that the fair market rent for 154 tenants is incorrect, and that the City’s disclosure request relates only to these tenancies. The City submits, therefore, that its disclosure request is proportionate considering the size of the Subject Property, the number of tenancies where fair market rents are in issue, and the probative value of the leases as they relate to the issue of fair market rents. The City further submits that 183119 Canada Inc. does not apply, because in that case, the Board found that the moving party did not establish the relevance of the requested documents. The City also states that it is prepared to copy the documents in either paper or electronic format. Consequently, the City submits that it is unclear why Promenade would have to expend additional time and resources to provide the documents.

22The City disputes Promenade’s assertion that the City could not maintain the confidentiality of the requested documents, submitting that Promenade’s concerns are grossly exaggerated. The City also submits that Promenade’s claim is inconsistent with its conduct, because Promenade has already provided the City with various proprietary financial information (all without a non-disclosure agreement), including full leases, income and expense statements, and rent rolls.

23Regarding Promenade’s submission that many of the leases requested by the City were negotiated more than five years before the January 1, 2016 Valuation Date, the City relies on the Board’s Disclosure Guideline, which includes a Disclosure Schedule that outlines the documents that are generally considered to be relevant to specific valuation methods. More specifically, the City relies on the provision in the Disclosure Schedule which provides that, when the fair market rent of a tenant is raised as an issue in dispute, leases for the five years ending and concluding with the valuation date (i.e., 2012-2016) are considered relevant and proportional.

Finding on Request No. 1

24The Board first observes that Promenade’s submission indicates that it is prepared to allow inspection of the documents. This is a form of production, which would be made on the basis that the requested documents are relevant, or, alternately that Promenade is prepared to produce them, without admitting relevance or admissibility, pursuant to Rule 46.

25The Disclosure Schedule indicates that the leases in force for the five years preceding the Valuation Date are generally considered to be relevant, and therefore, should be routinely be disclosed. The Board understands that Promenade’s submission relates to leases that were negotiated more than five years before January 1, 2016. However, these leases were, nonetheless, in force, and, therefore, are relevant and should be disclosed. The weight to be ascribed to this evidence will be determined at the hearing. Regarding Promenade’s reliance on 183119 Canada Inc., the Board, in that case, found that the requested documents were not relevant. Therefore, that decision does not apply to the circumstances before the Board in this Motion.

26Promenade has argued that confidentiality of the documents cannot be ensured, citing only anecdotal evidence of data breaches and data base cyber attacks where there has been unauthorized release of confidential information. The Board finds that it is, at best, speculative that an unauthorized release of the documents would occur if the documents are provided to the City and MPAC. When balanced against the importance of disclosing relevant documents in this appeal proceeding, the Board finds that Promenade has not provided convincing evidence to support its position that the documents should not be disclosed. In further support of this conclusion, the Board notes that risk of attempted data breaches and cyber attacks also exists for Promenade, as no one is immune from such interference. The Board finds that Promenade’s anecdotal evidence does not establish that this risk would significantly increase if the documents are provided to City and MPAC subject to the terms of a confidentiality agreement.

27Regarding Promenade’s assertion that the leases contain clauses that are not relevant to the issues in dispute, the Board accepts that this may be the case. However, for the purpose of Rule 45, a document is relevant, even though it may contain both relevant and irrelevant information.

28Regarding the question of proportionality, the Board notes that it cannot assume that production of a large number of documents necessarily imposes a significant workload in terms of time and resources. If the requested leases already exist in electronic file format, very few resources would be required to copy and deliver them. Unfortunately, in this Motion, none of the parties provided the Board with confirmation whether the leases currently exist in electronic format. In any event, the City has confirmed that it will incur the expense of photocopying or electronically scanning the leases, so the Board finds that there are no resource implications for Promenade in providing the leases to the City and MPAC.

29The Board expects the parties to work collaboratively to facilitate the exchange of disclosure. In this case, this means that the City should identify if there are pages of the leases that do not need to be copied. However, the Board notes that it may be more time-consuming to redact such documents before copying them, as opposed to simply copying the entire document. The most efficient option should be implemented.

30Based on the above analysis and findings, the Board grants Request No. 1.

Disclosure Request No. 2

31The City’s specific disclosure request is for original and Amended Agreements of Purchase and Sale, relating to the sale of the Subject Property on April 19, 2017.

Submissions

The City

32The City submits that an evaluation of whether the sale is a valid open market sale transaction begins with a review and investigation of the Agreement of Purchase and Sale. The City maintains that it requires the requested documents to investigate the details of the sale and to prepare its Statement of Response.

Promenade

33Promenade states that it has already provided a copy of the Land Transfer Tax Affidavit to the City and MPAC and the Respondent (MPAC), which contains the relevant information about the transaction. Promenade further states that it has also provided a completed Sales Questionnaire using a template that was provided by MPAC.

34Promenade submits that the Land Transfer Tax Affidavit and the Sales Questionnaire provide sufficient documentation for the City and MPAC to confirm the relevant particulars of the sale, in the event these are necessary for the preparation of a Statement of Response.

35Promenade states that it has also offered to provide the City and MPAC with an opportunity to review these documents in person at its offices or at the City’s offices, noting that the City has rejected this proposed disclosure method.

36Promenade also relies on Mr. Bock’s statement that the Agreement of Purchase and Sale (including the Amended Agreement of Purchase and Sale) includes numerous clauses that are not typically relevant to a sales investigation in the context of an assessment appeal, which includes “Representations, Warranties and Covenants”, “Operation Until Closing”, “Real Estate Commissions”, “Work Orders”, “Third Party Claims”, and “Escrow Closing and Land Title Registration”.

The City’s Reply

37The City does not dispute Promenade’s assertion that some clauses in the Agreement of Purchase and Sale are not relevant. However, the City submits that, although certain clauses of an Agreement of Purchase and Sale may deserve more attention than others, this does not, in and of itself, make the document irrelevant. The City maintains that, if the Board were to accept Promenade’s reasoning, it is unclear whether an Agreement of Purchase and Sale of a property would ever be considered relevant when determining whether a property’s current value should be revised to its arm’s length and market-tested sale.

38Regarding the requirement to produce a copy of the full document, the City repeats its submissions above made in respect of Request No. 1. Regarding the question of relevancy, the City notes that the Disclosure Guideline states that the disclosure of an Agreement of Purchase and Sale is deemed relevant and proportionate if an appellant raises the sale of a subject property as an issue in dispute.

Finding on Request No. 2

39The Board finds that its analyses made in respect of Disclosure Request No. 1, equally apply to Disclosure Request No. 2. The Agreement of Purchase and Sale and the Amending Agreement of Purchase and Sale relate to a sale of the Subject Property that is sufficiently proximate to the January 1, 2016 Valuation Date to be relevant to the issue of the current value of the Subject Property. Therefore, the requested documents are relevant and should be disclosed, notwithstanding that they may include information which may not be relevant.

40Promenade submits that it should not be required to produce a relevant document if other sufficient information has been provided. Implicit in this argument, is the assumption that the disclosing party can decide whether another party requires the requested document for the preparation of its case. The Board does not accept this submission. Rule 45 clearly requires that, if a party has a relevant document in its possession, power, or control, it must be disclosed. Other parties are entitled to receive all relevant documents, for the purpose of determining whether they will rely on them as part of their evidence at the hearing of the appeal. Furthermore, while there may be duplication of information in the disclosure of relevant documents, this factor only pertains to the question of whether it is proportionate to require that the requested documents be produced. In this case, Promenade has not argued that the requirement to produce the requested documents would be disproportionate.

41Based on the above analysis and findings, the Board grants Disclosure Request No. 2.

Disclosure Request No. 3

42The City’s specific disclosure request is for an appraisal report respecting the Subject Property prepared for Promenade by Tim MacLeod of Altus Group (“Report”).

Submissions

The City

43The City submits that the Report is relevant to the issue of revising the 2016 current value assessment to the time-adjusted sale amount of the Subject Property, an issue which Promenade has raised in its Statement of Issues. Regarding high value commercial properties such as the Subject Property, the City asserts that it is common practice for prospective buyers to obtain an appraisal report for the purpose of due diligence, purchase price negotiations, financing, etc. The City submits that any appraisal obtained or relied upon by the landlord in its purchase of the Subject Property on April 19, 2017, is relevant to the weight to be placed on the sale.

44The City further states that the Report values the Subject Property based on a leased fee interest (actual income and expense information of the Subject Property). The City submits that the Report directly relates to several issues raised in Promenade’s Statement of Issues pertaining to the actual rental income and expenses of the Subject Property. For example, one of the issues raised by Promenade is that the correct non-recoverable expense allowance should be no less than 10%.

Promenade

45Promenade relies on Mr. Bock’s evidence where he states that he “had discussions with the purchaser's VP of Finance (Patrick Chung) and was advised by him and do verily believe that the appraisal was prepared after the purchase price for the asset was agreed to and was therefore not relied on by the purchaser to determine the price they were willing to pay for the Subject Property.” Mr. Bock also states that he does not “believe the appraisal for financing purposes is relevant to determine the reliability of the sale price as a reflection of market value particularly since the negotiated purchase price was not influenced by the appraisal.”

46Promenade relies on the Board’s decision in GT & T Holdings Ltd. v. Municipal Property Assessment Corp. Region No. 15, [2010] O.A.R.B.D. No. 65 (“GT & T Holdings”), where the Board, in its final decision, placed no weight on an appraisal report that was prepared for financing purposes, further finding it was not relevant to the determination of the current value of the subject property because such reports provide a conservative estimate of value.

47Promenade also relies on a decision of the Manitoba Municipal Board in Assessor for The City of Winnipeg v. Great-West Life Assurance Co., [2002] M.M.B.O. No. 70 (“Winnipeg”), regarding an appraisal that was prepared to validate the accuracy of the “book value” of the property. In this case, the Manitoba Municipal Board observed that the purpose of an appraisal report may affect the approach taken in the preparation of the report and found that the appraisal report provided an opinion based on information that went beyond “what may be necessary to establish the market value of the subject property” (para. 34).

48Promenade also submits the neither the City nor MPAC have provided any reason why the opinion of an appraisal prepared for non-assessment purposes will have any probative value and, even if it had some probative value, it would be outweighed by its prejudicial effect. In support of the latter assertion, Promenade relies on Regina v. MacDonald et al. [Indexed as: R. v. MacDonald], 2000 CanLII 16799 (ON CA), 49 O.R. (3d) 417 (“MacDonald”), a criminal law decision of the Ontario Court of Appeal which discusses the prejudicial effect of accepting demonstrative evidence.

The City’s Reply

49The City observes that, in GT & T Holdings, the appraisal report was disclosed to all parties and that they had the opportunity to make submissions at the main hearing as to the weight to be given to the appraisal report and to test its quality and reliability. The City submits that, in this case, at this stage of the proceeding, it is better that the Board should “err on the side of caution” and order the disclosure of the Report.

Finding on Request No. 3

50The purpose of Rule 45 is to ensure that each party has access to all documents that are relevant to an issue in dispute, in order that each party may fully prepare its case for the hearing. Although, the Hearing Member may accord little or no weight to the evidence, this does not indicate that a document is not relevant to an issue in dispute for the purpose for Rule 45.

51The Board does not accept Promenade’s assertion that the Report constitutes demonstrative evidence, nor Promenade’s submission that any probative value of the Report would be outweighed by its prejudicial effect. Assessment reports provide both factual and opinion evidence. They do not fall within the classification of demonstrative evidence as set out in MacDonald. The Hearing Member must determine if there is any prejudice in allowing the Report to be adduced as evidence at the hearing. At this stage in the proceeding, this is not a ground on which to deny a request for disclosure of a relevant document.

52Promenade relies on the findings in GT & T Holdings, which indicates that an opinion in an appraisal report prepared for financing purposes should be given no weight, and Winnipeg, which indicates that the purpose for which an appraisal report is prepared may affect the approach taken in the preparation of the report. Promenade’s expert, Mr. Bock, has also expressed his opinion that the appraisal for financing purposes is not relevant to the issue of determining the reliability of the sale price of the property as a reflection of market value.

53For purposes of this Motion, the Board finds that it is unnecessary to determine whether the Report’s ultimate conclusion regarding property value is relevant. The City has argued that information in the Report would be relevant to some of the specific issues raised in Promenade’s Statement of Issues. Promenade, in its reply to this Motion, has not specifically disputed this. On its face, the Report has been prepared in respect of the Subject Property, and there is no evidence before the Board that it was prepared at a time that is too far removed from the January 1, 2016 Valuation Date to have any probative value. Whether there is some information in the Report that is not relevant or whether the assessor’s opinion regarding value should be given no weight, are questions to be addressed at the main hearing. Therefore, the Board finds that it is reasonable to conclude that there is merit in the City’s submission that information in the Report would be relevant to some of the specific issues raised in the Statement of Issues.

54For the above reasons, the Board grants Disclosure Request No. 3.

ORDER

55The City’s disclosure requests are granted.

56Promenade is directed to provide the requested documents within 30 days of the issuance date of this Decision.

57The due date in the Schedule of Events for the responding parties to file their Statements of Response is amended to a date that is 90 days from the issuance date of this Decision, and all other due dates are to be adjusted accordingly. These due dates will be further adjusted by any suspensions issued by the Board pursuant to the Provincial COVID-19 Emergency Order.