Tribunals Ontario Tribunaux décisionnels Ontario Assessment Review Board Commission de révision de l’évaluation foncière

ISSUE DATE: September 28, 2023 FILE NO.: RD 22-016A AMENDED DECISION ISSUED: October 03, 2023

Assessed Person(s): Stelco Inc.; Legacy Lands Hamilton Inc. Appellant(s): City of Hamilton Respondent(s): Municipal Property Assessment Corporation Region 19 Respondent(s): Stelco Inc.; Legacy Lands Hamilton Inc. Property Location(s): 386 Wilcox Street Municipality(ies): City of Hamilton Roll Number(s): 2518-030-272-02600-0000 Appeal Number(s): 3286794, 3363761, 3408301, 3447109, and 3489654 Taxation Year(s): 2018 - 2022 Legislative Authority: Rules 101-103 of the Assessment Review Board’s Rules of Practice and Procedure

Parties	Counsel
City of Hamilton	John L. O’Kane
Stelco Inc.	Kathleen D. Poole and Lauren Lackie
Legacy Lands Hamilton Inc.	Mark R. Blidner
Municipal Property Assessment Corporation	Donald G. Mitchell

REQUEST FOR: A review of the Board’s Decision WR 176392 issued on May 17, 2022 HEARD: In writing ADJUDICATOR(S): Dirk VanderBent, Vice-Chair

AMENDED DECISION

AMENDED DECISION

In accordance with Rule 99 of the Assessment Review Board’s Rules of Practice and Procedure, effective April 1 2021, related to the correction of minor errors and in accordance with section 21.1 of the Statutory Powers and Procedure Act regarding the correction of errors, this Amended Decision is issued to correct submissions made by the Municipal Property Assessment Corporation at paragraph 72 and by the inclusion of a new paragraph 89. The amendments have been underlined for ease of reference. There are no other changes in this Amended Decision.

INTRODUCTION

Request for Review

1On June 14, 2022 the City of Hamilton (the “City”) filed a written Request for Review (“Review Proceeding”) with the Assessment Review Board (the “Board”) respecting Stelco Inc. v Municipal Property Assessment Corporation, Region 19, 2022 CanLII 42264 (ON ARB) issued May 17, 2022 (the “Decision”). The Decision was issued after a five-day hearing held from January 31, 2022 to February 4, 2022 (the “Hearing”).

Overview

2The Decision relates to appeals for the 2018 to 2022 taxation years filed by the City of Hamilton (the “Appeal Proceeding”) respecting 386 Wilcox Street (the “Subject Property”). The Subject Property is an 806.2 acres parcel of land, with 288.8 acres used for steel production; 70 acres for rail corridors and roads; and 447.4 acres of unused land.

3The only matter in dispute at the Hearing was the value of a 411.6 acres portion of the Subject Property, referred to as the “Residual Lands” in the Decision.

4At the Hearing, MPAC argued for a nominal value of $100 per acre, based on an expert opinion that the Residual Lands were unmarketable due to concerns that they were environmentally contaminated. Stelco supported MPAC’s position. The City argued that the correct current value of the Residual Lands should be $125,000 per acre.

5In the Decision, the Board accepted MPAC's evidence and found that the value of the Residual Lands was $100 per acre for a total of approximately $41,000.

6On June 2, 2022, just two weeks after the Decision was issued, Stelco sold the entire Subject Property for $518,000,000 (the “2022 Sale”). Negotiation of the purchase and sale agreement and other actions leading to the 2022 Sale occurred prior to the Hearing; however, no evidence relating to these actions was adduced at the Hearing.

7The City submits that the 2022 Sale is new evidence that was not available at the time of the Hearing. The City says this new evidence illustrates that MPAC's conclusion that the Residual Lands are unmarketable is “patently unreasonable”. The City submits that the Board would not have accepted MPAC's position on value had evidence of the 2022 Sale been adduced at the Hearing.

Background Regarding the Subject Property

8In order to understand the grounds raised in the City’s Request for Review, it is necessary to provide some detail regarding the ownership and sales history of the Subject Property, as well as MPAC's assessments of current value.

Property Ownership and Sales History

9In 2014, the Subject Property was owned by U.S. Steel Canada Inc. (“US Steel”). The company ran into financial difficulties, and an application for relief was made to the Ontario Superior Court under the Companies’ Creditors Arrangement Act, R.S.C. 1985, c. C-36 (the “CCAA”) (the “Creditors Arrangement Proceeding”). As part of this process, the Court appointed a Monitor whose duties included monitoring the business and reporting to the Court.

10On June 5, 2018, the Court approved a sale of the entire Subject Property to Stelco for $69,458,651.

11On June 1, 2022 - two weeks after the Decision was issued – the 2022 Sale occurred. Stelco sold the Subject Property to Slate HWD Inc. (“Slate”) for $518,000,000.

MPAC's assessments for 2017 to 2023

12Under the Assessment Act, S.O. 1990, c. A.31 (the “Act”), the valuation day for determining the current value of the Subject Property for the 2017 to 2023 taxation years is January 1, 2016 (“Valuation Day”). MPAC is required to conduct a general reassessment of all properties in Ontario as of this Valuation Day (“General Reassessment”). In its General Reassessment, MPAC valued the Subject Property using the cost approach valuation methodology, which required MPAC to value both improvements and the underlying land. MPAC assessed the entire 806.2 acres of land (including the Residual Lands) at $100,805 per acre. The total assessed value of both the land and the improvements was $86,449,000.

13In 2017, MPAC concluded there was an error in its assessment of the value of the Residual Lands. MPAC concluded that the Residual Lands are of nominal value only at $100 per acre. MPAC issued an assessment of the Subject Property for the 2018 taxation year showing a total assessed value of $44,994,000 which reflects the reduction in the assessed value of the Residual Lands (the “2018 Assessment”). As noted above, the 2018 Assessment is the assessment the City has appealed.

The Hearing and the Decision

14The Board heard evidence from January 31, 2022 to February 4, 2022, and reserved its decision. The Decision was issued in writing on May 17, 2022.

15In the Decision, the Board found that substantial weight should be placed on MPAC’s appraisal expert evidence, concluding that it “was the best evidence before the Board”: see Decision at paragraph 100. The Board found that the Residual Lands were unmarketable due to contamination or the likelihood of contamination, and accepted MPAC’s appraisal expert evidence that the current value of the Residual Lands is $100 per acre.

Relevant Rules

16In considering whether to grant a Request for Review submitted pursuant to Rule 101 of the Board’s Rules of Practice and Procedure (the “Rules”), the test to be applied is whether the requester has established any of the grounds set out in Rule 102:

Grounds for Review

102. A request for review will not be granted unless the Board is satisfied that:

a) the Board acted outside its jurisdiction or violated the rules of natural justice or procedural fairness;

b) the Board made a significant error of law or fact such that the Board would likely have reached a different decision;

c) the Board heard false or misleading evidence from a party or witness, which was discovered only after the hearing and would have affected the result; or

d) there is new evidence that could not have reasonably been obtained earlier and have affected the result.

17The Board’s powers when considering a request for review are set out in Rule 103:

Review Order

103. Upon considering a request for review, or on its own initiative, the Board may:

(a) dismiss the request; or

(b) after providing all parties an opportunity to make submissions:

i. confirm, vary, or cancel the decision; or

ii. order a rehearing on all or part of the matter.

Grounds for the City’s Request for Review

18The City argues that the Board: (i) acted outside its jurisdiction; (ii) made significant errors of fact and law such that the Board would likely have reached a different decision; and (iii) there is new evidence that could not have reasonably been obtained earlier which could have affected the result.

19The City requests that the Board vary the Decision to order that the current value of the Subject Property is $86,449,000 for 2018 to 2020 taxation years and $83,725,000 for the 2021 to 2022 taxation years, or, alternatively, order a re-hearing of the matter.

20The Board requested submissions from the other parties. Legacy Lands did not provide submissions. Stelco and MPAC provided response submissions, disputing the City’s position on all three grounds of review. They submit that the Board should deny the City’s requests.

ISSUES

21The specific issues raised in this Review Proceeding are:

1. Did MPAC did have jurisdiction under the Act to issue the 2018 Assessment?

2. Did the Hearing Panel make an error of law in accepting hearsay evidence respecting environmental contamination of the Residual Lands?

3. Is evidence that the 2022 Sale transaction closed on June 1, 2022 new evidence that could not have reasonably been obtained earlier? If so, could this new evidence have affected the result?

4. If the answer to any of questions 1 to 3 is yes, should the Board vary the Decision or order a rehearing of all or part of the matter?

RESULT

22The Board finds that:

1. MPAC did have jurisdiction under the Act to issue the 2018 Assessment.

2. The Hearing Panel did not make an error of law in considering the hearsay evidence respecting environmental contamination of the Residual Lands.

3. Evidence that the 2022 Sale transaction closed on June 1, 2022 is new evidence that could not have reasonably been obtained earlier and could have affected the result.

4. Based on the circumstances of this case, the Board orders a new hearing.

ANALYSIS

23The Board observes that the parties have provided extensive submissions on the issues raised in this Review Proceeding. While the Board has considered all submissions in detail, the Board has reported only the most salient submissions in this Review Decision.

24As part of its submissions, the City filed all of the expert reports adduced as evidence at the Hearing, and copies of the certified transcripts of oral evidence at the Hearing. However, in a request for review proceeding pursuant to Rule 101, the Board does not conduct a re-hearing of the issues. Therefore, in this Review Proceeding, the Board has reviewed the evidence as set out in the expert reports and the transcripts solely for the purpose of addressing the grounds for review listed above.

Issue 1: Did MPAC have jurisdiction under the Act to issue the 2018 Assessment?

Submissions

City’s Submissions

25The City submits that MPAC did not provide evidence of a defect, error, omission or misstatement in the General Reassessment that would permit MPAC to change the current value in the 2018 Assessment.

26The City further submits there is no evidence in the record that MPAC issued a notice of correction under s. 32, 33 or 34 as required by s. 35 of the Act. In support of this submission, the City refers to the Board’s decision in National Car Rental (Canada) Inc. v Municipal Property Assessment Corporation, Region 15, 2022 CanLII 53352 (ON ARB) (“National Car”) and decisions cited therein. More specifically, the City refers to s. 32(1.1) of the Act (which is discussed in the Board’s findings below).

MPAC's Submissions

27MPAC submits that a change in opinion can be corrected pursuant to s. 32(1) of the Act, and relies on paragraph 168 of National Car, which refers to two Board decisions that address MPAC's authority to assess under s. 32(1) of the Act.

Stelco’s Submissions

28Stelco submits that National Car has no relevance in this case, arguing that the City’s argument is contradictory. Stelco explains that, on one hand, the City is asserting that MPAC's appraisal expert was not permitted to consider new information in 2017, which changed his opinion of the current value assessment for 2018 taxation. On the other, the City argues that new information discovered after January 1, 2016 justifies an adjustment to the assessment.

29Stelco states that the 2022 Sale is exactly the type of new information that the City suggests that MPAC and the Board cannot consider in light of National Car. Stelco submits that the City is making fundamentally conflicting arguments that cannot be sensibly reconciled.

Findings on Issue 1

30It is not disputed that MPAC changed its opinion as to the current value of the Residual Lands for the 2018 Assessment. The issue is whether MPAC had the authority to do so under the Act. Pursuant to s. 45 of the Act, in an appeal proceeding, the Board has all the powers and functions of the assessment corporation. Therefore, if MPAC does not have the authority under the Act to make a correction under s. 32, neither does the Board.

31The submissions made by the parties require that the Board conduct a statutory interpretation of s. 32 of the Act, more specifically, a comparison between s. 32(1) and s. 32(1.1) which state:

Correction of errors, etc., in assessment roll

32 (1) Despite the delivery of any notice provided for under this Act, the assessment corporation at any time before the time fixed for the return of the assessment roll may correct any defect, error, omission or misstatement in any assessment and alter the roll accordingly.

Same, factual error only

(1.1) Despite the delivery of any notice provided for under this Act, for 2009 and subsequent taxation years, the assessment corporation may, at any time during the taxation year, correct any error in the assessment or classification of a property that has resulted from incorrect factual information about the property, and not from a change in opinion as to current value, . . . [Emphasis added.]

32It is also necessary to consider s. 36(1) of the Act which specifies the date for the time fixed for the return of the roll:

Time for annual assessment and return of roll

Assessment

36 (1) Except as provided in section 32, 33 or 34, assessments of land under this Act shall be made annually at any time between January 1 and the second Tuesday following December 1.

This is commonly referred to as ‘the return of the assessment roll’.

33While s. 36(1) does not state the year in which the assessment roll must be returned, it is self-evident that it must be the calendar year prior to the taxation year to which the assessment roll applies. This is because s. 31 of the Act requires that, if there is any change in the information reported on the assessment roll for a taxation year, a notice of assessment must be delivered to the property owner. The limitation period provisions for making a request for reconsideration under s. 39.1 of the Act requires that the request for reconsideration must be made by March 31 of the taxation year. Similarly, the limitation for filing an appeal under s. 40 of the Act requires that the appeal must also be delivered prior to March 31 of the taxation year being appealed (unless a request for reconsideration has been made). Consequently, the return of the assessment roll must be made prior to the commencement of the taxation year for which the roll is being returned. Therefore, the s. 36(1) reference to “January 1 and the first Tuesday in December” can only refer to the calendar year prior to the taxation year for which the assessment roll is returned.

34Accordingly, the combined effect of s. 31(1) and s. 36(1) is that MPAC may correct any “defect, error, omission or misstatement in assessment”, provided that the change is made “any time between January 1 and the second Tuesday following December 1” of the calendar year prior to the taxation year for which the assessment roll is being returned.

35Section 32(1.1) does allow MPAC to correct errors after the assessment roll is returned, for instance, at any time during the taxation year to which the taxation roll applies. However, MPAC's authority to make a correction after the return of the assessment roll is not as broad as its authority under s. 32(1). Under s. 32(1.1), MPAC is not permitted to make a change to the assessment roll that results from “a change in opinion as to current value”.

36Therefore, the question is whether, under s. 32(1), “any defect, error, omission or misstatement in any assessment” includes a “change in opinion as to current value”. The answer is that it must. The Legislature, in s. 32(1.1) specifically excluded consideration of “a change in opinion as to current value”. In s. 32(1), the Legislature has not done so. Clearly, had the Legislature intended that the term “defect”, as used in s. 32(1), would not include “a change in opinion as to current value”, the Legislature would have expressly said so. Furthermore, to hold otherwise would effectively make the authority to correct an error under s. 32(1) and s. 32(1.1) the same, rendering s. 32(1.1) redundant.

37Turning to the findings in National Car, the Board observes that the substantive finding of this decision is that a “change in opinion as to current value” must be based on a property’s characteristics as of the valuation day prescribed in s. 19.2 of the Act. In the Appeal Proceeding, MPAC’s 2018 assessment is not due to a change in the Subject Property’s characteristics which occurred after the January 1, 2016 Valuation Day. Instead, it was due to a change in opinion as to the current value of the Subject Property as of the prescribed Valuation Day.

38MPAC did not seek to correct the error for the 2017 taxation year, as s. 32(1) would only have allowed MPAC to correct an error for the 2017 taxation year if the correction was made by the second Tuesday of December of 2016. MPAC clearly did not make the correction as of this date. MPAC did make the correction prior to the second Tuesday in December of 2017, and, therefore, MPAC properly issued a notice of change in the assessment for the 2018 taxation year, pursuant to s. 31(1) of the Act, in the form of a Property Assessment Notice. For this reason, the Board does not accept the City’s premise that MPAC was required to issue a notice of its correction pursuant to s. 35 of the Act.

39For these reasons, the Board finds that MPAC had the legislative authority to correct its assessment for the 2018 taxation year, and it correctly issued the notice required under the Act. Consequently, the Board does not accept the City’s submission that MPAC did not have the jurisdiction to issue the 2018 Assessment.

40The Board notes that both MPAC and the City made submissions respecting s. 40 of the Act, but finds that it is unnecessary to address these submissions in light of the Board’s analysis and findings above.

Issue 2: Did the Hearing Panel make an error of law in accepting hearsay evidence respecting environmental contamination of the Residual Lands?

Submissions

The City’s Submissions

41The City acknowledges that the Statutory Powers Procedure Act, R.S.O. 1990, c, S.22 (the “SPPA”) expressly provides that the Board can accept hearsay evidence. However, the City relies on jurisprudence from the Supreme Court of Canada regarding hearsay evidence and submits that this jurisprudence indicates that where an expert witness relies on hearsay evidence as a basis for the expert’s opinion, the hearsay must be independently proven at the hearing before the Board can attach any weight to the evidence. More specifically, the City submits that, where an expert witness’ opinion is informed by hearsay evidence, a responding party must have the opportunity to challenge the hearsay evidence through cross-examination. The City further submits that, where an expert can develop an opinion based on hearsay that is not independently proven, the Board abdicates its gatekeeping function that would otherwise keep “junk science” out of the evidentiary record. In support of this submission, the City relies on R. v. Abbey, 1982 CanLII 25 (SCC), [1982] 2 SCR 24 (“Abbey”), at p. 40; and R. v. Lavallee, 1990 CanLII 95 (SCC), [1990] 1 SCR 852 at p. 892 (“Lavallee”).

42The City states that MPAC’s appraisal expert admitted that, in developing his opinion of value, he relied on the second or third hand hearsay information of:

1. a representative of the Office of the Premier of Ontario;

2. Stelco’s representatives as to the nature and extent of areas of alleged contamination, without any independent investigation or due diligence confirmation;

3. Legacy Lands’ representatives about the Creditors Arrangement Proceeding and the “market”, without any independent investigation or due diligence confirmation;

4. the Court Monitor in the Creditors Arrangement Proceeding respecting this proceeding and the “market”, without any independent investigation or due diligence confirmation.

43The City also submits that Stelco’s expert provided opinion evidence that rested entirely on hearsay.

44The City refers to the Board’s findings at paragraphs 91 and 92:

91It is significant that no witnesses were called by the City to respond to the factual and, at times, hearsay evidence of Mr. Stadig [MPAC’s appraisal expert], Mr. Uba [Stelco’s expert] or Mr. Bender [Stelco’s expert]. The concern in City of Saint John v. Irving Oil Co. Ltd. (1966), 1966 CanLII 64 (SCC), 58 D.L.R. (2d) 404 (S.C.C.) at 414 [“Irving Oil”] cited by MPAC on the Board’s authority to consider hearsay evidence and weight was that a hearing “would take on an endless character as each of the appraiser’s informants whose views had contributed to the ultimate formation of his opinion would have to be individually called.”

92That might have been a concern had numerous witnesses been summoned to testify on these points. However, not a single witness was called by the City to rebut any of this testimony, where summonses could have been requested pursuant to Rule 51 of the Board’s Rules of Practice and Procedure. That left the Board with the uncontested evidence of Mr. Stadig and Mr. Uba on this point which the Board accepts as the best evidence before it.

The City submits that Irving Oil is a much older decision and must be read through the lens of the Supreme Court’s more recent decisions cited by the City. The City submits that, as provided in s. 40(17) of the Act, the burden of proof rests with MPAC, and that MPAC also has the evidentiary onus to prove the opinion proffered by its expert. The City submits that the Board’s finding in paragraph 92, namely, that it is incumbent on the City to lead evidence to disprove hearsay evidence, is a legal error as MPAC has the evidentiary onus of proof.

MPAC’s Submissions

45MPAC relies on s. 15 of the SPPA and submits that the Hearing Panel carefully considered and rejected the City’s arguments on the hearsay issue. MPAC argues that a request for review is not an opportunity to reargue a case or make up deficiencies in evidence or arguments presented at the Hearing.

Stelco’s Submissions

46Stelco’s submissions overlap MPAC’s submissions. In addition, Stelco submits that the weight given to an expert opinion informed by hearsay depends on the nature of its source and its reliability and, for this reason, the Board must be careful to look for the hallmarks of unreliable evidence: citing both Irving Oil and General Motors of Canada Limited v Municipal Property Assessment Corporation, Region No. 27, 2017 CanLII 3664 (ON ARB). Stelco argues that the City has never argued that the hearsay evidence relied upon by MPAC’s and Stelco’s experts was unreliable or lacked credibility. Stelco submits, therefore, that the Board was entitled to find this evidence to be credible, particularly when undisturbed by any evidence to the contrary.

47Stelco maintains that both experts conducted thorough investigations and analysis of information to inform their opinions. Stelco argues that, while the City’s expert may not have relied materially on hearsay, this reflects the fact that, unlike MPAC’s appraisal expert and Stelco’s expert, he did virtually no investigation into the Subject Property, its history, or characteristics, or any of his comparable sales.

48Regarding the Board’s observation that the City could have summoned the sources of hearsay evidence relied upon by MPAC and Stelco’s experts, Stelco submits that this has nothing to do with MPAC’s onus as the City has claimed. Stelco maintains that, as the City took the position that the hearsay evidence was unreliable, the Board simply noted that the City should have challenged the hearsay evidence and did not.

Findings on Issue 2

49The Board begins its analysis by focusing on the reference in the City’s submission on hearsay that is material to the issues on appeal. The City’s submissions appear to focus on whether MPAC and Stelco have established that the Subject Property is, in fact, environmentally contaminated; however, the Board finds that this is not the material consideration. Neither party disputed that there is no evidence of actual environmental contamination on the Subject Property.

50Stelco’s appraisal expert’s evidence was that it would be reasonable for a prudent and knowledgeable potential buyer to consider the unknown risk of acquiring the Subject Property as the nature and extent of contamination is unknown. This is the material consideration. Therefore, when deciding whether to admit hearsay evidence, the Board must consider its relevance and reliability as it relates to whether a potential buyer would consider the unknown risk that the Subject Property may be contaminated.

51In making this finding, the Board has considered that the City’s expert provided a response report dated March 18, 2020 in which he challenged Stelco’s appraisal expert’s findings. He cites an article that “implicitly states that the presence of contamination does not necessarily mean that an unacceptable risk is present, nor that remediation is required for a contaminated property.” The Board does not consider that their respective opinions are contradictory. The Board does not read his evidence as indicating that there is an unacceptable risk of environmental contamination or that remediation is necessarily required. He simply states that a prudent purchaser would consider the unknown risk of environmental contamination.

52Regarding the City’s reliance on the decisions of the Supreme Court of Canada in Abbey and Lavallee, the Board first observes that both decisions were made in the context of criminal law proceedings. The burden of proof in a criminal proceeding (beyond a reasonable doubt) is much higher than the burden of proof in civil proceedings (balance of probabilities). Furthermore, the Court in these proceedings did not have authorization to admit hearsay evidence granted by s. 15 of the SPPA, which states:

Evidence

What is admissible in evidence at a hearing

15 (1) Subject to subsections (2) and (3), a tribunal may admit as evidence at a hearing, whether or not given or proven under oath or affirmation or admissible as evidence in a court,

(a) any oral testimony; and

(b) any document or other thing,

relevant to the subject-matter of the proceeding and may act on such evidence, but the tribunal may exclude anything unduly repetitious.

[Emphasis added.]

For these reasons, the Board does not accept the City’s submission that hearsay evidence that is material to the issues on appeal must necessarily be independently proven at the hearing before the Board can attach any weight to it.

53However, it is not disputed that the Board must, nonetheless, identify whether evidence is hearsay, and, in exercising its discretion whether to admit the evidence, consider whether the evidence is sufficiently reliable to be admitted as evidence, and, if so, the weight to be given to it.

54Turning to the specifics of this case, the question is whether the hearsay evidence is sufficiently reliable as a basis to say that a willing buyer would consider the risk of environmental contamination in a sale transaction. For the following reasons, the Board concludes that it is:

1. Page 39 of Stelco’s appraisal expert’s report documents information obtained from written reports prepared in the course of the Creditors Arrangement Proceeding by experienced individuals. These reports document concerns regarding the risk of contamination, including reference to investigations of specific areas of known contamination adjacent to the Subject Property. Stelco’s appraisal expert also reports that soil and groundwater conditions have not been fully characterized. The Board observes that there is nothing in the evidence adduced to suggest that this reported hearsay evidence is inaccurately or inadequately described.

2. The City chose to retain an expert who is a property appraisal expert with special expertise in real estate damage economics and valuation. If the City’s position was that there is no environmental contamination, or, alternatively, no reasonable apprehension of environmental contamination, then it would have been unnecessary for the City to call an appraisal expert whose appraisal opinion is, in part, based on consideration of sales of environmentally contaminated properties.

55Based on the above analysis and findings, the Board finds that the Hearing Panel did not make an error of law in admitting the hearsay evidence regarding the risk of environmental contamination of the Subject Property.

Issue 3: Is evidence that the 2022 Sale transaction closed on June 1, 2022 new evidence that could not have reasonably been obtained earlier? If so, could this new evidence have affected the result?

Evidence provided in this Review Proceeding

City’s evidence

56The City provided opinion evidence from its appraisal expert, as follows:

1. The 2022 Sale strongly suggests that the Subject Property and the Residual Lands were never unmarketable between January 1, 2016 and June 1, 2022.

2. In a retrospective appraisal, an appraiser must approach market evidence from after the valuation with caution. However, to ignore market evidence of a sale of the Subject Property, even market evidence from six years after the valuation date, would be a mistake. Had the City’s expert concluded that the Residual Lands were unmarketable, the 2022 Sale would have caused him to revise this conclusion.

3. Had the evidence of the 2022 Sale been available at the Hearing, this evidence could not have been ignored by MPAC’s appraisal expert and would have informed a view that the Residual Lands have a substantial value, not a nominal value.

57The City’s expert applied a time-adjustment factor to the 2022 Sale price to arrive at a per acre value of $300,000. However, he did not provide a detailed description of his calculations, nor did he indicate the assumptions he made in arriving at this value, other than the time-adjustment factor.

Stelco’s Evidence

58In this Review Proceeding, Stelco provided the following evidence respecting the 2022 Sale:

1. Stelco’s acquisition of the Subject Property provided Stelco with the flexibility to utilize this property for its existing operations and to further develop excess lands.

2. As early as 2018, Stelco publicly indicated the possibility of further development of the excess Residual Lands.

3. In 2019, Stelco submitted an application to the City to sever the Subject Property into 7 parcels of land. However, this severance application was not approved.

4. On January 14, 2021, Stelco executives engaged in a conference call with then City Mayor Eisenberger advising him of a revised severance approach and the fact that Stelco was proposing to sell the Subject Property to a third party and lease back its operating lands.

5. On March 19, 2021, Stelco entered into a Purchase and Sale Agreement with Slate. This was twice amended, and restated on July 31, 2021 and September 30, 2021.

6. On April 9, 2021, Stelco and Slate conducted a conference call with Mayor Eisenberger introducing him to Slate’s Chief Executive Officer and other members of the Slate team.

7. On July 7, 2021, a subsequent meeting was held between Stelco, Slate, the Mayor, and other City staff.

8. On July 27, August 11, October 27, and November 3, 2021, Slate, Slate’s planning consultants, Stelco, and City staff met to discuss severing and servicing the site in connection with the Stelco-Slate sale transaction.

9. On November 25, 2021, Stelco submitted a second severance application to the City, which was approved by the City’s Committee of Adjustments.

59Stelco’s evidence included a copy of the public Severance Hearing Notice dated November 9, 2021 which stated:

Subject to consent being obtained, it is intended that the Severed Parcel will be transferred to new ownership and that a long-term lease will be entered into with Stelco for Stelco’s cold steel rolling plant. The consent to the conveyance and long-term lease of the Severed Lands will facilitate appropriate financial and risk management measures required by the nature of Stelco’s steel manufacturing operations.

60As noted above, Stelco successfully completed the sale of the Subject Property to Slate on June 1, 2022 for $518,000,000. Stelco did not provide the Board with evidence of the terms of the Purchase and Sale Agreement. Stelco provided evidence that it invested several years and considerable resources to be able to execute this sale, and that a significant portion of the value associated with the 2022 Sale is due to Stelco leasing back lands that are now owned by Slate. Stelco provided evidence that the Subject Property would not have transacted at this price had it not been for Stelco being considered as a stable and viable long-term tenant capable of paying rent over the long-term.

MPAC’s Evidence

61MPAC did not provide evidence in this Review Proceeding.

Submissions

City’s Submissions

62The City relies on the opinion evidence of its appraisal expert filed in this Review Proceeding.

63The City maintains that there was no evidence at the Hearing, or in Stelco’s evidence filed in this Review Proceeding, to suggest that the City:

1. was a party to the 2022 Sale;

2. had any means to know of the June 1, 2022, closing date; or

3. had any means to know the approximately $518,000,000 sale price.

64The City submits that: (i) the evidence of the 2022 Sale could have impacted the expert opinions; and (ii) the evidence before the Hearing Panel would have been different and it may have weighed the expert evidence differently, “through the lens of the recent $518 million sale of the Subject Property”.

65The City argues that, because there were no comparable property sales involving parcels of the nature and size of the Subject Property, the time period within which to consider similar sales, or sales of the Subject Property, expands.

66The City asserts that the evidence Stelco filed in this Review Proceeding does not assert that any environmental cleanup has occurred at the Subject Property, nor does it explain how land use processes mitigate market perceptions regarding environmental contamination. The City argues that the 2022 Sale cannot be reconciled with the conclusion that the Subject Property is not marketable.

Stelco's Submissions

67Stelco submits that the City’s evidence shows it was aware that the 2022 Sale was pending before the Hearing began on January 31, 2022. Stelco maintains that, while the exact closing date and sale price may not have been known before the Hearing, the fact that the Subject Property would likely be sold for development was in the City’s knowledge well before January 31, 2022.

68Stelco emphasizes that the City has adduced no evidence relating to Stelco’s development plans or severance application efforts.

69Stelco further emphasizes that the City did not bring the pending transaction or the obtained severances to the attention of the Board, nor did it introduce any related evidence at the hearing, which, Stelco submits, the City absolutely could have done if it considered the 2022 Sale to be relevant.

70Stelco submits that the 2022 Sale does not undermine MPAC's appraisal expert’s opinion on the value of the Residual Lands for several reasons: (i) there has been a significant improvement in the market for steel and stability of Stelco’s operations between January 1, 2016 and the timing of the 2022 Sale; and (ii) the value of the Subject Property was extremely limited without the land severances.

71Stelco submits that the 2022 Sale should not be considered by the Board because:

1. It is a complex transaction of both the operating steel mill and development lands, whereas the only issue before the Board was the sale of the Residual Lands.

2. It is too far removed from the January 1, 2016 valuation day. While Stelco acknowledges that the Board has found that a recent open market sale of a property is the best means of establishing the market value of that property, the 2022 Sale is not recent as it has occurred six years after the valuation day.

3. The fact that the 2022 Sale was possible, and its sale price, reflect numerous circumstances that did not exist at the base date.

4. There was evidence of other property sales adduced at the Hearing.

MPAC's Submissions

72MPAC also submits that the 2022 Sale is too far removed from the statutory valuation day to be relevant evidence of the current value of the Subject Property. MPAC further submits that in National Car, the Board held that changes in the market occurring after the valuation day are not relevant to the determination of current value on the valuation day.

Findings on Issue 3

The legal test to be applied

73As noted above, Rule 104(d) requires that the evidence:

1. be new;

2. could not have been reasonably obtained earlier; and

3. could have affected the result.

The Board will address each of these requirements in turn.

Is there new evidence?

74This requirement is straightforward. New evidence is evidence that was not adduced at the hearing. It is not disputed that evidence that the 2022 Sale closed on June 1, 2022 for a sale price of $518,000,000 was not adduced at the hearing. Therefore, this is new evidence.

Could the new evidence have been reasonably obtained earlier?

75The City, having been made aware that Stelco had entered negotiations with Slate for purchase of the Subject Property, could reasonably have obtained the Agreement of Purchase and Sale (and amendments thereto) through a request for disclosure in the Appeal Proceeding.

76However, the fact remains that the evidence that the 2022 Sale would actually be completed on the June 1, 2022 closing day, could not have been obtained prior to the Hearing, because the sale closed after the Hearing. For this reason, the Board accepts that this is new evidence that could not have reasonably been obtained earlier.

77In arriving at this conclusion, the Board has considered Stelco’s submission that, prior to the Hearing, the City was aware that the Subject Property would likely sell. However, this does not change the fact that the closing of the 2022 Sale, i.e. whether or not the sale transaction would be completed, is new evidence that the City could not reasonably have obtained prior to the actual closing on June 1, 2022. At most, the evidence establishes that the City knew that Stelco was in negotiations, and the general nature of the structure of the proposed transaction including the lease back and land severance. However, Stelco has not provided the Board with evidence respecting the terms of the Agreement of Purchase and Sale. It is not disputed that the City was not a party to the sale transaction. Therefore, the Board cannot infer that the Agreement of Purchase and Sale would have led the City to conclude that the 2022 Sale would close on June 1, 2022 for $518,000,000.

78In summary, while the City could reasonably have obtained some evidence respecting the proposed 2022 Sale, the City could not have reasonably obtained evidence that the 2022 Sale in fact closed on June 1, 2022.

Could the new evidence have affected the result?

79Rule 104(d) does not require that the new evidence would have affected the result, but that it could have affected the result. Accordingly, the City is not required to establish that the new evidence will, with certainty, affect the result. Each case must be determined on its own merits. In making its determination, the Board must consider the specific issues to which the new evidence applies, and the degree of relevance and apparent probative weight of the new evidence in relation to these issues.

80It is not disputed that the issue here is MPAC's appraisal expert’s reasons for determining that the Residual Lands are of nominal value as of January 1, 2016. His expert report included the following evidence:

1. The value of the Residual Lands is the result of his conclusion that these lands are “nonmarketable” due to the presence of contamination: page 4.

2. While the contamination did not occur after his general reassessment of the Subject Property for January 1, 2016, what did change was MPAC's greater understanding of how strongly the market reacted to the presence of contamination: page 4.

3. Of the 447.4 acres of unused lands at the Subject Property, only 35.8 acres could be sold without difficulty. The remaining 411.6 acres (the Residual Lands) require rehabilitation or remediation before being marketable: page 8.

4. Much of the Residual Lands are developed by obsolete buildings that have ceased to improve the land. He concludes that, although the exact cost is unknown, demolishing and removing these buildings will be a significant expense: page 12.

5. There were no satisfactory offers to purchase the Subject Property. To obtain this information, MPAC’s appraisal expert spoke with the then-current owner Legacy Lands, the former owner Stelco, the Monitor in the Creditors Arrangement Proceeding, the City of Hamilton, and the Hamilton Port Authority which submitted a total bid of $100 for the entire Subject Property: page 12.

6. He concluded as follows at page 14:

The conclusion reached after engaging in discussions with Ernst & Young and HPA was that the land is not marketable in its current state. The risk associated with the contamination has prevented all potential purchasers from making an offer to buy the subject property. With this in mind, it has been concluded that the nonmarketable 411.6 acres of land have only a nominal value of $100 per acre.

81In cross-examination, MPAC’s appraisal expert testified that:

1. MPAC’s appraisal expert’s conversations with the Monitor in the Creditors Arrangement Proceeding, the occupant of the property, an Ontario Government representative, and the Hamilton Port Authority led him to believe that there was no willing buyer in the marketplace.

2. He was advised that the intention was to raze many of steelmaking buildings on the Residual Lands as they would be difficult to repurpose, and that these demolitions would be ‘revenue neutral’ as selling the scrap steel might off-set the cost to demolish. He agreed that, other than an uncertainty associated with disturbing the earth beneath the buildings, demolition costs did not factor significantly into his conclusion that the value of the Residual Lands acreage should be $100 per acre. He confirmed his evidence-in-chief that the cost of removing the slag piles situated on the Residual Lands was relatively minor.

3. When applying the Cost Approach, the acreage is valued using the market sale comparison approach. When the City posited that he did not do the market sale comparison process in arriving at his conclusion as to the value of the acreage, he stated “I wasn’t able to.” He did not address why he was he was unable to do so.

4. When considering whether to make an offer to buy or sell, there are a host of considerations that market participants will consider, including: (i) the land isn’t suited to the buyer’s uses (ii) the financing terms aren’t appropriate; (iii) its proximity to transport isn’t satisfactory; and (iv) there might be contamination.

5. It was his understanding that were no prospective purchasers of the Subject Property. When the City posited that, although there were no meaningful offers, there were offers made, MPAC’s appraisal expert responded that he did not know, but it was possible that there were some offers made.

6. Although the Monitor and Legacy Lands reported to him that none of the potential participants were interested in acquiring the entire Subject Property because they were repelled by the contamination, it was possible there may be other factors that influenced their decisions, separate and apart from contamination.

7. To investigate the perceptions of market participants, it is preferred to obtain this information directly from them. However, if an appraiser sees enough instances of negative reactions from market participants, this is compelling, although they may all have a different reason for being disinterested. More specifically, at page 171 of the transcript of his cross-examination, MPAC’s appraisal expert stated:

To have an appreciation for the specific reason somebody was disinterested, you would need to ask them why they were disinterested. However, by way of extensive marketing, if the result is that no one was interested, I’m satisfied in my conclusion that regardless of the reason, it wasn’t marketable.

8. When asked why he concluded that the Residual Lands acreage was only $100 per acre, MPAC’s appraisal expert stated that no market participant has found any use for this acreage that was financially feasible because the market perceived a contamination stigma.

82In summary, the thrust of MPAC's appraisal expert’s evidence is that there was no market for the Residual Lands because of concerns of environment contamination. Therefore, in this Review Proceeding, the Board must examine whether the new evidence of the closing of the 2022 Sale could have affected the Hearing Panel’s acceptance of MPAC's appraisal expert’s evidence. For the following reasons, the Board concludes that it could.

83The evidence indicates that there was no environmental remediation of the Residual Lands prior to the closing of the 2022 Sale. Apart from some minor changes such as the removal of a slag heap, the Residual Lands were in the same physical condition upon the closing of the 2022 Sale as they were at the time MPAC's appraisal expert assessed the value of these lands.

84MPAC's appraisal expert, in asserting that there was no market for the Residual Lands, is, in effect, saying that there would be no willing buyer for these lands. Had the evidence respecting the sale negotiation between Stelco and Slate been before the Hearing Panel, the issue of whether the sale transaction would close clearly could have been a relevant consideration. If the sale transaction closed, the Hearing Panel could have accepted that this evidence indicates there was a market for the Residual Lands. As such, the Hearing Panel could have rejected MPAC's appraisal expert’s opinion that the value of the Residual Lands is nominal.

85Conversely, if the 2022 Sale did not close, this failed effort to sell the Residual Lands is evidence that could have supported MPAC's appraisal expert’s opinion that there was no market for the Residual Lands.

86Either way, the evidence of whether the 2022 Sale closed clearly could have been considered by the Hearing Panel and could have affected the result.

87In arriving at this conclusion, the Board has considered Stelco’s submission that the 2022 Sale transaction is too far removed from the January 1, 2016 Valuation Day to be considered relevant. In support of this submission, Stelco emphasizes that there have been post-valuation day changes, these being the approved land severance in 2021 and an economic up-turn in the steel industry.

88The Board observes that the evidence adduced at the Hearing, which includes MPAC guidelines, confirms that steel manufacturing facilities are special purpose properties which are seldom sold on the open market. For this reason, the Cost Approach appraisal method is used to value these facilities, as opposed to using a Comparable Sales Analysis approach. However, as MPAC's appraisal expert has based his opinion of value on the ground that there was no market for the Residual Lands, this logically raises the question of whether there have been market sales of steel manufacturing facilities. Therefore, in this case, market sales of steel manufacturing facilities could be relevant evidence. Given the dearth of market sales evidence for steel manufacturing facilities, a hearing panel could decide that it is relevant to consider the 2022 Sale, notwithstanding that it post-dates the applicable valuation day, particularly so, as it is a sale of the Subject Property. It is also important to note that the relevant issue under consideration in this Review Proceeding is whether the Residual Lands are marketable, i.e. have any value, not what the quantum of the value would be if they are marketable.

89MPAC has submitted that, in National Car, the Hearing Member held that changes in the market occurring after the applicable valuation day are not relevant. The Board does not accept this submission. In National Car, the primary issue addressed by the Hearing Member, was the correct valuation day to be applied when determining current value for the 2020 taxation year. However, this decision confirms that evidence regarding a property, which post-dates the applicable valuation day, can be considered, if it is found to be relevant to the determination of the current value of the property on the valuation day. At paragraph 231, the Hearing Member expressly considered the relevance of the post-valuation day changes presented by the property owner. The Hearing Member concluded that that these changes did not indicate that the previously agreed current value as of the January 1,2016 valuation day was incorrect. In support of his conclusion, the Hearing Member observed that the property owner had not argued that they did.

90The Board further observes that, in this Review Proceeding, the Board is not required to make a final determination regarding the relevancy of the new evidence, or its weight. That must be determined in a hearing on the merits. The only question before the Board is whether this new evidence could have affected the result. Based on the above analysis, the Board finds that the Hearing Panel could have accepted that the closing of the 2022 Sale is relevant in determining whether there was any market for the Residual Lands.

Conclusion

91Based on the above analysis and findings, the Board finds that the evidence of the closing of the 2022 Sale transaction on June 1, 2022 is new evidence that could not have reasonably been obtained earlier and could have affected the result.

Issue 4: Should the Board vary the Decision or order a rehearing of all or part of the matter?

92The Board has found that there is new evidence that could have affected the result. This will require that each party’s appraisal expert consider the new evidence, and potentially revise or update their analyses. This, in turn, will require that a Hearing Panel revisit all the appraisal opinion evidence. Furthermore, the new evidence relates to a fundamental question to be adjudicated by a hearing panel in determining the current value of the Subject Property. Taking these factors into consideration, the Board concludes that a rehearing of the entire matter is required.

ORDER

93The Board orders a rehearing of the whole Appeal Proceeding, to be conducted by a different hearing panel.