COURT FILE NO. D-06-005
ONTARIO SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
J. Wright, Platana, Pierce, JJ.
B E T W E E N:
THUNDER BAY SEAWAY NON-PROFIT APARTMENTS
Applicant (Respondent on Appeal)
Chantelle Bryson, for Thunder Bay Seaway Non-Profit Apartments
- and -
MUNICIPAL PROPERTY ASSESSMENT CORPORATION
Respondent (Appellant)
Karey Lunau for Municipal Property Assessment Corporation
THE CORPORATION OF THE CITY OF THUNDER BAY
Respondent
No-one appearing for the Corporation of the City of Thunder Bay
HEARD: December 4, 2006
Reasons for Judgment on Appeal
from the decision of Zelinski, J.
Introduction
1The Municipal Property Assessment Corporation appeals the declaration of Mr. Justice R.E. Zelinski, dated March 3, 2006, that Thunder Bay Seaway Non-Profit Apartments, located at 415 Kingsway Street in Thunder Bay are exempt from municipal taxation, as provided in s. 3(1)-11 of the Assessment Act.
2The appellant concedes that Seaway, the owner of the property, is a non-profit philanthropic corporation. The appeal turns on whether the property is a "house of refuge" or land used for a similar purpose, as specified in the exemptions from municipal taxation found at s. 3(1)-11 of the Act.
3Section 3(1)-11 of the Assessment Act provides:
"All real property in Ontario is liable to assessment and taxation, subject to the following exemptions from taxation: ….
- Land owned, used and occupied by a non-profit philanthropic corporation for the purpose of a house of refuge, the reformation of offenders, the care of children or a similar purpose but excluding land used for the purpose of a day care centre."
The Appellant framed this appeal as having two questions:
Did the learned trial judge err in finding that Seaway's property was used as a "house of refuge" or for a similar purpose? In particular did he err in his application of the "primary purpose" test and the definition of a "house of refuge" set out by the court in Re Buenavista on the Rideau and Regional Assessment Commissioner, Region No. 2 et al. (1996) 1996 11792 (ON SC), 28 O.R. (3d) 272 (Gen. Div., Divisional Court), p. 276; Leave to appeal refused at [1996] O.J. No. 2632 (Ont. C.A.) and Teen Challenge Farm Inc. v. Regional Assessment Commissioner Region No. 23 [1995] O.J. No. 992 (Gen. Div.); Leave to appeal refused at [1996] O.J. No. 1074 (Ont. C.A.)?
Did the learned trial judge err in his interpretation of the exempting provision by granting an exemption from municipal taxation on the basis that Seaway is supported by the Provincial government and therefore has a meaningful social purpose?
Facts
4With one minor exception not determinative of the issue, the factual findings of the application judge are not disputed. The application judge noted that Seaway's objects are detailed in its Supplementary Letters Patent as follows:
"To provide housing accommodation to recovering alcoholics of lower or modest income and drug dependency individuals of low or modest income who are endeavouring to establish themselves in the community."
5The apartment complex is run by a volunteer board of directors and financed by the Ministry of Health and Long-Term Care under a long term funding agreement designed for social housing programs. Seaway's funding arrangements include provision for payment of municipal taxes by the funding ministry if required. The executive director's salary is funded by the Ontario Substance Abuse Bureau. Apart from the executive director, a janitor is the only other staff member. Neither lives on-site.
6Seaway consists of a complex of 15 apartments, an office, and a common kitchen/lounge in addition to simple outdoor amenities. It constitutes secondary housing for adults who have been detoxified. Rental of the units is geared to income. The apartment units are self-contained and fully furnished. Residence however is under licence, not lease. A resident may be expelled without recourse to the Residential Tenancies Act. Residence is time limited although, with extensions, residence for up to two years is possible.
7Only persons with incomes of $18,000 or less are accepted, which includes individuals in receipt of welfare benefits. There are no special security measures for the building beyond the controlled access arrangements commonly found in modern apartment buildings. Guests are buzzed in the front door by the residents. There is no record kept of their visits.
8The residents are not supervised, and are permitted to have visitors to their apartments, including overnight. They are also permitted to be away from their residence. The objective of Seaway is to provide a supportive transitional environment for its recovering clients, so that they may become stabilized, live independently, and return to society in a sober or drug-free state. Most residents stay a year, although extensions to two years can be granted.
9Seaway does not offer mandatory, on-site programs, although community agencies may conduct rehabilitation meetings at the facility a few times a year. The principal requirement of residents is that they remain drug and alcohol-free. This expectation is enforced by random drug testing at the discretion of the executive director. If a resident offends this rule, he will be summarily evicted. In this respect, Seaway is different than standard or subsidized housing.
10The executive director meets with residents for individual counselling sessions every 2 – 3 months to monitor progress toward individual goals and basic life skills. There is no group counselling. Intensive counselling is done by other agencies off-site. Seaway does not offer any educational programming for its clients and does not compel attendance if residents are pursuing their education in the community.
11The executive director is available on a round-the-clock basis if necessary, and provides referral service and guidance as required. The residents make use of the common kitchen/lounge area for mutual support.
The Taxing Statute
12The starting point in the Assessment Act is that all land is assessed and taxed. From this tax base, a municipality funds its services. Exemptions from taxation are written into the Act. How should the court construe these exemptions?
13The application judge relied on the Supreme Court of Canada which set out the following general principles for interpretation of tax legislation in Quebec (Communaute Urbaine) v. Corp. Notre-Dame de Bon-Secours 1994 58 (SCC), [1994] 3 S.C.R. 3, at p. 20:
Tax legislation should be interpreted in the same manner as other legislation;
The court should determine the context and legislative purpose underlying the statute, and interpret the legislation – whether strictly or liberally – in light of the legislative intent. This is sometimes referred to as the teleological approach.
Whether the court's interpretation favours the tax payer or the tax department will depend on the court's determination of the legislative intent, and is not based on presumptions.
The court should prefer substance to form if it is consistent with the wording and objective of the statute.
The residual presumption in favour of the taxpayer should only apply if the ordinary rules of interpretation do not resolve the issue based on a reasonable doubt.
14In Quebec, the Supreme Court acknowledged that a taxation statute may be an instrument of economic and social policy. Thus, the general policy of raising revenue may be subject to a secondary policy of exempting social works from taxation. See: Quebec, p. 18.
15The practical ramifications of tax exempt status were acknowledged by the Ontario Court of Appeal in Diocese of Toronto Camps (Anglican Church of Canada) v. Municipal Property Assessment Corp. 2004 34918 (ON CA), [2004] O.J. No. 4443 at par. 16. The court cited its own decision in Ottawa Salus Corporation. v. Municipal Property Assessment Corporation 2004 14620 (ON CA), [2004] O.J. No.213 to this effect:
"Exemption from property tax allows these organizations to spend more of their limited resources on those activities. The clear implication of these exemptions is that while there is a substantial public interest in the generation of revenue through the taxation of real property, in the context of the real property covered by these exemptions, that public interest is outweighed by the public interest in giving relief from property taxation to certain organizations."
16The question remains: is Seaway one of these organizations?
What is a "House of Refuge"?
17The application judge rejected MPAC's argument that "protection" must be the primary purpose of those corporations entitled to the exemption. MPAC submitted that protection was a necessary element in defining a house of refuge. It contended that protection could be achieved by a remote location, bars on the windows, bricks and mortar, security systems, restrictions "in and out" of the facility, and the like. In this case, MPAC argued that Seaway provided little more than independent housing facilities whose primary purpose is the rehabilitation of its residents.
18In order to qualify for an exemption, Seaway must establish that its primary or foremost purpose is the operation of a "house of refuge." On this appeal, counsel for MPAC agreed that the application judge applied the correct test as set out in Buenavista; however, she submitted that he did not correctly apply the facts to that test.
19The application judge summarized the test as follows:
"The test for determining whether an exemption should be granted is whether the primary purpose of the institution comes within the words defining the exemption in the Assessment Act. This is true with respect to s. 3 of the Assessment Act generally…. It is also true with respect to the interpretation of the specific exemptions set out in s. 3, para. 11 of the Assessment Act…"
20The majority of the Divisional Court in Buenavista adopted the dictionary definition of "refuge" as follows: "shelter from danger or trouble; protection, aid; a place of safety or security; a shelter, a stronghold." The court added that"The residents are removed from their homes, jobs, friends and recreations and placed in a closed environment where they can be sheltered and rehabilitated."
21Mr. Justice Rutherford, dissenting in Buenavista, characterized a refuge as "…a place in which one finds shelter or protection from something or someone."
22This expanded definition of "refuge" was also adopted in Teen Challenge Farm. In other words, a person can seek refuge from an external threat, such as an abusive partner, or from an internal threat, such as alcoholism.
Discussion
23Since an appeal is not a re-trial of a case, consideration must be given to the standard of review applicable to questions that arise on appeal. The standard of review on pure questions of law is one of correctness, and an appellate court is thus free to replace the opinion of the trial judge with its own. Appellate courts require a broad scope of review with respect to matters of law because their primary role is to delineate and refine legal rules and ensure their universal application. The standard of review for findings of fact is such that they cannot be reversed unless the trial judge has made a "palpable and overriding error". Questions of mixed fact and law involve the application of a legal standard to a set of facts: Housen v. Nikolaisen, 2002 SCC 33, [2002] 2 S.C.R 235. At paragraph 37 the court noted:
"… it is settled law that the determination of whether or not the standard of care was met by the defendant [in the Seaway case, the issue being whether or not the premises were exempt from taxation] involves the application of a legal standard to a set of facts, a question of mixed fact and law. This question is subject to a standard of palpable and overriding error unless it is clear that the trial judge made some extricable error in principle with respect to the characterization of the standard or its application, in which case the error may amount to an error of law."
24The issue before Zelinski J. was a factual one: Was this particular property a house of refuge in fact?
25"House of refuge" is a good Victorian expression describing a good Victorian institution. Historically it was a sanctuary, not from people, but from the storms and perils of life. Disabled soldiers and sailors, orphans and the aged were the typical inmates of such houses. The key is not so much the services provided as the protection afforded.
26The peril the Seaway inmates face is recidivism into addiction. This institution is a non-profit philanthropic corporation whose object is to:
"(a) to provide housing accommodation to recovering alcoholics of lower or modest income and drug dependency individuals of low or modest income who are endeavouring to establish themselves in the community" and
"(b) to support their efforts by providing guidance in their obtaining and managing the necessary financial resources and the development of a stable lifestyle".
27The Operating Agreement between Seaway and the Provincial Government requires that Seaway use all of its fifteen (15) units for Recovering Substance abusers. This facility offers a protected environment to a fragile segment of our society. That protection consists of affordable temporary residence accommodation where:
The premises are drug/alcohol free,
One's neighbours are in the same recovery phase,
the staff member is familiar with and sympathetic to the problems of the inmates. Thus immediate support is available in a crisis.
28The danger lies in casting the net too widely so that all geared-to-income housing is brought under the exemption to the detriment of the municipal tax base. This institution can be differentiated from subsidized housing offered by other charitable institutions in that:
The tenants do not have any right to remain on the premises. They are not there under a lease. Their tenancy is at will under a licence which may be revoked at any time.
Residency is time limited. The general rule is that one may not remain for more than a year although extensions are possible for up to two years.
The no-drug/alcohol policy differs from that which might be included in an apartment lease in that it is enforceable by a mandatory drug/alcohol test and immediate expulsion for an infraction.
29The judge at first instance weighed those facts and concluded that they brought the institution within the exemption. In reaching that conclusion it cannot be said that he made a palpable and over riding error. We see no extricable error in the manner in which the application judge applied the facts to the legal test he considered.
30This appeal is dismissed. The Respondent shall have its costs in the amount of $3,500.00.
J. Wright, J.
Platana J.
Pierce J.
Released: January 25, 2007
COURT FILE NO. D-06-005
DATE: 2007-01-25
ONTARIO SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
J. Wright, Platana, Pierce, JJ.
B E T W E E N:
THUNDER BAY SEAWAY NON-PROFIT APARTMENTS
Applicant (Respondent on Appeal)
- and –
MUNICIPAL PROPERTY ASSESSMENT CORPORATION
Respondent (Appellant)
THE CORPORATION OF THE CITY OF THUNDER BAY
Respondent
REASONS FOR JUDGMENT ON APPEAL
J. Wright, Platana, Pierce, JJ.
Released: January 25, 2007
/mls