COURT FILE NO.: 333/07
DATE: 20081223
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BROCKENSHIRE, JANET WILSON and KARAKATSANIS J.J.
B E T W E E N:
ST. GEORGE AND ST. RUEISS COPTIC ORTHODOX CHURCH
Appellant
- and -
CITY OF TORONTO
Respondent
James Morton, for the Appellant
Dianna Dimmer, Christoper Henderson, for the Respondent
HEARD AT TORONTO: Oct. 7, 2008
THE COURT:
[1] St. George & St. Rueiss Coptic Orthodox Church (the Church) purchased a property at 25-33 Mallard Road on February 28, 2003 adjacent to the Church (the Property). The Church asserts that in 2003 the Property was exempt from property taxes as it was owned by the Church and was “land used in connection with” a place of worship.
[2] This is an appeal by the Church from the June 20, 2007 Decision of the Assessment Review Board (the Second Board Decision). The Board denied the Appellant’s request for a review of the Board’s prior decision made March 5, 2007 (the First Board Decision). The First Board Decision dismissed the Church’s appeal with respect to property taxes assessed by the City of Toronto for the taxation year 2003.
[3] The Appellant requests that the Second Decision of the Board be set aside and that the matter be sent back to the Board for a rehearing.
[4] Section 43.1 of the Assessment Act, R.S.O. 1990, c. A.31 provides for an appeal to the Divisional Court with leave on a question of law. Kiteley J. granted leave to appeal from the Second Board decision. She concluded that there was good reason to doubt the correctness of the First Board decision, which flowed into and was exacerbated by errors made in the Second Board decision.
[5] The First Board decision concluded that storage of Church property or use of the Property for Church youth groups did not constitute a “place of worship”. The appellant argues that the Board asked itself the wrong question, and failed to consider whether the Property was “land used in connection with a place of worship”.
The legislation
[6] The appeal raises the legal interpretation of section 3(1)3(i) of the Assessment Act.
Property assessable and taxable, exemptions
3.(1) All real property in Ontario is liable to assessment and taxation, subject to the following exemptions from taxation:
Churches
- Land that is owned by a church or religious organization or leased to it by another church or religious organization and that is,
i. a place of worship and the land used in connection with it,
Background Facts
[7] At the time of purchase, the Property consisted of office and warehouse space for several commercial businesses. It was assessed and taxed as a commercial property.
[8] By October 2005 it is not disputed that the warehouse portion of the Property had been demolished and the commercial portion was being used as a place of worship. The issue relates to the use of the property in 2003.
[9] On February 26, 2004, the Church submitted an application to the City under ss. 357(1)(a) and (c) of the Municipal Act, 2001, S.O. 2001, c. 25 seeking an exemption from property taxes in respect of the Property. The Church sought cancellation, reduction or refund of taxes paid for the 2003 taxation year on the Property.
[10] The Church relied upon s. 3(1)3 (i) of the Assessment Act.
[11] At the First Board hearing, the priest for the Church testified that the Property was used for various church services and related youth activities almost immediately after is was acquired in 2003. He testified that the entire warehousing space was used to store religious artifacts and Church property. He agreed that commercial tenants operating a limousine business were still occupying the remaining part of the Property.
[12] The Board accepted the evidence of the city inspector which included photographs that the Property was being used by the limousine commercial tenants. The Board noted that there was no signage or other indication that the Property was used by the Church for church activities. The city inspector did not enter the premises. The Board concluded that the evidence of the priest was vague and preferred the evidence of the city with respect to the use of the premises in 2003.
[13] The Church did not appeal the First Board decision. Rather, it sought a review of the First Board decision, which was denied. It is the refusal of the Second Board decision to review the First Board decision that is being appealed to this court.
Analysis and Conclusions
[14] The findings of fact by the Board in the initial decision do not appear to be supported by the evidence. The city inspector admits that he did not enter and inspect the warehouse space. The evidence of the priest of the Church was therefore uncontradicted. He was clear with respect to the use of the warehouse space in 2003. However, the issue of law before the Divisional Court is whether the Board erred in the legal test it applied under ss 3(1)(3.
[15] We concur with the submissions of the appellant that the Board in both the First and the Second decision asks itself the wrong question, and did not properly address the issue as to whether the Property qualifies as “land used in connection with” a place of worship. It is conceded that the Church is a place of worship. This error squarely raises a question of law.
[16] The following is an except from the First Board Decision illustrating the error:
Subsection 3(1)(3) of the Assessment Act provides that property owned by a church or religious institution is exempt from taxation if it is used as a place of worship. It is not enough for the Church to simply own the property.
Exhibit #5 consists of photographs taken in April 2004, during an inspection by Mr. McHugh from MPAC. The photographs provide absolutely no evidence of the use of this property for a place of worship and the absence of such indicia is corroborated by Mr. McHugh’s sworn testimony. [emphasis added]
[17] The following are excerpts from the Second Board Decision, which makes it clear that the Board did not address the correct question when it was reviewing the First Board Decision:
As the for the second ground, it is possible that the property was being used for storage of Church property as Member Driesel notes Father Awad as saying at the hearing since there is no evidence of the assessor looking inside the warehouse at the time of the April 2004 inspection. Father Award in his Statutory Declaration says he testified at the hearing that the warehouse was also used for Church youth programs. However, neither of these activities (storage of Church property to use for Church youth programs) would qualify the warehouse as “a place of worship” within the meaning of paragraph three of subsection 3(1) of the Assessment Act.
[emphasis added]
As there was no error in the Member’s finding that the evidence did not show that the subject property was being used as a place of worship in 2003 and as the Salus decision submission is not persuasive, I am denying your request for review. The Board’s Decision is confirmed. [emphasis added]
[18] We heard submissions from the City that even if the Board had asked the correct question, the use of the warehouse premises for Church youth groups and storage of Church property does not qualify as “land used in connection with” a place of worship.
[19] We disagree.
[20] In our view the City position does not appear to consider the plain meaning of the language of section 3(1)(3)(i) of the Assessment Act..
[21] The City relies on the cloister cases in support of their argument that even if the correct question been asked the Property would not qualify for an exemption. See: Holy Theotokos Convent v. Whitchurch-Stouffville (Town) (2007), 31 M.P.L.R. (4th) 293 (Ont. S.C.J.); Les Souers de La Visitation D’Ottawa v. The City of Ottawa, 1951 109 (ON SC), [1952] O.R. 61 (Ont. H.C.J.). The cloister cases deal with whether residences for priests or nuns are places of worship and hence entitled to the exemption. The facts of the cloister cases are distinguishable from the facts of this case.
[22] Counsel for the City also relies upon the Ontario Court of Appeal decision in Diocese of Toronto Camps (Anglican Church of Canada) v. Municipal Property Assessment Corporation (2004), 2004 34918 (ON CA), 191 O.A.C. 278 (C.A.) which considers an exemptions for non-profit organizations for the purpose of the care of children. Again this is a different factual context, but the principles in this case are helpful.
[23] Doherty, J.A. outlines principles which are applicable when considering taxing statutes in paras. 12, 15 and 18.
The "primary purpose" test employed in Re Buenavista is well established in the jurisprudence of this province. It requires an objective determination of the principal purpose for which the land is used and occupied. That purpose must be distinguished from others that are incidental to it.
Taxing statutes, including exemptions within those statutes, are subject to the generally applicable rules of statutory interpretation. The provision must be read in its statutory context having regard to the ordinary and grammatical meaning of the words used, the scheme and object of the statute, and the intention of the legislature: [citations omitted]
The Legislature has specifically addressed the competing policy interests inherent in determining whether property should be exempt from tax based on ownership, occupation, and use of land for religious and educational purposes. The words "the care of children" should not be read so as to significantly broaden the educational and religious exemptions created by the Legislature.
[24] It is conceded that the Property was purchased for intended use for the Church and that after 2003 the Property was “land used in connection with” a place of worship and hence exempt from taxation.
[25] The issue in the case before the Board is whether the Property used for church storage and Church youth group activity should be exempt from taxation for 2003 as “land used in connection with” a place of worship. The Property is a distinct building adjacent to the Church. However, there is no requirement in the section that the lands be on the same parcel of land as the place of worship, simply that they be used in connection with it. Even if the Property is a distinct building, the use of the Property may be consistent with what occurs across the province in church basements, or in church facilities that are often a wing attached to the place of worship which are eligible for a tax exemption.
[26] We conclude that the case law relied upon by the City is not determinative of whether the Property is “land used in connection with” a place of worship. We conclude that the Board member in both the First and Second Decision asked itself the wrong question and considered the wrong legal test. In these circumstances the appeal is granted. The Second Decision is set aside and we order that the matter be returned to be reheard by a different Board member.
[27] The parties indicated that they were hopeful that they had reached a settlement when they appeared before us on October 7, 2008. We heard the appeal and agreed to release the reasons only if the parties were unsuccessful in their discussions. Hopefully the parties can renew productive discussions given the limited scope of the dispute.
[28] If the parties are unable to agree on the costs of the motion for leave to appeal and this appeal, they shall exchange brief written submissions within 30 days of the release of these reasons. The appellant shall file three copies of the consolidated cost submissions with the Court.
BROCKENSHIRE J.
JANET WILSON J.
_______________________ KARAKATSANIS J.
Released:
COURT FILE NO.: 333/07
DATE: 20081223
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
BROCKENSHIRE, JANET WILSON and KARAKATSINIS J.J.
B E T W E E N:
ST. GEORGE AND ST. RUEISS COPTIC ORTHODOX CHURCH
Appellant
- and -
CITY OF TORONTO
Respondent
REASONS FOR JUDGMENT
THE COURT
RELEASED: December 23, 2008