Court File and Parties
CITATION: Haldimand County v. U.S. Steel Canada Inc., 2016 ONSC 5286
DIVISIONAL COURT FILE NO.: 15-655
DATE: 2016-09-19
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
FREGEAU AND THEN J.J., GORDON R.S.J.
BETWEEN:
THE CORPORATION OF HALDIMAND COUNTY Appellant
– and –
U.S. STEEL CANADA INC. Respondent
Mr. W. McKaig, for the Appellant
Mr. D. Fleet, for the Respondent
HEARD: June 2, 2016 in Hamilton, Ontario
Reasons for Decision
J.S. FREGEAU
INTRODUCTION
[1] U.S. Steel Canada Inc. (“U.S. Steel”) owns and operates an integrated steel production facility In Haldimand County (“Haldimand”), a municipality in southwestern Ontario. U.S. Steel applied to Haldimand for vacancy property tax rebates (“vacancy rebates”) pursuant to section 364 of the Municipal Act (the ”Act”) for various periods in 2009, 2010 and 2013 (the “claimed periods”).
[2] Haldimand denied the applications. U.S. Steel appealed the denials to the Assessment Review Board (the “Board”). The Board heard the appeal on February 11, 2015. The Board allowed the appeal in part and held that U.S. Steel was entitled to vacancy rebates for the claimed periods in 2010 and 2013. The Board dismissed the appeal regarding the 2009 claim.
[3] Haldimand sought and was granted leave to appeal the Board’s decision. The dismissal of the 2009 claim was not appealed.
FACTUAL BACKGROUND
[4] The steel production facility in question is comprised of two parts. The production plant sits on approximately 2,060 acres of land with numerous buildings. It is an integrated steel mill where raw materials are converted to liquid iron in a blast furnace and then manufactured into hot roll coils of steel.
[5] In the normal course, the production plant operates 24/7, year round. During normal production periods at this site, approximately 810 employees work during the day and approximately 390 employees work at night.
[6] The second component of the facility is a plant at 19 Hawke Street, Haldimand (“19 Hawke Street”). This facility sits on approximately 22 acres of land with one building housing “pickling lines”. The pickling of steel is a process in which the hot roll coils of steel are cleansed of iron oxide and oiled to prevent re-oxidization. Typical production at 19 Hawke Street involves approximately 22 employees during the day and 20 at night.
[7] Steel production ceased on March 1, 2009 due to a lack of orders as a result of the recession. A significant number of employees were laid off. U.S. Steel could not reach a collective agreement with the union and locked out its employees from August 3, 2009 to April 15, 2010. One of the two “claimed periods” which are the subject of this appeal begins on January 1, 2010.
[8] Production ceased again prior to April 28, 2013. U.S. Steel again locked out its employees from April 28 to September 1, 2013 (the second “claimed period”).
[9] At the production plant during the claimed periods:
- there was no steel production;
- the workforce was approximately 168 in 2010 and 130 in 2013;
- machinery and equipment remained on site;
- activities were limited to repairs, maintenance, heating and cooling of the buildings and repairs and maintenance of fixtures, equipment and machinery;
- water flow was maintained through critical water pipes to prevent corrosion and to preserve machinery and equipment, including heating and air-conditioning equipment;
- finished or semi-finished goods remained on site and were not shipped;
- inspection schedules were maintained;
- machinery was examined and briefly operated as necessary to maintain in operating condition;
- visual inspections were conducted on HVAC systems, flood checks were conducted on pipes, pumps and machinery;
- visual fire check inspections were conducted on wiring, electrical equipment and machinery;
- Fire Code compliance checks were conducted; and,
- winterization activities took place as and when required.
[10] The activities performed at 19 Hawke Street during the 2010 and 2013 claimed periods consisted of flood checks, fire checks, Fire Department checks and critical water system checks.
THE DECISION OF THE BOARD
[11] The Board allowed the appeal in part and determined that the properties were eligible properties and that U.S. Steel was entitled to vacancy rebates for the claimed periods in 2010 and 2013.
[12] In coming to this conclusion, the Board made the following three findings:
- The reason for the vacancy (a lockout of employees) did not disqualify U.S. Steel from entitlement to a vacancy rebate;
- The tests for “carrying on business” under the previous business occupancy tax regime are not relevant in determining “use” for the purposes of Regulation 325/01 and the current vacancy rebate program;
- The activities undertaken in the buildings during the claimed periods fell within the exemptions set out in Regulation 325/01 such that the buildings were not being used during the claimed periods for the purpose of Regulation 325/01 and s. 364 of the Act.
THE MOTION FOR LEAVE TO APPEAL
[13] Section 43.1(1) of the Assessment Act, R.S.O. 1990 provides that an appeal lies from the Board to the Divisional court, with leave of the Divisional Court, on a question of law. On February 5, 2016, Justice Braid granted leave to appeal, finding that there was reason to doubt the legal correctness of the Board’s decision and that the issues involved were of sufficient importance that leave ought to be granted.
STANDARD OF REVIEW
[14] In Alberta (Information and Privacy Commissioner) v. Alberta Teachers’ Association 2011 SCC 61, [2011] 3 S.C.R. 654, the Supreme Court considered the appropriate standard of review on a judicial review application concerning the interpretation of the administrative tribunal’s home statute.
[15] The Court, citing Dunsmuir v. New Brunswick, 2008 SCC 9 and Smith v. Alliance Pipeline Ltd., 2011 SCC 7, found that there is authority establishing that “deference will usually result where a tribunal is interpreting its own statute or statutes closely connected to its function, with which it will have particular familiarity”. The Court held that this principle applies “unless the interpretation of the home statute falls into one of the categories of questions to which the correctness standard continues to apply, i.e., constitutional questions, questions of law that are of central importance to the legal system as a whole and that are outside the adjudicator’s expertise.” See para. 30.
[16] In The Kensington Foundation v. Municipal Property Assessment Corporation et al 2013 ONSC 7694, the Divisional Court considered the appropriate standard of review on an appeal from a decision of the Assessment Review Board.
[17] Citing Alberta, the Divisional Court in Kensington held that there is a presumption that tribunals interpreting or applying their home statutes are to be reviewed on a reasonableness standard unless the question at issue is a true question of jurisdiction or is of central importance to the legal system and also outside the adjudicator’s area of expertise. The Court in Kensington found that the case before them did not fall within any of the exceptions noted in Alberta and held that the appropriate standard of review was reasonableness. See paragraphs 12 and 13.
[18] In the appeal before this court, the Assessment Review Board is interpreting a companion statute and regulation (the Municipal Act and Regulation 325/01) to its home statute (the Assessment Act). In our opinion, none of the appellant’s questions of law on this appeal concern constitutional or jurisdictional issues or questions of central importance to the legal system and outside the specialized expertise of the Board such that a correctness standard would apply.
[19] Given all of the above, we find that the standard of review for the Board’s Decision is reasonableness – whether the Decision falls within a range of possible acceptable outcomes which are defensible in respect of the facts and law.
THE POSITION OF THE APPELLANT
[20] From both a broad and narrow policy perspective, the appellant submits that an employer which locks out its employees during a labour dispute is ineligible for a vacancy rebate.
[21] Broadly speaking, the appellant submits that a strike/lockout situation cannot trigger the vacancy rebate provisions because:
- A lockout of employees is a strategic labour relations bargaining decision made by an employer and taxpayers should not be required to bear the burden of such a bargaining strategy;
- Entitlement to a vacancy rebate will create a disincentive on the part of employers to settle a labour dispute; and,
- In a unionized setting, the physical activities of an employer in maintaining a plant in a “production ready” state during a labour dispute can be considered “business as usual” and “use” of the facility.
[22] From a narrow perspective, the appellant submits that the maintenance of plant and equipment during a strike/lockout such that production can resume immediately after the end of the labour dispute constitutes use of the building outside the exempted uses set out in section 1(4)2 of Regulation 325/01.
[23] The appellant further submits that the Board erred in law by misconstruing the definitions of “eligible property”, “use” and “other activity” in section 1 of Regulation 325/01.
[24] The appellant submits that the correct and reasonable interpretation of Regulation 325/01 is that the activities which took place during the claimed periods constitutes use of the property. As eligible property is defined with reference to “use” and “other activity”, the appellant submits that misinterpretations of those terms suggests the Board’s finding respecting eligible property is incorrect and unreasonable.
[25] Pursuant to section 1(4)2 of Regulation 325/01, specific activities are deemed not to constitute “use” in the absence of “other activity”. If “other activity” occurs, then that activity constitutes use and the exempted uses lose their exempt status. The appellant submits that the Board’s finding that all the activities which took place during the claimed periods constitute exempted uses is incorrect and unreasonable.
[26] The appellant also submits that the Board erred in law by failing to follow and apply the decisions in Firestone Tire and Rubber Company v. Hamilton (City) [1995] S.C.R. and Nordfibre Co. v. Ontario, [1994] O.J. No. 4470. The appellant submits that there is a direct connection between the vacancy rebate provisions in the case at bar and the former business tax regime considered in Firestone and Nordfibre.
[27] Had the Board followed these decisions, the appellant submits that the Board would have concluded that U.S. Steel was using the properties during the claimed periods and that such use could not conceivably have been intended to fall within any of the exempted uses set out in section 1(4)2 of the Regulation.
[28] The appellant submits that the failure to apply the principles from these cases constitutes an error in law resulting in a decision which is both wrong and unreasonable.
THE POSITION OF THE RESPONDENT
[29] The respondent submits that neither the provisions of section 364 of the Act or Regulation 325/01 make express or implied reference to any aspect of labour relations. The relevant provisions of the legislation do not allow the appellant to establish its own criteria to determine whether a property is an “eligible property” or to inquire into why a vacancy of commercial or industrial property has occurred.
[30] The respondent submits that there is no municipal or Board discretion to deny a vacancy tax rebate due to the reason for vacancy. The respondent submits that “a vacant building is a vacant building, regardless of the cause of the vacancy.”
[31] The respondent submits that the Board carefully applied correct principles of statutory interpretation and properly analyzed the language of section 1(4)2 of Regulation 325/01 to determine if U.S. Steel’s activities during the claimed periods constituted a use or “other activity” that would disqualify either property from being an “eligible property” under section 364 of the Act.
[32] The respondent notes that the Board did conclude that one aspect of the respondent’s activities during the claimed periods did not fall within permitted activities set out in section 1(4)2(i)(ii) and (iii) of Regulation 325/01 and therefore possibly constituted “other activity”. However, the respondent submits that the Board concluded that the buildings met the requisite regulatory criteria such that they were not being “used.” The respondent submits that this conclusion was reasonable and within a range of possible acceptable defensible outcomes in respect of the facts and the law.
[33] The respondent submits that the current vacancy tax rebate scheme and the previous business tax scheme, abolished in Ontario as of 1998, relate to two different concepts of tax liability. The former business tax liability regime related to property occupation, not property ownership. The current scheme of tax liability relates to property ownership and the vacancy rebate scheme flows from that concept of tax liability.
[34] The respondent submits that the Board correctly determined that intent of the former legislation was different than the current legislation. The respondent submits that the Board’s decision to distinguish cases decided under the former legislation was both correct and reasonable.
THE ISSUES
Did the board err in law by misinterpreting and/or misapplying the vacancy rebate provisions of section 364 of the Act and regulation 325/01 in concluding that an employer which locks out its employees during a labour dispute remains eligible for a vacancy rebate.
Did the Board err in law by misconstruing the definitions of “eligible property”, “use” and “other activity” in section 1 of Regulation 325/01.
Did the Board err in law by failing to apply and follow the decision of the Supreme Court of Canada in Firestone Tire and Rubber Company v. Hamilton (City), [1955] S.C.R. 604 SCC and Nordfibre Co. v. Ontario, [1994] O.J. No. 4470.
DISCUSSION
ISSUE 1
[35] The appellant concedes that there is no case law addressing this issue in the context of the current vacancy rebate legislation.
[36] The Assessment Act and the property tax portions of the Municipal Act form a complete code for property assessment and taxation. Section 364 of the Act is remedial legislation for the benefit of commercial and industrial property owners who establish the requisite facts of vacancy of an eligible property.
[37] Property owners qualify for a vacancy tax rebate when a property meets the provincially stipulated criteria. The legislation does not grant jurisdiction to a municipality or the Board to exercise their discretion to deny a vacancy rebate due to the reason for the vacancy. Neither section 364 of the Act nor Regulation 325/01 make reference to any aspect of labour relations.
[38] In dismissing this issue, the Board concluded that the purpose of the vacancy rebate program is to lessen the tax burden on properties due to a reduction in the property’s productive capacity to bear taxes. The Board found that a property that is not being used will not be productive regardless of why it is not being used. The Board held that they were not authorized by the legislation to inquire into the business reasons for a cessation of production.
[39] We find that the Board’s conclusion on this issue was reasonable and within a range of possible acceptable outcomes.
ISSUE 2
[40] Section 364(1) of the Act requires municipalities to provide tax rebates to owners of commercial or industrial classes of property that have vacant portions. Subsection 364(2)1 of the Act states that the program shall apply to “eligible property’” as prescribed by regulation for the purposes of this section.
[41] Section 1(1) of Ontario Regulation 325/01 provides that “a building or structure on property that is classified in one of the commercial classes or industrial classes is prescribed to be an eligible property for the purposes of section 364 of the Act for a period of time if,
(a) The period of time is at least 90 consecutive days; and,
(b) No portion of the building or structure was used at any time in the period of time.
[42] Section 1(4) of Ontario Regulation 325/01 states that the following rules apply for the purposes of subsection (1):
- The following, in the absence of other activity, does not constitute the use of a building or structure or a portion of a building:
i. Construction, repairs or renovations of the building, structure or portion of the building.
ii. The heating, cooling, lighting or cleaning of the building, structure or portion of the building.
iii. The presence of fixtures.
[43] The Board correctly identified the issue before them as being how to characterize the activities in the plant during the claimed periods;
Do they fall within the enumerated activities that are deemed not to constitute use: construction, repairs, renovation, heating, cooling, lighting cleaning of the building or the presence of fixtures? Do they constitute “other activity” such that those aforementioned exemptions from use do not apply, and thus disqualifying the property from being prescribed as eligible property? Should the word “other” be interpreted to mean distinctly different activity than those enumerated exemptions, or to mean similar types of activity.
[44] The Board carefully considered the nature of the activities in the production plant and pickling plants during the claimed periods, concluding that “there appears to be no doubt that the delineated portions of the two pickling plants were not used during the periods in question.”
[45] In considering the “busier work” carried on in the production plant, the Board narrowed in on the maintenance of equipment by way of continuous “exercising” of machinery, finding that this activity “appears to fall into a category of other activity”. However, the Board went on to find that the inclusion of this type of maintenance into the exemptions of repair, renovation and construction was a “common sense reading” of subsection 1(4)2(i).
[46] The Board, consistent with the established modern principle of statutory interpretation, considered the entire context, object and purpose of the vacancy rebate program and concluded that;
The provisions of s. 1(4)2 (i), (ii) and (iii) read together and in context, evince an intention to permit an industrial property owner to continue the upkeep of the plant while it is not being used for its normal purposes. Vacancy was never intended to mean empty and/or devoid of all activity, particularly the sound and prudent business practice of doing whatever is necessary to maintain the plant in good condition. Those activities are of the same or similar general nature and character as the stated exemptions and are not the type of “other activity” that would disqualify the owner from a tax rebate.
[47] We accept the submissions of the respondent on this issue – “the language of Ontario Regulation 3125/01 demonstrates the legislature’s intention to allow the business goal of “using” the Subject Properties for the purpose of maintaining them. Businesses should not be required to let their buildings and fixtures fall into ruin and disrepair in order to benefit from the vacancy tax rebate.”
[48] We are of the opinion that the Board’s analysis and conclusion on this issue were reasonable and within a range of possible acceptable outcomes which are defensible in respect of the facts and law.
ISSUE 3
[49] The Board rejected the appellant’s submission that the principles established in Firestone and Nordfibre should apply to support Haldimand’s position that U.S. Steel continued to carry on business during the claimed periods and thus use the two buildings in issue, disentitling U.S. Steel from the rebate.
[50] The Board concluded that there are fundamental differences between the former business occupancy tax regime and the current vacancy rebate program. The Board considered the appellant’s submission on this issue, but concluded that the cases were distinguishable because the “nature, aim and intent” of the business legislation in question in Firestone and Nordfibre is different than that of the current legislation.
[51] The Board concluded that Regulation 325/01 “specifically envisions that the type of activity that the court found to be evidence of carrying on business in Firestone does not necessarily exclude the application of the rebate provisions” under the current legislation – “the permitted activities demonstrate an intention to allow the business goal of “using” the property for the purpose of maintaining it. The policy rationale for this is clear: Businesses should not be required to let their buildings and fixtures fall into ruin and disrepair in order to benefit from the rebate.”
[52] We find that the Board’s conclusion on this issue was reasonable.
RESULT
[53] For these reasons, the appeal is dismissed.
[54] Costs for both the leave application and appeal are awarded in accordance with the agreement of the parties. Haldimand shall pay costs of $17,000.00 inclusive of HST to U.S. Steel.
Justice J. S. Fregeau
Justice E. F. Then
RSJ R. D. Gordon
Released: September 19, 2016
CITATION: Haldimand County v. U.S. Steel Canada Inc., 2016 ONSC 5286
DIVISIONAL COURT FILE NO.: 15-655
DATE: 2016-09-19
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
FREGEAU AND THEN J.J., GORDON R.S.J.
BETWEEN:
THE CORPORATION OF HALDIMAND COUNTY Appellant
-and-
U.S. STEEL CANADA INC. Respondent
REASONS ON APPEAL
Released: September 19, 2016