CITATION: Haldimand County v. U.S. Steel, 2016 ONSC 825
COURT FILE NO.: 15-655-ML
DATE: 2016-02-05
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
THE CORPORATION OF HALDIMAND COUNTY
Woodward McKaig, for the Moving Party
Moving Party/Appellant
- and -
U.S. STEEL CANADA INC.
David Fleet, for the Respondent
Respondent
HEARD: December 10, 2015
The Honourable Justice C.D. Braid
RULING ON MOTION FOR LEAVE TO APPEAL
I. INTRODUCTION
[1] The Corporation of Haldimand County (“Haldimand County”) seeks leave to appeal from the decision of the Assessment Review Board (“the Board”) dated April 30, 2015. The Board determined that U.S. Steel Canada Inc. (“U.S. Steel”) is entitled to vacancy rebates for 2010 and 2013 during periods of labour disruption when U.S. Steel had locked out its employees. Haldimand County argues that there is reason to doubt the correctness of the Board’s decision and the question of law is of sufficient importance that leave should be granted.
II. FACTS
[2] U.S. Steel owns and operates a steel mill near the shores of Lake Erie in Haldimand County, Ontario. The factory produces steel using three separate buildings. The main building houses all of the machinery required to produce the steel. Two other buildings referred to as “pickling plants” accept the raw steel and scrub it into a condition that is fit for transporting.
[3] Steel production ceased during two periods of labour disruption when U.S. Steel locked out its unionized employees: August 3, 2009 to April 15, 2010, and April 28 to September 1, 2013. The workforce during typical production is 1268 employees, while the workforce during the lockouts was 168 in the 2010 period and 130 in the 2013 period. During the lockouts:
- There was no production.
- Activity was strictly limited to repair and maintenance for the physical integrity and safety of the buildings, equipment and machinery (including repairs, heating and cooling of the equipment and machinery).
- Employees conducted regular inspections in buildings; examined machinery; exercised equipment according to schedule; and did minor cleaning repair or renovation work. These tasks were all done for maintenance so production could resume quickly when the lockout ended.
[4] U.S. Steel applied to Haldimand County for rebates of property taxes under the vacancy rebate program set out in s.364 of the Municipal Act, 2001, S.O. 2001, c. 25 for periods in 2009, 2010, and 2013. Haldimand County denied the applications and U.S. Steel appealed the denials to the Assessment Review Board.
III. DECISION OF THE BOARD
[5] On April 30, 2015, the Board allowed the appeal in part and determined that U.S. Steel is entitled to vacancy rebates for the periods in 2010 and 2013, but not the period in 2009.
[6] The Board stated that the scheme and purpose for the vacancy rebate program is to lessen the tax burden on properties due to a reduction in the property’s productive capacity to bear those taxes. The Board relied on the decision in Armel Corp. v. Guelph (City), 2011 CarswellOnt 12949 in coming to this conclusion. The Board held it is not authorized by the legislation to conduct an inquiry into the business reasons that an industrial facility shuts down or curtails production for a period of time.
[7] The Board referred to Ontario Regulation 325/01 and the permitted activities that, absent other activity, do not constitute “use.” The Board found the maintenance conducted by U.S. Steel during the lockout is similar to the activities that are exempt. The Board found that the list of permitted activities demonstrate the legislature’s intention permit a business to use 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.
[8] The Board held that the activities carried out during the claimed periods were within the exemptions set out in the Regulation, and consequently the buildings were not being used during those periods. The Board further held that the lockout of employees does not disqualify U.S. Steel from entitlement to a vacancy rebate.
[9] Haldimand County has sought leave to appeal the Board’s decision. Haldimand County also seeks an Order for a stay pending the Appeal pursuant to rule 63.02(1).
IV. LEGISLATION
[10] Section 364 of the Municipal Act requires a municipality to provide tax rebates for owners of vacant property:
Vacant unit rebate
364(1) Every local municipality shall have a program to provide tax rebates to owners of property that has vacant portions if that property is in any of the commercial classes or industrial classes, as defined in subsection 308(1). [Emphasis added].
[11] Ontario Regulation 325/01 sets out the requirements for a property to be eligible to receive the vacant property rebate:
Eligible property
1.(1) 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.
(3) A portion of a building on property that is classified in one of the industrial classes is prescribed to be an eligible property under section 364 of the Act for a period of time if,
(a) the period of time is at least 90 consecutive days; and
(b) throughout the period of time, the portion of the building was not used and was clearly delineated or separated by physical barriers from the portion of the building that was used.
(4) The following rules apply for the purposes of subsections (1), (2) and (3):
A reference to a period of at least 90 consecutive days shall be read as a reference to a period of at least 89 consecutive days if the period includes all of February.
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. [Emphasis added].
V. POSITIONS OF THE PARTIES
[12] U.S. Steel takes the position that, during the claimed periods, the claimed areas fell within the ambit of the vacancy rebate program. U.S. Steel states that the described activities that were carried on during the labour disruption were largely maintenance and are described by the exemptions in the Regulation. The claimed areas could not be defined as being used, which is the test for vacancy. The company characterized the activities as the necessary maintenance and repairs required to ensure the physical integrity and safety of the plant during production cessation, and to keep the machinery tuned for a quick restart. The company argues that the scheme and purpose behind the regime for rebating property taxes require a consideration of the absence of productivity from the property to determine whether the company is subject to those taxes. Since there was no production of steel during the claimed periods, the company should be entitled to the rebates.
[13] For these reasons, U.S. Steel argues that the Board’s decision was correct and that leave to appeal should not be granted.
[14] On the other hand, Haldimand County argues that the voluntary locking out of employees and idling of the plant is not the scenario that was envisioned by the framers of the legislation to be included in the vacancy rebate program. The County submits that the business decision to close down the steel mill gave a strategic benefit to the owner, and it was improper to download the cost onto the municipality. Haldimand County states that U.S. Steel was occupying and carrying on its business in the plant during the lockout, and those activities constituted sufficient use to disqualify the plant from being an eligible property for the rebate program.
[15] Haldimand County argues that there is good reason to doubt the correctness of the Board’s decision, and the proposed appeal involves matters of public importance. For these reasons, the County submits that leave to appeal to the Divisional Court should be granted.
VI. LEGAL ISSUES RAISED BY THIS APPEAL
[16] If leave is granted, four questions of law will be raised on the appeal:
i. What is the proper statutory interpretation of the phrases “used” and “other activity” within the context of Regulation 325/01?
ii. Do the tasks conducted by U.S. Steel during the claimed periods disentitle the company to the vacancy tax rebate?
iii. Does a strike by employees or a lockout by an employer entitle a property owner to a vacancy rebate?
iv. What is the scheme and purpose of the vacancy rebate provisions under section 364 of the Municipal Act?
VII. TEST FOR LEAVE TO APPEAL
[17] Pursuant to s.43.1(1) of the Assessment Act, R.S.O. 1990, c. A.31, “An appeal lies from the Assessment Review Board to the Divisional Court, with leave of the Divisional Court, on a question of law.”
[18] There are two parts to the test for leave to appeal in this case. Leave to appeal shall not be granted unless:
a) There is reason to doubt the legal correctness of the Board’s decision on a question of law; and
b) The question of law is of sufficient importance to warrant the attention of the Divisional Court.
(BCE Place Ltd. v. Municipal Property Assessment Corp., [2008] O.J. No. 4580 (Div. Ct.)).
[19] The Court does not need to be satisfied that the decision is wrong or even probably wrong. There must be some reason to doubt the correctness of the Board’s decision on a question of law (BCE Place Ltd, supra, at para. 6).
[20] The first part of the test for leave to appeal is similar to the one set out in rule 62.02(4)(b). In cases decided under that rule, courts have held that it is not necessary for the judge to be satisfied that the decision in question was actually wrong; the judge only needs to find that the correctness of the order is open to “very serious debate” (Nazari v. OTIP/RAEO Insurance Co., 2003 40868 (ON SC), [2003] O.J. No. 3442, at para. 23 (Sup. Ct.), Ash c. Lloyd’s Corp. (1992), 1992 7652 (ON SC), 8 O.R. (3d) 282, at 284 (Gen. Div.)). This concept has been summarized in another way as follows:
It is not necessary for the moving party to convince the court that the decision it seeks to appeal from is wrong or even probably wrong. It is sufficient for the moving party to show this court that there is good reason to doubt the correctness of the decision. Thus, the court should ask itself whether the correctness of the decision in question is open to "very serious debate" and, if so, is it a decision that warrants resolution by a higher level of judicial authority.
(see Brownhall v. Canada, 2006 7505 (ON SC), 2006 CarswellOnt 995, at para. 30 (Sup. Ct.))
[21] I am satisfied that leave to appeal ought to be granted as the test has been satisfied. There is reason to doubt the correctness of the Board’s decision and it is a question of law that warrants resolution by an appellate court. I reach that conclusion for the following reasons.
VIII. ANALYSIS
A. General Principles of Statutory Interpretation
[22] Where the wording of the legislation is unclear or ambiguous, the purposive and contextual approach to statutory interpretation will be applied. This means that the statute must be read in its entire context and in its grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament. This interpretation approach applies to tax legislation as well, although the courts have generally focused on a more textual interpretation due to the technicalities and detail involved in tax provisions. The presumption in favour of taxpayers should apply only where there remains ambiguity in the provision after the preferred multi-faceted approach has been applied.
[23] The purposive and contextual approach is the established modern principle of statutory interpretation. This principle has been cited and relied upon in various decisions of Canadian courts and has been declared to be the preferred approach of the Supreme Court of Canada in the leading case of Re Rizzo and Rizzo Shoes Ltd., 1998 837 (SCC), [1998] 1 S.C.R. 27, at para. 21.
[24] Statutory interpretation cannot be founded on the wording of legislation alone (Re Rizzo and Rizzo Shoes Ltd., supra, at para. 21). In Chieu v. Canada (Minister of Citizenship and Immigration), 2002 SCC 3, [2002] S.C.J. No. 1, at para. 34, the Supreme Court stated that the provision must be read in its entire context:
The grammatical and ordinary sense of the words employed in [the provision] is not determinative, however, as this Court has long rejected a literal approach to statutory interpretation. Instead, [the provision] must be read in its entire context. This inquiry involves examining the history of the provision at issue, its place in the overall scheme of the Act, the object of the Act itself, and Parliament's intent both in enacting the Act as a whole, and in enacting the particular provision at issue.
B. Interpretation of the Regulation
[25] This case involves determinations of statutory interpretation. In order to determine whether U.S. Steel is entitled to the vacancy rebate, consideration must be given to the definition of “use” in section 1 of Ontario Regulation 325/01 under the Municipal Act.
[26] The Supreme Court of Canada has expressed that the courts have considered the term “use” in a variety of different contexts and statutes. The courts have generally looked to dictionary definitions of the word “use” as a starting point in the interpretive process. The proper legal interpretation of “use” is context and fact specific, and a refinement of the definition may be required in a particular circumstance (see Ontario v. Canadian Pacific Ltd., 1995 112 (SCC), [1995] 2 S.C.R. 1031, at para. 67).
[27] The present Ontario vacancy tax rebate scheme commenced in 2001. It appears that no court has determined the definition of “use” and “vacant property” within the context of s.364 of the Municipal Act. The only two court cases that have specifically considered s.364 of the Municipal Act do not provide clear interpretations of the two terms (see BCE Place Ltd. v. Municipal Property Assessment Corp., [2008] O.J. No. 4580 (Div. Ct.), Niagara Falls (City) v. Lundy’s Lane Portfolio Inc., [2010] O.J. No. 2593 (Div. Ct.)).
C. The Interpretation of Similar Legislation
[28] The parties both cited cases that deal with the interpretation of the words “use” and “vacant property”, and submitted that these cases support their positions.
[29] Haldimand County relies on several cases in which properties were found to be in “use.” I have summarized some of those cases below.
[30] In Newcastle City Council v. Royal Newcastle Hospital, [1959] A.C. 248 (H.L.), the issue was whether the hospital used or occupied land. The hospital owned unfenced vacant land which was acquired to keep the atmosphere clear and unpolluted, prevent building on the land, provide quiet and serene surroundings for the patients, and give room to expand hospital activities. The court held that an owner can “use” land by keeping it in its virgin state for his own special purposes. As such, the land was used by the hospital. It was not necessary for there to be overt acts of physical use, because the hospital is reaping a benefit from the land.
[31] In British Columbia (Assessment Commissioner) v. McMinn, [1981] B.C.J. No. 34 (Sup. Ct.), the court considered the meaning of “use” in the context of British Columbia’s Assessment Act. Part of the property was inside a fence and classified as farmland, while the part outside the fence that was not being actively used for farming operations was classified as rural. The court held that, while the acreage outside the fence was not actively used, the respondent was embarking on a plan to bring this entire acreage into a farming operation and was taking a logical course to develop his entire property. Thus, all of the property was being used.
[32] In Nordfibre Co. v. Ontario (Regional Assessment Commissioner Region, No. 28), 1994 8810 (ON SCDC), [1994] O.J. No. 4470 (Div. Ct.), the union went on strike from 1989 to 1993. Since the strike, Nordfibre had not produced any product. The Assessment Act imposed tax liability on every person “occupying or using land for the purpose of, or in connection with, any business.” The Divisional Court held that Nordfibre had maintained its plant so that it could recommence production. The court held that Nordfibre was not exempt from the taxes because it still occupied land in connection with a manufacturing business.
[33] Haldimand County also cited the decision in Firestone Tire and Rubber Company v. Hamilton (City), 1955 13 (SCC), [1955] S.C.R. 604. This case was decided under the old business assessment tax regime which provided for a refund of taxes if the company was not “carrying on business.” In the Firestone case, the plant was shut down for four months due to a strike. Factory workers were not permitted onto the property and no product was produced. The plant was maintained so that the normal business would be resumed following the temporary interruption in production. The Supreme Court of Canada stated that it was not sufficient to show that part of the business activities were suspended, even though it was a major part. It was incumbent upon the company to show that no part of its business was carried on during the period. The Court held that the company was carrying on business which did not permit a basis for an application for a tax refund.
[34] On the other hand, U.S. Steel relies on several cases in which properties were found to be not in “use” and/or “vacant.” The issue in the following four cases was whether the owner is entitled to a s.364 Municipal Act vacant unit rebate. In these cases, the Assessment Review Board had to interpret the word “vacant” in Regulation 325/01 (which is not defined in the Regulation) and whether the property was “used.” In each of these cases, the Board found that the presence of fixtures was not sufficient proof that the property was being used; therefore, a vacant unit rebate was available.
[35] In 539843 Ontario Ltd. v. Marathon (Town), [2009] O.A.R.B.D. No. 111 (ARB File No. WR 77720), a restaurant had been closed since 2006. Equipment and furniture remained on the premises. The Regulation specifically refers to the fact that the “presence of fixtures” does not “constitute use of a building or structure or a portion of a building.” The Board stated that the intention of the vacancy rebate is to promote the economy by helping businesses weather economic distress. The Board further stated that the most important factor in determining eligibility is usage. Emptiness may provide an indication as to whether or not a unit is being used but it is not the determinative factor.
[36] In Vaspan Developments Ltd. v. London (City), 2011 CarswellOnt 7433, [2011] O.A.R.B.D. No. 288 (ARB File No. WR 103015), a property was leased as a supermarket but became vacant in 2007. Chattels and fixtures used in the operation of a supermarket remained on the premises. The Board found that the owner qualified for the vacancy rebate and explained that the word “vacant” refers to whether the property or a portion of the property is being used, not whether the property is empty. If the owner is not using the property for its own purposes and it is available for lease to tenants, the property is vacant.
[37] In Windsor Tool & Die Ltd. v. Windsor (City), 2012 CarswellOnt 12848, [2012] O.A.R.B.D. No. 231 (ARB File No. WR 114783), a manufacturing facility ceased production after 2007. The claimed vacant area contained built-in obsolete machinery that was cost prohibitive to remove. The Board found that the claimed vacant area was eligible for the vacant unit rebate. The large pieces of machinery anchored to the floor were fixtures, and their presence did not constitute a use of the claimed vacant area pursuant to the Regulation.
[38] In Kitchener Frame Ltd. v. Kitchener (City), [2013] O.A.R.B.D. No. 300 (ARB File No. ID 121839), a manufacturing building ceased production in 2008. The owner then dismantled and removed equipment affixed in the building. The Board considered the context, purpose and legislative intent of s.364. The Board recognized that the presence of fixtures; the installation or removal of fixtures; and the activities of repairing, cleaning or renovating the building do not constitute a use of the building as provided for in the Regulation. It therefore found that the dismantling and removal of equipment did not constitute a use of the building. Thus, the area was vacant and the owner was entitled to a tax rebate.
IX. APPLICATION OF THE TEST AND CONCLUSION
[39] As I have stated above, it is not necessary for me to find that the moving party’s arguments will or probably will succeed. I am, however, satisfied that they do raise issues that are open to very serious debate. In coming to this determination I have had careful regard to the careful and persuasive counter-arguments advanced by the respondent in its factum.
[40] It is not my role, as the judge hearing the leave motion, to make determinations of the issues. That is the role of the panel hearing the appeal.
[41] The cogency of the arguments on both sides reinforces the conclusion that the correctness of the decision is indeed open to very serious debate. There are arguable errors of law in the Board’s statutory interpretation of the terms. Although U.S. Steel has cited several Administrative Review Board decisions that have interpreted the Regulation, the facts of those cases were very different. The Divisional Court decision in Nordfibre Co. v. Ontario is factually similar to the case at bar as it involved a strike in an industrial setting, but that case involved the interpretation of a different legislation. No court has provided a decisive statutory interpretation of Regulation 325/01 in these circumstances.
[42] The Board relied on the decision of an Administrative Review Board in the case of Armel Corp. v. Guelph (City), 2011 CarswellOnt 12949, [2011] O.A.R.B.D. No. 388 (ARB File No. WR 112615) in concluding that that the scheme and purpose for the vacancy rebate program is to lessen the tax burden on properties due to a reduction in the property’s productive capacity to bear those taxes. It is notable that, in Armel Corp., the appellant company owned a self-storage or mini warehouse facility. Given that the case at bar deals with industrial property and the lockout of employees during periods of labour disruption, the Armel Corp. decision is arguably not entirely relevant to the current fact situation.
[43] It is a matter of serious debate whether the Board correctly interpreted the legislation, reading it in its entire context, with a view to its object or the legislature’s intent. The interpretation of the legislation is further complicated by the argument that a voluntary lockout of employees offended the scheme and purpose of the legislation and thereby disqualified the plant from the rebate program. In my view, given the complexities of statutory interpretation and the underlying facts of this case, these issues are a matter of serious debate.
[44] I am also satisfied that the issues involved are matters of sufficient importance that leave to appeal ought to be granted. Given that there is no higher court interpretation of the specific provision in the legislation in this case, a decision of the Divisional Court may provide certainty to both municipalities and taxpayers in determining whether vacancy rebates are appropriate for these situations. This will permit property owners and municipalities to have greater accuracy with budgets and financial shortfalls.
[45] There are also other underlying issues regarding the impact that a lockout of unionized employees can have on a vacancy rebate. The rebate can only be granted if the property is not used for a period of at least 90 consecutive days. It is unclear whether allowing a rebate in these circumstances may adversely affect collective bargaining, as it may provide a disincentive for an employer to settle within the first 90 days of a lockout.
[46] Leave to appeal the Assessment Review Board’s decision of April 30, 2015 is therefore granted. The decision of the Board is stayed pending the appeal of the decision, pursuant to rule 63.02(1)(b).
[47] The question of entitlement to costs of the leave motion is reserved to the panel hearing the appeal. The parties agree that costs of this motion should be fixed at $8,000 including disbursements and HST. I agree that this is an appropriate quantum for costs of this motion and therefore fix the costs of this leave motion at $8,000.
Braid J.
Released: February 5, 2016
CITATION: Haldimand County v. U.S. Steel, 2015 ONSC 7767
COURT FILE NO.: 15-655-ML
DATE: 2016-02-05
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
B E T W E E N:
THE CORPORATION OF HALDIMAND COUNTY
Moving Party/Appellant
- and –
U.S. STEEL CANADA INC.
Respondent
RULING ON MOTION FOR LEAVE TO APPEAL
CDB:
Released: February 5, 2016