CITATION: Municipal Property Assessment Corporation v. Loblaw Properties Limited, 2017 ONSC 1299
DIVISIONAL COURT FILE NO.: 633/15
DATE: 20170301
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
MORAWETZ R.S.J., NORDHEIMER & MULLIGAN JJ.
BETWEEN:
MUNICIPAL PROPERTY ASSESSMENT CORPORATION
Appellant
– and –
LOBLAW PROPERTIES LIMITED and THE CITY OF TORONTO
Respondents
F. Shea & M. McLaren-Caux, for the appellant
J. Walker Q.C. & K. West, for the respondent, Loblaw Properties Limited
C. Henderson, for the respondent, City of Toronto
HEARD at Toronto: February 7, 2017
NORDHEIMER J.:
[1] The Municipal Property Assessment Corporation appeals, with leave, from a decision of the Assessment Review Board dated November 6, 2015.[^1] In that decision, the Board found that the current values of lands owned by the respondent, Loblaw Properties Limited (“Loblaws”), located at 720 Broadview Avenue in the City of Toronto, were $8,400,000 for the 2006, 2007 and 2008 taxation years and $10,920,000 for the 2009, 2010, 2011 and 2012 taxation years. However, using the principal of equity set out in ss. 44(2) and 44(3)(b) of the Assessment Act, R.S.O. 1990, c. A.31, the Board lowered the assessed values of those lands to $1,635,000 as of January 1, 2005 and to $3,042,000 as of January 1, 2008.
[2] No dispute is taken with respect to the Board’s findings regarding the current values of the lands. The dispute is with respect to the findings regarding the assessed values of the lands. More specifically, MPAC submits that the Board erred in its application of the principal of equity set out in ss. 44(2) and 44(3)(b).
Background
[3] Loblaws owns and operates a grocery store at 720 Broadview Avenue. The location is near Danforth Avenue, above the Don Valley ravine, 200 meters from the subway, with unobstructed views of downtown Toronto. The current as of right zoning for this property permits the construction of over 200,000 square feet of residential gross floor area. The property is currently developed with a surface parking lot and an 18,180 square foot, single-storey grocery store, built in 1959.
[4] Loblaws appealed the 2006 to 2012 taxation year assessments for 720 Broadview to the Board, pursuant to section 40 of the Assessment Act, due to the fact that the assessments included a three-story parking garage on the property that had, in fact, been demolished in 2001. In response to the appeal, MPAC delivered a Notice Seeking an Increase of Assessment. MPAC contended that the property should be assessed as “development land”.
[5] The property had originally been assessed by MPAC using the Grocery Store Model and the Large Income Retail Analysis. This is the approach generally taken to the assessment of grocery stores. However, MPAC took the position, before the Board, that those methods for determining assessments were no longer appropriate for this property. Rather, as I have already mentioned, MPAC submitted that the property should be assessed as development land given its unique features.
[6] The Board agreed with MPAC’s submission. At para. 239 of its reasons, the Board said:
The Board accepts MPAC’s evidence that the property is in a prime location and that is has development potential as of right. The Board is satisfied on the evidence that the GSM and LIRA models do not work for this unique piece of prime real estate.
[7] The Board then determined that the current value for the property was $8,400,000 for the 2006, 2007 and 2008 taxation years and $10,920,000 for the 2009, 2010, 2011 and 2012 taxation years. The current values are important because the basic principle for assessing lands, pursuant to s. 19 of the Assessment Act, is:
The assessment of land shall be based on its current value.
[8] While there are prescribed exceptions to the general scheme that land is to be assessed at its current (or market) value (e.g. farm land, railway lands), there are no exceptions to that general rule for the vast majority of lands, including lands that happen to be used as grocery stores.
[9] The determination of current values was not the end of the exercise, however. Having made those determinations, the Board was then required to consider the principle of equity. The rationale for the equity principle was expressed, by the Court of Appeal, in Empire Realty Co. Ltd. and Assessment Commissioner for Metropolitan Toronto et al., 1968 183 (ON CA), [1968] 2 O.R. 388 at p. 398:
The testing of the fairness to the ratepayer of the assessment of his property by looking at what has been done with comparable properties is too well established to need any defence; even an assessment made at the actual value of lands and buildings in compliance with the provisions of s. 35(1) would be an unequitable assessment if all similar lands in the vicinity were assessed at some percentage of actual value substantially less than one hundred; …
[10] The principle of equity is set out in s. 44(2) and s. 44(3)(b) of the Assessment Act. Those two subsections read:
(2) For taxation years before 2009, in determining the value at which any land shall be assessed, reference shall be had to the value at which similar lands in the vicinity are assessed.
(3) For 2009 and subsequent taxation years, in determining the value at which any land shall be assessed, the Board shall,
(b) have reference to the value at which similar lands in the vicinity are assessed and adjust the assessment of the land to make it equitable with that of similar lands in the vicinity if such an adjustment would result in a reduction of the assessment of the land.
[11] While the two subsections are worded somewhat differently, nothing turns on the differences in the wording. It is agreed that the purpose of these subsections is to allow the Board to adjust, what would otherwise be the appropriate assessment for a property, to bring that assessment in line with the assessment of other similar lands in the vicinity. This is consistent with a basic principle of the process under the Assessment Act, which is to ensure a proportional distribution of the tax burden, relative to the current values of lands, so that each property bears its “fair share.”
[12] The Board applied the equity principle to reduce the assessment for 720 Broadview from the current values, that I have set out above, to an assessed value of $1,635,000 as of January 1, 2005 and $3,042,000 as of January 1, 2008. It is that determination that is the subject of this appeal.
Standard of review
[13] The parties are in agreement that the standard of review applicable to decisions of the Board is reasonableness: Junvir Investments Ltd. v. Municipal Property Assessment Corp., [2015] O.J. No. 1347 (Div. Ct.); Municipal Property Assessment Corp. v. Schumacher, 2016 ONSC 3239, [2016] O.J. No. 3400 (Div. Ct.).
[14] As was held in Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190 at para. 47, reasonableness is concerned with the existence of:
… justification, transparency and intelligibility within the decision-making process. But it is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law.
[15] The consideration of reasonableness is made more difficult for a reviewing court, however, where the analytical path used by a tribunal, in arriving at its conclusion, is unstated and/or unexplained. Failing to explain how a result was arrived at is the functional equivalent of a failure to give reasons. As was observed in Edmonton (City) v. Edmonton East (Capilano) Shopping Centres Ltd., 2016 SCC 47, [2016] S.C.J. No. 47 by Karakatsanis J. at para. 36:
When a tribunal does not give reasons, it makes the task of determining the justification and intelligibility of the decision more challenging.
[16] That is what has occurred in this case. As I shall explain, at no point in the Board’s reasons does the Board adequately canvass what the test is, under ss. 44(2) & 44(3)(b), for the application of the equitable principle, nor does the Board state why, in this case, it decided that the only “similar lands” to be considered, under the equitable principle, were two other grocery stores in the area. Consequently, the task of deciding, whether the Board’s ultimate determination is a reasonable one, is a much more difficult exercise.
The Issues
[17] Two questions of law were stated in the order granting leave to appeal. Those questions are:
(i) Did the Assessment Review Board err in its interpretation of subsection 44(2) and paragraph 44(3)(b) of the Assessment Act by failing to identify or apply the correct test or measure of equity, which is the relationship between the assessed values and current values of similar lands in the vicinity?
(ii) Did the Assessment Review Board err in its interpretation of the term “similar lands” found in subsection 44(2) and paragraph 44(3)(b) by having regard to only the current use of the land?
[18] I begin by noting that there is a significant degree of overlap between these two questions. My analysis will consequently address the two questions together, as opposed to separately.
[19] The first principle to be applied, in this analysis, is the modern rule regarding statutory interpretation. That principle is well-established. It is set out, among other places, in Rizzo & Rizzo Shoes Ltd. (Re), 1998 837 (SCC), [1998] 1 S.C.R. 27 where Iacobucci J. said, at para. 21:
Although much has been written about the interpretation of legislation (see, e.g., Ruth Sullivan, Statutory Interpretation (1997); Ruth Sullivan, Driedger on the Construction of Statutes (3rd ed. 1994) (hereinafter "Construction of Statutes"); Pierre-André Côté, The Interpretation of Legislation in Canada (2nd ed. 1991)), Elmer Driedger in Construction of Statutes (2nd ed. 1983) best encapsulates the approach upon which I prefer to rely. He recognizes that statutory interpretation cannot be founded on the wording of the legislation alone. At p. 87 he states:
Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.
[20] What is readily apparent from the plain wording of ss. 44(2) & 44(3)(b) is that, once the Board has determined the current value of the property, it is then mandated to “adjust” the assessed value to make it equitable with “similar lands in the vicinity”. The Assessment Act is, therefore, clear that any adjustment to the current value is to be based on similar lands. What then does the expression “similar lands” mean?
[21] There is little existing authority on this issue. One case from the Supreme Court of Canada, to which the parties made reference, is Ontario (Regional Assessment Commissioner, Region Number 13) v. Downtown Oshawa Property Owners’ Assn., 1978 36 (SCC), [1978] 2 S.C.R. 1030. In that decision, Spence J. referred (at p. 1035) to a test, that had been used in the Court of Appeal in that case, to decide what was meant by “similar real property in the vicinity”. The Court of Appeal had rejected the approach of the Board to the meaning of those words and had determined that the proper meaning was to property that was “of the same general nature, character or function”.
[22] However, it is not apparent from a reading of the full decision that Spence J. adopted that test. Indeed, he expressly disagreed with the approach that the Court of Appeal had taken to the issue before it and reinstated the decision of the Board. What Spence J. did say, in that decision, on the issue of similar property related back to the approach that the Board had taken. He said (at p. 1036):
Reading those two paragraphs in which the Board found that the Central Business Properties and the properties in Mid-Town Mall are not similar, I find that the Board considered many points of comparison between the two sets of properties and on the basis of the consideration of them all came to the conclusion that the properties were not similar. I do not need to express the view of whether I would have come to a similar conclusion although I find the reasons very persuasive but I am of the opinion that the finder of fact, i.e., the Municipal Board, did not fall into any error of principle in considering the applicability of the words “similar property in the vicinity” to the sets of comparable property submitted to it.
[23] The reference to “many points of comparison” is of interest because it mirrors wording used in a later judgment of this court, namely, Trizec Equities Ltd. v. Ontario (Regional Assessment Commissioner, Region No. 27), [1988] O.J. No. 182 (Div. Ct.). In that decision, Saunders J. was faced with the same issue, that is, what constitutes similar properties. He referred to the decision in Downtown Oshawa and found that, based on that decision, the Board was required to “consider all points of comparison”. Saunders J. then concluded on the issue by saying:
All points of comparison must be considered. The Board must make a factual finding based on such a consideration. One point of similarity such as use may be, but is not necessarily, determinative. Some similarities may be overridden by other characteristics and some differences may be subordinated.
[24] Another decision on this issue, to which we were referred, is Municipal Property Assessment Corp. v. Schumacher, 2016 ONSC 3239, [2016] O.J. No. 3400 (Div. Ct.) where the court, in addressing this issue, said simply, at para. 18:
Section 44(3)(b) does not specify any particular methodology.
[25] In my view, the proper approach to be taken to determining what are “similar lands in the vicinity” is that set out by Saunders J. in Trizec, that is, that all points of comparison must be considered. I also agree with the point that he made, and which is of some importance to this case, that a single point of similarity, such as use, is not necessarily determinative of the issue.
[26] The central problem with the decision here is that the Board did not undertake any discernible analysis of the core issue. In the entire section of the Board’s reasons (paras. 241-266), on the issue of the application of the equitable principle, the only reference to any authority on the point is a single reference to the Downtown Oshawa decision, which, as I have said, does not decide the appropriate test.
[27] Of more importance, however, is that the Board does not explain why it concluded that grocery stores were the sole appropriate comparator nor, if it was, why only two grocery stores were considered. This is particularly troubling because, in its reasons on the determination of the current value, the Board had found that the models by which grocery stores had been historically assessed “do not work for this unique piece of prime real estate”. Notwithstanding that express finding, the Board then proceeded, in its equity determination, to apply those self-same models to reach its determination on the assessed value.
[28] The only apparent explanation, offered by the Board, for this inconsistent approach is found in its reasons at para. 245:
The purpose of equity is to ensure that the municipal tax burden is distributed fairly. If all grocery stores in Ontario are assessed by one of the models, is it unreasonable to apply a different standard to this property, just because its current value is exponentially higher than those of other grocery stores? The Board finds that it would be inequitable to do so.
[29] With respect, that is a conclusion without any offered justification. One would have thought, having concluded that this property was a unique piece of prime real estate, the exercise of determining similar lands would have looked at other properties that shared some, or all, of the distinguishing features of this property, principally other development lands. MPAC had provided a level of assessment study for development lands in the vicinity, because its position throughout the hearing was that 720 Broadview would be regarded by the market as development land. The Board did not refer to this evidence. Rather, the Board fixed on other grocery stores because they had the same function, and then only considered two of those stores. By isolating that sole factor, the Board failed to consider all points of comparison, as it ought to have done.
[30] Another problem with the Board’s decision is that it does not appear that any type of analysis, or testing, of the result was undertaken to ensure that the ultimate determination of assessed value reflected a result that was consistent with other properties. Even accepting that the Board was entitled to look only at other grocery stores, the Board had to look at how those grocery stores were assessed, and how those assessed values compared to their corresponding current values, in order to determine whether the result for this property reflected similar treatment to those other stores. Once again, the Board failed to do this.
[31] The Board had before it (exhibit 34) evidence that demonstrated a level of assessment for grocery stores in the vicinity, that was similar to the level of assessment demonstrated for development lands in the vicinity. In particular, it showed a median level of assessment of 86%, and an average (mean) of 81%. The Board rejected that evidence because it was based on the models that MPAC had said, and the Board agreed, were inapplicable to this property. Specifically, the Board said, at para. 252:
As the models did not work with respect to the determination of current value for the property, it would be a fiction to use ASRs determined by the models and apply them to the current values not determined by the models.
[32] However, having rejected this evidence because it was based on the models that the Board found did not apply to this property, the Board then went ahead and determined the assessed values, on an equitable basis, by using those same models. The Board said, at para. 256:
The Board further finds that to make the assessment of the subject property equitable with that of other similar lands in the vicinity, the assessed value for the subject property should also be determined by the models.
[33] The conflict, and inconsistency, between those two conclusions ought to be readily apparent.
[34] The Board concluded that, notwithstanding that there were a number of grocery stores in the vicinity, only two constituted similar properties for the purposes of the equity analysis. Of those two stores, one was located at 1015 Broadview Avenue and the other was located at 2455 Danforth Avenue. The Board used information from those two properties, specifically fair market rents, to arrive at an assessed value for 720 Broadview that was similar to those two properties.
[35] Having done that, one might have expected that the Board would compare the assessed values for 1015 Broadview Avenue and 2455 Danforth Avenue, against their respective current values, to see if the percentage ratio for those two properties was similar to the percentage ratio that was going to result for 720 Broadview. That would certainly be one way, if not an obvious way, of determining whether similar properties were being similarly assessed for equitable purposes.
[36] Contrary to Loblaws’ contention, the Board did have evidence before it of the current value of the properties at 1015 Broadview Avenue and 2455 Danforth Avenue. With respect to 2455 Danforth Avenue, the evidence was that that property, which operates as a Sobeys grocery store, had sold for $5,600,000 in March 2009. It was assessed for the January 1, 2008 valuation day at $4,917,000, and for the January 1, 2012 valuation day at $6,146,000. The assessed value, therefore, was relatively close to its current value.
[37] The evidence with respect to 1015 Broadview Avenue, which also happens to operate as a Sobeys grocery store, was less specific. The evidence was that its current value was approximately $2,000,000 more than its assessed value. That would appear to place its assessed value in the range of 60% to 70% of its current value, depending on how one does the calculation.
[38] The Board found that the assessed values for 720 Broadview should be $1,635,000 as of January 1, 2005 and $3,042,000 as of January 1, 2008, based on the equity principle. That results in the assessed values for 720 Broadview being 20% and 28%, respectively, of the current values. That is not an equitable result. It is a result that bears no relation to the other two properties that the Board used as comparators. It is a result that leaves 720 Broadview, a property whose current value significantly exceeds the current values of the comparators, 1015 Broadview and 2455 Danforth, with an assessed value significantly lower than the assessed value for those two properties. That is certainly not a result that could be explained to the owners of 1015 Broadview Avenue and 2455 Danforth Avenue.
[39] It is also not a result that can be justified on the plain language of the statute. The purpose of ss. 44(2) and 44(3)(b) is to “adjust” the assessed value, so that it is equitable to that of similar lands. The word “adjust” means to “alter or move something slightly in order to achieve the desired fit, appearance or result”.[^2] The result arrived at by the Board is not an adjustment. It is a wholesale up-ending of the values that would otherwise have been dictated by the terms of the Assessment Act.
[40] The result arrived at by the Board is not equitable. It is not based on the evidence that was placed before the Board. If the Board had undertaken the simple test, that I have just set out, it ought to have been obvious to the Board that its application of the equitable principle was fundamentally flawed. The Board’s decision is unexplained and the result is not justified. It is a decision that either misapprehended relevant evidence or ignored relevant evidence. It is a decision that did not employ the proper test for the application of the equitable principle. Those errors constitute errors of law.[^3] They also render the decision an unreasonable one, since those errors render the decision neither justified nor intelligible. It is also not a decision that falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and the law.
[41] For these reasons, the two questions of law, stated in the order granting leave to appeal, must be answered in the affirmative. The appeal is allowed and the decision of the Board, as it relates only to the application of the equitable principle set out in ss. 44(2) and 44(3)(b), is set aside. The matter is remitted back to the Board, to a differently constituted panel, for the purpose of determining the assessed values of the lands, in accordance with these reasons, and on the existing record.
[42] MPAC is entitled to its costs of the appeal to be paid by Loblaws in the agreed amount of $20,000, inclusive of disbursements and HST. The City of Toronto is entitled to its costs of the appeal to be paid by Loblaws in the agreed amount of $12,500, inclusive of disbursements and HST.
NORDHEIMER J.
MORAWETZ R.S.J.
MULLIGAN J.
Date of Release: March 1, 2017
CITATION: Municipal Property Assessment Corporation v. Loblaw Properties Limited, 2017 ONSC 1299
DIVISIONAL COURT FILE NO.: 633/15
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
MORAWETZ R.S.J., NORDHEIMER & MULLIGAN JJ.
BETWEEN:
MUNICIPAL PROPERTY ASSESSMENT CORPORATION
Appellant
– and –
LOBLAW PROPERTIES LIMITED
and THE CITY OF TORONTO
Respondents
REASONS FOR JUDGMENT
NORDHEIMER J.
Date of Release:
[^1]: Loblaw Properties Ltd. v. Municipal Property Assessment Corp. Region No. 9, [2015] O.A.R.B.D. No. 284
[^2]: Oxford Dictionary of English, 2nd edition, revised, Oxford University Press
[^3]: Junvir Investments Ltd. v. Municipal Property Assessment Corp., [2015] O.J. No. 1347 (Div. Ct.) at para. 8.