Carsons' Camp Ltd. v. Municipal Property Assessment Corp. et al. [Indexed as: Carsons' Camp Ltd. v. Municipal Property Assessment Corp.]
88 O.R. (3d) 741
Court of Appeal for Ontario,
Simmons, MacFarland and Rouleau JJ.A.
January 14, 2008
Assessment -- Constitutionality -- Trailers owned by third parties which were placed on campground owner's land with sufficient permanency to be considered part of land being included in owner's property tax assessment -- Assessment of trailers not amounting to indirect tax -- Taxation of trailers being authorized by statute and not contravening s. 53 of Constitution Act, 1867 -- Assessment Act, R.S.O. 1990, c. A.31 -- Constitution Act, 1867, s. 53.
Assessment -- Interpretation -- "Current value" -- Inclusion of term "fee simple" in definition of "current value" not having effect of limiting tax assessment to interests owned by owner of the underlying land -- Section 19(1) of Assessment Act contemplating assessment of all that falls within expanded definition of "land" -- Trailers owned by third parties which were placed on campground owner's land with sufficient permanency to be considered part of land being properly included in owner's property tax assessment -- Assessment Act, R.S.O. 1990, c. A.31, ss. 1, 19(1).
The applicant owned and operated a campground which contained campsites that were rented out to third party trailer owners on a seasonal basis. The respondent determined that a number of the third-party-owned trailers were placed on the applicant's property with sufficient permanency to be considered part of the applicant's land for the purpose of assessment under the Assessment Act. The applicant applied for an order declaring that seasonally-used trailers owned by third parties could not be assessed and taxed as land under the Act, that taxation of such trailers amounted to an indirect tax and was beyond the legislative competence of the province, and that taxation of such trailers was not authorized by statute and contravened s. 53 of the Constitution Act, 1867. The application was granted in part. The application judge found that the trailers did not form part of the "current value" of the land. "Current value" is defined in s. 1 of the Act as meaning "in relation to land, the amount of money the fee simple, if [page742] unencumbered, would realize if sold at arms length by a willing seller to a willing buyer". The application judge found that the trailers could not be assessed and taxed as land because they did not form part of the "fee simple" of the applicant's property. He rejected the applicant's constitutional challenges. The respondent appealed and the applicant cross-appealed.
Held, the appeal should be allowed; the cross-appeal should be dismissed.
The application judge erred in his interpretation of the term "current value". The inclusion of the term "fee simple" in the definition of "current value" did not have the effect of limiting tax assessment to interests owned by the owner of the underlying land. If the legislature had intended it to have that effect, it would have changed the definition of land in the Act to make it coincide with the common law definition of land. The failure to do so was not merely an oversight. The definition of "current value" in s. 1 must be read harmoniously in the context of the whole of the Act, the object of which is to assess all property in Ontario coming within the expanded definition of "land", "real property" and "real estate". Similarly, the term "fee simple" cannot be isolated from the rest of the definition of "current value". That definition clearly states that it is to be applied "in relation to land". The expression "fee simple" was not intended to limit assessment to the "fee simple" interest in the freehold owner at common law. Rather, the words "fee simple" must be interpreted "in relation to" the statutorily broadened definition of "land". The Act contemplates identifying what is land according to the expanded definition, then assessing the value of the land assuming a fee simple ownership interest without encumbrance of all that comes within the definition. The trailers were properly included in the applicant's property tax assessment.
The assessment of the trailers did not amount to an indirect tax. The tax had the hallmarks of a true land tax. It was imposed on land and assessed as a percentage of the value of land. It was collected from the owner of the freehold. The fact that the tax may be recouped from a third party did not change the nature of the tax and make it indirect. The fact that the definition of land in the Act includes items not owned by the owner of the freehold did not change the character of the tax.
The tax did not contravene s. 53 of the Constitution Act, 1867. The Act authorizes the levy of realty taxes against the owner of the freehold for the assessed value of land as broadly defined in the statute. Once a trailer comes within the definition of land, it is included in the assessed value without regard to the ownership of the trailer. The Act provided the statutory basis for the tax on land, defined to include the trailers. The tax was authorized by statute, and the statutory authorization predated the Taxpayer Protection Act, 1999, S.O. 1999, c. 7.
APPEAL AND CROSS-APPEAL from the judgment of O'Connell J., [2006] O.J. No. 5373, 49 R.P.R. (4th) 288 (S.C.J.), allowing in part an application attacking an assessment.
Cases referred to Bell ExpressVu Ltd. Partnership v. Rex, [2002] 2 S.C.R. 559, [2002] S.C.J. No. 43, 100 B.C.L.R. (3d) 1, 212 D.L.R. (4th) 1, 287 N.R. 248, [2002] 5 W.W.R. 1, 93 C.R.R. (2d) 189, 18 C.P.R. (4th) 289, 2002 SCC 42; McMaster University and City of Hamilton (Re) (1975), 16 N.R. 589 (S.C.C.), affg (1973), 1973 CanLII 410 (ON CA), 1 O.R. (2d) 378, [1973] O.J. No. 2179, 16 N.R. 590 (C.A.); Myers v. Ontario Regional Assessment Commissioner, Region No. 32 (1991), 1991 CanLII 7078 (ON SC), 3 O.R. (3d) 488, [1991] O.J. No. 910, 81 D.L.R. (4th) 149, 4 M.P.L.R. (2d) 238 (Div. Ct.); Northern Broadcasting Co. v. Mountjoy (Improvement District), 1950 CanLII 9 (SCC), [1950] S.C.R. 502, [1950] S.C.J. No. 19, [1950] 3 D.L.R. 721; Ontario Home Builders' Assn. v. York Region Board of Education, 1996 CanLII 164 (SCC), [1996] 2 S.C.R. 929, [1996] S.C.J. No. 80, 29 O.R. (3d) 320n, 137 D.L.R. (4th) 449, 201 N.R. 81, 35 M.P.L.R. (2d) 1, 4 R.P.R. (3d) 1[page743] Statutes referred to Assessment Act, R.S.O. 1990, c. A.31, ss. 1 "land", "real property" and "real estate", "current value", 3(1) [as am.], 17(1) [as am.], 19(1) [as am.] Constitution Act, 1867, ss. 53, 92(2) Taxpayer Protection Act, 1999, S.O. 1999, c. 7, Sch. A
Christian G. Schulze, for appellant, respondent by cross- appeal, Municipal Property Assessment Corporation. Donald R. Greenfield, for appellant, respondent by cross- appeal, the Corporation of the Town of South Bruce Peninsula. John L. O'Kane, for intervenors for County of Bruce, County of Prince Edward, County of Huron, County of Lambton, County of Brant, County of Simcoe, County of Grey, United Counties of Prescott-Russell, City of Sarnia, City of Quinte West, City of Elliot Lake, Municipality of East Hawkesbury, Township of Ear Falls, Township of Tay, Town of Goderich and Town of Espanola and Town of Lincoln. Peter T. Fallis, for respondent, appellant by cross-appeal, Carsons' Camp Limited. Shannon M. Chace-Hall, for intervenor the Attorney General of Ontario.
The judgment of the court was delivered by
[1] ROULEAU J.A.: -- This appeal concerns the proper interpretation of "current value" as it appears in s. 19(1) of the Assessment Act, R.S.O. 1990, c. A.31 (the "Act"). The issue is whether the assessed value upon which the owner of the underlying land must pay taxes can properly include the value of third-party owned trailers which are placed upon or affixed to the land.
I. Background
[2] Carsons' Camp Limited owns and operates a 53 acre campground on the shores of Lake Huron in the Town of South Bruce Peninsula. In addition to 205 campsites for transient campers, the campground contains 495 campsites that are rented out to individual third party trailer owners on a seasonal basis from May 1 to October 15 of each year.
[3] The Municipal Property Assessment Corporation ("MPAC") determined that 229 of the third-party owned trailers located on Carsons' property were placed there with sufficient permanency [page744] to be considered part of Carsons' land for the purpose of assessment under the Act. MPAC issued an Omitted Property Assessment Notice for the 2003 taxation year which included the value of the 229 trailers, thereby adding $5,250,000 to Carsons' pre-existing assessment for that year.
[4] The 2003 Omitted Assessment was subsequently cancelled by regulation. However, for the 2004 and 2005 taxation years MPAC assessed all seasonally-used trailers it determined to be land within the meaning of the Act to the owners of campgrounds across Ontario. Carsons' assessment again included $5,250,000 on account of the value of the 229 trailers.
[5] Carsons' does not dispute that the 229 trailers met MPAC's criteria for determining whether a trailer should be assessed under the Act. In order to meet MPAC's "permanency test", a trailer unit must be at least 102 inches (8' 6") wide, with or without an addition. The trailer unit must also meet three of the following five criteria:
(1) The trailer unit has permanent water, electrical and waste disposal connections to the site;
(2) The trailer unit requires an oversize permit for road travel (based on its width, length, height or weight);
(3) The trailer unit is equipped with attached structures such as a deck, carport, garage or sunroom;
(4) The trailer unit's tow tongue has been removed; and
(5) The trailer unit is placed on concrete blocks or a concrete pad or other foundation, whether or not the undercarriage has been removed.
[6] Despite conceding permanency, Carsons' argued that the value of the trailers should nonetheless not be included in its property tax assessment by virtue of a 1997 amendment to the Act which changed the basis for valuation from "market value" to "current value". The significance of this change will be discussed in detail below.
[7] In February 2005, Carsons' applied for an order declaring, among other things, that:
(1) seasonally-used trailers owned by third parties cannot be assessed and taxed as land under the Act;
(2) taxation of seasonally-used trailers owned by third parties amounts to an indirect tax and is beyond the legislative competence of the province; and[page745]
(3) taxation of seasonally-used trailers owned by third parties is not authorized by statute and contravenes s. 53 of the Constitution Act, 1867.
[8] The application judge allowed Carsons' application in part. He held that seasonally-used trailers owned by third parties and not intended to be permanent fixtures on the land do not form part of the "current value" of land as that term is defined in the Act. He therefore concluded that the 229 trailers in question could not be assessed and should not have been included in Carsons' property tax assessment. The application judge rejected Carsons' constitutional challenges to the taxation scheme.
[9] MPAC and the Town of South Bruce Peninsula appealed on the question of whether seasonally-used trailers owned by third parties can be assessed and taxed as land under the Act. Carsons' cross-appealed on the question of whether taxation of seasonally-used trailers owned by third parties violates ss. 53 and 92(2) of the Constitution Act. The Attorney General of Ontario and a coalition of 17 municipalities intervened in support of MPAC and the Town's positions on the appeals.
[10] I am of the view that the application judge erred in his interpretation of the term "current value"; I would therefore allow the appeal. I agree with the application judge's conclusions on the constitutional issues and would dismiss the cross-appeal.
II. The Statutory Scheme Under the Act
(a) All land is liable to assessment
[11] Section 3(1) of the Act provides that "all real property in Ontario is liable to assessment and taxation" subject to certain exceptions (none of which apply in this case).
[12] The terms "real property", "land" and "real estate" are used interchangeably throughout the Act and are broadly defined in s. 1 to include:
(a) land covered with water,
(b) all trees and underwood growing upon land,
(c) all mines, minerals, gas, oil, salt quarries and fossils in and under land,
(d) all buildings, or any part of any building, and all structures, machinery and fixtures erected or placed upon, in, over, under or affixed to land,
(e) all structures and fixtures erected or placed upon, in, over, under or affixed to a highway, lane or other public communication or water, but not the rolling stock of a transportation system.
(Emphasis added) [page746]
[13] This broad definition has not changed since its introduction in the Act in 1904 and its interpretation continues to be governed by the Supreme Court of Canada's decision in Northern Broadcasting Co. v. Mountjoy (Improvement District), 1950 CanLII 9 (SCC), [1950] S.C.R. 502, [1950] S.C.J. No. 19. In that case, the majority held that the expanded definition of land in the Act meant that certain items not considered fixtures at common law could nonetheless be considered part of the land for the purpose of valuation, so long as they are placed upon or affixed to land with some degree of permanency.
(b) Land is assessed against the owner
[14] Section 17(1) of the Act states that "land shall be assessed against the owner". The term "owner" is not defined in the statute, but has been interpreted to mean the legal owner of the land: see McMaster University and City of Hamilton (Re) (1973), 1973 CanLII 410 (ON CA), 1 O.R. (2d) 378, [1973] O.J. No. 2179 (C.A.), at p. 383 O.R., affd (1975), 16 N.R. 589 (S.C.C.).
[15] Where the land is comprised of interests owned by tenants or third parties other than the owner of the underlying land, the Act does not provide for separate assessment of each individual owner: Myers v. Ontario Regional Assessment Commissioner, Region No. 32 (1991), 1991 CanLII 7078 (ON SC), 3 O.R. (3d) 488, [1991] O.J. No. 910 (Div. Ct.), at p. 491 O.R. In Myers, the court held that trailers, which were occupied year round in that case, were assessable against the owner of the land upon which they were placed or to which they were affixed, notwithstanding the trailers being owned by third parties.
(c) Assessment of land is based on current value
[16] Section 19(1) of the Act provides that "[t]he assessment of land shall be based on its current value". "Current value" is defined in s. 1:
"current value" means, in relation to land, the amount of money the fee simple, if unencumbered, would realize if sold at arm's length by a willing seller to a willing buyer;
[17] The term "current value" first appeared in the Act in 1997. Prior to that, the statute provided that land was to be assessed at its "market value", which was defined as "the amount that the land might be expected to realize if sold in the open market by a willing seller to a willing buyer".
[18] This change in wording to include the term "fee simple" in the definition of "current value" is at the centre of this case. The parties disagree as to whether the introduction of the term "fee [page747] simple" has the effect of limiting tax assessment to interests owned by the owner of the underlying land.
III. The Judgment Below
[19] The application judge appears to have accepted that the 229 trailers in issue were placed on Carsons' land with sufficient permanency so as to constitute land within the expanded definition in s. 1 of the Act. Following Myers, he also accepted that the entire value of a parcel of land is to be included in a single assessment against the owner of the underlying land, and that the Act does not provide for a separate assessment being produced for each trailer distinct from the land upon which it is placed or to which it is affixed.
[20] Nevertheless, the application judge concluded that the 229 trailers could not be assessed and taxed as land because they did not form part of the "fee simple" of Carsons' property. He wrote at paras. 61-62:
I ask the question how can the meaning of current value, the basis for the assessment include the value of 229 trailers, if they are land. They are not part of [the] [f]ee [s]imple. They would not be sold by a willing seller to a willing buyer nor would they be part of a sale of land, as they are not owned by the seller.
The term "fee simple" does not cover moveable trailers owned by third parties. Such being the case, they must be classified as chattels, moveable, unless the interpretation of the word land, referring to structures i.e. trailers, is extended to include such, they being placed there with some degree of permanency. If such is the interpretation [then] the definition of current value for the purposes of the Assessment Act is deficient.
[21] Unable to reconcile the definition of "land" and the definition of "current value" with respect to seasonally-used trailers, the application judge concluded at para. 70 that the 229 trailers could not be assessed "until such time as appropriate amendment is made" to the definition of current value in the Act.
IV. Analysis
The main appeal
(a) Appellants' submissions
[22] The appellants submit that the application judge misconstrued the words and purpose of s. 19(1) in concluding that the definition of "current value" is at odds with the definition of "land". The definition of land has not changed since 1904 and the value of land for assessment purposes has been based [page748] on this expanded definition ever since. In the appellants' view, the application judge's interpretation of "current value" divorces the valuation function from the statutory definition of land. Further, it fails to take into account the purpose of the Act as a whole.
[23] The appellants submit that use of the term "fee simple" in the definition of "current value" is intended to capture the totality of interests in an assessable parcel of land; the term does not preclude parts of the land assessed from being owned by individuals other than the freehold owner. The appellants submit that neither the language nor purpose of this amendment indicates an intention to alter the law that everything encompassed by the defined term "land" is to be included in assessing value. It would be illogical, they contend, to define land broadly in one part of the Act, only to ignore this definition when determining the assessed value of land in another part.
(b) Respondent's submissions
[24] In contrast, Carsons' argues that by introducing the concept of "current value" as that term is defined, the legislature intended to exclude from the assessed value of land anything that would not have been considered land at common law. This is why the legislature used the term "fee simple" in the definition of "current value". Carsons' submits that the failure to change the definition of "land" to coincide with this more limited interpretation should simply be viewed as an oversight.
[25] Carsons' further notes that the legislature discontinued the separate assessment of tenants for business occupancy taxes as part of the 1997 amendments. Since then, only the owner of the freehold of the land receives an assessment; tenants no longer receive a separate assessment for the portion of land they occupy. This change, Carsons' argues, supports their submission that by its 1997 amendments the legislature intended to exclude from the assessed value of the land property, such as the 229 trailers, that are owned by third party tenants.
(c) Discussion
[26] I agree with the appellants' submissions that nothing on the record before us suggests that the legislature intended to change what is to be included in the assessed value of land. If Carsons' interpretation is accepted, it would signal a dramatic change in the scope of the Act as it has existed and been applied since 1904 and render the expanded statutory definition of land [page749] meaningless. If the legislature had intended to do so, it would have changed the definition of land in the Act to make it coincide with the common law definition of land. The legislature did not, and I do not find Carsons' submission that this failure was merely an "oversight" to be persuasive.
[27] In addition, I am not persuaded that the change in 1997 from occupancy-based business taxes assessed as against each individual tenant to realty taxes payable by the freehold owner is relevant to the present discussion. Business occupancy taxes were in no way concerned with ownership of the property or the assessed value of the land as a whole; neither is there evidence to indicate that Carsons' tenants were carrying on businesses from their trailers. I do not accept that discontinuance of separate business tax assessments signals an intention to change what was to be included in the assessed value of land.
[28] The interpretation advanced by the appellants accords with the modern approach to statutory interpretation. The Supreme Court of Canada in Bell ExpressVu Ltd. Partnership v. Rex, 2002 SCC 42, [2002] 2 S.C.R. 559, [2002] S.C.J. No. 43, at para. 26, quoted with approval Professor Driedger's formulation of the modern approach to statutory interpretation:
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.
[29] In my view, the change from "market value" to "current value" and the reference to "fee simple" in the definition of "current value" were not intended to change what is to be included in the assessed value. The definition of "current value" in s. 1 must be read harmoniously in the context of the whole of the Act, the object of which is to assess all property in Ontario coming within the expanded definition of "land", "real property" and "real estate". Similarly, the term "fee simple" cannot be isolated from the rest of the definition of "current value". That definition clearly states that it is to be applied "in relation to land". From this contextual perspective, it is apparent that the expression "fee simple" was not intended to limit assessment to the "fee simple" interest of the freehold owner at common law or as that interest would appear in the registry or land titles offices. Rather, the words "fee simple" must be interpreted "in relation to" the statutorily broadened definition of "land".
[30] Put another way, the Act contemplates identifying what is land according to the expanded definition, then assessing the [page750] value of the land assuming a fee simple ownership interest without encumbrance of all that comes within the definition. There are strong policy reasons for interpreting the Act in this way. The dominant owner of the freehold is easily identified; there is no need to determine the ownership interest in each portion of the broadly defined "land". This approach makes it easier to assess the total value of the land, while also preventing manipulation of assessed value by changing the ownership of parts of the land. Further, the freehold owner controls what is included in the assessed value because the freehold owner controls what is placed on the land and on what terms.
[31] For these reasons, I conclude that s. 19(1) of the Act contemplates assessment of all that falls within the expanded definition of land despite the use of the words "fee simple". The 229 trailers were therefore properly included in Carsons' property tax assessment.
The cross-appeal
[32] It is Carsons' position that the application judge ought to have found that the assessment of the 229 trailers is an indirect tax and is therefore beyond the legislative competence of the province. Further, Carsons' submits that the assessment and taxation of the 229 trailers is not authorized by statute and therefore contravenes s. 53 of the Constitution Act. I disagree.
(a) Is the tax direct or indirect?
[33] Carsons' relies on Ontario Home Builders' Assn. v. York Region Board of Education, 1996 CanLII 164 (SCC), [1996] 2 S.C.R. 929, [1996] S.C.J. No. 80 to argue that the tax on the 229 trailers is indirect and beyond the legislative competence of the province. Carsons' points out that the portion of its realty taxes attributable to the value of the trailers is not levied against the owners of the trailers. Rather, it is demanded from one person (Carsons') with the intent and expectation that someone else (the owners of the trailers) will pay. The character of the tax is therefore indirect.
[34] I would not give effect to this submission. As Iacobucci J. explained in Ontario Home Builders' Assn. at para. 46:
[T]he incidence of land tax, in the traditional sense, will be direct. The hallmarks of a land tax are that the tax is, of course, imposed on land against the owner of the land, and that the tax is assessed as a percentage of the value of the land, or as a fixed charge per acre. The tax may be an annual, recurring assessment, or a one-time charge. . . . Although landowners, like everyone, may wish to pass on their tax burden to someone else [page751] or otherwise avoid taxation, this desire or ability does not transform the direct nature of the tax into an indirect one. . . .
(Emphasis added)
[35] The tax in issue has the hallmarks of a true land tax. The tax is imposed on land and assessed as a percentage of the value of land. The tax is collected from the owner of the freehold, who is also the very person whom the legislature intends and desires should pay it. The fact that the tax may be recouped from a third party does not change the nature of the tax and make it indirect; on the contrary, landlords almost always recoup realty taxes from tenants in some manner.
[36] The fact that the definition of land in the Act includes items not owned by the owner of the freehold also does not change the character of the tax. When determining the incidence of a tax, it is important to bear in mind the context within which the tax operates as well as the purpose of the tax: Ontario Home Builders' Assn., at para. 43. Here, the 229 trailers have features closely associated with the land and are structures placed thereon with a degree of permanency. The purpose of the assessment is the taxation of land and the tax is therefore a direct tax within the competence of the province.
(b) Does the tax contravene section 53 of the Constitution Act, 1867?
[37] Carsons' argues that the 1997 amendments to the Act restrict assessment to the freehold interest in the land, including chattels affixed to the land in which the owner of the freehold has a fee simple interest. Carsons' submits that, absent an amendment to the Act, the province cannot now assess and tax the 229 trailers because they do not constitute fixtures at common law and the owner of the freehold does not have a fee simple interest in the trailers. This argument is closely linked to Carsons' position in the main appeal.
[38] Carsons' position is that, before the province can levy a tax on these trailers, s. 53 of the Constitution Act requires that the province pass a bill in the legislature authorizing such tax. Since the adoption of the Taxpayer Protection Act, 1999, S.O. 1999, c. 7, Sch. A, a referendum is required before such a new tax is imposed.
[39] I would not give effect to this submission. As set out earlier in these reasons, I interpret the Act as authorizing the levy of realty taxes against the owner of the freehold for the assessed value of land as broadly defined in the statute. Once a trailer comes within the definition of land, it is included in the [page752] assessed value without regard to the ownership of the trailer. Both prior to and following the 1997 amendments, the Act provides the statutory basis for the tax on land, defined to include the 229 trailers. The tax on these trailers is authorized by statute and this statutory authorization pre-dates the Taxpayer Protection Act.
V. Conclusion
[40] I would allow the appeal and would grant an order deleting paras. 1 to 6 from the judgment and dismissing the claim for relief granted therein and amending para. 12 as required to give effect to these reasons. I would also dismiss the cross-appeal and award costs to the appellants fixed at $30,000, inclusive of disbursements and GST.
Appeal allowed; cross-appeal dismissed.