CITATION: Municipal Property Assessment Corporation v. Steelcare Inc., 2012 ONSC 3719
DIVISIONAL COURT FILE NO.: 488/11
DATE: 20120625
SUPERIOR COURT OF JUSTICE - ONTARIO
(DIVISIONAL COURT)
RE: MUNICIPAL PROPERTY ASSESSMENT CORPORATION v. STEELCARE INC. et al.
BEFORE: Justice Swinton
COUNSEL: Donald Mitchell for the Moving Party, Municipal Property Assessment Corporation
J. Bradford Nixon and Kathleen D. Poole for the Responding Party, Steelcare Inc.
HEARD at Toronto: June 22, 2012
E N D O R S E M E N T
Swinton J.
Overview
[1] The Municipal Property Assessment Corporation (“MPAC”) seeks leave to appeal the decision of the Assessment Review Board (“the Board”) dated September 23, 2011. It argues that the Board erred in law in applying a Market Adjustment Factor (“MAF”) in the assessment of a rail yard owned by the Canadian Pacific Railway (“CP”) in Hamilton and in failing to find that CP was in actual use and occupation of all the railway lands, including the part leased to the responding party Steelcare Inc.
[2] An appeal from a decision of the Board lies to the Divisional Court with leave of the Court, but only on a question of law (s. 43.1(1) of the Assessment Act, R.S.O. 1990, c. A.31).
[3] The test on a leave motion is twofold: is there good reason to doubt the correctness of the decision, and does the proposed appeal raise an issue of importance?
The MAF Issue
[4] In my view, there is not good reason to doubt the correctness of the decision on this issue. The Board clearly stated that it was required to value CP’s railway lands in accordance with s. 30(2)(d) of the Act, which states that the land and property of a railway company shall be assessed as follows:
the real property not designated in clauses (b) and (c) in actual use and occupation by the company, at its actual cash value as it would be appraised upon a sale to another company possessing similar powers, rights and franchises.
[5] The Act does not prescribe a particular methodology for the Board in determining valuation. The moving party states in its factum, “The cost approach is one of several acceptable methods of valuation. The individual components of the cost approach are not assessments but rather tools used to arrive at an estimate of value” (para. 29).
[6] The Board correctly stated that s. 30(2)(d) required it to consider a hypothetical sale to a railway company in valuing the CP lands. The Board also noted that the provision of the Act was enacted to ensure that the real property of a railway company, in actual use and occupation by the railway company, should not be assessed at scrap value (Canadian Pacific Railway Co. v. City of Sudbury (1961), 1960 344 (BC SC), 26 D.L.R. (2d) 261 (S.C.C.) at pp. 288-89).
[7] The parties had agreed that the cost approach should be the method of valuation. The land component used comparisons of sales of similar industrial properties in the Hamilton marketplace, while the Steelcare warehouse built on the land included calculation of replacement cost new less chronological depreciation for the building.
[8] MPAC had developed the MAF after observing that industrial properties were selling in the marketplace for less than the cost values. According to its in-house policy, the MAF is not applied to certain lands, including railway yards, although it is applied to port authority lands and petro-chemical plants, for example. Applied here, the MAF would reduce the assessment by 22.24%.
[9] The Board determined that the MAF applied by MPAC to the current value of industrial properties in Hamilton should be applied to the current value of the whole CP property. In reaching that decision, the Board gave careful reasons, in which it referred to the proper provision in the legislation and the governing case law and considered the expert evidence. It explained that a failure to apply the MAF would result in an assessment for these properties which do not sell that would be higher than the assessment for identical properties that sold. The Board indicated that this did not make sense (Reasons, p. 22). The Board also observed (at p. 23),
Moreover, the intention of subsection 30.(2)(d) is surely to have all rail yards, etc. assessed at their values as such, not to have them valued at more than if valued at current value pursuant to section 19 of the Act.
[10] The Board then concluded that MPAC had over-assessed the property because it did not apply the MAF after using the cost approach methodolgy.
[11] I see no error of law in the Board’s conclusion that the MAF should be applied in order to value the CP rail yard property.
The Actual Use and Occupation Issue
[12] Subsection 30(2)(d) applies to real property “in actual use and occupation” by the railway company. The Board considered the terms of the Management Agreement between CP and Steelcare and the evidence and concluded that CP was not in actual use and possession of the 14.4 acres of land on which Steelcare had constructed the warehouse. Therefore, this part of the property should be assessed under s. 19.
[13] The Board rejected an argument that Steelcare was acting as an agent for CP. It concluded that Steelcare has physical possession and control of the Steelcare portion of the property. In doing so, the Board made a number of findings of fact, including the following:
- Steelcare built, owns and maintains the 167,000 square foot warehouse building on the Steelcare portion of the lands;
- Steelcare controls access and moves railcars in and out;
- Steelcare services both CP and its own customers from the warehouse, with about 50,000 square feet reserved to serve CP and its customers;
- CP does not conduct any business on the Steelcare portion of the lands;
- Article 10.2 of the Management Agreement provides that the facility will be operated by and for the sole benefit and profit of Steelcare; and
- Article 20.11 provides that the parties are independent contractors.
[14] I do not see any legal error in the interpretation of the Management Agreement or the finding that Steelcare was not an agent for CP. The Board applied the relevant case law to the facts and concluded that CP was not in actual use and occupation. As there is not good reason to believe that the Board erred in law, I would not grant leave to appeal this issue.
Conclusion
[15] The motion for leave to appeal is dismissed. Costs to Steelcare are fixed at $4,000.00 inclusive of HST and disbursements.
Swinton J.
Released: June 25, 2012