CITATION: TransCanada Pipelines Ltd. v. Ontario (Minister of Finance), 2022 ONSC 4432
DIVISIONAL COURT FILE NO.: DC-757/17
DATE: 20220729
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Swinton, Stewart and Davies JJ.
BETWEEN:
TRANSCANADA PIPELINES LIMITED
Applicant
– and –
HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO (MINISTER OF FINANCE) and MUNICIPAL PROPERTY ASSESSMENT CORPORATION
Respondents
Michael Barrack and Nicole Henderson, for the Applicant
Christopher Thompson and Ryan Mak, for the Respondent, Her Majesty the Queen in Right of Ontario (Minister of Finance)
Karey Lunau for the Respondent, Municipal Property Assessment Corporation
HEARD at Toronto (by videoconference): May 2, 2022
REASONS FOR DECISION
DAVIES J.
A. Overview
[1] TransCanada Pipelines Limited owns and operates a system of natural gas pipelines across Alberta, Saskatchewan, Manitoba, Ontario and Quebec. TransCanada challenges, by way of an application for judicial review, the validity of the provisions of the regulation under the Assessment Act, R.S.O. 1990, c. A.31 that prescribe the formula for calculating the value of its pipelines in Ontario for property tax purposes: O. Reg 282/98, ss. 41 and 42 and Part X (Tables 1, 2 and 3). TransCanada seeks a declaration that those provisions are ultra vires the Minister’s regulation-making authority.
[2] TransCanada argues the purpose of the Assessment Act is to assess and tax real property in Ontario according to its current value. TransCanada further argues that O. Reg 282/98 is inconsistent with the purpose of the Assessment Act and, therefore invalid, because the formula results in an assessed value for its pipeline that is greater than its current value.[^1] Finally, TransCanada argues that while the Legislature can empower a Minister to make regulations that are inconsistent with the purpose of an act, the Assessment Act does not clearly and explicitly authorize the Minister to depart from the requirement that property is to be assessed according to its current value.
[3] The Minister of Finance and Municipal Property Assessment Corporation (MPAC) argue the purpose of the Assessment Act is simply to assess and tax real property in Ontario and the Minister has the authority to define different methods of assessment for different categories of property. In the alternative, the Minister and MPAC argue that even if the purpose of the Assessment Act is more narrowly construed as TransCanada suggests, the Minister is given clear and explicit power in the Assessment Act to create an alternative method for assessing pipelines that is not necessarily based on current value.
[4] For the reasons that follow, I dismiss the application. I find the purpose of the Assessment Act is to provide for the assessment and taxation of property in Ontario. The provisions of O. Reg 282/98 that create the formula for assessing pipelines are consistent with that purpose. But even if the purpose of the Assessment Act were to assess property based on current value, I find the Assessment Act expressly authorizes the Minister to make regulations providing an alternate method for valuing pipelines. The formula-setting provisions of O. Reg 282/98 are, therefore, valid.
B. Jurisdiction and Standard of Review
[5] Regulations are subordinate legislation that reflect the policy choices of government. Regulations are presumed to be valid. However, a Minister’s powers to make regulations are not without limits. The Minister cannot thwart or undermine the purpose of the enabling legislation when making regulations: Padfield v. Minister of Agriculture, Fisheries and Food, [1968] A.C. 997 (UKHL) at 1060.
[6] The burden is on TransCanada to demonstrate the formula-setting provisions of O. Reg 282/98 are invalid: Katz Group Canada Inc. v. Ontario (Health and Long-Term Care), 2013 SCC 64 at para. 25. One way a regulation can be invalid is if it is inconsistent with the overall purpose of its enabling statute: Katz Group at para. 27; Wildlands League v. Ontario (Natural Resources and Forestry), 2016 ONCA 741 at para. 41. To show O. Reg 282/98 is inconsistent with the purpose of the Assessment Act, TransCanada must show the regulation is irrelevant, extraneous or completely unrelated to the statutory purpose of the Assessment Act: Katz Group, at para. 28; Royal Demaria Wine Co. v. Ontario (Lieutenant Governor in Council), 2018 ONSC 7525 (Div. Ct.) at para. 57.
[7] The presumption of validity requires this Court to favour an interpretation that reconciles the regulation with its enabling legislation so that, if possible, the regulation in dispute is found to be intra vires or within the Minister’s legal authority to make: Katz Group, at para. 25; Royal Demaria Wine Co. at para. 57. The Court must also use a broad and purposive approach when interpreting both the challenged regulation and its enabling statute: Katz Group at para. 26. The regulation and statute must also be read in their grammatical and ordinary sense, harmoniously with the scheme and object of the legislation and the intention of the Legislature.
[8] There are several factors that are not relevant to whether O. Reg 282/98 is ultra vires the Minister’s regulation-making powers. First, the merits of the government’s policy choices that animate the regulation are irrelevant to an assessment of the regulation’s validity: Wildlands, at para. 46. Second, the likelihood that the regulation will advance the Legislature’s policy goal is also irrelevant. Finally, the reason why the Minister made the regulation is also irrelevant.
C. Analysis
a. The regulation is consistent with the purpose of the [Assessment Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html)
[9] TransCanada argues the purpose of the Assessment Act is to provide for the assessment and taxation of real property in Ontario based on its current value. TransCanada argues that the formula in the regulation for valuing pipelines is inconsistent with this purpose because it does not account for current value.
[10] The Minister and MPAC argue the purpose of the Assessment Act is broader than TransCanada suggests. The Minister argues the purpose of the Act is simply to provide for the assessment and taxation of real property in Ontario. The Minister argues the Assessment Act itself contains different methods for assessing different types of real property, and only some methods are based on current value. Therefore, the purpose of the Assessment Act cannot be to assess all real property based only on current market value.
[11] I agree with the Minister and MPAC that the purpose of the Assessment Act is to provide for the assessment of real property in Ontario for tax purposes. A broader interpretation of the purpose of the Assessment Act is consistent with existing jurisprudence and with the language of the Act as a whole.
[12] Section 3 of the Assessment Act states that all real property in Ontario is liable to assessment and taxation, with some exceptions. MPAC is responsible for assessing real property in Ontario for taxation purposes in accordance with the Assessment Act and its regulations.
[13] TransCanada argues that purpose of the Assessment Act is narrowed by s. 19, which says that a land’s assessment “shall be based on its current value.” The term “current value” is defined in the Act as 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: Assessment Act, s. 1.
[14] Sections 41 and 42 of O. Reg 282/98 contain a formula for assessing the value of pipelines in Ontario: the length of the pipe is multiplied by a set rate per linear foot (which depends on the type of pipe and its location). The value of the pipeline is then depreciated according to its age. Finally, a flat rate is added for each connection on the pipeline to an end user. The value of a pipeline can also be reduced for tax purposes if it is not the primary pipeline on a particular right-of-way or easement.
[15] In 2016, MPAC assessed TransCanada’s pipelines in Ontario as having a value of $1.747 billion using the formula in the regulation. According to TransCanada’s expert, however, the market value of the pipelines in question was only $592 million in 2016. Accepting TransCanada’s expert opinion at face value, the formula in the regulation results in an assessed value that is (or at least could be) significantly higher than the current market value of the pipelines in question. TransCanada argues that the formula is, therefore, inconsistent with the purpose of the Act and ultra vires the Minister’s regulation-making authority.
[16] The Court of Appeal for Ontario has commented on the purpose of the Assessment Act in several decisions. For example, in Ottawa Salus Corp. v. Municipal Property Assessment Corp., 2004 14620 (ON CA), [2004] OJ No. 213 at para. 25, the Court held:
The general purpose of the Assessment Act is obvious. It is expressed in s. 3(1) of the Act: “All real property in Ontario is liable to assessment and taxation . . .”. In Canadian Mental Health Ass'n v. Ontario Property Assessment Corp., [2002] O.J. No. 2199 (QL), 31 M.P.L.R. (3d) 79 (S.C.J.) at para. 42, Kozak J. described the purpose of s. 3(1) as follows: “to impose upon all real property in Ontario a general obligation to pay a property tax so that the government can meet its expenditures”.
The Ottawa Salus case dealt with the proper interpretation of one of the exemptions under the Assessment Act for property that is “owned, used and occupied” by charitable and not-for-profit organizations. The issue in that case was what it means to “occupy” land.
[17] In Carsons’ Camp Ltd. v. Municipal Property Assessment Corp., 2008 ONCA 17 at para. 29, the Court of Appeal again held that the purpose of the Assessment Act is to assess all property in Ontario coming within the definition of land, real property and real estate. The Carsons’ Camp case deals with the interpretation of the term “current value” and whether it should include trailers owned by a third-party that were on the land being assessed. The specific issue was whether a change in the language of the Assessment Act (from “market value” to “current value” as the basis for assessments) changed the process for assessing the value of land.
[18] TransCanada relies on a much earlier decision of the Court of Appeal in Mississauga v. Ontario, 1995 687 (ON CA), [1995] OJ No. 1010 (CA) to support its position that the purpose of the Assessment Act is to assess and tax property based on its current value. That case dealt with an earlier version of the Assessment Act. In 1970, the Assessment Act was amended to freeze the value of property for tax purposes at the 1969 market value. In effect, the 1970 amendments suspended the operation of some provisions of the Assessment Act, including the section that required all property to be assessed based on market value. In 1986, while the freezing provisions were still in effect, the Minister made regulations that created a class of land (railway roadways) to be reassessed. Like the argument being advanced by TransCanada, Mississauga argued the regulation was invalid because it provided a formula that assessed the value of railway roadways in a manner that was inconsistent with market value. In that case, the formula for assessing railway roadways resulted in an assessed value that was below the market value. The Court of Appeal upheld the regulation. The Court found that the “primary purpose” of the Assessment Act was that all property in Ontario “be assessed at market value.” Nonetheless, the Court found that the Legislature intended to specifically override the primary purpose of the Assessment Act when it enacted the freezing provisions. As a result, the Minister had authority to make regulations to reassess railway roadways based on a specific formula that did not account for current value.
[19] The decision of the Court of Appeal in Mississauga v. Ontario is not binding on this court for several reasons. First, the decision pre-dates Ottawa Salus and Carsons’ Camp, in which the Court defines the purpose of the Assessment Act more broadly. Second, the decision in Mississauga v. Ontario involved an older version of the Assessment Act and focused on provisions that are not in the current version. Third, the comments by the Court about the purpose of the Assessment Act in Mississauga v. Ontario were largely obiter. That case was really about the scope and application of the freezing provision, not whether the regulations would have been ultra vires had the freeze provisions not been in effect.
[20] The broader statement of the purpose of the Assessment Act in Ottawa Salus and Carsons’ Camp is more consistent with the language and overall structure of the Act. Section 3 of the Assessment Act lays out the overall purpose of the Act – to provide for the assessment and taxation of all real property in Ontario. Section 19 creates a default method for assessing land, namely based on its current value. However, the Act creates several exceptions to the general rule that land is to be assessed according to its current value. Pipelines are not the only class of property that are subject to a different method of assessment under the Assessment Act. Electricity generating and transformer buildings are assessed at a fixed rate per square metre: Assessment Act, s. 19(5.2) and O. Reg 282/98, s. 32.1. Wind turbine towers are assessed at a fixed rate based on their generation capacity: Assessment Act, s. 19.0.1 and O. Reg 282/98, s. 42.5. Given the Assessment Act contains several different methods for assessing real property, it is not accurate to say the purpose of the Act is to assess land based on its current value. Rather, the purpose is to ensure all land is subject to assessment and taxation.
[21] TransCanada also relies on this Court’s decision in Municipal Property Assessment Corporation v. BCE Place Limited (2009), 2009 92126 (ON SCDC), 98 OR (3d) 581 to support its position that the purpose of the Act should be more narrowly defined. However, in BCE Place Limited, the Court found, at para. 61, that the purpose of the Act is “to subject all real property in Ontario to assessment and taxation.” The issue in that case was which method should be used to determine the current value of a large commercial building. The issue was not whether the property should be assessed based on current value or some other method of valuation. It is within that context that the Court held that the Act “intends that every parcel of land shall bear its proportionate share of municipal taxation in a fair and equitable manner, favouring neither the taxing authority through an over-valued assessment nor the taxpayer through an under-valued assessment.” The Court then held that the definition of “current value” must be interpreted in a manner that is fair.
[22] The decision in BCE Place Limited does not stand for the proposition that the purpose of the Act is to provide for the assessment and taxation of all real property at current value. If anything, the decision in BCE Place Limited supports an interpretation that the purpose of the Act is to subject all real property in Ontario to assessment and taxation in a manner that is fair. But there can be more than one method for assessing real property that is fair.
[23] I find that the purpose of the Assessment Act is to provide for the assessment and taxation of land in Ontario. Section s. 2(2)(d) of the Assessment Act gives the Minister the power to make regulations “governing the assessment of pipelines and providing for the depreciation of the assessed values of pipelines.” Sections 41 and 42 of O. Reg 282/98 create a formula for the assessment of pipelines for tax purposes. Those provisions are consistent with the purpose of the Assessment Act and are intra vires the Minister’s regulation-making authority.
b. The [Assessment Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-a31/latest/rso-1990-c-a31.html) expressly authorizes the Minister to make regulations specifying a method for assessing pipelines that is not based on current value
[24] Even if the purpose of the Assessment Act were to assess land for taxation according to its current value, I would still find ss. 41 and 42 of O. Reg 282/98 to be valid.
[25] There is a presumption that the Legislature does not mean to depart from the general purpose of the law without clearly expressing its intentions to do so: Goodyear Tire & Rubber Co. of Canada v. T. Eaton Co., 1956 2 (SCC), [1956] SCR 610 at 614; Parry Sound (District) Social Service Administration Board v. OPSEU, Local 324, 2003 SCC 42 at para. 39. TransCanada argues that the Assessment Act does not expressly override the principle that assessments are to be based on “current value” for all property – including pipelines – and the formula in O. Reg 282/98 is, therefore, invalid. I disagree.
[26] The starting point of TransCanada’s argument is s. 19 of the Act, which says that land assessment “shall be based on its current value.” The Minister is given the power, under s. 19(2.1) of the Assessment Act, to make regulations that specify how the current value of land will be determined. If s. 19(2.1) were the only regulation-making power in the Assessment Act, TransCanada’s argument that the regulations dealing with the assessment of real property must account for the current value of the property would have significant force.
[27] However, the Assessment Act contains several provisions that deal specifically with the assessment of pipelines.
[28] First, s. 2(2)(d) of the Act gives the Minister the power to make regulations “governing the assessment of pipelines and providing for the depreciation of the assessed values of pipelines.”
[29] Second, s. 7 of the Act requires the Minister to prescribe certain classes of property for the purpose of the Act, including pipelines.
[30] Third, s. 25 of the Act contains a detailed scheme for assessing pipelines that is different from how other classes of property are treated under the Act. Subsection 25(4) of the Act states, “despite any other provisions of this Act, a pipe line shall be assessed for taxation purposes in accordance with the regulations.
[31] Finally, pipelines are excluded from s. 24(1) of the Assessment Act, which requires certain land owned by gas distribution companies to be assessed based on its current value. Section 24(2) expressly states, “this section does not apply to a pipe line as defined in section 25.”
[32] Read together, ss. 2(2)(d), 24(2) and 25(4) disclose a clear intention by the Legislature to create an assessment regime for pipelines that is not based on the current value of the land. The Legislature gave the Minister power to make regulations that specify how pipelines are to be assessed. If the Minister’s authority to make regulations governing the assessment of pipelines was constrained by the requirement of s. 19 to assess land based on current value, s. 25(4) would be redundant and the words “despite any other provisions of this Act” would have no meaning. Similarly, if the Minister was only permitted to make regulations for assessing the current value of pipelines, s. 24(2) would be redundant: there would be no reason to exempt pipelines from s. 24(1), which requires assessment based on current value, if the Minister’s power under s. 2(2)(d) was constrained to making regulations based on current value.
[33] Even if the purpose of the Act is to assess land based on current value, the language “despite any other provision of this Act” in s. 25(4) discloses a clear and express intention on the part of the Legislature to empower the Minister, when drafting regulations related to the assessment of pipelines, to establish the method for assessing pipelines without regard to and unconstrained by the requirement in s. 19 of the Assessment Act to assess land based on its current value.
D. Conclusion
[34] Sections 41 and 42 of O. Reg 282/98 are intra vires the Minister’s regulation-making authority. The application for judicial review is, therefore, dismissed.
[35] As agreed by the parties, the applicant shall pay costs of $15,000 all inclusive to Her Majesty the Queen in Right of Ontario.
Davies J.
I agree _______________________________
Swinton J.
I agree _______________________________
Stewart J.
Released: July 29, 2022
CITATION: TransCanada Pipelines Ltd. v. Ontario (Minister of Finance), 2022 ONSC 4432
DIVISIONAL COURT FILE NO.: DC-757/17
DATE: 20220729
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Swinton, Stewart and Davies JJ.
BETWEEN:
TRANSCANADA PIPELINES LIMITED
Applicant
– and –
HER MAJESTY THE QUEEN IN RIGHT OF ONTARIO (MINISTER OF FINANCE) and MUNICIPAL PROPERTY ASSESSMENT CORPORATION
Respondents
REASONS FOR decision
DAVIES, J.
Released: July 29, 2022
[^1]: TransCanada advanced several other arguments in its factum but abandoned all but this one argument during the hearing of its judicial review application.