COURT FILE NO.: A-12737-14
DATE: 2014-12-04
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
City of Greater Sudbury
Applicant
– and –
655131 Ontario Ltd., 655130 Ontario Ltd. Operating under the trade name and style of Algonquin Equipment
Respondents
Marc A.J. Huneault, for the Applicant
Edward J. Conroy, for the Respondents
HEARD: November 26, 2014
REASONS FOR JUDGMENT
GAUTHIER J.
The Application
[1] The City seeks the following relief:
A declaration that any structures erected on the Lands and which specifically include the Butler building and the two fabric covered buildings located at 259 Fielding Road form part of the Lands as defined in section 1 of the Municipal Act 2001, S.O. 2001, c. 25;
A declaration that the City, as owner of the lands as a result of a Notice of Vesting, is also the owner of any and all buildings and structures which specifically include the Butler building and the two fabric covered buildings affixed to the Lands; and
A permanent injunction restraining and prohibiting the Respondents, their employees, successors, agents, assigns, or representatives from removing or deconstructing buildings or structures erected upon 259 Fielding Road, 235A Fielding Road and/or 235B Fielding Road, City of Greater Sudbury.
[2] The properties in question, known municipally as 259 Fielding Road, 235A Fielding Road and 235B Fielding Road, in the City of Greater Sudbury, in the Province of Ontario are legally described as:
PIN 73372-0117
Pcl 29980 SEC SWS; Firstly: Pt Broken Lt 2 Con 5 Waters
Pt 3, 4, 10 53R11242; Secondly: SRO Pt Broken Lt 2 Con 5 Waters
Pt 1, 2, 5, 53R11242; S/T Pt 5 & 10 53R11242 as in LT602178
Greater Sudbury
PIN 73372-0058
Pcl 28624 SEC SWS SRO; Pt Lt 2 Con 5 Waters
As in LT602180; Greater Sudbury
PIN 73372-0057
Pcl 28623 SEC SWS SRO; Pt Lt 2 Con 5 Waters
Pt 6-9, 11-18, 53R11242 T/W Pt 5, 10, 53R11242 as in LT602179
S/T Pt 6-9, 53R11242 as in LT602178; Greater Sudbury
[3] The properties were owned by 655131 Ontario Ltd. (“131”). Michael McGuire was the President of that corporation. His wife, Theresa McGuire, was an officer.
[4] 655130 Ontario Ltd. (“Algonquin Equipment”) was a tenant of 131 and carried on business on the premises under the name Algonquin Equipment. Theresa McGuire is the President and Director of that corporation.
[5] According to Theresa McGuire’s Affidavit, affirmed on October 23, 2014, Algonquin Equipment purchased and paid for the erection and maintenance of the three structures that are the subject of this Application. This fact is not in dispute.
[6] Algonquin Equipment has operated a recreational vehicle sales and service business on the lands for the past twenty years, and continues to do so.
[7] For decades, 131 neglected to pay the realty taxes levied on the subject property. As of July 24, 2014, the sum of $2,760,975.61 was owed to the City.
[8] On January 16, 2006, the City obtained default against 131, for $1,780,433.97, bearing interest at the rate of 15% per year.
[9] On September 29, 2009, 131’s corporate charter was cancelled by the Corporations Tax Branch, effective that date. For all intents and purposes, 131 ceased to exist as a corporate entity as of that date.
[10] On May 11, 2011, the City sent a Notice of Attornment of Rents to Algonquin Equipment, directing Algonquin Equipment to pay its rents owing to 131 to the City.
[11] Algonquin Equipment did not comply with the Notice of Attornment of Rents and advised the City that it did not have sufficient operating revenue to pay any rent to the City.
[12] On September 29, 2011, the City registered Tax Arrears Certificates against the property and initiated tax sale proceedings.
[13] On May 28, 2012, Algonquin Equipment registered a notice on the title to the property, claiming that Algonquin Equipment had an unregistered estate, right, interest or equity in the lands, in the form of a written lease agreement between itself and 131.
[14] Subsequently, the City advertised the lands for sale by public tender, pursuant to section 379 of the Municipal Act, with a closing date for tenders as of May 28, 2014. No bids were submitted by the closing date.
[15] On September 23, 2014, the City registered a Notice of Vesting on the title to the property. The Notice registered by Algonquin Equipment pertaining to the May 28, 2012, Agreement between 131 and Algonquin Equipment was deleted by the Land Registry Office subsequent to the registration of the Notice of Vesting.
[16] As I understand the evidence, Algonquin Equipment and the City entered into a Lease Agreement regarding the subject property in October 2014. Algonquin is paying rent (under protest I am told) to the City to occupy the land and buildings in question.
[17] Algonquin Equipment is considering moving the three structures from the land in question to a farm property municipally known as 144 Moxam Landing Road, in Lively, Ontario.
[18] The City has brought the within Application in response to Algonquin Equipment’s advice of possible relocation of the structures.
The Structures in Question
[19] Although there are multiple buildings on the property in question, there are three in particular, as indicated above, that form the subject matter of the dispute between the parties, and that Algonquin Equipment alleges it owns and is entitled to, despite the registration of the Notice of Vesting. They will be referred to as buildings A1, A2, and A3.
[20] The City’s evidence includes a Building Inventory Report prepared by Tall Pines Engineering. Algonquin Equipment has filed a Building Cost Assessment Report from CDCD Engineering Limited. To a large extent, in dealing with the description of the structures in question, the reports are not contradictory. There is some discrepancy regarding the size of building A1. The former report states that A1 is approximately 11,000 square feet, while the latter describes A1 as being 12,250 square feet. Counsel agreed that not much turns on that difference of opinion.
[21] There is also a difference of opinion regarding the cost of dismantling, removing, transporting and re-assembling the structure. I will have more to say about that later in these reasons.
[22] In describing the structures, I have borrowed liberally from the Tall Pines Engineering report.
A1
[23] The building was constructed in 1993, with an addition in 2003.
[24] This building appears to be two adjoining, pre-engineered steel frame structures with a third structure of unknown construction, located on the north side of the west building.
[25] The building houses Algonquin Equipment’s retail sales operation and its shop. It is somewhere between 11,000 and 12,250 square feet in size, and as indicated consists of three distinct structural parts. The shop and offices are located in the east structure, the retail space and sales staff offices in the west structure, and the third structure referred to as “the lean-to” is not occupied. The west portion of the east structure has a second floor which houses offices and communal staff areas.
[26] The ground floor is concrete slab-on-grade, on foundations which, although not visible, are presumed to be present given the nature and size of the building.
[27] The exterior walls are metal cladding, with an area of masonry veneer on the southeast corner of the retail building at the customer entrance. There is finished drywall in the sales and office areas. The walls in the shop area are metal cladding or unfinished liner.
[28] The interior flooring consists of a concrete slab ground floor, and wood laminate on the second floor. It is unclear what the interior flooring is in the lean-to.
[29] The building is equipped with plumbing, as well as bathroom and kitchen fixtures.
[30] The Tall Pines report opined that the structure is permanent and affixed.
A2
[31] The only opinion evidence regarding this structure (as well as A3) is contained in the Tall Pines report. The CDCD Engineering report dealt only with structure A1.
[32] A2, which was constructed in 1994, is described as an oval “off-white fabric structure”, housing Algonquin Equipment cold storage and is 50’-0’’x100’-0” in size, being approximately 20’ in height. The overall size is 5,000 square feet.
[33] This structure is completely open on the interior, and, although unheated, is serviced with electricity for lighting. There is a breaker panel, but no hydro meter was observed. The floor is granular.
[34] The frame of this structure is light weight steel or aluminum, anchored directly to the ground with driven steel rod anchors. No floor slab was observed. The structure has no permanent foundations.
[35] The Tall Pines report described this structure as affixed and non-permanent.
A3
[36] Except for size, this structure is similar to A2, as it is a fabric structure housing Algonquin Equipment cold storage. It is completely open on the interior, unheated but serviced with electricity for lighting; there is a breaker panel, but no hydro meter. Its frame is light weight steel anchored directly to the ground with steel spike anchors. No floor slab was observed.
[37] The structure is 25’-0’’x115’-0’ in size, approximately 15 feet high, and the interior flooring is granular. The overall size is 2,875 square feet. This structure was constructed in 1989.
[38] When addressing the issue of permanence, in the body of report, Tall Pines offered the opinion that the building is intended to be permanent, “however the damage to the end panel would likely prevent reassembly without intervention from the original manufacturer.” I believe that the use of the word “permanent” in this portion of the report is in error, given that both buildings A2 and A3 are described in almost identical terms, and both A2 and A3 are described as being “affixed and non-permanent” in the report’s Executive Summary.
Issue
[39] The ultimate issue is whether the three structures, or any of them, are chattels and removable by Algonquin Equipment, or whether they are part of the land now owned by the City.
The City’s Position
[40] The City, by virtue of the Notice of Vesting, owns the lands on which the disputed structures are located. The land includes the buildings. As a result, Algonquin Equipment cannot assert ownership of the disputed buildings. The only right it might have would be as against 131.
[41] The City disputes Algonquin Equipment’s suggestion that it was (and is) an innocent tenant of 131, and that the failure of 131 to pay its taxes has nothing to do with Algonquin Equipment. The City relies on the spousal/family relationship between 131 and Algonquin Equipment. Further, the City submits that the purported Agreement of May 18, 2012 is a non-arm’s length transaction advanced after decades of non-payment of municipal taxes.
[42] All three structures are affixed to the land, are large structures that have been in use for more than 20 years, and are permanent (as opposed to occasional).
[43] The City relies on the interplay between the Municipal Act, 2001, S.O. 2001, c.25, the Assessment Act, R.S.O. 1990. c. A/31, and the Building Code Act, 1992, S.O. 1992, c.23, in support of the proposition that “land” includes “buildings”.
[44] Insofar as building A1 is concerned, a court has already determined that a Butler building, once erected, ceases to be a chattel and becomes a building affixed to land within the definition of “land” and “real property” in the Assessment Act. See Port Colborne (City) v. Port Colborne Yacht Harbour and Marine Ltd., 1990 CanLII 6855 (ON SC), 71 O.R. (2d) 225.
[45] As the disputed structures are “land”, the City has established its legal ownership of same and Algonquin Equipment should be prevented from removing them. An Order preventing Algonquin Equipment from doing that is appropriate.
Algonquin Equipment’s Position
[46] Algonquin Equipment owns the Butler style building and the two fabric structures and has the right to disassemble, move or modify any or all of them at any time.
[47] None of the three buildings is annexed to the land; all three are chattels and although the City owns the land by virtue of the Notice of Vesting, it does not own the buildings.
[48] In Newfoundland and Labrador Housing Corp. v. Humby 2013 Carswell Nfld 18, the Court of Appeal found that a Butler building “is designed so that it can be dismantled and moved to another location; it is annexed to the land in such a fashion that it can readily be removed. Thus, in its mode of attachment, it is more like a tent than it is like a permanent building.” See paragraph 21.
[49] In that case, the court also observed that tents do not become part of realty as they are not permanently attached to the land, their purpose being to be set up, taken down, and set up in another location, as required.
[50] Algonquin Equipment paid for the construction and maintenance of the structures and it has never at any time been responsible for any municipal taxes owed in relation to the land on which the buildings are situated.
Legislative Provisions
Municipal Act
[51] Section 1 of the Act defines “Land” this way:
(1) In this Act, “Land “includes buildings; (“bien-fonds”).
[52] Section 349 authorizes the recovery of taxes by a municipality and describes taxes follows:
(2) Taxes are a special lien on the land in priority to every claim, privilege, lien or encumbrance of every person except the Crown, and the lien and its priority are not lost or impaired by any neglect, omission or error of the municipality or its agents or through taking no action to register a tax arrears certificate.
[53] Subsection 379(7.1) describes the effect of the registration of notice of vesting:
(7.1) Despite subsection 3.6.1 (2) of the Fuel Tax Act, subsection 18 (2) of the Gasoline Tax Act, subsection 22 (2) of the Retail Sales Tax Act and subsection 24.1 (2) of the Tobacco Tax Act, a notice of vesting, when registered, vests in the municipality an estate in fee simple in the land, together with all rights, privileges and appurtenances and free from all estates and interests, including all estates and interests of the Crown in right of Ontario, except,
(a) easements and restrictive covenants that run with the land, including those of the benefit of the Crown in right of Ontario;
(b) any estates and interests of the Crown in right of Canada; and
(c) any interest or title acquired by adverse possession by abutting landowners including the Crown in right of Ontario, before registration of the notice of vesting. 2006, c. 32, Sched. A, s. 156 (4).
The Assessment Act
[54] Subsection 1.(1) provides that:
In this Act,
“land”, “real property” and “real estate” 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; (“biens-fonds”, “biens immeubles”, “biens immobiliers”)
[55] Section 3 provides that:
3.(1) All real property in Ontario is liable to assessment and taxation, subject to the following exemptions from taxation:
Analysis
[56] For reasons that follow, I conclude that all three structures are “buildings” and therefore are part of the land pursuant to the Municipal Act. Put another way all three structures are “land”, “real property” and “real estate” in accordance with the Assessment Act, as they are “buildings…and structures… erected or placed upon, in, over, under or affixed to land.”
[57] All three buildings have been on the property for some time: A1 for 21 years, A2 for 20 years, and A3 for 25 years.
[58] All three buildings are and have been assessed as taxable structures by the Municipal Property Assessment Corporation, and have been included in the taxes owing on the lands over the years.
[59] All three buildings, and in particular building A1, are of substantial size and clearly much larger than the Butler building which was the subject of the Newfoundland and Labrador Housing Corp. v. Humby decision; that building was only 1,500 feet in size. It was described as being able to be readily dismantled and removed. (paragraph 22).
[60] The expert reports delivered by both sides addressed the cost of dismantling and removing building A1 (the original Butler building and the addition).
[61] The Tall Pines Report estimated a cost of between $515,000 and $615,000 to disassemble the building, including removal of drywall, wiring, insulation, wall framing, stairs, plumbing, kitchen and bathroom fixtures, removal of the concrete pad and foundation, and to reconstruct the building. According to the report, reconstruction would entail cataloguing of component parts, creating assembly drawings, mechanical drawings, and electrical drawings to obtain a new building permit, as well as a structural analysis and architectural building code review. Doors, windows, metal roofing, and wall cladding will be need to be replaced.
[62] The CDCD report describes the stages of disassembly required to remove building A1 as follows:
(a) Disconnect all existing utilities/services and remove all contents of the building, including electrical wirings and drywall;
(b) Disassemble steel cladding, girts, purlins, and rigid frames;
(c) Remove any structure that is anchored by bolts into the concrete pad by either cutting the bolts at the base, or unscrewing the anchors; and
(d) Load the components to a truck for relocation.
[63] The report suggests a time estimate of two to four weeks for the disassembly, at a cost of $65,000. While the opening paragraph of the report describes the purpose of same as a “building cost assessment (to dismantle in place, relocate, and rebuild at the proposed new location”), there is no discussion or proposed cost of reassembling the building at the proposed new location. The estimate therefore is somewhat incomplete.
[64] Regardless of which report more accurately reflects the cost to dismantle, move and reconstruct the buildings, the conclusion in both is that none of the buildings in question can be simply disassembled, picked up, relocated, and reconstructed. Two to four weeks is not an insignificant period of time.
[65] A further observation about the Tall Pines report is appropriate. While the author of the report described buildings A2 and A3 as “non-permanent”, that does not mean that the structures are chattels. They are structures affixed to the land, according to the evidence. I will say more about the term “permanent”.
[66] The period of time and the cost to dismantle, move and reconstruct, together with the rest of the evidence, establishes that the structures in question are not chattels, but rather that they are fixtures, or part of the land.
[67] “Fixtures” is a term with a well-defined legal meaning. Ellies J. described the term in this manner, in Great Lakes Power Ltd. v. Municipal Property Assessment Corp., paragraph 61:
At common law, a fixture is an article that has, by virtue of the degree to which and the purpose for which it has been attached to real property, become part of the land (see British Columbia Forest Products Ltd. v. Minister of National Revenue (1969), 1969 CanLII 1607 (CA EXC), 69 D.T.C. 5127 (Exch. Crt.))
[68] The recognized test for distinguishing between chattels and fixtures is found in Stack v. T. Eaton Co. (1902), 4 O.L.R. 335 (Ont. Div. Ct.), at paragraph 16:
(a) That articles not otherwise attached to the land than by their own weight are not to be considered as part of the land, unless the circumstances are such as shew that they were intended to be part of the land.
(b) That articles affixed to the land even slightly are to be considered part of the land unless the circumstances are such as to shew that they were intended to continue chattels.
(c) That the circumstances necessary to be shewn to alter the prima facie character of the articles are circumstances which shew the degree of annexation and object of such annexation, which are patent to all to see.
(d) That the intention of the person affixing the article to the soil is material only so far as it can be presumed from the degree and object of the annexation.
(e) That even in the case of tenants’ fixtures put in for the purpose of trade, they form part of the freehold, with the right, however, to the tenant, as between him and his landlord, to bring them back to the state of chattels again by severing them from the soil, and that they pass by a conveyance of the land as part of it, subject this right of the tenant.
[69] Although building A1 is a more substantial structure than the other two with characteristics of a building occupied for business purposes, including washroom and kitchen facilities including plumbing, all three buildings are affixed to the land (Tall Pines report). They are more “than slightly affixed to the freehold”, and have been assessed as such for tax purposes.
[70] The degree to which a structure is annexed to land and the object of the annexation are to be considered. See Fess Oil Burners Ltd. v. Mutual Investments Ltd. 1932 CanLII 118 (ON CA), [1932] O.R. 203 (Ont. C. of A.), where at page 2, the Court said this:
The degree and object of the annexation are to be considered and where the object of annexation is the beneficial use of the land and buildings, the article in question is to be regarded as a fixture even though the degree of annexation may be of the slightest. In fact, in many cases where it is plain that the article is supplied solely for the beneficial use of the freehold, the doctrine of constructive annexation prevails and a chattel may acquire the character of a fixture without any annexation at all, e.g., storm windows which at the time of the sale may be stored in a shed, keys which are accessory to the lock in the door, etc.
[71] Building A1, has been used as the office, the showroom, and the shop of Algonquin Equipment’s retail sales and service business for more than 20 years. There is no doubt that the building was constructed and erected on the land to benefit Algonquin Equipment’s use of the land, that is, to permit it to carry on the business.
[72] The other two buildings were also erected on the land for use by Algonquin Equipment for cold storage. The object of annexation of these two buildings as well relate to Algonquin Equipment’s beneficial use of the land.
[73] While those two buildings were described as being “non-permanent”, the word permanent has a particular meaning in the context of assessing whether something is a chattel or a fixture.
[74] The Supreme Court of Canada, in Haggert v. Brampton (Town) interpreted “permanent” as being distinct from “occasional”:
Special attention must be given to the use of the word “permanent” in this context. I note the word is used in contradiction to “occasional”. When used with reference to affixing or annexing chattels to realty I cannot believe that “permanent”, a relative term, means remaining in the same state and place forever or even for an indefinitely long period of time. Especially must this be so where the chattels being considered are subject to wear and tear through use … In my opinion the word “permanent”, as used by King J. should be interpreted for the purposes of this appeal as indicating the object of having the carpeting remain where it is so long as it serves its purpose. I think the permanency of the original affixing, in this sense, is not affect by the consideration that it might well be intended to replace the carpeting if it should later become worn…
[75] With regard to building A1 in particular, a court has found that it would have ceased being a chattel upon its erection:
Since the Butler building, once erected, ceased to be a chattel, it follows that it is a building or a structure “erected or placed upon” or “affixed” to land within the definition of “land” and “real property” in the Assessment Act [s.1(k)].
[76] While the Agreement of May 18, 2012, between Algonquin Equipment and 131 might provide some evidence of an intention by Algonquin Equipment to retain mobility of the three buildings, the Agreement was entered into at a time when 131 no longer existed as a legal entity. Thus, the Agreement is of little or no assistance to Algonquin Equipment. Even if the Agreement was valid, it would not, in my view, displace the rather compelling evidence that has led me to conclude that the buildings are part of the land, and are not chattels.
[77] I also cannot accept Algonquin Equipment’s submission that it was an innocent tenant and should not be penalized by the failure of 131 to pay the municipal taxes. 131 and Algonquin Equipment are not at arm’s length of each other.
[78] Since I have concluded that the three buildings in question are part of the land, and that they belong to the City by virtue of the Notice of Vesting, it is appropriate to grant to the City the relief that it seeks, and I do so.
Conclusion and Order
[79]
A declaration that any structures erected on the Lands and which specifically include the Butler building and the two fabric covered buildings located at 259 Fielding Road form part of the Lands as defined in section 1 of the Municipal Act 2001, S.O. 2001, c. 25.
A declaration that the City, as owner of the lands as a result of a Notice of Vesting, is also the owner of any and all buildings and structures which specifically include the Butler building and the two fabric covered buildings affixed to the Lands.
A permanent injunction restraining and prohibiting the Respondents, their employees, successors, agents, assigns, or representatives from removing or deconstructing buildings or structures erected upon 259 Fielding Road, 235A Fielding Road and/or 235B Fielding Road, City of Greater Sudbury.
[80] In the event that the parties are unable to agree on costs, the City may make written submissions as to costs within 30 days of the release of these Reasons for decision. Algonquin Equipment shall have 10 days after receipt of same to respond. If no submissions are received within this time frame, the parties will be deemed to have settled the issue of costs as between themselves.
The Honourable Madam Justice Louise L. Gauthier
Released: December 4, 2014
COURT FILE NO.: A-12737-14
DATE: 2014-12-04
ONTARIO
SUPERIOR COURT OF JUSTICE
BETWEEN:
City of Greater Sudbury
Applicant
– and –
655131 Ontario Ltd., 655130 Ontario Ltd. Operating under the trade name and style of Algonquin Equipment
Respondents
REASONS FOR JUDGMENT
Gauthier J.
Released: December 4, 2014