St. George and St. Rueiss Coptic Orthodox Church et al. v. Municipal Property Assessment Corporation et al.

[Indexed as: St. George and St. Rueiss Coptic Orthodox Church v. Municipal Property Assessment Corp.]

Ontario Reports

Ontario Superior Court of Justice,

Dunphy J.

March 9, 2016

130 O.R. (3d) 105 | 2016 ONSC 1723

Case Summary

Assessment — Exemptions — Church owning single-building complex containing place of worship and school — Church incorporating separate company to operate school for insurance and liability reasons — Church controlling and dominating school — Church and school forming part of single patrimony — Exemption in s. 3(1)3(i) of Assessment Act for place of worship and land used in connection with it applying to all portions of building also used by school with exception of school administration areas — Exemption in s. 3(1)5 for land owned, used and occupied solely by non-profit educational seminary of learning applying to all school use areas — Assessment Act, R.S.O. 1990, c. A.31, s. 3(1)3(i), (1)5.

The applicant church built and owned a single-building complex to house both its traditional church functions and a Christian primary school that provided religious instruction in the Coptic language. For insurance and liability purposes, it incorporated a separate company to operate the school. The applicant brought [page106] an application for a declaration that the building was exempt from assessment and taxation under the Assessment Act.

Held, the application should be granted.

Exemptions under the Assessment Act are not to be narrowly construed. The church and the school formed part of a single patrimony. The church controlled and dominated the school and had made fostering and sustaining the school an important part of its mission and religious activities. The exemption in s. 3(1)3(i) of the Act for "a place of worship and the land used in connection with it" applied to all portions of the building used by the school, with the exception of the school administrative areas. The exception in s. 3(1)5 of the Act for land "owned, used and occupied solely by a non-profit philanthropic, religious or educational seminary of learning" applied to all of the school use areas.

Cases referred to

Buanderie centrale de Montréal Inc. v. Montreal (City); Conseil de la santé et des services sociaux de la région de Montréal métropolitain v. Montreal (City), [1994] 3 S.C.R. 29, [1994] S.C.J. No. 80, 171 N.R. 191, J.E. 94-1523, [1995] 1 C.T.C. 223, 1994 CanLII 59, 50 A.C.W.S. (3d) 540; Wheatley Harbour Authority Corp. v. Municipal Property Assessment Corp., [2010] O.J. No. 2197, 2010 ONSC 2499, 267 O.A.C. 19, 319 D.L.R. (4th) 723, 72 M.P.L.R. (4th) 195, 189 A.C.W.S. (3d) 518 (Div. Ct.), apld

Other cases referred to

Diocese of Toronto Camps (Anglican Church of Canada) v. Municipal Property Assessment Corp., [2004] O.J. No. 4443, 246 D.L.R. (4th) 170, 191 O.A.C. 278, 2 M.P.L.R. (4th) 218, 26 R.P.R. (4th) 126, 48 O.M.B.R. 257, 2004 CanLII 34918, 134 A.C.W.S. (3d) 757 (C.A.); Les Soeurs de La Visitation D'Ottawa v. Ottawa (City), 1951 CanLII 109 (ON SC), [1952] O.R. 61, [1951] O.J. No. 519, [1952] 2 D.L.R. 343 (H.C.J.); Ottawa Salus Corp. v. Municipal Property Assessment Corp. (2004), 69 O.R. (3d) 417, [2004] O.J. No. 213, 235 D.L.R. (4th) 743, 182 O.A.C. 172, 44 M.P.L.R. (3d) 202, 17 R.P.R. (4th) 81, 2004 CanLII 14620, 128 A.C.W.S. (3d) 867 (C.A.); Québec (Communauté urbaine) v. Corp. Notre-Dame de Bon-Secours, [1994] 3 S.C.R. 3, [1994] S.C.J. No. 78, 171 N.R. 161, J.E. 94-1522, [1995] 1 C.T.C. 241, 95 D.T.C. 5017, 3 G.T.C. 8071, 1994 CanLII 58, 50 A.C.W.S. (3d) 541

Statutes referred to

Assessment Act, R.S.O. 1990, c. A.31 [as am.], s. 3(1)3(i), (1) 5

APPLICATION for a declaration that the property was exempt from assessment and taxation.

Peter Milligan and Jamie Walker, for applicants.

Donald Mitchell, for respondent Municipal Property Assessment Corporation.

[1] DUNPHY J.: — For many years, courts have been faced with pleas of taxation authorities not to allow form to trump substance and to ensure that taxation statutes are given a broad and remedial interpretation to implement their objects similar to other statutes. The courts have hearkened to that call and the modern school of statutory construction seeks to interpret an enactment with deference, granting a broad and liberal [page107] application to its remedial legislative intent. In this case, the respondent Municipal Property Assessment Corp. ("MPAC")[^1] is effectively asking this court to turn the clock and heed only the narrowest view of the form of a transaction even if its substance fully conforms to any reasonable view of legislative intent. I cannot give effect to that desire.

[2] At issue here is a single-building complex built and owned by the applicant church in North York to house both its "traditional" church functions and a non-denominational Christian primary school that provides religious instruction in the language and faith of the church while providing a Ministry of Education-approved formation. The facilities and indeed the desks, tables and chairs of the school are all owned by the church. St. George Montessori School Inc. (the "school") is the company incorporated by the church to operate the school. It is controlled by, indeed dominated by, the church. The facilities used by the school on weekdays are used by the church on religious holidays and weekends for services, Sunday school and similar parish activities.

[3] The respondent MPAC concedes that the school or the church would very likely be tax exempt if they separately owned the facilities that they use on the site and the church would be tax exempt on all of the facilities if it operated the school directly instead of through a controlled/dominated corporation. Nevertheless, it submits that the school must be considered solely as an entity in isolation from its context and is taxable in this case by reason of neither owning the land it uses nor having an exclusive lease of it. As a result, MPAC has sought to assess the portions of the building where the school operates. Catch-22, while a slang phrase, seems particularly apt to describe this situation.

[4] Fortunately, the reasoning that leads to that improbable conclusion is flawed and I can interpret the Assessment Act, R.S.O. 1990, c. A.31 in accordance with its intent and common sense to do justice by having regard to the substance of the situation rather than rigidly worshipping the false idol of its form. I have found that the school and church form part of a single patrimony. The church is not required to choose between having unlimited liability arising from the operation of a school that could potentially threaten its very survival on the one hand or being permanently saddled with a significant property tax [page108] burden increasing the drain upon the resources of a school it already heavily subsidizes when that same burden is not shared by other non-profit private schools solely because it lacked the means to acquire two separate and distinct facilities. The objects of the Act would be frustrated by the position taken by MPAC.

[5] At the hearing of the application, I indicated that I would grant the application sought (after making some minor technical changes to the form of order sought) with reasons to follow. These are those reasons.

[6] The applicant church is a non-profit, non-share capital corporation and a registered charity. It serves the Coptic Christian community in Toronto. Its articles of incorporation include among its purposes "to acquire and hold land for the purposes of a place of worship, residence for the priest, a burial ground or cemetery, a theological seminary or similar institution of religious instruction" (emphasis added). Among the important features of this religious community is its language. The Coptic Church has maintained use of the Coptic language -- a direct descendant of ancient Egyptian without recourse to which Mr. Champollion might well never have deciphered the Rosetta Stone, leaving the world able only to marvel and guess at the accomplishments of that ancient civilization. The preservation and transmission of that language to the next generation is intimately tied to their faith and is thus a matter of particular concern to them.

[7] Before 2011, the church was located in downtown Toronto. There, it had a grade school and its worship facilities, both activities housed in the same building. Both were accepted as exempt from assessment under the Assessment Act.

[8] In 2011, the church purchased land and constructed a new building in North York. The building was designed to house both the church and the school under a single roof. It was thought advisable to incorporate a second non-profit, non-share capital corporation to operate the school for insurance and liability reasons. The school was incorporated by the church on September 28, 2011. This date is after the beginning of the 2011-2012 school year, a fact to which I shall return. The school is also a registered charity. Its objects are

(A) To establish and maintain a religious school of instructions for children, youths and adults;

(B) To establish and maintain a religious day school;

(C) To advance and teach the religious tenets, doctrines, observances and culture associated with the Christian faith. [page109]

[9] The school is controlled by the church. Its directors are appointed by the church and the chair of its board is appointed by the church. It is overwhelmingly financially dependent on the church, who grants it non-exclusive access to the facilities it uses, owns substantially all of its physical assets and underwrites its considerable operating losses. Almost every student at the school is in receipt of direct tuition subsidies from the church. Teacher hiring is approved by the parish priest. Four priests teach in the school and its Christian-based curriculum is approved by the church. The school offers students instruction in the ancient Coptic language as well as religious instruction. The school is effectively dominated by the church, who has clearly made fostering and sustaining the school a very important part of its mission and religious activities.

[10] The respondents suggest that the foregoing picture overstates the role of the church in the school's operations. They point to a memorandum of agreement dated August 1, 2011 (but actually finalized and executed in 2012) among the church, the school and Mr. Winston Ling and Dr. Stephanie Ling. They suggest that it is the Lings and not the church that control the school because Dr. Ling is principal.

[11] Indeed, the memorandum contains a detailed agreement with the Lings that permits the school to use the "Cornerstone" brand owned by the Lings (and used by another school founded by them) and the Lings are entitled to nominate four directors to the board of the school (five being appointed by the church). Cornerstone, while non-denominational, is a Christian school whose objects very closely align with the objectives of the church, a factor that explains their co-operation. The objects of the church described in its articles are those of a Christian church with a universal mission. The affiliation of the church and its school with Cornerstone should thus be seen not as a departure from those objects but an evolution.

[12] In my view, the memorandum does not change the control analysis in any material way. While the Lings' have provided some early financial support (apparently in the way of bridge financing), the operating deficits are financed primarily by the church. Neither "Cornerstone" nor the Lings actually own any of the school's assets. The church pays utilities and maintenance and owns most physical plant. The memorandum is not permanent -- either party can terminate it and indeed it expires in July 2016 unless renewed. The Lings' involvement is personal, a fact made quite clear on the cover of the document.

[13] While employment of the Lings has brought with it access to a "brand" (i.e., Cornerstone), the memorandum is not that [page110] much different from an employment contract for a senior executive. The board controls the school even if it has a principal just as in a business corporation the board of directors and shareholders who elect them control the corporation even if the board hires a CEO. The church operated a school before it decided to work with the Lings and use their "Cornerstone" name and there is no reason to assume that the school will cease to operate if either party decided to discontinue the relationship.

[14] MPAC has designated the classroom areas, school administrative areas and the gymnasium as being taxable portions of the building and these have accordingly been assessed for 2011 and following years. The evidence establishes that none of the areas of the building are exclusively allocated to the school. The school's operations are entirely within the common building owned by the church. The parking areas are common. Worshippers may come in through the "school" doors or the main doors. Sunday school is held using the same classrooms used by the school. The gymnasium is used for church activities as well. There is, however, no evidence before me that there is any co-use of the administrative areas used by the school. If the administrative area has sensitive student records that are kept securely, the church nevertheless has access to it at all times. There is no lease granting the school exclusive possession of any part of the building and the church routinely uses all but the school administrative areas for its own regular activities.

[15] Section 3(1) of the Assessment Act provides that all real property in Ontario is liable to assessment and taxation subject to the listed exemptions, of which two are at issue in this case:

3. Land that is owned by a church or religious organization or leased to it by another church or religious organization and that is,

i. a place of worship and the land used in connection with it,

and:

5. Land owned, used and occupied solely by a non-profit philanthropic, religious or educational seminary of learning or land leased and occupied by any of them if the land would be exempt from taxation if it was occupied by the owner. This paragraph applies only to buildings and up to 50 acres of land.

[16] There is no dispute that the church is "a church or religious organization" within the meaning of s. 3(1)3 of the Assessment Act and that the school is a "non-profit philanthropic, religious or educational seminary of learning" within the meaning of s. 3(1)5 of the statute.

[17] The idea that exemptions to the Assessment Act are to be narrowly construed is one that no longer applies: [page111] Ottawa Salus Corp. v. Municipal Property Assessment Corp. (2004), 69 O.R. (3d) 417, [2004] O.J. No. 213, 2004 CanLII 14620 (C.A.), at para. 15. Tax legislation serves a number of legislative purposes. The raising of funds and the exemption (and thus fostering) of social works such as schools and religious institutions are all policies clearly expressed and evident in the Assessment Act and there is no reason why one policy should be viewed as automatically taking precedence over the other. The object of statutory construction remains the same -- to discern the intent of the legislator having regard to all of the policies advanced by an enactment, not merely some of them. The legislator's task requires the balancing of a myriad of important public interests and there is no reason why the act of interpreting the product of that process should ignore the very balancing that went into it. Neither the social goal of the raising of revenue nor the social goal of exempting certain activities or persons from that burden is entitled to dominance. The goal of interpretation is to determine the balance between the two intended by reference to the language used. I would not follow the case of Les Soeurs de La Visitation D'Ottawa v. Ottawa (City), 1951 CanLII 109 (ON SC), [1952] O.R. 61, [1951] O.J. No. 519 (H.C.J.) as its "strict construction" approach to taxation statutes and exemptions thereunder have both been thoroughly revised and revisited by the Supreme Court of Canada in, among others, Québec (Communauté urbaine) v. Corp. Notre-Dame de Bon-Secours, [1994] 3 S.C.R. 3, [1994] S.C.J. No. 78, 1994 CanLII 58.

[18] I first consider the application of s. 3(1)3(i), being for land owned by a church for a "place of worship and the land used in connection with it". In considering the application of this exemption, I must determine whether the "primary purpose for which the land is used and occupied" fits within the exemption and distinguish this from merely incidental uses: Diocese of Toronto Camps (Anglican Church of Canada) v. Municipal Property Assessment Corp., [2004] O.J. No. 4443, 2004 CanLII 34918 (C.A.), at paras. 11-12.

[19] There is no question that the primary purpose of the occupation by the church of the land is to house its place of worship. This is recognized by the respondent who has assessed almost all of the building in accordance with that finding. The evidence establishes that the parking lot and auditorium, for example, are used in connection with the place of worship and are thus exempt. In my view, the mere fact that some of the facilities used in connection with the place of worship are also used by the school does not strip them of their primary purpose. The land and building are owned by the church. The church uses [page112] the classrooms and gymnasium in connection with its worship activities to conduct Sunday school, for language classes and for ingress and egress to the main part of the church itself. The use by the church of what might be characterized as the "school" wing is integral to its use of the building as a place of worship. The fact that worship services are not generally conducted on weekdays and that the church is able to fulfill another aspect of its mandate (i.e., education) without interfering with its primary mandate (worship and activities ancillary to that) does not detract from the primary purpose of the portions of the land and building that are, in effect, "co-used" by the school any more than a church allowing an advance poll or other off-hour community use of its facilities ceases thereby to be a place of worship. The portion of the lands used by the school when the church does not require it nevertheless can be said to have their primary purpose as being a place of worship and lands used in connection with it despite such incidental off-hours use.

[20] I should not be able to extend this reasoning to the administrative facilities used by the school. While the school does not have "exclusive" use of those facilities and the priest at the church has access to all of the facilities, these facilities are nonetheless segregated from normal church use for obvious reasons and parishioners would not normally have access to these areas in the ordinary course of church activities. The gymnasium and classroom areas, on the other hand, are used as and when needed in the ordinary course of the worship services and activities of the church and their complementary co-use by the school in off-hours does not detract from the primary purpose of such facilities which are physically attached to and integrated with the church in every way.

[21] In conclusion, I would apply the "place of worship" exemption to all portions of the building also used by the school with the exception of the school administrative areas.

[22] However, in my view the exemption contained in s. 3(1)5 of the Act for a non-profit educational seminary of learning applies in this case to all of the contested "school use" areas since the school and church share a "common patrimony": Wheatley Harbour Authority Corp. v. Municipal Property Assessment Corp., [2010] O.J. No. 2197, 2010 ONSC 2499 (Div. Ct.) and Buanderie centrale de Montréal Inc. v. Montreal (City); Conseil de la santé et des services sociaux de la région de Montréal métropolitain v. Montreal (City), [1994] 3 S.C.R. 29, [1994] S.C.J. No. 80, 1994 CanLII 59.

[23] In many ways, the status of the church vis-à-vis the school is stronger than was the case in Buanderie Centrale (supra) [page113] since the church clearly controls and indeed dominates the school in the manner outlined above, which was not the case for the hospital control of the laundry facilities in Buanderie Centrale (supra). Not only did the church operate a school at its former facility, but it operated this school from its opening in the 2011 school year until the school was fully organized and the memorandum finalized and put in place. The students from the old school downtown formed the nucleus -- indeed, apparently the large majority -- of students at the new when it opened in the new building in 2011. As Gonthier J. found in Buanderie Centrale (supra), the change in legal structure did not alter the fact that the same activities took place before and after and there is no reason why the formerly tax exempt activities should be found to be altered by the change in legal structure since they form part of a common patrimony. The land and building are owned by the church who formerly operated a properly tax-exempt school. The new legal structure continues to serve the same tax-exempt objects of the same institution -- the church.

[24] The respondents submit that I must give effect to the separate legal personality of the school. With respect, I am doing so. The school was incorporated to provide a means of segregating legal liability for two activities, allowing it to be separately insured. In all cases where a common patrimony is found, there are necessarily separate legal entities involved. On the facts of this case, having regard to the evidence before me, I have found that a "common patrimony" as described by Gonthier J. in Buanderie Centrale (supra) and the Divisional Court in Wheatley Harbour (supra) is the appropriate description of the relationship between the school and the church and that the exemption in s. 3(1)5 is therefore available based upon the church's ownership and the common patrimony associated with its use.

[25] There are two other areas of the building that I have not discussed in these reasons that should be mentioned for the sake of completeness. There is a small church supply and bookstore that is opened to sell religious articles and books to parishioners before and after services. The evidentiary record before me in relation to this store was not sufficiently complete to enable a ruling on whether it too qualifies under the Assessment Act exemption claimed. I made my ruling without prejudice to the church resuming its application in relation to that aspect of its assessment appeal on further and better evidence. In addition, there is a day care facility operated in a different segment of the building whose assessment was not at issue and is not affected by my ruling. I considered only the portions of the application relating to operations of the school. [page114]

[26] The parties were in agreement that no order of costs should be made and I accordingly made no such order.

Application granted.

Notes

[^1] The City of Toronto is a respondent but filed no material and took no part in the argument of this application.

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