Altus Group Ltd. v. Calgary (Composite Assessment Review Board), 2011 ABQB 739

Court of Queen ’ s Bench of Alberta Citation: Altus Group Ltd. v. Calgary (Composite Assessment Review Board), 2011 ABQB 739 Date: 20111130 Docket: 1001 11267, 1001 11268 Registry: Calgary In the Matter of the Municipal Government Act , RSA 2000, c. M-26 and amendments thereto (the “ Act ”) And in the Matter of an application under

section 470 of the Act for leave to appeal a decision of an Assessment Review Board ARB 0557/2010-P dated July 15 th , 2010. And in the Matter of an application under

section 470 of the Act for leave to appeal a decision of an Assessment Review Board ARB 0558/2010-P dated July 15 th , 2010. And in the Matter of Rule 753.03 and parts 33 and 56.1 of the Rules of Court respecting judicial review Between: Altus Group Ltd. Applicant - and - The City of Calgary Composite Assessment Review Board, the City of Calgary, and the Assessor for the City of Calgary Respondents _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice R.E. Nation _______________________________________________________

[ 1 ] On November 15, 2011 I heard an application for leave to appeal two decisions of the City of Calgary Composite Assessment Review Board dated July 15, 2010. The decisions relate to the assessment of the value of two properties for the purpose of municipal taxation, one is the building known as Bankers Hall, the other, Livingston Place. Statutory Background [ 2 ] This application is brought pursuant to s. 470 of the Municipal Government Act , R.S.A. 2000, c. M-26 (the “ Act ”) which deals with appeals from the Assessment Review Board (the "Board"). [ 3 ] By way of background, the Act sets out the statutory regime in

part 9 and

part 10 for the assessment of property and its taxation.

Part 11 sets out the establishment, function and rules of the Board. The Board is composed of appointed individuals. The Act sets out a procedure by which a person wishing to make a complaint about any assessment or tax may do so to the Board. The Act requires that the Board must render a decision in writing within a set time period. [ 4 ]

Section 470 of the Act expressly sets out the right of appeal from a decision of the Board to the Court of Queen's Bench on a question of law or jurisdiction only. Leave to appeal is necessary. The Act requires a hearing for a decision as to whether leave to appeal will be granted. A judge may grant leave to appeal if the judge is of the opinion that the appeal: (1) involves a question of law or jurisdiction, (2) is of sufficient importance to merit an appeal, and (3) has a reasonable chance of success.

The Act then goes on to state that if leave to appeal is granted, the judge may direct which persons are to be named as respondents and specify the question of law or jurisdiction to be appealed. [ 5 ] This background is important, as the Act establishes that an appeal to the Court of Queen's Bench is on restricted basis, and only available for a question of law or jurisdiction, of sufficient importance to merit an appeal and with a reasonable chance of success. Preliminary Issue [ 6 ] There was a preliminary issue raised by the City Of Calgary.

The Applicant/Proposed Appellant (referred to as the "Applicant") in the style of cause is only the Altus Group Ltd., who is not the owner of either property. Altus has been designated as an agent to appear for the owners, who have signed the "agent authorization" form provided by the Board. [ 7 ] Altus takes the position that it was the named "complainant" in the decisions written by the Board, and therefore it should be the applicant, and if successful, the appellant.

The argument of the City is technical, but correct, that the Act allows certain people to appeal, and those are set out in s. 479 (2) of the Act as: the complainant; an assessed person who is affected by the decision; a municipality; or the assessor for the municipality. The Act in s. 460 states that a complaint may only be made by an assessed person or a taxpayer. Altus is a company which is in the business of running tax appeals, it is a designated agent of the owner. [ 8 ] Hall, J. dealt with a similar objection in his October 13, 2011 decision: Degi Homburg Harris General Partner Ltd. v.

Assessment Review Board for the City of Calgary , Action No: 1101 06126. There both the landowner and Altus were named in the style of cause. Hall, J. found it was apparent that the Board was treating the tax agent of the assessed person as being the complainant, and as that was the case, he allowed the Altus group as a proper party to be named in the application. [ 9 ] That case was somewhat different from this case, as here, only Altus is named as the applicant, there is no reference to the owner or taxpayer. Generally the party with the statutory right to appeal should be named as party to an appeal.

[ 10 ] I find that the style of cause for this application and any appeal, if leave is granted, should name the assessed person or taxpayer who is bringing the appeal. The flaw is not fatal to this application, but the style of cause in these actions should be amended to show the assessed person or taxpayer as a party. If Altus for some reason wants its name in the style of cause, it should be in addition to the owner’s and it must be specified as a “designated agent”. The Background Facts [ 11 ] Altus, on behalf of various owners, filed an appeal of the assessment of a number of properties.

It was acknowledged there were a number of issues common to several properties, so the common evidence was heard on all those properties at a hearing lasting four days. A separate hearing was held for each property in relation to site specific issues, with the understanding the evidence on the common issues would also be treated as part of each separate hearing. [ 12 ] The common issues related to how general office rental and vacancy rates should be assessed for AA buildings, and what the overall capitalization rate should be for that year’s assessment.

All parties agreed that these were necessary components to be decided, in coming to the evaluation of market value of these AA office towers. This is because the estimate of market value was determined by the application of the direct capitalization method of the income approach to value. [ 13 ] Altus lead evidence at the hearings that challenged the office rental rate and vacancy rate used by the assessor. Altus' position was that fair market value should take into account trends that seemed to be shaping up for the future (which it submitted showed signs of decreased rents and increased vacancies).

Altus’ position was that a buyer and seller of AA office towers would be concerned not only about rentals now and vacancies now, but also, with an eye to what the future may hold. [ 14 ] The assessor (the City of Calgary) took the position that it had correctly used actual lease rates, actual occupancy rates, and averages and trends discernable at the evaluation date, any trends for the future would affect the valuation the next year, once those trends were actually established as a market reality. [ 15 ] The decisions on both of these properties were provided in writing, and were almost identical in wording in terms of the three common issues raised: the office rental rates, the office vacancy rates and the overall capitalization rate.

The decisions did not specifically state the definition of market value set out in the Act . The decisions outlined the property description, the location, the square footage and set out that the space was classified as "AA" office space. They set out that the income approach to value using the direct capitalization method was applied to determine the estimate of market value and then addressed each of the three issues: office rental rate, office vacancy rate and overall capitalization rate.

The decisions dealt with the findings, the reasons, and the ultimate conclusions, specific to each building. [ 16 ] Alberta Regulation 220/2004 (the " Regulations ") sets out regulations relating to assessment and taxation under the Act . These Regulations establish that the valuation date is an estimate of the value of a property on July 1 of the assessment year. The valuation standard is market value. Market value is defined in s. 1(1)(

n) of the Act as "the amount that a property might be expected to realize if it is sold on the open market by a willing seller to a willing buyer." The standard of assessment is to be based on market value prepared using mass appraisal, and must reflect typical market conditions for properties similar to that property. Mass appraisal is defined as the process of preparing assessment for a group of properties using standard methods and common data and allowing for statistical testing.

The Grounds for Leave to Appeal [ 17 ] I must go through the three statutory requirements for each of the grounds of appeal, to determine if leave to appeal should be granted. 1. The first requirement that the applicant must establish that the appeal involves a question of law or jurisdiction. [ 18 ] The appellant sets out the following alleged errors of law:

A. The Board failed to identify or apply the appropriate legal test, specifically that it did not properly identify and apply the assessment standard of market value as what a willing buyer would pay to a willing seller on the open market. B. The Board breached the right of the taxpayer to natural justice and procedural fairness by ignoring or failing to give appropriate weight to certain evidence. C. The Board failed to provide adequate reasons, by not linking the assessment standard of market value and the decision to reject the “forward looking approach”. D.

The Board failed to give the taxpayer a fair complaint hearing by failing to adhere to the statutory requirements to fully record the hearings. [ 19 ] It is necessary to evaluate these alleged errors to see if they are errors of a question law, as only questions of law (or jurisdiction) can be the subject of an appeal. [ 20 ] There has been considerable judicial analysis of exactly what is a question of law, as opposed to a question of mixed law and fact.

This is because Courts of Appeal, as well as Courts involved in judicial review, and interpreting situations where there is a limited right to appeal, all have to battle with this distinction. Fruman, J.A. sets out the dilemma and importance of the distinction well in paras. 15 to 22 of Alberta (Worker's Compensation Board) v. Appeals Commission , 2005 ABCA 276 . [ 21 ] Generally stated, an incorrect statement of the legal standard, or test, or an application of incorrect factors in applying the law to the facts is clearly an error of law. The law must not only be correctly stated, but that correct

interpretation of the law must be applied to the facts, when engaged in applying the law to the facts. Where there is a discretion involved in applying the law to the facts, the application of the discretion is not a question of law, but a question of mixed law and fact. However, if a wrong legal principle is used in the application of the law to the facts, or in the exercise of the discretion, there is an error of law. A.

The Board failed to identify or apply the appropriate legal test, specifically that it did not properly identify and apply the assessment standard of market value as what a willing buyer would pay to a willing seller on the open market. [ 22 ] The applicant argues that its approach, and the evidence and extensive submissions it made before the Board was to show that the income approach to value should take into account not just the information of lease rates and office vacancy rates at the valuation date, but also should include a look to the future (the "forward looking approach") as potential buyers and sellers would have this in mind.

It argues that the Board, by failing to talk about the definition of "market value" in the Act , and by its failure to articulate why it rejected the “forward looking approach” in assessing lease rates, vacancy rates and capitalization rates, committed an error of law. The applicant argues that because the Board never referred to the definition of market value as: "what a willing buyer would pay to a willing seller on the open market", this is an error of law.

It argues that the Board failed to make its determinations with this definition in mind. [ 23 ] The respondent City argues that this is not a question of law. It submits that the Board considered the conflicting evidence of how to assess three specific issues, and indicated that it did not accept the applicant's position. The City went through the written decision of the Board, in an effort to illustrate that it is a mischaracterization to state this is an error of law. It argues it involves findings of fact, or at best, issues of mixed fact and law.

It argues that looking at the issues and reasons, one can see that this is a choice of what rates or numbers to use, from considering the evidence. [ 24 ] Thus, the City points to the Board’s written reasons. It did not accept the office rental rates put forward by the applicant, saying they were not typical transactions of the 2009 AA office rental rates. The Board noted that large project leasing managers were aware of these transactions argued by the applicant, but used a certain weighted average rental rate. The Board looked at what the companies reported for 2009.

This, the respondent says, is a question of deciding whose evidence is preferable, and it is a question of mixed law and fact.

[25] Likewise, in terms of future forecast of office vacancy rates, the City argues that the Board was aware that a large inventory ofnew AA class office space was being developed and would be available. However, the Board found that while players in the marketconsider the future, the consideration is expressed in actual transactions which occurred at any particular time. The Board looked at thevacancy rate in the 2009 year, and indicated it would rely on the actual market condition in 2009.

The Board stated that it is only whenthe market showed higher vacancy rates that the higher rate will be used in the direct capitalization method of valuation. In relation to thecapitalization rate, the Board found that the evidence from both sides was not compelling. The Board was satisfied with a seven percentrate suggested by an industry publication. [26] The City argues these details demonstrate that this is not a question of law, but rather the Board is deciding which componentsto choose, while interpreting the Act, thus, applying the law to the facts, a mixed question of fact and law.

It argues that the failure toactually state the definition of market value from the Act does not mean the Board was unaware of it. The Board was aware of theapplicant’s position, and stated why it rejected the “forward looking approach” in deciding the specific components for the capitalizationof income approach to value for AA buildings. The City argues the Board was not involved in determining broad

definitions of thewords: “market value”. It argues it does not have to set out the definition of market value in its reasons. The City says that just by readingthe decision, one can tell the Board had that in mind. [27] After reviewing this analysis, I find that issue A is not a question of law. The Board was deciding numbers such as officevacancy rates, office rental rates and an overall capitalization rate, so they could be used and applied in the income approach to value,using the direct capitalization method to determine the estimate of market value in a given year.

The Board was clearly dealing withexactly the issue of how much forward looking should go into the determination of the components necessary to come to an exactnumber under that approach to valuation. [28] The acceptance or rejection of specific evidence in coming up with rental rates, office vacancy rates and overall capitalizationrates is not a question of law.

Although the applicant tried to frame it as a question of law by referencing the overall definition of marketvalue in the Act, in essence, here the Board is deciding on the evidence to accept or reject in coming to the components of the equation toestablish value. [29] The issues raised here are similar to those faced by Belzil, J. in TransCanada Keystone Pipeline Lts. Partnership v. Alberta(Designated Linear Assessor), 2011 ABQB 460 , 86 M.P.L.R. (4th) 268, (Alta.

Q.B.), in the sense that although the issues inthat case were framed as issues of law, a closer look rendered them to in fact be issues of mixed law and fact. B. The Board breached the right of the taxpayer to natural justice and procedural fairness by ignoring or failing to give appropriateweight to certain evidence. [30] This is akin to arguing that the applicant did not like the result, or a credibility finding, or how the board accepted or rejectedthe evidence of various experts or witnesses. The weight given to evidence, which has been heard and analyzed by a tribunal, is clearlynot a question of law. C.

The Board failed to provide adequate reasons, by not linking the assessment standard of market value and the decision to rejectthe “forward looking approach”. [31] A failure to give adequate reasons may be a breach of natural justice, and thus an error of law. Adequacy of reasons is aquestion of law. D. The Board failed to give the taxpayer a fair complaint hearing by failing to adhere to the statutory requirements to fully record thehearings. [32]

Section 14 of the Regulations provides that the Board must make and keep a record which must include a transcript orrecording of the hearing, or in the absence of a transcript or recording, a

summary of all testimonial evidence given at the hearing.Clearly, there was a complete recording of the common issues heard on June 7 through 10, 2010. The Board reconvened on June 16 and17, 2010 to deal with the specifics of each building. It is acknowledged by the Board that the recordings of these latter two dates areincomplete. The explanation is that the recorders or microphones in the hearing room are voice activated. If turned down, or if theparties do not speak into the microphone, the recording machine may not be activated.

[ 33 ] Whether a failure to record the whole proceedings is found to be a breach of a duty of fairness or to result in a loss of jurisdiction is clearly a question of law. [ 34 ] Thus, it is only issues C and D which are issues of law, and eligible to meet the first of the three tests for leave to appeal to be granted. Issues C and D must now be assessed in relation to the second test. 2. The second requirement that the appeal involves questions of sufficient importance to merit an appeal. [ 35 ] Case law cited by Ross, J. at para. 42 of Associated Developers Ltd. v. Edmonton (City) , [2011] A.J.

No. 1033 suggests that an issue may be of sufficient importance to merit an appeal if it is important for jurisprudential purposes. The importance must be determined on an objective scale, not the subjective importance of the matter to the applicant. Generally there should be something unsettled about the question, or the decision should have wide ranging implications.

The issues should not be merely the correction of a situation fact specific to the one case, without more. [ 36 ] In relation to issue C, the adequacy of reasons is important for any tribunal and the party effected, so would be a question important enough to merit an appeal. [ 37 ] In relation to issue D, the question is whether the failure to record a portion of the proceedings, is of sufficient importance to merit an appeal.

The first four days of evidence on the contentious areas of lease rates, vacancies and capitalization rates was recorded, what was not adequately recorded was the last day of each hearing, specific to issues on each property.

Neither party to this application provided evidence of what occurred in the hearing on the days in question: whether it involved specific testimony (which the Board has a duty to at least summarize) or whether it involved submissions to and argument before the Board. [ 38 ] Although clearly the Board needs to review how it records matters, or the checks and balances to make sure the recording equipment is functioning, I cannot say that, based on the evidence presented, this is a question of sufficient important to merit an appeal, as nothing has been identified by the applicant as turning on the unrecorded portion, other than a failure to follow the statutory requirement. [ 39 ] Lutz, J. dealt with a similar issue, although it was a total absence of any transcript, in International Association of Bridge, Structural and Ornamental Iron Workers v.

The Alberta Labour Relations Board , 43 A.R. 299 (Q.B.) . The facts and statutory situation were different in that case, but he held the lack of a record was not a jurisdictional defect in itself (when there was no evidence of the effect). [ 40 ] The applicant argued "general procedural fairness" as the ground to allow an appeal on the basis of the defect in the recording of the last two days. No specifics of even what happened on that final day of each site specific hearing was provided, although the applicant had counsel in attendance.

There is an onus on the applicant to bring forward the procedural fairness that was impacted, or lost due to lack of recording, so the question can be evaluated as to its importance in the circumstances of the case in a leave to appeal application. [ 41 ] As a result, it is only issue C that must be assessed in relation to the third requirement for leave to appeal to be granted. 3. The third requirement that the appeal has a reasonable chance of success. [ 42 ] The merits of an appeal are not considered on an application for leave.

The issue of the adequacy of reasons of an administrative tribunal is different from the task of assessing the substantive decision made, in terms of whether it is correct, or falls within acceptable outcomes. The inadequacy of reasons is not a freestanding ground of appeal. It requires the reviewing court to review the reasons, in light of the Board's mandate and in the context of the matters dealt with. It looks to the ability to explain why an issue was

decided but not how (Authority: R. v. R.E.M., 2008 SCC 51 , 2008 S.C.C. 51 at paras. 16 to 21). [43] As set out in Moll v. College of Alberta Psychologists, 2010 ABCA, 110, the assessment of the adequacy of reasons is donehaving regard to the purposes that reasons serve: (1) to tell the parties why a decision was made; (2) to provide public accountability forthe decision; and (3) to permit effective appellate review. Reasons are looked at in context, not in a vacuum.

The question is whether thepublic and losing party can understand why the Board decided the way it did, that it considered the main arguments and that onlyrelevant considerations were made. The reasons must address the substance of live issues, key arguments, contradictory evidence andnon-obvious inferences. The test is functional and purposeful. (Authority: Spinks v.

Alberta (Law Enforcement Review Board), 2011ABCA 162, para. 30.). [44] The issue raised by the applicant about the adequacy of reasons is very much along the lines of their argument about the errorof law, it relates to the rejection of the “forward looking approach”.

It argues that the reasons did not detail the definition of fair marketvalue, or give a detailed description of how the “forward looking approach” was inconsistent with that definition. [45] When I read the reasons in these two decisions, they discuss in detail the conflicting positions of the parties on thecontentious issues, and indicate why the Board does not accept the evidence of the applicant, as it relates to vacancy rates and officerental rates, outlining the logic of not using future trends.

In terms of the overall capitalization rate, the Board outlined the position of theapplicant and the City and accepted neither as compelling, but was satisfied with a seven percent rate that was suggested by industrypublication. [46] More detailed reasons could always be provided, but the question is whether one understands why the decision was made.One can easily understand why the Board made its decision in this case from the reasons. That the applicant does not agree with thedecision or cannot see the process by which the decision was made is not the issue.

The reasons must be seen in the context of what wasat issue here, a complex determination of factors that go into the valuation of Calgary AA office buildings, in a hearing betweensophisticated parties, who are arguing the intricacies of the components of valuation before this administrative board. The reasons aresuch that I am of the opinion that the appeal on the adequacy of the reasons does not have a reasonable chance of success. Conclusion [47] As a result, the applicant's application for leave to appeal is dismissed. Heard on the 15th day of November, 2011.

Delivered orally on the 28th day of November, 2011. Dated at the City of Calgary, Alberta this 30th day of November, 2011. R.E. Nation J.C.Q.B.A.

Appearances: Judson Virtue, Macleod Dixon LLP for the Applicant Leila Gosselin, City of Calgary Law Department for the Respondent Patrick Knoll, Q.C. for the Respondent, Composite Assessment Review Board