908118 Alberta Ltd Applicant - v. -, 2013 ABQB 100

Court of Queen ’ s Bench of Alberta Citation: 908118 Alberta Ltd v Calgary (City), 2013 ABQB 100 Date: 20130213 Docket: 1101 13982 Registry: Calgary Between: 908118 Alberta Ltd Applicant - and - The City of Calgary and the Assessment Review Board for the City of Calgary and the Minister of Justice and Attorney General for Alberta Respondents _______________________________________________________ Memorandum of Decision of the Honourable Madam Justice C.L.

Kenny _______________________________________________________ [ 1 ] The Applicant, 908118 Alberta Ltd. ("O'Connors"), seeks leave to appeal from Decision 1553/2011-P of the Calgary Assessment Review Board (the "CARB") pursuant to s 470(1) of the Municipal Government Act , RSA 2000, c M-26 (the "MGA"). The CARB upheld the January 2011 assessment which the Applicant argues wrongfully assessed property used as parking stalls adjacent to the O'Connors retail store at market value as opposed to nominal value.

Both the CARB and City take the position that the property was properly assessed at market value, and that the Applicant has not met the test for leave to appeal. Background

[ 2 ] O'Connors sells men's and women's clothing, as well as footwear. In the year 2000, O'Connors applied for a development permit to expand an existing building at 1415 1 Street SW, in the "beltline" area of Calgary. This location would eventually house a freestanding O'Connors store. [ 3 ] O'Connors was issued Development Permit 2001-0124 on October 18, 2001 (the "Permit"). At the time the Permit was issued, City of Calgary Bylaw 2P80 (the "Bylaw") required "1 parking stall per 46 square meters of net floor area" for retail stores in the specified zone: Bylaw, s 18(iv).

Given the dimensions of O'Connors' clothing store, in order to comply with the Bylaw the Applicant had to provide a total of 26 parking stalls. The Bylaw went on to state that all parking stalls required by the Bylaw shall be located on the same site as the use requiring it, subject to specific exceptions: Bylaw, s 18(1)(a). [ 4 ] O'Connors had initially envisioned expanding the store northward, but was prohibited from doing so as it would have left insufficient space for the additional required parking spots.

As such, it purchased space across the street to accommodate its women's clothing store. [ 5 ] The parking stalls were developed on three adjacent parcels of property: 1401 1 Street SW ("1401"); 1411 1 Street SW ("1411") and 207 14th Avenue SW ("207"); (collectively the "Properties"). Historically, the Properties were assessed at a nominal value, which O'Connors submits was done to reflect the fact that its use of the Properties was restricted under the Bylaw. Between 2007-2010 the average annual assessment for the Properties was $883 for property 1401, and $818 for properties 1411 and 207.

O'Connors submits that the assessment amounts reflect the City's past recognition of the relationship between the parking requirement imposed by the Bylaw and the retail premises. [ 6 ] In 2011 the City assessed the Properties as follows: 1401 was assessed at $1,220,000; 1411 was assessed at $781,000; and 207 was assessed at $780,000. The City states that the 2011 assessments were based upon market value in accordance with the MGA .

The CARB upheld the City's assessment as reasonable. [ 7 ] In upholding the 2011 assessments, the CARB found that the MGA and related regulations were clear that a parcel of land is to be assessed at market value, as defined, and that the legislation mandates the appraisal using market value as an estimate of the value of the fee simple estate in the property. The CARB ruled that it was precluded from considering the limitations created by the parking requirements and noted that O'Connors could have considered leasing a parking structure as an alternative measure to fulfilling the requirements under the Bylaw.

The CARB's decision [ 8 ] In giving its decision, the CARB reproduced the applicable sections of both the MGA and the Assessment Regulation. As noted by the CARB, section 1(1)(

n) of the MGA defines market value as follows: "market value" means the amount that a property, as defined in section 284(1)(r), might be expected to realize if it is sold on the open market by a willing seller to a willing buyer; [ 9 ] Section 4(1) of the Matters Relating to Assessment and Taxation Regulation , AR220/2004 (the "Assessment Regulation") states that: The valuation standard for a parcel of land is (

a) market value, or (

b) if the parcel is used for farming operations, agricultural use value

[ 10 ]

Section 2 of the Assessment Regulation states that: An assessment of property based on market value (

a) Must be prepared using mass appraisal, (

b) Must be an estimate of the value of the fee simple estate in the property, and (

c) Must reflect typical market conditions for properties similar to that property. [ 11 ] After reviewing argument and the applicable legislation, the CARB held as follows: The Board finds the legislation is clear that a parcel of land is to be assessed at market value unless it is used for farming operations.

With respect to the criteria for applying a "nominal parking rate" set out in CARB 2242/2010-P, this Board could not find any provision in the Act or the related regulations that gives the assessor authority to prepare an assessment of a parcel of land not used for farming operations, at a value other than market value. With respect to the correct market value of the subject properties, there was no market evidence before the Board to refute the $195.00 per sq. ft. base rate, or the +5% corner lot adjustment applied by the assessor.

The Board therefore accepts that these rates reflect typical market value for the subject properties. Further, the legislated requirement that an assessment of property based on market value must be an estimate of the value of the fee simple estate precludes the Board from considering the impact of contractual, or in this instance, internal operational arrangements.

The Board also notes that the parking requirements set out by Bylaw 2P80 do not specify that parking areas must be owned; the requirements may be fulfilled by leasing a parcel (or a parking structure) from a third party, which would also be subject to assessment at market value. [ 12 ] The above constitutes the totality of the CARB's analysis in reaching its decision. Grounds for Appeal [ 13 ] O'Connors sought leave to appeal the CARB's decision to this Court on a number of grounds.

However, during oral submissions, counsel for O'Connors stated that the grounds of appeal could essentially be distilled down to the following issues: 1) whether the CARB erred in failing to account for the Bylaw restriction; and, 2) whether the CARB erred in finding that it was precluded from assessing a nominal value for the Properties. [ 14 ] The parties agree that the test for leave to appeal under the MGA is threefold, as defined under s 470 of the MGA.

In order for leave to be granted, an applicant must establish the following: 1. the appeal involves a question of law or jurisdiction; 2. the issue is of sufficient importance to merit an appeal; and 3. the appeal has a reasonable chance of success. [ 15 ] I stress at the outset that this is an application for leave, and that as such, the merits of the case are not decided at this point.

I shall address each ground for appeal separately to determine whether it satisfies the above criteria for leave to appeal: Edmonton (City) v Edmonton (City) Composite Assessment Review Board , 2012 ABQB 439 , para 22 [ Mediplex ] . [ 16 ] For the reasons that follow, I am satisfied that both grounds of appeal put forward by O'Connors satisfy the test for leave to

appeal. Ground One: Whether the CARB erred in failing to account for the Bylaw restrictions 1. Does the appeal involve a question of law? [17] O'Connors argues that the parking requirements are imposed under the Bylaw and are necessary for the legal operation of theretail premises, and that as such, the Properties cannot be considered in isolation.

Rather, it states that the Properties are legally requiredfor parking in conjunction with O'Connors' adjacent clothing store, and that the CARB should have recognized this restriction inassessing market value. [18] O'Connors further argues that the CARB erred in classifying its designation of the adjacent Properties as parking stalls as an"internal operational arrangement". Rather, it states that such designation was in response to a legal requirement implemented throughthe Bylaw. [19] O'Connors submits that the question of whether the CARB applied the correct factors in determining market value is one oflaw.

It stated that the CARB did not assess the impact of the Bylaw on market value, as it was required to do. [20] The City argues that any legal impediment imposed by the Bylaw relates to the property on which the O'Connors retail storeis situated; not on the Properties designated as parking lots. In arguing before the CARB the City presented evidence establishing thatthere was no caveat or restriction on the title to the Properties that would restrict their use in any way. [21] The City submits that the Bylaw requires 26 parking stalls in connection with the O'Connors retail store.

The Bylaw, as itread at the time of development, required all parking stalls to be either located on the same site as the use requiring it, or - with approval -on a site within 120 meters of the proposed development site, provided that the site was used exclusively as a parking area and could besecured for a time period equal to that of the approved use.

I note that the current version of the Bylaw (1P2007) does not provide forthis exemption. [22] The City argues that O'Connors' designation of the Properties as parking lots was in fact an internal operational arrangement(as found by the CARB) as it could have made alternate arrangements for parking stalls within 120 metres from the retail store, or on theretail site itself (by providing underground parking for example).

The City submits that the CARB's finding in this regard is a question ofmixed fact and law, from which no question of law is extricable, and that as such the application for leave must fail: Canadian NaturalResources Ltd v Wood Buffalo (Regional Municipality), 2012 ABQB 177, para 109. [23] In T Eaton Co v Alberta (Assessment Appeal Board) (1996), 1995 ABCA 361 , 174 AR 99 (ABCA) the Courtaddressed the effect of a restriction on the market value of land. Here, land was acquired in contemplation of developing a large retailshopping project.

As a part of the development Eatons accepted the imposition of certain restrictions, which were not present when theland was purchased. The restrictions arose as a part of a negotiated redevelopment scheme under which the land became subject toheight, density, and use restrictions incorporated in a development agreement between Eatons, the City and the developer, and containedin a Bylaw.

The land was subsequently assessed based upon the price paid when the land was acquired, with the assessor finding that thedevelopment restrictions did not lower the land's value for assessment purposes. [24] In allowing the appeal, the Court held, at para 4, that: The question before the Board was whether the market value of the land was adversely affected by the development limitations attachedfollowing its acquisition. Although the Board professed to answer that question, it in fact looked only at the impact of the restrictions onthe special value of the property to Eatons.

That was an error of law which is, in my view, sufficient to justify interfering with thedecision.

[25] In finding that the Board erred, the Court held, at para 23 that "the presence of development and use limitations contained in aBy-law or in an agreement with the municipal authority may affect the market value of land relative to comparable land not sorestricted." In so finding, the Court held that the question facing the Board was whether the restrictions reduced market value. [26] In classifying the Board's error as one of law, the Court held at para 37: The foregoing extracts from the Board's reasons demonstrate clearly that the Board, while purporting to assess the market value of theland, in fact based its assessment on its special and subjective value to Eatons.

This was, in my view, a significant error of law. TheBoard considered the effect of the restrictions on the value of the land to Eatons; it did not assess their impact on market value as it wasrequired to do. This error is sufficient to justify allowing the appeal and quashing the Board's decision. [27] O'Connors relies on T Eaton in arguing that the question of whether the CARB failed to account for the restriction under theBylaw is one of law.

It submits that T Eaton stands for the proposition that a Board's failure to answer the question of whether the marketvalue of the land is adversely affected by a developmental limitation is an error of law. [28] The City submits that O'Connors is attempting to elevate a mixed question involving a factual consideration (the parkingarrangements) to one of pure law in order to bring it within the scope of s 470 of the MGA.

It states that the first ground for appealinvolves an application of the law to the facts and as such, is mixed: Alberta (Workers' Compensation Board) v Appeals Commission,2005 ABCA 276, 371 AR 318 at paras 21-22; Altus Group Ltd v Calgary (Composite Assessment Review Board), 2011 ABQB 739, 528AR 138 at para 21. [29] The distinction between questions of law, fact, and mixed law and fact was described in Canada (Director of Investigationand Research, Competition Act) v Southam Inc, (SCC), [1997] 1 SCR 748: 35 Briefly stated, questions of law are questions about what the correct legal test is; questions of fact are questions about what actuallytook place between the parties; and questions of mixed law and fact are questions about whether the facts satisfy the legal tests. […] 39 …if a decision-maker says that the correct test requires him or her to consider A, B, C, and D, but in fact the decision-makerconsiders only A, B, and C, then the outcome is as if he or she had applied a law that required consideration of only A, B, and C.

If thecorrect test requires him or her to consider D as well, then the decision-maker has in effect applied the wrong law, and so has made anerror of law. [30] O'Connor's relies on the above in arguing that in assessing the Properties, the CARB was required to consider the effect ofthe Bylaw, and that in failing to do so, it applied incorrect factors to its assessment, thus erring in law. [31] O'Connors argues that requirement to account for legal restrictions stems not only from case law, but from the legislationitself. It relies on s 289(2) of the MGA which reads:

(2) Each assessment must reflect (

a) the characteristics and physical condition of the property on December 31 of the year prior to the year in which a tax is imposedunder

Part 10 in respect of the property, and (

b) the valuation and other standards set out in the regulations for that property.

[ 32 ] O'Connors submits that the "characteristics" of the property would include the attributes of a property as affected by restrictions imposed by a municipality. There is no mention of s 289(2) in the CARB's decision. [ 33 ] The question of whether or not a decision maker has identified or followed the correct test is a one of law: Associated Developers Ltd v Edmonton (City) , 2011 ABQB 592 , 50 Alta LR (5th) 219 at para 36 .

As this Court in Altus stated, at para 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. [emphasis added] [ 34 ] I agree with O'Connors that the question of whether the CARB properly accounted for the developmental restrictions imposed by the Bylaw is one of law.

This is not simply a matter of ignoring evidence or giving inappropriate weight to evidence - it is a question of whether there was a failure to consider the effect of a legal requirement. [ 35 ] The City argues that even if the question is one of law, the CARB was not required to account for the Bylaw restriction based upon the CARB's finding that the restriction pertained only to the parcel of land housing the retail store and not to the Properties per se . [ 36 ] I cannot accept the City's argument in this regard. With respect, I do not see this reasoning expressed in the CARB's decision.

In any event, even if such an approach was taken, it would arguably be unnecessarily restrictive or narrow. The fact of the matter is that O'Connors is unable to carry on its retail operations without providing a specific number of parking stalls set by the Bylaw. It satisfied this legal requirement by utilizing the Properties as parking stalls. To classify this as an "internal operational arrangement" is to fail to acknowledge the reality that the Properties are restricted by the operation of the retail store.

The restrictive effect of the Bylaw is not to be considered in isolation. [ 37 ] I conclude that the question of whether the CARB erred in failing to account for the restrictions under the Bylaw is a question of law. The first part of the test for leave to appeal is met. 2. Is the issue of sufficient importance to merit an appeal? [ 38 ] To meet the second part of the test the Applicant must demonstrate that the issue is of significant import.

The parties agree that in order for a question to have sufficient importance to merit an appeal it must be important for jurisprudential purposes: Omega2 Corporation v Edmonton (City) , 2005 ABCA 449 at para 9 . [ 39 ] The City submits that the question of Bylaw restrictions only effects the valuation of the Properties in question and does not have wide-ranging implications.

I agree that whether a question is of sufficient importance must be determined on an objective scale as opposed to basing it on the subjective importance to the applicant: Wood Buffalo at para 119. [ 40 ] However, I cannot accept the City's argument that this issue is not objectively important. The question of whether developmental restrictions (imposed through Bylaw or otherwise) impact the value of property for taxation purposes extends far beyond O'Connors' subjective interests. It is of note to anyone who owns, or might consider owning, property subject to a restriction.

As such, addressing this issue is clearly important for jurisprudential purposes for any municipality governed by the MGA . The decision is also important for jurisprudential purposes if the CARB is intending to signal a departure from the Court's approach in T Eaton . [ 41 ] The burden lies with the Applicant to demonstrate that the impugned question is of sufficient importance: Ruppert v Calgary (City) Assessment Review Board (18 November 2010), Calgary CVQ10RUPPERTJ (QB). I find that O'Connors has met this burden, satisfying the second part of the test for leave.

3. Does the appeal have a reasonable chance of success [ 42 ] In order to satisfy the third part of the test for leave to appeal under s 470 of the MGA , an applicant must demonstrate a prima facie or arguable case at the leave stage to establish a reasonable chance of success on appeal: Altus Group Ltd v Calgary (City) (23 July 2012), Calgary 1101-01047 (QB). [ 43 ] O'Connors submits that the T Eaton decision is sufficient to demonstrate a reasonable chance of success on appeal. [ 44 ] The City argues there is no chance of success.

It submits that because the restrictions do not apply to the Properties, but rather to the retail property, there is simply no evidence to support a finding that the market value of the Properties was effected by the Bylaw. It relies on Mediplex to argue that the CARB is prohibited from assessing market value by 'capturing' the value of adjacent properties as one parcel for assessment purposes. [ 45 ] The first step in assessing whether an applicant has demonstrated a reasonable chance of success on appeal is determining the applicable standard of review.

As noted by Poelman J in Ruppert : To determine whether there is a reasonable chance of success on appeal, it is necessary to consider what legal principles would apply. Initially, that means considering the relevant standard of review: Lor-Al Springs v Ponoka County, 2000 ABCA 299 , at para. 6 . [...] [ 46 ] O'Connors argues that as an extricable question of general law, the question of whether the CARB erred by failing to account for the Bylaw is reviewable on the correctness standard: Martin v Alberta (Workers' Compensation Board) , 2012 ABCA 248 , 65 Alta LR (5th) 220 at para 28 .

However, O'Connors suggests that even if a reasonableness standard is followed, it is able to demonstrate a prima facie chance of success on appeal. It relies on Martin in suggesting that a protracted debate of correctness or reasonableness may not be necessary when the result would be the same: paras 30-31. It states that under either standard, the CARB's decision cannot stand. [ 47 ] The City and the CARB both take the position that the question must be reviewed on a reasonableness standard.

As stated in Martin , at para 26 : Since argument of this appeal, the Supreme Court of Canada has reinforced the deference that judicial review courts owe to tribunals interpreting their enabling statutes and interpreting associated statutes with which the tribunals regularly work, unless a true question of vires or jurisdiction is clearly involved (and those are uncommon): see Alberta Teachers' Association v. Alberta (Information and Privacy Commissioner), 2011 SCC 61 , [2011] 3 SCR 654 , paras. 33 to 34 (Alberta Teachers) . See also Celgene Corp v.

Canada, 2011 SCC 1 , [2011] 1 SCR 3 , paras. 33 to 34 ; Smith v. Alliance Pipeline Ltd, 2011 SCC 7 , [2011] 1 SCR 160 , para. 26 ; Manitoba Association of HCP v. Nor-Man RHA, 2011 SCC 59 , [2011] 3 SCR 616 , paras. 35 to 36 . [ 48 ] The composition of the CARB has undergone changes since the recent amendments to the MGA . However, there have been a number of decisions that have recently commented upon the specialization of the CARB in finding that the appropriate standard is reasonableness.

See for example: Edmonton (City) v Edmonton (City) Composite Assessment Review Board , 2012 ABQB 118 , 534 AR 110 , at para 42 [ Jorgenson ] ; Edmonton East (Capilano) Shopping Centres Ltd (AEC International Inc) v Edmonton (City) , 2012 ABQB 445 at para 14 ; Wood Buffalo at paras 125-127. In AEC International , the Court indicated that reasonableness is the presumed standard of review to be applied in CARB leave applications.

The Court in Globexx Properties Inc v Edmonton (City) , 2012 ABQB 651 came to a similar conclusion: para 11. [ 49 ] If the applicable standard of review has already been established, the courts need not necessarily engage in an exhaustive analysis for the proper standard: Dunsmuir v New Brunswick , 2008 SCC 9 , [2008] 1 SCR 190 para 57 . I am satisfied that the CARB was engaged in examining the Bylaw against the assessment requirements as set out under the MGA and the Assessment Regulation. The appropriate standard is therefore reasonableness.

I adopt the conclusion on this point of Poelman J in Ruppert , where he held: The questions of law that arise on this application are of a nature calling for, in my view, a reasonableness standard of review because

they involve the tribunal interpreting its own statute and are not central to the legal system as a whole or outside the tribunal's specialized area of expertise. [ 50 ] The Court in Dunsmuir elaborated on the meaning of the reasonableness standard at 220-221: Reasonableness is a deferential standard animated by the principle that underlies the development of the two previous standards of reasonableness: certain questions that come before administrative tribunals do not lend themselves to one specific, particular result. Instead, they may give rise to a number of possible, reasonable conclusions.

Tribunals have a margin of appreciation within the range of acceptable and rational solutions. A court conducting a review for reasonableness inquires into the qualities that make a decision reasonable, referring both to the process of articulating the reasons and to outcomes. In judicial review, reasonableness is concerned mostly with the existence of justification, transparency and intelligibility within the decision-making process.

But it is also concerned with whether the decision falls within a range of possible, acceptable outcomes which are defensible in respect of the facts and law. [ 51 ] The reasonableness standard provides that a tribunal may reach a number of conclusions, provided the conclusion falls within a range of possible, acceptable outcomes defensible given the facts and the law. In this instance, the CARB's decision fails to account for the effect of the Bylaw on the Properties. The CARB failed to rationally link the legal requirements arising under the Bylaw to the practical effects of the same on the Properties.

Its treatment of the Bylaw is largely limited to indicating that the parking spots did not need to be owned in order to fulfill the Bylaw requirements. It fails to give any consideration to the realities of the current situation. Its analysis arguably falls short of the standard of ensuring transparency, justification and intelligibility in the decision making process, and therefore could be found to be unreasonable. [ 52 ] I find that O'Connors has established a prima facie chance of success on appeal using the reasonableness standard of review.

Having met all three elements of the test under s 470 of the MGA , leave to appeal is granted on the first question. Ground Two: Whether the CARB erred in finding that it was precluded from assessing a nominal value for the Properties 1. Does the appeal involve a question of law? [ 53 ] O'Connors argues that the CARB wrongfully found that it was precluded from assessing the Properties at nominal value. It submits that where land is restricted pursuant to bylaw, the assessment must be related to the restricted use.

It claims that in finding that it could not assign a nominal value for the purposes of addressing the restrictions in performing the assessment, the CARB misinterpreted the MGA , thus erring in law. [ 54 ] O'Connors submits that historically, the CARB acknowledged that the Properties were of nominal value due to the Bylaw restrictions. For example, in 2010, the total assessed value for the Properties was $2,250; in 2011 it was $2,781,000. O'Connors submits that the City should have performed the 2011 assessment using the 2010 assessment approach as its base, varied to reflect any changes in market data.

It argues that if the City is going to depart from its historical position of allowing for an assessment at nominal value, this significant departure should have been justified by the City. [ 55 ] The City argues that O'Connors has misinterpreted the CARB's decision. The City submits that the CARB did not find that property can never be assessed at a nominal value in a market regime.

Rather, its decision was specific to the facts before it: the Properties in issue could not be assessed at nominal value. [ 56 ] I do not read the CARB's decision as acknowledging that the MGA contemplates a nominal value in instances where the market value has been shown to be negligible. No such analysis was undertaken.

Rather, the CARB found that with respect to applying a "nominal parking rate" that "this Board could not find any provision in the Act or the related regulations that gives the assessor authority to prepare an assessment of a parcel of land not used for farming operations, at a value other than market value". [ 57 ] In Jorgenson the land owner complained that a warehouse building and certain yard improvements that were not complete by the assessment date of December 31, 2009 should not have been included in the property assessment, as s 291(2) of the MGA exempts improvements which have not been completed by the year-end.

In determining whether the first branch of the test under s 470 had been

met, the Court held, at para 34: On the face of it, the question of whether the ARB misinterpreted sections of the MGA appears to be a question of statutory

interpretation, and therefore a question of law. The essence of the City's argument is that the ARB failed to apply a purposive analysis when interpreting the MGA and to consider

definitions of terms contained in the sections it applied. These failures, according to the City, resulted in the ARB interpreting the statute incorrectly. Although the misinterpretation necessarily leads to a misapplication of the MGA, the question raised by the City does deal directly with the application of statute to the facts. Therefore, the first question is a question of law. [emphasis added] [ 58 ] In construing the definition of "market value" under the MGA and the provisions for land valuation under sections 4(1) and 2 of the Assessment Regulation, to preclude a nominal value, the CARB was engaged in legislative

interpretation. Whether it did so correctly is a question of law. 2. Is the issue of significant importance to merit an appeal? [ 59 ] O'Connors argues that if the CARB is going to preclude the availability of a nominal value for property assessment, then such a shift in assessment approach will be of note to any property owner holding restricted lands. It argues that if the CARB is going to depart from the principles set out in T Eaton and other cases concerning restricted properties, the decision is important for jurisprudential purposes and has wide-ranging implications.

As such, O'Connors submits that the test in Omega 2 and Wood Buffalo have been met. [ 60 ] The City argues that the decision does not suggest that restricted property can never be assessed at a nominal value; merely that on these facts it is not appropriate. It therefore argues that the decision is of subjective value to O'Connors alone. [ 61 ] The City further argues that because there is nothing novel or unsettled about this question, it cannot pass the second test: R v Terroco Industries Ltd , 2004 ABCA 159 , 348 AR 96 at para 18 . The City submits that the Mediplex case has already addressed this issue.

In Mediplex certain parking lots were assessed as individual parcels of land, yet their value was captured in the building to which they were adjacent. As such, the CARB reduced the assessed value of the parking lots to a nominal value. The City argued that the CARB misinterpreted the MGA in assessing the parking lots at nominal value, and erred in law in doing so. In grating leave the Court held, at para 32, that: … it could not be clearer that here the CARB failed to comply with the legal requirement that it assess each of the parking lots in question on a market value basis.

The CARB made a finding not of market value but rather of "nominal" value. It was not entitled to do so. [ 62 ] The City relies on this finding in arguing that there is nothing novel or unsettled about the question of whether the Properties can be assessed using a nominal value, as this Court has already concluded that they may not. [ 63 ] The City further submits that the issue of whether previous years' assessments must be taken into account as a starting point for the current years' assessment has been answered in the negative by this Court in Globexx .

In Globexx this Court found that in a mass appraisal system, there is no requirement for a prior-year starting point: paras 23-27. Again, the City submits that based upon this decision, there is no novel or unsettled issue being raised by O'Connors. [ 64 ] I cannot accept the above propositions. With respect to the City, while Mediplex deals with the ability to assess lands at a nominal value, it does not address the situation before this Court. Namely, the case is silent as to whether a legal restriction can affect market value in a manner essentially reducing market value to a nominal amount.

The question of whether parking spots utilized to fulfill a legislated requirement was not dealt with. [ 65 ] Similarly, Globexx can be distinguished on the facts. I do not read Michalyshyn J's decision in as wide of terms as suggested by the City. Rather, I read the decision as stating that the dollar value of a prior year's assessment (as derived from a valuation scheme based on comparables and other market value utilized by the City) is not the starting dollar value for next year's assessment. That is, last

year's numbers do not dictate a starting point for the current year's assessment value. I do not read Globexx as stating that a complete change in policy as to how a property is going to be assessed need not be taken into account; a distinction may be drawn between methodology of valuation and dollar amount. As such, I cannot find that Globexx has settled the issue or made the applicant's argument unoriginal or moot. [ 66 ] I agree with O'Connors that the question is important for jurisprudential purposes, is unsettled, and is of objective importance. It is therefore significant enough to merit an appeal. 3.

Does the appeal have a reasonable chance of success [ 67 ] For the reasons discussed above at paras 45-49, I accept that the question of whether the CARB erred in finding that it was precluded from assessing the Properties using a nominal value should be reviewed using the reasonableness standard. [ 68 ] O'Connors submits that in addition to T Eaton , there is ample jurisprudence establishing that property can have a nominal value in a market regime, and that the MGA does not restrict value in the manner found by the CARB.

It argues that on the strength of this jurisprudence it has established a prima facie chance of success on appeal utilizing the reasonableness standard. I shall briefly review these authorities. [ 69 ] In Home Depot Holdings Inc v Calgary (City) , [2010] AMGBO No 49, MGB 032/10, the Municipal Government Board ascribed a nominal value to property used for parking in connection with an adjacent property housing a Home Depot store. The property in issue was a vacant land parcel primarily used for parking but separately titled and on a separate roll number.

The Board had to determine whether the parking lot parcel should have an independent value from the main Home Depot roll number. Home Depot argued that it was legally obligated under bylaw to provide 460 parking stalls and that the property was limited in use. The Board agreed that the separate parcel was required for the operation of the Home Depot site and assigned it a nominal value for assessment purposes. [ 70 ] In Calgary (City) v.

Alberta (Municipal Government Board) , 2004 ABCA 10 , 339 AR 393 [ Carma ] , the Court of Appeal restored the decision of the Board which held that certain ravine lands that would revert to the City upon subdivision of nearby property could not be assessed using the market value of nearby property. The Court held, at para 13: The properties used by the City for comparison were properties that could be sub-divided and developed. This accounts for the high market value of the Tuscany lands.

Having assessed acres at an enhanced value because of the ability to sub-divide, however, the City had to be prepared for the logical aftermath. If the high market value of the 14.13 acres was derived from the assumption that the land would be sub-divided, the remaining land had to be assessed in accordance with the negative aspects of that assumption, namely, that the reserve lands would pass to the City once the property was sub-divided at no cost to the City. Thus, the ravine lands had no market.

What willing buyer would pay anything for land designated to be transferred to the City of Calgary at $0.00? [ 71 ] In Gander International Airport Authority Inc v Gander (Town) , 2011 NLCA 65 , 342 DLR (4th) 477 the Town appealed an assessment of lands restricted use for airport purposes at $1. In dismissing the appeal, the majority of the Court found that the effect of the restrictions had to be considered in determining market value. The Court examined the nature of the property in its present use in determining whether the assessor erred.

The Court found that although future assessments may change, if the restrictions were lifted, in the current circumstances the trial judge did not err in accepting a nominal value of $1. [ 72 ] The City relies on both Mediplex and Globexx in support of its position that O'Connors does not have a prima facie chance of success given the jurisprudence. As discussed above, both of these cases can be distinguished on the facts. The City also argues that T Eaton , Carma , and Gander are not applicable in that in the case at bar the restrictions in the Bylaw do not apply directly to the subject Properties.

Again, this fails to address the reality of the situation: that the Properties are in fact being used to satisfy the restrictions legally imposed by the Bylaw. I note that in Carma , the subject ravine property had not yet reverted as the subdivision had yet to occur. This did not stop the Court from addressing the de facto restriction on the land based upon the practical realities of the situation. [ 73 ] Similarly, in Home Depot , the Board looked to the limited use of the parking lot property in relation to the requirements tied to the retail development in assessing a nominal value.

[ 74 ] The City argues that the CARB's finding that "the subject properties are properly assessed at market value pursuant to the legislation, and should not be assessed at an arbitrary nominal value" indicates that the CARB acknowledged that a nominal value can be utilized in a market regime, but that the CARB found that on the facts before it, there was no ground for utilizing a nominal value. With respect, I do not read the CARB's decision as acknowledging that a nominal value may be assigned, but only in cases where the market value of the property is in fact nominal.

Rather, the CARB finds it is precluded from using any value other than market value (based upon fee simple estate value) unless the land is farmland. [ 75 ] While the CARB acknowledges that MGA mandates the use of market value, it fails to examine whether market value has been reduced to a nominal value in the circumstances. I find that based upon the existing jurisprudence, O'Connors has established a prima facie case that it will be successful in arguing that the CARB erred in interpreting the MGA to preclude an assessment at nominal value. [ 76 ] The Applicant is granted leave to appeal on the second question.

Conclusion [ 77 ] O'Connor's has satisfied the test for leave to appeal set out under s. 470 of the MGA on the two questions identified in these reasons. It is therefore granted leave to appeal on the following grounds: 1) whether the CARB erred in failing to account for the Bylaw restriction, and; 2) whether the CARB erred in finding that it was precluded from assessing a nominal value for the Properties. [ 78 ] If the parties are not in agreement on the issue of costs, they may speak to me within 30 days of the release of the decision. Heard on the 29 th day of November, 2012.

Dated at the City of Calgary, Alberta this 13 th day of February, 2013. C.L. Kenny J.C.Q.B.A. Appearances: Gilbert J. Ludwig for the Applicant Nathan Irving for the Respondent City of Calgary

Shaun Fluker for the Respondent Calgary Assessment Review Board