Altus Group Ltd. v. Calgary (City), 2013 ABQB 608

Court of Queen ’ s Bench of Alberta Citation: Altus Group Ltd. v. Calgary (City), 2013 ABQB 608 Date: 20131017 Docket: 1101 01047 Registry: Calgary Between: Altus Group Ltd. on behalf of various owners Applicants - and - The City of Calgary and the Assessment Review Board for the City of Calgary and Minister of Justice, Attorney General for Alberta Respondents _______________________________________________________ Reasons for Judgment of the Honourable Madam Justice K.M.

Eidsvik _______________________________________________________ [ 1 ] The Applicants seek leave to appeal pursuant to s. 470 of the Municipal Government Act, RSA 2000, c M-26 (the “MGA”) from Decision 0626/2010-B of the Calgary Local Assessment Review Board (the “LARB”). The LARB upheld an assessment in 2010 by the City of Calgary of business tax on parking spaces rented to tenants of office buildings by the Plaintiff landlords. Background

[ 2 ] The LARB heard the appeal of 127 complainants over a 6 day period in November 2010. The decision was rendered on December 23, 2010 dismissing all of the appeals. The LARB found, after determining that it had the jurisdiction to hear the appeals, that the parking stalls are subject to business assessment and tax because: A. Parking spaces are included within the definition of “Premises” B. Parking stalls are occupied or used for the purpose of or in connection with a business C. Business is operated in the “Premises” D.

Occupation or use of the parking spaces is for the purpose of or in connection with the complainants’ business [ 3 ] The Applicants take particular issue with the findings in C and D; that business is operated in the parking stalls and that the landlords occupy these stalls for the purpose or in connection with a business.

They say that based on similar facts and the same legislation (the same provisions of the MGA and Calgary Bylaw), both the Queen’s Bench and Court of Appeal of Alberta found that it was a reasonable conclusion of the Municipal Government Board (who heard a similar appeal for the 2005 and 2006 taxation years) that the landlords were not operating a separate parking business in the parking stalls. [ 4 ] The City, on the other hand, says that the LARB is not bound by previous tax assessment decisions and that in this case, this was a reasonable decision and

interpretation of the legislation.

The City submitted that the Queen’s Bench and Court of Appeal decisions only decided whether the Municipal Government Board’s (“MGB”) reasons for its decisions were adequate, and that neither legal decision contained an analysis of the legislation, therefore they were not relevant here. [ 5 ] The Applicants also question whether the LARB appeal structure that is now in the MGA meets the requirements for institutional independence in the case of taxation appeal tribunals. [ 6 ] The new MGA eliminated a right to appeal assessments to a provincially appointed MGB and limited an appeal to either a local, municipally appointed and compensated tribunal, the LARB, or one that has one provincial member from the MGB in addition to the local members, the CARB.

Appeals from the local board go directly now to the Court of Queen’s Bench and can only be on questions of jurisdiction or questions of law of importance that have a reasonable prospect of success. The Applicants argue that the Local Assessment Appeal Board in this case is not sufficiently independent. [ 7 ] The Board responded by arguing that the structure set up by the legislature is sufficiently independent and should be respected based on recent case law from the Supreme Court: Ocean Port Hotel Ltd. v. British Columbia (General Manager, Liquor Control and Licensing Branch) , 2001 SCC 52 , [2001] 2 SCR 781.

The City agreed with the Board’s submissions. [ 8 ] In sum, the Applicants seek leave to appeal on the following questions: 1. Did the LARB err in law in finding business tax liability on landlords of office space by:

a) misinterpreting or ignoring s.4 and other provisions of the City of Calgary Bylaw 1M2010;

b) misinterpreting sections 372, 373 and 374 of the MGA;

c) by taking into account irrelevant considerations, or failing to take into account relevant considerations; or

d) misinterpreting or misapplying limited lease clauses to attach liability to all landlords.

2. Does the LARB meet the requirements for institutional independence of an adjudicating tribunal and the requirements for fair and impartial decisions? [ 9 ] Although the Originating Notice filed by the Applicants had other claims for relief including judicial review and claims of unfair and biased proceedings, they have limited the leave application for present purposes to the questions just noted and will continue on with the judicial review issues (to the extent that they are not subsumed in the leave to appeal) at a later date.

They also advised that they would not be proceeding with the actual bias issue but only the institutional independence issue. [ 10 ] The parties agree that the test for leave to appeal under the MGA is threefold, as defined by s. 470 of the MGA: (

a) that the appeal involves a question of law or jurisdiction (

b) that the issue is of sufficient importance to merit an appeal; and (

c) that the appeal has a reasonable chance of success [ 11 ] I note at the outset that a leave application is not the hearing of the appeal. A large part of the argument and the briefs deal with the merits of the appeal - I shall only consider them in

summary in order to determine the questions before me. To go further would be inefficient and duplicative. I shall address each question for which the Applicants’ seek leave separately. 1. Did the LARB err in law in finding business tax liability on landlords of office space (

a) Does the appeal involve a question of law? [ 12 ] The City submits that the first issue raised by the Applicant - whether the LARB erred in finding business tax liability on landlords of office space - is not a question of law, thus precluding a grant for leave to appeal. Rather, the City argues that this issue is at most one of mixed fact and law and therefore fails to satisfy the first step in the test for leave. [ 13 ] The Applicant contends that legislative

interpretation is a question of law: Dunsmuir v New Brunswick , 2008 SCC 9 , [2008] 1 SCR 190 at para 66 . [ 14 ] Moreover, the Applicant argues that in failing to consider precedent on this issue, the LARB failed to apply or incorrectly applied the legal test for determining liability under s. 4 of the Bylaw. It submits that the misapplication of a legal test to a set of facts is an error of law: Housen v. Nikolaisen, 2002 SCC 33 [2002] 2 SCR 235 para. 27 . [ 15 ] As noted above, the Applicant submits that its current position is consistent with decisions in similar cases decided by the MGB.

It stresses that for the years 2005 - 2006 the MGB made a determination based upon an almost identical fact pattern that the landlords should not have been liable for parking assessment (MGB Order 057/08; the “BTC Decision”). [ 16 ] The City applied for judicial review of the BTC Decision which was denied on the basis that it was a reasonable decision based on appropriate reasons: Calgary (City) v. Alberta (Municipal Government Board) , 2010 ABQB 719 , 504 AR 1 (the “Romaine Decision”). The City’s appeal of this decision was dismissed: 2012 ABCA 13 , 519 AR 259.

The decision of the Court of Appeal was released following the LARB’s decision. [ 17 ] A review of the BTC Decision demonstrates a marked similarity between that case and the one at bar. Although amendments have been made to the MGA following the BTC decision, the relevant sections of the MGA dealing with business tax bylaws (namely sections 371-374) and the definition of “business” remain the same. The liability provision of the City’s Business Tax Bylaw has not

changed from when the BTC Decision was rendered, it reads: 4(1) Every Person who operates a Business in Premises within the City shall be assessed by the Assessor for the purposes of imposing aBusiness tax. [18] The liability provision is identical to that considered by the MGB in the BTC Decision and in the Romaine Judgment. TheBylaw provides a definition of “Business” taken from the MGA. It also defines “Premises”. The impugned decision does not turn on thedefinition of these terms. Rather, the

interpretation of s. 4 of the Bylaw was the primary dispute, the issue being whether the Applicantwas operating a business in premises. [19] The facts in the BTC Decision and the impugned decision are also very similar. In BTC the appellant landlord agreed that itwas in the business of operating space, but submitted that it did not use or occupy the parking facilities in connection with its business.Rather, the parking stalls were provided for the use of the corporate tenants, as evidenced by the rights given to the tenants pursuant tothe leases.

The MGB found that the owner/landlord was not operating a parking business and was not subject to taxation on the parkingstalls. The MGB defined the central issue of the decision as “whether there is a parking business being operated in the premises” anddistinguished those decisions wherein the owner agreed that it was operating a parking business. [20] In determining whether business tax is assessable under s. 4 of the Bylaw, the MGB stated that three elements must besatisfied, being:

a) there must be a business being operated;

b) there must be premises; and

c) the premises must be used or occupied in the operation of or in connection with that business. (BTC Decision p 13) [21] After reviewing the leases and the evidence the MGB found that the landlord was not operating a parking business but wasrather in the business of leasing space, including space in the offices proper as well as the parking facility. As such, parking wasconsidered incidental to the office lease and was not something being operated as a secondary business.

Finally, the MGB determinedthat it was not required to engage in a Gottardo or Qu’Appelle analysis, as the issue of paramountcy did not arise: Gottardo Properties (Dome) Inc. v Toronto (City) (1998), (ON CA), 162 DLR (4th) 574 (Ont CA); Qu’Appelle Developments Ltd. vRegina (City) (1989), (SK CA), 5 WWR 353 (Sask CA). [22] The City argued that the BTC Decision does not apply to the case at bar.

In its brief the City submits that the facts betweenthe case at bar and the BTC Decision are very different, and that “the decisive fact is that in [the BTC Decision] the Board found that thelandlord did not operate a business, whereas in the within matter, the Applicants have admitted that it did operate a business.” [23] I cannot accept the City's submission in this regard. In the BTC Decision the Board expressly noted that “the Appellantagreed that it is operating the business of leasing space...” (BTC Decision p 6).

I do not see how the Board's finding in this regardrepresents a “major factual difference” between the Applicants' concession that it is in the business of leasing space. [24] The City further submits that the Romaine Decision does not contain an analysis of the legislation in issue, and that thedecision focuses on the adequacy of reasons. This argument was put forth to bolster the City’s position that the LARB did not have toundertake any meaningful analysis of this decision. Again I cannot accept this submission.

The Romaine Decision addresses both theMGA and the Bylaw in some detail: see paras. 12-25 and the conclusion at para. 133. It goes on to discuss the reasonableness of theBoard’s findings. [25] The above findings undermine the City’s argument that the BTC Decision and the Romaine Decision can either bedistinguished factually from the case at bar or are otherwise irrelevant to the analysis undertaken by the LARB. [26] The City submits that the LARB, like other administrate tribunals, is not bound by precedent inter se. While this is true, the

City itself has argued for consistency in reasoning. In The BTC Decision it argued that the issues before the Board had been “thoroughly canvassed and decided by ...previous MGB decisions” and it encouraged the MGB to “apply the principles previously laid out” (BTC Decision p 9). The City made similar arguments before Justice Romaine: Romaine Decision para. 76.

At the Court of Appeal level the City argued that the Board was required to adequately explain why it came to a different result than it had in previous decisions: para. 21. [ 27 ] The Board in the BTC Decision enunciated a test for determining whether business tax liability arises under s.4 of the Bylaw. It stated that the following elements must be satisfied: there must be a business in operation; there must be premises, and; the premises must be used or occupied in the operation of that business (p 13).

The Board concluded that while the landlord was operating a business (the business of leasing space), and while a parking lot may be captured in the definition of the term “premises”, the landlord was not using or occupying the space in connection with its business as a landlord. [ 28 ] The conclusion reached by the MGB based upon the above factors was commented on by Justice Romaine, at para. 98: The MGB’s conclusion that BTC was not operating a parking business in the subject parking facilities was consistent with a reasonable

interpretation of the MGA and the Bylaws...Based on the law, evidence and arguments made by the parties, it was reasonable for the MGB to conclude that the provision of parking was complementary to the lease of the office space and that BTC did not operate a separate parking business. It is also clear from its reasons how it came to that conclusion [ 29 ] In commenting on the Board’s decision on the merits, the Court of Appeal referenced the factors as follows, at para. 24: The Board considered the relevant provisions of the Bylaws.

These included the general authority for assessment: “Every Person who operates a Business in Premises within the City shall be assessed ... for the purposes of imposing a business tax.” The respondent's argument was that it operated a business as a landlord but not “ in ” the parking lot premises (emphasis added).

In determining that the respondent ought not to have been assessed, the Board asked three questions: (1) was there a business being operated? (2) were the parking facilities “premises”? and (3) were the premises used or occupied in the operation of or in connection with that business? [ 30 ] In the impugned decision, the LARB does not mention the factors laid out in the BTC Decision. Rather, it determined that as “premises” can include parking facilities, if a business is operated on the premises it is taxable as a parking business. The LARB does not indicate how it connected: (

a) the fact that the Applicant was operating a business of leasing space; and (

b) the

interpretation of “premises” to include parking space to; (

c) reach the conclusion that the Applicant was therefore operating a parking business in the premises. Rather, the LARB simply concluded that “a business of renting space, in this instance specifically parking space, is being undertaken by the landlord.” (LARB 0262/2010-B at p 20). In so doing, the LARB failed to establish the factual base upon which its finding of liability is made.

Rather, the LARB assumed this base and focused on the paramountcy test under the Gottardo and Qu ’Appelle analysis. [ 31 ] In reaching this conclusion, the LARB did not identify or apply the factors expressly enunciated in the BTC Decision, namely whether or not the premises are used or occupied in the operation of that business. As such, it did not explain how the Applicants’ business fell within the definition of a “Business in Premises” in s.4 of the Bylaw. The question of whether a board identified or followed the correct legal test is a question of law: Associated Developers Ltd. v.

Edmonton (City) , 2011 ABQB 592 , 50 Alta LR (5th) 219, para. 36 . [ 32 ] In Globexx Properties Ltd. v Edmonton (City) , 2011 ABQB 464 , 338 DLR (4th) 543 this Court had the opportunity to address the new appeal process introduced by the 2010 amendments to the MGA. Globexx dealt with a complaint made to the Composite Assessment Review Board (CARB) regarding an assessed value. The CARB dismissed the complaint and upheld the assessment resulting in an application for leave to appeal.

The applicant argued that the CARB erred in law by considering incorrect evidence (in relying on incorrect 2009 assessment numbers for the 2010 assessment) and that it erred in relying on an internal and unpublished decision ( Maguire ) which was distinguishable on the facts. The applicant submitted that the CARB was aware of the earlier MGB decision which reduced the 2009 assessment numbers and that it erred failing to properly deal with the reduced figures. [ 33 ] In addressing whether the issue complained of was a question of law the Court held, at paras. 58-59 that [emphasis added]:

It is clear that the CARB was aware that the MGB had reduced the 2009 assessment. It also appears that it was aware that the properties put forward by the City as comparable to the Property in 2009, and which had been before the MGB and accepted by it as comparable at the appeal, had all decreased in value for the 2010 assessment year. The Property, however, increased almost 13%. However, the CARB accepted new comparables submitted by the City in support of its 2010 assessment of the Property. The effect of doing so was to ignore the effect of the successful 2009 appeal.

I consider that the ability (or not) of a municipality and a CARB to ignore a successful appeal (the effect of which was to direct the City to place a revised assessment on the Property which would then become the starting point for the 2010 assessment) is a question of law . I am also not convinced by the City's argument that, because there is a new assessment each year, the City is entitled to disregard the effect of a successful appeal of the previous year's assessment. To the contrary, this is a mass appraisal system which is legislated under the MGA. Each property is not individually assessed each year.

In a mass appraisal system the City starts with the previous year's assessment as its base and then applies various factors (derived from its analysis of market data collected over the intervening year) as appropriate to particular properties. [ 34 ] In Altus Group Ltd. v. Calgary (Composite Assessment Review Board) , 2011 ABQB 739 , this Court heard an application for leave to appeal two decisions of the City of Calgary Composite Assessment Review Board relating to the value of the properties for the purpose of municipal taxation.

The Court evaluated the errors alleged by the owners in order to determine whether they raised a question or law or jurisdiction, as required for leave under s. 470 of the MGA. It held, at paras. 20-21 [emphasis added]: 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 . 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. [ 35 ] In Edmonton (City) v.

Alberta (City of Edmonton Composite Assessment Review Board) , 2012 ABQB 118 , the City sought leave to appeal a decision of the CARB that a landowner’s warehouse improvement was not assessable for taxation. In noting that leave may only be granted on questions of law or jurisdictional questions, the Court held, at para. 34 [emphasis added]: 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 . [ 36 ] I note that in the Romaine Decision, she classified the issues before the MGB as “mainly factual” (para. 59).

However, in the Romaine Decision the Board had identified a legal analysis which addressed whether the landlord was operating a “Business in Premises” as required by s. 4 of the Bylaw and was applying this analysis to the facts. In the case at bar the error alleged is that the LARB either ignored or misinterpreted the provision itself. [ 37 ] In “Consistent Decision-Making – A Core Value for High Volume Jurisdiction Tribunals and Agencies?” a paper prepared for the Workplace Safety and Insurance Appeals Tribunal 25 th Anniversary Symposium, December 14, 2010, [unpublished], David J.

Mullen, a recognized expert in Canadian Administrative Law, examined the importance of consistency in tribunal decision making. While the paper focused on various techniques used to promote consistency in decision making and what constitutes adequate reasons, his commentary on the requirement for consistency in decision making is particularly relevant: What might that mean in the context of inconsistent decision-making? To return to the duty to give reasons, what it may speak to is a sense that reasons are inadequate to the extent that the decision-maker does not address and explain deviations from precedents.

To the

extent that a deviation is neither explained nor readily explicable, reviewing courts should at least be prepared to remit the matter back for reconsideration . [...] Indeed, there is recognition of this need to articulate reasons for departing from prior jurisprudence to be found in the caselaw of WSIAT’s predecessor, the Workers’ Compensation Appeal Tribunal.

In Decision No. 1004/89, the panel stated: [W]henever a subsequent Panel substantively departs from the reasoning of a previous decision there is an obligation to address and explain the reasons for such departure . [emphasis added] [ 38 ] In the case at bar the LARB failed to give any cogent reasons for its departure from the BTC Decision.

While not bound by the factors enunciated by BTC in examining whether tax liability attached under s. 4 of the Bylaw, it was under an obligation to consider and address these factors in order to make a legal determination as to whether the Applicants fit within the definition of operating a “Business in Premises.” This is especially so given the strong factual similarities between the two decisions. [ 39 ] In BTC, part of the analysis in determining whether an entity was operating a business in premises included a careful examination of the leases.

As this forms part of the test to determine liability, it may be necessary to reinterpret the limited lease clauses if an appeal is granted. [ 40 ] The City itself appears to be taking an inconsistent position as to the need for the Board to consider similar previous decisions. As noted above, during the BTC case argument and subsequent appeals the City argued that the Board has an obligation to adequately explain why it arrived at a different result from prior findings.

The Court of Appeal found that the Board did adequately address its prior decisions on point, holding, at para. 21 that: The Board referred to these decisions and distinguished them on the basis that the issue in one case, and the evidence in another, were different. The Board's reasons adequately explain the distinction and meet the requirement for sufficiency of reasons.

The reviewing judge did not err in her conclusion that the Board's reasons were sufficient. [ 41 ] Conversely, in the case at bar the City submits that the LARB was not obliged to consider other tribunal decisions given that assessments are undertaken on an annual basis based on the market value of the property for the current year. This argument holds no weight when one considers the fact that the impugned decision deals with which entities are subject to taxation.

Surely the City cannot take the position that landlords must be kept in abeyance from year to year as to whether they may face (in some cases fairly substantial) tax liability. [ 42 ] The City further submits that in Newfoundland and Labrador Nurses' Union v. Newfoundland and Labrador (Treasury Board), 2011 SCC 62 , [2011] 3 SCR 708, the Supreme Court found that where reasons are provided, inadequacy of reasons is not an error of law. I prefer the

interpretation given by our Court of Appeal in BTC at para. 15: The Supreme Court of Canada recently determined that where there are reasons to review (as opposed to a situation where the tribunal gave no reasons) any challenge to the sufficiency of the reasons should be made within the reasonableness analysis: Newfoundland and Labrador Nurses' Union v Newfoundland and Labrador (Treasury Board), 2011 SCC 62 .

Abella J noted that it would be “an unhelpful elaboration on Baker to suggest that alleged deficiencies or flaws in the reasons fall under the category of a breach of the duty of procedural fairness and that they are subject to a correctness review”: para 21. [ 43 ] Based on the above, the question of whether the LARB sufficiently addressed the BTC Decision should be made within a “reasonableness” analysis. The LARB’s reasons fail to adequately address relevant precedent and the legal test enunciated therein, either through principled disagreement or by distinguishing the decision.

The question of whether a board identified or followed the correct legal test is a question of law. [ 44 ] As such, I find that the question of whether the LARB erred in finding business tax liability on the Applicants by

misinterpreting or ignoring s.4 of the Bylaw and misinterpreting ss. 372-374 of the MGA to be questions of law. (

b) Is the issue of sufficient importance to merit an appeal? [ 45 ] The City submits that the question of whether the LARB erred in law in finding business tax liability on landlords of office space is not of sufficient importance as there is nothing novel or unsettled about the question, nor does it have wide-ranging implications: R v Terraco Industries Ltd. , 2004 ABCA 159 , 348 AR 96, at paras. 18-20 . [ 46 ] Rather, the City submits that the question simply reflects the private commercial interests of the Applicants as commercial landlords.

I agree that sufficient importance must be determined on an objective scale and not on the basis of subjective importance to an applicant: 845971 Alberta Ltd. v Grande Prairie (Subdivision and Development Appeal Board) , 2010 ABCA 135 , para. 8 . [ 47 ] The Applicants submit that an issue is considered to be sufficiently important to merit grating leave if it is important for jurisprudential purposes: Omega2 Corporation v. Edmonton (City) , 2005 ABCA 449 .

It argues that the question is of sufficient import for two reasons: first that the question of tax liability is important to the administration of the business tax scheme in the City of Calgary and second, that the question of whether a local board properly addresses precedent is important to the consistency and predictability of the administrative system. [ 48 ] I agree with the City that the burden lies with the applicant to demonstrate that the question is of sufficient importance: Ruppert v. The City of Calgary (18 November 2010) Calgary CVQ10RUPPERTJ (ABQB) [unpublished].

I find that the Applicants have met this burden. [ 49 ] The question of whether an entity attracts liability for business tax assessment is important to a municipality and any potential taxpayer (here commercial landlords and possibly tenants). The ongoing nature of this type of litigation indicates that there is indeed something unsettled about this question. Whether the LARB is properly interpreting the MGA and related Bylaw, as well as its need to address precedent decisions, are clearly important issues for jurisprudential purposes. (

c) Does the appeal have a reasonable chance of success [ 50 ] The City argues that the LARB’s analysis was comprehensive and that the Applicants have failed to point to any evidence supporting a different result.

The City suggests that as such, there is no reasonable chance of success of appeal. [ 51 ] The Applicants submit that the BTC Decision, which was considered reasonable on judicial review is sufficient to demonstrate a chance of success. [ 52 ] The Applicants must demonstrate that the proposed appeal is prima facie meritorious to satisfy this element of the test for leave: Stiles (Estate of) v Alberta (Energy and Utilities Board) , 2005 ABCA 308 , 53 Alta LR (4th) 235, at para. 19 . [ 53 ] In Ruppert , Justice Poelman stated: 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 . [...] [ 54 ] Poelman J., then went on to summarize the factors laid out in Dunsmuir to be considered in determining whether a reasonableness or correctness standard applied. While noting the distinction between statutory appeal and judicial review, Justice Poelman concluded:

The questions of law that arise on this application are of a nature calling for, in my view, a reasonableness standard of review becausethey involve the tribunal interpreting its own statute and are not central to the legal system as a whole or outside the tribunal’sspecialized area of expertise. [55] Adopting the reasonableness standard as appropriate for this Court’s review of the LARB’s decision, I find that the Applicantshave shown that the proposed appeal is prima facie meritorious.

The reasons given by the LARB reveal that it failed to consider existingprecedent setting out a formula for determining whether an entity is operating a “Business in Premises”. Had this approach beenconsidered, there is a reasonable chance the LARB would not have found liability. [56] I therefore grant the Applicant’s leave to appeal on the following questions of law: 1. Did the LARB err in law in finding business tax liability on landlords of office space by:

a) misinterpreting or ignoring s.4 and other provisions of the City of Calgary Bylaw 1M2010;

b) misinterpreting sections 372, 373 and 374 of the MGA;

c) by taking into account irrelevant considerations, or failing to take into account relevant considerations; or

d) misinterpreting or misapplying limited lease clauses to attach liability to all landlords. [57] I turn next to the second question for which the Applicants seek leave. 2. Does the LARB meet the requirements for institutional independence? [58] The Applicants submit that the amendments to the MGA which implements a system whereby appeals of assessments areheard by the LARB fails to meet the requirements for institutional independence. [59] The Board, whose submissions were adopted by the City, argues that the Applicant has failed to satisfy the test on this issueand that in any event, the LARB is sufficiently independent of the City. (

a) Does the appeal involve a question of law? [60] The parties agree that the question of whether a board is sufficiently independent is one of natural justice or proceduralfairness and is therefore a question of law and jurisdiction: Associated Developers, para. 37; Stiles (Estate of), para. 21; CanadianNatural Resources Ltd. v. Wood Buffalo (Regional Municipality), 2012 ABQB 177, at para 172. (

b) Is the issue of sufficient importance to merit an appeal? [61] The Court in R v Valente, (SCC), [1985] 2 SCR 673 commented on the importance of judicial independenceas follows, at para. 22:

Both independence and impartiality are fundamental not only to the capacity to do justice in a particular case but also to individual andpublic confidence in the administration of justice. Without that confidence the system cannot command the respect and acceptance thatare essential to its effective operation. It is, therefore, important that a tribunal should be perceived as independent, as well as impartial,and that the test for independence should include that perception. [62] The issue of whether the LARB is able to independently review taxation assessments is clearly of sufficient importance.

It isimportant to all stakeholders and not only to the Applicants, as every taxpayer disputing an assessment has an interest in a fair andimpartial hearing: Wood Buffalo, para. 173. (

c) Does the appeal have a reasonable chance of success [63] The question of whether the Applicants have a reasonable chance of success in arguing a lack of tribunal independence is notas easy to answer. Again, the Applicants have the burden of demonstrating a prima facie meritorious case. [64] The parties are in agreement as to the three essential conditions of judicial independence as defined in R. v. Valente, (SCC), [1985] 2 SCR 673 being: (

i) security of tenure; (ii) financial security, and; (iii) administrative control.

I acknowledgethat the conditions of institutional independence set out in Valente in the judicial context need not be applied with the same strictness inthe case of administrative tribunals: Canadian Pacific Ltd. v Matsqui Indian Band, (SCC), [1995] 1 SCR 3, at para. 113(Lamer C.J.); see also Ocean Port Hotel Ltd. v British Columbia (General Manager, Liquor Control and Licensing Branch), 2001 SCC52, [2001] 2 SCR 781, at paras. 23-24, where the Court discusses the distinction between administrative tribunals and courts. [65] Again, the question of whether a reasonable chance of success exists is informed by the applicable standard of review.

Anallegation of a failure to comply with procedural fairness raises a question of law: Wood Buffalo at para. 172. The effect of a breach ofprocedural fairness is to render the decision void ab initio: Dunsmuir para 108. [66] The Applicants assert that the structure of the LARB, as established by the recent amendments to the MGA, lack the essentialconditions of independence as defined in Valente. The Applicants further assert that consideration of the actual practice of the tribunal isrelevant in evaluating independence. [67] The MGA provides for the establishment of a Local Assessment Review Board under

Part 11, notably ss. 454(1) and 454.1(1)(the “LARB”). These sections provide that the council (defined as the council of a city, town, village, summer village, municipal districtor specialized municipality) is to appoint three person as members to each LARB. The council is also charged with prescribing the termof office and the remuneration payable to each member of the LARB appointed.

The Act itself is silent as to the length of term a membermay be appointed for and the financial compensation payable. [68] Section 455(1) of the MGA provides that the council is to appoint a designated officer to act as the clerk of the assessmentreview boards. The council provides for the remuneration and duties of the clerk. [69] The Applicants submit that the indicia of independence have not been met in this instance as the MGA does not provide forset tenure or remuneration, thus failing to provide any security for board members in these areas.

They further submit that the individualson the LARB are tasked with determining the interests of the City, which is the same entity to which they owe their appointment; arelationship which brings independence into question. They argue that the Matsqui case applies in this regard. [70] As contemplated in s.454(1) of the MGA, the council has established Local Assessment Review Boards by bylaw. Section2(1) of Bylaw 25M2010 (“the Bylaw”) establishes LARBs for the City of Calgary.

Section 4 of the Bylaw also establishes the positionof General Chairman, to whom members of both Local and Composite Review Boards must report. This

section provides that theGeneral Chairman may establish rules, procedures and policies for the administration of these Assessment Review Boards, as consistentwith the MGA. [71]

Section 6 of the Bylaw provides that both the General Chairman and members of each LARB shall serve for a one-yearperiod. The Bylaw is silent as to early termination or renewal of term.

Section 9 of the Bylaw provides that the remuneration of members

is to be determined by the clerk in consultation with the General Chairman. Following the application for leave, this Court was provided with email correspondence setting out the set rate of remuneration for LARB officers and members on a per diem basis. [ 72 ] The Board relied upon both Ocean Port and Wood Buffalo in arguing that the Applicants cannot meet the burden of showing a prima facie meritorious case and that as such, leave should be denied.

The Board argues that the three indicia of independence have been met in this instance and that, in any event, the statutory regime in place prevails over the common law principles concerning institutional independence. [ 73 ] Interestingly, while Ocean Port was heard before Wood Buffalo, the Court in Wood Buffalo did not find it was precluded from examining whether leave may be granted on the issue of bias.

In Wood Buffalo , the applicants sought leave on the question of whether the Composite Assessment Review Board (the “Composite Board”) as established under the MGA lacked institutional independence due to the fact that the Composite Board members did not have security of tenure and because the clerk who manages the Board’s administration was essentially appointed by the City.

In finding that there was no reasonable chance of success in arguing bias due to lack of independence the Court held, at para. 174: It is at this last stage of the analysis where [the applicant’s] argument fails. [the applicant] argues that the CARB's proceedings raise reasonable apprehension of bias because the Board lacks requisite institutional independence. [the applicant] contends that the first two factors of institutional independence identified in Valente, financial security and security of tenure, are “entirely absent” in the empowering legislation.

However, as the CARB correctly points out, this ignores ss. 23 and 24 of Bylaw 10/003.

Section 23 prescribes a finite 2-year term of office with no provisions for early termination.

Section 24 fixes the board members' remuneration by reference to the Government of Alberta Order in Council 004/2008 and its succeeding legislation. I find that these provisions provide adequate financial security and security of tenure for the CARB's members. [ 74 ] The decision in Wood Buffalo can be distinguished on two grounds. First, the members of the Composite Board enjoy a security of tenure that is twice as long as members of the LARB.

Second, the composition of the Composite Board differs from the LARB in that pursuant to the MGA only two members of the Composite Board are appointed by City council, with the third member being a provincial member appointed by the Minister: s. 454.2(1)-(3). The provincial member is to act as the presiding officer: s. 454.2(4). This differs from the composition of the LARB where all three members are appointed by City council: s. 454.1(1).

An argument exists that in having one Board member appointed by the Province, a greater level of independence may be assured. [ 75 ] In Ocean Port , the Supreme Court confirmed that the degree of independence required of a tribunal may be set by the legislature through the tribunal’s enabling statute. Ocean Port Hotel was penalized following a finding that it had not been operating in compliance with the province’s Liquor Control and Licensing Act . It appealed its temporary suspension in part by arguing the Liquor Appeal Board lacked institutional independence.

Members of the Board were appointed for a term “at pleasure” of the executive, which in practice amounted to a one-year term pursuant to an Order-in-Council. In finding that the Board was sufficiently independent, the Court held at paras. 20-22: ...It is well established that, absent constitutional constraints, the degree of independence required of a particular government decision maker or tribunal is determined by its enabling statute. It is the legislature or Parliament that determines the degree of independence required of tribunal members.

The statute must be construed as a whole to determine the degree of independence the legislature intended.

Confronted with silent or ambiguous legislation, courts generally infer that Parliament or the legislature intended the tribunal's process to comport with principles of natural justice: [...] In such circumstances, administrative tribunals may be bound by the requirement of an independent and impartial decision maker, one of the fundamental principles of natural justice: [...] Indeed, courts will not lightly assume that legislators intended to enact procedures that run contrary to this principle, although the precise standard of independence required will depend “on all the circumstances, and in particular on the language of the statute under which the agency acts, the nature of the task it performs and the type of decision it is required to make”...

However, like all principles of natural justice, the degree of independence required of tribunal members may be ousted by express statutory language or necessary implication. [...] Ultimately, it is Parliament or the legislature that determines the nature of a tribunal's relationship to the executive. It is not open to a court to apply a common law rule in the face of clear statutory direction. Courts engaged in judicial review of administrative decisions must defer to the legislator's intention in assessing the degree of independence required of the tribunal in question.

[ 76 ] In the case at bar the body from which the LARB needs independence (in essence the City) has been delegated almost all authority over key questions of tenure and remuneration by the Province. The City also stands to benefit from any taxation assessments made by the LARB which attach liability. I do not read the Court’s decision in Ocean Port as completely foreclosing on the possibility of considering the fairness of the statutory process in such circumstances. [ 77 ] The Applicants also submit that the fact that the MGA operates in conjunction with the Bylaw distinguished the case at bar from Ocean Port.

They submit that the decision in Ocean Port does not give authority to enable a bylaw to “legislate away the principles of natural justice.” The Applicant appears to be suggesting that the decision in Ocean Port does not apply in instances where a city council makes determinations of tenure and remuneration through a bylaw, as opposed to through legislation. In this regard they rely on the Matsqui case where sufficient independence was not found in the by-law structure that the Bands had set up. I agree that this is a concern.

Justice Lamer said this at para 104: The function of institutional independence is to ensure that a tribunal is legally structured such that its members are reasonably independent of those who appoint them...the point of the institutional independence doctrine is to ensure that tribunal independence is not left to the discretion of those who appoint tribunals. [ 78 ] The Board in reply attempts to distinguish Matsqui by suggesting that here, unlike in Matsqui , the MGA and its regulations do provide a “comprehensive framework” of legislated provisions that should be respected in light of Ocean Port . [ 79 ] In my view, the Court in Ocean Port was clear that the impugned statute must be construed as a whole in order to determine the level of independence intended by the Legislature.

As noted above, such construction shall take into account “...all the circumstances, and in particular on the language of the statute under which the agency acts, the nature of the task it performs and the type of decision it is required to make.” There is a serious question as to whether the degree of independence of the LARB will match that required by the legislation upon a review of the MGA as a whole; that is, whether the comprehensive nature of the assessment/review scheme sufficiently establishes a clear legislative intention to reduce the degree of independence otherwise presumed.

I find that such a fulsome examination is a task better suited to a reviewing court as opposed to during a leave application. Accordingly, I find that the Applicants have therefore established a prima facie meritorious argument that the LARB lacks institutional independence. [ 80 ] Based upon the above I find that the Applicants have demonstrated a reasonable chance of success in arguing that the LARB lacks institutional independence. I therefore grant leave to appeal in this question.

Tenants as parties to the appeal [ 81 ] The City has requested that if leave is granted, the tenants of the properties in issue should be named as parties to the appeal. Section 470(6) of the MGA permits this Court to direct which persons are to be named as respondents to the appeal.

The City submits that on appeal, if the decision of the LARB is canceled, then the issue of who the proper party is for assessment becomes ‘resuscitated’ and the tenants may then bear liability. [ 82 ] The Applicants submit that the appeal deals solely with liability of the landlords and any disposition by this Court will not create liability for the tenants. They therefore submit that it would not be appropriate to name the tenants as parties to the appeal. [ 83 ] The ultimate appeal in this matter pertains to an assessment for taxation made in 2010. The City did not assess the tenants at this time.

The argument made by the City presumes that one or the other of the tenants or landlords must be taxed, which may not be the case on these facts. I note that these are the same reasons the MGB in Board Order 032/11 dismissed a similar request by the City with respect to the same taxation question for the years 2007, 2008, and 2009. [ 84 ] In sum, I do not find that this is an appropriate instance to add the tenants as parties to the appeal. Conclusion [ 85 ] The Applicants are granted leave to appeal on questions one and two, above.

Costs [ 86 ] If the parties cannot reach an agreement as to costs they may reappear before me within 60 days. Heard on the 24 th day of May, 2012. Delivered Orally at the City of Calgary, Alberta this 18 th day of June, 2012. K.M. Eidsvik J.C.Q.B.A. Appearances: Gilbert J. Ludwig Brian K. Dell Wilson Laycraft LLP for the Applicants Tina Squires Susan Trylinski Law Department, City of Calgary for the City of Calgary Pat Knoll Faculty of Law, University of Calgary for the Assessment Review Board