Summerside Residents Association v Edmonton (City), 2016 ABQB 696

Court of Queen’s Bench of Alberta Citation: Summerside Residents Association v Edmonton (City), 2016 ABQB 696 Date: 20161209 Docket: 1603 04096 Registry: Edmonton Between: Summerside Residents Association Applicant - and - City of Edmonton and Edmonton Composite Assessment Review Board Respondents _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice Peter Michalyshyn _______________________________________________________ I.

Introduction [ 1 ] This is an application for permission to appeal a decision of the Edmonton Composite Assessment Review Board (the Board). The applicant, the Summerside Residents Association (the Association), owns a 41.41 acre property, comprised of a lake and a community recreation development, in Edmonton’s Summerside area (the Property). It seeks permission to appeal a decision of the Board that determined the Property was not exempt from taxation for 2015. [ 2 ] The City of Edmonton (the City) opposes the application.

The Board takes no position on the outcome of the application, but makes submissions as to the relevant legislative scheme, the nature of the questions the Association seeks permission to appeal on, and the standards of review applicable to those questions: 1447743 Alberta Ltd v Calgary (City) , 2011 ABCA 84 at paras 20-21 , 502 AR 330.

II. Relevant Legislation [ 3 ] Section 362(1) of the Municipal Government Act , RSA 2000, c M-26 (the MGA ) provides that certain property is exempt from taxation. Clause (

n) of section 362(1) lists five types of exempt property and then provides an exemption to “any other property that is described and that meets the qualifications and conditions in the regulations”. [ 4 ]

Section 370 (

c) of the MGA provides that the Minister can make regulations “describing other property that is exempt from taxation pursuant to section 362(1) (n), and respecting the qualifications and conditions required for the purposes of section 362(1) (n)”. The Community Organization Property Tax Exemption Regulation , Alta Reg 281/1998 (the COPTER ) is such a regulation. [ 5 ]

Section 14 of the COPTER provides that

Part 3 - Other Property Exempt Under Section 362(1)(n), which consists of sections 13 through 18, “describes property that is exempt from taxation under section 362(1)(

n) of the Act that is not exempt under section 362(1)(n)(

i) to (

v) of the Act.” [ 6 ]

Section 14.1(1) of the COPTER provides that “[p]roperty that is owned and held by and used in connection with a residents association is exempt from taxation.” [ 7 ]

Section 13 (e.

i) of the COPTER sets out the conditions an organization must meet to qualify as a “residents association”. It provides that: “residents association” means a non - profit organization that requires membership for residential property owners in a specific development area, that secures its membership fees by a caveat or encumbrance on each residential property title and that is established for the purpose of (

i) managing and maintaining the common property, facilities and amenities of the development area for the benefit of the residents of the development area, (ii) enhancing the quality of life for residents of the development area or enhancing the programs, public facilities or services provided to the residents of the development area, or (iii) providing non - profit sporting, educational, social, recreational or other activities to the residents of the development area; [ 8 ]

Section 14.1(2) of the COPTER sets out exceptions to the exemption from taxation provided in

section 14.1(1). It provides that: Despite subsection (1), the following property owned and held by and used in connection with a residents association is not exempt from taxation under section 362(1)(

n) of the Act: ... (

c) property if, for more than 30% of the time that the property is in use, the use of the property is restricted within the meaning of

section 7 ... [ 9 ]

Section 7 of the COPTER (under

Part 1 - General Rules) provides that:

(1) In this Regulation, a reference to the use of property being restricted means, subject to subsections (2) and (3), that individuals are restricted from using the property on any basis, including a restriction based on (

a) race, culture, ethnic origin or religious belief, (

b) the ownership of property, (

c) the requirement to pay fees of any kind, other than minor entrance or service fees, or (

d) the requirement to become a member of an organization.

(2) The requirement to become a member of an organization does not make the use of the property restricted so long as (

a) membership in the organization is not restricted on any basis, other than the requirement to fill out an application and pay a minor membership fee, and (

b) membership occurs within a short period of time after any application or minor fee requirement is satisfied.

(3) Not permitting an individual to use a property for safety or liability reasons or because the individual’s use of the property would contravene a law does not make the use of the property restricted. III. Earlier Decisions of the Board [ 10 ] The issue of whether the Property is exempt from taxation under section 362(1)(

n) of the MGA and the COPTER has come before the Board several times. For 2012, the Board determined that the Property was not exempt from taxation because, among other things, for more

than 30% of the time it was in use, its use was restricted based on (

i) the ownership of property and (ii) the requirement to become a member of an organization (ss 14.1(2)(

c) and 7(1)(

b) and (

d) of the COPTER ): 2012 ECARB 1304 at paras 44, 46 and 48 (the 2012 Decision). [ 11 ] The Board reached the opposite conclusion for 2013, determining that the Property was fully exempt from taxation. In that instance, the Board was satisfied that the use of the Property was not restricted based on (

i) the ownership of property; (ii) the requirement to pay fees of any kind, other than minor entrance or service fees; nor (iii) the requirement to become a member of an organization, for more than 30% of the time it was in use (ss 14.1(2)(

c) and 7(1)(b), (

c) and (

d) of the COPTER ): 2013 ECARB 00660 at paras 53-58 and 72 (the 2013 Decision). [ 12 ] The City’s application for permission to appeal the 2013 Decision was dismissed by this Court: Edmonton (City) v Edmonton (Assessment Review Board) , 2015 ABQB 103 , 610 AR 241. [ 13 ] The Board did not consider whether the Property was exempt from taxation for 2014 because the Association’s complaint about the City’s assessment for that year was filed late. IV. The Impugned Decision of the Board [ 14 ] As in years past, the City assessed the Property as fully taxable for 2015, and the Association filed a complaint claiming that the Property was exempt from taxation under section 362(1)(

n) of the MGA and the COPTER . The Board heard the Association’s complaint in December 2015 and released the impugned decision in February 2016: 2015 ECARB 02280. A. Issue Estoppel [ 15 ] The Board rejected the Association’s argument that issue estoppel arose from the 2013 Decision, and precluded the City from re-litigating the issue of whether the Property is exempt from taxation under section 362(1)(

n) of the MGA and the COPTER . The Board referenced the Court of Appeal’s restatement of the four-part issue estoppel test from Danyluk v Ainsworth Technologies Inc , 2001 SCC 44 , [2001] 2 SCR 460 [ Danyluk ] in Sihota v Edmonton (City) , 2013 ABCA 43 at paras 7-8 and 10 , 542 AR 229 [ Sihota ].

And, after reviewing the parties’ submissions, it concluded the test was not met. [ 16 ] The Board held that issue estoppel did not arise from the 2013 Decision because “the statutory process of property assessment and taxation is an annual function with an annual right of appeal through a legislated complaint process” and, consequentially, the 2013 Decision was only final and absolute for the 2013 taxation year: para 15.

Moreover, it held that injustice “might result from the application of [issue estoppel] in assessment complaints”, as the COPTER ’s exemption criteria are “founded on a ‘time’ and ‘use’ analysis of the property which may vary from one year to the next”, and lead to different taxation results: para 16. As an example, the Board noted that, had issue estoppel been found to have arisen from the 2012 Decision, the Association would have been precluded from seeking a tax exemption under section 362(1)(

n) of the MGA and the COPTER for 2013. B. Qualifications/Conditions in sections 13(e.1) and 14.1(1) of the COPTER [ 17 ] As in years past, the Board determined that the Association met the definition of “residents association” in

section 13(e.1) of the COPTER and that the Property was “owned and held by and used in connection with” the Association: COPTER , ss 14.1(1). C. Application of sections 14.1(2)(

c) and 7(1)(

b) and (

d) of the COPTER [ 18 ] However, contrary to what it concluded in the 2013 Decision, the Board went on to determine that the Property was not exempt from taxation under section 362(1)(

n) of the MGA and the COPTER because, for more than 30% of the time that it was in use, the use of it was restricted based on (

i) the ownership of property, (ii) the requirement to pay fees of any kind, other than minor entrance or service fees, and (iii) the requirement to become a member of an organization (ss 14.1(2)(

c) and 7(1)(b), (

c) and (

d) of the COPTER ): para 112. [ 19 ] In concluding that, for more than 30% of the time that the Property was in use, its use was restricted based on the ownership of property and the requirement to become a member of an organization, the Board referenced this evidence: (

i) the sign at the Property’s main entrance read, “The Summerside amenities, including the Lake and associated facilities, parklands, walkways, and lake access walkways (the ‘Summerside Amenities’) are for the exclusive use of Members of the Summerside Residents Association and their guests”; (ii) the Association’s website materials, and media reports, indicated that the Association’s “facilities and amenities [were] for the exclusive use of the resident association owner/members”; and (iii) membership in the Association was mandatory for, and restricted to, owners and tenants of properties within the Summerside area: paras 99 and 109. [ 20 ] The Board also noted the Association’s acknowledgment that, with a few exceptions, the use of the Property was “restricted to owners and members of the [Association] and their guests”: para 100. [ 21 ] The Board rejected the Association’s proposed

interpretation of the ownership and membership restrictions in sections 7(1) (

b) and (

d) of the COPTER , holding that:

[The Association’s suggestion] that “ownership” in section 7(1) (b), must mean ownership of some property (other than the residential property within the development area); and “membership” in section 7(1) (d), must mean membership in some organization (other than the residents association) is inconsistent within the context of the [ COPTER ] and illogical within the plain meaning of the words.

The [ COPTER ] references ownership of the residential properties within the development area, and membership in the development area’s residents association throughout its provisions: para 103. [ 22 ] The Board also held that it could find “no plausible basis for relating an exemption of a residents association recreational property within a development area, to the ownership of some ‘other’ property, undefined and unrelated to that development; and to membership in some ‘other’ organization, undefined and unrelated to the residents association of that development area”: para 104. [ 23 ] In rejecting the Association’s proposed

interpretation of the ownership and membership restrictions in sections 7(1) (

b) and (

d) of the COPTER , the Board implicitly rejected the analysis and

interpretation in the 2013 Decision. [ 24 ] The Board accepted the City’s argument that: [A]lthough the definition of a residents association indicates it is established for the purpose of providing public facilities, amenities, programs, services, and activities to the residents of the development area, the definition in no way suggests the use of those public facilities, amenities, programs, services, and activities may be restricted to the residents of the development area: para 105. [ 25 ] The Board concluded that, in order to qualify for an exemption from taxation, the Association could only restrict the use of the Property to owners of property in the development area/members of the Association for 30% of the time the Property was in use (or less).

It further concluded that, at all other times, the Property would have to be “open to individuals residing outside of the development area, and individuals who are not members of the [Association]”: paras 106-107. The Board said, “had the legislators intended to provide an exemption from taxation for privately-held, fully restricted residential association properties, it would have been easy to say precisely that”: para 108. [ 26 ] The Board went on to consider the exception to the restriction based on the requirement to become a member of an organization in section 7(2) of the COPTER .

It concluded that membership in the Association was “restricted on the basis of property ownership or tenancy within the development area”; that is, it was restricted on a basis other than the requirement to fill out an application and pay a minor membership fee: para 109. Thus, the requirement to become a member of the Association made the use of the Property restricted. D. Application of sections 14.1(2)(

c) and 7(1)(

c) of the COPTER [ 27 ] In concluding that, for more than 30% of the time that the Property was in use, its use was restricted based on the requirement to pay fees of any kind, other than minor entrance or service fees, the Board held that, with a few exceptions, only Association members, who paid significant membership fees, could use the Property. It also noted that there was no option for non-members of the Association to pay a minor entrance or service fee to use the Property: paras 110-111. V. Proposed Appeal [ 28 ] The Association seeks permission to appeal the Board’s decision on the grounds that the Board erred in: (

i) concluding that issue estoppel did not apply, (ii) concluding that the Association’s membership and property ownership requirements disqualify it from obtaining tax exempt status; and (iii) failing to address the issue of onus and misapplying the burden of proof. VI.

Test for Permission to Appeal [ 29 ] Permission to appeal a decision of the Board may be granted on a question of law or jurisdiction, if the question is of sufficient importance to merit an appeal, and if the proposed appeal has a reasonable chance of success: MGA , ss 470(1) and (5). [ 30 ] Regarding the sufficient importance part of the test, “[a]lthough permission to appeal may be granted where the decision affects only the parties themselves, parties should generally show that the issue will have jurisprudential value or implications which go beyond the dispute between the parties”: Yee v Leduc (County) , 2016 ABCA 40 , [2016] AJ No 146 (QL) at para 10 [ Yee ], citing Grand Central Properties Inc v Cochrane (Town) , 2013 ABCA 69 , [2013] AJ No 636 (QL) at para 31 and Carleo Investments Ltd v Strathcona (County) , 2014 ABCA 302 , [2014] AJ No 985 (QL) at para 10 . [ 31 ] And, when assessing whether the proposed appeal has a reasonable chance of success, one should consider the applicable standard of review: Yee at para 11 , citing Lor-al Springs Ltd v Ponoka (County) Subdivision and Development Appeal Board , 2000 ABCA 299 at para 6 , 271 AR 149 [ Lor-al ].

VII. Analysis A. Issue Estoppel

[32] The Association argues that, although the Board referenced the correct test for issue estoppel (from Sihota), it erred in law inconcluding that issue estoppel did not arise from the 2013 Decision. In other words, it misapplied the relevant test. [33] In Sihota, at paragraph 8, the Court of Appeal said that Danyluk “confirmed that issue estoppel can arise as a result ofadministrative proceedings in some circumstances”; and held that, for issue estoppel to apply: (

a) the same issues must be involved, (

b) the decision said to create the estoppel must be final, (

c) the same parties or their privies must be involved, and (

d) as a discretionary matter, it must be fair and just to apply the doctrine of issue estoppel in the particular circumstances. [34] The Court of Appeal further held that, although the fourth part of the issue estoppel test “involves some discretionaryconsiderations, the overall application of the test is nevertheless a question of law”: para 7. Accordingly, I am satisfied that the first partof the test for permission to appeal is met. The question of whether the Board erred in concluding that issue estoppel did not arise fromthe 2013 Decision (and preclude the City from arguing that the Property is not exempt from taxation under section 362(1)(

n) of the MGAand the COPTER) is a question of law. [35] I am also satisfied that the issue estoppel question is important to the Association, and for jurisprudential purposes, and is,therefore, of sufficient importance to merit an appeal. The issue estoppel question is important to the Association because, if it cannotrely on the doctrine of issue estoppel before the Board, it will have to re-litigate the issue of whether the Property is exempt fromtaxation under section 362(1)(

n) of the MGA and the COPTER (including the sub-issues of whether each of the relevant qualificationsand conditions is met) every year, even if nothing of consequence has changed. I agree with the Association that this seems unfair,inefficient and uneconomical. [36] The issue estoppel question is important for jurisprudential purposes as there does not appear to be any Alberta authoritydealing with the question of if, and when, the doctrine of issue estoppel might apply to preclude re-litigation in assessment matters.

ACourt decision settling that question could well have an impact on the City; other municipalities; and other municipal taxpayers,particularly other community organizations who routinely seek exemptions from taxation under s. 362(1)(

n) of the MGA and theCOPTER. [37] I am also satisfied that the third part of the test for permission to appeal is met; that is, I am satisfied that the Association’sproposed appeal on the issue estoppel question has a reasonable chance of success. In Sihota, at paragraphs 6 and 7, the Court of Appealheld that a subdivision and development appeal board’s consideration of the common law doctrine of issue estoppel is reviewable on thecorrectness standard. I am satisfied that the same standard applies to the Board’s consideration of the doctrine.

Thus, the Board’sconclusion that issue estoppel did not arise from the 2013 Decision is not entitled to deference. [38] Moreover, I am satisfied that it is arguable that issue estoppel can arise in assessment matters, and that it arose from the 2013Decision. The Board determined issue estoppel did not arise from the 2013 Decision because the finality precondition was not met, as thedecision was only final for the 2013 tax year; and because injustice might result from the application of issue estoppel in assessmentmatters, as the relevant facts might vary from year to year and lead to different results.

This analysis seems flawed, given that nothingsubstantive changed after the 2013 Decision, and that issue estoppel does not apply where something substantive changes after therelease of the relevant decision. As the Association argues, the Board’s analysis suggests issue estoppel will never arise from itsdecisions. It seems unlikely that this is the case. [39] Issue estoppel has been held to arise from the decision of an assessment review board in at least one Canadian jurisdiction.

InWabi Iron Steel Corp v Ontario (Municipal Property Assessment Corporation, Region No. 29) (2005), (ON SCDC),195 OAC 382, [2005] OJ No 626 (QL) [Wabi], the Ontario Superior Court of Justice Divisional Court confirmed an assessment reviewboard’s decision which concluded that issue estoppel precluded a taxpayer from challenging the multi-year assessed value of a property asecond time. At paragraphs 19 and 21 of its decision, the Court held that: ...

The policy objectives which provide the rationale for the application of issue estoppel, avoiding duplicative litigation, inconsistentresults, undue costs, and inconclusive proceedings are important to all participants in tax assessment litigation. Litigants benefit from asystem which is efficient and which produces predictable and final results. ...

There is no principled basis to exclude assessment proceedings from the doctrine of issue estoppel where the decision is within thejurisdiction of the tribunal and there has previously been a full and fair hearing on the merits. [40] The Court in Wabi noted that the application of issue estoppel did not negate the taxpayer’s right to litigate the relevantassessment. At paragraph 18, it held that “[t]he right to complain of assessments in each year is provided for [in the legislation]. The[assessment review board] is required to hold a hearing when a complaint is filed.

There is a continuing right to challenge the currentvalue on the basis of evidence of a change in the property.” (emphasis added) [41] At the end of the day, I am satisfied that the Association should be granted permission to appeal the Board’s decision on thequestion of whether the Board erred in concluding that issue estoppel did not arise from the 2013 Decision. B. Application of sections 14.1(2)(

c) and 7(1)(b), (

c) and (

d) of the COPTER [42] The Association also argues that the Board erred in law in concluding that the restrictions on the use of the Property (based on

the ownership of property in the Summerside area, and the requirements to be a member of the Association and to pay Association membership fees) disqualified it from receiving an exemption from taxation under section 362(1)(

n) of the MGA and the COPTER . [ 43 ] It is the Association’s position that the Board’s

interpretation of

section 7 of the COPTER leads to an absurd result; that is, the result that a residents association is disqualified from receiving an exemption from taxation if it restricts the use of its property on the basis of the very same criteria it must meet to qualify as a “residents association” under

section 13 (e.1) of the COPTER . [ 44 ] The Association submits that the proper

interpretation of

section 7 of the COPTER is that found in the 2013 Decision. More specifically, it says that: (

i) the restriction based on the ownership of property must refer to the ownership of property other than residential property in the relevant specific development area; (ii) the restriction based on the requirement to pay fees must refer to fees other than the relevant residents association’s membership fees; and (iii) the restriction based on the requirement to become a member of an organization must refer to membership in an organization other than the relevant residents association. [ 45 ] In other words, the Association submits that the restrictions in

section 7 of the COPTER should be interpreted as restrictions that distinguish between residents of the relevant specific development area, or between members of the relevant residents association. Accordingly, it is the Association’s position that the fact that non-residents of a specific development, or non-members of a particular residents association, are restricted from using the residents association’s property should be inconsequential; that is, it should not preclude the residents association’s property from obtaining an exemption from taxation under section 362(1)(

n) of the MGA and the COPTER . [ 46 ] Whether the Board erred in interpreting

section 7 of the COPTER is a question of statutory

interpretation and, therefore, a question of law: Lor-al at para 23 . [ 47 ] As the Board has provided competing

interpretations of

section 7 in its decisions regarding the Property, I am also satisfied that the question of how the

section should be interpreted is one of sufficient importance to merit an appeal. It is not desirable for the COPTER to mean different things in different Alberta municipalities, let alone for it to mean different things to the same taxpayer in Edmonton from year to year. This Court has a legitimate role to play in ensuring that the COPTER is interpreted consistently: Edmonton East (Capilano) Shopping Centres Ltd v Edmonton (City) , 2015 ABCA 85 at para 30 , 599 AR 210, rev’d on other grounds Edmonton (City) v Edmonton East (Capilano) Shopping Centres Ltd , 2016 SCC 47 , [2016] SCJ No 47 (QL) [ Capilano SCC ]. [ 48 ] Finally, although it is clear that the Board’s

interpretation of

section 7 of the COPTER is reviewable on the reasonableness standard ( Capilano SCC at paras 22-23 and 34 ), I am satisfied that the Association’s appeal has a reasonable chance of success. While it may be that

section 7 of the COPTER can reasonably be interpreted in different ways, the competing

interpretations the Board has provided in its decisions regarding the Property cannot both be reasonable as they have led to polar opposite results: the Property being exempt from taxation versus the Property being fully taxable. It is certainly arguable that the Association’s proposed

interpretation of

section 7 of the COPTER is the reasonable one. The fact that the Board accepted the Association’s proposed

interpretation in the 2013 Decision, and this Court denied the City permission to appeal that decision, demonstrates this. Therefore, it is arguable that this Court will conclude that the Board’s

interpretation of

section 7 of the COPTER in this instance was unreasonable. [ 49 ] In the result, I am satisfied that the Association should be granted permission to appeal the Board’s decision on the question of whether the Board erred in interpreting

section 7 of the COPTER . C. Onus and Burden of Proof [ 50 ] Finally, the Association argues that the Board erred in failing to address the issue of onus and misapplying the burden of proof. In making this argument, all the Association points to is the Board’s rejection of its submission that, in the face of the 2013 Decision, it was up to the City to show that the relevant facts had changed, causing the Association to become disqualified from receiving an exemption from taxation under section 362(1)(

n) of the MGA and the COPTER . [ 51 ] It appears that the Association’s rejected submission was flawed. It is clearly up to the moving party (in this case the Association) to establish “the preconditions to the operation of issue estoppel”: Danyluk at para 33 .

And, establishing those preconditions, particularly the same issues precondition, surely involves demonstrating that nothing substantive has changed since the relevant decision. [ 52 ] In any event, as the Association’s rejected submission formed part of its issue estoppel argument, if necessary, it can be addressed by this Court when it deals with the question of whether the Board erred in concluding that issue estoppel did not arise from the 2013 Decision. The Association’s onus and burden of proof argument does not warrant a stand-alone ground of appeal. VIII.

Conclusion [ 53 ] Permission to appeal is granted on the following questions: 1. Did the Board err in concluding that issue estoppel did not arise from the 2013 Decision? 2. Did the Board err in interpreting

section 7 of the COPTER ?

[ 54 ] If the parties are unable to agree, they are free to speak to costs. Heard on the 23 rd day of September, 2016. Dated at the City of Edmonton, Alberta this 9 th day of December, 2016. Peter Michalyshyn J.C.Q.B.A. Appearances: David D. Risling McLennan Ross LLP for the Summerside Residents Association Tanya Boutin City of Edmonton Law Branch for the City of Edmonton Kate L. Hurlburt, Q.C. Emery Jamieson LLP for the Edmonton Composite Assessment Review Board