Calgary (City) v Renfrew Chrysler Inc, 2017 ABQB 197

Court of Queen’s Bench of Alberta Citation: Calgary (City) v Renfrew Chrysler Inc, 2017 ABQB 197 Date: 20170322 Docket: 1501 10147 Registry: Calgary Between: City of Calgary Appellant - and - Renfrew Chrysler Inc., Represented by AEC Property Tax Solutions and Assessment Review Board for the City of Calgary Respondent(s) _______________________________________________________ Memorandum of Decision of the Honourable Mr. Justice R.A.

Neufeld _______________________________________________________ Introduction [ 1 ] In this proceeding, the City of Calgary (the “Appellant”, or the “City”) appeals a decision by the Assessment Review Board for the City of Calgary (the “Board”) dated 13 August, 2015. In it, the Board reduced the assessed value of land leased by the City of Calgary to the Respondent Renfrew Chrysler Inc. (the Respondent” or the “Taxpayer”) from $22,130,000 to $16,520,000. [ 2 ] The Appellant contends that it was denied procedural fairness at the hearing of the Taxpayer’s complaint.

It says that the Board unfairly raised a new issue regarding the impugned assessment during questioning of the City’s two witnesses. It also says that the Board unfairly relied on its own expertise, rather than the evidence, in making a finding that the new issue warranted a substantial (20%) reduction in the property assessment. [ 3 ] The Respondent denies that the issue raised by the Board in questioning was new, saying that the need for a downward adjustment to account for restrictions in land use was a enumerated ground of complaint from the beginning. It contends that there was

nothing unfair in the Board acting on its own expertise, and in reliance on the evidence before it in concluding a downward adjustment to reflect zoning restrictions was required. Background [ 4 ] The land parcel in question in this case is approximately eight acres in size. It is located at the extreme west end of Calgary’s downtown district, in the community of Sunalta.

In the past, a creosote treatment plant was operated on an adjacent parcel, resulting in substantial contamination of the site. [ 5 ] The land was purchased by the Appellant, City of Calgary, a number of years ago, and leased back to the Respondent, which is responsible for payment of municipal taxes. It is not the only parcel purchased by the City in the area; the City has acquired most of the land in the immediate vicinity with the long term intention of remediation and resale for development in accordance with its West Village Area Redevelopment Plan.

Following its purchase, the Land was redesignated by the City as a DC (Direct Control) district, with Urban Reserve Guidelines, and additional Permitted and Discretionary Uses of automobile sales and rentals. [ 6 ] In 2014, the assessed value of the land was $8,530,000. In 2015, it was assessed at $22,130,000- a 160% increase. [ 7 ] The Respondent complained. It gave ten reasons for its complaint, including the absence of an adjustment in market value to account for the restriction of land use. [ 8 ] In support of its complaint, and as required by the Matters Relating to Assessment Complaints Regulation Alta.

Reg. 310/2009 (“MRAC”) the taxpayer filed a package of written submissions and supporting evidence within the Board. The submission summarized the complaint issues as follows: 1. The subject has been assessed in excess of market value. 2. The subject assessment is inequitable. 3. The City of Calgary uses inappropriate value adjustments. [ 9 ] As part of its written submissions, the Respondent filed an appraisal report prepared by Mr. Ian Pritchard- an expert land appraiser. That report used as a base assumption that the land could only be legally used as an automobile dealership (or rental).

It estimated the land’s market value at $11,950,000 by comparing it to land parcels around Calgary that were designated for automobile sales. [ 10 ] The Respondent argued that the market value estimated by Mr. Pritchard should be used by the Board as a base value, and should then be adjusted downward by 30%.

Such an adjustment, it said, would be equitable as all similarly-contaminated sited are eligible for a market value adjustment of 30% for assessment purposes. [ 11 ] The Respondent’s written submissions did not advocate a reduction in its assessment due to land use restrictions per se, even though a reduction of 20% was an enumerated ground of its complaint. [ 12 ] In reply to the Respondent’s submissions, the Appellant filed a 50 page evidence package comprised of property details; a response to the complainant’s evidence; comparable information relating to downtown assessment, and a brief conclusion.

It also provided 127 pages of appendices compromised of legislation, a glossary of terms supporting sales documentation, and case law and review board decisions. [ 13 ] The thrust of the Appellant’s case was that the market value evidence provided by Mr. Pritchard should be rejected on the basis that his sales comparables could not be used to establish market value. The Hearing [ 14 ] The complaint was heard by a 3 person panel of the Composite Assessment Review Board. [ 15 ] The Respondent was represented by an experienced agent, Mr. John Smiley of AEC Property Tax Solutions. Mr.

Smiley gave evidence, along with Mr. Pritchard. [ 16 ] The Appellant City was represented by two of its expert assessors – Mr. Steven Berzins and Mr. Jared Young. No counsel were involved. [ 17 ] Unsworn oral presentations were made by each side with the participants cross-examining each other. At the conclusion of cross-examination, the Panel members asked questions of their own. Following completion of oral evidence, an opportunity was provided for closing argument. Each side availed itself of that opportunity. The Decision [ 18 ] On August 13, 2015, the Board decided that the assessment was excessive.

As its reasons were brief, I will quote them in their entirety. [30] The Board will limit its comments to the relevant facts pertaining to the stated issues(s).

[31] The Board finds that a year-over-year percentage increase in assessment does not in itself, constitute grounds to change anassessment. While an increase may suggest that an assessment could be incorrect, it does not prove market value amount is correct. [32] On the issue of market value, the Board considered the market evidence presented by both parties, and finds that theComplainant’s evidence is not sufficiently compelling to warrant a change to the assessment. The Subject Property’s locationalproximity is next to Calgary’s Central Core.

The Board finds the sale comparable utilized by the Appraiser were in non-comparablelocations and lacked adjustments. [33] In respect of the +5% corner lot value adjustment, the Board finds the adjustment is not warranted; the property is not on acorner.

The property does not receive the positive effects of superior exposure; the access/degree is considered to be rather circuitous. [34] With regards to the issue of equity, the Board finds that the Subject Property is currently receiving the -30% adjustment forcontamination. [35] The Board noted the restrictive DC Land Use Guidelines currently in place on the Subject Property. While the Board recognizesthat the UR designation currently in place is merely a transitional zoning (pending the environmental clean-up of the site as argued bythe Respondent), it is nevertheless, the Land Use that is currently in place.

The Board finds that the sole permitted use of “automotiveservices” is extremely restrictive, and would surely impact the sale of the Subject Property. Consequently, the Board has determined thata -20% adjustment per the City of Calgary’s “Land Influence Chart” [R1; Pg.48] applies to the Subject Property. [36] In

summary, having considered the evidence presented by both parties, the Board finds sufficient cause to change the assessmentper the reasons indicated above. [37] The Assessment is reduced to $16,520,000. Did the Board Discharge its Duty of Procedural Fairness? [19] As noted earlier, the Appellant contends that the Board acted unfairly by: 1. Raising and relying on a new issue in finding that the assessment was excessive, without affording the City the opportunity torespond 2. Using its own expertise to decide the matter in substitution for evidence presented at the hearing.

a) Standard of Review [20] Procedural fairness is not subject to assessment under the correctness versus reasonableness dichotomy discussed inDunsmuir v New Brunswick, 2008 S.C.R. 190. Instead, the issue is whether the conduct of the tribunal having regard to all of thecircumstances, conformed to the standards expected. In Thomas v Alberta (Transportation and Safety Board, 2003 ABCA 256(Thomas) Paperny JA discussed the flexible nature of that standard, as follows: 61.

The content of the duty of fairness is flexible and variable depending upon the context of the particular statute involved and therights, privileges or interests affected. “[T]he purpose of the participatory rights contained within the duty is to ensure that administrativedecisions are made using a fair and open procedure, appropriate to the decision being made and its statutory, institutional and socialcontext, with an opportunity for those affected to put forward their views and evidence fully and have them considered by the decision-maker.” Baker v Canada (Minister of Citizenship and Immigration), (SCC), [1999] 2 S.C.R. 817 at para 22. 62.

The several criteria to determine what procedural rights the duty of fairness requires in the circumstances of the operation of this civillaw program, as set out in Baker at paras. 23-28, include: (1) the nature of the decision being made and process followed in making it;(2) the nature of the statutory scheme and the terms of the statute pursuant to which the body operates; (3) the importance of the decisionto the individual or individuals affected; (4) the legitimate expectations of the person challenging the decision; (5) the choices ofprocedure made by the agency itself. The list is not exhaustive.

b) Did the Board act unfairly in raising and relying on a new issue, without givingthe City a fair opportunity to respond? [21] The Appellant argues that in order for a party to have a fair opportunity to respond, it must receive timely notice of the evidence as well as the issues that will be considered at the hearing. It quotes Blake, Administrative Law in Canada, 5th Edition for thefollowing proposition: In addition to the evidence, the essential issues to be considered should be identified.

A party should not be left in the position ofdiscovering upon receipt of the tribunal’s decision, that it turned on a matter on which the party had not made representations becausethe party was not aware it was in issue.

Nor is it fair to have an important issue sprung on a party during a hearing without prior notice oran adjournment...(at page 43) [22] The Appellant says that the question of whether a land use restriction adjustment should be made to the assessed value of theland was sprung for the first time on its representatives by Board member Massey his questioning of the City’s two representatives. [23] The Respondent denies that the Board treated the City unfairly. It says that the issue of whether a land use restrictionadjustment should be made was one of its reasons in support of its complaint.

Therefore, the Appellant knew that the issue was on the

table, even if the Respondent’s submissions did not elaborate on that ground.

Moreover, it says that both the Respondent and the Appellant included the 2015 Downtown Land Influence Chart that contains a 20% reduction for properties whose use is restricted by a Direct Control district by-law. [ 24 ] At the leave stage, this Court found that leave to appeal should be granted, stating as follows: It’s obvious to me that in making this minus 20 percent adjustment and the basis upon which it was done, the Board made its decision without giving the parties, and in particular the City of Calgary which has been more negatively affected by this, the opportunity to provide evidence to support its position and its position is obviously contrary to the decision that was ultimately made by the Board. [ Unreported, ABQB Action no. 1501-10147, April 19, 2016, at p.2 ] Findings [ 25 ] In determining whether a tribunal has discharged its duty of procedural fairness, it is necessary to have regard for the statutory scheme, the nature of the issue before the tribunal, and the reasonable expectations of the parties (among other factors) ( Baker ). [ 26 ] In this case, the procedure of adjudication of a complaint regarding a municipal tax assessment is prescribed by the MGA, and the MRAC Regulation promulgated thereunder. [ 27 ] It begins with the filing of a complaint within a specified time period following receipt of an assessment.

The complaint must set out the grounds for challenging the assessment. [ 28 ] Those grounds form the jurisdictional foundation for review of the assessment by the tribunal. For the Board to consider a ground that has not been identified in the complaint constitutes on error of jurisdiction. ( City of Edmonton v. Edmonton East (Capilano Shopping Centres Ltd 2016 SCC 47 at para 116 ) [ 29 ] The second step is the filing of written material in support of the complaint, including “the documentary evidence, a

summary of testimonial evidence including a signed witness report for each witness, and any written argument that the complainant intends to present at the hearing in sufficient detail to allow the respondent to respond to or rebut the evidence at the hearing.” ( MRAC, s.8 (2) (a)). This information must be disclosed at least 42 days prior to the hearing date. [ 30 ] The third step is for the Respondent to disclose its documentary evidence, a

summary of the testimonial evidence including a signed witness report for each witness, and any written argument that it intends to present at the hearing in sufficient detail to allow the complainant to respond to or rebut that evidence. This must be done at least 14 days before the hearing. [ 31 ] The fourth step is for the complainant to disclose its rebuttal evidence and argument, at least 7 days before the hearing. [ 32 ] The intention of these provisions of MRAC is to ensure that the evidence and arguments to be relied on and advanced by either side, is disclosed in advance.

S. 9 (2) of MRAC entrenches goes one step further and prohibits a board from hearing any evidence that has not been disclosed in accordance with s.8 . [ 33 ] The Appellant does not dispute that the land use restriction adjustment issue was listed in the Complaint. [ 34 ] However, it says that the Respondent’s evidence disclosure made no reference to that issue, leading the Appellant’s hearing representatives to believe that it would not be addressed at the hearing.

For that reason, when they were questioned on the land use restriction and entitlement to a 20% reduction (as per the City’s Land Influence Chart), they were taken by surprise, and were in no position to present considered evidence and argument on the issue. [ 35 ] The Respondent does not dispute the fact that its pre-filed evidence and argument did not in the first instance seek an adjustment for the land use restrictions imposed on the site. It maintains, however, that the City’s expert assessors should have been ready to discharge its onus of proof in demonstrating that its assessment was fair and equitable.

The Respondent says that the City’s experts should have been prepared to defend their decision to not apply such an adjustment irrespective of whether the issue was specifically addressed in the Respondent’s pre-filed evidence and in its oral submissions to the Board. [ 36 ] In my view, there is considerable merit to the Respondent’s submissions in this regard. The appraisal report submitted by the Respondent did not specifically address the 20% land use restriction adjustment, as was ultimately found by the Board to be warranted.

However, it is clear that the limited use to which the land could be put was reflected in the appraiser’s choice of comparable land sales, which in turn led him to opine that the market value of the Land was approximately $11 Million, as opposed to the Appellant’s estimate of over $22 Million. [ 37 ] The Appellant’s own evidence also included an information package prepared by the City explaining how it approaches the estimation of market value for downtown – with the Bow Trail land value listed at $85.00/sq. foot (the base value used in this particular assessment).

It then discusses out of market adjustments that are or can be made to these base values for assessment purposes. A 2015 Downtown Land Influence Chart is provided, listing adjustments for corner lots (+5%), environmental contamination (-30%) and land use restrictions (-20%).

The City’s assessment in this case included a 5% upward adjustment for a corner lot and a 30% downward adjustment for environmental contaminating, but stated “NA” in respect of land use restriction. [ 38 ] In the circumstances, the questions put to the City’s expert assessors by Board member Massey (an expert appraiser in his own right) as to why a land use restriction adjustment had not been made were logical, reasonable, and somewhat predictable. Having argued against Mr.

Pritchard’s use of automotive sites as comparables, the City’s assessors should have expected to be asked how, then, the restriction on land use contained in the Direct Control district by law could or should be accounted for (if at all). [ 39 ] Unfortunately, it is clear from the transcript that the City’s expert assessors were indeed surprised by the question. A

considered response would not have included statements such as the City’s assessment division being “hooped” by the land use restrictions imposed by the City itself; nor would it likely have included the somewhat circular argument that the restrictions could be ignored because the City of Calgary could just as easily re-designate the land to some other use. [ 40 ] Rather than providing such off the cuff responses, the City’s representatives would have been more prudent and helpful to the Board had they noted that the question had taken them by surprise (having not been articulated in the complainant’s evidence), and requested an adjournment to provide a considered response.

They did not do so, choosing to respond to the Board’s questions, and to then provide additional argument on the issue in their final submissions. [ 41 ] For these reasons, it is not at all clear-cut that the Appellant was denied procedural fairness. The broad question of how the market value of the property was affected by its restricted land use was clearly at issue in the hearing.

The narrow question of whether a land use restriction adjustment – as described in the City’s own landowner information package submitted as evidence- should be applied was raised initially as a specific ground for complaint, and was a question that could reasonably have been anticipated.

To the extent that the City’s representatives were surprised and unprepared to respond, they could have advised the Board of that and sought an adjournment rather than ploughing ahead. [ 42 ] On the other hand, the Respondent -which was represented by an agency experienced in these hearings-, chose not to advance its complaint regarding the absence of a land use restriction adjustment in its written evidence and argument. It also chose to not mention the need for such an adjustment in its oral evidence at the hearing.

It addressed the issue only in closing argument, after it had been raised in the Board’s questioning of the City’s experts. This clearly contributed to the City’s experts being caught by surprise by that questioning and was contrary to the spirit and intent of the regulations to ensure fair disclosure of evidence and arguments before commencement of a hearing. [ 43 ] Procedural fairness accomplishes two broad objectives in administrative hearings. First and foremost, it fulfills the parties’ fundamental right to be heard when a decision is being made that affects their interests.

Second, (and occasionally overlooked) procedural fairness assists the decision- making process itself by improving the quality of the record through the testing of evidence, and allowing for considered argument on that evidence. [ 44 ] In my view, the Board was entitled to raise the land use restriction adjustment issue at the hearing. However, in the circumstances it should not have awaited questioning of the City’s witnesses to do so.

It should have noted its interest in receiving evidence and argument on that ground of complaint at the outset of the hearing, or at the conclusion of the complainants’ evidence, and sought submissions from the parties regarding their readiness to proceed. This would have been fair to both sides, and would have increased the quality of evidence and argument received on what turned out to be an important issue. It would also have been in better accord with the spirit and intent of the MRAC Regulation. The Board’s failure to take such an approach constituted a beach of procedural fairness.

c) Did the Board act unfairly by using its own expertise to decide the matter in substitution for the evidence presented at the hearing? [ 45 ] Given my decision on the first procedural fairness issue, it is not necessary to decide the second question of law upon which leave was granted. [ 46 ] Had it been necessary to do so, however, I would not have allowed the appeal on this ground. [ 47 ] The decision of the Board to apply a land use restriction adjustment of 20% was not made in the absence of evidence.

In fact, there was evidence before the Board – particularly from the City itself- that showed the land use restrictions currently in place under the Direct Control District by-law for this site. There was written and viva voce evidence from the Respondent’s expert appraiser that discussed those land use restrictions. There was written and viva voce evidence from the City’s experts that described how downtown land assessments are made, and that identified or discussed the adjustment factors that can be applied.

The Board also heard final submissions from both sides on this issue, (among others), which given the informal nature of the hearing process included an evidentiary aspect, as well as pure argument. [ 48 ] Accordingly, while the process used to receive evidence and argument fell short in respect of procedural fairness, it cannot be said that the Board substituted its own expertise for evidence. Remedy [ 49 ] S. 470.1 (1) (

b) of the Municipal Government Act provides that on hearing of an appeal the Court may confirm or cancel the decision. S. 470.1(2) states:

(2) In the event that the Court of Queen’s Bench cancels a decision, the Court must refer the matter back to the assessment review board, and the board must rehear the matter and deal with it in accordance with the opinion of or any direction given by the Court on the question of law or the question of jurisdiction. For the reasons discussed earlier, I have concluded that the procedure used by the Board fell short of its duty to provide procedural fairness.

When the Board concluded that the applicability of a 20% land use restriction adjustment was in issue, it should have offered the parties the opportunity to provide additional evidence and argument on that issue. On rehearing of the matter, the Board will need to decide how best to proceed in ensuring that this specific issue is fully and fairly adjudicated while preserving balance of the hearing record to the extent reasonable.

Costs [ 50 ] The City has sought costs against the Respondent. In my view, an award of costs is not appropriate in this case, given the mixed result and the circumstances leading to the Board’s error. Heard on the 22 nd day of February, 2017. Dated at the City of Calgary, Alberta this 23 rd day of March 2017. R.A. Neufeld J.C.Q.B.A. Appearances: Tina Squire for The Appellant City of Calgary Susan E.A. Trylinski for the Respondent Renfrew Chrysler Inc. Michael Janke for the Respondent Assessment Review Board