2016 QCCQ 789, 2016 QCCQ 789

9170-1649 Québec inc. c. 3652904 Canada inc. 2016 QCCQ 789 COURT OF QUEBEC CANADA PROVINCE OF QUEBEC DISTRICT OF montreal Civil Division No: 500-22-219053-157 DATE: February 22, 2016 ______________________________________________________________________ PRESIDED BY THE HONOURABLE VINCENZO PIAZZA, J.C.Q. ______________________________________________________________________ 9170-1649 quebec inc.

Plaintiff v. 3652904 canada inc and Hyung Woo Paik Defendants ______________________________________________________________________ ORDER AS TO THE REOPENING OF THE TRIAL (Art. 323 C.C.P.) ______________________________________________________________________ [ 1 ] 9170-1649 Quebec inc. (Quebec Inc.) claims $25,168.32 from 3652904 Canada inc. (Canada Inc.) and Hyung Woo Paik, representing the outstanding balance of their proportionate share of the municipal real-estate taxes for 2014 and 2015, as apportioned by Quebec Inc. to the premises leased to Mr. Paik and Canada Inc. in Quebec Inc.’s property. [ 2 ] Mr.

Paik and Canada Inc. aver that they owe nothing and that in fact it is Quebec Inc. who is indebted to them, for the reimbursement of municipal taxes that they have overpaid in the past, by error, and in violation of the provisions of their lease. [ 3 ] Mr. Paik and Canada Inc. plead that the lease of February 2002 does not allow Quebec Inc. to charge them any portion of the municipal real-estate taxes levied against Quebec Inc.’s property, except the water tax. They refer to a clause in the lease, which reads as follows: CONDITIONS SPÉCIALES 1.

Le Locataire devra payer lui-même les taxes d’eau, d’affaires, de vidanges et toutes autres taxes de nature locative . Cependant, le Locataire consent à rembourser à demande au Locateur tous les montants, les taxes d’eau, d’affaires, de vidanges et toutes autres taxes de nature locative , si le Locateur était tenu de les payer lui-même à la municipalité. 2. Le Locataire paiera les frais de chauffage et d’électricité pour les lieux loués. 3.

Le Locataire devra acquitter seul les frais d’électricité et services du même genre et le Locateur ne sera pas responsable des coûts de toutes installations électriques spécialement requises par le Locataire dans le cours de son commerce. 4. Le Locateur ne fournira aucun service de conciergerie ou d’enlèvement de rebus. Cependant, le Locateur procédera au déneigement de la ruelle. (…) [Emphasis added by the Court.] [ 4 ] In the judgment he delivered for the Supreme Court of Canada in Montréal (City) v. Montreal Port Authority [1] , Mr. Justice Louis LeBel made the following observations: E.

Development of the City of Montréal’s Tax System (…) [26] Before 2003, as I have noted, the City imposed property taxes and a business occupancy tax . However, the new City as of that time included several municipalities that had not previously imposed a business occupancy tax. In fact, that tax was collected in only 10 of the City’s 28 sectors. Where the tax was in effect, it was imposed on occupants of non-residential immovables who engaged in commercial or professional activities . Moreover, the property tax itself had certain distinctive features.

The City first imposed a general property tax on all taxable immovables and then added a surtax on non-residential immovables.

[27] In light of these disparities, the City concluded that it had to thoroughly review its taxation structure to harmonize the differing tax systems within its territory and improve efficiency. In 2000, the Quebec National Assembly had changed the legislative framework for municipal taxation by enacting legislation that authorized municipalities to adopt between two and five different property tax rates based on the categories to which immovables belonged ( Act respecting municipal taxation , R.S.Q., c. F-2.1, s. 244.29 (added by S.Q. 2000, c. 54, s. 82 )).

The amendments did not change the legal nature of the tax, which remained a property tax on immovables located within municipalities . However, Quebec municipalities could from that time on adjust the tax rate by applying different rates to the various categories of immovables established by the legislation: non-residential immovables, immovables consisting of six or more dwellings, serviced vacant land, industrial immovables, and immovables that were unclassified and therefore part of the “residual” category (s. 244.30). [28] The City exercised those regulatory powers.

For 2003 and the following fiscal years, it abolished its business occupancy tax and changed its property tax structure . It established a variable-rate property tax that would enable it, inter alia , to recover the income it would lose after abolishing the business occupancy tax. [Emphasis added.] [ 5 ] While the case was under advisement, the Court reckoned that this

section of the City’s Charter [2] , which was not raised by Plaintiff’s attorney at trial, could be material to the outcome of the case: 151.6.2. Where a unit of assessment situated in a sector that belongs to the group described in

section 244.31 of the Act respecting municipal taxation (chapter F-2.1) is the subject of a lease that is in force on the first day following the fiscal year of reference, within the meaning of the second paragraph, and that does not allow the owner to increase the rent stipulated to take into account new taxes for which the owner becomes the debtor, or to have the lessee otherwise assume payment of such a tax, the owner may nonetheless, in accordance with the rules set out in this section, increase the rent stipulated to take into account all or part of the additional amount payable by the owner for a fiscal year in relation to the fiscal year of reference by reason of the imposition of a mode of property taxation specific to the non-residential sector.

The fiscal year of reference is the last fiscal year for which the city imposes the rental tax in respect of the sector concerned, either separately or within the whole territory of the city. “Rental tax” means the business tax or the tax provided for in

section 101 of

Schedule C where its rate is based on the rental value. Where one of those taxes ceases to be imposed in respect of the sector while the other continues to be imposed, the fiscal year of reference is determined on the basis of the first tax. The rent that may be so increased is the rent payable for the period, subsequent to the fiscal year of reference, in which the lease is effective and that includes all or part of a fiscal year for which the amount referred to in the first paragraph is payable. However, the rent stipulated in a lease entered into for part of the unit of assessment that does not constitute premises within the meaning of the last two paragraphs of

section 244.34 of the Act respecting municipal taxation , cannot be so increased. Where the lease is entered into for such premises among other premises within the unit of assessment, the increase in rent shall take into account only the proportion of the amount referred to in the first paragraph that corresponds to the proportion that the premises under lease are of the total of the rental values of all the premises at the end of the fiscal year of reference. However, another proportion, as agreed upon by the owner and all the lessees of the premises, may be established.

Subject to the seventh and eighth paragraphs, the amount payable for a fiscal year by reason of the imposition of a mode of property taxation specific to the non-residential sector is, (1) where under

section 244.29 of the Act respecting municipal taxation , the city fixes a general property tax rate specific to the category provided for in

section 244.33 of that Act, the difference obtained by subtracting the amount of the tax that would be payable if only the basic rate provided for in

section 244.38 of that Act were applied from the amount of the tax payable in respect of the unit of assessment for the fiscal year ; or (2) (subparagraph repealed). Where the city avails itself of the power under the sixth paragraph of

section 101 of

Schedule C to impose the tax provided for in that

section for a fiscal year, the total obtained by adding the amount of that tax payable in respect of the unit of assessment and the amount determined under the sixth paragraph of this

section is the amount payable for that fiscal year by reason of the imposition of a mode of property taxation specific to the non-residential sector.

For the fiscal year before the end of which the lease ceases to be effective, the amount payable by reason of the imposition of a mode of property taxation specific to the non-residential sector is the product obtained by multiplying the amount determined under the sixth or the seventh paragraph, as the case may be, by the quotient resulting from the division of the number of whole days in the fiscal year that have elapsed at the time at which the lease ceases to be effective, by 365 or by 366 in the case of a leap year.

Sections 491 and 244.64 of the Act respecting municipal taxation apply respectively, with the necessary modifications, for the purpose of interpreting the words “owner” and “tax” used in this section. FOR THESE REASONS, THE COURT: ORDERS the reopening of the trial; ORDERS the parties’ attorneys to indicate, by letter to the Court, by no later than February 26, 2016, whether they wish to make oral or written observations as regards the above; WITH COSTS to follow.

__________________________________ VINCENZO PIAZZA, j.c.q. Me David Ghavitian ME DAVID GHAVITIAN Attorney for the Plaintiff Me Gregory Azancot AZANCOT & ASSOCIÉS Attorney for the Defendants Dates of hearing: October 8, 2015 and January 20, 2016