HJR Holdings Ltd. Appellant And: Town of Holyrood Respondent and: Municipal Assessment Agency Inc. second Respondent - v. -, 2023 NLSC 94

court crest IN THE SUPREME COURT OF NEWFOUNDLAND AND LABRADOR GENERAL DIVISION Citation : HJR Holdings Ltd. v. Holyrood (Town) , 2023 NLSC 94 Date : June 23, 2023 Docket : 202101G3756 Between: HJR Holdings Ltd. Appellant And: Town of Holyrood Respondent and: Municipal Assessment Agency Inc. second Respondent - AND - Docket : 202101G0328 Between: HJR Holdings Ltd. Appellant And: City of Mount Pearl first Respondent and: Municipal Assessment Agency Inc. second Respondent

Before: Justice Alexander MacDonald Place of Hearing: St. John’s, Newfoundland and Labrador Date of Hearing: March 3, 2023 Appearances: Sarah J. Clarke Appearing on behalf of the Appellant in 202101G3756 and 202101G0328 Travis D. Payne Appearing on behalf of the Respondent in 202101G3756 Geoffrey K. Penney Appearing on behalf of the First Respondent in 202101G0328 Daniel M. Glover Appearing on behalf of the Second Respondent in 202101G3756 and 202101G0328 Authorities Cited: CASES CONSIDERED: Ring v. Newfoundland and Labrador, 2013 NLCA 66; St. John’s (City) v. St.

John’s International AirportAuthority, 2017 NLCA 21; Wedley v. North Shore / Squamish Valley Assessor, Area No. 08, [1996] B.C.W.L.D. 3067, 4 G.T.C. 6275(S.C.); Wedley v. North Shore / Squamish Valley Assessor, Area No. 08 (1998), (BC SC), 10 Admin. L.R. (3d) 182,81, A.C.W.S. (3d) 929 (B.C.S.C.); Law Society of Saskatchewan v. Abrametz, 2022 SCC 29; Canada (Minister of Citizenship andImmigration) v. Vavilov, 2019 SCC 65; St. John’s (City) v. 10718, 2018 NLSC 194 STATUTES CONSIDERED: Assessment Act 2006, S.N.L. 2006, c. A-18.1, Excise Tax Act, R.S.C, 1985, c.

E-15 REASONS FOR JUDGMENT MacDonald, J.: INTRODUCTION [1] HJR Holdings Limited (HJR) owns four vacant properties, three in the City of Mount Pearl, and one in the Town of Holyrood.The municipalities through the auspices of the Municipal Assessment Agency (Agency) assessed the “actual value” of the properties for

municipal taxation purposes. The Agency conducts these assessments, through assessors appointed pursuant to Assessment Act, 2006 , S.N.L. 2006, c. A-18.1 ( Act ). [ 2 ] HJR appealed these assessments to the Agency. The Agency appointed commissioners to hear the appeals. The commissioners dismissed HJR’s appeals and confirmed the assessors’ “actual values.” [ 3 ] HJR appealed the Mount Pearl commissioner’s decision.

It says the commissioner erred in law by finding that harmonized sales tax (HST) is included in the assessed value and by finding that the taxes added intrinsic value to the properties. [ 4 ] It appealed the Holyrood commissioner’s decision on the same basis. It also says that the commissioner erred by failing to decide whether the value of its 15 acres of vacant land should be reduced because of title issues similar to those described in the decision of the Court of Appeal in Ring v.

Newfoundland and Labrador , 2013 NLCA 66 . [ 5 ] However, at the hearing HJR made no arguments on the Ring issue and did not list it as an issue in its Application brief. I will therefore not consider it. [ 6 ] The parties agreed I would hear the appeals together. In both appeals, it asked that I refer the assessments back to the Agency with an opinion on how to resolve any errors of law or jurisdiction. [ 7 ] I am therefore to consider: ISSUE 1: Did the commissioners make an error in law or jurisdiction if they included any payable HST in the assessed value of the properties?

ISSUE 2: What relief should I order? [ 8 ] I dismiss HJR’s appeal of the Mount Pearl commissioner’s decision. I allow its appeal of the Holyrood commissioner’s decision and refer the matter back to that commissioner with an opinion I describe later. [ 9 ] I will now tell you why I make these decisions. I will first consider whether the commissioners made an error of law or jurisdiction by including HST in the assessed value of the properties.

ISSUE 1: Did the commissioners make an error in law or jurisdiction if they included any payable HST in the assessed value of the properties? [ 10 ] I find that the Mount Pearl commissioner did not err in law or jurisdiction while the Holyrood commissioner did, but not for the reason suggested by HJR. [ 11 ] Under section 39(3) of the Act , HJR may appeal the decisions of the commissioners “on a question of law or jurisdiction.” The standard of review is correctness ( St. John’s (City) v. St. John’s International Airport Authority, 2017 NLCA 21 , at para. 22 ).

HJR has the burden of showing that the Agency’s assessment is incorrect (at para. 23). [ 12 ] The mandate of the Agency, through an assessor, is to assess real property at its “actual value.” The Act defines actual value as the “market value of the fee simple interest in the real property.” [ 13 ] Under section 17(3) of the Act , the assessor shall consider other assessments in the municipality “to ensure that the taxation falls in a uniform manner upon the real property that is subject to taxation.” [ 14 ] The assessors considered the value of comparable properties to assist in deciding the actual value of the property.

They found these values in registered conveyances. The Mount Pearl assessors said that if the deed says the consideration is: (a) $X and does not mention HST, it concludes the value of the property as $X; (b) $X plus HST, it adjusts the value by adding the HST so that value of the property is $X + 15%; and (c) $X including HST, it makes no adjustment so that the value of the property is $X. [ 15 ] The Holyrood assessor said, “Whatever sale prices printed in the deed of conveyance is what is used for comparable sales purposes.” (Record Tab 1, last paragraph.

This seems to be the same as the Mount Pearl assessors’ approach although it is not clear what the Holyrood assessor would do with the example set out above in subparagraph 14(b). [ 16 ] Thus, the assessors use inputs that calculate the actual value of a hypothetical property differently depending on the how the vender and purchaser worded the deed even though the underlying transaction price may be the same (Transcript of Mr.

Hearn, page 29, lines 4–12). [ 17 ] Furthermore, in response to a question, “are you arguing … that HST should be included in the assessed value of the property,” Mount Pearl assessor answered, “I am flat out arguing it should be included. If it’s paid by the vendor or the purchaser then is should be included in the valuations” (Transcript of Hearn, page 30, lines 8-18). [ 18 ] HJR suggests the issue is whether the commissioners should include any payable HST in the market value of the properties.

If not, the commissioners should adjust the comparable sales to exclude HST. [ 19 ] As attractive as this formulation of the issue may seem, the issue is not that simple. The question is complex and invites a discussion of the Excise Tax Act, R.S.C, 1985, c. E-15 , and the economic theory of “market value.”

[20] The Crown under the Excise Tax Act assesses HST in Newfoundland and Labrador at 15% “on the value of consideration forthe supply.” [emphasis added] The Crown charges HST on sales of vacant land only in some circumstances. It generally charges no HSTif the land is sold by an individual. [21] However, the Crown generally charges HST on sales of vacant land sales by corporations such as HJR. A corporation generallyreceives an input tax credit when it sells the land, the effect of which is that an ultimate consumer pays the HST. [22] The parties provided me with assessment cases.

These cases often include theoretical economic discussions on how liability forpayment of GST or HST affects the “market value” of the property sold. Some suggest that the tax increases the market value of landbecause the purchaser, when it resells it, will recoup the amount of tax it paid from the next buyer. Furthermore, they concludeindividual tax-exempt sellers will increase the sales price of their vacant land to reflect that corporate developers must charge GST orHST on the sale of their land. [23] The British Columbia Supreme Court in Wedley v.

North Shore / Squamish Valley Assessor, Area No. 08, [1996] B.C.W.L.D.3067, 4 G.T.C. 6275 (S.C.) considered a case where the assessor included GST on the taxpayers’ purchase price for a property indetermining its assessed value. [24] On appeal from a decision of the Appeal Board, the parties asked the court to rule on whether it is a question of law if anassessor should include GST in the sales price to determine “actual value” for assessment purposes. [25] They also asked if there was any evidence upon which the Appeal Board could arrive at the conclusion that GST should beincluded in the determination of actual value for assessment purposes (at para. 14). [26] At paragraph 15, the Chief Justice confirms that the Appeal Board’s choice of appraisal method is a question of fact, not law. [27] The Chief Justice, at paragraph 17, endorsed the British Columbia Court of Appeal decision in Vancouver Assessor, Area No.09 v.

Lord Realty Holdings Ltd., [1996] B.C.W.L.D. 2709, 66 A.C.W.S. (3d) 16 (C.A.) Stated Case 32, that said “It is for the Board todecide if it needs information to fulfill its duty to find actual value. It is for the Board to decide what factors should be included orexcluded in a method of arriving at value. It is for the Board to determine what circumstances affect value.

All are questions of fact.” [28] The Chief Justice also concluded at paragraph 18 that, “The question of whether GST should be included in the assessed valueof a new property is part of an assessment methodology and in my view is a question of fact.” [emphasis added] [29] In a subsequent hearing, Wedley v. North Shore / Squamish Valley Assessor, Area No. 08 (1998), (BC SC),10 Admin. L.R. (3d) 182, 81 A.C.W.S. (3d) 929 (B.C.S.C.), Justice Levine found at paragraph 56: (

a) the Chief Justice in the previous case, “did not affirm that the [appeal] board may always accept the proposition that G.S.T. isrecouped upon resale or that the acceptance of that proposition should inexorably lead to the inclusion of GST”; (b) “The [c]ourt declined jurisdiction over that question because it is a question of fact.

The technical and economic aspects of theenquiry indicate why the legislature has entrusted the resolution of these matters to expert tribunals and not judges and courts”; and (c) “the [appeal] board could not fetter its discretion as if it were bound by the [Chief Justice’s ruling] to apply G.S.T. in every case,but was required to consider if its policy was warranted generally or in the specific circumstances.[emphasis added] [30] Our Court of Appeal in St. John’s (City), concluded that a “commissioner has authority to accept or reject the approaches usedby an assessor.

This is generally a factual determination by the commissioner which is not subject to appeal … because an appeal undersection 39 of the Act is limited to questions of law or jurisdiction” (at para. 35). [31] Thus, I conclude any effect of HST on the assessed value is a matter of fact and not law. However, as a matter of law, thecommissioners are required to consider the effect of HST on the assessed value generally or in HJR’s specific case. I will first consider ifthe Mount Pearl commissioner did so.

Did the Mount Pearl Commissioner consider the effect of HST on the assessed value generally or in HJR’s specific case? [32] The Supreme Court of Canada in Law Society of Saskatchewan v. Abrametz, 2022 SCC 29, confirmed at paragraph 27 that,“where questions of procedural fairness are dealt with through a statutory appeal mechanism, they are subject to appellate standards ofreview.” [33] Supreme Court of Canada in Canada (Minister of Citizenship and Immigration) v.

Vavilov, 2019 SCC 65 (in the contextconsidering how a duty to provide reasons will impact how a court conducts reasonableness review) said, at paragraph 77, “It is wellestablished that, as a matter of procedural fairness, reasons are not required for all administrative decisions.

The duty of proceduralfairness in administrative law is ‘eminently variable,’ inherently flexible and context-specific.” [34] It also said, “[w]here a particular administrative decision-making context gives rise to a duty of procedural fairness, the specificprocedural requirements that the duty imposes are determined with reference to all of the circumstances.” [35] Section 37(4) of the Act says that the Commissioner “shall” provide written reasons. This is not surprising as commissionersfacilitate taxation of citizens, conduct hearings, record the proceedings, hear evidence and publish decisions.

HJR has a right toparticipate in the process and appeal the decisions. [36] Justice McGrath (as she then was), in St. John’s (City) v. 10718, 2018 NLSC 194, in the context of a municipal assessmentappeal, concluded that reasons must be sufficiently transparent, justifiable, or intelligible for the parties to understand whether or howthe assessor decided the issue (at para. 70).

[ 37 ] She also observed that a court’s review of adequacy of reasons is not generally a stand-alone ground of appeal but must be undertaken in a review of the decision as a whole (at para. 86). [ 38 ] The Supreme Court also directs in Vavilov (in the context of a judicial review, not a statutory appeal) that I must not assess an administrative decision-maker’s reasons against a standard of perfection. I cannot divorce these reasons from the institutional context of the proceeding or from the history of the proceeding.

I should read the reasons considering the history and context of the proceeding (at para. 91). [ 39 ] I find that I may consider this guidance in the context of a statutory appeal, when I consider the sufficiency of the commissioners’ reasons. I may consider the evidence before the commissioners and submissions of the parties (at para. 94). [ 40 ] The record before me includes a decision for each of the three HJR Mount Pearl properties. The commissioner specifically discussed the HST issue in his judgments. In particular he said: (

a) the appraiser who provided comparable sales data said she considered the full sales price including HST of the property when making comparisons. She submitted details of her assessment in which she used 11 land sales to support the assessed value at sale prices ranging from $80,000 to $148,120; (

b) the assessor said her research indicates that rulings across the country show HST can be included in the value of residential lots. She did not consider separately whether HST is included but merely took full sales price as the market value; and (

c) HJR said taxes are not “intrinsically part of land value.” [ 41 ] The transcript of the hearing shows at pages 6–34 that the appraiser (who provided the comparable sales), the assessor, and HJR discussed and argued the issue before the commissioner.

The assessor gave her reasons supporting their position on HST. [ 42 ] I agree with the conclusion of the British Columbia Chief Justice when he concluded in paragraph 24 that, “the law is quite clear that an appraiser may and frequently does take into account what might be described as hearsay evidence or the opinion of others.” [ 43 ] The Chief Justice observed that while the evidence of comparable values was “certainly thin,” he could not say that there is no evidence.

There clearly there was evidence before the commissioner allowing him to do what he did. [ 44 ] I find that the transcript and the Mount Pearl commissioner’s reasons show they considered the effect of HST on the assessed value generally or in HJR’s specific case and made a decision on the issue. This decision is on a question of fact, not law. [ 45 ] I therefore dismiss HJR’s appeal of the Mount Pearl commissioner’s decision. I now turn to the Holyrood decision.

Did the Holyrood Commissioner consider the application of HST? [ 46 ] The Holyrood commissioner in his decision said only that, “[g]iven the information supplied by the assessor and the appellant, it is my opinion that based on information obtained from the Registry of Deeds regarding sales, it is usually indicated on the deed if HST is exclusive of the sale price.

Therefore, whatever sale price is printed in the deed of conveyance is what is used for comparable sales purposes.” [ 47 ] The Holyrood commissioner’s comments consisted of a statement that, deeds usually indicate if HST is exclusive of the sales price. This is not an explanation of how he considered the effect of HST on HJR’s assessment.

Likewise, there is limited discussion of HST at the appeal hearing [see transcript page 28]. [ 48 ] Thus, the Holyrood commissioner’s reasons and the hearing transcript do not show that the commissioner considered the effect of HST on the assessed value generally or in HJR’s specific case. His failure to do so is an error of law.

Should I dismiss the Appeal because the assessment has a “just and fair relationship to the value at which other properties are assessed” [ 49 ] The Agency also argues that even if the Holyrood commissioner erred in law, I should dismiss HJR’s appeal because it failed to establish under section 37(1) of the Act that the assessment does not bear a “just and fair relation to the value at which other properties are assessed.” [ 50 ] I cannot do so because the record does not disclose the assessed value of the other properties.

The Holyrood commissioner’s decision says, “Residential Assessor with the [Agency], submitted a report indicating eight (8) sales which were used in determining the value for the subject property.” The transcript of the proceeding says on page 28 at line 19, “with regards to the assessment … there [were] 26 vacant land sales that [were] used in the “analysis.” [ 51 ] The record does not provide any detail of the assessor’s eight sales assessments or the 26 vacant lot sales. [ 52 ] HJR contests the assessed value because it says that the some of the comparable sales improperly included HST.

If the comparable sales should not include HST, some of the comparable sales prices could be 15% lower. I have found that record does not show that the Holyrood commissioner considered this issue generally or in this specific case. [ 53 ] Thus, neither the Agency nor I can say that HJR cannot succeed the record does not show that the Holyrood commissioner considered the effect of HST on the assessed value generally or in HJR’s specific case. [ 54 ] Thus, I reject the Agency’s argument that I should dismiss HJR’s appeal despite the Holyrood commissioner’s failure to consider the effect of HST.

I now turn to what relief I should order. ISSUE 2: WHAT RELIEF SHOULD I ORDER?

[ 55 ] Under section 39(5) of the Act , I must either confirm or vacate the decision of the commissioner. If I vacate the decision, I shall refer the matter back to the commissioner with my opinion on the error in law. DISposition [ 56 ] I confirm the Mount Pearl commissioner’s decision. I dismiss HJR’s appeal. [ 57 ] I vacate the Holyrood commissioner’s decision. I allow HJR’s appeal . I refer HJR’s appeal back to the Holyrood commissioner. They shall provide reasons “either generally or in HJR’s specific circumstances” with respect to the effect of HST on the assessed value of HJR’s property.

COSTS [ 58 ] HJR was successful on the Holyrood appeal. It was unsuccessful in the Mount Pearl appeal. In light of this mixed success, each party will bear their own costs. _____________________________ ALEXANDER MacDONALD Justice