City of Moose Jaw (as represented by the Saskatchewan Assessment Management Agency) Prospective Appellant v. Temple Hotels Inc. (formerly, 2015 SKCA 123

Court of Appeal for Saskatchewan Docket: CACV2717 Citation: Moose Jaw (City) v Temple Hotels Inc. and Sasco Developments Ltd. , 2015 SKCA 123 Date: 2015-11-19 Between: City of Moose Jaw (as represented by the Saskatchewan Assessment Management Agency) Prospective Appellant And Temple Hotels Inc. (formerly Temple Gardens Mineral Spa Inc.) and Sasco Developments Ltd. Prospective Respondents Before: Ottenbreit J.A. (in Chambers) Disposition: Application denied Written reasons by: The Honourable Mr.

Justice Ottenbreit Application: Saskatchewan Municipal Board, AAC 2013-0128, 2013-0129 and 2013-0130 Chambers Date: September 21, 2015 Counsel: David G. Gerecke for the Prospective Appellant Leonard D. Andrychuk, Q.C., for the Prospective Respondents Ottenbreit J.A. I.

Introduction [ 1 ] The City of Moose Jaw [City] as represented by the Saskatchewan Assessment Management Agency [SAMA] applies pursuant to s. 33.1 of The Municipal Board Act , SS 1988-89, c M-23.2 [ MBA ], for leave to appeal the decision of the Saskatchewan Municipal Board, Assessment Appeals Committee [Committee] dated May 6, 2015, in appeals AAC 2013-0128, 2013-0129 and 2013- 0130 [decision]. The decision relates to the assessment of three parcels of land comprising the Heritage Inn and Temple Gardens Mineral Spa, all located in Moose Jaw [properties].

The lead appeal, 2013-0130, relates to the Heritage Inn owned by the prospective respondents Sasco Developments Ltd. The proposed appeal relates to the assessor’s development of the capitalization rate [CAP rate] in respect of full service primary accommodation properties in Moose Jaw which is to be used in assessing the properties. For the reasons hereinafter set forth, leave to appeal is denied. II. Facts and Background [ 2 ] The properties were assessed by SAMA for the purposes of a 2013 revaluation for municipal taxes.

The assessor examined numerous properties in the process of developing a CAP rate for different property groups. The assessor determined that two properties, one each in Yorkton and Estevan, represented the appropriate sales data group for use in developing the CAP rate for full service primary accommodations. This resulted in a CAP rate of 7.5% which was applied to the properties. [ 3 ] The Estevan property used in developing the full service CAP rate was the Derrick Motor Hotel [Derrick Hotel]. Through communications with the owner, SAMA determined the sale price of the Derrick Hotel was $5.2 million.

SAMA explained how they verified that price: (

a) SAMA received an affidavit of value from ISC in which a value of $2,850,000 was set out; (

b) although SAMA did not receive a completed sales verification form it received a completed but unsigned information request form from the purchaser; (

c) SAMA spoke with the purchaser to obtain information concerning the sale transaction and was advised that the negotiated sale price was $5.2 million; and (

d) SAMA received an email from the purchaser – the current owner – confirming that the sale price was $5.2 million. SAMA also obtained a copy of the sale contract, which confirmed the price of $5.2 million. (Neither document was put in evidence at the subsequent hearing before the Board of Revision [BOR].) [ 4 ] The sale of the Derrick Hotel included a freestanding restaurant, which at the time of the sale was closed and not capable of operation as it was undergoing a complete renovation.

As a result, SAMA ascribed no value to the restaurant. [ 5 ] After SAMA made its assessment, the proposed respondents appealed the assessment to the BOR making two principal arguments. First, that the assessor erred in using $5.2 million as the sale price for the Derrick Hotel when the affidavit of value that the purchaser filed with ISC showed a value of $2.85 million.

Second, that the assessor erred in failing to attribute a value to the restaurant on the site. [ 6 ] In its decision, the BOR held that “the sale price of the Derrick Hotel property was not sufficiently verified and should not be used in the calculation of the CAP rate”. The reasons for this were that it was unlikely that the buyer would have ascribed zero value to the vacant freestanding restaurant and SAMA failed to ascertain what part of the $5.2 million sale price was considered, by either the buyer or seller, to be the value of the restaurant.

The BOR stated that the assessor failed to recognize the value of the potential income from the vacant restaurant and deduct it from the sale price of the Derrick Hotel. The BOR concluded that since the value of the restaurant was unknown, the value of the Derrick Hotel sale was unknown.

[ 7 ] The BOR ordered SAMA to provide a CAP rate using three sales comprising the Yorkton property, and two sales that SAMA had used in developing a limited service primary accommodations CAP rate, leaving the Derrick Hotel sale out of the calculation. In doing so, because it left only one sale for the full service category, it necessarily required SAMA to combine the full service and limited service groupings. That single CAP rate for both full service and limited service hotels was set at 10.9%. [ 8 ] The City appealed to the Committee.

Its main argument was that the BOR had erred by disregarding the purchase price of $5.2 million confirmed in the information request form. The Committee found: (

a) that the evidence presented to the BOR by the assessor was inadequate to verify the sale; (

b) that the assessor made an error of law in not verifying the sale price and the BOR was correct in excluding the Derrick Hotel sale based on that error; and (

c) that there was no error in the BOR decision and it was reasonable. III. Grounds of Appeal [ 9 ] The City’s proposed grounds of appeal as set forth in its draft Order filed are as follows: (

a) The Committee erred in law and jurisdiction by holding that the SAMA Board order dated May 23, 2012, was not properly before it because the SAMA Board order did not appear on the Board of Revision record, when, pursuant to s. 12(3) of The Assessment Management Agency Act , an order of the SAMA Board has the effect of law upon publication; (

b) The Committee erred in law and jurisdiction by failing to find that the Board of Revision erred in excluding the sale of the Derrick Hotel property from the calculation of the capitalization rate and ordering the calculation and use of a new capitalization rate, when: (

i) there was no evidence on the record on which the Board of Revision could conclude the Derrick sale was not a valid or qualified sale; (ii) there was no demonstrated error on the part of the assessor with respect to the inclusion of the Derrick sale, including with respect to the assessor’s verification of such sale and adjustment of the sale price, and the Board of Revision was required to defer to the professional judgment and discretion of the assessor and uphold the assessment; and (iii) the Board of Revision ignored the evidence from the assessor with respect to its verification of the Derrick sale in arriving at its decision to exclude such sale; and (

c) The Committee erred in law by failing to find that the decision of the Board of Revision resulted in inequity, contrary to s. 165(5) of The Cities Act . IV. Analysis A. Jurisdiction of the Court and the Test for Granting Leave [ 10 ] The City is entitled to apply for leave to appeal under s. 33.1 of the MBA on a question of law or a question concerning the jurisdiction of the Committee. The test set out in Rothmans, Benson & Hedges Inc. v Saskatchewan , 2002 SKCA 119 , 227 Sask R 121, is applicable.

The test is well known and requires the City to demonstrate that the grounds of the proposed appeal have sufficient merit and are of sufficient importance to warrant the granting of leave. [ 11 ] As explained by Jackson J.A. in Saskatoon (City) v North Ridge Development Corp. , 2015 SKCA 13 , 451 Sask R 265: 49 Since 2007, Rothmans has become the preferred expression of the test to be applied under s. 33.1 of The Municipal Board Act : see 101050457 Saskatchewan Ltd. and Gunner Industries Ltd. v City of Regina , 2007 SKCA 92 [ Gunner Industries ]; Bison Properties Limited v City of Regina and Saskatchewan Assessment Management Agency , 2007 SKCA 135 ; City of Prince Albert v 101027381 Saskatchewan Ltd. , 2008 SKCA 1 , 307 Sask R 162; Behenna v Rural Municipality of Rudy No. 284 , 2012 SKCA 14 , 385 Sask R 240 [ Behenna ]; Rutherford v Husky Oil Operations Limited , 2014 SKCA 118 ; and Town of Pilot Butte v Aaron Enterprises Inc. , 2014 SKCA 119 . 50 From my review of the jurisprudence, I conclude that the change in wording of the test for granting leave has not resulted in a change in this Court’s approach.

As the Rothmans test makes clear, the Chambers judge must decide whether he or she is sufficiently concerned about the correctness of a decision to warrant granting leave, including determining whether the appeal is prima facie destined to fail, and must also consider importance. These are the underpinnings of the decision in Schalk as well. [ 12 ] However, Jackson J.A. observed that the Rothmans test must be slightly modified to apply to s. 33.1 applications.

This modification has recently been summarized by Ryan-Froslie J.A. in Deer Lodge Hotels Ltd. v Saskatoon (City) , 2015 SKCA 105 : 21 Based on Jackson J.A.’s comments, the modifications to the Rothmans criteria applicable to s. 33.1 applications may be summarized as follows: (

i) The Rothmans analysis contemplates an ongoing proceeding which generally is not the case with respect to appeals pursuant to s. 33.1, hence the question of whether an appeal would unduly delay proceedings in the court below, or add unduly or disproportionately to

the costs of the proceedings are not applicable issues when assessing whether leave should be granted pursuant to s. 33.1; and (ii) How importance of the proposed appeal is assessed is also different. It will be measured not with respect to its effect on the ongoingcourt proceedings, but rather with respect to its effect on the impugned order or decision, and whether it raises a new or controversialissue of practice, or a new, uncertain or unsettled point of law. The focus of this analysis is on whether the issues raised have general asopposed to limited application. B. Merit 1.

The Committee erred by holding that the SAMA Board order dated May 23, 2012, was notproperly before it because it was not part of the record of the BOR. [13] At para. 20 of the decision, the Committee states: SAMA told the Committee that “adjusted sale price” is defined in a SAMA Board Order dated May 23, 2012, and applicable to the 2013assessment year. The Committee notes, however, that the record contains no reference to this Order or the definition it contained.

TheCommittee is unable to comment on the applicability of the definition given that the Board did not have the benefit of the informationSAMA is presenting now to the Committee and SAMA could have given it to the Board for its hearing. [14] The City and the prospective respondents both agree that the SAMA Board order is a regulatory document and carries theweight of law. The prospective respondents argue that the decision of the Committee regarding this issue reflects only that the order wasnot argued or relied on before the BOR by the City and, therefore, the Committee was right to refuse to consider it.

The Cityacknowledges that even if the Committee made an error by such refusal, it is unclear whether the error would have made a difference inthe decision of the Committee or even if it was relevant to the proceedings. As a general rule, the Court does not grant leave in relation toquestions that would make no difference to the result (Dubois v Saskatchewan Municipal Board, at paras 9–10 (SaskCA)).

In view of this, I am not satisfied that this ground has sufficient merit. [15] That said, it is worth noting that in assessment appeals such as this, parties have a right to refer to any duly enacted legislation,Court or Committee decision. Such legislation and decisions carry the weight of law. If a party chooses to refer to such decision orlegislation at a particular stage of proceedings without having referred to it at a previous stage, they may do so without putting the orderinto evidence. They are not a matter of evidence.

However, it is still open to the tribunal hearing the matter to refuse to entertain whatessentially is a new argument or ground based on that order. This, of course, will depend on the nature of the proceedings, the issuesinvolved, the prejudice to parties and the other circumstances. 2. The Committee erred in law and jurisdiction by failing to find that the Board of Revision erredin excluding the sale of the Derrick Hotel property from the calculation of the capitalization rate andordering the calculation and use of a new capitalization rate, when: (

i) there was no evidence on the record on which the Board of Revision could conclude the Derrick sale was not a valid orqualified sale; (ii) there was no demonstrated error on the part of the assessor with respect to the inclusion of the Derrick sale, includingwith respect to the assessor’s verification of such sale and adjustment of the sale price, and the Board of Revision was required todefer to the professional judgment and discretion of the assessor and uphold the assessment; and (iii) the Board of Revision ignored the evidence from the assessor with respect to its verification of the Derrick sale in arrivingat its decision to exclude such sale. [16] These grounds can conveniently be recast as whether the BOR was right to conclude the sale had not been properly verified.The sale price of the Derrick Hotel in this instance is a question of fact. [17] Respecting the first subground, it was agreed by the parties before the Committee that the Derrick Hotel sale was valid andqualified on bases other than sale price.

It was open to the BOR to determine whether the value of that property chosen by the assessorwas proven. Although the BOR uses the term qualified sale in its conclusion, it stated that the sale price was not “verified” earlier in itsdecision. The BOR was aware of what SAMA had done to verify the sale price and concluded on that basis as a matter of fact that thesale was not verified at $5.2 million for the purposes of the proceedings. This was based largely on the fact that the assessor hadattributed no value to the vacant restaurant.

Implicit in this observation is that the price was not properly adjusted. [18] There was also evidence of a discrepancy between the ISC affidavit of value of $2.85 million and the $5.2 million value theassessor proffered. In most cases such a discrepancy calls for an explanation as the Committee observed when the matter came before it.The BOR determined that the value was not verified. They were entitled to come to such a conclusion. [19] There is no indication that evidence was ignored in the BOR’s determination. [20] The Committee had a valid basis for sustaining the BOR’s decision in this respect.

It would be an uphill battle to argue it erredon this issue. [21] I am not satisfied that this ground has sufficient merit. 3. The Committee erred in law by failing to find that the decision of the Board of Revision resultedin inequity, contrary to s. 165(5) of The Cities Act.

[ 22 ] The City argues that the decisions of the BOR and of the Committee have resulted in inequity. However, inequity was not discussed in SAMA’s written submissions and the Committee did not address the issue. [ 23 ] The prospective respondents argue that equity, even if it were an issue argued before the Committee, is not really in play because the lack of verification of the sale price is a more fundamental issue affecting the prior market valuation standard [MVS].

It argues that equity can only be achieved by the proper application of the MVS and the lack of verification of the sales price prevents equity from being achieved. [ 24 ] I am satisfied that this ground of appeal is destined to fail. V. Conclusion [ 25 ] I need not address the issue of importance. The application for leave to appeal is denied. “Ottenbreit J.A.” Ottenbreit J.A.