The City of Saskatoon Prospective Appellant (Respondent) v. Wal-mart Canada Corp., Canadian Tire Corporation and, 2015 SKCA 125

Court of Appeal for Saskatchewan Docket: CACV2708 Citation: Saskatoon (City) v Wal-mart Canada Corp. , 2015 SKCA 125 Date: 2015-11-25 Between: The City of Saskatoon Prospective Appellant (Respondent) And Wal-mart Canada Corp., Canadian Tire Corporation and Home Depot Holdings Inc. Prospective Respondents (Appellants) Before: Ottenbreit J.A. (in Chambers) Disposition: Application granted On Appeal From: Saskatchewan Municipal Board, AAC 2013-0186 (Lead), 2013-0182, 2013-0183, 2013-0184, 2013-0185 Heard: July 22, 2015 Counsel: Kim M.K. Bodnarchuk for the Prospective Appellant Leonard D.

Andrychuk, Q.C., for the Prospective Respondents Ottenbreit J.A. I. Introduction [ 1 ] The City of Saskatoon [City] applies pursuant to s. 33.1 of The Municipal Board Act , SS 1988-89, c M-23.2 [ MBA ], for an order granting leave to appeal the decision of the Saskatchewan Municipal Board, Assessment Appeals Committee [Committee] dated April 24, 2015, covering appeals AAC 2013-0186 (Lead), 2013-0182, 2013-0183, 2013-0184 and 2013-0185 [decision].

The decision is in respect of appeals against municipal tax assessments applied to five big box retail properties throughout the City of Saskatoon [properties]. [ 2 ] The properties are occupied by Wal-mart Canada Corp., Canadian Tire Corporation and Home Depot Holdings Inc. [prospective respondents]. The Committee set aside the decision of the Saskatoon Board of Revision [BOR] which upheld the assessments. [ 3 ] For the reasons hereinafter set forth, leave to appeal is granted. II.

Facts and Background [ 4 ] The City assessed the value of the various properties [assessment] for the purpose of determining 2013 taxes under The Cities Act , SS 2002, c C-11.1 [ Act ]. To do this the assessor used the non-central business district multiple regression analysis rent model [rent model] to estimate market rent for the properties. The rent model was developed from 865 rents signed between January 1, 2008, and December 31, 2010, to estimate the value of retail properties in Saskatoon (other than the central business district) as at the base date of January 1, 2011.

This rent model was applied to all non-central business district retail properties in the City of Saskatoon. The value of the properties was based on this rent model. [ 5 ] The prospective respondents appealed the assessment to the BOR. At issue for all of the properties was the rent model’s method of adjusting for size of tenant leasable area. Before the BOR, the prospective respondents argued: (

i) that the size thresholds used for the rent model did not reflect market behaviour and were inequitable, (ii) that the rent model could not be applied to the properties because of the size disparity between the properties and those used to develop market rents in the rent model, and (iii) that the assessor ought to have used rents from previous cycles in the rent model in order to include more rents from big box properties.

The prospective respondents argued that the assessor’s use of his discretion had created an undesirable result and that the assessment was inequitable. [ 6 ] The BOR confirmed the assessment and stated that the rent model met the requirements of equity by deriving a base rent and adjustments for factors which had an effect on market rent which were applied to all retail freestanding properties covered by the model. The BOR found no error in the assessor’s selection of time frame which had been applied across all properties covered by the rent model.

With respect to the issue of adjustment for size of tenant space, the BOR concluded that providing an alternative method to adjust for size, as the prospective respondents had done, did not establish assessor error, particularly where the size thresholds chosen by the assessor had been statistically tested and fell within the requirements of the International Association of Assessing Officers’ guidelines. [ 7 ] The prospective respondents appealed to the Committee arguing: (

a) the assessments were not equitable; (

b) the assessor ignored relevant information by arbitrarily restricting the time frame;

(

c) the assessor’s application of a size break didn’t reflect market behaviours and violates the equity requirements in ss. 165(3) and (5) of the Act ; (

d) the assessor used dissimilar properties to determine the rental rate for retail properties in excess of 26,500 square feet and therefore had no reliable information to support the income valuation the size of the properties; (

e) the assessor’s statistical evidence did not accurately represent retail properties substantially in excess of 26,500 square feet because the assessor had insufficient data for statistical testing; and (

f) the correct classification of the properties was “Retail Warehouse”. [ 8 ] After the Committee hearing, the Committee requested further information from the assessor through a “request for undertaking” asking for net rents for leases with start dates from January 1, 2004, for all properties covered in the appeal and development of a new assessment model using a power curve to adjust for size.

The assessor refused to provide new information without a clear indication of the Committee’s reasons for making this request and invited the Committee to provide its decision on the matter. [ 9 ] The Committee issued its decision and overturned both the BOR’s decision and the assessment. [ 10 ] The Committee determined the BOR made a mistake: [14] Equity is “the dominant and controlling factor in the assessment of property” (s. 165[3], the Act ). [15] The Board was correct when it identified equity as a “dominant factor.” However, it made a mistake when it stated: “Equity is maintained in that similar ‘Retail Freestanding’ were assessed in the same manner” (p. 12).

Just because a property may be assessed in the same manner as another property does not necessarily mean equity has been achieved. [16] In addition, the Board stated, “The Market valuation standard is met when using mass appraisal, reflects typical market value for similar properties with dominant factor being equity” (p. 12). This is not the entire test for equity.

The test for equity involves a number of steps. [17] The Act states that the application of the Market Valuation Standard (MVS) achieves equity (s. 165[5]). “Equity in non-regulated property assessment is achieved by applying the market valuation standard so that the assessments bear a fair and just proportion to the market value of similar properties as of the applicable base date” (s. 165[5]). [18] Because the Board made a mistake by inadequately analyzing all aspects of the MVS, the Committee must do what the Board should have done. [ 11 ] The Committee then engaged in the analysis that it said the BOR failed to do and determined after applying the market valuation standard [MVS] mandated by s. 164.1(2) of the Act that equity was not achieved by the assessment.

No further analysis of any errors in the BOR’s decision was made by the Committee. [ 12 ] The Committee decided that the rent model did not meet the equity requirement of the Act because (

i) size thresholds used by the assessor did not reflect market behaviour because substantially smaller properties were used to develop the base rent, (ii) the assessor did not consider using a curve, and (iii) the assessor fettered his discretion by not considering alternative methods in light of the lack of data comparable to the subject property.

The Committee held that had the assessor considered other techniques it may have shown an error in his model. [ 13 ] The Committee reviewed the disclosure obligations of the assessor in the appeal process and determined that s. 171(6) of the Act properly construed requires an assessor to disclose confidential data to the party on the appeal and the Committee, if necessary, for the party to prepare and present its case. [ 14 ] The Committee determined that it had the authority pursuant to s. 20(2) of the MBA , ss. 11 , 15 and 25 of The Public Inquiries Act, 2013 , SS 2013, c P-38.01, as well as s. 223(2) of the Act to require the assessor to provide additional information; specifically, four more years of rent data, calculations and demonstrations how the assessor has accounted for all elements of the MVS and a demonstration of how the properties compare to other properties using a power curve. [ 15 ] The Committee set aside the 2013 assessed values of the properties and remitted the matter back to the assessor for a new assessment.

The Committee stated it was necessary for the assessor to go further in order to confirm or refute the validity of the original model and ordered the assessor to assess the properties by: (

i) using net rents for leases starting from January 1, 2004, with the data being time adjusted, and (ii) considering how the subject properties compare to other properties of similar size with the use of a power curve for size adjustments. The Committee ordered the assessor to provide the prospective respondents with a written explanation of how the assessment was determined, including all of the data considered in determining the new assessed values. [ 16 ] The City applies for leave to appeal the decision of the Committee. The City raises 16 grounds or subgrounds of appeal in its proposed notice of appeal.

The City groups those into four main headings as follows: 1. the jurisdiction of the Committee in assessment appeals (grounds A, B, H and I); 2. the onus on an appellant of establishing error in the assessment (grounds C and J(i)-(vi)); 3. the deference owed to the assessor’s professional judgment and discretion in choosing the methodology for conducting assessments (grounds E, F, and G); and 4. the requirements of fair hearing (ground D).

[ 17 ] For the purposes of this decision, I will deal with the proposed grounds of appeal in the same fashion. III. Analysis [ 18 ] 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. [ 19 ] 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. [ 20 ] 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 ongoing court proceedings, but rather with respect to its effect on the impugned order or decision, and whether it raises a new or controversial issue of practice, or a new, uncertain or unsettled point of law. The focus of this analysis is on whether the issues raised have general as opposed to limited application. [ 21 ] As a preliminary matter, I want to address the format of the proposed grounds of appeal. It is important to remember that grounds of appeal are a framework upon which the arguments of the appellant can be safely built.

Whenever possible, grounds should be focussed on setting forth the issue or issues upon which argument will be made and be as concise as the case of the appellant will permit. Stream of consciousness grounds are to be avoided.

Cameron J.A. in Civil Appeals to the Court of Appeal: Practice and Procedure (Regina: Law Society of Saskatchewan, 2009), online: Courts of Saskatchewan <www.sasklawcourts.ca> (November 24, 2015) at p 33, gives excellent advice on the proper drafting of grounds of appeal: In addition, it is well to present carefully drawn grounds of appeal that are limited to the essentials, tightly stated, and free of embellishment.

It does your case no good if it gets off on a lengthy, ill-focussed, rambling, and argumentative set of grounds of appeal. [ 22 ] While I understand that the City is attempting to be precise in its formulation of the grounds of appeal, I note that most grounds are a paragraph long. The 16 grounds and subgrounds sometimes contain argument and in some cases are repetitive. That said, I appreciate the effort made by the City in this application to group its many proposed grounds under main headings or issues which I will now review in turn. A. Merit 1.

Jurisdiction of the Committee (Grounds A, B, H and I) [ 23 ] The City makes a number of arguments under this heading. It argues that the Committee erred in law by interpreting ss. 222 and 223(2) of the Act as expanding its powers to hear and compel new evidence on its own motion and use its broad powers under the MBA to seek and obtain information; specifically, new data and a new assessment model based on parameters the Committee set. The City submits that such an

interpretation is not in accord with the restrictions set out in s. 223(1) of the Act . The prospective respondents do not dispute that the question of the

interpretation of the Committee’s powers in this respect is a question of law and that arguable issues arise from the Committee’s

interpretation of its powers but submit that because the Committee did not specifically say it had the power to “compel” additional information, this ground was not deserving of the Court’s attention. [ 24 ] The Committee made it clear that in the absence of the requested information it would remit the matter back to the assessor to reformulate the assessment based on the parameters of the information requested. It may be that such remitting back is, in fact, an order compelling the assessor to provide the information under the guise of ordering a new assessment. The powers of the Committee and their extent are certainly in issue as is the statutory

interpretation of the powers in the sections of the Act set forth in the proposed grounds. I cannot say this ground is destined to fail.

[25] The City further argues that the Committee erred by interpreting s. 20(2) of the MBA as authorizing the Committee to requestan assessor to create an entirely new assessment model for the Committee’s review and consideration without having determined that theassessor’s model was in error or that the BOR had erred.

The ground as well concerns the nature of the Committee’s statutory authorityand has sufficient merit. [26] The City also submits that the Committee committed a jurisdictional error when, on its own initiative, it considered and ruledon the matter of disclosure to the prospective respondents by the assessor of data determining the new assessment without the issuehaving been raised before the BOR or before the Committee.

There is a question whether there has been a fair opportunity for the partiesto make submissions regarding the obligation of the City to provide data to the prospective respondents as part of the appeal. [27] Lastly, the City argues that the Committee erred by ordering the assessor to disclose to the prospective respondents all dataconsidered to develop the Committee-ordered power curve assessment model without consideration of the appropriate balancing testapplicable to disclosure of confidential information, and that the Committee also erred in its

interpretation or consideration of ss. 171(5),171(6), 200 and 201 of the Act. The prospective respondents agree that these grounds raise a question of law or jurisdiction but that theCommittee did not actually require disclosure of confidential information and, accordingly, the conclusions of the Committee on theobligation to disclose are obiter dicta and that the question should await a case where there is a judicial review of an assessor’s refusal toprovide information sought by a taxpayer.

There is a question whether these provisions of the Act explicitly empower the BOR or theCommittee to compel disclosure from either party. The authority of the Committee to compel disclosure of confidential information ofthird parties in an MVS assessment appeal falls into this category. [28] These last two grounds, in my view, also have sufficient merit. I have considered the foregoing arguments of the parties onthese grounds of appeal and I cannot say they are destined to fail. They have sufficient merit. 2.

Onus of Establishing Error in the Assessment (Grounds C and J(i)-(vi)) [29] The City argues that the Committee erred by using the incorrect standard of proof applicable to the onus on the prospectiverespondents in an assessment appeal to demonstrate error. The City argues that the property assessment is presumed to be correct and thatthe prospective respondents had to demonstrate an error. The City submits that the finding by the Committee that the BOR made a“mistake” does not equate to a “material error of fact or law or standard appraisal principle” on the part of the assessor or the BOR andreflects a relaxed

interpretation of the standard of error. [30] The City argues that the Committee’s requirement for the assessor to confirm or refute the validity of the original assessmentmodel establishes that the Committee did not determine that the assessor’s original model was in error. Moreover, the alleged error of theBOR that it inadequately analyzed all aspects of the MVS is not necessarily self-evident in the Committee’s reasons.

The City arguesthat the Committee, by immediately analyzing the assessor’s choices rather than the BOR’s treatment of those choices may haveexceeded its mandate in doing so and conducted a de novo hearing. The prospective respondents submit that the Committee did in factfind error by the BOR and determined on further review that the prospective respondents had demonstrated other errors the BOR did notfind.

In my view, the use by the Committee of the term “mistake” may not clearly indicate that the “mistake” is a material error of fact orlaw or standard appraisal principle and practice especially in the context of the Committee’s comments about confirming or refuting theassessor’s analysis.

The Committee’s statements that it wanted more information to confirm or refute the assessment calls into questionwhether an error sufficient to overturn the decision of the assessor was present and whether an error on the part of the BOR wasestablished. [31] This argument is not destined to fail and has sufficient merit. [32] The City also argues that the Committee erred by overturning the assessment because the assessment model failed to meet therequirements of the MVS thereby failing to meet the test for equity. The City then lists six specific errors allegedly made by theCommittee.

The prospective respondents admit that most of these appear to be alleged errors of law. These grounds, in my view, concernstatutory

interpretation, decisions purportedly made on the basis of no evidence, consideration of irrelevant matters and failure toconsider relevant matters. These grounds have sufficient merit. 3. Deference (Grounds E, F and G) [33] The City argues that the Committee erred by reading down the rule in Regina (City) v Laing Property Corp., (SK CA), [1995] 3 WWR 551, that deference is owed to the professional opinion of the assessor.

The City argues that suchdeference has not been eroded under the MVS and even if the BOR or Committee prefers an alternative approach to that of the assessor,it is an error to overturn the assessment where the assessor has properly chosen one of a number of acceptable options and has applied anaccepted assessment approach. The prospective respondents agree that a question of law is raised but challenge the foundation of theground. The City submits that the Committee has wrongly substituted its own views for those of the assessor.

Although the Committeeacknowledged deference was owed to the discretion of the assessor, the issue, in my view, is whether in the circumstances this principleof deference was properly applied. [34] The City also argues that the Committee’s disregard for assessor discretion is revealed in the Committee, under the guise of“quality assurance standards”, choosing a time frame for the new assessment. The time frame was not considered at the hearing beforethe BOR or commented on by the BOR in its record of decision. The City submits evidence and argument before the BOR did notaddress discretion.

It argues that assessor discretion was not a ground of appeal at the BOR and the BOR’s record was silent on the issue.The prospective respondents argue the timing issue was raised. [35] The City lastly argues that the Committee erred by determining the assessor had fettered his discretion by failing to consideralternative methods to adjust for size in the assessment model in choosing to use thresholds.

The City argues that the record does notestablish that there was any argument at the BOR hearing or in the materials submitted that the use of thresholds was not in accordancewith the standard appraisal principles and practice and, in fact, the Committee accepts that thresholds may be properly used to adjust forsize.

[ 36 ] These grounds of appeal are not destined to fail and accordingly have sufficient merit. However, all of these grounds will be recast as one, i.e. , “Did the Committee err by disregarding the principle of deference to the discretion of the assessor”. The City can, under this recast ground, make the various arguments found in grounds E, F and G. 4. Procedural Fairness (Ground D) [ 37 ] The City argues that the Committee erred by failing to provide reasons explaining its request for new evidence.

The City submits that the issue of whether reasons are required for Committee requests for undertakings is a question of law of broad application that merits the consideration of the Court. [ 38 ] The prospective respondents note that the practice of the Committee has been to provide no reasons when requesting an undertaking and that the process respecting undertakings is quite informal.

Moreover, the prospective respondents argue that because the City took the position that it was not obligated to provide the information whatever the reasons and did not do so, and the City and the assessor were not compelled to provide a response, it is a moot point and there is no live issue deserving of the Court’s time and attention. [ 39 ] In my view, the issue of whether to provide reasons for a request is a matter best left to the Committee which can in this respect determine its own process. It is destined to fail and leave will not be granted on this ground. B.

Importance [ 40 ] On the question of the second arm of the Rothmans test, i.e. , whether the proposed grounds are sufficiently important, I am satisfied that they are. In my view, the grounds raise questions regarding the interplay of previous jurisprudence in this area and the MVS system of assessment. IV. Conclusion [ 41 ] Leave is granted to the City to appeal on the bases of the proposed grounds of appeal except ground D. As well, grounds E, F and G shall be recast as previously indicated. [ 42 ] Costs of this application shall be left to the panel which hears the appeal. “Ottenbreit J.A.” Ottenbreit J.A.