The City of Saskatoon Prospective Appellant (Respondent) v. Triovest Realty Advisors Inc., 2015 SKCA 126

Court of Appeal for Saskatchewan Docket: CACV2694 Citation: Saskatoon (City) v Triovest Realty Advisors Inc. , 2015 SKCA 126 Date: 2015-11-27 Between: The City of Saskatoon Prospective Appellant (Respondent) And Triovest Realty Advisors Inc. Prospective Respondent (Appellant) Before: Ottenbreit J.A. (in Chambers) Disposition: Application denied On Appeal From: Saskatchewan Municipal Board, AAC 2013-0296 and AAC 2013-0307 Heard: September 21, 2015 Counsel: Kim M.K. Bodnarchuk for the Prospective Appellant Leonard D. Andrychuk, Q.C., for the Prospective Respondent 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 Assessment Appeals Committee of the Saskatchewan Municipal Board [Committee] dated March 11, 2015, covering appeals AAC 2013-0296 and AAC 2013-0307 [decision]. The decision concerns the 2013 property tax assessment of a leased movie theatre improvement [property] in the central business district [CBD] in Saskatoon occupied by Triovest Realty Advisors Inc. [prospective respondent].

The Committee set aside the decision of the Saskatoon Board of Revision [BOR] which upheld the assessment by the City. II. Facts and Background [ 2 ] The assessor assessed the property as a freestanding theatre and along with two other freestanding theatres in Saskatoon considered it to be a special purpose property. The property was assessed by the assessor on the “cost approach” with a market adjustment factor [MAF] of 0.99 which was derived from the sales of ten churches that were located outside the CBD.

Two other movie theatres in the City which were attached to shopping malls had been assessed on the income approach using a retail rent and capitalization rate model. [ 3 ] The prospective respondent appealed the assessment to the BOR on a number of grounds, including that the assessment did not meet the requirements of the market valuation standard [MVS] or equity because non-comparable properties and a different method of assessment for similar properties ( i.e. , the mall theatres) had been used.

The prospective respondent argued before the BOR that in order to achieve equity with similar properties, the property should be assessed using an income model like all other commercial properties found in the CBD. The prospective respondent also contended that the assessor had failed to use an arm’s length sale in determining the MAF which, if included, would lower the MAF from 0.99 to 0.74. [ 4 ] The BOR accepted the categorization of the property by the assessor as special purpose property and found that it was not similar to other commercial properties in the CBD assessed on the income approach.

The BOR found the correct approach was the cost approach. The BOR did find that the assessor had erred by omitting an arm’s length sale in the MAF sales array and ordered it to be included thereby reducing the MAF to 0.74. [ 5 ] The prospective respondent appealed the BOR’s decision. It challenged the BOR finding that the property was dissimilar from mall theatres because it was freestanding. [ 6 ] The Committee determined that the proper assessment approach was the income approach: [29] The subject property is a commercial property which houses a theatre.

The Committee believes it operates most similarly to the theatres in the City’s shopping malls. These theatres are leased to tenants. [30] The Committee believes the subject property is not a special purpose property. Special purpose properties generally do not lease as they are owner occupied. The other freestanding theatres in the City are special purpose properties and are owner occupied.

Famous Players, on the other hand, leases the subject property from Triovest, which is an investment company. [31] The theatres in the shopping malls are not special purpose properties and they are valued using the income approach. To value similar properties using a different approach to value would be treating the subject property differently than other comparable properties.

This would not be equitable. [32] Assessors may use the cost approach “when the property being valued is recently constructed, or nearly new. It is also applicable in situations where there are no or limited comparable sales available or when the improvements are unique or specialized … special purpose” (SAMA Handbook, p. 12). [33] The subject property was built in 2006. It is not new or nearly new. The City’s position is that there was limited comparable data, so the Assessor used the cost approach.

In order to use the cost approach, the City had to use data from churches which are not comparable to the subject property. For example, churches are not commercial and are not leased or used as investment properties. [34] The Board made a mistake when it decided the cost approach was the appropriate approach to value the subject property. The Committee finds the income approach is the correct approach to value the subject property. III. Proposed Grounds of Appeal [ 7 ] The City proffers the following proposed grounds of appeal. A.

The Committee erred in law by contravening the principles of natural justice through its failure to provide adequate reasons for its decision, including failing to articulate error on the part of the Board of Revision in upholding the assessment of the subject property; B. The Committee erred in law by considering irrelevant matters, failing to consider relevant matters and by misconstruing the evidence and, in doing so, arrived at conclusions amounting to errors of law: (

i) in finding that the subject property is not a special purpose property; (ii) in holding that the subject property is comparable with theatres which are secondary anchors in regional shopping centres because it operates in a similar manner, despite there being no classification for assessment purposes for “secondary anchors within a regional shopping centre”, despite the subject property’s physical attributes and construction as a free-standing theatre and despite the Board upholding the Assessor’s classification of the subject property as a free-standing theatre; (iii) with respect to the Market Valuation Standard, by failing to consider and apply standard appraisal methods as set out by The Saskatchewan Assessment Management Agency, the International Association of Assessment Officers and the Appraisal Institute of Canada; and (iv) with respect to the statutory requirement to achieve equity, by arriving at an assessment which fails to reflect typical market conditions for similar properties; C.

The Committee erred in law by, without first finding a material error of fact, of law, or of assessment principles and practice on the part of the Assessor, and without finding error on the part of the Board of Revision, substituting its own discretion for that of the Assessor and the Board and overturning the Assessor’s discretionary decisions to: (

i) classify the subject property as a free standing theatre; (ii) classify the subject property as a special purpose property; and (iii) select the cost approach to valuation as appropriate to determine the assessment of the subject property. IV. Analysis [ 8 ] 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. [ 9 ] 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. [ 10 ] 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. V. Merit A.

The Committee failed to provide adequate reasons for its decision, including failing to articulate error on the part of the BOR. [ 11 ] The City’s argument in this respect is a bare bones argument that insufficient reasons were provided. There is no detail as to what this ground encompasses. The prospective respondent argues that the reasons of the Committee must be read in the context of the record. [ 12 ] In this case, the adequacy of the reasons of the Committee would be considered on appeal in the context of the record before it. There was substantial evidence before the BOR and the facts were not in dispute.

The issues in this case and evidence with respect to the issues are clearly recorded in the BOR’s decision as well as the position of the parties on the issues. [ 13 ] Jurisprudence about adequacy of reasons suggests that reasons are sufficient if it allows for a meaningful appellate review and if the parties’ functional need to know why the decision has been made has been met. A practical and functional approach will be applied R v Sheppard , 2002 SCC 26 , [2002] 1 SCR 869.

While failure to find an error in the decision being reviewed or provide sufficient reasons is an error of law, the City will have an uphill battle that the Committee erred in this respect. I am satisfied that the City will likely be unsuccessful on both issues. I believe this ground is destined to fail. B.

The Committee erred by considering irrelevant matters, failing to consider relevant matters, by misconstruing the evidence in respect of whether or not the property is a special purpose property, whether the property is comparable with shopping mall theatres, by failing to consider and apply standard appraisal methods, and by arriving at a decision which fails to reflect typical market conditions for similar properties. [ 14 ] The argument of the City is encapsulated in the

summary of this ground set forth above. [ 15 ] The prospective respondent argues that the Committee could not see a distinction between the property and the mall theatres or at least none had been pointed out by the assessor.

The prospective respondent argues that the City is merely trying to reargue facts. [ 16 ] The issue here is whether the assessor used the proper assessment approach based on whether there was similarity and comparability between the property and the mall theatres. [ 17 ] While assessors are allowed a sphere of discretion in the application of assessment principles, an error will be committed if the assessor’s discretion is founded on “material error of fact, or law, or standard appraisal principle and practice, or some combination of these” ( Sasco Developments Ltd. v Moose Jaw (City) , 2012 SKCA 24 , 385 Sask R 287).

The exercise of discretion refers to the choice between two reasonable, just, fair or equitable outcomes. [ 18 ] The issue is not one solely of interference with the assessor’s discretion but, more fundamentally, with the underlying factual conclusions made by the assessor to exercise his discretion. Those factual conclusions are the similarity of the property to special purpose properties and the comparability of the properties used in the MAF. These are questions of fact and, as such, no appeal to this Court is allowed on that issue.

It would be an uphill battle for the City to argue that the Committee misconstrued the evidence or failed to consider the appropriate factors such that it amounts to an error of law. There is insufficient merit in this ground. C.

The Committee erred in law without finding a material error of fact, of law, or of assessment principles and by substituting its own discretion for that of the assessor. [ 19 ] The City argues that it was in the assessor’s discretion to classify the property as a freestanding theatre, as a special purpose property and use the cost approach to value it and that therefore deference is owed to his opinion. The City submits that the assessor provided ample evidence surrounding the appropriate exercise of his discretion.

Moreover, it says that the BOR was correct that it was not an error to apply the cost approach to assess the property.

[ 20 ] The prospective respondent argues that the City is not truly raising a question of law or jurisdiction but simply asks this Court to come to a different conclusion than the Committee on the evidence. [ 21 ] In my view, the City’s argument on this proposed ground is destined to fail. The Committee did find the BOR erred. The Committee is entitled to correct the error of the BOR with respect to the similarity and comparability issues dealt with by the BOR. The basis for the Committee’s decision is that special purpose properties are generally not leases but are owner occupied.

In the case of the property there was a lease in place from Triovest. Underlying this conclusion is that the Committee determined this property, although freestanding, was most similar to leased theatres in malls. My comments on the previous ground of appeal, i.e. , this not being an issue of law or jurisdiction, are apt. VI. Conclusion [ 22 ] Based on the foregoing, leave to appeal is denied. “Ottenbreit J.A.” Ottenbreit J.A.