Weyburn (City) v Wal-Mart Canada Corp., 2017 SKCA 110

Court of Appeal for Saskatchewan Citation: Weyburn (City) v Wal-Mart Canada Corp. , 2017 SKCA 110 Date: 2017-12-20 Docket: CACV2949 Cities of Weyburn, Estevan, Moose Jaw and Yorkton (as represented by the Saskatchewan Assessment Management Agency) Applicants/Prospective Appellants (Respondents) and Wal-Mart Canada Corp. Ltd. and Canadian Tire Corporation Ltd. Respondents/Prospective Respondents (Appellants) Docket: CACV2952 Wal-Mart Canada Corp. and Canadian Tire Corporation Ltd.

Applicants/Prospective Appellants (Appellants) And Cities of Weyburn, Estevan, Moose Jaw and Yorkton (as represented by the Saskatchewan Assessment Management Agency) Respondents/Prospective Respondents (Respondents) Before: Ottenbreit J.A. (in Chambers) Disposition: Applications denied Written reasons by: The Honourable Mr. Justice Ottenbreit On Application From: AAC 2013-0162 (lead), Regina Application Heard: July 12, 2017 Counsel: David Gerecke for the Cities of Weyburn, Estevan, Moose Jaw and Yorkton (as represented by the Saskatchewan Assessment Management Agency) Leonard D.

Andrychuk, Q.C., for Wal-Mart Canada Corp. and Canadian Tire Corporation Ltd. Ottenbreit J.A. I.

Introduction [ 1 ] The Saskatchewan Municipal Board Assessment Appeals Committee (Committee) rendered a single decision dated July 27, 2016 (decision), applicable to 14 appeals concerning the assessment of six Wal-Mart and Canadian Tire stores in Weyburn, Estevan, Moose Jaw and Yorkton for 2013 and 2014. [ 2 ] The cities of Weyburn, Estevan, Moose Jaw and Yorkton, as represented by the Saskatchewan Assessment Management Agency (SAMA), seek leave to appeal against the decision under s. 33.1 of The Municipal Board Act , SS 1988-89, c M-23.2 [ MBA ], in CACV2949. [ 3 ] Wal-Mart and Canadian Tire seek leave to appeal against the decision under s. 33.1 of the MBA in CACV2952. [ 4 ] For the reasons hereinafter set forth, both applications for leave to appeal are dismissed.

II. Facts and Background [ 5 ] The procedural history of this matter is more particularly described by the Committee in its decision. The appeals before the Committee concerned the 2013 and 2014 assessments of Wal-Mart and Canadian Tire “large format big box stores”. The lead appeal before the Committee was the Weyburn Wal-Mart appeal AAC 2013-0162.

I will refer to the background of this appeal because the Committee’s analysis and decision regarding that matter is applicable to all the appeals in this Court. [ 6 ] The Weyburn Wal-Mart land and building had been assessed by SAMA at a value of $10,793,600 using an income approach based on rents. In building the applicable rental model, SAMA analyzed rents from 1,521 various commercial properties in Weyburn, Estevan, Moose Jaw and Yorkton. The largest commercial properties used were two properties of about 38,000 square feet being Sobeys supermarkets in Estevan and Moose Jaw.

Rent data from large format big box stores was not included. SAMA decided to adjust its income approach model by valuing retail properties with the first 38,253 square feet thereof valued at the appropriate big box retail rate depending on rent quality and the additional area valued at the general warehouse rate. SAMA then developed a capitalization rate locally from sales in each municipality. The sales grouping included no big box stores but comprised small restaurants, offices and warehouses.

Applying this income model, the first 38,253 square feet of the Weyburn Wal-Mart was assessed as retail big box and the balance of 26,036 square feet as general warehouse. This approach was used by SAMA to value the other stores. [ 7 ] Wal-Mart and Canadian Tire appealed their 2013 and 2014 assessments on the properties to the local Boards of Revision based on grounds that the assessments had failed to achieve the market valuation standard (MVS) or equity because dissimilar properties had been used by SAMA to determine the rental rate and capitalization rate used in the income approach. They submitted that under

generally accepted assessment principles, in the absence of data from comparable properties, the assessor should have used a cost approach. SAMA’s income approach valuation of $10,793,600 for the Weyburn Wal-Mart was about 58% more than SAMA’s own cost approach valuation of $6,879,790. Wal-Mart argued that this was indicative of an error in the income approach value.

Wal-Mart took the position that no market adjustment factor (MAF) should be applied to the cost approach because if there were no sales of comparable properties from which to derive a reliable capitalization rate for the income approach, then there would be no sales of comparable properties from which to derive a MAF. [ 8 ] The Weyburn and Estevan appeals were heard together by the Board of Revision and the appeals were dismissed.

The Board’s reasons do not discuss the comparability issue in relation to the income approach and concluded that the cost approach did not meet the requirements for mass appraisal. [ 9 ] Wal-Mart appealed to the Committee advancing basically the same arguments that the assessment failed to meet the MVS or equity. The Committee found that the Boards of Revision for Weyburn, Estevan and Yorkton had erred in upholding the assessed values that SAMA had arrived at using the income approach (with the exception of the Estevan Canadian Tire).

It found that the use of the income approach led to assessed values that did not meet the MVS and that SAMA should have used the cost approach to meet the MVS. The Committee, however, disagreed with Wal-Mart’s arguments that no MAF should be applied. [ 10 ] Because it lacked the data to apply the cost approach, the Committee issued three requests for information (RFI) to the parties. The RFIs and the responses to them spanned approximately 10 months. The Committee first asked the parties to inspect the properties, if necessary, and agree on the replacement cost new less depreciation (RCNLD) for the properties.

The parties did this. It also requested SAMA to provide a revised sales list showing all sales of commercial properties, province-wide within SAMA’s jurisdiction, meeting certain age, building area and retail occupancy code “criteria”. This was done. SAMA’s analysis produced a MAF of 1.78 derived from six sales.

Wal-Mart maintained that the sales were not comparable to the subject big box stores and reiterated its arguments that, in the absence of sufficiently comparable properties, no MAF should be applied. [ 11 ] After receiving the RFIs, the Committee, after consideration, ultimately decided to determine a MAF based on ten sales with retail uses over 10,000 square feet in building area in Weyburn, Estevan, Moose Jaw and Yorkton from 2007 to 2010, regardless of age.

It also decided that two Sobeys sales included in the ten should be treated as one sale because there was a single vendor and purchaser, because the sales dates were one day apart and the prices for each were identical even though the buildings differed somewhat.

The use of the ten sales by the Committee yielded a MAF of .85 that the Committee ordered to be applied to the RCNLD of the subject properties (with the exception of the Estevan Canadian Tire). [ 12 ] The Committee recognized the shortcomings of its grouping of comparable sales, noting that none of the comparable sales were big box stores but that there was a variety of retail buildings including warehouse retail that were somewhat similar to big box stores, having sales that collectively represented some of the key characteristics of the subject properties.

The Committee observed that this was better than narrowing the viewpoint to the extent that there was no, or only one, ideal comparable. The Committee also acknowledged that they were being more selective in their choice of sales than SAMA was in the sales it used in the income approach. This was because when dealing with unusually large retail properties the market was broader than an individual small city and consisted of all smaller southern Saskatchewan cities. [ 13 ] The Committee observed it was not just flawed sales that brought the income approach into question but also gaps in the rental data SAMA used.

It observed that both the cap rate and rental estimates suffered from poor and lacking data. In the end, the Committee acknowledged that its choice of MAF sales was less than ideal but indicated that finding the ideal was taking too narrow a view. The Committee observed that there was only one sale that was close to ideal; that of the two Sobeys supermarkets but that the use of one sale to establish a MAF would not meet the MVS. It explained its grouping was more comparable and reflective of the market than SAMA’s choices in using the income approach. III.

Proposed Grounds of Appeal [ 14 ] Wal-Mart and Canadian Tire proffer the following ground of appeal in CACV 2952: (

a) The Committee erred in law by concluding that a Market Adjustment Factor must be applied when valuing non-regulated properties under the cost approach. [ 15 ] SAMA proffers the following grounds of appeal in CACV 2949: (

a) The Committee erred in law and jurisdiction by concluding that the assessor had erred in utilizing the income approach and ordering that the cost approach be used to value the subject properties . (

b) Having determined that the income approach adopted by SAMA was in error, the Committee erred in law and jurisdiction by concluding that it was not open for the Committee to cons i der modifications to SAMA’s income approach and that the only option available to it was to use the cost approach . (

c) The Committee erred in law and jurisdiction when it held that the disparity in size between the subject property and the comparables used by the assessor in the income approach was so grea t that the assessor’s data analysis was not reliable. (

d) The Committee erred in law and jurisdiction when it ordered the parties to consult with one another to jointly research sales and then provide a joint submission to the Comm i ttee. (

e) Further , and in the alternative : (

i) the Committee erred in law and jurisdiction by ordering a new grouping of properties for the purpose of developing a market

adjustment factor (MAF) when , in response to requests for information (RFIs) by the Committee , the assessor brought forward its own MAF grouping and the appellants and the Committee failed to demonstrate material errors of fact or law or standard appraisal pr i nciple or practice in respect of t he assessor’s MAF grouping ; (ii) The Committee erred in law and jurisdiction in ordering such new MAF grouping by disregarding the principle of deference to the discretion and substituting its own views for those of the assessor, particularly when its new MAF grouping was demonstrably inferior to that put forward by the assessor ; and (iii) The Committee erred in law and jurisdiction when it ordered a new MAF grouping without carrying out any statistical testing itself o r allowing an opportunity for statistical testing to occur to determine whether its MAF grouping would withstand the scrutiny that would be expected to be applied by the assessor to any valuation model in mass appraisal. (

f) The Committee erred in law and jurisdiction when it held that the Sobey’s transactions relied on by SAMA in its income model and in its MAF calculation (provided in response to requests for information by the Committee) were to be treated as a single transaction. IV. Analysis [ 16 ] Wal-Mart, Canadian Tire and SAMA are entitled to apply for leave to appeal under s. 33.1 of the MBA on a question of law or jurisdiction. The test set out in Rothmans, Benson & Hedges Inc. v Saskatchewan , 2002 SKCA 119 , 227 Sask R 121 [ Rothmans ], is applicable.

The test is well-known and requires Wal-Mart, Canadian Tire and SAMA to demonstrate that the grounds of their proposed appeal have sufficient merit and are of sufficient importance to warrant the granting of leave. [ 17 ] How the Rothmans test is applied to assessment appeals was explained by Jackson J.A. in Saskatoon (City) v North Ridge Development Corporation , 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. (Footnote omitted) [ 18 ] 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 , 467 Sask R 134: [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. A. Application of SAMA [ 19 ] SAMA’s proposed notice of appeal grounds (a), (

b) and (

c) argue the Committee erred in determining the assessors’ income approach was flawed and consequently deciding to use the cost approach. At the heart of these three grounds is the issue of comparability. I am satisfied that each of these grounds is destined to fail. I will explain. [ 20 ] In Harvard Property Management Inc. v Saskatoon (City) , 2017 SKCA 34 [ Harvard ], the assessment was challenged on the basis that the assessor included two non-comparable properties in a grouping used to determine a capitalization rate applied to perform a market value assessment.

The Committee had not dealt with the comparability issue. This Court set aside its decision because it failed to come to grips with whether the properties used were comparable and instead improperly treated statistical testing as a substitute for comparability. [ 21 ] This Court observed that s. 165 of The Cities Act , SS 2002, c C-11.1, indicated both that equity was the dominant and controlling factor in the assessment exercise and that equity meant assessments should bear a fair and just proportion to the market value of similar properties (at para 21).

As well, the Court indicated that comparability, insofar as the capitalization rate was concerned, was a factual matter involving consideration of the characteristics of one property versus the characteristics of another.

[ 22 ] In Saskatoon (City) v Triovest Realty Advisors Inc. , 2015 SKCA 126 , 467 Sask R 259, the City of Saskatoon had applied for leave to appeal against a decision of the Committee where it had used the income approach rather than the cost approach as was used by the Board of Revision. At the root of the appeal was whether the assessor used the proper assessment approach based on whether there was similarity and comparability between the property being assessed and the grouping used to develop the approach .

This Court found these were factual issues and leave was denied. [ 23 ] The first three grounds of SAMA’s notice of appeal are not questions of law or of jurisdiction. All three attack the Committee’s decision that the income approach by SAMA did not include sufficiently comparable properties so as to achieve the MVS. At the core of these arguments is SAMA’s contention that the properties used by it were in fact comparable and the Committee’s grouping of sales used in the cost approach was not. This is a question of fact based on the cases referred to above. [ 24 ] SAMA also argues in ground (

b) that the Committee failed to exercise its discretion or fettered its discretion by not making appropriate adjustments to the income approach. Essentially, this again comes down to what comparable sales justified the income approach. Whether the Committee fettered its discretion is a question of law but it is so intimately tied to the issue of comparables that, in my view, it is destined to fail. I find that the first three grounds lack merit as it is defined in Rothmans . [ 25 ] SAMA argues in ground (

d) that the Committee erred in law in ordering, or had no jurisdiction to order, the parties to jointly research sales by way of RFIs, to consult with one another and provide a joint submission to it. Wal-Mart and Canadian Tire agree that there is a question about whether the Committee had jurisdiction to issue an RFI at all, let alone a request that the parties consult and prepare a joint submission. The Cities Act does not appear to provide any jurisdiction to the Committee for doing so. Nevertheless, it appears to be a practice engaged in by the Committee on a number of appeals in the past.

What is significant is that the parties appeared to consent to the process and more or less complied with it. There was no objection from either party although Wal-Mart and Canadian Tire during the process took the position that no MAF was applicable. [ 26 ] It is clear that the parties engaged in a voluntary process through the RFIs. Each was able to make their arguments for and against the necessity of a MAF or the determination of an appropriate MAF in the context of these further consensual proceedings. On this basis, there is insufficient merit to this ground.

Neither is it an issue of importance under the Rothmans test. [ 27 ] SAMA next argues in grounds (e)(

i) and (e)(ii) and that the Committee erred by ordering a new grouping of properties for the purpose of developing a MAF and disregarded the principle of deference to the discretion of the assessor’s MAF proffered as part of the RFI process. SAMA submits the Committee failed to demonstrate material errors of fact or law or standard appraisal principle or practice in respect of the assessor’s proffered MAF grouping. SAMA argues that once it put its position in response to the RFIs forward to the Committee, the principle of deference continued to apply.

SAMA argues that the need for deference does not end simply because an appeal has been launched and the assessor is evaluating possible alternative approaches. It argues that any alternatives provided by the assessor should be accorded the same deference as the original assessment. [ 28 ] The arguments of SAMA have a superficial air of a question of law as to whether deference to the assessor’s decision should operate in the RFI process the same way as it does in the initial case. These arguments ultimately involve issues of comparability and are grounded in factual inquiries rather than legal.

That alone results in the case for leave not being made out. In any event, the Committee is entitled to differ from the assessor on the factual question of comparability as is made clear in Harvard . [ 29 ] Moreover, the concept of deference to the assessor is rooted in the notion of deference to the decision.

SAMA’s response as to what the MAF should be was not a decision by SAMA as much as a position taken by them in the RFI process which was itself a part of the appeal process. [ 30 ] In short, on these two sub-grounds I am satisfied SAMA will have an uphill battle to succeed. [ 31 ] SAMA’s ground (e)(iii) argues that the Committee’s decision to use a new MAF grouping is in error because it failed to do any statistical testing or allow an opportunity for statistical testing to occur. SAMA argues the Committee did not give the parties any opportunity to provide their views on the grouping it chose.

SAMA argues that the lack of statistical testing is inconsistent with the legislation. It also submits the absence of an opportunity to provide its views on the MAF violates procedural fairness. [ 32 ] As a first point, statistical testing is referable to comparability, which is a question of fact. Second, the absence of statistical testing is not necessarily fatal to the MAF grouping.

As observed in Harvard , “statistics alone do not determine comparability or the strength of arguments in relation to comparability” (at para 25). [ 33 ] SAMA argues as part of this ground that the Committee had brought forward a MAF stratification that had not been the subject of argument. SAMA submits neither party had been given the opportunity to make representations. In support of this argument on procedural fairness, SAMA cites L & L Lawson Enterprises Ltd. v Regina (City) , 2008 SKCA 43 , 310 Sask R 29.

Notably, that was a case where the Committee had decided the appeal before it on a basis not raised in the notice of appeal, not argued by either party, not raised by the Committee during oral argument and for which neither party had been given the opportunity to make representations. This was not the case here where both sides apparently were fully engaged in the RFI process to help develop a MAF. [ 34 ] All parties appear to have had an opportunity to provide their views on the comparability issues related to the MAF. The Committee had requested a list of sales meeting certain parameters.

SAMA thus knew what comparability factors the Committee was considering. SAMA was aware that the issue was the appropriate grouping of sales to be used to develop a MAF. During the RFI process, at the request of the Committee, SAMA had proffered a grouping of six properties that it argued were comparable for the purposes of deriving a MAF, including its analysis. It thus appears to have had the opportunity to make its argument as to what an appropriate MAF should be. Wal-Mart and Canadian Tire responded to SAMA’s arguments and sales grouping.

This is not a case where SAMA, on receipt of the Committee’s decision, was left in the position of discovering that it turned on a matter on which it had not made representations. Its argument regarding the MAF was clearly rejected by the Committee, which developed its own MAF grouping. [ 35 ] Wal-Mart takes the position that the failure to allow the parties to respond to the Committee’s grouping does raise an issue of procedural fairness. I am not convinced this is so. SAMA will have an uphill battle succeeding, given that all parties appear to have

participated in the RFI process, responded to each other’s submissions and the requests of the Committee. This ground is destined to fail. [ 36 ] Last, SAMA argues that the Committee erred when it held that the Sobeys’ transactions relied on by the Committee in its MAF calculation were to be treated as a single transaction. [ 37 ] The treatment of the Sobeys stores arose during the RFI process when the Committee found that the cost approach would be applied, that a MAF would be required and directed SAMA to provide sales outside of each specific community.

It is clear that Wal-Mart and Canadian Tire argued the point and SAMA responded to the issue. Whether the transaction should be used as one market indicator or two in a particular context is a question of comparability and therefore of fact and is not a question of law. The ground fails on this basis. [ 38 ] Based on the criteria set forth in the Rothmans test, I am satisfied that none of the proposed grounds of appeal of SAMA have merit. All are destined to fail. Moreover, I am satisfied that none of the proposed grounds rise to the level of importance necessary to satisfy the test.

Accordingly, the application of SAMA for leave to appeal is denied. B. Application of Wal-Mart and Canadian Tire [ 39 ] Wal-Mart and Canadian Tire submit that the Committee erred by concluding that a MAF must be applied when valuing non- regulated properties under the cost approach. They submit that using depreciated replacement cost without a MAF is an accepted method of estimating the market value of property.

They argue that if there is insufficient comparable property sales from which to determine a capitalization rate under the income approach, then there are insufficient comparable properties to determine a MAF. Wal-Mart and Canadian Tire argue that if there are no comparable sales demonstrating that buildings are being sold for more or less than their calculated RCNLD, then there is no evidence that a MAF is required.

They accept that comparability is a question of fact. [ 40 ] SAMA argues that a MAF is always required in order to meet the statistical testing requirements of mass appraisal and of quality assurance. It acknowledges that the Committee accepted SAMA’s arguments in this regard. [ 41 ] Wal-Mart attempts to morph this ground into an argument that the decision of the Committee erred in law or jurisdiction by concluding that a MAF must always be applied when valuing non-regulated property under the cost approach.

However, the Committee did not go that far. [ 42 ] The Committee acknowledged that a MAF is not absolutely mandated. However, it gave several reasons why one was used in this case. The Committee justified its decision on the basis that the Depreciation Analysis Guide found in the Handbook supported a MAF. It also pointed out that Wal-Mart and Canadian Tire relied too heavily on one pillar of the MVS definition, discounting the other three. It observed that site improvements are missed in the costing of buildings under the RCNLD without a MAF and would not reflect their value.

It also noted that if there was no MAF, the value would not be capable of statistically being tested. It also pointed out that it was a generally accepted practice to use a MAF in cost valuations and that the use of a MAF was consistent with the legislation generally. [ 43 ] Implicit in Wal-Mart’s and Canadian Tire’s argument is that the Committee’s MAF grouping of properties was dissimilar. The fundamental complaint of Wal-Mart is really comparability or the lack of it. Comparability is a factual issue and not a legal one. Accordingly, its proposed ground fails on this basis alone.

However, I am also satisfied, apart from this, that there is insufficient merit in this ground. [ 44 ] Accordingly, the application of Wal-Mart and Canadian Tire for leave to appeal is denied. [ 45 ] There will be no order as to costs. “Ottenbreit J.A.” Ottenbreit J.A.