Neptune Capital Inc. v Yorkton (City), 2020 SKCA 128

Court of Appeal for Saskatchewan Docket: CACV3583 Citation: Neptune Capital Inc. v Yorkton (City), 2020 SKCA 128Date: 2020-11-18 Between:Neptune Capital Inc.Appellant(Applicant)AndCity of Yorkton and Saskatchewan Assessment Management AgencyRespondents (Respondents)Before: Caldwell, Whitmore and Leurer JJ.A. Disposition: Appeal allowedWritten reasons by: The Honourable Mr. Justice CaldwellIn concurrence: The Honourable Mr. Justice Whitmore The Honourable Mr. Justice LeurerOn appeal from: 2020 SKMB 6, ReginaAppeal heard: October 14, 2020Counsel: Paul J.

Harasen for the Appellant Amy Groothuis for the Respondents Caldwell J.A. [1] On December 17, 2019, this Court issued its decision in Neptune Capital Inc. v Yorkton (City), 2019 SKCA 136 [RemittalDecision], which allowed a tax assessment appeal under The Cities Act, SS 2002, c C-11.1, against a decision of the Assessment AppealsCommittee of the Saskatchewan Municipal Board [Committee] (Neptune Capital Inc. v Yorkton (City), 2017 SKMB 22 [2015Assessment Decision]) and remitted to the Committee the recalculation of the final 2015 assessed value for a property owned by NeptuneCapital Inc.. [2] On January 20, 2020, the Committee rendered its decision on the recalculation remitted to it (Neptune Capital Inc. v Yorkton(City), 2020 SKMB 6 [Recalculation Decision]). [3] On February 26, 2020, Richards C.J.S. granted Neptune leave to appeal against the Recalculation Decision on the solequestion of whether the Committee had exceeded its jurisdiction and erred in law by not following the direction this Court gave in theRemittal Decision.

The standard of review on this question is correctness: Gary L. Redhead Holdings Ltd. v Swift Current (RuralMunicipality), 2017 SKCA 47, 415 DLR (4th) 218. [4] Counsel for the City of Yorkton [City] and the Saskatchewan Assessment Management Agency [SAMA] appeared at thehearing of the instant matter but said the respondents had instructed her to undertake a watching brief only. Nonetheless, the City andSAMA filed a factum in response. [5] Although the background to this appeal is somewhat convoluted, it may be summarised as follows: (

a) In the 2015 assessment, SAMA determined the initial assessed value of Neptune’s property was $2,989,200 by carrying thatvalue forward from the 2014 assessment. (

b) The 2014 assessed value was itself a carry-forward from the 2013 assessment. (

c) In an appeal from the 2013 assessment, the Board of Revision had ordered SAMA to use the income quality rating [IQR] of“4-Good” when determining the rent rate to be applied to the subject property, which ultimately produced the assessed value of$2,989,200. (

d) In Yorkton (City) v Neptune Capital Inc., 2016 SKMB 8 [2013 Assessment Decision], the Committee held that theBoard had erred when it lowered the IQR from “5-Best” to 4-Good and, therefore, it reinstated what had been an agreed upon assessedvalue of $3,488,200 based on the 5-Best IQR. (

e) In the meantime, the 2014 assessment had been carried out also on the basis of the 4-Good IQR, using the 2013 assessedvalue of $2,989,200. As the 2013 Assessment Decision was still under reserve, SAMA appealed against the 2014 assessment on the samebasis as it had appealed against the 2013 assessment. However, the Committee ruled it did not have the jurisdiction to hear SAMA’s 2014assessment appeal (Yorkton (City) v Neptune Capital Inc., 2017 SKMB 7 [2014 Assessment Decision]). On March 31, 2017,SAMA was denied leave to appeal against the 2014 Assessment Decision. (

f) By the time of the 2015 assessment, the Committee had issued its 2013 Assessment Decision. As such, SAMA carried out the2015 assessment using the $3,488,200 initial assessed value that had been reinstated under the 2013 Assessment Decision and the 5-BestIQR. Neptune appealed from the 2015 assessment, alleging SAMA had applied an incorrect capitalisation rate. (

g) In the 2015 Assessment Decision, the Committee allowed Neptune’s capitalisation rate appeal and changed that rate for the2015 assessment. However, it also found the Board had erred by carrying forward the $2,989,200 assessed value from 2013. TheCommittee held that the initial assessed value in 2015 should have been $3,488,200, based in part on the application of s. 227 of The CitiesAct and its conclusion that the 5-Best IQR should have been used in the 2013 assessment.

(

h) Neptune appealed the 2015 Assessment Decision to this Court on the basis that the Committee had erred in law when it declined to revisit the 2013 Assessment Decision , arguing the 2015 Assessment Decision was inconsistent with this Court’s rulings in South Hill Mall Property Holdings Inc. v Prince Albert (City) , 2017 SKCA 52 , and Prince Albert (City) v Prince Albert Co-op Association Ltd. , 2017 SKCA 53 , which interpret and apply s. 227 of The Cities Act . [ 6 ] The recalculation ordered by this Court under the Remittal Decision was predicated on the formula the Committee had used when it calculated the 2015 assessed value of the property under the 2015 Assessment Decision (at paras 37-43), which was summarised in the Remittal Decision : [99] As the Committee indicated in the [ 2015 Assessment Decision ], the final value for 2015 is to be determined by using the adjusted capitalization rate applied to a specific formula – {gross leasable area (GLA) x master rating (MR)}/{capitalization rate (CAP)} = assessed value (AV) – and then plugging in the rent rate associated with the 5-Best Income Quality Rating.

Using the formula suggested by the Committee and applying it to an initial assessed value of $3,488,200 for 2015, would produce a final value of $3,188,880… [ 7 ] This Court declined to carry out the recalculation itself for the following reasons: [100] However, according to Neptune, since the initial 2015 value should have been $2,989,200, it stands to reason that the application of that number to the formula will yield a different final value for 2015. While Neptune may view this as a relatively easy calculation, I am not persuaded the process is quite that simple.

Therefore, recognizing the complexities of the calculation, the more appropriate order is to remit the matter to the Committee for a calculation of the final 2015 assessed value: see, for example, Kramer Ltd. v Sherwood (Rural Municipality) , 2003 SKCA 121 at para 34 , 241 Sask R 67. [ 8 ] Although Neptune raised other issues in its appeal, so far as it concerns the question now before the Court, the Remittal Decision addresses whether the initial assessed value in 2015 should have been $2,989,000 or $3,488,200.

Here, it is important to understand that, in its representations made in this Court, SAMA had agreed that “the initial assessed value for 2015 should have been $2,989,200” (at para 92), which results arithmetically only from the use of a 4-Good IQR. While the answer the Court gave is a dollar value that recognises SAMA’s concession, the Court knew that the arithmetic mattered. The Court understood recalculation of the 2015 assessed value involved more than simply substituting $2,989,200 for $3,488,200.

It knew the calculation required the application of the 4-Good IQR rent rate, which lay more within the expertise of SAMA and the Committee than the Court. [ 9 ] Accordingly, with SAMA’s concession on the record, this Court allowed Neptune’s appeal under the Remittal Decision and ordered that: [103] Given the forgoing, the [ First Committee Decision ] is set aside, with the following result: (

a) the Committee erred in applying s. 227(1) of the Act to the 2014 assessment year because the 2014 assessment was under appeal; (

b) the assessed value for 2014 is $2,989,200; (

c) the Committee erred in determining the initial assessed value for 2015 was $3,188,880, when it should be $2,989,200; and (

d) calculation of the final assessed value for 2015 is remitted to the Committee, using an initial assessed value for 2015 of $2,989,200. [ 10 ] However, under the Recalculation Decision , the Committee applied $2,989,200 to the formula it had used in the 2015 Assessment Decision in a way that produced precisely the same final assessed value as had the application of $3,488,200 to the formula, namely, $3,188,880. The Committee explained this result as follows: [8] In the present case, we had established the correct Net Operating Income (NOI) was to be based on the quality rating 5-Best.

As well, we found the correct Capitalization (Cap) Rate to be 8.5%. These findings of the Committee were not challenged to the Court. Therefore, as we found in AAC 2013-0112.1, and to maintain equity with other similar buildings, the final 2015 assessed value should be calculated by applying a Cap Rate of 8.5% to the NOI of the property, based on 5-Best quality. CONCLUSION: [9] We are bound by the remedial powers set out in

section 226 of the Act to ensure a fair and equitable assessment is placed on the assessment roll. Based on the above, the final 2015 assessed value would be $3,188,880. However, the appeal before us is grounded on the position the assessed value is too high. There is no appeal before us asserting the assessed value is too low.

Therefore, based on the Court’s direction and our finding the assessed value cannot exceed the initial assessed value of $2,989,200, the Committee orders the final 2015 assessed value to be $2,989,200. [ 11 ] Although it did not set out its calculations, it is readily apparent from paragraph 8 of the Recalculation Decision that the Committee erroneously recalculated the final 2015 assessed value of the property on the basis of the 5-Best IQR.

Given the nature of SAMA’s concession on this point and the terms of this Court’s order, the Committee should have well understood that it had been ordered to recalculate the 2015 assessed value on the basis of the 4-Good IQR that is embedded in the assessed value of $2,989,200. [ 12 ] In the result, I find the Committee erred in law and jurisdiction when it misapprehended the scope of its mandate under the Remittal Decision . I would allow the appeal, set aside the 2015 assessment and remit the matter to SAMA pursuant to s. 226(1) (

c) of The Cities Act to carry out the recalculation ordered under the Remittal Decision by using the 4-Good IQR to calculate the final 2015 assessed value of the property. [ 13 ] As Neptune did not request costs, none are ordered, either in relation to this appeal or the leave application. “Caldwell J.A.”

Caldwell J.A. I concur. “Whitmore J.A.” Whitmore J.A. I concur. “Leurer J.A.” Leurer J.A.