Richardson International Ltd., Viterra Inc., G3 Canada Limited, Northwest Terminal, Parrish & Heimbecker, Cargill Limited v. Prairie, 2021 SKCA 104

Court of Appeal for Saskatchewan Docket: CACV3537 Citation: Richardson International Ltd. v Various Rural Municipalities, Towns, Village and City (Saskatchewan Assessment Management Agency) , 2021 SKCA 104 Date: 2021-07-30 Between: Richardson International Ltd., Viterra Inc., G3 Canada Limited, Northwest Terminal, Parrish & Heimbecker, Cargill Limited and Prairie Malt Limited Appellants (Appellants/Respondents) And Various Rural Municipalities, Towns, Village and City (as represented by the Saskatchewan Assessment Management Agency) Respondents (Respondents/Appellants) Before: Richards C.J.S., Ottenbreit and Ryan-Froslie JJ.A.

Disposition: Appeal dismissed Written reasons by: The Honourable Mr. Justice Ottenbreit In concurrence: The Honourable Chief Justice Richards The Honourable Madam Justice Ryan-Froslie On appeal from: 2019 SKMB 116 , Regina Appeal heard: January 13, 2021 Counsel: Patrick McDonald, Q.C., for the Appellants Jeff Grubb, Q.C., for the Respondents Ottenbreit J.A. I.

INTRODUCTION [ 1 ] Richardson International Ltd., Viterra Inc., G3 Canada Limited, Northwest Terminal, Parrish & Heimbecker, Cargill Limited and Prairie Malt Limited [collectively elevator companies or ELCOs] appeal a decision of the Assessment Appeals Committee [Committee] of the Saskatchewan Municipal Board [Board], regarding the assessment of 74 properties, all of which were grain elevators [elevators] in 51 rural municipalities and cities in Saskatchewan: Various (DuCharme, McMillen & Associates) v Various Rural Municipalities, Towns, Village and City (Saskatchewan Assessment Management Agency) , 2019 SKMB 116 [ Committee Decision ]. [ 2 ] Of the 74 elevators dealt with by the Committee, two were regulated properties and the rest unregulated.

Although the assessment process is different for regulated and unregulated properties, the underlying issue concerning their assessment is the same. [ 3 ] Pursuant to The Municipalities Act , SS 2005, c M-36.1 [ Act ] and The Cities Act , SS 2002, c C-11.1 [ Cities Act ], assessable property includes both land and improvements. Section 2(1)(

q) of the Act and s. 2(1) (

p) of the Cities Act define improvement as a building, but as not including machinery and equipment “ unless the machinery and equipment is used to service the building or structure ” (emphasis added). The central issue in this appeal is whether the grain handling equipment [GHE] used in the elevators to receive, store and ship grain is machinery and equipment used to service the building or structure. I conclude it is and is therefore assessable.

Accordingly, I would dismiss the appeal. [ 4 ] Because the statutory provisions in the Act and the Cities Act germane to the central issue mentioned above are identical, I need refer only to the provisions of the Act in these reasons. II. BACKGROUND [ 5 ] The Saskatchewan Assessment Management Agency [SAMA] assessed the non-regulated elevators using the cost approach that incorporated a throughput adjustment factor that considered the amount of grain handled as it related to the facility’s capacity.

The regulated elevators were assessed using the cost approach without a throughput adjustment. [ 6 ] All of the elevators were assessed using rates from SAMA’s 2015 Cost Guide , ver 1.1 (Regina: Saskatchewan Assessment Management Agency, 2017) [ Cost Guide ]. The Cost Guide has separate rates for both the structure and the equipment used to service the

structure. Each elevator was assessed taking into account both its building and the GHE. [ 7 ] The GHE consisted of the pits, legs, gates, distributors, conveyors, spouting, dust collection systems, clean out systems, car loading systems and electrical systems. The GHE functions to allow the grain to move through the elevators.

It was common ground that grain brought to the elevators is initially dumped into a pit before it is moved up to the top of the elevator by the leg, poured into storage bins, and then emptied from the bottom of the bins to conveyor belts, moving up again to smaller shipping bins and then, finally, loaded through a spout into waiting railcars.

It was also common ground that the GHE was not used for cleaning or drying grain. [ 8 ] The ELCOs appealed the decision of SAMA to assess the GHE in respect of each of the elevators to boards of revision [BORs] in the municipalities and cities in which the elevators were located on the primary ground that the GHE was not being used to service the building and therefore should not be assessed because the equipment did not fall within the definition of improvement. Equity was a separate ground of appeal. [ 9 ] Two different categories of results were obtained before the BORs that heard the ELCOs’ appeals.

In respect of seven elevators, the appeals were granted and the assessment was reduced on the basis that the GHE was not assessable. These decisions were issued by the BOR in the City of Moose Jaw ( Viterra Inc. (Lead) v Moose Jaw (City) , Appeal ID 18C0008, Moose Jaw Board of Revision [ CMJ Decision ]) and the BORs in three other municipalities.

The CMJ Decision and the reasoning therein was dealt with by the Committee in its hearing of this matter. [ 10 ] The CMJ Decision found that the particular use or purpose of the elevator is to be ignored in determining whether the GHE “services the building”, calling it “a red herring”. It determined that SAMA conflated the use of the elevator and the elevator building itself. It found the key word for the purpose of the analysis was the verb “service”. It determined that the focus must be on whether the equipment is essential to the building regardless of its purpose.

The BOR came to that conclusion on the basis that purposes are not permanent and may change. It observed there is always another use for a building even though it may be inconvenient or costly to change the building to that use. It found that an improvement stands alone regardless of its purpose and the purpose of its equipment.

The CMJ Decision found that the GHE did not service the building and as a result was not assessable as an “improvement”. [ 11 ] In respect of the remaining 67 elevators, the BORs dismissed the ELCOs’ appeals thereby, affirming that the GHE was assessable as being used to service the building or structure. At least 23 of these decisions were made by BORs consisting of the same members, referred to by the Committee as the GKA Board. I will refer to them collectively as the GKA Decisions .

The decision of the Corman Park BOR is representative of the reasoning to be found in this category of decision: Richardson International v Corman Park No. 344 (Rural Municipality) , 2018 SKMBR 3440019. [ 12 ] The Corman Park BOR found t he GHE in the elevator supported the principal purpose of the building of temporary storage for the purpose of transport and was not a part of any significant processing or manufacturing operation. It found the GHE assessable. [ 13 ] The ELCOs and SAMA each appealed the respective BOR decisions unfavourable to them to the Committee. III.

DECISION OF THE COMMITTEE [ 14 ] I will refer to the appeals by SAMA as the SAMA appeals and the appeals by the ELCOs as the ELCO appeals. The Committee focused primarily on the CMJ Decision and the GKA Decisions in coming to a determination that the GHE in the elevators is used to service the building and is therefore an improvement assessable pursuant to the Act . [ 15 ] Before the Committee, the ELCOs made several arguments. They first argued that the GHE was not assessable because it did not provide services that were in the nature of utility types of services such as heating or electrical.

They argued that the GKA Decisions erred in that they failed to focus on whether the equipment was used to service the building. They submitted that the GKA Decisions instead looked to whether the processing of grain had occurred through the use of the machinery and, having found none took place, determined the GHE was assessable.

The ELCOs argued alternatively that there was evidence of cleaning, drying, and mixing of grain occurring prior to storage and in this way, the machinery was used to process the grain and not to service to the building. [ 16 ] Before the Committee, SAMA argued that defining the phrase “machinery and equipment used to service” only as utility type services or was too narrow a definition. Moreover, the business of the elevators was not to process grain but to store it.

SAMA submitted that the type of building and the use for which it was designed were important considerations as to whether the machinery and equipment serviced the building. [ 17 ] The Committee assessed the arguments of the parties in the context of the reasoning set out in the two categories of decisions represented by the CMJ Decision and the GKA Decisions . It referred to the evidence, the germane legislation, The Municipalities Regulations , RRS c M-36.1 Reg 1 [ Regulations ] and to assessment practice.

It reviewed the arguments of the parties. [ 18 ] The Committee found that the use to which an elevator was put was the main factor in determining whether the equipment was used to service the building. The Committee pointed to subsection 39 (

g) of the Regulations , which defines elevators in terms of their use, that is, as properties “designed and used for receiving, processing and shipping grains”, and to SAMA’s Market Value Assessment in Saskatchewan Handbook (Regina: SAMA, 2012) [ Handbook ], specifically to

chapter 13 entitled “Special Purpose Properties Valuation Guide” [ SPP Valuation Guide ], in which an elevator is recognized as a “special purpose property”, that is, a “property with a unique physical design, special construction materials, or a layout that restricts its utility to the use for which it was built” (at 2.0; see also

chapter 14, entitled “Grain Elevator Valuation Guide”, at 1.0). If the elevators were not being used for handling grain, they would no longer be classified as an elevator. It also noted that the elevators were designated by the Canadian Grain Commission as primary elevators and used for storage. [ 19 ] The Committee found that by discounting the purpose of the improvement, the CMJ Decision was inconsistent with the elevator classification and the fact that the elevators were special use properties. It further found that the CMJ Decision went beyond the wording of the legislation by choosing to add a limit, i.e., “regardless of its purpose” ( CMJ Decision at para 51).

[ 20 ] The Committee noted that, for non-regulated elevators, the assessment of the building referenced its purpose in the sense that there was an adjustment used for throughput that considered how intensely each elevator was used relative to its capacity. [ 21 ] The Committee also noted that the definition of service on its own was not contained in the legislation nor is equipment defined in the Act . It noted that the Oxford Online Dictionary defines “equipment” as “supplies, necessary items, tools or other objects for completing a task” and “equip” as to “provide with the required equipment, supply with necessary materials”. It observed that those

definitions relate to purpose and provided additional context to the meaning of the legislation. [ 22 ] The Committee was not convinced that processing of grain had any relevance to the question of whether equipment is or is not used to service a building. [ 23 ] The Committee then concluded that the equipment necessary to fulfill the purpose or use by reference to which a building is defined must be considered as being “used to service the building”. The Committee said: [64] … The subject improvements are grain elevators, which are designed and used to receive, store and ship grain.

There was no evidence presented to show how an elevator could fulfill its purpose without the machinery and equipment enabling movement of grain through the facility. … … [70] We find the use of a building is an important consideration in determining whether machinery and equipment is used to service the building. If such equipment is used to receive, store and ship grain, it is used to service a grain elevator. The CMJ Board provided a substantial amount of reasoning but discounted the use of the building in deciding the key question.

The CMJ Board was mistaken in its conclusion because it deliberated on the wrong question. [ 24 ] The Committee determined the CMJ Board was mistaken to find property use was an independent consideration from the equipment that services the building. It observed that an elevator with its GHE removed is considered to be in a very different market from functioning elevators. [ 25 ] The Committee acknowledged that the GKA Decisions supporting assessment of the GHE lacked adequate reasons but found this insufficient to overturn those decisions.

It sustained the original assessments in respect of the unregulated properties dealt with therein and dismissed the appeals of the ELCOs. It set aside those decisions of the BORs represented by the CMJ Decision and allowed the appeals of SAMA. [ 26 ] In making its ruling, the Committee did not distinguish between the unregulated elevators and the two regulated properties which had an ability to produce malt. It found these elevators included the same equipment as the non-regulated elevators for receiving, storing and shipping grain and the resulting malt products.

They concluded that GHE was therefore part of the improvement on the basis that it serviced the building and its functions. [ 27 ] In the result, the Committee upheld the assessment of the GHE in all 74 elevators. The ELCOs now appeal the Committee Decision . IV. STANDARD OF REVIEW [ 28 ] The applicable standard of review to be applied to the Committee Decision was recently reiterated in Freeborne Developments Ltd. v Corman Park (Rural Municipality) , 2021 SKCA 48 .

This Court said: [15] As s. 33.1 of [ The Municipal Board Act , SS 1988-89, c M-23.2 ] limits appeals from a decision of the Committee to questions of law or jurisdiction, the applicable standard of review of the Committee’s decision is correctness ( Gary L.

Redhead Holdings Ltd. v Swift Current (Rural Municipality) , 2017 SKCA 47 at para 88 , 415 DLR (4th) 218; Consumer Co-operative Refineries Limited v Regina (City) , 2020 SKCA 111 at para 40 [ Co-op Refineries ]; City Centre Equities Inc. v Regina (City) , 2018 SKCA 43 at paras 26 –​27, 75 MPLR (5th) 179 [ City Centre ]). … [ 29 ] The parties agree that the issue on appeal is one of law and, therefore, the standard of review is correctness. V. ISSUES [ 30 ] The ELCOs were granted leave to appeal on a question of law, stated as follows: (

a) Did the Committee err in law by finding the grain handling equipment used in grain elevators to receive, store and ship grain is machinery and equipment used to service the building pursuant to subclause 2(1) (

q) of the Municipalities Act , and subclause 2(1) (

p) of the Cities Act ? VI. ANALYSIS A. Did the Committee err in law by finding the grain handling equipment used in grain elevators to receive, store and ship grain is machinery and equipment used to service the building pursuant to subclause 2(1)(

q) of the Municipalities Act and

subclause 2(1)(

p) of the Cities Act ? [ 31 ] As a preliminary matter, I note that the nature of the GHE, the mechanics, how it works and what it does are not in issue. [ 32 ] The issue stated above revolves around the statutory

interpretation and ambit of the phrase “machinery and equipment … used to service the building” as it applies to elevators. If the GHE is “machinery and equipment … used to service the building or structure” pursuant to s. 2(1) (

q) of the Act , then it is part of the building or structure and assessable as an improvement in the same way the building or structure is assessable. [ 33 ] I turn first to the positions of the parties. The ELCOs argue that SAMA’s conclusion that the GHE is used to service the building assesses the enterprise or operating use of the building rather than the building itself. They submit that the use or purpose of the building is not relevant for assessment purposes and that the focus must be on whether any machinery and equipment “services the building”. [ 34 ] They submit the definition of “building” in s. 2(1) (

e) of the Act distinguishes the physical structure of the building from the use and occupancy that the building shelters. They argue that the term building as defined in that

section cannot encompass the process or operation carried on within it; the building, and the machinery and equipment that service it, are to be distinguished from the machinery and equipment effecting its use or occupancy. They submit that the service provided by the GHE must therefore be something in furtherance of the shelter and support function and not the use of the building.

The ELCOs argue the CMJ Decision gave effect to that distinction and comports with the common understanding of the word “building”. [ 35 ] The ELCOs further argue that the fact that the elevator is specially designed for only one use and is treated in the Regulations as an elevator only when used for that purpose does not erase the distinction between the building and the equipment and machinery used to service it and the equipment and machinery used to operate a business that take place within the structure.

They submit the “heightened specialization” of grain elevators does not reflect a “substantive difference” that gives rise to a service relationship between the building and the machinery and equipment used to operate the business within it. They suggest that a building capable of only one function is still a building without the equipment or machinery required for that function. [ 36 ] SAMA disputes the bright line drawn by the ELCOs between the use of a building and the building itself.

It contends that a building’s use is an important consideration in determining whether machinery and equipment services the building. SAMA submits this involves an examination of whether the machinery or equipment is necessary for the building to function as a building, keeping in mind that what is necessary for a building to function as a building will vary depending on a range of factors. [ 37 ] SAMA argues that, in the case of elevators, the purpose for which the building was built is relevant in determining if machinery and equipment is used to service the building.

It submits that, with very few exceptions, an elevator as a structure has only one purpose, i.e., to accept grain and then to store or forward the grain. As a result, the assessment category (i.e., special purpose buildings) in which elevators are placed is relevant. It argues that without the GHE, the building would not be an elevator. [ 38 ] To assess these arguments, I turn first to the germane provisions of the Act . Section 194(1) states: Property assessable 194

(1) All property in a municipality is subject to assessment.

(2) An assessment must be prepared for an improvement whether or not it is complete or capable of being used for its intended purpose. [ 39 ] The Act defines property as follows: 2 (1)(gg) “property” means, for the purposes of sections 9 and 39 and Parts X [Property Assessment] and XI [Taxation], land or improvements or both[.] [ 40 ] The Act defines an improvement as follows: 2 (1)(q) “improvement” means, subject to the regulations: (

i) a building or structure erected or placed on, over or under land or over or under water but does not include machinery and equipment unless the machinery and equipment is used to service the building or structure; (ii) anything affixed to or incorporated in a building or structure affixed to land but does not include machinery and equipment unless the machinery and equipment is used to service the building or structure; … [ 41 ] Also germane is subsection 2(1) (

e) of the Act : 2 (1)(e) “building” means, subject to the regulations, any structure used or occupied or intended for supporting or sheltering any use or occupancy …. [ 42 ]

Section 39 (

g) of the Regulations states: Classes of property 39 The following classes of property are established pursuant to clause 196(1) (

a) of the Act : …

(

g) Elevators, which includes only: (

i) land and improvements designed and used for receiving, processing and shipping grains, oilseeds and special forages, and licensed by the Canadian Grain Commission; and (ii) land and improvements used in conjunction with the land and improvements described in subclause (i)[.] [ 43 ] In interpreting the meaning of the phrase in issue, I rely on s. 2 - 10 of The Legislation Act , SS 2019, c L-10.2 : Acts and regulations remedial 2-10

(1) The words of

an Act and regulations authorized pursuant to an Act are to be read in their entire context, and in their grammatical and ordinary sense, harmoniously with the scheme of the Act , the object of the Act and the intention of the Legislature.

(2) Every Act and regulation is to be construed as being remedial and is to be given the fair, large and liberal

interpretation that best ensures the attainment of its objects. [ 44 ] Central to the phrase “is used to service the building or structure” is the term “service”. There is no definition of service in the Act . The term is used in many senses as is evident from the definition in Bryan A. Garner, ed, Black’s Law Dictionary , 11th ed (St. Paul, Minnesota: Thomson Reuters, 2019): service, n. (15c) 1. The status or condition of a servant , esp. a domestic servant … 2.

Labor performed in the interest or under the direction of others; specif., the performance of some useful act or series of acts for the benefit of another, usu. for a fee … • In this sense, service denotes an intangible commodity in the form of human effort, such as labor, skill, or advice. … 3. The official work or duty that one is required to perform. 4. Any institution or organization instituted for the accomplishment of such a duty … 5. A person or agency that accomplishes some constantly recurring work or fills some perpetual demand … 6. Hist.

Whatever service a feudal tenant was bound to render to his lord for the use and occupancy of the land; any render made for the enjoyment of land …. However, these

definitions, per se , are of little assistance in interpreting the meaning of the phrase in this case. The grammatical and ordinary sense of the word connotes that something is being added or provided to that which is being served. However, knowing this does not disclose the ambit of the word as used in s. 2(1) (

q) of the Act . [ 45 ] The noun service and its plural services have been judicially considered in the context of financial services, human rights, disputes involving city licensing bylaws and builders’ lien legislation. However, resort to the

definitions in these cases is again unhelpful in the context of municipal tax assessment. It is necessary to look at the provisions in the Act that might shed some light on the meaning of the phrase in issue. [ 46 ]

Part X of the Act in which s. 2(1) (

q) is found deals with municipal taxation. The object of municipal taxation is well known and I need not say anything further about it. It is also uncontroversial that

Part X sets out a mechanism whereby land and improvements on the land, usually in the form of buildings or other structures, are assessed and taxed. That much is clear from s. 194. [ 47 ] The

preamble of the definition of improvement in s. 2(1)(q)(

i) and (ii) is relatively straightforward as well. Generally speaking, an improvement is usually a building or structure erected on the land, excluding any equipment or machinery sheltered by it. This accords with the purpose of

Part X to assess and tax land and buildings and not equipment and machinery. [ 48 ] Interestingly, in the case of improvements related to the resource industry, this definition is not so restricted. Section 2(1) (q)(iii) defines resource production equipment (such as that of a mine or petroleum oil or gas well) as an improvement. Similarly, s. 2(1)(q)(iv) defines a pipeline (whether on or under land) as an improvement. The effect of these two provisions, assisted by more nuanced

definitions thereof in s. 2(3) and (4) of the Regulations , is to make machinery and equipment used and operated in the business of resource production and to some extent, resource transportation, assessable and ultimately taxable. It would therefore be incorrect to state that the Act does not permit machinery and equipment used in the operation of a business to be assessed as an improvement. [ 49 ] The purpose of s. 2(1)(

q) is to set out a test as to which equipment and machinery will be treated conceptually as part of the land or building and therefore be assessable. In s. 2(1)(q)(

i) and (ii), that test centers on whether the equipment and machinery is used to service the building. The building in this case is an elevator. [ 50 ]

Section 196 of the Act and s. 39 of the Regulations classify assessable property in terms of its use. Elevators, as described in s. 39 (

g) of the Regulations , are a class for the purpose of fixing a percentage of value to be used in the calculation of the taxable assessment of the elevator. Of note is that elevators are described in terms of “land and improvements designed and used for ” the varied aspects of grain handling (emphasis added). The description in s. 39 (

g) does not refer to the elevator building alone. An elevator building may be designed for grain handling, but it can only be used for receiving, processing and shipping grains if it contains the appropriate equipment and machinery. [ 51 ] The description in the elevator classification can be contrasted with subsections 39(c)–(f), which respectively describe residential, multi-unit residential, seasonal residential and commercial and industrial classes of property. These descriptions employ the words “used or intended to be used” and not the words “designed and used”.

I infer that the difference is that, for the purposes of it being classified as an elevator and arriving at an assessable value, the elevator must actually be used for grain handling. This differs from a residential property, for example, which will still be classed as such even if it is empty, as long as it is intended to be used for residential purposes. [ 52 ] If the elevator building is not being used and operated as an elevator, it cannot be classified as one. In short, the Regulations treat elevators as a single use special purpose property that are operated for that use and purpose.

While that does not change the service test in s. 2(1) (

q) of the Act , this statutory approach provides valuable context for how elevators are treated for assessment purposes pursuant to the Act and informs the

interpretation of the phrase used to service as it is applied to elevators.

[53] I conclude from the foregoing that the regulatory definition of an elevator as a class requires that, to be assessable, the elevatorbuilding must operate for the purpose for which it was designed. On this basis, the phrase “used to service the building” as it applies toelevators requires an examination of what equipment is required to allow the building to function as an operating elevator. [54] I turn now to the jurisprudence. Judicial discussion of the term service in the context of municipal tax assessment is limited to aseries of cases from New Brunswick.

They all deal with municipal assessment legislation in its various iterations in force between 1973and 2005.

Although the New Brunswick legislation is not identical to that being considered in this case, the element common to thatlegislation and the Act is resort to wording that makes machinery and equipment assessable where it “is used to service the building” orreal property. [55] These cases grapple with the distinction between machinery and equipment housed within a building that is assessable as partof the building and that which is non-assessable as being merely located within the building for the purposes of the business beingoperated therein.

Each party cites these cases as supporting its position on how the phrase “used to service the building” should beinterpreted. It is therefore helpful to briefly summarize these cases and the parties’ positions on their significance. [56] Both parties refer to Irving Oil Ltd. v New Brunswick (Executive Director of Assessment), 2005 NBCA 39, 282 NBR (2d) 275[Irving Oil] (leave to appeal to SCC refused, ).

In that case, the Executive Director of Assessment appealed adetermination that finishing tanks belonging to Irving Oil Ltd. were properly considered as manufacturing equipment and therefore exemptfrom assessment. The Court dealt with legislation that made clear that only machinery and equipment that provided services to buildingswas assessable (Assessment Act, RSNB 1973, c A-14 [NB Act]). The Court noted that machinery and equipment used in a manufacturingprocess was not assessable. It said: [10] The same type of reasoning can be applied to properties used for manufacturing purposes.

Take the hypothetical example of amanufacturer of widgets. For assessment purposes, the Director of Assessment seeks to establish the fair market value of the property as amanufacturing facility, not as a manufacturing facility for widgets. Applying the definition of real property under the Assessment Act, theassessed value of the property would not include any of the equipment used in the manufacturing of widgets. However, any equipmentthat services a building would be assessable (e.g. heating, fire protection and burglar alarm systems).

Once again the thrust of thelegislation is to determine the fair market value of the property in terms of its highest and best use. That is to say what any manufacturerwould pay for the property after it is stripped of all equipment or machinery used in the manufacturing of a particular item. However, theassessed value must include those items that allow the building to function as a building.

In contrast, manufacturing equipment, which intheory could be removed, is not assessable. (Emphasis added) [57] The Court ultimately applied a “primary purpose” test and found that the tanks’ primary purpose was for storage and notmanufacturing and, as such, they were assessable. [58] The Court noted that when determining the distinctions between buildings and machinery for the purpose of its assessment,contextual factors are important: [20] The reasoning of this Court in [Bégin (Gilles) Lumber Ltd. v New Brunswick Geographic Information Corp. et al. (1995), (NB CA), 169 NBR (2d) 29] is consistent with the manner in which other courts have approached the distinction between“buildings” and “machinery”.

The jurisprudence refers not only to the physical nature of the item in question but also to what it wasdesigned for and how it functions: see Re Weyerhaeuser Canada Ltd. and City of Sault Ste. Marie, (ON SC), [1968] 1O.R. 460 (Dist. Ct.), Orchardson Forest Products Ltd. v. British Columbia (Assessor of Area 14), [1987] B.C.J. No. 384 (S.C.), leave toappeal to B.C.C.A. refused, [1987] B.C.J. No. 1372 (C.A.) and Dresser Canada Inc. v. Regional Assessment Commissioner, Region No.18, [1995] O.J. No. 197 (Gen. Div.). … [22] In the 1985, the Ontario Court of Appeal held in Metals & Alloys Co. Ltd. v.

Regional Assessment Commissioner, Region No. 11et al. (1985), (ON CA), 49 O.R. (2d) 289 at 305 (C.A.), leave to appeal to S.C.C. refused (1985), (SCC), 51 O.R. (2d) 64n, that the use toward which an item was put was no longer determinative of its status for assessment purposes, butrather was only one of a number of factors to be taken into account in determining whether an item was a building or structure ormachinery or equipment. Several questions were posed: How is it constructed? Why was it constructed in a particular shape or of aparticular material or of a certain size? Does it look like a building?

Is it built like a building? Does something happen within or on thisitem that is an integral part of the manufacturing process, as distinct from happening within or on a piece of machinery that the itemencloses? With respect to the latter point, see Bégin at para. 12. [59] The ELCOs submit that Irving Oil supports the distinction between a building and the purpose or use of the building.

Theypoint to the examples given by the Court of equipment that services a building – an electric motor that raises and lowers a barn door, stormwindows, heating and fire protection – as “provid[ing] a safe and controlled environment for some enterprise or activity to be carried on inthe building”.

The ELCOs therefore submit that Irving Oil bolsters their argument that machinery or equipment is only assessable if it isnecessary for a particular property “to function as a building” as in the case of the examples of equipment given by the Court. [60] SAMA focuses on the reference in Irving Oil to the thrust of the legislation, i.e., to determine the fair market value of theproperty in terms of its highest and best use or what any manufacturer would pay for the property after it is stripped of all equipment ormachinery used in the manufacturing of a particular item.

It notes that the Court in Irving Oil stated the assessed value must include thoseitems that allow the building to function as a building or structure. It argues that the GHE is necessary to allow the building to function asa grain elevator building. [61] The ELCOs also rely on Re Acadian Pulp & Paper Ltd. and Minister of Municipal Affairs (1973), (NB CA),41 DLR (3d) 589 (NBSC (App Div)) [Acadian Pulp] to illustrate the limited ambit of the term “services to the building”.

The Court in thatcase was dealing with whether a combined air conditioning and heating system in a new storage warehouse used to maintain temperature

and humidity conditions for refined sugar stored in the upper two floors of a building was assessable pursuant to a previous version of theNB Act (SNB 1965-66, c 110). The Court determined it was, stating that the assessability of machinery, installations and equipmentdepended on “whether its presence is ‘for providing services to the buildings’, i.e., whether that is its primary purpose” (at 593, emphasisin original).

The ELCOs argue that this case is significant because it highlights that heating and cooling were common assessable servicessupplied to a building and that these kind of services are consistent with the examples of similar services set out in Irving Oil. [62] The next case is New Brunswick (Director of Assessment) v Miramichi Pulp & Paper Inc. (1996), (NB CA),172 NBR (2d) 290 (CA) [Miramichi]. There, the Court decided that the electrical distribution system in a pulp mill and sawmill wasassessable pursuant to the NB Act.

The ELCOs downplay the significance of this case on the basis that the installed power system was partof the building. SAMA argues the overarching point of the decision is that one must also look to the purpose of the building whendetermining whether machinery and equipment services the building. [63] The last case of interest is Kennebecasis Valley Recreational Centre Inc. v New Brunswick (Minister of Municipal Affairs)(1975), (NB CA), 11 NBR (2d) 361 (NBSC (App Div)) [Kennebecasis].

In Kennebecasis, the Court was called on torule whether, pursuant to the NB Act, ice-making machinery in a recreational centre provided services to the building and was thereforeassessable. A majority of the Court held that it was. The ELCOs maintain this decision supports their argument because the ice rink wasrequired to make the building function as a building, submitting in their factum that “without such equipment, the building is useless as abuilding” and, as such, the machinery is required as “a prerequisite of the enterprise or activity … carried on in the facility” (emphasis inoriginal).

This decision is understood by SAMA as providing support for the proposition that a building’s purpose is instructive indetermining whether the machinery and equipment services the building. [64] SAMA argues that the cases of Irving Oil, Acadian Pulp, Miramichi and Kennebecasis all consider the building’s purpose andnature as informing the question of whether machinery and equipment is assessable. I agree the purpose of the building is a commonthread found in those cases. However, these cases also demonstrate a contextual approach to determining if machinery or equipment isused to service the building.

On this basis, the phrase “used to service the building” in s. 2(1)(q) – which is similar to the provisions of theNB Act at issue in the New Brunswick cases – must be interpreted as a flexible test. [65] Taking into consideration the grammatical and ordinary meaning of the phrase in issue, the other provisions of the Act thatinform its

interpretation and the above cases, I am unconvinced by the ELCOs’ arguments. On this basis, I am satisfied that theCommittee did not err in deciding as it did. I will explain. [66] Admittedly, the ELCOs’ distinction between what is required for a building to function as a building and the use to which abuilding is put appears to have an attractive analytical clarity to it.

It offers a clear-cut means to separate machinery and equipment thatservices the building from machinery and equipment which is necessary for the enterprise being carried on within the building. [67] However, the central problem with this distinction is that it fails to recognize that some element of underlying contextual detailis required to understand what is needed to service a building for it to function as a building. That inevitably involves consideration of thebuilding’s use and purpose.

It was this kind of analysis that took place to a greater or lesser extent in the New Brunswick cases. [68] Although each case is different, some of the contextual factors considered in the New Brunswick cases include: the nature ofthe machinery; its purpose and how it functions; the extent to which it is integrated with the building; and whether it operates part of amanufacturing process. The cases also consider the nature of the building, its purpose and any special aspects of the building. A non-exhaustive list of these factors was set out in Irving Oil, as follows: [22] … How is it constructed?

Why was it constructed in a particular shape or of a particular material or of a certain size? Does it looklike a building? Is it built like a building?

Does something happen within or on this item that is an integral part of the manufacturingprocess, as distinct from happening within or on a piece of machinery that the item encloses? … [69] The extraordinarily wide number of different usages to which buildings can be put highlights that, in some instances, buildingsmay require very little, or indeed no, equipment or machinery to function as a building; equipment and machinery to provide power, waterand heat may be enough.

In other cases, the nature of the building’s design may necessitate a much more extensive installation ofmachinery and equipment in order for the building to function; for example, public passenger elevators may be required in tall buildings. [70] The ELCOs attempt to limit the ambit of machinery and equipment that is capable of servicing a building to that in the nature ofutilities, fire protection and security systems. However, the Act does not impose such limitations. As noted above, the test of what is usedto service the building is flexible.

Indeed, in Kennebecasis, ice-making machinery was found to be used to service the building. [71] While the ELCOs rely on the list of services set out in Irving Oil, the case as a whole does not correspond fully with thedistinction they propose. Admittedly, at paragraphs 9–​10, the Court indicated that the precise use of a building was not of interest forassessment purposes. While this is, for the most part, true, the general use (e.g., farming, manufacturing) to which the building is put isstill a factor in determining the classification for assessment.

This is clear from the different classifications of property set out in s. 39 ofthe Regulations that drive the percentage of value to be applied for the assessment of each class. [72] SAMA submits an elevator is a special kind of building and it says that fact must be taken into consideration when determiningwhether the GHE is used to service the elevator. I agree.

Section 39(

g) of the Regulations recognizes elevators as a specific class or typeof improvement. SAMA’s Cost Guide also establishes a basis for the particular treatment of grain elevators. It defines them as “speciallydesigned buildings that incorporate … equipment required to receive, weigh, elevate, store, and load grain grown by farmers into railwaycars and trucks” (at s. 8.14). This corresponds to the general description of an elevator in s. 39(

g) of the Regulations. [73] SAMA’s Handbook should also be noted here. It sets out a category of “special purpose properties” that inherently have alimited number of alternative uses. SAMA has categorized all of the elevators involved in this appeal within this list. “Special purposeproperty” is a class of properties created in SAMA’s SPP Valuation Guide, described in s. 1.0 as follows: A special purpose property (also known as a specific use property or special design property) is characterized as a “property with a uniquephysical design, special construction materials, or a layout that restricts its utility to the use for which it was built.” In addition, these

properties may also contain a significant amount of equipment and/or machinery integrated into the structure. Due to their unique nature and special design, these properties provide limited utility for alternate uses. Converting a special purpose property to an alternate use usually requires significant renovations at consideration financial cost. The unique characteristics inherent in special purpose properties results in a limited market where they are seldom leased and rarely sold except for nominal amounts at the end of their economic life.

This serves to limit the approaches to value that can be applied when valuing special purpose properties using mass appraisal techniques. (Footnotes omitted) [ 74 ] This description of special purpose properties is congruent with the nature and design of elevators, as well as their extremely limited utility for alternative uses. SAMA confirmed during the BOR hearings that only one elevator in Canada had been put to a different use – as a backdrop for a visual arts show. [ 75 ] Machinery and equipment in special purpose properties will not necessarily be deemed assessable.

However, the purpose of a building and its use takes on a greater significance when it is designed for a use so specific that there is no alternative use to which it could be reasonably or practically put. For such a building, there is no meaningful distinction between general use and specific use. Accordingly, the line between the building and its purpose or use become blurred and may disappear.

In such circumstances, the equipment and machinery therein that allows the building to fulfill the use for which it was specifically designed could be seen as being used to service the building. [ 76 ] The GHE required for an elevator to carry out its sole purpose “services the building” within the meaning of s. 2(1)(

q) of the Act and, as such, is assessable. Indeed, if the GHE was to be removed from an elevator, it would cease to be classified as an elevator because, in order to be an elevator, a building must be used for receiving, processing and shipping grains. As noted above in Irving Oil , the assessed value must include those items that allow the building to function as a building. [ 77 ] I conclude that the Committee made no error in taking into consideration the purpose of an elevator when determining that the GHE is an improvement under s. 2(1)(

q) of the Act and s. 2(1) (

p) of the Cities Act . It properly found that the GHE was used to service the buildings in issue. It was therefore correct to uphold the assessment of the GHE for all 74 elevators. VII. CONCLUSION [ 78 ] I would dismiss the appeal of the ELCOs with costs to SAMA. “Ottenbreit J.A.” Ottenbreit J.A. I concur. “Richards C.J.S.” Richards C.J.S. I concur. “Ryan-Froslie J.A.” Ryan-Froslie J.A.