Carrier Forest Products Ltd. v. Agrium Inc., 2021 SKCA 120

Court of Appeal for Saskatchewan Docket: CACV3462 Citation: Carrier Forest Products Ltd. v Big River (Rural Municipality) 2021 SKCA 120 Date: 2021-09-08 Between: Carrier Forest Products Ltd. and Agrium Inc. (as represented by Altus Group Limited) Appellants (Appellants) And Rural Municipality of Big River No. 555 and Rural Municipality of Lakeside No. 338 (as represented by the Saskatchewan Assessment Management Agency) Respondents (Respondents) Before: Richards C.J.S., Whitmore and Kalmakoff JJ.A.

Disposition: Appeal allowed in part Written reasons by: The Honourable Chief Justice Richards In concurrence: The Honourable Mr. Justice Whitmore The Honourable Mr. Justice Kalmakoff On appeal from: 2019 SKMB 59 , Saskatoon Appeal heard: April 21, 2021 Counsel: Andrea Rohrke for the Appellant Jeffrey Grubb, Q.C., for the Respondents Richards C.J.S. I. INTRODUCTION [ 1 ] This appeal raises a question about the “local multiplier”, an element of one of the formulae used to determine the assessed value of certain types of buildings and structures.

More specifically, Carrier Forest Products Ltd. [Carrier] and Agrium Inc. [Agrium] argue that an error was made in the assessment of their properties because the goods and services tax [GST] and the provincial sales tax [PST] were not deducted in the course of determining the applicable local multipliers. They say that such deductions are mandated by the Marshall Valuation Service [Marshall Service], a guide used to determine property values. [ 2 ] I conclude that the Marshall Service does not, by its own terms, require that GST and PST be deducted in the way suggested by Carrier and Agrium.

However, the assessor, Saskatchewan Assessment Management Agency [SAMA], correctly accepts that GST should nonetheless be backed out when calculating a local multiplier. As explained below, there is no need to back out PST. II. THE BACKGROUND [ 3 ] The Carrier property is a sawmill located in the Rural Municipality of Big River No. 555. It is a “regulated” property and hence falls to be assessed in accordance with the Saskatchewan Assessment Manual [Manual]. [ 4 ] The sawmill is a “heavy industrial property” within the meaning of that term as defined in s. (

d) of Document 1.1.2 of the Manual. Document 1.1.7 sets out the formula to be used in determining the assessed value of heavy industrial buildings and structures: BV = ((RCN – Phys) – Funct) x CAF where: BV = assessed value of buildings and structures RCN = replacement cost new Phys = physical deterioration Funct = functional obsolescence CAF = closure adjustment factor The replacement cost new, physical deterioration, functional obsolescence and closure adjustment factor shall be determined in accordance with the valuation procedures in

Chapter 3 – Heavy Industrial Improvements and Marshall Valuation Service. [ 5 ] For present purposes, the RCN is the most important consideration. Document 3.1.2 of the Manual sets out the general rules to be used in the calculation of RCN: The replacement cost new of heavy industrial buildings or structures shall be determined by calculating the cost of construction using the calculator method, unit-in-place cost method, segregated cost method or trended original cost method. The methods shall be applied in accordance with the valuation procedures in the Marshall Valuation Service, or in the case of non-standard buildings and structures in

Chapter 3 – Heavy Industrial Improvements, Non-standard Buildings and Structures. [ 6 ] The calculator method was used for the Carrier assessments. Document 3.1.3 provides that, under the calculator method, the RCN is to be multiplied by a cost factor. Document 3.1.4 says that the cost factor is to be calculated as follows: Cost Factor = Current Cost Multiplier x Local Multiplier x Saskatchewan Cost Factor [ 7 ] The Saskatchewan cost factor, referred to in the above formula, is prescribed by the Manual to be 1.10.

Document 3.1.4 indicates that the current cost and local multipliers for the calculator method are to be determined in this way: When using the calculator method use the Marshall Valuation Service current cost multipliers in

Section 99 (Current and Local Cost Multipliers), page 3, Current Cost Multipliers, Calculator Cost Sections, Central, dated 10/2014. [ 8 ] The Marshall Service referred to by the Manual in this regard is an authoritative guide used for developing such things as replacement costs and depreciated values of buildings and other improvements. The parts of the Marshall Service that set out the Saskatchewan local multipliers are found at s. 99, page 5 and read as follows: LOCAL MULTIPLIERS Apply to costs brought up-to-date from preceding pages. Do not apply to

Section 98 or any other indexes. CANADA (Computed in Canadian Dollars, including GST (PST) but no new construction rebate or exemptions.) CLASS A B C D S SASKATCHEWAN 1.36 1.45 1.42 1.36 1.35 Moose Jaw 1.39 1.46 1.43 1.36 1.37 North Battleford 1.36 1.46 1.43 1.34 1.34 Prince Albert 1.33 1.43 1.42 1.38 1.32 Regina 1.40 1.48 1.44 1.38 1.38 Saskatoon 1.34 1.42 1.40 1.34 1.32 [ 9 ] This table is followed by the part of the Marshall Service that lies at the heart of this appeal. I will refer to it in these reasons as the “tax removal provision”.

It speaks to the issue of tax deductions in the calculation of local multipliers: CANADIAN TAX REMOVAL The following percentage deductions need to be applied to the Canadian local multipliers to remove all GST, PST and HST rates. CLASS A B C D S … Saskatchewan 7.8% 7.9% 7.9% 7.7% 7.9% … As will be explained below, the question in the Carrier aspect of this appeal is whether SAMA erred by not making these deductions from the local multiplier when determining the assessed value of Carrier’s mill. [ 10 ] The Agrium property at issue in this appeal is a potash mine in the Rural Municipality of Lakeside No. 338.

It is a “non- regulated” property and hence, as provided by s. 194.1(2) of The Municipalities Act , SS 2005, c M-36.1 [ Act ], its assessed value falls to be determined “according to the market valuation standard”. Because of the lack of comparable sales information for this type of property, SAMA valued it by using its 2015 Cost Guide [Cost Guide]. [ 11 ] The assessment of the Agrium property raises precisely the same question about the meaning of the tax removal provision as do the assessments of the Carrier property.

This is because, in determining the assessed value of a non-regulated property, Document 3.4 of the Cost Guide directs assessors to apply the Marshall Service as follows: Apply the Marshall Valuation Service local multipliers from

Section 99 (Current and Local Cost Multipliers), page 5, Local Multipliers, Canada, Saskatchewan, dated 10/2014. This, obviously, is the same language as is found in Document 3.1.4 of the Manual and it references the tax removal provision, the same provision of the Marshall Service as is referred to by Document 3.1.4. [ 12 ] As with the Carrier mill, the bottom-line issue on this branch of the appeal is whether SAMA erred by not deducting GST and PST when it determined the local multiplier to be used in calculating the assessed value of Agrium’s property. III.

BOARD OF REVISION DECISIONS [ 13 ] Carrier appealed the 2017 assessment of its property to the Board of Revision. See: 2017 SKMBR 5550005. It took the position that the tax removal provision requires that local multipliers be reduced by the specified tax rate – 7.9% in the case of Saskatchewan. On the other hand, the RM of Big River appears to have argued that assessors, at their option, may or may not back out GST and PST in determining a local multiplier. It said that such reductions were not mandatory. [ 14 ] The Board seems to have accepted Carrier’s argument about the proper

interpretation of the tax removal provision but it

nonetheless rejected Carrier’s appeal on the basis of its understanding of the concept of equity. The Board wrote as follows: [19] The Appellant has raised a very substantial issue. If, as suggested by M&S, the local modifiers should account for local taxes by reducing the RCN according to the table shown on page 69 of Exhibit R-1 and if the Appraiser has failed to do so, then an error would appear to exist. [20] A key part of this is the

interpretation of the paragraph respecting “Canadian Tax Removal” as shown on Page 69 of Exhibit R-1. The Board sees use of the phrase “ need to be applied to remove all GST, PST and HST rates ”. This appears to be a requirement, rather than an option available at the discretion of the Appraiser. [21] The challenge presented to the Board in this appeal is if this appeal is allowed based on this issue of local modifiers, equity would likely be disturbed across the province.

If the RCN of an improvement should not include PST or GST, as suggested by M&S, this should apply to all properties throughout Saskatchewan in order to maintain equity. [22] Since the legislation takes precedence over the M&S cost guide, the Board believes it has no choice but to follow the principle of equity. The Board acknowledges and respects a decision of the Alberta Queen’s Bench provided by the Appellant which states, in effect, that the consistent application of an error does not achieve equity.

The Board will defer the effect of the Alberta Queen’s Bench decision to a higher body to determine if their ruling is relative to, and should be applied to assessment procedures in Saskatchewan. [23] The Board believes the Appellant has identified a potential omission error by the Appraiser for all properties in Saskatchewan whether Regulated or Non-Regulated that are assessed using the Cost Approach / Marshall & Swift valuation procedures.

The Board suggests to the Appraiser they review this matter closely to determine if the local modifier to adjust for taxes should be applied to all properties in Saskatchewan. [24] The Board chooses to dismiss this appeal out of respect for the fundamental principle of equity as stated in the legislation. The filing fee shall be retained by the municipality. (Emphasis in original) [ 15 ] Carrier appealed the 2018 assessment as well. See: 2018 SKMBR 5550002. In dismissing that appeal, the Board of Revision again invoked the principle of equity: [20] The Appellant has raised a very substantial issue.

If, as suggested by M&S, the local modifiers should account for local taxes by reducing the RCN according to the table shown on page 69 of Exhibit R-1 and if the Appraiser has failed to do so, then an error would appear to exist. [21] A key part of this is the

interpretation of the paragraph respecting “Canadian Tax Removal” as shown on Page 69 of Exhibit R-1. The Board sees use of the phrase “need to be applied to remove all GST, PST and HST rates”. This appears to be a requirement, rather than an option available at the discretion of the Appraiser. [22] The challenge presented to the Board in this appeal is if this appeal is allowed based on this issue of local modifiers, equity would likely be disturbed across the province.

If the RCN of an improvement should not include PST or GST, as suggested by M&S, this should apply to all properties throughout Saskatchewan in order to maintain equity. [23] Since the legislation takes precedence over the M&S cost guide, the Board believes it has no choice but to follow the principle of equity. The Board acknowledges and respects a decision of the Alberta Queen’s Bench provided by the Appellant which states, in effect, that the consistent application of an error does not achieve equity.

In doing so, there are conflicting decisions from Alberta Queen’s Bench decision and Saskatchewan Court of Appeals decisions. [24] While the Appellant has identified a potential omission error by the Appraiser for all properties in Saskatchewan, whether Regulated or Non-Regulated and assessed using the Cost Approach including the Marshall & Swift valuation procedures, it involves a delicate

interpretation which M&S have often stated are not universal in nature. There are numerous elements of the M&S Guide, such as depreciation, where they specifically state their tables and mechanisms should not be used on a universal basis and should be developed locally. [25] In this appeal, the Board recognizes the Appraiser has included the GST and PST on a global basis for all similar properties. In the result, equity has been achieved.

Whether or not the M&S guide prohibits the inclusion of local taxes as part of the RCN of any property is a matter that this Board will leave to the SMB-AAC and, or, the Court to determine as a matter of fact or law. [26] Since GST and PST have not been removed from any other property assessed using the Cost approach, whether Industrial, Commercial, or Residential, the Board believes equity would be disturbed if it were to allow this appeal. [27] In the result, this appeal is dismissed based on the Board’s respect for the fundamental principle of equity as stated in the legislation.

The filing fee shall be retained by the municipality. (Emphasis in original) [ 16 ] Agrium appealed the 2018 assessment of its property and put forward the same argument about the tax removal provision as Carrier had advanced. See: 2018 SKMBR 3380004. The Board of Revision, comprised of the same individuals who had dismissed Carrier’s 2017 appeal and two of the three individuals who had dismissed Carrier’s 2018 appeal, did not accept Agrium’s arguments.

By way of analysis, the Board said no more than this: [13] The Board chose to dismiss the similar 2017 appeal from the RM of Big River No. 555 and maintains its position with this appeal. Therefore, this appeal is dismissed. The assessed values shall remain and the filing fee shall be retained by the municipality.

IV. THE COMMITTEE DECISION [17] The Assessment Appeals Committee [Committee] heard Carrier’s 2017 and 2018 appeals and Agrium’s 2018 appeal at thesame time. It did so because the issue about the

interpretation of the tax removal provision was common to all. The Committee wrote onedecision in response to the three appeals. See: 2019 SKMB 59 , 2019 SKMB 059. [18] The Committee accepted SAMA’s submission that the tax removal provision – “[t]he following percentage deductions need tobe applied to the Canadian local multipliers to remove all GST, PST and HST rates” – was in the nature of a “how to” instruction asopposed to a “mandatory” direction. It said this: [32] We reviewed the explanation and guidance in

section 99, Cost Multipliers, in Marshall and agree with SAMA’s

interpretation. Itdoes not make sense to us to include the sales tax calculation only to immediately and in every situation direct it to be removed. Theassessment stands alone. The Assessor chose not to back out the taxes – which is his choice to make. The MVS has not beencompromised. [19] The Committee then went on to address Carrier’s argument that the Boards had misunderstood the concept of equity bythinking that it can be attained so long as an assessment error is made universally or consistently.

The Committee expressed its conclusionon that issue in two somewhat difficult-to-understand paragraphs that will be examined more closely below. [20] In the end, the Committee dismissed Carrier’s and Agrium’s appeals and thereby confirmed the assessments of their propertyand the decisions of the Boards. V. LEAVE TO APPEAL [21] Carrier and Agrium were granted leave to appeal on the following questions: (

a) Did the Committee: (

i) select the correct standard of review to apply to the Board’s determination that equity in the subject property assessments had beenachieved; and (ii) correctly apply that standard of review? (

b) Did the Committee: (

i) select the correct standard of review when determining whether the Board improperly fettered its discretion; and (ii) correctly apply that standard of review? [22] I take question (

a) to encompass the issue of whether the tax removal provision, correctly interpreted, requires that GST andPST be deducted when calculating a local multiplier. The parties took the same approach. VI. ANALYSIS [23] I will deal in turn with the two questions on which leave was granted. A.

Equity and related issues [24] The first issue is whether the Committee correctly selected and applied the proper standard of review in dealing with theBoards’ determinations that equity had been achieved and that the assessments should therefore stand. [25] The Committee spoke directly to the standard of review question at paragraphs 11 to 13 of its decision. Referencing City CentreEquities Inc. v Regina (City), 2018 SKCA 43 [City Centre], it identified the standard of reasonableness as being applicable to questions offact and mixed fact and law.

It also indicated that questions of law were to be reviewed using the correctness standard. The Committeemade no error in any of that. See: City Centre at paras 98–101. [26] The Committee’s application of the standards of review that it identified is somewhat more difficult to assess. It clearly seemsto have applied the correctness standard in concluding, at paragraph 32, that the tax removal provision did not oblige the removal of GSTand PST.

With respect to the issue of equity and the Carrier property, the Committee expressed its conclusion by writing as follows: [38] The Assessor applied the Manual properly and achieved equity with similar properties. If the non-application of the Act andManual according to the intent of those documents results in an error of law, then we uphold SAMA’s assessments on a correctnessstandard. With regard to the Carrier property, there was evidence placed before the Board that SAMA followed the Calculator Method asit is set out in Document 3.1.2, page 3, and in Document 3.1.3, page 1.

Those pages provide the precise formulae for valuing the Carrierproperty; no mention is made of an adjustment to “back out” the GST and PST, as the Appellant is suggesting. [27] The Committee’s reasoning, as revealed in this passage, is not entirely clear. In the first sentence, and without explanation, itappears to say that the Boards made no error in their treatment of the equity issue. On its face, holding that the Manual was “properly”applied suggests that the correctness standard was employed in coming to that conclusion.

Then, however, the Committee goes on toindicate that, if there was an error of law, it would nonetheless uphold the assessments on a correctness standard. It is not immediately

apparent how an error can be upheld through the application of the correctness standard but I take the Committee to be saying, albeit inelegantly, that even if the Boards erred on the equity issue, their bottom-line decisions were nonetheless sustainable because SAMA made no error in deciding not to back out GST and PST in its determination of the local multipliers. This seems to be the meaning of the last sentences in paragraph 38 as well.

Thus, overall, I conclude that, in regard to the Carrier assessments, the Committee appears to have reviewed the Boards’ decisions by using the correctness standard. [ 28 ] The Committee’s treatment of the Agrium property is also not well expressed. On that front, it wrote as follows: [39] With regard to the Agrium property (non-regulated), where the assessment is determined under the MVS, the parties agreed the process to calculate the RCN is the same as for regulated properties. Again, the issue is the treatment of the PST and GST.

The Board clearly considered the arguments put forth by the parties in arriving at its decision. We owe deference to the Board decision. We find the Board decision to uphold the Assessor’s assessment is reasonable and we will not interfere.

The Appellant did not prove assessor error. [ 29 ] The second last sentence of this passage directly indicates that the Committee applied the reasonableness standard of review but, curiously, it does not explain why that approach was being taken in the context of the Agrium appeal when the standard of correctness was used in dealing with exactly the same issue in the Carrier appeals. But, by going on to say “[t]he Appellant did not prove assessor error”, the Committee seems to be indicating that it applied, or also applied, the correctness standard.

This is a murky state of affairs. [ 30 ] At the end of the day, however, none of this is of any particular moment. SAMA, Carrier and Agrium agree that the

interpretation of the Act , the Cost Guide and the tax removal provision involve questions of law. (This is so for the tax removal provision because it is effectively adopted into the Manual and the Cost Guide by reference.) As a result, the Committee was obliged to apply the correctness standard in reviewing that aspect of the Board decisions. In turn, this Court must apply the correctness standard in reviewing questions of law arising from the Committee’s decision. See: City Centre at para 27 .

Thus, when all of the standard of review underbrush is cleared away, the root question that must be answered is whether the tax removal provision, correctly interpreted, required that PST and GST be deducted in the course of calculating the local multipliers for Carrier’s and Agrium’s properties. [ 31 ] Before dealing with that issue, it is necessary to say a word about equity. The Boards reasoned that equity is achieved if an assessor errs but errs consistently.

Putting the same point the other way around, the Board in the 2017 Carrier appeal said, “if this appeal is allowed based on this issue of local modifiers, equity would likely be disturbed across the province. If the RCN of an improvement should not include PST or GST…this should apply to all properties throughout Saskatchewan in order to maintain equity” (at para 21). This kind of thinking reveals a fundamental misunderstanding of the concept of equity.

Quite properly, SAMA makes no effort to defend the Boards’ line of thinking on this point. [ 32 ] Equity is one of the foundational concepts underpinning property assessment and

Part X of the Act . Indeed, s. 195(5) of the Act says that “[t]he dominant and controlling factor in the assessment of property is equity”. [ 33 ] Section 195(6) of the Act speaks specifically to the meaning of equity in the context of the assessment of regulated property like Carrier’s mill. It reads as follows:

(6) Equity in regulated property assessments is achieved by applying the regulated property assessment valuation standard uniformly and fairly. [ 34 ] In turn, the Act , in s. 193 (i), defines “regulated property assessment valuation standard” in this way: (i) “regulated property assessment valuation standard” means the standard achieved when the assessed value of the property is determined in accordance with the formulae, rules and principles set out in this Act , the regulations made pursuant to this Act , the assessment manual and any other guideline established by the agency to determine the assessed value of a property. [ 35 ] It is self-evident that the assessed value of a property cannot be determined “in accordance with the formulae, rules and principles” set out in the Act and elsewhere, as per this definition, unless those formulae, rules and principles are properly interpreted and applied.

If they are understood inaccurately, an assessment simply cannot be determined “in accordance” with them as required by s. 193(i). There is no room in any of this for the idea that, so long as an

interpretational error is made consistently, equity will be achieved. [ 36 ] The Act also speaks directly to the meaning of equity in the context of non-regulated property like Agrium’s mine. Section 195(7) says this:

(7) Equity in non-regulated property assessments is achieved by applying the market valuation standard so that the assessments bear a fair and just proportion to the market value of similar properties as of the applicable base date. [ 37 ] The term “market valuation standard”, in turn, is defined as follows in s. 193(e.1): (e.1) “market valuation standard” means the standard achieved when the assessed value of property: (

i) is prepared using mass appraisal; (ii) is an estimate of the market value of the estate in fee simple in the property; (iii) reflects typical market conditions for similar properties; and (iv) meets quality assurance standards established by order of the agency[.] [ 38 ] These provisions do not expressly state that the assessments of non-regulated properties must respect applicable formulae, rules and principles, or be conducted in accordance with them, but that is their unavoidable implication. The rule of law does not tolerate the notion that the Act , or the manuals, guidelines and so forth established pursuant to s. 12(1) (

d) of The Assessment Management Agency Act ,

SS 1986, c A-28.1 , or documents like the Marshall Service, adopted by reference into those manuals and guidelines, can be ignored or incorrectly interpreted or applied with impunity. The Court made this point very succinctly in Estevan Coal Corporation v Estevan (Rural Municipality No. 5) , 2000 SKCA 82 at para 39 , [2000] 8 WWR 474, when it said that “the assessment must be considered inequitable here since it was not done in accordance with the assessment manual”.

See also: Consumers Co-operative Refineries Limited v Regina (City) , 2020 SKCA 111 at para 102 , where Caldwell J.A. explained that, where there is an error in the assessment model underlying the market valuation standard, equity may not be achieved even if the error has been applied uniformly. [ 39 ] In short, equity cannot be achieved through the consistent or universal application of a flawed and incorrect understanding of the Act , the Manual or allied assessment instruments. It was a clear error for the Boards to think otherwise. [ 40 ] With that ground covered, I turn now to the question of the proper

interpretation of the tax removal provision. [ 41 ] As noted, Carrier and Agrium argue that the tax removal provision should be read as directing or requiring that GST and PST be backed out of local multipliers. Most fundamentally, they contend that GST and PST do not add value to property and should therefore not be seen as increasing its value for taxation purposes.

In this regard, Carrier and Agrium rely very heavily on 1542921 Alberta Ltd. v Calgary (City) , 2018 ABQB 607 , 77 Alta LR (6th) 261 [ 154 Alberta ]. [ 42 ] The issue in 154 Alberta concerned a situation where an amount representing GST had been included in determining the assessed value of commercial properties for tax purposes. Justice Nixon resolved the case in favour of the property owners on the basis that GST is, by its nature, external to value. He wrote as follows: [35] As a value-added tax, GST is imposed upon the value of a taxable supply, as represented by the consideration paid or payable.

Given that the GST is a value-added tax, it follows that GST does not form part of the value of that supply. [36] Contrary to the Cities’ argument, the GST is typically not embedded in that value. Indeed, that is one of the critical distinctions between the GST framework, which came into force on January 1, 1991, and the Federal Sales Tax (“FST”) framework, which existed before January 1, 1991.

FST was an embedded cost, whereas GST typically is not. [ 43 ] For its part, SAMA argues that the tax removal provision is not mandatory in the sense that, properly interpreted, it does not dictate that GST and PST must always be deducted in the calculation of local multipliers. In this regard, it makes two compelling points. First, it suggests that, as the Committee found, the plain wording of the tax removal provision indicates that it is in the nature of a “how to” instruction, not a mandatory directive. I agree with that reading.

The tax removal provision says only that specified percentage deductions “need to be applied to the Canadian local multipliers to remove all GST, PST and HST rates”. In other words, it provides the rates to use if GST, PST and HST are backed out of a local multiplier calculation. That is something quite different than saying such amounts must be backed out for all purposes. [ 44 ] The second point made by SAMA reinforces its first. The Marshall Service features a “What the Costs Contain”

section at s. 1, page 3. There, it is indicated that “[a]ll material and labor costs include all appropriate local, state and federal sales or GST taxes, etc.”. SAMA underlines this explanation and asks why the Marshall Service would build GST and PST into cost estimates only to invariably take them out again by way of the tax removal provision.

I agree with SAMA that this point strongly suggests the tax removal provision should not be read as meaning GST and PST must always be backed out of local multipliers but, rather, as setting out the relevant rates if they are backed out. [ 45 ] The reading of the tax removal provision advocated by SAMA also fits with the fact that the Marshall Service is not an assessment guide.

Rather, it is a valuation guide designed to be used for a variety of purposes including the calculation of replacement costs and the determination of depreciated values and insurable values and, according to its own terms at s. 1, page 1, is intended to be used by “independent appraisers, insurance companies, savings and loan associations, banks, architects, developers, accountants, assessors, engineers, and members of many other vocations”.

Backing out taxes might be appropriate for some of the purposes referenced in the Marshall Service but not for others and, hence, this recommends against reading the tax removal provision as rigidly as Carrier and Agrium suggest.

Although it carries little, if any, real evidentiary value, I also note that an email from CoreLogic (successor to Marshall & Swift) to SAMA dated October 6, 2017, and accepted into evidence by the 2017 Carrier Board, indicates that “[tax] removal itself is not mandatory [ sic ] it would depend on what kind of property or appraisal you would be working on”. [ 46 ] It is also interesting that the Cost Guide, at Document 3.3, page 1, in explaining the RCN concept, indicates that both direct costs and indirect costs are included in its rate schedules.

Indirect costs are said to include such things as legal and selling fees, survey fees, “net sales taxes” and other charges. It is of course true that the GST is a kind of sales tax in the broad sense that it is a consumption tax imposed on the sale of goods and services. But, in practical terms and at least in Canada, the GST is rather consistently distinguished from provincial sales taxes which, of course, are normally called just that, provincial “sales taxes”.

Therefore, although the point may not be wholly clear, the wording of Document 3.3 tends to suggest that GST is not included as an indirect cost but that PST is included. This too supports SAMA’s position with respect to whether PST should be backed out of local multipliers. [ 47 ] I further observe that, according to the CoreLogic email, the tax removal provision was added to the Marshall Service only in January of 2012.

This seems significant because, if the deduction of GST and PST is in fact a conceptually necessary step in the calculation of a local multiplier, it is curious that the tax removal provision was added only so recently. One might have expected such deductions to have been part of the landscape from the beginning if, as Carrier and Agrium suggest, they are a mandatory part of the calculation of a local multiplier.

It seems much more likely that the tax removal provision was added to the Marshall Service in 2012 as a convenience, as a ready guide to follow for backing out taxes if they are backed out. [ 48 ] In the end, I am unable to read the tax removal provision as directing that, in all circumstances, GST and PST must be removed when determining a local multiplier. This, however, does not necessarily resolve this appeal in favour of SAMA.

If the removal of GST and PST is only permitted – not mandated – by the tax removal provision, the issue is whether SAMA nonetheless erred by failing to remove those taxes when performing the assessments in issue here. [ 49 ] That leads to a somewhat curious aspect of this case. The record contains correspondence from SAMA to Carrier’s tax agent, in

the form of an email dated September 25, 2017, confirming that GST and PST were not backed out of the local multiplier used in the assessment of Carrier’s property. SAMA said, “We do not remove any tax from these rates”. But, in oral argument, counsel for SAMA indicated that GST had in fact been taken out and that, as a matter of principle, SAMA agrees with the proposition that GST must be backed out when calculating a local multiplier.

I understand SAMA to take that position because of its understanding that, by way of the input tax credit mechanism, GST can, in effect, be recovered by the owner of a commercial property and is thus not a cost that such an owner must ultimately bear. In this regard, SAMA points out that 154 Alberta , the case relied on by Carrier and Agrium, deals only with GST. The real issue, says SAMA, is whether it was obliged to back PST out of the local multipliers. [ 50 ] SAMA’s position on GST raises an issue about remedies which I will address later.

Aside from that, however, it is appropriate to proceed on the basis of SAMA’s concession or acknowledgement that the nature of the GST requires it to exercise its discretion under the tax removal provision in favour of backing GST out of local multipliers. Carrier and Agrium accept or agree with SAMA’s view of the operation and impact of the GST in this regard. [ 51 ] It is necessary, therefore, to turn to the PST. Carrier and Agrium base their PST argument on their

interpretation of the tax removal provision. They do not expressly argue that, even if this provision only empowers SAMA to back out PST in determining a local multiplier and does not require it to do so, SAMA was nonetheless obliged to exercise its authority in favour of removing PST.

Nonetheless, the substance of the arguments advanced by SAMA, Carrier and Agrium in effect canvassed this issue and thus allow a consideration and resolution of it. [ 52 ] In my view, the position taken by SAMA in relation to PST is logical and appropriate, i.e., it is logical and appropriate that PST not be backed out in the determination of a local multiplier. This is because sales taxes, such as the PST, are irrevocably embedded in the cost of a building or structure. Their value cannot be recouped by a purchaser in the way that, as explained by counsel, the value of GST can be recouped.

This point is recognized by the Marshall Service itself which, in describing the notion of replacement cost at s. 1, page 2, explains as follows: The replacement cost of a building is the total cost of construction required to replace the subject building with a substitute of like or equal utility using current standards of materials and design.

These costs include labor, materials, supervision, contractors’ profit and overhead, architects’ plans and specifications, sales taxes and insurance. … [ 53 ] If the purpose or objective of the RCN variable is to estimate the replacement cost of a building or structure, such costs should reflect not just the direct expense of materials and services incorporated into the building or structure but also the amount of PST that would have to be incurred in the course of obtaining and deploying those materials and services.

Accordingly, there is no basis for Carrier’s and Agrium’s attack on SAMA’s failure to back out PST when calculating local multipliers. The PST is a “cost” of replacing a structure just as surely as is the price that is paid for building materials themselves. SAMA’s approach is principled and fully in line with the overall property tax scheme and its objectives. [ 54 ] I conclude that, when calculating a local multiplier, SAMA must back out GST but need not back out PST. B.

Fettering discretion [ 55 ] Carrier and Agrium also argue that the Boards improperly fettered their discretion in considering the local multiplier issue and that the Committee erred by failing to address this matter in its decision. More specifically, Carrier and Agrium submit that the Boards fettered their discretion by (

a) deciding not to correct SAMA’s alleged failures to properly apply the tax removal provision because doing so would offend the principle of equity, (

b) deciding to defer the consideration of the effect of 154 Alberta to the Committee, and (

c) suggesting to SAMA that it closely examine the situation concerning the local multiplier to see if a province-wide change in its calculation should be made. [ 56 ] There is no doubt that the Boards acted improperly by proceeding as they did in relation to the points just mentioned. First, as explained earlier, they wholly misapprehended the concept of equity. Second, it was an error to defer the consideration of 154 Alberta to the Committee. The Boards had a duty to deal with the arguments and authorities presented to them. They were wrong to simply pass those arguments and authorities up the line.

Third, suggesting that SAMA re-examine its approach to local multipliers was no substitute for addressing the arguments advanced by Carrier and Agrium and making the decisions that were recommended by those arguments. [ 57 ] All of that said, I am unable to see any of this as being “fettering discretion” in the normal administrative law meaning of that term. Fettering discretion means proceeding in a way that “mechanically or blindly makes the determination without analyzing the particulars of the case and the relevant criteria”.

See: Guy Régimbald, Canadian Administrative Law , 2d ed (Markham, Ont: LexisNexis, 2015) at 236. In broad terms, the prohibition against the fettering of discretion seeks to ensure that each case is “looked at individually, on its own merits”. See: David Phillip Jones and Anne S. de Villars, Principles of Administrative Law , 7th ed (Toronto: Thomson Reuters, 2020) at 207. Carrier and Agrium have legitimate complaints about how the Boards dealt with their appeals. However, a concern about fettering discretion is not one of them. The Boards did not fail to consider their appeals on an individualized basis.

Thus, although the Committee should have addressed this issue in its decision, its failure to do so was of no ultimate consequence. [ 58 ] By way of conclusion, I see no merit in this wing of Carrier’s and Agrium’s argument, as framed. VII. CONCLUSION [ 59 ] As explained above, Carrier’s and Agrium’s argument about the proper

interpretation of the tax removal provision in the Marshall Service must fail. At the same time, and in view of SAMA’s concession about the GST issue, the Committee’s decision must be varied to the extent it endorsed the view that GST did not have to be deducted in calculating the local multipliers for the Carrier and Agrium properties. Accordingly, the bottom line of this appeal is that SAMA erred in the assessments in issue insofar as it failed to back out GST in determining those multipliers.

[ 60 ] That takes me to the remedies issue noted above. Counsel for SAMA advises in this Court that GST was, in fact, taken out during the calculation of the local multipliers. The record before the Court, however, is to the opposite effect. The email from SAMA to Carrier’s tax agent indicates that no taxes were removed in the course of determining local multipliers and the 2018 Carrier Board, at paragraph 25 of its decision, expressly recognized this point.

As a result, I see no alternative but to proceed on the basis of the evidence that was before the Committee and, therefore, on the basis that GST was not backed out in the calculation of the local multipliers for the Carrier and Agrium properties. Counsel’s representations cannot displace the record developed during the course of the proceedings. Significantly, there was no application to adduce fresh evidence on this issue in this Court.

There was a failed fresh evidence application before the Committee but, assuming it concerned the GST issue, SAMA made no attempt to appeal the dismissal of that application to this Court. In the end, therefore, this matter must be resolved on the basis that SAMA did not back out GST when it determined the local multipliers for Carrier’s and Agrium’s properties and that, in proceeding in this way, it erred. [ 61 ] Carrier and Agrium have achieved a measure of success on this appeal and are jointly entitled to one set of costs. “Richards C.J.S.” Richards C.J.S. I concur. “Whitmore J.A.” Whitmore J.A.

I concur. “Kalmakoff J.A.” Kalmakoff J.A.