Midtown Plaza Inc. Applicant/Prospective Appellant (Appellants/Respondent) v. City of Saskatoon, 2022 SKCA 145

Court of Appeal for Saskatchewan Citation: Midtown Plaza Inc. v Saskatoon (City) , 2022 SKCA 145 Date: 2022-12-16 Docket: CACV4071 Between: Midtown Plaza Inc.

Applicant/Prospective Appellant (Appellants/Respondent) And City of Saskatoon Respondent/Prospective Respondent (Respondent/Appellant) Docket: CACV4059 Between: Canalta Real Estate Services Ltd. (as represented by Altus Group Limited) Applicant/Prospective Appellant (Appellant) And City of Melfort (as represented by the Saskatchewan Assessment Management Agency) Respondent/Prospective Respondent (Respondent) Docket: CACV4060 Between: 101242692 Saskatchewan Ltd.

Applicant/Prospective Appellant (Appellant) And City of Regina Respondent/Prospective Respondent (Respondent) Before: Richards C.J.S. (in Chambers) Disposition: Leave to appeal granted in part Written reasons by: The Honourable Chief Justice Richards On application from: 2022 SKMB 95, 2022 SKMB 76 and 2022 SKMB 77 Application heard: December 14, 2022 Counsel: Nicholas Horlick for the Applicants Tyson Bull and Brandon Friesen for the City of Saskatoon Troy Baril for the City of Melfort Steven Dribnenki and Dona-Lynn Morley for the City of Regina Richards C.J.S. I.

INTRODUCTION [ 1 ] This is an application for leave to appeal from three separate decisions of the Assessment Appeals Committee of the Saskatchewan Municipal Board [Committee]. CACV4071 relates to the assessments of properties in Saskatoon. CACV4059 concerns the assessment of the Canalta Hotel in Melfort. CACV4060 involves commercial properties in Regina. [ 2 ] There is considerable overlap among the proposed appeals with respect to the questions on which leave is sought. I have numbered them for ease of reference. [ 3 ] The following questions are common to all three proposed appeals: (

a) the Committee erred in law when it misinterpreted subsection 165(3.1) of the Act by: (

i) concluding that the phrase “facts, conditions, and circumstances” is limited to physical characteristics, rather than those factors that may affect value identified in assessment guidance materials, according to the approach set out by this Honourable Court in Preston Crossing Properties Inc. v. Saskatoon (City) and Westfair Properties

(1981) Ltd. v. Prince Albert (City) ; and

(ii) concluding that information arising from after the base date cannot be considered in analysis under that provision; (

b) the Committee erred in law when it overlooked the evidence relating the effects of the COVID-19 pandemic to the economic downturn in Estevan, or by concluding that such evidence was not evidence; and (

c) the Committee erred in law when it required the Prospective Appellants to prove that income tends to affect the market value of properties that have been assessed according to the income approach. [ 4 ] In addition to these issues, the proposed Saskatoon appeal features this question: (

d) the Committee erred at law by: (

i) mischaracterizing the Board’s finding that the former theatre space was no longer theatre space; (ii) misinterpreting this Honourable Court’s decision in Prince Albert (City) v.

Twin Oaks Management Inc. as support for the general proposition that an agreement restricting the use of a property must not be considered in assessing that property; and (iii) failing to correct the Board’s reduction to the assessed value of $432,952 (for net operating income of $11.36 per square foot associated with the 38,112 square foot space), to $7,676,452.90 (being net operating income of $432,952 divided by the capitalization rate of 0.0564) representing the capitalized net operating income associated with that space; [ 5 ] With respect to the proposed Melfort appeal, leave is sought on this question, in addition to the common questions: (

e) the Committee erred at law when: (

i) it concluded that the Prospective Appellant relied solely on the actual income of the subject property; and (ii) it misinterpreted this Honourable Court’s reasons in Saskatoon (City) v Walmart Canada Corp. , 2018 SKCA 2 , by treating the phrase “totality of the evidence” as being limited to evidence tendered by the property owner; II. THE APPROACH [ 6 ] There is no dispute about the approach that should be taken in determining whether leave should be granted with respect to some or all of the foregoing questions.

It was recently clarified in SBLP Town N Country Mall Inc. v Moose Jaw (City) , 2022 SKCA 10 , 465 DLR (4th) 675: [42] Having canvassed the various submissions as to how the North Ridge approach might be adjusted, it may be helpful at this point to offer something of a restatement of the key part of North Ridge . I do so by noting, at the outset, and as per North Ridge itself, that the questions raised for consideration under each heading are not necessarily exhaustive.

I also note that, in considering the issue of whether to grant leave in this context, it is best to analyze matters on a proposed question-by-proposed-question basis rather than by looking globally at the potential appeal. Thus, I would restate the North Ridge approach as follows: First, is the proposed question of sufficient merit to warrant the attention of the Court of Appeal? ● Will the proposed question give rise to an appeal that is prima facie frivolous or vexatious?

If so, leave should be denied. ● Will the proposed question give rise to an appeal that is prima facie destined to fail having regard to the applicable standard of review and other relevant considerations? If so, leave should be denied. ● Will the answer to the proposed question have a material impact on the bottom line of the Committee’s decision?

If not, leave should be denied. ● In the normal course, leave should be granted only if there is a meaningful doubt as to the correctness of the Committee’s decision in relation to the proposed question. ● All other things being equal, the stronger the apparent merits of the applicant’s position on the proposed question, the more appropriate it will be to grant leave.

Second, is the proposed question of sufficient importance to warrant determination by the Court of Appeal? ● Does the answer to the proposed question have significant consequences for the proposed appellant or the proposed respondent? ● Does the proposed question transcend the particular in its implications? ● Does the proposed question raise a point of significance to the law of property assessment, to the larger assessment regime or to the administration of justice more generally? ● Does the proposed question raise a new or uncertain or unsettled point of law or jurisdiction? [43] All of this said, the process of deciding whether to grant or refuse an application for leave to appeal pursuant to s. 33.1 of the Act cannot be reduced to a rigid formula or equation. (See Rothmans at para 6.) The deliberations of a Chambers judge who entertains an application for leave will involve, at their heart, a pragmatic weighing of both the merit and the importance of the proposed appeal in a manner that reflects the Court’s role in the appellate scheme established by the Act and related statutes, all in an effort to determine whether the proposed appeal is something that warrants determination by the Court.

At the end of the day, an applicant for leave must

establish that, on balance, the relevant considerations “weigh decisively” in favour of leave being granted. (See Rothmans at para 6.) III. ANALYSIS A. The common questions [7] The central point pursued by the property owners is that the assessed values of their properties for 2021 should reflect theeffect of the COVID-19 pandemic on their businesses. They were unsuccessful in this regard at the relevant boards of revision and at theCommittee. [8] The key to this issue is s. 165(3.1) of The Cities Act, SS 2002, c C-11.1 [Act]. It reads as follows:

(3.1) Each assessment must reflect the facts, conditions and circumstances affecting the property as at January 1 of each year as if thosefacts, conditions and circumstances existed on the applicable base date. [9] The property owners argue that the Committee erred in law by failing to find that the “facts, conditions and circumstancesaffecting the property as at January 1 of each year” includes the impact of the pandemic.

Saskatoon, Melfort and Regina resist that notion,saying that “facts, conditions and circumstances” refers (at least in general terms) to physical matters affecting a property and not tomarket or economic conditions. They submit that market and economic factors are reflected in base date valuations. [10] Having read the materials filed by the property owners and considered the oral submissions made by counsel, I am unable toconclude that the owners’ line of argument is of sufficient merit to warrant the attention of the Court.

More particularly, I am unable toconclude that there is meaningful doubt as to the correctness of the Committee’s decisions on this issue. I say this for four main reasons. [11] First, and most importantly, the Court has spoken to this issue in a line of cases indicating that “facts, conditions andcircumstances” in s. 165(3.1) refers to the characteristics of the property itself and to factors that directly affect the property such aslocation and zoning. Significantly, those cases include ones decided after the Act was amended to bring in the market value concept. See:Westfair Properties

(1981) Ltd. v Prince Albert (City), 2006 SKCA 64 at para 42, 270 DLR (4th) 649; Preston Crossing Properties Inc. vSaskatoon (City), 2006 SKCA 63 at para 69, 279 Sask R 117; City Centre Equities Inc. v Regina (City), 2019 SKCA 80 at para 47, 91MPLR (5th) 1; Western Eagle Lodge Management General Partners Inc. v North Battleford (City), 2022 SKCA 53 at paras 22 and 24. [12] Second, the property owners’ approach would be extraordinarily difficult to operationalize. They suggest that “typical” marketconditions should not be seen to impact assessed value but that “dramatic” changes should be taken into account.

It is very unclear,however, how an assessor, a board of revision or the Committee might go about drawing such lines on a property-by-property and event-by-event basis. I doubt that the Legislature can be taken to have intentionally injected this degree of uncertainty into the propertyassessment system. [13] Third, the property owners’ approach is difficult to reconcile with the idea of a four-year assessment cycle.

Their reading of s.165(3.1) would tend to erode the concept of a “base year” and lead to a situation where assessed values are substantially built fromsomething like the ground up on a year-by-year basis. This does not sit happily with the overall scheme of

Part X of the Act. [14] Fourth, the owners’ position does not take proper account of the “Market Value Evidence” order of the SaskatchewanAssessment Management Agency dated December 15, 2017. It prescribes that market data that occurred or arose after January 1, 2019,shall not be used to determine non-regulated property assessments for the years 2021 to 2024. When pressed, the owners say this order,having the status of a regulation, cannot trump s. 165(3.1) itself.

However, they have made no effort to argue that the order is of no effectbecause it is in conflict with the Act. [15] It follows from all of this that I am obliged to deny leave to appeal on question (a)(i). Leave must also be denied with respect toquestion a(ii) as well because it is tied directly into the question of whether the effects of the pandemic should be factored into theassessed values of property. [16] The property owners properly acknowledge that questions (

b) and (

c) are relevant only if they are granted leave in relation toquestion (a). Given my decision to deny leave on question (a), I also deny leave on questions (

b) and (c). B. The additional Saskatoon question [17] The Centre Mall in Saskatoon has a vacant 38,112 square foot space that was once occupied by the Rainbow and Cineplexmovie theatres [theatre space]. The Mall’s lease with Cineplex precludes a new theatre from going into the theatre space. That space hassloped floors and is therefore unusable for retail purposes. [18] The assessor saw the theatre space as being of the “Anchor-Theatre” occupancy type and gave it a positive adjustment of$11.36 per square foot.

The Board of Revision perceived this to be a premium for occupancy type that should not have been applied giventhat the space was not being used as a theatre.

It ordered a $432,952 (38,112 square feet x $11.36 per square foot) reduction in the assessedvalue of the Mall. [19] In dealing with this issue, the Committee noted the agreement that the theatre space could not be used as a theatre and thenreferenced Prince Albert (City) v Twin Oaks Management Inc. (1995), (SK CA), 131 Sask R 223 (CA) [Twin Oaks],saying “based on Twin Oaks, this restriction should not be taken into consideration when establishing the assessed value” (at para 53).

TheCommittee agreed that it would have been an error to have applied a premium rent in respect of the theatre space but pointed out that thisis not what had happened, i.e., the $11.36 per square foot figure was not an adjustment to a base-type rent but, rather, it was the rentapplicable to theatre space under the assessor’s model. Then, saying that the theatre space had to be valued, the Committee determinedthat the only way to do that was to apply a rent of $11.36 per square foot as per the model.

[ 20 ] The owner of the Mall contends that the Committee erred by reading Twin Oaks as meaning that an assessor is obligated to ignore private agreements concerning the use of a property and that it erred by failing to engage with the substance of its position, i.e., that the theatre space should not be valued as a theatre if it could not be used as a theatre.

The owner also says the Committee erred by failing to recognize that the adjustment of $432,952 should have been capitalized in order to properly represent the extent to which the inability to use the theatre space reduced the value of the Mall. [ 21 ] For its part, Saskatoon acknowledges that the $432,952 rent amount should have been capitalized and that a reduction in the Mall’s assessed value would have been appropriate if the $11.36 per square foot rental adjustment had been a premium.

However, Saskatoon says the Committee made no bottom-line error because the theatre space had to be given some value and the only way to do that under the assessor’s model was by resort to the theatre rate, i.e., $11.36 per square foot. [ 22 ] By way of a bottom line, I am persuaded that the theatre space issue raises questions of law that are of sufficient merit and importance to warrant granting leave to appeal. However, I am not convinced that the questions proposed by the owner are the appropriate way to come at those issues. Question (d)(

i) is a question of mixed fact and law. Questions (d)(ii) and d(iii) do not frame the issue in the most helpful way. As a result, I would grant leave on these two admittedly somewhat overlapping questions: (

a) Did the Committee err in law by failing to give any effect to the agreement that precludes the space formerly occupied by the Rainbow and Cineplex theatres from being used as a theatre? (

b) Did the Committee err in law by failing to adjust the assessed value of the Mall to reflect the fact that the space formerly occupied by the Rainbow and Cineplex theatres was not being used as a theatre? C. The Canalta question [ 23 ] Canalta seeks leave on two questions specific to its situation. It contends, by way of question (e)(i), that the Committee erred in law when it concluded that Canalta relied solely on the actual income of its property in its submission to the Board of Revision. Through question (e)(ii), it suggests that the Committee erred in treating the phrase “the totality of the evidence” as being limited to the evidence tendered by a property owner. [ 24 ] Question (e)(

i) is a question of fact, not law. Further, it does not raise an issue of sufficient importance to warrant the attention of the Court. It is entirely specific to this case and does not involve a matter of general principle or broad application or significance. I would not grant leave to appeal this question. [ 25 ] Question (e)(ii) seizes on a specific phrase used by the Committee in its decision and attempts to elevate it into a question of law. I accept that, in paragraph 33, the Committee did say “the totality of the evidence was the actual performance of the property”.

However, it then went on, at paragraphs 34–37, to consider what appears to be the whole of the evidence before it on the point in issue and, at a minimum, to consider at least some of the evidence introduced by the assessor. It would follow, therefore, that whatever the Committee said at paragraph 33 about the actual income of the hotel being the “totality” of the evidence, it nonetheless did not restrict its analysis to that evidence.

As a result, it is by no means clear that question (e)(ii) deals with an issue that affected the bottom line of the Committee’s decision. [ 26 ] Further, and in any event, question (e)(ii), appreciated in context, is simply not a matter that is of sufficient importance to warrant the attention of the Court. I do not understand the phrase in issue to reflect some sort of general view by the Committee that it, or boards of revision, will or should look only to the evidence adduced by a property owner in the course of deciding an appeal.

Thus, the Committee’s decision does not, certainly in any clear way, raise a point that is significant to the law of property assessment or to the assessment regime overall. Nor does it have any apparent consequence beyond the four corners of this case. [ 27 ] In the end, the arguments in support of granting leave with respect to question (e)(ii) come far short of weighing decisively in favour of granting leave. IV. CONCLUSION [ 28 ] The property owners’ applications for leave to appeal are dismissed, save for these two questions concerning the Centre Mall: (

a) Did the Committee err in law by failing to give any effect to the agreement that precludes the space formerly occupied by the Rainbow and Cineplex theatres from being used as a theatre? (

b) Did the Committee err in law by failing to adjust the assessed value of the Mall to reflect the fact that the space formerly occupied by the Rainbow and Cineplex theatres was not being used as a theatre? [ 29 ] Given that the property owners have been largely unsuccessful in their application for leave to appeal, the respondents are each entitled to one set of costs. They are to be calculated on the basis of Column 2. “Richards C.J.S.” Richards C.J.S.