Detroit (City) v. Sandwich West (Township), [1970] SCR 627

Supreme Court of Canada

Detroit (City) v. Sandwich West (Township), [1970] S.C.R. 627

Date: 1970-03-19

The City of Detroit (Plaintiff) Appellant;

and

The Corporation of The Township of Sandwich West (Defendant) Respondent.

1970: February 17, 18; 1970: March 19.

Present: Abbott, Judson, Ritchie, Hall and Spence JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO.

Taxation—City of Detroit holding land in Ontario as lessee from Crown—Land and improvements not exempt from municipal taxation—The Assessment Act, R.S.O. 1960, c. 23, ss. 4(9), 34(1).

The City of Detroit, the lessee of certain land in the Township of Sandwich West in the Province of Ontario, made application to the Supreme Court of Ontario for a declaration that the land and improvements were exempt from municipal taxation. The land, on which is erected a substantial water intake structure, is owned by the Crown in right of the province and is under the Detroit River. The lease was originally granted by the province to the County of Wayne in the State of Michigan. The county later assigned the lease absolutely to the city, including the water intake structure.

The judge of first instance dismissed the application and his dismissal was affirmed by the Court of Appeal. The city then appealed to this Court.

Held: The appeal should be dismissed.

The appeal failed on the following grounds:

1. The city was not a municipality within the meaning of “municipality” in The Assessment Act, R.S.O. 1960, c. 23. It was, therefore, not within the exemption under s. 4(9) of the Act because it was not a county or municipality.

2. Even if the city were a “municipality”, the property in question did not belong to a municipality as was required by the Act. It belonged to the province and was under lease to the city.

3. Although the township could not assess and tax lands belonging to the province—this by virtue

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of s. 4(1)—it could, under s. 34(1), assess the land in the hands of a non-exempt tenant and tax that tenant.

4. Neither the provisions of s. 43 of The Assessment Act nor The Department of Municipal Affairs Act had any application to a foreign municipality or a foreign municipal public utility. The appellant, a foreign corporation holding lands in Ontario as lessee from the Crown, was assessable under s. 34 of The Assessment Act.

APPEAL from a judgment of the Court of Appeal for Ontario, dismissing an appeal from a judgment of Henderson J. Appeal dismissed.

W.B. Williston, Q.C., F.W. Knight and W.C. Graham, for the appellant.

Bernard Chernos, for the respondent.

The judgment of the Court was delivered by

JUDSON J.—The City of Detroit is the lessee of land in the Township of Sandwich West in the Province of Ontario. The land is owned by the Crown in right of the Province of Ontario and is under the Detroit River. There is a substantial water intake structure erected on the land. The lease is dated November 15, 1957, from the Province of Ontario to the County of Wayne in the State of Michigan. The County of Wayne, in 1959, assigned the lease absolutely to the City of Detroit, including the water intake structure. The lease expires in 1991 when the City of Detroit has the option to purchase the water structure as well as the rest of the water supply system for one dollar.

The problem is whether the Township of Sandwich West may assess and collect municipal taxes on this land and the improvements against the City of Detroit. The city made an application to the Supreme Court of Ontario for a declaration that the land and improvements were exempt from municipal taxation. The judge of first instance dismissed the application. His dismissal was affirmed by the Court of Appeal. Hence this appeal. My opinion is that the appeal fails.

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The first question is whether the City of Detroit is a municipality within the meaning of the Ontario Assessment Act, R.S.O. 1960, c. 23, and as such, exempt from taxation under s. 4(9) of the Act. Section 4(9) reads:

4. All real property in Ontario is liable to assessment and taxation, subject to the following exemptions from taxation:

* * *

(9) Subject to section 43, the property belonging to any county or municipality or vested in or controlled by any public commission, municipal parking authority or local board as defined by The Department of Municipal Affairs Act, except property of a harbour commission used for the parking of vehicles for which a fee is charged, wherever situate and whether occupied for the purposes thereof or unoccupied, but not when occupied by a tenant or lessee.

The learned trial judge and the Court of Appeal correctly, in my opinion, held that the City of Detroit was not a municipality within the meaning of “municipality” in The Assessment Act. The reason is obvious. Wherever The Assessment Act mentions a municipality it means a municipality within the Province of Ontario. To me this is plain beyond argument. The City of Detroit is, therefore, not within the above quoted exemption because it is not a county or municipality.

Even if it were a “municipality”, the city still fails. This property does not belong to a municipality. It belongs to the Province of Ontario and is under lease to the City of Detroit. From 1917 to 1954, s. 4(9) exempted lands belonging to or leased by a municipality. The words “or leased by” were struck out in 1954.

So far the appeal fails on two grounds. Although the Township of Sandwich West cannot assess and tax lands belonging to the province—this by virtue of s. 4(1)—it can assess the land

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in the hands of a non-exempt tenant and tax that tenant. This is done under s. 34(1) which reads:

34. (1) Notwithstanding paragraph 1 of section 4, the tenant of land owned by the Crown where rent or any valuable consideration is paid in respect of such land and the owner of land in which the Crown has an interest and the tenant of such land where rent or any valuable consideration is paid in respect of such land shall be assessed in respect of the land in the same way as if the land was owned or the interest of the Crown was held by any other person.

Therefore, up to this point the City of Detroit is assessable and taxable as a tenant of Crown lands notwithstanding the fact that the Crown could not be assessed or taxed. The land is to be assessed and taxed “as if the land was owned or the interest of the Crown was held by any other person.”

I have not yet dealt with the opening words of subs. (9)—“Subject to section 43”. Section 43 deals with municipal public utilities. These are defined by The Department of Municipal Affairs Act, R.S.O. 1960, c. 98, s. 1(g). The machinery of s. 43 of The Assessment Act is extremely complicated and I do not set it out in detail. All of these public utilities are deemed to be operated by a commission whether or not that is the actual fact and this notional commission has to pay to the municipality annual sums which are the equivalent of taxes calculated according to special standards and exemptions set out in s. 43. Those special standards and exemptions appear to be attractive to the appellant here. But neither s. 43 of The Assessment Act nor The Department of Municipal Affairs Act has any application to a foreign municipality or a foreign municipal public utility. The problem is reduced to very simple elements. A foreign corporation holds lands in Ontario as lessee from the Crown. It is assessable under s. 34 of the Assessment Act.

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I do not think it necessary to deal with the claim for complete immunity from taxation based upon the assertions that the State of Michigan is a sovereign state; that the County of Wayne is an “arm” or “emanation” of that state and that the City of Detroit is the agent of the county. The judge of first instance and the Court of Appeal have said nothing about this claim. I will follow their example. However, I do say that the expert evidence before us shows that no state of the United States of America is treated as sovereign for tax purposes in another state of that federal system.

I would dismiss the appeal with costs.

Appeal dismissed with costs.

Solicitors for the appellant: Bartlet, Richardes, Knight & Wilson, Windsor.

Solicitors for the respondent: Feigman & Chernos, Toronto.