Date: 20250219

Docket: T-163-23

Citation: 2025 FC 315

Ottawa, Ontario, February 19, 2025

PRESENT: The Honourable Mr. Justice Pamel

BETWEEN:

CITY OF OTTAWA

Applicant

and

HIS MAJESTY THE KING IN RIGHT OF CANADA, AS REPRESENTED BY THE MINISTER OF PUBLIC SERVICES AND PROCUREMENT CANADA, CANADA POST CORPORATION, and the NATIONAL CAPITAL COMMISSION

Respondents

JUDGMENT AND REASONS

I. Overview

[1] The applicant, City of Ottawa [Ottawa], seeks judicial review of the decisions of the respondents Public Services and Procurement Canada [PSPC], Canada Post Corporation [Canada Post] and National Capital Commission [NCC] respecting the applications for payments in lieu of taxes [PILTs] made by Ottawa in 2021 and 2022. To be clear, the dispute relates neither to a disagreement about the value of the federal properties involved, the taxable area of those properties, the methodology used for the calculation of PILTs, nor whether the properties in question are federal properties within the meaning of the Payments in Lieu of Taxes Act, RSC 1985, c M-13 [PILT Act]. Rather, the dispute relates to the respondents’ choice of an effective rate of taxation for the calculation of their PILTs for school purposes for those given years.

[2] For the reasons that follow, I would dismiss the underlying application for judicial review, with costs.

II. Background

[3] I should mention from the outset that although the NCC remains a party to these proceedings, by Order dated May 8, 2023, Justice Pallotta ordered that the portion of the underlying application as against the NCC be held in abeyance pending final resolution of the matter as against PSPC. Consequently, only PSPC—represented by the Attorney General of Canada—and Canada Post, as pleading respondents, have taken an active role in these proceedings in opposing the underling application. Therefore, going forward, when I refer to the respondents, I am limiting myself to the pleading respondents.

[4] Under section 125 of the Constitution Act, 1867 (UK), 30 & 31 Vict, c 3, reprinted in RSC 1985, Appendix II, No 5 [Constitution], the Federal Crown is exempt from provincial and municipal taxes. As such, no provincial or municipal government can impose any tax on federally owned property. However, it is undeniable that the federal government receives a range of municipal services for which municipalities need to be compensated. To balance tax fairness for municipalities with the preservation of this constitutional immunity from taxation, and to compensate for the real property tax that the municipalities would otherwise have levied on property belonging to the Federal Crown, the federal government established a regime of discretionary and voluntary PILTs under the PILT Act [the Program]. The purpose of the PILT Act “is to provide for the fair and equitable administration of [PILTs]” (section 2.1 of the PILT Act); in short, the reason for its enactment was because the federal government “wanted its administrators and agents to act as good residents of the municipalities where federal property is located” (Montréal (City) v Montreal Port Authority, 2010 SCC 14 [Montreal Port Authority] at para 14; see also Montréal (City) v Old Port of Montréal Corporation Inc, 2021 FC 806 [Old Port] at para 23).

[5] Ottawa has more than its fair share of federal properties. In fact, there are approximately 667 federal government or federal crown corporation properties within the boundaries of the city—not only the highest number in Ontario but also representing some of the highest property values in Ottawa—that are exempt from provincial and municipal taxes. The federal properties at issue in this case are the properties owned by the Government of Canada and managed by a federal department or agency for which the Program is administered by PSPC, those federal properties under the management, charge and direction of Canada Post, and those under the control and management of, or vested in, the NCC; both Canada Post and the NCC are included in Schedule III to the PILT Act and, in line with the Crown Corporation Payments Regulations, SOR/81-1030 [CCP Regulations], made pursuant to paragraph 9(1)(f) of the PILT Act, are responsible for the administration of the Program for the federal properties they manage.

[6] I should also mention that the Program administered by PSPC includes diplomatic properties which, although do not technically meet the definition of “federal property” in the PILT Act, are nonetheless the subject of an annual application for PILTs [PILTs application] submitted by Ottawa, as the relevant taxing authority within the meaning of the PILT Act. In response to Ottawa’s yearly PILTs applications with respect to the relevant federal properties, the respondents, amongst other federal agencies, provide their respective decisions in which they set out a summary explanation of the reasons for and the manner in which they have calculated the amount of their respective PILTs.

[7] Separate from the Program, and pursuant to section 257.7 of the Education Act, RSO 1990, c E.2 [Education Act], every municipality in the Province of Ontario [Province] is required to levy and collect the taxes for school purposes on, in particular, taxable business property within its territorial limits [Business Education Taxes or BET]. In Ottawa, depending on the tax class and the location of the particular property, the total applicable tax rate for any given business property is comprised of a number of different components applicable for different services; there are the constituent tax rates that are set by City Council—such as a city-wide rate, a conservation authority rate, a police rate, and a transit rate—as well as the rates with respect to BET [BET Rates] which are set by the Province as prescribed under Ontario Regulation 400/98 [School Tax Regulations] enacted under the Education Act. Ottawa has no control over the setting of BET Rates. Also, although BET collected by each of the 444 municipalities in Ontario are remitted to local school boards, for historical reasons, PILTs for school purposes made in lieu of the payment of BET are retained by the municipalities as part of their own budgets.

[8] In November 2020, the government of Ontario announced various COVID‑19 relief measures for private businesses which included, amongst other things, accelerating a plan already in place for streamlining the wide range of BET Rates across the Province by reducing high BET Rates within regions of Ontario to a predetermined target. The measures also included, as a further tax relief measure for private businesses that were impacted by the pandemic, the lowering the BET Rates to a single rate of 0.88%—ten basis points below the streamlining target which had existed at the time—for both commercial and industrial properties beginning in 2021. To be clear, there existed municipalities in Ontario where the BET Rates were already at 0.88% or lower, in which case those municipalities did not see any reduction of BET Rates for private businesses.

[9] It would seem that the COVID‑19 relief measures were not intended to benefit government-owned properties for which PILTs were made. In a letter dated November 17, 2020, the Ontario Ministry of Finance advised the municipalities in Ontario of the government’s plan to reduce BET Rates, but also stated that ““[t]o ensure municipalities are not negatively impacted by BET reductions, the Province will maintain BET rates at the 2020 BET rate for properties whose payments in lieu of education taxes municipalities are permitted to retain.” [Emphasis added.]

[10] To implement the measures, in February 2021, the government of Ontario filed Ontario Regulation 46/21, which amended the School Tax Regulations to include, amongst other things, the following subsection:

Rates for Payments in Lieu of Taxes for School Purposes

9.1 (1) This section applies with respect to the following payments in lieu of taxes for school purposes in respect of business property described in subsection 2(1), 3(1) or 9(1):

1. Payments in lieu of taxes for school purposes payable by the following:

i. A designated electricity utility within the meaning of section 19.0.1 of the Assessment Act.

ii. A corporation referred to in clause (d) of the definition of “municipal electricity utility” in section 88 of the Electricity Act, 1998.

2. Payments in lieu of taxes for school purposes provided for under the following provisions:

i. Subparagraph 24 iii of subsection 3(1) of the Assessment Act.

ii. Subsection 27(3) of the Assessment Act.

iii. Section 71 of the Ontario Water Resources Act.

iv. Subsections 84(2), (3) or (5) of the Electricity Act, 1998.

v. Subsection 4(4) of the Municipal Tax Assistance Act.

3. Payments in lieu of taxes for school purposes provided for under the Payments in Lieu of Taxes Act (Canada).

[Emphasis added.]

[11] The amendments to the School Tax Regulations [the School Tax Regulations, as amended] identified the different category of properties for which PILTs for school purposes were made—not just federal properties but also provincial properties that made PILTs for school purposes—and thus created a distinction between the rates applicable for school purposes on privately-owned business properties on the one hand, and the rates applicable to PILTs for school purposes on the other. The said amendments also created new tables of effective rates of taxation to be applied in both cases: tables 1 to 4 for privately-owned business properties depending on circumstance, and tables 5 to 8 for PILTs for school purposes for business properties, again depending on circumstance.

[12] The result was that, under the School Tax Regulations, as amended, privately-owned business properties—otherwise taxable properties—would be subject to a revised lower BET Rates not exceeding 0.88% [Revised BET Rate], while federal PILTs for school purposes, lands owned by the Crown in Right of Ontario and lands owned by Hydro One would continue to be subject to the existing BET Rates, many of which, depending on the region, were higher than 0.88% [Standard BET Rate]. For Ottawa, the applicable BET Rates set by the School Tax Regulations, as amended, are set out as follows:

BLANK	Privately-owned Taxable Business Properties (Revised BET Rate)	PILTs Eligible Federal Properties (Standard BET Rate)
Rate for the Commercial Property Class	0.880%	0.980%
Rate for the Office Building Property Class	0.880%	1.250%
Rate for the Industrial/Large Industrial Property Class	0.880%	1.250%

I am advised that the Province and Hydro One had agreed to apply the Standard BET Rate with respect to properties which they own or control.

[13] For the taxation years 2021 and 2022, Ottawa applied separately to the respondents for PILTs for school purposes based on Standard BET Rate, i.e., the effective rates of taxation which were higher than those to which privately-owned business properties were subject. I am advised by the parties that considerable discussion and exchanges took place between them in relation to how to deal with the situation created by the amendments to the School Tax Regulations; however, in the end, the respondents balked at using the Standard BET Rates and determined their PILTs for school purposes based on the Revised BET Rate.

[14] In letters dated July 13, 2021 (mistakenly dated June 21, 2020) and July 23, 2022, Canada Post explained that it was applying the Revised BET Rate as it considered that Ottawa’s use of the Standard BET Rate in its calculations was contrary to the CCP Regulations. On August 5, 2022, and after some exchanges between the parties as to the rationale for payment, PSPC sent a letter to Ottawa explaining its reasons for applying the Revised BET Rate for 2021 and 2022 [PSPC Decision]; reasons which included the lack of discretion it had under the PILT Act in determining rates for calculating payments to municipalities, as well as the need to ensure fair and equitable treatment across the country for all PILTs recipients. Going forward, I will refer to these three decisions as the “decisions under review”. For Ottawa, this represented what it calls an underpayment of PILTs of over $22 million for the two years in question (as regards PSPC, a shortfall of $10,694,989.35 in 2021 and $10,697,625.73 in 2022; for Canada Post, a shortfall of $469,228.35 in 2021 and $505,562.42 in 2022).

[15] A taxing authority that disagrees with any decision it has received regarding PILTs may apply for a review of its PILTs applications by the Payments in Lieu of Taxes Dispute Advisory Panel [DAP], a board appointed under subsection 11.1(1) of the PILT Act to “give advice to the Minister in the event that a taxing authority disagrees with the property value, property dimension or effective rate applicable to any federal property, or claims that a payment should be supplemented under subsection 3(1.1).” Between approximately October 2021 and November 2022, Ottawa applied to the DAP for review of its 2021 and 2022 PILTs applications for school purposes [Review Applications]. In letters dated December 3, 2022 (for the PSPC properties) and December 6, 2022 (for the Canada Post properties) [together the DAP decisions]), the DAP advised, rightly or wrongly, that the substance of the request was beyond the scope of its mandate and that it could not consider the Review Applications as the nature of the dispute fell outside its legislative authority.

[16] On January 29, 2023, Ottawa filed the underlying application seeking to set aside the decisions under review regarding the amount of PILTs for school purposes paid by the respondents for the 2021 and 2022 taxation years, and a declaration that Ottawa is entitled to additional payments for those years. Ottawa initially included as a respondent The Regional Group of Companies Inc. [The Regional Group], asserting that the latter was responsible for administering the Program for Canada Post. However, Ottawa discontinued the matter as against The Regional Group in February 2023 and proceeded to file an Amended Notice of Application in April 2023, no longer naming The Regional Group as a party.

[17] Having only received the DAP decisions in early December 2022, Ottawa is also seeking an order pursuant to section 18.1 of the Federal Courts Act, RSC 1985, c F-7, for an extension of time, if necessary, to commence the underlying application; the respondents have confirmed their consent to such a request. For my part, I am satisfied that Ottawa has met the test for an extension of time set out in Canada (Attorney General) v Hennelly, 1999 CanLII 8190 (FCA). In any event, I am of the view that the interests of justice call for the extension of time to be granted (Canada (Attorney General) v Larkman, 2012 FCA 204 [Larkman] at paras 61–62).

III. Issue and Standard of Review

[18] The validity of Ontario Reg 46/21 or the School Tax Regulations, as amended, is not the issue before me; rather, the issue before me is whether the decisions under review should be set aside as being unreasonable. During its submissions, Ottawa clarified that what it is seeking is an Order quashing the decisions under review and referring the matter back to the decision makers, albeit with direction to apply the Standard BET Rate, in line with the relief afforded by the Supreme Court and this Court in Montreal Port Authority.

[19] As for the standard of review, the parties agree that it is one of reasonableness (Old Port at para 31). As noted by the Supreme Court of Canada in Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65 [Vavilov], a reasonable decision is “one that is based on an internally coherent and rational chain of analysis and that is justified in relation to the facts and law that constrain the decision maker” (Vavilov at para 85; Mason v Canada (Citizenship and Immigration), 2023 SCC 21 [Mason] at para 8). This Court should intervene only if the decision under review does not bear “the hallmarks of reasonableness—justification, transparency and intelligibility” and if the decision is not justified “in relation to the relevant factual and legal constraints that bear on the decision” (Vavilov at para 99; Mason at para 35).

[20] Also, in Vavilov and Mason, the Supreme Court set out specific principles that apply to a reviewing court’s assessment of the reasonableness of a decision on a question of statutory interpretation. It is not necessary for the reviewing court to undertake a de novo analysis of the question or “ask itself what the correct decision would have been”. Rather, a reviewing court “must examine the administrative decision has a whole, including the reasons provided by the decision maker and the outcome that was reached” (Vavilov at para 116; Mason at para 68). As stated by the Supreme Court in Vavilov at paragraph 110:

What matters is whether, in the eyes of the reviewing court, the decision maker has properly justified its interpretation of the statute in light of the surrounding context. It will, of course, be impossible for an administrative decision maker to justify a decision that strays beyond the limits set by the statutory language it is interpreting.

[21] Ottawa also raises the argument of PSPC and Canada Post having fettered their discretion in rendering their respective decisions regarding the 2021 and 2022 PILTs applications. Issues of the fettering of discretion are not particularly amenable to a standard of review and are best resolved by asking whether the decision arose from a fettered discretion (Shakes v Canada (Immigration, Refugees and Citizenship), 2022 FC 1024 [Shakes] at para 28; Matharoo v Canada (Citizenship and Immigration), 2020 FC 664 at para 21; Austin v Canada (Citizenship and Immigration), 2018 FC 1277 at para 16; Stemijon Investments Ltd v Canada (Attorney General), 2011 FCA 299 at para 24).

IV. Analysis

[22] As stated, the underlying application relates to a dispute between the parties over the appropriate BET Rates—whether the Revised BET Rate or the Standard BET Rate—to be applied in the determination of PILTs for school purposes in relation to federal properties for 2021 and 2022.

A. Whether the decisions under review are inconsistent with the PILT Act

[23] Ottawa asserts that the decisions under review are not justifiable, and although there are several flaws with the decisions under review, at the end of the day the outcome is unreasonable because it is inconsistent with the purpose and intent of the PILT Act. I accept that statutory interpretation requires a textual, contextual and purposive analysis, which entails that the words of a statute 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 Parliament. However, from my perspective, although we can address the intent and purpose of the PILT Act as part of statutory interpretation, we must begin with the text of the statute, in particular the notion of an “effective rate” under the PILT Act.

[24] Subsection 4(1) of the PILT Act sets out the formula or methodology to be used for the calculation of PILTs; PILTs shall be determined by multiplying the “property value” by the applicable “effective rate” of taxation. Subsection 2(1) of the PILT Act defines these two terms as follows:

For Crown corporations, a similar but not identical formula for the determination of PILTs is set out in subsection 7(1) of the CCP Regulations. In addition, section 2 of the CCP Regulations defines the two terms in a similar fashion:

[25] In Montreal Port Authority, the Supreme Court made clear that the term “effective rate” is meant to be the rate applicable “as if the federal property were taxable property” and which the administrators of the Program for the various federal properties “would consider applicable to an immovable taxed in the municipality if it belonged to a private owner” (Montreal Port Authority at paras 32, 40) [emphasis added].

[26] Ottawa first argues before me that the BET Rates applicable to PILTs for school purposes set by the School Tax Regulations, as amended, are but rate suggestions or proposals, to be applied by the respondents in the determination of PILTs, and that nowhere in the applicable legislation are municipalities authorized to levy and collect taxes for school purposes on federal properties at those rates; this avoids, according to Ottawa, any conflict with the Federal Crown’s immunity from provincial and municipal taxation. Thus, in distinguishing between privately-owned business properties, on the one hand, and PILTs for school purposes, on the other, the School Tax Regulations, as amended, merely provide rates to be considered by PSPC and Canada Post for the determination of their PILTs for school purposes in relation to the federal properties for which they are responsible. As such, and although accepting that the respondents are not constitutionally bound by the “suggested” rates, PSPC and Canada Post nonetheless have the discretion, argues Ottawa, whether to apply the Standard BET Rates proposed by the Province when calculating PILTs for school purposes, a discretion which must be exercised in a reasonable manner while giving heed to the factual context and the purpose of the PILT Act.

[27] However, Ottawa continues by saying that considering the factual context—that the COVID‑19 relief measures were created to provide tax relief only to those private business owners affected by the COVID‑19 pandemic—, the intent and purpose of the PILT Act—which is to ensure the fiscal stability of municipalities by treating them fairly (Old Port at para 57; Trois-Rivières (City) v Trois-Rivières Port Authority, 2015 FC 106 [Trois-Rivières] at para 64)—as well as the harsh consequences on Ottawa of applying the Revised BET Rate, any decision by PSPC or Canada Post in this case not to choose the Standard BET Rate would be unreasonable. From my perspective, what Ottawa is describing is somewhat of a Hobson’s choice, as its argument sound to me as if PSPC or Canada Post in fact had no discretion when it came down to applying the “suggested” rate proposed by the Province.

[28] In any event, Ottawa cites Old Port at paragraph 56, to argue that although a certain amount of discretion does exist in selecting the effective rate to be applied in the calculation of PILTs, “[a] discretionary power is not absolute and untrammelled as it is constrained by the scheme and object of the statute that confers it (CUPE v Ontario (Minister of Labour), 2003 SCC 29 at para 107)”. Here, argues Ottawa, PSPC and Canada Post did not exercise their discretion appropriately in that, given the exceptional nature of the COVID relief provided by Ontario for the benefit of private businesses, it was inconsistent with the intent and purpose of the PILT Act that PSPC and Canada Post preferred the lower Revised BET Rate so as to gain an annual $11 million windfall; this is especially so considering the respondents are receiving the same level of services as in the past. If PSPC and Canada Post were truly giving careful consideration to the intent of the PILT Act, it was unfair, argues Ottawa, and therefore unreasonable as contrary to such intent as well as the rationale behind the amendments made to the School Tax Regulations, for PSPC and Canada Post to have chosen the Revised BET Rate when determining their PILTs, a choice which resulted in significant hardship being suffered by the municipality as the relief measures that were never intended for the respondents. Consequently, given the harshness of the decisions under review, according to Ottawa, PSPC and Canada Post made a reviewable error in applying the Revised BET Rate.

[29] The respondents would not characterize the result as a windfall for them, but rather as the unintended consequences of what was done by the Province, and the manner in which it was done. In addition, on the issue of fairness, the respondents submit that the way the PILT Act achieves its purpose of fairness is by ensuring that the government departments and Crown corporations pay tax on the same basis as private taxable property, and that it would in fact be unfair to subject government departments and Crown corporations to a different, higher level of taxation than the level of taxation applied to other corporations, some of which, argues Canada Post, it competes with. I would tend to agree with the respondents.

[30] The difficulty I have with Ottawa’s position is that, although it stresses the intent and purpose of the PILT Act, it remains relatively silent on how the Standard BET Rate, as applicable to PILTs, fits within the definition of “effective rate” under the PILT Act or the CCP Regulations so as to be available for PSPC and Canada Post to even consider.

[31] As stated by the Supreme Court in Vavilov at paragraph 120:

[120] But whatever form the interpretive exercise takes, the merits of an administrative decision maker’s interpretation of a statutory provision must be consistent with the text, context and purpose of the provision. In this sense, the usual principles of statutory interpretation apply equally when an administrative decision maker interprets a provision. Where, for example, the words used are “precise and unequivocal”, their ordinary meaning will usually play a more significant role in the interpretive exercise: Canada Trustco Mortgage Co. v. Canada, 2005 SCC 54, [2005] 2 S.C.R. 601, at para. 10. Where the meaning of a statutory provision is disputed in administrative proceedings, the decision maker must demonstrate in its reasons that it was alive to these essential elements.

[32] Here, the words used to define “effective rate” are clear and unequivocal. Ottawa begins its analysis by looking to the policy-driven decisions of the Province in amending the School Tax Regulations and argues that the notion of “effective rate” under the PILT Act must, for reasons of fairness, take into consideration those policy decisions and be interpreted so as to enable them. In other words, the purpose and intent of the PILT Act must include those policy decisions of the Province. I cannot agree; Ottawa seems to be trying to fit a square peg into a round hole on the coattails of statutory intent and purpose. The starting point of the analysis should be the text of the PILT Act itself, and the Program it has created.

[33] First, there is no issue between the parties that the decision itself by the respondents to even make PILTs is a discretionary one; paragraph 3(1)(a) of the PILT Act provides that the Minister “may” make payments “in lieu of a real property tax for a taxation year” (see also Montreal Port Authority at para 40). There is also no issue between the parties that such discretion exists with respect to the determination of the amount of PILTs; Ottawa recognizes that the Province cannot dictate the amount of PILTs, which is ultimately within the discretion of the administrators of the Program for the various federal properties. What is clear is that the respondents need not seek to duplicate the tax systems otherwise applicable to private property owners within the relevant municipality (Trois-Rivières at para 58). The Program is a distinct and autonomous regime where the managers of federal properties are “not limited to a ‘mechanical application’ of municipal assessments” (Montreal Port Authority at paras 34–35; Trois-Rivières at para 59).

[34] In addition, at least before me during the hearing, the parties agreed that PSPC and Canada Post also enjoy some level of discretion in selecting the effective rate to be applied in the determination of PILTs—in fact the definition of “effective rate” in subsection 2(1) of the PILT Act provides that it is to be determined “in the opinion of the Minister”. In Montreal Port Authority, in discussing the level of discretion to be afforded the managers of federal properties in the computation of PILTs, the Supreme Court acknowledged that “choosing the effective rate of tax may be difficult at times, particularly where the choice depends on how the property is classified and the provincial legislation provides for the possibility of applying different rates depending on the nature of the property involved” (Montreal Port Authority at para 35). The Supreme Court went on to confirm that “managers of federal property must retain some latitude so that they can react to protect federal government interests should municipalities use their taxing powers in bad faith to specifically target federal Crown property” (Montreal Port Authority at para 35).

[35] To be clear, the situation before me is not one of bad faith by the Province; there is no suggestion that by setting different BET Rates for private business owners distinct from the rate to be used for the determination of PILTs in respect to government properties, the Province was somehow acting in bad faith to specifically target federal properties. In fact, its own properties as well as the properties of Hydro One were also caught by the distinction. Nor is this a situation of a distinction being made between rates based upon the manner in which the federal property is classified or the nature of that property.

[36] That said, and although there does exist some level of discretion on the part of the respondents in selecting the effective rate to be applied in the determination of PILTs, I agree that such discretion is confined; it exists as long as the selection of the effective rate is consistent with the scheme and object of the PILT Act and is informed by the tax system that would apply to the federal property in issue if that property were taxable property (Halifax (Regional Municipality) v Canada (Public Works and Government Services), 2012 SCC 29 [Halifax] at para 42; Trois-Rivières at para 63). I appreciate that the situations in Halifax and Trois-Rivières involved the issue of the establishment of property value rather than the selection of an effective rate; however, I find the comments of Justice Cromwell in Halifax and Justice Locke, as he then was, in Trois-Rivières, equally applicable in the context of discussing the level of discretion retained by PSPC and Canada Post in the selection of an effective rate. The issue here is whether the scheme enacted by the Province fits within the provisions of the PILT Act. On the one hand, on a plain reading of the PILT Act, the Revised BET Rate does, as it is consistent with the definition of effective rate in the PILT Act, a “rate of real property tax” levied on a taxable property. On the other hand, as regards its application to PILTs, it seems to me that the Standard BET Rate does not, as it is not a “rate of a real property tax” levied on taxable property, but only, as conceded by Ottawa, a proposed or suggested rate for the administrators of the Program for the various federal properties to consider when determining PILTs.

[37] Ottawa asserts before me that the authority of the Province to set rates intended to be applied to PILTs in respect of federal properties comes from the Education Act. I cannot agree; a Province cannot by its own statute grant itself jurisdiction which it does not otherwise have under the Constitution. There is of course also the issue of whether the Province even has the authority under the Education Act to legislate “suggested” BET Rates which are not to be levied on business property as defined in that statute but rather to be applied to PILTs, or even whether in legislating such rates, the Province is doing in practice what it cannot do constitutionally, i.e., to set a rate it fully expects—given the context as well as the intent and purpose of the PILT Act—will be used in the determination of PILTs on federal properties that are otherwise exempt from taxation.

[38] However, putting those issues aside, and although no doubt true that private businesses and not government entities were the intended beneficiaries of the COVID‑19 tax relief measures in question, the fact remains that the decision on which effective rate is to apply must always be “justified in relation to the facts and law that constrain the decision maker” (Vavilov at para 85; Old Port at para 56) [emphasis added]. Here, the law that constrains PSPC and Canada Post includes the definition of “effective rate” under the PILT Act and “corporate effective rate” under the CCP Regulations. I have not been convinced by Ottawa that the decisions under review were unreasonable in essentially determining that the Standard BET Rate, as it is meant to apply to PILTs under the School Tax Regulations, as amended, during 2021 and 2022, is not an “effective rate” as defined in the PILT Act; it is not the rate that local taxpayers are paying under the circumstances. I am mindful of section 12 of the Interpretation Act, RSC, 1985, c I-21, which provides that enactments are to be “given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects”. However, the Standard BET Rate, as it applies to PILTs, is not a “rate of real property tax” which “would be applicable to any federal property if that property were taxable property” (subsection 2(1) of the PILT Act) or which the administrators of the Program for the various federal properties “would consider applicable to an immovable taxed in the municipality if it belonged to a private owner” (Montreal Port Authority at para 32).

[39] The problem may exist in the manner in which the amendments to the School Tax Regulations were drafted, an issue that was raised by the Minister of Public Services and Procurement in the PSPC Decision, as set out below. The respondents are not arguing that the Province is prohibited from distinguishing between tax class and types of property. However, to be able to do so presupposes that the properties in question are subject to the jurisdiction of the taxing authority; that is not the case here. It is well established that the calculation of a PILTs “must be based on the tax system normally imposed on a private owner in the place where the federal property is located” (Trois-Rivières at para 61; see also Montreal Port Authority at paras 40, 46). Here, there seems nothing unreasonable with the determination that, in essence, the School Tax Regulations, as amended, seek to impose the Standard BET Rate not on a taxable immovable but rather on PILTs, a voluntary payment made under the PILT Act. In a way, this situation seems analogous to that which existed in Montreal Port Authority—where the Montreal Port Authority and the Canadian Broadcasting Corporation determined their PILTs to the City of Montreal by basing their calculations on a fictitious tax system they themselves had created arbitrarily (at para 40)—but in reverse.

[40] Even putting aside, as Ottawa urges that I do, the notion of what a private owner would be paying under the circumstances and focusing simply on the definition of effective rate in the PILT Act, any effective rate that would be available for consideration is limited to those rates which “would be applicable to any federal property if that property were taxable property”. In the way the School Tax Regulations, as amended, are set out, the only rate that is actually meant to be applicable to taxable property is the Revised BET Rate. Ottawa calls the approach taken by PSPC and Canada Post overly technical and concedes that if we are to take a technical approach to the determination of the proper effective rate, such would be problematic for the City. It is for this reason that Ottawa is urging a purposive approach and saying that a technical route is not necessary. However, Ottawa’s urging is misguided, as the City is asking me to read into the legislation something that is not there. Here, the Standard BET Rate is to be applied to the determination of PILTs, and not as a rate for the levying of real property taxes on taxable properties in the same way the Revised BET Rate is to be. In fact, what the Standard BET Rate is being applied to is specifically not taxable properties and is premised on the fact that the person paying is in effect not a taxpayer. Here, in the opinion of PSPC and Canada Post, only the Revised BET Rate was an “effective rate” consistent with the text of the PILT Act and CCP Regulations, and with the case law establishing what is meant by an “effective rate”; I see nothing unreasonable with that assessment.

[41] As a matter of statutory interpretation particular to the PILT Act, Ottawa cites paragraphs 55 to 61 of Old Port. I am in agreement today with the principles set out therein as I was when I first drafted my decision in that case. However, even taking a generous and holistic approach as Ottawa is asking me to, in considering the intent and purpose of the PILT Act and taking into consideration the harshness of the decisions under review on a city like Ottawa that has more tax-exempt federal properties within its boundaries than any other municipality in Ontario, I cannot read into the School Tax Regulations, as amended, or the PILT Act what is clearly not there; even keeping in mind that statutes are to be “given such fair, large and liberal construction and interpretation as best ensures the attainment of its objects” (section 12 of the Interpretation Act), statutory interpretation cannot rewrite the law. In any event, it is not for me to determine the nature of BET Rates created with the amendments to the School Tax Regulations, nor, as stated earlier, is it to ask myself what the correct decision should have been. Here, looking at the decisions under review as a whole, as well as the reasons given, I am not convinced that the choice made by PSPC and Canada Post to select the Revised BET Rate was unreasonable.

[42] I accept that the decisions under review are not models of perfection and clarity; however, they need not be (Vavilov at para 91). In this case, PSPC stated that the School Tax Regulations, as amended, “reduced business education tax rates for taxable business properties” and that the “consequence of this change and the interaction with the long-standing [PILT Act] create an inconsistency between the treatment of taxable and federal [PILT] properties within the province…” Regarding Canada Post, it set out the definition of “Corporation Effective Rate” under the CCP Regulations as being “the rate of real property tax or of frontage or area tax that a corporation would consider applicable to its corporation property if that property were taxable property”, and concluded: “The rate used in [Ottawa’s] application for [PILTs] is contrary to the [CCP Regulations]. As a result, the amount of eligible [PILTs] has been recalculated using as the Corporation Effective Rate that rate which would be applicable if the property were taxable property”. It seems clear that both PSPC and Canada Post were focused on applying the effective rate applicable to taxable business properties, which is consistent with the PILT Act; there is nothing unreasonable in them doing so, nor in their reasoning as I set out below.

[43] Ottawa is understandably unhappy with the outcome, and asserts that even putting aside its arguments that the decisions under review failed in obtaining the necessary level of justification, the decisions can be quashed solely on the basis of the outcome and quality, regardless of the reasoning; according to Ottawa, although there are good reasons to find that the reasoning of the respondents is deficient, even putting those reasons aside, it is the outcome and the substance of the decisions under review which are perverse and militate in favour of setting the decisions aside. I cannot agree; in considering the decisions under review as a whole and the outcome that was reached, as I am required to do, and, in particular, the legislative constraints as regards the selection of an effective rate, I have not been convinced by Ottawa that the respondents somehow unreasonably exercised their discretion in choosing the Revised BET Rate in determining their PILTs for school purposes.

B. Fettering of Discretion

[44] Ottawa makes a similar argument as the one I addressed earlier, but this time in the context of the fettering of discretion. The City argues that PSPC, in particular, wrongly fettered its discretion by taking the position that it lacked discretion under the PILT Act in determining rates for calculating payments to municipalities, and that they were somehow bound to apply the Revised BET Rates. For its part, PSPC argues that the correct rate to be applied is the Revised BET Rate and submits that, although it does have some discretion to select an effective rate, it does not have—as set out in the PSPC decision—the discretion in this case to choose a rate which is inconsistent with the definition of “effective rate” under the PILT Act; Canada Post supports this position.

[45] I accept that discretion conferred by statute must be exercised consistently with the purposes underlying its grant (Ontario (Public Safety and Security) v Criminal Lawyers’ Association, 2010 SCC 23 at para 46; Baker v Canada (Minister of Citizenship and Immigration), 1999 CanLII 699 (SCC) at paras 53, 56, 65), and that the fettering of discretion is a reviewable error that results in the decision being quashed (Shakes at para 28). In this case, as stated earlier, the discretion is not untrammelled and must be exercised in compliance with the requirements of the PILT Act (Halifax at para 42). As stated by the Supreme Court in Montreal Port Authority at paragraph 33:

However, in a country founded on the rule of law and in a society governed by principles of legality, discretion cannot be equated with arbitrariness. While this discretion does, of course, exist, it must be exercised within a specific legal framework. Discretionary acts fall within a normative hierarchy. In the instant cases, an administrative authority applies regulations that have been made under an enabling statute. The statute and regulations define the scope of the discretion and the principles governing the exercise of the discretion, and they make it possible to determine whether it has in fact been exercised reasonably.

[46] In my opinion, the respondents did not fetter their discretion, but rather exercised it in a way that is constrained by the PILT Act. I read the PSPC Decision as saying that the PSPC had no discretion to apply a rate that was inconsistent with the PILT Act and the CCP Regulations; there is no discretion, it seems to me, to choose an effective rate which is inconsistent with the PILT Act and is not informed by the tax system that would apply to the federal property in issue as if that property were taxable property.

[47] In the PSPC Decision, the Minister of Public Services and Procurement raised the issue as follows:

The Province of Ontario’s March 2021 legislative amendment reduced business education tax rates for taxable business properties. The consequence of this change and the interaction with the long-standing Payments in Lieu of Taxes Act create an inconsistency between the treatment of taxable and federal payments in lieu of taxes properties within the province, resulting in the identified shortfall for municipalities.

I have urged the Province of Ontario to redesign the measure in order to correct these unintended consequences. Federal officials remain available to the Province for consultation to ensure that there are no further conflicts with the Payments in Lieu of Taxes Act.

[Emphasis added.]

[48] Given my finding that there was nothing unreasonable with the respondents choosing the Revised BET Rate as the effective rate for the purposes of determining their PILTs, I do not find that the respondents’ decisions to apply this rate are a fettering of discretion. The respondents reviewed the assessment authority’s valuation and made their own independent determination of the value that would be attributed to its properties by an assessment authority. The decisions to apply the Revised BET Rate were made in the context of exercising the discretion to make a PILTs that must not exceed the product of the effective rate and the property value. These decisions are not unreasonable in light of the applicable facts and the law.

C. Sufficiency of Reasons

[49] In addition to asserting that they are not justifiable, Ottawa also argues, even if the decisions under review meet the test of transparency and intelligibility—issues that were not challenged by Ottawa—that the decisions under review were not sufficiently justified. According to Ottawa, the reasons given by PSPC and Canada Post in the decisions under review were flawed, deficient and incomplete as they paid no heed to the overall context—no mention is made therein that we are dealing with COVID‑19 relief measures—nor to the underlying purpose, intent, goals and scheme of the PILT Act. Canada Post argues that its decision clearly sets out the applicable statutory framework, communicates the determination made and explains the rationale for that decision, and is therefore sufficiently justified. PSPC argues that its decision clearly sets out the reasons for its decision and, in any case, “must not be assessed against a standard of perfection” (Mason at para 61).

[50] The Federal Court of Appeal provided the following guidance with respect to the sufficiency of reasons in Farrier v Canada (Attorney General), 2020 FCA 25:

[13] In Vavilov, the Supreme Court clearly indicated that when an administrative decision-maker must make a reasoned decision in writing (this is the case here […]), the assessment of the reasonableness of the decision must include an assessment of its justification and transparency. As the Supreme Court pointed out, the reasons given by the administrative decision-maker must not be assessed against a standard of perfection. The administrative decision-maker cannot be expected to refer to all of the arguments or details the reviewing judge would have preferred. “Administrative justice” will not always look like “judicial justice” (Vavilov at paragraphs 91 to 98).

[14] The sufficiency of reasons is assessed by taking into account the context, including the record, the submissions of the parties, practices and past decisions of the decision-maker (Vavilov at paragraph 94). However, the Supreme Court noted the principle that the exercise of the Appeal Division’s power must be justified, intelligible and transparent, not in the abstract, but to the individuals subject to it (Vavilov at paragraph 95).

[51] I am not convinced that the reasons lack sufficiency. It is true that both decisions are brief and do not offer a detailed analysis of the intent and purpose of the PILT Act, but I would not have expected that they would have given the prior discussions and exchanges between the parties, as set out in the evidence, in particular after the interim decisions were made, followed by further discussions on the issues. In fact, the concern regarding the impact on Ottawa of PSPC applying the Revised BET Rate was specifically addressed before the Minister of Public Services and Procurement. As I stated above, the focus of concern was on the legal constraints imposed by the definition of effective rate in the PILT Act, and it was not unreasonable for the respondents to find that there is only one reasonable interpretation of the “effective rate” under the PILT Act, which is that the effective rate is the Revised BET Rate. The level of justification is a function of the underlying issue, as well as the history of the parties. As stated, and under the circumstances, I am not convinced that the reasoning of the decisions under review was insufficient for Ottawa to understand why the decisions were rendered as they were.

[52] Taking into consideration the issue of primary concern to the respondents, the evidentiary record and the submissions of the parties which confirmed that the parties had been grappling with the issues raised by the amendments to the School Tax Regulations for some time, I find that the decisions under review are justified, intelligible and transparent to the parties subject to it (Vavilov at para 95); on the whole, the decisions under review have not been shown to me to be unreasonable (Vavilov at para 312).

V. Conclusion

[53] I will dismiss the underlying application. As for costs, the parties confirmed before me that $5,000 should be awarded to each successful party. As both PSPC and Canada Post are the successful parties, I will order costs to each of them in the amount of $5,000.

 

JUDGMENT in T-163-23

THIS COURT’S JUDGMENT is that:

1. The applicant’s request for an extension of time is granted.

2. This application for judicial review is dismissed.

3. The respondents are each awarded $5,000 in costs.

"Peter G. Pamel"

 

FEDERAL COURT

SOLICITORS OF RECORD

DOCKET:	T-163-23
STYLE OF CAUSE:	CITY OF OTTAWA v HIS MAJESTY THE KING IN RIGHT OF CANADA, AS REPRESENTED BY THE MINISTER OF PUBLIC SERVICES AND PROCUREMENT CANADA, CANADA POST CORPORATION, and the NATIONAL CAPITAL COMMISSION
PLACE OF HEARING:	ottawa, ontario
DATE OF HEARING:	June 10, 2024
JUDGMENT AND REASONS:	PAMEL J.
DATED:	february 19, 2025

APPEARANCES:

Timothy J. Hill Matthew Helfand	For The Applicant
Michael Roach	For The Respondent His Majesty the King in Right of Canada, as represented by the Minister of Public Services and Procurement Canada and the National Capital Commission
Christopher J. Rae	FOR THE RESPONDENT Canada Post Corporation

SOLICITORS OF RECORD:

Aird & Berlis LLP Toronto, Ontario	For The Applicant
Attorney General of Canada Ottawa, Ontario	For The Respondent His Majesty the King in Right of Canada, as represented by the Minister of Public Services and Procurement Canada and the National Capital Commission
Fasken Martineau DuMoulin LLP Toronto, Ontario	FOR THE RESPONDENT Canada Post Corporation