Regional Assessment Commissioner Region No. 14 v. Office Specialty Ltd. et al., [1975] 1 SCR 677

Supreme Court of Canada

Regional Assessment Commissioner Region No. 14 v. Office Specialty Ltd. et al., [1975] 1 S.C.R. 677

Date: 1974-10-01

The Assessment Commissioner of the York Assessment Office Appellant;

and

Office Specialty Limited Respondent;

and

The Regional Assessment Commissioner Region Number 14 Appellant;

and

Office Specialty Limited and the Township of East Gwillimbury Respondents.

1974: May 1, 2; 1974: October 1.

Present: Laskin C.J. and Martland, Judson, Spence and Dickson JJ.

Assessment—Real property—Valuation at “market”, “actual” value—Restatement of principle—“market value”, “actual value” synonymous in rating legislation—The Assessment Act, R.S.O. 1960, c. 23, s. 35—The Assessment Act, 1968-69 (Ont.), c. 6, s. 27.

Section 35 of The Assessment Act, R.S.O. 1960, c. 23, required that assessment of real property be made at “actual value”, however The Assessment Act 1968-69 (Ont.), c. 6., (now R.S.O. 1970, c. 32) at s. 27 uses the term “market value”. The assessor used and the Municipal Board affirmed, in circumstances where property was unlikely to be readily marketable by reason of its use and location, where the property was not going to be put on the market and where the property was thoroughly suitable for its present use, the depreciated replacement cost method rather than the comparative method based on market data. The Court of Appeal held a contrary opinion.

Held: The appeal should be allowed with costs.

The substitution of the requirement to assess real property at its “market value” rather than at its “actual value”, the only difference between The Assessment Act, R.S.O. 1960 c. 23, and The Assessment Act, 1968-69 (Ont.) c. 6 (now R.S.O. 1970, c. 32), does not alter the basis of the assessment of rateable property. The Courts had long held these terms, as used in rating legislation, to be interchangeable and synonomous. The principle whereby “actual” or “market” value can be ascertained is well stated in Montreal v. Sun Life Assurance Co. of

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Canada, [1952] 2 D.L.R. 81. The owner has to be regarded as a possible purchaser or an estimate made of what he would spend on a building to replace that which is being valued.

Montreal v. Sun Life Assurance Co. of Canada, [1952] 2 D.L.R. 81 applied.

APPEALS from a judgment of the Court of Appeal for Ontario[1] allowing appeals from orders of the Ontario Municipal Board confirming assessments for taxation in the years 1970 and 1971. Appeals allowed, decisions of the Municipal Board affirmed, with costs.

B. Chernos, Q.C., and R.M. Syer, for the appellants.

Dennis Lane, Q.C., for the respondents.

The judgment of the Court was delivered by

JUDSON J.—We are concerned in these appeals with two building assessments made in 1969 and 1970 for taxation in the years 1970 and 1971. The 1969 assessment was for $655,‑600. On appeal to the County Court Judge, this assessment was reduced to $300,000. A further appeal to the Municipal Board resulted in the figure of $663,200. The Court of Appeal sent the assessment back to the Municipal Board for a re-hearing according to certain principles formulated by it. The 1970 assessment for taxation in the year 1971 followed the same course except that the appeal to the County Court Judge was omitted.

The 1969 assessment was made pursuant to section 35 of The Assessment Act, R.S.O. 1960, c. 23, which required the assessment to be at actual value and directed the assessor “in assessing land having buildings thereon, (that) the value of the land and building shall be ascertained by giving consideration to present use, location, cost of replacement, rental value, sale value, and any other circumstance affecting

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value…”. The 1970 assessment was made pursuant to section 27 of The Assessment Act, 1968-69 (Ont.) c. 6, which required the assessment to be at market value and directed the assessor that “the market value of land assessed is the amount that the land might be expected to realize if sold in the open market by a willing seller to a willing buyer”. Both assessments were made and all the evidence was tendered by the appellant to the Board on the basis that actual value and market value, in this case, were similar legal terms.

The 1969 and 1970 assessments of the building were made on the basis of depreciated replacement cost. The assessor derived his valuation by the use of the Provincial Assessment Manual which was based on actual costs, as verified by market, and uniformly applied throughout the county.

The building in question is a modern, one-storey building in the Village of Holland Landing in the County of York. It is entirely suitable for the purposes for which it is being used. It was built in four stages as follows: 20,664 sq. ft. in 1949; 36,240 sq. ft. in 1956; 86,976 sq. ft. in 1967, and approximately 57,000 sq. ft. begun late in 1970 and completed early in 1971. The last mentioned addition was built after the assessments now in issue were made.

Office Specialty Limited began its business in the Town of Newmarket. The transfer of its operations from this town to the new building at Holland Landing was a slow and gradual process and was completed in 1967.

The problem before us is clearly stated in the reasons delivered by the Municipal Board in the following terms:

Firstly, consideration is given to the effect of the new legislation on the assessment of property. One appeal is brought under The Assessment Act, R.S.O. 1960 as amended, and the second appeal is governed by the new act, The Assessment Act, 1968-69 as amended. In accordance with the terms of the old act,

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the assessment shall be made according to actual value which has been held to mean market value. The new act specifically states that the assessment shall be made at its market value and this term is defined as the amount that the land might be expected to realize if sold in the open market by a willing seller to a willing buyer. This principle has long been accepted as the criterion to be followed in determining market value, and the Board has therefore concluded that there is no useful distinction to be made between actual value as enumerated in the old act and market value as set out in the new legislation.

The basic issue here is whether, in determining the assessment according to market value, it is open to the assessor to arrive at that value by using a manual of rates to determine the depreciated replacement cost, where the property, if exposed in the market and an actual sale consummated, would most likely bring a sum considerably less than this depreciated replacement cost. The real estate brokers called on behalf of Office Specialty Limited would naturally be in closer touch with the current trends in prices for industrial properties within this area, and if the subject property was vacant and unused at the time, the Board would be in a better position to give effect to depressed market conditions. However, the ratepayer was using the property to its fullest potential and from the evidence presented, the light manufacturing business carried on appears to be a viable efficient operation. The company must be included as a potential purchaser for such property if it were offered for sale, which would have a bearing on the determination of the price that a willing purchaser would pay for the subject lands if offered in the open market. The open market as envisaged by the act means a normal market one with sufficient buyers and sellers to produce an atmosphere of competition. Where for one reason or another the competitive market is not available, the assessor must arrive at the assessment for the property by some other reasonable method. In this particular case, the replacement cost method was selected as a suitable procedure. The Board was advised that this method is used for other industrial properties within the municipality, and provides a reasonable apportionment of the municipal cost burden among the classes of residential, commercial and industrial land uses.

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It was not demonstrated successfully that the rates used in calculating the replacement cost were in error in any way. The Board has concluded that under the circumstances this method is the proper one to be applied to this property at least until more market data information is available. The Assessment Commissioner, as appellant for the assessment made in 1969 for taxation in the year 1970, has therefore discharged the onus incumbent on him in this appeal.

My opinion is that the Municipal Board was right in holding that the evidence before it proved that the market data method of valuation in this particular case could not be used to determine actual value or market value. The Court of Appeal held the contrary opinion. I cannot accept that view of the evidence. The witnesses stated plainly that no purchasers for this building for its present use would likely be found. This was entirely attributable to the location of the building in a small village such as Holland Landing.

This building is not going to be put on the market. It is thoroughly suitable for the business being carried on and it is significant that it was being extended by its owner while these appeals were going on.

In my respectful opinion, the Court of Appeal was also in error in characterizing The Assessment Act, 1968-69, as “a new basic approach to the whole matter of assessment of rateable property for municipal taxation… (which)… must be recognized in the interpretation of the new enactment” and to state that there was “a fundamental difference between the two statutes.” In fact, the only difference between The Assessment Act, R.S.O. 1960, and The Assessment Act, 1968-69, in so far as the assessment or valuation of real property was concerned, was in the substitution of the requirement of the assessment of real property at its market value in place of its actual value. And this was not a change, for the Courts had up to then held the terms, as used in rating legislation, to be interchangeable and synonymous.

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How does an assessor determine “actual” or “market” value on facts such as we have in the present case? This is a modern, standard, one-storey building, badly located for a general purchaser but entirely suitable and satisfactory to its owner. It is not for sale and it is not likely that it will be offered for sale. I think that in ascertaining “actual” or “market” value, an assessor has to regard the owner as a possible purchaser or estimate what he would expend on a building to replace that which is being valued.

The principle is well stated in Montreal v. Sun Life Assurance Co. of Canada[2], at p. 90 in these terms:

Their Lordships would agree that where no sale is contemplated and indeed any sale would be difficult what has been called the higgling of the market is not an element of much if any consequence, but nevertheless the ultimate aim is to find the exchange value of the property, i.e., the price at which the property is salable. In reaching their result the appointed Tribunal must take into account not only the amount which a buyer would give but also the sum at which the owner would sell. What that sum would be is, as the authorities have pointed out, best ascertained either by regarding him as one of the possible purchasers or by estimating what he would be willing to expend on a building to replace that which is being valued. But the owner must be regarded like any other purchaser and the price he would give calculated not upon any subjective value to him but upon ordinary principles, i.e., what he would be prepared to pay, if he was entering the market, for a building to meet his requirements, or would be willing to expend in erecting a building in place of that which is being assessed.

I would allow the appeals and affirm the decisions of the Municipal Board. The municipality is entitled to its costs throughout.

Appeal allowed with costs.

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Solicitors for the appellants: Feigman & Chernos, Toronto.

Solicitors for the respondent: Osler, Haskin & Harcourt, Toronto.