a choice is not an omission

Canadian Property Tax Association, Inc.
Association canadienne de taxe foncière, Inc.
Volume No. 31
Issue: July/August 2011
A CHOICE IS NOT AN OMISSION
Submitted by: Vincent Piazza, Partner
De Grandpré Chait LLP / s.e.n.c.r.l.,
Montréal, QC
On July 4, 2011, the Quebec Court of Appeal1 upheld a
judgment by the Superior Court2 which declared illegal two
certificates of modification of the inscription on the 20062009 real estate assessment roll of a private golf course
operated by the Country Club of Montreal (hereinafter
“CCM”) in the City of Saint-Lambert (hereinafter “StLambert”).
THE SUPERIOR COURT DECISION
THE FACTS
CCM has operated a private golf course in St-Lambert since
1910. In the early 1970’s, St-Lambert wished to expand its
urban development and in order to do so, planned to extend
Queen Blvd. and to develop Victoria Street. It negotiated
with CCM for the purchase of a portion of CCM’s property
which formed part of its golf course.
By virtue of a contract dated August 20th, 1973, CCM sold
some land to St-Lambert but retained a right of use for a
portion thereof and of some adjacent lands also owned by St
-Lambert, for the operation of its golf course.
In addition to the purchase price of $1,725,000, the contract
stipulated that St-Lambert will assume all school and
municipal property taxes levied against the golf course until
the expiry of the right of use on August 20th, 2000. No rent
was payable by CCM.
This first contract was amended in 1986. The right of use
was extended until the end of the 2010 golf season. It also
provided for the payment by CCM of a $50,000 annual rent
indexed based upon CPI, from 2001 onwards. St-Lambert
still assumed all school and municipal property taxes.
A third contract was executed in 1990, whereby the right of
use was once again extended, this time to the end of the
2030 golf season. CCM undertook to make certain capital
investments in the golf course but the clauses pertaining to
rent and taxes remain unchanged. Up until 2001, StLambert returned its own assessment roll. From the 1973
contract with St-Lambert until December 31, 2005, CCM’s
golf course was never entered on the roll in the name of
CCM nor as taxable, but rather in St-Lambert’s name and as
exempt of taxes, despite Section 208 of the Act respecting
municipal taxation.3
In 2002, St-Lambert was merged to Longueuil. From then on,
Longueuil returned St-Lambert’s assessment roll (which was
previously done by St-Lambert itself). Regional and local
municipal taxes and school taxes are levied against taxable
properties entered by Longueuil on this roll.
On October 15th, 2005, Longueuil deposited its assessment
roll for the years 2006 to 2008. This roll was to remain in force
for an additional year until December 31st, 2009.
Even though it had been the only occupant of the golf course
since its foundation, CCM was entered on the roll as the
occupant of the golf course for the first time since 1973.
In March 2006, CCM received a first municipal tax account.
Viewing that its contract with St-Lambert called for the
assumption by the latter of all property taxes, CCM attempts
to address the situation with St-Lambert, to no avail.
However, during the same period, CCM stopped receiving
rent invoices from St-Lambert. Since the amount of the
municipal taxes was comparable to the rent that it paid until
then, CCM thus decided to pay the municipal taxes in lieu of
its rent. It advised St-Lambert accordingly. CCM proceeded
the same way in 2006, 2007 and 2008 without St-Lambert
questioning the conduct nor demanding payment of the rent.
On November 19th, 2008, CCM received a notice of
modification of the real estate assessment roll (hereinafter the
“First Notice”). This First Notice modified the real estate tax
rate applicable to the residual category of immovables to
the one which applied to non-residential property.4
The way this was done is by entering a number (here, number
“10”, which means “100% nonresidential”) in a section of the
1 Longueuil (Ville de) c. Country Club de Montréal, 2011 QCCA 1245
(CanLII)
2 Country Club de Montréal c. St-Lambert (Ville de), 2011 QCCS 989
(CanLII)
3 R.S.Q., chapter F-2.1 (hereinafter : the Act). Section 208 of the Act
provides that where non-taxable property (such as that belonging to the
municipality in which it is situated) is occupied or rented by a “normal”
taxpayer (as is the case for CCM), it is entered on the roll as taxable in
the name of the tenant or occupant.
4 Section 244.39 of the Act provides that the rate specific to the category of
non-residential immovables must be equal to or greater than the basic rate
inscription which had been left blank at the deposit of the
roll. The section serves to indicate the non-residential
percentage of a property’s taxable value, for the application
of the various general property tax rates regime introduced
in 2000.5 This modification was effective as of January 1st,
2007.6
As a result, Longueuil issued a revised tax invoice on
November 24th, 2008, and St-Lambert does so on January
23rd, 2009. For the 2007-2009 period, the increase in those
taxes amounted to $342,981.33.
On December 8th, 2008, St-Lambert and CCM entered into
an emphyteutic lease for the golf course. This lease took
effect on December 1st, 2008, for a term of 41 years and 11
months, ending on October 31st, 2050.
CCM assumed various social and financial obligations,
including, for the first time since the 1973 contract, the
obligation to pay all taxes levied against the golf course. On
February 20th, 2009, Longueuil issued another notice of
modification of the real estate assessment roll, increasing
the area of the golf course from 30.2 hectares to 45.8
hectares (hereinafter the “Second Notice”). This translated
into an increase of the assessed value of the golf course
from $5,944,500 to $7,195,500. Since this Second Notice
was effective as of January 1st, 2008, CCM is charged
additional taxes amounting to $85,099.28.
On June 2nd, 2009, CCM filed an introductory motion before
the Superior Court seeking the cancellation of both notices
and the reimbursement of all additional taxes charged
pursuant thereto.
THE LAW
The Superior Court noted that the return of real estate
assessment rolls purports primarily to establish public order
through the equitable distribution of municipal expenses
amongst citizens. However, this objective must be balanced
with another one, which calls for the stability of public
finances, as it regards to both the municipality and the
taxpayers.7 Once the deadline for a taxpayer to ask for a
review of its assessment or for the municipal assessor to
make an ex officio correction has passed,8 the legislation
has chosen to favour the immutability of the roll for the
period for which it is made. In principle, the roll can only be
modified exceptionally and only by following the strict rules
prescribed by the Act.
As a result, the Court noted that Longueuil and St-Lambert
had the burden to prove that one of the strict exceptions
contained in section 174 of the Act allowed the issuance of
the First Notice and the Second Notice.
THE FIRST NOTICE
Longueuil and St-Lambert argued that the First Notice was
predicated upon paragraph 174 (13.1.1) of the Act, which
reads as follows:
174. The assessor shall alter the property
assessment roll
(13.1.1) with regard to section 57.1.1, to add a
particular unduly omitted or strike out a
particular unduly entered and, provided the roll
is required to contain such information, to take
account of the fact that a unit of assessment :
(a) becomes or ceases to be subject to
section 57.1.1;
(b) changes category from among the
categories provided for in section
244.32;
(c) becomes or ceases to be subject to
section 244.51 or 244.52;
(d) becomes or ceases to be subject to
section 244.54, or changes category
from among the categories provided for
in that section
In its defence dated September 11th, 2009, Longueuil pleaded
that the absence of the particular “10” as regards the golf
course in the 2006 assessment roll (which made the golf
course taxable in accordance with the nonresidential tax rate)
resulted from a mistake committed by inadvertence in the
course of the electronic capture of data. More precisely, it
alleged a problem in the transmission of data between an
external firm, to whom a mgiven, and the assessment
department of Longueuil.andate to balance the roll had been
given, and the assessment department of Longueuil.
The Court noted that after only a few minutes of the external
firm’s representative’s testimony, it became obvious that this
theory was completely baseless, since this firm played no roll
whatsoever in regards to this particular.
At trial, Longueuil and St-Lambert then argued that the
absence of this particular constituted a manifest omission.
5 Distinct tax rates can be imposed to the different categories of
immovables defined by the Act, which are (1) the category of nonresidential immovables; (2) the category of industrial immovables; (3) the
category of immovables consisting of six or more dwellings; (4) the
category of serviced vacant land; (4.1) the category of agricultural
immovables; and (5) the residual category.
6 This is as far back as the modification could go, in application of
section 177 of the Act.
7 Sears Canada inc. c. St-Laurent (Ville de), [1996] R.J.Q. 2465, p. 2470
(C.A.).
8 May 1st following the coming into force of the assessment roll, which, per
section 14 of the Act and save exceptions, is made for a 3-year period.
2
CCM argued that the defendants had not discharged their
burden to establish that this was an undue omission but that
on the contrary, the absence of this particular resulted from
a decision by St-Lambert which had been endorsed by
Longueuil.
the non-residential tax rate was not entered because the
property, being in St-Lambert’s name, was considered not
taxable. The Municipal Assessor admitted that per StLambert’s contract with CCM, this was still the case when
the 2006 roll was deposited. Nothing had changed.
In support of their position, St-Lambert and Longueuil only
called one witness, i.e. the deputy assessor for Longueuil
since April 19th, 2005 (hereafter the «Municipal Assessor»),
whom was responsible for two (2) divisions, including
nonresidential operations.
The Court also remarked that there is another golf course in
St-Lambert which is still not taxed according to the nonresidential rate. The Court concluded from this that
Longueuil had not omitted the particular which would have
subjected the golf course to the non-residential tax rate, but
rather deliberately decided not to enter it.
However, the Court found that by itself, the Municipal
Assessor’s testimony was not sufficiently reliable for
Longueuil and St-Lambert to discharge their burden of proof.
The Court notes that the Municipal Assessor’s testimony
had been hesitant, defensive and imprecise, and that he
even had to change his testimony on some essential
questions. His testimony regarding his personal implication
in the preparation of the 2006 assessment roll fluctuated
importantly. After initially indicating that he actively took part
in the process and consulted the 1990 contract, he admitted
that he did not participate in any way whatsoever to the
inscription of CCM’s golf course on the 2006 roll.
For the Tribunal, this admission was sufficient to seal the
debate as regards the First Notice. Indeed, Longueuil and St
-Lambert had the burden to demonstrate that the absence of
the particular “10” as regards the golf course on the 2006
assessment roll resulted from an omission. Since the
Municipal Assessor did not take part in its preparation, he
could not testify as to the reasons for the absence of this
particular.
The Court then considered the argument that this would be
a manifest omission. The Courts found that this argument
could not hold in light of the evidence adduced by Longueuil
and St-Lambert. According to the Municipal Assessor,
someone at the treasury department of St-Lambert
communicated with him by telephone in September or
October 2008 to ask him if it was normal to tax the golf
course at the residual rate and not the commercial one. The
Court asked itself why St-Lambert made this inquiry at that
precise point in time, considering that the rate of taxation
had been in use for the last three years. Was it by reason of
the popular pressure which CCM’s secretary referred to in
his testimony? The evidence did not provide the answer. Be
that as it may, the Municipal Assessor testified that it was on
this occasion that he realized that Longueuil had “manifestly
omitted” to enter this particular.
Since Longueuil and St-Lambert had not discharged their
burden to establish that the absence of this particular resulted
from an omission, the Court declared the First Notice illegal.
THE SECOND NOTICE
The Court also cancelled the Second Notice, on the basis that
the missing 15 hectares did not constitute an “unduly omitted
immovable” within the meaning of paragraph 174(4) of the
Act. Indeed, a portion of this area was in fact entered on the
roll, but still in St-Lambert’s name. For the Court, the fact that
there still remained a “missing area” resulted from an
erroneous land area calculation, which does not correspond to
an undue omission. The Court adds that this is particularly
true when the assessing authority has an intimate knowledge
of the property in question, which was obviously the case
here. In conclusion, section 174 of the Act does not permit the
correction of assessment or calculation mistakes made at the
deposit of the roll.
THE COURT OF APPEAL DECISION
Longueuil appealed this decision, but only as regards the
cancellation of the First Notice. Seized with CCM’s motion for
summary dismissal of the appeal, the Court of Appeal ruled
that the appeal had no reasonable chance of success. On the
basis of the evidence adduced before him, the trial judge
concluded that the absence of a code subjecting the golf
course to the nonresidential tax rate resulted from a deliberate
decision by Longueuil and that it did not constitute an
omission, nor an error. Since Longueuil did not demonstrate
how this factual conclusion could be reversed in appeal, its
appeal was dismissed.
CONCLUSION
Even where a property is undisputedly 100% nonresidential,
the municipal assessor must demonstrate that the absence of
a particular subjecting it to the non-residential tax rate results
from an omission. Otherwise, the principle of the immutability
of the roll shall prevail.
The Court noted that on the 2002 assessment roll, the
inscription of the golf course contained the same mentions
as on the 2006 roll. The particular subjecting the property to
3