Cold Lake (City) v. Canada (Attorney General)

Cold Lake (City) v. Canada (Attorney General)
Court (s) Database
Federal Court Decisions
Date
2024-03-18
Neutral citation
2024 FC 432
File numbers
T-2700-22
Decision Content
Date: 20240318
Docket: T-2700-22
Citation: 2024 FC 432
Ottawa, Ontario, March 18, 2024
PRESENT: The Hon Mr. Justice Henry S. Brown
BETWEEN:
THE CITY OF COLD LAKE
Applicant
and
ATTORNEY GENERAL OF CANADA
Respondent
JUDGMENT AND REASONS
I. Nature of the matter
[1] This is an application by the City of Cold Lake [the City] for judicial review under section 18.1 of the Federal Courts Act, RSC 1985, c F-7 [Federal Courts Act] of a decision dated November 30, 2022 [Decision] of the Minister of Public Services and Procurement Canada [Minister] pursuant to the Payments in Lieu of Taxes Act, RSC 1985, c M-13 [PILT Act]. The Decision determined the property value of the 4 Wing Cold Lake Military Base in Alberta [the Property] for the purpose of calculating payments in lieu of taxes [PILT] by Public Services and Procurement Canada [PSPC] to the City for the 2013-2021 tax years.
[2] The City submits the Decision is unreasonable because the Minister undervalued the Property based on an untenable interpretation of the PILT Act, and because she refused to make late payment supplements (interest payments), both resulting in lowered PILT to the City.
[3] The Applicant further submits issues of procedural fairness, which in some respects the Respondent concedes while others are disputed. The Respondent moved to have the Applicant’s application granted and the case remanded for redetermination on procedural fairness grounds, but the motion was dismissed by Justice Favel because it would have left the PILT issue unresolved.
[4] The Respondent’s position is the Minister’s Decision is reasonable and in accordance with the PILT Act.
II. Background and History
A. Valuation dispute
[5] This Application arises from a dispute between the City and the Minister over the value of the Property for PILT Act purposes. The Property is an active Canadian military air force base which provides combat-ready and deployable fighter aircraft along with tactical fighter force training with its airport runways, hangars, headquarters, administrative buildings, military housing, social and utility support infrastructure all owned by the federal Crown. The Property lies entirely within the City of Cold Lake. The Property is self-sustaining in the sense that it provides its own water, sewer and servicing infrastructure including power, roads, and sidewalks.
[6] Under the PILT Act, PILT is calculated based on the value of the relevant federal property for the year as determined by the Minister, to which applicable municipal mil rates are applied.
[7] At issue is the treatment of onsite “Water mains, sewer mains” which are not included in the definition of federal property for valuation purposes under the PILT Act. Canada constructed and maintains the water mains and sewers and the City does not carry their servicing burdens.
B. Hearings before the Dispute Advisory Panel in 2014 and 2022
[8] Previously, the parties disputed the value of the Property for the 2012 taxation year. A hearing was held in 2014 that resulted in an opinion to the Minister [2014 Advice] from a Dispute Advisory Panel [DAP] established pursuant to subsection 11.1(2) of the PILT Act:
11.1 (2) The advisory panel shall 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).
[9] The DAP’s 2014 Advice recommended the Property be valued “recognizing that certain portions of the land have services available to them, but simply not placing any additional value on the actual service infrastructures themselves.” The 2014 Advice determined the Property should not be valued “as if those services did not exist.”
[10] The DAP’s 2014 Advice for the 2012 taxation year noted the infrastructure was old, was in the process of upgrades, and would cost approximately $114,000,000 to upgrade. The DAP accounted for this cost by determining the upgrade costs would reduce the market value of the Property by $114,000,000, resulting in a value for the 2012 tax year of approximately $44 million, lower than what would have otherwise been set (approx. $158 million).
[11] The Minister accepted the 2014 Advice for the 2012 tax year. Since then the Minister has made annual PILT payments to the Applicant, but without regular annual adjustments.
[12] The Applicant applied for judicial reviews of the 2014 Advice and Minister’s decision regarding the year 2012. On consent of both parties, the application was placed in abeyance for some 6 years while the parties attempted to resolve their dispute over federal property and the value of the Property for PILT purposes.
[13] Every year from 2013 forward, the City requested a DAP to review the annual PILT. Eventually DAP advised it would not consider the City’s requests to review PILT for tax years after 2012 until judicial reviews were concluded.
[14] The Applicant discontinued its application for judicial review December 13, 2018.
[15] The Applicant proceeded before the DAP regarding PILT for taxation years 2013 to 2021.
[16] As of the start of this proceeding, all issues before the DAP were resolved between the parties leaving only the “gate” or threshold issue of federal property and how to value the Property given water mains and sewer mains are not included in the definition of federal property under the PILT Act.
[17] In February 2022, the matter proceeded before a different three-member panel of the DAP to provide advice to the Minister in respect of PILT payments for the 2013-2021 tax years.
C. 2022 DAP recommendation: Majority Advice and Minority Advice
[18] The DAP held a 12-day virtual hearing. It considered the evidence of 11 experts on property values and assessments, five of whom gave oral testimony. After consideration, the DAP panel issued its advice to the Minister on July 20, 2022, [2022 Advice]. The three person DAP had split two to one. Its advice therefore consisted of two sets of reasons, the “Majority Advice” and the “Minority Advice.”
[19] The Majority Advice agreed with the expert recommendations of Mr. Hofer who was PSPC’s expert, finding that the water mains and sewer mains should be excluded for all purposes, and valued the Property “as an 8533-acre parcel of land with services coming to, but not inside, its boundaries.” This resulted in values for the 2013 to 2021 tax years in the early years being set close to the 2012 value determined by the DAP’s 2014 Advice.
[20] At paragraph 114 of the Majority Advice the two Panel members notes the different evaluations of the different agreed upon experts. They chose that of Mr. Hofer:
114. We heard testimony from five acknowledged expert valuation witnesses. Mr. Lennie relied on the DAP 1 value of $44,775,126. The other four witnesses began with valuations, before any deductions for servicing and infrastructure ranging from $129 million to $185 million with an average at $147 million:
Birtles
$185,275,954
Hofer
$139,602,500
Beatty
$135,312,500
Gettel
$128,856,345
[21] The Minority Advice relied on the expert opinions of the City’s expert Mr. Birtles who advanced the City’s position that the Property should not be valued as an unserviced parcel. While the Minority also held the costs for maintaining water and sewer infrastructure should be deducted from the Property’s value, rather than simply deducting $114,000,000 from the value as Mr. Hofer and the Majority did, the Minority Advice used a maintenance/amortization model representing an annual allowance for maintenance costs. This resulted in property values lower than what the City requested, but higher than both PSPC’s requested value and the 2012 value accepted by the Minister in 2014.
[22] Both the Majority and Minority Advice recommended higher PILT amounts than what the Minister actually had been paying between 2013 and 2021. These would normally have resulted in late payment supplements (i.e., interest) unless the Minister was of the view the matter had been unreasonably delayed.
[23] With respect to late payment supplements, the Majority and Minority Advice differed on whether they should be paid to the Applicant. The Majority Advice recommended against supplementary payments, while the Minority Advice recommended some should be paid.
[24] After the DAP decision, the Applicant wrote four letters to the Minister between July 20, 2022 and the issuance of the Minister’s Decision November 30, 2022. The Applicant asked the Minister to adopt the Minority Advice.
[25] On October 26, 2022, the Deputy Minister sent a Memorandum to the Minister, which included the 2022 Advice, 2014 Advice, all correspondence from the Applicant, legal advice, and a recommendation to the Minister to accept the Majority Advice for the reasons provided for in the Majority Advice, and draft reasons.
[26] The Minister also considered a briefing note titled “Advice to Minister” containing political and other advice. It included information not before the DAP. The briefing note was not provided to the Applicant, therefore the City did not have an opportunity to respond to it.
[27] On November 30, 2022, the Minister issued her Decision which was to “accept the majority recommendation with respect to the land values and late payment supplements, for the reasons outlined in the Majority’s DAP advice of July 20, 2022.” The two-page Decision states:
The City of Cold Lake (the City) requested a review by the Payments in Lieu of Taxes Dispute Advisory Panel (DAP) of the payments in lieu of taxes established by Public Services and Procurement Canada for the years 2013 to 2021. The purpose of this request was to review the land value used in the calculations of the payments for Canadian Forces Base (CFB) Cold Lake.
The review was completed by the DAP following a hearing held between February 28 and March 15, 2022. The advice was then issued to the City and to my predecessor on July 20, 2022. It is based on evidence presented at the hearing by the City and the Department, as well as oral and written submissions from both parties. The advice was not unanimous and included two recommendations: a majority (two DAP members) and a minority (one DAP member).
After careful consideration of this matter, I have decided to accept the majority recommendation with respect to the land values and late payment supplements, for the reasons outlined in the majority’s DAP advice of July 20, 2022. Therefore, the land values for CFB Cold Lake for the calculation of payments in lieu of taxes for the years 2013 to 2021 are those defined on page 11 of the DAP advice. The majority recommendation represents fair and reasonable land values for CFB Cold Lake that reflect the purpose of the Payments in Lieu of Taxes Act (the Act).
The majority’s recommendation to exclude the servicing infrastructure from the value of the base lands is consistent with the exemptions in Schedule II of the Act, which excludes water and sewer mains from the definition of federal property. In addition, the Act requires that the relevant provincial assessment legislation be considered when determining the property value of federal property. The standard in Alberta is market value. Accordingly, the majority recommends values that contemplated how the marketplace would view the lands in their current use and condition as an operational military base, and how the market would address the existing liability and ongoing maintenance costs related to the servicing infrastructure that is owned and maintained by the owner of the property.
Furthermore, I accept the majority’s advice not to issue late payment supplements. I do not feel that the payments to the City were unduly delayed by Public Services and Procurement Canada. The annual payments in lieu of taxes made to the City were based on the land values from the initial DAP advice for 2012, pending resolution of the dispute.
Following the issuance of the DAP advice, you wrote a letter to my predecessor on August 17, 2022, and to me on September 9, 2022. In these letters, you note that the majority’s advice erred in describing how federal property is to be assessed for payments in lieu of taxes purposes and that the majority took the view of hypothetical future uses when valuing the land. I have thoroughly considered both the DAP advice and your letters, and I note that the DAP majority considered the highest and best use of the property to be an operational air force base with supporting residential, commercial and industrial uses, and determined the market value of the lands based on the marketplace in its current condition for each year of the review. The land value was then adjusted to reflect the fact that the serving infrastructure is exempt under the Act. This is comparable to how assessment authorities value other military bases in Alberta.
In your letter, you also reference the previous DAP advice and conclude that it contradicts the 2022 majority advice. The DAP advice for 2012 recommended a land value of $44 million, and the 2022 DAP majority recommended $48 million for 2013. I believe that these represent fair and reasonable values that appropriately recognize the exemptions in the Act, respect the principles of market value as defined in the assessment legislation and are equitable with other military bases in Alberta. The minority advice recommends a land value of $115 million for 2013 and does not fully account for the servicing infrastructure as required by the Act and appraisal principles. This is a marked departure from the other DAP findings.
For the reasons outlined above, I will be instructing departmental officials to make the necessary changes to the payments in lieu of taxes calculations for all years based on the DAP majority advice and to issue the corresponding payments. Officials from Public Services and Procurement Canada’s Western Region will contact the City to consult on the details of the payments.
The Government of Canada remains committed to ensuring fair and predictable payments in lieu of taxes to all stakeholders.
III. Statutory and constitutional scheme
[28] Federal property is constitutionally exempt from taxation under section 125 of the Constitution Act, 1867, 30 & 31 Vict, c 3 [Constitution Act, 1867]. The PILT Act is a legislated and discretionary regime enacted by Parliament essentially to authorize the Minister to make grants to municipalities to compensate them for the taxes that they might otherwise have levied on federal property. It recognizes some federal properties have no equivalent in the private, municipal and or provincial sectors, such as the military air force base in the matter at hand.
[29] PSPC administers the PILT Act program for federal properties under the direction of the Minister.
[30] The purpose of the PILT Act is set out in section 2.1: “the purpose of this Act is to provide for the fair and equitable administration of payments in lieu of taxes.”
[31] Pursuant to the PILT Act, municipalities may be eligible on application for PILT in respect of federal property located within their boundaries. Federal property is a term defined by Parliament, and is subject to the exclusions in subsection 2(3) of the PILT Act and Payment in Lieu of Taxes Regulations, SOR/81-29.
[32] Federal property is defined in subsection 2(1):
federal property means, subject to subsection (3),
(a) real property and immovables owned by Her Majesty in right of Canada that are under the administration of a minister of the Crown,
(b) real property and immovables owned by Her Majesty in right of Canada that are, by virtue of a lease to a corporation included in Schedule III or IV, under the management, charge and direction of that corporation,
(c) immovables held under emphyteusis by Her Majesty in right of Canada that are under the administration of a minister of the Crown,
(d) a building owned by Her Majesty in right of Canada that is under the administration of a minister of the Crown and that is situated on tax exempt land owned by a person other than Her Majesty in right of Canada or administered and controlled by Her Majesty in right of a province, and
(e) real property and immovables occupied or used by a minister of the Crown and administered and controlled by Her Majesty in right of a province.
[Emphasis added]
[33] Paragraph 2(3)(a) sets out what is not included in the definition of federal property:
Property not included in the definition federal property
(3) For the purposes of the definition federal property in subsection (1), federal property does not include
(a) any structure or work, unless it is
(i) a building designed primarily for the shelter of people, living things, fixtures, personal property or movable property,
(ii) an outdoor swimming pool,
(iii) a golf course improvement,
(iv) a driveway for a single-family dwelling,
(v) paving or other improvements associated with employee parking, or
(vi) an outdoor theatre;
(b) any structure, work, machinery or equipment that is included in Schedule II;
[Emphasis added]
[34] Notably for the purposes of this application, paragraph 2(3)(b) just quoted provides that federal property “does not include… any structure, work, machinery or equipment that is included in Schedule II.”
[35] Section 13 of Schedule II establishes that federal property for the purposes of the PILT Act specifically does not include “water mains” and “sewer mains”. Schedule II in full provides:
SCHEDULE II
(Section 2)
1 Canal structures — walls and locks
2 Conveyor belts and conveyance systems other than elevators and escalators, letter sorting equipment, computers, built-in cranes, lathes, drills, printing presses and weigh scales
3 Docks, wharves, piers, piles, dolphins, floats, breakwaters, retaining walls, jetties
4 Drydocks
4.1 (1) Fortifications including, without limiting the generality of the foregoing, improvements such as ramparts, retaining walls, stockades and outerworks composed of Redan, Salient, Bastion, Demi-Bastion, Tenaille, Curtain and similar elements
(2) For the purpose of this item, the following are components of fortifications: escarp walls, courtyard walls, postern tunnels, sallyports, underground tunnels, underground magazines, earth ramparts, gun emplacements, parapets, banquettes, fraises, terre-plein, drawbridges, entrance gates, guérite, machicolation, musketry galleries, ditches, moats, counterscarp galleries, caponniers, mine galleries, glacis, ravelin, reverse fire galleries, entrance cuttings, stockades, embrasures, barbettes, casemates, demi-casemates and lunettes
5 Gasoline pumps
6 Gun butts
7 Monuments
8 Penitentiary walls, fencing
9 Pole lines, transmission lines, light standards, unenclosed communications towers, unenclosed lighthouses and range lights
10 Reservoirs, storage tanks, fish-rearing ponds, fishways
11 Roads, sidewalks, aircraft runways, paving, railway tracks
12 Snow sheds, tunnels, bridges, dams
13 Water mains, sewer mains
[Emphasis added]
[36] A central concept in this case is the “property value” of the federal property. The PILT Act requires the Minister to determine the “property value” of federal property, which is then used as the basis for computing the amount of municipal property tax levied by municipality which commonly levy taxes based on a municipal mil rate. Simply put and generally speaking, PILT is determined by multiplying the federal property value by the municipal mil rate. Property value is defined by subsection 2(1):
property value means the value that, in the opinion of the Minister, would be attributable by an assessment authority to federal property, without regard to any mineral rights or any ornamental, decorative or non-functional features thereof, as the basis for computing the amount of any real property tax that would be applicable to that property if it were taxable property.
[Emphasis added]
[37] Section 3 of the PILT Act gives the Minister the discretion to make PILT payments, and where they are unreasonably delayed, the Minister may make late payment supplements per subsection 3(1.1):
Authority to make payments
3 (1) The Minister may, on receipt of an application in a form provided or approved by the Minister, make a payment out of the Consolidated Revenue Fund to a taxing authority applying for it
(a) in lieu of a real property tax for a taxation year, and
(b) in lieu of a frontage or area tax
in respect of federal property situated within the area in which the taxing authority has the power to levy and collect the real property tax or the frontage or area tax.
Delayed payments
(1.1) If the Minister is of the opinion that a payment under subsection (1) or part of one has been unreasonably delayed, the Minister may supplement the payment.
Maximum payable
(1.2) The supplement shall not exceed the product obtained by multiplying the amount not paid by the rate of interest prescribed for the purpose of section 155.1 of the Financial Administration Act, calculated over the period that, in the opinion of the Minister, the payment has been delayed.
[38] Section 15 of the PILT Act expressly states there is no right conferred:
No right conferred
15 No right to a payment is conferred by this Act.
[39] Subsection 11.1(1) of the PILT Act authorizes the Governor in Council to appoint members to the DAP and a Chairperson, a panel created by the legislation tasked with providing advice to the Minister. Taxing authorities, such as municipalities, may request a review from the DAP in the event there is a disagreement respecting the property value, dimension, effective rate applicable, or to claim a payment should be supplemented:
11.1 (1) The Governor in Council shall appoint an advisory panel of at least two members from each province and territory with relevant knowledge or experience to hold office during good behaviour for a term not exceeding three years, which term may be renewed for one or more further terms. The Governor in Council shall name one of the members as Chairperson.
IV. Issues
[40] The Applicant puts in issue:
1.Whether the Ministers Decision to value the Property as an unserviced parcel is unreasonable, and more specifically, whether it was reasonable for the Minister to interpret the PILT Act as requiring that federal properties be valued as unserviced;
2.Whether it was reasonable to refuse to grant late payments supplements; and
3.Whether the Minister afforded the City appropriate procedural fairness.
[41] The Respondent raises the following:
1.Who is the proper respondent;
2.Did the Minister breach procedural fairness in rendering the Decision?
3.Is the Minister’s Decision reasonable?
4.If the Court is satisfied that the Decision was unreasonable or made in breach of procedural fairness, or both, what is the appropriate remedy?
[42] Respectfully, the issue is whether the Decision is reasonable, and in accordance with procedural fairness.
V. Submissions of the parties and analysis
A. Standards of review
(1) Reasonableness
[43] The Applicant submits the Minister adopted the reasons of the Majority Advice in her Decision and offered her own reasons, such that both should be considered on a reasonableness review. I will consider them as one.
[44] The parties agree, as do I, that the standard of review is reasonableness. With regard to reasonableness, in Canada Post Corp v Canadian Union of Postal Workers, 2019 SCC 67, issued at the same time as the Supreme Court of Canada’s decision in Canada (Minister of Citizenship and Immigration) v Vavilov, 2019 SCC 65, [2019] 4 S.C.R. 653 [Vavilov], the majority per Justice Rowe explains what is required for a reasonable decision, and what is required of a court reviewing on the reasonableness standard:
[31] 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). Accordingly, when conducting reasonableness review “[a] reviewing court must begin its inquiry into the reasonableness of a decision by examining the reasons provided with ‘respectful attention’ and seeking to understand the reasoning process followed by the decision maker to arrive at [the] conclusion” (Vavilov, at para. 84, quoting Dunsmuir, at para. 48). The reasons should be read holistically and contextually in order to understand “the basis on which a decision was made” (Vavilov, at para. 97, citing Newfoundland Nurses).
[32] A reviewing court should consider whether the decision as a whole is reasonable: “what is reasonable in a given situation will always depend on the constraints imposed by the legal and factual context of the particular decision under review” (Vavilov, at para. 90). The reviewing court must ask “whether the decision bears the hallmarks of reasonableness – justification, transparency and intelligibility – and whether it is justified in relation to the relevant factual and legal constraints that bear on the decision” (Vavilov, at para. 99, citing Dunsmuir, at paras. 47 and 74, and Catalyst Paper Corp. v. North Cowichan (District), 2012 SCC 2, [2012] 1 S.C.R. 5, at para. 13).
[33] Under reasonableness review, “[t]he burden is on the party challenging the decision to show that it is unreasonable” (Vavilov, at para. 100). The challenging party must satisfy the court “that any shortcomings or flaws relied on ... are sufficiently central or significant to render the decision unreasonable” (Vavilov, at para. 100).
[Emphasis added]
[45] In the words of the Supreme Court of Canada in Vavilov, a reviewing court must be satisfied the decision-maker’s reasoning “adds up”:
[104] Similarly, the internal rationality of a decision may be called into question if the reasons exhibit clear logical fallacies, such as circular reasoning, false dilemmas, unfounded generalizations or an absurd premise. This is not an invitation to hold administrative decision makers to the formalistic constraints and standards of academic logicians. However, a reviewing court must ultimately be satisfied that the decision maker’s reasoning “adds up”.
[105] In addition to the need for internally coherent reasoning, a decision, to be reasonable, must be justified in relation to the constellation of law and facts that are relevant to the decision: Dunsmuir, at para. 47; Catalyst, at para. 13; Nor-Man Regional Health Authority, at para. 6. Elements of the legal and factual contexts of a decision operate as constraints on the decision maker in the exercise of its delegated powers.
[Emphasis added]
[46] The Supreme Court of Canada in Vavilov at paragraph 86 states, “it is not enough for the outcome of a decision to be justifiable. Where reasons for a decision are required, the decision must also be justified, by way of those reasons, by the decision-maker to those to whom the decision applies.” Vavilov provides further guidance that a reviewing court decide based on the record before them:
[126] That being said, a reasonable decision is one that is justified in light of the facts: Dunsmuir, para. 47. The decision maker must take the evidentiary record and the general factual matrix that bears on its decision into account, and its decision must be reasonable in light of them: see Southam, at para. 56. The reasonableness of a decision may be jeopardized where the decision maker has fundamentally misapprehended or failed to account for the evidence before it. In Baker, for example, the decision maker had relied on irrelevant stereotypes and failed to consider relevant evidence, which led to a conclusion that there was a reasonable apprehension of bias: para. 48. Moreover, the decision maker’s approach would also have supported a finding that the decision was unreasonable on the basis that the decision maker showed that his conclusions were not based on the evidence that was actually before him: para. 48.
[Emphasis added]
[47] Furthermore, Vavilov makes it abundantly clear the role of this Court is not to reweigh and reassess the evidence unless there are “exceptional circumstances”. The Supreme Court of Canada instructs:
[125] It is trite law that the decision maker may assess and evaluate the evidence before it and that, absent exceptional circumstances, a reviewing court will not interfere with its factual findings. The reviewing court must refrain from “reweighing and reassessing the evidence considered by the decision maker”: CHRC, at para. 55; see also Khosa, at para. 64; Dr. Q, at paras. 41-42. Indeed, many of the same reasons that support an appellate court’s deferring to a lower court’s factual findings, including the need for judicial efficiency, the importance of preserving certainty and public confidence, and the relatively advantageous position of the first instance decision maker, apply equally in the context of judicial review: see Housen, at paras. 15-18; Dr. Q, at para. 38; Dunsmuir, at para. 53.
[Emphasis added]
[48] The Federal Court of Appeal confirms in Doyle v Canada (Attorney General), 2021 FCA 237 [Doyle] that the role of this Court is not to reweigh and reassess the evidence unless there are fundamental errors:
[3] In doing that, the Federal Court was quite right. Under this legislative scheme, the administrative decision-maker, here the Director, alone considers the evidence, decides on issues of admissibility and weight, assesses whether inferences should be drawn, and makes a decision. In conducting reasonableness review of the Director’s decision, the reviewing court, here the Federal Court, can interfere only where the Director has committed fundamental errors in fact-finding that undermine the acceptability of the decision. Reweighing and second-guessing the evidence is no part of its role. Sticking to its role, the Federal Court did not find any fundamental errors.
[4] On appeal, in essence, the appellant invites us in his written and oral submissions to reweigh and second-guess the evidence. We decline the invitation.
[49] Vavilov requires reviewing courts to assess whether the decision is subject to judicial review meaningfully grapples with the key issues:
[128] Reviewing courts cannot expect administrative decision makers to “respond to every argument or line of possible analysis” (Newfoundland Nurses, at para. 25), or to “make an explicit finding on each constituent element, however subordinate, leading to its final conclusion” (para 16). To impose such expectations would have a paralyzing effect on the proper functioning of administrative bodies and would needlessly compromise important values such as efficiency and access to justice. However, a decision maker’s failure to meaningfully grapple with key issues or central arguments raised by the parties may call into question whether the decision maker was actually alert and sensitive to the matter before it. In addition to assuring parties that their concerns have been heard, the process of drafting reasons with care and attention can alert the decision maker to inadvertent gaps and other flaws in its reasoning: Baker, at para. 39.
[Emphasis added]
[50] Laval (Ville) v Canada (Attorney General), 2019 FC 1481 [Laval] confirms deference must be shown when reviewing whether the Schedule II exceptions in the PILT Act have been reasonably interpreted. At paragraph 17, Justice Martineau states:
[17] Therefore, this is a case where the Court must show deference. The PILTA provides a plethora of terms in Schedule II and of more detailed definitions in subsection 2(3), which could easily inspire any lawyer to get creative. It is true that some administrative determinations made on behalf of the Minister by the decision-maker could never be reasonable. For example, in Montreal Port Authority, the Supreme Court determined that a grain silo simply could not be considered a “reservoir” under section 10 of Schedule II. That said, the decision-maker must have some flexibility in interpreting the exclusions without this Court’s substituting its own interpretation (Canada (Attorney General) v Heffel Gallery Limited, 2019 FCA 82 at paras 45–53).
(2) Correctness
[51] Questions of procedural fairness are reviewed on the correctness standard: Canada (Minister of Citizenship and Immigration) v Khosa, 2009 SCC 12, per Binnie J at paragraph 3 and see Canadian Association of Refugee Lawyers v Canada (Immigration, Refugees and Citizenship), 2020 FCA 196 per de Montigny JA (as he then was) [Near and LeBlanc JJA concurring]:
[35] Neither Vavilov nor, for that matter, Dunsmuir v. New Brunswick, 2008 SCC 9, [2008] 1 S.C.R. 190, have addressed the standard for determining whether the decision-maker complied with the duty of procedural fairness. In those circumstances, I prefer to rely on the long line of jurisprudence, both from the Supreme Court and from this Court, according to which the standard of review with respect to procedural fairness remains correctness.
[52] I also understand from the Supreme Court of Canada’s teaching in Vavilov at paragraph 23 that the standard of review for procedural fairness is correctness:
[23] Where a court reviews the merits of an administrative decision (i.e., judicial review of an administrative decisions other than a review related to a breach of natural justice and/or the duty of procedural fairness), the standard of review it applies must reflect the legislature’s intent with respect to the role of the reviewing court, except where giving effect to that intent is precluded by the rule of law. The starting point for the analysis is a presumption that the legislature intended the standard of review to be reasonableness.
[Emphasis added]
B. Reasonableness of valuation of the Property
(1) The PILT Act and tax fairness
[53] The Applicant submits the Majority Advice misunderstands the purpose of the PILT Act as a balancing exercise as tax fairness between municipalities and Canada, whereas the PILT Act is intended to ensure tax fairness as between municipalities. The Applicant submits this is to ensure that such municipalities are not advantaged or disadvantaged based on the proportion of federal Crown property within their boundaries.
[54] In this the Applicant relies on Halifax v Canada, 2012 SCC 29 [Halifax], where Justice Cromwell writing for the Supreme Court of Canada at paragraph 10 states:
[10] Under s. 125 of the Constitution Act, 1867, the Federal Crown is exempt from provincial and municipal taxes. This constitutional exemption has the potential to cause unfair adverse effects to municipal revenue — unfairness that Parliament has attempted to mitigate with the Act. As stated in s. 2.1, the purpose of the Act “is to provide for the fair and equitable administration of payments in lieu of taxes”. Paragraph 3(1)(a) of the Act provides that the Minister “may” make payments “in lieu of a real property tax for a taxation year”. The amount of this payment shall not exceed the amount determined by multiplying the “property value” by the applicable “effective rate” of taxation: s. 4(1).
[Emphasis added]
[55] The Applicant submits fairness and equity under the PILT Act is not achieved by balancing, but rather through valuation decisions that reflect the assessed value of the property as the same as if it were not owned by the federal Crown. The Applicant submits this would ensure parity between federal and non-federal property.
[56] The Applicant submits the Minister erred in accepting the Majority Advice on PILT, because the Majority Advice stated it viewed fairness and equity under the PILT Act “as a middle of the road concept that excludes extremes” and selected property values that “were the median values derived from the reports of the five experts who testified.” This approach, the Applicant submits, is inconsistent with the statutory scheme and the principle discussed at paragraph 40 of Halifax:
[40] The Minister’s role under the Act is not to review the assessment authority’s assessment; the Minister’s function with respect to the value of the property is to reach an opinion about the value that would be attributed by an assessment authority. This is done in the context of exercising the discretion to make a PILT that must not exceed the product of the effective rate and the property value. While the view of an assessment authority is an important reference point for the Minister, I nonetheless agree with Evans J.A. that in reaching his or her opinion, the Minister is entitled to make an independent determination of the value that would be attributed to the federal property by an assessment authority.
[57] The definition of federal property is a constraint on the Minister’s discretion for the purpose of setting property value for PILT. The Applicant further relies on the Supreme Court of Canada in Montréal (City) v Montreal Port Authority, 2010 SCC 14 [Montreal], where Justice Lebel for the Court at paragraph 40 states:
[40] However, there is a fundamental flaw in this interpretation and application of the PILT Act and the Regulations. As I have indicated, the two corporations certainly have a discretion. It is clear from the definition of “effective rate” that Crown corporations have to decide on the appropriate tax rate. However, they cannot base their calculations on a fictitious tax system they themselves have created arbitrarily. On the contrary, those calculations must be based on the tax system that actually exists at the place where the property in question is located. The PILT Act and the Regulations require that the tax rate be calculated as if the federal property were taxable property belonging to a private owner. In s. 2 of the Regulations and the corresponding provision of the PILT Act, it is assumed that the corporations begin by identifying the tax system that applies to taxable property in the municipality in order to establish the property value and effective rate of tax. They cannot do so on the basis of a system that no longer exists.
[Emphasis added]
[58] The Respondent submits that the PILT Act is designed to provide tax fairness and equity for municipalities and the federal government alike. The Respondent relies on Halifax at paragraph 41:
[41] This conclusion finds support in the functional and practical considerations which LeBel J. identified in Montreal Port Authority, at paras. 34-35. The calculation of PILTs is not limited to a mechanical application of municipal assessments and tax rates. It must be adaptable to the various locations in which federal properties are situated, and to those properties’ circumstances. This is especially so in view of the diverse and sometimes unique nature of federal properties. We need look no further than the Citadel site, 48 acres of 19th-century fortification sitting in the middle of a modern city, for an obvious example. Assessment principles are not self-applying. Legitimate disagreements about how they apply in a particular case are to be expected. There will often be no one, “right” answer. Moreover, the Minister is not in the same situation as an ordinary taxpayer. Where disagreements about an assessment of federal property arise, the Minister cannot take advantage of the assessment appeals processes that would be available to taxpayers subject to particular municipal or provincial regimes. Finally, it makes sense that within this highly discretionary regime of PILTs — a regime that explicitly preserves the Federal Crown’s constitutional immunity from provincial and municipal taxation (s. 15) — the Minister would be armed with ways to protect federal interests against over-zealous assessment authorities should the need arise.
[Emphasis added]
[59] In this connection, the Respondent also relies on Montréal (City) v Old Port of Montréal Corporation Inc, 2021 FC 806 [Montreal FC], where Justice Pamel at paragrap