Martin-Brower of Canada Limited v. Regional Assessment Commissioner, Region No. 15

Martin-Brower of Canada Limited v. Regional Assessment Commissioner, Region No. 15 Collection Decisions of the Court of Appeal Date 1999-01-04 Docket numbers C26847 Judges Carthy, James Joseph; Laskin, John Ivan; Goudge, Stephen Thomas Subject Civil Decision Content DATE: 19990104 DOCKET: C26847 COURT OF APPEAL FOR ONTARIO CARTHY, LASKIN and GOUDGE JJ.A. BETWEEN: ) ) MARTIN-BROWER OF CANADA ) Phillip L. Sanford, LIMITED ) for the appellant ) Applicant ) (Appellant) ) ) Christian G. Schulze, - and - ) for the respondent ) REGIONAL ASSESSMENT ) COMMISSIONER, REGION NO. 15 ) and THE CORPORATION OF THE ) CITY OF BRAMPTON ) Heard: October 20, 1998 ) Respondent ) (Respondent) ) ) GOUDGE J.A.: [1] The question posed in this appeal is whether, for the purposes of business assessment, the appellant Martin-Brower of Canada Limited carries on the business of a wholesale merchant as set out in s. 7(1)(b) of the Assessment Act, R.S.O. 1990, c. A.31. Given the repeal of all business assessment in Ontario by the Fair Municipal Finance Act, S.O. 1997, c. 5, the answer to this question carries no prospective import. [2] The appellant carries on business from premises located at 12 Barton Court, in the City of Brampton. The respondent Regional Assessment Commissioner has responsibility for this location. Martin-Brower was assessed for business assessment purposes on the basis that it carries on the business of a wholesale merchant at that location. It successfully challenged the assessment before MacKenzie J. The Regional Assessment Commissioner then appealed to the Divisional Court where Steele J., speaking for the court, allowed the appeal and restored the original assessment. Pursuant to leave, the matter comes to this court. [3] The Divisional Court, following the case of Buchman & Son Lumber Company Ltd. et al. v. Regional Assessment Commissioner, Region 9 et al. (1982), 14 O.M.B.R. 166 (Div. Ct.), held that Martin-Brower carries on the business of a wholesale merchant at this location and that its business assessment must be on that basis. For the reasons that follow I agree with this result. [4] The relevant provision of the Assessment Act is s. 7(1)(b). That subsection, which has since been repealed along with the rest of s. 7, reads as follows: 7.—(1) Irrespective of any assessment of land under this Act, every person occupying or using land for the purpose of, or in connection with, any business mentioned or described in this section, shall be assessed for a sum to be called "business assessment" to be computed by reference to the assessed value of the land so occupied or used by that person as follows: . . . (b) The business of a wholesale merchant, brewer, insurance company, loan corporation, trust corporation, express company carrying on business on or in connection with a railway or steamboats or other vessels, land company, loaning land corporation, bank, banker, credit union, caisse populaire or any other financial business, for a sum equal to 75 per cent of the assessed value of the land so occupied or used. [5] The appellant argues against the application of this subsection to the facts of this case but says rather that s. 7(1)(k) applies. It reads as follows: (k) Any business not specially mentioned before in this section, for a sum equal to 30 per cent of the assessed value of the land so occupied or used. [6] The relevant facts concerning the appellant are quite unique. Martin-Brower is an independent company having no ownership connection with McDonald's Restaurants of Canada. Martin-Brower purchases large quantities of restaurant food and supplies, warehouses them, and resells them in large quantities to McDonald's Restaurants, both those that are corporately owned and those that are franchised outlets. Martin-Brower has its own premises, its own equipment and its own work force. It uses its own capital to finance these purchases and it alone is responsible for payment to the suppliers. McDonald's has no responsibility for these debts nor for the debts owed to Martin- Brower by its franchisees. [7] Martin-Brower sales are exclusively to McDonald's Restaurants. Its suppliers are selected by McDonald's. The prices it pays are set by agreement between McDonald's and those suppliers. The prices it charges on resale are set by agreement between Martin-Brower and McDonald's so as to provide Martin- Brower with an adequate agreed rate of return on its working capital. In this regard, Steele J. made the following finding of fact: The overall return to Martin-Brower is directly linked to its costs of operation including an appropriate return on investment and profit margin so as to give Martin-Brower a return usually in a range of 16 to 20 percent. In other words, Martin-Brower takes the risk of the operation and historically has achieved the above profit margins. However, even within that range it is Martin- Brower's risk. I believe that Martin-Brower does realize a profit on the overall inventory handled by it. [8] The Divisional Court reached its conclusion by applying Buchman, supra to these facts. That case sets out two criteria for determining whether a business is that of a wholesale merchant for the purpose of s. 7(1)(b) of the Assessment Act. First, does it engage in sales of large quantities of product and, second, are those sales to a person other than the end user. [9] In my view these criteria are properly applied in this case. They represent a sound test of whether the business of Martin- Brower is that of a wholesale merchant, giving those words their ordinary meaning, as required by Xerox of Canada Ltd. v. Regional Assessment Commissioner et al., [1981] 2 S.C.R. 137. Moreover, because the repeal of all business assessment has closed the universe of such cases, it would be undesirable to depart from what has been sound law since 1982 nor is it necessary to explore whether this might represent an exhaustive definition of the term "wholesale merchant". [10] The business of the appellant clearly meets both criteria set out in Buchman. Its sales are of large volumes and the purchasing restaurants are not the end users. Rather, their customers are. [11] The appellant argues that because Martin-Brower has reduced its freedom of decision-making in a number of respects and in return has reduced the risk to its rate of return, it therefore does not meet the definition of "wholesale merchant". I disagree with this approach. I can see no principled basis on which to define how much freedom must be retained or how much risk must remain for the definition to be met. Indeed, the degree to which an enterprise has freedom of decision-making and carries business risk seems to me to reflect not whether it is a wholesale merchant but rather the particular market circumstances of the enterprise. In my view, the ordinary meaning of "wholesale merchant" can encompass a wide range of market circumstances. In any event, in this case Martin-Brower has retained some freedom of operation and some commercial risk. [12] In summary, therefore, I agree with Steele J. that Martin- Brower carries on the business of a wholesale merchant at this location. I would therefore dismiss the appeal with costs. RELEASED: January 4, 1999