Religious Hospitallers of St. Joseph Housing Corporation v. Regional Assessment Commissioner, Region 1

Religious Hospitallers of St. Joseph Housing Corporation v. Regional Assessment Commissioner, Region 1 Collection Decisions of the Court of Appeal Date 1998-12-17 Docket numbers C27291 Judges McKinlay, Hilda Margaret; Austin, Allan McNiece; O’Connor, Dennis Subject Civil Decision Content DATE: 19981217 DOCKET: C27291 COURT OF APPEAL FOR ONTARIO McKINLAY, AUSTIN and O'CONNOR JJ.A. BETWEEN: ) ) THE RELIGIOUS HOSPITALLERS OF ST. ) JOSEPH HOUSING CORPORATION ) Carl B. Davis and ) Karey Lunau Applicant ) for the appellant (Respondent in Appeal)) ) and ) ) Diane Kelly and REGIONAL ASSESSMENT COMMISSIONER, ) Gary W. Tranmer REGION 1 and THE CORPORATION OF THE ) for the respondent CITY OF CORNWALL ) ) Respondent ) (Appellant in Appeal) ) Carol A. Albert ) for the interveners and ) ) THE ONTARIO ASSOCIATION OF NON- ) PROFIT HOMES and SERVICES FOR SENIORS ) ) Interveners ) Heard: September 22 & ) 23, 1998 ) ) McKINLAY J.A.: [1] Two related appeals from decisions of the Divisional Court brought with leave by the Regional Assessment Commissioner, Region l with respect to municipal taxes were heard together. The first appeal was from an order of the Divisional Court allowing an appeal of the Religious Hospitallers of St. Joseph Housing Corporation ("the Housing Corporation") and setting aside a judgment of The Honourable Mr. Justice Forget, dated August 18, 1994. Forget J.'s judgment dismissed an application of the Housing Corporation for inter alia an order granting it exemption from municipal property taxes. COMMISSIONER'S APPEAL RE THE HOUSING CORPORATION [2] In this appeal, the Divisional Court held that the Housing Corporation's land was exempt from municipal taxation pursuant to s.3.12 of the Assessment Act, R.S.O. 1990, c. A.3l ("the Act"). The only issue in this appeal is whether the land in question meets the criteria of that section for exemption from taxation. The law is clear that when a taxpayer claims an exemption from taxation he or she has the onus of showing that he or she comes clearly within the terms of the exemption clause in the relevant statute: see Re City of London and Ursuline Religious of Diocese of London, [1964] 1 O.R. 587 (C.A.); and Yarmouth et al. v. City of London et al., [1957] O.R. 37 (C.A.). This is because, as stated in Commissioners for Special Purposes of Income Tax v. Pemsel, [1891] A.C. 531, at p.551, "[t]here is no purpose in a Taxing Act but to raise money, and ....every exemption throws an additional burden on the rest of the community." RELEVANT FACTS [3] The Housing Corporation is the owner of the subject property, which comprises 59 residential apartment units used to accommodate senior citizens. This is the only undertaking of the Housing Corporation. [4] The 59 apartments comprising the property, which is known as the Marie de la Ferre Apartments, are all allocated to senior citizens, defined for this facility as individuals 59 years of age or older or couples where one spouse is 59 years of age or older. They are allocated in accordance with a Target Plan approved by the Ministry of Housing: 3l to households of the "Deep Core Need" category; 10 of the "Shallow Core Need" category; 6 of the "Non-Core Need" category; and 12 where market rent is charged. Thus, it is clear that 20% of the occupants of the apartments pay market rent. The balance all pay rent geared to income. [5] The apartment complex is built on land which was originally severed from land owned by the order of the Religious Hospitallers of St. Joseph of Cornwall (the "Order"). A hospital which was originally located on the severed land, and operated by the Order, was moved to another location and the land was sold by the Order to the Housing Corporation at a price of $l,050,000. The hospital buildings were converted to the apartment complex as it now exists at a price of $2,582,719. All capital funding was provided for by a mortgage to the Ontario Housing Corporation. The income to operate the complex is derived from rentals paid by residents, parking charges, and charges for use of laundry facilities. An annual administration fee is paid to the Order which, we were informed, is responsible for managing the complex. We were informed that the fee is approximately $60,000. An annual budget is presented to the Ministry of Housing, and when approved, the Ministry pays to the Housing Corporation an amount sufficient to make up the shortfall between income and expenditures. As an example, in 1993 the amount actually paid by government was $483,176. Part of the expenses claimed to make up the shortfall included $437,749 paid as interest on the mortgage against the property. Other expenses were administrative overhead (which must represent the management fee for that year), insurance, maintenance wages and benefits, materials and services, municipal taxes, utilities, and "other". Total expenditures, including mortgage payments, amounted to $664,296. [6] The government subsidies are not referable to individual units, but are blanket subsidies resulting, at least partly, from less than market rentals paid by low and middle income senior citizens. In fact, the evidence does not indicate whether, if market rental were paid by all tenants, the income would be sufficient to cover the costs set out in the financial statements. This is because approximately 66% of the cost of operation involves payments on the mortgage financing of the total purchase price of the realty and the renovations to the buildings. In effect, it appears from the materials before us that cash was received by the Order which established the Housing Corporation for the purchase of the land from it and, in addition, government subsidies pay annually for the total financing of that purchase. In addition, the Order is in annual receipt of a management fee for administering the operation. APPLICATION OF THE PROVISIONS OF THE ACT [7] The relevant exemption provision -- s.3.12 of the Act -- reads as follows: Land of an incorporated charitable institution organized for the relief of the poor, The Canadian Red Cross Society, St. John Ambulance Association, or any similar incorporated institution conducted on philanthropic principles and not for the purpose of profit or gain, that is supported, in part at least, by public funds, but only when the land is owned by the institution and occupied and used for the purposes of the institution. [8] The only issues for us to decide are whether the Housing Corporation is "an incorporated charitable institution organized for the relief of the poor", or is a similar incorporated institution. [9] The Housing Corporation is clearly an incorporated institution. If it is organized for the relief of the poor, I think it can be assumed, at least in this case, that it is a "charitable" institution. Thus the issue is narrowed down to a consideration of whether the institution was organized for the relief of the poor, or is a similar institution. As I see it, those issues break down into three questions: first, whether the corporate objects are relevant, or whether it is the actual operation of the corporation which should be considered; second, if the latter, is the institution organized for the relief of the tenants; and, third, whether it is or is not organized for the relief of the tenants, does the evidence indicate that the tenants are poor? (a) Are the corporate objects relevant? [10] The corporate objects of the Housing Corporation, as set out in its Letters Patent, are: To provide and operate non-profit residential accommodation and incidental facilities thereto exclusively for: (i) persons of low income; (ii) senior citizens primarily of low or modest income; (iii) disabled persons primarily of low or modest income; or any combination of subparagraphs (i), (ii) and (iii). [11] Looking at the corporate objects, particularly of a single purpose corporation such as this, should be of assistance in determining whether the institution was "organized for the relief of the poor". However, it goes without saying that they cannot be conclusive; otherwise determining whether an exemption is available would depend purely on the drafting of the corporate objects. It is the property for which exemption is claimed and its actual operation and administration which are of primary concern in determining whether the exemption criteria are met. [12] In this case, the facts indicate that apartments are being let to senior citizens of low and modest income, and to other senior citizens presumably not in those categories, as they pay market value rent. (b) Is the institution organized for the relief of the tenants? [13] This question is important because, if the institution is not organized for the relief of the tenants then it doesn't matter whether they can be categorized as "poor" or not. I consider this to be a vital question on the facts of this case, and it is for this reason that the method of administration of the Housing Corporation was outlined earlier in these reasons. I read the words "organized for the relief of the poor" to mean that it would be the corporation itself, by some form of endeavour of the corporation, which would provide the relief involved. In this case, the corporation itself does very little. It raises no funds by efforts of its members for the support of the institution, such as solicitation of the public or other fund- raising projects or events. It does not manage the operation; that is done by the order of the Religious Hospitallers of St. Josephin in return for payment of an annual fee of approximately $60,000. The Housing Corporation is the registered owner of the property which it purchased from the Order, but the purchase was fully financed, and the cost of financing is paid for in total, by government funds. From the outset, the actual operation and administration were organized so that the Housing Corporation has provided nothing which is for the relief of the tenants. The total cost is borne by a combination of the tenants themselves and government. [14] In my view, the Housing Corporation was not "organized for the relief of" the tenants within the meaning of the exemption provision. [15] Having come to that conclusion, I feel compelled to comment on one portion of the wording of s.3.12 which I find rather peculiar in the context in which it is found, and that is the portion which states, "that is supported, in part at least, by public funds". I would have thought that, given the nature and function of the institutions which would be seeking exemption under the section, supported "by public funds" would mean that the organizations are supported by appeals to the public for funds to assist in their work. It would seem strange to me that a charitable institution relying in part on government funds for its operation could take advantage of the exemption provision, but one providing all of its own funds through its members and appeals to the general public could not. However, that issue was raised before the Supreme Court of Canada in 1973 in the case of Assessment Commissioner of the Corporation of the Village of Stouffville v. Mennonite Home Association of York County et al., [1973] S.C.R. 189. In that case, Spence J., speaking for the majority, appears to limit the meaning of the words "public funds" to funds from a government source. [16] In our case, all of the funds to operate the Housing Corporation project come from the tenants and government sources. It is that fact which, as stated above, compels me to conclude that it is not the Housing Corporation which provides relief for the tenants in this case. [17] Before leaving this portion of my reasons, I wish to comment on an issue raised by the Commissioner which questions the whole purpose of this litigation. On the facts as outlined above, if the Housing Corporation were to succeed in obtaining an exemption, there would be no item in its statements showing municipal property taxes as an expense. This would reduce their deficit by the amount of those taxes. However, since the provincial government makes up the total amount of that deficit, the Housing Corporation has nothing obvious to gain in obtaining an exemption. It appears that the only result is to shift the burden of the shortfall, to the extent of the municipal property tax amount, from the province to the municipality, which was never a party to the arrangement in the first place. (c) Are the tenants poor? [18] Having concluded that the Housing Corporation was not "organized for the relief of" the tenants, it is not necessary to decide whether the tenants are "the poor". However, because this is an appeal from the decision of the Divisional Court, it is necessary to comment on the statement on p.2 of its very short reasons that, "[i]ndeed, these senior citizens are poor." There is no analysis of how the Divisional Court reached that conclusion, other than their comment that 80% of the units are allocated to "senior citizens of low and modest income". Certainly, clause (ii) of the corporate objects refers to senior citizens of "low or modest income". However, in her evidence Jeannette Despatie, assistant executive director of The Religious Hospitallers of St. Joseph of Cornwall, acknowledged that the Housing Corporation rents apartments to senior citizens of "low and middle income". [19] The fact is that the tenants who do not pay market rent are within income groups mandated by the Ministry of Housing for the purpose of coming within the programme under which the Housing Corporation operates. We were directed to no evidence which indicates that the programme requires any of the tenants to be "poor", nor were we directed to evidence which would assist in defining the word "poor". The members of the Divisional Court panel were obviously willing to take a leap of faith in deciding that issue, and I cannot say that they erred in that respect. They did not, however, analyse the other aspects of this case which I consider of primary concern in determining whether the Housing Corporation has brought itself within the requirements of s. 3.12. (d) Is the Housing Corporation a "similar incorporated institution"? [20] The respondent argues that the Housing Corporation, if it is not "an incorporated charitable institution organized for the relief of the poor", is a "similar incorporated institution". Given my views of the nature of the Housing Corporation, as expressed in (a), (b) and (c) above, I am unable to saythat it is in any real way similar to "an incorporated charitable institution organized for the relief of the poor". It is interesting to note that the "similar incorporated institution" has now been removed from the Act: see Assessment Act, as amended by 1997 (Ont.), c. 29, s. 3(1). RESULT [21] I would allow the appeal, set aside the decision of the Divisional Court, and restore that of Forget J., with costs. Released: December 17, 1998