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

Religious Hospitallers of St. Joseph of Cornwall v. Regional Assessment Commissioner, Region 1 Collection Decisions of the Court of Appeal Date 1998-12-17 Docket numbers C27292 Judges McKinlay, Hilda Margaret; Austin, Allan McNiece; O’Connor, Dennis Subject Civil Decision Content DATE: 19981217 DOCKET: C27292 COURT OF APPEAL FOR ONTARIO McKINLAY, AUSTIN and O'CONNOR JJ.A. BETWEEN: ) ) THE RELIGIOUS HOSPITALLERS OF ST. ) JOSEPH OF CORNWALL, ONTARIO ) 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] This is the second of two appeals heard together from decisions of the Divisional Court on appeal from two decisions of Forget J., both made on the same day -- August 18, 1994 -- and involving related organizations. In this case the Divisional Court dismissed an appeal by the Commissioner from Forget J.'s judgment declaring that property owned by the Religious Hospitallers of St. Joseph of Cornwall, Ontario ("Cornwall") is exempt from municipal real property taxes. A question of exemption from business tax was conceded by the Commissioner, and need not be considered by this court. [2] Forget J., the motions judge, held that Cornwall qualified for exemption as an incorporated charitable institution organized for the relief of the poor or as an institution similar to such a charitable institution pursuant to s.3.12 of the Assessment Act, R.S.O. 1990, c.A.31, which reads: 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. [3] For the purposes of the appeal, the appellant Commissioner concedes that Cornwall is an institution organized for the relief of the poor, conducted on philanthropic principles, not for the purpose of profit or gain, and that the subject property, excluding the portions rented to other organizations or otherwise not used by Cornwall, is occupied by Cornwall for its purposes. [4] The relevant portion of the corporate objects of Cornwall is: To establish, maintain and conduct in the said Town of Cornwall a hospital for the sick and the infirm, a home for the aged and indigent, an orphanage for orphans and children and an institution for novices entering the community of The Religious Hospitallers of St. Joseph of Cornwall, Ontario or of any other institution of a religious nature which the Corporation may desire to carry on. [5] The land in question is located on York Street in the City of Cornwall. The following buildings are located on the land: (i) A nursing home (St. Joseph's Villa) with space for 150 residents; and (ii) A building previously used as a convent and currently leased or available for lease to others. [6] There is also a boiler building on the land which provides steam for both buildings, and houses a recreational centre used by residents of the nursing home. There is open space used by residents of the nursing home, and parking facilities used by occupants and staff of both buildings. [7] One third of the former convent building is leased by Cornwall to other organizations. In cross-examination on her affidavit filed on the motion before Forget J., Jeannette Despatie, assistant executive director of the Religious Hospitallers of St. Joseph of Cornwall, stated that only one room approximately 10 ft. by 10 ft. is used by Cornwall as an office in which to prepare financial statements and a small chapel is used by nursing home occupants and staff. The balance of the space is unused and available for lease. As of April 1994 the tenants were the Alzheimer Society, Canadian Hearing Society, Children's Aid Society, Community Family Care Program, Cornwall Home Assistance Services to Seniors Inc., Free to Become Daycare, Ontario March of Dimes and York Centre Supervised Access Centre. Also as of April 1994, the leased premises totalled approximately 12,100 sq. ft., and the total annual rent was approximately $45,000. [8] There is no evidence of the purpose or purposes for which any tenant was incorporated or for which it used the premises, although it is agreed that all are non-profit organizations. There was evidence of the purposes of the Religious Hospitallers who incorporated Cornwall but, in my view, they are not relevant to this appeal. It is the purpose or purposes for which Cornwall was incorporated which are relevant, and they are set out in the corporate objects quoted above. ISSUE [9] The sole issue in this appeal, as stated in the factum of the appellant, is "whether Cornwall is entitled to an exemption from municipal taxation for that portion of its lands leased, or available for lease, or otherwise not 'used' by Cornwall." 1. Reasons of Forget J. [10] Forget J. held that both the rented property and the vacant property were exempt. His two basic reasons were, first, that the tenants "are non-profit organizations which are being subsidized by the applicant by the payment of nominal rents" and, second, that "[o]ccupation and use by others upon payment of a fee, where the revenue generated is used to maintain the property for its charitable purpose, is occupation and use within the meaning of s. 3(12)". The Divisional Court upheld Forget J.'s decision, but did so in a one page endorsement which did not refer to the rented or vacant property at all, but merely stated that the residents of the Villa were "poor" within the meaning of s.3.12, and therefore the "lands" were exempt from taxation. [11] The Divisional Court did not address the issue of segregating portions of the property for tax purposes and, therefore, its endorsement is not of assistance to us. Forget J. did not treat the property as segregated for tax purposes because of the two reasons referred to above. (a) Nominal rents charged to tenants [12] I found nothing in the evidence filed on the motion before Forget J. to indicate that the tenants were "being subsidized by the applicant by the payment of nominal rents." However, even if they were, that fact would not be sufficient to entitle Cornwall to an exemption for the rented portion of the land. To qualify for an exemption, it would be necessary for Cornwall to show that the rented premises were used for its charitable purposes, not the charitable purposes of some other institution. (b) Rent used to maintain property for its charitable purposes [13] I found nothing in the evidence filed on the motion to indicate that the rents generated were used to maintain the property for the charitable purposes of Cornwall. The financial information filed constituted rental information on each of the leases and financial statements for the operation of St. Joseph's Villa--the home for the aged operated on the property. The land is owned by Cornwall, not by the Villa, and I can only assume that the rent was received by Cornwall. It is certainly not shown in any of the revenue information relating to the Villa. We were given information as to the purposes of Cornwall, but none with respect to whether the rents were used for those purposes. 2. Exclusive, constant, or permanent occupation of the premises [14] Cornwall argues that, since it is conceded that the portion of the lands occupied by the Villa is "occupied and used for the purposes of" Cornwall, and thus is exempt from taxation, all of the land should be exempt because exclusive, constant, or permanent occupation by the taxpayer is not necessary to qualify for exemption. The cases cited by Cornwall involve situations where portions of land are occupied by institutions or persons other than the taxpayer. It is Cornwall's position that they stand for the propositions that it is not necessary to qualify for exemption that the land be exclusively occupied and used by the taxpayer itself, nor is it necessary that occupation by the taxpayer be constant or permanent, nor is it necessary that the taxpayer occupy all of the premises for its own purposes. [15] City of Toronto v. Governors of University of Toronto, et al., [1946] O.R. 215, 2 D.L.R. 532 (C.A) is a decision of the Ontario Court of Appeal involving an unusual arrangement for use of premises on Yonge Street in the City of Toronto leased to the Board of Governors of University of Toronto. The university established a school of physical and health education and used the necessary space in the building for that purpose. By letter from the Bursar and Secretary, the Board of Governors of the University gave permission to the Eaton Girls' Club to use available portions of the premises at such times as they were not being used for the purposes of the physical and health education department of the university. The relevant exemption in the Assessment Act at that time was s.4.3, which read: 3. The buildings and grounds of and attached to or otherwise bona fide used in connection with and for the purposes of a university...so long as such buildings and grounds are actually used and occupied by such institution, but not if otherwise occupied. [16] It should be noted first that there are significant differences in the exemption provisions involved. Section 3.12 requires the person claiming exemption to be the owner of the land, while the provision in the University of Toronto case requires only use and occupation. The portion of the reasons in that case which Cornwall relies on is found on pages 221 and 222, where Laidlaw J.A., speaking for the court, states: The use made by them [the Eaton Girls' Club] of the premises is not in any way connected with or for the purposes of a university. It may be, too, that the number of such members who actually use the premises is greater than the number of university students who do so, and that a larger part of the space is used by them than is used by the Board. But the use of a portion -- even the larger portion - - of the premises for purposes other than those of a university does not necessarily preclude a finding that the building is actually used by such institution within the meaning and intent of the legislation. I do not read the words in the subsection, "so long as such buildings and grounds are actually used and occupied by such institution, but not if otherwise occupied", to mean "so long as every part of such building and grounds is used and occupied by such institution, but not if otherwise occupied or used in part". If such a meaning had been intended, appropriate language would no doubt have been used to make that meaning plain. [17] At first blush those words might seem to apply to a situation such as ours. However, I am of the view that they do not. First, Laidlaw J.A. goes on to state that the question of whether a person is an occupier or within an exemption provision is a question of fact. He then states that two principles of occupation can be gleaned from the cases -- first, that occupation depends on the right of regulation and control of the premises in question, and second, that occupation does not depend on legal title. The second principle is irrelevant in our case, because Cornwall does have legal title, and because it must have title to fit within the statutory provision with which our case deals. The first principle is, however, of some significance in our case. There is no evidence that the leases in this case were not of the usual type which give occupation, and thus regulation and control, to the tenant within the terms of the lease. It has given up those rights. [18] In the University of Toronto case regulation and control of the building was not given up by the University. The letter sent to the Eaton Girls' Club made that abundantly clear. It stated: You are at liberty until further notice to use for the purpose of your Club, available portions of our premises...at such times as we are not using all of the premises for the purpose of the Physical and Health Education Department of the University.... [19] Because occupation is a question of fact in each individual case, it is clear that the University of Toronto case, given its unusual facts, is of assistance not in the sense of presenting an analogous fact situation but, rather, in articulating principles to apply in considering the question of occupation. [20] In National Ballet School v. Assessment Commissioner, Region No. 9, et al. (1979), 10 M.P.L.R. 208 (H.C.J.), Grange J. dealt with the question of exemption from taxation of l.2 acres of land on which was located a large house which was used by the National Ballet School for meetings of its Board and various committees, and for a twenty-five day fund raising event. Again, the exemption provision was somewhat different from the one with which we are dealing, but the major issue in the case was whether the facts of use by the National Ballet School satisfied the requirement that "such grounds and buildings are exempt only while actually used and occupied by" the National Ballet School. [21] Grange J. considered that the real difficulty in that case was the extent of the use of the property by the National Ballet School. In dealing with the portion of the exemption provision which is similar, although not identical to ours, he stated, at p.211: They [the words of the exemption provision] do not require "constant" use or "regular" use; nor even do they require "exclusive" use. Nor is there any requirement that all the property be used or that it be used all of the time. [22] The principle of "right of regulation and control of the premises" as articulated in the University of Toronto case was not referred to by Grange J., although he did discuss other principles in that case which were relevant to his decision. His case involved use which was not constant in respect of either time or space. It did not involve relinquishing any regulation or control of the premises as in our case. [23] The last case relied on by Cornwall on this issue is Re Governing Council of the Salvation Army, Canada East and Regional Assessment Region No. 22 et al. (1983), 21 M.P.L.R. 99 (H.C.J.), a decision of Reid J. of the Ontario High Court of Justice. In that case 200 acres of rural land was owned by Salvation Army. On the property it operated a place of refuge for the rehabilitation of destitute alcoholics and drug addicts, called "Hope Acres". [24] The only real issue in the case was whether 125 acres of the property contracted out to a farmer was exempt from taxation. This is the closest to our situation of all those cited to us. The statutory provision involved is the same, and the facts are similar in some respects. There are, however, two major differences. First, the evidence indicated that all profits from the contract with the farmer were to be used for the charitable purposes of the Salvation Army -- specifically to help finance the operation of Hope Acres. As stated earlier, there was no evidence in this case that the rental income was used for the charitable purposes of Cornwall. Second, it was the view of Reid J. that the lease to the farmer would not grant to the farmer exclusive or constant possession. The indications are otherwise in our case. 3. Unused portion of the premises [25] There are some portions of the former convent building that, at the time of the application of Cornwall, were not actually being used by anyone. The cases cited above make it clear that it is not necessary that all of the premises be in use all of the time in order to satisfy the test of occupation and use for the purposes of the institution. Those portions are properly exempt under s.3.12 as part of the premises which come within the provision. RESULT [26] In my view, the portions of the land which are rented out to other institutions are not exempt from taxation, because the evidence does not indicate that they are occupied and used for the purposes of Cornwall. [27] The portions of the premises which are not actually in use should be exempt along with the balance of the property. [28] I would allow the appeal, set aside the order of the Divisional Court, and replace it with an order varying the judgment of Forget J. so as to dismiss Cornwall's application with respect to those portions of its land occupied by tenants. There will be no order as to costs here or below. Released: December 17, 1998