The Reasons for Judgment of the British Columbia Court of Appeal recently released in the Assessor of Area #01 – Capital et al. v. Nav Canada (2016 BCCA 71) represent a significant victory for local government in relation to the assessment of land and improvements.
In the appeal, the Court of Appeal had to consider the appropriate method for valuing federally owned airport lands and improvements that were occupied by Nav Canada for the sole permitted use of providing civil air navigation services.
The District of North Saanich was involved in the appeal as federally owned lands and improvements occupied by Nav Canada at the Victoria International Airport (which is located in North Saanich) were involved in the appeal. Historically, those lands and improvements were assessed by the Assessment Authority using the replacement cost approach, with their value being approximately $1.4 million. Nav Canada appealed that assessment for the 2011 and 2012 taxation years to the Property Assessment Appeal Board, arguing that the lands and improvements should be assessed at nominal value on the basis that there is no market for them. Nav Canada argued that:
- Pursuant to federal legislation, it had a monopoly on the provision of civil air navigation services in Canada;
- As the use of the land and improvements was restricted to use for the provision of civil air navigation services, no one other than it had any use for the land and improvements;
- There being no one else that had any use for the land and improvements, there was no market for the land and improvements; and,
- There being no market for the land and improvements, the land and improvements had only nominal value as Nav Canada would not pay any more for the land and improvements than anyone else would.
In making its argument, Nav Canada relied on the decision of the Court of Appeal in Southam Inc. (Pacific Newspaper Group Inc.) v. British Columbia (Assessor of Area No. 14 – Surrey/White Rock) where the court held that the replacement cost approach to valuing land and improvements was not available where the evidence does not establish that there is a purchaser for the property being assessed other than the current owner of the property. On the basis that decision was binding authority on the issue, the board accepted Nav Canada’s argument and ordered that the land and improvements be assessed at $20. North Saanich had not appeared or made argument before the board. Once North Saanich became aware of the board’s decision, North Saanich joined with the British Columbia Assessment Authority to have the board state a case to the British Columbia Supreme Court for the court’s consideration of the issue. The Supreme Court upheld the board’s decision, again on the basis that Southam was binding authority on the issue. North Saanich and the Assessment Authority then brought the appeal.
In the appeal, North Saanich and the Assessment Authority sought to have the Court of Appeal reverse its previous decision in Southam. In order for the Court of Appeal to do so, the court was asked to and did sit as a five-member panel. North Saanich and the Assessment Authority argued before five-member panel of the Court of Appeal that its previous decision in Southam was incorrect as it failed to follow binding authority from the Supreme Court of Canada and the Privy Council. The five-member panel of the Court of Appeal agreed and held that, where there is no market for land and improvements, one must take into account the sum that the owner would pay for the land and improvements or for replacement land and improvements suitable for the owner’s purposes.
As a result of the Court of Appeal’s decision, the replacement cost approach to valuing land and improvements is once again a significant tool that can be used by the Assessment Authority in valuing properties that do not trade or rarely trade in the market. One can expect that the Court of Appeal’s decision will be relied upon by the Assessment Authority when valuing such properties (e.g., the land and improvements used by the British Columbia Ferry Corporation at its major ferry terminals, which were previously the subject of proceedings before the board that resulted in them being valued at nominal value).
Nav Canada is in the process of seeking leave to appeal the Court of Appeal’s decision to the Supreme Court of Canada, and North Saanich has committed to representing the interests of British Columbia local governments before the Supreme Court of Canada. North Saanich will be seeking the support of the UBCM and other local governments for its role in the proceedings.
Sukhbir Manhas is a barrister and solicitor with Young, Anderson in Vancouver.