Supreme Court

Administrative Law

Fairness to municipalities demands that Minister’s opinion be informed by tax system

Land and property owned by federal Crown exempt from provincial and municipal taxation by virtue of s. 125 of Constitution Act, 1867. To compensate municipalities for loss of revenue, Payments in Lieu of Taxes Act (Can.), authorized Minister of Public Works and Government Services to make payments in lieu of taxes that would have been paid to municipality if federal property had been taxable. Act did not create legal right to payments in lieu. Payments under Act were ex gratia. Respondent municipality applied to Federal Court to set aside Minister’s calculation of payments in lieu in respect of Halifax Citadel, Canada’s most frequently visited national historical site. It occupied total of 48.5 acres of land in city centre. Approximately six acres of site comprised 19th century military fortification structures, three-storey house and other smaller buildings. Land sloping down from ramparts to road below covered with grass and comprised about 42 acres of citadel land, known as glacis. Municipality requested more than $15.5 million in payments in lieu while Minister paid $2.2 million. Most important difference in valuation concerned 42 acres of land under glacis, which Minister assessed at $10. Minister adopted assessment of value of citadel contained in report of dispute advisory panel appointed under Act. Applications judge granted municipality’s application for judicial review, applying reasonableness standard of review to Minister’s valuation. He concluded Minister’s decision unreasonable because reasons given inadequate. Federal Court of Appeal reversed decision. Municipality’s appeal allowed and matter remitted to Minister for redetermination. Minister’s role under Act not to review assessment authority’s assessment; Minister’s function to reach opinion about value that would be attributed by assessment authority. View of assessment authority important reference point but Minister not bound by it; he is entitled to make independent determination of value that would be attributed to federal property by assessment authority. Minister’s discretion not unfettered and Minister must comply with requirements of Act. Fairness to municipalities demands that Minister’s opinion be informed by tax system that would apply to federal property in issue if taxable. Provided that Minister applies correct legal test, exercise of discretion judicially reviewed for reasonableness, concerned both with transparency and intelligibility of reasons given for decision and with outcome of decision-making process.

Halifax (Regional Municipality) v. Canada (Public Works and Government Services)

(June 15, 2012, S.C.C., McLachlin C.J.C., LeBel, Deschamps, Fish, Abella, Rothstein, Cromwell, Moldaver and Karakatsanis JJ., File No. 33876) Decision at 321 D.L.R. (4th) 638, 192 A.C.W.S. (3d) 367 was reversed. 215 A.C.W.S. (3d) 20 (34 pp.).

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