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Supreme Court of Canada

Schools—School taxes on machinery—Invalidity of assessment—Action for repayment of taxes not due—Jurisdiction of Provincial Court—Jurisdiction of Superior Court—Code of Civil Procedure, arts. 33, 35—Education Act, R.S.Q. 1964, c. 235, ss. 510 et seq.—Cities and Towns Act, R.S.Q. 1964, c. 193, ss. 411, 488—Montreal Protestant Central School Board Act, S.Q. 1947, c. 81, s. 3 (am. by S.Q. 1962, c. 17, s. 7).

Appellants claimed repayment of school taxes paid on the valuation of their machinery in the City of St. Michel for the years 1963-64 to 1967-68, and relied on the decision in Jenkins Bros. Ltd. v. Protestant School Board of Greater Montreal, [1967] S.C.R. 739, on the illegality of resolutions identical to those at issue in the case at bar. Here, instead of appealing against the resolutions, appellants paid the taxes and brought this action for repayment of taxes not due. The Superior Court allowed the action, but the Court of Appeal reversed the judgment of the Superior Court on the ground that this valuation was subject to review and the review of a valuation roll is within the jurisdiction of the Provincial Court, not the Superior Court.

Held: The appeal should be allowed.

Appellants could not have had the value of their machinery removed from the valuation roll. They could only have asked that the resolutions of respondents be declared void in so far as their effect was to levy a school tax on their machinery. The action in this case is not one to annul or set aside a valuation roll, which under art. 35(3) of the C.C.P. is within the jurisdiction of the Provincial Court. So far as ss. 510 et seq. of the Education Act are concerned, they contemplate a remedy of

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the same kind as that provided in s. 411 of the Cities and Towns Act, the quashing on ground of illegality. This Court recognized in Duquet v. Town of Ste-Agathe that s. 411 does not prevent an action in nullity against municipal by-laws in cases of ultra vires, and that in such case the matter is within the jurisdiction of the Superior Court. Concerning the legal consequences of a tax levied on non-taxable property, Montreal Light, Heat & Power Cons. v. City of Westmount, [1926] S.C.R. 515, is directly applicable to the case at bar and conclusive on the merits. By levying school tax on machinery which was not taxable for such purpose, respondents exceeded their authority and the assessment is therefore invalid.

Although one of the appellants had distributed its property to its shareholders and so cancelled the shares of its capital stock, it did not lose its legal status since the surrender of its charter had not been approved by the appropriate authority.

Donohue v. Parish of St. Etienne de la Malbaie, [1924] S.C.R. 511; Montreal Light, Heat & Power Cons. v. City of Westmount, [1926] S.C.R. 515; Jenkins Bros. Ltd. v. Protestant School Board of Greater Montreal, [1967] Que. Q.B. 19, aff. [1967] S.C.R. 739; Duquet v. Town of Ste-Agathe, [1977] 2 S.C.R. 1132, followed; Richmond Pulp v. Bromptonville, [1970] S.C.R. 453, referred to; Mailman Corp. Ltd. v. Protestant School Board of Greater Montreal et al., [1976] C.A. 200, disapproved.

APPEAL against a decision of the Court of Appeal of Quebec, reversing a judgment of the Superior Court. Appeal allowed.

T.H. Montgomery, Q.C., and R.J. Cowling, for the appellants.

Clermont Vermette, Q.C., and Maurice Trudeau, for the respondent Commission.

Peter Graham, Q.C., for the respondent Board.

The judgment of the Court was delivered by

PIGEON J.—This appeal is from a decision of the Court of Appeal of the Province of Quebec, which reversed a judgment of the Superior Court allowing appellants’ action for repayment of school taxes paid on the valuation of their machinery in the City of St. Michel for the five school years 1963-1964 to 1967-1968. In the Court of Appeal the case was heard concurrently with that of Mail-

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man Corp. Ltd. against both respondents, the Montreal Catholic School Commission (the “Commission”) and the Protestant School Board of Greater Montreal (the “Board”). Mailman Corp. Ltd. was appealing against a judgment of the Superior Court on a similar action in respect of taxes levied on the valuation of its machinery in the City of Lachine. In the Superior Court, Mitchell J. had, however, come to a conclusion on the law contrary to that reached earlier by the late Demers J., in the instant case. The Court of Appeal affirmed the judgment rendered in Mailman[1], and for the same reasons reversed the judgment rendered in the instant case.

The legislation under consideration in these cases has already been dealt with in a decision of the Court of Appeal, unanimously affirmed in this Court, Jenkins Bros. Ltd. v. Protestant School Board of Greater Montreal[2]. The ratepayer had appealed to the Court against resolutions of the Board and of the Commission which, for the purpose of taxes to be collected for the school year 1963-1964, adjusted the valuation of lands and buildings in the City of Lachine by a fifteen per cent increase, and further directed that no amendment be made to the valuations of machinery and accessories appearing on the municipal valuation roll. Pratte J.A., one of the majority in the Court of Appeal, stated the question of law and the conclusions he had reached as follows (at pp. 25-26):

[TRANSLATION] It must, however, be accepted that the Legislature has indicated the intention that there shall be a uniform basis of valuations in all municipalities subject to the jurisdiction of the Greater Montreal School Board. This clearly appears from s. 3 of 11 Geo. VI, c. 81 (as replaced by s. 5 of 4-5 Eliz. II, c. 124, and amended by s. 7 of 10‑11 Eliz. II, c. 17). That provision reads as follows:

3. If the valuations, or any one of them, appearing on the valuation roll of any such municipality are not established on a basis equal to the basis of the valuations made in the city of Montreal, the Protestant

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School Board of Greater Montreal shall, by resolution, direct amendments to the valuation roll of all or any immoveable properties entered on the protestant and neutral panels in such municipality other than the city of Montreal, and direct that such amended valuation roll shall replace for all purposes of assessment and collection of school taxes in respect of immoveable properties entered on the protestant and neutral panels, the valuation roll theretofore in use by such municipality.

The Act containing this provision does not indicate what is meant by “basis of the valuations”; and, in the absence of enactments clarifying the intent of the Legislature the meaning of the phrase might be discussed endlessly. The fact is, however, as we shall see, that the Legislature has expressed its intent on this question quite clearly in a statute dealing specifically with the valuation of property subject to the school tax. As we know, one of the basic principles of real property taxation is that the taxable property shall be valued at its real value (Cities and Towns Act, s. 485; Municipal Code, s. 650). Now, if we turn to s. 367 of the Education Act (R.S.Q. 1941, c. 59 (R.S.Q. 1964, c. 235)), we find that it is this real value which is to be used as the “basis of the valuations”. Accordingly it seems logical to conclude that what the Legislature intended by enacting s. 3 of 11. Geo. VI, c. 81 was that, in all municipalities within the jurisdiction of the Greater Montreal School Board, the real value of immoveables should be arrived at in accordance with the rules followed in the valuation of immoveables located in Montreal, especially those respecting the elements to be included in determining the value. I do not see how the uniformity desired by the Legislature can otherwise be achieved.

In the case at bar, appellant’s property has been valued at $3,430,690, including $166,710 for the land, $1,699,820 for the building and $1,564,160 for the machinery. After examining this valuation, the Board concluded that the valuation of the land, and of the building as well, should be raised by fifteen per cent, to correspond with valuations made in Montreal, but it stated that it was making no amendment to the valuation of the machinery. As a result of this decision, and because the building and the machinery it contained are one and the same, the property of appellant was henceforth valued at $3,710,669, that is $191,716 for the land and $3,518,953 for the building (including the machinery). In Montreal, however, a provision of the City Charter directs that buildings be valued without taking into account machinery that may be incorporated therein. It is therefore clear that, as a consequence of the

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decision of the School Board, appellant’s property is over-valued by $1,564,160, that is the value of the machinery. Accordingly, I would say that this decision is erroneous in that it allowed the amount of $1,564,160 in the valuation figure to remain unaltered, whereas this item should have been set aside by the School Board.

Montgomery J.A., for his part, stated (at p. 29, a passage quoted in the judgment of this Court):

I am satisfied that it was the intention of the Legislature that, so far as possible, equality should be established among the owners of properties on the protestant and neutral panels in all territories subject to respondent’s jurisdiction. This intention is partly defeated by giving a restricted meaning to the term “basis of the valuation”, limiting it to the rules followed in determining values per square foot of land and per cubic foot of building space and ignoring the various legal provisions as to the accessories to be included in the value of the immoveable.

Until the final decision was rendered by this Court on October 3, 1967, the Board and the Commission annually adopted with regard to the valuation of machinery in the City of Lachine resolutions identical to those which were in the end declared void in Jenkins. Both bodies made similar decisions regarding the valuation of machinery in the City of St. Michel, another municipality in the Board’s territory, where, as in Lachine, machinery was taxable for municipal purposes. The difference between the legal position of Jenkins and that of Mailman and the appellants is that the latter paid the taxes instead of appealing against the resolutions of the taxing authorities. The question in the case at bar is therefore as follows: Did the illegality of the resolutions give rise to an action for the repayment of taxes which were not due?

In concluding his opinion Kaufman J.A. said, in support of the opinion of Mitchell J.:

With respect, I cannot convince myself that the taxes levied—or even parts thereof—were null ab initio. That the taxing authorities may have erred I do not deny, but this is not the type of case where a separate tax was imposed on certain machinery. Rather, it was tax on Appellant’s immovable property, and if items were

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included which, in virtue of the Charter of the City of Montreal, should have been left out, Appellant was free to avail itself of the remedies which then existed—i.e. an appeal to the Magistrate’s Court (or, later in time, to the boards concerned and thence to the Provincial Court (and even further).

By its failure to do so, Appellant forfeited its right to have the error corrected, and while I agree that more than one remedy may exist to right some wrongs, in this case, Appellant—harsh though this may be for it paid the taxes trustingly and in perfectly good faith—cannot be given a second chance, two to six years after the event, to correct an error made by the mise-en-cause and the Respondents. To so allow, particularly in the light of the clear wording on this point in the Code of Civil Procedure and the Education Act, would permit Appellant to do indirectly what it no longer can do directly—and that is to correct the valuation roll.

I should point out, first, that appellants could not have had the value of their machinery removed from the valuation roll. The relevant portion of s. 488 of the Cities and Towns Act provides:

488. The taxable immoveables in the municipality shall comprise lands, constructions and work-shops erected thereon and all improvements made thereto, as well as machinery and accessories which are immoveable by destination or which would be so if they belonged to the owner of the real property…

Under the decision in Jenkins, appellants could only have asked that the resolutions of the Board and of the Commission be declared void in so far as their effect was to levy a school tax on appellants’ machinery, by directing that, for school tax purposes, the valuation recorded for the machinery should remain intact on the valuation roll. Such valuation was moreover entered as a separate item and not included in the value of the land and buildings.

Then, I must observe that the provision of the Code of Civil Procedure referred to by Kaufman J.A. and quoted at the beginning of his opinion can have no application in this case. This the paragraph of art. 35, which is as follows:

35. Saving the right of evocation provided for in article 32, and subject to the jurisdiction assigned to the municipal courts, the Provincial Court also has jurisdic-

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tion, to the exclusion of the Superior Court, in all suits, whether personal or hypothecary:

3. to annul or set aside a valuation roll of immoveables which are taxable for municipal or school purposes, whatever be the law governing the municipal or school corporation concerned.

This is not an action to annul or set aside a valuation roll of taxable immoveables and the machinery in question is not an immoveable taxable for school purposes.

So far as the provisions of the Education Act cited by Kaufman J.A. are concerned, namely ss. 510 et seq., they contemplate a remedy of the same kind as that provided in s. 411 of the Cities and Towns Act, the quashing on ground of illegality. In this regard the following observations were made in the reasons of this Court, in Duquet v. Town of Ste-Agathe[3] (at pp. 1142-43):

I shall now turn to the second point, admitted by the judge of first instance and not considered by the Court of Appeal. Is it true to say that appellant had no remedy other than those provided under the Cities and Towns Act? Under s. 411 of the Cities and Towns Act, a municipal by-law may be quashed “on the ground of illegality”. Apart from special formalities, such as security for costs and so on, the right to apply by petition for the quashing of a by-law is subject to a time limit of three months after the coming into force of the by-law (s. 421). If there had been no other possible remedy, the by-laws in question could not have been attacked when appellant made his motion. Such a conclusion runs counter to many decisions of the courts, which for a long time have allowed actions in nullity against municipal by-laws in cases of ultra vires.

That case, like Donohue v. Parish of St. Etienne de la Malbaie[4], which is therein referred to, dealt with unlawful municipal assessments, and it was held, in accordance with a well‑established line of authority, that in such case the matter is within the jurisdiction of the Superior Court.

At the beginning of his opinion Bernier J.A. states:

[TRANSLATION] The first question to be decided is as to the jurisdiction of the Superior Court. Whether the

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Superior Court has or does not have jurisdiction depends on whether the imposition of that portion of the school tax corresponding to the value of the machinery, an immoveable by destination within the meaning of s. 488 of the Cities and Towns Act, R.S.Q. 1964, c. 193, (hereinafter referred to as “the machinery”), was void “ab initio” or merely voidable.

Having quoted from the opinions in the Court of Appeal in Jenkins, he continues:

[TRANSLATION] In my opinion, therefore, the respondents did not tax immoveable property that was exempt, but they did err in correcting the municipal valuation roll, by not removing the value of the machinery in effecting standardization on the basis of the valuation in the City of Montreal. The resulting valuation is a valid overall valuation, but subject to review. The review of a valuation roll is not within the jurisdiction of the Superior Court.

With respect, I must say that this conclusion is based on an erroneous view of what was decided in Jenkins. In the unanimous judgment of this Court one reads (at p. 745):

…the sole question at issue in these appeals is whether machinery and equipment, owned by respondent and located on its immoveable property in Lachine, are subject to tax for school purposes.

Concerning the legal consequences of a tax levied on non-taxable property, there is a case of major importance which unfortunately does not appear to have been mentioned in the Court of Appeal: Montreal Light, Heat & Power Cons. v. City of Westmount[5]. It was an action to recover municipal and school taxes. The ratepayer had not attacked the valuation roll, and had not appealed to the courts under the Cities and Towns Act or the Education Act. This Court nevertheless dismissed the action as to the taxes levied of the electric system, on the ground that non-taxable property had been included in the valuation of this system, namely the meters, which are moveable property temporarily put in consumers’ homes. Anglin C.J., speaking for all but one member of the Court, said (at p. 522):

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Had the valuation of the poles, wires and transformers been made separately from that of the meters the assessments of the electric system for the years 1920-21 and 1921-22 could have been maintained as to all except the last mentioned. Donohue v. St. Etienne de la Malbaie, [1924] S.C.R. 511. But, in each of these two years, all the electric property of the appellant is embraced in a single gross valuation and is the subject of but one assessment. That the electric meters are of substantial value and form a not unimportant item in each of the total assessments of $85,000 seems clear. It is not within the jurisdiction of the Superior Court to apportion the amount of these assessments between the taxable and non-taxable property included in them. Being, to an extent not indicated, made upon movables, the entire assessments of the electric system for the two earlier years are thereby invalidated and no part of the taxes sued for in respect of them is recoverable.

The exercise in the present case of the powers of taxation, conferred as above indicated, is evidenced by three municipal by-laws and three resolutions of the Board of School Commissioners. Each of the three by-laws provides for the imposition and levy of taxes “on the taxable real estate situate within the limits of the city;” each of the resolutions provides for imposing a tax on “all taxable real property liable therefor in the school municipality of the city of Westmount.”

To employ the very term by which the property made taxable is designated in the Act which confers the power to tax was obviously the certain method of subjecting to the taxation everything which the municipal corporation and the Board of School Commissioners are given the right to tax. That certain and safe method has been departed from by both governing bodies.

This reasoning is directly applicable to the case at bar and conclusive on the merits. By levying school tax on machinery which was not taxable for such purpose, respondents exceeded their authority and the assessment is therefore invalid. The same case also disposes of some alternative arguments submitted by respondents. Thus, they contended that the evidence did not show that all the machinery assessed was exempt. According to the trial judge, this was only true of an insignificant item. The decision in Westmount shows that once it is established that an appreciable part was not taxable, the whole assessment was void. It was also

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argued, relying on Richmond Pulp v. Bromptonville[6], that some machines are immoveable by nature, and it was suggested that this might be true of some of appellants’ machinery. Although the trial judge considered it necessary to observe that [TRANSLATION] “The evidence was somewhat weak regarding the machinery”, he nevertheless found it sufficient to justify a judgment. There is no basis for presuming that all the machinery of the industrial undertakings in question was immoveable by nature.

There was really no basis for the submission by counsel for the Commission that the resolutions in question in this case should be regarded as a finding that all the machinery valued for municipal purposes in the City of St. Michel was of the same nature as that which was taxable in Montreal. The wording clearly shows that they purported to levy the school tax on all machinery, without any distinction, and not merely on what was taxable in Montreal, that is “machines producing motive power”. In this regard, the trial judge said that [TRANSLATION] “it was proven that plaintiffs owned no such machine, except for a very old unit worth $100.00 at the most”.

Finally, it was argued that one of the appellants had lost its legal status because, intending to surrender its charter, it had distributed its property to its shareholders and cancelled the shares of its capital stock. The trial judge properly dismissed this argument: so long as the surrender of the charter has not been approved by the appropriate public authority, a company incorporated by the letters patent continues to exist.

For these reasons, I would allow the appeal, set aside the decision of the Court of Appeal and restore the judgment of the Superior Court, with costs throughout against respondents.

Appeal allowed with costs.

Solicitors for the appellants: Ogilvy, Montgomery, Renault, Clarke, Kirkpatrick, Hannon & Howard, Montreal.

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Solicitors for the respondent Commission: Vermette, Dunton, Ciaccia, Rusko, De Wever & Saintonge, Montreal.

Solicitors for the respondent Board: Howard, McDougall, Ewasew, Graham & Stocks, Montreal.

 



[1] Mailman Corp. Ltd. v. Protestant School Board of Greater Montreal et al., [1976] C.A. 200.

[2] [1967] Que. Q.B. 19 aff. [1967] S.C.R. 739.

[3] [1977] 2 S.C.R. 1132.

[4] [1924] S.C.R. 511.

[5] [1926] S.C.R. 515.

[6] [1970] S.C.R. 453.

 

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