Page 1
1 of 1 DOCUMENT
Indexed as:
Regional Assessment Commissioner, Region No. 12
v. Oshawa Group Ltd.
The Regional Assessment Commissioner, Region No. 12 has
appealed to the Ontario Municipal Board under subsection
43(1) of the Assessment Act, R.S.O. 1990, c. A.31 from
decisions of the Assessment Review Board regarding those
properties in the City of Etobicoke concerning those roll
numbers and taxation year noted below
Roll Number: 19 19 017 010 010 00 0010
Municipal Address: 144 Parklawn Road City of Etobicoke
Taxation Year: 1990
Roll Number: 19 19 032 530 001 00 3200
Municipal Address: 302 The East Mall City of Etobicoke
Taxation Year: 1990
Roll Number: 19 19 032 530 001 00 3300
Municipal Address: 302 The East Mall City of Etobicoke
Taxation Year: 1990
[1994] O.M.B.D. No. 1638
File Nos. A 9000657, A 9000655
Ontario Municipal Board
C.A. Beach
October 28, 1994
(10 pp.)
COUNSEL:
K. Lunau, for Regional Assessment Commissioner, Region No. 12.
H. Elston, for The Oshawa Group Limited.
Page 2
DECISION delivered by C.A. BEACH AND ORDER OF THE BOARD:-At issue is the correct business assessment to be assessed against the Oshawa Group Ltd.
(Oshawa) at 302 the East Mall, Etobicoke. The parties agree that the Oshawa premises at 144 Park
Lawn Road should be assessed at 50% pursuant to subsection 7(1)(e) of the Assessment Act, R.S.O.
1990, c. A.31 (the Act).
The Regional Assessment Commissioner (RAC) contends that Oshawa should be assessed at
75% in accordance with subsection 7(1)(c) of the Act which states:
"The business of selling or distributing goods, wares and merchandise through a
chain of more than five retail stores or shops in Ontario, directly or indirectly
owned, controlled or operated by the seller or distributor, for a sum equal to 75
per cent of the assessed value of the land occupied or used in the business for a
distribution premises, storage or warehouse for the goods, wares and
merchandise, or for an office used in connection with the business."
Oshawa contends that they should be assessed at 30% in accordance with the omnibus
provisions of subsection 7(1)(k) of the Act which states:
"Any business not specially mentioned before in this section, for a sum equal to
30 per cent of the assessed value of the land so occupied or used."
The Board in determining the appropriate level of assessment, whether under subsection
7(1)(c) or 7(1)(k) must do so in the context of Section 7(1), the opening section to 7(1)(c) and
7(1)(k). This opening section ties the assessment to the occupation and use of land. In part, it states:
"....every person occupying or using land for the purpose of, or in connection
with, any business mentioned or described in this section,...." (Board's
underlining)
From the evidence adduced and the submissions of counsel it is clear to the Board that
Oshawa's premises located at 302 The East Mall is not used for selling, distributing or storing of
goods, wares and merchandise. Therefore, the determinant issue of this appeal is posed by the
following question.
Are the premises, located at 302 The East Mall, Etobicoke used as an office in connection
with the business described in subsection 7(1)(c) of the Act?
The Board will now review the evidence of the nature and character of Oshawa. It is
Page 3
described on page 1 of its promotional brochure (Exhibit 7) as:
"a Canadian Company that grew from a stall in the bustling old Toronto fruit and
vegetable market into one of the nation's largest distributors of food,
pharmaceuticals and general merchandise."
It operates in nine provinces and its 1992 sales surpassed $9 billion dollars. The breadth and width
of its operation is best described on page 3 of Exhibit 7, its promotional brochure:
"The Company began the 1990s with sales of approximately $5 billion, and was
supplier to 500 IGA franchise markets, 384 other franchise units, 1,658
convenience stores, 24 cash and carry and 5,274 non-affiliated food stores while
operating 99 company-owned supermarkets, 51 department stores, 152 drug
marts, 25 pharmacies, 48 restaurants and snack bars and 10 gas bars."
The organisational structure of Oshawa is typical for a diverse company of its size. The
structure consists of some 18 separate divisions representing Oshawa's diverse interest in the food,
pharmaceutical and general merchandise areas. Food wholesale and retail divisions accounted for
86.2% of its 1992 consolidated sales. No evidence was offered that the predominance of the food
wholesale and retail divisions was different in 1990. Of the 18 divisions, only 6 are not
incorporated.
Although counsel tried to lessen the importance of Oshawa's promotional material filed as
Exhibit 7, and the way Oshawa describes itself in its 1992 Annual Report filed as Exhibit 8, it is
difficult for the Board to accept that such a large and important company, in public documents,
would mislead the general public or falsely represents itself. Therefore, on the inside of the cover of
its 1992 Annual Report (Exhibit 8) where it states: "For more than half of its 80-year history,
Oshawa's wholesale divisions have served grocers trading under the IGA store banner"; it sees its
affiliated companies as "divisions" and makes a link between its divisions and itself. At page 4 of
Exhibit 7 it states: "Oshawa's wholesale and retail food divisions supply franchised markets,
convenience stores, cash and carry units, non-affiliated independents and Company owned
supermarkets...". Again, the link between Oshawa and its divisions are established.
Mr. P. Connell, who until he retired in 1992 was Oshawa's Chief Financial Officer, in
describing the decentralised approach of Oshawa, described the "food business" as a "penny
business" which requires on the spot cost control. As a result, each division has control of its day to
day management in order to react quickly to the peculiarities of the market it serves. Therefore,
each division is autonomous to the extent that it improves the efficiency of that particular division
and adds to the profitability of Oshawa.
Mr. Connell described Oshawa as a head office responsible for overseeing its investments.
However in its brochures it does not describe itself as an investment company. It describes itself as
one of the nation's largest distributors of food, pharmaceuticals and general merchandise. It is
Page 4
predominantly in the "food business" which is a term used by Mr. Connell. Any doubt about this is
dispelled by its 1992 Annual Report (Exhibit 8) which states that 86.2% of consolidated sales were
derived from its food wholesale and retail divisions. And, although it is true that Oshawa acquired
and divested itself of companies it did so not because it was in the investment business but because
it provided "growth opportunities while balancing its geographic asset base".
As an example, General Motors and the Ford Motor Company if they acquire other
companies related to the auto industry would not be described as investment companies. Their
predominant business is manufacturing cars and these companies are described as being in the car
manufacturing business. Oshawa, with respect to acquiring or divesting itself of other companies, is
no different. It is in the "food business".
Counsel, in their submissions cited cases which in their opinion support their respective
positions. The Board, in its review of the cases cited, notes that none of the cases cited fit the
matters before it like the proverbial "well fitting glove". Besides, most of the cases cited deal with
the relationship or linkage for taxation purposes between subsidiaries or divisions of a company
with their main operation or head office. The issue being whether for taxation purposes can the
subsidiary or division be considered as part of the main operation. The matter before the Board is
the reverse of this. Here, the board is dealing with the relationship of a head office with its divisions
or subsidiaries with respect to taxation. The issue being as previously stated.
However, the Board does not intend to minimise the importance of the cases cited. These
cases have established important principles against which evidence can be tested. In the following
passages the Board discusses the relevant principles against which the evidence will be tested.
Although counsel for Oshawa described Re Hiram Walker & Sons Limited and Town of
Walkerville (1917) as old law, in the Board's opinion the learned judge, Meredith, C.J.O. in his
judgment at p. 156 of 40 O.L.R. laid down an enduring principle with respect to the relationship of
one part of a business to another part for taxation purposes. He reasoned that in a distillery, the
distillation process for taxation purposes cannot be treated differently than the blending and storing
of the product of distillation. They were all part of the same process. His reasoning was as follows:
"The case was argued by Mr. Anglin as if the legislation imposed taxation in
respect of a "distillery." The question in such a case would be a very different
one from that which arises when the taxation is in respect of "the business of a
distiller." The court cannot, I think, know judicially what such a business is, and
the question of what it is must therefore be a question of fact. I do not think that
there can be any reasonable doubt that, where it is shown that a distiller, in
addition to distilling, warehouses the product of distillation and also blends
liquors from the process of distillation and warehouses these liquors, the business
of distiller as used in the clause may embrace all these branches of the business."
This principle, "the business of a distiller", runs like a thread through a number of the cases
Page 5
cited by counsel for the RAC.
Another important principle which the Board is of the opinion is pertinent to the matter before
it, was laid down in the Judgement of Henderson J.A. Toronto v. Lever Brothers [1942] 3. O.L.R.
At page 472 the distinguished judge reasoned:
"What is necessary under s. 8 of the Assessment Act (as it then was) is to
determine the real character of the business for the purpose of which the land is
occupied or used. It may be necessary in some cases to look beyond the activities
upon the premises to ascertain the real character of the business." (Board's
underlining and fine print)
In Re United Trust Co. et al. and City of Toronto et al. 11 O.R. (2d), Fraser, J. in determining
whether an assessment was to be based on the use of premises for trust company purposes or for
real estate purposes referenced a number of cases including Hiram Walker & Sons Ltd. and Town
of Walkerville [1917] in his decision. At page 328 he reasoned as follows:
"...What governs is the character of the business carried on by the person who
occupies the land, not necessarily what is done on the particular parcel if it is
used for the purpose or in connection with the business of the occupant."
(Board's underlining)
In Re Kitchener-Waterloo Real Estate Board Inc. and Regional Assessment Commissioner,
Region No. 21 et al, 56 O.R. (2d), at page 138 Campbell, J. in determining whether the premises of
a Real Estate Board are occupied or "used for the purpose of, or in connection with any business",
included as part of his reasoning the following:
"The long answer is that even if the occupation here is not "for the purpose" of a
profit making-making business because the board itself does not make a profit,
the occupation is "in connection with" the profit-making business of individual
members.
The respondent suggests that the words "in connection with" are broader than the
words "for the purpose of" and says that even if the activity is not caught by the
latter it is caught by the former. This is an accurate interpretation of the plain
meaning of the words of the statute. The word "connection" simply means that
there is some relationship between two things or activities - that they have
something to do with each other. The relationship need not be purposive to
constitute a connection..."
(Board's underlining)
Counsel for Oshawa cited a passage from page 75 of the Ontario Property Tax Assessment
Page 6
Handbook which in his opinion is indicative of and supports his position. It states:
"The manufacturers rate of business assessment will not be applicable to a
division of a parent corporation that is fully capable of existing on its own and is
not dependent on the parent corporation. Some of the factors that might be
indicative of whether a division is independent of its parent would be if there are
any internal purchases, if it sets out its own budget, hires and fires its own staff,
manages its own sales or bids for contracts all without intervention of the
parent." (Board's underlining)
It is clear from the evidence adduced that Oshawa does intervene in the business of its
divisions. It operates their payroll and pension plan, it approves their annual budget, no major
investment can be made by divisions without the approval of Oshawa, and more telling, the
manager of each division is appointed and can be fired by Oshawa. In the Board's opinion, given the
facts stated above, it cannot be said that the divisions are operationally completely separate from
Oshawa.
The matter before the Board is therefore different to Re Aluminum Co. of Canada Ltd. et al.
and regional Assessment Commissioner, Region No. 5 et al. cited by counsel for Oshawa and found
in 54 OR (2d) at page 251:
"...the Alcan International operating at the Kingston Laboratory is legally and
operationally completely separate from the other Alcan undertakings in the City
of Kingston." (Board's underlining)
The finding of the Board is that the divisions are not operationally completely separate from
Oshawa.
Based on the principles established in the cases cited above, when one looks beyond the
premises of Oshawa one finds a network of divisions either in food wholesale or retail,
pharmaceuticals and general merchandise with operational links to Oshawa and with reference to
Re Hiram Walker & Sons Limited and Town of Walkerville quoted earlier, can be said to be in the
business of "food wholesale and retail" which is its preponderating business.
Further, the Board finds that the Oshawa premises are for "the purpose of" and "in connection
with" the business of its divisions.
The Board, therefore, allows the appeal by the Regional Assessment Commissioner, Region
No. 12 and orders that the business assessment for roll number 19 19 032 530 001 00 3200 and 19
19 032 530 001 00 3300, 302 the East Mall, City of Etobicoke be assessed at 75% pursuant to
section 7(1)(c) of the Act and roll number 19 19 017 010 010 00 0010, 144 Parklawn Road, City of
Etobicoke be assessed at 50% pursuant to section 7(1)(e) of the Act for taxation year 1990.
Page 7
MOTION
At the outset of the hearing, counsel for the RAC moved a motion requesting an adjournment
of the hearing. The principal grounds for the motion were:
1.
2.
3.
there has been no discovery, or waiver of discovery;
witness statements and expert reports have not been exchanged;
a certificate of readiness has not been filed.
After listening to submissions from counsel, the Board found that each was partly responsible
for the non-exchange of documents. However, the Board, with the agreement of counsel, resolved
the matter by adjourning the hearing until the following day so that documents could be exchanged.
C.A. BEACH, Member
d/swh