Legal Matters Affecting You
and Your Municipality
Tauna Staniland
and
Jonathan Dale
Outline
1. Issues of Taxation
a. Types of Taxation
b. “carrying on business”
c. Exemptions
d. Tax Collection
2. Contract Law
a. Tendering and Bidding
b. Contract Drafting and Contract
Management
c. Contract Principles
Taxation – Types of Taxation
1.
2.
3.
4.
5.
Real property tax
Business tax
Poll tax
Direct sellers tax
Water and sewage tax
Taxation – Real Property Tax
Municipalities Act:
112. (1) A council may impose an annual tax, to be known as "the
real property tax", on the owners of real property within the
municipality.
subsection (2) states that there may be different rates for
residential and commercial property.
Municipality cannot be discriminatory with respect
to setting and applying tax rates. Must be fair.
Courts will not tolerate arbitrary decision making.
Must treat all parties fairly.
Taxation – Real Property Tax
Who is liability for Property Tax in a
Landlord / Tenant or Rent-to-own
situation?
• The Act states that a council may impose a real property
tax on owners of real property (Landlord, not the Tenant).
• Landlord may choose to charge the Tenant property tax as
part of the rental.
• Where Landlord is not known, s. 115 provides that the
occupier is considered to be the owner for the purpose of
property tax.
• Burden is then on the Tenant to ensure town knows who
the Landlord is.
Taxation – Real Property Tax
• In a rent-to-own situation, a strict reading of s.
112 suggests that until title passes to the
renter, the owner is liable for taxes.
• In both situations, where poll tax is imposed,
the town may impose the poll tax on the tenant
pursuant to s. 126.
• Where a landlord has not paid outstanding
taxes, a town can direct that the tenant pay all
rental monies to the town (s. 148). If tenant
does not comply, town may prosecute in
Provincial Court for breach of statutory duty.
Taxation – Business Tax
Municipalities Act, 1999
120. A council shall impose an annual tax, to be known as
"the business tax", on all businesses carrying on business
in the municipality.
VS Services v. St. Anthony (NFCA 1988)
“business” is employment; occupation; profession;
calling; vocation; means of livelihood; that which
occupies the time, attention and labour of men, for the
purpose of profit or improvement.
Taxation – Business Tax
• Municipalities run into difficulty when a business
operates from one location while carrying on
business in various other communities
Hypothetical: Company A has a registered head
office in Town X, with a small office house a
phone line and a garage full of heavy equipment.
The company operates and generates revenue in
neighbouring Town Y and Town Z. Does the
Company have to pay business tax in 3
communities?
Taxation – Business Tax
Company’s argument would be that the garage is
housing the heavy equipment and that no
revenue is being generated therefrom since the
work is being performed in Towns Y and Z.
If Town X imposes property tax: company will be
responsible for taxes based on the assessed
value of the real property
If Town X doesn’t impose property tax: business tax
will be a percentage of the total gross revenue of
the business regardless of whether some or most
of the work is carried out in Town Y or Z.
Taxation – Business Tax
Discuss case: Town of Long Harbour & Mount
Arlington Heights
This case demonstrates that Company A in the
above hypothetical example will likely have to
pay taxes in each Town in which is it operating.
Taxation – Business Tax
Not-for-profit (non-profit) businesses
• Act states that a Town shall impose a business
tax on all businesses carrying on business
within the Town.
• Definition of business in s. 2(1)(c) includes all
types of business organizations “whether or not
they are for profit”
• However, Towns often consider the nature and
purpose of these business enterprises and
vote to exempt such corporations from taxation
pursuant to s. 111 of the Act
Taxation – Home-based Business
All home based business should be subject to
business tax
No Property Tax?: Business tax is a percentage of
the gross revenue of the business and it is
irrelevant whether the business is a home-based
business.
• s. 121(2) allows the business tax to be a
percentage of the assessed value of the property
used by the business even where no property tax
Property Tax?: business tax is a percentage of the
assessed value of the space used by the
business
Taxation – Business Tax
Discussion case:
Ultramar Canada Inc. v. Mount Pearl (Town)
(1987)
Taxation – Business Tax
Hypothetical -Exemptions
A fish processing company operated in the Town
on a seasonal basis for nearly 15 years. There
was only one other commercial fish operation in
the Town. The second company operated for less
time throughout the year. The Town imposed a
business tax on the first company, but gave the
second company an exemption. Does the Town
have the discretion to apply taxes differently to
these similar businesses?
Taxation – Business Tax
• NO! (see Petty Harbour v. Peerless (NLSCTD 2005)
• Municipalities must operate within the powers
conferred on them; it cannot discriminate beyond
what is permitted in its empowering statute.
• A municipality cannot decide on its own, in the
absence of statutory authority, to decline to tax a
taxpayer in a class when it is authorized and
directed to tax “all” taxpayers.
Tax Collection
Disconnection of service
s. 132 – council may disconnect service of a water system,
sewage system or water and sewage system provided to
the person who owes the tax, fee, levy, assessment, fine
or charge to the council.
Lien
s. 134 - Where taxes owed are in respect to real property
owned by the person to whom the tax is assessed (e.g.
the owner of the house where water tax is owing, or
business tax where the owner of the business also owns
the property where the business is located), the tax
imposed upon the real property constitutes a lien.
Tax Collection
Seizure of rentals
s. 148 Council may seize rentals payable by tenants of real
property that is subject to the real property tax, business
tax or water and sewage tax to discharge the liability of
the owners of that real property for tax due, whether or not
the taxes are in respect of the real property occupied by
the tenants.
Prosecution
s. 421 provides that prosecutions for offences under the Act
may be carried out by a council or a local service district
committee or its agent or a peace officer.
Tax Collection
Civil debt
s. 133 - All taxes, together with interest owing on
those taxes may be sued for and collected by
action in the name of the council as a civil debt
due to the council.
Tax Sale
s. 137 – 147 - Where taxes owed are in arrears,
the council can give notice to the owner and
encumbrancers of the real property that the
property is to be sold unless arrears are paid
within 60 days from the date of the notice.
NOT where occupied for residential purposes
Contract Law
BIDDING AND TENDERING
• Towns should know their obligations
• Common Source of Litigation
• Complicated area of the Law
BIDDING/TENDERING
PUBLIC TENDER ACT
WHEN IS IT NECESSARY TO CALL?
- Whenever public work is to executed under a Town’s
direction or goods/services to be acquired by a Town
BUT, numerous exceptions as to when it is not necessary
(Section 3(2) of the Act)
- Example: Not necessary to call where estimated cost of
goods is less than $10,000 or where estimated cost of
work is less than $20,000
- Example: Emergency
BIDDING/TENDERING
Practical Considerations
• Have good tender specifications and a good
contract
• Consider how specific a call for tenders needs to be:
i.e. overly specific requirements that have no
relationship to the quality or cost of the work might
cause problems
BIDDING/TENDERING – Legal Framework
Contract A
All companies that submit a compliant bid further to a call
for tenders are parties to Contract A between each of them
individually and the Town.
Contract A requires:
• Fair and Equal Treatment of every compliant bidder;
• Privilege clauses do not allow Town to accept noncompliant bid;
• Implied term that Town will only accept a compliant bid
• Must award to the lowest price bid (vs. RFP where you can
use multiple criteria)
BIDDING/TENDERING – Legal Framework
Contract B
• After a bid is accepted and awarded, obligations under
Contract A cease
• Contract B is governed by the terms of the Tender and the
compliant bid
• Town can insist on strict compliance
• Town can take such other contractual actions as are
contemplated in the Tender and the compliant bid
Double N Earthmovers – 2007 SCC 3
• Town put out call for a term contract for supply of refuse
equipment and operators
• Tender documents required all equipment to be 1980 or
newer and required bids to include year of manufacture
and serial number
• Lowest tender was from Sureway – but the serial
numbers corresponded to equipment manufactured
before 1980 and the year of manufacture in Sureway’s bid
was incorrect
• Town awarded contract to Sureway on basis of its bid,
which was compliant on its face, and allowed Sureway to
carry out the work with older equipment
Double N Earthmovers – 2007 SCC 3
• Double N had submitted a compliant bid and sued the
Town, stating that Town could not later modify the contract
by allowing older machines
Action Dismissed
• Bid was compliant on its face and Town was not required
to check its database to confirm that serial numbers
corresponded to appropriately aged machinery
• Call for tenders allowed for changes to be negotiated with
the lowest compliant bidder, so Town was able to allow
older machinery
• SCC was split 5-4 in its decision
CMH Construction – 2010 NLTD 145
• Department of Municipal and Provincial Affairs approved a
budget of $120,000 to Town’s municipal centre;
• Call for tenders issued by Town;
• CMH was only bidder, in amount of $183,000;
• CMH bid was compliant;
• Call for tenders provided that Town did not have to accept
the lowest or any bid;
• Town chose to not award the contract, and instead got
Department approval to revise the specifications of the
work and also got approval to get the work done in a
phased approach, which meant that it was not necessary
to call for tenders.
CMH Construction – 2010 NLTD 145
CMH sued and was successful at Trial
• Court found that the Town breached its duty of fairness
to CMH, as follows:
• The specifications in the call for tenders could not reasonably
have been met within the Town’s budget;
• Town was still in possession of CMH’s security at the time work
was being carried out by other contractors;
• Town did not offer CMH opportunity to bid on the broken down
aspects of the revised work.
Tender Specifications
Consider the following in tendering specifications:
• How specific should specifications be?
• Include material items
• Town has discretion - but don’t be “fancy”
• Reserve the right to cancel tender and re-bid
• Budgetary concerns or other legitimate reasons
• Otherwise accept compliant/lowest price bid
• Reserve the right to waive any irregularities/informalities
that would not materially affect price or performance
• Exclude any implied terms based on past practice of
municipality
Tendering specifications (con’t):
• Exclude Town’s liability for breach of “Contract A”
• Tercon Contractors (2010 SCC)
• Attach “Contract B” to tender specifications
Contract Drafting and Contract Management
• “Contract B” Should be well drafted for the benefit
of the Town and included with the specifications
• But also - outside of the context of bidding and
tendering - municipalities should aim for well
drafted contracts.
• Examples - service contracts, leases, employment
contracts, supply contracts, sale and purchase of
land
• Pay attention to contract management. Don’t just
stick it away in a drawer!
Contract Drafting and Contract Management
Contra Proferentem is a rule of contractual
interpretation which provides that an ambiguous
term will be construed against the party that
drafted the contract.
Contract should be clearly drafted, particularly when:
1.
2.
3.
4.
the Town is providing a standard form contract to a party;
a contract is drafted in-house;
contract is drafted by the town’s legal counsel; and
where the other party has not had a real opportunity to
negotiate the terms contract
As the terms will be interpreted against the Town
when this is a dispute.
Contract Drafting and Contract Management
Written Agreements:
• Set out the parties “intentions” with respect to the
transaction or relationship.
• If clear and unambiguous, they will be enforceable in
court as set out in the agreement without reference to
extrinsic evidence.
“THIS is our agreement, enforce it.”
Contract Drafting and Contract Management
In Plain Language:
• Always have a clear scope of work (where
relevant)
• Payment terms / payment schedule
• Set out all material obligations of each party
Contract Drafting and Contract Management
Common Provisions
• Term (including any renewal rights subject to PTA)
• Termination (on notice, on default or breach of
conditions)
• Default Provisions (insolvency,
assignment/subcontract, fails to pay for
labour/materials, fails to provide documentation,
fails to perform work in manner specified, etc.)
• Liability and Indemnities (property, personal injury
and 3rd party for negligence and breach of contract)
Contract Drafting and Contract Management
Common provisions (continued):
• Insurance and Proof (automobile, general liability,
business, employee, environmental, other?)
• Workplace Health, Safety and Compensation Act –
registration and compliance
• Compliance with laws
• No assignment / no subcontracting (or with consent)
• No waiver of terms except in writing
• No Amendments except in writing
Contract Drafting and Contract Management
Other useful provisions:
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•
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Severability
No partnership
Confidentiality
Headings for Reference only
Notice
Time is of the essence
Contract Drafting and Contract Management
Other useful provisions (con’t):
• Counterpart execution
• “The Parties agree that this agreement may be executed in
counterparts and by facsimile and when so executed shall
constitute a binding agreement between the Parties”
• Delivery by fax / e-mail copies
• Entire Agreement
Contract Principles
• Breach of Contract is a legal cause of action in
which a binding agreement is not honored by one or
more of the parties to the contract by nonperformance or interference with the other party’s
performance.
• Minor Breach
• Material Breach
• Are you permitted to terminate the agreement?
Contract Principles
Minor Breach: (partial breach or immaterial breach), occurs
when the non-breaching party is not entitled to an order for
performance of the obligations, but only to collect the actual
amount of their damages. For example, suppose a Town hires
a contractor to clear snow from town roads and insists that the
plow be red. The contractor paints his plow blue part way
through the winter but it still functions just as well. Although
the contractor breached the literal terms of the contract, the
Town can only recover the amount of its damages. Since the
plows is identical in value and service, the difference is zero;
therefore, there are no damages and the Town receives
nothing. It is important to note, however, that if the agreement
specifies that he plow colour is a condition of the agreement,
the breach of that condition will permit termination by the
Town.
Contract Principles
Material Breach: any failure to perform that permits the other
party to the contract to either compel performance, or collect
damages because of the breach. If the contractor in the
previous example had been instructed to use a plow with
certain sized plow blade, and instead used a smaller plow
blade which didn’t clear the snow as effectively as the larger
plow, the Town could sue for breach of contract and recover
the cost of correcting the breach – i.e. costs of hiring a new
contractor with the correct size plow blade, or hiring
someone to clear the snow that wasn’t removed by the
smaller plow. In addition, if the size of the plow is a condition
of the agreement – the Town may terminate the agreement
AND recover damages.
Contract Principles
Hypothetical
The Town has a contract with Plows ‘R Us for
snow removal which stipulates that plows must
be on the roads before 5:00 am. Plows ‘R Us
fails to meet this requirement, and there is no
mention in the contract of what remedy exists in
this situation. The Town hires Super Plows to
clear the roads.
1. Is the Town liable to Plows ‘R Us for damages?
2. Is Plows ‘R Us liable to the Town for damages?
Contract Principles
• Town would not be liable to Plows ‘R Us. The
Company’s claim for breach of contract would fail due
to the fact that the Town had to act in the best interest
of its residents to ensure safety.
• Town could sue for a breach of contract under the
common law and receive damages for amounts spent
in hiring the subsequent service provider.
• What about termination? What does the contract say.
• This example shows the importance of good drafting.
If a remedy had been included in the initial contract
for this type of scenario, dispute would have been
avoided.
Contract Principles
• Key to a successful business relationship is a welldrafted contract.
• Seek legal advice up front (prior to sending out
specifications) rather than when the problem
arises.
• Anticipate problems and include them in the
contract.
• Even the most well-intentioned, reasonable parties
can have disputes and it is always best to be able
to point to a provision in the written contract which
explains each party’s responsibilities, obligations
and duties.
THANK YOU!
ANY QUESTIONS?