The YMCA, Taxation, and Statutory Interpretation: YMCA of Greater Toronto v Municipal Property Assessment Corporation
A recent ruling at the Court of Appeal for Ontario (“ONCA”), Young Men’s Christian Association of Greater Toronto v Municipal Property Assessment Corporation, 2015 ONCA 130 [YMCA, ONCA], held that the Toronto YMCA was not exempt from municipal property taxes on four properties to which it holds leases. The ONCA’s pithy decision rests on principles of statutory interpretation and an avoidance of the lower court’s lengthy discussion of the word “of.”
Facts and Findings at First Instance
The Toronto branch of the Young Men’s Christian Association (YMCA Toronto) held leases to the four Toronto buildings at the centre of this matter. At the time of application, the four buildings were being used as: (i) an emergency youth shelter known as YMCA House; (ii) YMCA Toronto’s administrative headquarters; (iii) a centre for day programs for young men considered to be at risk; and (iv) a daycare. With the exception of the third building, which YMCA Toronto purchased in August of 2013, each were held under leases of varying lengths from different owners (YMCA, ONSC, see chart at para 8).
In Young Men’s Christian Association of Greater Toronto v Municipal Property Assessment Corporation, 2014 ONSC 3657, [YMCA, ONSC], YMCA Toronto brought an application at the Ontario Superior Court of Justice for an exemption from assessment of municipality property tax for each of the leased properties. Their application was based on section 10 of The Toronto Young Men’s Christian Association Act, 1923, SO 1923, c 106 (electronic version unavailable, see part 16 of table at link for currency) [YMCA Act], a provincial statute establishing the organization that has gone unamended since receiving Royal Assent in 1923 (YMCA, ONSC, para 7). The section in question provides that:
The buildings, lands, equipment and undertaking of the said association so long as and to the extent to which they are occupied by, used and carried on for the purposes of the said association are declared to be exempted from taxation except for local improvements.
YMCA Toronto argued that the four properties it was leasing constituted “buildings” and “lands” for the purposes of section 10, and that the associated leases rendered them buildings and lands “of the said association,” that is, of YMCA Toronto. As such, YMCA Toronto sought an order declaring that they were exempted from municipal taxation for those leases.
The respondents, the Municipal Property Assessment Corporation and the City of Toronto, challenged the application on the grounds that the section 10 exception applies only to properties to which YMCA Toronto enjoys fee simple ownership.
At the Ontario Superior Court of Justice, Justice Perrell ultimately finds that leaseholds do not qualify for the YMCA Act’s section 10 tax exemption. His reasons can be divided into those of strict statutory interpretation and those of common law precedent. Regarding the first, he begins by stating that the central issue to be analyzed is “whether the YMCA’s four four leased premises are caught by the words buildings, lands, equipment, and undertaking of the said association” (para 18, emphasis in original).
His next moves, here only briefly recounted, are to find that only the word “lands” is capable of capturing the leased premises, and thus, that the interpretive exercise is narrowed to the question of whether “the YMCA’s leases are “land of the YMCA?” (paras 19-24). One might be struck, as the author was, by the court’s equivocation of ‘lease’ and ‘land.’ Although clearly aware of the distinction between a proprietary interest (the lease) and the rights object in which the lease creates rights (the land), the linguistic elision of the two continues throughout his analysis.
Returning to what has been identified as the determinative question – whether the YMCA’s leases are “land of the YMCA?” – Justice Perell centres his analysis on the interpretation of the word “of.” He begins with the dictionary. Justice Perell notes that among many of the Concise Oxford Dictionary of Current Edition (7th Edition)’s definitions of this “powerful preposition,” one finds notions of belonging and possession.
Further, he notes that one of the fundamental uses of “of” is to indicate the relationship of ownership (paras 25-26). After recognizing that the preposition and question and ownership tend to run together, he turns to distinguish owning land from leasing land, noting that in common use, the distinction between the two is clear: “If you ask a tenant who owns his or her leased premises, the tenant will name the landlord who actually owns the title to the land” (para 27).
Justice Perell thus comes to the conclusion that he would interpret “land of the YMCA” in section 10 of the YMCA Act to mean “land owned by YMCA.” This interpretive finding is then is then supported by the rehearsal of a series of cases which express the same sentiment, as well as distinguishing the case relied upon by the appellants (paras 31-34). As such, since the YMCA does not own the properties in question, the court finds that there is no exemption in the case at bar (para 47).
The YMCA MCA appealed Justice Perell’s decision, contending that the application erred in restricting his analysis strictly to the word “of.” They also offered two further arguments for a more expansive interpretation which were addressed by the Court of Appeal.
Issue at the Court of Appeal
A unanimous Court of Appeal, eschewing the more narrow language of Justice Perell, phrased the central issue as follows:
The issue is whether the buildings and lands leased, occupied, and used by the Toronto YMCA in the City of Toronto are exempt from municipal taxation under the Assessment Act, RSO 1990, c A.31, as amended, by virtue of s. 10 of the YMCA Act? (YMCA, ONCA, para 3).
Ultimately, the ONCA upholds the decision of Justice Perell, but for different reasons than the ones he offered.
Reasons of the Court of Appeal
The ONCA begins by quietly diverging with the analysis at the court below on the question of whether a lease might be captured by section 10 of the YMCA Act. They first observe that “the appellant’s leased premises are not “land,” because a tenancy does not qualify as “land”; it is an interest in land. Accordingly, “lands… of the [Toronto YMCA]” would not ordinarily include lands that the Toronto YMCA leases (YMCA ONCA at para 10). Here, the Court is recognizing the tacit elision we flagged in our rehearsal of Justice Perell’s reasons above. This initial divergence means that the Court of Appeal does not need to engage in the interpretation of the word “of” that follows from equivocating ‘lands’ and leases.
The ONCA then entertains the appellant’s arguments for expanding the interpretive breadth of “land” in the context of the YMCA ACT to include leases.
YMCA first points to section 5 of the YMCA Act, which, after enumerating both ownership and leaseholds in the first clause, creates a limit on how long “land at any time acquired” can be held after it ceases to be required for the associations purposes in the second. This section, the appellants argue, must include any proprietary interest, and that this expanded meaning should be carried into section 10. The Court of Appeal rejects this argument for two reasons: first, it is unclear that the second clause groups together all interests, and second, that section 5 operates for a different purpose than section 10 (para 12).
The second argument, given to a similar effect, is that the court should apply a purposive interpretation of section 10 that “furthers the philanthropic objects of the association by recognizing [the YMCA’s] need to use its assets to fund its activities. Thus, the argument concludes, section 10 should be interpreted to apply to all buildings, whenever they are used and occupied by the appellants (para 13).
However, in a deft reply, the ONCA notes that accepting this argument would run afoul of the principle of statutory interpretation that every word that is used in a statute is to be given meaning (para 14). In particular, the Court notes that the appellant’s proposed purposive interpretation — on which use and occupation by the association would ground the exemption — would take no account of the words “of the said association” in the first portion of the section which must pick out something other than use and occupation.
To this, they add that this ‘something other’ generally borne out in the case law is ownership, and not leasehold interest (para 15). This further strengthens the conclusion that it is ownership, and not leases, which activate section 10.
Finally, the Court of Appeal concludes that the case is distinguishable from a similar case in which a Kitchener YMCA, established using a similar statute with an exemption clause, due to the fact that the Kitchener-specific statute was amended in 2005 to provide an exemption for all land used or occupied by the association in Waterloo, including leased property (para 16).
The ONCA concludes its judgment by noting that it is “unfortunate,” but hardly surprising, that different YMCA associations will in some cases be tax exempt and in others, assessable, being that the exemptions are contingent on private acts enacted independently and at different times (para 18). Indeed, without a comprehensive scheme holding for all associations which explicitly sets out what sorts of proprietary interests ground exemptions, such uniformity is not possible.
An additional point of interest in the Court of Appeal’s decision is the manner in which it departs from the focus of the superior court decision. By initially diverging from Justice Perell’s first finding that “lands,” rather than any of the other enumerated items in section 10, could act to capture “leased premises,” the ONCA is able to offer a wholly different analysis. The Court completes this divergence quietly, without remarking on or rebuking the methods taken up at first instance, coming to the same (and probably correct) conclusion.