Decision Date: December 16, 2015
Court: B.C.S.C., Justice Thompson
Citation: 2015 BCSC 2371
Oceanview Golf Resort & Spa Ltd. (“Oceanview”) appealed a decision of the Forest Appeals Commission (the “Commission”) to the BC Supreme Court. The Commission’s decision concerned the levying of an exit fee by the Private Managed Forest Land Council (the “Council”) on five contiguous parcels of land (the “Lands”) owned by Oceanview. The Lands are in the midst of a residential subdivision development process within the City of Nanaimo. The Lands were previously private managed forest land.
The “managed forest” class of property is established under the Assessment Act. Land classified as managed forest is taxed at a lower rate than residential land. Owners can enter and exit their land from the managed forest class by providing notice to the Council and meeting certain requirements under the under the Private Managed Forest Land Act (the “PMFL Act”) and its regulations. One of the requirements for entry is to submit a forest management commitment to the Council for approval. When private managed forest land is sold, the land will be declassified under the Assessment Act if the buyer fails to submit a new management commitment to the Council. When land is declassified, the buyer may be liable under the PMFL Act and Private Managed Forest Land Regulation (the “Regulation”) to pay an exit fee, if the land was managed forest land for less than 15 consecutive years and none of the exemptions in section 3 of the Regulation apply. The Council calculates the exit fee based on regulations, and is paid by the land owner to the local municipal government. The exit fee results in the local government recapturing part of the property taxes that were avoided while the land was classified as managed forest land.
In 2005, Oceanview’s corporate predecessor, Cable Bay Lands Inc. (“Cable Bay”), purchased the Lands. At that time, the Lands were classified as managed forest. When Cable Bay purchased the Lands, it failed to submit a management commitment to the Council. As a result, the Lands were declassified as managed forest land.
In 2007, the Lands were reclassified as managed forest land after Cable Bay submitted a management commitment to the Council. In January 2008, parcels 3 and 4 of the Lands were declassified as managed forest land after Cable Bay requested their withdrawal. Cable Bay paid an exit fee to Nanaimo for the withdrawal. In January 2010, at Cable Bay’s request, parcels 3 and 4 were reclassified as managed forest land.
Meanwhile, in September 2008, Nanaimo passed a new Official Community Plan (“OCP”) Bylaw that included designation of the Lands as a resort centre, which is the first phase in a four-phase development process. In February 2010, Nanaimo approved a Master Plan for the proposed development, which is the second phase in the development process. The Master Plan designates portions of the Lands for future use as park land, right of ways, and public utilities.
In 2011, at Oceanview’s request, the Lands were declassified as managed forest land. Subsequently, the Council notified Oceanview that the exit fee was $312,957.20. Oceanview requested that the Council reconsider the exit fee. The Council upheld its previous decision regarding the exit fee.
Oceanview appealed the Council’s decision to the Commission. Oceanview requested that the Commission rescind the Council’s decision and exempt all of the Lands from the exit fee; or alternatively, recalculate the exit fee based on exemptions under the Regulation for the areas designated for future use as parks, public utilities and right of ways.
In Oceanview Golf Resort & Spa Ltd. v. Private Manager Forest Land Council (Decision No. 2012-PMF-001(a), June 22, 2012), the Commission held that when the Lands were declassified in 2011, they had not been classified as managed forest land for more than 15 consecutive years, and therefore, they were not exempt from the exit fee under section 2(5) of the Regulation. Cable Bay’s failure to file a management commitment when it purchased the Lands led to the declassification. Cable Bay should have been aware of its legal obligations, and Oceanview, as Cable Bay’s successor, could not now seek an exemption under section 2(5). In addition, the Commission held that section 2(1) of the Regulation requires the exit fee to be determined when land is declassified, rather than at some future date when the development process is complete. The Council has no discretion to delay the determination of the exit fee, and even if it did, the process would be unmanageable because the Council would have to monitor developments to determine when they are complete. The Commission also found that delaying the determination of the exit fee would be contrary to the statutory scheme, which encourages owners of private forest land to manage their land for forestry over the long term in return for a lower tax rate.
Finally, the Commission held that when the Lands were declassified in 2011, no portion of the Lands fell within the exemptions in sections 3(1)(a) or (c) of the Regulation, which states that exemptions apply to declassified land that “is” gifted to a government or “is” subject to a right of way or easement. When the Lands were declassified, none of it had been transferred to Nanaimo. Furthermore, the OCP Bylaw could be amended to change the land uses contemplated in the Master Plan. Consequently, the designations in the Master Plan should not be taken as certainties upon which exemptions from the exit fees may rest. Accordingly, the Commission dismissed the appeal.
Oceanview appealed the Commission’s decision to the BC Supreme Court, on the basis that the Commission erred in finding: (1) that section 2(1) of the Regulation required the Council to determine the exit fee when the Lands were declassified, rather than upon completion of the development process with respect to the Lands; and (2) that Oceanview is not entitled to an exemption from the exit fee under section 3(1) of the Regulation to the extent that the Lands will be gifted to the Nanaimo or subject to rights of way or easements.
First, the BC Supreme Court addressed the standard of review that applied to the Commission’s decision. The Court found that forestry practices are central to the Commission’s function, and the PMFL Act and its regulations are intended to promote certain forestry practices on private land. The exit fees and exemption provisions are a central part of this scheme. The Council is empowered to make exit fee and exemption decisions, and the Commission, as an appeal body, has particular familiarity with the legislation delineating Council’s functions. Consequently, the Court applied a standard of “reasonableness” in reviewing the Commission’s decision. This meant that Oceanview had the onus of establishing that the Commission’s interpretation of the Regulation fell outside the range of possible, acceptable outcomes which are defensible in respect of the facts and law.
Turning to the statutory interpretation issues, the Court found that the Commission’s interpretation of the Regulation was not unreasonable. The Court held that the words in section 2(1) of the Regulation obligate the Council to determine the exit fee when managed forest land is declassified. Although one of the objects of the exit fee may be to discourage the program being used as a temporary property tax shelter, as asserted by Oceanview, this narrowly stated purpose is not inconsistent with the Commission’s more broadly expressed object of the exit fee: to promote the continued inclusion of property in the private managed forests land program. The Court found that the prompt imposition of an exit fee upon declassification tended to support this broader purpose. Regarding section 3(1) of the Regulation, the Court held that the grammatical and ordinary sense of the word “is” in that section could not be stretched to encompass what will be. It was not unreasonable for the Commission to hold that the rights of way or alleged gift did not exist at the time of the Council’s exit fee determination, and therefore, no exemption was applicable under section 3(1). To construe the phrase “is subject to” as meaning “is or will be subject to” or “is or may in the future be subject to” would be taking impermissible liberties with the clear language of section 3(1) of the Regulation.
In addition, the Court concluded that, even if it was wrong regarding the proper standard of review, and the less deferential standard of “correctness” should apply, the Commission’s interpretation of sections 2(1) and 3(1) of the Regulation were correct and the Commission correctly held that Oceanview was not entitled to an exit fee exemption.
Accordingly, the Court dismissed Oceanview’s appeal, and upheld the Commission’s decision.