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RioCan ordered to reimburse Rossy for business tax at Carbonear store

Rossy has been leasing space in the Trinity Conception Square Mall in Carbonear for a number of years.
Rossy has been leasing space in the Trinity Conception Square Mall in Carbonear for a number of years. - Chris Lewis

Supreme court decision sees dispute end between two companies

CARBONEAR, NL — A Supreme Court justice in St. John’s recently ruled on a dispute between Rossy and the company that owns the Trinity Conception Square Mall in Carbonear.

Rossy, a Canadian retail chain, has been leasing space from RioCan at the mall for several years. Recently, the two have run into some issues when it comes to annual business tax payments issued by the Town of Carbonear since 2013.

Gross rent for the space leased by Rossy comes to $132,000 per annum, payable in equal monthly instalments. Gross rent, in this situation, includes all occupation taxes including without limitation real estate and school taxes, as well as common area expenses.

In the court document, it states that Rossy claimed reimbursement for business taxes they have paid to the Town of Carbonear totalling $107,449.58 for the years 2013 to 2017. Rossy’s main argument was because business taxes are occupation taxes, these taxes fall under the rental payments in the offer to lease, and therefore must be paid by RioCan. RioCan, however, disagreed with this.

The Municipalities Act outlines two separate methods for the assessment of business tax. One goes by the percentage of gross revenue for the business in question, while the other is the percentage of the assessed value of the real property used by the business. In the case of Rossy, the percentage comes from the real property rather than the gross revenue, and according to the court document, Rossy has never been asked to provide revenue information for this purpose to the Town of Carbonear.

Rossy’s main argument in the dispute brought forth the fact that, in other instances similar to this, courts have more often than not interpreted business tax as an occupation tax. In one instance out of Alberta, the Court of Appeal characterized business tax in a similar sense, stating that business taxes arise from the occupation of real property.

Rossy went on to argue that because the Municipalities Act state that business tax is levied on the basis of occupation, RioCan is ultimately responsible for payment of this occupation tax.

However, RioCan questioned the characterization of business tax, bringing up the subject as addressed in Assessment and Rating, Being the Law of Municipal Taxation in Canada where it states that business tax is not “a tax levied on or with respect to ‘lands,’ and cannot be regarded as a tax on land.”

RioCan also argued that it would make no business sense for them to agree to pay Rossy’s business taxes, going on to say that both parties involved are sophisticated business entities, and must be taken to have intended a contract-term that is commercially sensible.

Ultimately, Justice Deborah Paquette found that the term occupance tax of the offer to lease did in fact include business tax. RioCan is to reimburse Rossy for the business taxes that Rossy has paid to the Town of Carbonear during the term of the offer to lease from 2013 to 2017, however, both parties were unable to quantify an amount at the time.

Another dispute between the two companies is whether or not Rossy had properly exercised the option to renew the offer to lease. Paquette found that Rossy had failed to advise to RioCan in writing of their intent to extend the term of the offer at least 12 months prior to the term’s expiration, resulting in the option becoming null and void.

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