Decision Date: November 9, 2012
Link: Case Summary Document
Citation: [2012] ONSC 6112 (Ontario Superior Court of Justice, Aston, Lax, Swinton JJ)
Acknowledgement:The Pemsel Case Foundation thanks The Australian Centre for Philanthropy and Nonprofit Studies for its contribution in the drafting of this Case Note.


In this Canadian case, the Hospital for Sick Children (the Hospital) and the Hospital for Sick Children Foundation (the Foundation) appealed a decision that the premises they occupied were not exempt from municipal taxation. The appeal was dismissed.

The relevant legislation was the Assessment Act, R.S.O. 1990, c. A.31 (the Act) which sets out a detailed list of exemptions from municipal assessment and taxation. At issue in this appeal was section 3(1)6, which exempts ‘land used and occupied by a public hospital that receives provincial aid under the Public Hospitals Act but not any portion of the land occupied by a tenant of the hospital’.

A ‘hospital’ is defined in the Public Hospitals Act, R.S.O. 1990, c. P.40 to mean ‘any institution, building or other premises or place that is established for the purposes of the treatment of patients and that is approved under this Act as a public hospital’. There was no question that the Hospital for Sick Children is a public hospital that is funded under the Public Hospitals Act, and any land ‘used and occupied’ by it is exempt from taxation.

At issue was a leased building in which the Foundation occupied three floors. The main point of the case was the relationship between the Hospital and the Foundation. The two bodies are separate legal entities. At trial, relevant considerations in the relationship were:

  • The two bodies share five Board appointments and several reporting obligations.
  • The Foundation is the main source of non-government revenue for the Hospital, and is responsible for all fundraising activities carried out on behalf of the Hospital.
  • For the last three years grants to the Hospital have averaged 95% of all grants made by the Foundation.
  • The Hospital and the Foundation have two ongoing, specific funding agreements that provide that the Foundation’s funding commitment to the Hospital will be in excess of $225 million over the next five years.
  • Approximately 80% of the funds that the Hospital receives from the Foundation go towards medical research. A smaller percentage goes towards patient care.
  • Although the Foundation raises considerable amounts of money for the Hospital, the monies raised by the Foundation and given to the Hospital only constitute approximately 7% of the overall financing of the operations of the Hospital. The vast majority of the Hospital’s funding comes from the provincial government pursuant to the provisions of the Public Hospitals Act.
  • The Foundation, pursuant to its Letters Patent, can also raise funds for the benefit of any other hospital, university or medical association or any other association, foundation or person in respect of activities related to the health of children. Approximately 10% of the monies raised by the Foundation are provided to organizations other than HSC.
  • Upon dissolution of the Foundation, its property would not become the property of the Hospital. Its Letters Patent dictate that the Foundation’s remaining property after payment of all debts and liabilities ‘shall be distributed or disposed of to charitable organizations that carry out their work solely in Canada’.

The judge at first instance concluded that the premises used by the Foundation were not exempt from municipal taxation for two reasons:

1.       the premises were occupied by a tenant of the Hospital, not by the Hospital itself

2.       the Hospital and Foundation did not share a patrimony such that they should be treated as the same entity for purposes of the exemption.

The appeal court looked at the issues of tenancy and patrimony. Was the Foundation a tenant of the Hospital? The court said that this was an issue of fact, and agreed that it was a tenant, saying (at [10]–[12]):

Determination of occupancy depends on an entity’s right of regulation and control of premises and requires consideration of actual occupation, exclusivity for the particular purposes of the possessor, value or benefit to the possessor, and permanence…. The appellants argue that the application judge erred in finding the Foundation was a tenant because the Foundation has no lease for the premises. While it has used the premises since 2004, the appellants argue that it is, at most, a tenant at will. There is no permanency to its possession, and it pays no rent. In my view, the application judge made no error in finding that the Foundation was a tenant within the meaning of the Act. He found that the Foundation was in occupation and possession of the premises because of its continuous use of the premises and its payment of the common expenses attributed to the space ($300,000 in 2010 and $1.3 million in 2009). This evidence supports his conclusion, as does the evidence that the Foundation has its own sign on the premises and controls access through a pass system. Passes are only available to its employees and not those of the Hospital.

Shared patrimony is a Canadian legal concept arising from two 1994 decisions of the Supreme Court of Canada: Buanderie centrale de Montréal Inc. v Montreal (City), 1994 CanLII 59 (SCC), [1994] 3 S.C.R. 29 and Partagec Inc. v Québec (Communauté urbaine), 1994 CanLII 60 (SCC), [1994] 3 S.C.R. 57. The notion of shared patrimony (which would make the two entities the same for the purposes of occupation of the premises) in previously decided cases had turned on an interpretation of the relevant legislation by the court to determine the intent of the Legislature. In this case, the Court said (at [24]):

…in the present case, the question the application judge had to determine was whether there was a legislative intent to give the Foundation, the charitable arm of the Hospital, the same exemption as that provided to a public hospital by the Assessment Act. More precisely, was there such an identity of patrimony that one could conclude the Legislature intended to provide the same exemption to the property used and occupied by the Foundation as it did to property used and occupied by the Hospital?

The court concluded that there was not a sufficient identity or patrimony to allow the Foundation to benefit from the public hospital exemption. The trial judge had considered all the relevant matters (see above) and had correctly held that there was not a sufficient identity between the Hospital and the Foundation so as to conclude that the Foundation could claim the exemption in the Act for land used and occupied by a public hospital.

The appeal court said on this point (at [28])

The Foundation occupies the premises for the purpose of fundraising. The Hospital’s fulfillment of its main purpose, the provision of patient care and research, is not dependent on the Foundation’s occupancy of the subject premises.

Therefore, the Foundation was not exempt from municipal taxation, and the appeal was dismissed.

The case may be viewed at:

Implications of this case

This case draws a distinction between a fundraising body and a related hospital body. The Hospital was exempt from municipal taxation under the relevant legislation because it was a public hospital. The Foundation was held to be the Hospital’s tenant, and not a body which shared a sufficient patrimony with the Hospital to benefit from its exemption from taxation. The court identified the purposes of the two bodies as different: one was for fundraising (not exempt from taxation) and the other a hospital for patient care and research (exempt as a public hospital).