County of Wellington and Township of Puslinch v. Municipal Property Assessment Corporation Region 22, 2018 CanLII 32198

Assessment Review Board

Commission de révision de l’évaluation foncière

ISSUE DATE: April 09, 2018

FILE NO.: DM 2018M02

Moving Party(ies): County of Wellington and Township of Puslinch

Respondent(s): Municipal Property Assessment Corporation Region 22

Respondent(s): St. Mary’s Cement Inc. (Canada), Rosedale Securities Limited, Gina Martinello, Wilfred Sodtke and Margaret Sodtke

Property Location(s): 4642 Sideroad 10N, Con 2 Front Pt Lot 27, 4532 Wellington Road 32, 7129 Concession 2, 7145 Concession 2, 4296 Sideroad 25S, Con 1 Rear Pt Lot 25

Municipality(ies): Township of Pulslinch

Roll Number(s): 2301-000-001-01500-0000, 2301-000-004-12700-0000, 2301-000-002-17600-0000, 2301-000-004-12105-0000, 2301-000-004-12110-0000, 2301-000-004-12200-0000, 2301-000-004-12205-0000, 2301-000-004-12210-0000 and 2301-000-004-12215-0000

Appeal Number(s):

Taxation Year(s): 2003, 2004, 2005, 2009, 2010, 2011, 2012 and 2013

Hearing Event No.: 690869

Legislative Authority: Section 40.1 of the Assessment Act, R.S.O. 1990, c. A.31, as amended

Heard: January 26, 2018 in Toronto, Ontario

APPEARANCES:

Parties Counsel

County of Wellington and Township of Puslinch John O’Kane

MPAC Donald Mitchell

St Mary’s Cement Inc. (Canada), Rosedale Securities Limited, Gina Martinello, Wilfred Sodtke and Margaret Sodtke Jeff Cowan

DISPOSITION OF THE BOARD DELIVERED BY SCOTT McANSH

1The County of Wellington and the Township of Puslinch (the “Municipalities”) say that, for several years, four properties were improperly classified. The Municipal Property Assessment Corporation (“MPAC”) placed the properties in the farm or residential property class. The Municipalities argue the properties were used for sand and gravel extraction, so they should have been placed in the industrial property class. MPAC was not aware that aggregate extraction was taking place on those properties during the relevant taxation years. The Municipalities say this oversight resulted in palpable errors in the assessment roll, and bring this motion pursuant to clause 40.1(b) of the Assessment Act, RSO 1990, c. A.31 (the “Act”), requesting that this Assessment Review Board (the “Board”) extend the time for bringing appeals for those properties.

2MPAC says that any errors that were made were not palpable errors, and therefore cannot be corrected at this late date. St. Mary’s Cement Inc. (Canada), Rosedale Securities Limited, Gina Martinello, Wilfred Sodtke, and Margret Sodtke (the “Taxpayers”) argue that the errors are errors in judgment, so they cannot be palpable errors. Both MPAC and the Taxpayers argue that, even if these were palpable errors, this is not a case in which I should exercise my discretion to create late appeals.

3I find that there are errors in the assessment roll here, and that they would have been plain and obvious to anyone who took a cursory look at the properties. They are therefore palpable errors. I also find, however, that this is not an appropriate case for the Board to exercise its discretion to extend the time for bringing appeals. The Municipalities’ motion is denied.

REASONS FOR DISPOSITION OF MOTION

4Section 40.1(b) of the Assessment Act states: “If it appears that there are palpable errors in the assessment roll… if alteration of assessed values or classification of land is involved, the Board may extend the time for bringing appeals and direct the assessment corporation to be the appellant.”

5The first step in a 40.1 application is to determine if there is a palpable error in the assessment roll. This Board has held that “the enquiry into palpable error requires a consideration first of whether it is a true inadvertent and unintentional error, and second whether that error is palpable,” Municipal Property Assessment Corporation v Chew, 2015 CanLII 78969, [2015] OARBD No 296 (“Chew”) at paragraph 19.

6A palpable error is one “that mischaracterises the fundamental nature or legal character of the property,” Hopper v Municipal Property Assessment Corporation, 2016 CanLII 24421, [2016] OARBD No 84 (“Hopper”) at paragraph 15. They are errors that “would be plain and obvious to anyone that took even a cursory look at the properties,” Municipal Property Assessment Corporation v Guelph Eramosa Township, 2018 CanLII 263, [2018] OARBD No 2 (“Guelph”) at paragraph 9.

7It is not enough that there appear to be palpable errors in the assessment roll. The relief in section 40.1 is discretionary and should only be exercised in the clearest of circumstances, see Hopper at paragraph 13. This is because section 40.1 is the only provision in the Assessment Act that does not have a limitation period. Granting late filing for all appeals were there is a palpable error could undermine the scheme of the legislation, which balances the valid interest in a correct assessment roll with the practical interest in a final assessment roll, see Toronto (City) v. Wolf, 2008 CanLII 39430, 241 OAC 41, [2008] OJ No 3061 (“Wolf”) at paragraph 20. The exceptional cases in which it would be appropriate to exercise the Board’s discretion have been described as those where denying relief would be “unreasonable, unfair and highly prejudicial,” see Guelph at paragraph 16. That is, the Board must look at the prejudice to the parties to determine if it would be highly prejudicial to leave the roll as it stands.

Errors

8Before I determine if there are palpable errors in the assessment roll I must determine if there are any errors at all in the assessment roll. The Municipalities have identified four properties where they say there are errors. They say that aggregate extraction was taking place on certain properties that was not reflected in the assessment roll during certain tax years:

a. the “Martinello Property” is located at 4642 Sideroad 10N and identified by roll number 2301-000-001-01500-0000. The Municipalities are seeking to have appeals created for the 2003, 2004, 2005, 2006, and 2007 taxation years when the property was in the farm and residential property classes.

b. the “McNally Property” is located at Con 2, Front Pt Lot 27 and identified by roll number 2301-000-004-12700-0000. The Municipalities are seeking to have appeals created for the 2009, 2010, 2011, and 2012 taxation years when the property was in the residential property class.

c. the “Capital Property” is located at 4532 Wellington Road 32 and identified by roll number 2301-000-002-17600-0000. The Municipalities are seeking to have appeals created for the 2009, 2010, 2011, 2012, 2013, and 2014 taxation years when the property was in the farm and residential property classes.

d. the “Lanci Property” is a collection of six parcels of land located at 7129 Concession 2, 7139 Concession 2, 7145 Concession 2, 4296 Sideroad 25S, 4284 Sideroad 25S, and Con 1, Rear Pt Lot 25 and identified by roll numbers 2301-000-004-12105-0000, 2301-000-004-12110-0000, 2301-000-004-12200-0000, 2301-000-004-12205-0000, 2301-000-004-12210-0000, and 2301-000-004-12215-0000. The Municipalities are seeking to have appeals created for the 2012 and 2013 taxation years when the property was in the residential property class.

9The Municipalities argue that in each of those taxation years the properties should have been in the industrial property class and, as a result, assessed at a higher rate. They point to clause 6(2)(2.2) of the General Regulation, O Reg 282/98, which states that land is in the industrial property class if it is licensed under Part II of the Aggregate Resources Act, RSO 1990, c A.8 and is used for “extracting anything from the earth, excavating, processing extracted or excavated material, stockpiling extracted or excavated material, or stockpiling overburden.”

10There is no dispute that all of the properties were licensed under Part II of the Aggregate Resources Act during the relevant taxation years. The use of the properties in each taxation year must be proven by the Municipalities, as the party alleging that there is an error in the assessment roll. Extensive affidavit evidence was filed by all parties, and most affiants were cross-examined on their evidence.

11The Municipalities relied on three main pieces of evidence to prove that the properties had aggregate extraction taking place in particular taxation years: (1) reports made pursuant to section 15.1 of the Aggregate Resources Act; (2) the site plans under the Aggregate Resources Act; and (3) aerial photographs of the properties.

12Operations that are licensed under the Aggregate Resources Act must file an annual compliance report. These reports are referred to as a Licensees Compliance Assessment Report (“CAR”) and they set out what is happening on the site, where there is any non-compliance with the regulatory regime, and how that non-compliance will be remedied. The CAR for each property was sent to the Municipalities each September and the CAR went to Puslinch Town Council each year to determine if the report matched the site plan for the property. Those site plans are also required pursuant to the Aggregate Resources Act, and set out where on each property aggregate extraction activities will take place. The aerial photographs provided by the Municipalities were only for a small number of the years at issue, and the Municipalities were clear that the photographs were primarily used to check veracity of the self-reports contained in the CAR. The main evidence of use for all of the properties is the CAR.

Martinello Property

13The Martinello Property CAR for 2001 indicates that it is “not operating yet.” The CAR for 2002 indicates that a haul road has been completed and that 0 hectares have disturbed that year. The CAR for 2003 indicates that extraction is proceeding on part of the property, as does the 2004 CAR. The 2005 CAR states that extraction is nearing completion. The 2006 CAR states that the “site has been rehabilitated” with some seeding to occur in 2006. The 2007 CAR also states that berms have been removed and that the “site has been rehabilitated.” The same statement appears in the 2008 CAR. The 2009 CAR states that the site is ready for surrender. The license for the Martinello Property was approved for surrender on July 5, 2010. The Municipalities also provided an aerial photograph from 2006, which shows the land to lack vegetative cover, and little else. The CAR for each year is the best indication of what was happening on the property in that year.

14That evidence shows that at least a portion of the Martinello Property was used for aggregate extraction in 2003, 2004, and 2005. The evidence from 2006 on does not clearly indicate that any of the activities listed in clause 6(2)(2.2) of the Regulation were taking place. The Martinello Property was in the farm and residential property classes for all of those tax years, even when it was being used for extraction. I therefore find that there appear to be errors in the assessment roll for the Martinello Property for the 2003, 2004, and 2005 taxation years.

McNally Property

15The McNally Property CAR for 2008 indicates that the site has been stripped, but that no excavation has occurred. The 2009 CAR indicates that extraction has commenced. The 2010 CAR also indicates that extraction has commenced. The 2011 CAR indicates that active extraction is taking place. The 2012 CAR states that extraction is nearing completion and the 2013 CAR indicates that active extraction has been completed. No aerial photographs were submitted for those taxation years.

16The evidence shows that the McNally Property was used for aggregate extraction in 2009, 2010, 2011, 2012, and 2013. MPAC argues that extraction starting in 2009 would not be reflected on the assessment roll in 2009. This is because “the assessment of real property is determined by the situation and facts as they were at the time of the return of the roll,” Scollard Developments Inc. v Ontario (Regional Assessment Commissioner, Region No 9), [1992] OJ No 1296. The roll is returned each year on the second Tuesday after December 1, see subsection 36(2) of the Assessment Act. Thus, for 2009 taxation, the question is what the situation on the property was on December 9, 2008. There is no evidence that the activities on that date would have met the requirements of clause 6(2)(2.2) of the Regulation. There is, therefore, no evidence that the 2009 assessment of the McNally Property was in error.

17The McNally property was in the residential property class for the 2010, 2011, 2012, and 2013 taxation years when the activities on the property met the requirements in clause 6(2)(2.2) of the Regulation. I therefore find that there appear to be errors in the assessment roll for the McNally Property for the 2010, 2011, 2012, and 2013 taxation years.

Capital Property

18The Capital Property CAR for 1998 indicates that initial stripping is in progress and that extraction has not yet started. The 1999 CAR states that equipment set up is still in progress. The Municipalities did not provide another CAR until 2008. The 2008 CAR does not provide details on the operations on the site. The 2009 CAR indicates some disturbed land. The 2010 CAR indicates extraction is taking place. The next CAR is for 2012 and indicates that extraction continues and rehabilitation has started. The 2013 CAR indicates some stockpiling on the site. Both the 2014 CAR and the 2015 CAR state that extraction at the site is not complete. The two aerial photographs presented, for 2010 and 2015, are consistent with the self-reporting.

19MPAC issued a corrected assessment for the 2015 taxation year, pursuant to section 32 of the Assessment Act. That corrected the classification and value to match the use on the site. This was done after the Municipalities brought the use to MPAC’s attention. Thus, there is no error in the assessment roll for the 2015 taxation year. The evidence indicates that activity on the Capital Property likely met the requirements of clause 6(2)(2.2) of the Regulation for the 2009, 2010, 2011, 2012, 2013, and 2014 taxation years. The property was in the farm and residential property classes for all of those taxation years. I therefore find that there appear to be errors in the assessment roll for the Capital Property for the 2009, 2010, 2011, 2012, 2013, and 2014 taxation years.

Lanci Property

20The first CAR for the Lanci Property that indicates any extraction activity is the 2012 CAR, which states that operations recently commenced on the site. That same indication appears on the 2013 CAR. The 2104 CAR notes ongoing extraction and stockpiling activities, and the 2015 CAR indicates that extraction has commenced. The only aerial photograph of the Lanci Property is from 2015 and confirms the self-reporting of the activities taking place on the site.

21MPAC issued a corrected assessment notice for the Lanci Property for the 2014 and 2015 taxation years, after being notified of the extraction activities by the Municipalities. There is no allegation of any errors from 2014 onward. MPAC argues that there is also no evidence of an error for the 2012 taxation year because of the roll return date. I agree that there is no evidence that the classification was in error on December 13, 2011.

22The only concern is with the 2013 taxation year. The Lanci Property was in the residential property class for the 2013 taxation year, when the evidence indicates that the requirements of clause 6(2)(2.2) of the Regulation were met. I therefore find that there appears to be an error in the assessment roll for the Lanci Property for the 2013 taxation year.

Error Summary

23In summary, I find that there appear to be classification and valuation errors in the assessment roll:

a. for the Martinello Property in the 2003, 2004, and 2005 taxation years;

b. for the McNally Property in the 2010, 2011, 2012, and 2013 taxation years;

c. for the Capital Property in the 2009, 2010, 2011, 2012, 2013, and 2014 taxation years; and

d. for the Lanci Property in the 2013 taxation year.

Inadvertent Errors

24There are errors in the assessment roll and I must next determine how to characterize those errors. I must first determine if the errors are “true inadvertent and unintentional” errors, Chew at paragraph 26. There is no dispute on that point here. The Municipalities described the error as negligence, or MPAC failing to act as a “reasonable assessor.” The evidence shows that if MPAC had known about the aggregate extraction use during the relevant time they would have assessed these properties in the industrial property class. They only failed to do so because they didn’t know what was happening on these properties. It is clear that these are inadvertent errors.

25The Municipalities properly point out that the obligation to correctly assess property rests squarely with MPAC, but it is inevitable that MPAC will make mistakes. The Assessment Act specifically contemplates that fact, in stating that the assessment roll is final and binding “despite any defect or error committed in or with regard to the roll,” see section 41.

26The errors came about because information was not conveyed to MPAC. MPAC indicates that it does not have the ability to inspect all property in the province and relies on “trigger events” to know when to update the information it has on file. The most common trigger event is the issuance of a building permit, which MPAC receives a copy of from each Municipality. However, aggregate extraction often does not involve buildings, so does not require building permits. The reporting obligation for these properties, pursuant to the Aggregate Resources Act, does not require the operators to notify MPAC, but it does require them to notify the Municipality.

27The Municipalities suggested that the Taxpayers ought to have reported their activities to MPAC, but acknowledged that there is no statutory obligation to do so. The most likely way that MPAC is to be notified of aggregate extraction is by the Municipalities because they are legally required to be notified of aggregate extraction and have an interest in an accurate assessment roll. The Municipalities received the CAR for each of the properties each year and each CAR was reviewed by Municipal Council. The Municipalities admit that they did not compare the CAR to the assessment roll, and that is one reason that the changes in use were missed.

28The Municipalities knew that aggregate extraction was taking place on these properties at the relevant time, but did not communicate that information to MPAC. The communication gap appears to have been within different departments, or branches, of the Municipalities. But the error is a communication error. MPAC would have altered the roll if it had been made aware of the information. The error flowed from the communication gap between the Municipalities and MPAC.

29It is not enough, however, that there are errors in the assessment roll and that those errors are inadvertent. The errors must be a special class of errors: palpable errors. As noted above, those are fundamental, obvious, errors that “jump out” on a cursory examination of the facts.

Palpable Errors

30Palpable errors are those that are plain and obvious on a cursory review of the properties. They are errors in legal description, such as in Whitby (Town) v. Municipal Property Assessment Corp, Region No 13, [2004] OARBD No 218, or the use of a fictional roll number, such as in Burnac Corp v Municipal Property Assessment Corp, Region No 9, [2013] OARBD No 169 (“Burnac”), or gross land description errors, such as in Guelph, or a failure to reflect a conveyance of land, as in Arbor Memorial Incorporated v Municipal Property Assessment Corporation, 2015 CanLII 86041, [2015] OARBD No 316.

31The Taxpayers argue that these are errors in judgment, and that an error in judgment cannot be a palpable error, relying on decisions such as Kinglip Holdings Inc. v Municipal Property Assessment Corp., Region No 9, [2015] OARBD No 42. I do not find that distinction helpful. There is nothing in section 40.1 that makes that distinction, and it is “a distinction that may be difficult to make,” Burnac at paragraph 36. I do not find that “error in judgment” is a valid consideration in a motion pursuant to section 40.1.

32The errors here mischaracterized the use of the properties. The use of land is one of its fundamental characteristics. These errors were also plain on a cursory examination of the facts. Anyone visiting these properties in these taxation years would have seen that they were not farm land or residential property. The assessment roll said they were and was obviously, plainly, wrong on that point. These are palpable errors.

Discretion

33Any exercise of discretion must balance the prejudice to the parties, Chew at paragraph 26. Appeals should only be created under section 40.1 where “it would be “unreasonable, unfair, and highly prejudicial” to leave the assessment roll as it stands, Guelph at paragraph 16. The Municipalities had all the information needed to make this case in hand at the same time that they had a legal right to make this case. It is not unfair to leave the assessment roll as it is when a party fails to file appeals in a timely way due to their own negligence.

34The Municipalities did not start monitoring their assessment roll in any meaningful way until 2015. That is why they missed these classification errors at the time. Beginning around 2009, many aggregate properties in Ontario were under appeal before this Board. That litigation was managed by this Board, in a process that led to a number of “test cases” being scheduled in 2016. The Municipalities were party to some of those test cases. The Municipalities also signed the minutes of settlement that came out the settlement of those appeals, because the settlement impacted a number of properties in the Municipalities.

35The settlement of that litigation prompted the Municipalities to seek this motion. The Municipalities were concerned about the tax refunds they were required to provide after the settlement was reached in late 2015. The impending settlement made the Municipalities focus on the aggregate extraction properties in the assessment base. The errors in the assessment roll of the Lanci Property were raised by the mayor in 2014, after he drove by the property. MPAC corrected the error on the Lanci Property for the 2014 taxation year, once it was notified by the Municipalities. The Municipalities retained a consultant to look at the other properties before me in 2015 and they are not alleging any errors since that time. That is, once the Municipalities began to take steps to see that the assessment roll is correct, they have not alleged that it is incorrect.

36The shift in the Municipalities’ approach to protecting its tax base included hiring a person to look more closely at assessments in early 2015. This is prudent because the Assessment Act requires municipalities to keep an eye on the assessment roll. Subsection 40(1) sets out who can appeal an assessment each year and explicitly includes a municipally. There is no doubt that the Municipalities had a legal right to challenge the errors brought before me if they had done so in a timely manner. I also find it likely that if the Municipalities had approached its assessment base like it does now, these errors here would never have occurred. MPAC would have corrected the assessment roll once the Municipalities provided information on the aggregate extraction.

37The Municipalities are seeking a remedy for their error in communicating the relevant information about these properties to MPAC at the relevant time. Section 40.1 is aimed at addressing situations where leaving the roll closed would be unreasonable, unfair and highly prejudicial. A party suffering the foreseeable consequences of its inattention or inaction does not rise to that level.

38The Municipalities claim prejudice if this motion is denied in three main ways: (1) lost tax revenue; (2) the undermining of the integrity of the assessment roll; and (3) the resulting unfair distribution of taxes. I do not see any meaningful prejudice flowing to the Municipalities on any of those grounds.

39There may be some prejudice in lost tax revenue, but that is balanced by the Municipalities’ failure to pursue that revenue when they were legally entitled to do so. The Municipalities were provided the CAR for each property each year and explicitly reviewed them. As noted above, the CAR is the best evidence of what is taking place on each property. The Municipalities had all of the information they needed to appeal each incorrect assessment in a timely way. A reasonable Municipality would have done so. The Municipalities have made changes that make it much more likely that they will do so in the future. The Municipalities only lost out on tax revenue as a result of their own negligence. On balance there is no prejudice on the potential taxes lost through the Municipalities’ inaction.

40There are a number of competing interests in the assessment roll, most notably between a correct assessment roll and a final assessment roll, Wolf at paragraph 20. The Divisional Court has held that other interests, such as financial prejudice to a taxpayer, can outweigh the policy goal of correct assessments, see Kensington Foundation v. Municipal Property Assessment Corp., 2013 ONSC 7694, [2013] OJ No 5848. The assessment roll has integrity when all of those competing interests are balanced. The Municipalities claim that they are prejudiced by the assessment roll lacking integrity, but there is no evidence that the overall integrity of the assessment roll is compromised.

41The improper distribution of the municipal tax burden during the tax years in question is certainly unfair. But it is not the Municipalities that suffer the prejudice flowing from that improper distribution. The prejudiced parties are the taxpayers in the Municipalities that paid more tax than they needed to, and they are not party to this motion. The focus in a section 40.1 application should be the balance of prejudice to the parties to the application.

42MPAC is not claiming any prejudice on this motion, but the Taxpayers are prejudiced if this motion is granted. The Taxpayers reasonably planned their affairs, including the settlement of other assessment appeals, based on the unappealed assessed value of these properties. The Taxpayers indicate that if they had been made aware that the Municipalities would seek this motion they might not have settled the other appeals on the same terms. The settlement of the appeals of the other aggregate extraction properties was, like all settlements, a compromise position for all of the parties. The Taxpayers say that they likely would have not compromised as much if they had known that the potential tax liability flowing from this motion was possible. That is significant prejudice. Extending the time for bringing appeals would alter the historical tax liability of the Taxpayers for taxation years that they fairly assumed were settled, and relied on to plan their affairs. Altering the assessment roll for these properties would be prejudicial to the Taxpayers.

43The balance of prejudice favours denying this motion. The dominant factor is that the Municipalities had a legal right of appeal, and possessed all of the information required to file that appeal, in those tax years. But the Municipalities did not appeal. The Taxpayers planned their affairs based on the Municipalities’ failure to appeal. It would be unfair to expose the Taxpayers to more tax liability, years later.

44I find that my refusal to extend the time for bringing appeals is not unreasonable, unfair, and highly prejudicial. The Taxpayers would be more prejudiced by extending the time for bringing appeals than the Municipalities are by my refusal to do so. I therefore decline to exercise my discretion to extend the time for bringing these appeals.

CONCLUSION

45There were unintentional errors made in the assessment of these properties in certain taxation years, which resulted palpable errors in the assessment roll. However, there is nothing unfair, unreasonable, and highly prejudicial in the current state of the assessment roll. This is not an appropriate case to extend the time for bringing appeals. The Municipalities’ motion is denied.