2371633 Ontario Inc. v. Municipal Property Assessment Corporation Region 22, 2022 CanLII 122319

Tribunals Ontario

Assessment Review Board

Issue Date: December 19, 2022 File No.: DM 181896 Assessed Person(s): 2371633 Ontario Inc. Appellant(s): 2371633 Ontario Inc. Respondent(s): Municipal Property Assessment Corporation Region 22 Respondent(s): City of Guelph Property Location(s): 785 Gordon Street Municipality(ies): City of Guelph Roll Number(s): 2308-060-009-07400-0000 Appeal Number(s): 3438557 and 3490054 Taxation Year(s): 2021 and 2022 Hearing Event No.: 777376 Legislative Authority: Section 40 of the Assessment Act, R.S.O. 1990, c. A.31

Parties	Counsel*/Representative
2371633 Ontario Inc.	Steve Pocrnic
Municipal Property Assessment Corporation	Alyssa Gee
City of Guelph	John O’Kane*

Request For: Prohibiting the Appellant from Relying on Amended SOI Heard: October 20, 2022 in writing Adjudicator(s): Subuola Awoleri, Member and Christopher Voutsinas, Vice-Chair

MOTION DECISION

OVERVIEW

1The City of Guelph (the “City”) and the Municipal Property Assessment Corporation (“MPAC”) are Respondents in the appeal.

2The City seeks an order prohibiting 2371633 Ontario Inc. (the “Appellant”) from raising new issues at the hearing of the appeals in respect of 785 Gordon Street (the “Subject Property”) in its Amended Statement of Issues (“Amended SOI”) which were not raised in its Original Statement of Issues (“Original SOI”). It also requests an order preventing the Appellant from presenting into evidence documents relating to the new issues in its Amended SOI which were not raised in its Original SOI. In the alternative, the City seeks an order striking from the proceedings the Amended SOI, preventing the Appellant from relying on it at the hearing of the appeals. MPAC consents to the City’s requests. The City further requests for an order amending the Schedule of Events (“SOE”) suspending dates for the delivery of supplementary/reply expert reports and subsequent dates in the SOE.

3The Appellant opposes the City’s requests. The Appellant submits that the City has no grounds for filing this motion, since the City ceased to be an active participant in the appeals when it chose not to file a Statement of Response (“SOR”) to the Appellant’s Original SOI. However, the Appellant agrees with the City’s request for the Assessment Review Board (the “Board”) to amend the SOE suspending/extending dates for delivery of supplementary/reply expert reports and further dates in the SOE.

Result

4For the reasons that follow, the Board finds that:

a. The City being a statutory party, has grounds to file this motion.

b. The Board’s Rules of Practice and Procedure (the “Rules”) do not provide for striking of pleadings.

c. The Appellant’s Amended SOI was amended and served in accordance with the parties’ agreement to extend the deadline in the SOE, which did not require the Board’s approval.

d. The Appellant is prohibited from raising new issues in its Amended SOI not raised in its Original SOI and is further not allowed to present into evidence documents relating to the new issues in its Amended SOI not raised in its Original SOI.

Procedural Background

5The Subject Property is a two-storey, 87-unit Days Inn Motor Hotel at 785 Gordon Street in the City of Guelph.

6In accordance with the SOE established by the Board, appeals for the Subject Property were assigned a commencement date of June 15, 2021. The SOE provides a detailed process and timeline for an appeal from its commencement date to the date of the hearing. It sets out what the parties need to do to perfect the appeals prior to the hearing date.

7The Appellant served its Original SOI on August 10, 2021, which was the deadline pursuant to the SOE.

8MPAC served the Appellant and the City its SOR on October 28, 2021, earlier than the due date of November 2, 2021, established in the SOE.

9The City did not serve its SOR by the due date of November 2, 2021.

10In accordance with the SOE, the parties were to exchange expert reports by July 27, 2022. As provided in the Board’s “Practice Direction on How to Interpret the Schedule of Events for General Proceedings (“Practice Direction”), parties can agree amongst themselves to an extension of due dates, (except for the due date for completion of the mandatory settlement meeting, for filing of an Acknowledgement of Expert Duty, as well as the date for filing documents to be relied on at a hearing), and this does not require the Board’s approval.

11The Appellant and MPAC agreed by email to an extension of the due date to file their expert reports from July 27, 2022 to August 22, 2022, and supplementary/reply expert report from August 17, 2022 to September 6, 2022. The City was copied on the email but it did not respond.

12On August 22, 2022, the Appellant served its expert report and an Amended SOI on MPAC and the City. On the same date, MPAC served its expert report and an Amended SOR on the Appellant and the City. However, the City served only its expert report on the Appellant and MPAC on the agreed extension date.

13The City argues that the delivery of the Amended SOI was made without its consent or any order or direction from the Board and it was after the SOE deadline. Furthermore, the City argues that the introduction of entirely new issues in the Amended SOI at the late stage of the proceeding will make the proceeding more expensive, less expeditious and less fair.

Issues

14The issues to be addressed in this Motion Decision are:

1. Does the City have grounds to file this motion?

2. Can the Board strike from the proceedings the Appellant’s Amended SOI?

3. Was the Appellant’s Amended SOI amended and served contrary to the deadline in the SOE? If so, are there exceptional circumstances to extend the deadline?

4. Should the Appellant be prohibited from raising entirely new issues in its Amended SOI?

ANALYSIS

Issue 1 – Does the City have Grounds to File this Motion?

15We find that the City being a statutory party, has grounds to file this motion.

16The Appellant argues that the City ceased to be an active participant in the proceedings since it failed to serve its SOR on the deadline prescribed in the SOE, therefore, it has no grounds filing this motion.

17The Board notes that the Appellant continued to acknowledge the status of the City as a statutory party, despite the City not serving a SOR, by copying the City on all its correspondence in the appeals.

18Pursuant to section 40(11) of the Assessment Act (the “Act”), the municipality in which the property is located is a statutory party in these appeals. The municipality is entitled to receive notices and participate in the proceedings like any other party. The municipality may choose to participate in the proceedings.

19The City’s failure to serve its SOR does not eliminate it status as a statutory party entitled to participate in the proceedings. The limitations provided in the Board’s Rules where a party does not serve a SOR, is that the party will be deemed not to oppose any future settlement in the appeal (Rule 60). Also, the party cannot raise any issue at a hearing event, which includes a motion hearing, unless it has been raised in the party’s SOI or SOR, served on all the parties and filed with the Board, unless the Board determines there are exceptional circumstances (Rule 49).

20In this motion, the City is challenging the Appellant’s right to serve an Amended SOI, which the City submits is an entirely different pleading from the Appellant’s Original SOI. The Board finds that as a statutory party to the proceedings, the City has a right to file this motion even though it has not served and filed its SOR. In 10198447 Canada Inc. v Municipal Property Assessment Corporation, Region 03, 2022 CanLII 3379 at paragraph 70, the Board determined that “[t]he fact that the Owner did not file a Statement of Response does not vitiate its status as a statutory party in the appeal proceeding.”

Issue 2 – Can the Board Strike from the Proceedings the Appellant’s Amended SOI?

21The Board’s Rules do not provide for striking of pleadings; therefore, the Board cannot make an order striking the Appellant’s Amended SOI from the proceedings. See General Motors of Canada Co. v. Municipal Assessment Property Corp., Region No. 19 [2021] O.A.R.B.D. No. 1 at paragraph 11.

Issue 3 - Was the Appellant’s Amended SOI Amended and Served contrary to the deadline in the SOE? If so, are there exceptional circumstances to extend the deadline?

22We find that the Appellant’s Amended SOI was amended and served in accordance with the parties’ agreement to extend the deadline for filing the expert reports and Amended SOI in the SOE, which did not require the Board’s approval.

23Pursuant to Rule 44 of the Board’s Rules, Statements of Issues cannot be amended after the due dates for amending these documents set out in the SOE unless all parties consent, or the Board directs otherwise.

24The SOE established February 23, 2022 as the deadline for the parties to schedule and complete a mandatory settlement meeting to attempt to resolve the appeals among themselves. MPAC shall then deliver to the Board a completed Notice of Mandatory Meeting Form, advising whether the appeals are resolved or not.

25It is not clear from the parties when they held the mandatory meeting. The City submits that with the consent of all the parties, MPAC filed an Expedited Board Direction Form (“EBDF”) and obtained the consent of the Board for the suspension of the SOE pending the outcome of a test case, scheduled to be heard by the Board. According to the City, the representative of the Appellant was also retained in the test case, where the issue was also similar, relating to COVID-19 impact on a hotel. The test case was scheduled to be heard June 7-8, 2022, but the appellant in that appeal withdrew the appeal.

26The SOE further directs that by August 17, 2022,

Each party is to serve any supplementary report(s) by its expert(s) in reply to any additional expert reports served by other parties, as well as any amendment to the party’s Statement of Issues or Statement of Response, to address any additional evidence or new issues raised in the expert’s reports.

27The deadline in the SOE for each party to serve its expert report was July 27, 2022, and the deadline for the parties to serve any supplementary expert report in reply to the initial expert report filed by July 27, 2022, including any amendment to the SOI or SOR was August 17, 2022. The Appellant and MPAC, with the knowledge of the City, agreed to extend the deadline for filing the initial expert report from July 27, 2022 to August 22, 2022. The parties further agreed to extend the deadline for filing the supplementary/reply report from August 17, 2022 to September 6, 2022. As provided in the SOE, the parties may serve an amended SOI or SOR with the supplementary expert reports.

28On August 22, 2022, in accordance with the agreement for extension by the Appellant and MPAC, the Appellant served its expert report together with an Amended SOI. MPAC also served its Amended SOR on the same date, but the City only served its expert report, since it did not serve a SOR on the due date in the SOE.

29As established in the Board’s Practice Direction, parties can agree on an extension of a due date in the SOE, as long as an extension will not interfere with their ability to complete their work prior to the due date for completion of the mandatory settlement meeting, and the due date for filing documents.

30The Appellant served its Amended SOI before the agreed upon extended due date of September 6, 2022. Consequently, it did not need the consent of the other parties before amending it.

31The City did not oppose the extension of the due date for serving the expert reports or supplementary expert report. It benefited from the extension by serving its expert report on the extension due date and therefore cannot oppose it at the same time. Although the City did not respond to the proposed extension, its implied consent is indicated by the fact that it complied with the extended deadline. The City is deemed to have consented to this extension by its actions.

Issue 4 – Should the Appellant be prohibited from raising entirely new issues in its Amended SOI?

32For the following reasons, we find that the Appellant is prohibited from raising entirely new issues in its Amended SOI. Having so determined, we therefore also find that the Appellant may not present into evidence documents relating to the new issues in its Amended SOI that were not raised in its Original SOI.

33A review of the Appellant’s Original SOI and the Amended SOI, reveals that these two documents are entirely different pleadings.

34The Original SOI provides the following at paragraphs 8 and 9:

Basic Issues

8. The Appellant states that the CVA is incorrect and is inequitable relative to the subject property’s state and condition, which materially changed and was damaged in the 2020 and 2021 tax years with:

(a) the onslaught of the Pandemic, and

(b) the invoking of extreme Governmental and legal orders, limitations and encumbrances and their excruciating impact and effect.

MPAC does not forecast any type of interruption or material change in its valuation model or CVA. A fundamental adjustment and decrease to the returned CVA is warranted and required.

9. The income approach to value is the correct approach to use in the valuation of the subject property. However, it must fully consider major shifts. The inputs for the 2020 and 2021 tax years must be adjusted to reflect the constriction caused by the Pandemic.

35The Subject Property was valued using the income approach to value.

36The Appellant further states in the Original SOI at paragraph 19 that MPAC’s valuation parameters such as capitalization rate “lack the necessary consideration to the impact of the Pandemic and have an uncertain duration. Consequently, the Appellant requests MPAC use a higher capitalization rate of 10.80%.”

37The only issue raised in the Appellant’s Original SOI is the COVID-19 impact on the assessment of the Subject Property.

38The Appellant concludes that the current value of the Subject Property is $1,836,000.

39The Amended SOI served August 22, 2022, does not mention the issue of COVID-19 related impact to the assessment of the Subject Property. Rather, it focuses on entirely new issues around the valuation parameters of the income approach to value, such as highest and best use, revised expenses, revised capitalization rate etc., which were not raised in its Original SOI. The Appellant concludes an indicated value of $3,309,705 to derive a final estimate of equitable current value effective January 1, 2016, of not more than $2,286,697 or $2,285,000 rounded.

40The City submits that to allow the Appellant to rely on the Amended SOI at the late stage of the proceeding will be procedurally unfair to it. The City argues that the Appellant has filed two different pleaded cases in its Original SOI and the Amended SOI. The City also submits that the pleaded case in the Original SOI informed its decision not to file and serve its SOR, since it believed that MPAC’s SOR had adequately addressed the only issue in the Appellant’s Original SOI and it strategically decided not to serve its SOR.

41According to the City, the Amended SOI totally abandoned the COVID-19 related impact on assessment of the Subject Property and now raises entirely different issues on the valuation methodology of the Subject Property.

42The SOE provides that parties can amend their SOI and SOR to address any additional evidence or new issues raised in the expert’s report. The sub-issue which arises from this is:

To What Extent Can Parties Significantly Amend their Pleadings?

43The Board’s Rules do not specifically limit the degree to which a party can amend its pleadings. The Board’s Rules do make provision for amendments of pleadings, to allow parties the opportunity to present their case, such as when expert reports are exchanged and there is a need to amend the pleadings to address additional evidence or issues raised in the expert report. This ensures that parties know the case to be met. This is further emphasized in Rule 49, which provides:

No New Issues

49. An issue can only be raised at a hearing event if it has been set out in the Statements of Issues and Response which have been served on all other parties and filed with the Board in accordance with these Rules, unless the Board determines that there are exceptional circumstances.

44In NAV Canada v. Municipal Property Assessment Corporation, Region 15 and 23, 2017 CanLII 70657 (ON ARB) at paragraph 13 (“NAV Canada”), the Board reiterated that:

The purpose of pleadings is to let all parties know the case to be met and to avoid ambush. Pleadings lock the issues in place and ground all further work on appeals. They should only be amended late in the process in special circumstances.

45In Nav Canada, the appellant filed a motion for a third amendment of its SOI, which was opposed by the other parties. The Board determined at paragraph 14 that:

NAV Canada argues that their third Statement of Issues will narrow the matters in dispute, but the proposed pleading actually creates entirely new issues for dispute. NAV Canada was arguing for nominal values, on a largely legal framework. They are now abandoning those legal arguments and seeking to shift to more standard arguments around valuation methodology. It is completely reasonable for the other parties to oppose such an amendment at this point in the process.

46The Board declined Nav Canada’s motion to amend its SOI stating that NAV Canada “has not demonstrated a compelling reason to permit such a late and significant change to its pleading.”

47Therefore, we find that the extent to which a party can amend their pleading in a proceeding will depend on the stage of the proceeding and prejudice to the other parties.

Late Stage of the Proceeding

48The City argues that the Appellant should not be allowed to raise a different pleaded case, by its Amended SOI, a year after it served its Original SOI, and just four months before the December 2022 hearing date, as provided in the SOE.

49The Appellant did not provide any reason for abandoning the COVID-19 impact on the assessment of the Subject Property. The Appellant submits that its experts are free to address any matters they feel are necessary to formulate professional opinions and can address issues parties have not raised in their pleadings. The Appellant further adds that for this reason the SOE allows for amendments of pleadings.

50The City also argues that prior to the Appellant serving its Amended SOI, the Board released its decision in National Car Rental (Canada) Inc. v Municipal Property Assessment Corporation, Region 15, 2022 CanLII 53352 (ON ARB) (“National Car Rental”), on June 21, 2022, where among other issues the Board was asked to consider the COVID-19 impacts on the state and condition of the properties under appeal in the 2021 taxation year.

51The appellants in National Car Rental requested an extension of the SOE to amend their pleadings to include the state and condition of the properties due to the COVID-19 pandemic. The exceptional circumstance argued by the appellants to extend the SOE to permit an amendment of their pleadings was the COVID-19 pandemic. The Board denied this motion, and as of the date of this Motion Decision, there is an ongoing application for Judicial Review of the Board’s decision.

52The Appellant served its Amended SOI on August 22, 2022, after the release of the National Car Rental decision. We are careful not to infer that the Appellant abandoned the only issue of the COVID-19 impact on the assessment of the Subject Property in its Original SOI, due to the National Car Rental decision. However, we note the chronology of events of the Appellant’s actions.

53In French v. H & R Property Management Ltd., 2019 ONCA 302 at paragraphs 26 to 27 Justice Harvison Young for the Ontario Court of Appeal determined that:

…there is a distinction between pleading a new cause of action and pleading new or alternative relief based on the same facts as originally pleaded. An amendment is not the assertion of a new cause of action where the "original pleading ...contains all the facts necessary to support the amendments ... [such that] the amendments simply claim additional forms of relief, or clarify the relief sought, based on the same facts as originally pleaded"……

The relevant principle is summarized in Paul M. Perell & John W. Morden, The Law of Civil Procedure in Ontario, 3rd ed. (Toronto: LexisNexis, 2017), at p. 186:

A new cause of action is not asserted if the amendment pleads an alternative claim for relief out of the same facts previously pleaded and no new facts are relied upon, or amount simply to different legal conclusions drawn from the same set of facts, or simply provide particulars of an allegation already pled or additional facts upon [which] the original right of action is based.

54Although made in the context of civil proceeding, those principles apply by analogy to the Board. Here the Appellant is not claiming new additional relief. The facts and issues pleaded in the Original SOI and the Amended SOI are totally different. The facts in the Amended SOI do not arise from the Original SOI.

55As determined in Nav Canada, the Appellant in its Original SOI is requesting for a lower current value based solely on COVID-19 pandemic impact on the assessment of the Subject Property. The Appellant has abandoned this argument in its Amended SOI and is seeking a general argument around valuation methodology using the income approach to value.

56If this motion is denied, the Board will have to adjourn the proceedings to allow for discoveries, inspection, and requests for production. Essentially, the entire SOE will need to be restarted from service of the SOI. This will unnecessarily lengthen the proceedings, which is contrary to Rule 3, which provides that the Rules shall be liberally interpreted to ensure the just, most expeditious and least expensive determination of every proceeding.

57We find that such a significant amendment to the Appellant’s SOI is too late at this stage of the proceeding as the hearing month was originally scheduled for December 2022.

Prejudice to the Parties

58The Board finds that although both parties will suffer prejudice, the prejudice to the Appellant is of its own making. There was no reason adduced by the Appellant for abandoning the only issue of the COVID-19 impact on the assessment of the Subject Property in its Amended SOI. Furthermore, the issues raised in the Appellant’s Amended SOI, around the valuation methodology of the Subject Property, are issues that could have been known by the Appellant prior to filing the Appeal.

59The Appellant argues that it will be the only party prejudiced if the motion request is granted, due to the amount of assessment and importance of the appeal to the Appellant.

60The City also argues that it is prejudiced as the time to file its SOR has passed. The City further argues that the Amended SOI has altered the case it has to meet, it has constrained the City’s ability to pursue relevant lines of inquiry regarding production, disclosure and inspection and it has also restricted the City’s ability to develop relevant evidence to address the new issues raised in the Amended SOI.

61A Respondent’s decision on whether to file a SOR, is in part based on its review of the Appellant’s SOI and the issues raised. In this case, the City decided not to file its SOR, based on its understanding of the issues that the Appellant was arguing is in connection with the COVID-19 pandemic – this is no longer the case. It is for this reason the City is prejudiced. This prejudice cannot be cured by an adjournment without an unacceptable effect on the objective of efficiency, as it will unnecessarily lengthen the proceedings and require the duplication of efforts and costs already expended on this appeal.

CONCLUSION

62We find that each case will be determined on its facts. Parties are allowed to amend their pleadings. A party may be allowed to significantly amend its pleadings. However, allowing such a significant amendment to the Appellant’s Original SOI at this late stage of the proceeding would violate procedural fairness, cause significant prejudice to the City and unnecessarily lengthen the proceedings.

ORDER

63The Board grants the motion and makes the following Orders:

a. The Appellant is prohibited from raising the new issues in its Amended SOI not raised in its Original SOI.

b. The Appellant shall not be allowed to present into evidence documents relating to the new issues in its Amended SOI that were not raised in its Original SOI.

c. An amended SOE shall be provided to the parties by the Registrar within 4 weeks of the release of this Motion Decision.