10 Dundas Street Ltd v. Municipal Property Assessment Corporation Region 09, 2023 CanLII 78831

Tribunals Ontario Tribunaux décisionnels Ontario Assessment Review Board Commission de révision de l’évaluation foncière

ISSUE DATE: August 23, 2023 FILE NO.: DM 2023M01

Assessed Person(s): 10 Dundas Street Ltd Applicant(s): 10 Dundas Street Ltd Respondent(s): Municipal Property Assessment Corporation Region 09 Respondent(s): City of Toronto Property Location(s): 10 Dundas Street East Municipality(ies): City of Toronto Roll Number(s): 1904-066-450-00050-0000 Taxation Year(s): 2017 to 2019 Hearing Event No.: 773766

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

Parties	Counsel/Representative*
10 Dundas Street Ltd	Kathleen Poole and Karina Wong
Municipal Property Assessment Corporation	Alyssa Gee*
City of Toronto	Submissions not received

REQUEST FOR: Correction of a Palpable Error HEARD: August 26, 2022 in writing ADJUDICATOR(S): Dirk VanderBent, Vice-Chair

MOTION DECISION

OVERVIEW

The Application

110 Dundas Street Ltd (the “Applicant”) is the owner of the property located at 10 Dundas Street East, Toronto (the “Subject Property”), and has filed an application pursuant to s. 40.1(b) of the Assessment Act, S.O. 1990, c. A.31 (the “Act”) requesting that the Assessment Review Board (“Board”) correct palpable errors on the assessment roll for the 2017 to 2019 taxation years.

2Section 40.1 of the Act states:

Correction of errors

40.1 If it appears that there are palpable errors in the assessment roll,

a) if no alteration of assessed values or classification of land is involved, the Board may correct the roll; and

b) 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.

The Palpable Error

3The Subject Property is a mixed use vertically integrated entertainment/retail complex with upper floor office space. The Applicant filed appeals pursuant to s. 40 of the Act for the taxation years in question challenging the Municipal Property Assessment Corporation’s (“MPAC”) assessment of current value. The Subject Property was valued using appraisal methodology described as the income approach, where an opinion as to current value is based, in part, on the income generated by the property.

4When valuing the Subject Property, the Applicant’s property appraiser incorrectly considered income from a unit described as Unit 120. This unit is physically included in a different property, i.e. falls within the description of a property which is identified by a different assessment roll number. As this income had already been included in the assessment of the current value of this other property, this has resulted in double assessment, and, consequently, double taxation. The parties negotiated a settlement of the Applicant’s appeals for the 2017 to 2019 taxation years, being unaware of this error at the time. This settlement was reflected in Minutes of Settlement (the “Settlement Agreement”) which was filed with the Board, and the Board issued decisions for each of these taxation years in accordance with these Minutes of Settlement.

5MPAC agrees that there is an error, more specifically, that the gross leasable area of the Subject Property is overstated as 333,401 square feet, whereas the correct area is 330,382 square feet. The Applicant’s evidence indicates that, if this error is corrected, current value would be reduced by $2,000,000. Consequently, the Applicant has overpaid a total of $51,023 in municipal taxes for the taxation years in question.

6MPAC has corrected the error for the 2020 and subsequent taxation years.

The Dispute

7MPAC agrees that the error qualifies as a palpable error under s. 40.1 of the Act. However, under s. 40.1, correcting a palpable error is not mandatory. The Board must exercise its discretion as to whether it will correct the palpable error. MPAC maintains that the Board should not do so for any of the taxation years in question. MPAC argues that s. 40.1 is not directed at correcting an error missed in the course of settling appeals. MPAC submits that correcting the error would, in effect, allow the Applicant to re-litigate the s. 40 appeals for the taxation years in question. MPAC maintains that this would undermine the principle of finality, arguing that finality is a principle that the statutory scheme of the Act and the doctrine of issue estoppel are designed to preserve. MPAC further argues that issue estoppel applies to prevent the Applicant from raising this issue in this s. 40.1 proceeding.

8The Applicant disagrees, arguing that it is not attempting to re-litigate the s. 40 appeals. The Applicant maintains that it is merely attempting to correct the palpable error, and the Board should exercise its discretion to do so.

RESULT

9The Board exercises its discretion to correct the palpable error for each of the taxation years in question.

ISSUES

10The issue to be addressed in this Application is whether the Board should exercise its discretion to correct the palpable error for the 2017 to 2019 taxation years. In the circumstances of this case, the submissions raise three questions:

1. What is the relevant approach when exercising the Board’s discretion under s. 40.1 of the Act?

2. In applying the relevant approach to the circumstances of this case, should the Board exercise its discretion to correct the error?

3. Does the doctrine of issue estoppel apply to preclude the Applicant from applying to correct a palpable error pursuant to s. 40.1 of the Act?

11While the Board has reviewed all the parties’ submissions in detail, for the purposes of this Motion Decision, the Board provides a synopsis of only the most salient submissions.

ANALYSIS

Introduction

12The submissions of both MPAC and the Applicant are premised on a requirement that the Board should exercise its discretion only in “the clearest of circumstances when it would be unreasonable, unfair, and highly prejudicial to penalize a party for not meeting their statutory obligation to file an appeal in a timely manner”. For ease of reference the Board describes this requirement as the “Restrictive Approach”.

13In 388210 Ontario Limited v Brampton (City), 2023 CanLII 64028 (ON ARB) (“0 Centre Street”), a Request for Review decision issued after the parties filed submissions in this case, the Board rejected this Restrictive Approach, finding instead that the Board, when exercising its discretion, must balance the questions of timing and fairness with the need for correction and the integrity of the assessment roll. In this regard, the Reviewer relied on a decision of the Divisional Court in The Kensington Foundation v. Municipal Property Assessment Corporation et al., 2013 ONSC 7694 (“Kensington - Div. Ct.”), which has been cited in this Application proceeding. The Reviewer further found that the Board will achieve this balance by carefully weighing any form of resulting prejudice to each of the parties, or systemic prejudice to the administration of the municipal taxation system, caused by correcting or not correcting the error.

14For purposes of this Application Decision, the Board is prepared to proceed on the assumption that the Restrictive Approach can be considered by the Board in deciding whether to exercise its discretion. Therefore, it has been unnecessary for the Board to invite further submissions from the parties respecting 0 Centre Street.

15However, the question remains whether the Restrictive Approach is a relevant consideration in the circumstances of this case. In this regard, the Board observes that the fundamental underlying rationale for the Restrictive Approach is that a party should not be permitted to use s. 40.1 to by-pass an assumed requirement to file a s. 40 appeal within the specified limitation period. The Board notes that, in this case, the Applicant did file a s. 40 appeal on time and did proceed with its appeals. Therefore, “whether it would be unreasonable, unfair, and highly prejudicial to penalize a party for not meeting their statutory obligation to file an appeal in a timely manner” is not a relevant consideration in the circumstances of this particular case.

16Therefore, the remaining question is: what approach should the Board apply when deciding whether to exercise its discretion in this case?

MPAC's Submissions and Consideration of the Board’s Decision in ‘Regent Street’

17MPAC submits that a settlement is a settlement of all the issues. MPAC argues that the Applicant should not be allowed to correct the palpable error on the basis that it discovered that it made an error in calculating the current value of the Subject Property. MPAC maintains that allowing the Applicant to do so would be to allow the Applicant to “re-litigate” the issue of the correct current value for the taxation years in question.

18In support of this submission, MPAC relies on a request for review decision in 1763931 Ontario Limited v Municipal Property Assessment Corporation, Region 30, 2018 CanLII 86685 (ON ARB) (“Regent Street”). To fully understand MPAC's submission, it is necessary to discuss this decision in some detail.

19The circumstances in Regent Street were somewhat complex. The subject property was a shopping mall. The property owner filed an appeal for the 2013 taxation year. This appeal was not resolved by the 2014 taxation year. For the 2014 taxation year, the property owner filed a request for reconsideration pursuant to s. 39.1 of the Act. The basis for the property owner’s request for reconsideration was the value of one of the kiosks in the shopping centre. MPAC and the property owner resolved the issue in the 2014 request for reconsideration, agreeing that the current value of the entire shopping centre should be $30,381,000 (the “Reconsideration Settlement”). However, this settlement did not resolve the 2013 appeal. Deemed appeals for the 2014 to 2016 taxation years were created due to delay in completing the hearing of the original 2013 appeal. The parties then negotiated a settlement of current value for the 2013, 2015 and 2016 taxation years at a value that was less than the $30,381,000 current value agreed for the 2014 taxation year. Based on minutes of settlement filed, the Board issued decisions for the 2013, 2015 and 2016 taxation years, at values less than $30,381,000. However, for the 2014 taxation year, the Board issued a decision at a value of $30,381,000 based on the Reconsideration Settlement. The appellant then requested a review of the decision for the 2014 taxation year arguing that the 2014 Reconsideration Settlement should be set aside. One of the submissions made by the appellant was that the Reconsideration Settlement constituted a palpable error on the assessment roll. The Board, on review, held that it was not. The Board’s rationale for finding that there was no palpable error was that the alleged error in current value did not result from incorrect factual information about the property. As the Board emphasized in its analysis, the mall was the same structure. Hence, there was no factual error respecting the property. Only MPAC’s opinion of value changed between 2014 and 2017.

20In addressing MPAC's submissions in this case, the Board began its analysis by first observing that, as the Board, in Regent Street, concluded that the alleged error did not qualify as a palpable error, the Board was not required to address the question as to whether it should exercise his discretion to correct a palpable error. Therefore, Regent Street must be distinguished from the circumstances in this case, where MPAC agrees that there is a palpable error. On this basis alone, the Board does not accept that Regent Street applies to the circumstances of this case.

21However, MPAC submits that it would not be unfair to hold the Applicant to the settlement reached for the 2017 to 2019 appeals. In support of this submission, MPAC relies on Regent Street, noting that the Hearing Member observed that “[p]ermitting an appeal of a consent resolution would undermine the principle of finality”: see paragraph 22. Furthermore, MPAC points out that, in refusing to interfere with the request for Reconsideration Settlement, the Hearing Member stated “[i]t is incumbent on the parties to make sure that they are satisfied with the new global value before executing minutes of settlement” (see paragraph 24).

22In addressing this submission, the Board notes that the above quoted statements made by the Hearing Member were included in the section of his decision entitled “The Interplay between Requests for Reconsideration Settlements and Deemed Appeals”. As such, these particular findings were made in respect of his analysis of the question as to whether the Reconsideration Settlement was binding, notwithstanding the creation of the deemed 2014 appeal. As such, the above quoted findings do not pertain to s. 40.1. The Hearing Member addressed s. 40.1 as a separate issue (see paragraphs 41 to 45).

Appellant’s Submissions - Relevance of the Board’s Decision in ‘Jolis’

23In its reply to MPAC's response submissions, the Applicant has cited a decision of the Board in Jolis Investments Ontario Ltd. v. Municipal Property Assessment Corp. Region No. 14, [2011] O.A.R.B.D. No. 143 (“Jolis”), which the Board treated as an application under s.40.1 of the Act. The Board observes that this decision is of particular relevance because it addresses circumstances similar to those in this case.

24In Jolis, the property owner submitted a request for reconsideration pursuant to s.39.1 and reached a settlement with MPAC. Pursuant to s. 39.1(9) and (10), MPAC notified the municipality of the settlement and the municipality corrected the taxation roll. Therefore, the end result was the same as if the property owner had filed a s. 40 appeal, and the Board corrected the assessment roll based on minutes of settlement filed by the parties.

25As stated in Jolis at paragraph 1(2), the “… Minutes [of Settlement] were erroneous because the properties were incorrectly classified as Industrial Vacant (IX) while they were in fact being farmed” (emphasis added). Consequently, their correct classification was ‘Farmland Waiting Development’. Thus, the error was a factual error in that no farming activity was taking place on the property. The Hearing Member concluded that this was a palpable error. In addressing his discretion as to whether he should correct the error, he stated at paragraph 2 of his Analysis section:

In a situation such as this one, it is often best to view the matter from the simple perspective of the scheme and purpose of the Act. . . . The Board agrees . . . that sections 40, 40.1, 44, and 45, read in the context of the scheme and purpose of the Act, gives the Board broad powers to achieve the primary objective of ensuring the correctness and integrity of the roll.

Furthermore, at paragraph 5, he made specific reference to s. 40.1, stating:

. . . Section 40.1 permits the correction of errors on the roll, on the premise, "If it appears that there are palpable errors in the assessment roll..." There is no apparent restriction on how these errors come to light or wind up on the Board's doorstep.

Hence, on the facts of Jolis, the error was clearly an error regarding factual information about the property, and the Hearing Member, in correcting the error, clearly found that the Board must consider the primary purpose of correcting the assessment roll, notwithstanding that the reason the factual error was on the assessment roll was the result of a settlement agreement made by the parties.

The test to be considered when deciding whether the Board should exercise its discretion to correct a palpable error

26In light of the Board’s discussion above, the Board does not accept MPAC's submission that it should necessarily decline to exercise its discretion to correct a palpable error because the error occurred in the course of negotiating a settlement. That being said, the Board still must decide whether it will exercise its discretion to correct the palpable error.

27The Applicant has cited Kensington - Div. Ct. as authority for the proposition that the Board has the jurisdiction to correct a decision even if an error was not discovered for several years. However, the Board observes that the Applicant’s submission fails to mention the more important finding made in Kensington – Div. Ct., namely, that in exercising its discretion, the Board must balance the questions of timing and fairness with the need for correction and the integrity of the assessment roll (see paragraph 18).

28Hence, the Board finds that in exercising its discretion in this case, the Board must balance the competing goals of integrity and finality of the assessment roll, notwithstanding that the palpable error has resulted from a settlement agreement negotiated by the parties.

In applying the relevant approach, should the Board exercise its discretion to correct the error?

29The Board begins its analysis by observing that, in Jolis, the Hearing Member exercised his discretion to correct the palpable error notwithstanding that the error was created through the parties’ settlement agreement. However, apart from this finding, the Hearing Member did not provide any further reasons to explain why he chose to exercise his discretion to correct the error. His decision appears to have been based on his acceptance that there was a palpable error on the assessment roll, that the cause of the error was immaterial, and that the Board must achieve the primary objective of ensuring the correctness and integrity of the assessment roll.

30The Applicant submits that MPAC and the City have not provided any evidence that they would suffer any prejudice if the palpable error is corrected. In contrast, the Applicant submits that it will suffer significant prejudice if the palpable error is not corrected, in that the Applicant has overpaid $51,023 in municipal taxes. On the question of finality of the settlement agreement, the Applicant submits that the error occurred due to the highly unusual circumstance of both MPAC’s assessor and the Applicant’s consultant erroneously including Unit 120 in the rent roll and site plan when determining current value. The Applicant argues that it would be unreasonable to expect that the Applicant would have identified this error, because both property appraisers missed the duplication even though they followed normal procedures when valuing the Subject Property.

31In response, MPAC argues that finality, at some point, must be achieved. MPAC also asserts that a party who claims prejudice cannot rely on its own carelessness, citing 217-225 Richmond Street West Ltd v Ontario (Assessment Review Board), 1997 CanLII 26465 (ON CTGD), [1998] OJ No. 35, 105 OAC 231, [1998] 2 CTC 304) at paragraph 1.

32In weighing the prejudice to the Applicant, the Board should not, in the circumstances of this case, attempt to draw a fine distinction between an error caused by carelessness and an error caused by an oversight. On one hand, it can be said that the Applicant should have verified whether Unit 120 was properly included in the assessment of the Subject Property. On the other hand, as neither property appraiser “caught the error”, this suggests that this was a mistake caused by simple human error, not carelessness.

33Consequently, the Board finds that, although there would be prejudice to the Applicant if the error is not corrected, in weighing the prejudice to the Applicant, the Board must consider that, to some degree, the Applicant is responsible for the occurrence of the error. This reduces the weight given to this prejudice. However, the decision in Kensington - Div. Ct. also clearly indicates that the Board must consider the financial consequences to the property owner. Based on these considerations, the Board concludes that there is some prejudice to the Applicant if the palpable error is not corrected, albeit being of lesser weight due to the Applicant’s conduct which contributed to the error.

34In weighing the prejudice to MPAC, the Board has already rejected that it should decline to exercise its discretion to correct a palpable error because the error occurred in the course of negotiating a settlement. In the circumstances of this case, if there can be some perceived prejudice to MPAC, the Board must also consider that that the error was made by MPAC's assessor as well as the Appellant’s consultant. Hence, as with the Applicant, the Board would ascribe lesser weight to such prejudice. As MPAC has not claimed any other form of prejudice, the Board concludes that there would be little or no prejudice to MPAC if the palpable error is corrected.

35As noted above, the City has not participated in this proceeding, so there is no evidence before the Board of any prejudice to the City if the error is corrected.

36Regarding systemic prejudice to the administration of the municipal taxation system, the Board has considered the issue of double taxation. This is not a situation where the correcting the error would simply increase or decrease the assessed value of the subject property, which would ensure that the property owner would pay its fair share of municipal taxes in comparison to other property owners. In this case, it is not disputed that there is double taxation because Unit 120 has, in effect, been assessed twice. Double taxation is not consistent with a fair collection of public taxes based upon an accurate assessment roll. Therefore, on this ground, there is systemic prejudice if the palpable error is not corrected.

37In summary, therefore, there would be little or no prejudice if the error is corrected. However, there is evidence of prejudice if the error is not corrected, including financial consequences for the Applicant and systemic prejudice. Accordingly, the Board finds that correcting the palpable error will achieve the appropriate balance between timing and fairness and the need for correction and the integrity of the assessment roll. For this reason, the Board concludes that it should exercise its discretion to correct the palpable error.

Does the doctrine of issue estoppel apply to preclude the Applicant from applying to correct a palpable error pursuant to s.40.1 of the Act?

38As noted above, the Applicant submits that it is not attempting the re-litigate the issues resolved in the parties’ settlement agreement. Instead, the Applicant argues that it is merely attempting to correct the palpable error.

39In response, MPAC submits that the doctrine of issue estoppel applies for the taxation years in question because the parties are the same, the issue was the same, and the decision was final. In support of this submission, MPAC cites a decision of the Ontario Superior Court in Paletta v. Paletta, 2003 CanLII 19580 (ON SC) (“Paletta”) at paragraph 22. The Applicant has not disputed this submission. MPAC further emphasizes that the doctrine of issue estoppel applies to consent judgements, including assessment appeals resolved by minutes of settlement, citing Canadian Niagara Hotels Inc. v Municipal Property Assessment Corporation, Region 18, 2022 CanLII 54916 (ON ARB) at paras 4, 36 and 38. Again, the Applicant does not dispute this submission.

40The Board notes that the Settlement Agreement is in respect of a s. 40 proceeding, whereas the proceeding in this case is a s. 40.1 application where the substantive grounds to be established in each of these proceedings is different. However, the doctrine of issue estoppel prevents a party from relitigating an issue already decided in an earlier proceeding, even if the causes of action in the two proceedings differ: see Minott v. O'Shanter Development Company Ltd., 1999 CanLII 3686 (ON CA), 42 O.R. (3d) 321 (C.A.) (“Minott”) at paragraph 16. Therefore, the doctrine of issue estoppel can nonetheless apply if the issue before the Board in this s. 40.1 proceeding is the same as the issue resolved in the s. 40 appeal proceeding.

41Furthermore, the doctrine of res judicata (cause of action estoppel) provides that estoppel applies “to every point which properly belonged to the subject of litigation, and which the parties, exercising reasonable diligence, might have brought forward at the time”: see Grandview v. Doering, 1975 CanLII 16 (SCC), [1976] 2 S.C.R. 621 at page 634; Paletta at paragraph 22. Clearly, the issue of including Unit 120 in the assessment of the current value of the Subject Property was a point to be determined in the s. 40 appeal proceeding. Therefore, the Board accepts MPAC’s submission that the doctrine of issue estoppel can apply in this case.

42However, both parties acknowledge that issue estoppel is a discretionary remedy, and the Board may decline to order that issue estoppel applies. The Applicant argues that the Board should not exercise its discretion to order issue estoppel, whereas MPAC argues that it should. In deciding whether to exercise this discretion, the Board must answer the question: is the fact that there was an error made in the resolution of the earlier proceeding a relevant consideration? This question was addressed in Minott, where the Court of Appeal stated at page 340:

Issue estoppel is a rule of public policy and, as a rule of public policy, it seeks to balance the public interest in the finality of litigation with the private interest in achieving justice between litigants. Sometimes these two interests will be in conflict, or at least there will be tension between them. Judicial discretion is required to achieve practical justice without undermining the principles on which issue estoppel is founded. Issue estoppel should be applied flexibly where an unyielding application of it would be unfair to a party who is precluded from relitigating an issue.

That the courts have always exercised this discretion is apparent from the authorities. For example, courts have refused to apply issue estoppel in "special circumstances", which include a change in the law or the availability of further relevant material. If the decision of a court on a point of law in an earlier proceeding is shown to be wrong by a later judicial decision, issue estoppel will not prevent relitigating that issue in subsequent proceedings. It would be unfair to do otherwise. . . . [Emphasis added.]

43In this case, although there has been no “later judicial decision” indicating that the s. 40 decisions issued for the 2017 to 2019 taxation years are wrong, MPAC agrees that these decisions are, in fact, wrong. That is why MPAC has corrected the error for the 2020 and subsequent taxation years. Accordingly, as these decisions are wrong, they create a real injustice in this case. Consequently, the Board finds that it should not exercise its discretion to apply issue estoppel. In the circumstances of this case, it would be unfair to deprive the Applicant of its right to request a correction of the palpable error pursuant to s. 40.1. As stated by the Supreme Court of Canada in Danyluk v. Ainsworth Technologies Inc., 2001 SCC 44, [2001] 2 S.C.R. 460 (S.C.C.) at paragraph 33, the underlying purpose of issue estoppel is to balance the public interest in the finality of litigation with the public interest in ensuring that justice is done on the facts of a particular case.

Conclusion

44In summary, the Board has found that, although the requirements for issue estoppel have been met, the Board declines to exercise its discretion to grant this remedy. The Board has also found that it should exercise its discretion to correct the palpable error. As the alteration of assessed value is involved, the Board extends the time for bringing appeals for the 2017 to 2019 taxation years and directs MPAC to be the Appellant. The Board imposes the following additional requirements as set out in the Order below.

ORDER

45The Board orders that:

a. There is a palpable error in the assessment roll for each of the 2017 to 2019 taxation years, namely, that the determination of the current value of the Subject Property wrongly included consideration of Unit 120.

b. The Board exercises its discretion to correct the palpable error for each of the 2017 to 2019 taxation years.

c. As the alteration of assessed values is involved, the Board extends the time for bringing appeals for these taxation years subject to the following conditions:

i. the appeals must be filed with the Board within 30 days of the issuance of this Motion Decision;

ii. the Board directs MPAC to be the Appellant in the appeal proceedings for these taxation years; and

iii. the appeals may only address the valuation issues resulting from the correction of the palpable error.