SUPERIOR COURT OF JUSTICE - ONTARIO
DIVISIONAL COURT
RE: NEAMSBY INVESTMENTS INC.
Appellant
- and -
THE CORPORATION OF THE TOWN OF MARKHAM
Respondent
BEFORE: Justices Carnwath, Perkins & Low
COUNSEL: David G. Fleet & Ken West, for the Appellant
Melissa E. VanBerkum, for the Respondent
HEARD: June 10, 2008
E N D O R S E M E N T
1This is an appeal by Neamsby Investments Inc. (“Neamsby”) from a decision and final order of Mr. Justice Wilton-Siegel of the Ontario Superior Court, dated November 23, 2007. The order dismisses the application to quash the “new construction notice” issued by the Town of Markham (“Markham”) on or about September 22, 2005, the recalculated property tax bills for taxation years 2001 to 2004 in relation to the new construction notice and the 2005 tax bill for an industrial property municipally known as 210 Duffield Road (“the property”).
2The appeal involves the statutory interpretation of s. 331 of the Municipal Act, 2001, S.O. 2001, c. 25 (“the Act”). This section directs municipalities to determine municipal and school taxes for “eligible properties” which have undergone a specified change, such as new construction, by calculating the average level of taxation of comparable properties in the vicinity and applying it to the current value assessment of the new property. This ensures that the eligible property is taxed at the same level as comparable properties.
3The list of comparable properties used to derive the level of taxation for the eligible property is to be sent to the municipality by the Municipal Property Assessment Corporation (“MPAC”) as soon as practicable. The municipality “shall mail to the owner of each eligible property” the list and the resulting tax calculations to the taxpayer (by way of a new construction notice) within sixty days of receipt of the list of comparables. Markham did not comply with the time limit of sixty days, and did not do so until September of 2005, some years later. Markham acknowledges that the delay was deliberate and did not flow from clerical error or negligence. The computer software used by Markham to develop tax bills was not configured to create s. 331 tax bills. Markham chose to wait until the software was upgraded. It conceded the calculations could have been done manually.
4The Superior Court judge below found that the issue to be determined was strictly one of statutory interpretation of s. 331 of the Act. He found the deadline in ss. 331(9) of the Act to be directory, rather than mandatory, and that the failure of Markham to meet the deadline did not impair its legal authority to bill the taxes relating to the property, as it did.
BACKGROUND FACTS AS AGREED UPON BY COUNSEL
5Neamsby is the assessed owner of a 6.4-acre parcel of land located at the western end of Duffield Drive in the Town of Markham, now municipally known as 210 Duffield Drive, Markham (“the property”). In 2000 and early 2001, Neamsby had constructed upon the property a new industrial building of approximately 143,788 square feet of floor space. On April 10, 2001, Neamsby entered into a fifteen-year lease with a printer, PLM Group Ltd. (“PLM”), in respect of the property (“the lease”), pursuant to which PLM is responsible for payment of property taxes for the whole of the property.
6For taxation year 2001, the property was assessed by the Municipal Property Assessment Corporation (“MPAC”) as vacant industrial land on two separate assessment roll numbers. The capped taxes levied by Markham against the property for 2001 taxation totalled $15,436.76.
7On September 9, 2001, MPAC issued a supplementary assessment, effective May 1, 2001, that reflected the current value of the completed building constructed on the property (“the supplementary assessment”).
8Pursuant to the provisions of s. 331 of the Act, MPAC identified and created a list of comparable properties and sent it to Markham (“the list”). The list was delivered to Markham by MPAC by not later than May 27, 2002, within the time limit set out in s. 331 of the Act.
9For each of the 2002, 2003 and 2004 taxation years, the capped final taxes levied on Neamsby for the property appeared on a single roll number. A tax cap adjustment was applied to each of the historic tax bills. All taxes as levied by the historic tax bills for each of the 2001, 2002, 2003 and 2004 taxation years were paid in full.
10On July 9, 2004, Markham issued a supplementary tax bill for the 2001 taxation year in respect of the supplementary assessment (“supplementary tax bill”). The net effect of the supplementary tax bill, which is not in dispute, was to adjust the total 2001 taxes for the property from $15,436.76 to $66,031.10.
11On November 1, 2004, Neamsby received from Markham a statement of taxes indicating total taxes outstanding and owing in the amount of $82,600, reflective of a final 2004 tax bill of $123,939.51. The final tax bill for 2004 took into account adjustments arising from the supplementary tax bill.
12Unexpectedly and inexplicably, on September 6, 2005, Neamsby received from Markham a further statement of taxes asserting taxes outstanding and owing in the collective amount of $587,108.78 for the taxation years 2003, 2004 and 2005. Then, on September 20, 2005, Neamsby received from Markham a final tax bill for 2005 taxation that removed the tax cap adjustment and levied 2005 taxes of $330,855.70. Markham accepts that if the proper tax cap adjustment had been made by Markham for 2005 taxation, utilizing 2004 annualized taxes of $123,939.51, the final 2005 taxes would not exceed approximately $138,594.96.
13On September 22, 2005, Neamsby received from Markham a tax bill entitled “new construction notice” bearing an effective date of May 1, 2001 (“the notice”) that levied additional taxes for 2001 through 2004 in what Markham admits was a shocking total amount of $587,108.78. The notice asserts that the property had been identified by MPAC for reconsideration under the provisions of s. 331 of the Act, to ensure that Neamsby’s taxes were no higher than the average level of taxation of four comparable industrial properties in the vicinity.
14Twice in November, 2005, Neamsby registered objection to the notice and increased taxes levied by Markham. Neamsby expressly referred Markham to s. 359 of the Act as a remedial provision for any asserted tax undercharge. By letter dated November 30, 2005, Markham asserted “…that the timing of the list of comparables does not affect the rights of the municipality or the taxpayer…”.
15For the 2001 through 2005 taxation years collectively, the taxes for the property, as levied by the historic tax bills and as estimated by Neamsby, may be compared to the taxes as asserted by Markham, as follows:
Original Billing
Adjusted Billing
Difference
2001-2004
$413,422.69
$1,000,531.47
$587,108.78
2005
$138,594.96
$ 330,855.70
$192,260.74
Total
$552, 017.65
$1,331,387.17
$779,369.52
Neamsby asserts that Markham has improperly levied taxes for the property for each of the 2001 through 2004 and 2005 taxation years in amounts in excess of what is permitted by law, in a collective amount of at least $779,369.52.
THE POSITION OF THE PARTIES
16Neamsby submits:
(a) the Superior Court judge made an error in law when he interpreted the term ‘shall’ in subsection 331(9) of the Act as directory, not mandatory, in light of section 331, the legislative history of the Act and the common law in relation to statutory interpretation and property taxation;
(b) the recalculation of the Property’s taxes, in light of the New Construction Notice, amounts to a correction of a clerical or factual error which ought to have been done only through the application of the ‘remedial’ sections of the Act, particularly sections 359 and 359.1; and,
(c) Markham should be estopped from relying on the New Construction Notices to bill Neamsby for property taxes because Markham’s retention of these taxes undermines the rule of law and constitutes a distinct branch of restitution. Neamsby argues that Markham was unjustly enriched to the prejudice and detriment of it and its tenant.
17Markham’s position in respect of these issues is:
(a) the Superior Court judge made no error in law when he interpreted the term ‘shall’ in subsection 331(9) as directory. He correctly applied the rules of statutory interpretation set out in Québec v. Notre-Dame de Bonsecours (Corp.), 1994 58 (SCC), [1994] 3 S.C.R. 3 (“Bonsecours”). He examined the purpose of both section 331 and the Act as a whole in determining that the deadline in subsection 331(9) is directory and that the failure to meet the deadline by Markham does not impair its authority to bill taxes in relation to the new construction;
(b) the tax calculation and billing by Markham was completed in accordance with section 331 of the Act. The failure to meet the sixty-day timeframe in subsection 331(9) was an act of judgment made by Markham because of technical restraints and one to which no remedial sections of the Act apply, particularly to sections 359 and 359.1; and,
(c) the delayed application by Markham of section 331 was not negligent nor was Neasmby prejudiced by the delay in the billing of taxes. The principle of unjust enrichment has no application to this case.
THE APPLICABLE PROVISIONS OF S. 331 OF THE ACT
18Section 331 of the Act states:
Taxes on eligible properties
331.(1) The purpose of this section is to ensure that eligible properties are taxed at the same level as comparable properties. 2001, c. 25, s. 331(1).
Determination of taxes
(2) Despite any other provision in this Part, each local municipality shall determine the taxes for municipal and school purposes for each eligible property for the year or portion of the year as follows:
Determine the level of taxation for each property identified by the assessment corporation under subsection (6) as a comparable property by dividing the taxes for municipal and school purposes levied for the year by the taxes for municipal and school purposes that would have been imposed but for the application of this Part.
Determine the average of the levels of taxation for all comparable properties determined under paragraph 1.
Determine the taxes for municipal and school purposes for the eligible property for the year by multiplying the average level of taxation determined under paragraph 2 by the taxes for municipal and school purposes that would have been imposed on the eligible property but for the application of this Part.
The taxes for municipal and school purposes for an eligible property for the year shall be the lesser of the amount determined for the year or portion of the year but for the application of this Part and the amount determined under paragraph 3. 2001, c.25, s. 331(2); 2002, c. 17, Sched. A, s. 55(1).
Adjustments
(3) The local municipality shall make the necessary adjustments on the tax roll for the year or portion of the year in accordance with the determination under subsection (2). 2001, c. 25, s. 331(3).
Limits to apply
(4) The taxes for municipal and school purposes on a property to which this section applies for a taxation year shall be calculated under section 329 for subsequent years. 2001, c. 25, s. 331(4).
Determination of taxes for the subsequent year
(5) For the purposes of paragraph 2 of subsection 329(2), taxes are to be recalculated as if the amount determined under paragraph 4 of subsection (2) of this section had been determined on a full year basis. 2001, c. 25, s. 331(5).
Comparable properties identified
(6) The assessment corporation shall identify six comparable properties with respect to an eligible property for the purposes of this section or, if there are fewer than six comparable properties, as many comparable properties as there are. 2001, c. 25, s. 331(6).
Mixed use properties
(7) For the purposes of this section,
(a) if an eligible property or a comparable property is classified in more than one class of real property under section 7 of the Assessment Act, each portion shall be treated as a separate property; and
(b) up to six comparable properties, or if there are fewer than six comparable properties, as many as there are, shall be identified for each portion of an eligible property under clause (a). 2001, c. 25, s. 331(7).
List provided to municipality
(8) The assessment corporation shall provide a list of the comparable properties under subsection (6) or (7) with respect to an eligible property to the local municipality as soon as is practicable,
(a) after the return of the assessment roll for eligible properties that are on the assessment roll; or
(b) after the mailing of the notice of the assessment of the eligible property under section 33 or 34 of the Assessment Act. 2001, c. 25, s. 331(8).
List to be mailed to the owner
(9) The local municipality shall mail to the owner of each eligible property the list of the comparable properties and the determination made under subsection (2) with respect to that eligible property within 60 days after the date the list is received by the local municipality. 2001, c. 25, s. 331(9).
Complaint
(11) The owner of an eligible property or the local municipality may, within 90 days of the mailing of information under subsection (9), complain to the Assessment Review Board in writing concerning the properties on the list and request that up to six alternative properties be used as comparable properties for the purposes of this section. 2001, c. 25, s. 331(11); 2002, c. 22, s. 157(1).
THE SUPERIOR COURT JUDGE’S DECISION
19The judge began by finding that the applicable principles of statutory interpretation for this taxing Act were as set out by Gonthier J., in Bonsecours, above:
(a) The interpretation of tax legislation should follow the ordinary rules of interpretation.
(b) A legislative provision should be given a strict or liberal interpretation depending on the purpose underlying it, and that purpose must be identified in light of the context of the statute, its objective and legislative intent: this is the teleological approach.
(c) The teleological approach will favour the taxpayer or the tax department depending solely on the legislative provision in question, and not on the existence of predetermined presumptions.
(d) Substance should be given precedence over form to the extent that this is consistent with the wording and objective of the statute.
(e) Only a reasonable doubt, not resolved by the ordinary rules of interpretation, will be settled by recourse to the residual presumption in favour of the taxpayer.
20The judge found that the second and third principles referred to immediately above had particular relevance. Also relevant for the judge were the provisions of subsections 64(1) of the Legislation Act, 2006, S.O. 2006, c. 21, Sched. F, which provides that an Ontario statute shall be interpreted as being remedial and shall be given such fair, large and liberal interpretation as best ensures the attainment of its objects.
21The judge then applied the teleological approach referred to in Bonsecours, above, and asked the question – what was the purpose of s. 331? He found that subsection 331(1) stated that the purpose was to ensure that eligible properties were taxed at the same level as comparable properties. He then considered subsection 331(9) to give effect to the express purpose enunciated in subsection 331(1).
22He then asked himself whether there was an interpretation of subsection 331(9) that furthered the object of the section in its entirety without contradicting the scheme of the Act or common law principles affording protection to taxpayers against unfairness in the imposition of taxation. He concluded that an interpretation of subsection 331(9) that treats the sixty-day requirement as directory satisfied the test and gave five reasons for this conclusion:
The interpretation did not detract from the principle that taxpayers must be informed of the amount and basis of any taxation imposed. It was mandatory that Neamsby be informed of the amount and basis of the calculation of the amount imposed. This was done.
Interpreting ‘shall’ as mandatory would defeat the purpose of s. 331 of the Act without furthering any other express object of the statute. Both parties agreed before the judge there was no other provision in the Act and no procedure under s. 331 by which Markham could revise the tax rolls and give effect to the provisions of s. 331 in respect of the 2001 and all subsequent taxation years, if the time limit was determined to be mandatory. The effect would be, as submitted by Markham, that Neamsby would pay approximately forty percent of the taxes assessed against the comparable properties.
The judge found no significance in the specific requirement of a sixty-day time period. It did not form part of an integrated structure of time limits furthering a particular objective. The time limit runs only upon receipt by a municipality of the list of comparable properties from MPAC which, presumably, was to be done within a reasonable time.
The judge found no compelling reason why failure to observe the sixty-day limitation should produce the draconian results of preventing the municipality from applying the provisions of s. 331 to the taxation of eligible properties. The judge found as a fact there was no prejudice to Neamsby, who passed the liability for property taxes through to its tenant.
The judge noted that interpreting the time limit as directory did not adversely affect the right of Neamsby to initiate a complaint under subsection 331(11). Indeed, it was acknowledged that Neamsby had done exactly that, with the matter still pending before the Assessment Review Board .
ANALYSIS
23The Superior Court judge was dealing with a question of statutory interpretation and the standard of review is, therefore, correctness.
24We agree with the judge’s conclusion that the principles of statutory interpretation of s. 339 are found in Bonsecours. Neamsby included in its brief of authorities many cases with different fact situations and principles having no bearing on the interpretation of s. 331. From these cases, counsel extracted a pastiche of principles which, he submitted, applied to the analysis of s. 331. With respect, we disagree with his approach. We agree with the finding of the judge below that s. 331 must be approached applying the principles identified by Gonthier J. in Bonsecours.
25Having so concluded, we agree that s. 331 must be viewed in the light of subsection 331(1), that is, the purpose of the section is to ensure eligible properties are taxed at the same level as comparable properties.
26We find no error in the judge’s application of the principles in Bonsecours to the facts of this case. In articulating the five reasons why a directory interpretation of “shall” is preferable, his analysis is both logical and consistent. While one might quarrel with his finding of fact that there was no prejudice to Neamsby by the late assessment, this was a finding of fact which he was entitled to make on the evidence. It must be remembered that while the tax bills may have struck a blow at PLM’s cash flow, PLM did have the use of the money which would otherwise have gone to pay the taxes if the sixty-day time limit had been observed. A reasonable presumption would be that Neamsby and PLM would expect the assessments on the property to change to reflect the erection of the building.
27Shortly put, a mandatory interpretation of “shall” would frustrate the intention of s. 331 as set out in subsection 331(1), grant a tax holiday in perpetuity for Neamsby for those taxes resulting from the erection of the building, and pass the burden of that tax holiday to owners of comparable properties. A directory interpretation of “shall” ensures that comparable properties are taxed at the same level, preserves the principle that the taxpayer must be informed of the amount and basis of any taxation imposed, causes little prejudicial effect to Neamsby/PLM and preserves the right of Neasmby to complain about the appropriateness of the comparables.
28We find the Superior Court judge below made no error in law.
29If the parties are unable to agree upon costs, they may make short written submissions limited to three pages to supplement the Costs Outline left with the Court. It appears the costs below have not been dealt with. Submissions may be made as to how counsel wish to resolve the matter of the costs below.
CARNWATH J.
PERKINS J.
LOW J.
DATE: 20080908