Court File and Parties
CITATION: The Kensington Foundation v. M.P.A.C., 2013 ONSC 1799
COURT FILE NO.: 51/12
DATE: 20130327
SUPERIOR COURT OF JUSTICE – ONTARIO – DIVISIONAL COURT
RE: THE KENSINGTON FOUNDATION, Applicant (Moving Party)
-and-
MUNICIPAL PROPERTY ASSESSMENT CORPORATION and THE CITY OF TORONTO, Respondents (Responding Parties)
BEFORE: MOLLOY J.
COUNSEL: Richard R. Minster, for the Moving Party
Francis X. Shea, for the Respondent, Municipal Property Assessment Corporation
Christopher J. Henderson, for the Respondent, City of Toronto
HEARD: March 5, 2013, at Toronto
ENDORSEMENT
Introduction
[1] In 2002 the Assessment Review Board (“the Board”) made a typographical error in an order it issued, dropping a crucial zero from the value of the property assessed. Six years later when the error was discovered, the Board unilaterally issued an amended order with the correct amount, and the taxpayer got a bill for over half a million dollars in back taxes. The taxpayer, the Kensington Foundation, applied to the Board in 2011, seeking to have the 2008 amending decision reversed. For reasons issued on dated January 13, 2012, the Board refused to grant any relief. Kensington now seeks leave to appeal from the Board’s decision.
Factual Background
[2] The Kensington Foundation (“Kensington”) is a not-for-profit charitable corporation that owns a commercial building on College St. in Toronto. The building operates as a health centre and Kensington rents office space to various health-provider tenants.
[3] The property in question had been assessed by the Municipal Property Assessment Corporation (“MPAC”) for the tax years 2001 and 2002 at a value of $10,508,000.00. Kensington disputed that valuation. Kensington reached a settlement with MPAC reducing the assessment to $7,790,000.00. The Board then issued an Order dated November 8, 2002 which stated “Change assessed value from 10508000 to 779000.”
[4] Kensington’s solicitors received a copy of the decision, but did not notice that the amended amount was missing a zero. In fairness, the absence of any commas or periods in the number makes it easy to see how such a mistake could be missed.
[5] The Board Order was forwarded to the municipal clerk to be added to the municipal rolls, from which the property tax payable was calculated. The clerk thought the new amount looked odd and called MPAC about it, but was told the amount was correct. Therefore, Kensington’s property taxes for 2001 and 2002 were calculated based on an assessed value of $779,000.00 rather than $7,779,000.00.
[6] Because of the complicated capping/claw-back and phase-in provisions of the tax regime at that time, there was no direct correlation between the refunds received and the amount of the reduction in the assessment. Therefore, Kensington did not notice that an error had been made. Kensington operated its building on a net-net basis, charging each tenant for its share of the property tax. Accordingly, for 2001 and 2002 Kensington paid the taxes provided in its tax bills, and collected from its tenants only that amount required to reimburse those amounts.
[7] The tax bills for 2003 and all subsequent years were based on accurate assessed values and the taxes charged and collected were correct. The only issue is with respect to 2001 and 2002.
[8] On September 5, 2008, the Board issued an Amended Decision which states, “Change assessed value from $10,508,000 to $7,790,000.” There is no reference in the amended decision as to what is amended and nothing to alert the reader to the fact that the previously issued 2001 and 2002 Orders had reflected an incorrect assessed value. There is also no indication as to what prompted the issuance of the amended decision.
[9] Kensington’s first knowledge of any problem came from a tax bill from the City on November 26, 2008 which stated that Kensington owed $515,954.66 in recalculated back taxes for the years 2001 and 2002. It took considerable time and effort for Kensington to find out what had triggered this. Even now, the complete story is unknown. The Board destroyed all of its files in relation to the matter in 2010 and is not in a position to say what led to the amended decision in 2008. However, City staff noticed the discrepancy in April 2008, contacted MPAC, and was advised that amended decisions would be issued to correct the error. It is reasonable to assume that this inquiry is what led to the issuance of the Board’s September 2008 amended decision.
[10] It is clear that Kensington was not given any notice of any intention to amend the 2002 Order. It was simply advised of the change after the fact.
The Board’s Decision in 2008
[11] It would appear that the Board’s decision to amend its 2002 Order was made unilaterally and without notice to Kensington, although it may have been done at the suggestion of either the City or MPAC.
[12] In issuing the amendment, the Board gave no reasons. The Board relies on Rule 142 of its own Rules of Practice and Procedure which states:
- Correcting Minor Errors
The Board may at any time and without prior notice to then parties correct a technical or typographical error, error in calculation or similar minor error made in a decision or order, and may clarify a misstatement, ambiguity or other similar problem. There is no fee if a party requests this type of correction.
The Board’s Decision in 2012
[13] Kensington applied to the Board in 2011 seeking a review of its 2008 amended decision. Kensington alleged that it was prejudiced by the amendment given the passage of time and the fact that it would be unable to collect the back-taxes from its tenants, many of whom were no longer in the building or otherwise unable to pay.
[14] Although the prescribed time for reviewing a prior decision had expired, the Board agreed to extend the time and hear Kensington’s application.
[15] The Board made three findings, stated at page 3 of the reasons:
(i) In 2008, the Board had authority and jurisdiction to exercise its discretion to correct the original decision under Rule 142.
(ii) The Board on review lacked the authority to overturn the 2008 decision and to effectively confirm an inaccurate assessment.
(iii) Even if the Board did have that jurisdiction on review, the “financial implications to the taxpayer are insufficiently prejudicial to do so.”
[16] On the latter point, with respect to prejudice, the Board held that the “correction means simply that the parties will be put in the same tax position as they would have been had there been no error.” The Board reasoned that the particular circumstances of the taxpayer (i.e. the inability of Kensington to pass on the additional taxes to tenant) “cannot outweigh getting the matter correct.”[^1]
[17] Kensington had argued that the doctrine of laches and limitation periods in various statutes, including the Municipal Act should be taken into account. The Board emphasized that the primary scheme and purpose of the legislation is to “get the assessment right.” The Board held that in light of the wording of Rule 142, which permits corrections “at any time,” the Board on review has no authority “to set a time limit on the phrase ‘at any time’.”[^2]
The Test for Leave to Appeal
[18] An appeal lies from the Board to the Divisional Court, with leave of this Court, on a question of law.[^3]
[19] The parties accept that the test to be applied in considering whether leave should be granted in this case involves two factors, both of which must be present before leave can be granted:
(1) reason to doubt the correctness of the decision; and,
(2) an issue that involves a point of law of sufficient importance, beyond the interests of the parties involved, meriting the attention of the Divisional Court.
The Issues Upon Which Leave to Appeal Is Sought
[20] On the motion for leave to appeal, Kensington took the following positions:
(1) The Board in 2008 lacked jurisdiction to make the amendment under Rule 142 and ought to have treated it as a request for a substantive change under Rule 143. Further, the amending decision was made in breach of principles of procedural fairness and natural justice because Kensington was not given notice and an opportunity to participate.
(2) The Board erred in its interpretation of Rule 142 by failing to import a limitation period.
(3) The Board erred in in its interpretation of its own jurisdiction on review.
(4) The Board on review erred in law by failing to properly consider the issues of delay and prejudice to the taxpayer as factors in determining whether to set aside the 2002 amending decision.
Analysis: Rule 142 or 143 and Notice
[21] Rule 143 provides:
If a party requests a correction or clarification that in the Board’s opinion is a request for a substantive change in the decision, the Board will treat it as a request for a review.
[22] Counsel for Kensington argues that a correction from $779,000.00 to $7,790,000.00S is a substantive change and ought to have been dealt with under Rule 143, rather than under Rule 142 which relates only to “minor errors.”
[23] On review, the Board held that it was “questionable” whether there was any jurisdiction in the Board to review a decision to process an amendment request under Rule 142 as opposed to Rule 143. If the Board’s analysis had ended there, I would have doubted its correctness. I do not consider the Board’s jurisdiction on this point to be at all “questionable.” The Board has very broad powers on review, including the power to vary, suspend, or cancel a decision or to order a re-hearing. If the Board in the first instance had incorrectly proceeded with an amendment under Rule 142, it would be open to the Board on review to vary or cancel it, or send it for a new hearing.
[24] However, the Board did not rest its decision on this question of jurisdiction. Rather, the Board considered the nature of the amendment and the meaning of Rule 142 and determined that the Order made was properly dealt with under Rule 142. I see no reason to doubt the correctness of the Board’s determination in this respect. I agree with the Board’s conclusion that the error in this case was clearly a typographical mistake and that it fell squarely within Rule 142. I also agree with the Board’s reasoning that the reference to “similar minor error” indicates that the Rule is intended to be used to cover other types of errors, in addition to the specifically listed technical/typographical/calculation errors, that are similarly minor to those types of listed errors. The quantum of the error is not relevant to whether it is “substantive” or not. The error at issue here was a dropped zero – a purely mechanical typographical error – and squarely within Rule 142.
[25] I also agree with the Board’s finding that there was no breach of procedural fairness or natural justice in the manner the amending decision was made. There is no requirement for the Board to give notice to the parties every time a minor error correction is made under Rule 142.
[26] There may, of course, be situations where correction of a minor error can have a substantial impact on others, or where there are other extenuating circumstances. However, the Board’s power under Rule 146 to review such decisions, and to extend the time for hearing such applications, provides an effective safeguard to protect rights that may be affected by Rule 142 decisions. Indeed, that is precisely what happened in this case. Although Kensington had no notice of the amending decision itself, it was subsequently able to challenge it and to have its submissions considered in determining whether, in all of the circumstances, the order should stand.
[27] I see no basis for granting leave to appeal on this issue.
Limitation Period Under Rule 142
[28] Counsel for Kensington submits that the Board erred in failing to interpret Rule 142 as incorporating some form of limitation period that would preclude correction of errors after six years had passed. Counsel referred in that regard to s. 25.1(3) of the Statutory Powers Procedure Act, the Assessment Act and the Municipal Act (City of Toronto Act, 2006).
[29] The short answer to this question is that Rule 142 specifically states that the Board may correct an error under this provision “at any time.” There is no limitation period in the Rule and no basis for importing one. None of the statutory provisions relied upon by counsel apply in this situation.
[30] That does not mean that the length of time that has passed is wholly irrelevant to the Board’s decision as to whether or not to exercise its discretion under Rule 142 (when originally considering an error correction) or under Rule 146 (when determining whether there are circumstances warranting setting aside the Rule 142 decision). Indeed, it may well be relevant to consider what limitation periods would apply if the same kind of error had been made elsewhere (e.g. in the assessment rolls as opposed to the Board Order). However, that is not the same thing as importing a limitation period directly into Rule 142.
[31] Again, I see no basis for granting leave on this issue.
Jurisdiction on Review
[32] Having determined that the 2008 amending decision was appropriately made under Rule 142, the Board on review held that it was without jurisdiction to overturn that discretionary decision and to substitute an incorrect assessment for the correct one.
[33] In my view, this is a question of jurisdiction upon which the Board was required to be correct.
[34] I am further of the view that there is reason to doubt the correctness of that finding. As I have noted above, the powers of the Board on review are extensive. Given the fact that the initial decision is made without any time restriction and without any submissions from any parties affected by it, it is particularly important that all relevant factors be taken into account on the review. Those facts could not have been known to the original Board. A compelling case can be made for the argument that not every typographical error must be corrected. The language, even in Rule 142, is permissive. The decision is discretionary and it is appropriate to take into account all relevant factors known to the decision maker at the time. That applies to the initial Board as well as to the reviewing Board.
[35] I see this as a legal issue with broad implications. It is important that the Board’s jurisdiction on review not be arbitrarily circumscribed. This is important not just for these parties, but for all taxpayers and municipalities in the province. It is an issue that merits consideration by a full panel of the Divisional Court.
[36] I find that the test for leave to appeal is met in respect of this issue. I have considered whether, notwithstanding that finding, I should deny leave because the Board went on to make a ruling on the merits notwithstanding its determination on jurisdiction. I have concluded that leave to appeal should still be granted for two reasons: (1) because the limited view of jurisdiction seems to have affected the consideration of the merits; and (2) because the jurisdiction issue is an important one and should be clarified.
The Effect of Prejudice and Delay
[37] Clearly, if the typographical error had been discovered shortly after it was made, there could be no basis whatsoever for challenging a decision correcting it. The question, however, is whether that determination changes as time passes and prejudice is incurred by an affected party.
[38] The moving party has presented a persuasive argument that the Board on review did not actually take delay or prejudice into account in making its decision.
[39] In dealing with the impact of prejudice, the Board held, at p. 11 of its decision:
On the issue of prejudice, the correction means simply that the parties will be put in the same tax situation as they would have been in had there been no error. I accept Mr. Shea’s contention [for MPAC] that the particular circumstances of the taxpayer in question can not outweigh getting the matter correct, where it is a simple correction. In such cases, no notice is given to the parties, precisely because their particular circumstances are not a factor in getting it right. The fact that Kensington is a non-profit, and may have some difficulty collecting the taxes from their tenants, does not restrain the Board’s ability to make the correction.
[40] It seems to me that what the Board is saying here is that in a matter of simple error correction, prejudice is irrelevant because the only concern is getting the numbers right and prejudice has nothing to do with that. The Board seems to be equating prejudice with the “particular circumstances” of a taxpayer, in the sense that a business that is failing or a homeowner that is indigent cannot seek to avoid paying taxes because of their own circumstances. It is certainly arguable that prejudice caused by delay and reliance upon an incorrect order falls into a different category from those types of “circumstances.” It does not appear that the Board fully considered the nature of the prejudice here and whether, in all of the circumstances, it was appropriate for this financial burden to fall entirely upon Kensington.
[41] Further, the Board appeared to be of the view that having determined that there was no limitation period in Rule 142, the issue of time limitations was now irrelevant to its consideration under Rule 146 and whether the amending decision should remain in force. It seems to me that there is a basis for considering how much time has elapsed in deciding whether or not the amendment should be made. It is arguable, for example, that it would be relevant for the Board to consider that the City would not have been entitled to correct a similar kind of mistake on the assessment rolls after this much time had passed. Similarly, I find merit in Kensington’s submission that under the relevant provisions of the Municipal Act and City of Toronto Act, the City could not have applied to the Board for this correction given the passage of time, and that the City should not therefore be able to effectively achieve that result through the backdoor by having the Board make the decision unilaterally. In my view, the Board ought to have at least considered that argument.
[42] Finally, the Board placed considerable, perhaps even exclusive, emphasis on the importance of getting the numbers right. The Board did not consider the substantial jurisprudence in similar cases where the importance of accuracy is weighed against finality and fairness to the taxpayer.[^4] The moving party submits that while accuracy of the assessment rolls is important and ensures that the tax burden is spread fairly among all the taxpayers, it is also necessary to consider the prejudice sustained by an individual taxpayer as a result of an error and the passage of time, and to balance fairness to that taxpayer against the overall objectives of a fair taxation system.
[43] There is reason to conclude that the Board did not engage in that balancing exercise and did not properly consider the nature of the prejudice claimed by Kensington. There is also a good argument that these are necessary and important principles to take into account. I therefore find reason to doubt the correctness of the Board’s decision on this issue.
[44] This is an issue that goes beyond the parties involved. It relates to the nature of the jurisdiction of the Board as well as to the test to be applied in these situations. There is also an overarching question as to whether the same legal principles ought to inform the analysis in this situation as would be applied under the other error correction situations involving municipalities and taxpayers. Accordingly, I find the test for leave to appeal is met on this issue.
Conclusion and Order
[45] In the result, I grant leave to appeal to the Divisional Court on the following two issues:
(i) Did the Board err in concluding it had no jurisdiction to overturn a decision made under Rule 142 if that amending decision set out a correct assessment value?
(ii) Did the Board err in the test it applied on review of the Rule 142 decision, particularly having regard to issues of the length of the delay and prejudice to the taxpayer?
[46] The parties agree that costs should be left to the discretion of the panel hearing the appeal.[^5]
MOLLOY J.
Date: March , 2013
[^1]: Reasons of the Board, January 13, 2012 at p.11
[^2]: Ibid, at pp. 11-12
[^3]: Assessment Act, R.S.O. 1990, c. A. 31, s. 43.1
[^4]: See, for example, MPAC v. Montevallo Developments Ltd. 2008 ONSC 69580, 305 D.L.R. (4th) 618 (Ont.Div.Ct.); Hope Depot Holdings Inc. v. Markham (Town), 2010 ONSC 1466 (Div.Ct.); MPAC v. Kwan & Kwan Ltd., [2011] O.A.R.B.D. No. 235
[^5]: I note that the parties had also agreed that if I denied leave to appeal, the appropriate costs disposition would be $2500.00 to MPAC and the City did not seek costs.