CITATION: The Kensington Foundation v. Municipal Property Assessment Corporation et al., 2013 ONSC 7694
DIVISIONAL COURT FILE NO.: 51/12
DATE: 20131218
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
MARROCCO A.C.J., HIMEL AND DiTOMASO JJ.
BETWEEN:
THE KENSINGTON FOUNDATION
Appellant
– and –
MUNICIPAL PROPERTY ASSESSMENT CORPORATION AND THE CITY OF TORONTO
Respondents
Richard R. Minster, for the Appellant
F. X. Shea, for the Respondent, Municipal Property Assessment Corporation
Christopher J. Henderson, for the Respondent, The City of Toronto
HEARD: December 11, 2013
HIMEL J.:
[1] The Kensington Foundation (“Kensington”) appeals pursuant to s. 43.1 of the Assessment Act, R.S.O. 1990, c. A.31, a decision of the Assessment Review Board (the “Board”) dated January 13, 2012. The Board had made a typographical error in an order it issued in 2002, dropping a crucial zero from the value of the assessed property. When the error was discovered six years later, the Board issued amended orders for the taxation years 2001 and 2002 with the correct amount. The taxpayer received a bill for $515,954.66 for taxes owing. Kensington applied to the Board in 2011 for a review of the 2008 amending decisions in order to have them reversed. The Board held that it did not have the jurisdiction to overturn the earlier decisions and grant relief. Kensington obtained leave to appeal to this court. This appeal concerns the jurisdiction and powers of the Board.
Factual Background
[2] Kensington is a not-for-profit charitable corporation that owns a building located at 344 College Street in the City of Toronto. It operates as a health centre and leases the office space to various tenants, that are mainly in the medical field. The property was assessed by the Municipal Property Assessment Corporation (“MPAC”) for the taxation years 2001 and 2002. Kensington appealed the assessments to the Board. Kensington signed Minutes of Settlement with MPAC in September 2002, reducing its assessment from $10,508,000 to $7,790,000. The Board issued an order implementing that settlement on November 8, 2002, that stated “Change assessed value from 10508000 to 779000.” The Board omitted a zero in its decision. Kensington did not notice the amended amount was missing a zero. Taxes were calculated and refunds issued based on the incorrect assessments.
[3] The City, however, noticed a drop in the value when the Board order was sent over to be added to the municipal rolls and contacted MPAC about it. MPAC said that it was the correct amount. Kensington says that because of the complicated capping/claw-back and “phase-in” provisions of the tax regime, there was no direct correlation between the tax refunds received and the amount of the reduction in the assessment. Because of this, Kensington says it did not notice the error. This was compounded by the fact that there were no commas in the number. Kensington charged and collected the amounts from each tenant as required in the tax bill for 2001 and 2002 and paid the taxes. Tax bills were sent by the City in the following years and were paid by Kensington.
[4] In 2008, the City again inquired about the assessment and whether there was a mistake for 2001 and 2002. This time, MPAC informed the City that a mistake had been made. On September 5, 2008, the Board issued an amended decision that said “Change assessed value from $10,508,000 to $7,790,000.” There was no reference to the previous orders and what prompted the amended decisions to be issued. Kensington says it first heard about this when it received a tax bill on November 26, 2008, stating that it owed $515,954.66 in back taxes for 2001 and 2002. Kensington paid the taxes under protest in order to avoid the Bailiff taking action
[5] Kensington takes issue that it was not given notice of this decision and was not given an opportunity to be heard. The Board gave no reasons. Moreover, the files relating to the matter were destroyed in 2010 so it is unclear what led to the amended decisions. Kensington had to take steps to determine why it received the adjusted tax bill. In 2010, Kensington was told that the 2008 billing was a result of the 2008 correction decisions. The Board’s solicitor referred the appellant to Rule 142 (the “Slip Rule”) of the Assessment Review Board Rules of Practice and Procedure, that provides as follows:
The Board may at any time and without prior notice to the 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 Motion for Review
[6] Kensington brought a motion for review in 2011 under Rule 146. It asked that the Board cancel or rescind the 2008 amended decisions and reinstate the original decisions on the basis that: (1) procedural fairness required that the appellant be permitted to make submissions relating to the decisions that were released six years after the original decisions; (2) the six-year delay caused irreparable prejudice to the appellant because it would not be able to collect back taxes from tenants, some of whom were no longer in the building or were otherwise unable to pay; and (3) the Board’s home statutes contain limitation periods for the correction of errors and therefore the corrections were contrary to the applicable statutory framework.
The Decision of the Board
[7] In his decision released on January 13, 2012, Member Wyger held that, in the interests of natural justice and an expeditious determination of the matter, Kensington should be permitted to request a review motion even where the request was not made in time. He held that the Board had jurisdiction to exercise its discretion to correct its original decisions pursuant to Rule 142. He determined that the error, although inadvertent, was entirely the fault of the Board, but that the other parties were not blameless. The Board applied Rule 142, which permits the correction of a technical or typographical error or an error in calculation. Member Wyger said that the Board had the discretion to use either Rule 142 or Rule 143, the latter which involves a substantive change in a decision. He said that all changes in figures to correct a typographical error will have some substantive implication. The intent of the ARB Slip Rule is “the simple result that the correct taxes will be payable, regardless of the magnitude.”
[8] Member Wyger went on to say that he did not have jurisdiction to overturn the Board’s “discretionary exercise and effectively confirm an incorrect assessment.” Then he held that even if he did have such authority, there was insufficient prejudice to the appellant to overturn the decision. He observed that all parties have an obligation to check the figures so that an error will be discovered as soon as possible, thus lessening the resulting financial implications. He noted that the appellant has merely been put in the position that it would have been in had there been no error. He agreed with counsel for MPAC that the particular situation of the taxpayer cannot outweigh “getting the matter correct” where a simple correction is involved. He also noted that notice is not required because the circumstances of the taxpayer are not a factor in getting it right.
[9] Kensington had also argued that time limits in the Board’s various home statutes and the doctrine of laches apply to balance the principle of correctness in taxation and fairness to taxpayers in the City generally against individual taxpayer’s right to finality and certainty in respect of their financial obligations to the City. However, Member Wyger held that the Limitations Act, S.O. 2002, c. 24, the Rules of Civil Procedure, R.R.O. 1990, Reg. 194 and the Municipal Act, S.O. 2001, c. 25 have no application, and that the Slip Rule permits a correction of a typographical error “at any time and without prior notice to the parties”. He refused to set a time limit on the application of the rule. He noted that Rule 142 is somewhat analogous to s. 40.1 of the Assessment Act, which allows the Board to correct palpable errors on the roll. There is no time limit for such corrections.
The Motion for Leave to Appeal
[10] Section 43.1(1) of the Assessment Act provides that an appeal lies from the Board to the Divisional Court, with leave of the Divisional Court, on a question of law. On March 27, 2013, Justice Molloy denied leave on the issue of procedural fairness and on the issue of a limitation period in Rule 142, but was satisfied that the test for leave was met on two issues. Molloy J. granted leave on the following issues:
(1) whether the Board erred in concluding it had no jurisdiction to overturn a decision made under Rule 142 if that decision set out a correct assessment value; and
(2) whether the Board erred in the test it applied on review of the Rule 142 decision, particularly having regard to the issues of the length of delay and prejudice to the taxpayer.
Standard of Review
[11] The appellant argues that the issue of the Board’s jurisdiction is jurisdictional, and so the standard of review is correctness. The City submits that the standard of review of the Board’s interpretation and formulation of the test to be applied to any particular case before it is correctness; however, so long as the Board applied the correct test, the standard of review should be reasonableness. MPAC argues that the standard of review when the Board is interpreting the Assessment Act is correctness and, when interpreting its rules, is reasonableness.
[12] There is a presumption that tribunals interpreting or applying their home statutes are to be reviewed on a reasonableness standard: see Alberta (Information and Privacy Commissioner) v. Alberta Teachers’ Association, 2011 SCC 61, [2011] 3 S.C.R. 654. However, where the question at issue is “of central importance to the legal system [and] also outside the adjudicator’s specialized area of expertise”, the correctness standard will apply: see para. 46. The same applies for a “true question of jurisdiction”: see paras. 37-38. While questions of law may therefore be reviewed on a reasonableness standard, the Divisional Court and the Court of Appeal have held that the standard for review for this Board on questions of law is correctness: see 1098748 Ontario Ltd. v. Ontario Property Assessment Corp, Region No. 11, (2001) 2001 40233 (ON SCDC), 198 D.L.R. (4th) 139 (Div. Ct.), at paras 10-12; and Municipal Property Assessment Corp. v. BCE Place Ltd., 2010 ONCA 672, (2011) 103 O.R. (3d) 520, at para. 17. However, these cases were decided prior to Alberta Teachers’, where the Supreme Court established the aforementioned presumption of reasonableness, and also stated that “true questions of jurisdiction” will rarely be found.
[13] More recently, in McLean v. British Columbia (Securities Commission), 2013 SCC 67, the Supreme Court reaffirmed the presumption that the reasonableness standard will apply when a tribunal is applying or interpreting its home statute or statutes closely connected with its function: see paras. 19-33. In the present case, although Member Wyger concluded that he had no jurisdiction, he did so by interpreting the Board’s rules. In light of the direction by the Supreme Court in Alberta Teachers’ and McLean, and because the present case does not constitute any of the exceptions described by Moldaver J. in McLean, we find that the standard of review for the Board’s decision is reasonableness.
The Board’s Power on Review
[14] In its decision, the Board held that the 2008 amending decisions were appropriately made under Rule 142. It further held that it was without jurisdiction to overturn that discretionary decision and substitute an incorrect assessment for the correct one. On this first question upon which leave was granted, there was no serious dispute during the hearing of the appeal before us that the member erred in concluding that the Board had no jurisdiction to overturn a decision made under Rule 142 if that amending decision set out a correct assessment value. Clearly, the Board has broad powers of review, and refusing to undertake the analysis was an error in law. The Board should have conducted a full analysis of all the facts available in determining whether the 2008 amended decisions should have been confirmed, varied, suspended or cancelled under Rule 146 (emphasis added). The Board’s decision in this regard fails on both the reasonableness and correctness standards.
The Effect of Prejudice and Delay
[15] The second issue on this appeal concerns the Board’s refusal to take into account delay or prejudice when conducting the review under Rule 149. Counsel for MPAC and the City argue that the Board was alive to the issue of prejudice and referenced this in its decision. We do not think that the Board’s decision was saved by its statements at page 3 under “Disposition of Motion”, where the Member wrote:
I conclude that I lack the authority to overturn that discretionary exercise and effectively confirm an incorrect assessment. Even if I did have authority, the financial implications to the taxpayer are insufficiently prejudicial to do so. The original decision is confirmed.
[16] He continued on page 11 as follows:
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 had there been no error. I accept Mr. Shea’s contention that the particular circumstances of the taxpayer in question cannot 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.
[17] In our view, the Board erred in not considering the implications of a correction in the assessment; it failed to take into account the important objectives of ensuring the correctness of the assessment upon which the tax is payable while considering the relevant factors of timing, finality and possible prejudice. It failed to engage in a balancing exercise when it held that correctness of the assessment was the only consideration when it conducted the review under Rule 149. As such, the Board committed an error in law; its decision was both incorrect and unreasonable
[18] The case before us involves a situation where the detriment to the taxpayer was caused by the Board making errors in its decisions that went undiscovered for six years. Moreover, the Board’s file on the matter has been destroyed. Affidavit evidence had been filed that this not-for-profit charitable corporation would have to bear the burden of the errors because its tenants were under “net-net” leases, and a number of tenants from 2001-2002 had left or would not be able to pay their share. This affidavit evidence suggested that Kensington would only be able to recover approximately 10 to 15 per cent of the increased tax bill. In these particular circumstances, the financial consequences to the taxpayer should be taken into account when the Board conducts a review. The relevant jurisprudence has recognized the need to balance questions of timing and fairness with the need for correction and the integrity of the assessment roll: see Municipal Property Assessment Corp v. Montevallo Developments Ltd., (2009) 2008 69580 (ON SCDC), 305 D.L.R. (4th) 618 (Ont. Div. Ct.), at para. 32; 1609830 Ontario Ltd. v. Municipal Property Assessment Corp., Region No. 9, [2008] O.J. No. 3688 (Div. Ct.), at paras. 22-24; Home Depot Holdings Inc. v. Markham, 2010 ONSC 1466 (Div. Ct.), at para. 17; and Ontario Property Assessment Corp. v. Nelson Steel, (2002) 2001 38751 (ON SC), 57 O.R. (3d) 330 (Div. Ct.), at para. 12. Timing and finality must be weighed with the objective of correctness of the assessment roll in achieving a balanced approach under the legislation: see Toronto (City) v. Municipal Property Assessment Corp., 2013 ONSC 6137 (Div. Ct.).
The Appropriate Remedy
[19] Kensington argues that this court has the same powers as the Board under s. 44(1) of the Assessment Act to reopen the assessment and substitute its own decision. It asks that the court suspend or cancel the 2008 amended decisions, restore the decisions that contain the error and direct a refund to it of the taxes paid with interest and penalties. Counsel for Kensington was unable to provide us with any authorities to support the proposition that this remedy should be granted in this case.
[20] We are aware of several cases where the Divisional Court has refused to remit a successful appeal under the Assessment Act back to the Board for reconsideration. For the reasons that follow, we do not think these cases assist Kensington’s position. In Ambler v. Municipal Property Assessment Corp., Region No. 7, [2007] O.J. No. 1672 (Div. Ct.), the court found that the Board had failed in its interpretation of provisions under the Assessment Act, and in doing so had incorrectly classified the appellant’s property as industrial rather than commercial. Swinton J. denied MPAC’s request to remit the matter to the Board, noting there was no reason to do so, and that it would be unfair to the appellants. In Viva v. Ontario Property Assessment Corp., Region No. 10, [2001] O.J. No. 273 (Div. Ct.), the court reassessed the value of the appellant’s property, but did so on the basis that both parties agreed that the court ought to fix the amount. The present case is significantly more complex than the facts in Ambler, and the parties differ with respect to the proper remedy, unlike in Viva. These cases do not persuade us that we should not remit the matter to the Board.
[21] Further, there is insufficient evidence of the effects of the errors on the assessments in subsequent years. It was suggested by counsel for the City that Kensington has enjoyed a significant competitive advantage as a landlord as a result of the errors, but we were not satisfied with the evidence of any long-term benefit to Kensington. We are also of the view that the financial circumstances of Kensington, including the effect of delay, must be taken into account. We conclude that the matter is better left to the Board and we decline to substitute our decision for that of the Board.
[22] Accordingly, we are of the view that the matter should be remitted to a differently constituted Board for a reconsideration of the matter. When reconsidering the case, the Board is directed to look at all the circumstances, including those related to the issue of prejudice including the financial consequences for Kensington resulting from the Board’s mistake.
Result
[23] For these reasons, the appeal is granted and the matter is remitted to the Board to reconsider the case by taking into account all the circumstances of the parties, including those concerning the effect of delay and prejudice.
[24] Costs for both the leave application and appeal are awarded in accordance with the agreement of the parties as follows: MPAC shall pay costs of $10,000 inclusive of disbursements and HST to Kensington, and the City shall pay costs of $5,000 inclusive of disbursements and HST to Kensington.
MARROCCO A.C.J.
HIMEL J.
DiTOMASO J.
Released: December 18, 2013
CITATION: The Kensington Foundation v. Municipal Property Assessment Corporation et al., 2013 ONSC 7694
DIVISIONAL COURT FILE NO.: 51/12
DATE: 20131218
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
MARROCCO A.C.J., HIMEL AND DiTOMASO JJ.
BETWEEN:
THE KENSINGTON FOUNDATION
Appellant
– and –
MUNICIPAL PROPERTY ASSESSMENT CORPORATION AND THE CITY OF TORONTO
Respondents
REASONS FOR JUDGMENT
Himel J.
Released: December 18, 2013