CITATION: 1392290 Ontario Ltd. v. Ajax (Town), 2010 ONCA 37
DATE: 20101022
DOCKET: C50012
COURT OF APPEAL FOR ONTARIO
Goudge, LaForme and Rouleau JJ.A.
BETWEEN
1392290 Ontario Ltd. and Riocan Holdings Ltd.
Appellants
and
Corporation of the Town of Ajax
Respondent
Phillip Sanford and Sarah Chesworth, for the appellants
Peter Milligan and Adam Stephens, for the respondent
Heard: October 14, 2009
On appeal from the order of the Divisional Court (Then R.S.J., Lederman and Karakatsanis JJ.) dated October 24, 2008, with reasons by Karakatsanis J. and reported at (2008), 52 M.P.L.R. (4th) 270.
H.S. LaForme J.A.:
[1] The corporate appellants are owners of a commercial property in Ajax. They sought a favourable municipal tax ruling in the Superior Court but were unsuccessful. Their subsequent appeal to the Divisional Court was also unsuccessful. They now appeal to this Court. At issue is the proper interpretation of s. 447.70(21)(c) of the now-repealed Municipal Act, R.S.O. 1990, c. M.45 (the “Act”).
BACKGROUND
[2] The appellants owned a 38.06 acre parcel of land in the Town of Ajax (the “original parcel”). The original parcel was classified by the Municipal Property Assessment Corporation (“MPAC”) as a Commercial, Industrial or Multi-Residential Property. Favorable tax treatment was attached to this classification.
[3] In 2000, the original parcel was severed into two parcels: one 9.79 acre parcel (the “child parcel”) and one 28.29 acre parcel (the “mother parcel”). The appellants retained the mother parcel and conveyed the child parcel to Home Depot. At the time, the Act did not impose tax consequences on severance or subdivision.
[4] Amendments to the Act came into force on January 1, 2001 and December 5, 2001. These amendments imposed a new taxation scheme on certain “eligible” properties including, pursuant to s. 447.70(21)(c), property “that was subdivided or was subject to a severance”. The appellants applied to Superior Court for a declaration that the amendments did not apply to severances that occurred in 2000, such that the mother parcel would continue to enjoy favorable tax treatment. On November 6, 2007, Pattillo J. dismissed the application. His decision was upheld by the Divisional Court on October 24, 2008.
ISSUES
[5] The appellants take the position that the mother parcel is not an “eligible property” under the amendments for municipal tax purposes because the severance took place in 2000, well before s. 447.70(21)(c) came into force. In other words, they argue that the amendments do not apply retrospectively.
[6] The appellants advance three submissions in support of their position. First, they argue that the scheme of the Act supports an immediate, rather than retrospective, application. Second, they argue that the absence of regulations dealing with properties severed before January 1, 2001, when considered in light of the regulations that address properties severed after that date, demonstrates that the legislature did not intend the amendments to apply retrospectively. Third, they submit that they had vested rights and were thus entitled to a presumption that s. 447.70(21)(c) was not intended to have a retrospective effect.
[7] In my view, the definition of “eligible property” in s. 447.70(21)(c) operates retrospectively and does not interfere with vested rights. I would therefore dismiss the appeal.
ANALYSIS
[8] Section 447.70(21) of the Act defines an “eligible property” as properties
(a) to which subsection 447.65 (8) or 447.68 (8) applies,
(b) that ceases to be exempt from taxation for 2001 or thereafter,
(c) that was subdivided or was subject to a severance,
(d) whose classification changes for 2001 or a later year, or
(e) that is prescribed by the Minister of Finance;
[9] The modern approach to statutory interpretation, first set out in E. A. Driedger, Construction of Statutes, 2nd ed. (Toronto: Butterworths, 1983) is well-settled:
Today there is only one principle or approach, namely, the words of an Act are to be read in their entire context and in their grammatical and ordinary sense harmoniously with the scheme of the Act, the object of the Act, and the intention of Parliament.[^1]
[10] The first step of statutory interpretation is to determine the meaning that "would be understood by a competent language user upon reading the word in their immediate context." The immediate context consists of as much of the text surrounding the words to be interpreted as is needed to make sense of those words and usually consists of the section in which the words appear: see R. Sullivan, Statutory Interpretation, 2nd ed. (Toronto: Irwin Law, 2007) at 50-51. Although the use of the past tense in s. 447.70(21)(c) is consistent with a retrospective application, in this case, a textual analysis is not necessarily conclusive. I accordingly turn to the appellant’s three submissions, which speak to the legislative scheme and intention of the legislature.
Legislative scheme and intention of the legislature
[11] The appellants’ first argument is that the scheme of the Act supports the conclusion that s. 447.70(21)(c) does not apply to severances that took place in 2000. I disagree.
[12] The scheme of the Act is to tax, from 2001 onwards, all properties to which Part XXII.3 of the Act applies. The historical background behind the amendments is instructive in identifying those properties and, in my view, suggests that s. 447.70(21)(c) captures the mother parcel owned by the appellants. Four dimensions of the legislative scheme support this conclusion.
(a) The motivation to legislate
[13] Prior to 1998, the municipal property assessment and taxation system was “grossly out of date and, as a result, extremely unfair. Many taxpayers in similar situations were paying very different property taxes and facing whopping increases.”[^2] To rectify this situation, in 1998 the government implemented a Current Value Assessment (“CVA”) taxation system. Taxes were calculated by multiplying the CVA by the applicable tax rate for the property class.
[14] The sudden move to CVA resulted in disproportionate changes in taxes for certain properties, including the commercial, industrial and multi-residential classes. Accordingly, the government introduced a system of taxation caps and clawbacks for those properties, which were referred to as “protected classes”. Their level of taxation was effectively frozen at the December 31, 1997 rate, subject to legislated increases. The purpose of the cap/clawback system was to ensure a more manageable transition to a CVA taxation scheme.[^3]
[15] However, the cap/clawback system did not address the tax consequences of certain changes – for example, where the property was “newly created or had new buildings erected or their tax classification was changed”: see Curtis Properties (Bridgeland) Inc. v. Toronto (City) (2006), 27 M.P.L.R. (4th) 140 (Ont. S.C.). Absent intervention, these properties would have been liable to the full CVA taxation amount.
[16] Accordingly, Part XXII.3 was enacted on January 1, 2001 and created an eligible/comparable property scheme. The “eligible properties” set out in s. 447.70(21) would be subject to the lesser of the full CVA taxation amount or the average amount paid by up to six “comparable properties”.
(b) Previous versions
[17] The first definition of “eligible property” was in force from January 1, 2001 to December 4, 2001. Section 447.70(21), as it then read, included land that “was added to the assessment roll for 2001 or subsequent taxation years as a result of the subdivision or severance of land.”
[18] When a property is severed, only the child parcel is given a new roll number and added to the assessment roll. The mother parcel may retain the original parcel’s roll number. As a result, while the child parcel clearly fell within the original wording of s. 447.70(21)(c), it was debatable whether the mother parcel was caught. The respondent submits that the purpose of the December 5, 2001 amendment, which changed the provision to its present form, was to address this ambiguity. I agree.
[19] In my view, there is no principled reason why the mother and child parcels should be treated differently for tax purposes. Indeed, there is nothing to suggest that under the prior definition the legislature intended that mother and child parcels would be treated differently. Consequently, the amendment to the definition of “eligible property” is properly understood as clarifying the ambiguity to make it clear that it applies to all parcels resulting from severance.
(c) Temporal references in related provisions
[20] The appellants note that the legislature has specifically addressed events occurring prior to 2001 elsewhere in s. 447.70. They cite s. 447.70(20) as an example:
447.70 (20). This section also applies for the 2001 taxation year to a property that is subject to this Part and that,
(a) ceased to be exempt from taxation during 1998, 1999 or 2000; or
(b) was reclassified pursuant to an assessment under section 34 of the Assessment Act during 1998, 1999 or 2000 or was classified differently on the assessment roll for taxation in 1999 or 2000 from its classification in 1998 or 1999, respectively.
They argue that temporal references of this nature give rise to an inference that the section only applies to events occurring prior to January 1, 2001 where those events are specifically referenced. Again, I disagree.
[21] The Divisional Court rejected this argument, correctly reasoning that the inclusion of temporal restrictions within s. 447.70 is not determinative. I further note that s. 447.70(21) itself contains temporal references. Subsection (b) says, “that ceases to be exempt from taxation for 2001 or thereafter”; subsection (d) says, “whose classification changes for 2001 or a later year”. It is, therefore, equally arguable that if the legislature intended for subsection (c) to apply only to events that occurred after January 1, 2001, they would have included language to that effect in the same manner as they did in the surrounding subsections.
[22] Finally, I agree with the respondent’s submission that specific temporal references only exist where special circumstances warrant. No such circumstances exist in relation to severance and subdivision, since 2001 is clearly the first applicable taxation year. The legislature did not include a specific temporal reference because one was not required.
[23] Accordingly, in my view, the temporal references in the related provisions of the Act do not advance the appellants’ argument in any significant way.
(d) Object of the Act
[24] In addition to the above, s. 447.70(1) of the Act clearly states, “The purpose of this section is to ensure that eligible properties are taxed at the same level as comparable properties.” Similarly, as evidenced by the following excerpt, the overwhelming focus of the legislative debates surrounding the introduction of s. 447.70 was a concern for the “principle of property tax fairness”:
The new property tax system is based on a principle of property tax fairness. Property owners who own similar properties of similar value in the same community will pay the same taxes. Of course, before the introduction of the first bill that this government brought forward some three or four years ago, there were hundreds, thousands of examples across the province of similar homes on the same street or in similar neighbourhoods in the same municipalities paying markedly different taxes.[^4]
[25] Accordingly, the scheme of the Act and the intention of the legislature in enacting s. 447.70(21)(c) was to ensure fair and equal treatment of the two post-severance properties and equal taxation of comparable properties. In my view, this conclusion significantly undermines the appellants’ position.
Regulations
[26] I would address the appellants’ second argument by way of brief comment. They note that the Minister’s regulations address severances occurring after, but not before, January 1, 2001. They assert that the regulations would address severances occurring in 2000 if the legislature intended for s. 447.70(21)(c) to apply retrospectively.
[27] As noted by the Divisional Court at para. 21 of their reasons, the absence of regulations for the 2001 taxation year is not determinative. I agree and would reject this submission. The Minister is entitled to make regulations regarding the application of Part XXII.3. The exercise, or non-exercise, of this authority could be informed by any number of factors; it has little bearing on the temporal application of the enabling legislation.
[28] I now turn to the appellants’ third and final submission.
Vested Rights
[29] The appellants argued before Pattillo J. that s. 447.70(21)(c) would only capture the mother parcel if it applied retroactively. In oral argument – as it appears to have been in Divisional Court – there was some indication that the appellants no longer argue that the application of s. 447.70(21)(c) to a severance that occurred in 2000 would result in a retroactive application of the Act. In other words, the only issue in this appeal is whether the provision applies retrospectively by changing the tax consequences for 2001 onwards for events that occurred in 2000.[^5]
[30] What the appellants now argue on appeal is that they have vested rights, which attract the common law presumption against applying legislation retrospectively if it would interfere with such rights unless the legislative intention is express or “plainly manifested by unavoidable inference”: Dikranian v. Quebec (Attorney General), 2005 SCC 73, [2005] 3 S.C.R. 530 at para. 33.
[31] I conclude that the appellants do not have vested rights and that the presumption thus does not apply. However, a brief review of the difference between retroactive and retrospective legislation will be helpful.
(a) Distinction between retroactivity and retrospectivity
[32] In Benner v. Canada (Secretary of State), 1997 376 (SCC), [1997] 1 S.C.R. 358 at para. 39, Iacobucci J., in discussing the distinction between a retroactive statute and a retrospective statute, adopted the following statement from E.A. Driedger, “Statutes: Retroactive Retrospective Reflections” (1978), 56 Can. Bar Rev. 264 at pp. 268-69:
A retroactive statute is one that operates as of a time prior to its enactment. A retrospective statute is one that operates for the future only. It is prospective, but it imposes new results in respect of a past event. A retroactive statute operates backwards. A retrospective statute operates forwards, but it looks backwards in that it attaches new consequences for the future to an event that took place before the statute was enacted. A retroactive statute changes the law from what it was; a retrospective statute changes the law from what it otherwise would be with respect to a prior event. [Emphasis in original.]
[33] There are two relevant time periods: when the event takes place, and when that event starts to have legal effects. In this case, the “event” is the severance of the original parcel, and the “legal effects” are the tax consequences. Simply put, in our case, the amendments are retrospective if they impose different tax consequences for 2001 onwards for a 2000 severance - future consequences for past actions. If they imposed different tax consequences for the years preceding 2001, as well as 2001 onwards – past and future consequences for past actions – they would be retroactive.
[34] The analysis is further complicated in two scenarios: (i) where a new law is passed while the events are still taking place; and (ii) where a new law is passed while the legal effects are ongoing: see Épiciers Unis Métro-Richelieu Inc. v. Collin, 2004 SCC 59, [2004] 3 S.C.R. 257.
[35] This case is not analogous to the first scenario, since the severance is deemed to be instantaneous. However, our case is analogous to the second scenario, since the property was already being taxed – albeit at a favourable rate. The legal effects of the severance had already crystallized when the law changed in 2001.
(b) The common law presumption
[36] There is a strong common law presumption that legislation does not apply retroactively if it would interfere with vested rights: Gustavson Drilling (1964) Ltd. v. M.N.R., 1975 4 (SCC), [1977] 1 S.C.R. 271. A similar presumption exists with respect to retrospective application. Where vested rights are affected, the courts will find retrospective application only if this legislative intent is express or “plainly manifested by unavoidable inference”: Dikranian at para. 33.
[37] The legal test was set out in Dikranian at paras. 37-38. There are two requirements. First, the appellants’ legal (or juridical) situation must be tangible and concrete rather than general and abstract; they must point to a specific right. Second, this legal situation must have been sufficiently constituted at the time of the new statute’s commencement; the appellants must demonstrate that they have exercised that right
[38] In essence, this test demands that the rights be “crystallized” and “have inevitability and certainty.” While a party may claim it has an accruing right, it can do so only "if its eventual accrual is certain and not conditional on certain events": Niagara Escarpment Commission v. Paletta International Corp. (2007), 39 M.P.L.R. (4th) 6 (Ont. S.C.), citing R. v. Puskas, 1998 784 (SCC), [1998] 1 S.C.R. 1207 at para. 14. In particular, as noted in Dikranian:
[T]he mere possibility of availing oneself of a specific statute is not a basis for arguing that a vested right exists. As Dickson J. (as he then was) clearly stated in Gustavson Drilling, the mere right existing in the members of the community or any class of them at the date of the repeal of the statute to take advantage of the repealed statute is not a right accrued. ... In other words, the right must be vested in a specific individual.
[39] The appellant in Dikranian was found to have a vested right in the interest payment terms set out in a loan certificate issued by the government. This holding strongly suggests that the success of the claim turns on the characterization of the right at issue. As noted in R. Sullivan, Construction of Statutes, 5th ed. (Toronto: Lexis-Nexis, 2008) at p. 714 and 717:
[T]he contract was simply a mechanism by which the government delivered a benefit to a class of persons; what the new legislation interfered with was less a contractual right than a statutory benefit. If the appellant’s rights had been characterized in this way – as public law rights – the outcome would not be so obvious.
As Dickson J. wrote in Gustavson Drilling,
no one has a vested right to the continuance of the law as it stood in the past; in tax law it is imperative that legislation conform to changing social needs and governmental policy. A taxpayer may plan his financial affairs in reliance on the tax laws remaining the same; he takes the risk that the legislation may be changed.
[40] She further notes at p. 717, “What Dickson J. says of tax legislation applies to all legislation. Once the government undertakes to regulate a matter to protect the interests of particular groups or the public at large, individuals who organize their affairs on the assumption that “promised” advantages will not be withdrawn do so at their own risk.”
[41] The appellants argued that they had a vested right to the continuance of the cap/clawback scheme. An alternative argument – that the appellants had a vested right to sever their property without adverse tax consequences – was canvassed in oral argument. In my view, Gustavson is a complete answer to both submissions. The appellants have not demonstrated a specific right within the meaning of Dikranian. They have no vested rights and the presumption does not apply.
[42] I also agree with the conclusion of Patillo J. at para. 10 of his reasons:
In the present case, the [appellants] … have no vested rights, which they can rely on or which are being affected by the application of the legislation. The year 2001 was the first year in which the parcels created by the severance assumed their own taxable identity and were added to the assessment roll. Prior to 2001, the parcels had no status and had acquired no rights.
[43] Finally, as noted above, the eligible/comparable property scheme was implemented in order to correct a mistake and defect in the law. There was general consensus that the pre-CVA taxation scheme was outdated and unfair; there was equal agreement that a sudden transition to a CVA scheme would likewise create unfairness. Tax unfairness is clearly a public harm with widespread and serious consequences. This backdrop, in my view, would in any event have deprived the presumption against retrospectivity of much of its impact.
[44] The retrospective application of s. 447.70(21)(c) is commensurate with the concern for tax fairness. Severance and subdivision materially change the characteristics of the property in question; this change should in turn impact the level of taxation. An impact that results in these newly created parcels being taxed at a level similar to “comparable properties”, as contemplated by s. 447.70(21)(c), cannot be said to undermine the purpose of the legislation, viewed as a whole.
[45] In conclusion, the definition of “eligible property”, insofar as it includes lands subdivided or severed, operates retrospectively.
DISPOSITION
[46] I would dismiss the appeal. As agreed upon, I would award the respondent its costs in the all-inclusive amount of $5,000.
RELEASED:
“JAN 22 2010” “H.S. LaForme J.A.”
“STG” “I agree S.T. Goudge J.A.” “I agree Paul Rouleau J.A.”
[^1]: See, for example, Re Rizzo & Rizzo Shoes Ltd., 1998 837 (SCC), [1998] 1 S.C.R. 27; R. v. Bell ExpressVu Limited Partnership, 2002 SCC 42, [2002] 2 S.C.R. 559. [^2]: Ontario, Legislative Assembly, Official Report of Debates (Hansard), No. 105B (21 November 2000) at p. 5655, (J. Tascona). See also the explanation of B. Elliot in Ontario, Legislative Assembly, Official Report of Debates (Hansard), No. 106B (22 November 2000) at p. 5720. [^3]: Ontario, Legislative Assembly, Official Report of Debates (Hansard), No. 104B (20 November 2000) at p. 5594 (D. Young). [^4]: Ontario, Legislative Assembly, Official Report of Debates (Hansard), No. 104B (20 November 2000) at p. 5594 (D. Young). [^5]: It is worth noting that Part XXII.3 is entitled “Limitation on Taxes for Certain Property Classes Beginning in 2001”.