Toth Equity Limited v. Ottawa (City), 2011 ONCA 372
CITATION: Toth Equity Limited v. Ottawa (City), 2011 ONCA 372
DATE: 2011-05-12
DOCKET: C52855
COURT OF APPEAL FOR ONTARIO
Sharpe, Gillese and Karakatsanis JJ.A.
BETWEEN
Toth Equity Limited
Applicant/Respondent
and
The City of Ottawa
Respondent/Appellant
Counsel:
Stuart Huxley, for the appellant
Peter A. Milligan and Adam J. Stephens, for the respondent
Heard: March 24, 2011
On appeal from the Order of the Divisional Court (Pierce R.S.J., Matlow and Power JJ.) dated June 30, 2010.
Gillese J.A.:
OVERVIEW
[1] Toth Equity Limited (Toth) owns the Towngate Shopping Centre, a property located at 2446-2470 Bank Street, Ottawa. It claims that the City of Ottawa (the City) overcharged it for property taxes on the property in the 2003, 2004 and 2005 tax years (the Claim).
[2] By order dated June 30, 2010 (the Order), the Divisional Court issued an order in the nature of mandamus, requiring the Ottawa City Council (City Council) to hold a meeting pursuant to s. 357(5) of the Municipal Act, 2001, S.O. 2001, c. 25, at which Toth is to be permitted to make representations with respect to the Claim. In addition, it ordered City Council to make a decision with respect to the issues that Toth raises at the meeting.
[3] The City appeals.
[4] I would allow the appeal. As I explain below, in my view, the Order cannot stand because it (1) conflicts with the legislative scheme established by s. 357 of the Municipal Act, 2001; and (2) runs contrary to established jurisprudence, which requires Toth to exhaust its appeal rights in the administrative process before pursuing an application for judicial review.
BACKGROUND IN BRIEF
[5] The Towngate Shopping Centre is a 100,516 square foot shopping centre in Ottawa. In 2005, Toth complained to the Assessment Review Board (the ARB), under s. 40 of the Assessment Act, R.S.O. 1990, A. 31, that the Municipal Property Assessment Corporation (MPAC) assessments for the property were too high.
[6] The s. 40 complaints were disposed of by way of a settlement between Toth and MPAC. As a result of the settlement, the ARB released three consent decisions in May of 2005, one for each of the tax years 2003, 2004 and 2005 (the ARB consent decisions). The City was not a party to the s. 40 proceedings, settlement or ARB consent decisions.
[7] The ARB consent decisions resulted in a reduction of the total assessed value of the property. However, they also led to a change in the apportionment of value for the property, with more value being placed on the "commercial property" class and less on the "shopping centre" class. The commercial property class carries a higher tax rate in Ottawa. Consequently, there was an increase in the property taxes.
[8] The ARB consent decisions were sent to the City so that it could make the necessary tax adjustments. By letter dated August 24, 2005, the City advised Toth of the tax increases for the property for 2003, 2004 and 2005, resulting from the ARB consent decisions.
[9] According to Toth, the City made an error in 2001 in calculating the property taxes for the shopping centre and that error has had an impact on the calculation of taxes in the years that followed. It says that in calculating the 2001 taxes, the City was required to calculate the notional taxes for 2000, the base year. In calculating the 2000 notional taxes, the City had to take into account the changes in apportionment. Toth says the City failed to recalculate the 2000 notional taxes based on those changes. This error allegedly led to errors in the property taxes charged for 2003, 2004 and 2005. Toth says that it was overcharged by an amount in excess of $400,000 for those years.
[10] Toth says that it discovered the alleged errors in 2005.
[11] The City contends that the alleged errors are the unintended ramifications flowing from the settlement and the ARB consent decisions.
[12] While there was much correspondence between Toth and the City, the two key documents are a letter dated September 26, 2005, from Toth to the City, and the City's response to Toth in a letter dated October 18, 2005.
[13] In the September 26, 2005 letter, Toth[^1] applied to the City for the cancellation, reduction or refund in taxes resulting from the ARB consent decisions in the 2003, 2004 and 2005 taxation years. It claimed that it had been overcharged by reason of a "gross or manifest error" in the preparation of the assessment role.
[14] Section 357(f) of the Municipal Act, 2001, gives a municipality the power to reduce or refund taxes if a person was "overcharged due to a gross or manifest error that is clerical or factual in nature". Pursuant to s. 357(3), an application must be brought before February 28 of the year following the year in respect of which the application is made.
[15] The City responded in a letter dated October 18, 2005. It advised Toth that the shift in the apportionment from shopping class to commercial class tax flowing from the ARB consent decisions led to the increase in taxes. It said that the adjustments that were made followed the procedures outlined in the relevant legislation. As there had been no error in calculations, no adjustments could be made as a result of Toth's application.
[16] City Council did not hold a meeting to consider Toth's application.
[17] On October 16, 2006, Toth filed appeals in respect of the tax matters relating to the 2003, 2004 and 2005 tax years with the ARB, on the basis that City Council did not make a decision (the "non-decision") by September 30, 2006. What has transpired in relation to these appeals is discussed below in the section entitled "The requirement to exhaust adequate alternative remedies".
[18] On July 11, 2007, Toth started these proceedings in the Divisional Court. Its basic position was that in failing to hold a meeting to consider its application, the City was in breach of its obligation under s. 357(5) of the Municipal Act, 2001, because the application had been brought within the statutory timelines.
[19] Toth's application for judicial review was heard on February 3, 2010, and resulted in the Order.
[20] In its reasons for decision, the Divisional Court stated that the City erred in law by refusing to provide Toth with a hearing before City Council and the opportunity to make representations at that hearing in respect of its Claim. It further stated that Toth was not required to exhaust other means of obtaining relief before following the procedure that it had chosen (i.e. the application for judicial review).
THE ISSUE
[21] The issue raised by this appeal can be simply stated: did the Divisional Court err in making the Order?
THE RELEVANT PARTS OF SECTION 357 OF THE MUNICIPAL ACT, 2001
[22] Section 357 of the Municipal Act, 2001, is critical to the resolution of this appeal. The relevant parts of s. 357 read as follows:
Cancellation, reduction, refund of taxes
- (1) Upon application to the treasurer of a local municipality made in accordance with this section, the local municipality may cancel, reduce or refund all or part of taxes levied on land in the year in respect of which the application is made if,
(f) a person was overcharged due to a gross or manifest error that is clerical or factual in nature, including the transposition of figures, a typographical error or similar error but not an error in judgment in assessing the property; or
Timing
(3) An application under this section must be filed with the treasurer on or before February 28 of the year following the year in respect of which the application is made.
Meeting
(5) On or before September 30 of the year following the year in respect of which the application is made, council shall,
(a) hold a meeting at which the applicants may make representations to council;
(b) notify the applicants of the meeting by mail sent at least 14 days before the meeting; and
(c) make its decision.
Notice
(6) Within 14 days after making its decision, council shall notify the applicants of the decision and specify the last day for appealing the decision.
Appeal
(7) Within 35 days after council makes its decision, an applicant may appeal the decision of council to the Assessment Review Board by filing a notice of appeal with the registrar of the board.
Where no decision
(8) If council fails to make its decision by September 30 of the year following the year in respect of which the application is made, an applicant may appeal to the Assessment Review Board by October 21 of the year by filing a notice of appeal with the registrar of the board and the appeal shall be a new hearing.
Notice
(9) The Assessment Review Board shall notify the appellants and the treasurer of the municipality of the hearing by mail sent at least 14 days before the hearing.
Decision
(10) The Assessment Review Board shall hear the appeal and may make any decision that council could have made.
Decision final
(17) A decision of the Assessment Review Board is final.
Notice of decision
(18) The council and the Assessment Review Board shall forward a copy of their decisions under this section to the assessment corporation but failure to comply with this requirement does not invalidate the proceedings taken under this section.
ANALYSIS
[23] In my view, the Divisional Court erred in law in two ways in making the Order. First, requiring the City to hold a meeting and render a decision in respect of the Claim conflicts with the legislative scheme established by s. 357 of the Municipal Act, 2001. Second, the Order runs contrary to established jurisprudence which requires a person, absent exceptional circumstances, to exhaust his or her appeal rights in the administrative process before pursuing an application for judicial review.
The legislative scheme established by s. 357 of the Municipal Act, 2001
[24] Sections 357(5) and (8) of the Municipal Act, 2001, are central to the following analysis. They are, therefore, set out again now for ease of reference.
Meeting
(5) On or before September 30 of the year following the year in respect of which the application is made, council shall,
(a) hold a meeting at which the applicants may make representations to council;
(b) notify the applicants of the meeting by mail sent at least 14 days before the meeting; and
(c) make its decision.
Where no decision
(8) If council fails to make its decision by September 30 of the year following the year in respect of which the application is made, an applicant may appeal to the Assessment Review Board by October 21 of the year by filing a notice of appeal with the registrar of the board and the appeal shall be a new hearing.
[25] I accept that reading s. 357(5) alone could lead one to conclude that City Council was required to hold a meeting to consider Toth's complaints "on or before September 30 of the year following the year in which the application is made". After all, s. 357(5) provides that council "shall" hold a meeting at which an applicant may make representations.
[26] However, that reading of s. 357(5) fails to take into consideration s. 357(8) of the Municipal Act, 2001, which provides that if council fails to make a decision "by September 30 of the year following the year in which the application is made", the applicant may appeal to the ARB.
[27] That is, s. 357(8) expressly contemplates – and provides for – the situation in which a municipal council does not make a decision in respect of an application. It creates a scheme so that if council does not render a decision, the applicant has the remedy of appealing to the ARB.
[28] The legislative scheme, read in its entire context, logically leads to the conclusion that council is not obliged to hold a meeting in respect of every application, despite the use of the word "shall" in s. 357(5). As noted, s. 357(8) specifically contemplates that a council could fail to make a decision by the specified date. There could be a variety of reasons for failing to make the decision, including that no meeting had been held.
[29] In my view, it was not the legislature's intention to require municipal councils to hold a meeting for every application that is filed with them. This means that a municipality would have no ability to screen out applications for any reason, including council's determination that the application did not meet the requirement of a gross or manifest error that was clerical or factual in nature.
[30] Where a municipal council is unable or unwilling to hold a hearing, whether due to refusal, neglect, mistake, inadvertence or scheduling difficulties, the legislature has provided the applicant with an appeal right to the ARB. The appeal places the applicant in the same position as it was with the municipal council because the ARB "may make any decision that council could have made" (s. 357(10)). In so doing, the legislature created a statutory scheme specifically designed to provide an adequate remedy when a council renders no decision in respect of an application.
[31] The Order is in the nature of mandamus. Mandamus lies only where, among other things, an applicant for judicial review shows that it is owed a legal duty: see Karavos v. Toronto and Gillies, [1948] 3 D.L.R. 294 (Ont. C.A.), at para. 4. For the reasons given, the City did not owe Toth a legal duty to hold a hearing in respect of the Claim.
[32] Accordingly, the Divisional Court erred in law and the Order cannot stand.
The Requirement to Exhaust Adequate, Alternative Remedies
[33] The Divisional Court held that even if Toth had the right to appeal City Council's "non-decision" to the ARB, Toth was not required to exhaust that right before pursuing its application for judicial review.
[34] With respect, the Divisional Court erred in principle in so concluding. It is an important principle of administrative law that, absent exceptional circumstances, a party must exhaust any available adequate alternative remedy within the administrative process before pursuing an application for judicial review: see Harelkin v. University of Regina, [1979] 2 S.C.R. 561.
[35] The Canadian courts have enforced this general principle vigorously. In the recent decision of C. B. Powell Ltd. v. Canada (Border Services Agency), 2010 FCA 61, at paras. 31-32, Stratas J.A. of the Federal Court of Appeal, usefully describes the principle and its rationale.
[31] Administrative law judgments and textbooks describe this rule in many ways: the doctrine of exhaustion, the doctrine of adequate alternative remedies, the doctrine against fragmentation or bifurcation of administrative proceedings, the rule against interlocutory judicial reviews and the objection against premature judicial reviews. All of these express the same concept: absent exceptional circumstances, parties cannot proceed to the court system until the administrative process has run its course. This means that, absent exceptional circumstances, those who are dissatisfied with some matter arising in the ongoing administrative process must pursue all effective remedies that are available within that process; only when the administrative process has finished or when the administrative process affords no effective remedy can they proceed to court. Put another way, absent exceptional circumstances, courts should not interfere with ongoing administrative processes until after they are completed, or until the available, effective remedies are exhausted.
[32] This prevents fragmentation of the administrative process and piecemeal court proceedings, eliminates the large costs and delays associated with premature forays to court and avoids the waste associated with hearing an interlocutory judicial review when the applicant for judicial review may succeed at the end of the administrative process anyway… Further, only at the end of the administrative process will a reviewing court have all of the administrative decision-maker's findings; these findings may be suffused with expertise, legitimate policy judgments and valuable regulatory experience. .. Finally, this approach is consistent with and supports the concept of judicial respect for administrative decision-makers who, like judges, have decision-making responsibilities to discharge. [citations omitted]
[36] Because City Council failed to make a decision in relation to Toth's application, pursuant to s. 357(8) of the Municipal Act, 2001, Toth had the right to appeal to the ARB. For ease of reference, I set out s. 357(8) again below:
(8) If council fails to make its decision by September 30 of the year following the year in respect of which the application is made, an applicant may appeal to the Assessment Review Board by October 21 of the year by filing a notice of appeal with the registrar of the board and the appeal shall be a new hearing.
[37] It will be recalled that Toth, in fact, filed notices of appeal with the ARB within the prescribed time frame.
[38] Neither party contended that there were any exceptional circumstances permitting early recourse to the courts. This is appropriate, given that the authorities show that very few circumstances qualify as "exceptional": see C.B. Powell at para. 33. Consequently, unless an appeal to the ARB is an inadequate remedy, Toth was required to exhaust that appeal right before proceeding to court by means of a judicial review application.
[39] Accordingly, two questions must be answered. First, is an appeal to the ARB an adequate alternative remedy by which to challenge the City's decision in respect of the tax dispute? Second, if an appeal to ARB is an adequate alternative remedy, did Toth exhaust its appeal rights prior to commencing its application for judicial review?
[40] Is an appeal to the ARB an adequate alternative remedy? In Canadian Pacific Ltd. v. Matsqui Indian Band, [1995] 1 S.C.R. 3, the Supreme Court set out a number of factors that should be considered when determining whether a statutory appeal procedure is an adequate alternative remedy. At para. 37, Lamer C.J., writing for a majority of the court, states:
[I] conclude that a variety of factors should be considered by courts in determining whether they should enter into judicial review, or alternatively should require an applicant to proceed through a statutory appeal procedure. These factors include: the convenience of the alternative remedy, the nature of the error, and the nature of the appellate body (i.e., its investigatory, decision-making and remedial capacities). I do not believe that the category of factors should be closed, as it is for courts in particular circumstances to isolate and balance the factors which are relevant.
[41] Based on a consideration of these factors, in my view, there can be no doubt but that an appeal to the ARB is an adequate alternative to judicial review. The ARB is a specialized tribunal with expertise and experience in dealing with property tax and assessment matters. As the Divisional Court held in Municipal Property Assessment Corp. v. Minto Developments Inc. (2003), 2 M.P.L.R. (4th) 89, at paras. 31-34, decisions of the ARB are to be afforded deference because of the powers and functions vested in it and the high degree of expertise needed to decide the complex disputes over property classification that it is called on to adjudicate. In the present case, the alleged errors relate to the assessed value of property and the calculation of property taxes, matters squarely within the jurisdiction, and specialized expertise of, the ARB. Moreover, the ARB has full remedial powers, as it can make any order that the City Council could have made (s. 357(10)).
[42] Thus, the question becomes, did Toth exhaust its appeal right to the ARB? Toth says that it did. In its factum, Toth states that it attempted to appeal to the ARB but "was informed that the ARB lacked jurisdiction to hear the appeal". In making this submission, Toth relies on para. 16 of the reply affidavit evidence of Gordon Jones, a Senior Manager in Property Tax Services for Deloitte & Touche, in which Mr. Jones says "my interpretation of the guidance we have received from the ARB is that they will not hear appeals on the matter until Council has issued a decision on the application". There is no correspondence (or anything else) from the ARB provided as support for this statement.
[43] The City disputes Toth's claim that it exhausted its appeal with the ARB. It acknowledges that Toth commenced appeals in respect of the alleged errors. However, the City says that despite requests to Toth for clarification, it has never been given any evidence that Toth attempted to pursue the appeals or otherwise revive them. The City checked the e-status of the ARB's appeal files, which indicate that the files have been "closed". The record does not contain any explanation for why the files have been closed. Counsel for the City stated that based on Toth's submissions at the Divisional Court, the files were closed for "administrative reasons", which suggests that Toth did not prosecute its appeals. He also noted that while there is a statement in Mr. Jones' affidavit to the effect that he understood that the ARB would not hear the appeals, there is nothing in the record from the ARB to this effect and it runs contrary to the ARB's established jurisprudence.
[44] The burden was on Toth to demonstrate that it exhausted its appeal right prior to bringing an application for judicial review. Section 357(10) of the Municipal Act, 2001, makes it mandatory that the ARB hear appeals brought pursuant to s. 357(8). Various decisions rendered by the ARB make it clear that it hears cases in which a municipal council did not hold a meeting or make a decision: see, for example, Mattamy (Castlemore) Ltd. v. Brampton (City), [2010] O.A.R.B.D. No. 602. And, s. 357(18) requires the ARB to forward a copy of the decisions they make under s. 357 to the assessment corporation. Accordingly, one would have thought that it would have been a simple matter for Toth to have filed the ARB's decisions in respect of its appeals, had such decisions been made. The record contains no such decisions. Instead, the evidence is that the ARB has "closed" its files on these appeals. The fact that a file has been closed does not mean that a decision was rendered.
[45] At its highest, the evidence is that Toth, in reliance on Mr. Jones' interpretation of guidance he says that he received from the ARB, has failed to pursue its appeals. In the circumstances, I am not prepared to find that Toth has exhausted its right of appeal to the ARB.
[46] Consequently, in my view, the City is entitled to succeed on this appeal on this ground alone.
DELAY AND OTHER MATTERS
[47] Toth commenced its application for judicial review on July 11, 2007, some 21 months after the City's October 18, 2005 letter. The City says that post application, Toth delayed for another approximately 30 months. The City submits that the Divisional Court further erred by failing to address the issue of Toth's delay in pursuing its application for judicial review when deciding whether to grant an order in the nature of mandamus. In light of the conclusions reached above, I find it unnecessary to address this issue.
[48] In addition, the City points to a number of alleged factual errors in the reasons of the Divisional Court. Again, in light of the conclusions reached in relation to the first two grounds of appeal, I find it unnecessary to deal with the alleged factual errors.
DISPOSITION
[49] Accordingly, I would allow the appeal and set aside the Order. I would award costs to the City, for the proceedings below and the appeal, fixed at $18,720.00, inclusive of disbursements and applicable taxes.
RELEASED:
"MAY 12 2011" "E.E. Gillese J.A."
"EEG" "I agree Robert Sharpe J.A."
"I agree Karakatsanis J.A."
[^1]: For convenience, I refer to Toth throughout. However, many actions were taken by Deloitte & Touche, the firm that Toth retained to act as its agent in respect of assessment matters.