COURT FILE NO.: 619/07

DATE: 20081229

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

IN THE MATTER OF a decision of the Assessment Review Board pursuant to s. 40.1(b) of the Assessment Act, R.S.O. 1990, c. A. 31, dated February 2, 2005 and confirmed by decision of the Board dated February 2, 2007.

CARNWATH, J. MACDONALD AND BELLAMY JJ.

B E T W E E N:

MUNICIPAL PROPERTY ASSESSMENT CORPORATION

Chester Gryski, for the Applicant.

Applicant

• and -

MonTEVALLO DEVELOPMENTS LIMITED, 1462199 ONTARIO INC., CITY OF TORONTO AND ASSESSMENT REVIEW BOARD

Peter Milligan for the Respondent Montevallo Developments Limited.

Angus MacKay for the Respondent, City of Toronto.

Respondents

HEARD at Toronto: December 8, 2008

R E A S O N S F O R D E C I S I O N

J. Macdonald, J.:

Overview

[1] Municipal Property Assessment Corporation (MPAC) seeks judicial review and quashing of part of an order of the Assessment Review Board (the Board) dated February 2, 2005 which was confirmed by the Board's further decision dated February 2, 2007. The Board's second decision was released to the parties on December 1, 2007.

Background

[2] In 1999, the respondent Montevallo Developments Limited (Montevallo) purchased industrial property municipally described as 101 Union Street, Toronto. In 2000, the property was severed into two parcels. The respondent City of Toronto (the City) rezoned one parcel to permit the erection of residential housing. A warehouse on that parcel was demolished in 2000. In 2001, Montevallo sold the industrial parcel and retained the residential parcel.

[3] The dispute in issue is in respect of the assessment in 2001 and 2002 when the two severed parcels were erroneously assessed under the original assessment roll number and all taxes for both parcels were assessed against Montevallo. The assessment of $773,000 was returned as if there were only one parcel, instead of two.

[4] Montevallo filed a complaint before the Board in an effort to obtain new assessment roll numbers for each parcel and an apportionment between the two parcels of the assessed value of $773,000. In December 2003, during the pre-hearing process, MPAC advised Montevallo that its residential parcel had a current value assessment of $1,650,000. Montevallo then moved to withdraw its complaint. In its decision of February 2, 2005, the Board permitted this, and there is no dispute that Montevallo's complaint has been withdrawn.

[5] In the decision of February 2, 2005, the Board made an additional order, part of which is the subject of this application. Pursuant to section 40.1 of the Assessment Act, R.S.O 1990, c. A.31 as amended (the Act), the Board, acting on its own motion, found that there were palpable errors in the assessment roll as it related to the two severed parcels and directed MPAC to bring a complaint before the Board to rectify these errors.

[6] Section 40.1 of the Act states:

40.1 If it appears that there are palpable errors in the assessment roll,

(a) if no alteration of assessed values or classification of land is involved, the Board may correct the roll; and

(b) if alteration of assessed values or classification of land is involved, the Board may extend the time for making complaints and direct the assessment corporation to be the complainant.

Section 40 addresses complaints. I will consider it subsequently.

[7] The Board held that the errors consisted of the following:

(a) new assessment roll numbers are needed for each parcel,

(b) both parcels need to be reclassified and,

(c) the assessed value of $773,000 needs to be divided between the two lots, bearing in mind the reduction in value resulting from the demolition of the warehouse on Montevallo's residential parcel.

[8] The Board's decision did not give effect to MPAC's position that the assessed value of $773,000 was a palpable error in the roll. The Board held that the only palpable error in respect of the assessed value of the severed parcels was that the assessment roll did not divide the assessed value of $773,000 between the two severed parcels, and take into account the reduction resulting from the demolition of the warehouse. Consequently, in directing that the complaint to be brought by MPAC would proceed on this basis, the Board did not allow MPAC to assert therein that the current value assessment for Montevallo's residential parcel should be increased to $1,650,000. This decision was upheld by the Board, on review.

The Issues

[9] MPAC submits that the Board, in both the original decision and in the confirming decision, erred in law and exceeded its jurisdiction in ordering, in sub-paragraph (c) aforesaid that the assessed value to be entered in the assessment roll for each of the new parcels shall be a value different from the "current value" of each parcel. MPAC submits that section 19 (1) and section 19.1 (1) of the Act require that the assessment of land shall be its current value for the taxation year. These sections state:

19 (1) The assessment of land shall be based on its current value or average current value, as determined under section 19.1.

19.1(1) Land shall be assessed,

(a) For a taxation year before 2005, at the land's current value for the taxation year;

The "current value" is defined in section 1 of the Act as "… the amount of money the fee simple, if unencumbered, would realize if sold at arm’s length by a willing seller to a willing buyer".

[10] MPAC also submits that the Board erred in law and exceeded its jurisdiction because it determined, in sub-paragraph (c) aforesaid, that the current value of each of the severed parcels would be a portion of $773,000 without giving the parties, including MPAC, the opportunity to prove the actual current value of the parcels. MPAC contends that the Board breached section 40 (11) of the Act which states:

40 (11) After hearing the evidence and the submissions of the parties, the Board shall determine the matter and, in complaints involving current value, shall determine the amount of the assessment as necessary to reflect corrections to the current value.

[11] MPAC therefore seeks an order striking from sub-paragraph (c) of the Board's 2005 decision, as confirmed by the 2007 decision, the words "the assessed value of $773,000 needs to be divided between the two lots bearing in mind the reduction resulting from the demolition of the warehouse", and replacing these words with "each of the lots shall be valued at its current value in accordance with section 19 of the Assessment Act", and second, an order requiring the Board to conduct a hearing of the issues raised in the complaint it ordered MPAC to bring, amended as aforesaid, and requiring the Board to determine those issues in accordance with the evidence called by the parties. MPAC does not take issue with sub-paragraphs (a) or (b) of the Board's 2005 order.

[12] MPAC also submits that the standard of review applicable to the Board's decision is correctness.

[13] The City supports MPAC's entire position.

[14] Montevallo raises the following issues:

1. MPAC failed to exhaust its statutory appeal rights and the court should not conduct a judicial review in these circumstances.
2. If the court considers the judicial review application, the Board was correct in its decision.
3. The standard of review is correctness.

Analysis

[15] MPAC did not attempt to appeal the Board's 2005 decision. Instead, it moved for a review of that decision by the Board itself, as was its right. When the Board confirmed its earlier decision, MPAC sought judicial review of the Board's decision, as confirmed. I am not persuaded to disallow a judicial review because MPAC did not exhaust its appeal rights, for the following reasons.

[16] First, we are told by all counsel that the sections of the Assessment Act in issue have not been considered by a court. The confirming decision of 2007 mentioned the absence of guidance from the court. Second, timeliness is a concern. Much time has been allowed to pass in the procedures before the Board. MPAC acted appropriately in seeking the Board's review of the 2005 decision, and sought judicial review relatively promptly when, almost 3 years after that decision, the Board released its decision confirming it. I conclude that it is in the interests of justice to determine the merits of this application without further delay.

[17] All parties agree that the Board was entitled to require MPAC to bring a complaint before it for the purpose of correcting certain types of errors in the assessment roll, pursuant to section 40.1 of the Act. The only pre-condition to the Board's exercise of this power is that there must be "palpable errors in the assessment roll". There is no express limitation on how the Board may learn of such errors. No one submits that the Board erred in law or exceeded its jurisdiction by using information which it learned from Montevallo's withdrawn complaint as a basis for ordering, on its own motion, that MPAC institute another complaint.

[18] The pre-condition contained in section 40.1 was met because the Board found the aforesaid palpable errors in the assessment roll.

[19] Pursuant to section 40.1 (a), the Board may correct the roll if the error involves "no alterations of assessed values or classification of land". The error described in sub- paragraph (a) of the Board's 2005 decision is of this type: the issuance of new assessment roll numbers for the severed parcels. Pursuant to section 40.1 (b), the Board may not correct errors without directing the assessor to bring a complaint before it if "alteration of assessed values or classification of land is involved". The errors described in sub-paragraphs (b) and (c) of the Board's 2005 decision are of this type.

[20] Every complaint before the Board, including a complaint which it directs the assessor to bring, proceeds pursuant to section 40 of the Act, the relevant parts of which state:

40. (1) Any person, including a municipality, a school board or, in the case of land in non-municipal territory, the Minister, may appeal in writing to the Assessment Review Board that,

(a) the current value of the person’s land or another person’s land is incorrect,

(b) the person or another person was wrongly placed on or omitted from the assessment roll,

(c) the person or another person was wrongly placed on or omitted from the roll in respect of school support,

(d) the classification of the person’s land or another person’s land is incorrect;

(e) for land, portions of which are in different classes of real property, the determination of the share of the value of the land that is attributable to each class is incorrect.

(5) The following persons are parties to a proceeding:

1. The assessment corporation.

2. All persons complaining and all persons whose assessment is complained of.

3. The municipality in which the land is located or, if the land is located in non-municipal territory, the Minister.

(6) The Assessment Review Board shall give the parties notice of any hearing at least 14 days before the date fixed for the hearing.

(11) After hearing the evidence and the submissions of the parties, the Board shall determine the matter and, in complaints involving current value, shall determine the amount of the assessment as necessary to reflect corrections to the current value.

(12) If the land is located in a municipality, the Board shall forward its decision to the municipality and the clerk shall forthwith,

(a) alter the assessment roll in accordance with the decisions of the Board from which no appeal is taken;

(b) indicate on the roll that the alteration has been made; and

(c) complete the roll by totalling the amounts of the assessments in the roll and inserting the total.

(13) The Assessment Review Board, as to all matters within its jurisdiction under this section, has authority to hear and determine all questions of law or of fact and a decision of the Board under this section is final and binding unless it is appealed under section 43.1.

[21] The issues come into sharper focus at this point. As mentioned, in ordering MPAC to bring a complaint before it involving alteration of assessed values, the Board precluded MPAC from raising in the complaint that the current value assessment for Montevallo's residential parcel should have been $1,650,000 and not what the Board directed it to be, a portion of $773,000. MPAC and the City submit that the Board erred in law because it did not allow a hearing of the evidence and the submissions of the parties, including MPAC, as required by section 40 (11), and the Board failed to determine an amount for the assessment which was, in the words of section 40 (11), "…necessary to reflect corrections to the current value…" These parties also submit that the Board did not have a basis in evidence for determining that an unascertained portion of $773,000 would represent the current value, as defined by section 1 of the Act. Consequently, these parties argue that what the Board decided did not comply with section 19 and section 19.1 of the Act, which require that the assessment of land shall be its current value for the taxation year.

[22] These submissions do not give proper effect to the discretion given to the Board in section 40.1 (b) by the words "…the Board may extend the time for making complaints and direct the assessment corporation to be the complainant." The Board has the right either to direct, or to refuse to direct the assessor to bring a complaint. In this case, the Board exercised its discretion by directing MPAC to bring a complaint before the Board. However, in respect of alteration of assessed values, the Board exercised its discretion by refusing to direct and thereby refusing to permit MPAC to include a claim that the assessed value be increased. The Board permitted MPAC to seek only apportionment between the two severed parcels of its long standing current value assessment of $773,000 for the original lot.

[23] Most of the Board's 2005 decision addresses why Montevallo should be given leave to withdraw its complaint. The Board found that, nearly 5 years after purchasing the property, Montevallo still did not know by what amount the original assessment of $773,000 was reduced by the demolition of the warehouse. Montevallo therefore could not clear up the tax accounts between it and the purchaser of the severed industrial parcel.

[24] The Board made further findings about delay occasioned by MPAC and the City, and the effect of that delay on Montevallo. The Board held: "After the purchase of 101 Union street, the demolition, the severance and sale…, Montevallo had, perforce, to rely on the City of Toronto to carry out its role with the assistance of MPAC. …. The Official Plan and the General Zoning Bylaw were amended in February 2000. It was not until February 2003 when Montevallo first heard of any indication that MPAC was seeking a CVA increase. Both MPAC and the City have provisions available to them to correct assessments which are too low. Nearly 3 years were available to them to rectify any under-assessments."

[25] While the aforesaid statements about delay are part of the rationale for permitting Montevallo to withdraw its complaint, they also appear to be the rationale for the Board's exercise of discretion under section 40.1 of the Act. I say that because the Board addressed its section 40.1 decision in the paragraph immediately following its delay findings which I have just mentioned and, in addressing its section 40.1 decision, the Board did not add further reasoning. In addition, the Board's conclusions about the delay by MPAC and the City and its effect on Montevallo clearly are relevant to the Board's exercise of discretion to refuse to permit MPAC to include, in the complaint directed by the Board, a claim for an increased assessment for Montevallo's residential parcel.

[26] The Board's confirming decision in 2007 explained in greater detail its rationale for its 2005 decision. This explanation supports the conclusions expressed in paragraph [26]. In its 2007 decision, the Board stated "it is clear that the Board has found a lack of timeliness, in processing the changes to the roll, to be prejudicial and unfair to the taxpayer. Unfairness to the taxpayer is one of the factors to be considered and balanced against the integrity of the assessment roll and the fairness to other taxpayers of the city. Without referring to the integrity of the roll or fairness to City taxpayers, it is evident that the Member considered the unfairness to the complainant (Montevallo) to be the overriding consideration". (Parentheses added).

[27] In addition, the Board stated in 2007: "The Board's reasonable judgment was that to permit an increase in the original assessment after the administrative nightmare, City disinterest, lapse of time and tax consequences would be prejudicial to the complainant (Montevallo) and would not be a 'just determination'." (Parentheses added).

[28] Thus, the Board explained in its 2007 decision, the Board in 2005 did not make a finding about the current value assessment without any evidence, "(t)he Board was simply carrying through its ruling, foreclosing the ability of the City or MPAC to seek a change in the existing assessment of $773,000 for the reasons cited."

Conclusion

[29] The Board held that MPAC had failed to seek an increased assessment in a timely manner, and that an increase in the assessment so long after the fact would be unjust to the taxpayer. In the complaint which the Board directed MPAC to bring, the Board therefore did not allow MPAC to claim that the existing assessment of $773,000 was too low, and should be increased.

[30] Nonetheless, the Board did find that some patent errors in the assessment roll should be corrected. In deciding what these errors were, the Board exercised its discretion against finding that the assessed value of $773,000 was one of them. The Board found that the only patent error in respect of assessed value for which MPAC would be entitled to seek correction, by means of the complaint which it directed MPAC to bring, was the apportionment of the existing assessed value of $773,000 between the two severed parcels, bearing in mind the reduction in value from demolition of the warehouse.

[31] The party bringing a complaint before the Board usually is entitled to determine the issues submitted to the Board. However, this is not the usual case. The complaint in issue has been ordered by the Board, pursuant to section 40.1 (b) of the Act. In enacting that the Board "may" exercise the powers contained in section 40.1 (b), the Legislature gave the Board the discretion to determine when, and in what circumstances to exercise those powers. The Board was entitled to decide the issues to be raised in the complaint which it was entitled to direct MPAC to institute, for the purpose of correcting palpable errors which it found in the assessment roll.

[32] The Board's decision to preclude MPAC from asserting in this complaint that the assessed value itself was wrong and should be increased was rationally related to its findings about MPAC's delay in seeking a higher assessment and the resulting prejudice to Montevallo. As the Board itself concluded in its 2007 decision, the Board held in 2005 that unfairness to Montevallo was the overriding consideration, when weighed against the integrity of the assessment roll and fairness to other taxpayers.

[33] As the Board also concluded in its 2007 decision, the Board in 2005 did not make a finding about the current value assessment without any evidence, despite what MPAC asserts. The Board left the existing assessment of $773,000 in place. It was the assessor who determined that assessment, not the Board.

[34] The discretion exercised by the Board pursuant to section 40.1 (b), in the circumstances it found to exist herein, led to a result which was contemplated by the Legislature. Section 41 of the Act stated, at the relevant time, in part:

41. The roll as finally revised by the Assessment Review Board and certified by the registrar shall, subject to sub-sections 37 (5) and (6), be valid and bind all parties concerned, despite any defect or error committed in or with regard to the roll…

Neither of the subsections mentioned in section 41 is relevant to the issues under consideration.

[35] If it is assumed that MPAC is correct in its assertion that the current value assessment should be higher than $773,000, section 41 supports the conclusion that the Legislature gave the Board the authority in section 40.1 (b) to exercise its discretion as it did in this case, despite the provisions of sections 19 (1) and 19.1.

[36] The Board was correct in determining that it had the discretion under section 40.1(b) to limit as it did the subject matter of the complaint which it was entitled to direct MPAC to bring, in the circumstances as it found them to be. It is therefore unnecessary to consider whether the Board has a similar discretion based upon other sections of the Act, the Assessment Review Board Act, R.S.O. 1990, c. A.32, or otherwise.

[37] It is also not necessary to determine whether the standard of review is correctness or reasonableness. Having acted in accordance with its discretionary powers in section 40.1 (b) of the Act, the Board's decision was both correct and reasonable.

Order

[38] The application for judicial review is dismissed. Montevallo is entitled to its costs from MPAC, on a partial indemnity basis. The City does not seek costs. If the parties cannot agree on costs, Montevallo's submissions shall be delivered within 14 days. MPAC's submissions shall be delivered within 10 days thereafter.

J. Macdonald, J.

I agree. Carnwath, J.

I agree. Bellamy, J.

Released: December , 2008

COURT FILE NO.: 619/07

DATE: 20081229

ONTARIO

SUPERIOR COURT OF JUSTICE

DIVISIONAL COURT

IN THE MATTER OF a decision of the Assessment Review Board pursuant to s. 40.1(b) of the Assessment Act, R.S.O. 1990, c. A. 31, dated February 2, 2005 and confirmed by decision of the Board dated February 2, 2007.

CARNWATH, J. MACDONALD AND BELLAMY JJ.

B E T W E E N:

MUNICIPAL PROPERTY ASSESSMENT CORPORATION

Applicant

• and –

MonTEVALLO DEVELOPMENTS LIMITED, 1462199 ONTARIO INC., CITY OF TORONTO AND ASSESSMENT REVIEW BOARD

Respondents

REASONS FOR DECISION

J. Macdonald, J.

Released: December 29, 2008