CITATION: Municipal Property Assessment Corporation v. Zarichansky, 2020 ONSC 1124
DIVISIONAL COURT FILE NO.: 18-DC-2446
DATE: 20200220
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Aston, Bale and Favreau JJ.
B E T W E E N :
MUNICIPAL PROPERTY ASSESSMENT CORPORATION
Appellant
– and –
KEN ZARICHANSKY AND THE TOWNSHIP OF NORTH GRENVILLE
Respondents
Donald G. Mitchell for the Appellant
Jack A. Walker and Jamie G. Walker for the Respondent Ken Zarichansky
No one appearing for the Township of North Grenville
Brian Blumenthal for the Ontario Assessment Board (Intervenor)
HEARD: September 12, 2019
FAVREAU J.:
Introduction
[1] The appellant, the Municipal Property Assessment Corporation (MPAC), appeals a decision of the Assessment Review Board (the "Board") dated July 27, 2018, in which the Board found that MPAC did not meet its burden of proving that the value of the respondent Ken Zarichansky's property was $84,000 for 2017. Instead, the Board held that the property should be valued at the last uncontested value, which was $57,000 in 2012.[^1]
[2] MPAC argues that the Board's decision is inconsistent with the Assessment Act, R.S.O. 1990, c. A.31, which requires the Board to determine the current value of the property.
[3] For the reasons below, we agree that the Board made an error of law in its approach to assessing the value of Mr. Zarichansky's property, and that the matter should be remitted back to the Board.
Statutory scheme
[4] Section 3 of the Assessment Act provides that, with some exceptions, all real property in Ontario is subject to assessment and taxation.
[5] Section 19(1) of the Assessment Act provides that the "assessment of land shall be based on its current value”. Section 19.2 of the Assessment Act prescribes the valuation dates for the assessment of properties.
[6] MPAC is responsible for the assessment of properties, subject to appeal rights to the Board.
[7] Section 40(1) of the Assessment Act provides that any person may appeal an assessment to the Board, including on the basis that "the current value of the person's land … is incorrect".
[8] Section 40(17) of the Act provides that "[f]or 2009 and subsequent taxation years, where value is a ground of appeal, the burden of proof as to the correctness of the current value of the land rests with the assessment corporation".
[9] Section 44(3) of the Act requires the Board to assess the current value of the land and then provides for an equitable adjustment based on the value of lands in the vicinity:
(3) For 2009 and subsequent taxation years, in determining the value at which any land shall be assessed, the Board shall,
(a) determine the current value of the land; and
(b) have reference to the value at which similar lands in the vicinity are assessed and adjust the assessment of the land to make it equitable with that of similar lands in the vicinity if such an adjustment would result in a reduction of the assessment of the land.
[10] Section 45 sets out the powers of the Board on an appeal:
Upon an appeal with respect to an assessment, the Assessment Review Board may review the assessment and, for the purpose of the review, has all the powers and functions of the assessment corporation in making an assessment, determination or decision under this Act, and any assessment, determination or decision made on review by the Assessment Review Board shall be deemed to be an assessment, determination or decision of the assessment corporation and has the same force and effect.
Background facts
Assessment of Mr. Zarichansky's property
[11] Mr. Zarichansky owns a property located at 5300 County Road 19 in the Township of North Grenville. The property is a single-family dwelling on a 0.69 acre lot. The original dwelling was built in 1946 and an addition was started in 1999. The addition was never completed because the property is located in a floodplain.
[12] MPAC has classified the condition of the building as poor.
[13] For the 2017 taxation year, MPAC initially assessed the value of the property at $89,000.
[14] Mr. Zarichansky appealed this valuation to the Board.
[15] At the hearing, Mr. Zarichansky took the position that the current value of his property was $55,000. For the purposes of the hearing, MPAC revised its assessment of the current value to $84,000.
Decision of the Board
[16] The hearing before the Board was held on December 4, 2017.
[17] The Board released its decision on July 27, 2018.
[18] In its decision, the Board found that MPAC failed to discharge its statutory burden of proving the assessed value of the property. The Board applied a test it developed in Jay Patry Enterprises Inc. v. Municipal Property Assessment Corporation, Region 05, 2019 39629 (ON ARB), which was released by the Board on the same day as the decision in this case. The test quoted by the Board from para. 40 of Patry Enterprises is as follows:
[T]he appropriate procedure to follow in an appeal where the current value is at issue is to first look at MPAC's evidence on its own and make a determination as to whether it can prove its suggested current value on a balance of probabilities. If MPAC meets its burden, the Board should review all of the evidence before it and determine the current value of the property. However, if MPAC has not met its burden, the taxpayer's evidence must be analyzed to see if it is capable of proving that a particular current value is more likely than not. If there is insufficient evidence in the record that is capable of proving [the] current value, the Board should fix the assessment at the last uncontested assessed value. This framework provides meaning to both subsection s. 44(17) and clause 44(3)(a).
[19] Applying the test in this case, the Board first found that MPAC's evidence was not sufficient to establish the current value of the property because the only comparable properties put forward by MPAC were superior to Mr. Zarichansky's property:
MPAC submits $84,000 as the current value of the subject property based on the direct comparison approach, but gave us no comparable properties that reflect that current value. When we asked what value the -20% adjustment applied to, MPAC could not say. When we asked for an analytical pathway from the evidence presented to MPAC's proposed value of $84,000, MPAC was unable to provide one. MPAC submits that its current value was produced by its computer system but could not give any particulars of how the current value was calculated, or how the evidence it submitted supported a current value of $84,000.
[20] The Board then found that Mr. Zarichansky did not provide any evidence in support of his contention that the property was worth $55,000:
Mr. Zarichansky argues that the property is worth $55,000 because it is in a flood plain and is in worse condition than it was on the last valuation day. He admits that he purchased the property in 1999 for just under $50,000, but insists it would only sell for $55,000 on the January 1, 2016 valuation day.
Mr. Zarichansky does not provide any comparable sales evidence, or any other objective evidence, to support his proposed current value. We do not find that the information he has provided is sufficient to prove that any particular current value is more likely than not.
[21] The Board then fixed the value of the property at $57,000, which was the assessed value for 2012 that the Board characterized as "the last uncontested value".
[22] Finally, the Board found that this was not an appropriate case for an "equity adjustment" pursuant to section 44(3) of the Assessment Act:
We find that an equity assessment is not necessary when MPAC has failed to discharge its burden. We have not made a current value determination, but have instead imposed a previous assessed value due to MPAC's failure to discharge its burden. There is therefore no current value determined in clause 44(3)(a) to compare to the assessments of similar lands in the vicinity in clause 44(30(b). Other land is assessed at its current value pursuant to subsection 19(1) while this property is not. It is likely that there will be an inequity that results from MPAC failing to discharge its burden, but the inequity is that the property is likely assessed lower than other property in the vicinity. This is not an inequity that clause 44(3)(b) can cure.
Court's jurisdiction
[23] Section 43.1(1) of the Assessment Act provides that an appeal from the Board lies to this Court with leave only on a question of law.
[24] In this case, leave was granted by Beaudoin J. on December, 2018, on the following question of law:
Did the Board err in law by failing to determine the correct current value as required by clause 44(3)(a) of the Act and instead finding that "if there is no evidence in the record that is capable of proving current value, the Board should fix the assessment at the last uncontested assessed value”.
Standard of review
[25] At the time of the hearing, the parties agreed that the standard of review was reasonableness. This was consistent with prior decisions of this Court: see, for example, Municipal Property Assessment Corporation v. Loblaw Properties Limited, ONSC 1299 (Div. Ct.), at paras. 13-14.
[26] However, since the matter was argued, the Supreme Court released its decisions in Minister of Citizenship and Immigration v. Vavilov, 2019 SCC 65, and Bell Canada v. Canada (Attorney General), 2019 SCC 66, in which the Court revisited the standard of review applicable to statutory appeals. In particular, at para. 37 of Vavilov, the Court explained that the standard of review applicable to a statutory appeal is the appellate standard of review in Housen v. Nikolaisen, 2002 SCC 3. This means that the standard of review applicable to questions of law on a statutory appeal such as this is correctness. In addition, at para. 50, the Court confirmed that "[w]hile the existence of a leave requirement will affect whether a court will hear an appeal from a particular decision, it does not affect the standard to be applied if leave is given and the appeal is heard".
[27] Prior to issuing this decision, the Panel requested submissions from the parties on the change in the standard of review brought about by Vavilov. All parties agreed that the standard of review applicable to questions of law on appeals from decisions of the Board is now correctness.
[28] Therefore, the standard of review applicable to the question of law on which leave was granted in this case is correctness.
Parties' positions
[29] MPAC appeals the decision on the basis that the decision-making process followed by the Board is inconsistent with the statutory scheme, which requires the Board to establish the current value of the property. By reverting back to the prior assessed value of the property, the Board is failing to meet its statutory obligation.
[30] Mr. Zarichansky argues that the Board's decision should stand because, where MPAC has failed to meet its burden to prove the current value, it makes sense for the Board to be able to rely on the most recent uncontested value.
[31] The Board appeared as an intervenor at the hearing of the appeal and took the position that the standard of review is reasonableness. As reviewed above, this standard no longer applies but this does not affect the outcome of the decision.
Analysis
[32] I agree with MPAC that the four-step decision making process the Board followed is contrary to the scheme of the Assessment Act. The Act requires the Board to determine the current value of the property, and the Board failed to do so. As reviewed above, the Board ultimately stated in its reasons that it did not make “a current value determination, but … instead imposed a previous assessed value due to MPAC’s failure to discharge it burden [of proof]”. The Board is an adjudicative tribunal and it cannot abdicate its statutory duty to determine the current value of a property pursuant to sections 40(19) and 44(3) of the Assessment Act, and instead assign a value to a property that it knows is not current.
[33] As indicated above, the Board relied on its decision in Patry Enterprises in reverting back to the 2012 assessed value of the property. At para. 41 of that decision, the Board explicitly held that it has no obligation to determine the current value of the property where neither MPAC or the taxpayer present sufficient evidence. The Board developed the framework referred to above for deciding appeals on valuation issues. In establishing this framework, it is evident that the Board was primarily influenced by section 40(17) of the Assessment Act, which places the burden of proof on MPAC to prove the correct current value of the property.
[34] At para. 32 of Patry Enterprises, the Board stated that there should be a “real consequence” for MPAC when it fails to meet its burden:
It is essential that subsection 40(17) be interpreted in a way that achieves the goals of transparency and a “level playing field” in assessment appeals. That requires that there be a real consequence for MPAC failing to meet its burden. If MPAC can provide insufficient evidence to prove current value and still potentially have its assessment confirmed, then there is no incentive for MPAC to bring a sufficient case to the Board.
[35] At para. 42, the Board held that, where MPAC does not meet its burden, the fair consequence is for the Board to revert back to the last uncontested assessment:
A nil value for the assessment would be a default consequence for failing to meet a burden in line with the Supreme Court of Canada’s reasoning in Tervita. The Court was clear that “where the burden is not met, there are no proven quantifiable anti-competitive effects.” Similarly here, if there is insufficient evidence on which to find a current value, there is no proven current value. Assessments are at current value, pursuant to subsection 19(1) of the Act, so if there is no proven current value there should be no assessment. However, subsection 3(1) of the Act states that “all real property in Ontario is liable to assessment and taxation,” except for the properties set out in section 3. A nil assessment is not a taxable assessment. A nil assessment would also be unfair to other taxpayers, who must still pay taxes based on their assessed value. We find that, in circumstances where insufficient evidence is presented to make a current value determination, a fair consequence for MPAC failing to meet its statutory burden would be to reduce the assessment to the last uncontested assessment of the property.
[36] In Patry Enterprises, the Board found that, while MPAC had not presented sufficient evidence to meet its burden, the taxpayer provided sufficient evidence about the current value of the properties. However, at para. 41, the Board referred to the present case as an example of a case in which MPAC and the taxpayer did not provide sufficient evidence of the current value:
Examining the taxpayer’s evidence before turning to a fixed consequence is fair to taxpayers that have spent the time and effort to prepare for a hearing. It also fulfils this Board’s statutory obligation to determine current value when it is able to. But there will be cases, such as Zarichansky v Municipal Property Assessment Corporation, WR 150192, also released today, where a taxpayer does not bring sufficient evidence on which to determine current value. Such cases should be rare. However, when the Board is presented with insufficient evidence to determine a current value, we find that it is not obligated to determine current value. There must be a default position to return to when the evidence does not lead to a current value.
[37] Since the decision in Patry Enterprises, the Board has applied the decision making framework it developed in that case to other cases which at the time of the hearing included Barnard v. Municipal Property Assessment Corporation, 2018 88478 (ON ARB), at para. 14; Stronach v. Municipal Property Assessment Corporation, 2018 84488 (ON ARB), at para. 36; Chakraborty v. Municipal Property Assessment Corporation, 2018 86681 (ON ARB), at para. 18; Pacey v. Municipal Property Assessment Corporation, 2018 104614 (ON ARB), at paras. 32 and 36; and Taddeo v. Municipal Property Assessment Corporation, 2018 110110 (ON ARB), at para. 37.
[38] In my view, it is evident that the Board’s approach to determining the current value of property is inconsistent with the scheme of the Assessment Act and the relevant statutory provisions. The Board has placed undue emphasis on MPAC’s burden of proof without sufficient regard to the purposes of the Assessment Act and its own obligations under the statute.
[39] The Act emphasizes that properties are to be taxed based on their assessed “current value”:
• Section 19(1) states that the “assessment of land shall be based on its current value” (emphasis added).
• Section 19.2 prescribes the valuation date for the purpose of each taxation year. For example, section 19.2(1)4 provides that “For the period consisting of the four taxation years from 2017 to 2020, land is valued as of January 1, 2016”.
[40] Under the statutory scheme, MPAC is initially tasked with determining the current value of the property. However, where a taxpayer appeals to the Board, it is up to the Board to make that determination:
• Section 40(1)(a)i provides that a person can bring an appeal to the Board on the basis that the “current value” of his or her land is incorrect. Section 40(19) requires the Board to determine the “matter” after hearing submissions from the parties.
• Section 44(3) requires the Board to determine the “current value of the land”, after which the Board can reduce the value to make it equitable in relation to land in the vicinity.
• Section 45 provides that, on an appeal, the Board has all of MPAC’s powers in determining the value of the property.
[41] In combination, these provisions make clear that an assessment must be based on the current value of the property. The Board has no power to dodge this responsibility based on a finding that MPAC has not met its burden of proof.
[42] The Assessment Act requires all property owners in Ontario to pay their fair share of taxes. The Act is based on a requirement that taxation be based on the current value of the property. The Board’s decision to rely on an earlier assessment in circumstances where MPAC has failed to meet its burden is contrary to this statutory scheme and intent.
[43] It is evident that the Board’s decision in Patry Enterprises was a response to frustration with MPAC’s inadequate evidence. However, the Board’s solution to this problem is not authorized by the statute. Ultimately, the Board has no authority to fix the value of a property at an amount that it knows does not represent the “current value”. The exception to this is section 44(3), which provides a specific mechanism for reducing the current value in circumstances where it is equitable to do so. However, the starting point for this exercise, as set out in section 44(3)(a), is determining the current value of the property. In this case, as reviewed above, the Board explicitly acknowledged that it had “not made a current value determination, but … instead imposed a previous assessed value due to MPAC's failure to discharge its burden”. This was contrary to its statutory mandate.
[44] What is the Board to do in circumstances where MPAC has failed to meet its burden? It is not for this Court to prescribe what should be done in all circumstances. There may be cases in which it is appropriate for the Board to require MPAC to obtain additional evidence. There may be cases in which the taxpayer’s evidence is sufficient to assess the current value of the property. And there may be cases in which the Board can find that the previous assessed value is justifiably the current value. However, what the Board cannot do is avoid its responsibility to determine the current value of the property.
[45] Under the circumstances, the appropriate remedy is for this matter to be remitted back to the Board to be decided in accordance with these reasons.
Conclusion
[46] For the reasons above, the appeal is allowed, and the matter is remitted back to the Board to be decided in accordance with these reasons.
[47] As agreed by the parties, there shall be no costs.
FAVREAU J.
I agree _______________________________
ASTON J.
I agree _______________________________
BALE J.
RELEASED: February 20, 2020
CITATION: Municipal Property Assessment Corporation v. Zarichansky, 2020 ONSC 1124
DIVISIONAL COURT FILE NO.: 18-DC-2446
DATE: 20200220
ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT
Aston, Bale and Favreau JJ.
B E T W E E N :
MUNICIPAL PROPERTY ASSESSMENT CORPORATION
Appellant
– and –
KEN ZARICHANSKY AND THE TOWNSHIP OF NORTH GRENVILLE
Respondents
REASONS FOR JUDGMENT
FAVREAU J.
RELEASED: February 20, 2020
[^1]: The $57,000 figure was actually the outcome of a decision by the Board about the 2008 value of the property. For 2012, Mr. Zarichansky and MPAC had entered into minutes of settlement in which they agreed that the value of the property was $64,000.