SUPERIOR COURT OF JUSTICE - ONTARIO

COURT FILE NO.: 15-63596

RE: BONA BUILDING & MANAGEMENT COMPANY LIMITED – Applicant v. MUNICIPAL PROPERTY ASSESSMENT CORPORATION and THE CORPORATION OF THE CITY OF OTTAWA - Respondents

BEFORE: Madam Justice Liza Sheard

COUNSEL: Kenneth Radnoff, Q.C., Jonathan Collings for the Applicant

Francis Shea, for the Applicant

HEARD: December 10, 2015

ENDORSEMENT

[1] This is an application for a declaration that the Property Assessment Change Notice issued in December 2014 for the 2012 and 2013 taxation years (“the Notices”) are invalid and of no force and effect with respect to the property located at 100-200 Coventry Road, Ottawa[1] (“the Property”.)

[2] The Notices purport to correct the assessments of the Property to now include the value of the Marriott Hotel: a 15-floor, 395 guest room hotel, located at 100-200 Coventry Road Ottawa, Ontario (“the Marriott”).

[3] The 2012 and 2013 assessed values of the Marriott, as set out in the Notices, are $24,394,000.00 and $25,031,500.00 respectively. If found to be valid, the effect of the Notices will be to include the value of Marriott in the assessment of the Property for those years.

[4] Including the Marriott in the assessment of the Property triggers the payment of additional property taxes as follows:

(1) May 1, 2012 to December 31, 2012

Municipal Levy $297,955.52

Education Levy $205,496.36

Subtotal: $503,451.88

(2) January 1 to December 31, 2013:

Municipal Levy $471,875.53

Education Levy $327,455.10

Subtotal $799,330.63

TOTAL Additional Taxes: 2012 and 2013: $ 1,302,782.50

[5] The applicant acknowledges that the value of the Marriott was not included in the 2012 and 2013 assessments. It challenges the validity of the Notices on the basis that the respondent Municipal Property Assessment Corporation (“MPAC”) did not “omit” to assess the Marriott but deliberately chose not to include the value of the Marriott in its assessment of the Property.

[6] The applicant argues that the Notices could only be validly issued to correct an inadvertent omission, not a deliberate omission.

Statutory Framework

[7] Under the Assessment Act, R.S.O. 1990, c. A.31 (“the Act”), “land”, “real property” and “real estate” is defined to include “all buildings, or any part of any building, and all structures, machinery and fixtures erected or placed upon, in, over, under or affixed to land.” (ss. 1.(1)(d)).

[8] Pursuant to s. 33(1) of the Act, if MPAC has omitted in whole or in part property which is liable to assessment, it may issue a revised assessment for the prior two taxation years.

[9] Section 33(1) of the Act provides:

33. (1) The following rules apply if land liable to assessment has been in whole or in part omitted from the tax roll for the current year or for all or part of either or both of the last two preceding years, and no taxes have been levied for the assessment omitted:

34. The assessment corporation shall make any assessment necessary to correct the omission.

35. If the land is located in a municipality, the clerk of the municipality shall alter the tax roll upon receiving notice of the change, and the municipality shall levy and collect the taxes that would have been payable if the assessment had not been omitted.

36. If the land is located in non-municipal territory, the Minister shall alter the tax roll upon receiving notice of the change, and shall collect the taxes that would have been payable if the assessment had not been omitted. 2006, c. 33, Sched. A,

Background

[10] The Property is comprised of three commercial buildings: the Hampton Inn, completed in December 1999, a Conference Centre completed in 2009 and the Marriott, completed in May 2012.

[11] The Marriott had been under construction from 2008 to 2012. It opened for business in May 2012.

[12] At the hearing, the applicant admitted that:

1. the value of the Marriott had not been included in determining the assessment for the Property in the 2012 and 2013 taxation years which are the subject of this application; and

2. if the value of the Marriott had not been included by reason of the negligence, error, inadvertence or mistake of MPAC, the Notices would not be subject to any challenge.

[13] The basis of the applicant’s challenge to the Notices is that:

(a) the Act permits the issuance of the notices only when the omission has been inadvertent - by accident, sloth, error, negligence, etc. - the result of which requires the assessment to be “corrected or rectified”. A property that has been deliberately assessed and undervalued cannot later be re-assessed.

(b) MPAC has the onus of showing why the Marriott was omitted from the assessment;

(c) MPAC failed to prove that the Marriott had been omitted from the assessed value of the Property because of MPAC’s negligence, error, inadvertence or mistake;

(d) MPAC or its employees knew of the existence of the Marriott and, absent proof of inadvertent omission, it should be inferred that MPAC deliberately chose not to include the Marriott’s value in the assessment of the Property;

[14] MPAC argues that the Act does not require an explanation for the omission: it is enough to establish that the Marriott was omitted from the Property assessment.

MPAC’s knowledge of the Marriott

[15] The evidence put forth by the applicant is that MPAC and its employees were well aware of the existence of the Marriott:

(a) it is located five kilometers from MPAC’s Ottawa offices;

(b) MPAC held an employee conference at the Marriott in December 2013; and

(c) in 2010, an MPAC representative attended a meeting at the property while the Marriott was under construction, at which time the Marriott was expressly discussed.

[16] James Laking, a Property Valuation Specialist in the Hospitality Group employed by MPAC (“Laking”) swore an affidavit on behalf of MPAC. Among other things, Laking was responsible for returning the omitted assessments on the Marriott.

[17] In his affidavit, Laking stated that he became aware of the omitted assessments for the Marriott in the fall of 2014. He exercised MPAC’s authority to complete an inspection and obtain relevant documents from the applicant from which he prepared the 2008 and 2012 pro forma evaluations of the Marriott. Those values were then used in the Notices.

[18] At para. 24 of his affidavit, Laking states: “At no time did MPAC intend to not assess a newly constructed 15 storey 397 room Marriott Courtyard Hotel.”

[19] The applicant does not accept Laking’s evidence as proof that the omission of the Marriott was inadvertent. It points to the evidence given by Laking when he was cross-examined on his affidavit at which time Laking admitted that nothing prevented MPAC from assessing the Marriott; the applicant did not impede the assessment co-operated with MPAC; and that the Marriott is one of the largest hotels in Ottawa.

Interpretation of Tax Statutes

[20] The Supreme Court of Canada has made it clear that in the construction of taxation statutes the modern approach applies: That is, “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” (p. 578): see 65302 British Columbia Ltd. v. Canada, 1999 639 (SCC), [1999] 3 S.C.R. 804, at para. 50. However, because of the degree of precision and detail characteristic of many tax provisions, a greater emphasis has often been placed on textual interpretation where taxation statutes are concerned: Canada Trustco Mortgage Co. v. Canada, [2005] 2 S.C.R. 601, 2005 SCC 54, at para. 11. Taxpayers are entitled to rely on the clear meaning of taxation provisions in structuring their affairs. Where the words of a statute are precise and unequivocal, those words will play a dominant role in the interpretive process. (Placer Dome Canada Ltd. v. Ontario (Minister of Finance), [2006] 1 S.C.R. 715, 2006 SCC 20).

[21] The respondent asked this Court to consider the 2013 decision of the Divisional Court in Toronto (City) v. MCAP., 2013 ONSC 6137, [2013] O.J. No. 4425 (“Toronto v. MCAP”). Paragraph 30 of the decision sets out a helpful overview of the objective of the Assessment Act:

The primary objective of the Act is to achieve equity in taxation. Equity will result when every parcel of land bears its proportionate and fair share of the tax burden for the community. This principle favours ensuring the correctness of the assessments upon which the tax payable is based. On the other hand, it is also the intention of the legislation to ensure a stable and reliable tax base. This principle favours finality. The principles of equity and finality are often in conflict and each must be weighed in the balance in arriving at the proper interpretation of the legislation. The Divisional Court describes this tension in Toronto (City) v. Wolf, 2008 39430 (ON SCDC), [2008] O.J. No. 3061, as follows (at para 20):

We appreciate that there are competing purposes inherent in the scheme of the Act. To achieve the equitable distribution of the tax burden, there must be mechanisms to correct errors in the assessment roll. At the same time, in fairness to the taxpayer, there must be some finality in the system in order to achieve a stable and reliable tax base. That balance is achieved by the relatively simple, informal right to complain, coupled with a specific and firm limitation period in the governing legislation.

[22] Section 33(3) of the Act “is directed solely at correcting a situation where some or all of the property was erroneously omitted from the assessment roll.” Toronto v. MCAP, at para.44.

[23] Further, s. 33 is meant to address specific situations that arise outside the usual assessment process and to correct specific errors: the omission of land under s. 33 (1) and incorrect taxable status under s. 33 (3). Toronto v. MCAP, at para 47.

Issue 1: Does MPAC have the onus of showing that the Marriott was omitted from the Assessment through negligence, error, inadvertence or mistake?

[24] Counsel for MPAC argues that the Act is clear that if a property is omitted from the assessment MPAC may reassess for the prior two years. The reason for its omission is irrelevant.

[25] Counsel for both parties relied upon the decision of Justice Belobaba in East of Bay (2003) Development Corp. v. Municipal Property Assessment Corp., 2011 ONSC 242, 2011 CarswellOnt 312).

[26] In East of Bay, MPAC had chosen to assess every condominium unit in a condominium development at $30,000. This was done in order to put a placeholder value on these units and in the expectation that MPAC would revisit the assessed value at a future time when its staffing resources were less stretched.

[27] In East of Bay the court determined that s. 33(1) was not intended to allow MPAC to revisit and correct the value placed on a property. Rather, that section was intended to allow for the assessment of a property that had been entirely omitted from the property assessment.

[28] In East of Bay, the court refused to allow MPAC to change the assessed values of each condominium. It found that MPAC had not “omitted” the properties but, rather, had put a nominal value on the condominiums. The City of Toronto did not object to or appeal from the values given these properties and, accordingly, those values were preserved.

[29] The facts in East of Bay are distinguishable from the case at Bar. In East of Bay, (paras. 13, 14, 17 and 18) the court found:

• The apartment units had been individually placed on the roll, correctly identified and described as required by s.14(1) of the Act;

• The Assessment Notices were sent to each unit owner whose units were classified as “residential-taxable-full” and the $30,000 amount as “the assessed value of your property” to be “used by your municipality to calculate [your 2007 or 2008] property taxes.”;

• The City of Toronto did not appeal the $30,000 assessments, as permitted under s. 40 of the Act;

• MPAC knew the building was completed and occupied; and

• MPAC correctly described and placed the residential apartment units on the tax rolls.

[30] The Court in East of Bay determined that the condominium units had not been “omitted” from the assessment; there was no omission to “rectify”*. It further found that the “so-called omission” was “intentionally created by the assessor by wrongly assessing the property as vacant land simply to buy time and defer doing a proper current value assessment as required by the Act.…to deal with an internal staffing problem” (East of Bay, para. 27)*The word now found in s. 33(1) is “correct” not “rectify”.

[31] The conclusions of the court in East of Bay are specific to the facts of that case. I do not accept that East of Bay does or intends to impose an obligation upon MPAC to explain how or why a property was omitted from the tax rolls.

[32] In this case the applicant concedes that MPAC attributed no value whatsoever to the Marriott. There is no suggestion or assertion that MPAC put a placeholder value on the Marriott. Moreover, it is quite apparent from the assessments themselves that the value of the Marriott was not included in the Notices.

Issue 2: If MPAC fails to give any reason or explanation for the omission of the Marriott from the Property assessment, can and should it be inferred that MPAC deliberately chose not to include the Marriott?

[33] MPAC’s evidence on this application can be found in the Laking affidavit, sworn April 28, 2015. At para. 26 of his affidavit, Laking states that he became aware of the omitted assessments in the fall of 2014. He then issued the Notices whereby the value of the Marriott was added to the assessment of the Property.

[34] Laking also states that the applicant knew that the Marriott had not been included in the 2012 and 2013 assessments. His evidence was that the applicant has dealt with MPAC through a paralegal firm, Property Tax Review Services (“PTRS”). At the request of PTRS, MPAC provided details of how it had assessed the Property. Laking’s affidavit attaches that correspondence which clearly shows that the 2012 values only included the Hampton Inn and the Convention Centre: no value was given for the Marriott.

[35] Even if I were to find, which I do not, that MPAC has an obligation to explain the omission, or to prove that the omission was not advertent or deliberate, the absence of that evidence does not lead to an inference that MPAC “deliberately” chose to omit the Marriott.

[36] The evidence before me satisfies me that the omission did not come to the attention of the assessor who issued the Notice until 2014. I therefore find that the reasonable inference in this case is that the omission of the Marriott was as a result of MPAC’s negligence, error, inadvertence or mistake.

Issue 3: Was the Marriott omitted from the assessment of the Property such that MPAC was entitled to issue a revised assessment for the 2012 and 2013 taxation years Notices pursuant to the Provisions of s. 33 of the Act?

[37] In view of the findings under Issues 1. and 2., the answer to Issue 3. is obvious and conceded by the applicant: The Act specifically authorizes the issuance of the Notices.

Conclusion

[38] In keeping with the primary objective of the Act, equity will result by including the value of the Marriott in the assessment of the Property and thereby bears its proportionate and fair share of the tax burden for the community.

[39] The Application is dismissed. As the Respondent has been entirely successful, it is entitled to its costs of the Application. If the parties are unable to agree on costs, they may exchange and file brief costs submissions not to exceed three pages, plus Bills of Costs, within 30 days of the date of this endorsement.

Madam Justice Liza Sheard

Date: March 16, 2016

Released: March 16, 2016

[1] Roll number 06 14 031 301 72701 0000 JUNC GORE N PT LOT 10, RP 4R-133424, PARTS 1 & 2, RP 4R-16296, PARTS 1 & 2 ROW, RP 4R-13463, PARTS 1&2.