Court File and Parties

COURT FILE NO.: CV-18-00608917-00CL DATE: 2022/04/01 SUPERIOR COURT OF JUSTICE – ONTARIO COMMERCIAL LIST

RE: Grant Thornton Limited in its capacity as Court-appointed Receiver of Paramount Equity Financial Corporation and Silverfern GP Inc., Applicant AND: 1902408 Ontario Ltd., Respondent

BEFORE: C. Gilmore, J.

COUNSEL: Philip Cho, Jeff Cowan and Agatha Wong, Counsel for the Township of Augusta Catherine Francis, Counsel, for the Respondent 1902408 Ontario Ltd. Ryan Flewelling for 1217858 B.C. Ltd.

HEARD: March 15, 2022

Endorsement

Introduction

[1] The Receiver, Grant Thornton Limited (the “Receiver”) moves for advice and directions with respect to a proof of claim filed by the Township of Augusta (the “Township”) for outstanding taxes in the amount of $216,899.78 plus costs and interest for the 2017, 2018 and 2019 tax years (the “Supplemental Taxes”).

[2] 1902408 Ontario Ltd. (“190”), the former owner of 1120-1124 County Road 2 East, Brockville, Ontario (the “Property”) submits it does not owe any of the taxes as it settled all issues related to the classification and value for the 2017, 2018 and 2019 tax years by way of Minutes of Settlement which are binding on the Municipal Property Assessment Corporation (“MPAC”) and the Township. After the settlement, MPAC issued Notices of Assessment and 190 paid all taxes owing.

[3] 1217858 B.C. Ltd. (“121”) bought the Property by way of a sale that closed on September 19, 2019. The sale was conducted by the Receiver in accordance with an Approval and Vesting Order (the “AVO”) dated September 16, 2019. 121 submits that any Supplemental Taxes claimed by the Township were vested out as a result of the terms of the AVO. Further, 121 relied on written assurances from the Township that the taxes were “written off.”

[4] The Township, in furtherance of its statutory duties under the Municipal Act, 2001, S.O. 2001, c. 25, seeks a determination with respect to the effect of the AVO on the Supplemental Taxes so that it can collect the taxes either from the surplus sales proceeds or from 121. The Township does not agree that the amount of taxes owing can be reduced or modified as that is a matter which is within the jurisdiction of the Assessment Review Board (the “ARB”) pursuant to the Assessment Act, R.S.O. 1990, c. A.31.

[5] For the reasons set out below, I find that the Township is precluded from recovering taxes by way of the Claims Process and is estopped from obtaining any taxes from 121 as a result of the terms of the AVO and 121’s reasonable reliance on assurances from the former Treasurer of the Township.

Background

The Receivership

[6] A detailed review of the background facts is required in this case in order to fully understand the quandary in which all of the parties find themselves.

[7] On January 7, 2019, the Receiver was appointed by this Court. The Receivership related to the subject property which was located in the Township and owned at that time by 190. The Property consists of 27 acres and was operating as “Thousand Islands Village.” The complex included: event space, apartment townhouses, a boutique, storage space, meeting space, a chapel, a gymnasium, a coffee shop, a repair garage and a carpenter building.

[8] The Township received notice of the Receivership Application. The Township did not oppose the Application.

[9] The Township is a municipal corporation governed by the Municipal Act. The Treasurer of such a corporation has the duty to collect property taxes from property owners in its municipality. MPAC has exclusive jurisdiction in Ontario to assess property for the purpose of realty tax. MPAC sets both a valuation and classification for all properties in a municipality. MPAC may reassess the value or reclassify a property. If it does so, it will send the municipality a Supplementary or Omitted Assessment listing all of the changes. Upon receipt of such a notice, the municipality is required to adjust its tax roll and send a further tax bill.

[10] The Receiver marketed the property and on July 16, 2019, Justice Dietrich made the AVO to approve the sale of the Property. The Township was served with the Receiver’s Motion Record requesting approval of the Agreement of Purchase and Sale and seeking the AVO. The Township did not oppose the motion. The Property was sold to 121 for $13M and closed on September 29, 2019. Thereafter, the Receiver paid out the first and second mortgagees as well as the Receiver’s fees and disbursements, leaving $4.8 million in net sale proceeds.

[11] The Receiver was authorized by Court Order to pay $2M of the net sale proceeds to 190. After the payout of a third mortgage and settlement of a disputed claim, the Receiver continues to hold approximately $600,000 subject to ongoing administration costs. The only other party who has advanced a claim to the remaining sale proceeds is the Township. The claim by the Township was made more than two years after the sale of the Property closed.

Reconsideration of 190’s Municipal Taxes

[12] It is not disputed that while 190 was the owner of the Property, it requested a reconsideration of its tax assessment in 2017. Representatives of MPAC met with representatives of 190. 190 also provided extensive written material to MPAC in support of its position.

[13] After touring the property, MPAC and 190 entered into Minutes of Settlement (the “Settlement”) in December 2017 to settle the classification and value of the Property for the 2017, 2018 and 2019 tax years. As part of the settlement, MPAC agreed to confirm the tax class as Residential and also agreed to reduce the assessment of the Property from $2,262,000 to $963,000.

[14] The Township confirmed in writing on May 14, 2018 that a reduction in 190’s Tax Assessment had occurred due to signed Minutes of Settlement effective January 1, 2017. The letter set out the reduced taxes for 2017 and the estimated reduced taxes for 2018. The letter contained the following caveat:

*It should be noted that any improvements or upgrades to the property may result or cause an increase or change in assessment and thus an increase in annualized taxes.

[15] MPAC then issued an Amended Notice of Assessment in accordance with the Settlement. The Township did not appeal the Amended Notice of Assessment to the ARB. Rather, the Township issued tax bills to 190 thereafter in accordance with the Notices of Assessment which 190 paid. An email sent by then-Treasurer of the Township to the President of 190 (Mr. Dennis Bank), on March 29, 2018, confirmed that the Township had received a copy of the Settlement and confirmed the decrease of the assessment to $963,000 for the years 2017-2020 and that the Township would not be objecting to the Assessment.

[16] Mr. Bank confirmed in his affidavit, sworn January 14, 2022, that 190 did not change the use of the Property between the date of the Settlement and the sale in September 2019.

The Reassessment and Supplemental Tax Notice

[17] Prior to closing the sale, the Receiver obtained a Tax Certificate from the Township. The Tax Certificate disclosed that taxes of $5,464.24 were due and owing on September 30, 2019. The Receiver paid the adjusted and outstanding taxes on closing.

[18] On November 25, 2019 the Township issued a Supplemental Tax Notice to 121 in which it purported to impose $159,568.76 in Supplemental Taxes on the Property retroactive to January 1, 2017.The Notice stated that “Coding Change” was the reason for the Supplemental Taxes resulting in additional municipal and educational levies. The Township generated the Supplemental Tax Notice because it had received an Omitted Assessment Listing from MPAC in October 2019, one month after the issuance of the AVO, which reflected changes in the Property’s classification (from Residential to Commercial) and value for 2017, 2018 and 2019. Neither 121 nor the Township ever advised 190 of the Supplemental Tax Notice for reasons which will be explained below.

[19] On December 13, 2019, 121’s counsel wrote to Ray Morrison, the Treasurer and Chief Administrative Officer of the Township at that time, and objected to the payment of Supplemental Taxes on the basis that taxes had “vested out” with the AVO. Mr. Stuart McIlmoyle (“Mr. McIlmoyle”), the President of 121, had a telephone conversation with Mr. Morrison on January 14, 2020, in which Mr. Morrison confirmed to him that the Supplemental Taxes were not 121’s responsibility. That conversation is summarized in a January 14, 2020 email between Mr. Chris Ge, Vice-President of Maple Leaf Education North America Ltd., a company related to 121, and Mr. Morrison which is set out below:

From: Ray Morrison rmorrison@augusta.ca Sent: September 25, 2020 11:58 AM To: Chris Ge chris.ge@mapleleafts.com; Ray Morrison rmorison@ripnet.com Cc: Peter Owen phowen@shaw.ca; Mark Liu mark.liu@mapleleafschools.com; Penney Pan penney.pan@mapleleafschools.com Subject: RE: Tax Notice (Township of Augusta)

Good afternoon, Chris: I have attached a revised municipal tax billing for your property and supporting documentation. Please review and advise that you concur with our adjustment calculations. In summary, we wrote off the supplementary taxes, previous to the date MLS took ownership. In addition, interest on late payment was cancelled. Please contact me at your convenience if I can provide any additional information at the number below, or after hours on my cell at 613-498-5180. Thank you.

Ray Morrison, CPA/CA

[20] MPAC issued a Property Assessment Change Notice to 121 on November 5, 2019, and a Property Assessment Notice to 121 on November 12, 2019 (the “2019 Assessment Notices”). The deadline to submit a Request for Reconsideration of the 2019 Assessment Notices was March 4 and March 31, 2020, respectively.

[21] In September 2020, the Township sent a further Tax Notice to 121 seeking $312,079.76 in tax arrears which included the Supplemental Taxes. Mr. Ge emailed Mr. Morrison on September 21, 2020 to ask why the Township was seeking payment given the contents of Mr. Morrison’s January 14, 2020 email.

[22] Mr. Morrison responded by return email as follows: "Your account should have been adjusted accordingly based on our previous discussion. I will forward you an updated invoice with Maple Leaf Schools' assessment only tomorrow." Accordingly, on September 25, 2020, Mr. Morrison provided Mr. Ge with a revised Tax Bill. That bill is attached as Exhibit “I” to Mr. Ge’s affidavit and shows $0 taxes owing for 2017, 2018 and prior. There is $3,476.66 shown as owing from 2019 and current taxes owing in 2020 of $146,111.64. Given this communication, 121 took no further steps in relation to the Supplementary Taxes until it was contacted by the Township in the fall of 2021 about the same issue.

[23] Mr. Mark McDonald (“Mr. McDonald”), the current Treasurer of the Township, deposed that Township officials were not aware that Mr. Morrison had told 121 that the taxes had been “written off” until after Mr. Morrison left his job as Treasurer in October 2021.

[24] On December 15, 2021, the Township filed a proof of claim against 190 in the Receivership claiming the sum of $216,899.78 plus interests and costs.

[25] In support of its proof of claim, the Township relied on the Tax Certificate issued to 190 on December 15, 2021. The roll number on the Tax Certificate is not the tax roll number for the Property. The Receiver has surplus funds on hand which would cover the Supplementary Taxes being sought by the Township.

[26] On his cross-examination, Mr. McDonald admitted the following:

a. He manually created the December 15, 2021 Tax Certificate using a subordinated roll number. He agreed that such roll numbers are used for enumeration and information purposes only and that he had never created a Tax Certificate like this before;

b. He manually changed the name on the December 15, 2021 Tax Certificate to 190 and created it solely for the purpose of this Motion knowing that 190 was no longer the owner of the Property.

c. He was aware of the Settlement between the Township and 190;

d. He knew that MPAC had issued an Amended Property Tax Notice in 2018 which the Township did not appeal;

e. He agreed that the Township is not aware of any change of use or improvements to the Property;

f. He knew that the Township had issued a Tax Certificate to the Receiver showing current taxes of $5,464.24 with $0 taxes owing for previous years;

g. The Township was aware of the Receivership;

h. He prepared the September 25, 2020 Tax Certificate on Mr. Morrison’s instructions showing that no taxes were owed for 2017 and 2018 and a small amount owing for 2019. He was aware that the September 25, 2020 Tax Certificate did not contain any amounts related to the Omitted Assessments. He agreed that the September 25, 2020 Tax Certificate certified that the “back taxes” were no longer the responsibility of 121. While he thought that Mr. Morrison’s instructions to prepare the Certificate were strange, he agreed that the Certificate was binding on the Township.

i. He is not aware that the Township told 190 or the Receiver about the possibility of a reassessment.

j. The Township did not advise 190 of the Supplemental Tax Notice issued to 121 in 2019.

190’s Position

[27] 190 relies on the affidavits of Mr. Banks sworn on January 14 and 26, 2022. Mr. Banks was not cross-examined by the Township.

[28] 190 submits that it first learned of the alleged “back taxes” in September 2021 through the Receiver. 190 did not receive a copy of the Supplemental Tax Notice until October 2021 when it was provided with a copy through the Receiver.

[29] As 190 was never assessed under the 2019 Assessment Notices and did not receive copies of them, it did not take steps to appeal the assessments. 190’s position is that it would have appealed the 2019 Assessments given the Settlement entered into with MPAC in December 2017. 190 submits that MPAC is estopped from re-assessing the Property retroactive to 2017 as a result of the terms of the Settlement.

121’s Position

[30] 121 relies on the AVO and specifically those provisions in the AVO which vested the Property in 121 as purchasers “free and clear of all levies and charges.” The Township could have sought legal advice with respect to the position taken by 121 in relation to the AVO and 121’s counsel’s letter to Mr. Morrison in December 2019. It did not take any such steps.

[31] In addition, 121 relies on the communication between Mr. Morrison and Mr. Ge in January and September 2020 wherein Mr. Morrison confirmed that the taxes had been “written off” and then issued a revised Tax Bill which did not show any amounts owing for 2017, 2018 and only a small amount for 2019.

The Township’s Position

[32] The Township submits that at the time of granting the AVO, there were certain Omitted Assessments for the years 2017, 2018 and 2019 which had not been issued by MPAC. As such, the Supplemental Taxes had not been added to the tax roll for the Property. Upon receipt of the Omitted Assessments in October 2019, the Township was obligated to issue a notice for Supplemental Taxes due to change of the Property’s classification and value.

[33] As for Mr. Morrison’s advice to Mr. Ge in 2020 with respect to taxes having been “written off,” the Township submits that this was both inaccurate and wrong. Taxes cannot be “written off” by a municipality except in accordance with the provisions of the Municipal Act. Those provisions provide for a write off of taxes only where a municipal tax sale results in proceeds which are insufficient to pay the taxes owing in full. The Township concedes that Mr. Morrison did not advise Mr. Ge that the writing off of taxes could only be done by the Township in certain limited circumstances.

[34] The Township admits that the reclassification by MPAC to limited commercial use was an error. However, any question dealing with an error in an assessment must be dealt with in accordance with the statutory scheme in the Municipal Act.

[35] Further, the taxes were moved to a subordinate tax roll for the Property (the “Subordinate Tax Roll”) not for any nefarious reason but simply to allow them to be administered separately from the main tax account.

[36] In January 2020, the Township received a letter from Mr. McIlmoyle on behalf of 121 stating that he was willing to work with the Township to identify options to obtain the Supplementary Taxes from either 190 or the Receiver. The Township submits that this was an implicit acknowledgement by 121 that the taxes were owing. Had 121 notified 190 of the Supplementary Taxes, 190 would have had an opportunity to appeal.

[37] After the start of the pandemic, the Township was focused on public health issues and did not re-direct their attention to this matter until the summer of 2021.

[38] The Township has submitted a Proof of Claim in accordance with the Claims Procedure approved by this Court in December 2021. A Tax Certificate for the Subordinate Tax Roll was issued by the Township Treasurer on December 15, 2021. As of January 21, 2022, taxes in the amount of $219,544.90 including interest are outstanding plus legal costs of $40,000. Interest continues to accrue at the rate of 1.25% per month.

[39] There is no prejudice to having the issue of Mr. Morrison’s error and MPAC’s error heard by the ARB which can order that the taxes be refunded.

The Issues

Issue #1 – Has the Township Proven a Claim Against 190

[40] The answer to this must be no. MPAC and 190 settled the issue of both classification and assessed value by way of signed Minutes of Settlement. This resulted in an Amended Assessment Notice for 2017, 2018 and 2019. The Township took no steps to appeal either the Settlement or the Amended Notice of Assessment despite being aware of both.

[41] In Mr. McDonald’s evidence, he infers that the Township did not take steps to appeal the Settlement or the Amended Assessment Notice because it was aware that an Omitted Assessment Notice was coming out in relation to a change of use on the Property. This evidence is somewhat concerning as it implies that MPAC’s entry into the Settlement was disingenuous as it had no intention of abiding by it, knowing all along that it intended to reassess based on commercial use. This also means that the Settlement was binding on 190 but somehow not on MPAC or the Township who could decide to issue a retroactive notice after the sale of the Property for the same period as the Settlement.

[42] Mr. McDonald also gave evidence that the Township viewed the outstanding Supplementary Taxes as “uncollectible” until it received advice from a bankruptcy trustee in the late summer of 2021 that this might not be the case. In the intervening period, both 121 and 190 were left to rely on the Settlement and the commitments made by Mr. Morrison, blithely allowing appeal periods to pass by based on such reliance. They are now assured by the Township that it would support their appeal to extend the time for appeal to the ARB based on Mr. Morrison’s inaccurate statements and MPAC’s palpable error in issuing the Supplementary Notice of Assessment. However, that is cold comfort to 190 or 121 who, having paid the outstanding amounts, would have no assurance that they would be refunded or what position the Township would take on an appeal.

[43] 190 paid its taxes in accordance with the Amended Notice of Assessment post Settlement and no further Notice of Assessment was issued to 190 while it was the owner of the Property. I agree with 190 that the Tax Certificate “created” by Mr. McDonald cannot be relied upon by the Township. It was issued to a non-owner and manually manipulated to fit the Township’s requirements two years after the sale to 121.

[44] For the reasons above, I find that the Township has not proven its claim against 190.

Issue #2 – Vesting Out

[45] It is undisputed that the Township was served with the motion for a Sale Approval Order and did not respond to that motion.

[46] The relevant section of the AVO sets out as follows:

2. THIS COURT ORDERS AND DECLARES that upon the delivery of a Receiver's certificate to the Purchaser substantially in the form attached as Schedule A hereto (the "Receiver's Certificate), all of the Debtor's right, title and interest in and to the property described in the Sale Agreement, including Schedule B and Schedule C hereto, and in the Chattels listed in Schedule D hereto, shall vest absolutely in the Purchaser, free and clear of and from any and all security interests (whether contractual, statutory or otherwise), hypothecs, mortgages, trusts or deemed trusts (whether contractual, statutory, or otherwise), liens, executions, levies, charges, or other financial or monetary claims, whether or not they have attached or been perfected, registered or filed and whether secured, unsecured or otherwise (collectively, the "Claims") including, without limiting the generality of the foregoing: (i) any encumbrances or charges created by the Order of the Honourable Justice Pattillo dated January 7, 2019; (ii) those claims listed on Schedule E hereto (all of which are collectively referred to as the "Encumbrances", which term shall not include the permitted encumbrances, easements and restrictive covenants listed on Schedule F) and, for greater certainty, this Court orders that all of the Encumbrances affecting or relating to the Purchased Assets are hereby expunged and discharged as against the Purchased Assets.

[47] It is clear from the wording of paragraph 2 of the AVO that claims by creditors are “vested out”, including government creditors. While paragraph 2 does not expressly use the term “taxes”, I find it is not necessary to do so. First, taxes were adjusted on closing such that there were no taxes owing once the sale transaction took place. Second, the word “levies” is used by MPAC and the Township to describe different types of taxes, i.e. “municipal” levies and “education” levies. I do not see how the two terms can be mutually exclusive. They are the same thing.

[48] In Third Eye Capital Corporation v. Ressources Dianor Inc./Dianor Resources Inc., 2019 ONCA 508, 435 D.L.R. (4th) 416, at para. 80, the Court reviewed the usefulness and importance of vesting orders as follows:

[80] The necessity for a vesting order in the receivership context is apparent. A receiver selling assets does not hold title to the assets and a receivership does not effect a transfer or vesting of title in the receiver. As Bish and Cassey state in “Vesting Orders Part 2”, at p. 58, “[a] vesting order is a vital legal ‘bridge’ that facilitates the receiver’s giving good and undisputed title to a purchaser. It is a document to show to third parties as evidence that the purported conveyance of title by the receiver – which did not hold the title – is legally valid and effective.” As previously noted, vesting orders in the insolvency context serve a dual purpose. They provide for the conveyance of title and also serve to extinguish encumbrances on title in order to facilitate the sale of assets.

[49] Purchasers in the context of Receiverships must be able to rely on Vesting Orders or the modern insolvency regime would crumble. In the Third Eye case, the Court was dealing with royalty rights related to mining rights. The Court described the royalty rights as “more than a fixed monetary interest that attached to the property”: at para. 111. Those rights were vested out on the sale of the assets.

[50] In Bloom Lake, g.p.l. (Arrangement relatif à), 2016 QCCS 5620, aff’d 2017 QCCA 15, the Quebec Superior Court dealt with Vesting Orders in the context of a Companies’ Creditors Arrangement Act, R.S.C., 1985, c. C-36 (“CCAA”) case. In that case, the Sept-Îles Port Authority purchased certain assets from the Bloom Lake entities pursuant to a liquidation process under the CCAA. The transactions were approved by the Court pursuant to typical Vesting Orders. Post purchase, the Port Authority applied to the City for subdivision approvals. The City refused the applications until the pre-sale taxes were paid in full and asserted a claim against the Purchasers as “subsequent acquirers” pursuant to s.498 of the Cities and Towns Act, C.Q.L.R. c. C-19, which permits such collection from subsequent owners. The Purchasers applied to the Superior Court seeking declaratory relief to confirm that the claimed taxes were purged pursuant to the Vesting Order.

[51] The Court granted the Purchasers’ motion concluding that the Vesting Orders were sufficiently broad to encompass the pre-transaction taxes. The Court importantly added that one purpose of Vesting Orders was to allow a debtor’s assets to be sold at the highest price. If eventual claims for taxes were known for prospective purchasers, they would no doubt have offered a lower price: at para. 23.

[52] Further, the Court held that the provisions in the Cities and Towns Act relating to “subsequent acquirers” was ineffective against purchasers in a CCAA context. This case can be linked in context to the Quebec Court of Appeal’s ruling in Le château d’Amos ltée c. Banque canadienne impériale de commerce, [1999] R.J.Q. 2612 (QCCA), where the Court held that this same section under the Cities and Towns Act was ineffective in proceedings under the Bankruptcy and Insolvency Act, R.S.C., 1985, c. B-3 (“BIA”). I, therefore, reject the arguments made by the Township that this Court does not have jurisdiction to deal with taxes levied on “subsequent acquirers” such as 121 and find that the Supplemental Taxes were vested out by the AVO.

[53] However, if I am wrong with respect to my interpretation of the weight to be given to the Vesting Order, I rely on the Township’s post sale representations to 121 in relation to any special lien which may exist on the Property. While the Township submits that Mr. Morrison’s assurance that the Supplementary Taxes would be “written off” was inaccurate and without any statutory authority or basis, 121 relied on that statement in February and in September 2020. Mr. Morrison was both the Treasurer and CAO of the Township at time. He is a qualified accountant and was the highest non-elected representative of the Township. It is therefore not unreasonable that 121 relied on those clear statements.

[54] The Township is critical of 121 for not informing 190 about the Supplementary Tax issue such that 190 could have taken steps or appealed. However, this is a somewhat unfair accusation. Why would 121 inform 190 when they had been assured by the Township that no taxes were owing?

[55] While estoppel cannot override the law, it can be advanced as a defence to the position of the Township that the Supplementary Taxes were owed even after Mr. Morrison confirmed they would be “written off.” This is somewhat similar to the situation in Forbes v. Caledon (Town), [2009] O.J. No. 928 (Ont. S.C.), at paras.74-75, in which the Town countenanced certain non-conforming uses on certain conditions. The Court found that the owners were permitted to continue with the non-conforming uses because the owners complied with the conditions imposed by the Town.

[56] Further, even if the statements made by Mr. Morrison are insufficient to bind the Township, certainly the Tax Certificate issued on September 25, 2020 must be. Mr. McDonald, in his cross-examination, agreed that Tax Certificates issued by the Township are binding and may be relied upon. In this regard, s.352 of the Municipal Act is relevant, which states:

Statement

352 (1) The treasurer shall, upon the written request of any person, give to that person an itemized statement of all amounts owing for taxes in respect of any separately assessed rateable property as of the day the statement is issued. 2001, c. 25, s. 352 (1); 2006, c. 32, Sched. A, s. 141.

Effect

(2) A statement given under subsection (1) is binding on the municipality. 2001, c. 25, s. 352 (2). [Emphasis added.]

[57] The Township was adamant that this Court should not rule on the issue of the Township’s post sale conduct. That is, if there was no recourse against 190 and the Receiver, then the Township should be entitled to bring a separate proceeding against 121. This is both inefficient and contrary to s. 138 of the Courts of Justice Act, R.S.O. 1990, c. C.43, which instructs the Court to avoid multiple legal proceedings where possible. The record before the Court was complete, including significant documents, affidavits from all stakeholders and a transcript of Mr. McDonald’s examination. Most of the background facts in this case were uncontested. There is no reason to pursue further legal proceedings in this matter.

Issue #3 Jurisdictional Issues

[58] The Township argues that this Court does not have jurisdiction to deal with an Omitted Assessment. A Notice of Appeal must be delivered to the ARB within 120 days of the issuance date. A property owner may request an extension of time for bringing such an appeal. The appeal is made pursuant to s. 40 of the Assessment Act. Where an appeal is taken under that section, the jurisdiction of this Court is ousted. As such, Ontario courts have dismissed claims relating to the quantum of assessments which could have been challenged on appeal to the Board: see Elders v. MPAC and West Gray (Municipality of), 2012 ONSC 5694, at paras. 10-13.

[59] As well, a landowner or other person may apply to a Treasurer to cancel, reduce or refund all or part of levied taxes due to an alleged error in a supplementary or omitted assessment.

[60] The Township submits that as 190 or 121 seek to challenge the 2019 Assessment Change Notice based on the 2017 Settlement, such a challenge must be brought to the ARB and not to this Court. As there has been no evidence of any error in the quantum of the Supplemental Taxes, this Court has no jurisdiction to reduce the quantum of taxes or make any determinations related to the Property Assessment Change Notice.

[61] Finally, the Township also submits that this Court is unable to make a finding that taxes were “written off” as this can only be done in accordance with s.354(2)(a) of the Municipal Act and only on the recommendation to the Treasurer that the taxes are uncollectible after a tax sale. None of those statutory requirements are present here.

[62] I do not agree with the position of the Township on the jurisdictional issues. This Court has not made any finding with respect to the quantum of the Supplementary Taxes. Rather, this Court has found that the AVO vested out the Supplemental Taxes and as such the Township is not entitled to receive any amount of taxes from the surplus proceeds. To do otherwise would mean that MPAC could potentially wait years and then issue Omitted Assessments to new owners and/or try to collect from previous owners even when they had entered into settlements with respect to both value and classification. Permitting such conduct would be contrary to the scope and function of an AVO in the context of a Receivership as set out in the Third Eye case above.

[63] That is, whereas in this case, the Supplementary Tax Notice was not delivered until two months after closing, the AVO must be relied upon to vest out contingent, unknown interests which arise after the AVO is issued. To do otherwise, would create chaos and uncertainty in the face of what are intended to be organized processes in the context of insolvencies.

[64] This case is very different from the case relied upon by the Township, namely Credit Union Central of Ontario Limited v. Heritage Property Holdings Inc., 2008 ONCA 167. In that case, the parties to the transaction knew that the purchased property’s taxes would be re-assessed, however, the amount of reassessment was not crystallized on closing. The Court of Appeal held that the Vesting Order meant that any reassessed taxes which were incurred up to the date of the Receiver’s Certificate were the responsibility of the Receiver. Unlike the case at bar, there was no dispute about the fact of the reassessment nor were there any assurances from the municipality that the purchaser need not pay. In the case at bar, the Notice of Supplementary Taxes was not issued until after the date of closing. The Court in Credit Union, at para. 26, emphasized the extent of the protection of a Vesting Order for a purchaser.

[65] The Township argues that if the Supplementary Taxes are vested out, then the Township may rely on a special lien which continues to attach to the surplus proceeds. I do not agree. Both 190 and 121 are entitled to rely on the Tax Certificate dated September 25, 2020, which states that no taxes are owing. The Certificate is binding on the Township and able to be relied on by both 121 and 190. There is no reason to pursue any process before the ARB as there are no taxes owing for the relevant periods as per the September 25, 2020 Tax Certificate.

[66] If I am wrong with respect to my reliance on the Tax Certificate, the Tax Certificate combined with the Settlement is sufficient evidence of detrimental reliance by both 190 and 121 on the documented commitments of both MPAC and the Township.

[67] If I am wrong on the detrimental reliance issue, I find there was no statutory authority to issue a tax bill to 190 post sale which led to Mr. McDonald having to manually create one in 2021 including a subordinate tax roll number some two years after the sale had closed. The only way to issue a tax bill to 190 would be in accordance with an assessment by MPAC. The only assessment which existed was issued in relation to 121.

[68] Finally, and most importantly, this Court is not exercising its jurisdiction in relation to the provisions of any provincial legislation. Rather, it is doing so in the context of a Receivership and the provisions of the BIA. The BIA is federal legislation which is paramount to any provincial legislation in this context including the Municipal Act and the Assessment Act. As per the Quebec decisions cited above, the Township cannot bypass the effect of the CCAA and the BIA by relying on provincial legislation to obtain taxes from subsequent purchasers.

Orders and Costs

[69] Given all of the above, I find that the Township has not met its onus to submit a claim for taxes to the Receiver within the Court ordered claims process. Further, the Township cannot pursue a claim against 121 as the taxes were either vested out on the purchase of the Property or 121 is entitled to rely on the Tax Certificate issued to it in September 2020 by Mr. Morrison.

[70] The parties each provided a Costs Outline. The parties agreed that the scale of costs should be partial indemnity in this case. The Township’s costs were $25,000. 121’s costs were $16,000. 190’s costs were $48,000. The costs must be proportionate the amounts at stake and the length of the proceeding (two hours to argue). There were extensive motion records and supplementary motion records as well as the cross-examination of Mr. McDonald. Therefore, the Township shall pay costs of $16,000 to 121 and $40,000 to 190.

C. Gilmore, J. Date: April 1, 2022