) ) CITY OF TORONTO Applicant – v. –, 2013 ONSC 6137

CITATION : Toronto (City) v. Municipal Property Assessment Corporation, 2013 ONSC 6137 DIVISIONAL COURT FILE NO.: 444/10 DATE: 20131001 ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT HAMBLY, MOLLOY and HERMAN JJ. BETWEEN: ) ) CITY OF TORONTO Applicant – and – MUNICIPAL PROPERTY ASSESSMENT CORPORATION, SHANE B INC., RAINBOW DEVELOPMENTS INC. and ASSESSMENT REVIEW BOARD Respondents ) ) ) ) ) ) ) ) ) ))) Angus MacKay and Rodney Gill , for the Applicant J. Bradford Nixon and Kathleen D. Poole , for the Respondents Shane B Inc. and Rainbow Developments Inc.

Karey Lunau , for the Respondent Municipal Property Assessment Corporation ) ) ) HEARD: April 19, 2013 in Toronto molloy j.: REASONS FOR DECISION A. INTRODUCTION [ 1 ] This is a stated case brought pursuant to s. 43 of the Assessment Act [1] (“the Act”), in which the Assessment Review Board (“ARB”) seeks the opinion of the Divisional Court on two issues of law. [ 2 ] There are no facts in dispute.

The case involves two properties in the City of Toronto, both of which historically had been exempt from paying municipal property tax – one because it was occupied by a church, and the other because it was occupied by a school. The properties were assessed in the normal course over the years by the Municipal Property Assessment Corporation (“MPAC”) and a current value was attributed to them.

Neither the property owners nor the City of Toronto challenged the current values assessed by MPAC during this period. [ 3 ] In each case, a portion of the property was subsequently sold to a developer, such that the severed portion now became subject to property tax. There is no question that MPAC has the power to correct the assessment to show the new status of the property previously exempt from tax. Further, there is no question that MPAC, in doing so, must ascribe a current value to the severed portion that is now liable for tax.

The issue that arises is whether MPAC, or alternatively the ARB, is empowered at that same time to assess the severed property at a new market value based on the fact that the prior current value assessment for the property as a whole was too low. [ 4 ] The stated case asks the court to answer the following two questions: [2]

(1) When the Municipal Property Assessment Corporation returns an omitted or supplementary assessment, pursuant to s. 33(3) or s. 34 (1) (b)(

i) of the Act to change the tax status of a property from exempt to taxable, can it also alter the property’s current value if there has been no physical change to the property?

(2) On an appeal of the supplementary or omitted assessment referred to in (1) can the ARB, pursuant to s. 44(1) and/or s. 45(1) of the Act , alter the property’s current value if there has been no physical change to the property? [ 5 ] For the reasons that follow, I would answer both questions in the negative. Because the approach taken by MPAC was somewhat irregular, I will deal first with the first question (powers of MPAC), then turn to the second question (powers on appeal) and finally deal with the implication of these rulings for the properties in this case, given the procedure adopted by MPAC. B.

THE FACTS 650 Sheppard Avenue – The Church [ 6 ] The Passionate Church of Canada (“the Church”) owned 7.16 acres of land at 650 Sheppard Avenue in the City of Toronto (“the Sheppard property”). The land contained a church and a manse. In the assessment roll for 2004, MPAC valued the property at $9,093,000. It classified the property as exempt, except for $78,000 in relation to the manse. On December 9, 2004, the Sheppard property was severed into two parcels. Shane B Inc. purchased one portion (5.03 acres) for a purchase price of $13,663,000. The Church kept the remaining 2.13 acres.

The church building and the manse were on the Shane B property. The Church planned to demolish the existing church and build a new church on its portion of the property. Shane B planned to build an apartment building on its property. [ 7 ] On December 14, 2004, when MPAC returned the assessment roll for 2005, it did not show the new ownership of the severed parcels of land. It returned the assessment roll identically as it had for the 2004 taxation year. On March 29, 2005, the City appealed that assessment to the ARB pursuant to s. 40(1) of the Act .

The City appealed both with respect to the current value of the property and the fact that the severance and change in status had not been reflected. [ 8 ] In November, 2005, MCAP returned “omitted assessments” for the 2004 and 2005 tax years, purporting to act under s. 33(3) of the Act . First it “deleted” the original assessment from the roll, thus cancelling the prior assessment. Then it assigned new roll numbers for the two new portions of the previous Church property and ascribed current values for each portion.

Effective December 23, 2004, the value of the church property was stated to be $1,214,000 (with an exempt status) and the value of the Shane B. property was stated to be $7,877,000. The total of these values is $9,093,000, which is the total assessed current value for the property in the assessment roll for 2004. Thus, MPAC essentially used the existing current value assessment for the property and allocated it between the two new parcels created as a result of the severance.

There were no physical changes to the Sheppard property in 2004 or 2005. [ 9 ] On February 15, 2006 the City filed another appeal pursuant to s. 40 of the Act , this time an appeal from the November 2005 omitted assessment. Based on comparable sales, the City’s position is that the current value of the Shane B property is far higher than is reflected in the current value assessment set by MPAC. The City accepts that MCAP correctly valued the church property at $1,214,000. However, it submits that the ARB should designate the current value of the Shane B property at $23,157,000, from December 9, 2004.

Hollywood Avenue – The School [ 10 ] In 2006 the Toronto School Board (“the School Board”) owned 2.94 acres of land on Hollywood Avenue in the City of Toronto. MPAC had designated the property on the assessment roll for 2006 as exempt because it was land used by a school. The assessment roll for 2006 showed the current value of the property to be $3,215,000. On December 4, 2006, the property was severed. Rainbow Development Inc. purchased 1.08 acres at a purchase price of $15,112, 791, upon which it intended to build a condominium.

The School Board retained 1.86 acres, upon which its school was located. [ 11 ] MCAP returned the assessment roll for 2007 on December 12, 2006 in a form identical to the previous year. MCAP did not reflect the severance and did not show Rainbow as an owner. The City did not appeal this assessment in 2007. [ 12 ] In November 2007, MCAP returned an omitted assessment pursuant to s. 33(3) of the Act . It followed the same procedure as it had used for the Sheppard property, first deleting the property from the roll and then assigning new roll numbers for the two new properties.

The school portion of the property remained exempt and was valued at $2,518,000. The Rainbow property was classified as multi-residential. MCAP showed its current value to be $697,000 effective December 4, 2006. This is the value proportionate to the amount of land it received from the School Board based on the current value of the Hollywood property shown on the assessment roll for 2006 of $3,215,000. Thus, each property was given its proportionate share of the 2006 current value.

There were no changes to the Rainbow property in 2006 and 2007. [ 13 ] In February 2008, the City appealed to the ARB from the omitted assessment returned in 2007 for the Rainbow property. Based on comparable sales, it seeks to have the ARB show the current value on the Assessment Roll for the Rainbow property at $10,060,000 effective December 4, 2006. C. THE POSITION OF THE PARTIES [ 14 ] The City of Toronto submits that the Act must be interpreted in a manner that best achieves correct assessments, so that the property tax burden is distributed equitably among all property owners.

The City takes the position that when MPAC returns an omitted assessment under s. 33(3), it may alter the property’s prior assessed value to show the true market value of the land. Therefore, it submits that when MPAC returned the omitted assessments for these two properties to reflect the change in exempt status, those assessments should also have been adjusted to reflect the true values of the lands, which were significantly greater than the values previously assessed.

Alternatively, the City argues that even if MPAC has no power to adjust the current value on an omitted assessment, the ARB has the power to do so on appeal. [ 15 ] MPAC accepts the importance of correct assessments, but submits that the underlying principle of finality must also be considered in interpreting the legislation. MPAC agrees that the assessed values shown in the omitted assessments for the two properties are not “correct” and should be higher.

However, MPAC takes the position that during a taxation year, it has no power to alter the assessment roll based on a changed opinion as to the market value of the property. Unless there has been some physical alteration of the

property (which was not the case here), where ownership is now divided between more than one person, MPAC’s only power is to change the exempt status designation and allocate the assessed value of the property proportionately. [ 16 ] Shane B and Rainbow also rely upon the principle of finality. They note that for each year prior to the severances the City could have appealed the assessed value of the properties under s. 40(1) of the Act , regardless of the properties’ exempt status, but failed to do so.

They submit that MPAC had no jurisdiction to change the assessed value of the property under either an omitted or supplementary assessment, and that the omitted assessments it returned for the years in question were therefore accurate. Further, they argue that the ARB has no greater jurisdiction to change the assessed value than does the original assessor, MPAC. D. RELEVANT STATUTORY PROVISIONS [ 17 ] The starting point for taxation on property is the assignment of a current market value for the property.

In Toronto, assessing the value of the property is the responsibility of MPAC, which is required to prepare an assessment roll for the City containing, among other things: identification of the persons liable to assessment; the amount assessable against each person; a description of the property sufficient to identify it; the size of the property; its current value; the value liable to taxation; and its classification. [3] For this purpose, “land” includes all buildings and structures on it and “current value” means “in relation to land, 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.” [4] [ 18 ] Property is either taxable or exempt.

Unless an exemption applies, all property is assessable and taxable. Churches and schools are among the listed exemptions in the Act . [5] [ 19 ] MPAC assesses all property each year, whether that property is taxable or exempt. The valuation is required to be based on “current value” and is calculated as of a prescribed valuation date. [6] By the second Tuesday of December each year, MPAC is required to deliver an assessment roll to the City clerk, from which the City clerk prepares the tax roll. [7] [ 20 ] Any person may appeal an assessment under s. 40(1) (

a) of the Act , which states: 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, (

a) on the basis that, (

i) the current value of the person’s land or another person’s land is incorrect, (ii) the person or another person was wrongly placed on or omitted from the assessment roll, (iii) the person or another person was wrongly placed on or omitted from the roll in respect of school support, (iv) the classification of the person’s land or another person’s land is incorrect, or (

v) 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; [ 21 ] An appeal under s. 40 is subject to time requirements.

For the most part, the time requirement is that the appeal must be brought within 90 days after the notice of assessment has been mailed or before March 31 of the taxation year. [8] If no appeal is brought, the assessment roll is deemed to be final, regardless of any errors within it, subject to limited prescribed exceptions. [9] [ 22 ] For the most part, property is assessed only once per year and that assessment is final, subject only to appeal.

There are, however, some provisions in the Act permitting changes to an assessment during the year, primarily to reflect changes such as improvements to the property or a change in its classification or status. [ 23 ] The first question in the stated case now before the court seeks clarification of the powers of MPAC in delivering “omitted” and “supplementary” assessments. These types of assessments arise where there has been some omission of property from the rolls, or some change in the property within the taxation year. The stated case refers specifically to ss. 33(3) and 34(1)(b)(ii).

However, it is useful to consider other subsections of ss. 33 and 34 for purposes of comparison, and they are therefore set out below in full. [ 24 ] Omitted assessments are dealt with in ss. 33(1) and 33(3) as follows: 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: 1. The assessment corporation shall make any assessment necessary to correct the omission . 2. 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. 3.

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. 33

(3) The following rules apply if land liable to taxation has been entered on the tax roll for the current year or for all or part of either or both of the last two preceding years as exempt from taxation, and no taxes have been levied on that land: 1. The assessment corporation shall make any assessment necessary to correct the omission. However, no change shall be made if a court

or tribunal has decided that the land is not liable to taxation. 2. If the land is 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 land had been entered in the tax roll as being liable to taxation. 3.

If the land is 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 land had been entered in the tax roll as being liable to taxation. [ 25 ] Supplementary assessments are governed by s. 34, the relevant portion of which provides: 34.

(1) If, after notices of assessment have been given under

section 31 and before the last day of the taxation year for which taxes are levied on the assessment referred to in the notices, (

a) an increase in value occurs which results from the erection, alteration, enlargement or improvement of any building, structure, machinery, equipment or fixture or any portion thereof that commences to be used for any purpose; (

b) land or a portion of land ceases, (

i) to be exempt from taxation, . . . (

c) Repealed: 1997, c. 5, s. 22 (1). (

d) a pipeline increases in value because it ceases to be entitled to the reduction provided for in subsection 25 (9) , the assessor may make the further assessment that may be necessary to reflect the change, and upon receiving notice of the further assessment, the clerk of the municipality or, in the case of land in non-municipal territory, the Minister shall enter a supplementary assessment on the tax roll and the amount of taxes to be levied thereon shall be the amount of taxes that would have been levied for the portion of the taxation year left remaining after the change occurred if the assessment had been made in the usual way. [ 26 ] The second question in the stated case relates to the powers of the ARB on appeal under ss. 44(1) of the Act , which states: 44.

(1) Upon an appeal on any ground against an assessment, the Assessment Review Board or court, as the case may be, may reopen the whole question of the assessment so that omissions from, or errors in the assessment roll may be corrected, and the amount for which the assessment should be made, and the person or persons who should be assessed therefor may be placed upon the roll, and if necessary the assessment roll, even if returned as finally revised, may be opened so as to make it correct in accordance with the findings made on appeal. [ 27 ] Also relevant is s. 45 of the Act dealing with the powers and functions of the ARB, as follows: 45.

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. E GENERAL PRINCIPLES OF STATUTORY

INTERPRETATION [ 28 ] All parties are in agreement as to the general principles to be applied in interpreting this legislation. The provisions of the Act must be read in their statutory context having regard to the ordinary and grammatical meaning of the words used, harmoniously with the scheme and object of the Act and the intention of the legislature. [10] [ 29 ] The applicable principles are conveniently summarized in this Court’s decision in Municipal Property Assessment Corporation v. BCE Place [11] as follows (at paras. 65-66): 65.

In construing a statute, the language of the statute must be addressed in its total context, having regard to the purpose of the legislation, the consequences of proposed

interpretations, the presumptions and special rules of

interpretation, as well as admissible external aids. After considering all these indicators of legislative meaning, the court must adopt an

interpretation that is appropriate. An appropriate

interpretation is one that can be justified in terms of (

a) its plausibility, that is, its compliance with the legislative text; (

b) its efficacy, that is, its promotion of the legislative purpose; and (

c) it’s ( sic ) acceptability, that is, the outcome is reasonable and just (see: Professor R. Sullivan, Sullivan on the Construction of Statutes , 5 th ed. (Markham: LexisNexis, 2008) at 3-4 [Sullivan]). 66. The following guides are to be used to assist in interpreting a taxing statute: (

i) The

interpretation of tax legislation should follow the ordinary rules of

interpretation; (ii) (

a) A legislative provision should be given a strict or liberal

interpretation depending on the purpose underlying it, and that purpose must be identified in light of the context of the statute, its objective and the legislative intent: this is the teleological approach; (

b) The teleological approach will favour the taxpayer or the tax department depending solely on the legislative provision in question, and not on the existence of predetermined presumptions. (iii) Substance should be given precedence over form to the extent that this is consistent with the wording and objective of the statute.

(iv) Only a reasonable doubt, not resolved by the ordinary rules of

interpretation, will be settled by recourse to the residual presumption in favour of the taxpayer. (citations omitted) [ 30 ] 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. [12] 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 described this tension in Toronto (City) v. Wolf 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. F. ANALYSIS: QUESTION ONE [ 31 ] In each of these cases, just prior to the end of the year, property was severed with the result that there were now two parcels and two property owners, instead of one. Further, although one portion of each original property continued to hold its exempt status, the owners of the other portions now became liable to pay property tax.

MPAC failed to pick up that change either in the year in which it occurred or for the next tax year. Clearly, MPAC had jurisdiction to change the status and owners of the property through supplementary and omitted assessments. The question is whether, at that time, MPAC could also change the assessed current value of the property. [ 32 ] It is also clear that every year the City had a right of appeal under s. 40 if it wished to challenge the accuracy of the current value at which the properties were assessed, regardless of the fact that the properties were exempt from paying tax.

Until the properties were severed, the City did not choose to exercise that option. [ 33 ] MPAC became aware of the severances in the tax year after they had occurred, at which point MPAC purported to act solely by issuing omitted assessments under s. 33(3) of the Act . The stated case seeks this court’s opinion as to the jurisdiction of MPAC to change current values at the time of a s. 33(3) omitted assessment, and also asks the same question with respect to MPAC’s power on a s. 34(1) (b)(

i) supplementary assessment. This is not merely a question of academic interest. Typically, where a property’s exempt status is changed during a taxation year, a supplementary assessment would be issued under s. 34(1)(b)(i) (changing the property’s tax status from exempt to taxable as of the sale date and carrying forward to the end of that tax year).

However, if this does not happen, or if because of some other error property subject to tax is shown as exempt and no taxes are levied, then an omitted assessment could be returned under s. 33(3). [ 34 ] Accordingly, I will address the issue of supplementary assessments undertaken in the normal course under s. 34(1)(b)(i), and then consider the situation for omitted assessments under s. 33(3). Supplementary Assessments: Section 34(1) (b)(i) [ 35 ] Section 34(1)(b)(

i) is designed to address the exact situation that occurred with these two properties – “a portion of land cease[d] to be exempt from taxation” after the annual notice of assessment had been given and before the end of the taxation year. In that situation, the Act provides that “the assessor may make the further assessment that may be necessary to reflect the change .” [ 36 ] In the course of argument, counsel for the City conceded that the jurisdiction under s. 34(1) (b)(

i) is limited to reflecting the change in status and does not include the power to alter the current value of the property. That is also the position taken by the property owners and by MPAC. [ 37 ] I agree with the position taken by all counsel. The same restrictive language applies whether the change in status is for an entire parcel of land or for a portion of land. Where the land is no longer exempt, the assessor can issue a further assessment to reflect “ the change.” The “change” referred to is clearly the change in status.

The power to issue a new assessment is restricted only to reflecting that change, nothing more. In my view, that is the plain meaning of the language used. It also accords with the principle of finality. A current value had already been assessed for the property for that year, and no appeal having been taken, that current value was deemed to be correct by s. 41 of the Act . [ 38 ] Further, the structure of s. 34(1) must be taken into account. It has three subparagraphs: (a), (

b) and (d). Both subparagraphs (

a) and (

d) relate to “increases in value” whereas subparagraph (

b) relates to situations in which land “ceases” to fall into a particular category. In all three situations, the only further assessment that is authorized is one “that may be necessary to reflect the change .” Subsection (

a) relates to a situation where “an increase in value occurs which results from the erection, alteration, enlargement or improvement of any building, structure, machinery equipment or fixture.” Even in that situation, the language of the

section restricts the change in the assessment to that which is “necessary to reflect the change.” [ 39 ] In Magee v. MPAC , [13] this Court considered a case in which buildings constructed on a golf course had been missed in assessments over a period of several years. MPAC issued omitted assessments under s. 33(1) taking the position that the buildings (which fall within the definition of “land”) had been “omitted” under the prior assessments in error.

The issue before the court was whether the assessment of the buildings in question should be subject to assessment under s. 33 as “omitted” (which would go back for two years) or whether the appropriate assessment was under s. 34(1)(a) (which had no retroactive effect). The Divisional Court held that s. 33 was the appropriate mechanism because what was at issue was an error correction, rather than an adjustment to reflect a change. At paragraph 15 of its Reasons, the Court adopted the following excerpt from an October 27, 2006 ARB decision in A. Mantella & Sons Ltd. v. MPAC, Region No. 9 (at p. 5):

…the purposes of s. 33 and 34 of the Act are different. The purpose of s. 33 is to allow assessments that have been omitted from the assessment roll in error, to be caught and added to the assessment roll, subject to the preconditions for doing so set out in

section 33 being satisfied. The purpose of

section 34 is not to correct errors in or omissions from the assessment roll; rather,

section 34 is an assessing section, and its purpose is to allow new buildings and structures that have commenced to be used in a year after the assessment roll has been issued for that year, to be assessed for the balance of the year. [emphasis added] [ 40 ] Accordingly, in my view, the scope of s. 34(1) (b)(

i) is narrow. Its purpose is simply to address the change in exempt status that occurs during a taxation year. It does not provide any additional power to MPAC to change the current value of the property solely because the exempt status has changed.

Omitted Assessments: Section 33(3) of the Act [ 41 ] The trigger that enables an omitted assessment under s. 33(3) of the Act is where “land liable to taxation has been entered on the tax roll for the current year or for all or part of either or both of the last two preceding years as exempt from taxation, and no taxes have been levied on that land.” In other words, property upon which tax should be paid is incorrectly listed on the assessment roll as being exempt, such that no property tax is therefore charged.

In that situation, the Act stipulates that the assessor “shall make any assessment necessary to correct the omission.” [ 42 ] The City points to the difference in wording between the supplementary assessment power (“the further assessment necessary to reflect the change”) and the omitted assessment power (“any assessment necessary to correct the omission”) and argues that the latter is a broader power that encompasses further error correction to include the accurate current value of the property. [ 43 ] I do not agree. The

interpretation urged by the City might be appropriate if s. 33(3) gave MPAC the power to make “any assessment necessary to correct the prior assessment .” If so, it might be arguable that correction of the “prior assessment” would include correction of the current value if it in fact was inaccurate.

However, the language of s. 33(3) is specifically restricted to correcting “the omission.” It is clear from the plain wording of this provision, particularly when read in the context of the legislation as a whole, that the “omission” referred to is the failure to designate the property as subject to taxation. [ 44 ] This Court was not referred to any case in which s. 33(3) was interpreted as providing jurisdiction to review and change the current value of property.

However, there is case law supporting the view that s. 33(1) does not create a general power to review errors in valuation, but is directed solely at correcting a situation where some or all of a property was erroneously omitted from the assessment roll. In the absence of such an omission, the courts have refused to permit any change in the valuation of the property. [ 45 ] In Re Beaver Lumber and City of Ottawa [14] the taxpayer’s property had been assessed in 1971 at a value of $101,650, but due to human or computer error, $29,300 was omitted from the assessment for 1971, 1972 and 1973.

As a result, property taxes and business taxes were paid at a much lower rate than would have been the case if calculated on the correct assessed value. In 1974, the City of Ottawa sought to amend the assessment roll to tax Beaver Lumber for the three preceding years based on the correct current value of the property, relying upon what was then s. 42(1) of the Act (which is in all relevant respects the same as s. 33(1) of the current Act). The Divisional Court held that this was an improper use of the omitted assessment power.

There had been no land “omitted” and therefore there was no jurisdiction under the omitted assessment provisions to change the current value of the property. In coming to that conclusion, the Court noted that there were appeal provisions available to the City (the equivalent of the current s. 40 ) by which the City could have challenged the accuracy of the current values. Since the City did not see fit to exercise that right of appeal, it could not do so under the guise of an omitted assessment. [ 46 ] More recently, in East Bay

(2003) Development Corp. v. MPAC , a similar approach was taken involving the

interpretation of s. 33(1) and an omitted assessment of a large condominium building in Toronto. Although registered as a condominium, the owner of the building marketed all of the units as rental apartments and the building was fully leased and occupied by the fall of 2006. In 2007 and 2008 MPAC valued each unit at $30,000, intending this to be a “placeholder” and to represent the value of the land only, without the building. At the time it did so, however, MPAC was fully aware that the building was in fact complete and fully occupied.

In 2008, MPAC issued omitted assessment notices increasing the previous $30,000 assessments to amounts ranging from $149,000 to $361,000 for the years 2007 and 2008. MPAC argued that since its previous valuation was based on vacant land, the building property had been “omitted” and could now properly be re-assessed under s. 33(1).

This argument was rejected by Belobaba J. who held that MPAC was distorting the purpose and intent of the legislation by deliberately issuing incorrect assessments and later seeking to “correct” them under s. 33(1) as omitted assessments, in order to solve an “internal staffing problem” at the time the first assessments were returned. He held that because the assessments showed the full description of the property, there was no “omitted” land and that s. 33(1) could not be used in that situation to alter the current value.

On appeal, the Divisional Court declined to deal with whether only mistaken, as opposed to deliberate, omissions are captured under the s. 33(1) power, but upheld the motion judge’s conclusion that there had not been any “omitted” property in the prior assessments and there was therefore no jurisdiction to change the current value under s.33(1). [ 47 ] In the case now before this court, the question is not whether there has been any “omitted” property, as the issue arises under s. 33(3) rather than 33(1). However, the same overall approach should govern.

Section 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). It ought not to be used as a substitute for the already existing right that arises in every taxation year to appeal the current value set out in an assessment. Further, it ought not to be used to augment or circumvent that appeal power. [ 48 ] In my view, there is no rational basis for creating a distinction between s. 33(3) and s. 34(1) (b)(i).

Both should be treated similarly within the statutory scheme. As was fairly conceded by the City, if an assessor is asked in a timely way to issue a supplementary assessment under s. 34(1)(b)(

i) at the point when a property loses its exempt status during a taxation year, all that can be changed in that assessment is the tax status. There is no jurisdiction to substitute a completely different current value for the property. However, if the City’s

interpretation of s. 33(3) is adopted, a municipality could obtain an enormous advantage simply by delaying its application to change the tax status on the assessment roll. Suppose, for example, a municipality is aware that property previously tax

exempt has changed its status and is also aware that its current value is lower than it should be. Suppose that municipality simply sits back and does nothing, delaying until a year or more has expired, and then seeks correction of the omission under s. 33(3). Surely, in that situation, the municipality should not be considered to have gained the advantage of a complete reassessment of the current value under s. 33(3) merely by dragging its feet. If the jurisdiction under these two provisions is to be that radically different, one would expect that intention to be reflected clearly in the language used.

I do not find that to be the case. Although the language is not identical, it is very similar in its content and structure. Given the similarity of the language used, it cannot have been the intention of the Legislature to have created such radically different remedies. [ 49 ] Timeliness and finality are important principles underlying the legislative scheme. The

interpretation urged by the City in this case, defeats both objectives. Under the legislative scheme, the principle of finality is balanced against equity and correctness by providing for a wide-ranging right of appeal from yearly assessments under s. 40 (including the right to challenge the correctness of the current value), subject to strict time limits. Permitting the use of s. 33(3) to review the accuracy of current values outside the s. 40 appeal right, interferes with that balance by giving undue priority to correctness, at the expense of finality and stability.

Conclusion: Question One [ 50 ] MPAC’s jurisdiction on an omitted assessment under s. 33(3) is the same as on the supplementary assessment under s. 34(1) (b)(i). In both situations, it is empowered to make whatever changes are necessary to reflect the correction with respect to the exempt status. Its jurisdiction goes no further than that, and in particular, does not include the power to change the current value based solely on a change in opinion as to its correctness. G.

ANALYSIS: QUESTION TWO [ 51 ] The City contends that even if MPAC lacked jurisdiction to amend the current value of the properties, there is jurisdiction in the ARB to do so, by virtue of ss. 40(8), 44, and 45 . In my view, none of these provisions gives such power to the ARB. If MPAC did not have jurisdiction to adjust the current value in these circumstances, then there is no greater jurisdiction in the ARB or this court on appeal.

Section 40 – General Appeal Rights [ 52 ] Although there is no express appeal right set out in ss. 33 or 34 , all parties submit there is a right to appeal omitted or supplementary assessments under s. 40 of the Act . We agree that s. 40 provides a right of appeal from assessments made under ss. 33 and 34. That is a necessary implication from s. 40(8) dealing with the length of time for appeal when notices of assessment are sent under s. 35(1) of the Act, because s. 35(1) requires service of notices of assessments under ss. 32, 33 and 34.

Accordingly, I find that the City does have a right of appeal from the omitted assessments delivered under s. 33(3) of the Act, as provided in s. 40. [ 53 ] The City argues that the plain meaning of s. 40 is that upon any appeal all of the grounds of appeal set out in s. 40(1) (

a) are available to the appellant. Therefore, the City submits that: (

a) since it has an appeal right under s. 40(1); and (

b) since s. 40(1)(a)(

i) states that an appeal can be taken on the basis that the current value is incorrect; (

c) therefore, on an appeal from a s. 33(3) omitted assessment, the ARB has jurisdiction to decide whether the current value of the land is incorrect, regardless of whether the current value was the subject matter of the assessment under review or whether MPAC had jurisdiction to change the current value. [ 54 ] I do not agree that this is the plain meaning of s. 40(1). This provision is permissive in nature and merely sets out the possible bases upon which appeals may be taken.

It is not in accordance with a “plain meaning” construction to read into this language a vesting of substantive jurisdiction in the ARB not specifically provided for elsewhere in the Act . On the contrary, it would strain and distort the language of this provision to interpret it as creating appellate jurisdiction that would not otherwise exist.

Section 45 – Powers and Functions of the ARB [ 55 ] The powers of the ARB are stipulated in s. 45 to be “ all the powers and functions of the assessment corporation,” in this case, MPAC. The property owners argue that s.45 gives the ARB all of the powers of MPAC, but does not extend the powers of ARB beyond the powers of MPAC. The City argues that this provision does not restrict the powers of the ARB to matters within the jurisdiction of MPAC and that the

interpretation urged by the other parties requires the court to read in the word “only,” such that the ARB would only have the powers of MPAC and no other powers. [ 56 ] In my view, the only thing this provision does is to vest in the ARB all of the powers of MPAC, such that on an appeal from MPAC, the ARB would have all the same powers that MPAC would have had in the first instance. It does not give the ARB any greater powers than that, but neither does it necessarily restrict those powers.

However, it is clear that the powers of the ARB are appellate in nature and that its function is to consider appeals “with respect to an assessment.” This provision does not contemplate that the ARB will be a decision-maker in the first instance with respect to assessments, but rather will perform a reviewing function with respect to assessment decisions of MPAC.

There is no basis in the legislative scheme to support a conclusion that the ARB should have a broader jurisdiction than MPAC in situations of omitted or supplementary assessments. [ 57 ] I note that a similar conclusion was reached by the Ontario Municipal Board (“the OMB”) in Citipark. [15] That case was decided in 1993 when the Act provided for an appeal from the ARB to the OMB. At that time, ss. 44(1) and 45 of the Act were essentially the same as they are now, except that the powers on appeal were stated to be vested in the OMB as well as the ARB and the court.

In Citipark , the OMB considered the extent of its power under s. 45 and whether it included jurisdiction not held by the assessor.

Although not binding on this court, I consider the reasoning of the Board to be compelling, and endorse its conclusion as set out in para. 38 of the Board’s reasons as follows: The Board notes that subsection 45(1) clearly stipulates that “Upon a complaint or appeal with respect to an assessment ”, the ARB and the OMB “ may review the assessment ’ and for that purpose, “has all the powers and functions of the assessor in making an assessment, determination or decision under this Act . ” Accordingly, it is clear that the legislation does not intend to confer upon the appellate tribunal powers and functions that go beyond those which the assessor has, unless such powers and functions are specifically established

in the legislation. Section 44(1) – Opening Assessment on Appeal [ 58 ] The City argues that the expansive jurisdiction of the ARB for which it is advocating is provided for in s. 44(1) of the Act . Section 44(1) states that upon an appeal “on any ground against an assessment,” the ARB or court “may reopen the whole question of the assessment so that omissions from, or errors in the assessment roll may be corrected.” According to the City, this language means that the ARB (or court) may correct the current value of properties regardless of whether MPAC would have had any jurisdiction to do so. [ 59 ] I do not agree that such an

interpretation is a necessary implication of the language used. Further, I do not find that

interpretation to be consistent with the overall scheme and purpose of the legislation. The scheme of the legislation is that current value assessments are to be determined by a specialized assessor. Those assessments are intended to be final after the expiry of the time for appeal, except in prescribed circumstances, including ss. 33 and 34. [ 60 ] If the City’s

interpretation is correct, any party could seek an omitted assessment and upon receiving that assessment could appeal on grounds completely outside the jurisdiction of the assessor. The ARB would then, according to the City, have the power to completely open up the assessment and perform its own current value assessment in a situation where this could never have been achieved under other provisions of the Act , nor under s. 33(3) directly.

Thus, the party would be able to obtain indirectly from the ARB, relief which was not available from the body designated by the legislature as responsible for assessing current values. Such an approach might arguably be consistent with ensuring accuracy of assessments, and therefore equity between taxpayers. However, it completely ignores the principles of finality and stability. Indeed, assessed current values could be challenged by anybody at any time and would be in a constant state of flux. This would not be consistent with correct principles of

interpretation which require a balanced approach in considering the purposes underlying the legislation. [ 61 ] The City was unable to provide any authority for interpreting s. 44(1) in this manner. Although dealing with a somewhat different point, the Divisional Court in a 1978 case, Re Downtown Churchworkers Association and Assessment Commissioner , [16] rejected such an approach. I find the following words of Craig J. in that case to be particularly apt: … However, to give the relevant sections of the Act such an

interpretation would mean that, while a person appealing to the Assessment Review Court can only do so on two grounds, once the appellant gets before that Court by some kind of false pretence, the Assessment Review Court can make an administrative decision on any ground even if it involves such a question of law. [ 62 ] The City referred to three decisions of the ARB in which current values were revised by the ARB after an appeal of a s. 33(1) omitted assessment. [17] None of these decisions deal with a situation in which the ARB altered a current value in circumstances where MPAC could not have done so.

In each case, MPAC conducted an omitted assessment on property that had not previously been assessed and was therefore required to provide a current value. The subject matter of the appeal was whether the MPAC valuation was correct. There was no issue as to jurisdiction of the ARB, nor of MPAC, and no discussion of the correct

interpretation of s. 44(1) in that regard. [ 63 ] The City also referred to Charron v. MPAC Corp , Region No. 1, [2006] O.A.R.B.D. No. 8. According to the facts recited in the ARB’s decision, MPAC changed the classification of the subject property from exempt to commercial in 2002 and delivered an omitted assessment notice in which it provided a current value assessment based on an income approach valuation. The property owner appealed the current value based on sales of comparable properties.

The Board held that this was a preferable method of valuation and reduced the current values assessed by MPAC based on comparables. It is not clear from the decision what the assessed current value of the property had been prior to the change in its status in 2002. There is no discussion as to whether MPAC had jurisdiction to change the assessed value in the omitted assessment, although there is a vague reference to renovations having been done.

More importantly, there was no discussion or analysis of the issue now before this court – namely, whether the ARB has jurisdiction under s. 44(1) to change a current value where MPAC had no such jurisdiction. Therefore, this decision is of no precedential value. Conclusion: Question Two [ 64 ] Accordingly, I find that the ARB has no independent power to alter the current value on appeal. Its jurisdiction is strictly appellate and it has no jurisdiction beyond that vested in the initial decision making body, in this case MPAC. Since MPAC has no jurisdiction to amend the current value under s. 33(3) or 34(1) (b)(

i) in the absence of a physical change to the property, the same is true for the ARB. H. THE CIRCUMSTANCES OF THE SHEPPARD PROPERTY APPEAL [ 65 ] An additional complication arises in this case because of the procedure adopted by MPAC and its effect on the appeal rights of the City on the Sheppard property. [ 66 ] On December 14, 2004, in the normal course, MPAC returned the assessment roll for the Sheppard property for the 2005 assessment year. It failed to show the severance or change in tax exempt status (not surprisingly since it had occurred just five days before) and valued the property at $9,093,000.

On March 29, 2005, within the time stipulated for appeal, the City filed an appeal to the ARB challenging the exempt status and also challenging the current value of the property as being too low. The right to appeal the current value is a right provided by the statute and the City did all that was required to exercise that right. [ 67 ] In November 2005, MPAC returned an omitted assessment dealing with the severance and tax exempt issues. The procedure it adopted was to first delete the Sheppard property from the assessment roll and then create two new parcels with new roll numbers.

An issue arose during the course of argument as to whether this procedure had the effect of deleting the assessment for the 2005 taxation year and thereby nullifying the appeal brought by the City in respect of that assessment.

[ 68 ] In the course of argument, counsel for MPAC fairly conceded that MPAC has no jurisdiction to take away a right of appeal granted under the legislation. I agree. Upon receipt of the assessment for the 2005 taxation year, the City had a right of appeal, which it chose to exercise. That appeal right, pursuant to s. 40 of the Act , included the right to appeal the assessed current value. Whatever internal administrative procedure MPAC adopted cannot be interpreted as having taken away that substantive and vested right of appeal.

Ms Lunau, on behalf of MPAC, outlined the procedure that should have been followed, which would have MPAC dealing only with the tax status and the severance being dealt with under s. 322 of the City of Toronto Act and which, she said, would have preserved the City’s right of appeal. I make no comment on whether or not this was the correct procedure.

However, it is clear that the City had an appeal right, it exercised that appeal right, and MPAC had no jurisdiction to erase it. [ 69 ] Accordingly, the City still has its appeal to the ARB with respect to the current value for the property set out in the assessment delivered at the end of 2004.

If, as a result of that appeal, the ARB changes the current value of the property, that change must then be reflected in the November 2005 omitted assessment as well, because it is based on an allocation of the current value between the two parcels. [ 70 ] On the facts that were before this court on the stated case, it does not appear that the City delivered a timely notice of appeal from the yearly assessment on the Hollywood property. It would therefore appear that this issue does not arise in respect of the Hollywood property. H.

CONCLUSION [ 71 ] Paragraph 14 of the Stated Case asks this Court the following questions with respect to the Sheppard property: (

a) When MPAC made the omitted assessments on the Shane B Property, changing the tax status from exempt to taxable, could it also have altered the property’s current value? (

b) On the City’s appeal of the omitted assessments on the Shane B Property, can the ARB alter the property’s current value? [ 72 ] In respect of the Sheppard property, this court’s answer to Question (

a) is “No.” With respect to Question (b), the answer is also “No”, but the omitted assessment does not prevent the ARB from altering the property’s current value on the City’s appeal (filed in March 2005) from the regular assessment returned for this property for the 2005 taxation year. [ 73 ] Paragraph 25 of the Stated Case asks this Court the following questions with respect to the Hollywood property: (

a) When MPAC made the omitted assessments on the Rainbow Property, changing the tax status from exempt to taxable, could it also have altered the property’s current value? (

b) On the City’s appeal of the omitted assessments on the Rainbow Property, can the ARB alter the property’s current value? [ 74 ] This court’s answer to both questions is “No.” [ 75 ] As agreed by all counsel, there shall be no order as to costs. MOLLOY J. HAMBLY J. HERMAN J. Released: October 1, 2013 CITATION : Toronto (City) v. Municipal Property Assessment Corporation, 2013 ONSC 6137 DIVISIONAL COURT FILE NO.: 444/10 DATE: 20131001 ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT HAMBLY, MOLLOY and HERMAN JJ.

BETWEEN: CITY OF TORONTO Applicant – and – MUNICIPAL PROPERTY ASSESSMENT CORPORATION, SHANE B INC., RAINBOW DEVELOPMENTS INC. and ASSESSMENT REVIEW BOARD Respondents REASONS FOR DECISION THE COURT Released: October 1, 2013