Ontario Tax - Assessment Act. Drewlo Holdings v. MPAC
In Drewlo Holdings v. MPAC (Div Court, 2023) the Divisional Court, in considering what constituted a legal error for purposes of a leave for appeal motion, held that there was a conflict in the municipal tax (Assessment Act) case law regarding the statutory interpretation of the term "intentionality":
Issue 4: The Board Failed to Consider “Intentionality”:. Tartu College v. Municipal Property Assessment Corporation
 In Magee, Sachs J. also adopted the following statement as the purpose of section 33, at para. 15, quoting from A. Mantella & Sons Ltd. v. Municipal Property Assessment Corp., Region No. 09, a 2006 decision of the Board:
...The purpose of section 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. Belobaba J., in East of Bay (2003) Development Corp. v. MPAC, 2010 ONSC 3337 (CanLII), held that where MPAC had intentionally placed an incorrect assessment on the roll, land had not been “omitted”. He stated as follows at paras. 5 and 6:
 This is not the usual case where MPAC has inadvertently omitted part of a land parcel or unknowingly failed to include a recent building expansion in the course of preparing the annual property assessment. The case law is clear that s. 33(1) is readily available in situations where the assessing authority was unaware of the omissions of land at the time of the delivery of the assessment roll. MPAC is entitled to “rectify the omission” by issuing an Omitted Property Assessment Notice when the omission is discovered. On appeal, the Divisional Court declined to address the issue of whether deliberate omissions are captured under s. 33(1) (see: East of Bay v. MPAC, 2011 ONSC 242). However, it upheld Belobaba J.’s decision.
 Here the omissions were not inadvertent but intentional. MPAC knew that the building in question was completed and fully occupied. But MPAC was having difficulty coping with the deluge of new condominium registrations. Lacking the manpower to do all of the current value assessments on an annual basis, MPAC decided as a matter of internal policy to do the condominium assessments in two steps several years apart: it first sent out a property assessment notice for each condo (or apartment) unit pegged at $30,000 ostensibly valuing only the “vacant land” portion. Then, because s. 33(1) allows re-assessments for omitted land going back two years before the current year (and land is defined to include buildings) MPAC was able to delay the assessment for the building itself for at least two years. When it had the time and resources to complete the assessment, MPAC sent out the Omitted Property Assessment Notices for the increased amounts.
 There has been debate as to whether “intentionality” is a proper consideration since East of Bay. In Bona Building & Management Company Limited v. Municipal Property Assessment Corporation, 2015 ONSC 7824, Sheard J. distinguished East of Bay factually and stated, at para. 31, “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”.
 There is a line of Board cases in which intentionality was considered, although in relation to s. 40.1 of the Act (see: Sarnia (City) v. Municipal Property Assessment Corp., 2011 CarswellOnt 12984,  O.A.R.B.D. No. 392, 71 O.M.B.R. 313, Municipal Property Assessment Corporation Region 09 v. Chew, 2015 CanLII 78969 (ON ARB) and WBH Woodstock Ltd. v. Woodstock (City),  O.A.R.B.D. No. 414 (ARB File No. 39980)). The City and MPAC properly point out that Sarnia (City) v. MPAC was decided between Belobaba J.’s decision and the appellate Divisional Court decision.
 In the present case, the Board distinguished East of Bay, at para. 28. In East of Bay, MPAC’s first s. 33 omitted assessment added the new condominium units to the Assessment Roll together with a reported current value for each unit. Here the condominium units were not added. The Board also noted that the Divisional Court declined to address intentionality and thus, Belobaba J.’s ruling on this point was obiter dicta and not binding upon the Board.
 In Shane B, Molloy J. certainly suggests that s.33(1) is directed solely at correcting situations arising from erroneously omitted land (at p. 44). She then referred to East of Bay before concluding, at para. 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. (emphasis added) In the within case, Drewlo led evidence that was uncontroverted that MPAC had been advised that the units in the apartment buildings would be converted to condominium units. These communications continued up until the May Omits were issued.
 I conclude that there are a line of conflicting cases on the importance of intentionality. The Board determined that it was not bound by East of Bay and did not, therefore, engage in the analysis as to whether MPAC could not rely upon s. 33(1) because no land was “omitted”. Although this may not be wrong, I am of the view that there is some reason to doubt the correctness of its decision not to do so as it open to serious debate.
In Tartu College v. Municipal Property Assessment Corporation (Div Court, 2023) the Divisional Court confirmed that an appeal to the Divisional Court from the Assessment Review Board (ARB) was limited to questions of law [presumably under AA s.43.1(1)]:
 In a decision dated November 26, 2019, the Assessment Review Board (“the ARB”) determined that the subject property should be classified Multi-residential, not Residential, for property tax purposes. The Multi-Residential tax class applies to properties used for residential purposes that have “seven or more self-contained units”. Properties used for residential purposes with less than seven self-contained units are classified “Residential”. The Assessment Act does not define “self-contained units”. . Municipal Property Assessment Corporation et. al v. County of Wellington
 This is a statutory appeal restricted to a question of law only and as such, the standard of review is correctness. The parties agree the test to be applied to determine the boundaries of a classification unit is a question of law. In particular, the test for determining the meaning of “self-contained unit” is a matter of statutory interpretation and is a question of law.
 A recent decision of this Court confirmed the application of the correctness standard to appeals from ARB decisions, see Municipal Property Assessment Corporation v Zarichansky, 2020 ONSC 1124 [Div. Ct.], (at para 26).
 Importantly, a central finding made by the ARB was that the students in the subject property, as a group, had occupation over the entire suite and the suite is the appropriate classification unit. The Respondent submits, correctly in my view, this is a finding of mixed fact and law and is therefore not subject to appellate review by this court, absent an extricable error of law.
In Municipal Property Assessment Corporation et. al v. County of Wellington (Div Court, 2023) the Divisional Court explains the central role of 'classification day' in the overall Assessment Act scheme:
b) The Board did not Fail to classify the lands at issue Based on their use on the statutory classification day.. Municipal Property Assessment Corporation et. al v. County of Wellington
The Significance of the Classification Day
 Section 19.3 of the Act provides that land is to be classified for a particular taxation year as of June 30 of the previous year. This is known as the “classification day”. MPAC and the Owners assert that the Board erred by effectively ignoring the classification day in its Decision. They point to paragraph 54 of the Decision where the Board sets out that:
 Classification is determined based on the use of the land as of June 30 of the preceding year (s. 19.3 of the Act). A change in classification results from a change in actual use. The Board finds that s. 6(2)2.2 should be interpreted to account for the dynamic nature of a mining operation, which includes gravel pits. As further explained below, the activities listed in s. 6(2)2.2 are all encompassing and not to be viewed as frozen in time. Unless and until a ‘change in actual use’ is determined, the classification does not change. We find that the Board did not ignore the classification day. They clearly recognized it in the paragraph above. What they did do was to interpret s. 6(2)2.2 of the Regulation in a manner that accommodated the classification day and made it workable. Nowhere in the Board’s Decision did the Board indicate the classification day would be anything other than June 30 nor did they “effectively” ignore it.
 Their interpretation of s. 6(2)2.2, which accommodates the dynamic nature of a mining operation, does not ignore the Act’s use of the classification day. While the property class for a particular portion of land is to be determined by the actual use of a property at the classification day of June 30 in the year before the applicable taxation year, “actual use” reflects the function of a property (Sgambelluri v Municipal Property Assessment Corporation, Region 18, 2015 CanLII 58803 (ON ARB), at para. 32).
 The Board was correct in not freezing a property as of the classification day and carving out which areas are used for specific activities. It, instead, correctly looked at the property’s function or purpose on that date.
 MPAC criticizes the Board’s Decision to include, in the industrial class, “land that was not used for excavating or extracting anything from the earth on the classification day […] if it had been extracted or excavated in the past.” They specifically point to the reclassification of a portion of “Disturbed Land” located on the Capital Paving property from residential to industrial, even though the land had not been excavated or extracted since sometime before 2007. In fact, despite that, excavation/extraction on that property has not been completed. That “Disturbed Land” is only partially extracted, and it has not been rehabilitated. As of the classification day, its only legal use, as contemplated by the legislature, was for purposes of extraction or excavation. The land has no function or purpose other than extraction or excavation, which the property owner may choose to continue at any time. We have already said that we agree with the Board’s finding that it would offend the legislative scheme for a property owner to be able to “sit on” licensed land which has no other use or purpose other than excavation/extraction, not actively excavate or extract it on the classification day and then claim the benefit of a lower tax rate, while still preserving their ability to return to excavating or extracting it at any time.
 We agree with the County’s submission that if a gravel pit owner who is extracting a site strategically chooses not to operate its gravel pit on the classification day (e.g. gives its workers the day off so no machinery is being run), this cannot permit the property owner to escape potential industrial classification. Any other interpretation would defeat the property classification scheme and provide property owners with a clear path to circumventing proper tax assessment contrary to the purposes of the statute.
 The classification day should be understood and used as a representation of the property’s function on that day. Even if a portion of property is not actively being excavated on the classification day, its function as of that date may still be for the purpose of excavation, thereby attracting an industrial classification under s. 6(2)2.2.
 MPAC and the Owners’ own expressed practices and understandings of the classification day support that conclusion:
(a) MPAC’s “Gravel Pit and Quarry Questions and Answers” document advises gravel pit owners that “The Industrial Class includes all areas being used for operation of the gravel pit.” Further, a gravel pit is classified as active, and subject to taxation, if extraction is carried on “at any time”, even if extraction is carried on for only a couple of months each year. The Owners also take issue with the following portion of the Board’s Interim Decision at paragraph 60:
(b) Mr. Hanratty’s evidence was that, for the purpose of MPAC’s questionnaire, they take aerial imagery of their sites annually, but not necessarily on the classification day. They use the aerial photos to look “at the use of the property for about a period of a month in and around [the classification day] to show what the active use was at the time”, and “it represents a period of time recognizing the dynamic nature of the site”.
(c) Mr. Mitchell’s evidence (witness/representative for the Dufferin Pit) was that he understood MPAC’s questionnaire was expected to capture activity not just on the exact classification day, but also the days following it.
Further, applying too narrow of an interpretation, as submitted by the owners and MPAC, would necessitate undue effort, checking and counter- checking of what ‘activity’ was occurring on what specific patch of land at a specific time (i.e. the classification date). This is not a realistic expectation to place on MPAC or the owners. The Owners submit that this conclusion of the Board’s is based on what is “convenient”, in relation to the classification of land on the June 30th date. As we have already stated, however, it is based on a purposive reading of the legislation, so that s. 6(2)2.2 of the Regulation and s. 19.3 of the Act are read together in a logical and consistent manner. The Board did not ignore the classification date, but rather came to an interpretation that allowed it to be applied in a meaningful way.
 The Owners propose that the classification day requires an exact assessment of precisely what parts of land are being used for the activities listed in s. 6(2)2.2 of the Regulation, defined narrowly, on June 30th. Their position is that, for example, an industrial classification should be applied only to the specific land that is actively being excavated on the classification day – even if the Owners had begun to prepare the additional space, and the very next day, the pit being excavated in fact does grow. This is what the Board referred to as the Owners’ proposed approach of “checking and counter-checking what ‘activity’ was occurring on what specific patch of land at a specific time or the classification date. Such an approach is inconsistent with not only the Owners’ own evidence as to their practices, as noted above, but also the classification date’s focus on function and use as a representation for the taxation year. The Board’s interpretation recognized what is involved in a mining operation and permits the land to be assessed based on its function as of the classification date.
 It was also no error for the Board to consider the practical capabilities and resource limitations of MPAC when interpreting the Act. The Board recently took a similar approach in National Car Rental (Canada) Inc. v Municipal Property Assessment Corporation, Region 15, 2022 CanLII 53352 (ON ARB) at para 93. Section 36 of the Act provides that “assessments of land under this Act shall be made annually between January 1 and the second Tuesday following December 1”) in determining that s. 36 of the Act does not require MPAC to assess properties annually:
The Board also observes that if s. 36(1) required that MPAC mandatorily annually reassess a property value, this would require that MPAC annually reassess the values of all five million properties in Ontario. The resource implications of such an interpretation are significant, to say the least. If the Legislature intended such a result, it would have provided a clear and express statement to this effect. Such wording is not present in s. 36.
In Municipal Property Assessment Corporation et. al v. County of Wellington (Div Court, 2023) the Divisional Court set out the procedural essence of an Assessment Act appeal from the Assessment Review Board:
 This is a statutory appeal pursuant to section 43.1(1) of the Assessment Act, R.S.O. 1990, c. A.31 (the “Act”) and Rules 61.01 & 61.04 of the Rules of Civil Procedure, RRO 1990, Reg 194. Leave to Appeal was granted on March 7, 2018 (2022 ONSC 1458 (Div Ct)). The parties appeal from the March 29, 2021 Interim Decision and the October 19, 2021 Amended Decision (collectively referred to as the “Decision”) of the Assessment Review Board (“The Board”), which classified more of the land used for gravel pit operations as “industrial”, and not as “residential” land. Industrial land is taxed at a higher rate than residential land. The Board found that land owned by gravel pit operators (the Owners) that is classified as residential (as opposed to industrial) is to the benefit of the Owners and to the detriment of all other taxpayers of the County of Wellington (the “County”).. Toronto (City) v. Craft Kingsmen Rail Corp.
 Since s.43(1) only allows appeals to the Divisional Court based on errors of law, the Appellants request that the Decision be set aside and remitted to the Board based on errors of law made in it.
In Toronto (City) v. Craft Kingsmen Rail Corp. (Div Court, 2023) the Divisional Court, in considering a unique real estate assessment issue, reveals some Assessment Act procedures:
 The City of Toronto (“Toronto”) and the Municipal Property Assessment Corporation (“MPAC”) appeal from the decision of the Superior Court of Justice dated April 11, 2022 (Craft Kingsmen Rail Corp v. Municipal Property Assessment Corporation, 2022 ONSC 2222), which held that “Air Parcels”—stratified parcels that start above the ground—are not “land” under the Assessment Act, R.S.O. 1990, c. A.31, until they are fixed to the ground. . Toronto (City) v. Craft Kingsmen Rail Corp.
Jurisdiction and Standard of Review
 The proceeding below was commenced by the Respondent, Craft Kingsman Rail Corp. (“Craft”) pursuant to s. 46 of the Assessment Act, which permits any person against whom the land is assessed to bring an application to the Superior Court of Justice for the determination of any matter relating to an assessment other than the assessed value or classification of the land or a determination that the lands are conservation lands.
 Pursuant to s. 46(4), an appeal lies to the Divisional Court from the judgment of the Superior Court of Justice.
In Toronto (City) v. Craft Kingsmen Rail Corp. (Div Court, 2023) the Divisional Court considers the statutory interpretation of "includes", here in the definition of real property:
F. Inclusive Definition. Toronto (City) v. Craft Kingsmen Rail Corp.
 The Application Judge accepted, at para. 27, that the definition of “land” in s. 1 of the Assessment Act was an inclusive definition but concluded that what was included was limited by the examples listed in subsections (a) to (e) to something affixed to the ground. He stated, at para. 41:
Everything about the definitions in s. 1, as broadened by the SCC, speaks to the relationship of something else with the ground. The broadened part of the definition is the inclusion of chattels that are on the land with some permanence but are not fixtures. This part of his analysis was, however, based on his premise that real property at common law did not include the air above the land, and, therefore, he concluded, the examples listed in s. 1 could not be used to include something that had no connection to the ground. If we reject the premise, however, the examples listed in (a) to (e) cannot be used to narrow what was already included in the common law.
 The word “includes” is generally used to indicate that what follows are examples rather than an exhaustive list: Sullivan, at §4.04. This is confirmed by reading s. 1 of the Assessment Act as a whole. Section 1 of the Act lists 23 definitions. Nineteen of those definitions use the word “means”, which “generally precedes a definition to be construed as exhaustive”: Canada 3000 Inc., Re; Inter-Canadian (1991) Inc. (Trustee of), 2006 SCC 24,  1 S.C.R. 865, at para. 46. Only four of the definitions in the Act use the word “includes.” In this context “includes” cannot be interpreted as limiting the definition to the itemized list.
 The Supreme Court of Canada and the Court of Appeal have both confirmed that the examples given in the definition were intended to expand on the common law definition. These cases do not support the proposition that there was any intention to subtract from or limit the common law definition of land or real property. See also Owners, Strata Plan para. 39.
In Toronto (City) v. Craft Kingsmen Rail Corp. (Div Court, 2023) the Divisional Court considers the history and purpose of the Assessment Act:
C. History of the Assessment ActAt paragraphs 78-91 the court considers the purpose of the Assessment Act.
 To understand the relevance of the common law to the definition of “land”, “real property” and “real estate”, it is helpful to provide some historical context. While, as the Application Judge pointed out, we are concerned with the 1904 definition of land, that definition cannot be fully understood without referencing the earlier versions of the Assessment Act.
 The Ontario Assessment Act dates back to at least the Assessment Act of 1869, 32 Vict. c. 36. For ease of reference, I will begin with the Consolidated Assessment Act 1892, 55 Vict. c. 48, although the definitions in that statute were unchanged from the1869 statute.
 Prior to 1904, both real and personal property were assessable and liable to taxation. Section 7 of the Consolidated Assessment Act 1892 provided that: “All property in this Province shall be liable to taxation subject to the following exemptions…”.
 Property was defined in s.2 para. 8:
8. “Property” shall include both real and personal property as hereinafter defined. The statute had inclusive definitions for both real and personal property.
 Section 2, para. 9 stated:
9. “Land”, “real property” and “real estate” respectively, shall include all buildings or other things erected upon or affixed to the land, and all machinery or other things so fixed to any building as to form in law part of the realty, and all trees or underwood growing upon the land, and land covered with water, and all mines, minerals, quarries and fossils in and under the same, except mines belonging to Her Majesty; Section 2, para. 10 stated:
10. "Personal Estate" and "Personal Property" shall include all goods, chattels, interest on mortgages, dividends from bank stock, dividends on shares or stocks of other incorporated companies, money, notes, accounts and debts at their actual value, income and all other property, except land and real estate, and real property as above defined, and except property herein expressly exempted. These provisions were continued in the Assessment Act, R.S.O. 1897, c. 224.
 By the 1904 Assessment Act, 4 Edward VII, c. 23, personal property ceased to be liable to assessment, but the legislature expanded the definition of “land”, “real property” and “real estate” to include some items that formerly qualified as personal property. This was accomplished by amending the words “all buildings or other things erected upon or affixed to the land” in s. 2 para. 9 to the present wording: “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”.
 The 1904 definition continues to apply today.
. Toronto (City) v. Craft Kingsmen Rail Corp.
In Toronto (City) v. Craft Kingsmen Rail Corp. (Div Court, 2023) the Divisional Court considered the Assessment Act taxability of real estate 'air parcels', a task which required a basic examination of what constitutes 'land' (also 'real property' and 'real estate'):
 The terms “land”, “real property” and “real estate” are used interchangeably in the Assessment Act. Section 1 of the Assessment Act provides:
“land”, “real property” and “real estate” include, Section 3(1) of the Assessment Act provides:
(a) land covered with water,
(b) all trees and underwood growing upon land,
(c) all mines, minerals, gas, oil, salt quarries and fossils in and under land,
(d) 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,
(e) all structures and fixtures erected or placed upon, in, over, under or affixed to a highway, lane or other public communication or water, but not the rolling stock of a transportation system.
All real property in Ontario is liable to assessment and taxation, subject to the following exemptions from taxation: There follows a long list of exemptions, such as Crown Lands, cemeteries, land owned by a church or religious organization, public educational institutions, public hospitals, conservation land, etc.
 Section 3(1) was interpreted by the Supreme Court of Canada in Toronto Transit Commission v. City of Toronto, 1971 CanLII 8 (SCC),  SCR 746 (the “TTC case”). The Court stated, at 751:
The construction, however, is not difficult as the section provides simply for the assessment of “all real property”. In the same initial lines appear the words “subject to the following exemptions from taxation” and since that provision sets up an exemption the person must show plainly that he comes within the exemption. None of the exemptions listed in s. 3 of the Act apply in this case.
 The assessment is done for the purposes of taxation—property taxes are based on the assessed value and classification of the land.
 Also relevant is s. 1 of the Land Titles Act, which defines “land” as follows:
“land” means land, tenements, hereditaments and appurtenances and any interest therein. Also relevant is s. 1 of the Land Transfer Tax Act, R.S.O. 1990, c. L.6, which defines “land” as follows:
“land” includes lands, tenements and hereditaments and any estate, right or interest therein, a structure to be constructed on land as part of an arrangement relating to a conveyance of land, a leasehold interest or estate, the interest of an optionee, the interest of a purchaser under an agreement to sell land, or goodwill attributable to the location of land or to the existence thereon of any building or fixture, and fixtures