1037618 Ontario Inc. v. Thunder Bay (City)

1037618 Ontario Inc. v. Thunder Bay (City) Collection Decisions of the Court of Appeal Date 1999-08-19 Docket numbers C29383 Judges Carthy, James Joseph; Moldaver, Michael James; Borins, Stephen Subject Civil Decision Content DATE: 19990819 DOCKET: C29383 COURT OF APPEAL FOR ONTARIO CARTHY, MOLDAVER AND BORINS JJ.A. BETWEEN: ) ) Allan D. McKitrick 1037618 ONTARIO INC. and ) for the appellant 1191111 ONTARIO LIMITED ) ) Applicant ) (Respondents in ) Appeal) ) ) and ) William G. Shanks ) for the respondent THE CORPORATION OF THE CITY ) OF THUNDER BAY ) ) Respondent ) (Appellant in ) Appeal) ) Heard: March 10, 1999 On appeal from a judgment of Kozak J. dated February 27, 1998, made at Thunder Bay, Ontario. CARTHY J.A.: [1] The City appeals from a determination by Kozak J. now reported at (1998) 45 M.P.L.R. (2d) 208 (Ont. Gen. Div.) that the respondent is not liable to payment of interest and penalties on the amount of the reduction of its appealed tax assessment. [2] The facts are not in dispute and are recited by the motions judge as follows: The applicant is the owner of property in the City of Thunder Bay, which is referred to as Pool 6. It can be noted that this is a significant piece of waterfront property which was formerly owned by the Saskatchewan Wheat Pool. Since its acquisition of the property in 1994, the applicant has paid no municipal taxes whatsoever to the respondent corporation for the years 1994, 1995, 1996 and 1997. Instead, the applicant pursued tax assessment appeals which resulted in a reduction of the taxes assessed, by a factor of six, by an order of the Ontario Municipal Board. As a result of the revised assessment of taxes by the Ontario Municipal Board, and there being no further appeals pending by the respondent, the clerk of the respondent revised the rolls with respect to the principal amount of taxes assessed, but did not amend the amount claimed on account of penalties and interest, and continued to calculate interest and penalties based upon the unreduced assessment amounts. There is no dispute between the applicant and the respondent with respect to the principal amount of taxes properly due and owing for the relevant period of assessment. In its calculation of the cancellation fee, the respondent utilized the revised assessment as determined by the Assessment Review Board, and the Ontario Municipal Board, but applied the interest and penalty provisions to the unrevised assessment of taxes and, in so doing, arrived at a cancellation fee of $667,050.63. The applicant, in applying the interest and penalty provisions to the revised assessment of taxes, calculates the cancellation fee to be $445,141.31. [3] The essence of the City’s position is that it is empowered and required to impose a penalty and interest on unpaid tax assessments and that if a ratepayer wishes to avoid their imposition pending an appeal, the taxes can be paid and will be refunded later if the assessment is reduced. [4] The City relies upon Zaiden Group Ltd. v. London (City) (1990), 47 M.P.L.R. 1 (Ont. C.A.); appeal to the Supreme Court of Canada dismissed (1991), 3 S.C.R. 593, as establishing that the Assessment Act, R.S.O. 1991, c. A.31 and related statutes provide a complete code, excluding any concepts of fairness or other equitable considerations. The statutory regime includes s.399(3) of the Municipal Act, R.S.O. 1990, c.M.45 authorizing a by-law to exact a penalty for non-payment of taxes of 1¼% per month for the year of the assessment. (The city passed such a by-law.) Subsections 419(1)-(2) of that Act require the imposition of interest on due and unpaid taxes. Those subsections read: 419. (1) Despite any special Act, but subject to subsection (2), the treasurer, collector or county treasurer, as the case may be, shall add to the amount of all taxes due and unpaid interest at the rate of one-half of 1 per cent per month for each month or fraction thereof from the 31st day of December in the year in which the taxes were levied until the taxes are paid, provided that the council by by-law may increase such rate to a rate not exceeding 1¼ per cent per month. (2) Despite subsection (1) or any special Act, the council of a local municipality may, by by-law, require that the treasurer, collector or county treasurer, as the case may be, add to the amount of all taxes due and unpaid interest at such rate not exceeding 15 per cent per annum as the council determines, from the 31st day of December in the year in which the taxes were levied until the taxes are paid. [5] It is the City’s position that there are no provisions for repayment of the penalty or interest and that this is a legislative design to prevent defaulters from casting a burden upon the remaining ratepayers who comply with their obligations. ANALYSIS [6] Zaiden makes it clear that where, as here, there is a complete statutory code the common law and equity should not intrude to correct perceived unfairness. That is not to say that the context and the factual circumstances against which the statutes are overlaid is irrelevant in aid of interpretation of the language used by the legislature. [7] Every municipality has an interest in collecting taxes when due in order to meet its budgeted expenditures. It is sensible that they impose penalties and interest charges on overdue taxes to offset necessary borrowing charges. Municipalities that are sensitive to ratepayer concerns will pass by-laws requiring interest to be paid on overpayments. From a ratepayer’s point of view, it may be good business judgment to delay payment of taxes and accept the penalty and interest charges or, alternatively, to pay the taxes, pursue an appeal, and then, where permitted, recover interest on the overpayment. These are the interfacing considerations in most situations. [8] The situation before the court in this instance is out of the ordinary. A formerly operating grain facility was being demolished with the prospect of a new use for the land. The owner sought a markedly reduced assessment and there was no requirement that the assessed taxes be paid as a prerequisite to an appeal. If the assessed taxes were paid when due, any overpayment would be refunded at the current rates of Canada Savings Bonds according to the municipality’s by-law. In the result of the appeal proceeding, such an overpayment would have been five- sixths of the amount paid. Thus, a very substantial sum would have had to be deposited in advance at a modest prospective return. Given the choice not to pay, the penalty charge in the first year was 1¼% per month, and thereafter the interest charge was at the same rate, not compounded. [9] The City says that it is entitled to 15% per annum on the original assessment even though it was reduced on appeal to one- sixth of the original amount. That is an effective charge of 90% on the eventual assessment. What if, in other circumstances, the ratepayer was held on appeal to be non-assessable? [10] With these considerations in mind, I turn to analyze the language of the statutes to determine the legislative intent. [11] The initial step is the imposition of a penalty and interest and the requirement that these be added to the roll. Section 419 of the Municipal Act, R.S.O. 1990, c.M.45 in its entirety reads: 419. – Despite any special Act, but subject to subsection (2), the treasurer, collector or county treasurer, as the case may be, shall add to the amount of all taxes due and unpaid interest at the rate of one-half of 1 per cent per month for each month or fraction thereof from the 31st day of December in the year in which the taxes were levied until the taxes are paid, provided that the council by by-law may increase such rate to a rate not exceeding 1¼ per cent per month. (2) Despite subsection (1) or any special Act, the council of a local municipality may, by by-law, require that the treasurer, as the case may be, add to the amount of all taxes due and unpaid interest at such rate not exceeding 15 per cent per annum as the council determines, from the 31st day of December in the year in which the taxes were levied until the taxes are paid. (3) No interest or percentage added to taxes shall be compounded. (4) Interest and percentages added to taxes form part of such taxes and shall be collected as taxes. [12] “Percentages” are penalties.1 The significance of these provisions to our present concern is that from the outset, interest and penalties form part of the taxes and are payable as taxes. If adjustments are later made it must be to a composite, now called “taxes”. [13] Following a successful appeal, s.37(6) of the Assessment Act, R.S.O. 1991, c. A.31 takes effect. It reads: 37(6) No assessment shall be increased, reduced or otherwise altered until all complaints, appeals or proceedings concerning the assessment have been finally determined and disposed of, and where the result of the final determination and disposition of the complaints, appeals or proceedings increases, reduces or otherwise alters the assessment, the taxes levied and payable with respect to the assessment shall be adjusted accordingly and any overpayment resulting from the adjustment shall be refunded by the municipality. [My Emphasis.] [14] The “taxes levied and payable” are, by force of s.419(4) of the Municipal Act, the combination of the taxes, penalty and interest. These, in aggregate, “shall be adjusted accordingly.” Plain words leading to a clear result. If the ratepayer has paid taxes on time, they are refunded; if paid somewhat late, including penalty and interest charges, the excess of all items is refunded; if not paid, then the roll is adjusted as to all items. [15] Certainly the municipality relies upon the assessment to meet its commitments. However, taxes paid and reduced on appeal must be refunded or, if not paid, cannot be collected, and thus, distort the budget. I can see no logical basis to support a differentiation between the excessive assessment on the one hand and the interest and penalty on that excess, on the other. Both affect the municipal finances but by force of s.419(4) of the Municipal Act they sensibly walk hand-in-hand. [16] In my view this is not in any respect a strained reading of the legislation, or even one that implements a bias in favour of the taxpayer. And it leads to a sensible legislative intention that a taxpayer should not be held to account for more than its legal obligations. If those obligations turn out on appeal to be the original assessment, the ratepayer who has not paid the taxes when due will pay heavily for taking that risk, as is indicated by the dollar figures in this proceeding. [17] I would therefore dismiss the City’s appeal with costs. Released: August 19, 1999 “J.J. Carthy J.A.” “I agree, M. Moldaver J.A.” BORINS J.A. (Dissenting): [18] The hearing before Kozak J. resulted from The Corporation of the City of Thunder Bay (“the City”) commencing proceedings under the Municipal Tax Sales Act, R.S.O. 1990, c.M.60 for the sale of land owned by the respondent 1037618 Ontario Inc. (“the respondent”) for arrears of the payment of real property taxes. The proceedings were commenced by the registration of a tax arrears certificate against the title to the respondent’s land under s.3(1) of the Act. The tax arrears certificate provided, as required by s.3(2), that the land would be sold by public sale if the cancellation price, as defined in s.1(1), was not paid within one year from the date of the registration of the certificate. [19] The parties were in disagreement with respect to the amount of the cancellation price. The respondent, which had not paid municipal taxes since it purchased the land on October 10, 1993, took the position that the statutory interest and penalties owing in respect to the tax arrears should be calculated on the basis of the reduced assessed value of the land as ordered by the Ontario Municipal Board (“the OMB”). Although the City agreed with the respondent that the tax arrears component of the cancellation price should be calculated on the basis of the reduced assessed value of the land, it took the position that the interest and penalty components of the cancellation price were to be calculated on the basis of the taxes levied and unpaid pursuant to the original assessed value of the land. [20] To resolve this impasse, the respondent commenced an application under s.6(2) of the Act to determine the amount of the cancellation price. Kozak J. accepted the respondent’s position. The City has appealed from that result. As I agree with the City’s position, I would allow the appeal and order that in calculating the cancellation price, interest and penalties are to be calculated on the basis of taxes levied and unpaid pursuant to the original assessed value of the land. BACKGROUND [21] As Carthy J.A. has stated, the facts are not in dispute. As they are contained in his reasons, there is no need to repeat them. [22] However, it is helpful to add the following. On January 23, 1997, the OMB released its order significantly reducing the assessed value of the respondent’s lands. The City registered its tax arrears certificate on February 14, 1997. The City calculated the cancellation price to be $667,050.63 as of December 9, 1997. As of that date, the respondent had not paid any amount for municipal taxes, whether based on the original, or the reduced, assessed value of land. Nor had it paid any amount for interest and penalties owing in respect to its failure to pay its real property taxes when due, which had been calculated by the City pursuant to the statutory scheme which I will describe, and added to the unpaid taxes. REASONS OF THE MOTIONS JUDGE [23] After referring to s.37(6) of the Assessment Act, R.S.O. 1990, c.A.31 and s.390 of the Municipal Act, R.S.O. 1990, c.M.45, the motions judge recognized that unpaid taxes can cause financial problems for municipalities as they are dependant on the payment of taxes to finance the operations they are required to carry out. He continued: On the other hand, a requirement that a property owner be called upon to pay on a due date, a grossly overvalued assessment and then, in default, to have to pay a penalty and interest upon such an assessment, could cause severe financial hardship, if not the possibility of financial ruin, especially if the municipality does not see fit to pass a bylaw to pay interest on overpayments. (See Zaidan Group Ltd. v. Corporation of the City of London (1991) 50 OR. (3d) 384 S.C.C.) There is the potential for financial abuse at both ends. There is no need for this Court in the circumstances of this case to make a specific determination as to whether the legislation and bylaws constitute a complete statutory code, which may exempt principles of equity and the common law. However, it should be noted that the general rule of interpretation requires that a taxing statute be strictly construed, and unless the statute clearly and unambiguously intends to do so, it should not be construed so as to make any alterations in the common law. In such cases where questions of interpretation arise, there is a likelihood that they will be resolved in favour of the taxpayer. Both the Assessment Act and the Municipal Act are silent on the subject of interest. As well, this Court was not provided with any case that falls squarely along side the case at bar. The issue of refunds on interest for overpayments made by a taxpayer, did arise in Zaidan where it was held that in the absence of a bylaw requiring a municipality to do so, it is not obligated to make a payment with respect to interest on a refund for overpayment….. In Zaidan, the plaintiff sought interest on the overpayment from the City of London. In the case at bar, the applicant did not pay any money up front and waited for a final resolution at the O.M.B., which resulted in a substantial revision of the assessment. When the O.M.B. held the unrevised or original assessment to be too high, and reduced it accordingly, then it follows, pursuant to Section 37(6) of the Assessment Act and s.390 of the Municipal Act, that the amount on which the City could legally collect interest was also reduced. To allow the City to collect interest on the original amount would, in effect, entitle them to monies over which they did not acquire a legal interest. In conclusion, I cannot find any statutory authority that allows the City of Thunder Bay to collect interest and penalties on the unrevised amount. The Court in Zaidan supra distinguished between legal and illegal collections. Judicial intervention is premised on illegal or ultra vires collections of this nature. It is therefore the finding of this Court that the respondent has not established a valid legal claim to the interest or penalties based on the unrevised figure, and accordingly, it is hereby declared that the proper calculation of the cancellation fee is to be arrived at by applying the interest and penalty provisions to the revised taxes, which the parties agree was the sum of $449,342.64. [Emphasis added.] [24] What I understand from the reasons of the motions judge is that he interpreted s.37(6) of the Assessment Act and s.390 of the Municipal Act to mean that in calculating the cancellation price for the purpose of s.6 of the Municipal Tax Sales Act, interest and penalties are to be calculated on the basis of the reduced assessed value of the land. He found that to calculate interest on the basis of the original assessed value of the land would entitle the City to interest on taxes “over which they did not acquire a legal interest”. Although the motions judge did not make a similar finding with respect to penalties, he went on to hold that he was unable to find any statutory authority that allows the City to collect interest and penalties on the original assessed value of the land. THE LEGISLATION AS A STATUTORY CODE [25] In considering the relevant legislation, the starting point is the decision of this court in Zaidan Group Ltd. v. London (City) (1990), 71 O.R. (2d) 65, which applied the decision of this court in Windsor Roman Catholic Separate School Bd. v. Windsor (City) (1988), 64 O.R. (2d) 241, leave to appeal to S.C.C. refused (1988), 30 O.A.C. 160. An appeal in Zaidan was dismissed by the Supreme Court of Canada: [1991] 3 S.C.R. 593. In Zaidan, the taxpayer had paid its municipal taxes, the amount of which was reduced by its successful appeal of the assessment of its lands. It received a refund from the City of London of the amount of the taxes it had overpaid. As there was no legislation that required London to pay interest to the taxpayer on the amount of taxes it overpaid, it sought to recover interest in reliance on the doctrine of unjust enrichment. [26] This court found that the taxpayer could not recover interest. In rejecting recovery of interest on the basis of unjust enrichment, the court stated at p.69: The common thread of unfairness recognized by the common law breaks when a legislative body acts within its jurisdiction and stipulates, as here, that the municipality shall levy assessed amounts, the taxpayers shall pay those amounts, the municipality may use the money it has collected, and must refund it if adjusted downward on appeal, with interest if it has passed a by- law. The statute could equally have said that a taxpayer must pay the assessed amounts without any recourse by way of complaint. The unfairness of such a statute would be universally denounced but, if it were constitutionally competent to the legislature, the common law would have nothing to say on the subject. There is no question of a gap being left in the legislation for the common law to fill. The taxes are a statutory creation and the conditions surrounding their payment and repayment must be in the statutes associated with their creation. The common law cannot characterize competent legislation as unjust, and it would be doing so if it imposed an additional duty to pay interest on a statutory duty to levy and to refund a specific amount of money. Austin J., [in dissenting reasons in the Divisional Court: (1988), 64 O.R. (2d) 438 at 442-44] relying upon this court’s decision in Windsor Roman Catholic Separate School Board v. Windsor (City) (1988), 64 O.R. (2d) 241, 49 D.L.R. (4th) 576, 37 M.P.L.R. 70, characterized the relevant statutory provisions as a complete statutory code which excludes the common law. I am saying much the same thing but putting it in terms of the ambit of the principle of unjust enrichment so as to identify a clear distinction from the reasoning in the Air Canada case where the province had reached beyond its jurisdiction and had no statutory protection against the allegation of unfairness. [Emphasis added.] [27] In dismissing the taxpayer’s appeal, the following brief reasons were given by the Supreme Court at 594: THE COURT – We are all of the view that this appeal must be dismissed. The appellant’s claim to interest on an overpayment of tax based on the doctrine of unjust enrichment is not available in this case in the light of s.6(1) of the Municipal Interest and Discount Rates Act, 1982, S.O. 1982, c.44. This section authorizes a municipality to pass a by-law for the payment of interest and also gives a municipality a discretion to do so. In this case, the City of London did not pass such a by-law. Accordingly, the claim for unjust enrichment fails and the appeal is dismissed with costs. See also Lafarge Canada Inc. v. Calgary (City) (1988), 40 M.P.L.R. 242 (Alta. Q.B.); Hensrud v. Regina (City) (1994), 115 D.L.R. (4th) 69 (Sask. Q.B.), aff’d (1994), 121 D.L.R. (4th) 188 (Sask. C.A.). [28] In my view, in this appeal the relevant provisions of the Municipal Act, the Assessment Act, the Municipal Interest and Discount Rates Act, R.S.O. 1990, c.M.58, the Municipal Tax Sales Act, the City’s interim and final tax levy by-laws and the City’s penalty, interest and overpayment by-laws provide a complete statutory code governing the assessment of real property, the levying of municipal taxes, the payment of taxes by the dates on which they are due, and penalties and interest payable on taxes unpaid when due, as well as the payment of interest on overpayments of taxes consequent to a successful appeal resulting in a reduction of the assessed value of the land in respect to which the tax was levied. I find nothing in the statutory code, express or implied, which requires the City, in calculating the cancellation price for the purposes of a tax sale, to recalculate unpaid interest and penalties based on the reduced assessed value of the respondent’s land. [29] The Assessment Act is complementary to the Municipal Act for the purposes of municipal taxation. Section 3 of the Assessment Act provides that all real property in Ontario is subject to assessment and taxation, subject to certain exemptions. Part XXII of the Municipal Act in general, and s.362 in particular, as well as s.37(3) of the Assessment Act, provide that municipal taxes shall be levied upon the assessment for real property made under the Assessment Act. (Although significant amendments were made to Part XXII by S.O. 1997, c.5, they do not affect the issues raised by this appeal. All references to the Municipal Act, therefore, are to the Act prior to its 1997 amendment.) The Assessment Act contains all the provisions applicable to complaints and appeals from assessments. As well, Part XXII of the Municipal Act contains a number of remedies available to a municipality to enable it to collect taxes, as does the Municipal Tax Sales Act. The subject of this appeal is real property taxes, which represents only one of several types of taxes which a municipality is empowered to impose. However, it is significant that municipalities derive the major portions of their revenue from real property taxes. [30] In addition to the general provisions of the Assessment Act and the Municipal Act, the following statutory provisions, together with the City’s by-laws, form the statutory code which applies to the issues raised by this appeal. [31] The Municipal Act: 390. If alterations are made in the assessment role, in accordance with the Assessment Act, after the collector’s roll or rolls for the municipality for the year for which such assessment has been made have been prepared, the clerk of the municipality shall alter or amend the collector’s roll or rolls to correspond with such alterations, and insert the proper rates therefor, and the rates or taxes shall be collectable in accordance with such corrected rolls in the same manner and with the like remedies as if they had been in the rolls when first prepared and certified by the clerk of the municipality. [Emphasis added.] 391. The collector, upon receiving his or her roll, shall proceed to collect the taxes therein mentioned. 399.(1) In local municipalities, the council may by by-law require the payment of taxes, including local improvement assessments, sewer rents and rates, and of other rents or rates payable as taxes, to be made into the office of the treasurer or collector by any day or days to be named therein, in bulk or by instalments, and may provide that on the punctual payment of any instalment the time for payment of the remaining instalment or instalments shall be extended to a day or days to be name, or may provide that in default of payment of any instalment by the day named for payment thereof, the subsequent instalment or instalments shall forthwith become payable. [Emphasis added.] …. (3) The council may by by-law impose a percentage charge as a penalty for non- payment of taxes or any class or instalment thereof not exceeding 1 ¼ per cent on the first day of default and on the first day of each calendar month thereafter in which default continues, but not after the end of the year in which the taxes are levied. [Emphasis added.] …. (5) The council may by by-law authorize the treasurer or collector to receive in any year payments on account of taxes for that year in advance of the day that may be fixed by by-law for the payment of any instalment of such taxes and, (a) to allow a discount on any taxes so paid in advance at a rate not exceeding 12 per cent per annum and may allow interest at a rate not exceeding 12 per cent per annum on account of taxes so paid in advance for any portion of the period for which no discount is allowed; or (b) to allow interest on taxes paid in advance of the day fixed by by-law for the payment of any instalment of such taxes at a rate not exceeding 12 per cent per annum, even if the taxes for such year have not been levied or that the assessment roll on which such taxes are to be fixed and levied has not been revised and certified by the Assessment Review Board when any such advance payment is made, and a by-law passed under this subsection remains in force from year to year until it is repealed or amended. …. (9) The council of any municipality may by by-law authorize the treasurer and the collector of taxes to accept part payment from time to time on account of any taxes due and to give a receipt for such part payment, provided that acceptance of any such part payment does not affect the collection of any percentage charge imposed and collectable under subsection (3) in respect of non- payment of any taxes or any class of taxes or of any instalment thereof. (10) Where the treasurer or the collector of taxes receives part payment on account of taxes due for any year, he or she shall credit such part payment first on account of the interest and percentage charges, if any, added to such taxes, and, where such taxes are required to be paid by instalments under a by-law passed under subsection (1), the remainder of such payment shall be credited first against the instalment first due and secondly against the instalment next due, and so on, until the whole of the remainder of the payment has been credited against such taxes. 419. (1) Despite any special Act, but subject to subsection (2), the treasurer, collector or county treasurer, as the case may be, shall add to the amount of all taxes due and unpaid interest at the rate of one- half of 1 per cent per month for each month or fraction thereof from the 31st day of December in the year in which the taxes were levied until the taxes are paid, provided that the council by by-law may increase such rate to a rate not exceeding 1 ¼ per cent per month. [Emphasis added.] (2) Despite subsection (1) or any special Act, the council of a local municipality may, by by-law, require that the treasurer, collector or county treasurer, as the case may be, add to the amount of all taxes due and unpaid interest at such rate not exceeding 15 per cent per annum as the council determines, from the 31st day of December in the year in which the taxes were levied until the taxes are paid. (3) No interest or percentage added to taxes shall be compounded. (4) Interest and percentages added to taxes form part of such taxes and shall be collected as taxes. [Emphasis added.] [32] The Assessment Act: 37.(3) In every municipality the rate of taxation for each year shall be fixed and levied on the assessment taken in the preceding year according to the last revised assessment roll thereof. (6) No assessment shall be increased, reduced or otherwise altered until all complaints, appeals or proceedings concerning the assessment have been finally determined and disposed of, and where the result of the final determination and disposition of the complaints, appeals or proceedings increases, reduces or otherwise alters the assessment, the taxes levied and payable with respect to the assessment shall be adjusted accordingly and any overpayment resulting from the adjustment shall be refunded by the municipality. [Emphasis added.] [33] The Municipal Interest and Discount Rates Act: 6.(1) A local municipality may pass by-laws to provide for paying to persons to whom overpayments are refunded under subsection 37(6) of the Assessment Act, interest on the overpayments at such rate as the council may determine and different rates may be paid for different successive periods from the day the overpayments were made or such other day as may be set out in the by-law until the day they were refunded or such other day as may be set out in the by-law. [Emphasis added.] [34] The Municipal Tax Sales Act: 1. (1) In this Act, “cancellation price” means an amount equal to all the tax arrears owing at any time in respect of land together with all current real property taxes owing, interest and penalties thereon and all reasonable costs incurred by the municipality, after the treasurer becomes entitled to register a tax arrears certificate under section 3, in proceeding under this Act or in contemplation of proceeding under this Act and, without restricting the generality of the foregoing, may include, (a) legal fees and disbursements, (b) the costs of preparing an extension agreement entered into under section 8, (c) the costs of preparing a survey where such is required to register any document under this Act, and (d) a reasonable allowance for costs that may be incurred subsequent to advertising under section 9; (“coût d’annualation”) “tax arrears” means any real property taxes placed on or added to a collector’s roll that remain unpaid on the 1st day of January in the year following that in which they were placed on or added to the roll; (“arriérés d’impôts”). [35] As it was empowered to do by ss.376(2) and 399(1) of the Municipal Act, the City passed interim and final tax levy by-laws for the years in issue. A common feature of the by-laws required that the “tax levied shall be paid” by a stipulated date. [36] Pursuant to s.399(3) of the Municipal Act, the City passed a by-law imposing a penalty on all overdue taxes amounting to 1 ¼% of the amount of overdue taxes on the first day of default, and on the first day of each calendar month thereafter in which default continues. “Overdue taxes” is defined as “those taxes that have been levied in any year and have not been paid on or before the day payment is due”. [37] Both s.399(3) of the Municipal Act and the by-law provide that penalties apply only to the year in which the taxes are levied. Thereafter, pursuant to s.419 of the Act, interest is added to all taxes due and unpaid. As it was empowered to do by s.419(1), the City passed a by-law for the relevant years increasing the statutory interest rate on all tax arrears to 1 ¼% per month for each month, or fraction thereof, until the taxes are paid. “Tax arrears” is defined as “taxes which are due and unpaid after December 31st of the year in which they were levied”. [38] Section 11 of By-law 74-1994 provides: 11. Nothing in this By-law shall exempt the person failing to pay the said taxes or any instalment thereof as hereinbefore provided from all of the provisions of the Municipal Act regarding the collection of taxes in arrears and nothing herein shall be deemed to restrict any powers of the Collector to collect the said taxes or any instalment or portion thereof in arrears. [Emphasis added.] A similar provision is contained in by-laws passed in 1995, 1996 and 1997. [39] Finally, pursuant to s.6(1) of the Municipal Interest and Discount Rates Act, the City passed a by-law providing that it would pay interest to persons to whom overpayments are refunded under s.37(6) of the Assessment Act “calculated from the actual payment of the final tax instalment for the applicable year…until the overpayment is refunded”. Absent such by-law, the City has no obligation to pay interest on the refund of any overpayment, as decided in Zaidan. The by-law is clearly premised on the taxpayer’s statutory obligation to pay taxes when they are due and owing. ANALYSIS [40] In my view, the decision of this court in Zaidan, as affirmed by the Supreme Court of Canada, is determinative of the issues raised by this appeal. The focus of this appeal is the proper method of calculation of the cancellation price, as defined in s.1(1) of the Municipal Tax Sales Act. The proper calculation is essential so that the respondent may pay that amount to preclude the sale of its lands by the City consequent to its failure to pay real property taxes levied on its lands when due, together with interest and penalties added to the unpaid taxes, for a period of four years. As I will explain, the statutory code which is set out above, does not, for the purpose of calculating the cancellation price, relieve the respondent from the payment of interest and penalties added to the real property taxes which it did not pay throughout the period that the assessment was under appeal. Accordingly, the tax base for the computation of the interest and penalty components of the cancellation price is the original assessment. While this may seem unfair, as Zaidan holds, it is not for the court to alter a statutory code that is the creation of the legislature. [41] As the proceedings which resulted in this appeal had their genesis in the respondent’s failure to pay realty taxes when they were due and payable resulting in the City initiating tax sale proceedings, it is helpful to review some general principles relating to a taxpayer’s statutory obligation to pay realty taxes when due and the ultimate remedy available to a municipality to collect unpaid taxes. [42] The obligation of a taxpayer to pay municipal taxes on the date on which they are due arises from the provisions of the Municipal Act and the by-laws passed by the City. This has been recognized by many courts, the passage quoted earlier from Zaidan being illustrative. The filing of an appeal of the assessment of his or her property by a taxpayer does not relieve the taxpayer of the statutory duty to pay realty taxes when due. Neither the Municipal Act, nor the Assessment Act, contain any provision which suspends the payment of taxes during the appeal process, nor any provision which precludes a municipality from taking proceedings to collect tax arrears during this period. Such provisions would seriously deprive a municipality of the funds required to conduct its business. To require a taxpayer to pay taxes when due is the result of a statutory scheme imposed on both the taxpayer and the municipality by the legislature. The province is obliged to assess the taxpayer’s real property and, subject to the right which each has to appeal the assessment, the municipality and the taxpayer are bound to accept the assessment: cf. Lafarge, supra, at 249-50. [43] The purposes of assessment have been described by K. G. Crawford, Canadian Municipal Government, (1954) at 261: The process of assessing serves two major purposes: it determines what objects or properties in the municipality are liable to taxation, and thereby the total tax base upon which the tax rate is to be levied to raise the taxes required for the year, and at the same time it determines the share of the total tax burden which each taxpayer will be required to bear. In practice, the term “assessment” has several connotations. In one sense an assessment is the equivalent of a tax or a levy. From the individual’s point of view, municipally, it means the valuation for taxation purposes placed upon the taxable object, while from the viewpoint of a council, it means the total of the values for taxation purposes of all the taxable units in the municipality. To the citizen, the important factor of the assessment is its equity. It matters little ultimately to the individual whether his property is assessed at too high or too low a figure, as related to actual value, provided his assessment is equitable as related to the assessments of all the other properties, for, from his point of view, the assessment merely determines his share of the total tax burden. If all are assessed at 50 per cent of value, his share is not different than if all are assessed at 100 per cent. [44] As I explained previously, when the assessment upon which municipal taxes are to be levied has been determined, the municipal council fixes the rate of taxation annually and provides for the terms of payment, such as the date of payment, and provisions, if any, for instalment payments and discounts for early payment, as well as interest and penalties for late payment, and appropriate by-laws are passed. It then becomes the responsibility of the municipality to collect the taxes. [45] As I will deal with them subsequently, a brief reference is helpful to the assessment roll and the collector’s roll. The assessment roll is prepared under the Assessment Act, and its final version forms the foundation for the taxes imposed by a municipality. Thus, after the last revised assessment roll is delivered to the clerk of a municipality it is transformed into the collector’s roll upon the passing of the relevant by-laws, and is the authority of the tax collector under the Municipal Act to use the compulsory machinery of the Act to collect the taxes. Section 387(1) contains the direction to municipal clerks in respect to the preparation of a collector’s roll. A helpful discussion of the relationship between the assessment roll and the collector’s is found in Re Bayack (1929), 64 O.L.R. 14 (C.A.) in which Masten J.A. stated at 20-21: …down to the time when the roll is delivered by the assessor to the clerk there is no completed assessment. Up to that moment the assessor is engaged in making his roll. Prior to its delivery to the clerk he has power to make alterations in his tentative assessment, and in the entries which he has made in his roll… When he has delivered the verified roll to the clerk, the function and powers of the assessor cease. Then and then only is there a completed assessment. For a general discussion of the assessment roll and the collector’s roll, see H. E. Manning, Assessment & Rating: Municipal Taxation in Canada, 4th ed. (1962), at 113 et seq. and 383 et seq., respectively. [46] Under the Municipal Act, various inducements and devices are provided to encourage taxpayers to pay their taxes. Taxpayers may be permitted to pay taxes by instalments (s.399(1)) and may be allowed discounts for taxes paid in advance (s.399(5)). On the other hand, a percentage, or penalty, may be imposed for non- payment of taxes (s.399(3)) and interest shall be added to taxes due and unpaid (s.419(1)). Under s.419(4), interest and percentages added to taxes form part of such taxes and shall be collected as taxes. The Act provides a number of remedies for the collection of unpaid taxes. These include an action under s.383, from a tenant under s.384 and by distress upon the goods and chattels of the landowner under ss.400 and 420. In addition, under s.411 tax arrears form a charge on the land, and s.382 creates a tax lien. [47] In respect to the collection of tax arrears it is important to have regard to s.412 of the Act which provides: 412. The treasurer of every municipality shall collect the arrears of taxes outstanding after the return of the collector’s roll and may receive part payment of taxes returned to the treasurer as in arrears upon any land for any year and shall credit such payment first on account of the interest and percentage charges, if any, added to such taxes and shall credit the remainder of such payment against that part of the taxes that has been in arrears for the greatest period of time but no such payment shall be received after a tax arrears certificate has been registered under the Municipal Tax Sales Act. [Emphasis added.] In my view, this indicates the intention of the legislature to regard interest and percentages as distinct, or discrete, from taxes, notwithstanding that under s.419(4) they are to be collected as taxes. In this regard, it is to be noted that pursuant to s.419(1) and s.399(3), the relevant by-laws provide that interest and percentages, respectively, continue to apply until the taxes are paid. [48] In Canadian Municipal Government, at pp.319-20, Crawford provides a discussion of the purpose of penalties which, in my view, is relevant to this appeal: The imposition of penalties is a source of irritation and complaint on the part of taxpayers, in many cases because the purpose of the penalty is not appreciated. Most delinquent taxpayers regard the penalty as a punishment rather than a means of effecting equitable treatment among all the taxpayers. Municipalities have to borrow money to finance their operations in the interim between the start of the fiscal year and the time when taxes become due, which involves costs for the taxpayers as a whole. When the taxes are paid they are used to pay off the loans previously incurred but to the extent that the taxes of any individual are not paid on the due date that amount is not available to reduce the loans. It is inequitable that those who pay their taxes on the due date should have to pay also for the cost of financing those who do not or who cannot pay on time. The penalties encourage the payment of taxes and they also make the delinquent taxpayer bear the cost of financing the loans required as a result of his delinquency. Citizens frequently complain of the rigidity of enforcement of penalties but any leeway allowed in the enforcement of penalties in individual cases defeats the aim of equality of treatment, and although the individual benefitted by a special extension of time for payment of his taxes may be satisfied, a question is raised in his mind as to whether or not others may be getting the same or even greater concessions. One important factor in satisfying citizens, particularly in matters of taxation, is to convince them that there is uniform and equitable treatment for all under established rules. [Emphasis added.] [49] The ultimate remedy for the collection of unpaid real property taxes is the tax sale, which is the real focus of this appeal. In Bay Colony Ltd. v. Wasaga Beach (Town) (1997), 33 O.R. (3d) 637 at 639 this court stated that “[t]he purpose of tax sale statutes is to see that municipalities are able to collect taxes to assure that the tax burden is distributed fairly among municipal taxpayers”. For the manner in which a tax sale is conducted, see Perry Township Tax Sale No. 92-1 (Re) (1993), 14 O.R. (3d) 45 at 50 (Gen. Div.). [50] I come now to the proper calculation of the cancellation price for the purposes of the Municipal Tax Sales Act. In my view, the starting point is the definitions of “cancellation price” and “tax arrears” contained in s.1(1) of the Act. For convenience, I reproduce the relevant portion of the definitions: “cancellation price” means an amount equal to all the tax arrears owing at any time in respect of land together with all current real property taxes owing, interest and penalties thereon and all reasonable costs incurred by the municipality, after the treasurer becomes entitled to register a tax arrears certificate under section 3, in proceeding under this Act or in contemplation of proceeding under this Act or in contemplation of proceeding under this Act and, without restricting the generality of the foregoing, may include… “tax arrears” means any real property taxes placed on or added to a collector’s roll that remain unpaid on the 1st day of January in the year following that in which they were placed on or added to the roll; (“arriérés d’impôts). [Emphasis added.] It is significant to note that “tax arrears” do not include interest and penalties statutorily imposed on taxes not paid when due and payable. However, a component of the “cancellation price” includes interest and penalties on tax arrears. [51] It can be seen from its definition that the cancellation price contains four components: (1) all tax arrears (as defined by the Act) owing at any time, (2) all current taxes owing, (3) interest and penalties on tax arrears and current taxes owing, and (4) all reasonable costs incurred by the municipality. In my opinion, it is significant that in defining cancellation price the legislature has treated taxes, interest and penalties as discrete components, thereby reflecting the scheme of the Municipal Act which similarly treats them as discrete items. [52] In paragraph [6], I have set out the relevant portion of the reasons of Kozak J. I am unable to agree with him that it was unnecessary to determine whether the legislation and by-laws constitute a complete statutory code which governs the calculation of the cancellation price. In my view, it was necessary for him to make the determination. Nor do I agree with him that the Assessment Act and the Municipal Act “are silent on the subject of interest”. Certainly the Municipal Act is not, nor are the Municipal Tax Sales Act and the Municipal Interest and Discount Rates Act. As well, for reasons which I will develop, I do not agree the combination of s.37(6) of the Assessment Act and s.390 of the Municipal Act render illegal the collection of interest on the amount of unpaid taxes consequent to the original assessed value of the respondent’s land. I further do not agree that there is no statutory authority which allows the City to collect interest and penalties based on the taxes unpaid while the appeal process was pending and that the attempt of the City to collect them was “illegal or ultra vires”. In my view, neither s.37(6) of the Assessment Act, nor s.390 of the Municipal Act, affect the definition of “cancellation price” in the Municipal Tax Sales Act. Kozak J. did not consider the definition of cancellation price. [53] As well, I cannot agree with the conclusion of the motions judge that to “allow the City to collect interest on the original amount [of taxes unpaid] would, in effect, entitle them to monies over which they did not acquire a legal interest”. The fact is that the respondent paid no taxes. However, as the taxes were made due and payable on specific dates by the governing statutory code, the City acquired a “legal interest” in the taxes when they were due. From those dates the City would have been in a position to use the taxes for municipal purposes, or to invest them. As I have noted, where there is a shortfall in anticipated tax revenue, a municipality may be forced to borrow money to carry out its programs. The position of Kozak J. ignores the other side of the coin. As the respondent failed to pay its taxes, it continued to have the use of monies to which the City was statutorily entitled. [54] I am also, with respect, unable to agree with the approach taken by Carthy J.A. As I will explain, it is my opinion that s.419(4) of the Municipal Act does not expand the meaning of “taxes levied and payable” in s.37(6) of the Assessment Act to include penalties and interest due on unpaid taxes. As well, it is my view that s.37(6) of the Assessment Act has no application to the circumstances of this appeal as the respondent failed to pay its taxes when due, with the result that it was not entitled to a refund of any overpayment resulting from the reduction of the assessment by the OMB. [55] In my view, central to the resolution of the appeal is the interplay of ss.37(3) and (6) of the Assessment Act, s.6(1) of the Municipal Interest and Discount Rates Act, ss.390 and 419(1)(4) of the Municipal Act and the definitions of “cancellation price” and “tax arrears” in s.1(1) of the Municipal Tax Sales Act. [56] Section 37 of the Assessment Act is concerned with the last revised assessment roll. Subsection 37(6) is directed to the levy of taxes and addresses the outcome of an assessment appeal, by an owner or the municipality, which results in the reduction or increase of an assessment. As such, it serves three purposes. The first is the alteration of the assessment roll to conform with the result of an appeal. The second is to adjust “the taxes levied and payable” in accordance with the alteration of the assessment roll. The third is to require a municipality to refund any overpayment of taxes resulting from the alteration of the assessment and, as such, clearly contemplates that a taxpayer will have paid its taxes when due and payable. Indeed, further to what I have said earlier, there would be no need to provide for the refund of overpaid taxes if the statutory scheme did not require that taxes be paid when due. [57] It is also important to recognize what s.37(6) does not concern. It is not concerned with, nor does it speak to, the refund of interest or penalties which may have been paid on taxes in arrears: cf. Toronto College Street v. City of Toronto (1983), 43 O.R. (2d) 742 (High Ct.). Nor does it affect the definition of “cancellation price” in the Municipal Tax Sales Act. [58] Section 390 of the Municipal Act is directory and is complementary, inter alia, to s.37(6) of the Assessment Act. It has application when there has been an alteration of the assessment roll under the Assessment Act and directs the municipal clerk to make a corresponding alteration to the collector’s roll. Section 37(6) of the Assessment Act is but one of several sections in that Act which provide for the alteration of the assessment roll. Section 390 of the Municipal Act goes on to provide that consequent to the altered collector’s role, “taxes shall be collectable in accordance with such corrected rolls in the same manner and with the like remedies as if they had been in the [collector’s] rolls when first prepared”. While this may mean that insofar as unpaid taxes are concerned the amount, for collection purposes, is reduced to conform with the alteration to the collector’s roll, s.390 does not speak to interest or penalties in respect to unpaid taxes. [59] Section 419(1) of the Municipal Act, which mandates that a municipality shall add interest to the amount of all taxes due and unpaid, must be considered together with ss. 399(1) and (3) which provide for the imposition of a penalty for the non-payment of taxes. [60] This brings me to consider s.419(4) and its relationship to s.37(6) of the Assessment Act. Section 419(4) states: Interest and percentages added to taxes form part of such taxes and shall be collected as taxes. I read s.419(4) as providing a municipality with the power to collect unpaid interest and penalties. By adding interest and penalties to taxes, a municipality is provided with the same remedies contained in the Municipal Act for the collection of unpaid interest and penalties as are provided by the Act for the collection of unpaid taxes. In my view, this is the purpose of s.419(4). Without s.419(4), there is no provision in the Act which provides a remedy for the collection of unpaid interest and penalties: cf. Pipestone v. Hunter (1916), 28 D.L.R. 776 (Man. K.B.). This is in contrast with the definition of “cancellation price” in s.1(1) of the Municipal Tax Sales Act. That Act provides expressly for the collection of unpaid interest and penalties through the mechanism of a tax sale. See, also, s.412 of the Municipal Act which draws a distinction between interest and percentages, and taxes, by making provision for how a municipality is required to allocate monies collected for arrears of taxes. [61] As such, s.419(4) of the Municipal Act has no application to the adjustment of “the taxes levied and payable” within the meaning of s.37(6) of the Assessment Act. Similarly, interest and penalties do not form part of “the rate of taxation…fixed and levied on the assessment” within the meaning of s.37(3). These subsections must be read together. The fact that interest and penalties form part of municipal taxes under s.419(4) of the Municipal Act does not make interest and penalties “taxes levied and payable” for the purposes of s.37(6) of the Assessment Act. It follows, in my view, that s.419(4) cannot serve as the foundation for the calculation of the cancellation price under the Municipal Tax Sales Act. [62] Section 6(1) of the Municipal Interest and Discount Rate Act is also complementary to s.37(6) of the Assessment Act. It speaks to interest payable to a taxpayer who is entitled to a refund of overpaid taxes as provided by s.37(6). This makes perfectly good sense. It provides fair treatment of a taxpayer who has been successful in appealing his or her assessment and who has, as the legislation requires, paid real property taxes based on the original assessment. This was the focus of Zaidan. [63] However, it is noteworthy that s.6(1) does not provide for a refund of “overpaid” interest or penalties. Its purpose is to compensate a taxpayer for the lost use of funds resulting from the payment of taxes which have been reduced. Indeed, no provision is found in the statutory code for the refund of interest or penalties which a taxpayer may have paid through the collection mechanism of the legislation in circumstances where the tax on which they were calculated was in arrears, but is later reduced. This can be contrasted with legislation, such as s.23(2) of the Financial Administration Act, R.S.C. 1985, c. F- 11, as amended by S.C. 1991, c.24, s.7(2), which provides for the remission of any tax or penalty paid where the collection of tax or its enforcement was unreasonable or unjust. In my view, the absence of such provision makes commercial and fiscal sense. As I have discussed, municipalities are dependent on the payment of taxes to carry out their responsibilities to taxpayers, and others, and the statutory scheme obliges taxpayers to pay taxes when due, or suffer the consequences. Had the legislature intended to permit taxpayers, pending the result of an assessment appeal, to avoid their statutory obligation to pay taxes free from the sanctions of interest and penalties – not to mention tax sales – it would have said so. [64] To this I would add that s.37(6) of the Assessment Act can have no application to the circumstances of this appeal as it is premised on the statutory obligation of a taxpayer to pay taxes when due and payable. The respondent paid absolutely no taxes during the appeal period. For this reason, as well, s.37(6) cannot serve as the foundation for the calculation of the cancellation price. I am satisfied that the respondent knew exactly what it was doing when it elected to pay no taxes. It knew it was required to pay taxes when due, or suffer the consequences. Furthermore, it failed to pay the accumulated interest and penalties. It now seeks to receive a bonus for flouting the law by being relieved of its statutory obligation to pay the full amount of the interest and penalties lawfully added to its tax bill. [65] Furthermore, the explicit statutory authority to refund tax overpayments and to permit municipalities to pass by-laws for the payment of interest on overpayments indicates that the legislature has considered whether, in the calculation of the cancellation price, the amount of unpaid interest and penalties is to be based on the original assessment, or the reduced assessment, and that it has determined that they are to be calculated on the basis of the original assessment. The position which the respondent submits should govern the calculation cannot be inferred or implied in the absence of explicit statutory authority. As this court stated in Windsor Roman Catholic Separate School Bd. v. Windsor (City) (1988), 37 M.P.L.R. 70 at 80, it “would require the clearest possible direction in the statutes” to justify the position taken by the respondent. [66] In my view, the following comments of Austin J.A., on behalf of this court in Religious Hospitallers of St. Joseph of Cornwall v. Ontario (Regional Assessment Commissioner, Region 1) (1998), 168 D.L.R. (4th) 148 at 152, which considered issues similar to those in Zaidan, apply to this appeal: The taxpayer’s real complaint here is with the process of the Assessment Act which requires the taxpayer to pay the amount assessed, whether or not the assessment is under appeal. The process also requires the taxpayer to wait until all appeals are complete before any refund is payable. Section 37(6). The process requires the taxpayer to pay in advance whether he or she is right or wrong. To avoid what the taxpayer sees as an injustice, the process could be changed so as to require either no payment or payment of only the amount both sides agree to be appropriate, pending resolution of the dispute. While the individual taxpayer would undoubtedly regard such a change as rendering the process fairer, it takes little imagination to foresee the accounting chaos which might take place in such an event. [67] The following observation of Major J. in Zeitel v. Ellscheid, [1994] 2 S.C.R. 142 at 152, in which the Supreme Court considered the Municipal Sales Tax Act, also applies to this appeal: Recognition of the proper roles of the legislature and the judiciary requires that the courts give effect to the plain meaning of the words of a duly enacted statute. It is beyond the power of a court to interfere in a carefully crafted legislative scheme merely because it does not approve of the result produced by a statute in a particular case. See, e.g., Elmer A. Driedger, Construction of Statutes (2nd ed. 1983), at p.86. CONCLUSION [68] The statutory code that applies to the circumstances of this appeal requires the payment of real property taxes when due, and provides for reimbursement by the City of the overpayment of taxes, with interest, should the taxpayer successfully appeal the assessment of its lands. This is the protection which the statutory code provides when a taxpayer successfully appeals the assessed value of its property on which real property taxes have been levied and paid. [69] As for interest and penalties imposed by the statutory code for the failure to pay taxes when due, it does not provide for a rebate of interest and penalties that may have been paid on taxes overdue and unpaid, nor for the recalculation of unpaid interest and penalties, when the assessment has been reduced as the result of a successful appeal. This should not be surprising given the rationale for the imposition of interest and penalties as a result of a taxpayer’s failure to comply with its statutory obligation to pay its taxes when they are due and payable. [70] It follows, therefore, from the statutory code, in particular, the clear definition of cancellation price in the Municipal Tax Sales Act, and the policy underlying the imposition of interest and penalties on unpaid taxes, that the position of the appellant must prevail. [71] Accordingly, I would allow the appeal, set aside the order of Kozak J., and order that the proper amount of the cancellation price to be paid by the respondent is $667,050.63. The appellant will have its costs of the application and the appeal. “S. Borins, J.A.” _______________________________ 1 Subsection 399(3) of the Municipal Act provides: The council may by by-law impose a percentage charge as a penalty for non-payment of taxes or any class or instalment thereof not exceeding 1¼ per cent on the first day of default and on the first day of each calendar month thereafter in which default continues, but not after the end of the year in which the taxes are levied.