16 O.R. (3d) 83. [1993] O.J. No Action No. C Court of Appeal for Ontario, Tarnopolsky**, Krever and Arbour JJ.A.

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1 Page 1 1 of 1 DOCUMENT Re Regional Assessment Commissioner, Region No. 3 et al. and Graham et al. * [Indexed as: Ontario Regional Assessment Commissioner, Region No. 3 v. Graham] 16 O.R. (3d) 83 [1993] O.J. No Action No. C10042 Court of Appeal for Ontario, Tarnopolsky**, Krever and Arbour JJ.A. October 21, 1993 * An application for leave to appeal to the Supreme Court of Canada was dismissed May 5, 1994 (Lamer C.J.C., Cory and Iacobucci JJ.). ** Tarnopolsky J.A. died on September 15, Assessment -- Interpretation -- "Vicinity" -- Vicinity a question of fact -- Vicinity may be whole or part of municipality depending on circumstances -- Vicinity to be interpreted in a similar manner for similar sections of Assessment Act -- Assessment Act, R.S.O. 1980, c. 31, ss. 63(3), 65(2). The appellants were owners of a condominium unit in the Regional Municipality of Ottawa- Carleton and had disputed the assessment of their unit. In the courts below, reversing a decision of the Assessment Review Board, McRae J. held that, where a municipality had its assessment roll equalized under s. 63(3) of the Assessment Act, then for a residential assessment of condominium or co-operative units under s. 65(2) of the Act, which provides that the assessment of such units "shall be based on the same proportion of the market value thereof as that at which owner-occupied single-family residences in the vicinity are assessed", the word "vicinity" should be interpreted to mean the whole of the municipality. The Assessment Review Board had held that for this case vicinity was an area smaller than the whole of the municipality. McRae J.'s judgment was affirmed by the Divisional Court. The appellants appealed to the Court of Appeal for Ontario. Held, the appeal should be allowed.

2 Page 2 "Vicinity" is not defined in the Act. In cases dealing with s. 65(1) of the Act, which deals with assessment complaints and appeals to the Assessment Review Board, Ontario Municipal Board, or any court, vicinity has been treated as a question of fact and could mean an entire municipality or a smaller portion thereof. This flexibility in meaning did not make the word "vicinity" unclear or ambiguous. There was no absurdity or inconsistency apparent from the language of the Act that precluded vicinity having the same meaning for the purposes of s. 65(2) of the Act or that justified a departure from the ordinary, plain meaning of the word vicinity for the purposes of s. 65(2). The respondents could not point to any inconsistency in the wording of the Act itself but looked to examples of applications with consequences said to conflict with their argued intent of the Act. This was not the kind of inconsistency or absurdity that requires the court to interpret a word in a manner contrary to its plain and unequivocal meaning and involved assumptions about the intent and effect of equalization that could not be easily substantiated and were best left to the legislature. For s. 65(2), vicinity should be given the same meaning it has received in similar contexts in the same statute. Cases referred to Fogh-Dohmsmidt v. Ontario Regional Assessment Commissioner, Region No. 32 (1981), 16 M.P.L.R. 199 (Ont. Dist. Ct.); Joshi v. Ontario Regional Assessment Commissioner, Region No. 11 (1985), 18 O.M.B.R. 88; Mount Citadel Ltd. v. Ontario Regional Assessment Commissioner, Region No. 11 (1980), 13 O.M.B.R. 242; Peel Condominium Corp. No. 57 v. Ontario Regional Assessment Commissioner, Region No. 15 (1984), 47 O.R. (2d) 466, 11 D.L.R. (4th) 627, 26 M.P.L.R. 308, 16 O.M.B.R. 395, 5 O.A.C. 358 (Div. Ct.); Ritchie v. Nepean (Township), [1971] 1 O.R. 459, 15 D.L.R. (3d) 561 (Co. Ct.); York Condominium Corp. No. 460 v. Ontario Regional Assessment Commissioner, Region No. 11 (1985), 17 O.M.B.R. 74 [affd 17 O.M.B.R. 503 (Div. Ct.)] Statutes referred to Assessment Act, R.S.O. 1980, c. 31, ss. 39, 62, 63(1) [as am. 1983, c. 58, s. 4], (3), 65(1) [rep. & sub. 1982, c. 40, s. 3(14)], (2) -- now R.S.O. 1990, c. A.31, ss. 40, 58(1), (3), 60(1), (3) Assessment Act, R.S.O. 1990, c. A.31, s. 60(3) Rules and regulations referred to O. Reg. 19/80 (Assessment Act, R.S.O. 1980, c. 31) Authorities referred to Driedger, Construction of Statutes, 2nd ed. (Toronto: Butterworths, 1983), pp APPEAL from a judgment of the Divisional Court (unreported) dismissing an appeal from the judgment of the High Court of Justice (1987), 59 O.R. (2d) 722, 39 D.L.R. (4th) 154, 36 M.P.L.R. 145 (McRae J.), in an application to interpret the word "vicinity" in s. 65(2) of the Assessment Act, R.S.O. 1980, c. 31. William F. Burrows, for appellants. J.M. Canapini, for respondents.

3 Page 3 The judgment of the court was delivered by ARBOUR J.A.: -- This appeal concerns the interpretation of the word "vicinity" in s. 65(2) of the Assessment Act, R.S.O. 1980, c. 31, as amended (the "Assessment Act" or "Act"), in the case of a municipality which has had its assessment roll "equalized" pursuant to s. 63(3) of the Act. (1) History of the appeal The appellants appeal from an order of the Divisional Court dated June 1, 1989 which dismissed an appeal from the judgment of McRae J. McRae J. held that the word "vicinity" in s. 65(2) of the Assessment Act must be interpreted to mean the whole of the municipality in the case of a municipality which has had its assessment roll equalized for a particular year pursuant to s. 63(3) of the Act. Having reached that conclusion, McRae J. reversed the decision of the Assessment Review Board (the "board") which held that the appropriate vicinity on the facts before it was not the entire municipality but a smaller area delineated by the board. (2) Facts The appellants Donald and Esther Graham were the owners of a condominium unit of the appellant Carleton Condominium Corporation No. 221 in the City of Ottawa. In 1984, the Regional Assessment Commissioner, Region No. 3 (Ottawa-Carleton) conducted a reassessment program for the 1985 taxation year of only the condominium and co-operative housing units in the Regional Municipality of Ottawa-Carleton. The municipal tax assessment of the appellants' condominium unit for the year 1985 was reassessed along with other condominium units in Ottawa as a result of that reassessment. Pursuant to the provisions of s. 39 of the Act, the appellants, along with almost 2,000 other condominium unit owners, appealed the assessment to the Assessment Review Board on the ground that their assessment was too high. (3) Relevant sections of the Act The relevant sections in this appeal are ss. 63(1), 63(3), 65(1) and 65(2). They are set out as follows: 63(1) Subject to the other provisions of this Act and to the alterations, corrections, additions and amendments authorized by this Act, and for the purpose of any special or general Act, (a) the assessment roll of a municipality to be returned in the year 1974 shall be assessed of all real property as set forth in the assessment roll return for the year 1970 for taxation in the year 1971 as amended, added to or otherwise altered up to the third Tuesday following the 1st day of December, 1974;.....

4 Page 4 (j) subject to subsection (2) and to subsection 65(3), the assessment roll of a municipality to be returned in the year 1983 shall be the assessment of all real property as set forth in the assessment roll returned for the year 1982 for taxation in the year 1983 as amended, added to or otherwise altered up to the date when the assessment roll for taxation in the year 1984 is returned, provided that, where the assessor is of the opinion that an assessment to be shown on the assessment roll to be returned for the years 1974 to and including 1983 is inequitable with respect to the assessment of similar real property in the vicinity, the assessor may alter the value of the assessment to the extent necessary to make the assessment equitable with the assessment of such similar real property (3) Where the Minister considers that, within any class or classes of real property in a municipality, any parcel or parcels of real property are assessed inequitably with respect to the assessment of any other parcel or parcels of real property of that class, he may, if so requested by a resolution of the council of such municipality, direct that such changes be made in the assessment to be contained in the assessment roll next to be returned in that municipality as will, in his opinion, eliminate or reduce inequalities in the assessment of any class or classes of real property, and the Minister may, for that purpose, make regulations (1) The Assessment Review Board, Ontario Municipal Board or any court, in determining the value at which any real property shall be assessed in any complaint, appeal, proceeding or action, shall have reference to the value at which similar real property in the vicinity is assessed, and the amount of any assessment of real property shall not be altered unless the Assessment Review Board, Ontario Municipal Board or court is satisfied that the assessment is inequitable with respect to the assessment of similar real property in the vicinity, and in that event the assessment of the real property shall not be altered to any greater extent than is necessary to make the assessment equitable with the assessment of such similar real property. (2) For the purposes of subsection (1) and of section 63, where a residential assessment is made with respect to a unit, as defined in the Condominium Act, a proposed unit, as defined in that Act, or a unit or suite in the building of a co-operative housing corporation, the value at which such unit, proposed unit or suite shall be assessed shall be based on the same proportion of the market value thereof as that at which owneroccupied single-family residences in the vicinity are assessed. (4) Ottawa's implementation of s. 63(3) and reassessment program

5 Page 5 In 1979 the City of Ottawa requested that s. 63(3) of the Act be implemented for the purposes of reassessment of all real property in Ottawa for the year The implementation of that reassessment program resulted in adjustments being made to the assessment of every parcel of real property in the City of Ottawa. By O. Reg. 19/80, the classes of real property for the city were prescribed along with an equalization factor. For Class 4 residential properties, of which single-family residences and condominium units are included, this factor was per cent. Within the prescribed classes of real property, each parcel of property in the city was assessed at the same proportionate level of estimated 1975 market value. For example, the total tax assessment in 1980 for a particular property in Class 4 was the market value of the property estimated as of 1975 multiplied by the equalization factor of per cent. This meant that, in 1980, any two similar residential properties, each having an equivalent market value in the base year of 1975, located anywhere within the City of Ottawa, would be assessed for an identical amount. The resulting assessment was frozen or carried forward on the assessment roll each year subsequent to 1979 in accordance with s. 63(1) of the Act until the next s. 63(3) equalization occurred for Ottawa in 1986 for taxation in the year In 1984, the City of Ottawa underwent a reassessment of condominiums and co-operative units. This was made necessary as a consequence of the decision of the Divisional Court in Peel Condominium Corp. No. 57 v. Ontario Regional Assessment Commissioner, Region No. 15 (1984), 47 O.R. (2d) 466, 11 D.L.R. (4th) 627 ("Peel"), which held that, pursuant to s. 65(2) of the Act, municipalities had an obligation to assess condominiums annually at the same proportion to market value as that of owner-occupied single-family residences. The methodology employed by the municipality for reviewing and adjusting the assessment of condominiums and co-operative units for the 1984 assessment rolls conformed to a directive, dated December 13, 1984 issued by the Assessment Policies and Priorities Branch of the Assessment Division of the Ministry of Municipal Affairs. Step 2 of the directive dealt with vicinities and stated as follows: 2. Vicinities will be established that will include sufficient comparable sales to develop reasonable assessment to sale ratios. In municipalities which have implemented a Section 63 reassessment, the municipality will continue to be defined as the vicinity. This is consistent with the Section 63 Program requirement which provides for municipal-wide classes and class ratios. The municipality then arrived at a proper assessment-to-sales ratio for the reassessment of condominiums (using total sales and assessments of single-family dwellings in the entire municipality to arrive at a current assessment to market value ratio) factored to 1975 and which, when multiplied by a condominium's current market value, produced the total tax assessment for the condominium for the year (5) The decisions below The Assessment Review Board found the proper vicinity for the purposes of reassessment of the appellants' condominium, pursuant to their "complaint" under s. 65(1), to be an area smaller than the entire municipality. The board's reasoning was as follows:

6 Page 6 There is no legal definition for the word "vicinity" in the context that it is used in the Assessment Act nor, so far as we are aware, are there any adjectives qualifying its meaning in the Act. The courts on more than one occasion have stated that it is entirely a question of fact in each case based on the evidence submitted for the board to decide what is the appropriate vicinity. Basically, it must be an area of sufficient size that will enable an opinion to be formed on the basis of a suitable number of comparables as to the equity or inequity of the subject property. This approach is consistent with the comments of O.M.B. member A.J.L. Chapman in the case of Metropolitan Trust Co. v. Ontario Regional Assessment Commissioner, Region No. 11, which has been quoted with approval by the Courts: I would take the plain meaning of the words "in the vicinity" to be in close proximity which in the case of a very small municipality could mean the whole municipality, but in my view East York is far too large for that. I can also see the words "in the vicinity" meaning more than in close proximity if it were necessary to extend the vicinity over a large area of land in order to obtain a sufficient number of comparables to make a meaningful comparison. In the present situation, the respondents are relying on the policy directive of December 13, 1984 that the whole municipality is the vicinity when there has been a reassessment pursuant to s. 63(3) of the Assessment Act, in this case the City of Ottawa. In the opinion of the board, the statement in the policy directive concerning the ministry for s. 63 municipalities cannot be substantiated for the City of Ottawa as appropriate to test the equity of the assessments of the subject properties. Although the regulated factor of per cent was applied to all Class 4 properties in the municipality, not all properties in this class are considered to be similar, nor are they all considered to be in the same vicinity. The provisions of s. 65(1) and (2) of the Assessment Act make it mandatory for the board to determine whether or not the subject properties are equitably assessed in relation to similar properties (single-family dwellings and condominiums) in what it considers the appropriate vicinity without being restricted in this determination on any other particular ground. The board finds as a fact on the evidence submitted that the vicinity of Lindenlea and New Edinburgh, bounded by the Village of Rockcliffe Park, the City of Vanier and the Rideau River is an appropriate vicinity to determine the proper land of assessment for the subject condominium units. McRae J. overturned the decision of the board [(1987), 59 O.R. (2d) 722, 39 D.L.R. (4th) 154 (H.C.J.)]. He said [at pp ]: If the proportion of market value used to arrive at an assessed value for a particular class of property within the municipality were to vary between vicinities, s. 63(3) would not only be violated, but its entire purpose would be defeated. The sections can

7 Page 7 only be reconciled if the term "vicinity" is interpreted to mean "municipality" in a s. 63(3) municipality. This problem was largely dealt with by Craig J. in Wentworth Condominium Corp. No. 46 v. Ontario Regional Assessment Officer, Region No. 19 (1986), 33 M.P.L.R. 75, at pp. 81-2: It is apparent as well that the provisions of ss. 65(2) and 63(3) are in conflict. As indicated earlier, s. 63(3) provides for a specific mandatory scheme for assessment of all properties within a class in the municipality in all municipalities where it is implemented, whereas the provisions of s. 65(2) are general or nonspecific in terms; in particular "vicinity" is non-specific as to area. In this situation the provisions of s. 63(3) must prevail. In Driedger, Construction of Statutes, 2nd ed. (1983), it is stated (at p. 85) that where a statute contains a grammatical ambiguity, internal harmony must be maintained where possible. Thus the interpretation that "appears to better accord with the body of the enactment" is the one which must be adopted. It logically follows that in any municipality where s. 63(3) has been implemented "vicinity" in s. 65(2) can only mean the entire municipality. It is important to note that s. 63(3) was passed four years after s. 65 and was designed to correct inequities. This is a reasonable reconciliation of the two sections and in my view is in compliance with the objectives of the Act. A majority of the Divisional Court [unreported], per Chilcott J., dismissed the appeal from McRae J.'s decision and adopted his reasons, adding only that the word "vicinity" was capable of a wide or narrow meaning in the statute and that McRae J. chose to give it a broad meaning. Sirois J. dissented. He disagreed that the statute contains a grammatical ambiguity and that "vicinity" must mean "municipality" in a case where s. 63(3) has been implemented. With respect, I agree with Sirois J. and with the Assessment Review Board as to the correct interpretation of the word "vicinity" in the present circumstances. (6) Analysis "Vicinity" is not defined in the Act. The cases which have previously dealt with the definition of the term "vicinity" in the context of s. 65(1) of the Act have stressed that whether something is or is not "in the vicinity" must depend on the particular facts in issue: see Fogh-Dohmsmidt v. Ontario Regional Assessment Commissioner, Region No. 32 (1981), 16 M.P.L.R. 199 (Ont. Dist. Ct.); Joshi v. Ontario Regional Assessment Commissioner, Region No. 11 (1985), 18 O.M.B.R. 88; Mount Citadel Ltd. v. Ontario Regional Assessment Commissioner, Region No. 11 (1980), 13 O.M.B.R As was pointed out by the board in this case, "vicinity", in appropriate circumstances, can mean an entire municipality, but may also mean a smaller portion thereof, depending on the appropriate geographical base that will yield meaningful comparables. The flexibility in the term does not mean that it is unclear or ambiguous and that violence should be done to its accepted ordinary and

8 Page 8 grammatical meaning, and to the meaning that it clearly has in other parts of the Act. Departure from the ordinary, plain meaning of the word should only be resorted to in the face of an absurdity or inconsistency that is apparent from the very language of the statute: Driedger, Construction of Statutes, 2nd ed. (Toronto: Butterworths, 1983), at pp The respondents' main argument is that there is some repugnancy or inconsistency between ss. 63(3) and 65(2) and, thus, "vicinity" must be interpreted as "municipality" in order to avoid that repugnancy or inconsistency. I note at the outset that had the legislature intended that the municipality be the area of comparison in all cases, it would not have used the word "vicinity". The respondents' position, however, is that "vicinity" must be read differently in the case of condominiums in equalized municipalities than anywhere else in the Act in order to respect the intent and purpose of equalization. In my view, this is not the kind of inconsistency or absurdity which requires the court to interpret a word in a manner contrary to its plain and unequivocal meaning. In order to show that the plain and ordinary meaning should not be attributed to the word "vicinity", the respondents must point to something in the Act itself which supports their interpretation, that is, the inconsistency must be plain and apparent in the wording of the Act, and not exist merely in the consequences of applying the provisions to particular facts. It is only when one looks at the consequences of the application of ss. 63(3) and 65(2) that any conflict would be apparent. The alleged conflict arises because the effect of interpreting "vicinity" as anything other than "municipality" would be to distort the equity among all property within the municipality, contrary to what the intended effect of s. 63(3) is said by the respondents to be. In answer to that apparent conflict, the appellants submit that it is neither the purpose, effect or intention of the Act to maintain equalized assessments of residential properties in years other than the year in which a s. 63(3) equalization is implemented. They maintain that the freeze on assessments imposed by ss. 62 and 63 of the Act has the inherent effect of allowing the proportions to market value at which residential properties are assessed to vary from neighbourhood to neighbourhood within the same municipality after equalization as a result of differences in the rate of change of property values from one neighbourhood to another within the municipality. For example, if a residence worth $100,000 at the time of equalization, and given an equalization factor of 10 per cent and thus an assessment of $10,000 did not subsequently rise in value, its current assessment-to-market value ratio would remain at 10 per cent. On the other hand, a similar residence with an equal market value, equalization factor and assessment at the time of equalization but whose market value had escalated more rapidly and is currently worth $150,000 would continue to have a similar assessment of $10,000 but an assessment-to-market value ratio of only 6.7 per cent. On that basis, the appellants argue that in effect, equalization takes place, and is in fact intended to occur, only in the particular year in which a s. 63(3) equalization program takes place. The distortions that would occur as a result of the annual reassessment of condominium units under s. 65(2) is no different than the differential in assessment to market value ratios that is created over the years by market forces. The force of this submission is to show that any attempt by the courts to reconcile ss. 63(3) and 65(2) by departing from the plain reading of s. 65(2) involves assumptions about the intent and effect of equalization that cannot be easily substantiated and are therefore best left to the legislature.

9 Page 9 Section 65(2) was enacted four years before s. 63(3) came into effect. Section 65(2) appears to have been enacted to remedy the fact that assessors were assessing condominiums on the same basis as rental apartment buildings. This was inequitable as rental apartment buildings were assessed at a higher rate than ordinary residential property: see Ritchie v. Nepean (Township), [1971] 1 O.R. 459, 15 D.L.R. (3d) 561 (Co. Ct.), and York Condominium Corp. No. 460 v. Ontario Regional Assessment Commissioner, Region No. 11 (1985), 17 O.M.B.R. 74. In enacting s. 65(2), the legislature clearly intended the assessment of condominiums to be treated similarly to that of single-family residences. When a complaint is made about the assessment of a single-family residence, the adjudication must be made on the basis of a comparison with similar real property in the vicinity, under s. 65(1). The same should be the case when a complaint is made about the assessment of a condominium unit. The practical difference between the assessment of single-family residences and condominium units seems to have arisen from two sources. One is the decision of the Divisional Court in Peel, supra, which required annual reassessments of condominium units. The second basis for a distinction between the two can be found in the language of s. 65(2) which refers not only to comparisons in cases of inequity when a complaint is made, under the s. 65 scheme, but also to s. 63, the original assessment process by the assessors. The basis for a distinction in the treatment of condominium units has been removed by an amendment in the 1990 Assessment Act, R.S.O. 1990, c. A.31, s. 60(3), which makes it clear that the determination of equity in the vicinity only arises where there is a complaint under that section. This reinforces the original intent of s. 65(2) which is consistent with the interpretation of the word "vicinity" as having a single, consistent meaning throughout the Act. (7) Conclusion In summary, I hold that the word "vicinity" in s. 65(2) of the Assessment Act is neither unclear nor ambiguous and that it should be given the same plain and ordinary meaning that it has received in similar contexts in the same statute. I would therefore allow the appeal, set aside the decision of the Divisional Court and restore the order of the Assessment Review Board, with costs. Appeal allowed.