3 KEY ISSUES IN THE CAPILANO DECISION
BEYOND THE STANDARD OF REVIEW:
3 Key Issues in the Supreme Court of Canada’s Decision in Capilano
The long-awaited decision of the Supreme Court of Canada in the City of Edmonton v. Edmonton East (Capilano) Shopping Centres Ltd. (“Capilano”) case was released on November 4, 2016, reversing the decision of the Alberta Court of Appeal and restoring the original Board decision. In the process, a 5-to-4 majority of the Supreme Court confirmed that, where Alberta assessment review boards are interpreting provisions of the Municipal Government Act dealing with assessment matters, their decisions will be upheld by the courts provided they are reasonable.
While the Supreme Court’s determination of the standard of review applicable to assessment review boards is a critical issue in the context of assessment appeals, the Capilano decision also contains some important analysis of three key provisions of the MGA and its regulations that impact assessment practice generally.
Section 305: Substantive Error-Correcting Mechanism
Justice Karakatsanis, writing for the majority of the Supreme Court, held that the meaning of “error” in s. 305(1) of the MGA is not limited to typographical or similar errors. Rather, s. 305(1) empowers the assessor to change an assessment he or she later determines is too low (i.e. was made in error). In other words, the intent of s. 305 is to allow the assessor to correct errors discovered on the assessment roll whether they are of an administrative nature or a substantive change in the assessment.
Section 467: Boards Can Decrease or Increase Assessments on Complaint
Justice Karakatsanis held that the assessment complaint process under the MGA does not “belong” to anyone, including the taxpayer. Instead, it is a process through which the assessment review board, with the assistance of the taxpayer and the municipality, determines the correct, fair and equitable value of the assessment. The overarching intent of the MGA is to ensure that assessments are current, correct, fair and equitable.
Accordingly, where s. 467 states that the board may “change” an assessment, this means that the board may either (i) decrease the assessment (typically at the request of the taxpayer); or (ii) increase the assessment (typically at the request of the municipality), to ensure that the assessment is current, correct, fair and equitable. Justice Karakatsanis noted that if the board lacked the power to increase assessments that are too low, it would mean that other taxpayers would effectively bear more than their fair share of the overall tax burden, which would be a result contrary to the objectives of the MGA.
Sections 299 and 300: Not a Form of Early Disclosure
Justice Karakatsanis also reviewed the provisions of the Matters Relating to Assessment Complaints Regulation(“MRAC”), and concluded that s. 9(4) does not preclude a municipality from “changing its mind about an assessment and leading evidence to support its position, as long as it discloses the evidence within the prescribed time limit.” In this context, the requirement for disclosure is governed by s. 8(2)(b) of the MRAC, which requires the municipality to disclose its evidence at least 14 days before the board hearing. Justice Karakatsanis drew a distinction between the disclosure required under MRAC and the disclosure required under s. 299 and s. 300, noting that s. 8(2)(b) of MRAC “would serve little purpose if the municipality’s entire case already had to be disclosed to a complainant under s. 299 or s. 300.”
The implications of the majority’s decision in Capilano are clear. A municipality is not precluded from seeking a lower assessment before an assessment review board even if the basis of that (new) lower assessment and the supporting evidence are not previously disclosed in a s. 299 response, as long as disclosure is provided for purposes of the board hearing in accordance with the requirements of MRAC. However, in cases where the municipality pursues a lower assessment in a complaint proceeding (the basis of which lower assessment is not disclosed to the taxpayer until 14 days before the merit hearing), procedural fairness may require the assessment review board to extend the taxpayer’s deadline for filing rebuttal evidence.
This aspect of the Capilano decision is at odds with the decision of the Alberta Court of Appeal in Canadian Natural Resources Ltd. v. Wood Buffalo, 2014 ABCA 195 (“CNRL”). In that case, the Alberta Court of Appeal held that a municipality was not entitled to defend an assessment on a different basis than disclosed in a s. 299 response. The CNRL decision also raised questions as to the type of information required to be disclosed under s. 299 – in particular, if the municipality is required to disclose under s. 299 all of the evidence upon which it would rely in the event of a complaint. The majority decision in Capilano makes it clear that the answer is “no”. Disclosure of evidence in support of the municipality’s position in an assessment complaint must be made in accordance with the requirements of MRAC, rather than pursuant to s. 299 of the MGA.
The amendments to the MGA, expected to come into force in early 2017, do not contemplate changes to s. 305(1) or s. 467. Similarly, the proposed amendments to sections 299 and 300 do not impact the Supreme Court’s analysis in Capilano. Accordingly, the Supreme Court’s interpretation of these provisions as set out in Capilano will likely be unaffected by the passing of Bill 21, and will continue to represent the leading authority in Alberta.