It’s been said that the oldest rule of administrative law is to give a citizen notice of an alleged transgression or failing before penalizing him because of it. This is the core principle of “procedural fairness.”
The obligation to be fair not only applies to administrative boards and tribunals but to all statutory officers and officials. As discussed in the recent Manitoba Court of Queen’s Bench decision in Boeing Canada Operations Ltd. v. Winnipeg (City) Assessor, 2016 MBQB 175, this duty extends to an Assessor charged with the responsibility of assessing the value of real property for tax purposes.
At issue in the Boeing case was a penalty order imposed on a tenant as a result of its landlord’s failure to comply with an Assessor’s request for income and expense information.
Boeing, a tenant in a large industrial warehouse building, was responsible for paying realty taxes on the property it occupied, as set out in the terms of its lease. Having seen the property assessment more than double in a two-year period – from $4,678,000 in 2012 to $9,725,000 in 2014 – Boeing filed an appeal with the City of Winnipeg Board of Revision, and a hearing was conducted.
While the Board determined that the property had been over-assessed by approximately $3.5 million, the resultant tax savings were effectively cut in half on account of a “deferral order.” In light of the landlord’s failure to respond to an Assessor’s earlier information request, the Assessor asked that the reduced assessment be deferred for a one-year period. The Board agreed.
As a result of the imposed penalty, the tenant was required to pay approximately $93,000 in taxes, which it would not otherwise have had to pay.
How could this be?
The information request to Boeing’s landlord was made under s. 16(1) of The Municipal Assessment Act (the “MAA”), which gives Assessors a very broad power to request information from owners, tenants or other occupiers of property. This includes the right to demand “information or documentation that relates or might relate to, or that affects or might affect, the value of the property being assessed or that is or might be relevant to assessment of the property…” The Assessment Department then uses that data to create assessment models for various types of commercial properties.
Failing to respond to one of these information requests may result in a severe penalty. This is contemplated in s. 54(3.2) of the MAA, which provides:
“[W]here a person failed to comply with a request for information or documentation… the board shall specify in its order that any reduction in the assessed value of the person’s property is not to take effect until the year following the year to which the application relates.”
The Board of Revision decided to strictly enforce this section of the MAA regardless of the fact that the tenant had not even contacted the Assessor to provide the required information.
The tenant filed an application for judicial review of the Board’s decision, arguing that the Assessor’s conduct in requesting the penalty was procedurally unfair. Boeing was being penalized for an apparent oversight on the part of its landlord over whom it had no control.
The Court agreed, and the penalty order was struck.
In the course of her decision, Madam Justice McCawley explained that there are a number of factors for the court to consider in determining the extent of the duty of fairness owed by a public authority who affects the financial interests of taxpayers. This duty applies irrespective of the remedies that may be available under assessment legislation.
The Court determined it was only fair that the tenant receive notice of the alleged information problem before it was made to bear the consequences of a penalty. The Assessor knew that the tenant had a vested interest in the assessment and had appealed the assessment in years past. It could have reached out to Boeing in a timely manner, but chose not to do so.
The Assessor stressed that it was the department’s practice to only send information request to owners of commercial properties, and that tenants – while having a vested interest in the assessment – would have no expectation to be contacted. Justice McCawley rejected that position, stating:
Taken as a whole, the position of the City Assessor regarding this last consideration is overly formalistic and unduly bureaucratic. Pragmatism and wise use of resources, while important, are not ends in themselves and one must not lose sight of the impact on the taxpayer in assessing the appropriateness of the City Assessor’s conduct.
… Here, when the property owner failed to comply, the City Assessor could have sent some form of notification to… the tenant or occupier of the Property notifying it that the owner had failed to comply and the possible consequences of that. Not only would this not have imposed an onerous responsibility or expense on the City Assessor, it would maintain the integrity of the scheme and purpose of the legislation, balancing the restrictions and time limitations of the City Assessor as well as the legitimate interests of (the tenant) to be treated fairly.
The Court concluded by reiterating that the taxpaying tenant is entitled to a transparent and fair process, while at the same time observing the interests of the City Assessor to obtain information to ensure an accurate assessment roll.
Penalizing an innocent taxpayer could not be justified.
As one Alberta Court of Appeal judge put it in a similar case, “economy or efficiency does not trump everything in administrative law. Simple fairness entitles a citizen to speak to a government decision maker before that entity abrogates all of his or her rights.”
The Assessor has appealed the Boeing decision to the Manitoba Court of Appeal, and a hearing date is pending.