Costs Before the Assessment Review Board

The Assessment Review Board has never made an award of costs. That is not because costs awards are not permitted, they explicitly are. It has been the Board’s practice to treat costs as only appropriate for exceptional cases. That is not the legal test and there is some indication that the Board may be more willing to consider cost awards than it used to be.

Like most administrative tribunals, the Board does not often award costs to the successful party of the litigation. This protects taxpayers that are unsuccessful from any further punishment, but it also means that the entire cost of the litigation must be borne by a successful party. Those costs can be significant if the case is complex and counsel is retained. Although the situations in which costs can be awarded are limited, there will be cases where they should be awarded.

Costs before Ontario tribunals are limited by section 17.1 of the Statutory Powers Procedure Act, RSO 1990, c S.22. That section prohibits costs unless “the conduct or course of conduct of a party has been unreasonable, frivolous or vexatious or a party has acted in bad faith” and the tribunal has enacted Rules permitting cost awards. The Board has permitted cost applications in Rule 116, which largely mirrors the wording from the Act.

Rule 116 was part of the Board’s complete rewrite of the Rules in 2017. The pre-2017 Rules included Rule 137, which listed four examples of conduct that the Board would find to meet the test set out in the Statutory Powers Procedure Act. Those included “a party failing to attend a hearing before the Board,” “failing to comply in a timely manner with a Procedural Order,” “failing to comply in a timely manner with the disclosure or discovery requirements,” and “knowingly presenting false or misleading evidence.” Those are largely compliance issues and the Board has recently signaled that those types of actions should be addressed through costs.

In Municipal Property Assessment Corporation, Region No 7 v Cherry, 2018 CanLII 60392 (ON ARB) the Board stated, at paragraph 16, that it “would encourage parties to view costs as the appropriate remedy for non-compliance before this Board.” The Board was addressing MPAC’s request to dismiss an appeal due to actions, or lack of actions, by the taxpayer. The Board explained that when there are breaches of the Rules, costs are a better remedy than dismissal. Costs can be awarded against all parties while dismissal is only available against the party that filed the appeal. Costs also let the appeal continue in a way dismissal does not, meaning that appeals are heard on their merits even where there has been some non-compliance. The Board did not award costs in that case, effectively sending out a warning shot, but opened the door to more creative cost arguments.

It is important when making a request for costs from the Board to focus on the test set out in the Rules and the Act. The Board has repeatedly held that costs are only available in “exceptional circumstances,” see Windsor Tool & Die Ltd v Windsor (City), 2015 CanLII 43397 (ON ARB), at paragraph 18, or Scrimgeour v Municipal Property Assessment Corporation, Region No. 24, 2015 CanLII 40065 (ON ARB) at paragraph 17. That is not part of the legal test and that point should be made to increase the likelihood of a successful request for costs to the Board. The conduct need only be unreasonable for an award of costs to follow. There is, arguably, nothing exceptional about unreasonable behaviour.

Reframing the test is essential. Unreasonableness is the lowest standard that needs to be met. While costs are discretionary, they should be guided by the legislative framework and that is how the Act and the Rules are worded. The Board’s practice of making costs awards “exceptional” has led to some difficulty in applying the test as set out in the Act and the Rules.

In Windsor Tool & Die Ltd v Windsor (City), 2015 CanLII 43397 (ON ARB), the Board accepted that Windsor would not disclose documents ahead of the hearing and only agreed to meet on the morning of the hearing. The Board held, at paragraph18, that “the City’s conduct in this matter is less than satisfactory” but did not find that it met the threshold in Rule 137. That is, the Board found that the City’s conduct was unsatisfactory but not unreasonable. Those are different standards, but the Board does not explain how they differ.

In Scrimgeour MPAC agreed to an assessment that was over 40% lower than the returned assessment, but only after a hearing and successful review of the decision by the taxpayer. The Board did not find that to be unreasonable conduct, though it never says so explicitly. The reasons focus on bad faith. The Board does not explicitly find that MPAC’s conduct was reasonable. The final conclusion of the Board, at paragraph 18, was “there is no evidence to suggest that MPAC acted in bad faith, or acted in a way that would offend the basic principles of fairness and due process.” That is not the test. The Board did not address the true question, which is if the conduct was reasonable.

In Biskey v Municipal Property Assessment Corporation Region 26, 2016 CanLII 42758 (ON ARB). In that case, the Board found a current value of $0 based on environmental contamination. The taxpayers sought costs based on MPAC failing to consider their environmental reports before the hearing and failing to lead environmental evidence. The Board treated the test as extreme, stating at paragraph 13, that “the awarding of costs is the capital punishment in proceedings before this Board.” That is not the test and it is not surprising that the taxpayers were unable to meet that standard.

Interestingly, one reason the Board relied on for not awarding costs was that these appeals predated 2009, so the taxpayer had the burden of proof. The Board was clear, at paragraph 15, that when the taxpayers have the burden of proof “it is not unreasonable for MPAC to have required the Moving Parties/Appellants to prove their case by testing its evidence in a hearing before the Board.” The Board may have come to a different conclusion on costs for 2009 and later appeals.

A party should only need to prove that another party acted unreasonably in the conduct of the litigation in order to succeed on a request for costs. Cherry is clear, at paragraph 15, that “many willful breaches of Board orders will be unreasonable and in bad faith.” That makes costs a viable argument on procedural non-compliance in advance of the hearing because a reasonable litigant would comply with the Rules and Board orders.

Once costs are possible, the quantum will need to be litigated. It is unlikely that the Board will ever order full or substantial indemnity costs, but the standard is unclear. Old Rule 139 set a cap at $1,500 for each hearing day. That was removed from the 2017 Rules, and so it no longer applies. The door is open to all arguments on quantum.

Requests for costs are rare before the Board, but the Board has recently invited more requests on procedural issues. Litigants should not dismiss the possibility of an award of costs in a proper case. As long as the statutory test is met, costs need not be an exceptional occurrence at the Board.