A penny saved . . . is a cottage lost
A penny saved . . . is a cottage lost
Math skills don't always seem important, but as a recent dispute
over a vacation property shows, some battles are won by fractions
By PAUL WALDIE
UPDATED AT 9:02 AM EDT Saturday, Jun 5, 2004
Anyone who thinks a penny isn't worth much any more should meet
Frank Carrocci.
Mr. Carrocci has just won a legal battle over a vacation property
near Parry Sound, Ont., that centred on one cent and whether
fractions of a cent can be considered legal tender. His victory
could set a precedent for municipalities everywhere and force people
to do their math a little differently when they draw up tender and
sale documents.
"They tangled with the wrong guy. I'm stubborn and I know the law,"
said Mr. Carrocci, who retired as director of revenue for the City
of Hamilton last year. "I'm going to put up a sign there that says,
'Frank's One-Penny Paradise.' "
The saga started last January when the Municipality of McDougall,
just north of Parry Sound, put the vacant lot up for sale because of
tax arrears. It was a prime location, three-quarters of an acre of
land along the shores of a small lake where cottages go for as much
as $400,000.
Mr. Carrocci, 52, sold his family's cottage last summer and was
looking for a new vacation spot. He came across the auction and
submitted a bid of $21,000 (the municipality had assessed the land
at about $19,000).
All bidders had to submit a deposit worth at least 20 per cent of
their offer, and Mr. Carrocci sent in $5,000.
The auction attracted about two dozen offers, and Mr. Carrocci
discovered his was second-highest. The top bidder, whom the
municipality won't name, offered $22,100.99 and put up a deposit of
$4,420.19.
Mr. Carrocci got out his calculator and discovered that his rival's
deposit was one cent off the required 20 per cent. In fact, 20 per
cent of $22,100.99 is $4,420.198. So he argued that under Ontario
law, McDougall officials should have rounded that up to $4,420.20
and disqualified the bid.
Garfield Eaton, the treasurer of McDougall, disagreed. "I looked at
the issue and I felt that the purpose of a deposit is to ensure that
the person completes the transaction," Mr. Eaton recalled. "I didn't
think that the difference of a .002 of a cent would have resulted in
the highest bid defaulting on completing the transaction. So I
accepted the highest bid."
Mr. Carrocci took the town to court. "They decided that I'd probably
walk away from it, I guess. But they hadn't met me before," he said.
Mr. Carrocci's lawyer, Nicholas Roche, argued that the tax-sale
rules under Ontario's Municipal Act are clear and "whether you are a
penny short or a million short, it's still short."
Martin James, a lawyer representing the township, argued that the
deposit did not have to be rounded up because the Currency Act,
which governs legal tender in Canada, recognizes only one-one
hundredth of a dollar. The deposit technically should have been
$4,420.198, but the town could recognize only $4,420.19 because the
"8" is not part of the definition of legal tender.
Mr. James also argued that "when you have two reasonable
interpretations before you, you should opt for the one that
maximizes the recovery in a forced-sale situation."
But an Ontario Superior Court judge disagreed and threw out the
higher bid. Under the Currency Act, "it was impossible for the
person who submitted the highest tender to submit a deposit equal to
20 per cent, given that that amount equals $4,420.198, a currency
not recognized in law," Mr. Justice J. Stephen O'Neill said in his
ruling. "Accordingly, in order to meet the mandatory provisions of
[the Municipal Act regulations], the bid deposit had to be in the
amount of at least $4,420.20, even if this meant that
arithmetically, the bid deposit exceeded the sum of 20 per cent."
Mr. Eaton said the municipality won't appeal and he is already
preparing to hand over the land to Mr. Carrocci. But he said he "was
disappointed that [the issue] wasn't looked at in a more logical
position. I don't think the rules are that clear-cut that somebody
should be saying, 'Well, if it's not 20 per cent you throw it out.'
I think you need to look at it in terms of the purpose intended for
the deposit."
As for Mr. Carrocci, he hopes to have a cottage on the property
soon, but he does have one concern. "I know when I go in for
building permits, they are going to hassle me to death," he said
with a laugh. "Especially when I have that sign out front."
Paul Waldie is a Globe and Mail feature writer.
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