Ontario Tax Sale Property

---

Edda Emilie Zeitel, Agon Karl Zeitel, Claude
Manfred Henning and Nicole Therese Henning Appellants

v.

Susan Diane Ellscheid, Donald Anthony Simmons
and 794798 Ontario Limited Respondents

Indexed as: Zeitel v. Ellscheid
File No.: 22792.

1994: January 31; 1994: May 5.

Present: La Forest, Sopinka, McLachlin, Iacobucci and Major JJ.

ON APPEAL FROM THE COURT OF APPEAL FOR ONTARIO

Courts -- Jurisdiction -- Sale of property for municipal taxes owing -- Statute preventing judicial intervention with tax deeds -- Tax arrears necessary to trigger Act -- Mistake as to proper legal identity of two islands -- Appellants occupying and paying taxes on improved property that they thought they had bought -- Other island unimproved and non-residential -- Property occupied by appellants sold in tax sale -- Mistake discovered after sale -- Whether Municipal Tax Sales Act, 1984, shields sale from judicial intervention where the municipality has mistakenly confused the property sold with the property occupied by other tax-paying citizens -- Municipal Tax Sales Act, 1984, S.O. 1984, c. 48, ss. 3(1), 4, 9(5)(a), (b), (c), 11, 12(1), (2)(a), (b), (5)(a), (b), (c), (d), (e), 13(1)(a), (b).

Real property -- Deed for property sold for municipal taxes owing -- Statute preventing judicial intervention with tax deeds -- Tax arrears necessary to trigger Act -- Mistake as to proper legal identity of two islands -- Appellants occupying and paying taxes on improved property that they thought they had bought -- Other island unimproved and non-residential -- Property occupied by appellants sold in tax sale -- Mistake discovered after sale -- Whether Municipal Tax Sales Act, 1984, shields sale from judicial intervention where the municipality has mistakenly confused the property sold with the property occupied by other tax-paying citizens.

Appellants purchased Island 99B in Georgian Bay for $33,000 in 1987. Jean Strain was the registered owner of Islands 99C and 99D. Island 99D has a cottage built on it and Island 99B is described as an unimproved "Rock Island". Based upon the understanding of the prior owner of Island 99B, Jean Strain understood that Island 99B was Island 99D and vice versa. When the appellants purchased Island 99B, they too understood it to be the improved island occupied by their predecessors in title since 1954, rather than Rock Island. As such, the appellants began to occupy Island 99D during the summer of 1987 and made further improvements to the cottage on that property. Moreover, the municipal tax office taxed the appellants as if they were the owners of the improved island, rather than the owners of Rock Island. The assessment rolls and the taxes paid indicated that Island 99D was vacant land while Island 99B was described as residential.
Pursuant to the Municipal Tax Sales Act, 1984 ("MTSA"), the municipality initiated tax sale proceedings in relation to Island 99D in view of the tax arrears owing by Jean Strain. The respondents were the successful bidders on Island 99D, purchasing it "sight unseen" for $999. Upon visiting the location of Island 99D, the respondents discovered that the appellants had mistakenly been occupying Island 99D when they in actuality were the registered owners of Island 99B.

Following a series of letters between the parties with respect to who actually owned Island 99D, the appellants applied for a declaration that: (i) they owned Island 99D through adverse possession; (ii) the tax sale to the respondents was null and void; and sought (iii) a certificate of pending litigation on Island 99D and (iv) an interlocutory and permanent injunction restraining the respondents from trespassing on Island 99D. The respondents counter-applied for a declaration that they own Island 99D in fee simple. The trial judge decided the issue in favour of the appellants, but this ruling was reversed by the Ontario Court of Appeal. At issue here was whether the MTSA should be interpreted in such a way as to shield from intervention the sale of a property by a municipality for tax arrears in a situation where the municipality has mistakenly confused the property sold with property occupied by other tax-paying citizens.

Held (Sopinka and Iacobucci JJ. dissenting): The appeal should be dismissed.

Per La Forest, McLachlin and Major JJ.: A parcel of land cannot be sold pursuant to a tax sale unless tax arrears are owing with respect to that parcel. The existence of tax arrears is a condition precedent to the application of the Act.

It was irrelevant that the municipality assessed taxes against Island 99B as if it were improved property, whereas it was in fact unimproved. The municipality's error did not affect s. 13(1)(a), which provides that a tax sale is "final, binding and conclusive and not subject to challenge" on the basis of the "invalidity of any assessment upon which the tax arrears were based".

Appellants' possessory title to Island 99D through adverse possession too was irrelevant. A purchaser at a tax sale, pursuant to s. 9(5)(c), is vested with an estate in fee simple subject only to "any interest or title acquired by adverse possession by abutting landowners". Appellants, although adverse possessors, were are not abutting landowners with respect to Island 99D. Islands, separated by water, do not abut. The maxim expressio unius est exclusio alterius applied to any other possible exceptions to the grant of an estate in fee simple.

The statute was enacted to allow a municipality to sell property in tax arrears with some integrity of title. The courts are to give effect to the plain meaning of the words of a duly enacted statute and cannot interfere with a carefully crafted legislative scheme merely because they do not approve of the result produced by a statute in a particular case.

Appellants at all times prior to the tax sale and more particularly at the time of purchase had the means of ensuring the identity of their property. Public documents clearly describe the properties in question. Alternatively or additionally a survey certificate would have removed the possibility of the mistake made by them.

Per Sopinka and Iacobucci JJ. (dissenting): Canadian courts have adopted a pragmatic or purposive interpretative approach where the literal interpretation of a statutory provision would lead to results which are extremely unreasonable or inequitable or where a literal approach would produce results incompatible with other provisions or the objects of the legislation in question. Even where an interpretation of a legislative provision strains the words of the legislature, where an alternative interpretation would lead to absurd results, the former approach should prevail.

While the legislation in question provides for a series of protective measures with respect to the sale of property by a municipality for tax arrears, ss. 13(1)(a) and (b) of the MTSA, if interpreted literally would shield from invalidity a tax deed issued in relation to a property sold completely in error, regardless of whether the property owner was given notice of the impending sale or whether tax arrears are actually owing on the property. The literal interpretation of the MTSA would not only lead to absurd and unjust results but also is inconsistent with the objects of the MTSA itself.

The legislature, in enacting the MTSA, intended to create certainty and finality in tax sales, thereby insuring that municipalities would have an effective mechanism for collecting tax arrears. In pursuing this goal, it constructed a series of conditions to be satisfied in order for the municipality to initiate tax sale proceedings pursuant to the MTSA. The most important is that there be tax arrears owing prior to initiation of tax sale proceedings. A distinction exists between "tax arrears improperly assessed", and the "complete absence of tax arrears". Although s. 13(1) abolished the ability of courts to interfere with tax deeds in cases merely involving improper assessments, it is not intended to permit the arbitrary sale of property in cases which do not involve even a modicum of tax arrears.

Here, the appellants paid taxes as if they held paper title to Island 99D and had, prior to the tax sale, an apparently indefeasible possessory interest in that property. As possessory title owners, they paid taxes on the value of the title they owned. In substance, no "tax arrears" within the meaning of the MTSA arose. The appellants must be distinguished from the adverse possessor who intentionally or negligently avoids a tax obligation. A tax deed would extinguish the interest of such a person. The substantive trigger of MTSA operation, tax arrears, never arose in this case. Any purported sale pursuant to the provisions of that Act must be inherently flawed, and the resulting tax deed must be void.

Cases Cited

By Major J.

Referred to: Re Kirton and Frolak, [1973] 2 O.R. 185.

By Sopinka J. (dissenting)

Sutherland Publishing Co. v. Caxton Publishing Co., [1938] 1 Ch. 174; The Queen v. The Judge of the City of London Court, [1892] 1 Q.B. 273; Paul v. The Queen, [1982] 1 S.C.R. 621; Cadieux v. Montreal Gas Co. (1898), 28 S.C.R. 382, rev'd [1899] A.C. 589; R. v. Quon, [1948] S.C.R. 508; The Queen v. Sommerville, [1974] S.C.R. 387; Workmen's Compensation Board v. The Bathurst Co., [1924] S.C.R. 216; Motel Pierre Inc. v. Cité de Saint-Laurent, [1967] Que. Q.B. 239; Re Kirton and Frolak, [1973] 2 O.R. 185.

Statutes and Regulations Cited

Assessment Act, R.S.O. 1937, c. 272, s. 186.

Municipal Act, R.S.O. 1980, c. 302, s. 448.

Municipal Tax Sales Act, 1984, S.O. 1984, c. 48, ss. 3(1), 4, 9(5)(a), (b), (c), 11, 12(1), (2)(a), (b), (5)(a), (b), (c), (d), (e), 13(1)(a), (b).

Authors Cited

Driedger, Elmer A. Construction of Statutes, 2nd ed. Toronto: Butterworths, 1983.

APPEAL from a judgment of the Ontario Court of Appeal (1991), 5 O.R. (3d) 449, 85 D.L.R. (4th) 654, 50 O.A.C. 361, 8 M.P.L.R. (2d) 173, allowing an appeal from a judgment of and setting aside the order made by Hoolihan L.J.S.C. Appeal dismissed, Sopinka and Iacobucci JJ. dissenting.

Peter J. Harte, for the appellants.

Michael Anne MacDonald, for the respondents.

//Major J.//
The judgment of La Forest, McLachlin and Major JJ. was delivered by

MAJOR J. -- I have read the reasons of my colleague, Justice Sopinka, and respectfully disagree with his conclusion. I have concluded that the Municipal Tax Sales Act, 1984, S.O. 1984, c. 48 ("MTSA"), provides a complete answer to the appellants' claim.

This appeal involves two islands, 99B and 99D, located in Georgian Bay. Using the terminology of the Ontario Court of Appeal, Island 99B is described as "Rock Island" because it consists of bare rock, and Island 99D is described as "Cottage Island", because it has a cottage on it.

Both islands were initially owned by Marguerite Carpenter. She confused the islands, with the result that she referred to Rock Island, the undeveloped property, as Island 99D, rather than its proper description, Island 99B. Similarly, Cottage Island, the developed property, was referred to as Island 99B rather than Island 99D. In 1954 she sold Island 99B (Rock Island) to John Wanek. Wanek, sharing Carpenter's error, took occupation of Island 99D, (Cottage Island) presumably unaware that he was buying Island 99B (Rock Island) the undeveloped property. He then constructed a cottage on the island he thought he had purchased.
Paper title to Island 99B was the subject of a series of transfers from Wanek to Dagmars Leparskis in 1957 and finally to the appellants in 1987. Like their successors in title, the appellants took possession of, and made improvements to, Island 99D (Cottage Island) when in fact they had purchased Island 99B (Rock Island).

In the 40 years between the original sale of property Island 99B (Rock Island) from Carpenter to Wanek, apparently no purchaser obtained a survey certificate. Such a certificate would have immediately revealed the true identity of the property being purchased as the undeveloped Island 99B (Rock Island).

In 1964, Carpenter sold Island 99D (Cottage Island), as well as another island nearby, Island 99C, to Jean Strain, who shared the erroneous belief that Island 99D was the undeveloped Rock Island, when in fact it was not.

At all times, the land registry records correctly identified the location and owner of each island. The survey map available from the registry office clearly shows Island 99D as lying east of Island 99C, and Island 99B lying southwest of Island 99C. Furthermore, the location of each island is indicated by a distance and compass reference point from two nearby islands. The dispute in this case could have been avoided if the records available from the registry office had been checked before the purchase of Island 99B in 1987, or at any prior time.

The map and records used by the Municipality of Georgian Bay in the assessment of property taxes also properly identified the location and owner of each island. The municipal tax office records showed the assessment value assigned to each property. The records had Island 99B, the undeveloped property, assessed at a higher rate than Island 99D, the developed property. Consequently, the appellants, the registered owners of Island 99B (Rock Island), were taxed as though they owned improved property; Strain, the registered owner of Island 99D (Cottage Island), was taxed as if she owned unimproved property.

Strain notified the municipality that she would no longer pay taxes on Island 99D, presumably on the basis of the belief that it was undeveloped property of little value. Accordingly, the municipality conducted a tax sale of the property under the terms of the MTSA. There is no suggestion that the formal requirements of the Act were not satisfied. The advertisement that appeared in the Ontario Gazette, and upon which the respondents based their bid, correctly identified Island 99D by legal description.

Notice of the impending tax sale was given to Strain, as the registered owner of Island 99D. Not surprisingly, the appellants did not receive notice of the sale as there was no record of their interest in the property. They were the registered owners of Island 99B (Rock Island), for which taxes were not in arrears.

The respondents, relying on the notices of the tax sale, placed a successful bid of $999 on Island 99D (Cottage Island), sight unseen, and became the registered owners of that property pursuant to the provisions of the MTSA. They later transferred it to the corporate respondent.

The appellants, the occupiers of Island 99D (Cottage Island) but the registered owners of Island 99B (Rock Island) sought declaratory relief that the tax sale was null and void, and that they held a fee simple interest in Island 99D (Cottage Island). The decisions of the lower courts have been summarized by Sopinka J. The trial judge held in favour of the appellants. A majority of the Ontario Court of Appeal reversed that decision and affirmed the title of the respondent.

Legislative Provisions

The Municipal Tax Sales Act, 1984, provides:

3.--(1) Where any part of tax arrears is owing

. . .

the treasurer, unless otherwise directed by the municipal council, may prepare and register a tax arrears certificate in the prescribed form against the title to the land with respect to which the tax arrears are owing.

...

9.--(1) ...

(5) A tax deed or notice of vesting, when registered, vests in the person named therein or in the municipality, as the case may be, an estate in fee simple in the land, together with all rights, privileges and appurtenances and free form all estates and interests, subject only to,

(a)easements and restrictive covenants that run with the land;

(b)any estates and interests of the Crown in right of Canada or in right of Ontario; and

(c)any interest or title acquired by adverse possession by abutting landowners before the registration of the tax deed or notice of vesting.

...

13.--(1) Subject to proof of fraud, every tax deed and notice of vesting, when registered, is final, binding and conclusive and not subject to challenge for any reason including, without limiting the generality of the foregoing,

(a)the invalidity of any assessment upon which the tax arrears were based; and

(b)the breach of any requirements, including notice requirements, imposed by this or any other Act or otherwise by law,

and no action may be brought for the recovery of the land after the registration of the tax deed or notice of vesting if the statutory declaration required by subsection 9 (4) has been registered.

Analysis

Sopinka J. states that a literal interpretation of the MTSA could, as a result of an undiscovered error in municipal record keeping, deprive a citizen of his or her home even though that citizen had paid all taxes that had been assessed against that property.

There would be general concern if a municipality, acting pursuant to the MTSA, could deprive a citizen of property with respect to which he or she had paid all taxes. However, it is questionable whether the Act could entail such a result. The effect of s. 3(1) is that a parcel of land cannot be sold pursuant to a tax sale unless tax arrears are owing with respect to that parcel. The existence of tax arrears is a condition precedent to the application of the Act. A home owner who had paid all taxes assessed against his or her property could not have that property sold from under him or her.

However, the situation described in the preceding paragraph did not arise in the present appeal. Accepting that the appellants had acquired a possessory title to Island 99D through adverse possession, it follows that they held title to two islands. They held a paper title to Island 99B as registered owners and they held a possessory title to Island 99D as adverse possessors. It is clear that they paid taxes with respect to only one property. That property was correctly identified in the tax rolls as Island 99B. Taxes are assessed against registered owners, not against adverse possessors. The appellants did not pay taxes with respect to Island 99D. Consequently, when Strain, the registered owner of Island 99D, refused to pay taxes on that property, the island became subject to tax arrears and subject to sale under the MTSA.

It is irrelevant for the purposes of this appeal that the municipality assessed taxes against Island 99B as if it were improved property, whereas it was in fact unimproved. Whether the municipality's error is described as "incorrect", as a majority of the Ontario Court of Appeal preferred, or more strongly as "invalid", does not effect s. 13(1)(a) MTSA, which states that a tax sale is "final, binding and conclusive and not subject to challenge" on the basis of the "invalidity of any assessment upon which the tax arrears were based".

The fact that the appellants may have held a possessory title to Island 99D by reason of continuous adverse possession of the property since 1954 is similarly irrelevant in light of the provisions of the MTSA. Section 9(5)(c) states that a purchaser at a tax sale is vested with an estate in fee simple subject only to, inter alia, "any interest or title acquired by adverse possession by abutting landowners" (emphasis added). While the appellants may be adverse possessors, they clearly are not abutting landowners with respect to Island 99D. Islands, separated by water, do not abut.

The principles of statutory interpretation preclude this Court from expanding the scope of s. 9(5)(c) in order to allow the appellants to succeed. The maxim expressio unius est exclusio alterius stands for the proposition that where a statute specifies one exception to a general rule, other exceptions are excluded. In s. 9(5)(c), the legislature states that purchasers at tax sales take title subject only to one class of adverse possessors, i.e., abutting landowners. In the present appeal, the properties, being islands, do not abut and the appellants do not qualify for the exception.

Finally, it is necessary to consider the objects of the MTSA. The statute exists to allow property which is the subject of tax arrears to be sold by a municipality. As purchasers must be assured of the integrity of title, the legislature has stated that, with few exceptions, once a tax deed is issued, it is final and binding. In recent years, the legislation has been amended to better ensure finality. As my colleague, Sopinka J., notes, s. 13(1) was introduced to abolish the power of courts to declare tax sales invalid on the basis that an assessment was invalid: Re Kirton and Frolak, [1973] 2 O.R. 185 (H.C.). Similarly, the MTSA does not contain a provision found in predecessor legislation which allowed a tax deed to be attacked within two years of issue: see the Assessment Act, R.S.O. 1937, c. 272, s. 186, and the Municipal Act, R.S.O. 1980, c. 302, s. 448.

Recognition of the proper roles of the legislature and the judiciary requires that the courts give effect to the plain meaning of the words of a duly enacted statute. It is beyond the power of a court to interfere in a carefully crafted legislative scheme merely because it does not approve of the result produced by a statute in a particular case. See, e.g., Elmer A. Driedger, Construction of Statutes (2nd ed. 1983), at p. 86.

The appellants at all times prior to the tax sale, and more particularly at the time of purchase, had the means of ensuring the identity of their property. Public documents clearly describe the properties in question. Alternatively, or additionally, a survey certificate would have removed the possibility of the mistake made by them.

Accordingly, I would dismiss the appeal with costs.

//Sopinka J.//

The reasons of Sopinka and Iacobucci JJ. were delivered by

Sopinka J. (dissenting) --

Introduction

This case raises the issue as to whether the words in a statute must be interpreted so literally as to permit the occasioning of a result which is unjust and inconsistent with the objects of the legislation. Specifically, it is necessary to determine whether the Municipal Tax Sales Act, 1984, S.O. 1984, c. 48 ("MTSA"), should be interpreted in such a way as to shield from intervention the sale of a property by a municipality for tax arrears in a situation where the municipality has mistakenly confused the property sold with property occupied by other tax-paying citizens.

Facts

In 1987, the appellants purchased, for $33,000, Island 99B in Georgian Bay. Jean Strain was the registered owner of Islands 99C and 99D. Island 99D has a cottage built on it. Island 99B is described as an unimproved "Rock Island". However, based upon the understanding of the prior owner of Island 99B, Jean Strain understood that Island 99B was Island 99D and vice versa. When the appellants purchased Island 99B, they too understood it to be the improved island occupied by their predecessors in title since 1954, rather than Rock Island. As such, the appellants began to occupy Island 99D during the summer of 1987 and made further improvements to the cottage on that property. Moreover, the municipal tax office taxed the appellants as if they were the owners of the improved island, rather than the owners of Rock Island. While Jean Strain was billed $26.04 for annual taxes relating to Island 99D in 1988, the tax bill sent to the appellants, purportedly in relation to Island 99B, was $431.86. These assessments reflected the Assessment Rolls which, in 1987, indicated that Island 99D was vacant land, while Island 99B was described as residential.

Pursuant to the MTSA, the Municipality of Georgian Bay initiated tax sale proceedings in relation to Island 99D in view of the tax arrears owing by Jean Strain. The respondents were the successful bidders on Island 99D, purchasing it "sight unseen" for $999. Upon visiting the location of Island 99D, the respondents discovered that the appellants had mistakenly been occupying Island 99D when they in actuality were the registered owners of Island 99B.

Following a series of letters between the parties with respect to who actually owned Island 99D, the appellants applied for a declaration that: (i) they owned Island 99D through adverse possession and (ii) the tax sale to the respondents was null and void. They also claimed: (i) a certificate of pending litigation on Island 99D and (ii) an interlocutory and permanent injunction restraining the respondents from trespassing on Island 99D. The respondents counter-applied for a declaration that they own Island 99D in fee simple. The trial judge decided the issue in favour of the appellants, but this ruling was reversed by the Ontario Court of Appeal, Finlayson J.A. dissenting.

Judgments Below

Supreme Court of Ontario

Hoolihan L.J.S.C. granted the relief requested by the appellants, concluding that a municipality had no jurisdiction to conduct a tax sale under the MTSA where the assessment underlying the proceeding was invalid. He concluded as follows:

In the case at bar, the property involved was really Island 99D. There were no arrears of taxes in connection with that island. All the taxes had been paid. An Act respecting the sale of lands for arrears of municipal taxes does not give a municipality the right to sell land on which all taxes are paid. That cherished doctrine of our law, "a man's home is his castle" cannot be defeated by an erroneous tax sale. It would be iniquitous if a failure to pay taxes by one person could mean the loss of a home or business belonging to those who have paid their taxes.

Ontario Court of Appeal (1991), 5 O.R. (3d) 449

Carthy J.A., for the majority, disagreed with the trial judge's characterization of the facts of the case. He concluded that the error in this case had been the appellants' having taken up residence on an island where there was no more than a claim to adverse possession. He found that there were taxes owing on Island 99D since Jean Strain had ceased to pay the taxes in relation to that property. In the result the majority allowed the appeal of the respondents, concluding at p. 455 that:

...there was only one error in the tax rolls and assessment procedures related to this sale, that being the description of cottage island as unimproved and the resulting nominal tax bill. That makes the assessment incorrect, rather than invalid. Even if the assessment is invalid, however, the tax deed is final, binding and conclusive and not open to challenge by virtue of s. 13(1).

I am satisfied that there is nothing in the facts of this case to justify consideration of the earlier jurisdiction cases in the context of the new Act. In particular, adverse possession is specifically contemplated by the Act and the type of adverse possession which can prevail over a tax deed is identified. This tax deed, when registered, gave the appellants unquestionable title to island 99D under the provisions of the Act.

Finlayson J.A., dissenting, concluded that this was an appropriate case for the application of the error in substantialibus doctrine since there had been a fundamental mistake as between the municipality and the respondents with respect to the identity of the property being sold. In a situation involving such substantial error, he concluded that the statute could not preclude rescission of the conveyance. In that regard, he stated the following at p. 464:

Whether it is the case, as the trial judge saw it, that there were no arrears of taxes on the respondents' lands and accordingly no basis for the tax sale, or as I would put it, that there was a fundamental mistake as to the identity of the property which was the subject-matter of the tax deed, the court must interfere and correct this situation.

Issue

Should the MTSA be construed to prohibit review of a tax deed which purports to defeat the interest of a person who otherwise has an enforceable title to a parcel of land, and who has duly paid taxes with regard to the value of the parcel sold?

Relevant Legislative Provisions

Sections 9(5), 12 and 13(1) of the Municipal Tax Sales Act, 1984, provide:

9.--(1) ...

(5) A tax deed or notice of vesting, when registered, vests in the person named therein or in the municipality, as the case may be, an estate in fee simple in the land, together with all rights, privileges and appurtenances and free from all estates and interests, subject only to,

(a)easements and restrictive covenants that run with the land;

(b)any estates and interests of the Crown in right of Canada or in right of Ontario; and

(c)any interest or title acquired by adverse possession by abutting landowners before the registration of the tax deed or notice of vesting.

...

12.--(1) No proceedings for the sale of land under this Act are void by reason of any neglect, omission or error but, subject to this section and to section 13, any such neglect, omission or error may render the proceedings voidable.

(2) Subject to subsection (4) and to section 13,

(a)a failure on the part of the treasurer to substantially comply with section 4 or subsection 9 (1) of this Act; or

(b)an error or omission in the registration or sale of the land, other than an error or omission mentioned in subsection (5),

renders the proceedings under this Act voidable.

...

(5) No proceedings under this Act are rendered voidable by reason of,

(a)a failure on the part of the treasurer to distrain for any reason or take any other action for the collection of taxes;

(b)an error in the cancellation price other than a substantial error;

(c)any error in the notices sent or delivered under this Act if the error has not substantially misled the person complaining of the error;

(d)any error in the publishing or posting of advertisements if the error has not substantially misled the person complaining of the error; or

(e)any error in the description of the land in the tax arrears certificate if the error has not substantially misled the person complaining of the error.

...

13.--(1) Subject to proof of fraud, every tax deed and notice of vesting, when registered, is final, binding and conclusive and not subject to challenge for any reason including, without limiting the generality of the foregoing,

(a)the invalidity of any assessment upon which the tax arrears were based; and

(b)the breach of any requirements, including notice requirements, imposed by this or any other Act or otherwise by law,

and no action may be brought for the recovery of the land after the registration of the tax deed or notice of vesting if the statutory declaration required by subsection 9 (4) has been registered.

Principles of Statutory Interpretation

It is true that courts have reluctantly departed from the literal interpretation of statutory provisions which are reasonably susceptible to only one meaning simply to avoid an unjust result: Sutherland Publishing Co. v. Caxton Publishing Co., [1938] 1 Ch. 174; The Queen v. The Judge of the City of London Court, [1892] 1 Q.B. 273, per Lord Esher, at p. 290. Nevertheless, as recognized by this Court in Paul v. The Queen, [1982] 1 S.C.R. 621, per Lamer J. (as he then was), at p. 662, "this reluctance did not stop courts from departing from the ordinary rules of construction if through their application the law were to become what Dickens' Mr. Bumble said it sometimes could be, `a ass, a idiot' (Dickens, Oliver Twist)". Thus, Canadian courts have adopted a pragmatic or purposive interpretative approach where the literal interpretation of a statutory provision would lead to results which are extremely unreasonable or inequitable (Cadieux v. Montreal Gas Co. (1898), 28 S.C.R. 382, rev'd [1899] A.C. 589; R. v. Quon, [1948] S.C.R. 508) or where a literal approach would produce results incompatible with other provisions or the objects of the legislation in question: The Queen v. Sommerville, [1974] S.C.R. 387; Workmen's Compensation Board v. The Bathurst Co., [1924] S.C.R. 216; Motel Pierre Inc. v. Cité de Saint-Laurent, [1967] Que. Q.B. 239. Thus, even where an interpretation of a legislative provision strains the words of the legislature, where an alternative interpretation would lead to absurd results, the former approach should prevail: Paul v. The Queen, supra, at p. 664.

The Legislation

While the legislation in question provides for a series of protective measures with respect to the sale of property by a municipality for tax arrears, s. 13(1)(a) and (b) MTSA, if interpreted literally would shield from invalidity a tax deed issued in relation to a property sold completely in error, regardless of whether the property owner was given notice of the impending sale or whether tax arrears are actually owing on the property. One can easily imagine a situation in which tax-paying citizens could be deprived of their homes through a tax sale based on undiscovered errors in municipal record keeping. The only meaningful difference between such a case and the case at bar is that the appellants had a possessory claim to the land which was mistakenly sold by the municipality, rather than having held paper title to it. In my opinion, the literal interpretation of the MTSA suggested to this Court by the respondents would not only lead to absurd and unjust results, but also is inconsistent with the objects of the MTSA itself.

As noted by Finlayson J.A., a primary goal of the legislature in enacting the MTSA must have been to create certainty and finality in tax sales, thereby insuring that municipalities would have an effective mechanism for collecting tax arrears. Provisions such as s. 13(1) MTSA bear this out by providing that once a tax deed is issued, it is final and binding, except in a case where fraud is proven. That the legislature sought to achieve certainty and finality in tax sales through the implementation of the MTSA is also borne out by deletion of the provision in predecessor legislation that tax deeds were subject to challenge within two years of their execution: see the Assessment Act, R.S.O. 1937, c. 272, s. 186, and the Municipal Act, R.S.O. 1980, c. 302, s. 448. Moreover, s. 9(5)(c) MTSA provides that all adverse possessory claims, except those of abutting land owners, are extinguished by the issuance of a tax deed by the municipality.

In pursuing the goal of certainty and finality in tax sales, however, the legislature has recognized the depth of the interests affected by municipal sales of the property of individuals and has constructed a series of conditions to be satisfied in order for the municipality to initiate tax sale proceedings pursuant to the MTSA: see ss. 4, 9 and 11. No doubt, the most important of these is the requirement that there be tax arrears owing prior to initiation of tax sale proceedings: see s. 3. This, of course, is the logical prerequisite to the furtherance of the legislative goal of providing effective mechanisms for municipalities to collect delinquent taxes. Under this legislation, unless tax arrears are owing, the municipality has no legitimate interest in selling an individual's property. Thus, while s. 13(1) states that a tax deed, when registered, is final, binding and conclusive, even where preceded by an invalid assessment or where the procedural requirements of the statute are not observed, where the deed is issued in relation to land in respect of which tax arrears are not owing, a conclusion that the tax deed is final and binding would not further the primary object of the legislation. In effect, such an interpretation would permit municipalities to sell private property in situations where tax arrears are not owing, an outcome inconsistent with the object of providing municipalities with efficacious methods for collection of tax arrears. In this regard, I note that s. 13 applies to shield from attack a tax deed based on an invalid assessment "upon which the tax arrears were based", thus implying that a prerequisite to the operation of the section is the existence of tax arrears.

I must pause to underscore the nature of the prerequisite I have identified. In particular, I note the distinction between "tax arrears improperly assessed" and the "complete absence of tax arrears". Section 13(1) legislatively abolished the ability of courts to interfere with tax deeds in cases which merely involve improper assessments: cf. Re Kirton and Frolak, [1973] 2 O.R. 185 (H.C.), and cases cited therein. It did not, in my view, intend to permit the arbitrary sale of property in cases which do not involve even a modicum of tax arrears.

The case at bar presents such a situation. Although the assessment records indicate otherwise, the practical reality of the situation in the case at bar is that the higher municipal taxes in relation to Island 99D, an island with a residential dwelling, were being paid by the appellants, who were in possession of that property, but were not its registered owners. Likewise, the municipal taxes in relation to Island 99B, calculated at the lower rate associated with vacant land, were actually being billed to the registered owner of Island 99D, Jean Strain. The appellants and their predecessors in title had been in possession of Island 99D since 1954 and the municipal assessment rolls and the taxes assessed in accordance with the description therein reflect the fact that they occupied and paid taxes upon improved, rather than vacant land.

To put the matter another way, the appellants paid taxes as if they held paper title to Island 99D. They had, prior to the tax sale, an apparently indefeasible possessory interest in that property. As possessory title owners, they paid taxes on the value of the title they owned. In substance, therefore, they paid taxes like good citizens. Moreover, in substance, no "tax arrears" within the meaning of the MTSA arose.

The appellants must, in my opinion, be thus distinguished from the adverse possessor who intentionally or negligently avoids a tax obligation. A tax deed would extinguish the interest of such a person: s. 9(5). By virtue of their exemplary tax-paying behaviour, and because their misapprehension of the paper-title status of Islands 99B and D was fuelled by the municipal tax rolls, I am unable to distinguish, in any meaningful way, the appellants' predicament from the predicament of the model citizen who has good paper-title to a house, who pays taxes, but who arrives home one day only to be met by a tax deed and a padlock.

Based upon this interpretative approach to the MTSA, therefore, I find that the substantive trigger of MTSA operation, tax arrears, never arose in this case. Any purported sale pursuant to the provisions of that Act must be inherently flawed, and the resulting tax deed must be void.

In addition to insuring that ss. 3 and 13(1) MTSA further the objects of the statute itself, the foregoing interpretation of the statutory provisions prevents the occasioning of an extremely unfair result. Unlike other adverse possessors, who are unlikely to have paid tax in relation to the land which they occupy, the appellants have acted as responsible tax-paying citizens. Moreover, it is highly unlikely that Jean Strain would have been willing to let Island 99D be sold for taxes had her understanding of the location of Island 99D not been reinforced by the municipal assessment rolls which indicated Island 99D to be vacant and Island 99B to be improved. Finally, the treasurer of the municipality deposed, as the representative of the municipality, that she had no intention of holding a public sale for improved lands, but relied upon the assessment of Island 99D as vacant land. If section 13(1) were interpreted as upholding the validity of a tax deed in circumstances such as these, the result is that those with a good possessory claim to property could be deprived of that property by a municipality, without notice and in circumstances where tax arrears were not owing. In my opinion, this is a manifestly unjust result which is not necessitated by the wording or objects of the statute.

Finally, it is important to note that s. 9(5)(c) MTSA does not deprive all persons in adverse possession of a property from asserting their claims after the issuance of a tax deed. In fact, those persons who are in adverse possession of a property sold pursuant to the Act and are abutting landowners may still assert their claim after issuance of the tax deed. This provision must reflect a legislative intention to protect those who adversely possess property, treat it as their own and assume that the taxes which they pay relate to all of the property which they occupy. Although they were not abutting landowners, the appellants in the case at bar laboured under a false impression reinforced by the municipality, that they held paper title to the land which they adversely possessed and paid an amount of taxes reflective of the improved nature thereof. The similarity of their situation to that of an abutting landowner in adverse possession underscores the consistency of their claim with the objectives of the legislature.

Conclusion

In the result, I would allow the appeal and declare the tax deed in question to be void. However, I would leave the question of the vesting of title in Islands 99B and 99D to be determined in future proceedings. The appellants will have to quiet the title in relation to Island 99D and there is no basis upon which to conclude that their title to Island 99B is anything other than free and clear. Finally, there is no reason to impose title to Island 99B upon the respondents who placed their original bid on the basis of a survey of Island 99D. The appellants should have their costs throughout the proceedings.

Appeal dismissed with costs, SOPINKA and IACOBUCCI JJ. dissenting.

Solicitors for the appellants: Hacker, Gignac, Rice, Midland.

Solicitor for the respondents: Michael Anne MacDonald, Bracebridge.
LexUM in partnership with Supreme Court of Canada