A Reflection on the Revised Appeal Process from Staggered to Contemporaneous Exchange of Expert Reports

Submitted by: Drew Samuels, DMA Canada, Mississauga, ON

On February 17, 2021, the Assessment Review Board (“ARB”) revised its Rules of Practice and Procedure (“Rules”) which came into effect on April 1, 2021. One of the impactful shifts in the revised Rules was the Schedule of Events (“SOE”) for General Proceedings which is outlined in Schedule A. There were two fundamental changes: (1) the proceeding timeline was reduced from a maximum of 104 weeks to a maximum of 49 weeks, and (2) the exchange of disclosure / expert reports was revised from a staggered exchange (appellant(s) first, respondents second, then a reply from the appellant(s) third) to a contemporaneous exchange of disclosure / expert reports (all parties mutually exchange and then several weeks later all parties mutually reply). The latter of the two revisions was a topic of debate at the ARB’s Appeals Management Committee[1]. In fact, prior to the change, it led to the ARB asking for the stakeholders to make submissions on the exchange of expert reports procedure. There were very divergent opinions on this topic, and all have merit from their own perspective. The initial practice of staggered expert report exchange prompted concerns among stakeholders, particularly regarding the balance of power and the imposition of unnecessary costs.

Notwithstanding the ARB’s decision to revise the SOE to consist of a mutual exchange, the debate continues, and some stakeholders are still advocating for the ARB to revert to a staggered exchange. The difficulty in determining which approach is best hinges on what the “Ultimate Goal” from the perspective of the ARB and the parties should be: efficiency of process while maintaining the integrity of the assessment roll while also balancing costs to the taxpayer.

Definition of terms
Efficiency of process assists all parties who use the appeals system. The ARB needs an efficient process (productivity, time, and costs) to fulfill its mandate to have appeals disposed of within a typical four-year cycle.

The integrity of the assessment roll is what all citizens of Ontario should strive for, but in particular one would suggest that the Municipal Property Assessment Corporation (“MPAC”) and the municipalities would promote this as a fundamental mandate they both wish to achieve. This is a noble goal, and this integrity leads to stability of the roll which allows municipalities to budget and provide essential municipal services such as infrastructure, water and sewage, waste management, emergency services, parks, and recreation, etc.

Costs to the taxpayer are not limited to costs associated with appeals (although that is one important cost). Costs to the taxpayer can be eroded when appeals are not disposed of in a timely manner. When appeals unnecessarily have a longer life cycle, it costs the taxpayers more. The appeals system consists of MPAC, municipalities, and the ARB – all of which are taxpayer funded. If you add in the cost of representation, the taxpayers are on the proverbial “hook” for it all.

Now that our terms are defined, we can take a historical view of the former procedure and then reflect on the most recent revisions to the ARB Rules to determine if it gets the parties closer to solving the balancing act of the Ultimate Goal. To do so, the arguments supporting the transition to contemporaneous expert report exchange need to be explored, emphasizing its potential challenges and benefits in terms of cost-effectiveness, facilitation of settlements, and overall procedural fairness.

Historical ARB Rules re: Disclosure / Expert Reports
A retrospective examination of ARB Rules reveals that contemporaneous expert report exchange is not a groundbreaking concept. In earlier iterations of the rules, such as those circa 2008 (Rule 48) and 2014 (Rule 45), a 21-day prior disclosure date was enforced, providing parties an opportunity to respond and reply before a full hearing (14 days and 7 days prior to a full hearing respectively). Contemporaneous exchanges have been a long-standing practice for significant non-residential appeals for approximately a quarter century. For decades this was not controversial, but the tide had shifted in recent years when the ARB decided to create a staggered exchange of expert reports for a short period of time. To determine why this has become a topic of debate, the challenges and benefits of contemporaneous exchange of disclosure / expert reports needs to be explored.

Challenges of Contemporaneous Exchange
Advocates against contemporaneous exchange of expert reports may argue that the bad behaviour of the parties reveals inherent flaws in a mutual exchange. Appellants may be unresponsive in litigation which may lead to reports being produced by the respondents when the appellants are not actively pursuing the appeal, or the appellants are accepting a previously tendered settlement offer. Effectively, the position could be summarized that the appellants are the “drivers” in the appeal.

There is no doubt that the sentiment shared by these advocates is true and has some merit, however this problem is overstated. Advocates against the contemporaneous exchange have gone as far as saying the “system will collapse” if this exists. This was not true for the previous 20 years when this procedure existed and anything suggesting otherwise is patently untrue and not grounded in fact. Furthermore, these rules have been in place for nearly three years and there is no evidence of extreme prejudice or hardships. The fear that appellants may withdraw or accept an earlier settlement under contemporaneous exchange is unproven, as this is not a common occurrence in appeal proceedings in the grand scheme of appeals at the ARB. There are several methods of dealing with this behaviour. Ultimately a system should not be created to sustain and accommodate flawed litigation behaviour but only to achieve the Ultimate Goal.

If bad actors abuse a system, it is the actors, not the system at fault. If the advocates for a staggered exchange of expert reports face parties who abstain from discussion, revise pleadings contrary to the ARB Rules, or force/cause parties to expend resources on unnecessary expert reports, the cost provision should be enforced. Cost should be considered if a party can prove that it tried to engage with an appellant to determine its intent moving forward but the inquiry went unanswered, and resources were unnecessarily expended. If this proof can be gathered, a case for the behaviour being unreasonable, frivolous, vexatious, or bad faith can be made as per ARB Rule 116. This serves as both a specific and general deterrent.

Benefits of Contemporaneous Exchange
Advocates for contemporaneous exchange of expert reports may argue that this approach encourages earlier settlements, discourages unnecessary work, and aligns with the principles of fairness and justice. Contemporaneous exchange facilitates earlier communication between parties, fostering an environment where settlements and disposal of appeals on their merits are more likely to occur. Arguably the concerns about unnecessary work raised by advocates against contemporaneous exchange are outweighed by the benefits of efficiency, cost savings, and a more just process.

The SOE prior to the revisions in February 2021 had the parties make an election for two paths in the proceeding. After the exchange of pleadings and productions, the parties would need to meet in an event called a “mandatory settlement meeting.” It is the first of its kind insofar as the ARB would mandate the parties to meet, electronically or in-person, without an adjudicator or facilitator. After that meeting occurs, the parties would elect to continue in a shortened proceeding (an additional 4 weeks) or an extended proceeding (an additional 42 weeks). Most properties were in the extended proceeding. If one party elected the extended proceeding, all parties had to accept their fate even if it disagreed. In the extended proceeding, the appellant(s) would have 16 weeks to produce its expert reports, followed by a 16-week period where the respondents produce their respective expert reports, followed by a 6-week period for the appellant(s) to produce a reply report, then finally a 4-week period to submit all documents to the ARB.

Herein lies the biggest hurdle to the Ultimate Goal: once the extended proceeding is selected, all parties are not equally incentivized to have meaningful discussions. Once the extended proceeding is elected, the respondents have 32 weeks to produce its expert report. Expert reports are costly for all parties. This election can force appellants into producing reports unnecessarily, perpetuating the cycle of inefficiency. To be fair, the adoption of electing the extended proceeding started with good intentions. It was meant for complex appeals to have an extended period for litigation, where necessary. Unfortunately, issues such as declaring non-trivial matters as complex and opting for the extended proceeding or citing extended review time as a reason for selecting the extended proceeding further highlight the pitfalls. The staggered exchange can burden the taxpayer with additional costs and work because the initial appeal costs in the extended proceeding is only realized by one party. These challenges indicate that the staggered exchange does not fulfill its intended purpose but becomes a litigation tactic prolonging the appeal proceedings rather than a mechanism to promote efficient resolution. The selection of the extended proceeding can be arbitrary which applies pressure to the appellants to expend resources on unnecessary expert reports. Once one party expends the resources on expert reports it can very well be a sunk cost that narrows the zone of possible agreement for settlement once the costs are realized. This creates a system which operates conversely to settlement and delays the resolution to appeals which is inverse to the mandate of the ARB and the parties.

If the deterrent is the resources expended on creating expert reports, then all parties need to have the same deterrent. All parties benefit from early resolution and all parties are driven by a shared reluctance to expend resources unnecessarily. Parties will naturally gravitate towards early settlement discussions as all parties have a collective aversion for unnecessary expert reports. This ultimately promotes settlement discussions and inherently can lead to a shorter life cycle of an appeal. This can singlehandedly lead to achieving the Ultimate Goal: efficiency of process (time and costs) while maintaining the integrity of the assessment roll (earlier settlement discussions among active and encouraged parties) while also balancing costs to the taxpayer (less government intervention, less government resources required as the life cycle of appeals is shorter, and less expenses for legal representation). This further underscores the argument in favor of contemporaneous exchanges, emphasizing fairness and equal pressure on all parties.

Advocating for Access to Justice and a Balanced and Efficient Future
The revision of the shift from staggered to contemporaneous expert report exchange in ARB appeals is grounded in the pursuit of fairness, efficiency, and access to justice. It achieves the Ultimate Goal of efficiency of process while maintaining the integrity of the assessment roll while also balancing costs to the taxpayer. While some advocates may argue that the previous system of staggered exchange of expert reports is a better system, the pitfalls and challenges faced by all parties paint a different picture. More importantly, a staggered exchange of expert reports is a departure from standard legal processes, where the entity challenging the “state” does not produce its case first. Since MPAC has the onus to prove the assessment is correct, it can be argued that it should be producing its expert report first. In any other body of law, the party with the onus provides its disclosure / expert report first. An adoption of anything else raises access to justice concerns. MPAC, being a publicly funded corporation and bearing the onus in assessment appeals, should advocate for solutions that benefit all taxpayers, not just its own interests. The contention that the staggered exchange is effective is contradicted by the evident pitfalls that taxpayers face, including arbitrary selection of the extended proceeding and extending the life cycle of an appeal by lessening its workload but adding to the workload of taxpayers.

The assessment regime is a taxpayer funded system and must consider solutions that work for all parties, but especially the taxpayer. Contemporaneous exchanges offer a balanced and practical solution, aligning with historical practices and the overall objectives of the ARB (and the parties). As the legal landscape evolves, it is crucial for all stakeholders to embrace changes that foster a more just and efficient resolution of assessment appeals, ensuring the integrity of the system for years to come.

[1] The Appeals Management Committee membership consists of stakeholder representatives from law firms, tax consultants, the Municipal Property Assessment Corporation, and various representatives from a select group of municipalities.