1998 S.H.146123 IN THE SUPREME COURT OF NOVA SCOTIA BETWEEN: CANADA TRUSTCO MORTGAGE COMPANY and HALIFAX REGIONAL MUNICIPALITY DECISION HEARD BEFORE: at Halifax, Nova Scotia before the Honourable Justice Margaret J. Stewart on June 10, 1998, Special Chambers, 2:00 p.m. DECISION: July 9, 1998 COUNSEL: Joel Fichaud, Q.C., for the plaintiff Michael Moreash,for the defendant Stewart, J.: The plaintiff, Canada Trustco Mortgage Company, ("Canada Trust"), a municipal tax payer paid its property taxes as assessed for the years 1994, 1995, 1996 but on appeal was held entitled to a refund for each of the three years in the total amount of $420,177.13. Canada Trust, pursuant to s. 41(i) of the Judicature Act, R.S.N.S., 1989, c. 240 seeks payment of interest on this amount from the date of the payments and stresses it does not seek the alternative remedy of entitlement to the interest based on unjust enrichment. The facts are not in issue. Canada Trust, municipal taxpayer, in the City of Dartmouth, now Halifax Regional Municipality ("HRM"), the defendant, was assessed for municipal property taxes on fourteen multi-unit residential properties. As required by the Assessment Act, R.S.N.S., 1989, c. 23, Canada Trust paid its taxes as assessed. It appealed its assessments for the years 1994, 1995 and 1996 inclusive. The appeal process ended with the Nova Scotia Court of Appeal, on March 3, 1997, upholding the Utility and Review Board's assessment determination which translated into $420,177.13 overpayment of taxes. Within five months, on September 5, 1997, HRM issued $420,177.13 property tax refund cheque to Canada Trust. HRM earned interest on this money from the time of receipt or had the use of these monies. As noted, Canada Trust seeks interest pursuant to s. 41(i) of the Judicature Act, supra on the refund from the date it made the overpayments to HRM in response to HRM's tax invoices requiring payment of those amounts on the "due dates" in 1994, 1995 and 1996. Section 41(i) reads: In every proceeding commenced in the Court, law and equity shall be administered therein according to the following provisions: (i) in any proceeding for the recovery of any debt or damages, the Court shall include in the sum for which judgment is to be given interest thereon at such rate as it thinks fit for the period between the date when the cause of action arose and the date of judgment after trial or after subsequent appeal. Canada Trust submits s. 41(i) provides an "independent" statutory basis for interest claims on debts and states pre judgment interest is payable from "the date when the cause of action arose" and "the cause of action arose" when Canada Trust was required to overpay its property taxes, thereby causing it to suffer loss. Canada Trust submits it is entitled to compensation for the deprivation. Basically, Canada Trust contends pre judgment is payable on the overpayment of property taxes from the time of remittance for the same reasons pre judgment interest was payable in Cherubin Metalworks Limited v. Nova Scotia (Attorney General) (1995), 1995 CanLII 4314 (NS CA), 137 N.S.R. (2d) 197 (C. A.) where an overpayment of Health Services tax under the Health Services Tax Act, R.S.N.S., 1989, c.198, over period of several years resulted in the trial court and the Nova Scotia Court of Appeal, in an action for unjust enrichment, awarding judgment for substantial overpayment of sales tax and concurrently, under s. 41(i) of the Judicature Act, supra, prejudgment interest on the overpaid sales tax amount from the time of the remittance of the tax overpayment by Cherubin Metalworks Limited. Justice Roscoe, speaking for the unanimous court, at p. 209-11, stressed the court's previous findings that firstly, the purpose of s. 41(i) is to compensate the litigant for the profit he might have made if he had use of the money and secondly, interest is payable under this section on "any sum of money which is recoverable by one party from another, either in common-law or in equity or under Statute" thereby giving the phrase "debt or damages" "very wide" definition. Canada Trust stresses the issue is not when there is an obligation to pay prejudgment interest i.e. upon determination by the Court but rather the issue is when did the facts which if proven in the appropriate proceedings support the cause of action. When did those facts i.e. the overpayment of taxes because the properties were over-assessed happen? Canada Trust cites Cherubin, supra as an example of the trial judge finding an obligation to refund excess taxes in 1994 but awarding the prejudgment interest back to 1988, being the date when the overpaid health taxes were first remitted. HRM paid the refund of overpaid real property taxes to Canada Trust, pursuant to s. 90 of the Assessment Act, supra. Section 90 reads as follows: When person has paid any money on an assessment or rate that is subsequently quashed, reversed or varied as result of which his rates have been overpaid, he shall be repaid by the treasurer out of the general revenues of the municipality the amount overpaid, but if an appeal is taken against the order quashing, reversing or varying the assessment or the rate, the person is not entitled to repayment until the disposition of the appeal. HRM submits s.90 provides tax payer has no right to refund of any overpayment of taxes until the disposition of any appeal of the assessment. It specifically and expressly requires the municipality to refund the amount overpaid and intentionally makes no mention in this or in any other section to paying interest on that overpayment. This lack of obligation to pay interest on an overpayment of taxes, resulting from incorrect assessment, is fact that HRM contends is consistent with similar statutes in other provinces. HRM submits the legislature did not intend other statutory provisions, like s. 41(i) of the Judicature Act, supra, to apply or to be read in conjunction with the Assessment Act, supra. This intention can be drawn from the fact the Assessment Act, supra is complete code and s. 90 specifically is exhaustive in describing clearly what payment the municipality is required to pay, ie. the amount overpaid. No interest payment is authorized, either directly or indirectly, by the Assessment Act, supra and even the refund of taxes cannot be paid until the appeal process is complete. Secondly, the intention can be gained from the very terms or phrases in s. 41(i) of the Judicature Act, supra. Section 41(i) only applies where there is proceeding for the recovery of any debt or damages and it is "mischaracterization" of the various levels of assessment appeals to suggest they are proceedings for the recovery of debt or damages. am satisfied there was no cause of action for return of any overpayment of taxes until after the appeal provisions of the Assessment Act, supra had been exhausted. The Nova Scotia Court of Appeal ruled upholding the reduced assessment in March, 1997. Consequently, the date from which interest is calculated in this action to pursue Canada Trust's right to interest on the amount of the overpayment is upon completion of the appeal process. Appeal proceedings before the Utility Board and the Nova Scotia Court of Appeal were not "proceedings for the recovery of any debt or damages". No amount of money was awarded as judgment for overpayment. Rather, the appeal proceedings were limited to confirming or amending the assessment. At the end of the process, the assessment was reduced and this had the ramification of an overpayment when the taxes were recalculated. No order was provided for recovery of the overpayment. HRM was under direct mandatory statutory obligation, pursuant to s. 90 of the Assessment Act, supra to refund any amount overpaid as soon as the appeal process concluded. As noted in Island Realty v. Corner Brook (City) (1994), 1993 CanLII 7758 (NL CA), 113 Nfld. P.E.I. 198 (C.A.), at this point failure by HRM to repay the overpaid taxes could result in an action for recovery of the overpayment, pursuant to the Assessment Act, supra and interest could be claimed under s. 41(i) of the Judicature Act, supra from the time the overpayment was to be paid. There is no provision in the Assessment Act, supra to pay interest on the overpayment. Section 90 clearly states there is no entitlement to repayment of an amount overpaid until disposition of the appeal. Canada Trust could not bring an action to recover an overpayment from HRM at any time before the decision was rendered on the assessment by the appeal body. Appeal proceedings under the Assessment Act, supra relate to the validity and appropriateness of the assessment and are not proceedings for the recovery of "debt or damages". The taxpayer, Canada Trust, had no cause of action for return of any overpayment of taxes until the appeal provisions of the Assessment Act, supra had been exhausted and resulted in reduced assessment. Unlike Cherubin, supra the payment of taxes were not overpayments at the time they were paid. The payments were simply the payment of taxes on assessment and could not be said to have been overpayments until the conclusion of the appeal process (Zaidan Group Limited v. Corporation of the City of London (1988), 1988 CanLII 4803 (ON SC), 37 M.P.L.R. 261 at 264 (O.D.C. Austin, J., dissenting); (1990), 1990 CanLII 2624 (ON CA), 47 M.P.L.R. at 3(O.C.A.); (1992), 1991 CanLII 53 (SCC), 129 N.R. 227 (S.C.C.)). The date when it could be said to be an overpayment of taxes does not change or revert back to an earlier date when the tax payments were remitted because the appeal process has concluded. proceeding under the Judicature Act, supra does not create debt. There was no right to a refund of overpaid taxes until March 1997 when the Nova Scotia Court of Appeal rendered its decision upholding the reduction in the assessment. An appropriate interest claim does exist under s. 41(i) of the Judicature Act, supra on the principal amount for the five month period between the Nova Scotia Court of Appeal assessment determination in March, 1997, and the payment of the property tax refund, in September 1997, as well as on the unpaid interest until date of judgment. An interest rate of 8.75 % being a rate equatable to the interest rate charged by HRM on overdue taxes (prime plus 4 %) is an appropriate rate on the principal amount of $420,177.13 fro m March 3, 1997 to the date of the refund on September 5, 1997 and on the unpaid interest only from September 6, 1997 to the date of judgment. would ask counsel to make the appropriate calculations and subject to any agreement wil hear the parties as to costs by way of brief written submissions.
The plaintiff paid its municipal property taxes as assessed for three years. On appeal it was held to be entitled to a refund for each of the three years in the total amount of $420,000. The plaintiff, pursuant to s. 41(I) of the Judicature Act, sought payment of interest on this amount from the date of the payments. Awarding 5 months interest, that the date from which interest is calculated in this type of action is upon completion of the appeal process. An appropriate interest claim under s. 41(I) therefore only exists for the five month period between the Court of Appeal's assessment determination and the refund of the property tax five months later.