Osgoode – IPTI Certificate in Expert Evidence in Valuation Disputes

Jack Walker, Q.C. and Ken West, LL.M.

October 31, 2011

Osgoode P.D., Toronto, ON

REVIEW OF LEGAL PRINCIPLES AND BASIC

QUESTIONS AND ANSWERS

Goals for Days 3 and 4

- Examine statutory framework for valuation hearings and the context for expert

valuation reports

- Understand the roles and responsibilities of an expert valuation before a valuation

tribunal

- Review the USPAP/CUSPAP rules

- Address the appraisal concepts applicable to an appraisal critique on review

- Learn about preparing valuation opinion and drafting an expert report from a

valuator’s perspective

- Familiarize with real property law concepts

- Review current jurisprudence on key issues

Day 3 (Module 2, Part I) 9:00 Review of Essential Legal Principles Underlying Valuation Disputes and Basic Questions and Answers

Ken West

Jack A. Walker, Q.C.

10:45 Refreshment Break 11:00 Procedures and Practices in a Valuation Proceeding

Robert Butterworth, Vice-Chair, Assessment Review Board [invited]

11:30 Role, Responsibilities and Obligations of the Expert Valuator Jack A. Walker, Q.C.

12:30 Lunch 1:30 Expert Qualification for Valuation Experts

Panel: Ken West Chris Schulze, Q.C. [invited]

Jack A. Walker, Q.C.

2:15 Break

2:30 Developing the Valuation Opinion Paul Sanderson

3:30 Realities of Expert Witnessing – Panel: Moderator

Paul Sanderson, Robert Butterworth, Chris Schulze

4:30 Day 3 concludes

Day Four – Module 2, Part II 9:00 Writing a Statutory Valuation Expert Report

Jack A. Walker, Q.C. Paul Sanderson, J.P

10:30 Break

10:45 Testifying as an Expert Valuator: Credibility of the Expert Paul Sanderson, J.P.

12:15 Luncheon

1:15 Post-Hearing Issues and Evaluating Performance D.S. Colbourne, Former Chair O.M.B. and ARB [invited]

1:45 Drafting a Report (practicum) Faculty en Banc

3:15 Break

3:30 Examination- Knowledge Testing Multiple Choice Examination

4:30 Course Concludes

Awareness of the guiding statutory framework

Why do I require working knowledge of the relevant statutes?

• What are they?

Adjudicative Tribunals Accountability Governance and Appointments

Act, 2009 (OAL 239)

Assessment Act (OAL 1)

Assessment Review Board Act and Rules (OAL 193)

Rules of Civil Procedure (OAL 733)

Statutory Powers Procedure Act (OAL 749)

What Acts are in play?

Assessment Act, R.S.O. 1990, c.A. 31

Municipal Act, 2001, S.O. 2001, c.25

City of Toronto Act, 2006, S.O., 2006 c.11

Expropriations Act, R.S.O., 1990, c.E.26

Land Transfer Tax Act, R.S.O., 1990, c.L.6

Arbitration Act, 1991, S.O. 1991, c.17

• What supporting statutes are relevant?

Legislation Act, 2006 (OAL 447)

City of Toronto Act, 2006 (OAL 247)

Municipal Act, 2001 (OAL 475)

Municipal Freedom of Information and Protection of Privacy Act

(OAL 627)

Key sections of the Assessment Act: sections 3, 19, 40, and others.

Section 3 is the taxing provision in the Act.

Section 19 is the valuation provision in the Act.

Section 40 is the appeal provision in the Act.

Section 3: All real property in Ontario is liable to assessment and taxation, subject to the following exemptions from taxation. The

exemptions include:

Crown lands Public educational

institutions

Philanthropic

organizations, etc.

Public hospitals,

care homes, and

children's treatment

centres

Highways, etc.

Municipal property Charitable

institutions

Battle sites Machinery Machinery for

energy

conservation

Amusement rides Airports Conservation land Small theatres Large non-profit

theatres

Section 19: (1) the assessment of land shall be based on its current value.

Section 19.2 Valuation days

Subject to subsection (5), the day as of which land is valued for a taxation year is determined as follows:

1. For the 2006, 2007 and 2008 taxation years, land is valued as of January 1, 2005.

2. For the period consisting of the four taxation years from 2009 to 2012, land is valued as of January 1,

2008.

3. For each subsequent period consisting of four consecutive taxation years, land is valued as of January

1 of the year preceding the first of those four taxation years. 2007, c. 7, Sched. 1, s. 5.

(2)-(4) Repealed: 2007, c. 7, Sched. 1, s. 5.

Exception

(5) Subsection (1) does not apply in respect of the valuation of land for a taxation year after 2004 if the

Minister prescribes a different day as of which land is valued for that year. 2004, c. 7, s. 3 (2).

Section 40. (1) Any person, including a municipality, a school board or, in the case of land in non-municipal territory,

the Minister, may appeal in writing to the Assessment Review Board,

(a) on the basis that,

(i) the current value of the person’s land or another person’s land is incorrect,

(ii) the person or another person was wrongly placed on or omitted from the assessment roll,

(iii) the person or another person was wrongly placed on or omitted from the roll in respect of school support,

(iv) the classification of the person’s land or another person’s land is incorrect, or

(v) for land, portions of which are in different classes of real property, the determination of the share of the value of the

land that is attributable to each class is incorrect, or

(b) on such other basis as the Minister may prescribe. 2008, c. 7, Sched. A, s. 11.

Appeal requirements, fee

(2) A notice of appeal shall be delivered or mailed to the Assessment Review Board on or before the last day for

appealing under subsection (5), (6), (7) or (8), as the case may be, shall state a name and address where notices can be

given to the appellant and shall be accompanied by any fee required by the Board. 2008, c. 7, Sched. A, s. 11.

“Current Value” means, in relation to land, the

amount of money the fee simple, if unencumbered,

would realize if sold at arm’s length by a willing seller

to a willing buyer.

Other Key Sections

Section 17: Land is assessed against the owner

Section 19.1(3): Phase in

Section 39.1: RFR

Section 46: Judicial applications

Key legal principles applicable to valuation

• What is “land”? Differing definitions

• Difference between Assessment and Taxation

• Dichotomy between the Municipal Act, 2001 and the Assessment

Act

• Value in exchange vs. value in use

What is “Land”? Differing definitions

Assessment Act:

“Land”, “real property” and “real estate” include,

(a) Land covered with water,

(b) All trees and underwood growing upon land, (c) All mines, minerals, gas, oil, salt quarries and fossils in and under land,

(d) All buildings, or any part of any building, and all structures, machinery and fixtures

erected or placed upon, in, over, under or affixed to land,

(e) All structures and fixtures erected or placed upon, in, over, under or affixed to a

highway, lane or other public communication or water, but not the rolling stock of a transportation system

Expropriation Act:

“Land” includes buildings, structures and other things in the nature of fixtures and mines

and minerals whether precious or base, on, above or below the surface.

Real Property Law

Ken West, LL.M., Course Director

Osgoode-IPTI Expert Evidence Certificate

Osgoode Hall P.D., Toronto

October 31, 2011

The Nature of PropertyBundle of Rights

Two main distinctions:

• Real Property

Land

• Personal Property (Chattels)

Things other than land

Historical Notes

• Civil procedure in the middle ages

Real Actions

› Land or the res

Actions for damages

› Unimportance of chattels in medieval mindset

› No return of property only damages

• Realty vs. Personalty

Permanence of land/fixed and finite commodity

• In rem vs. In personam

In rem, is a right against the world at large

In personam is a right against an individual

Real Property

• Corporeal Hereditaments

Interests being capable of being held in possession

› Essentially freehold status

• Incorporeal Hereditaments

Non-possessory in nature

› Easements

› Profits a prendre

› Restrictive covenants

The Function of ModernProperty Law

• Determination of which items, tangible or otherwise,

should be protected as property

The Institution in Context• Estates and Tenure

English feudal ancestry

The things that lawyers know about

are property and land.

But why the leaves are on the trees,

and why the waves disturb the seas,

why honey is the food of bees,

why horses have tender knees,

why winters come when the river freeze,

why faith is more than what one sees,

and hope survives the worst disease,

and charity is more than these,

they do not understand.

H.D.C. Pepler, The Devil’s Dream

Estates

• Fee Simple

• Encumbrances

• Leases (Landlord and Tenant)

• Licenses

• Aboriginal title

Physical Dimensions of Ownership

• Cujus est Solum ejus est usque ad coelum

et ad infernos

Air Rights

Bay-Adelaide Decision

• Are air rights land?• Is there a distinction between air rights and development rights?

Subsurface Rights• Edwards v. Sims, 24 S.W. 2d 619

(Kentucky C.A., 1929

• The Onyx Cave case

Riparian Rights• Ownership of lands abutting

water • Right of access to water

• Right to take energy flood prevention measures

• May appropriate water for own

ordinary use

• Cannot diminish the quality or quantity of the natural flow

Servitudes• Easements

Incorporeal hereditament

A property interest that allows an individual to use a portion of another’s land

Recorded on title Four elements are necessary to create a valid easement

1) There must be a dominant tenement and a servient

tenement 2) The easement must accommodate the dominant land

3) The dominant and servient tenements must be held by

the same person 4) The easement must be capable of being the subject

matter of a grant

• Covenants

• Rights of Way

Fixtures• Northern telecom

• So firmly affixed thereto as to be considered part thereof?

• A matter of degree

Evidence Law

Evidence Review

WHAT IS EVIDENCE?

• The rules of evidence control the presentation of facts before the court.

Their purpose is to facilitate the introduction of all logically relevant facts “without sacrificing any fundamental policy of the law which may be of more importance than the ascertainment of

truth”. • What are the logically relevant facts in any particular case by the substantive law governing the cause

of action set out in the pleadings. • Evidentiary principles, on the other hand, regulate (1) what matters are or are not admissible before the

court, and (2) the method by which admissible facts are placed before it.

• The rules of evidence are made up of common law principles, statutory provisions and Constitutional principles.

• The essential purpose and feature of the trial system in our society is the search for truth.

• In an adversarial system, where fact presentation is controlled by the litigants and their counsel, the search for truth can be elusive in many cases. Apart from this deficiency in the framework in which the evidence is presented, the evidence itself may be inherently weak due, for example, to the imperfect

recollection or perception of witnesses.

WHAT IS EVIDENCE? Continued

• In an attempt to limit the systemic frailties of the legal system, many of the rules of evidence are

concerned with ensuring the reliability or accuracy of the evidence that is received. For example, the hearsay rule, which seeks to exclude evidence of the out-of-court statements of a person who is not a

witness where offered to prove the truth of the contents of the statements, is based in part on a fear of fabrication and on a reluctance to receive evidence where the perception of the actual witness of the events cannot be tested in cross-examination. Many of the early exceptions to the hearsay rule were

developed in areas where these concerns were not paramount. • The Supreme Court of Canada has created a general sweeping exception to permit any hearsay

which is considered by the trial judge to be both necessary and reliable. When out-of-court statements, however, continue to bear the risk of fabrication, such as in the case of self-serving, prior consistent

statements, they are excluded. • There is also concern about the reliability of other types of evidence. Because of the influential nature

of expert testimony, a threshold of sufficient reliability must be met before such evidence may be put before a jury, particularly when a novel scientific technique or theory is being advanced.

Mohan test

GOALS OF EVIDENCE

• A piece of evidence must satisfy a number of requirements before it can be considered by the trier of

fact in the ultimate deliberation on the facts in issue. Once it meets these requirements, the evidence can be received by the court.

• To be received, evidence must meet two basic requirements: 1) it must be admissible. 2) the trier of law

must not have exercised his or her discretion to exclude the evidence.

• Additionally, evidence is not admissible unless it is:

(1) relevant; and

(2) not subject to exclusion under any other clear rule of law or policy.

The trier of law, in determining whether a particular piece of evidence should be considered, will first consider whether it is relevant. If it is not, it will be rejected. If it is relevant, the trier of law will consider whether it is subject to any exclusionary rule of the law of evidence. If it is not, the trier of law will go on to

consider whether he or she has a judicial discretion to reject the evidence and whether that discretion should be exercised in the circumstances. If the evidence is subject to an exclusionary rule or is irrelevant,

there is no generally recognized judicial discretion to nevertheless receive the evidence.

The exclusionary rules which make up the second branch of the admissibility test constitute a large part of the law of evidence.

RELEVANCE

A traditionally accepted definition of relevance is that in Sir J.F. Stephen’s A Digest of the Law of

Evidence, where it is defined to mean:

…any two facts to which it is applied are so related to each other that according to the common course of events one either taken by itself or in connection with other facts proves or renders probable the past, present, or future existence or non-existence of the other.

Pratte J. in R. v. Cloutier accepted a definition from an early edition of Cross on Evidence

For one fact to be relevant to another, there must be a connection or nexus between the two which makes it possible to infer the existence of one from the existence of the other. One

fact is not relevant to another if it does not have real probative value with respect to the latter.

BURDEN OF PROOF

• The term “burden of proof” is occasionally used to describe two distinct concepts relating to the

obligation of a party to a proceeding in connection with the proof of a case.

• In its first sense, the term refers to the obligation imposed on a party to prove or disprove a fact or issue. • In the second sense, it refers to a party’s obligation to adduce or point to evidence already on the

record to raise an issue to the satisfaction of the trial judge.

EVIDENTIAL BURDEN

• The incidence of an evidential burden means that a party has the obligation to adduce evidence or to point to evidence on the record to raise an issue. Like the legal burden of proof, an evidential burden relates to a particular fact or issue, and where multiple facts or issues may be distributed between the

parties.

• The incidence of the evidential burden, the sufficiency of the evidence required to satisfy it, and the evidentiary effect of its discharge are all questions of law.

• It is critical that all elements of a case are proved by adducing evidence and meeting the burdens.

HEARSAY

The rule can be stated as follows:

Written or oral statements, or communicative conduct made by persons otherwise than in testimony at

the proceeding in which it is offered, are inadmissible, if such statements or conduct are tendered either as proof of their truth or as proof of assertions implicit therein.

• There are many exceptions to the hearsay rule. • Sweeping exception is that a statement that would otherwise be hearsay is admissible if it is considered

by the judge/member to be both necessary and reliable.

• The leading case on the hearsay rule is R. v. Starr (2000) 2 S.C.R. 144. • The US Federal Rules of Evidence (Article 8) is instructive on the subject of hearsay and its exceptions

and exemptions.

JUDICIAL NOTICE

• Judicial notice is the acceptance by a court or judicial tribunal, without the requirement of proof, of the

truth of a particular fact or state of affairs.

• Facts which are (a) so notorious as not to be the subject of dispute among reasonable persons, or (b) capable of immediate and accurate demonstration by resorting to readily accessible sources of indisputable accuracy, may be noticed by the court without proof of them by any party.

• The practice of taking judicial notice of facts is justified. It expedites the process of the courts, creates

uniformity in decision-making and keeps the courts receptive to societal change.

• Judicial notice in every hearing is indispensable to the normal reasoning process.

Statutory Interpretation

Statutory Interpretation • Principles

Historically, taxation statutes and exemption provisions were interpreted textually or using a “strict interpretation”

Today, the Modern Rule governs modified by a textual, contextual and purposive analysis.

The Modern Rule:

The words of an act are to be read in their entire context and in their grammatical and ordinary sense

harmoniously with the scheme of the Act. The object of the Act, and the intention of parliament.

Adopted by the Supreme Court of Canada in Notre Dame

In Placer Dome the Court held that the Modern Rule as stated in Notre Dame should be modified and applied

based on a textual, contextual and purposive approach

Paragraph 23 of Placer Dome Decision:

The interpretive approach is thus informed by the level of precision and clarity with which a taxing provision is

drafted. Where such a provision admits of no ambiguity in its meaning or in its application to the facts, it must simply be

applied. Reference to the purpose of the provision “cannot be used to create an unexpressed exception to clear

language”. Where, as in this case, the provision admits of more than one reasonable interpretation, greater emphasis

must be placed on the context, scheme and purpose of the Act. Thus, legislative purpose may not be used to supplant

clear statutory language, but to arrive at the most plausible interpretation of an ambiguous statutory provision.

Statutory Interpretation

• Leading Cases

Notre-Dame de Bon-Secours

Placer Dome

Canada Trustco

A tax statute with precise and unequivocal words, the words will play a

dominant role in the interpretive process. Where the words give rise to more

than one reasonable interpretation, the ordinary meaning of the words will play

a lesser role, and greater recourse to context and purpose of the Act may be

necessary.

Golden – represents the death of strict construction

Johns-Manville – presumptions are not a reliable way to interpret legislation

Statutory Interpretation

• Statutory Provisions

Section 64 Legislation Act

64. (1) An Act shall be interpreted as being remedial and shall be given such fair, large and

liberal interpretation as best ensures the attainment of its objects. Same(2) Subsection (1) also applies to a regulation, in the context of the Act under which it is

made and to the extent that the regulation is consistent with that Act.

Expert Witness Concepts Review

Questions that should be asked by the Expert Witness:

1. When do I get to the court room?

• Where is the courtroom – (Assessment Review Board Act s.12 (OAL p.191))

2. Where do I sit?

• Why? SPPA s.25.0.1 (OAL p.767)

Historical background

Practical aspects

3. Do I sit or stand when giving evidence?

ADJUDICATOR

WITNESS COURT REPORTER

COUNSEL COUNSEL

AUDIENCE

4. Who do I look at when answering?

5. What about my report?

• Do I take my report with me to the witness box?

6. What about my back up material?

7. How does the hearing proceed

a) What is meant by “onus”

b) Civil vs. Criminal

c) Who goes first

• Prior to 2009

• Post 2009

40 (17) Burden of Proof in Assessment hearings

40 (18) Shift in burden of proof if fail to allow inspection or

provide information

40 (15) Closing statement

The Hearing Process – Explaining the Components

TRADITIONAL

1. Opening statement by Appellant

2. Evidence-in-chief by Appellant

Factual evidence

Opinion evidence

Cross-examination

3. Opening statement by Respondents

4. Evidence-in-chief by Respondents

Factual evidence

Opinion evidence

Cross-examination

5. Closing statements

MODERN

Dealing with scarce resources and a

cumbersome caseload the future

may see significant changes to the

traditional hearing process.

Hope-tubbing is one possible

alternative procedure that we may

see more of in the future to deal with

the exigencies of modern tribunal

practices.

• What about the Rules of Practice of the Tribunal? Assessment Review Board (OAL 193)

Review of significant rule affecting expert witnesses

Rule 13 – Witness/advocate

Rule 48 – Disclosure

Rule 49 – Expert reports

Rule 50 – Reply reports

Rule 51 – Supplemental reports

Rule 54 – confidential documents

How to deal with confidential information/data in an expert report

Rule 69 - Summons

• What about case law?

Can only lawyers interpret cases?

Why is it necessary to interpret case law to

write an expert’s opinion?