FINE PRINT

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

PAUL WALDIE

June 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.