The Ontario Court of Appeal released Metropolitan Toronto Condominium Corporation No. 1352 v. Newport Beach Development Inc. earlier this week. It’s an interesting case and may actually provide some useful jurisprudence in litigation involving defects and claims under the Ontario New Home Warranties Plan Act (ONHWPA).
The facts are nicely summarized at the outset of the Decision as follows:
2] The respondent Metropolitan Toronto Condominium Corporation No. 1352 (“Metro 1352”) manages a luxury condominium project in Etobicoke near the shore of Lake Ontario. It alleges that the project has two major construction defects. It claims that the sanitary sewer system was not built properly, causing toilets in the condominium units to overflow and the units themselves to flood with sewage. It also claims that a systemic failure of the exterior cladding over the project, called the exterior insulated finish system (“EIFS”), has caused water penetration in the condominium units.
 Metro 1352 sought compensation for these two defects under the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. 0.31 (the “Act”). The administrator of the Act, the respondent Tarion Warranty Corporation, denied compensation. Instead of appealing Tarion’s decisions to the Licence Appeal Tribunal, as it was entitled to do, Metro 1352 started this litigation. It has sued Newport, the vendor and declarant of the project; Canderel, a developer related to Newport; Spampinato, an officer of Canderel; Enersys Engineering Group Ltd. and Eric Pun, the engineers on the project; and Tarion. It has asserted causes of action for breach of statutory warranty, negligence, breach of fiduciary duty and breach of contract. The engineers have been noted in default. The other defendants have not delivered a statement of defence.
 On its Rule 21 motion Newport asked for various forms of relief, but principally for an order dismissing the action on the ground that the litigation is an abuse of process. Newport argued that Tarion’s decisions denying warranty coverage could only be reviewed by an appeal to the License Appeal Tribunal. Either the doctrine of issue estoppel or the rule against collateral attack prevented Metro 1352 from re-litigating its claim by a civil action. The motion judge, Corrick J., disagreed and dismissed the motion in its entirety.
 On its appeal Newport raises three issues, which I put in the form of questions:
(1) Did the motion judge err by failing to dismiss Metro 1352’s claims relating to defects in the sanitary sewer system and the EIFS, both against Newport and Tarion, as an abuse of process?
(2) Did the motion judge err by failing to dismiss the claim for breach of warranty for defects in the sanitary sewer system on the ground that they do not constitute a major structural defect under s. 13(1)(b) of the Act?
(3) Did the motion judge err by failing to dismiss the claim for defects in the EIFS on the ground that the claim was a new cause of action added by amendment to the statement of claim after the expiry of the limitation period?
One of Newport’s arguments in relation to the first question above was that the doctrine of “issue estoppel” should – Metro 1352 having already been provided determinations by Tarion that the defects were not compensable under the ONHWPA – prevent Metro 1352 from suing Newport in Court over those very same issues.
In analyzing Newport’s argument regarding issue estoppel, one of the things that the Court of Appeal had to consider was whether Tarion’s decisions were “judicial” decisions. To my surprise and horror (OK…not horror, near horror), the Court of Appeal disagreed with the motion judge and ruled that the decisions of Tarion’s inspectors are “judicial” in nature.
I obviously don’t know whether any of the learned judges hearing this appeal have personally gone through the process of a Tarion inspection and of finding out what Tarion deems “warranted” or “not warranted” via its Warranty Assessment Report process. I also don’t know what evidence the learned judges had before them in terms of what the inspectors do (process, rules, policies) and what sort of education and training they have. That said, in addition to representing clients involved in disputes with Tarion, I’ve been through several Tarion inspections myself and “judicial” is not a word that comes to mind when I consider how the Tarion inspectors handled my claims. In my own experience, the Tarion inspectors that determined what was deemed warranted and what was deemed not warranted:
- Communicated regularly with both me and the builder in the absence of the other before (and after) issuing the Warranty Assessment Report, making the process far from open and transparent. Both sides can feed the inspector information without the other side necessarily knowing about it and there is, therefore, no way to know what information is being provided and what sort of verification is being done.
- Did not hold anything that could reasonably be considered a “hearing”.
- Don’t allow third/non-parties to be present during the inspection. If it is “judicial” or adjudicative in nature, why wouldn’t an owner or builder be permitted to have a lawyer or an expert, for example, present?
- Adhered rigidly and inflexibly to Tarion’s “Construction Performance Guidelines” which are a useful but, in my view, imperfect and incomplete set of “guidelines”. There is not much “judicial” analysis involved in robotically applying “guidelines” as though they are infallible and carry no exceptions.
- Did not have any legal training.
- Ignored large amounts of information provided to them (such as manufacturer’s installation instructions that had not been followed by our builder). None of this showed up anywhere in our Warranty Assessment Reports and when I asked about it at the inspection, I was told by one of the inspectors that he “hadn’t looked at it”.
- Didn’t bring a ladder or binoculars or have any way of “inspecting” second story exterior deficiencies for which they had ample and complete notice were to be assessed. If the inspectors are tasked with inspecting deficiencies and then making a “judicial” determination regarding same, how can they possibly do so if they show up and don’t have any manner of even looking at the alleged deficiency?
- Didn’t take note of most things either party said during the inspection. While I don’t think a detailed transcript should be required, when few notes are taken one is left to wonder how much information is actually making it onto “the record”.
At the end of the day, I think that the outcome (and most of the analysis) in this Decision is correct so it may be that not much turns, in practice, on this aspect of the Decision. It just strikes me – as I expect it might strike many who have had the experience of actually going through the Tarion conciliation inspection and assessment process – that to call Tarion’s internal decision making process “judicial” is inaccurate and diminishes truly judicial decision making. Just because an animal has a bill, webbed feet, and lays eggs, doesn’t necessarily mean it is a platypus.