Tarion Warranty Corporation v. Boros [Indexed as: Tarion Warranty Corp. v. Boros]
105 O.R. (3d) 401
2011 ONCA 374
Court of Appeal for Ontario,
Sharpe, MacFarland and LaForme JJ.A.
May 13, 2011
Sale of land -- New Home Warranty Program -- "Builder" -- Respondent beginning construction of home with intention of living in it but changing his mind at some point during construction -- Respondent not "builder" for purposes of Ontario New Home Warranties Plan Act -- Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31.
The respondent, an architect, applied for a building permit to construct a residence on property purchased by his wife. It was their intention to sell their current home and to live in the new home. That intention changed when the current home failed to sell. The respondent and his wife subsequently sold the new home. The respondent was charged with acting as a builder of a new home without being registered by Tarion, contrary to s. 6 of the Ontario New Home Warranties Plan Act, and commencing construction of a new home without enrolling the home with Tarion, contrary to s. 12 of the Act. He was acquitted, and the acquittal was affirmed on appeal. Tarion appealed.
Held, the appeal should be dismissed.
"Builder" is defined in the Act as "a person who undertakes the performance of all the work and supply of all the materials necessary to construct a completed home whether for the purpose of sale by the person or under a contract with a vendor or owner". When the respondent began construction, he was not a "builder" within the meaning of the Act and the Act did not apply to him. The Act does not apply to those who begin with the intention of building a home for their own use and occupation and then decide to sell the home when circumstances change.
APPEAL from the judgment of Knazan J. of the Ontario Court of Justice dated May 6, 2010 affirming the acquittal on charges under the Ontario New Home Warranties Plan Act.
Cases referred to Carreiro v. Moreira, [1998] O.J. No. 2648, 71 O.T.C. 29, 19 R.P.R. (3d) 80, 80 A.C.W.S. (3d) 1269 (Gen. Div.), consd Other cases referred to Mandos v. Ontario New Home Warranty Program, 1995 3158 (ON CA), [1995] O.J. No. 3647, 86 O.A.C. 382, 49 R.P.R. (2d) 1, 59 A.C.W.S. (3d) 423 (C.A.); Ontario New Home Warranty Program v. Lukenda (1991), 1991 7167 (ON CA), 2 O.R. (3d) 675, [1991] O.J. No. 320, 47 O.A.C. 388, 43 C.L.R. 225, 25 A.C.W.S. (3d) 978 (C.A.); R. v. Bernard Machado Construction & Woodworking Ltd., [2001] O.J. No. 6276, 63 C.L.R. (3d) 122, 74 W.C.B. (2d) 672 (C.J.) Statutes referred to Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 [as am.], ss. 1 [as am.], 6, 12, 22(1)(a) Rules and regulations referred to R.R.O. 1990, Reg. 892 (Ontario New Home Warranties Plan Act), ss. 1.1, 8 [rep. O. Reg. 498/09, s. 1.] [page402]
David Outerbridge, for appellant. Simon Van Duffelen, for respondent.
The judgment of the court was delivered by
[1] MACFARLAND J.A.: -- This is an appeal by Tarion Warranty Corporation ("Tarion") from the decision of Knazan J. upholding the acquittal of the respondent on two charges under the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 (the "ONHWP Act"). The appeal is brought with leave of this court pursuant to the order of Watt J.A. dated June 29, 2010.
[2] On September 17, 2007, the respondent was acquitted by Justice of the Peace S. John on two charges: (1) acting as a builder of a new home without being registered by Tarion, contrary to s. 6 of the ONHWP Act; and (2) commencing construction of a new home without enrolling the home with Tarion on paying the prescribed fee, contrary to s. 12 of the ONHWP Act.
[3] On May 6, 2010, Knazan J. dismissed an appeal by Tarion from the two acquittals. [^1] The Facts
[4] In June 2004, Cheri Boros, wife of the respondent, entered into an agreement of purchase and sale to acquire 577 Castlefield Road in the City of Toronto (the "Castlefield Property"). On June 22, 2004, Cheri Boros listed the property she owned at 1 Caldow Road, Toronto (the "Caldow Property") for sale. At the time, she and the respondent occupied the Caldow property as their matrimonial home.
[5] It is accepted by Tarion that, when Cheri Boros acquired the Castlefield Property, it was the intention of her and the respondent to build a new home on the site. They would occupy this new home as their family home and would sell the Caldow Property. [page403]
[6] On August 6, 2004 (before the closing of the Castlefield Property), the respondent, an architect by profession, applied to the City of Toronto for a building permit for the Castlefield Property. In that application, the respondent listed 577 Castlefield Road as the project location and described the work as "construct new 2 storey house with below grade garage". He declared and certified that he was the owner of the property and represented that he would be acting as the general contractor. He further declared as part of his application for a building permit:
I, Alex Boros (applicant) have read and understand the provisions of section 8(2) of the Ontario Building Code Act, as well as the relevant provisions of the Ontario New Home Warranties Plan Act, on the reverse side of this statement. I declare that I am not acting as a "vendor" or "builder", nor am I contracting with a "builder" to construct or manage the construction of this "home". I understand that this home is not eligible for enrolment or coverage under the Ontario New Home Warranties Plan Act and a warranty claim to the Ontario New Home Warranty Program (ONHWP) cannot be made for this home, by me or by any subsequent purchaser of this home.
[7] The respondent signed this declaration on August 6, 2004. On September 22, 2004, the Castlefield Property was conveyed to Cheri Boros and the following day, September 23, 2004, a building permit for that property was issued to the respondent.
[8] On October 30, 2004, the listing agreement for the Caldow Property expired and was never renewed nor was that property ever again listed for sale at any material time.
[9] The evidence of the respondent and his wife is that they acquired the Castlefield Property with the intention of tearing down the bungalow that existed on the property and building a new home which they would occupy. Their intention to occupy the Castlefield Property changed when the Caldow Property did not sell. The evidence is unclear as to precisely when their intention changed -- whether it was in October 2004, when the listing agreement for the Caldow Property expired and was not renewed, or whether it was later in March 2005, when the respondent attempted to register the Castlefield Property with Tarion. However, in my view, it is the fact that their intention changed that is material, not the precise time when the change occurred.
[10] On March 9, 2005, the respondent delivered an application for enrolment of a freehold home to Tarion. In that application, he gave the vendor/builder name as 759894 Ontario Limited ("759") and the builder name as his own. The municipal address of the home sought to be enrolled was 577 Castlefield Avenue, Toronto. The estimated contract/sale price was stated to be $400,000. The respondent declared that the information [page404] provided on the application was true and accurate and that he was authorized by the vendor/builder to provide the information.
[11] The evidence discloses that 759 is a company whose sole shareholder is Saul Schacht. Mr. Schacht is the only officer and director of the corporation. No one else has any interest in that company.
[12] Mr. Schacht had done business with the respondent on an earlier occasion in 2003-2004. The two were partners in a 13- unit townhouse project on Eglinton Avenue in Toronto. Mr. Schacht's company, 759, became registered with Tarion in connection with that project. After the completion of that project, 759 did not renew its registration with Tarion and neither 759 nor Mr. Schacht had anything whatever to do with the Castlefield Property.
[13] When Tarion received the application for enrolment, certain checks and cross-references were made by the staff. It soon became apparent that neither 759 nor the respondent were registered with Tarion. The application was rejected and an investigation was undertaken which culminated in the charges which are the subject of this appeal.
[14] On April 11, 2005, the Castlefield Property was listed for sale by Chestnut Park Real Estate Limited with an asking price [of] $1,125,000. Included in the description of the property were the words, "Brand New Allenby Area Home, Ontario New Home Warranty".
[15] In July 2005, Cheri Booth entered into an agreement of purchase and sale wherein the subject property sold to third parties. That transaction closed on October 6, 2005. Analysis
[16] There is no dispute among the parties that, at the outset, when Cheri Boros acquired the Castlefield Property and the intention was to build a home on the property which she and the respondent would occupy, the ONHWP Act did not apply to them because they were owners intending to build for their own occupation.
[17] That intention changed at some point in time between October 2004 and March 2005, and the issue raised is whether the respondent was subject to the provisions of the ONHWP Act when it was decided the property would be sold.
[18] For ease of reference I will set out the relevant sections of the ONHWP Act:
No person shall act as a vendor or a builder unless the person is registered by the Registrar under this Act. . . . . . [page405]
A builder shall not commence to construct a home until the builder has notified the Corporation of the fact, has provided the Corporation with such particulars as the Corporation requires and has paid the prescribed fee to the Corporation.
[19] The terms "builder" and "vendor" are defined terms under the legislation [at s. 1]:
"builder" means a person who undertakes the performance of all the work and supply of all the materials necessary to construct a completed home whether for the purpose of sale by the person or under a contract with a vendor or owner . . . . . . . .
"vendor" means a person who sells on his, her or its own behalf a home not previously occupied to an owner and includes a builder who constructs a home under a contract with the owner[.] And "owner" is defined as follows:
"owner" means a person who first acquires a home from its vendor for occupancy, and the person's successors in title[.]
[20] I begin with the observation of this court in Ontario New Home Warranty Program v. Lukenda (1991), 1991 7167 (ON CA), 2 O.R. (3d) 675, [1991] O.J. No. 320 (C.A.), at p. 676 O.R.:
The major purpose of the Plan Act is to protect purchasers of new homes by requiring that vendors and builders be screened for financial responsibility, integrity and technical competence. To assure public protection, it provides warranties, a guarantee bond and compensation in the event of loss by a purchaser resulting from dealings with a registrant. In order to effect this purpose of the Plan Act, a broad and liberal interpretation of its provisions is appropriate.
[21] This court further observed in Mandos v. Ontario New Home Warranty Program, 1995 3158 (ON CA), [1995] O.J. No. 3647, 86 O.A.C. 382 (C.A.), at p. 383 O.A.C.: "The Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O-13 is remedial legislation and should be given a fair and liberal interpretation."
[22] The central issue in this case is whether the respondent meets the definition of "builder" as it is defined in the ONHWP Act. It would appear that this question has not arisen in this court before. However, as outlined above, the prior jurisprudence of this court with respect to the ONHWP Act requires that a broad and liberal approach be taken to interpreting the meaning of the term "builder" in order to reflect the remedial purpose of the Act.
[23] With respect to the purpose of the Act, it is, I think, important to note that on behalf of Tarion both Mr. Outerbridge, before this court, and Ms. Street, before the trial court, were clear -- irrespective of the actions of the respondent and/or his wife, the purchasers of the Castlefield Property were entitled to [page406] the warranty protection available to new home owners under the ONHWP Act. As Ms. Street put it before the trial court:
I've provided you Your Worship, with a copy of the legislation. It is a non-profit self-funded corporation, it is not part of any government-funded program, it is funded entirely through the fees paid by builders of new homes and on registration and on fees paid on enrolment of the new homes that they built, so the obligation is two-fold. First of all, it's a mandatory obligation to be registered if one is building new homes in Ontario and if one is selling new homes in Ontario, the Act differentiates between those two Acts. It could be that it's the same individual doing both. In this case we have one defendant charged with building and Mrs. Boros, Cheri Boros charged with selling, she owned the property. The Act is mandatory as I said, the fee to become registered is $600 plus G.S.T. The cost of enrolment is on a sliding scale depending on the purchase price of the home to a maximum of I believe, $850, so the charges are not, or the fees rather, are not all that significant and the coverage on the other hand is quite significant. Coverage to a purchaser is today up to $300,000 for defects in construction. There are also a number of other warranties provided to purchasers. Those warranties are in place, regardless of whether the vendor or builder registered or enrolled, so if an individual purchaser has, meets the definitions in the Act, then that person is entitled to the coverage set out in the Act. And that's part of why it's important to Tarion to police its legislation, if you will, to ensure that those builders who are complying with the Act are not undercut, if you will, by those who are not. (Emphasis added)
[24] As it did in the court below, Tarion argues that the purpose of the ONHWP Act is to provide warranty protection to buyers of new homes. While that may be so, both in this court and in the trial court, counsel for Tarion has made it crystal clear that the buyers of new homes are protected and have the benefit of the ONHWP Act whether, the "builders"/ "vendors" are registered or not.
[25] In effect, those who purchase new homes, that have never before been occupied, are entitled to the protections and warranties available under the ONHWP Act, whether those from whom they acquired their properties are registered or not.
[26] Tarion takes the position that once the respondents' intention to occupy the home himself changed, he was obliged to register under the ONHWP Act.
[27] As the appeal judge below noted:
It is one thing to say that the purpose of the definition is to bring all new homes not built for their owners and not previously occupied within the protection of the statutory scheme, and another to decide if the Legislature succeeded in doing so. The definition, resorting as it does to the act of undertaking and then tying that word to all of the supplies and all of the work as well as to two purposes that can shift and change, is not clear.
[28] He concluded that "the stage of construction is crucial" and that [page407]
[i]f so much is left that it is possible to say that an intention can be formed to supply all of the material and perform all of the work for one of the defined purposes, without doing too much violence to the meaning of the word "all", then the definition could crystallize once the change of intention is established, and the person who undertook the construction could become a builder even though he was not when he originally undertook the performance and the supply of materials.
[29] The appeal judge concluded that there was insufficient evidence to enable him to say what the stage or degree of construction was between the dates specified on the information, namely, September 23, 2004 to March 23, 2005. He concluded:
Tarion relied on the de-listing of the original matrimonial home and the evidence of Cheri Boros and based its case on the change of intention only, without proving when the intention changed nor the amount of construction remaining at that point.
Even if the justice had not erred on this record, no court could find beyond a reasonable doubt that Boros was a builder within the time frame in the information. Although partially succeeding in its submission as to the interpretation of the Act, Tarion's appeals against Boros are dismissed.
[30] The definition of the term "builder" as used in the ONHWP Act was considered by Gans J. in Carreiro v. Moreira, [1998] O.J. No. 2648, 19 R.P.R. (3d) 80 (Gen. Div.). In that case, Moreira constructed a new home he intended to occupy, but his plans changed before the construction was completed and he listed the property for sale as a "custom built new luxury home". In Carreiro, there was some issue about whether Moreira had, in fact, occupied the subject property for some period of time before the sale. The court concluded, as a factual matter, that he had not and he was therefore a "vendor" under the ONHWP Act. The court stated, at p. 84 R.P.R.:
Having regard to my conclusion that Sidonio was a "vendor under the Act, I need not consider whether he was a builder, the definition of which term is as follows:
"builder" means a person who undertakes the performance of all the work and supply of all the materials necessary to construct a completed home whether for the purpose of sale by the person or under a contract with a vendor or owner ("constructeur")
Sidonio argues that he did not "undertake" the task of constructing the House at first instance for purposes of sale as it was his intention to occupy the House personally. In my view, that subsection is intended to include those who by their activities actually complete construction with a resulting sale. To hold otherwise would mean that the Act might not apply to the construction of a new home where one builder takes over from another as a result of an insolvency or, worse, artifice. In any event, as previously indicated, this analysis is rendered academic by my previous determination. [page408]
[31] As has been quite rightly observed, the court's comments in relation to the meaning of the term "builder" are pure obiter, in that the case was determined on the basis that Sidonio (Moreira) was a "vendor" as that term is defined. Nevertheless, this passage has been referenced in a number of other decisions in the Ontario Court of Justice and appears to have influenced some of those decisions: see R. v. Bernard Machado Construction & Woodworking Ltd., [2001] O.J. No. 6276, 63 C.L.R. (3d) 122 (C.J.), at para. 26.
[32] Unlike the case at bar, Moreira owned the property at issue and constructed the home. Here, Cheri Boros owns the property and the respondent constructed the home. The only basis upon which the respondent can be convicted is if he meets the definition of builder. In other words, if Tarion can prove beyond a reasonable doubt that the respondent was at the material time a "builder", as the term is defined in the ONHWP Act, he will be guilty as charged. If he does not meet the definition, the acquittals must be upheld.
[33] As this court has stated, one of the purposes of the legislation is to screen vendors and builders for financial responsibility, integrity and technical competence. The object is to insure that those members of the public who are buying new homes will have recourse against those from whom they acquired those homes -- be they builders or vendors. In order to be registered an applicant is required to demonstrate financial responsibility, integrity and honesty in its past conduct and its technical competence. If it cannot, registration can be refused.
[34] There are provisions in the ONHWP Act which suggest that it is directed at those who are in the business of building new homes for sale. For example, the definition of "builder" provides that it means "a person who undertakes the performance of all the work and supply of all the materials necessary to construct a completed home". This language would suggest it is directed at those who undertake -- from the outset -- the construction of a new home. Similarly, s. 12 provides:
- A builder shall not commence to construct a home until the builder has notified the Corporation of the fact, has provided the Corporation with such particulars as the Corporation requires and has paid the prescribed fee to the Corporation.
[35] Again, construction is not to "commence" until there is notice and fees are paid.
[36] Similarly, s. 8 (now s. 1.1) of the Administration of the Plan, R.R.O. 1990, Reg. 892 (Ontario New Home Warranties Plan Act) concerns the enrolment of homes in the plan and provides: [page409]
8(1) Forthwith upon the issue of a building permit authorizing the construction of a home, other than a condominium dwelling unit, but including a contracted home, the builder shall enrol the home in the Plan[.]
[37] The language, once again, is directed to the very early stages of a project, even before construction begins -- "forthwith upon the issue of a building permit . . . ".
[38] Read together, these provisions require that to be a builder one must (1) undertake the performance of all the work and (2) supply all the material necessary to construct a completed home for the purpose of (1) sale by the builder or (2) under a contract with a vendor
or (3) under a contract with an owner.
[39] The Shorter Oxford English Dictionary on Historical Principles, 3rd ed. (Oxford: Clarendon Press, 1974) defines "undertake" as follows:
To take upon oneself; to take in hand; freq. = to enter upon, begin; to take charge, accept the charge of; to enter upon, commit oneself to[.]
[40] In other words, a builder is one who takes on the performance of the work and supply of materials for the purpose of selling to others.
[41] While the respondent here clearly undertook the performance of all of the work and the supply of all of the materials necessary for the construction of a completed home, there is no evidence he did so for any of the purposes required. He did not undertake the construction for the purpose of sale -- he undertook the performance and supply for the purpose of building a home in which he would live with his family. No one disputes the respondent's original intention.
[42] It is agreed that when the respondent began construction, and up until the time his intention changed, the ONHWP Act did not apply to him. In other words, he was not a builder within the meaning of s. 1 of the ONHWP Act.
[43] In order for the Act to apply when the respondent's intention changed, the language of the Act must be clear. It must be clear from reading the definition of builder that it applies not [page410] only to those who, from the outset, undertake all the work and supply of all materials necessary to construct a completed home for sale to others or under a contract with either an owner or vendor, but also to those whose intentions change over the course of a project. The language of the Act refers only to those who begin construction with the intention to build for others. It makes no reference to those who start out with an intention to build for themselves. Those who build for themselves are not within the contemplation of the legislation and the ONHWP Act has no application to them.
[44] In my view, the wording of the legislation is geared toward those who begin the construction of a completed home with the intention of selling it to others. It is not geared toward those who, like the respondent, begin with the intention of building a home for their own use and occupation and then when circumstances change decide to sell to others. The definition of "builder" is precise. The respondent meets the first part of the definition in that he undertook all the work and supply of all the materials necessary to construct a completed home; however, he did not, at least at the time of his "undertaking", do so for the purpose of sale.
[45] Certainly, the respondent would meet a layman's understanding of the term "builder" or even a dictionary definition of the term. But here, the legislature has given a specific legislated meaning to the term and the respondent on this record does not meet that definition. In my view, if the legislature intended the ONHWP Act to apply to persons like the respondent, it had to say so in clear terms. It does not.
[46] Had builder been defined merely as, for example, "one who constructs completed homes for others", all those persons who build homes and ultimately sell them to others would be caught.
[47] The penalties for breach of the provisions of the Act and failure to register can be severe and include fines of up to $25,000 for an individual and up to one year in jail.
[48] In order for persons, such as the respondent, to be convicted of such offences, the language needs to be more precise.
[49] For these reasons, I would dismiss the appeal.
[50] Both parties seek costs in the event they are successful.
[51] The respondent shall have his costs of the appeal fixed in the sum of $15,000, inclusive of disbursements and all applicable taxes.
Appeal dismissed.
Notes
[^1]: There were charges in addition to those before this court. The respondent was also charged under s. 22(1)(a) of the ONHWP Act and his wife, Cheri Boros, was charged under s. 6 of the ONHWP Act. The disposition of those charges was not before this court.