Court File and Parties

CITATION: 2122157 Ontario Inc. v. Tarion Warranty Corporation, 2016 ONSC 851

DIVISIONAL COURT FILE NO.: 260/15
DATE: 20160203

ONTARIO SUPERIOR COURT OF JUSTICE DIVISIONAL COURT

AITKEN, SWINTON and C. HORKINS JJ.

BETWEEN:

2122157 ONTARIO INC.
Applicant

– and –

TARION WARRANTY CORPORATION, TORONTO STANDARD CONDOMINIUM CORPORATION N0. 2251 and OWENS WRIGHT LLP
Respondents

COUNSEL:
Brian M. Campbell, for the Applicant
David Outerbridge, for the Respondent Tarion Warranty Corporation
Kate Genest, for the Respondent Condominium Corporation
M. Scott Martin, for the Respondent Owens Wright LLP

HEARD at Toronto: January 15, 2016

Reasons for Decision

Swinton J.:

Overview

[1] The applicant 2122157 Ontario Inc. (“212”) brought an application for judicial review to set aside a decision of Tarion Warranty Corporation (“Tarion”) on the grounds of procedural unfairness. After oral argument, the Court dismissed the application without hearing the merits of the application with reasons to follow. These are the reasons for that decision.

Factual Background

[2] 212 built a townhouse and condominium complex in the west end of Toronto (“the Project”). 212 was initially registered as a builder and vendor with Tarion, a corporation appointed by the Ontario government to administer the Ontario New Homes Warranties Plan Act, R.S.O. 1990, c. O.31 (“the Act”). As a condition of registration, 212 agreed to provide $560,000 in security to Tarion. That security was provided by means of a Deposit Trust Agreement between Tarion, 212 and the respondent Owens Wright LLP as trustee.

[3] 212 lost its registration with Tarion in January 2012 because of its poor credit rating and its failure to execute and deliver the annual terms and conditions letter for the 2011-2012 renewal year. As 212 had not sold all the units at the Project, Tarion agreed to re-register 212 from August 2012 to August 2014 for the limited purpose of the sale of the units. Tarion cancelled 212’s registration as a vendor again on August 22, 2014.

[4] The Act and Regulation 892 prescribe three time periods during which a vendor has an opportunity to repair defects that are warrantable under the Act or otherwise resolve a vendor’s claims voluntarily:

1. after a homeowner submits a warranty claim to Tarion;
2. after a homeowner requests that Tarion conduct a conciliation inspection to determine whether a warrantable defect exists, but before the inspection occurs; and
3. after Tarion determines, as a result of the inspection, that claim items are warranted.

[5] Section 5.10 of Regulation 892 confers a discretion on Tarion to abridge the vendor repair periods if Tarion determines that the vendor is “unable or unwilling” to resolve the claim items covered by a warranty. When Tarion decides to abridge a vendor repair period, the vendor is not excluded from the warranty claim process and continues to receive written notice of warranty claims and conciliation inspections. However, Tarion can begin repairs or pay compensation sooner to homeowners.

[6] Tarion first found 212 to be unwilling or unable to resolve the warranty claims at the Project on September 4, 2013, following a process undertaken by its Unwilling/Unable Committee. The reasons for the decision included the number of warranty claims, the failure of 212 to carry out proper repairs of warrantable defects, and 212’s lack of attendance at conciliation inspections. After submissions from 212, the Chair of the Committee decided to give 212 a second chance, and the decision was reversed on September 20, 2013.

[7] Tarion reinstated the unwilling/unable determination in March 2014 because it concluded that 212 had failed to address significant warranty claims involving major defects, such as water penetration and lack of adequate insulation. In a letter dated March 5, 2014, Tarion informed 212 that Tarion would proceed to resolve all claims directly with homeowners without giving 212 an opportunity to do so. Homeowners would not be required to wait for 212 to resolve a warranty claim and could request a conciliation immediately. Tarion has since been resolving the homeowners’ claims directly and at considerable expense.

[8] On March 17, 2014, 212 sent Tarion an incomplete application package meant to commence Builders’ Arbitration Forum (“BAF”) proceedings. It followed up with an updated Request to Arbitrate and an arbitration agreement on April 9, 2014. Tarion refused the request to arbitrate, as 212 did not meet the eligibility requirements laid out in the BAF Procedural Rules. The main reason for the refusal was the fact that 212 was not a member in good standing under the warranty regime.

[9] In August 2014, 212 commenced a civil action against Tarion and the respondent Toronto Standard Condominium Corporation No. 2251 (“TSCC”). On May 22, 2015, 212 commenced this application for judicial review, claiming that it had been denied procedural fairness when Tarion made its decision finding 212 unwilling or unable to make warrantable repairs.

Should this Court exercise its discretion to grant judicial review?

[10] Tarion argued that the Court should exercise its discretion to dismiss the application for judicial review on a number of grounds: unreasonable delay, mootness, the availability of alternative remedies, and 212’s lack of clean hands.

Analysis

[11] Judicial review is a discretionary remedy, and courts will refuse a remedy where the public interest does not require judicial intervention (Chippewas of Sarnia Band v. Canada (Attorney General) (2000), 2000 16991 (ON CA), 51 O.R. (3d) 641 (C.A.) at para. 258; Donald J.M. Brown and John M. Evans, Judicial Review of Administrative Action in Canada, Carswell, para. 3:1200 (September 2009)). Whether on an application for judicial review or in another type of proceeding, courts will generally refuse to decide a case where the remedy sought would serve no useful purpose, because there is no live controversy or dispute between the parties (Borowski v. Canada (Attorney General), 1989 123 (SCC), [1989] 1 S.C.R. 342 at 357). Courts have also refused to deal with an application for judicial review where there has been unreasonable delay by the applicant in pursuing judicial review, or the applicant has an adequate alternative remedy (Harelkin v. University of Regina, 1979 18 (SCC), [1979] 2 S.C.R. 561 at 587, Brown v. Waterloo (Region) Commissioners of Police (1985), 1985 2219 (ON SC), 7 O.A.C. 51 (Div. Ct.) at paras. 10, 46-48).

[12] In the present case, the applicant does not challenge the merits of the determination that it was unwilling/unable to effect warranty repairs. Rather, it argues that the determination was made without procedural fairness. Were a court to find that there was a denial of procedural fairness, the remedy would be to set aside the determination. That would not prevent Tarion from proceeding to make the determination again, provided it acted fairly.

[13] In my view, there is no useful purpose in considering the application on the merits, given the time that has passed since the unwilling/unable determination was made in March 2014. That determination allowed Tarion to abridge the times for 212 to make warranty repairs. The vendor repair periods that 212 notionally seeks to revive have long since expired, and Tarion has either completed the repairs or the work is well underway. The evidence clearly establishes that 212 did not seek to repair the warrantable defects within those repair periods or after their expiry.

[14] 212 argues that this proceeding is not moot, as the effect of a decision setting aside the unwilling/unable determination would be to allow it to proceed to arbitration under the BAF process. This argument is based on a misunderstanding of the BAF process. The BAF process is an arbitration process that requires the consent of both the vendor/builder and Tarion. Consent from Tarion requires compliance with a number of conditions set out in Builder Bulletin 41R, including the requirement that the vendor be a registrant in good standing throughout the arbitration process. As set out in the Bulletin, the vendor must be in compliance with requirements under the statutory scheme other than with respect to the disputed warranty claim that is the subject of the BAF proceeding.

[15] As of August 2014, 212 is no longer registered with Tarion, so it is not eligible to participate in the BAF process. Moreover, around the time of the unwilling/unable determination, 212 was not compliant with the statutory scheme in a number of ways - in particular, it was regularly failing to attend conciliation inspections, it was regularly failing to repair warrantable defects, and it was not up to date in paying all invoices issued by Tarion for reimbursement for warranty breaches. As Tarion stated in a letter to 212’s counsel dated April 21, 2014:

Your client’s continued lack of participation in the warranty process is a breach of the Act, Builder Bulletin 42 and as a result, a breach of the Vendor Agreement. As such, your client is not considered to be in Good Standing with Tarion as defined by BAF Rules (2013).

Accordingly, 212 had no right of access to the arbitration process in the spring of 2014, nor would it have such a right today. Thus, the outcome of this judicial proceeding would have no effect on its access to the arbitration process.

[16] While 212 might prefer the arbitration route, it has an alternative route in the civil proceedings, where it can seek damages against Tarion. The civil action also provides an alternative remedy to this application for judicial review and, indeed, a preferable route, as this court cannot order monetary compensation if Tarion has carried out repairs that are not warrantable.

[17] There has also been undue delay in commencing and advancing the application for judicial review, which is another reason for the court refusing to exercise its discretion to grant judicial review (P.P.G. Industries Canada Ltd. v. Canada (Attorney General), 1975 204 (SCC), [1976] 2 S.C.R. 739). The unwilling/unable determination was made in March 2014, yet the application for judicial review was not launched until May 2015. The application was not argued until January 2016. No satisfactory explanation has been provided for the delay. 212 was objecting to the repairs done by Tarion from the outset, as demonstrated by the request to proceed to the BAF process and the commencement of a civil action claiming damages in August 2014.

[18] A court may refuse judicial review because of undue delay where there will be prejudice to a third party or the public interest if the decision under review is now reversed. As I have stated above, Tarion has undertaken repairs or has contracted for the repairs that 212 was obligated to carry out under the statutory scheme. I am satisfied that there will be prejudice to homeowners, TSCC and the public interest if the determination is now reversed, as there will likely be further delay in carrying out necessary repairs.

[19] Given the mootness of the issue before this Court, the unreasonable delay, and the availability of other remedies, the application for judicial review is dismissed.

Costs

[20] Costs to Tarion are fixed on a partial indemnity basis at $25,000.00, an amount that is fair and reasonable having regard to the size of the record, the need for cross-examinations, and the complexity of the issues.

[21] Neither TSCC nor Owens Wright should have been added as parties to this application for judicial review, as 212 sought private law relief against them in the nature of injunctive relief and interpretation of the trust agreement. Such relief is not properly raised in an application for judicial review. Costs to TSCC are fixed at $10,000 and to Owens Wright at $7,500.

Swinton J.

Aitken J.

C. Horkins J.

Released: February 3, 2016

CITATION: 2122157 Ontario Inc. v. Tarion Warranty Corporation, 2016 ONSC 851
DIVISIONAL COURT FILE NO.: 260/15
DATE: 20160203

ONTARIO
SUPERIOR COURT OF JUSTICE
DIVISIONAL COURT

AITKEN, SWINTON and C. HORKINS JJ.

BETWEEN:

2122157 ONTARIO INC.
Applicant

– and –

TARION WARRANTY CORPORATION, TORONTO STANDARD CONDOMINIUM CORPORATION N0. 2251 and OWENS WRIGHT LLP
Respondents

Reasons for Decision

Swinton J.

Released: February 3, 2016