Licence Tribunal

Appeal d'appel en

Tribunal matière de permis

DATE:

2011-10-04

FILE:

6298/ONHWPA

CASE NAME:

6298 v. Tarion Warranty Corporation

An Appeal of a Decision of Tarion Warranty Corporation under the Ontario New Home Warranties Plan Act – to Disallow a Claim

Applicant(s)

Applicant(s)

-and-

Tarion Warranty Corporation

Respondent

-and-

Sandbank Homes Inc. Added Party

REASONS FOR DECISION AND ORDER

ADJUDICATOR:

DOUGLAS R. WALLACE, Vice-Chair

APPEARANCES:

For the Applicants:

APPLICANT 1, representing himself and Applicant 2

For the Respondent:

BRENT ARNOLD, Counsel, representing Tarion Warranty Corporation

For the Added Party:

GRAHAM SHANNON, Agent, representing the Added Party, Sandbank Homes Inc.

Heard in Belleville:

August 8, 9, 10, 11 and 12, 2011

REASONS FOR DECISION AND ORDER BACKGROUND

Section 16 of the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 (the “Act”) requires Tarion Warranty Corporation (“Tarion”) to decide whether alleged defects in the construction of a new home are covered by a warranty as defined by the Act and Regulations, and allows homeowners to request a hearing by this Tribunal, of any decision denying them coverage. In conducting this hearing, the Tribunal exercises its own judgment, independent of any prior decision by Tarion.

PRELIMINARY MATTERS

At the opening of the hearing, the Tribunal was asked to deal with two preliminary matters.

The first was a request by the Applicants (“Homeowners”) to introduce expert reports and other documents which had not been disclosed to Tarion within the time provided by the Tribunal’s Rules of Practice or within the time frame provided by the panel member holding the pre-hearing in this matter. It was also noted that the Homeowners had failed to provide Tarion with the names and qualifications of the expert witnesses they wished to call. No explanation was offered for the Homeowners’ failure to comply with the Rules of Practice and the direction of the panel member holding the pre- hearing. Having heard submissions from the parties, the Tribunal ruled that documents produced by the parties after the expiration of the time specified at the pre-hearing and reports by experts whose names and qualifications had not been disclosed would not be admitted. The ruling concerning the admission of documents not disclosed in a timely manner was relaxed towards the end of the hearing when all parties requested permission to introduce photographs showing the present condition of the lawn.

The second matter dealt with was a Notice of Constitutional Question served by the Homeowners on all parties and the Attorney General. As the Notice¹ was unclear as to the legislation being challenged, the grounds for the challenge and the remedy sought, the Tribunal heard oral submissions on these matters from the Homeowners. The oral submissions satisfied the Tribunal that the Homeowners’ real concern was with the manner that Tarion was acting in consort with the Added Party (the “Builder”), under the Act and not with the Act itself. The Tribunal also heard submissions from Counsel for Tarion who referred the Tribunal to section 109 of the Courts of Justice Act, R.S.O. 1990, c. C.43 and the cases of Struss (Re) [1996] O.C.R.A.T.D. No. 97, and Ram (Re) [2002] O.L.A.T.D. No. 93. Having considered both the written and oral submissions, the Tribunal ruled that the Notice of Constitutional Question filed did not bring the constitutional validity of any legislation or the applicability of any legislation into question within the meaning of section 109 of the Courts of Justice Act. Nor did it claim a remedy. The application was accordingly summarily dismissed.

FACTS

The following facts were not in dispute and are found as facts by the Tribunal:

1. The Homeowners took possession of their new home on June 3, 2009.

2. On May 4, 2010, they filed a Year End Form with Tarion and the Builder itemizing some 28 outstanding items requiring completion or correction. The items listed include the four items forming the subject matter of this hearing:

(a) sink holes in lawn

(b) a steep slope on the east side of the lawn

(c) asphalt driveway too thin

(d) sinking cornerstone on entrance steps

3. On September 1, 2010, a Tarion Representative inspected the property and issued a Warranty Assessment Report on the next day, finding all four items in dispute to not be warranted.

4. On October 7, 2010, Tarion issued a Decision Letter denying coverage for all four items on the grounds stated in the Warranty Assessment Report.

5. The Homeowners requested this hearing by filing a Notice of Appeal on October 18, 2010.

6. The provisions of the Act requiring a “home”, an “owner” and a “vendor” were satisfied and no issue was taken as to the timeliness of the Homeowners’ request for a hearing.

THE LAW

The first year warranties applicable to new homes are set out in section 13 of the Act in the following words:

Warranties

13. (1) Every vendor of a home warrants to the owner,

(a) that the home,

(i) is constructed in a workmanlike manner and is free from defects in material,

(ii) is fit for habitation, and

(iii) is constructed in accordance with the Ontario Building Code;

(b) that the home is free of major structural defects as defined by the regulations; and

(c) such other warranties as are prescribed by the regulations. R.S.O.1990, c. O.31, s. 13 (1).

Exclusions

(2) A warranty under subsection (1) does not apply in respect of,

(a) defects in materials, design and work supplied by the owner;

(b) secondary damage caused by defects, such as property damage and personal injury;

(c) normal wear and tear;

(d) normal shrinkage of materials caused by drying after construction;

(e) damage caused by dampness or condensation due to failure by the owner to maintain adequate ventilation;

(f) damage resulting from improper maintenance;

(g) alterations, deletions or additions made by the owner;

(h) subsidence of the land around the building or along utility lines, other than subsidence beneath the footings of the building;

(i) damage resulting from an act of God;

(j) damage caused by insects and rodents, except where construction is in contravention of the Ontario Building Code;

(k) damage caused by municipal services or other utilities;

(l) surface defects in work and materials specified and accepted in writing by the owner at the date of possession. R.S.O. 1990, c. O.31, s. 13 (2).

Briefly paraphrased, a homeowner is, subject to the stated exclusions, entitled to three warranties for a period of one year from possession: a warranty that the home is constructed in a workmanlike manner and is free from defects in material, a warranty that the home is fit for habitation and a warranty that a home is constructed in accordance with the Ontario Building Code (the “OBC”). The provisions with respect to two-year warranties need not concern us here.

The remedies available to a homeowner in the event of a breach of warranty which is not excluded by subsection 13(2) of the Act are set out in subsections (3) and (7) of section14 as follows:

(3) Subject to the regulations, an owner of a home is entitled to receive payment out of the guarantee fund for damages resulting from a breach of warranty if, ….

(b) the person has a cause of action against the vendor or the builder, as the case may be, for damages resulting from the breach of warranty.

(7) The Corporation may perform or arrange for the performance of any work in lieu of or in mitigation of damages claimed under this section.

If the homeowner fails to receive satisfaction from Tarion at this stage, he or she may request a hearing before this Tribunal. The Tribunal’s jurisdiction to grant a remedy in this case is found in section 16 (3), which provides as follows:

(3) Where a person or owner gives notice in accordance with subsection (2), the Tribunal shall appoint a time for and hold the hearing and may by order direct the Corporation to take such action as the Tribunal considers the Corporation ought to take in accordance with this Act and the regulations, and for such purposes the Tribunal may substitute its opinion for that of the Corporation.

ISSUES

There is no suggestion that the items complained of rendered the Homeowners’ home unfit for habitation or structurally unsound. The only issues are accordingly:

1. whether the items claimed indicate defective material, unworkmanlike construction or a departure from the OBC,

2. if so, whether they are excluded from warranty coverage and

3. if there are warranted defects, what is the appropriate remedy?

EVIDENCE

A. Sink holes in the lawn

Homeowner 1 testified on behalf of both Homeowners with respect to all items in dispute. His evidence consisted of a slide show contained on a compact disc, a number of documents, his own testimony, and the evidence of five witnesses.

His evidence concerning the first item in dispute was that thousands of sink holes up to 3 ½ inches deep started to appear on their lawn within two months of its completion by the Builder in July 2009. He identified a number of photographs found on pages 4, 5 and 6 at the back of the Notice of Appeal² depicting the holes and showing their depth. In his opinion, the holes were deep enough to create a danger of tripping and to prevent cutting the lawn properly. In support of his claim that the lawn was full of depressions, he called a number of witnesses who visited his property between the time that the lawn was sodded and the date of the hearing.

The first witness called in support of the Homeowners’ claim with regard to this item was Brian VanDyk. Mr. VanDyk viewed the property in May 2011, well after the expiration of the one-year warranty. He testified that he found the lawn to be very difficult to walk on and confirmed that the photographs found on pages 4, 5 and 6 of Exhibit #6 accurately reflected his observations of the lawn at the time of his visit. The second witness, John Morris, identified the same photographs of the lawn and a document he signed on December 31, 2010, quoting costs to repair the lawn and the front steps of the home. On cross-examination, he admitted that although he was the author of the handwritten portions of the quotation, the typewritten portion of the quotation was prepared by Homeowner 1. The cost to replace the lawn was quoted in the amount of $4,000.00.

The third witness, Jamie Cutler, made several visits to the site in the Spring of 2010 and observed the same conditions. He also identified a quotation he had prepared to correct the problem he observed by adding top soil, compacting it and laying new sod. His quotation was in the amount of $3,800.00 plus HST.

The final witness called by the Homeowners with respect to this item was Bardi Vorster. Ms. Vorster is a practicing landscape architect with approximately 35 years experience providing residential landscape design services for private owners and subdivisions. When she visited the property on April 10, 2011, she found the depressions constituted a “trip hazard” which would make the lawn difficult to cut properly and would “prevent the Homeowners from the complete enjoyment” of their property. Her report, which was disclosed to the other parties on May 10, 2011, as part of Exhibit #5, gave her professional opinion as to the cause of the depressions and the steps which should be taken to correct the situation. She attributed the cause of the problem to inadequate compaction of the sub-grade and a failure to roll the sod following installation, combined with a trampling of the site by installers while the work was in progress.

In cross-examination by Counsel for Tarion she advised that, although she did not see the sod being laid, “if the top soil were properly compacted, there would be no depressions”. The recommended remedy included the removal of the existing lawn, rolling and raking the surface and re-laying new sod.

Tarion’s position on this issue is set out in its Decision Letter as follows:

Observations: The sod on the front, rear and side yards of the home were observed. There were several depressions observed throughout the sodded area of the property. The depressions throughout the lot are consistent with walking on the sod after watering of the lawn.

In support of Tarion’s theory, that the depressions were caused by walking on the lawn, Tarion’s Counsel obtained the admission that the Homeowners did considerable work on the home and surrounding lawn, much of it very shortly after the sod was laid. This work consisted of the addition of siding between ground level and the bottom of the existing siding, the addition of some river rock around the edge of the foundation, the planting of many shrubs and the planting of flowers and a small decorative fence close to the foundation. All the work contributed to excessive traffic which could have caused depressions in a newly sodded lawn. In the alternative, Counsel suggested that the depressions could have been caused by either insufficient watering by the homeowners or settlement.

Danny Conte, Tarion’s Field Claims Representative, carried out a conciliation inspection on September 1, 2010. His Report and 15 pages of photographs were entered as an exhibit. Seven of the photographs show the depressions in the lawn. His evidence was that he could see nothing in his inspection that would be contrary to the Construction Performance Guidelines which Tarion uses as reflective of acceptable workmanship. He could, however, see that the depressions looked like they were in the form of a path leading from the roadway to the house. In cross-examination, he denied that his conclusion was speculation as he had seen lawns that had been walked on after installation before and they looked exactly like this. He did not comment on the apparent discrepancy between his description of the lawn as containing “several depressions” and the state of the lawn indicated by the photographs and the evidence of all other witnesses.

Sean Forestall has had six years of landscaping experience, four of them with the Builder. Over that time he estimated he installed in excess of 125 lawns. He oversaw the installation of the Homeowners’ lawn. The procedure followed was to rough grade the site to within four to six inches of the proposed finished level, add four to six inches of top soil, rake it and then lay the sod. He or his crew did not roll the backfill, top soil or sod after installation. In his experience that is not necessary. Nor is it the practice in this area of Ontario. It was his opinion that the white spots shown in the photographs were caused either by lack of water or fertilizer or foot traffic. He lives in the area and observed Homeowner 1 planting shrubs and flowers and placing siding on his foundation within two or three weeks of completion of the sod laying. He also saw Homeowner 1 “pounding” his weed-whacker into the depressions.

He never observed the Homeowners applying water or fertilizer. He did not believe the water spayed on the lawn by the water truck following installation could have caused the depressions as suggested by Ms. Vorster.

The Builder corroborated Mr. Forestall’s evidence as to the method of installation and the method of watering the lawn immediately after installation.

B. The steep slope on the east side of the swale

Homeowner 1 testified and introduced photographs indicating a drainage ditch or swale at the back of his property. His complaint was that the slope on the left side of this swale was steeper than the 3:1 ratio grade promised by the Builder. The steeper slope made it difficult for elderly people such as him to maintain.

Mr. VanDyk testified that the left side of the swale was “uncomfortable” to walk on at the time of his visit in the Spring of 2011. Mr. Cutler’s evidence was that the side of the swale was a steep slope but that he could not testify as to the necessity for this steep a grade. Ms. Vorster testified that such swales are a normal requirement of the municipality.

The Builder gave uncontradicted evidence that the municipality set the grade of the swale as a condition for subdivision approval. His agreement with the municipality requires him to see that the swale is maintained and he has now taken over this responsibility from the owners of properties draining into it. He noted that the Homeowners could have seen the swale at or before the time of purchase but failed to make any complaint at that time. Tarion’s Field Claims Representative confirmed that once the municipality signs off on a plan neither the Builder nor the homeowner has the right to make any modifications. Although he expected the swale to have an approximate 3:1 grade, this did not form part of any agreement of purchase and sale.

C. The thickness of asphalt on the driveway

Due to a difference in elevation between the finished surface of the driveway and the abutting lawn, the Homeowners had Mr. Morris install a cut brick or stone border on both edges of the driveway. While doing this work, both he and Homeowner 1 noted that the asphalt along the edge of the driveway was little more than 1 inch thick in a number of locations. It was also noted at the time that in some locations, there was a space or void of up to 1 inch in depth between the bottom of the asphalt and the top of the underlying gravel surface. Finally, Mr. Morris and Homeowner 1 noted that the asphalt was very thin in the driveway where it met the road. Mr. VanDyk, Mr. Morris and Ms. Vorster all confirmed these observations.

Mr. John Lanning also testified on behalf of the Homeowners. He confirmed that the thickness of the asphalt on the driveway was below the industry standard of 2 inches and provided a quotation for the cost of removing the existing asphalt and repaving the driveway to industry standard.

Mr. Conte testified on behalf of Tarion. His evidence was that the asphalt where it could be observed at the edges of the driveway was 1½ to 2 inches thick. He also testified that when one cuts a straight saw cut along the edge of pavement such as this, and removes the asphalt between the saw cut and the edge to install border stones, a small amount of asphalt inside the saw cut may stick to the asphalt being removed or the underlying gravel. In the result, a measurement of the thickness of the remaining asphalt may not be an accurate reflection of the thickness of the driveway prior to the cut. He noted that the Construction Performance Guidelines deal with the condition of the finished driveway, such as cracks, slope and settlement, rather than the thickness of the asphalt. In this regard, he noted that this driveway showed no signs of cracking or unusual wear at the time of his inspection.

Mr. Lee Mitchell was the final witness to testify as to the condition of the driveway. He reluctantly recalled attending at the Homeowners’ premises and admitted that he had provided the Homeowner with a quotation ($3,750.00 plus HST) for removing the existing driveway and replacing it with another. He indicated, however, that the quote was based on what the Homeowner had said about the thickness of the asphalt rather than what he observed, and stated that by giving the quote he was not to be taken as recommending that the work be done. In fact, he indicated, many 1½ inch asphalt driveways will last “for years and years”, if built on a proper base. It was clear to the Tribunal that Mr. Mitchell was a most reluctant witness whose primary motivation was not to say anything that might offend the Builder or Tarion. The Tribunal gives little weight to his evidence for this reason, in spite of his considerable experience in the paving industry.

D. Sinking cornerstone on entrance steps

The front steps leading to the Homeowners’ entrance consist of two rows of cut stone. The top step consists of several stones. The stone on the right end has tipped down so that it is slanting towards the ground, leaving a crack the width of a finger between its left end and the abutting stone on the left. Homeowner 1 testified that Homeowner 2 had already tumbled twice at this location, and Ms. Vorster confirmed that she considered the situation hazardous. Tarion’s witness, Mr. Conte, indicated that he saw nothing dangerous about the condition.

With respect to the cause of the current condition, the Homeowner submits that it is due to improper workmanship whereas the Builder and Tarion submit that the tipping is the result of subsidence or ground settlement, possibly resulting in the soil being disturbed by the Homeowner.

ANALYSIS

Having considered the evidence in its entirety, and the submissions of the parties, the Tribunal finds as follows:

A. Sink holes in the lawn

It is quite clear that there is something seriously wrong with this lawn at the present time. It is also quite clear that the damage is much more extensive than the “several depressions” noted by Tarion’s Field Claims Representative. In the Tribunal’s opinion, the depressions go far beyond those few found to be the result of natural settlement in the case of 5188-5457-ONHWPA-CLAIM (Re) [2010] O.L.A.T.D. No. 190, referred to by Counsel for Tarion. None of the causes for the lawn’s present condition suggested by the Tarion representative or the Builder appear likely. In this regard, the Tribunal accepts Ms. Vorster’s testimony that merely walking on a lawn, even shortly after sod has been installed, should not result in the extensive damage displayed in the photographs entered in evidence in this case. The Tribunal also is not persuaded by the Builder’s submission that either the lack of water or the use of a weed-whacker is the most probable cause of the depressions. The fact that extensive depressions occurred over such a large portion of the lawn within weeks of its installation satisfies the Tribunal that it is more likely than not that Ms. Vorster accurately assessed the cause when she attributed it to a failure by the installer to provide a properly compacted layer of top soil over a proper base. In the Tribunal’s opinion, the lack of a properly compacted foundation combined with the lack of rolling following the laying of the sod could well explain the creation of such extensive depressions when heavy water was applied by the water truck at the end of the installation process.

The Tribunal finds this item to be warranted and the warranty not to be excluded by any failure of the Homeowners to properly maintain it.

B. The steepness of the grade on the east side of the swale

The Tribunal accepts the uncontradicted evidence of the Builder and Tarion’s Representative that the grading of the swale is a matter beyond the jurisdiction of the Builder. It also finds that the letter which the Homeowner considers evidence of a contractual obligation does not in fact create any such legal obligation. At best it was an expression of the Builder’s belief that such swales normally have a 3:1 grade.

C. The thickness of asphalt on the driveway

The Tribunal accepts Tarion’s evidence that the Construction Performance Guidelines are the best evidence of what the industry generally considers workmanlike construction. These Guidelines do not specify any minimum thickness of asphalt. Rather, they speak of cracks, and slopes, neither of which are present in this case. In the result, the Tribunal finds that the Homeowners have not proven on the balance of probabilities that the driveway was not constructed in a workmanlike manner.

D. Sinking cornerstone on entrance steps

The Tribunal accepts the fact that the cornerstone is in a hazardous condition at the present time.

This, however, is in and of itself, not evidence that its construction contravened any standards of workmanlike construction. Indeed, a warranty for this condition is expressly excluded by clause 14.13 of the Construction Performance Guidelines, which provides as follows:

Concrete stairs having not more than two risers, and small wood stairs not attached to the building do not require foundations and are often affected by the settlement of supporting backfill - this is not covered by the statutory warranty.

ORDER

Pursuant to section 16 (3) of the Act, the Tribunal orders that Tarion warrant item A, and disallow items B, C and D.

LICENCE APPEAL TRIBUNAL

Douglas R. Wallace, Vice-Chair

RELEASED: October 4, 2011

Footnotes

1. 1Exhibit #3
2. 2Exhibit #2