Licence Tribunal

Appeal d'appel en Tribunal matière de permis

DATE:

2012-12-13

FILE:

7006/ONHWPA & 7275/ONHWPA

CASE NAME:

7006 & 7275 v. Tarion Warranty Corporation

An Appeal of a Decision of Tarion Warranty Corporation under the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O. 31 – to Disallow a Claim

Applicants

Applicants

-and-

Tarion Warranty Corporation

Respondent

-and-

Rideau Lake Homes Ltd.

Added Party

REASONS FOR DECISION AND ORDER

ADJUDICATOR:

Keith Penner, Member

APPEARANCES:

For the Applicants:

Self-represented

For the Respondent:

Andrew McKenna, Counsel

For the Added Party:

Nigel McCready, Counsel

Heard in Ottawa

November 26, 2012

REASONS FOR DECISION AND ORDER

This is an appeal by the Applicants to the Licence Appeal Tribunal (the “Tribunal”) from Decision Letters of Tarion Warranty Corporation (“Tarion”) dated September 28, 2011 and March 2, 2012, with respect to a new home purchased from Rideau Lake Homes Ltd. (the “Added Party”).

BACKGROUND

On September 28, 2008, the Applicants entered into a written Agreement of Purchase and Sale (APS) to purchase a home located in Perth, Ontario from the Added Party. A Certificate of Completion and Possession was issued by Tarion on July 31, 2009. Warranty Assessment Reports were issued by Tarion on January 31, 2011, May 13, 2011 and May 17, 2011.

Tarion issued a Decision Letter on September 28, 2011 and all items referred to in this letter were either settled or withdrawn. A Supplemental Decision Letter was issued on March 2, 2012 and from this letter, two issues were identified as outstanding and were matters before the Tribunal. At the commencement of the hearing, a third issue was identified and this related to the Cana-Spec Report that had been contracted for by the Applicants.

ISSUES

The issues to be decided in these proceedings are:

1. Is Tarion liable for payment of an invoice issued to the Applicants by Cana- Spec Limited for consultation work contracted by the Applicants to further determine the nature of the problem related to the kitchen floor?

2. Are the claims made by the Applicants warranted under section 13(1) of the Act? Specifically, are the claims related to the hardwood flooring and to the white porcelain sink warranted under sections 18 and 19 of Regulation 892, dealing with substitutions?

EVIDENCE

The Applicants’ Evidence

The Applicants are a husband and wife. The husband led the evidence and called two witnesses,his wife and Mr. Robin L. Hopkins, owner of Cana-Spec Ltd.

Robin L. Hopkins is a Registered Home Inspector (RHI) and the owner/inspector of Cana –Spec Ltd. He completed a report for the Applicants dated February 14, 2012. On February 13, 2012, the Applicants received an invoice for consulting on floor concerns in the amount of $1,237.04 and on June 12, 2012 a further invoice for $250.54 for consulting with an engineer.

In his later submission, the Applicant argued that, as a consequence of this Cana-Spec Report, Tarion had a second Floor Evaluation Report done by Maybee Engineering and Design Inc., dated June18, 2012. Subsequently, a repair was completed on the surface of the kitchen floor and the problem was resolved.

It is the Applicants’ view that the report from Cana-Spec prompted a re-evaluation by Tarion. As a result of the second analysis by Maybee Engineering, the problem with the kitchen floor was solved. The Applicants contend, then, that Tarion should be liable for the payment of the invoices received by the Applicants from Cana-Spec.

The wife, in her evidence, expressed strong dissatisfaction with the flooring that was installed by the Added Party in the living room, den, entryway, hallways and bedrooms. She asserted that what was installed was certainly neither wanted nor ordered. She said that it was her understanding from discussions and messages received from the Added Party that the home was to have solid gunstock hardwood throughout the areas designated. What was now in place had boards that were wider than what they wanted and the material laid down was not the hardwood of their choice, but rather laminate flooring. Further, she noted that the installed product reacted badly to every drop of liquid causing it to appear unsightly. She said that the installed flooring should be removed and replaced with gunstock hardwood, as she considered had been agreed to by the Added Party.

The kitchen sink, she testified, was not the product that had been requested and was stipulated in Schedule D that formed part of the APS. What was ordered, she thought, was a solid white porcelain sink. What was installed was a metal one with a porcelain top coating. The witness stated that this was an inferior product and, in places, showed signs of rust. For her, it was quite unacceptable and should be removed and replaced.

Tarion’s Evidence

Counsel for Tarion filed two books of documents (Exhibits #5 and #6) and called one witness.

Mr. Perry Harkin is an experienced Tarion Field Claim Representative and a Regional Manager with Tarion. His testimony focused on how a warranted substitution claim must be substantiated. He emphasized that his authority, with respect to such claims, is entirely restricted to that which is specifically referred to in an APS or any of its schedules or by way of some other written contractual agreement entered into and signed by both parties.

Mr. Harkin observed that from his extensive experience with Tarion, he has often seen purchasers and vendors who negotiate back and forth on items to be installed in the new home. All of these interactions between the parties to the transaction have no validity under the New Home Warranty Plan Act and its regulations unless there is a written agreement regarding a specific item that is clearly described. Thus, fax messages, telephone calls, an exchange of letters, meetings, discussions or any other form of communication between the purchaser and vendor have no weight or bearing in the event that a claim is made for a warranted substitution. To substantiate such a claim, there must be some kind of a contractual agreement to be the reference point.

In the matter before the Tribunal, Mr Harkin noted that there is no mention of hardwood in the APS or any of its Schedules. There is no other signed contractual agreement stipulating that the carpet mentioned in the APS is to be substituted with the installation of gunstock hardwood. Accordingly, Tarion has no authority under the Act or its Regulations to warrant any such substitution. In fact, it is prohibited from doing so.

As to the claim for a warranted substitution for the kitchen sink, Mr. Harkin acknowledged that a white porcelain sink was referred to in Schedule D that formed part of the APS.

He noted, in his testimony that the sink was not referred to as a “solid white porcelain sink”, but simply as a “white porcelain sink”. It was Mr. Harkin’s contention that the item referred to in the Schedule was “generic” and could include a wide variety of products within a significant price range. In his view, that which was installed in the Applicants’ home was within the category of the item mentioned in the Schedule. Despite whatever understanding the purchasers may have thought they had, as to the product they wanted, it cannot be considered as a warranted substitution.

Regarding the Applicants’ claim that Tarion is liable for the invoices related to the consultation work carried out by Cana-Spec on behalf of the Applicants, Counsel for Tarion referred the Tribunal to the Licence Appeal Tribunal decision in Smith (Re) {2007}, O.L.A.T.D. No.214, which stated;

The costs associated with hiring an expert clearly fails to meet the requirement set out in subsection 6(6) of the Regulation.

The Added Party’s Evidence

The Added Party called two witnesses: a former employee of the Added Party and Mr. Frank Decaria..

L, a former employee for the Added Party testified that she was present for discussions with the Applicants when the matter of the hardwood was discussed. She recalled telephone conversations with the Applicants about selecting a hardwood and that she had sent fax messages in which there was reference to gunstock hardwood.

The witness stated that she was never in a decision-making position for the Added Party. Her responsibilities were secretarial in nature. As such, she kept notes and conveyed messages but did not make any final determinations on behalf of the Added Party regarding the wishes of the purchasers.

Mr. Frank Decaria, the owner and manager of the Added Party, testified that he had fulfilled all of his obligations under the APS. He admitted that he had agreed to a substitution for the carpet referred to in the APS. Hardwood samples had been sent to the Applicants. He stated that if the Applicants had wanted solid hardwood or engineered hardwood, they would have had to agree to pay the difference, perhaps up to $10,000, depending on the choice. When no formal agreement was reached with the Applicants, he exercised his discretion and installed a floor product that was of greater value than the carpet specified in the APS.

Mr Decaria stated that the white porcelain sink referred to in Schedule D that formed part of the APS was, in fact, installed in the Applicants’ home. He personally opened the box in which the product was sent. On the box, the product was described as a “Silhouette white porcelain sink”.

THE LAW

The applicable provisions of the Act are as follows:

Warranties

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

(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.

Notice of decision under s. 14

16. (1) Where the Corporation makes a decision under section 14, it shall serve notice of the decision, together with written reasons therefor, on the person or owner affected.

Notice requiring hearing

(2) A notice under subsection (1) shall state that the person or owner served is entitled to a hearing by the Tribunal if the person or owner mails or delivers, within fifteen days after service of the notice under subsection (1), notice in writing requiring a hearing to the Corporation and the Tribunal.

Powers of Tribunal

(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.

Parties

(4) The Corporation, the person or owner who has required the hearing and such other persons as the Tribunal may specify are parties to proceedings before the Tribunal under this section.

The relevant provisions of REGULATION 892 under the Act are as follows;

6(6) Liability under subsection (3) or (4) is limited to damage in the home only and

liability under subsection (5) is limited to damage to the common elements only and there is no liability for any other damage, direct or indirect.

Substitutions

18. (1) Every vendor of a new home warrants to the owner that the vendor shall make no substitutions in those items of construction or finishing for which the purchaser is entitled to make selection pursuant to the purchase agreement without the written consent of the purchaser. R.R.O. 1990, Reg. 892, s. 18 (1).

(2) Subsection (1) does not apply where,

(a) the purchaser, having been notified, does not make a selection within thirty days after executing the purchase agreement or within such other time period as may be agreed; or

(b) an item selected under clause (a) is not available and the purchaser does not make a selection within seven days of receiving written notice from the vendor or within such other time period as may be agreed that the item is unavailable. R.R.O. 1990, Reg. 892, s. 18 (2).

(3) Every vendor of a new home warrants to the owner that where the purchaser fails to make a selection under clause (2) (a) or (b) that the vendor will make a selection on the purchaser’s behalf that is of equal or better quality than the original selection as set out in the purchase agreement. R.R.O. 1990, Reg. 892, s. 18 (3).

19. Every vendor of a new home warrants to the purchaser that, where the vendor makes a substitution with respect to an item that is referred to in the purchase agreement that is not an item that is to be selected by the purchaser, the item will be of equal or better quality than the item referred to in the purchase agreement. R.R.O. 1990, Reg. 892, s. 19.

APPLICATION OF LAW TO FACTS

The Applicants seek the following:

1. Reimbursement of the invoices for the Cana-Spec Ltd. consultation in the amount of $1,487.58

2. Replacement of the hardwood flooring at an estimated cost of $ 9100.00

3. The installation of a new kitchen sink at an estimated cost of $ 1073.00

Counsel for the Respondent and the Added Party each argued that none of the statutory warranties had been breached and the appeal should be dismissed.

Regarding item #1, the reimbursement for the invoices, the Tribunal was referred to 6(6) of Regulation 892 which allows for no liability for any other damages, direct or indirect.

This claim which is essentially the cost of consultation services, does not fall within the prescribed ‘damages” dictated by the regulation and therefore cannot be granted.

Regarding items 2 and 3,,sections 18 and 19 of Regulation 892, limit any warranted substitutions to those specifically referred to in the APS.

The Applicants thought that they had a binding verbal agreement regarding the hardwood and they believed that the kitchen sink referred to in Schedule D would be solid porcelain.

However, there is nothing in the APS which can be said to reflect that understanding. The specificity required for the Act and regulations is absent.

The Tribunal finds therefore that the Applicants have been unable to prove, on a balance of probabilities, that their claims # 49 and # 51, referenced in the Tarion Decision Letter dated March 2, 2012, are covered under the warranties of the Act and Regulation 892.

ORDER

Pursuant to the authority vested in it under the provisions of the Act, the Tribunal directs Tarion to deny the claim in full.

LICENCE APPEAL TRIBUNAL

Keith Penner, Member

Released: December 13, 2012