Licence Tribunal Appeal d'appel en Tribunal matière de permis

DATE: 2015-09-09

FILE: 9423/ONHWPA

CASE NAME: 9423 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

Appellants Appellants

-and-

Tarion Warranty Corporation Respondent

-and-

Baywood Golf Developments Inc. Added Party

ADJUDICATOR: Kenneth W. Koprowski, Vice-Chair

APPEARANCES:

For the Appellants: "SB", representing himself and the second Appellant

For the Respondent: Montgomery Shillington, Counsel

For the Added Party: No one appearing

Heard in Toronto: July 28, 2015

This is an appeal by the Appellants to the Licence Appeal Tribunal (the "Tribunal") from a Decision Letter of Tarion Warranty Corporation ("Tarion") dated February 10, 2015, with respect to a new home purchased from Baywood Golf Developments Inc. (the "Added Party"), in which Tarion denied the Appellants' claims. The current appeal relates to second-year warranty claims.

Before the appeal was to be heard, Tarion brought this motion for an order dismissing that portion of the Appellants' current Notice of Appeal related to claims that Tarion alleged had already been determined or rendered moot by a previous decision of the Tribunal released on May 28, 2015. That decision dealt with the Appellants' appeal related to first year warranty claims.

No one appeared on this motion on behalf of the Added Party.

The previous appeal that related to first year warranty claims was heard over a period of ten days, beginning August 20, 2014, and ending April 22, 2015. Before that appeal began, the Appellants filed a second year warranty claim on September 30, 2013. There were 60 items in the second-year claim. Tarion responded to all 60 items in its decision letter of February 10, 2015 (that is, before the first appeal was completed). Tarion now argues that 22 of the items in the second-year claim have been adjudicated upon in the appeal decision released on May 28, 2015, so that they should not be part of the current appeal. Tarion relied on the principles of "res judicata" and "issue estoppel" in order to streamline the proceedings in the current appeal.

Res Judicata

On the issue of "res judicata," Mr. Shillington relied on the decision in Doering v. Grandview 1975 CanLII 16 (SCC), [1976] 2 S.C.R. 621.

In that action, the respondent sued the appellant municipality in 1969 for damages to his land and crops resulting from flooding in the years 1967 and 1968 and alleged to be due to a dam earlier built by the municipality but altered by it in 1967. The action was dismissed on May 24, 1973.

Some nine months later, the respondent commenced a new action, claiming damage to his crops from water in 1969, 1970, 1971 and 1972 as a result of the municipality having maintained the river waters at an artificially high level behind the same dam, causing the water of the river to enter an aquifer consisting of sandy soil about four feet below the surface of the respondent's lands and thus to saturate the soil with water.

The municipality brought a motion seeking to have the second action stayed or set aside. The trial judge granted the motion and stayed the action. On appeal, the judgment of the trial judge was reversed by a majority of the Court of Appeal and from that decision the municipality appealed to the Supreme Court of Canada. The Supreme Court held, in a 5-4 decision, that the appeal should be allowed and the order staying the action restored.

Mr. Shillington relied on the following passage to support his argument that 22 of the 60 items of complaint in the current appeal should be dismissed based on res judicata. At page 13 of the Judgment, Ritchie J. stated as follows:

This passage [referring to Phosphate Sewage Co. v. Molleson (1879) 4 App. Cas. 801, at pages 814-5] was adopted by the Supreme Court of Nova Scotia in Fenerty v. The City of Halifax [ (1920), 1920 CanLII 389 (NS CA), 50 D.L.R. 435.], where it was said at pp. 437-8:

The doctrine of res judicata is founded on public policy so that there may be an end of litigation, and also to prevent the hardship to the individual of being twice vexed for the same cause. The rule which I deduce from the authorities is that a judgment between the same parties is final and conclusive, not only as to the matters dealt with, but also as to questions which the parties had an opportunity of raising. It is clear that the plaintiff must go forward in the first suit with his evidence; he will not be permitted in the event of failure to proceed with a second suit on the ground that he has additional evidence. In order to be at liberty to proceed with a second suit he must be prepared to say: "I will shew you this is a fact which entirely changes the aspect of the case, and I will shew you further that it was not, and could not by reasonable diligence have been ascertained by me before."

However, the Tribunal notes that, in the Judgment given on behalf of the dissenting Justices, Pigeon J., at page 7, acknowledged that, in the first action, the issue of whether the river was caused to overflow its banks and damage the respondent's lands because the town had impounded water behind the dam was thoroughly explored. But, Pigeon J. concluded that the same question was not raised in the second action. He states:

That same question is not raised in the present action. What is urged is a completely different cause of action said to have occurred at a different time of the year, not at flood time, but during the growing season after any flood has subsided. It is not claimed that the dam has caused the river to overflow its banks, but that, due to the presence of an aquifer four feet under the surface, it has caused water saturation by keeping the water level higher than it would be under natural conditions. In other words what has been determined in the first action is that the dam did not cause the overflow that occurred in flood time, it has never been determined that it did not cause the water saturation that is alleged to have occurred after flood time. More simply, the question in the first action was whether the dam caused damage in high water, in the second, it is whether it caused damage in low water.

Of significance to the Tribunal is the conclusion at page 8 of the decision where Pigeon J. states:

I fail to see any valid reason preventing the respondent from claiming damages in later years because, by artificially keeping the water level higher than it would be under natural conditions after the flood has subsided, the town's dam causes damages to the crops on account of the presence of an aquifer under the surface soil. To so hold is to deny justice by a technical application of rules of court. When dealing with statutes, it is our duty as I see it, to apply the law as Parliament has written it. However, when, as here, we are dealing with judge-made law, I can see no reason for denying justice on account of technicalities, (cf Ares v. Venner [1970 CanLII 5 (SCC), [1970] S.C.R. 608.]; Frank v. Alpert [1970 CanLII 198 (SCC), [1971] S.C.R. 637.].

(Emphasis is added)

The Tribunal agrees that any perceived technicalities should not deny the Appellants the justice that they are seeking in the current appeal.

The parties must not forget or ignore that it has been held and that it is well established that the Act is remedial consumer protection legislation and should be given a fair, broad and liberal interpretation [Mandos v. Ontario New Home Warranty Program 1995 CanLII 3158 (ON CA), [1995] O.J. No. 3647; Markey v. Tarion Warranty Corporation [2006] O.J. No. 2929 (Ontario Superior Court of Justice, Divisional Court); Cecilio v. Tarion Warranty Corp. [2007] O.J. No. 1692, (Ontario Superior Court of Justice, Divisional Court)].

The Tribunal is persuaded by the words of Pigeon J. that, in considering the effect of the previous decision of this Tribunal, justice to the Appellant homeowner and consumer should not be denied on technicalities. In the particular circumstances of this case, and based on the submissions of S.B., the Tribunal concludes that form (the wording of Tarion's decision letter or the wording of the homeowner's complaint) should not prevail over substance (the nature and character of the complaint). To apply a strict interpretation, in the circumstances of this case, would negate the consumer protection character of the legislation and would deny fairness and natural justice to the Appellants.

Furthermore, on this motion, to deny the Appellants the opportunity to pursue their remedies for the current complaints that the Tribunal considers to be still outstanding would prematurely and improperly decide the merits of their complaints. That is not what the Tribunal is to do on this motion. The motion is to determine whether the Appellants should be given the opportunity to present their complaints, if the complaint has not already been decided upon. The Appellants must still prove the merits of their case on a balance of probabilities but that is to be done on the hearing of the appeal, not on this motion.

Issue Estoppel

Tarion also argued that 22 of the 60 complaints raised in the current appeal should be dismissed on the basis of issue estoppel. Tarion relied on the definition of that principle in the decision of Rasanen v. Rosemount Instruments Limited ("Rasanen") 1994 CanLII 608 (ON CA), [1994] O.J. No. 200 (Ontario Court of Appeal) where, at paragraph 28, Abella J. states:

28 The proceedings before us involve issue estoppel. Lord Guest summarized the requirements of issue estoppel as follows in Carl Zeiss, supra, at p. 935:

that the same question has been decided;
that the judicial decision which is said to create the estoppel was final; and
that the parties to the judicial decision or their privies were the same persons as the parties to the proceedings in which the estoppel is raised or their privies.

The operation of issue estoppel also applies to previous Tribunal decisions (Rasanen, at paragraph 37).

The Tribunal does not disagree with those criteria. It is a question of fact, however, in the circumstances of each case, as to whether those criteria have been met.

Tribunal's Rules of Practice and [Statutory Powers Procedure Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-s22/latest/rso-1990-c-s22.html)

Tarion also relied on paragraph 2.7 (a) and (b) of the Tribunal's Rules of Practice and on section 2 of the Statutory Powers Procedure Act R.S.O 1990, c. S.22 ("SPPA").

Rule 2.7 (a) and (b) provide as follows:

2.7 The Tribunal may dismiss an appeal without a hearing if it finds:

(a) It is frivolous, vexatious or is commenced in bad faith;

(b) It relates to matters that are outside the Tribunal's jurisdiction;

Section 2 of the SPPA provides as follows:

This Act, and any rule made by a tribunal under subsection 17.1 (4) or section 25.1, shall be liberally construed to secure the just, most expeditious and cost-effective determination of every proceeding on its merits.

The words, "most expeditious and cost-effective" should not overshadow the principles of consumer protection, fairness and natural justice.

Appellants' response to the motion

In response to this motion, S.B., on behalf of the Appellants, submitted that the previous appeal dealt only with very specific items in accordance with the wording in Tarion's previous decision letter ( the wording of which was not within the control of the Appellants) and not with issues outside those specific items. The Appellants had discussed more issues with the field representatives than were cited in the decision letter. The previous hearing did not deal with the "totality of the home," to quote S.B. For example, certain areas of the house were not examined, such as the garage.

S.B. contended on this motion that, throughout the first appeal, he had been informed by counsel for Tarion that another decision letter might have to be prepared to deal with such other issues. Counsel who appeared on behalf of Tarion on this motion, Mr. Shillington, was not the same counsel who appeared on behalf of Tarion at the first appeal. Mr. Shillington stated that he did not disagree with previous counsel but argued that the Appellants can appeal only what is in the decision letter and cannot embellish or add to the contents of the decision letter. The Tribunal did not have the luxury of reviewing any part of the transcript of the first appeal to verify S.B.'s submissions but has no cause to doubt his version of what transpired at the first appeal.

S.B.'s concern was that, after the Tribunal made its decision that was released on May 28, 2015, about specific items in Tarion's decision letter and about specific parts of the home, Tarion seemed to take the position, improperly, that all other complaints that might be related to other issues should be excluded, notwithstanding that the complaints in the current appeal are broader in scope than the issues decided upon in the previous decision.

Many of S.B.'s arguments related to the Appellants' claims that the complaints fell under the provisions dealing with water penetration under Regulation 892, R.R.O. 1990, passed under the Act.

Section 14 of that Regulation provides as follows:

Water Penetration

(1) Every vendor of a new home warrants to the owner that there will be no water penetration through the basement or foundation of the home.

(2) The warranty described in subsection (1) applies only in respect of claims made during a two-year warranty period ending on the second anniversary of the date of possession.

ISSUES

It must be remembered that the function of the Tribunal on this motion is not to decide whether the previous hearing was wrongly or inadequately decided.

Nor is it to determine the actual merits of the complaints that the Appellants have raised in their most recent list of warranty items in the Second Year form. If the complaints are not dismissed on this motion, the Appellants must still prove those claims on a balance of probabilities before the Member or Vice Chair who presides over the current appeal.

On the contrary, the function of the Tribunal on this motion is to determine whether the matters raised in the current Second Year claim are different from those that the previous Vice Chair decided upon or, stated another way, whether they are new matters that were not in issue at the previous hearing. Even if the Appellants are permitted to proceed with any of the new complaints, the onus remains on them to prove their claims on a balance of probabilities. The Tribunal cannot stress that enough upon the Appellants.

In arriving at its conclusion on each of the 22 items that Tarion urged this Tribunal to dismiss, the Tribunal has quoted the nature of the Appellants' complaint, Tarion's response to that complaint (either verbatim from the decision letter or as the Tribunal has summarized), Tarion's reference to the Tribunal's previous decision released on May 28, 2015, the Appellants' response to Tarion's submissions and, finally, the Tribunal's decision as to whether the new complaints are matters that should be considered in this current appeal.

The Tribunal has carefully weighed each item. Where the Tribunal has found that, on the facts, the current items of complaint were not matters that were required to be addressed at the previous hearing, the Tribunal has concluded that the Appellants should have the opportunity to present their complaints in the current appeal. Where the Tribunal has found otherwise, the complaint has been dismissed.

Throughout this decision, reference will be made to the items to which Tarion objects by using the numbering system that Tarion applied to the items in the decision letter of February 10, 2015, found at pages 164 to 182 of the Motion Record.

The impugned items that Tarion wishes to have removed from consideration in the current appeal are as follows:

Item 5 – "Item #60 on One Year form – hot in summer/cold in winter, extreme (sic). See LAT, and see N.H.I.R. *Note issue with A/C warranty?"

Both Mr. Shillington and S.B. acknowledged that the word, "extreme," above, should read "expense." Further, the reference to "N.H.I.R." should read "M.H.I.R." referring to "Mike Holmes Inspection Report."

This item was restricted in the previous decision to temperature variations in the northwest bedroom, also referred to as the "purple room."

Tarion argued that his matter had already been dealt with in the previous decision where the Vice Chair addressed the complaint at page 11 where she stated:

The Homeowners are concerned that Bedroom Number 3 (the "Purple Bedroom") is very cold in the winter and very hot in the summer. Additionally, the Homeowners claim there is a draft from the plugs on the exterior walls of the Purple Bedroom and a draft through all the top floor plugs.

Further, at page 12:

Mr. Martin [Tarion Warranty Service Representative] testified that a Tarion representative had done a heating test in the Purple Bedroom following the second rebalancing and found that the bedroom met the OBC requirement that it be capable of being heating (sic) to 22° Celsius. Tarion did not do a heating test on the basement.

The Tribunal required further testing to be done. This was not completed because, as the decision acknowledges, there arose some animosity between S.B. and the Tarion representative. At one point, the Vice Chair recognized such animosity when she stated, at page 13:

During the hearing, the Tarion representatives had displayed increasing impatience with SB, bordering on disdain. Therefore, it seems more probable than not that their impatience with SB as he attempted to alter the test conditions became disdainful.

In the end, the Vice Chair denied the complaint for reasons stated at page 13 of the decision:

While it might have been unpleasant for SB to feel he had been treated with disdain by the Tarion representatives, that was not sufficient grounds for him to halt the heating test. Given that the test was being conducted for his benefit, he might have pursued other options, including leaving the room where the test was being conducted or permitting the test to proceed and then conducting his own test with the conditions he favoured. SB did neither of these things. Instead he ended the test before it could be established what temperatures existed in either the Purple Bedroom or the basement. The Tribunal concludes that the Homeowners have not established their claim regarding the coldness of either the Purple Bedroom or the basement.

In response, S.B. argued that the previous decision specifically referred to the "purple bedroom" and basement whereas the Appellants' original and current complaint relates to the entire house. The original complaint referred to the entire house, but the decision letter dealt only with the one room. That was not what the Appellants intended. The decision letter ignored the rest of the house. What is needed is an assessment of the entire home, excluding the "purple bedroom."

It is not the function of this Tribunal on this motion to make a finding as to what the relationship was between the Appellants and the Tarion representatives. Nevertheless, the conclusion to be drawn from the reasons given in the previous decision is that more complete testing of the hot/cold complaint was not done. Tarion argued that the Appellants had the opportunity to present more evidence at the first appeal but failed to do so. The Tribunal considers that the Appellants should be given the opportunity to prove their case on a balance of probabilities. The apparent poor relationship with the Tarion representative should not bar that opportunity. It may be that, in the end, such evidence might not be available to the Appellants. Nevertheless, on the principles of fairness and natural justice, they should still be given the opportunity to present their case and concerns relating to the entire house, as they now contend in this appeal, and not just to one room. The gathering of their evidence should be free from any animosity flowing from any Tarion representative. The Tribunal notes that the Appellants' current complaint does not restrict their concern to any one particular area of the house. The Tribunal accepts S.B.'s submission that Tarion's decision letter that was considered in the previous hearing was more restrictive than the Appellants had intended.

Item 6 - #61 of One Year form – air draft through plug on exterior wall – Energy Star efficiency not adhered to – why?

Tarion submitted that this matter was already dealt with in the previous decision. At page 11, the Vice Chair introduced the problem by stating as follows:

Additionally, the Homeowners claim there is a draft from the plugs on the exterior walls of the Purple Bedroom and a draft through all the top floor plugs.

The attempt to correct the problem on the main floor was first tried with the injection of foam into the plugs. That foam had to be removed because of violations of electrical safety codes. The foam was replaced by a foam gasket. There was no finding that this remedied the draft problem throughout the house. Again, the previous decision dismissed the Appellants' complaint, but restricted the reasons by referring to the "purple bedroom," where, at page 13, the decision reads:

SB did smoke tests in the Purple Bedroom which appeared to show a draft from a plug. However, both Mr. Martin and Mr. Astolfi [agent for the Added Party] testified that when they entered the Purple Bedroom and turned on the light, the ceiling fan came on as well. When they turned the ceiling fan off manually and did a smoke test, there was no sign of a draft from the plug. SB testified that the ceiling fan was off when he did his test. Given that the ceiling fan was set to turn on when the light switch was turned on, the Tribunal accepts the evidence of Mr. Martin and Mr. Astolfi as being more probable and finds that this claim is not proven.

In response, S.B. submitted that the Appellants' claim was not restricted to the purple bedroom. Item #61 in the first year claim form (page 22 of Motion Record) was broadly worded as follows: "Draft from plugs on exterior walls." The claim was made within the proper time and should be a matter for this Tribunal to adjudicate upon because the problem of drafts in the entire house, not just one room on the top floor, should be a matter to be considered.

The Tribunal accepts the submissions of S.B. and agrees that the problem with drafts in the entire house should be considered.

Item 7 – Items #115 on 30 Day form, noise from floor, #55 on One Year form – floor not structurally sound/movement in floor excessive.

In the Tarion decision letter, reference was made to the Appellants' complaint of "oil canning" in the family room. The Vice Chair denied this claim. At page 11 of the previous decision, the Vice Chair stated:

The Homeowners complain of "oil caning", a metallic sound when they walk across their family room floor. However, they were unable to replicate the sound on any of the multiple occasions when either Tarion or Baywood representatives were in the house. The Homeowners were unable to produce any witness to these sounds other than SB and they were unable to produce persuasive objective evidence of a probable cause of the oil caning. The Tribunal finds that the Homeowners have not established this claim.

In response, S.B. argued that what the Appellants wanted to have addressed was a lack of bracing under the ceramic tile between the kitchen and the front entrance. Notwithstanding this submission, the Tribunal notes that, in the Year-End form, the Appellants, in item #55 of that form, specifically referred to "metal sounds walking in area" and specifically identified the family room as the location of the problem. Now, however, S.B. contends that this current complaint deals with health and safety under the Ontario Building Code.

The Tribunal considers that the previous decision did, indeed, deal fully with the complaint that the Appellants raised originally. In the absence of anything to show that the decision was more restrictive than the original complaint, the Tribunal finds that this matter is "res judicata" and, accordingly, is not now properly before this Tribunal in the current appeal.

Item 8 – Grading of land as identified on pre-delivery inspection form by Builder, item #2 of 30 Day warranty form, item #2 of One Year warranty form, Licence Appeal Tribunal, and see page 3

Tarion, in its decision letter relating to this complaint, referred to concerns with regard to the lot grading at the rear of the building, where the ground was found to be holding moisture at or near the patio area, and at the south side of the dwelling where excavation has occurred to address a foundation deficiency. Further, Tarion stated, "…overall lot grading concerns are the responsibility of the authority having jurisdiction, being the municipality."

Mr. Shillington explained that, in paragraph "d" of the Appellants' response to the motion, they treat two items (item #8 and item #14) as one and that the Appellants are relying on a report from Mike Holmes (the MHIR). In the previous decision, the Vice Chair had the MHIR before her. She acknowledged the report at page 2 of the previous decision, where she stated:

The Holmes Report addresses a number of concerns the Homeowner identified, including dampness in the basement.

At page 4 of the decision, in referring to one Mr. Milne who prepared a report for the Appellants, the Vice Chair summarizes the report by saying:

Mr. Milne identified the grading of the property as a contributing factor to the water issues. The grading, in his opinion, was not allowing the water to drain away from the building. The slope did not appear to be the required 2%. He noted higher elevation properties adjoining this one, adding to the drainage requirements. He recommended revising the grading of the property.

Accordingly, the Vice Chair made the following Order, at page 7 of her decision:

Based on the evidence above and for the reasons set out below, the Tribunal concludes that Tarion will be directed to dig up and replace the entire weeping tile system, including the weeping tile surrounding all four perimeter walls. In the process, Tarion will address the damp proofing, grading, porch and insulation and potential mould issues as will be detailed below.

Mr. Shillington submitted, therefore, that the grading issue had been decided in the Appellants' favour so that there was no point to re-litigate the issue, arguing that the decision was a "head on" case of res judicata.

S.B. replied that the decision does not deal with the grading of the garage area. The garage still has issues of cracks and water penetration so that the complaint is a legitimate second-year complaint of water penetration, relying on the MHIR.

The Tribunal agrees with S.B. that, if there is still a water penetration problem in the garage area, the complaint is a legitimate second-year water penetration issue and should remain for consideration at the hearing of this appeal.

Item 9 – Front page 2 – also see MHIR – defect – aiding water penetration

Tarion submitted that this item was a continuation of Tarion's response to item #1 in its decision letter. That item was a complaint relating to "brush coat" identified on the Pre-Delivery Inspection ("PDI")

Tarion's response to this complaint in its decision letter was identical to its response to the complaint in item 8, above. Similarly, Tarion argued that the Vice Chair dealt with this item, as well, at pages 7 and 17 of her decision. The Vice Chair ordered extensive remedial work at page 17 of the decision, where the Vice Chair states:

Tarion will cause any cracks or tie rod holes to be sealed from the exterior with an appropriate aqua cement.
Tarion will cause a tar coating to be applied to all foundation walls that will be below grade.
Tarion will cause new dimpleboard to be installed.

Therefore, the previous decision dealt with complaints of water through the foundation.

However, S.B. submitted that nowhere in the previous decision is any reference made to "brush coat," which was part of the original complaint. He informed the Tribunal on this motion that, at the previous appeal, Tarion's counsel who appeared at that hearing argued that brush coat does not fall under the wording of Tarion's decision letter. But, S.B. further argued that there remain cracks in different areas of the foundation. The garage has the same problems. The problems require brush coat, but that was not ordered and certainly not with regard to the garage. This is a second-year water penetration problem and has yet to be dealt with.

In the absence of any reference to "brush coat" and despite the absence of any detailed explanation on this motion as to what that process requires, and why it is different from what has already been ordered, the Tribunal concludes that the Appellants should be permitted to present their evidence on this complaint in the current appeal.

Item 12 – Brick cracking item 3109 on 30 Day form, #89, 94, 99 on One Year form, LAT issue, see MHIR.

Tarion submitted that the previous decision already dealt with these items. References to items # 14, 17 and 20 in that decision refer to items 89, 94 and 99, respectively, in the above complaint. S.B. did not disagree.

But, the Vice Chair denied those claims. Beginning at page 14, the Vice Chair stated:

Exterior Cracks in Brick and Mortar; Poor Installation of Brick – Claims Number 14, 17, 18, 19, 20

The Homeowners complain of numerous cracks in their brick work and the mortar between the bricks. They also assert that a "soldier course" of brick about the garage door is uneven.

Tarion and Baywood concede that there are numerous hairline cracks in the brick but Mr. Astolfi testified that this is typical of the particular type of brick which the Homeowners chose. Both Mr. Martin and Mr. Astolfi testified that these cracks do not penetrate the brick and will not affect the function or life of the brick.

Concerning the mortar, Mr. Martin and Mr. Astolfi testified that there were cracks in the mortar which they characterised as normal shrinkage cracks. Mr. Martin and Mr. Astolfi testified that the Construction Performance Guidelines that have been developed by Tarion to conciliate claims set out that to be defective, shrinkage cracks in the mortar must be greater than 2 millimetres in width to be warrantable and none of the cracks in the Homeowner's exterior mortar exceed that threshold.

Moreover, Mr. Martin and Mr. Astolfi testified that the cracks in the brick and mortar and the slight difference in the soldier course are not visible from the normal viewing distance of 6 meters. The Tribunal has carefully examined the photographs produced by both the Homeowners and Tarion and concludes that the imperfections in the brickwork and mortar are not visible from the normal viewing distance. The Tribunal accepts the evidence of Tarion and Baywood that the normal cracks in the bricks and mortar will not affect the function or life of the exterior of the house. Accordingly, these claims are denied.

Therefore, Mr. Shillington argued that these items are res judicata.

In response, S.B. stated that the decision dealt only with brickwork at the front of the house, the porch and specific windows on the south side of the house between the main floor window and the basement window. In contrast, this current complaint relates to other areas of the house where there is cracking. He further stated that counsel for Tarion at the first appeal stated that, if there were items other than the specific items before the Tribunal at that hearing, then another claim dealing with those other items would have to be made. That is what the Appellants are doing in this complaint, which S.B. argues falls under a two-year water penetration warranty.

In the absence of any material to contradict S.B.'s submission as to what was discussed at the previous hearing, and considering that there are other areas of complaint of water penetration than the specific areas referred to in the previous decision letter, the Appellants should be allowed to put forward the current complaint on this appeal.

Item 14 – From page 2 – also see Mike Holmes inspection report (MHIR) for details regarding grading

This item was already dealt with under item 8, above. The Tribunal has already determined that the Appellants should be allowed to pursue this matter in this appeal.

S.B. submitted, further, that water expelled by their sump pump flows to the front of the house (where the garage is). If grading is not done all around the house, the lack of grading there could impede the work done on the rest of the house. That is, water might not flow away from the house and thereby cause further water penetration problems at the garage foundation.

Item 15 – Insulation by builder covered as noted on PDI – water penetration discovered item #15, 93, 94, 99, 100, 101, 102 of 30 Day form – items #56, 78, 75, 77, 80 page 5

In Tarion's decision letter dated February 10, 2015, item 15 was referred to as relating to the condition of the insulation within the basement.

The Vice Chair directed her attention to this problem, where, at page 2 of the decision, she states:

The Homeowners have several concerns about their basement. The most serious is persistent wetness in the walls behind the insulation. At times, there has been visible pooling of water on the floor in isolated locations. More usually, the insulation is wet when pulled from the wall and the wall itself shows wet and damp spots.

… The Holmes Report addresses a number of concerns the Homeowner identified, including dampness in the basement.

At page 6 we read:

Mr. Martin testified that Tarion would replace the insulation in the basement. A dispute arose between the parties about the grade of insulation which should be used to replace the insulation originally installed. Mr. Martin testified that the OBC requires insulation to be replaced with a grade that is at least equivalent to that which is being removed. The insulation originally required was R12 and that is what Tarion is proposing to use to replace the insulation removed from the basement. SB wants insulation at the current grade, R 16, used.

And at page 9:

Concerning the possible mould, the Tribunal accepts Mr. Martin's proposal for remediation if mould is found when the insulation is removed. Mr. Martin did advise that if mould remediation were required, the basement would be sealed off from the rest of the house for safety reasons. The Tribunal also accepts Tarion's proposal to remove the insulation and replace it with insulation that is rated R12….

The Tribunal's remedy was outlined in paragraph 8 on page 17 of the previous decision, as follows:

Tarion will cause the insulation on the basement walls to be removed and will check for mould. If mould is discovered, then Tarion will direct the appropriate remediation. When any mould is removed, then Tarion will cause the new insulation, at the R12 density, to be installed.

Tarion argued, therefore, that this item has already been resolved in the Appellants' favour. That is, the Tribunal ordered that the insulation be removed and inspected and, if it was to be replaced, it is to be replaced with R12 insulation.

S.B. argued that the decision refers to insulation only in the basement, whereas he has problems with water leaks through their roof and in the upper floor walls, attic and garage. Only insulation in the basement is addressed in the previous decision, but the current complaint relates to insulation problems in other areas of the house.

Given the different nature of complaints and the different areas in the house that are complained of, the Tribunal should consider this item in the current appeal.

Item 23 – Grout cracking in various areas see item #110 of 30 Day form, #95, 89, 99 of One Year form, See LAT, see MHIR

On the One Year form, the Appellants complained of a crack in the brick from the basement window to the main floor window south side (#89), grout cracking at porch (#95) and grout on brick cracking and crumbling on front of garage. The parties agreed that reference to "grout" should read as a reference to "mortar." The previous decision dealt with these items and, at page 15 of the decision, these items were denied. Therefore, Tarion argued that this item is res judicata.

On the other hand, S.B. submitted that, although the previous decision dealt with the items complained of in the One Year form, there were now cracks in the mortar in other parts of the house. There is water coming through at those locations. Therefore, this is a legitimate water penetration Second Year claim. The Appellants should be able to address the matter on this appeal.

The Tribunal agrees with S.B.'s submissions and finds that the Appellants should be allowed to address these new water penetration problems on this appeal.

Item 25 – Insufficient insulation as per item #107 of 30 Day form – items #5, 70, 75, 77, 106 of One Year form, see LAT, MHIR

Tarion's decision letter confined this complaint to concerns with regard to the insulation at the basement perimeter because, in the One Year claim form, all the complaints about insulation listed there dealt with basement insulation. The previous decision, at page 6, decided the matter in favour of the Appellants by requiring Tarion to replace the insulation in the basement.

Although S.B. acknowledged the previous decision on this issue, he stated that insulation is missing on other floors resulting in water penetration. Since the current areas complained of were not matters that had to be dealt with in the previous decision and since there is a problem with water penetration, the Appellants should be able to press this new claim forward, as well.

The Tribunal agrees with S.B.'s submission and finds that the Appellants should be allowed to address this in the current appeal.

Item 32 – Vapour barrier should be repaired and returned to usable state as per manufacturer specifications. See MHIR.

Tarion's decision letter dealt with the problem of the vapour barrier within the basement.

Mr. Shillington argued that this matter was rendered moot by virtue of the previous decision. Although there was no determination of the condition of the vapour barrier, the previous decision required Tarion to remove all insulation in the basement walls and inspect it and remedy it appropriately. At paragraph 8 on page 17 of the decision, the Vice Chair ordered as follows:

Tarion will cause the insulation on the basement walls to be removed and will check for mould. If mould is discovered, then Tarion will direct the appropriate remediation. When any mould is removed, then Tarion will cause the new insulation, at the R12 density, to be installed.

Therefore, Tarion argued that, if the insulation is inspected and removed, the vapour barrier must be removed, as well. The vapour barrier would be replaced in that process. Therefore, the matter is moot. It is pointless to spend time on that matter on this appeal.

In response, S.B. argued that, once again, this matter was restricted to the basement in the previous appeal. But, there is water penetration on other floors. As well, there was no specific mention of vapour barrier in the previous decision. Furthermore, there are other areas of the house where the insulation may have to be remedied and the vapour barrier replaced. In the attic, for example, there is blown-in insulation and there is also a leak in the attic. The vapour barrier may have to be replaced by virtue of the water sitting in the attic. A similar problem exists under the garage roof.

The Tribunal acknowledges that the new areas of concern were not before the Tribunal at the previous appeal. The Appellants should be able to put forward their concerns about the other areas, as well, in the current appeal.

Item 33 – Cracks in foundation and/or brush coat

Tarion's decision letter addressed the Appellants' ongoing concerns with regard to cracking at the poured concrete foundation.

Mr. Shillington argued that, in the previous decision, all cracks were ordered to be addressed. At paragraphs 3, 4 and 5 at page 17 of the decision the following order appears:

3.Tarion will cause any cracks or tie rod holes to be sealed from the exterior with an appropriate aqua cement.

4.Tarion will cause a tar coating to be applied to all foundation walls that will be below grade.

5.Tarion will cause new dimpleboard to be installed.

Therefore, Tarion argued that this matter is res judicata.

S.B. argued that this current complaint refers to cracks in the garage foundation and there is no mention of the garage foundation in the previous decision.

The Tribunal disagrees with S.B.'s submission. Paragraph 4 of the above order clearly states that tar coating is to be applied to "all" foundation walls. Accordingly, this matter is removed from the current appeal. Item 9, above, should be sufficient to allow the Appellants to deal with their complaints related to "brush coat" in the current appeal.

Item 40 – Water penetration from floor up in various areas of foundation

Tarion's decision letter referred to the Appellants' concerns about water penetration into the basement. Mr. Shillington argued that the previous decision dealt adequately with this matter and that the issue of water penetration had been addressed. At page 7 of the decision, the Vice Chair stated:

The matters "detailed below" are contained in paragraphs 1 to 5 on page 17, as follows:

1.Tarion will cause the area around the foundation walls of the Homeowners' home to be excavated on all four perimeter walls to the foundation footings. This will involve supporting the porch and removing the porch slab and removing the interior garage slab. Tarion will cause the dimpleboard to be removed.

2.Tarion will cause the current weeping tile O-ring to be removed and replaced with a new O-ring which will not be secured by driving either nails or spikes through it.

3.Tarion will cause any cracks or tie rod holes to be sealed from the exterior with an appropriate aqua cement.

4.Tarion will cause a tar coating to be applied to all foundation walls that will be below grade.

5.Tarion will cause new dimpleboard to be installed.

S.B. submitted that this item in the current appeal refers to saturation from the garage floor upwards. The walls are soaking water up, creating a "wave" pattern on the garage walls where different rings appear, depending on where the water dried. Nothing in the previous decision relates to the walls of the garage being wet and no remedy is prescribed for that problem.

The Tribunal agrees that this matter should remain as part of the current appeal, accepting that this complaint is different from the complaint dealt with in the previous decision.

Item 41 – Insulation wet/dirty, should be replaced, see MHIR

Tarion's decision letter referred to the condition of the insulation within the basement. Paragraph 8 on page 17 of the previous decision (already quoted in relation to item 32, above), required Tarion to remove the insulation, check for mould and replace if needed. Therefore, Tarion argued that this matter was res judicata.

S.B. countered by informing the Tribunal that the previous decision dealt only with insulation in the basement walls, and not in the attic, upper floor walls or the garage. According to a report that the Appellants received the day before this motion was argued, there is mould in the attic. Another report confirmed mould in the garage.

The Tribunal considers that the Appellants should be able to put forward this complaint that deals with areas of the house that the previous decision did not decide upon.

Item 46 – Siding above porch, gap – item #92 of One Year form, water damage to finishes/ structure

Tarion argued that the previous decision already dealt with both the gap in the siding at the porch and with water penetration at the gap. At page 15 of the previous decision, the Vice Chair stated:

Gap in Siding above Porch Claim – Claim number 16

The Homeowners are concerned about a gap between the siding and the frieze board under the soffit along the garage roof on the same side of the house as the front porch. The Tribunal has reviewed the photographs and accepts Mr. Martin's evidence that the gap is caused by the fact that the siding and the frieze board are at two different angles and by the fact that the siding is contoured in this section and the frieze board is straight. Mr. Martin testified that the soffit protects the gap from water penetration.

SB produced a quote from a contractor for closing the gap but the Tribunal, after viewing the photographs, accepts as more probable the explanation of Mr. Martin that the gap is a result of two different shaped materials meeting. There is no evidence of water penetration in the area of the gap, which is slight. There is no evidence of a defect in workmanship and accordingly the Tribunal denies this claim.

S.B. argued that the dampness of the interior of the garage wall should be examined and assessed. No one assessed the water penetration in the same area in the interior. At that location, inside the garage, the wood is not covered and is damp.

The Tribunal notes that the Vice Chair made a finding, on the evidence presented at the previous hearing, that there was no evidence of water penetration. The Tribunal agrees with Tarion that this matter should be removed from consideration in the current appeal.

Item 47 – Rod holes not patched

Tarion's decision letter dealt with the Appellants' concerns about the condition of the foundation at the location of the tie rod holes. Mr. Shillington argued that this matter has already been determined at the previous hearing where, at paragraph 3 at page 17 of the previous decision, the Vice Chair made the following order:

3.Tarion will cause any cracks or tie rod holes to be sealed from the exterior with an appropriate aqua cement.

S.B. stated that this item in the current appeal deals with water entering rod holes in the garage. The previous decision did not deal with the rod holes in the garage. The decision referred to rod holes on the "drainage walls' but not the garage.

The Tribunal notes that the previous decision required that "any" cracks or tie rods were to be sealed from the exterior. It did not restrict the application of that order to any particular location in the house. Presumably, that would include the tie rod holes in the garage. If those have not been sealed as ordered, then the Appellants can pursue their complaint with Tarion; however, the Tribunal considers that this complaint has been dealt with in the previous decision, so that it should be struck from the matters to be considered in the current appeal.

Item 48 – Foundation floor – hollow where cracks are – water damage to contents/finishes and/or structure

Tarion's position is that this matter was dealt with in the previous decision on pages 7 and 17. On page 7, the Vice Chair stated:

The matters that were "detailed below" are found in paragraphs 1 to 5 on page 17, already set out in detail in the discussion of item 40, above.

S.B. submitted that the current complaint deals with cracks in the basement floor. The cracks are getting bigger. The previous decision dealt with the drainage system and the insulation and mould issues. Those matters were on the outside of the building not in the basement. Further, S.B. argued that this is a Second Year water penetration claim.

Although there were no details about water penetration given on this motion, the Appellants should be permitted to put forward this claim based on that argument, so that they can present their evidence to substantiate this claim.

Item 49 – Walls brick some concrete – cracked – cause water to enter home/weakened structure/chance of movement

Tarion's decision letter addressed the Appellants' concerns related to cracks within the foundation and the exterior masonry cladding assembly.

The previous decision denied the complaint about the cracks in the mortar but did allow the Appellants' claim related to cracks in the foundation by requiring that those cracks and the tie rod holes be sealed (see item 12, above).

S.B. submitted that the current complaint deals with cracks in the wall of the garage. It is the same complaint that the Appellants raised in item 33, above. The previous decision dealt only with interior and exterior drainage walls.

The Tribunal considers that the reasons for denying the complaint in relation to item 33 applies to this complaint, as well. That is, paragraph 5 on page 17 of the previous decision clearly states that tar coating is to be applied to "all" foundation walls. Accordingly, this matter is removed from the current appeal.

Item 50 – Brush coat falling off various areas

Tarion's decision letter addressed the concerns about the condition of the brush coat parging at the exposed portion of foundation around the perimeter of the dwelling. The decision related to this complaint states:

The quality of material and workmanship associated with parging falls within the 1^st Year warranties administered by Tarion. As such, this complaint does not fall within the scope of the 2^nd Year warranties administered by Tarion

Mr. Shillington argued that this matter was already dealt with in the previous decision, in paragraphs 4 and 5 on page 17, where it is stated:

4.Tarion will cause a tar coating to be applied to all foundation walls that will be below grade.

5.Tarion will cause new dimpleboard to be installed.

S.B. submitted that the coating is falling off in chunks at the garage and the rest of the house and that this becomes a water penetration issue.

The Tribunal is persuaded by S.B.'s submissions that this appears to be a new problem that was not in issue in the previous appeal. The Appellants should be permitted to present this complaint in the current appeal.

Item 51 – Foundation not sealed from water penetration

In its decision letter, Tarion referred to this complaint as a concern relating to the integrity of the poured concrete foundation.

Mr. Shillington argued that this matter had already been decided in the Appellants' favour in paragraphs 3, 4 and 5 on page 17 of the previous decision. It is worthwhile repeating those paragraphs that state:

3.Tarion will cause any cracks or tie rod holes to be sealed from the exterior with an appropriate aqua cement.

4.Tarion will cause a tar coating to be applied to all foundation walls that will be below grade.

5.Tarion will cause new dimpleboard to be installed.

S.B. argued that there is no mention of the garage in the previous decision, whereas this current complaint relates to the garage.

The Tribunal considers, however, as it did with relation to items 33 and 49, above, that the previous decision clearly states that tar coating is to be applied to "all" foundation walls. Accordingly, this matter is removed from the current appeal.

Item 52 – Inside of windows not finished

Tarion's decision letter assessed this concern to be the absence of a sealed insulation perimeter at the basement windows. The decision letter further states:

An examination by Tarion confirmed the gaps as identified, however this condition does not represent a deficiency with regard to the amount of insulation provided (2^nd Year warranty provision for insulation levels). The "Tuck Tape" that surrounds each window has partially detached, and may be found to do so in the future. This is an issue of homeowner maintenance required on an occasional basis to ensure the tape remains sealed.

Mr. Shillington submitted that the Tarion inspector acknowledged that the sealing by tuck tape of the vapour barrier to the window frame has become detached. But, the point is moot because the previous decision required that all insulation in the basement must be removed and put back or replaced, so that re-sealing would have to be done.

S.B. responded by informing the Tribunal that the tuck tape "all over the windows" has been pulled off and stuck on, there is damage to the windows. The framing on one window in the garage – not the basement (as the previous decision dealt with) - is damaged and water is entering. The previous hearing did not have that problem in front of it to consider. It is a Second Year water penetration problem.

The Tribunal is persuaded by S.B.'s submissions that this is a new, water penetration issue that should be considered in the current appeal.

Item 54 – Water penetration – 72% to 76% as tested by professional compared to 40% in open areas

Tarion addressed this complaint as basement water entry. The previous decision was in favour of the Appellants. The work order that was imposed at the previous hearing stated:

2.Tarion will cause the current weeping tile O-ring to be removed and replaced with a new O-ring which will not be secured by driving either nails or spikes through it.

3.Tarion will cause any cracks or tie rod holes to be sealed from the exterior with an appropriate aqua cement.

4.Tarion will cause a tar coating to be applied to all foundation walls that will be below grade.

5.Tarion will cause new dimpleboard to be installed.

Therefore, Mr. Shillington argued that it is pointless to pursue this matter again in the current appeal.

S.B. countered by submitting that the previous decision does not deal with the garage, which is the area complained of in the current appeal.

The Tribunal considers that the wording in the previous Order, referring to applying a tar coating to "all" foundation walls, has dealt with this item so that it does not have to be considered again in the current appeal.

CONCLUSION

In the absence of any contradicting evidence, the Tribunal accepts S.B.'s submissions that he had discussed more issues with the field representatives than were cited in the decision letter that was dealt with in the previous appeal. The Tribunal also accepts S.B.'s submissions that counsel for Tarion indicated, at the previous appeal, that the Appellants might have to submit other items of complaint through a further appeal.

For all the foregoing reasons, and relying on the principles of consumer protection, fairness and natural justice, the Tribunal concludes that, except for the seven items that the Tribunal dismisses from the current appeal, the remaining items of complaint that Tarion sought to have removed from the current appeal should not be dismissed as having been dealt with in the previous appeal. They remain as live issues and should be considered by the Tribunal in the current appeal.

The Tribunal further concludes that the remaining claims are not, for the reasons given, contrary to Rule 2.7 (a) of the Tribunal's Rules of Practice. Despite having taken possession of their house on October 5, 2011, the Appellants are still experiencing water penetration problems. If proven, that is an intolerable situation. There is nothing to persuade the Tribunal to conclude that the claims are by any means frivolous, vexatious or commenced in bad faith. The Appellants should be allowed to make their case.

Further, because the Tribunal has concluded that the Appellants can legitimately pursue the remaining claims under the Act, such complaints do not violate Rule 2.7 (b) as being outside the jurisdiction of the Tribunal.

At the conclusion of the hearing of this motion, the Tribunal did not schedule any hearing dates for the new appeal because the release date of this decision was not be known at that time.

Once this decision is released to the parties, a date(s) for the hearing of the appeal is to be scheduled.

ORDER

The Tribunal grants the motion in part. Items 7, 33, 46, 47, 49, 51 and 54 are hereby dismissed. The Appellants shall be permitted to pursue the remaining items of complaint in the current appeal.

The parties, in consultation with the Tribunal office, shall, within no more than three weeks of the release date of this decision, schedule mutually agreeable dates for the hearing of the Appellants' appeal.

LICENCE APPEAL TRIBUNAL

_________________________

Kenneth W. Koprowski

Vice-Chair

Released: September 9, 2015

9423 v. Tarion Warranty Corporation, 2015 CanLII 72281

Case Summary

Res Judicata

Issue Estoppel

Tribunal's Rules of Practice and [Statutory Powers Procedure Act](https://www.canlii.org/en/on/laws/stat/rso-1990-c-s22/latest/rso-1990-c-s22.html)

Appellants' response to the motion

Water Penetration

ISSUES

CONCLUSION

ORDER