Dellfina Homes Inc. v. Registrar, Ontario New Home Warranties Plan Act, 2017 CanLII 146473

Licence Appeal Tribunal

Safety, Licensing Appeals and Standards Tribunals Ontario

Tribunal d’appel en matière de permis Tribunaux de la sécurité, des appels en matière de permis et des normes Ontario

Date: 2017-01-08

Appeal from a Proposal of the Registrar under the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 – to Refuse Registration

Between:

Dellfina Homes Inc. Appellant

-and-

Registrar, Ontario New Home Warranties Plan Act Respondent

DECISION AND ORDER

Adjudicator: Mary Ann Spencer, Member

Appearances: For the Appellant: Patrick Summers, Counsel For the Respondent: Jillian Siskind, Counsel

Place and dates of hearing: Toronto, Ontario October 23 & 24, 2017

REASONS FOR DECISION AND ORDER

A. Overview

1This is a hearing before the Licence Appeal Tribunal of an appeal by Dellfina Homes Inc. of an Amended Notice of Proposal to refuse registration issued by the Registrar under the Ontario New Home Warranties Plan Act on March 14, 2017.

2The Registrar first issued a Notice of Proposal to refuse registration on September 28, 2016. There were two grounds for refusing registration. The first was that the appellant cannot reasonably be expected to be financially responsible in the conduct of its undertakings. Specifically, the appellant failed to provide $25,000 security requested by the Registrar as a condition of registration.

3The second ground was that the past conduct of the appellant and its officer and director, John Custodio, affords reasonable grounds for belief that it will not carry on its undertakings in accordance with law and with integrity and honesty. The Act requires builders and vendors to register with Tarion Warranty Corporation, the organization responsible for administration of the Act. Regulation 892 requires builders to enroll homes “forthwith” after a building permit has been issued. The Registrar alleges that the appellant built and sold a custom home, property Lr, without registering and that it commenced construction without enrolling the home.

4The Amended Notice of Proposal adds further particulars related to the past conduct of the appellant including that the appellant held itself out as a registered builder when it agreed to manage the construction of two other custom homes, properties Le and Mc; that it provided a false Tarion enrollment form to the owner of property Le; and, that it requested payment for enrollment from the owner of property Mc but did not enroll the home. The Registrar also alleges that Mr. Custodio attempted to intimidate the appellant’s framer into accepting a discount on fees and assaulted the framer when the proposal was not accepted.

5The appellant appealed the September 28, 2016 Notice of Proposal on the basis that it was improper for the Registrar to rely on the circumstances relating to Property Lr as a reason to deny registration. The appellant and Mr. Custodio were charged and pleaded guilty pursuant to a negotiated plea arrangement. One of the terms of that arrangement was that the appellant would re-register with Tarion. On July 19, 2016, Tarion accepted the appellant’s application for registration subject to certain conditions, including that the appellant pay $25,000 security with respect to the enrollment of property Lr. While the appellant’s first notice of appeal stated that Tarion should have made the appellant aware of this amount when the agreement was negotiated, its current position is that it will pay the $25,000.

6With respect to the conduct allegations, the appellant’s position is that: (i) the Registrar is estopped from relying on the circumstances relating to the convictions with respect to property Lr; and (ii) it is improper for the Registrar to now rely on allegations relating to properties Le and Mc, which the appellant denies, because Tarion had investigated these before it negotiated the plea arrangement and before it accepted the appellant’s application for registration.

7For the reasons set out below, I find that the past conduct of the appellant’s principal John Custodio affords reasonable grounds for belief that the appellant will not carry on its undertakings in accordance with law and with integrity and honesty. Therefore, I direct the Registrar to carry out the proposal to refuse registration.

B. ISSUES

8The issues to be considered in this appeal are:

(a) whether the Registrar is estopped from using information with respect to the appellant’s activities relating to property Lr as a basis for refusal of registration, and, whether the Registrar can use information with respect to the appellant’s activities relating to properties Le and Mc as a basis for refusal of registration;

(b) whether the appellant can reasonably be expected to be financially responsible in the conduct of its undertakings; and

(c) whether the past conduct of the appellant’s officer and director, John Custodio, affords reasonable grounds for belief that it will not carry on its undertakings in accordance with law and with integrity and honesty.

9If I find that the appellant cannot reasonably be expected to be financially responsible in the conduct of its undertakings and/or that its past conduct affords reasonable grounds for belief that it will not carry on its undertakings in accordance with law and with integrity and honesty, then I must determine the appropriate action to direct the Registrar to take.

C. LAW

10The allegations in this appeal relate to the appellant’s activities as a builder and vendor. Section 1 of the Act defines “builder” and “vendor” as follows:

“builder” means a person who undertakes the performance of all the work and supply of all the materials necessary to construct a completed home whether for the purpose of sale by the person or under a contract with a vendor or owner;

“vendor” means a person who sells on his, her or its own behalf a home not previously occupied to an owner and includes a builder who constructs a home under a contract with the owner;

10Section 6 of the Act requires registration with Tarion. It states that “No person shall act as a vendor or a builder unless the person is registered by the Registrar under this Act.”

11The appellant has a qualified right to registration. Section 8 of the Act provides that the Registrar may refuse to register an applicant where in the Registrar’s opinion the applicant is disentitled to registration under section 7. In particular, section 7(1)(c) indicates that a corporation is not entitled to registration when:

(i) having regard to its financial position, it cannot reasonably be expected to be financially responsible in the conduct of its undertakings, or

(ii) the past conduct of its officers or directors affords reasonable grounds for belief that its undertakings will not be carried on in accordance with law and with integrity and honesty;

12Section 9(4) of the Act states that the Tribunal may direct the Registrar to carry out the proposal or not, and to take such action as the Tribunal directs. The Tribunal may substitute its opinion for that of the Registrar.

D. EVIDENCE and ANALYSIS

13As background, I will set out the regulatory registration requirements and the chronology of events relating to the appellant’s registration before addressing the issues in this appeal.

14Anil Darr, Tarion’s Director of Underwriting, gave evidence relating to builder registration requirements. The criteria considered by Tarion to assess an application for registration are a builder’s technical competence, financial responsibility, and honesty and integrity. If an application is received from a previously registered builder, that builder’s past record is also taken into account. Depending on the overall risk assessment, conditions may be placed on a builder’s registration. These may include a limitation on the number of homes it may build and/or a requirement to post a security deposit to cover potential warranty obligations.

15Tarion’s Builder Bulletin # 28 is used as a guideline to determine the amount of security deposit a builder may be required to post. Mr. Darr explained that when a builder is found to have been building illegally, there is a higher risk and the security deposit amount increases. The current “normal” amount of security is in the $10,000 to $20,000 range for new builders. If construction on a home starts before it is enrolled, an additional $5,000 security must be posted.

16Builders are required to renew their registrations annually. If a builder does not renew a registration and later re-applies, the application is considered as new if it has been more than three years since the previous registration expired. The builder must take a test and be interviewed to determine technical competence.

17Mr. Darr testified that it is not unusual for registration to be requested as part of a plea arrangement when a builder has been found guilty of building illegally because it is important that a builder be brought under the regulatory scheme. However, registration cannot be guaranteed until the application has been submitted and assessed.

18Dellfina Homes was registered as a builder in 2006. When its registration expired in 2011, it did not apply for renewal. John Custodio is the director and president of Dellfina.

19On November 17, 2015, following an investigation by Tarion, both Dellfina and Mr. Custodio were charged under the Provincial Offences Act of acting as a builder without being registered, and of commencing construction of property Lr without enrolling the home in the warranty plan. On April 6, 2016, Dellfina and Mr. Custodio agreed to plead guilty to all four charges as part of a negotiated plea arrangement. Three of the charges were suspended and a fine of $2,500 was paid in respect of the fourth. Dellfina also agreed to re-register with Tarion and to enroll property Lr in the warranty plan.

20In May 2016, Mr. Custodio submitted an application for renewal of registration to Tarion with the renewal fee of $500. However, because more than three years had elapsed since Dellfina’s registration was active, it was treated as a new applicant. Dellfina paid the required fee of $2,500 for its application as a new applicant. Mr. Darr testified that Mr. Custodio took the technical competence test but failed it; however, his interview was sufficient to demonstrate he had the required technical competence. Dellfina’s past warranty history as a registrant was reviewed, and no serious issues were found.

21On July 19, 2016, Deputy Registrar Peter Balasubramanian sent a letter to Mr. Custodio which advised that Dellfina’s registration would be subject to a number of conditions including the requirement to post $20,000 security for each home built. An additional $5,000 was requested with respect to the enrollment of property Lr. Mr. Custodio agreed to the conditions.

22Tarion received the enrollment form for property Lr. However, the security deposit was not paid. Therefore, the Registrar issued the first Notice of Proposal to refuse registration on September 28, 2016. The Notice was amended on March 14, 2017 after the registration department became aware that the enforcement department had also investigated Dellfina’s activities at two other homes, properties Le and Mc. The investigation had provided some evidence that Dellfina represented itself as a registered builder to the owners of properties Le and Mc but, because the construction of the homes was not complete, no charges had been laid.

23Mr. Darr testified that if the security deposit had been paid when it was requested, Tarion would have registered Dellfina. He explained that he was not aware of the particulars relating to properties Le and Mc when he recommended Dellfina’s registration to the Deputy Registrar and the conditions letter was issued. Asked if he would have recommended Dellfina’s registration had he known about these additional properties, he stated that the additional information raised issues with respect to the appellant’s honesty and integrity. He explained that the fact Dellfina indicated it was registered and provided a home enrollment form to the owners of properties Le and Mc was a “big concern”. Tarion has vetted registered builders and by holding itself out as a registered builder, Dellfina was placing consumers at risk.

Issue 1: Is the Registrar estopped from using information with respect to the appellant’s activities relating to property Lr as a basis for refusal of registration? And, can the Registrar use information with respect to the appellant’s activities relating to properties Le and Mc as a basis for refusal of registration?

Submissions

24Mr. Summers submitted that Tarion cannot rely on the appellant’s past convictions with respect to property Lr as a reason to refuse registration. Mr. Custodio relied on the terms of the plea agreement entered into with Tarion to his detriment. By pleading guilty, he acquired a record of convictions. He paid the fine of $2,500 with respect to one of those charges. He applied for registration and paid the associated fees, took the technical competence test and was interviewed. On July 19, 2016, he received a letter advising that his registration would be subject to conditions. The only condition he objected to was the payment of $25,000 security. Mr. Summers submitted that “Tarion’s representations were intended to be acted upon and were acted upon. The elements of promissory estoppel are made out.”

25To support this position, Mr. Summers referred me to Mount Sinai Hospital Center v. Quebec (Minister of Health and Social Services), [2001] 2 SCR 281, 2001 SCC 41 which addresses the principle of promissory estoppel. In summary, between 1984 and 1991, the Ministry had advised the hospital, a long-term care facility, that it would be issued a permit enabling it to operate both short-term and long-term beds after it moved to Montreal. However, when it moved in 1991, the permit was denied on the basis that it was not in the public interest because the short-term beds would cost more. At paragraph 46, the decision states “if this were a private law case, I would agree that the elements of promissory estoppel are present” and notes that the evidence is that the hospital had relied and acted upon the representations of successive Ministers to its detriment. Mr. Summers submitted that Tarion is a private company regardless of the mandate it serves.

26Mr. Summers further submitted that Tarion must act in a “manner of fairness and natural justice.” He noted that Tarion had already investigated the appellant’s activities with respect to properties Le and Mc at the time its counsel negotiated the plea arrangement. Tarion should not be allowed now to rely on the evidence of those activities as a reason to refuse registration.

27Ms. Siskind submitted that Tarion does not operate within a “private law” framework. Rather, it is an administrative authority fulfilling a public interest purpose in the investigation and registration of vendors and builders of new homes. She referred me to paragraph 47 of the Mt. Sinai decision which states public law estoppel requires “an appreciation of the legislative intent embodied in the power whose exercise is sought to be estopped. The legislation is paramount. Circumstances that might otherwise create an estoppel may have to yield to an overriding public interest expressed in the legislative context.”

28Ms. Siskind referred to Ontario New Home Warranty Program v. Lukenda, 1991 CanLII 7167 (ON CA), which describes the consumer protection purpose of the Act:

The major purpose of the Plan Act is to protect purchasers of new homes by requiring that vendors and builders be screened for financial responsibility, integrity and technical competence. To assure public protection, it provides for warranties, a guarantee bond and compensation in the event of loss by a purchaser resulting from dealings with a registrant. In order to effect the purposes of the Plan Act, a broad and liberal interpretation of its provisions is appropriate.

29She submitted that “in order to properly effect its public interest mandate, it was Tarion’s duty to consider all the relevant facts… as and when those facts came to its attention”. She also noted that Tarion had the right to further review the appellant’s registration after he failed to submit the security deposit required as a condition of that registration.

Analysis

30Tarion is a not for profit corporation and, while I note that it is not designated as an administrative authority under the Safety and Consumer Statutes Administration Act, 1996, the Ministry of Government and Consumer Services, at www.ontario.ca, describes Tarion as one of the administrative authorities it oversees. The Ontario government website describes these administrative authorities as responsible “for ensuring that a number of Ontario’s consumer protection and public safety laws are applied and enforced.”

31Therefore, I agree with Ms. Siskind that the doctrine of private law promissory estoppel is not applicable in this case. Tarion is a consumer protection agency charged with administering the provisions of a consumer protection statute. The legislative framework which it administers is established by government in the public interest.

32I also question that any reliance the appellant placed on the terms of the plea agreement was to its detriment. Mr. Custodio and Dellfina agreed to plead guilty on four charges “on the basis that 3 of the charges will be suspended and there will be a fine payable by Mr. Custodio with respect to the section 6 charge”. Consistent with Mr. Darr’s testimony that it is important that builders be brought into the regulatory scheme, the requirement to register with Tarion was not for the benefit of the appellant, but rather, for the benefit of the public. Clause (e) of the April 6, 2016 letter from Dellfina’s counsel to Tarion’s counsel states “given Dellfina has agreed to re-register and register the property, Custodio will pay a fine of $2,500”. Mr. Drain testified that the standard fine is $7,500. The benefit of a reduced penalty accrued to Mr. Custodio.

33I note Mr. Darr’s testimony that registration cannot be guaranteed before an application is reviewed and assessed. Mr. Custodio testified that he understood that if he pleaded guilty to the charges relating to the property Lr, that he would not be charged with respect to properties Le or Mc. Asked if he was told he would be registered, Mr. Custodio’s response was that he “assumed” he would be.

34That Tarion’s registration department did not have the details of its enforcement department’s investigation of properties Le and Mc when it first assessed Dellfina’s application and approved it subject to conditions does not reflect well on Tarion’s internal communications. However, when the registration department learned those details after Dellfina’s appeal of the first Notice of Proposal, it had an obligation to consider them. Tarion would not be meeting its consumer protection mandate if it did not consider all of the information available to it in making its registration decisions. As Mr. Darr testified, consumers assume registered builders have been vetted by Tarion. I note that if Dellfina had already been registered under the terms of the conditions letter when the registration department learned the additional information, the Registrar would have been able to issue a Notice of Proposal to revoke that registration.

35In summary, I find that the doctrine of private law promissory estoppel is not applicable in this case. Tarion had an obligation to consider all available information to make a decision in the interest of the consuming public. I also note that if there was any unfairness in the manner in which Tarion proceeded, as Mr. Summers submitted, that the hearing before this Tribunal provides the appellant with a remedy. This Tribunal has an obligation to consider all of the evidence put before it.

Issue 2: Can Dellfina reasonably be expected to be financially responsible in the conduct of its undertakings?

Evidence

36The evidence is that Dellfina failed to submit the required $25,000 security deposit for property Lr to Tarion notwithstanding the fact that Mr. Custodio signed back the Deputy Registrar’s letter which set this payment out as one of the conditions of registration.

37Between July 26, 2016 and September 7, 2016, Tarion’s Senior Underwriting Analyst Ada Mai wrote to Mr. Custodio numerous times asking him to confirm that payment would be sent. On August 11th, 2016, Mr. Custodio responded and asked for patience because he was dealing with a medical issue. However, on September 18th, 2016 he indicated he was having some difficulty understanding the security amount, and asked if it could be lowered because he was just property Lr’s builder and not its vendor. Ms. Mai responded to confirm that Dellfina was both the builder and vendor.

38Mr. Custodio testified that shortly after receiving the Registrar’s conditions letter, he experienced complications from dental surgery. He was shocked by the amount of the security deposit requested because Builder Bulletin 28 indicates the maximum is $7,000. He was also involved in litigation over properties Le and Mc and was owed $400,000. He spoke to the vendor of property Lr who agreed to put up the security deposit but later reneged. Therefore, he did not pay the security and, when the September 28, 2016 Notice of Proposal was issued, he decided to appeal.

Analysis

39The only particular set out in the Registrar’s Notice of Proposal with respect to Dellfina’s ability to be financially responsible is that it failed to submit the required $25,000 security deposit for Property Lr.

40The Registrar may refuse registration when “having regard to its financial position”, an applicant cannot reasonably be expected to be financially responsible in its undertakings. Builder Bulletin 28 indicates that Tarion’s risk assessment of builders is based on a review of financial information including financial statements, credit rating and payment history.

41There was no evidence at this hearing of any concern the Registrar has with the appellant’s financial position other than the fact it did not submit the security deposit. I note that the base security requested from the appellant is $20,000 which is within the $10,000 to $20,000 range that Mr. Darr testified is normal for applicants. The additional $5,000 requested from the appellant is charged when a home is enrolled after construction. There was no evidence that the requested security deposit was higher than normal because Dellfina was considered to be a high financial risk.

42Mr. Darr noted that the latest version of Builder Bulletin 28 was published on May 1, 2009. He testified that the Bulletin is a guideline and the amounts levied by Tarion in practice have been revised to reflect market conditions. I note that the charts in the Bulletin do not set out the $7,000 amount Mr. Custodio believed was required. However, the Bulletin also does not set out the $20,000 requested and therefore I find that Mr. Custodio’s reaction to this amount was not unreasonable. And, while I agree with Ms. Siskind’s submission that it is unusual that Mr. Custodio requested payment of the security from the owner of property Lr, I do not find that relevant to determining the appellant’s ability to be financially responsible.

43Other than the failure to remit the security deposit, there is no evidence that Tarion has any other concerns with the appellant’s financial position. Mr. Summers advised that Dellfina is no longer disputing the amount requested and will pay the required $25,000. Therefore, I find that the Registrar has not proven that the appellant cannot reasonably be expected to be financially responsible in the conduct of its undertakings in accordance with section 7(1)(c)(ii) of the Act.

Issue 3: Does the past conduct of John Custodio afford reasonable grounds for belief that Dellfina will not carry on its undertakings in accordance with law and with integrity and honesty?

44The question before me is whether Mr. Custodio’s past conduct provides reasonable grounds for belief that Dellfina will not carry out its undertakings in accordance with law and with integrity and honesty in the future. The standard to be applied in making this determination is set out in Ontario (Alcohol and Gaming Commission of Ontario) v. 751809 Ontario Inc. (Famous Flesh Gordon’s), 2013 ONCA 157:

[19] As applied to this case, s. 6(2)(d) of the Act requires the Registrar simply to show that Mr. Barletta’s past or present conduct provides reasonable grounds for belief that he will not carry on business in accordance with the law and integrity and honour. The Registrar does not have to go so far as to show that Mr. Barletta’s past or present conduct makes it more likely than not that he will not carry on business as required

45Tarion senior investigator Todd Drain testified that Tarion opened its investigation into Dellfina Homes in June, 2015 after receiving a complaint from the owner of property Le. Mr. Drain’s investigation revealed that Dellfina was not registered as a builder with Tarion.

46Mr. Drain investigated Dellfina’s activities with respect to three homes; properties Le, Mc and Lr. He interviewed the owners of the properties and obtained copies of documents, including the management agreements they had signed with Dellfina. The management agreements state that Dellfina would supervise construction and provide a budget for the construction of the home but the trades would directly contract with and be paid by the owners. Dellfina would provide three quotes for each item for the owners’ approval.

47The Act defines “builder” as someone who performs all of the work and supplies all of the materials to construct a completed home. Property Lr was completed and its owner supplied Mr. Drain with information, including invoices, to support that Dellfina had provided the labour and materials for the home’s construction. Dellfina and Mr. Custodio were charged under the Provincial Offences Act with acting as a builder without being registered and of commencing construction of property Lr without enrolling the home in the warranty plan. On April 6, 2016, Dellfina and Mr. Custodio agreed to plead guilty to all four charges as part of a negotiated plea arrangement.

48Mr. Drain testified that charges were not laid with respect to properties Le and Mc because construction was not completed. He further testified the owners of both properties were involved in litigation which appeared to support the management contract and stated the “undertaking to build a complete home wasn’t there”.

Analysis

49The fact that Dellfina and Mr. Custodio pleaded guilty to the charges with respect to property Lr is sufficient for me to find that there are reasonable grounds for belief that Dellfina will not carry on its undertakings in accordance with law and with integrity and honesty as set out in s. 7(1)(c)(ii) of the Act.

What action should the Tribunal direct the Registrar to take?

50In deciding what action to direct the Registrar to take, I must consider all of Mr. Custodio’s past conduct, including his activities with respect to properties Le and Mc and the allegation that he attempted to intimidate and later assaulted the framer he employed on the projects.

Evidence

51Mr. Custodio testified that he did not renew his registration with Tarion after 2011 because the focus of his business had changed to building large custom homes. While he acknowledged that he had signed a vendor/builder agreement with Tarion when he was registered, his understanding was that a home had to be enrolled with Tarion if it was being built for the purpose of sale. Because he was not building homes for sale, he believed he did not require registration. However, the Tarion logo remained on his website because the website was not updated. He agreed that he used the logo because it gave consumers confidence. He also testified that he thought Tarion existed to protect the consumer, not individuals building their own homes. He did not enroll properties Lr, Le or Mc with Tarion because they were not being built for sale.

52Mr. Custodio also agreed that the terms of Dellfina’s management agreement make the owners the builder as defined in the Act. However, he testified that he did offer to enroll homes with Tarion because his understanding was that he would just have to renew his registration in order to do so.

Property Le

53The owners of property Le signed the management agreement with Dellfina on August 26, 2014. Witness G.D., one of the owners, testified that she and her husband hired Mr. Custodio to be the builder and did not understand that he was going to be a construction manager. She could not recall if he told her that the trades would work directly for the owners. However, she testified that she was given no quotes for approval and did not hire or pay any of the trades who worked on the home.

G.D. also testified that at their initial meeting Mr. Custodio told the owners that he was registered with Tarion. On August 28, 2014, Mr. Custodio gave her a Tarion enrollment form signed and dated August 26, 2104. Asked if she paid to enroll the home, she stated that she paid $34,000. However, she agreed that the budget Dellfina provided showed no amount for Tarion. She did not discuss the warranty with Mr. Custodio in depth and did not ask him when he would register the home.

54Mr. Custodio testified that he was hired as a construction manager for property Le and understood he was building a home for the owners to occupy. The owners elected not to pay a Tarion fee and he advised them they could get Tarion coverage at a later date. He does not know what G.D. is referring to with respect to her testimony that she paid $34,000.

55After construction of property Le began, Mr. Custodio learned that the owners did not having financing in place. They requested him to provide a Tarion form to forward to their financier. He used an enrollment form he had on file from his previous registration. He would have enrolled the home if he had been asked to but the owners were building the home for themselves and did not want to register it.

Property Mc

56Witness E.S. is the daughter of the owner of property Mc. Her mother signed the management agreement with Dellfina on August 14, 2014. E.S. testified that she reviewed Dellfina’s website as part of the research she conducted. She saw the Tarion logo on the website and believed Dellfina was registered with Tarion. And, she asked Mr. Custodio if the home would be covered by the Tarion warranty and was told it would be.

57Mr. Custodio provided a project budget but E.S. was concerned that the amounts itemized for demolition and excavation were too high. However, he told her she would receive quotes before work commenced. They discussed that the trades would report to the owner and E.S. understood that Mr. Custodio would supervise them. The owner’s responsibility would be to pay them. E.S. testified that her mother entered into no contracts with the trades. And, with the exception of windows, Dellfina did not provide any quotes.

58The budget for property Mc allocated $1,000 for Tarion which E.S. testified she paid. She understood that she would have to pay more as the project went on and that she would receive an information package from Tarion.

59E.S. and her mother terminated the contract with Dellfina because they believed the project was progressing too slowly. There is ongoing litigation with respect to the contract.

60Mr. Custodio testified that the owners of property Mc did not know if they would sell the home and his plan was that he would enroll it once the building was complete. He understood that the home only needed to be enrolled if was being built for sale. He admitted that the owners did pay him $1,000 for Tarion enrollment but testified that he did not have the chance to enroll the home because the contract was terminated. He anticipated that he would have no difficulties registering again with Tarion because he had no chargeable conciliations during his previous registration.

Alleged Assault

61With respect to the allegation that he attempted to intimidate the framer working on his projects, Mr. Custodio testified that he was notified that liens were being placed on both properties Le and Mc because the framing firm had not been submitting union fees. He met with the framer to discuss payment. The framer told him that he would deny he had been paid unless Mr. Custodio gave him $10,000. The framer assaulted him and Mr. Custodio held him and called police. Police charged Mr. Custodio with assault and forcible confinement. However, the charges were dismissed and Mr. Custodio signed a peace bond.

Submissions

62Ms. Siskind submitted that the past conduct of Mr. Custodio disentitles Dellfina to registration. He was intentionally dishonest when he represented Dellfina as a registered builder to the owners of properties Le and Mc and advised them they would have warranty coverage. He continued to display the Tarion logo on his website when he was not registered. And, he provided the owner of property Le with a false enrollment form. This conduct demonstrates that Dellfina is not entitled to registration.

63Ms. Siskind further submitted that the terms of Dellfina’s management agreement were crafted to exempt it from the requirement to register with Tarion notwithstanding Mr. Custodio’s testimony that he believed he did not have to register the homes because they were not being offered for sale. And, the evidence of homeowners G. D. and E.S. is that he did not honour the terms of the management agreement.

64Mr. Summers submitted that Mr. Custodio’s conduct is not at a level to justify refusing registration. He noted that Tarion agreed to register Dellfina with full knowledge of the property Lr charges. Tarion was aware of the allegations with respect to properties Le and Mc but chose not to prosecute. Mr. Custodio intended to register property Mc but the contract was terminated. Mr. Custodio’s failure to register may demonstrate a lapse in judgement but it was not his intent to harm consumers. Further, Dellfina does not have a history of non-compliance. The conduct allegations raised by the Registrar all took place in the fall of 2014.

Analysis

65Past decisions of this Tribunal establish that in determining who is a builder under the Act, consideration should be given to who was responsible for completing the essential elements of a home and who had control over its construction. Dellfina’s management agreements with the owners of properties Le and Mc are identical to its agreement with the owner of property Lr and include terms which place control of the supply of materials and labour in the owners’ hands and require Dellfina to provide the owners with quotes for their approval.

66Dellfina’s contracts were terminated for properties Le and Mc before the projects were completed. However, both G.D. and E.S. testified that they were not provided with quotes and, with the exception of windows at property Mc, did not hire the trades or pay them during construction. The documentary evidence is that Dellfina invoiced the owners of property Mc for excavation, structural steel, and lumber, among other items. While I acknowledge that charges could not be laid because these homes were not completed, this evidence suggests that Dellfina was in fact acting as a builder as defined in the Act from the outset of these projects. At minimum, the fact that Dellfina did not honour the terms of its contracts indicates a lack of honesty and integrity.

67Mr. Custodio agreed that the terms of the management agreements make the homeowners the builder. However, the evidence is that he led his clients to believe that he was registered with Tarion and that their homes were eligible for enrollment in the warranty program when the agreements were negotiated and signed. G.D. testified that when the management agreement was first discussed, Mr. Custodio informed her that property Le would be covered by the Tarion warranty. I acknowledge that the construction budget for property Le lists no amount beside the “Tarion” item, and, the evidence is unclear as to whether G.D. paid anything for enrollment. However, G.D. was provided with an “Enrolment of Freehold Home” form signed by Mr. Custodio to forward to her financier. Whatever the reason the form was provided, the registration number it cited was expired and the form was invalid; it was not sent to Tarion. Mr. Custodio testified that he did not enroll property Le because “the owners did not want to register it”. However, the requirement to register with Tarion and to enroll homes is not at a builder’s or an owner’s discretion; it is set out in the Act.

68E.S. also testified that she was informed by Mr. Custodio that property Mc would be covered by the Tarion warranty. Mr. Custodio confirmed that she paid the $1,000 listed in the budget for “Tarion”. The evidence is that no enrollment form was forwarded to Tarion.

69Mr. Custodio testified that he intended to enroll property Mc when it was completed. Mr. Summers’ submitted that s. 1.1(1) of Regulation 892 creates a question with respect to the timing of home enrollment when a builder comes to a project after a building permit has been issued. The section states:

Forthwith upon the issue of a building permit authorizing the construction of a home, other than a condominium dwelling unit, but including a contracted home, the builder shall enrol the home in the Plan by submitting to the Registrar a completed enrolment form as provided by the Corporation together with the enrolment fee.

In my view, the fact that building permits were already in place when Dellfina was hired does not create ambiguity with respect to the timing of home enrollment. If Mr. Custodio believed Dellfina became the builder sometime during the construction of any of the properties, then the obligation to both register with Tarion and to enroll the home “forthwith” became Dellfina’s as soon as that occurred. If there was doubt, a simple inquiry to Tarion would have provided an answer.

70The Notice of Proposal includes an allegation with respect to intimidation of the framer employed at properties Le and Mc by Mr. Custodio. I note that because Mr. Custodio’s testimony differed from G.D.’s, Ms. Siskind asked that she be allowed to call another witness who could confirm the framer’s appearance. I did not allow this witness to testify because I did not find the anticipated testimony would be relevant. The framer did not testify at this hearing. The only first person evidence of an altercation before me is Mr. Custodio’s testimony that the charges against him were dismissed and he entered into a peace bond. The fact that there is a peace bond is insufficient for me to assign any weight to the altercation in reaching a decision about Mr. Custodio’s ability to act in accordance with law.

71In summary, the evidence is that Mr. Custodio misrepresented the status of Dellfina to the owners of properties Le and Mc. He advised G.D. that he was a registered builder. He told the owners of both properties that their homes would be covered by the Tarion warranty. He included an item for Tarion in the budget for property Mc and took payment for it but did not enroll the home. He provided the owner of property Le with a Tarion enrollment form using an expired registration number and did not enroll the home. He continued to display the Tarion logo on his website in 2014, three years after his registration had expired. And, by failing to provide quotes to the owners and by hiring and paying trades himself, he did not honour the terms of Dellfina’s management agreements.

72I acknowledge that Tarion was prepared to register Dellfina notwithstanding the guilty pleas with respect to property Lr and that Mr. Darr testified he found no major issues with respect to Dellfina’s previous registration. Mr. Summers submitted that Mr. Custodio’s actions represent a lapse in judgment; the events described took place over a short period in 2014. I might agree with this characterization and consider registration with conditions if only one property had been involved. The fact that three properties were involved represents a pattern of behaviour. Mr. Custodio provided a number of explanations for his failure to register and to enroll homes. These included that registration was not required because the homes were not being built for sale; he believed he could simply renew his registration when he chose to; he intended to enroll one of the homes when it was completed; and, the owners of one of the homes asked him not to enroll it. However, Dellfina was previously registered with Tarion and Mr. Custodio either was aware or ought to have been aware of the registration and enrollment requirements. In this regard, I note that the wording of Dellfina’s management agreements suggests that he did understand exactly what was required to exempt a builder from registration.

74The purchase of a home is a very significant expenditure. Registration with Tarion provides the public with confidence that they are dealing with a qualified builder when they make that purchase. Not only must builders have the technical competence to build homes but they must do so with honesty and integrity.

75Based on the totality of Mr. Custodio’s past conduct, I conclude that Dellfina is not entitled to registration.

ORDER

76Pursuant to the authority vested in it under the provisions of the Act, the Tribunal directs the Registrar to carry out its proposal dated March 14, 2017 to refuse to register Dellfina Homes Inc.