Ashlar Construction Ltd. v. Registrar, Ontario New Home Warranties Plan Act, 2017 CanLII 35337

Appeal d'appel en

Tribunal matière de permis

DATE:

2017-04-13

10381/ONHWPA

10381 v. Registrar, Ontario New Home Warranties Plan Act

An appeal from a Notice of Proposal by the Registrar, Ontario New Home Warranties Plan Act to Refuse to Renew Registration

Ashlar Construction Ltd.

Appellant

-and-

Registrar, Ontario New Home Warranties Plan Act

Respondent

Patricia McQuaid, Vice-Chair, presiding

Evelyn Spence, Member

For the Appellant:

Stefan Hamed, Agent

For the Respondent:

Zahir Ali, Counsel

Heard in Ottawa:

February 8 and 9, 2017

Ashlar Construction Ltd. (the “Appellant” or “Ashlar”) has appealed a Notice of Proposal issued by the Registrar (the “Registrar” or “Tarion”) under the Ontario New Home Warranties Plan Act (the “Act”) on July 26, 2016. Stefan Hamed is the sole director and officer of Ashlar. The Registrar proposed to refuse to renew the Appellant’s registration as a vendor/builder under the Act. The reasons for the refusal fall into two categories.

The first category relates to the allegation that Ashlar lacks sufficient technical competence as a builder. The Registrar alleges a poor customer service record compared with the provincial average and a failure to consistently perform the warranties under the Act. Specifically, Ashlar has a high rate of chargeable conciliations to the five homes it has sold and has demonstrated poor after sales service. As well, the Registrar alleges that Ashlar has failed to indemnify Tarion with respect to breaches of the warranties under the Act.

The second category relates to the allegation that Ashlar lacks the necessary financial responsibility in the conduct of its undertakings. In particular, the Registrar alleges that Ashlar has failed to provide completed financial statements as required by the regulations under the Act and the Vendor and Builder Agreements, despite repeated requests to do so. Furthermore, Ashlar has failed to pay the amount of $2,260 in chargeable conciliation fees owed to Tarion under the Regulation.

BACKGROUND

It is useful to set out some of the statutory context for the issues in this appeal.

Tarion is a private, non-profit corporation designated by the Lieutenant Governor-in-Council to administer the Act. It is the Registrar under the Act, and it applies and enforces the Act and Regulations.

There are three main duties Tarion must carry out. The first duty is the registration of builders and vendors (“builders”) as those terms are defined in the Act. It is under this duty that the Notice of Proposal has been issued. Each builder or vendor of new homes in Ontario must be registered with Tarion. The registration process involves an applicant agreeing to standard registration terms; either through a Vendor Agreement, Builder Agreement or both, depending on the applicant’s proposed role in new home construction.

The second task is the management of the warranty scheme. Each new home built in the Province of Ontario for sale, or built by a builder who contracts to carry out all of the construction on the home on behalf of the owners, must be enrolled with Tarion and an enrolment fee paid prior to the commencement of construction. A builder may only enroll homes if they are registered under the Act.

The third obligation of Tarion is to manage the risk assessment function of the program to ensure that the warranty fund (in the Act, the Guarantee Fund) is properly underwritten with sufficient funds to pay for warranty deficiencies when a builder defaults in their obligations under the Act. Registrants must renew their registration each year. Upon renewal, Tarion requires financial disclosure and disclosure of the number of units (freehold or condominiums), unit values, and locations of the constructions the registrant expects to build or sell during the 12 months following the date of renewal. Once the information is received from applicants, Tarion issues a renewal letter setting out the security required for each home, the number of homes that are permitted to be built or sold in the year, and any other conditions the underwriting department feels are appropriate. Applicants signify their acceptance of these terms by signing the renewal letter and sending it back to Tarion.

Tarion does not operate as an insurance company. Its role is to ensure that builders comply with the statutory warranties set out in the Act. By statute, those warranties are included in every contract for the construction of a new home. The warranties are those of the builder, not Tarion. It is the obligation of the builder to respond to warranty claims (as submitted by homeowners to Tarion) within certain defined time periods, referred to as the builder repair periods. Only if a builder fails to complete warranty repairs in a timely manner may a homeowner ask Tarion to intervene by requesting a conciliation. At this stage of the process, no finding has been made for or against either the builder or the homeowner. The homeowner is alleging that one or more warranted items have not been repaired or resolved within the allowed time limits.

When a homeowner requests a conciliation, Tarion schedules an inspection and notifies the builder. The builder is given a further period after the date the homeowner requests the conciliation inspection to repair or resolve all of the claim items. Unless the homeowner requests that the conciliation inspection be cancelled, a Warranty Services Representative from Tarion will attend, review the homeowner’s claims (generally in the presence of the builder and the homeowner), and issue a Warranty Assessment Report (“WAR”) making findings of warrantability or non-warrantability for each disputed item.

Where Tarion determines that at least one item in the WAR is warranted, the conciliation will be considered to be chargeable against the builder’s record (unless one of the exceptions to chargeability applies). The fee levied against the builder for a chargeable conciliation is $1000 plus HST. The builder is then given a further period to carry out repairs, failing which, Tarion will then schedule a claims inspection with the homeowner. In such circumstances, the only issue to be determined is whether the builder has carried out repairs to those items determined to be warranted in the WAR. If not, Tarion will arrange to carry out the repairs or provide cash compensation to the homeowner from its Guarantee Fund. The amount paid by Tarion is then invoiced to the builder, plus an administrative fee of 15% and applicable taxes.

Failure by the builder to reimburse Tarion for amounts invoiced in this manner may be grounds for Tarion to seek to revoke the builder’s registration or for Tarion to move on the security it holds, or both.

If there is a finding that a conciliation is chargeable, and the builder disagrees with Tarion’s determination of warrantability or chargeability, the builder has a right of appeal to the Builders Arbitration Forum (“BAF”). The cost to file an appeal is $750. In the current case, the Appellant did not appeal any of the findings made against it. Therefore, at this hearing, the Tribunal limited the amount of evidence concerning the findings made in the various WARs in that this was now not the forum for the Appellant to argue the issue of warrantability or chargeability.

THE LAW

The relevant sections of the Act are as follows:

Definitions

In this Act,

“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;

Registration required

No person shall act as a vendor or a builder unless the person is registered by the Registrar under this Act.

Registration of vendors and builders

(1) An applicant is entitled to registration by the Registrar except where,

(a) having regard to the applicant’s financial position, the applicant cannot

reasonably be expected to be financially responsible in the conduct of the

applicant’s undertakings;

(b) the past conduct of the applicant affords reasonable grounds for belief that

the applicant will not carry on the applicant’s undertakings in accordance

with law and with integrity and honesty;

(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; or

(d) in the case of an application for registration as a builder, the applicant

does not have sufficient technical competence to consistently perform the

warranties.

Conditions of registration

(2) A registration is subject to such terms and conditions to give effect to the purposes of this Act as are consented to by the applicant or imposed by the Tribunal or prescribed by the regulations.

Revocation and refusal to renew

(2) Subject to section 9, the Registrar may refuse to renew or may suspend or revoke a registration for any reason that would disentitle the registrant to registration under section 7, if the registrant were an applicant, or where the registrant has a record of breaches of warranties or of failure or unwillingness to complete performance of contracts or is in breach of a term or condition of the registration.

Regulation 894 under the Act sets out the terms and conditions of registration. It incorporates by reference the Builder and Vendor Agreements signed by a registrant and it binds each registrant to diligently perform or cause to be performed its obligations under the Act, including its warranty obligations. Registrants are also required to indemnify Tarion for payments Tarion makes to homeowners for breaches of warranty not resolved by the registrant.

The relevant sections of Regulation 894, are as follows:

The registrant shall diligently perform or cause to be performed all obligations imposed under the Plan and under any agreement made with the Corporation in respect of the Plan.

3.1 The registrant, and where applicable its officers and directors, whether in connection with the registrant or other registrants, shall, at all times, carry out each of their undertakings to the Corporation in accordance with the law and with integrity and honesty. Without limiting the generality of the foregoing, it is a breach by the registrant of this condition of registration if the registrant, or where applicable any of its officers or directors, whether in connection with the registrant or other registrants, fails, at any time,

i. to fully indemnify the Corporation for all monies paid out by the Corporation to third parties for which the registrant or any of its officers or directors is responsible,

ii. to fully honour and comply with any outstanding guarantee or indemnity given to and in favour of the Corporation,

iii. to provide truthful, accurate and complete financial information to the Corporation as and when required, or

iv. to diligently perform or cause to be performed all obligations imposed under the Plan and under any agreement made with the Corporation in respect of the Plan.

The registrant shall indemnify and save harmless the Corporation and the insurers for the time being under any contract or contracts of insurance establishing the guarantee fund, from any loss which they or any of them may suffer by reason of the registrant’s failure to diligently perform or cause to be performed all obligations imposed under the Plan and under any agreement made with the

Corporation in respect of the Plan

The registrant shall furnish the Registrar with such information relating to the registrant’s financial affairs and position as the Registrar may reasonably request.

EVIDENCE

Ashlar was incorporated in 2008. Between 2008 and 2014, it built five homes. Ashlar did not build any homes in 2015 or 2016.

Ashlar’s claim history

a) Claims related to 6632 Pebble Trail Way

The Tribunal heard evidence from Douglas Lappan, the Tarion Warranty Service Representative who conducted conciliation inspections for a home at 6632 Pebble Trail Way (“6632”). 6632 was built by Ashlar in 2011.

The 6632 homeowners submitted a Year-End form in November 2012. For items listed on a Year-End Form, the builder is given 120 days after the first year anniversary of possession to complete any repairs covered by warranty during the initial builder repair period. Timelines may be extended, as they were for 6632, if the warranted items, and their repair, are considered ‘seasonal’. A seasonal item is any warranted item submitted to Tarion between November 16 and April 30 (inclusive), involving the exterior of the home.

As noted above, if the builder does not repair all of the warranted items during the initial builder repair period, the homeowner may request that Tarion perform a conciliation inspection, which the 6632 homeowners did. Mr. Lappan attended at the home, and as a result of his inspection, he assessed several items as being warranted, making the conciliation chargeable. These items related to the garage floor and ceiling, interior trim and caulking at basement windows. Ashlar then had a further 30 days to resolve the warranted items. Ashlar did not complete the repairs to the homeowners’ satisfaction. Tarion then conducted a claims inspection and Tarion confirmed that one or more of the warranted items that Ashlar was required to resolve had not been resolved. Tarion settled the claim with the homeowners. Ashlar was invoiced for the settlement amount.

The 6632 homeowners submitted a Second-Year Form in December 2013. Again, a conciliation inspection was performed and a WAR was issued by Mr. Lappan. One item (related to the sump pump drainage pipe) was warranted. It was not resolved by Ashlar within the prescribed 30 days and Tarion settled with the homeowners.

Therefore, for 6632, there were two chargeable conciliations. Ashlar was invoiced for these as well as the settlement amounts paid to the homeowners, and ultimately reimbursed Tarion for those amounts.

The evidence from Mr. Lappan and Mr. Hamed shows that Ashlar did make attempts to resolve the issues with the homeowners. Indeed, on April 23, 2013, Mr. Hamed provided a letter to the 6632 homeowners in response to their claims in the Year-End Form, outlining the items under warranty and providing details of their repair status. In subsequent communications with Mr. Lappan, Mr. Hamed indicated that he believed Ashlar had “taken care of everything”. At one stage, the homeowners wrote a glowing letter of recommendation, stating that Ashlar had built their “dream home”. However, it appears that not all of the repairs were to their satisfaction, nor did Tarion find that the warranties had been fully resolved.

Mr. Hamed expressed frustration and did not agree with the settlement amounts paid to the homeowners. He believed that the homeowners were, to some extent, at fault due to their lack of communication with him and their manipulation of the Tarion system.

Upon receiving Tarion’s invoice, he wrote a letter, citing several points of disagreement. He stated that he had “continuously inquired when speaking with [the homeowners] if everything we were doing was to their liking. They confirmed it was with the only exception being the stucco columns not having a top-coat as they wanted.” He further stated that the homeowners’ “lack of communication, deliberate misleading and lying” led to the builder repair periods having been exhausted. In the same letter, he asked to appeal the decision to hold Ashlar in breach of warranty. However, as noted above, he did not file an appeal with the BAF, as was his right.

The Tribunal was clear, at the outset of the hearing, that this was not the forum to hear or determine questions regarding the warrantability of claims or the chargeability of inspections. The BAF would have been the appropriate venue for Mr. Ashlar to voice his concerns regarding the homeowners’ alleged actions - upon which he claims to have relied - to his detriment, in this case.

b) Claims related to 1605 Magic Morning Way

Tarion’s second witness was Ashley Maxwell, a Tarion Senior Warranty Services Claims Representative. Ms. Maxwell handled the claim for “delayed closing” at a home built by Ashlar in 2013-2014, at 1605 Magic Morning Way (“1605”).

The sections of the regulation dealing with delayed closings will not be reviewed in detail. Essentially, the regulation provides that a builder shall compensate a buyer for all costs incurred as a result of a delay beyond the ‘firm closing date’ (a defined term), to a maximum of $7,500. In this kind of claim, the builder is given 30 days to resolve the claim. If there is no resolution, the homeowner can request that Tarion perform an assessment.

The 1605 homeowners claimed that the closing on the sale of their home was delayed by 20 days. Ms. Maxwell conducted an assessment, which involved a detailed review of all relevant documents given to her by the homeowners and builder.

Following her assessment, Ms. Maxwell found a valid claim for delayed closing, in the amount of $4,784.20. Ashlar was assessed a chargeable conciliation – its third. Ashlar did not appeal this to the BAF though Mr. Hamed disputed Ms. Maxwell’s conclusions. Mr. Hamed stated that he did not appeal at the time because he was unable to pay the $750 appeal fee.

In her review of the file, Ms. Maxwell also flagged an issue as to whether Ashlar had enrolled 1605 with Tarion within the prescribed time. It is illegal to begin construction without first enrolling a home. Though that issue was not resolved to Tarion’s satisfaction, Tarion decided not to pursue the matter. As Adil Darr, Tarion’s Director of Licensing and Underwriting, stated in his testimony, this issue was viewed by him as minor relative to his concerns about Ashlar’s financial viability and after-sales service.

The homeowners at 1605 also submitted a Year-End Form in June 2015. Perry Hart was Tarion’s Warranty Service Representative assigned to the file. The initial 120 day builder repair period applied and Ashlar had until November 4, 2015 to resolve the items covered by the warranty. The warranted items were not repaired or resolved by Ashlar during the allotted timeframe, and a conciliation was scheduled for January 7, 2016. That inspection was postponed until January 26, 2016, and the resulting WAR showed that 16 items were covered by warranty and needed to be resolved by Ashlar. While not an exhaustive list, these items included missing paint on trim, caulking issues, a missing railing on a back deck, and missing steps in two exterior locations. Once again, Ashlar was assessed a chargeable conciliation – its fourth.

Mr. Hamed did not attend the January 26th conciliation inspection. By that time, the relationship between the 1605 homeowners and Ashlar had deteriorated. In particular, Mr. Hamed and M.P., an employee who performed some customer service and administrative work for Ashlar, testified that the male homeowner demonstrated intimidating and volatile behaviour. Mr. Hamed described the homeowner as an “edge case” and Ms. P. indicated in her testimony that Ashlar had “constantly” been denied access to the home, despite its attempts to resolve the warranted items.

Yet, once again, Ashlar did not appeal Tarion’s findings of chargeability to the BAF. While the Tribunal is prepared to accept Ashlar’s evidence regarding the difficulties it faced when dealing with the 1605 homeowners, we reiterate that this is not the forum in which a builder may dispute Tarion’s findings of warrantability or chargeability.

When Ashlar’s registration was renewed in 2015, the registration was subject to several conditions, which is in itself not unusual for a relatively new builder. The conditions stated that Ashlar was not to build more than four homes, a $5,000 security was required at the time of enrolment of each home, and Mr. Hamed was required to attend a meeting with Dan Moreau, Manager of Tarion’s Stakeholder Relations department. Mr. Moreau described his function as educating builders regarding the warranty process and procedures, and assisting new builders to understand the timelines, obligations, and responsibilities under Tarion’s scheme.

At this time, Tarion was in the midst of addressing the two chargeable conciliations at 6632. It was not usual to require that a builder meet with Mr. Moreau, but given the chargeable conciliations, Tarion had concerns.

At the meeting with Mr. Hamed, Mr. Moreau reviewed Tarion’s Builder Bulletin 42, the customer service standard. Mr. Moreau testified that he did not discuss with Mr. Hamed whether the items in the 6632 WAR should have been warranted, but rather, the steps in the customer service process that need to be followed to ensure that things “do not go off the rails”. He made the point to Mr. Hamed that the warranted items at 6632 were relatively minor in nature, and the total time frame given for resolving the items was approximately six months, and yet, they were not completed. Mr. Moreau stressed to Mr. Hamed that he needed to have more control and involvement in ensuring that the repairs were completed within the prescribed timeframes.

Mr. Moreau’s impression was that the meeting went well – a view shared by Mr. Hamed - and that Mr. Hamed was sincere in his understanding of what needed to be done going forward and how he could improve his after sales service. Mr. Moreau acknowledged that a small builder, such as Mr. Hamed, wears a lot of hats and without a dedicated team to deal with customer service issues, this can be a challenge.

Mr. Hamed testified that he came away from the meeting with Mr. Moreau with a better understanding of the Tarion framework and what was required of him as a builder. Yet in the months that followed, he was unable to satisfactorily deal with the issues at 1605. In fact, Mr. Hamed stated that, given the challenges he faced with the 1605 homeowners, he believed that they had forfeited their right to warranty coverage. He acknowledged, however, that Tarion viewed it differently.

Several witnesses testified on Ashlar’s behalf. These witnesses did not testify to any great extent to the particulars of the chargeable conciliations or warranty claims (with the exception of Ms. P., whose evidence is referenced above), or to Ashlar’s financial viability, but rather, to Mr. Hamed’s competence as a builder and project manager and regarding his professionalism.

The witnesses were James Carty, a real estate appraiser who has worked with Mr. Hamed for the last 10 years; Sherry Laporte, a realtor who worked with Mr. Hamed on the sale of two properties; and Sean Zahrawi, a structural engineer. Mr. Zahrawi was familiar with the home at 6632 and some of the repair required, but he was not involved in the conciliation process. Each witness stated, without hesitation, that they would recommend Ashlar to others, and in some cases, they had already done so. Mr. Carty stated that he had retained Mr. Hamed as a project manager on the renovation of a commercial building.

The Tribunal notes that while the Notice of Proposal alleges that Ashlar “does not have sufficient technical competence…”, it is not alleging that Mr. Hamed lacks the training or skills to build a quality home. For Tarion, it is a question of whether Ashlar has the technical expertise to consistently perform its warranty obligations – as represented by its record of after sales service.

As Mr. Darr stated in his testimony, on a renewal, the existence of a record of chargeable conciliations is critical. He testified that the provincial average (and there are approximately 5,500 vendor/builders in Ontario) for chargeable conciliations is one chargeable for every 100 homes built. In contrast to this, Ashlar has four chargeable conciliations on five homes built. Furthermore, most claims by homeowners are resolved before a payout is required. Yet in Ashlar’s case, money was paid out by Tarion on all four conciliations.

Financial Responsibility of Ashlar

Mr. Darr explained that the financial viability of a builder is crucial because Tarion is, in essence, issuing licences to sell and build homes to the public, and the Act is consumer protection legislation. To assess builders’ financial strength, profitability, credit-worthiness and their corresponding ability to meet their commitments to purchasers through their obligations under the Act, builders are required to supply Tarion with their financial statements.

Ashlar did not provide its financial statements with its renewal application in April 2016. Tarion contacted Mr. Hamed and advised that if externally prepared financial statements were not available, then Ashlar’s most recent corporate income tax return would be accepted, together with income statement information. Mr. Hamed was also advised that for the renewal to proceed, he had to reimburse Tarion the sum of $9024.62, which is the amount owing for the two conciliations and the resulting settlement at 1605. It was noted by Mr. Hamed at the hearing that Tarion continues to hold $10,000 in security from Ashlar, to which Mr. Darr responded that Tarion does not generally release that security to pay amounts owing by a builder for its warranty obligations.

Tarion’s email communications to Mr. Hamed about the 2016 renewal and requirements for financial information and payment of outstanding amounts were being bounced back as “undeliverable”, so the deadline was extended several times - to May 18, then to June 18, and ultimately to July 25, 2016. In each instance, Tarion cautioned that if the financial statements and outstanding claims were not received, they would issue a Notice of Proposal to refuse to renew Ashlar’s registration. Accordingly, on July 26, 2016, when Tarion did not receive the documents, it issued the Notice of Proposal.

Mr. Darr testified that Tarion was provided with Ashlar’s financial documents, including the corporate tax return for the year ending December 2015, and an unaudited balance sheet as at December 31, 2015, approximately one week before the hearing. Of particular concern to Mr. Darr was the fact that Ashlar had a deficit of approximately $516,000 in 2014 and $690,000 in 2015, and it continues to carry significant mortgage and loan interest. Its loss in 2015 was approximately $193,000.

In Mr. Darr’s view, these are high numbers relative to the size of the company. He went on to note that Ashlar closed on two homes in 2014, but still posted a significant loss. Yet in 2013, Ashlar had a profit of approximately $257,000, suggesting to Mr. Darr that the company is trending in the wrong direction. Mr. Darr also stated that the fact that Mr. Hamed indicated to Ms. Maxwell that he did not have $750 to file a BAF appeal in respect of the 1605 claims was telling.

Mr. Hamed, in his testimony, acknowledged that the state of Ashlar’s financials is problematic. He stated that he is not taking a draw from the company, Ashlar does not currently employ any staff, and its operating expenses are minimal. Losses, he says, have been reduced. This, he suggests, points to the fact that the risk of insolvency is low. Further, he attributes Ashlar’s financial difficulties over the past few years to a couple of factors. In 2015, he states he suffered fraud at the hands of a subcontractor. He pursued court action and stated that he has received a judgment in the amount of $130,000. Criminal charges are pending against the subcontractor. Mr. Hamed stated that dealing with this issue had pulled his attention away from the business. Then, in 2016, he was caring for a friend who was very ill, and eventually died. This also consumed a lot of his time and energy and did not permit him to attend as diligently to Ashlar’s affairs.

ANALYSIS

On this appeal, the Tribunal must determine whether Tarion has established, on a balance of probabilities, that:

the Applicant has a record of breaches of warranties and does not have sufficient technical competence to consistently perform the warranties, in that:

a. it has a high ratio of 4 chargeable conciliations to 5 possessions and has demonstrated poor after sales service in respect of the 6632 and 1605 homes; and

b. it has breached the warranties under the Act and failed to indemnify Tarion for resulting losses incurred to date, and has thereby breached the terms and conditions of its registration

and:

the Applicant cannot reasonably be expected to be financially responsible in the conduct of Ashlar’s undertakings.

In weighing the evidence, first with respect to the chargeable conciliations, the Tribunal has considered Mr. Hamed’s submission that framing the issue as four chargeable conciliations for five built homes may seem to overstate the issue, given that of the five homes built, chargeable conciliations only occurred on two of the homes. At its most positive then, the issue is the ratio of two chargeable conciliations to five possessions. However, this too is far above the Ontario average of one in a 100. Such a high rate does reasonably imply a record of poor after sales service.

The warranted items, as noted by Mr. Lappan, Mr. Hart, and Mr. Moreau, were relatively minor in nature, yet Ashlar did not take steps to satisfactorily resolve them. Unfortunately, the consequences of that failure are significant. If Mr. Hamed had carefully reviewed the various Builder Bulletins and other resources that Tarion had made available to him, he would have realized as much.

Mr. Hamed concedes that the chargeable conciliations cannot be eliminated, but he prefers to see them as “battle wounds”. He stated that he “cut his teeth” on the 1605 situation and he proffered that Tarion has invested in his education; it has coached him through its processes, and it would be a shame to throw that away.

The Act is consumer protection legislation, and the stakes are high for homebuyers. They expect that Tarion has satisfied itself when registering a builder that the builder will be able to build well-constructed homes, on time, and in accordance with regulatory requirements, including meeting its warranty obligations, both financially and from an after sales service perspective. Whether it is a relatively new builder, such as Ashlar, or a large, established builder, the expectations are the same. In other words, there is no “probationary period” where the builder learns the ins and outs of the various Builder Bulletins and regulations. The homeowners at 1605 may have been challenging clients, but it was not for Mr. Hamed to conclude that they had forfeited their right to warranty coverage by virtue of their behaviour.

The Registrar cited several cases to the Tribunal in submissions. One of these was B&C Contracting (Kenora) Inc. (Re) [2007] O.L.A.T.D. No. 107. Counsel submitted that this case was “on all fours” with the one now before the Tribunal. At paragraph 78 of that decision, the Tribunal wrote:

By choosing to disregard this information the Applicant has clearly demonstrated arrogance towards the regulatory authority, a reliance on false and inadequate understanding of the law, and a lack of responsibility towards its homeowner clients - all of which have resulted in an inability to govern itself within the perimeters of its warranty and regulatory obligations. The Tribunal concludes such an attitude shows a wilful incompetence regarding the technical requirements it must meet to properly and consistently perform its warranties as required in section 7(1), that is directly responsible for its poor record of after sales service and extraordinarily high amount of chargeable conciliations.

With respect, the evidence does not support a finding that Mr. Hamed demonstrated arrogance toward Tarion or wilful incompetence, although it seems he did choose to disregard information provided to Ashlar on numerous occasions, including information in respect of the scope of required repairs, timelines for repair, dispute mechanisms available to contest repair, and financial obligations to compensate Tarion for repair of warranties Ashlar was considered to have breached. However, the evidence does suggest a lack of maturity in the business; Mr. Hamed certainly demonstrated a degree of naïveté about doing business in a heavily regulated industry. Specifically, during the Registrar’s cross-examination of him, Mr. Hamed acknowledged that he had violated the Act, the Vendor and Builder Agreements, and the regulations, all of which are in place to protect consumers. And yet he stated, “I hoped that individual circumstances could be considered. I thought that the human element would supersede the black and white procedure.” These statements reflect a significant lack of understanding of the regulatory framework in which he seeks to do business.

Based on the evidence, the Tribunal concludes that the Appellant has a record of breaches of warranties and does not have sufficient technical competence to consistently perform the warranties. The Appellant has failed to inform itself of its regulatory obligations regarding the appropriate process for responding to warranty claims.

Tarion’s evidence regarding the lack of financial responsibility is compelling as well. The financial statements (which in this instance took months for Ashlar to produce) allow Tarion to perform a risk assessment. They are the means by which Tarion can assess the financial strength of a builder to determine if it is financially viable and if it will remain in operation and have the means to meet any warranty claims, without creating a risk to Tarion’s Guarantee Fund. This is a necessary function to ensure that it can adequately protect the homeowner of a newly built home.

The picture drawn by Ashlar’s financials is rather grim. It was in a deficit position in 2014 and 2015. It has not reimbursed Tarion for the charges it incurred in respect of 1605, including the amounts Tarion paid out for breach of warranty claims and the conciliation fees, which total $9,024.62. Mr. Hamed claimed he did not want to pay the $750 fee associated with an appeal to the BAF, even though he felt he had grounds for appeal.

There was a reasonable explanation for the fact that Mr. Hamed was unable to put the energy into re-building his business over the last two years. And the Tribunal agrees that it is likely difficult to build the business when the status of his registration is under review, which is noted for the public to see on the Tarion website.

But in this regulatory environment, Ashlar’s financial viability can only be assessed against the facts as they presently exist. In this context, Ashlar’s potential to rectify its financial situation in the future cannot form part of the equation in assessing whether it should be registered now, especially without any articulated plan to address its current situation. Based on the evidence, the Tribunal finds that there are reasonable grounds for the Registrar’s belief that the Appellant will not be financially responsible in the conduct of its undertakings.

The Tribunal asked the parties for submissions on the possibility of registering the Appellant on terms and conditions. Tarion’s position is that terms and conditions are not appropriate given Ashlar’s risk assessment. In light of the evidence and its findings, the Tribunal agrees. Tarion did, however, state that if its concerns are somehow addressed in the future, Ashlar can always re-apply to Tarion for registration. Mr. Darr confirmed that if Ashlar’s financial situation changes, an application may be viewed in a positive way. Yet, at the same time, he stated, very frankly, that Ashlar’s record of chargeable conciliations will be difficult to overcome. The Tribunal notes that while there may be a high bar to overcome, it need not, in light of some of its conclusions regarding Mr. Hamed and his particular circumstances, be insurmountable.

LICENCE APPEAL TRIBUNAL

Patricia McQuaid, Vice-Chair

Evelyn Spence, Member

Released: April 13, 2017