Appeal from a Decision of Tarion Warranty Corporation under section 16 of the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 – to Disallow a Claim
Between:
M.S.C.C. No. 51.
Appellant
and
Tarion Warranty Corporation
Respondent
and
Clark Homestead Ltd.
Added Party
DECISION AND ORDER
Adjudicator: Avril A. Farlam, Vice-Chair
Appearances:
For the Appellant: Michael A. Spears, Counsel
Blaine Fedon, Counsel
For the Respondent: Danielle Peck, Counsel
For the Added Party: No one appearing
Heard in Toronto: February 9, 12, 13, March 26, April 6, June 25, July 24, 2018
REASONS FOR DECISION AND ORDER
A. Overview
1The appellant challenges the June 4, 2015 decision of Tarion Warranty Corporation (“Tarion”) to deny the appellant’s common element warranty claim under s. 14 (3) of the Ontario New Home Warranties Plan Act, R.S.O. 1990, c. O.31 (“Act”) with respect to item 4.2.2.1 contained in the appellant’s first year performance audit received by Tarion February 13, 2007 (“PA”).
2Tarion initially denied that item 4.2.2.1 was warranted but as a result of a re-inspection Tarion found item 4.2.2.1 to be warranted. Tarion offered cash compensation of $75,070.94 to resolve it on September 15, 2014. The appellant did not accept Tarion’s offer. Tarion became concerned that by not accepting compensation and completing the warranted repairs, the condition of the building may be negatively impacted and denied the appellant’s claim. The appellant’s position is that pending the hearing the defect had to be rectified by the appellant for $1,555,961.50 plus engineering fees.
B. ISSUES TO BE DECIDED:
a. Does the defect in item 4.2.2.1 fall within the first year warranty coverage provided by the Act?
b. If so, have damages resulted from that defect?
c. If so, what is the amount of those damages?
d. Do appellant’s damages include consequential or concealed damages?
C. CONCLUSION:
3I find that the defect in item 4.2.2.1. is the only defect that falls within the first year warranty coverage provided by the Act, that damages have resulted from that defect, the amount of those damages is $84,830.16 and the damages do not include consequential or concealed damages. I order Tarion to pay the appellant $84,830.16 for item 4.2.2.1.
D. LAW:
The Applicable Statutory Warranty
4Section 13 (1) (a) of the Act provides that the vendor of a home warrants to the owner that the home is constructed in a workmanlike manner and is free from defects in material, is fit for habitation and is constructed in accordance with the Ontario Building Code. Under s. 13 (4) of the Act the warranties apply for a one-year period unless a longer time is prescribed by Administration of the Plan, R.R.O. 1990, Regulation 892 (“Regulation”). Under s. 15 (2) of the Regulation the warranty for two years is:
(a) that the home is constructed in a workmanlike manner and is free from defects in materials including windows, doors and caulking such that the building envelope of the home prevents water penetration;…
(b) that all exterior cladding of the home is free from defects in materials and work resulting in the detachment, displacement or physical deterioration…
5Under s. 15 (3) of the Regulation the warranties described in s. 15 (2) apply only in respect of claims made during a two-year warranty period ending on the second anniversary of the date of possession, in respect of homes that were enrolled, or should have been enrolled, after December 31, 1990.
Statutory Exclusions from the Warranty
6Section 13 (2) (b) and (f) of the Act provide that a warranty under subsection (1) does not apply in respect of secondary damage caused by defects, such as property damage and personal injury and damage resulting from improper maintenance. In the case of common elements, subsection 6 (6) of the Regulation provides that liability is limited to damage to the common elements only and there is no liability for any other damage, direct or indirect.
Compensation for Breach of Warranty
7Section 14 (3) of the Act provides for payment of compensation for damages resulting from a breach of the warranty in s. 13 (1) of the Act.
The Common Element Warranty Claim
8Common element warranty claims are subject to both the Act and the Condominium Act, 1998, S.O. 1998, c. 19 (“Condominium Act”). Under s. 15 (a) of the Act the condominium corporation is the owner of the common elements of a condominium. Under s. 15 (b) the warranties on the common elements start on the date of registration of the condominium declaration and description (“registration”). The Condominium Act in s. 43 (1) provides that the developer of the condominium (“declarant”) must call a meeting of owners (“turn-over meeting”) to elect a new board of directors no later than 21 days after the declarant ceases to be the owner of the majority of the units and pursuant to ss. 43 (5) (f) (i) and (ii) within 30 days must deliver to the board elected at the turn-over meeting proof that the units and common elements have been enrolled in the warranty program under the Act and a copy of all final reports on inspections that the Act requires to be carried out on the common elements.
9Section 44 of the Condominium Act provides that the board of directors of a residential condominium shall retain a professional engineer or an architect to conduct a performance audit of the common elements no earlier than six months and no later than ten months following registration to determine whether there are any deficiencies in the common elements after construction has been completed on them that may give rise to a claim under the Act. The engineer or architect conducting the performance audit shall inspect the major components of the building, including wall construction, review all final reports on inspections that the respondent requires be carried out on the common elements, conduct a survey of owners as to damage they have seen of damage to the units that may have been caused by defects in the common elements and defects in the common elements that may cause damage to the units. A written report shall be prepared by the person who conducts the performance audit that includes details of the inspection and findings made, and a determination whether there are any deficiencies in the common elements that may give rise to a claim under the Act. The person who conducts the performance audit shall submit it to the board and file it with the respondent before the end of the 11th month following registration of the declaration. Under s. 44 (10) of the Act the filing of the report with the respondent shall be deemed to constitute a notice of claim to the respondent for the deficiencies disclosed in the PA.
Tribunal Powers on Appeal
10Where Tarion makes a decision under s. 14, the owner may appeal the decision to the Tribunal under s. 16 (2). Although the Act is a consumer protection legislation and should be given a liberal interpretation, the onus is on the appellant to prove, on a balance of probabilities, that the defects in the common elements fall within the warranty coverage, that damages have resulted from the defects and the amount of those damages. The Tribunal owes no deference to Tarion’s decision.
11Following a hearing, the Tribunal may, pursuant to s. 16(3) of the Act, order Tarion to take such action as the Tribunal considers Tarion ought to take in accordance with the Act and the regulations, and for such purposes the Tribunal may substitute its opinion for that of Tarion.
E. EVIDENCE AND ANALYSIS:
a: Does the defect in item 4.2.2.1 fall within the first year warranty coverage provided by the Act?
Facts Not in Dispute
12The appellant owns the common elements of the 43 unit, six storey residential condominium building registered March 14, 2006 and was managed at that time by North Country Property Management Ltd., the property manager put in place by the developer.
13As required by the Act and the Condominium Act, the appellant’s consultant Cochrane-Genivar Building Sciences Group delivered the PA to Tarion on or about February 13, 2007. The PA noted 4.2.2.1. as a deficiency.
14On or about August 11, 2009, Tarion wrote to North Country Property Management Ltd. to inquire whether the appellant and the builder had agreed to a repair schedule, or if the builder had resolved all common element concerns and stated “If there are outstanding warranty complaints which require further assistance from us please provide me with an updated list including the reference number from the PA for each outstanding concern or the date of the letter the outstanding concern was originally report to Tarion…”
15Tarion initially denied that item 4.2.2.1 was warranted by letter dated August 24, 2011 but as a result of a re-inspection on June 6, 2012, Tarion found item 4.2.2.1 to be warranted.
16On September 30, 2013, Tarion issued a scope of work to fix item 4.2.2.1 and bid documents prepared by its engineer Nick Tassone, Building Sciences Inc. and sent them to the appellant.
17On October 23, 2013 the appellant’s engineer Jeremy Nixon, Brown & Beattie wrote to Tarion that the scope of work proposed by Tarion’s engineer was insufficient. An amendment was proposed by the appellant and the bid documents were changed to incorporate this amendment.
18Tarion received a response to its bid of $84,830.16. On September 15, 2014 Tarion offered the appellant cash compensation of $75,070.94 plus 10% contingency to resolve item 4.2.2.1. Tarion also required a signed Settlement and Release. This offer was not accepted by the appellant.
19On June 4, 2015 Tarion denied appellant’s claim and appellant appealed to the Tribunal. On October 20, 2015 Tarion confirmed that item 4.2.2.1 is warranted and Tarion was willing to pay $75,070.94.
20On January 10, 2017 the appellant hired engineering firm Brown & Beattie to supervise its contractor’s removal and replacement of all the exterior cladding, do blueskin waterproofing, eavestrough replacements, heat cables, balcony railing work, flat roof and deck replacement, precast balcony repairs and sixth floor roof repairs for $1,555,961.50 plus engineering fees.
21Based on these undisputed facts and the admissions of Tarion that item 4.2.2.1. is covered by the warranty, I find that the defect in item 4.2.2.1 falls within the first year warranty provided by the Act. Tarion’s counsel confirmed at the hearing that Tarion’s admissions were not withdrawn and were still in effect.
b. If so, have damages resulted from that defect?
22Based on the admissions of Tarion set out above, I find that damages have resulted from the defect in item 4.2.2.1.
c. If so, what is the amount of those damages?
23The appellant bears the onus of proving the amount of damage that has resulted. The work done by the appellant’s contractor was removal and replacement of the siding for $1,142,910.00, blueskin waterproofing throughout for $113,000.00, eavestrough replacements for $63,167.00, heating cables for $42,940.00, balcony railing anchors for $2,825.00, balcony railing tightening for $1,412.50, balcony column repair for $11,300.00, flat roof and deck replacement for $94,186.00, trex decking for $14,464.00, precast balcony repairs for $20,566.00, sixth floor roof repairs for $32,143.00, new door suite 508 for $4,906.00 and interior drywall repairs for $12,142.00 for a total of $1,555,961.50 plus engineering fees. The appellant’s engineer Mr. Nixon gave evidence that all of this work was necessary because it was consequential or concealed damage related defects, defective weather-resistant barrier and strapping requiring replacement. While all of this work has likely improved the building because it replaced common elements constructed in approximately 2005 with 2017 construction of upgraded common elements and additional work such as a membrane system and roof and deck replacement, the appellant’s evidence did not establish on a balance of probabilities that all of this work was necessary to correct item 4.2.2.1. which is what I have found is covered by the warranty.
24I find that the sum of $84,830.16 would resolve item 4.2.2.1. based on the scope of repair recommended by Mr. Tassone and the bid received in response to it from Mr. Marlia. Instead of accepting this amount for item 4.2.2.1, the appellant choose to do a larger and more expensive scope of work than was required to correct item 4.2.2.1. While the appellant may have been of the view that this was the most practical and beneficial choice in 2017, this does not make it covered by the Tarion first year warranty. The appellant’s damages are the cost to remedy item 4.2.2.1. which I have found is the only part of the work covered by the warranty.
25The appellant submits that damages are $1,555,961.50 plus engineering fees based on a scope of work broader than the repair of Item 4.2.2.1. whereas Tarion submits damages are in the amount of $84,830.16 based on a scope of work to repair item 4.2.2.1. I find that the amount of damages to correct item 4.2.2.1. is $84,830.16.
26I accept the evidence of Tarion’s engineer Mr. Tassone and prefer it over that of appellant’s engineer Mr. Nixon because (i) he was involved in reviewing Item 4.2.2.1. earlier than the appellant’s engineer, (ii) he was made aware of the warranty coverage available by Tarion, (iii) he prepared the scope of work for the bid documents based on the warranty coverage available for item 4.2.2.1 and (iv) he presented a greater understanding of the Hardie board installation procedures at the time of construction in or about 2004.
27Ms. Olean Chlystyk testified that she has lived in unit 208 since January 14, 2006 and was the first person to move in and has been a member of the board of directors since the turn-over meeting. Ms. Chlystyk said that shortly after moving in she experienced water pouring down off the upper balconies and freezing to the extent that her balcony door was impeded due to the ice. She described that the water was coming down the walls, seemed to come from under the siding and ran in her door on both sides. She described water running down from under the siding penetrating units 503, 408, 601, 501 and/or 502 and 303 and identified photos she had taken. Ms. Chlystyk made a 30 day warranty claim to Tarion for her unit but when it was rejected by Tarion as being beyond the 30 day notice period she made no further warranty claim.
28Ross Statchuk, the appellant’s current property manager testified that after the turn-over meeting with the developer, he was hired by the appellant’s board of directors and took over as appellant’s property manager from North Country Property Management Ltd. On February 1, 2010, Mr. Statchuk wrote to Tarion to confirm he was the contact person, and wrote that of the 275 deficiencies detailed in the P.A., 166 items are complete and 109 still remain outstanding. He said he was organized, prepared spread sheets listing every deficiency and walked through the building with the builder. He described the spread sheets he developed as a living document that he updated daily. When asked in cross examination about item 4.2.2.1 he said he couldn’t recall it, said he didn’t know why this item was on the completed list and also on the outstanding list. Mr. Statchuk provided spreadsheet documents identifying each deficiency as a separate item to Tarion when he requested the common element conciliation. He admitted that he didn’t point out the gaps at the conciliation, thought Item 4.2.2.1 was minor and the PA was not the claim to Tarion. Mr. Statchuk said the loose paint/deterioration of the Hardi board is systemic throughout, the cladding system is defective and should not have been installed to the building. He said the appellant did not do another PA for the second year warranty claim. Mr. Statchuk testified that no maintenance or repairs had been done regarding item 4.2.2.1 although he thought the builder may have done some caulking and the appellant tried painting the siding but the paint would only last one winter before delaminating and the siding would crumble. He said the appellant was of the view that the condition of the siding could be worsened by inappropriate caulking and so decided not to do any caulking. Mr. Statchuk described the water penetration problem as systemic and said the cladding system is defective. After the common element conciliation meeting attended by Mr. Statchuk and another representative of the appellant, T.A. and a Tarion representative, on August 24, 2011 Tarion gave the appellant a Warranty Assessment Report finding a number of items not warranted including item 4.2.2.1. Kleinfeldt Consultants Limited did an engineering report for the appellant in October 2011 which was given to Tarion early in 2012. The Kleinfeldt report concluded that there were gaps in the caulking and problems around the balcony areas and recommended inspection of the sealant around the entire building, removal of the cement board siding sill and replacement with cultured stone, re-installment of all head flashing, inspection of areas where cultured stone meets a roof or soffit, removal and replacement of every piece of cement board siding cut along its length and any deteriorated pieces, installation of flashing at specified locations, cleaning and repainting of boards and review of gutter sizing and correction if undersized. No one from Kleinfeldt testified at the hearing.
29January 20, 2012 Mr. Statchuk wrote to Tarion that the building envelope of the subject property had failed, that the defects are structural in nature and therefore subject to Tarion’s seven-year major structural warranty provisions. February 17, 2012 Tarion wrote to Mr. Statchuk stating that his letter received February 3, 2012 was received after the expiration of the builder’s warranty for the common elements and therefore it appears that this concern was reported too late for warranty coverage, that only the major structural defect warranty remained in effect and enclosing a copy of the definition of major structural defect.
30On May 15, 2012 Tarion re-inspected and found item 4.2.2.1 to be warranted in its June 6, 2012 Warranty Assessment Report. Tarion’s engineer prepared bid documents September 30, 2013 for which were revised February 4, 2014 to include wording at the appellant’s request about “consequential or concealed damage related defects”. The only response to Tarion’s bid came from Marcelo Marlia’s company.
31Marcelo Marlia owns D & M Construction Ltd. He testified that July 2, 2014 he submitted a bid to Tarion for the work and hoped he would not get it because the work specified would not fix all the problems he could see with the exterior of the building and he thought more work should be done. Tarion’s scope of work was limited to removal of existing and installation of new caulking at composite trim and siding flashing interfaces and siding trim interfaces and to removal of 200 square metres of existing damaged composite siding and replacement of any defective weather-resistant barrier, strapping or other consequential or concealed damage related defects. He bid $84,830.16. Mr. Marlia admitted he did not know what the Tarion warranty covered. He was not hired to do the work.
32The appellant filed a full copy of the PA. The PA is the work of six engineers and architects. The PA addresses the components of the building including “exterior walls” and specifically “composite siding”. With respect to composite siding, the only deficiencies found are set out as Item 4.2.2.1 in which it is stated “In general, the composite siding appeared to be in good condition. However, some deficiencies were observed with the associated composite trim. The following is a list of deficiencies observed with the composite trim:” These two deficiencies were listed in a table as: “Typical condition throughout the building: lack of sealant at trim interfaces (i.e. Inside and/or outside corners)” and “typical condition – throughout ground floor: lack of sealant at composite siding/trim flashing interface”. The PA recommends “All composite siding deficiencies, as identified in Section 4.2.2.1 should be rectified.” None of the engineers or architects who worked on the PA testified at the hearing.
33Jeremy Nixon, an engineer with Brown & Beattie Building Science Engineering Ltd. became involved with the appellant in reviewing Tarion’s bid for correction of item 4.2.2.1. He wrote a report dated November 30, 2017 about the repairs proposed to the exterior of the building by the appellant’s contractor and also oversaw the work. He testified as to defects and deficiencies that he saw during his sixteen site visits to the building in 2017. He said there were installation defects in the cladding, specification deviations and non-compliance with the Hardie Board Best Practice Guide and said there was evidence of excessive bulk water entry into the cladding system behind the Hardie Board siding and that the water had caused various and significant deterioration and damage to the underlying concealed infrastructure supporting the Hardie Board siding. Mr. Nixon testified that it would have been both economically unfeasible and technically unsound to salvage any areas during repair and the only good practice would be to replace the cladding system entirely with new including related concealed components and weather-resistive barriers and related water draining systems. Shawn Trudell, an engineering technologist from Brown & Beattie testified to the same effect regarding the defects and deterioration of the cladding.
34Lee Jamieson, Tarion’s Warranty Services Representative-Condominium Common Element wrote the decision letter dated June 4, 2015. He explained that the P.A. was received at Tarion on February 13, 2007 and that this is deemed to be the first year warranty claim for the common elements pursuant to the Act and the Condominium Act. Given that the Declaration for the condominium was registered in March 2006, the appellant had until March, 2007 to submit the first year warranty claim. No second warranty claim was made by the appellant. Mr. Jamieson testified that item 4.2.2.1 is the only item in the PA for which there is warranty coverage and that is why it is the only item in the decision letter. He said there is no warranty coverage for item 4.2.4.1. because this item was included in the Settlement and Release signed by the appellant on March 14, 2013. There is no warranty coverage for Item 5.2.1.1. because it was found to be not warranted in Tarion’s Warranty Assessment Report dated August 24, 2011 and no further action was taken by the appellant. The appellant did not request an assessment of the remaining items 4.2.4.2, 4.2.4.3., 4.3.4.1, 4.3.4.2, 4.4.3.1., 4.4.3.2. and 5.4.1.1. in it’s Common Element Request for Conciliation dated December 20, 2010. All these claims were either settled and released or not assessed and that is why they are not in Tarion’s decision letter. Warranty coverage is limited to claims by the appellant made in accordance with the Act.
35Nick Tassone, an engineer with Building Sciences Inc. was retained by Tarion to prepare bid documents and obtain a bid complete the scope of work he prepared to correct item 4.2.2.1. Mr. Tassone was made aware of the warranty coverage available by Tarion. He prepared bid documents September 30, 2013. These were sent to the appellant. The appellant’s engineer and counsel objected to the scope of work in the bid documents and asked that Tarion amend its bid documents to include “consequential or concealed damage related defects”. Mr. Tassone testified that this wording was added at the appellant’s request but did not change the scope of the work in the bid and was not intended to include any other defects not covered by the Tarion warranty. The only bid received by Tarion was from Marcelo Malia’s company.
36Mr. Tassone was also retained by Tarion to visit the site on January 19, 2015 to review and document wall test cuts through the exterior Hardie board siding done by appellant’s contractor. Mr. Tassone and a colleague attended, took photographs and produced a report dated March 6, 2015. Mr. Tassone found that there was extensive water staining and related damage including to the Hardie board siding and trim which appeared to be related to construction irregularities of the precast balcony support framing. It was also noted that the bead of horizontal caulking at the joint between the concrete balcony and the beam framing member was not continuous so that was a source that allowed water penetration. He noted that there was no tight water seal present at the joint to the balcony slab junction causing water penetration. He concluded that the lack of sealant at the balcony slab junction was allowing water to enter the joint and bypass the exterior of the Hardie Board siding. Mr. Tassone noted at that time that the balcony slab and exterior wall junctions required immediate repair since it was causing extensive damage to the exterior wall assembly and structural balcony clip angle supports which also require repair.
37In his 2016 report, Mr. Tassone further comments that since the building is approximately 11 to 12 years old he recommends that a program of remedial repairs be carried out as a part of the appellant’s ongoing maintenance to reduce the potential for future deterioration. His opinion was that appellant’s engineers have not established widespread active water penetration into the interior of the building and many of the issues they noted were not identified in the PA and are unrelated to issues in the PA. Mr. Tassone was of the view that generally the composite siding was installed correctly with some exceptions and the damage primarily related to areas where the sealant was not applied as noted in the PA. Mr. Tassone recorded in his January 26, 2016 report that that appellant’s engineer relied on modern and undated specifications that were not available at the time of installation instead of the correct October 2004 four page installation instructions from Hardie Board literature. By way of example, he noted that Brown & Beattie said “the use of a weather-resistive barrier is required in frame construction with siding” but that back in or about 2004, during construction, a weather-resistive barrier was not required in ICF construction.
38Mr. Tassone viewed the building on multiple site visits in 2017 after the siding was removed and viewed the existing vertical/horizontal strapping and Hardie Board cladding in multiple locations. He stated his conclusion in his report dated September 29, 2017 that the repairs could have been easily made without widespread siding replacement since it was limited to sealant repairs at composite siding/trim junctions and associated replacement of adjacent water damaged siding/trim. Accordingly, the scope of required repairs initially proposed by him would have sufficed. In this report and in his testimony Mr. Tassone enumerated observations from multiple site visits and concluded the vast majority of the cladding removed was in good physical condition as evidenced by the photographs in his report. Mr. Tassone confirmed in his testimony that after having had the benefit of seeing what was behind the composite siding during the replacement work done by the appellant it was still his opinion that the scope of work and the price he obtained in response to the bid would have resolved Item 4.2.2.1.
Appellant’s Objection to Testimony of Tarion’s Engineer
39Appellants counsel submitted at the hearing that Tarion’s engineer ought not to be allowed to testify and alternatively, if allowed to testify should be given no weight because Tarion’s counsel did not cross examine Mr. Nixon. The appellant’s counsel relied on the rule in Browne v. Dunn.
40At the hearing I ruled that Tarion’s engineer could testify for the following reasons. Brown v. Dunn can be summarized as follows: if counsel intends to present evidence contradictory to a witness’s testimony, the contradictory version of events must be put to the witness during cross examination. Tarion’s counsel indicated that there was not going to be an attempt to impeach Mr. Nixon’s credibility and this was not advanced at the hearing. The parties to this hearing differed on what was covered by the statutory warranty and the quantum of the damages flowing from that difference. My view is that there is no absolute requirement before this Tribunal which requires counsel to ask contradictory questions of a technical witness about straightforward matters of fact on which the witness is unlikely to change his opinion. Further, the investigations and findings of both Mr. Nixon and Mr. Tassone were documented in their respective engineering reports before the hearing began and there was no surprise at the hearing as to the content of their respective testimony. At the hearing, Tarion did not attempt to challenge the evidence Mr. Nixon gave on the recent state of the common elements or the work undertaken by the appellant under his supervision. Tarion’s position was based on the extent of the warranty coverage for the common elements and that the warranty was limited to item 4.2.2.1 and the quantum of appellant’s damages related to item 4.2.2.1. For these same reasons, I have given appropriate weight to Mr. Tassone’s testimony.
Appellant’s Submissions
41The appellant’s counsel submitted that Tarion did not follow York Condominium Corp. No. 528 v. Ontario New Home Warranty Program, 1987 CanLII 4073 (ON HCJ), 60 O.R. (2d) 662 (Div. Crt.) and the decision of this Tribunal’s predecessor in Urbanetics Ltd. (Re), [1994] O.C.R.A.T.D. No. 39. These cases are not applicable as both predate the PA requirement. At that time it was the individual unit owners who had to report claims. The legislation was later change to require an engineer or architect to do a PA instead of putting this burden on lay persons.
42The appellant’s counsel submitted the Act is a consumer protection statute and should be given a broad and liberal interpretation. Counsel submitted Tarion had notice of water penetration in the PA in addition to item 4.2.2.1 including items 4.2.4.1, 4.2.4.2, 4.2.4.3., 4.3.4.1, 4.3.4.2, 4.4.3.1., 4.4.3.2., 5.2.1.1. and 5.4.1.1 and Tarion should have considered the complaints as symptoms of an overall systemic problem as shown by the appellant’s Kleinfeldt and Brown & Beattie reports. I do not accept this submission.
43The Kleinfeldt report was given to Tarion in February 2012, five years after the PA and after the expiration of the warranty for common elements. Tarion confirmed the expiration of the warranty to the appellant by letter dated February 17, 2012. The first Brown & Beattie report was more than six years after the PA and after the expiration of the warranty. By then the building was many years older than at the time of the PA and the appellant had been responsible for maintenance which Mr. Statchuk said it declined to do.
44Under the Condominium Act, the common element warranty claim starts with the PA. As required, the engineers and architects conducting the performance audit inspected the major components of the building and conducted a survey of owners as to damage they have seen of damage to the units that may have been caused by defects in the common elements and defects in the common elements that may cause damage to the units and contained details of the inspection and findings made, and a determination whether there are any deficiencies in the common elements that may give rise to a claim under the Act.
45The PA did not identify any overall systemic problem. To the contrary, with respect to composite siding the PA records: “In general, the composite siding appeared to be in good condition. However, some deficiencies were observed with the associated composite trim.” This indicates a specific and not a systemic defect within the warranty period. The PA is the only engineering or architectural evidence of the state of the common elements within the warranty period and I accept this evidence over the later engineering evidence of either Kleinfeldt or Brown & Beattie as these reports are many years later.
46The PA identified deficiencies as separate items and Tarion and the appellant treated each deficiency in the PA as a separate item. Mr. Statchuk made his own spreadsheet identifying each deficiency as a separate item and provided it to Tarion when he requested the common element conciliation. I find based that Item 4.2.2.1 is the only item which falls within the first year warranty coverage under the Act. Mr. Jamieson’s evidence, the request for common element conciliation, the warranty assessment report, the release signed by the appellant and the decision letter establish that there is no warranty coverage for Item 4.2.4.1. because this item was included in the Settlement and Release signed by the appellant on March 14, 2013. There is no warranty coverage for Item 5.2.1.1. because it was found to be not warranted in Tarion’s Warranty Assessment Report dated August 24, 2011 and no further action was taken by the appellant. The appellant did not request an assessment of the remaining items 4.2.4.2, 4.2.4.3., 4.3.4.1, 4.3.4.2, 4.4.3.1., 4.4.3.2. and 5.4.1.1. in its Common Element Request for Conciliation dated December 20, 2010. All these claims were either settled and released or not assessed and are not in Tarion’s decision letter and cannot be considered by the Tribunal which has limited jurisdiction to consider the sole item in Tarion’s decision letter. Item 4.2.2.1 is the only item before this Tribunal and the only item that the Tribunal can consider under the Act. Warranty coverage is limited to claims by the appellant made in accordance with the Act.
d. Do appellant’s damages include consequential or concealed damages?
47The appellant’s counsel also submitted that Tarion agreed to cover work outside the warranted item 4.2.2.1 because Tarion agreed to amend its bid documents to include “consequential or concealed damage related defects”. I do not accept this submission.
48The bid documents were prepared by Tarion’s engineer seven years after the warranty period expired for the use of Tarion to determine the cost of the warranted work. Tarion’s bid documents are not a warranty claim and are not an acknowledgment, admission or agreement by Tarion to fund any work other than the warranted work. The evidence of Mr. Tassone who drafted the bid documents was that this wording was added at the appellant’s request but did not change the scope of the work in the bid and was not intended to include any other defects not covered by the Tarion warranty. Characterizing the other work the appellant would like to see covered by the Tarion warranty as consequential damage does not expand the statutory warranty.
49The term “consequential” is not in the Act. Section 13 (2) (b) and (f) of the Act provide that a warranty under subsection (1) does not apply in respect of secondary damage caused by defects, such as property damage and personal injury and damage resulting from improper maintenance.
50In the case of common elements, subsection 6 (6) of the Regulation provides that liability is limited to damage to the common elements only and there is no liability for any other damage, direct or indirect. Although there is no definition of “secondary damage” in the Act, after considering s. 13, in Liddiard v. Tarion Warranty Corp., 2009 CanLII 65801 (ON SCDC), [2009] O.J. No. 4912 (Div. Crt.) Low, J. concluded “What is conferred by the warranty is the right to have done that which should have been done correctly in the first instance or a sum of money to purchase the labour and materials to do so. Any loss or damage that is derivative of the failure to construct in accordance with s. 13(1) is secondary and therefore excluded.” I adopt this interpretation. It is clear from the evidence before me that the damages the appellant seeks in excess of $84,830.16 are derivative of the builder’s failure to construct in accordance with s. 13(1) of the Act, are secondary and are other damage, direct or indirect and therefore excluded.
F. ORDER:
51For the reasons set out above, I order Tarion to pay the appellant $84,830.16 as damages for warranted Item 4.2.2.1.
LICENCE APPEAL TRIBUNAL
Avril A. Farlam, Vice-Chair
Released: October 23, 2018